18 May 2010

Smiths Group plc Interim Management Statement

Smiths Group delivered margin improvement and strong cash generation through its programme of operational improvement in the nine months to 1 May 2010. Trading for the three months ended 1 May 2010 is in line with the guidance given at the interim results with an underlying improvement in revenues and headline operating profit margin. We remain on track to meet expectations for the full year.

After nine months, Smiths Detection has generated underlying growth in sales and profit across its main markets. This reflects a continued strong sales performance in ports & borders and military, as well as a return to growth in transportation. Looking to the full year, the order book is expected to support continued sales growth although military sales are expected to flatten due to the phasing of orders. We will continue to invest in new product development to drive future sales growth while restructuring to improve the flexibility of the cost base and support margin improvement.

John Crane continues to deliver operational and margin improvements through its global restructuring programme and other cost saving initiatives. The order book has strengthened with a further improvement in the book-to-bill ratio in the quarter. This supports a return to underlying sales growth in the second half although, in line with previous guidance, this is unlikely to be sufficient to offset the first half declines. We expect margin expansion as a result of the sustained focus on cost control initiatives.

Improved operating performance at Smiths Medical delivered further like-for-like sales growth. Margins continue to benefit from the cost reduction initiatives and price increases. Looking to the full year, we will reinvest some of these benefits in increased new product development to support revenue growth in future years.

Smiths Interconnect has made steady progress against some challenging end markets. After nine months, underlying sales of components to military and aerospace customers were slightly down. There are signs of stabilisation in the wireless telecommunications and other markets while sales of network optimisation products remain strong. Overall, second half sales are expected to show underlying growth. The acquisition of Interconnect Devices, Inc. (IDI) was completed on 6 April and its integration is on track.

Flex-Tek has continued to see a recovery in recent monthly sales of components to the US residential construction and industrial markets while sales to the aerospace market remain weak. The restructuring and site rationalisation programme has delivered further savings which has helped to preserve margins and makes Flex-Tek strongly leveraged to a recovery in US residential construction.

Cash generation has remained strong in the first nine months. Net debt was £991m as at 1 May, reflecting the acquisition of IDI, the payment of the interim dividend in April and foreign exchange translation.

This press release contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of the press release and the Company undertakes no obligation to update these forward-looking statements. Nothing in this press release should be construed as a profit forecast.