annual report 
year ended 31july 2008
opportunities to create value smiths is a global technology company
listed on the london stock exchange 
a world leader in the practical application
of advanced technologies smiths group
delivers products and services for the
threat and contraband detection energy
medical devices communications and
engineered components markets
worldwide our products and services
make the world safer healthier and
more productive
smiths group plc
contents
1 group at a glance
1 opportunities to increase value
4 smiths group a global business
6 smiths divisions
8 summary performance
9 chairman’s statement
10 chief executive’s statement
12 business review
13 business review smiths detection
16 business review john crane
19 business review smiths medical
22 business review smiths interconnect
24 business review flext ek
26 financial review
29 legal issues
30 risks and uncertainties
32 corporate responsibility
36 board of directors
37 group directors’ report
43 corporate governance report
47 directors’ remuneration report
57 statement of directors’ responsibilities
58 independent auditors’ report to the members of smiths group plc
59 consolidated income statement
60 consolidated statement of recognised income and expense
61 consolidated balance sheet
62 consolidated cashflow statement
63 accounting policies
69 notes to the accounts
109 group financial record under ifrs 20052008
110 independent auditors’ report to the members of smiths group plc
111 company balance sheet
112 accounting policies
114 notes to the company accounts
ibc financial calendar
the purpose of this report is to provide information to the members of the company  
the annual report contains certain forwardlooking 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 forwardlooking
statements reflect knowledge and information available at the date of preparation 
of this annual report and the company undertakes no obligation to update these 
forwardlooking statements nothing in this annual report should be construed 
as a profit forecast
headline results for continuing operations
2008 2007
sales proﬁts sales profit
£m £m £m £m
detection 509 856 438 786
medical 703 1278 691 1273
specialty engineering
– john crane 626 959 532 753
– specialty – other 483 713 500 664
t otal sales 2321 2161
headline operating profit 3806 3476
interest 410 364
pensions financing 417 337
posttax loss of associate 10 05
headline pretax profit 3803 3444
headline earnings
per share basic 745p 470p
before exceptional items including impairment of assets amortisation of acquired
intangible assets profit or loss on disposal of businesses and financing gains or losses from
currency hedging
statutory results for continuing operations
2008 2007
sales proﬁts sales profit
£m £m £m £m
detection 509 850 438 651
medical 703 1061 691 1060
specialty engineering
– john crane 626 388 532 13
– specialty – other 483 958 500 607
profit on sale
of financial assets 240
t otal sales 2321 2161
operating profitloss 3257 2571
interest 410 364
pensions financing 417 337
share of posttax loss
of associate 10 05
financing gainslosses 61 21
pretax profit 3193 2560
earnings per share basic 630p 369p 1 smiths group plc annual report year ended 31 july 2008
opportunities to increase value
smiths has opportunities to create value for shareholders by improving
performance and growing our businesses
expand our
margins through 
a programme of
self help
taking advantage 
of opportunities
self help is taking many forms
at smiths t o improve efficiency
and remove a layer of
management the smiths
specialty engineering division
has been disbanded t o improve
customer focus operating
divisions’ headquarters are
relocating from london to be
close to 
their operations t o reduce
costs and improve lines of
accountability the corporate
centre has been halved in size
focusing its activities where it
can add value t o improve
service levels and deliver the
necessary data and information
a new global it service delivery
organisation has been created 
support topline
growth by
increasing
manufacturing and
service capacity
expanding capacity for 
airport checkpoint systems
over the past year smiths
detection has deployed new
checkpoint xray machines that
for the first time automatically
detect explosives and liquids in
carryon bags now located in
most major uk airports these
atix systems are being rolled
out in the usa and globally  
t o achieve the necessary
manufacturing capacity to meet
this demand the smiths
detection facility in wiesbaden
germany has been expanded
substantially  in less than 12
months the team has designed
and completed an extension
dedicated to the production of
new equipment such as the
atix system 2 smiths group plc annual report year ended 31 july 2008
create topline
growth by
expanding activity
in developing
markets 
building capacity in asia
flext ek is broadening its
footprint in asia where its
existing plant in malaysia
continues to expand over the
past year it has added to this
with new manufacturing
facilities in bangalore india 
in the clark special economic
zone philippines and
changzhou china the facilities
in india and philippines are
aimed at better serving its
aerospace customers following
increased demand due to the
growth of air traffic in asia 
the facility in changzhou is
focused on the growing hvac
and household appliance
market in china
deliver efficiencies
by restructuring
our organisation
and using our
scale more
effectively
creating one global 
john crane
a project launched in june 2008
is bringing together the two
geographic john crane
organisations unifying john
crane – with a head office
located in morton grove us –
will enhance performance and
improve customer service while
implementing a truly global
product portfolio the leadership
team is creating an organisation
that can more effectively deliver
stateoftheart solutions
anywhere in the world 
in this way john crane has the
capacity to provide customers
with a global operations
platform assuring rapid delivery
of products while improving
service support capabilities  3 smiths group plc annual report year ended 31 july 2008
grow our
technology and
geographic
footprint through
bolton
acquisitions
expanding in the world’s
major telecoms market
some 70 of the world’s
wireless telecommunications
infrastructure equipment is
manufactured in china t o
expand its footprint in the region
smiths interconnect acquired
allrizon a shanghaibased
communications equipment
firm allrizon together with
triasx – an australian based
business also with chinese
operations and acquired
recently – complement and
extend smiths interconnect’s
microwave business they add
not only chinese manufacturing
capacity but also strong design
teams and good relationships
with key wireless telecoms
infrastructure customers
drive growth 
in our technology
businesses by
investing in
targeted rd
developing new medical
products
smiths medical is increasing
rd in order to boost new
product development 
with a strong pipeline in place
new products are reaching 
the market recent innovations
include uniperc™ a unique
tracheostomy tube designed 
for patients with larger necks –
a problem increasingly faced by
clinicians due to rising obesity
levels among patients when it
comes to delivering medication
the new medfusion 4000™
system helps to treat patients
with cancer and painful
conditions it features wireless
connectivity to enable clinicians
to monitor the performance 
of the machine remotely  4 smiths group plc annual report year ended 31 july 2008
smiths group a global business
flextek 
piloting a new ehs
programme in
tennessee usa
flext ek business tutco
based in cookeville
t ennessee is piloting a
new environment health
and safety programme 
in a drive to become
ohsas 18001 certified 
the programme seeks 
to eliminate injuries 
and reduce hazards in 
the workplace the results
are already encouraging as
the number of recordable
injuries has been reduced
to zero and recordable
incidents have reduced by
25 while operating costs
at the facility have also
been cut 
smiths detection 
manufacturing expansion
in maryland usa
smiths detection has
expanded its
manufacturing capacity at
its edgewood site by 50
to fulfil increased demand
from the us department 
of defense chemical
biological protection
shelters cbps
programme cbps
provides contamination
free environmentally
controlled working areas
for medical and combat
services personnel in
operational circumstances
smiths medical 
automation in new
hampshire usa
each year around 150
million safety needles are
produced at our smiths
medical manufacturing
facility in keene this is
largely thanks to an
investment in advanced
highspeed automated
robotics which has yielded
record production rates
helping to reduce back
orders at the facility to zero
9
location of assets 
north america
uk
europe other
rest of world
27
14
50
21
group sales by destination 
north america
uk
europe other
rest of world
25
6
48
analysis excludes cash and cash equivalents 5 smiths group plc annual report year ended 31 july 2008
john crane 
servicing customers 
in saudi arabia
john crane is expanding
its global service and
support network in
addition to opening new
facilities in finland dubai
and morocco it has
inaugurated a new service
centre and training facility
in saudi arabia for middle
east customers
smiths interconnect 
opening up in tunisia
smiths interconnect
recently opened a new 
lowcost manufacturing
facility in tunisia to serve
its european customers
the facility consolidates
and expands manufacturing
capacity for connectors
which are deployed in
military commercial
avionics medical space
and test and measurement
applications
9
divisional sales 
smiths detection
john crane
smiths medical
smiths interconnect
flext ek
11
31
22
27
6
divisional headline operating profit 
13
34
22
25
smiths detection
john crane
smiths medical
smiths interconnect
flext ek
smiths group major
manufacturing and
service locations 
by division
smiths detection
john crane
smiths medical
smiths interconnect
flextek
analysis is based on revised operating structure for 200809 see page 72
percentage relates to headline operating profit before corporate costs
analysis is based on revised operating structure for 200809 see page 72 6 smiths group plc annual report year ended 31 july 2008
smiths divisions
customers 
our technology is 
deployed at nearly 80 
of the world’s commercial
airports some 85 of
sales are influenced 
by more than 100
governments and 
their agencies globally
including homeland
security authorities
customs authorities
emergency responders
and the military  this
includes the us
department of defense
us transportation security
administration tsa uk
ministry of defence and
airport operators such 
as baa in the uk
key strengths
• global market growth 
• strong technology
positions
• good access to growing
markets
• investment in rd
increasing 
employees
2300
smiths detection is a worldleading
designer and manufacturer of
sensors that detect and identify
explosives narcotics weapons
chemical agents biohazards 
and contraband 
with governments seeking more
advanced ways to counter terror
threats our world leading xray
screening equipment is continuously
evolving to help keep passengers
safe across the globe 
customers 
john crane serves oil and
gas companies refineries
pump and compressor
manufacturers chemical
and other process
industries its main
customers include bp
chevron china petroleum
conocophillips
exxonmobil gazprom
qatargas saudi aramco
shell t otal dresser elliot
flowserve ge nuovo
pignone itt mitsubishi
siemens solar turbines
sulzer y ork basf bayer
dow koch industries and
lyondell
key strengths
• twothirds of revenue 
from aftermarket
service 
• market leader in its field
blue chip customer base
• largest segment is fast
growing petrochemical
industry 
• good positions in key
growth markets
employees
6400
john crane is a worldleading
provider of products and services 
for the major process industries
these include the oil and gas
chemical pharmaceutical pulp 
and paper and mining sectors 
growth opportunities
• creation of a single john
crane customerfacing
organisation
• expand technology
footprint through
acquisitions
• build new upstream
services business that
uses existing global
network 
• increase original
equipment sales and
manufacturing capacity
and extend global
customer service
network
in the petrochemical industry 
our advanced mechanical seals 
are deployed on oil and gas pipelines
and refineries helping to deliver
energy efficiently to millions of
homes and businesses around 
the world 
smiths detection john crane
smiths group has five divisions
smiths detection john crane
smiths medical smiths
interconnect and flext ek our
businesses are highly competitive
with strong technology positions
and operate in sectors with
excellent opportunities for growth 
smiths has evolved substantially
since its foundation now
employing over 22000 people in
more than 50 countries we serve
a diverse range of global
customers including governments
and their agencies petrochemical
companies hospitals
telecommunications companies
and manufacturers in a variety 
of sectors around the world
we bring technology to life
contribution 
to 2008 sales
22
contribution to 2008
headline operating
profit
22
contribution 
to 2008 sales
27
contribution to 2008
headline operating
profit
25
growth opportunities
• bring new technologies
to market
• develop biological 
and millimetre wave
detection technology
• seek acquisitions
• deliver efficiencies
implement single
enterprise wide software
system and smarter
sourcing initiative
analysis is based on revised operating structure 
for 200809 see page 72
percentage relates to headline operating profit 
before corporate costs 7 smiths group plc annual report year ended 31 july 2008
customers 
we estimate that around
threequarters of our end
customers are hospitals
with the remainder
comprising the alternate
care market such as home
care and other surgery
centres we have a direct
sales presence in 20
countries with distribution
arrangements in many
others
key strengths
• consistent market
growth
• global sales  marketing
network 
• established brands 
with practitioner loyalty
• increasing rollout 
of new products
• focusing increased 
rd investment on
higher growth segments
and markets
employees
8400
customers 
smiths interconnect
supplies to multiple levels
of the supply chain and 
its blue chip customers
include primes and service
providers oems and
system suppliers and 
subsystem manufacturers
amongst our largest
customers are raytheon
finmeccanica bae
systems aait extron
northrop grumman
ericsson motorola sprint
nextel zte ge medical
and alstom
key strengths
• t echnical differentiation
providing barriers to
entry for competition
• strong brands
recognised by customers
as partners and solution
providers
• excellent military
programme positions
• positive market dynamics
in wireless infrastructure
and defence
employees
3100
customers 
flext ek serves mainly
domestic appliance
manufacturers and 
the us construction
industry  its large
customers include
whirlpool trane pratt
 whitney carrier
boeing electrolux
respironics ge
aerospace airbus
panasonic hoover 
and dyson
key strengths
• lean manufacturing
culture
• good performance 
in markets other
than us construction
market civil and
military aircraft
demand rising 
employees
2400
smiths medical is a leading supplier
of specialist medical devices and
equipment for global markets 
our products are focused in the
medication delivery vital care and
safety devices market segments
growth opportunities
• ageing population and
increasing prosperity
• safety legislation and
regulation
• healthcare industry
productivity needs and
increasing use of it
• leverage global product
development process 
and increase percentage
of sales from products
under three years old 
• scope to reduce costs
and improve margins
in healthcare our products help
prevent needlestick injuries and
reduce the risk of cross infections
while our revolutionary medication
delivery equipment helps to ease
patients’ pain and prevent accidental
overdoses
smiths interconnect designs and
manufactures specialised electronic
