Smiths Group plc Interim Management Statement

Smiths Group has today launched a fund raising to pre-refinance 2010 debt maturities, to extend the maturity profile of debt further and to reduce its exposure to bank financing. To support this process, the Board has accelerated the publication of the following Interim Management Statement.

Group trading for the nine months to 2 May has continued ahead of last year at reported exchange rates, benefiting from acquisitions and currency translation. Restructuring initiatives begun last year are delivering cost savings and operational improvements in line with our plans. As a result, the Group’s corporate costs are below those of last year. The programme to improve the Group’s information systems is also on track.

Overall, Smiths Group remains well placed to address the prevailing uncertainties facing the world economy. On a reported basis, including the benefit of currency translation and acquisitions, the Board expects the Company to meet expectations for the current year. On an underlying basis, John Crane delivered strong organic sales and profit growth with particular strength in the petrochemical industry. The major restructuring initiatives are on schedule and delivering savings in line with our plans. However, the order book has softened since January and is now slightly below the prior period.

As previously indicated in Smiths Detection, there are continued delays and uncertainty in the timing of contracts and tender activities, particularly in the ports and borders area and in airport equipment outside the USA. As a result, underlying performance after nine months is below that of the prior period which benefited from some large contract wins. New business enquiries and tender activity remain high although the timing of these contracts may affect the full year performance.

Smiths Medical maintains good progress in driving operational improvements and cost savings. However, the pressure on hardware sales from reduced hospital budgets continues to affect underlying sales. The SKU rationalisation programme announced in March is proceeding well. As previously guided, the exit from the diabetes pump market will have an anticipated impact on sales of around £7m in the second half.

Smiths Interconnect continues to benefit from involvement in several large, long-term military communications programmes which have shown good growth. However, sales of components to wireless and other industrial customers are behind the same period last year. As a result, underlying trading is behind last year. Interconnect continues to benefit from its recent acquisitions and currency translation which will support growth at reported exchange rates.

The housing, appliance and industrial markets served by Flex-Tek remain challenging, although sales of components and servicing to the aircraft industry have held up well. While Flex-Tek is benefiting from targeted price increases and cost savings, lower volumes are putting some pressure on margins.

At current exchange rates, we anticipate that net debt at the year end will be around £1bn, in line with previous guidance, assuming the completion of the acquisition of Orion Corporation. The acquisition of Shenzen Dowin Lightning Technologies by Smiths Interconnect was completed on 24 April.

ENDS