Smiths Group Finals 2012 - dividend improved

Annual results for the year ended 31 July 2012

*In addition to statutory reporting, Smiths Group reports its continuing operations on a headline basis. Headline revenue and profit is before exceptional items, amortisation and impairment of acquired intangible assets, profit/loss on disposal of businesses, costs of acquisitions, pension finance credit and financing gains/losses from currency hedging. Free cash-flow and return on capital employed are described in the Financial review. 2011 headline pre-tax profit, headline basic EPS and return on capital have been restated (see notes 1 and 3 to the accounts).

^#Organic growth at constant currency.

Highlights

• Headline revenue 7% higher; growth across all divisions
• Headline operating profit up 7% - as investment in growth drivers is increased
• Company-funded investment in new product development up 9% to £107m
• Emerging market revenue up 14%; now representing 15% of Group revenues
• Performance improvement initiatives on track in Smiths Detection; improving order book
• Strong headline operating cash conversion at 99% - with free cash-flow of £217m
• Dividend up 5%

"Smiths Group has performed well in a persistently tough economic environment, growing revenue across all divisions with a stronger performance in the second half. Headline margins were maintained while we significantly increased our investment in sales, marketing and new product development. We achieved strong cash conversion, and return on capital was also ahead of last year.

"The economic environment remains uncertain. Pressures on government spending are expected to continue, particularly given the risk of budget sequestration in the US and widespread concerns over national debt levels in parts of Europe. These conditions are likely to continue to constrain those parts of our business with government-funded customers.

"However, our investment initiatives are building a solid foundation to accelerate medium-term revenue growth. We will continue to deliver operational improvements and efficiencies, while balancing increased investment in the drivers of long-term profitable growth with opportunities to enhance margins and returns. Subject to economic conditions, I am confident we can continue to grow sales, deliver further operational improvements, achieve strong cash conversion and improve returns."