and radio frequency products that
connect protect and control critical
systems for the global wireless
telecommunications aerospace
defence space and medical markets 
flext ek provides engineered
components that heat and move
fluids for the aerospace medical
industrial construction and 
domestic markets 
growth opportunities
• expand globally from 
us base
• leverage market
knowledge and customer
relationships throughout
the business 
• add new technologies
and territories through
bolton acquisitions from
fragmented sector
• rationalise
manufacturing and
accelerate move to 
lower costs
in communications our
sophisticated technology helps to
keep people and systems connected
and protected
growth opportunities
• expand nonconstruction
market activities eg
aerospace and medical
• exploit growth potential
in asian industrial and
appliance markets
• further rationalise sites
our engineered components 
heat and move fluids in a wide
range of different industries 
from aircraft and racing cars 
to medical devices
smiths medical smiths interconnect flextek
contribution 
to 2008 sales
31
contribution to 2008
headline operating
profit
34
contribution 
to 2008 sales
11
contribution to 2008
headline operating
profit
13
contribution 
to 2008 sales
9
contribution to 2008
headline operating
profit
6 8 smiths group plc annual report year ended 31 july 2008
summary performance
sales 7
£2321m
headline pretax profit 10
£380m
statutory pretax profit
£319 3m
headline earnings per share
745p
dividend per share
340p 
statutory earnings per share
630p
2006 2007 2008
sales £m
2500
2000
1500
1000
500
0
2006 2007 2008
headline pretax profit £m
400
300
200
100
0 9 smiths group plc annual report year ended 31 july 2008
chairman’s statement
as i indicated in last year’s report the board appointed philip bowman
as chief executive of the group in december 2007 philip brings a new
energy to the group and already some significant changes to the
operation of the group have been announced following his initial review
at all levels all businesses benefit from fresh eyes and the board has
been delighted by the way in which philip has further energised the
management team
each of the group’s businesses brings technology based products and
solutions to a range of highly sophisticated customers the board has
continued to ensure that these customers are to be found in areas of
significant and profitable growth opportunity including security oil  gas
medical devices and wir eless communications these opportunities have
to be turned into value for our shareholders and to this end the chief
executive has instigated major changes that are aimed at substantially
increasing value creation across the group’s portfolio of businesses 
the programme of changes set out in the chief executive’s statement
and the other narrative in this report explain these opportunities and
how they will be exploited the board has encouraged the new approach
to ensure that operationally the group develops its potential to the full
at the forefront of this structure is clear delegated accountability for
achievement in each of our businesses with executive reward clearly
linked to value creating performance 
the smaller corporate centre of the group guides the strategy and
leverages benefits of scale across the group it retains the task on behalf
of the board of ensuring that the divisions comply with all of the systems
and processes that protect shareholders’ interests each division will
now hold monthly divisional board meetings included on these boards
will be an investor director from one of the chief executive’s direct
reports who will have a mandate that includes monitoring compliance
with group policies
the business leadership teams deliver the operational performance
which translates into improved shareholder returns this clarity is
important in developing a more performancedriven culture in smiths
there is a corresponding increase in the demands made of all
management to perform
on 28 july an extraordinary general meeting of shareholders adopted
proposals that substantially change how the senior teams both at the
centre and in each of the divisions are rewarded these changes place
a premium on the creation of shareholder value they strengthen the link
between pay and performance they link remuneration to longterm
value creation at divisional level and they provide exceptional reward only
if there is exceptional performance
in the past year there have been notable operational projects across the
business as a whole addressing new customers and generating new
products examples from across the businesses of these are to be found
in this report but it would be wrong at this time when everyone is
focused on safety not to mention the major breakthrough achieved by
our detection business with its new atix system security machines
which are now being rolled out from heathrow airport in the uk to
airports all around the world it is a relief not to have to take out laptops
where these machines are installed
i have said in past reports that the board is mindful of its role as guardian
of shareholders’ money as well as ensuring operating excellence the
board remains restless in its hunt for shareholder value and will
continue to monitor each of our businesses to ensure that the group is
their most appropriate owner 
the past year has seen a number of changes to the composition of the
board on the executive side the arrival of philip bowman in december
2007 was preceded by the retirement of keith butlerwheelhouse as i
discussed last year  in addition david lillycrop resigned from the board
in june 2008 standing down from his role as general counsel and
company secretary david had been a member of the board since the
merger with ti group and i would like to thank him for his major
contribution to smiths group and for the help he has given me
on the nonexecutive side in april 2008 peter loescher resigned as a
nonexecutive director at his own request so that he could concentrate
on his responsibilities as chief executive of siemens ag the board
benefitted from his wisdom and wish him well in his executive role
at the half year we explained that in light of the prevailing market
conditions and the scope for investment in organic growth and
acquisitions the board intends to grow dividends consistent with
increasing cover to around 25 times in the medium term as a result the
interim dividend was unchanged yearonyear  
the board has considered the final dividend in the light of this policy and
has decided to propose a dividend of 235p making a total of 340p for
the year unchanged from last year 
the final dividend will be paid on 21 november to shareholders
registered at the close of business on 24 october  the exdividend date
is 22 october 
this report is being published at a time of turmoil in financial markets
and anxieties for world growth this is putting pressure on sales and
margins for many businesses it is not by chance that smiths group is
positioned in markets that the board believes are better equipped to
resist the pressures of a global downturn neither the board nor
management are complacent and the businesses have embarked on
an extensive programme of selfhelp that aims over the course of the
next 24 months not only to withstand any effects from the downturn but
also to deliver increased value to shareholders the group remains
therefore both strong and dynamic
donald brydon
chairman 10 smiths group plc annual report year ended 31 july 2008
chief executive’s statement
we have delivered strong sales and profit
growth driven by good performances from
john crane smiths detection and smiths
interconnect a performance improvement
programme is underway to address the
operational issues that have held back
smiths medical over the past two years
the portfolio has been strengthened this
year through one divestment and seven
acquisitions which bring new technologies
and extend smiths geographic footprint –
particularly in developing markets
our focus is on topline growth and margin
enhancement while there are significant
opportunities to improve performance and
generate value across the group we have 
begun a substantial restructuring
programme that will deliver operating
efficiencies and improve customer service
the scale of the opportunities is
demonstrated by the new divisional targets
set out here for the first time
the sustained upheaval in the world
economy is creating uncertainty in many
markets and may disrupt government
spending patterns – particularly in the 
us and india where there are forthcoming
elections however smiths group is well
placed among global businesses to meet 
these challenges
looking at this year’ s results sales rose by 7 and the headline pretax
profit increased by 10 after adjusting for currency translation and
acquisitions and disposals the underlying improvement was 6 and 8
respectively the headline numbers exclude various exceptional items
which are detailed in the business review one of these is a charge of
£40m in respect of john crane inc litigation a full explanation of which
is on page 29
since joining smiths some nine months ago i have undertaken a
thorough review of operations it is a group with a strong set of
technologybased businesses applying some of the world’s most
advanced industrial sciences – from airport xray scanning machines to
mechanical seals for the oil industry  in addition the businesses operate
in markets sustained by longterm secular growth smiths medical’s
market is growing as populations age and increase in prosperity john
crane by energy consumption and interconnect by the need for
increased bandwidth and upgraded wireless infrastructure smiths
detection is driven by demand for increased security and protection
although flextek is exposed to more cyclical markets such as us
housing it has a portfolio of highperformance products that supply the
aerospace market
my review of operations identified significant opportunities to improve
performance progressively over a twoyear period and maximise value
for shareholders t o deliver these benefits the board has already taken
some key decisions
• manage the group as five divisions from 1 august 2008 and restructure
each to improve customer service and deliver efficiencies
• restructure and reduce the corporate centre to cut cost and focus it on
delivering returns from the business
• improve business systems and dataflow which over time will support
datadriven decisionmaking and enable the group to be more
responsive to changing market conditions and opportunities
• build the business through acquisitions which will add complementary
technologies expand the geographic footprint or leverage existing
scale
• increase investment in research and development and focus it more
intensely on higher growth areas that will deliver greater returns and
• introduce an incentive scheme for senior management that reinforces
our new culture of performance improvement and delivery against
recently established divisional targets
in june we announced that the specialty engineering division would be
disbanded so that its three constituent businesses – john crane
interconnect and flext ek – report directly to me this reduces cost and
gives greater accountability to each of the businesses in addition all
smiths divisions will now be managed from divisional headquarters that
are closer to their operations key markets and customers
we also aim to realise value by restructuring the divisions themselves
for example john crane which had historically been managed as two
separate operations from the uk and us is now combined under the
leadership of paul cox and headquartered at morton grove near
chicago in medical the management structure in the us will be
simplified and we will introduce a global approach to rd there are
also further opportunities to reorganise flextek’s portfolio of
businesses to drive efficiencies and improve operational effectiveness
at the same time we have defined more clearly the roles of the divisions
and their interface with the corporate centre these changes will reduce
substantially the size of the corporate office and improve the way we
work by introducing better defined governance and decisionmaking
the small head office will concentrate on three areas setting the
group’ s strategic direction and capital allocation leveraging the group’ s
scale where appropriate and ensuring compliance as a uklisted
company  in future we will report the corporate centre costs separately
which will give greater clarity to the underlying margins of the divisions
and provide a clear incentive to minimise corporate costs 11 smiths group plc annual report year ended 31 july 2008
philip bowman
chief executive
t aken together these restructuring programmes are expected to deliver
annual cost savings of £47m once they are complete in three years 
time the cost of delivering these programmes will be £48m which will 
be treated as an exceptional item further details are given in the
divisional reviews
we are also investing more to improve dataflow and speed up decision
making through the implementation of better information systems for
example erp systems are currently being deployed in detection john
crane and medical at a group level a new information platform is being
introduced which will help capture operational data from the divisions
this creates opportunities to leverage the scale of the group for the first
time by groupwide procurement of travel it and other services we
have already launched a programme to consolidate it service delivery
across the group improving service quality and cutting costs we have
also signed a deal with att to supply a range of communication
services such as mobile telephones remote access etc which will
deliver annual savings of at least 5m
our management team has also been strengthened reflecting the
importance of the it investment brian jones has joined us as chief
information officer  he brings many years’ experience in implementing
erp systems and improving information flow within large organisations
michael herlihy has been appointed general counsel and is also a
member of the executive committee and peter durman has joined to
lead an invigorated investor relations programme the mix of talent at
smiths will continue to be refreshed and reinforced with external
appointments bringing different competencies and innovative ideas to
the group
there are valuable opportunities to build smiths through bolton
acquisitions – particularly in john crane interconnect and detection
such acquisitions bring complementary technologies support
geographic expansion or leverage existing infrastructure john crane
acquired indufil a specialist in filtration systems and sartorius bearing
t echnology a leading provider of high performance rotating equipment
for the oil and gas industry both have added valuable new technologies
that can be leveraged through john crane’ s global network of more than
220 sales and service centres john crane also acquired fiberod which
further extends our upstream energy services capability and
complements the cdi acquisition made last year  in addition john crane
expanded its presence in japan the world’s second largest market for
oem pump manufacturers by increasing its ownership share of john
crane japan from 49 to 70 in interconnect the acquisitions of
shanghaibased allrizon t ongguang and brisbanebased t riasx pty ltd
have strengthened its position in the growing asian market flext ek’s
acquisition of fast heat has extended its range of specialty heating
solutions
we are also driving higher levels of revenue growth organically through
an increase in research and development rd investment focused
more tightly on growth areas that can deliver the most attractive returns
rd investment for the group increased by 8 or £7m to £86m in
detection our spend has been focused on xray detection systems for
both airports and cargo screening while we have extended our portfolio
of chemical and trace detectors we are at the cutting edge of a number
of technologies – xray screening millimetre wave imaging and
biological detection in medical we have launched a number of new
products during the year as we begin to benefit from the introduction of
a streamlined product development process it has resulted in a 50
increase in the number of product launches this year 
to reinforce our new culture of performance improvement we have
established tar gets for sales gr owth and mar gins for each of the divisions
these are the ranges we anticipate the divisions will operate within over
the next three years based on organic growth at constant currency and
assume a financial and macroeconomic environment consistent with
that of recent years alongside this we have introduced a new incentive
plan for senior management and divisional leadership it more closely
links remuneration with performance and ultimately value creation and
places much greater accountability on the divisional leadership for the
performance of their businesses the new incentive plan means that
each division will have its own targets to meet reward will be bound
together by one common currency the smiths share price in that way
we will reflect the valuecreating performance of each division
sales
2008 2008 t arget
£m growth

growth range

detection 509 12 1012
john crane 626 8 68
medical 703 0 35
interconnect 261 13 610
flext ek 206 4 07
total 2305
headline operating profit
2008 2008 t arget
£m margin margin range
detection 93 18 1720
john crane 104 17 1722
medical 140 20 2024
interconnect 54 21 2123
flext ek 24 12 1116
corporate centre 35
total 380
the above analysis reflects the revised operating structure for 200809 see page 72 and
excludes three months of trading for marine systems which was sold in november 2007

organic growth at constant currency 
delivering these returns will be a team effort and i would like to thank
our 22000 employees around the world for their hard work and support
during a time of very real change both within smiths group and the wider
economy 
in summary i believe that most divisions have the opportunity to improve
margins significantly the greater responsibility accountability and
incentivisation of the divisional management teams combined with the
availability of better data to underpin management decisions should
progressively unlock value for the benefit of shareholders 12 smiths group plc annual report year ended 31 july 2008
business review
group activities
smiths is a global technology business serving the detection medical
devices mechanical seals electronic product and engineered
component markets
strategy
smiths is committed to creating longterm value for shareholders by
building and sustaining strong businesses in growth sectors
the group’s objective is to create value from organic growth and from
reinvestment of selfgenerated cashflow  adjustments are made to the
business mix through both acquisitions and disposals to enhance value
for shareholders
performance of continuing operations
the continuing operations comprise the detection and medical divisions
together with john crane smiths interconnect and flext ek which until
31 july 2008 made up the specialty engineering division
following the restructuring of the roles of the divisions and the corporate
centre set out in the chief executive’s statement and the adoption of
ifrs8 from 1 august 2008 the divisional information in this review will
largely reflect the new operating arrangements in order to assist
shareholder understanding
the key smiths performance indicators which are closely monitored
throughout the year and measured against preset targets are 
• sales and headline profits 
• cash generation and 
• return on investment 
the table below shows the overall performance of continuing operations
2008 2007
£m £m movement
sales 2321 2161 7
headline
– operating profit 381 348 10
– pretax profit 380 344 10
– earnings per share 745p 470p
statutory
– operating profit 326 257
– pretax profit 319 256
– earnings per share 630p 369p
cash conversion 72 75
return on shareholders’ funds 
page 27 167 149
sales
sales increased by £160m to £2321m currency translation on overseas
sales contributed £46m of this increase while the net impact of
acquisitions and disposals lowered sales by £6m
on an underlying basis excluding the effects of currency translation and
acquisitions and disposals sales increased by £120m or 6 this £120m
increase was driven by
• smiths detection £55m reflecting the new contracts for airport
checkpoint detection systems high energy cargo screening and the
joint chemical agent detector jcad
• john crane £43m as a result of strong demand from the
petrochemical industry
• specialty – other £23m – driven by smiths interconnect and its new
contracts for usa 4g wireless broadband and new military
programmes and
• a decline of £1m in smiths medical reflects the operational challenges
of supply chain disruption and product recalls
profit
headline operating profit increased by £33m to £381m headline
operating margin increased to 164 2007 161 the £33m increase
in headline operating profit comprises £7m from favourable currency
translation £3m from the net impact of acquisitions and disposals made
during the year and a £23m or 6 increase in underlying headline
operating profit
the main drivers of the £23m underlying growth in operating profit are
• john crane £10m reflecting strong volume growth and price
increases
• specialty – other – comprising interconnect and flext ek £9m driven
by volume and price
• smiths medical £2m benefited from positive mix partly offset 
by higher costs as a result of supply chain problems and product
recalls and 
• detection £2m as a result of strong volume growth offset by adverse
currency transaction and mix
operating profit on a statutory basis after taking account of the items
excluded from the headline figures was £326m 2007 £256m
the net interest charge increased from £36m to £41m reflecting the
prior year benefit of £18m of interest income from the proceeds of the
aerospace sale there was a pensions financing gain of £42m 2007
£34m which reflected the funding position of the company’ s retirement
benefit schemes at july 2007
headline profit before tax increased by £36m to £380m the group’ s tax
rate on headline profit for the period was 240 2007 251 headline
earnings per share were 745p 2007 470p the comparison in earnings
per share is distorted by the share consolidation carried out in june last
year as part of the aerospace disposal on a proforma basis earnings
per share grew by 15
cash generation
headline operating cash flow totalled £273m representing 72 of
headline operating profit and reflects investment in capital projects and
increased working capital to support business growth the working
capital investment was particularly driven by the timing and nature of
contracts in detection and john crane net debt has increased since
july 2007 by £181m to £771m as a result of acquisitions and investment
in fixed and working capital to support growth
outlook
although the world economy is facing sustained upheaval and continued
uncertainties smiths group is well placed among global businesses to
meet the challenges smiths detection is expected to deliver growth
although there is likely to be some variability in the timing and pattern
of order flow – particularly in the us and india where there are
forthcoming elections john crane and smiths interconnect will
continue to benefit from their strong market positions the creation of
a unified john crane also offers cost benefits and enhanced customer
service in the future the performance improvement programme in
smiths medical is a key part of delivering better results flext ek will be
held back by the recession in the us construction market  13 smiths group plc annual report year ended 31 july 2008
business review smiths detection
sales by sector 
transportation
ports  borders
military
emergency responders
critical infrastructure
nonsecurity
15
5
11
8
23
38
stephen phipson
president
smiths detection is a world leading
designer and manufacturer of sensors
that detect and identify explosives
weapons chemical agents
biohazards narcotics and contraband
our technology helps customers in 
the global transportation ports and
borders critical infrastructure military
and emergency responder markets
we have the most comprehensive
range of detection technologies in 
the world including trace detection
millimetrewave infrared biological
detection and diagnostics
employees
2300
principal operating regions 
our eight manufacturing centres 
are concentrated in north america
germany france and the uk we sell
to over 100 markets around the world
either through a sales and marketing
company or a third party distributor 
customers
our technology is deployed at nearly
80 of the world’ s commercial airports
some 85 of sales are influenced by
more than 100 governments and their
agencies including homeland security
authorities customs authorities
emergency responders and the military 
these include the us department of
defense us transportation security
administration tsa uk ministry of
defence and airport operators such 
as baa in the uk
based on revised operating structure for 200809
see page 72 
percentage relates to headline operating profit
before corporate costs
2005 2006 2007 2008
sales performance £m
600
500
400
300
200
100
0
contribution to 2008 group sales
22
contribution to 2008 group headline
operating profit
22
competitors
data published by ims research
shows that in the combined
transportation critical infrastructure
and ports  borders sectors smiths
detection has a 29 market share
with ge security 155 l3 security 
detection systems 125 rapiscan
systems 85 and nuctech 8 the
main competitors in the military and
emergency responder markets not
included in this data the main
competitors are general dynamics
bruker environics and canberra
the world market for explosives weapons 
contraband detection equipment 2007 edition
markets 
homeland security is a top priority in western countries with 11 per
annum market growth expected the worldwide market for smiths
detection products and services is estimated to be worth £35 billion 
smiths detection’s products serve the transportation critical
infrastructure ports and borders military and emergency responder
markets the group also adapts technology developed for these markets
for carefully selected industrial applications in life sciences food quality
and safety 
the transportation sector which includes airports is the largest
representing 38 of total sales the airport security market is expected
to grow in response to 
• projected growth in air traffic 
• new security threats and 
• customer pressure for faster throughput at checkpoints and an
improved passenger experience
the critical infrastructure market is diversified with varying growth rates
in the different segments smiths detection focuses on three key areas
mass transit sports and events and government and military facilities
smiths detection has a growing invol vement in helping protect a number
of important metro systems in both the us and europe
the ports and borders market is a rapidly expanding sector driven by
government objectives of enhancing security screening and protecting
tax revenues customers require mobile and fixed units capable of
detecting explosives weapons radioactive materials narcotics and
contraband
the military market for uk and us technology is restricted by export
controls and these two governments form a large part of the market
which is characterised by tendering opportunities for large individual
contracts that typically run for several years smiths detection intends
to develop new business by expanding systems integration activity
offering improved functionality in protective shelters and introducing
new technologies through government funded partnerships
the emergency responder market is smaller than the others with us
sales accounting for more than 50 of global demand this market is
characterised by more localised purchasing decisions and steadier
growth
a possible future market is with biological detection and its application
to veterinary diagnostics smiths detection’s expertise in producing
rugged portable sensor equipment has enabled the development of a
fieldbased device which can detect a range of animal infections such as
footandmouth and avian flu it could also be developed for clinical
applications
the markets served by smiths detection are particularly influenced by
specific events and the perception of the threat of terrorist activity or
other security issues this perception itself has been and is likely to
remain variable 14 smiths group plc annual report year ended 31 july 2008
business review smiths detection continued
performance
2008 2007 reported underlying
£m £m growth growth
sales 509 438 16 12
headline operating profit 86 79 9 2
headline operating margin 168 180
statutory operating profit 85 65
reported sales grew by 16 and headline operating profit increased by
9 currency translation benefited sales by £17m and headline
operating profit by £5m on an underlying basis excluding the impact of
currency translation sales grew by 12 and headline operating profit
increased by 2 the key drivers of growth were contract wins for airport
checkpoint explosive detection systems for cargo screening systems
and for jcad the advanced chemical point detector  headline operating
margin declined from 180 to 168 reflecting the impact of currency
transaction and the timing and mix of new contracts compared to last
year  we also incurred additional costs associated with the scalingup of
our manufacturing to meet the strong customer demand for new
products the yearonyear impact of adverse currency transaction
amounted to some £9m which if excluded would give an underlying
operating profit margin of 18
the year had a very strong start with underlying sales growth of 21
compared with 6 in the second half this is a result of winning some
particularly large contracts in the first half of the year and some delays
to contracts at the year end it demonstrates the increasingly volatile
nature of the order flow of this government contracting business in
addition the strong growth in detection coupled with the increasing size
and changing payment terms of the new contracts has raised its
working capital requirements
in transportation we have benefited from the introduction of a new
generation of airport checkpoint explosive detection systems unlike
conventional xray systems this equipment captures multiple views of
carryon bags in a single sweep the system also includes powerful
software that helps the system operator detect potential threats and it
can easily be upgraded to meet future threats smiths detection has
won substantial contracts in the uk and us for this new equipment
which is helping airports to speed up passenger security checks to
support future demand a new 4000 square metre hightech production
plant was completed in wiesbaden germany in july overall
wiesbaden produced a record 5000 xray scanning units during 
the year 
our results also benefited from strong demand in the ports and borders
segment for advanced highenergy cargo screening solutions to inspect
inbound and outbound shipping containers and trucks deliveries to the
russian authorities from the st petersburg facility were completed in
december while a major order from us customs and border protection
is now being fulfilled
in the military segment the recently developed jcad programme has
begun to rollout with further orders received from the us department
of defense orders totalling 523m were received during the year  the
jcad is an advanced chemical point detector designed to help safeguard
troops by automatically detecting identifying and quantifying both
chemical warfare agents and toxic industrial chemicals we have begun
to expand production in the us with an extension of our facility at
edgewood construction began in 2008 and is expected to be completed
by january 2009
the implementation of a new erp system began during the second half
following 18 months of planning and preparation this single system will
replace 14 legacy business software systems and provide a common
information platform to support datadriven decision making nine sites
in the military and emergency responder area went live with the new
system in may 2008 the project is expected to conclude by the end of
calendar year 2009 investment to date has been £15m with a total
budget of £22m we anticipate that once complete the project will
generate efficiencies in working capital of £11m and annual cost savings
of £8m 15 smiths group plc annual report year ended 31 july 2008
new technology
enhances cargo
scanning 
our investment in rd
continues to drive advances 
in cargo screening the hcv
series of highenergy screening
equipment identifies both
contraband and security
hazards hidden in trucks and
other freight the hcv passthru
recently sold in the us features
advanced high throughput
technology which can scan 
200 trucks per hour enabling
customers to implement 100
cargo screening processes 
the new datasets management
system dms enables customs
officers to analyse images and
information taken at the
container’s departure point
remotely allowing them to clear
the container before its arrival
in the destination country 
research and development
smiths leadership in the sector is maintained by ongoing product
innovation developed by inhouse rd governmentfunded research
and through partnerships and licences companyfunded rd
increased by 10 to some £29m or 56 of sales 2007 59 of sales
this includes £8m of capitalised projects smiths detection actively
seeks customer and government support for rd which totalled £9m
in the period 2007 £7m t otal rd spend was £38m 2007 £33m or
7 of sales
key rd projects
xray screening continues to be a focus for our investment this has
supported the development of a new generation of cargo screening
which will be launched in the coming year  we have also continued to
invest in the development of our airport checkpoint explosive detection
systems particularly to address new threats
we have continued to invest heavily in chemical and trace detection in
september 2008 we launched two new handheld detectors for the
military and emergency responder markets highperformance
radioisotope identifier hprid is our first portable handheld radiation
detector which can be used for highly enriched uranium plutonium and
other radioactive substances we also launched the multimode threat
detector mmtd a portable device that detects a range of explosives
including the materials most commonly used in homemade bombs
smiths detection is developing technology that detects weapons
explosives and other potentially dangerous items concealed under layers
of clothing without physical contact the new system is based on
patented millimetrewave technology and creates video images that
reveal a far wider range of concealed weapons and hazards than is
possible with traditional people screening technologies with trials and
testing underway the system will offer a fast and efficient way of
scanning people as they enter airport checkpoints high profile buildings
or other facilities that require protection
diagnostics has also been an area of focus with the development of a
portable biological detection system that enables veterinarians to carry
out onsite diagnosis of animal diseases such as footandmouth and
avian flu the technology is now being developed for clinical applications
such as the detection and identification of mrsa sepsis or other medical
conditions
outlook
looking ahead the sector is set for continued growth and smiths
detection should benefit from its leadership position and the rollout of
new technologies we are wellpositioned for future growth although
the increasing size of contracts coupled with the irregular timing of
government contracting – particularly where there are elections –may
cause variability in the pattern of contract wins and working capital
requirements from period to period 16 smiths group plc annual report year ended 31 july 2008
business review john crane
sales by sector 
petrochemical
chempharma
commercial  refrigeration
industrial pulp and paper mining
other energy
6
23
4
17
51
paul cox
president
john crane is a worldleading provider
of products and services for the major
process industries these include the
oil and gas chemical pharmaceutical
pulp and paper and mining sectors 
we help to enhance customer
productivity by providing advanced
technology mechanical products
backed by an exceptional global service
network 
employees
6400
principal operating regions 
john crane is a global business with 
a presence in more than 50 countries
customers
john crane serves oil  gas
companies refineries pump and
compressor manufacturers chemical
and other process industries its main
customers include bp chevron china
petroleum conocophillips
exxonmobil gazprom qatargas saudi
aramco shell t otal dresser elliot
flowserve ge nuovo pignone itt
mitsubishi siemens solar turbines
sulzer y ork basf bayer dow koch
industries and lyondell
based on revised operating structure for 200809
see page 72 
percentage relates to headline operating profit
before corporate costs
contribution to 2008 group sales
27
contribution to 2008 group headline
operating profit
25
competitors
for rotating technologies in oil  gas
john crane’s main competitors are
flowserve and eagleburgmann
industries mechanical seals
kingsbury osborne engineering 
waukesha engineered bearings pall
hydac and boll filtration systems
thomas turboflex and kopflex
couplings for equipment in
upstream energy john crane’s
principal competitors include
weatherford norris upco cameron
and quinn
markets
john crane sustains the effective operation of customers’ rotating
equipment and other machinery with products that include mechanical
seals seal support systems engineered bearings power transmission
couplings and specialist filtration systems john crane also helps
maintain oil and gas productivity through the provision of downhole
pumping hardware all this technology is supported by a global sales
and service network that provides performance enhancing services
using expertise developed from decades of experience service teams in
more than 50 countries maintain and support customer assets
throughout their economic lifetime
john crane is experiencing strong demand for its products and services
particularly in the oil gas and petrochemical sector which is its largest
market john crane’s robust business model stems largely from the
aftermarket which represents twothirds of revenue at this stage in the
capital investment cycle the growth is in the sale of original equipment
for new production facilities this will provide aftermarket opportunities
in the future which are expected to generate attractive margins global
capital spending in the energy sector is projected to continue growing in
the long term in response to increasing energy demand 
john crane already has a global presence with local service centres in
more than 50 countries and hardware installed throughout the supply
chain for example liquefied natural gas lng produced in qatar and
ultimately drawn from the uk gas grid by consumers will have passed
through john crane seals and other technology at every point in its
journey  it is building on this platform in two ways 
first it is increasing its technological footprint by adding new product
lines these products typically also have a similar customer profile and
have strong aftermarkets
second there are approximately 850000 wells around the world and
many of these require oil and gas reserves to be brought to the surface
using artificial lift john crane is broadening into upstream energy
services which address a segment of this £700m per annum market
and leverage john crane’s strong global service and support
infrastructure 
over the past 12 months there have been significant developments in
both these areas the markets for these products are experiencing
significant growth resulting from the increasing consumption of oil this
growth is coming in both international and domestic markets in
addition we are also experiencing strong growth in the gas markets as
artificial lift systems are being used to dewater gas wells
700
600
500
400
300
200
100
0
2005 2006 2007 2008
sales performance £m 17 smiths group plc annual report year ended 31 july 2008
performance
2008 2007 reported underlying
£m £m growth growth
sales 626 532 18 8
headline operating profit 96 75 27 12
headline operating margin 153 141
statutory operating profit 39 1
john crane grew reported sales by 18 and headline operating profit by
27 sales benefited from currency translation £20m and from
acquisitions £30m giving underlying sales growth of 8 similarly
headline operating profit benefited from currency translation £4m and
from acquisitions £7m leaving an underlying growth rate of 12
margins increased by 120 basis points to 153 this strong growth has
been driven by high levels of investment by the petrochemical industry
reflecting the strong global demand for oil and gas
the growth in the petrochemical sector has increased original
equipment orders to record levels to help meet these requirements
john crane has invested over £5m worldwide to increase manufacturing
capacity by over 20
the provision of maintenance and repair services to customers through
the aftermarket represents twothirds of john crane’s sales the sale
of original equipment for new production facilities creates subsequent
aftermarket service opportunities that are delivered via john crane’s
network of service centres and the business has continued to build its
global service base local service centres are now sited in 52 countries
worldwide this capability allows us to provide a range of added value
services including repair root cause analysis alignment and condition
monitoring all designed to improve the performance of our customers ’
rotating equipment and reduce downtime current developments are
focused on key growth markets for example in saudi arabia we have
a new service centre in jubail and are building a new service sales
training and manufacturing facility in dammam the dammam facility
features an upgraded gas seals test capability and adds significant
service capacity in an area where extensive investment is planned by the
petrochemical industry over the next 10 years
production capacity has been increased by the creation of a new 5600
square metre 60 person manufacturing facility in mexico this factory
provides machining of seal parts seal welding and assembly in support
of the markets throughout the americas the increased capacity takes
advantage of the low cost base and availability of skilled machinists in the
mexico city area and is well positioned for future expansion 
another growth opportunity is china where we expect to complete a new
facility in tianjin by the end of 2009 this will support further growth and
enable the relocation and consolidation of two existing businesses to a
single site this new facility will accommodate sophisticated
manufacturing including assembly testing and enhanced product
development as well as providing a sales and service centre for the vast
domestic chinese market
major oil companies are making significant investments to develop the
canadian oil sands in northern alberta and saskatchewan where the 
oil reserves are thought to equal those of saudi arabia john crane
continues to add manufacturing capacity and support capabilities
throughout its canadian operations particularly in edmonton to service
the construction and maintenance of the refineries that bring this oil 
to market
helping ensure the
world’s oil and gas
keeps flowing
john crane invested £24m 
in a worldleading high
pressure seal testing facility 
at its manufacturing site in
slough uk one of the most
advanced of its kind in the
world the facility can test high
specification mechanical seals
under nearfield conditions at
pressures of up to 800 bar 
using a new remote weblink
the facility enables customers
to witness their seals being
tested in realtime from
wherever they are in the world
the facility is also being used by
the john crane rd team to
help develop new technologies
such as highpressure seals
that are increasingly requested
by customers 18 smiths group plc annual report year ended 31 july 2008
business developments
our customers are increasingly demanding larger and higher pressure
gas seals so we have invested in dry gas seal facilities in slough uk and
morton grove usa to support our customers’ objectives at the same
time one of the world’ s most advanced highpressure test rigs has come
onstream
in pursuit of its policy to increase its technological footprint john crane
completed a number of bolton acquisitions the acquisition of sartorius
bearing technology in november 2007 expands john crane’s offering
into the area of rotating bearings for turbo machinery while the
acquisition of indufil in march 2008 adds specialist filtration systems
the bearing business is a leading provider of engineered bearings for
high performance rotating equipment for the oil and gas industry based
in goettingen germany the acquisition cost of £13m was satisfied in
cash indufil was acquired for £71m and had sales of £25m in the
financial year ending 31 december 2007 it designs and manufactures
filtration systems for rotating equipment in the oil and gas chemical
and power sectors both businesses serve similar customers to john
crane with a strong aftermarket for their products a combination which
fits well with john crane’s business model
the acquisition of cdi energy services in march 2007 expanded john
crane’s upstream energy services capability this was boosted in
december 2007 with the acquisition of fibercomposite company inc
fiberod for £46m in calendar year 2007 fiberod reported sales of
£12m it is the world’s leading manufacturer of fibreglass sucker rods
complementing the cdi service offering 
as a sign of our solid commitment to both the japanese and the wider
asia pacific markets in december 2007 we increased our shareholding
in john crane japan a venture with starlite co limited to become the
majority shareholder the increased shareholding and operational
control gives john crane a greater presence in what is the second
largest market after the united states our new majority shareholding
will help us accelerate the levels of growth and investment in new
technologies which we are able to make in japan
the implementation of a new erp system is underway across europe
with 10 markets now successfully online the project will be rolled out
across europe and then into the middle east and asia investment to
date has been £17m out of a total project cost of £225m the project is
due for completion in june 2010 after which it should generate annual
cost savings of £95m
during the second half we began a restructuring programme to create
a global john crane business by merging the two existing regional
businesses through the creation of a global operations platform we
can provide better capacity and rapid delivery of products and services
we will also improve our service centre support capabilities and provide
distributed global account management teams for greater coordination
around the world going forward the product line will be managed
globally which will enhance service delivery to customers the project is
expected to cost £24m and deliver annual savings of £26m once
complete this initiative comes at a time when john crane is strong and
performing well an ideal time to build for greater success
outlook
looking ahead sustained growth in demand for oil and gas is likely to
continue to drive investment by petrochemical companies and original
equipment manufacturers into new technology and facilities the
addition of adjacent technologies to the portfolio will also support
growth
investment in equipment for new facilities not only provides short term
growth but provides the foundation for long term aftermarket business
with over 60 of our business derived from the aftermarket and new
equipment having an installed life of over 30 years we are well placed
for continued growth in this area
business review john crane continued 19 smiths group plc annual report year ended 31 july 2008
business review smiths medical
smiths medical is a leading supplier 
of specialist medical devices and
equipment for global markets
in medication delivery our devices 
help to treat cancer patients deliver
insulin to diabetics and provide relief 
to those in pain our vital care products
reduce hospital acquired infections
manage patients’ airways before
during and after surgery maintain
body temperature and assist
reproduction through ivf therapy  our
safety products keep health workers
safe by helping to prevent needlestick
injuries and reduce cross infections 
employees
8400
principal operating regions 
manufacturing is concentrated 
in mexico the us the uk italy and
germany  we sell to over 100 markets
worldwide with the us being our
largest single market with 49 
of sales
customers
we estimate that around three
quarters of our end customers are
hospitals with the remainder
comprising the alternate care market
such as home care clinics and other
surgery centres we have a direct sales
presence in 20 countries with
distribution arrangements in many
others
based on revised operating structure for 200809
see page 72 
percentage relates to headline operating profit
before corporate costs
srini seshadri
president
sales by sector 
medication delivery
vital care
safety devices
23
41
36
2005 2006 2007 2008
sales performance £m
750
600
450
300
150
0
contribution to 2008 group sales
31
contribution to 2008 group headline
operating profit
34
competitors
the competitive landscape for 
medical is complex as we compete
with different businesses across 
the wide range of product areas 
our competitors include covidien
t eleflexarrow b braun becton
dickinson hospira cardinal alaris
vital signs medtronic among many
others in many of these examples 
we only compete with a small 
portion of their medical businesses 
so comparison between peers 
is complex
markets
healthcare spending continues to increase worldwide driven by
demographics – aging populations and increasing prosperity
particularly in asia the overall world market for devices and equipment
of the type supplied by smiths medical is estimated to be worth £35
billion and is growing consistently  smiths medical has a global reach in
the design production and distribution of medical device products with
sales and marketing activities in over 100 countries its product ranges
serve three main markets – medication delivery vital care and safety  
medication delivery
smiths medical designs and manufactures drug delivery systems that
relieve acute and chronic pain cadd and medfusion chemotherapy
delivery systems to treat cancer patients cadd and patientfriendly
pumps to deliver insulin to diabetics cozmore the global market for
medication delivery products is estimated to be worth £15 billion and
growing at around 47 per annum this growth is due to the increase
in treatment of chronic conditions integrating medication delivery
devices with hospital it systems and the move to treating patients
outside hospitals we are a leader in ambulatory infusion with a strong
position in hospital infusion particularly in the syringe pump market
vital care
smiths medical’s products manage patient airways during and after
surgery portex aid patients with breathing difficulties portex
pneupac help to maintain body temperature level 1 monitor vital
signs such as blood pressure and heart rate bci medex and assist
reproduction through ivf therapy wallace the market for vital care
products is showing annual growth of around 24 partly due to a
steady increase in the incidence of chronic respiratory diseases and
obesity demand is increasing for single use devices such as portex
airway management products the market is expected to continue
growing as the number of operations and intensive care beds both
increase this market is currently worth about £15 billion a year  we are
a market leader in airway products
safety devices
smiths medical makes effective safety devices that prevent needlestick
injuries and reduce cross infections these cover a range of functions
including drawing blood samples jelco administering injections and
vaccinations jelco and delivering intravenous drugs deltec the global
market for safety products is estimated to be worth £500m and growing
at 35 per annum smiths medical is one of the world’s leading
suppliers of safety needles and catheters
in the us smiths medical is benefiting from the move towards treatment
of illnesses in their chronic rather than acute stages a number of
airway management products and ambulatory pumps already address
this trend – such as the cadd ambulatory infusion pump range and the
portex acapella respiratory therapy system – and it is becoming a focus
for our vital care products
the advantages of using safety devices are well understood in the us
and there is now greater recognition of the contribution safety devices
make to improving the safety and productivity of healthcare employees
in other geographic markets conversion to safety products is in its
infancy with opportunities for rapid future growth safety products are
also being introduced into other areas of healthcare such as dentistry  20 smiths group plc annual report year ended 31 july 2008
business review smiths medical continued
on a geographic basis our largest market is the us which accounts for
49 of sales and has experienced a 26 fall in sales as a result of the
supply chain disruption and product recall issues in europe sales have
grown by 24 w e have seen double digit growth albeit from a low base
in emerging markets served via our distributors particularly in latin
america and saudi arabia last year’ s investment in new infrastructure
for greater china contributed to a 30 growth in sales in that territory 
in the us a number of significant two or threeyear contracts were
agreed across the product portfolio during the period these include a
threeyear group purchasing organisation gpo contract with premier
purchasing partners to supply portacath® implantable access
systems to premier’s 1700 hospitals and almost 50000 other
healthcare sites across the us a new threeyear agreement has also
been signed with medassets for five categories of anaesthesia products
and a contract has been secured with amerinet for respiratory products
we secured major gpo contracts with hpg and broadlane for syringe
pumps in addition we signed a number of agreements from across the
portfolio with cardinal health which includes a groundbreaking
initiative for the cobranding of smiths edge safety needles over the
past year these and other gpo contracts totalling 32m have been
secured
there is an ongoing focus on margin improvement through cost control
and efficiencies the manufacturing rationalisation programme has
resulted in site closures at hythe uk and duluth georgia usa over
the past two years the proportion of all employees working in lowcost
countries has increased from 24 in july 2006 to 35 of our direct
manufacturing employees 62 are now working in mexico compared
with 44 in july 2006
the implementation of an erp system was restarted in june 2008 after
a period of stabilisation since the project was halted in 2007 the benelux
markets successfully went live in august 2008 such that more than 50
of global sites are now operating on the new system the project due for
completion in march 2010 will improve the quality of management
information and support inventory reductions global sourcing and
deliver savings the total budget is £32m of which £18m has been spent
to date once complete the project is expected to deliver annual cost
saving of £15m
business developments
we have announced a restructuring programme that will merge the two
existing operational units in the us this will create a more efficient
organisational structure and a single route to market giving a more
coherent customerfacing organisation the project is expected to cost
£4m and once complete generate annualised savings of £2m 
performance
2008 2007 reported underlying
£m £m growth growth
sales 703 691 2 0
headline operating profit 128 127 0 2
headline operating margin 182 184
statutory operating profit 106 106
at reported exchange rates smiths medical’s sales grew 2 while
headline operating profit remained in line with last year  excluding the
impact of currency translation the underlying growth in profit was 2
on flat sales operating profit margins reduced slightly by 20 basis points
performance has been severely affected by three product recalls and by
supply chain disruption caused by several longterm initiatives the
simultaneous relocation of manufacturing to lower cost regions the
integration of the medex acquisition and the implementation of a new
erp system have all posed operational challenges over the past two
years these factors combined to disrupt deliveries which in turn have
had an adverse impact on relationships with major customers a 24
month performance improvement programme has begun and a new
global operations team recruited to address these issues unfulfilled
customer orders peaked in june 2007 but as a result of the
performance improvement initiatives have since fallen by 90 back to
normal levels our immediate priority is the rebuilding of relationships
with customers and the delivery of the performance improvement
programme
while overall underlying sales growth was flat medication delivery grew
by 34 but was offset by declines in vital care of 1 and safety devices
of 29
medication delivery benefited from good growth in its infusion product
range particularly outside the us its performance in the us was held
back temporarily ahead of the launch of cadd solis which began in
april the access franchise which includes some new product launches
such as power ports and gripper micro grew well cozmore which
serves the diabetes market delivered strong growth outside the us but
sales were held back in the us by a product recall caused by a faulty
motor from a supplier the pain management franchise grew well
outside the us but supply chain problems and restructuring in the us
constrained overall growth
vital care’ s performance was affected by supply chain disruption and by
a product recall in temperature management the airway franchise
grew well in spite of supply chain problems and the assisted
reproduction area also delivered strong growth reflecting the growing
global demand however these performances were offset by declines
in temperature management caused by a product recall and aggressive
competitor pricing and declines in pressure monitoring caused by
supply chain disruption
the performance of safety devices was affected by declines in our
peripheral intravenous catheter franchise these declines were caused
largely by disruption to production schedules as a result of a problem
with resin from a supplier  the problem was quickly identified and no
faulty products entered the supply chain but supplies to our customers
were interrupted sales of safety needles also fell within the us market
but saw growth outside the us the decline in us sales was caused by
the conclusion of some large oem contracts during the year  21 smiths group plc annual report year ended 31 july 2008
research and development 
t otal rd investment has risen by 6 and as a proportion of sales has
increased from 35 to 37 looking forward we expect this
commitment to increase further  we are now focusing our investment
more tightly on product areas and segments which will deliver higher
growth for example the largest increase benefited medication delivery
where our rd investment in infusion pumps is typically much higher
at around 7 of sales in contrast our rd investment in safety
remained constant at 15 of sales which is in line with many of
competitors however we have invested in automated machinery to
drive capacity in summary we have increased the number of new
product launches by about 50 in the current year 
we have increased the rate of product launches with an improved new
product development process over the past year we have launched
several new products cadd®solis a next generation ambulatory
pump system replaces a 10 year old platform and features error
detection software and data connectivity to hospital it systems we also
launched the saft closed blood collection system® devices the dual
lumen implantable access systems p as port® t2 power p ac
and portacath® ii power pac the theraheat heated
humidification system and the gripper® micro safety needle a full
range of edge safety needles was also launched together with the
latest closed blood sampling product hemodraw which is already
winning market share in the us since the year end we have launched
smartx® a wireless blood pressure monitoring system uniperc™ a
tracheostomy tube for patients with large necks sacett which helps
to reduce hospital acquired infections and two lower cost intubation
devices for the chinese market 
outlook
the key priority for smiths medical is to improve customer service and
implement the performance improvement programme the division will
focus on growth in developing markets and globally through the launch
of new products the performance improvement programme will
support a return to sales growth in line with its end markets the focus
in the short term will be on margin improvement through restructuring
and operating efficiencies a planned review of portfolio profitability may
lead to the rationalisation of certain product lines and a short term
impact on revenue growth
revolutionising
portable
medication
delivery 
smiths medical’s revolutionary
cadd®solis portable
medication delivery system
eases patients’ pain enabling
them to stay mobile whilst
undergoing treatment
cadd®solis is a clinically 
and technologically advanced
system that administers pain
relief medication including
narcotics to postsurgery
trauma cancer and labour
patients its innovative safety
software allows hospitals to
input their own standardised
pain management protocols 
for their patients helping to
prevent accidental overdoses 
cadd®solis was developed 
in cooperation with expert
clinicians and the university
health network in t oronto 22 smiths group plc annual report year ended 31 july 2008
sales by sector 
milaero
wireless
medical
other
smiths interconnect is an electronic
components and subsystems
business providing signal power 
and microwave solutions that are
application specific and incorporate
innovative technologies to help 
our customers achieve ultimate
system performance
we design and manufacture
specialised electronic and radio
frequency products that connect
protect and control critical systems 
for the global wireless
telecommunications aerospace
defence space and medical markets
employees 
3100
principal operating regions
smiths interconnect operates globally
and has locations in the us mexico
costa rica ireland uk france
germany italy tunisia india china
and australia
customers
smiths interconnect supplies to
multiple levels of the supply chain and
its blue chip customers include primes
and service providers oems and
system suppliers and subsystem
manufacturers amongst our largest
customers are raytheon
finmeccanica bae systems
aait extron northrop grumman
ericsson motorola sprint nextel zte
ge medical and alstom
based on revised operating structure for 200809
see page 72 
percentage relates to headline operating profit
before corporate costs
contribution to 2008 group sales
11
contribution to 2008 group headline
operating profit
13
competitors
smiths interconnect operates in 
a fragmented market with many 
small and mediumsized competitors
in connectors the competitors include
amphenol deutsch radiall and
souriau microwave components
competes with amongst others
anaren spectrum control and 
parts of macom and dover  
the competitors of microwave 
subsystems include cobham ems
t eledyne and l3 protection competes
with huber  suhner dehn and parts
of sl industries
6
17
28
49
markets
the two largest markets for smiths interconnect are defence and
wireless telecommunications 
t ypical military applications for smiths interconnect technology include
unmanned aerial systems uas nextgeneration ground vehicles
communications systems surveillance systems and selfprotection
systems its rugged connectors and radio frequency products are
deployed in the most extreme environments such as keeping military
personnel and systems connected in areas of conflict
in the evolving field of mobile telecommunications smiths interconnect
supplies niche microwave components used in the base stations and
cell sites as well as protection solutions to safeguard the high value
infrastructure from the effects of lightning strikes and power surges and
maintain network integrity  
other applications for smiths interconnect products include medical
equipment such as mri scanners space and satellites commercial
aerospace and mass transit
smiths interconnect comprises four focused technology areas
• connectors provides applicationspecific highreliability electrical
interconnect solutions from highly integrated assemblies to micro
miniature connectors 
• microwave components provides passive microwave products used
within the building blocks that generate transmit receive and process
high frequency signals for communication systems
• microwave subsystems provides microwave and millimetrewave
subassemblies antennas and systems solutions for both defence
and commercial applications 
• protection provides signal and power integrity components that protect
high value electrical systems from surges caused by power spikes and
lightning strikes
performance
smiths interconnect delivered strong underlying sales and profit growth
sales growth was driven primarily by three technology areas protection
microwave subsystems and connectors
the performance of the protection technology group was enhanced by
sales of lightning and surge protection solutions supplied to major us
4g wireless broadband providers for mobile internet access it benefited
from sales of protection solutions to medical and telecommunications
customers the division has also made key wins in the defence sector
for protection of ground mobile communication systems
microwave subsystems saw strong sales growth through several us
military programmes including the threefrequency band data link
mdas which supports multiple unmanned aircraft systems positions
on three new satellite communications programmes for us forces were
also secured one is a shipboard communications programme and the
other two are satellite communications on the move sotm
programmes and warfighter information networkt actical win t the
us army system for reliable secure and seamless high bandwidth
mobile communications in areas of conflict
300
250
200
150
100
50
0
2005 2006 2007 2008
sales performance £m
business review smiths interconnect
ralph phillips
president 23 smiths group plc annual report year ended 31 july 2008
the connector group delivered good sales growth but profit was held
back by a slowdown in italy key wins were secured on several major
defence programmes and our connectors were selected as the high
reliability standard for future nasa space applications major product
orders were also received for medical mri scanners civil aerospace and
rail traction
the microwave components group delivered a small underlying
increase in sales as a result of a lower than expected demand from
chinese and north american telecom operators however we have
seen continued strong demand for filters used to combat improvised
explosive devices and other components for a variety of applications
including commercial satellite programmes
smiths interconnect successfully expanded its global capacity
particularly in lower manufacturing cost environments during the year
operations were opened in t unisia and india while we continued to build
our operating base in china mexico and costa rica over the last year
the proportion of smiths interconnect products manufactured in low
cost countries has more than doubled
business developments 
over the course of the past six months smiths interconnect has acquired
shanghaibased allrizon t ongguang and brisbanebased t riasx pty ltd
these strengthen our position in the growing asian market allrizon
offers firstclass technology providing new channels to market and
enhanced relationships with the rapidly growing chinese telecoms
manufacturers in the 2007 calendar year allrizon posted sales of
£53m t riasx has indepth knowledge of the telecommunications radio
frequency market and an excellent rd capability its strong filter
capabilities complement our existing products particularly those from
allrizon while the triasx interference testing devices fit well with 
our existing summitek test and measurement business in the year to
30 june 2008 triasx reported sales of £125m
outlook
there are good opportunities for smiths interconnect to grow organically
– particularly in developing markets – and scope exists to improve the
portfolio and extend its geographic reach through bolton acquisitions
military communications is anticipated to be an area of continued
investment by governments and the further rollout of wireless networks
is expected with the highest growth in developing markets smiths
interconnect’ s markets remain robust and are set for continued growth
the advanced mobile
directional antenna system
mdas is a sophisticated multi
band communication system
that facilitates communications
with unmanned aerial vehicles
uavs designed and built by
smiths interconnect business
t ecom industries mdas is 
a rugged portable antenna
which is typically mounted 
on vehicles
uavs are commonly used 
in reconnaissance missions 
to scout an area for threats
when the environment is too
dangerous for it to be patrolled 
the mdas system enables
tracking and communications
with multiple uavs relaying real
time pictures and video to the
soldier and command forces
keeping soldiers
connected and
protected in
extreme
environments 24 smiths group plc annual report year ended 31 july 2008
flext ek provides engineered
components that heat and move fluids
for the aerospace medical industrial
construction and domestic markets 
our flexible hosing and rigid tubing 
is deployed on commercial aircraft 
as well as in motorsport for fuel and
hydraulic applications in the home our
technology can be found in domestic
equipment including vacuum cleaners
and hvac systems support
employees 
2400
principal operating regions
flext ek conducts a majority of
business in the us but also has
manufacturing in the uk france
malaysia india china and mexico
customers
flext ek serves mainly domestic
appliance manufacturers and the 
us construction industry  its large
customers include whirlpool trane
pratt  whitney carrier boeing
electrolux respironics ge aerospace
airbus panasonic hoover and dyson
based on revised operating structure for 200809
see page 72 
percentage relates to headline operating profit
before corporate costs
contribution to 2008 group sales
9
contribution to 2008 group headline
operating profit
6
tedd smith
president
sales by sector 
housing
appliances
aerospace
medical
general industry
3
25
21
25
26
markets 
flext ek designs and manufactures engineered components which heat
and move fluids and gases for aerospace consumer products and
construction applications its products include proprietary hose and
tubing technology engineered thermal systems and heating elements
flext ek manufactures specialised highperformance tubing for the civil
and military aerospace industry and supplies most major aircraft and
engine manufacturers flextek’s customers also include leading
domestic appliance manufacturers and the us construction industry  in
addition it supports specialised original equipment manufacturers
oems with a wide range of solutions for equipment used to treat sleep
disorders semiconductor manufacture and temperature control in
extrusion and large commercial heating and ventilation
demand is normally a function of overall economic growth the air
transport market and the strength of the us construction industry 
flext ek goes to market via three distinct technology areas
smiths tubular systems aerospace
meeting the aircraft industry’s need for rigid and flexible hydraulic and
fuel hose sts aerospace delivers high performance airframe fluid
management systems that are also deployed in the world of motorsport
flexible solutions
focusing on flexible hose assemblies for a range of domestic appliance
manufacturers the flexible solutions group makes both high and low
pressure hose assemblies for oems it also supplies ducting for
purposes ranging from chemical transfer to grain handling
heat solutions
comprising specialised heating elements and thermal systems hvac
ducting and gas delivery tubing the heat solutions group’s products
serve customers that manufacture tumble dryers hvac equipment and
specialized oem customers described above ducting and gas delivery
tubing is largely supplied to the construction industry via distributors
performance
flextek experienced declines in sales and profit as a result of the
recession in the us residential construction markets and household
appliances market however these declines were offset in part by the
strong growth in sales of components and services to the aerospace
market and by the benefit from the acquisition of fast heat in january 
smiths tubular systems aerospace delivered strong growth in sales
and profit this technology group benefited from the high demand for
fluid distribution components and services for commercial and military
aircraft for example flextek secured an 18m contract for the
provision of flexible and rigid fuel and hydraulic hoses on the boeing 787
dreamliner  through a combination of price rises to offset raw material
cost increases and a focus on cost management we were able to
improve margins
flexible solutions experienced declines in sales and profit as a result of
continued pressure in the household appliance and general industrial
sectors the domestic appliance market has fallen by some 6 over the
past year while the general industrial market is tied to gdp 
300
250
200
150
100
50
0
2005 2006 2007 2008
sales performance £m
business review flextek
competitors
smiths tubular systems aerospace
competitors include parkerhannifin
and eaton as well as outsourced
capacity from its key customers
flexible solutions competes globally
with a number of smaller privately
owned businesses which manufacture
specialty hoses heat solutions
domestic appliance and specialty
heating element competitors include
emerson watlow and chromalox
whilst the construction related
products competitors are comprised 
of hitachi atco omegaflex 
hart  cooley and goodman 25 smiths group plc annual report year ended 31 july 2008
racing ahead in
world motorsport
in the competitive world 
of motorsport flext ek’s
advanced technology is helping
the winning teams to achieve
optimal performance flex
t ek’s highly specialised tubing
which provides fuel to engines
and hydraulic control for
landing gear and reverse
engine thrusters on aircraft
including the boeing 787
dreamliner is also deployed 
on the winning cars in high
performance motorsport 
our highly engineered
components – manufactured 
at our facility in laconia new
hampshire usa and paris
france – are designed for fuel
and braking in these very
demanding applications and 
are used by the major f1 
and nascar teams 
the heat solutions group supplies heating components for tumble
dryers and hvac ducting and related equipment to the us construction
market primarily to the residential sector the recession in the us
construction market saw a 30 decline yearonyear in building permits
and a 28 fall in housing starts similarly the us electric dryer
appliance market declined by around 6 against this background sales
and profit fell – although the impact on profit was partly mitigated
through careful cost management at the beginning of the year the
group completed a reorganisation and consolidation of manufacturing
in t ennessee which has cut costs and improved customer service
business developments
in january 2008 to extend flextek’s range of specialty heating
solutions smiths acquired fast heat for 18m now integrated into the
heat solutions group this business manufactures heating elements
and controls used for plastic injection moulding and packaging
equipment employed in the manufacture of medical products and semi
conductors
flext ek is broadening its global footprint particularly in asia where its
existing plant in malaysia continues to expand over the past year it has
added new manufacturing facilities in bangalore india the clark
freeport zone philippines and changzhou china the facilities in india
and philippines are aimed at better serving its aerospace customers
following increased demand due to the growth of air traffic in asia the
facility in changzhou is focused on the growing hvac and household
appliance market in china
as part of the group restructuring flextek has also announced a
programme to reorganise its operations to drive efficiency
improvements the programme will cost £5m in total and once complete
will deliver annualised savings of £7m
outlook
flextek is facing continued uncertainty in the us residential
construction and household appliance markets it will continue to
rationalise its portfolio of sites and reduce costs in order to deliver future
value when these markets improve the growth opportunities in
aerospace and developing markets will also be a focus 26 smiths group plc annual report year ended 31 july 2008
financial review 
changes in group composition
we continued to improve the portfolio and business mix through a
number of acquisitions and disposals during the year  in november
sartorius bearing technology a leading provider of high performance
rotating equipment for the oil and gas industry was acquired for £13m
in november smiths sold its marine systems business for £44m after
a working capital adjustment in december smiths acquired the
majority ownership of the john crane business in japan for a
consideration of £5m increasing its ownership share from 49 to 70
in february the heating element division of fast heat was acquired for
£9m it manufactures a wide range of specialty heating elements for
hvac industrial and medical applications in april john crane acquired
indufil bv for £71m a dutchbased specialist in filters for the
petrochemical and process industries in may smiths interconnect
acquired allrizon t ongguang a communications equipment firm based
in shanghai which designs and manufactures radio frequency filters
and products for the wireless telecommunications market the
acquisition of fiber composite company inc fiberod a texasbased
specialist provider of lifting equipment for the oil and gas industry was
completed in may  in july smiths interconnect acquired triasx pty ltd
a firm based in brisbane that designs and manufactures complex radio
frequency filter products for the wireless communications market
earnings per share 
basic headline earnings per share from continuing activities were 745p
2007 470p a rise of 59 
on a statutory basis the basic earnings per share from continuing
activities were 630p 2007 369p 
these comparisons are distorted by the effect of the share consolidation
in june 2007 following the disposal of the aerospace business the
average number of shares in issue during that year was a reflection of
the capital structure appropriate to both the continuing and the
discontinued business
exceptional and other items relating to continuing activities 
excluded from headline profits 
these items amounted to £59m compared to £88m in 2007 they
comprised
• £4m in respect of restructuring corporate and divisional headquarters
this cost is the initial part of a programme expected to cost
approximately £48m
• £9m for integration costs associated with the medex acquisition 
2007 £9m
• £54m 2007 £101m in connection with john crane inc asbestos
litigation including a £40m provision for adverse judgments see
litigation paragraph on page 29
• amortisation of intangible assets acquired in business combinations
of £19m 2007 £15m the amortisation relates principally to
technology and customer relationships and 
• profit on disposal of businesses of £27m 2007 loss of £5m
exceptional items in 2007 included insurance commutation proceeds
£43m profit on sales of ti automotive shares £24m and other costs
of £26m
financing losses amounted to £2m 2007 gain of £1m these represent
the results of derivatives and other financing instruments which are not
hedge accounted under ifrs of this sum nil 2007 £15m was charged
to operating profit
cash generation 
headline operating cashflow was £273m representing 72 of headline
operating profit this compares to operating cash of £259m in 2007 and
cash generation of 75 the cash generation outcome this year reflects
investment in capital projects and increased working capital to support
business growth in the new year  
on a statutory basis net cash inflow from continuing operations was
£198m 2007 £205m 
cash expenditure on exceptional items was £26m compared with an
£8m inflow in the previous year the group made special pension
contributions of £34m 2007 £56m free cashflow from continuing
operations after interest and tax but before acquisitions and dividends
was £91m 
dividends paid in the year on ordinary shares amounted to £131m
compared with £182m in 2007
interest and other financing costs 
for continuing operations interest payable on debt less interest on cash
deposits was £41m compared with £36m in 2007 net interest costs
were 93 times covered by headline operating profits 
the group accounts for pensions using ias19 as required by this
standard a finance credit is recognised reflecting the expected return on
pension scheme assets and a finance charge is recognised reflecting
the unwinding of the discount on the future pension liability the net
financing income for continuing operations was £42m in 2008 compared
with £34m in 2007 as a result of the reduction in pension surplus the
amount in the coming year is likely to be approximately £35m lower 
net debt 
net debt at year end was £771m up from £590m at the start
research and development 
investment in research and development rd drives future
performance and is a measure of the group’ s commitment to the future
organic growth of the business 
smiths invested a total of £86m in rd on continuing operations
equivalent to 4 of sales of that total £13m was funded by customers
the comparative figures for 2007 were £79m and £8m under ifrs
certain of these development costs are capitalised the gross
capitalisation is shown as an intangible asset where customers
contribute to the costs of development the contribution is included as
deferred income and disclosed within trade and other payables  27 smiths group plc annual report year ended 31 july 2008
accounting policies 
the accounts in this report are prepared under international financial
reporting standards ifrs as adopted by the european union eu
the accounting policies used in preparing these accounts are set out
on pages 63 to 68 
significant judgements key assumptions and estimates 
applying accounting policies requires the use of certain judgements
assumptions and estimates the most important of these are set out
on page 63 
the uncertainty affecting the estimation of provisions has increased
following the commutation of certain insurance policies in respect of
product liability  see legal issues section page 29 for details
taxation 
the tax charge for the year represented an effective rate for continuing
operations of 240 on the headline profit before taxation compared to
251 in 2007 the rate reduced due to taking advantage of global tax
incentives the taxefficient use of capital and active tax compliance
management on a statutory basis the tax charge on continuing
activities was £75m 
the fundamental tenets of the smiths approach to taxation are to
enhance the company’s competitive position on a global basis while
engaging with tax authorities around the world on a basis of full
disclosure full cooperation and full legal compliance the board
considers and approves the management of the company’s tax affairs
in the context of the company’s commercial objectives 
accordingly smiths seeks to build open relationships with tax authorities
to bring about timely agreement of tax affairs and to remove uncertainty
on business transactions 
in summary the company’s taxation strategy is to mitigate the burden
of taxation in a responsible manner for competitive advantage and in
this way to enhance longterm shareholder value
cost of capital and return on shareholders’ funds 
smiths uses its weighted average cost of capital as one measure to
appraise both internallygenerated investment opportunities and
acquisitions during 2007 the company’s weighted average cost of
capital wacc decreased from 9 to 8 as a result of the lower cost of
equity  
the aftertax headline return on shareholders’ funds for continuing
operations including goodwill setoff against reserves was 167 2007
149
retirement benefits
as required by ifrs the balance sheet reflects the net surplus or deficit
in retirement benefit plans taking assets at their market values at 
31 july 2008 and evaluating liabilities at yearend aa corporate bond
interest rates 
the yearend retirement benefit position was
2008 2007
funded plans
uk plans – funding status 106 113
us plans – funding status 89 92
other plans – funding status 81 83
2008 2007
£m £m
surplusdeficit
funded plans 102 297
unfunded plans 113 114
t otal surplusliability 11 183
company contributions to the funded pension plans were £56m 2007
£103m including discontinued operations in 2008 special contributions
were made totalling £17m including £4m in respect of the aerospace
disposal in 2007 special payments of £56m were made including £21m
in respect of the aerospace disposal during the year the trustees of
the ti group pension scheme invested £250m in annuities from legal
 general which are matched with specific liabilities of the scheme
thereby mitigating the longevity risk in respect of specific pensioners
full details of the retirement benefits are shown in note 10
exchange rates
the results of overseas operations are translated into sterling at average
exchange rates the net assets are translated at yearend rates the
principal exchange rates expressed in terms of the value of sterling are
shown in the following table
2008 2007
average rates
us dollar 200 195 dollar weakened 25
euro 135 148 euro strengthened 88
y earend rates
us dollar 198 204 dollar strengthened 29
euro 127 149 euro strengthened 147
dividend policy
an interim dividend of 105p per share was paid on 25 april 2008 a final
dividend of 235p per share is proposed
the board intends to grow dividends consistent with increasing cover to
around 25 times in the medium term dividend cover relative to headline
earnings for the year ending 31 july 2008 was 22 times 28 smiths group plc annual report year ended 31 july 2008
goodwill and intangibles
goodwill on acquisitions has been capitalised since 1998 until 1 august
2004 it was amortised over a maximum 20year period under ifrs
goodwill is no longer amortised but instead is subject to annual reviews
to test for impairment
the goodwill balance was tested for impairment in 2008 and 2007
treasury
smiths decentralises treasury management over its financial risks to
its subsidiary businesses within a strong control environment the
board has approved a treasury policy which governs the financial risk
profile and treasury permits appropriate delegated authorities across
the subsidiary companies the company uses financial instruments to
raise money for its operations and to manage the related financial risks
smiths neither speculates nor trades in derivative financial instruments
and all financial instruments are properly recognised on the balance
sheet a treasury report is presented annually to the audit committee to
confirm compliance with policy 
the objectives of the treasury function are to
1 to deliver the liquidity requirements of the businesses 
costeffectively
the group aims to minimise the level of surplus cash but where
surpluses arise tight controls apply to ensure that they are securely
placed with highlyrated counterparties and are available for
redeployment at short notice the company is required under ifrs to
show gross borrowings and cash under its cash pooling arrangements
despite these balances being netted for interest purposes which
exaggerates the company’s surplus cash balance liquidity is provided
to the group by a committed revolving credit facility to 2012 which at 
31 july 2008 was £450m undrawn local working capital needs and capital
expenditure requirements are typically funded by local bank facilities
2 to manage the central funding demands and provide a low cost 
of debt
the company’s funding requirements are largely driven by acquisition
activity and met by centrally arranged debt finance smiths has net debt
as at 31 july 2008 of £771m 2007 £590m with average maturity of 4
years 2007 5 years and at an average effective interest rate after
interest and currency swaps of 51 2007 58 through the use of
interest rate swaps smiths maintains a broadly even mix of fixed and
floating rate debt credit ratings have been held at bbbbaa2 stable
with standard  poor’s and moody’s respectively accordingly this
approach aims to reduce the cost of capital by optimising financial
liabilities
3 to develop and maintain strong and stable banking 
relationships and services
smiths has a core group of 11 leading global banks and financial
institutions that competitively tender for treasury business credit
exposures to any one bank are carefully controlled
4 to provide reasonable protection from foreign 
currency volatility
smiths has adopted hedge accounting for the majority of the group’s
business at its larger sites thereby mitigating the impact of transactional
exposures in the income statement material crossborder sales or
purchase contracts in foreign currencies are hedged at their inception
by appropriate derivative financial instruments principally forward
foreign exchange contracts and swaps with the group’s core banks as
counterparties whilst the trends of foreign currency movements cannot
be eliminated this hedging programme reduces volatility protecting
cashflow and margins
smiths protects its reserves from foreign currency fluctuations by
ensuring that at least 75 of the total net overseas operational assets
are offset either by borrowings in the respective currency or by currency
swaps this excludes goodwill which is only partly hedged overseas
earnings are translated at average currency rates for the year which
smoothes the effect of currency volatility 
therefore treasury management in smiths ensures a robust and
prudent financial profile while driving value for shareholders with the
support of worldclass banks
financial controls
while the group’s decentralised organisation delegates daytoday
control to local management smiths has comprehensive control
systems in place with regular reporting to the board the group has
continuous formalised business risk management processes operating
at each business unit
the internal audit department reviews all units over a rolling threeyear
cycle and its findings are reported to the audit committee all
acquisitions are reviewed within 12 months of acquisition to verify
compliance with group procedures
further information regarding the group’ s procedures to maintain strict
controls over all aspects of risk including financial risk are set out in the
corporate governance report on pages 43 to 46
financial review continued 29 smiths group plc annual report year ended 31 july 2008
legal issues
smiths is committed to operating within the law in all applicable
jurisdictions and seeks to benefit from the rights and protections
afforded by relevant laws the company aims to anticipate and meet the
changing requirements of the markets it serves as legal and regulatory
reforms impact those markets
smiths faces different types of legal issues in different jurisdictions the
high level of activity in the us for example exposes the company to the
likelihood of various types of litigation commonplace in that country
such as ‘mass tort’ and ‘class action’ litigation and legal challenges to
the scope and validity of patents these types of proceedings or the
threat of them are also used to create pressure to encourage negotiated
settlement of disputes
in addition contracting with the us government subjects a company to
numerous stringent regulatory obligations calling for an active
programme of compliance reporting and communication by contrast
the company’s activities in some countries with less developed legal
systems pose challenges for the protection of corporate assets such as
real estate and intellectual property rights
in order to address the challenges and exploit the opportunities arising
from these and other legal issues smiths employs experienced lawyers
in head office and certain operations and retains the services of law
firms around the world
john crane inc litigation
john crane inc jci an indirect subsidiary of the company is one of
many codefendants in numerous lawsuits pending in the usa in which
plaintiffs are claiming damages arising from alleged exposure to or use
of products containing asbestos the jci products generally referred to
in these cases consist of industrial sealing products primarily packing
and gaskets the asbestos was encapsulated within these products in
such a manner that according to tests conducted on behalf of jci the
products were safe john crane ceased manufacturing products
containing asbestos in 1985
jci has resisted every case in which it has been named and intends to
continue its robust defence of asbestosrelated claims based upon this
‘safe product’ defence as a result of its defence policy jci has been
dismissed before trial from cases invol ving approximately 159000 claims
over the last 29 years jci is currently a defendant in cases involving
approximately 136000 claims despite these large numbers of claims
jci has had final judgments against it after appeals in only 70 cases
amounting to awards of some us70m over the 29 year period
the 2007 annual report noted that jci had secured the commutation
of certain liability insurance policies resulting in proceeds of £43m
while substantial excess liability insurance remains in place the exact
scope of the cover is currently the subject of litigation in the united states
in the circuit court of cook county illinois in the meantime jci has
begun to meet defence costs directly and intends to recover appropriate
contribution from insurers in accordance with the terms of the
remaining policies in due course the 2007 annual report noted that jci
has made a provision for defence costs of £101m based upon an
assessment of the probable costs of defending known and expected
future claims in establishing this provision no account has been taken
of recoveries from insurers as their nature and timing are not yet
sufficiently certain to permit recognition
during the current year jci has charged £5m in respect of adverse legal
judgments delivered despite jci’s commitment to its safe product
defence history shows that juries will occasionally return adverse
verdicts which can be difficult to overturn on appeal a further £40m has
therefore been charged to establish a provision for future adverse
judgments in deciding upon this amount jci has relied on expert advice
from a specialist in asbestos liability estimation 30 smiths group plc annual report year ended 31 july 2008
risks and uncertainties
smiths is exposed to the following principal risks if any of these risks
or other significant unforeseen risks materialise they could have a
significant adverse effect on not only our business and financial condition
but also our reputation and the trading prices and liquidity of our
securities this could lead to a loss for investors of part or in a worst case
all of their investment
smiths seeks to mitigate significant identified risks through risk
management processes appropriate group policies and other
measures including insurance where we regard it as appropriate and
economic but there can be no assurance that such measures will be
effective in any particular case
competition innovation and major projects
smiths operates in highly competitive markets where some competitors
may have greater resources than we do and where the entry of new
competitors the consolidation of competitors and changed or irrational
behaviour by competitors could all have a significant adverse impact on
our business 
continued development of new products and improvements to existing
products is critical to the future of the business and competitors may
innovate in these areas more effectively than we do with significant
adverse consequences for smiths
smiths develops new technologies and introduces new products in
some cases contracting to supply the products to the customer before
the design is established or proven all new technologies and products
involve risk including possible abortive expenditure reputational risk
and potential customer claims or onerous contracts the same is true
for investment in new facilities and other major projects such risks if
they materialise may have significant adverse consequences for smiths
raw materials and inability to supply
smiths products contain various raw materials or purchased
components including electronic components metals and plastics
increases or volatility in prices and shortages in supply could have a
significant adverse effect
inability to supply against contractual commitments is a risk which
could materialise in a number of different scenarios and which could
have a significant adverse effect
given the competitive nature of the markets in which smiths operates
any loss of customer confidence resulting from failure to supply may be
difficult or impossible to recover 
global political and economic conditions
operating in over 50 countries smiths is exposed to political and
economic risks including possible terrorist action
some 43 of total sales are to customers in the us and the group is
therefore particularly affected by us economic conditions
smiths may be impacted by adverse changes in general economic
conditions including interest rates and the availability of credit exchange
rates and inflation and the effect of these could be significant in
addition demand for products from the detection and interconnect
divisions is significantly dependent on spending by governments and
government agencies and aside from the impact of general economic
conditions these businesses may suffer significant adverse effects if
these customers reduce their spending 
information technology
smiths is dependent on information technology systems for both
internal and external communications and for the day to day
management of its operations with a number of key enterprise resource
planning projects in the course of implementation across the group any
disruption to these systems or delays or failures in the implementation
of these projects could have significant adverse consequences for the
group
acquisitions and disposals
smiths is an active acquirer of other businesses and companies
acquisitions may involve risks that might have a material impact on 
the group
the sale and purchase agreement governing the sale of the aerospace
business to ge aviation uk in 2007 contains certain warranties and
indemnities in favour of ge aviation uk if costs should be incurred under
any of these warranties or indemnities or similar such provisions in
other agreements for the disposal of businesses these could have a
significant adverse effect 
controls
smiths information systems personnel and facilities are subject to
security risk and failures in security systems or processes could have
significant adverse consequences as could failures in the group’s
various corporate governance and internal controls or non compliance
with the smiths code of business ethics
legislative and regulatory
smiths is subject to a broad range of laws regulations and standards in
the jurisdictions in which it operates unexpected changes in these laws
or regulations or failure to comply with them could have significant
adverse consequences
the detection interconnect and medical divisions are particularly
subject to regulation with certain customers and regulatory or other
enforcement bodies routinely inspecting the group’s practices
processes and premises a compliance problem arising in one of these
or any other of smiths divisions could have significant adverse
consequences for the group as a whole 
litigation and product liability
smiths is subject to litigation risk including but not limited to product
liability risks many smiths products are used in critical applications
where the consequences of a failure could be extremely serious and in
some cases potentially catastrophic with significant adverse
consequences for the group
remediation of design manufacturing or other product defects could
require smiths to recall products with significant adverse consequences
for the group
john crane inc a subsidiary of smiths is currently one of many
defendants in litigation relating to products previously manufactured
which contained asbestos
the outcome of legal action is always uncertain and there is always the
risk that it may prove more costly and time consuming than expected
both current and potential future litigation could have significant adverse
impact on the group 31 smiths group plc annual report year ended 31 july 2008
environmental and external
the environmental laws of the jurisdictions in which smiths operates
impose actual and potential obligations to remediate contaminated sites
including some sites no longer owned by smiths there is a risk that
remediation could prove more costly than expected or that further
contamination could be discovered with significant adverse
consequences for the group because of the location of its operations
smiths is also exposed to a number of natural catastrophe risks such
as earthquakes floods hurricanes and other types of storm which like
other external events such as terrorist attacks or a disease pandemic
could have significant adverse consequences for the group
financial
smiths is exposed to two types of currency risk transaction risk in
respect of products manufactured in one currency region and sold in
another currency and translation risk in that the results of nonuk
businesses will translate into differing pounds sterling values depending
on the exchange rate
smiths is exposed to credit risk particularly in relation to customers
banks and insurers both currency and credit risk could result in
significant adverse consequences for the group
in addition whilst in recent times smiths has had an effective tax rate of
approximately 24 there can be no guarantee that this rate will remain
below the prevailing tax rate applicable in the territories in which smiths
operates 
pension funding
the group operates significant pension plans as a result of which smiths
is subject to various funding risks including poor performance of the
investments particularly equity investments increased longevity of
members and changes in valuation and funding assumptions any of
which could have significant adverse effects
human resources
smiths employs approximately 22000 people around the world and
faces considerable competition in recruiting and retaining the talented
individuals it needs to ensure that it is successful failure to recruit these
staff andor a loss of key personnel could have significant adverse
consequences 32 smiths group plc annual report year ended 31 july 2008
smiths code of business ethics 
the code is based on 12 principles
1 compliance with all applicable laws 
and regulations
2 fair and vigorous competition in the
marketplace
3 integrity and ethical conduct as the
standard of individual and corporate
business behaviour
4 fair and honest treatment of suppliers
business partners and customers
5 proper and respectful treatment 
of employees
6 high standards for health safety 
and security in the workplace
7 respect for the environment
8 contributing to the communities 
in which we live and work
9 engaging appropriately with
government departments and agencies
10 respect for human rights
11 prudent and transparent public
accounting and reporting
12 a culture of compliance throughout 
the entire smiths organisation embracing
all employees
the code applies to all smiths businesses and employees worldwide
and provides the framework for policies programmes and procedures
for a range of corporate responsibility issues it is endorsed and fully
supported by the board 
compliance support to smiths businesses is provided through legal
counsel serving the businesses and other experts who provide advice
export control policies education training guidance materials and risk
assessment tools 
during the financial year ended 31 july 2008 smiths retained the
consultancy urs to benchmark the code against those of peer
companies and a gap analysis was completed this work found that
there were no major omissions to the code but a revised version has
been produced to more fully reflect the current challenges facing a
global company the revised code although expanded retains the 12
core principles that were central to its predecessor’s structure and has
the simplified title ‘code of business ethics ’ it has been produced in all
of the main smiths operating languages and is being made available to
each employee in both hard copy format and on the smiths intranet
managing corporate responsibility
the code is monitored by the business ethics compliance council
which reports to the audit committee of the board and has
representation from each of the divisions responsibility for managing
specific areas of activity depends on the nature of the issue and how it
can most effectively be managed
• environment health and safety issues are managed through a group
wide steering committee a technical implementation committee and
local coordinators
• security is managed in each business by line management
• employee issues are managed by line management and through the
human resources function
• supplier and customer programmes are managed by each business
and
• community programmes are principally managed locally although
there is also some grouplevel activity  
corporate responsibility 33 smiths group plc annual report year ended 31 july 2008
health and safety
smiths is committed to conducting all its activities in a manner which
achieves the highest practicable standards of health and safety  
in 2007 smiths made the commitment to achieve certification to the
occupational health and safety management system standard
ohsas18001 by july 2010 at all of its facilities with more than 50
employees this financial year has seen pilot programmes the
development of standard materials and training workshops to support
this programme the success of ohsas18001 together with other
targeted initiatives is measured against the recordable incident rate
performance where a rate of better than 15 recordable incidents per
100 employees is expected
performance against targets
t arget august 2007  july 2010 2008 result
recordable incident rate
better than 15 per 100 employees 127
lost time incident rate
no target set 057
ohsas18001 certiﬁcation 17 out of 83
certification at all sites with more certiﬁed
than 50 employees by july 2010
last year we reported on three incidents that resulted in extended
hospital stays for the injured parties we are pleased to report that we
have had no incidents of the same severity this year 
following a concerted effort driven from the highest levels of the
organisation our safety performance as measured through recordable
incident and lost time incident rates continues to improve the
improvements are supported by enhanced incident investigation and
return to work programmes the financial year that we have just
completed has been the safest on record for smiths
environment
smiths is committed to ensuring that as far as is reasonably practicable
any detrimental effects of its activities products and services upon the
environment are minimised in practice this means using performance
based environmental management systems to drive improvement
throughout the business
the environmental management system iso14001 has been
implemented at all smiths manufacturing sites with more than 50
employees new acquisitions or businesses that grow above the 50
employee threshold are required to seek certification iso14001 ensures
that a culture of continual improvement is embedded throughout the
organisation 
threeyear targets were set in august 2007 to be achieved by july 2010
for greenhouse gas emissions waste disposal and water consumption
progress is reported below
performance against targets
t arget august 2007  july 2010 2008 result
iso14001 certiﬁcation all targeted sites
for all sites with more than 50 employees have been certiﬁed
greenhouse gas emissions 3 reduction
no absolute increase over the 2007 baseline
total nonrecycled waste 25 reduction
9 reduction over three years 
normalised against turnover
water consumption 12 reduction
9 reduction over three years 
normalised against turnover
each of our key indicators shows improvement during the year and we
will report on further progress and initiatives to ensure that this progress
is maintained 34 smiths group plc annual report year ended 31 july 2008
smiths medical is increasing 
its rd investment to boost 
the number of new product
launches and drive sales 
it is currently developing a
revolutionary breathing circuit
which was tested on mount
everest as part of a ground
breaking medical study that
smiths medical supported 
in collaboration with great
ormond street hospital and
university college london 
the system is undergoing
clinical trials and regulatory
assessments if approved 
it will for the first time enable
patients with chronic breathing
difficulties to stay active whilst
receiving treatment greatly
improving their chances 
of recovery 
high level
investigation may
help improve
breathing
corporate responsibility continued
employees
it is the companys policy to provide equal opportunities for employment
smiths recruits selects and promotes employees on the basis of their
qualifications skills aptitude and attitude in employmentrelated
decisions smiths complies with all applicable antidiscrimination
requirements in the relevant jurisdictions including concerning matters
of race colour national origin gender marital status sexual orientation
religious belief age or physical or mental disability  disabled people are
given full consideration for employment and subsequent training career
development and promotion on the basis of their aptitudes and abilities 
all smiths employees are treated with respect and dignity  accordingly
any harassment or bullying is unacceptable smiths respects the right
of each employee to join or not to join a trade union or other bona fide
employee representative organisation smiths believes in good
communications with employees and in promoting consultation 
cooperation and teamwork on matters of mutual concern 
smiths offers employees in the us and the uk opportunities to
participate in share plans that enable employees to benefit from
increases to the company’ s share price and to align their interests more
closely with those of shareholders 
reaching full potential
smiths invests in employees skills and capabilities which in turn helps
the company and its businesses to succeed current priorities for
smiths are talent development succession planning and employee
engagement
developing talent
smiths has a number of development programmes designed to evaluate
and enhance core leadership competencies these development
programmes are designed and tailored to address a wide range of
learning styles incorporating workshops experiential learning
mentoring team working and project experience
smiths continues to be actively involved in training and developing young
people including initiatives designed to ease the transition from school
or study to work for example horizons is a twoyear programme for
newly and recently appointed graduates and those early in their career 
it provides an understanding of the group and the business world in
general and develops personal and team working skills 35 smiths group plc annual report year ended 31 july 2008
succession management
smiths operates a systematic succession management process for
leadership roles our businesses identify leadership talent and
development needs using common tools and a consistent language
development plans are monitored by senior management to optimise
effective succession opportunities
employee engagement
smiths provides information to and communicates with employees as
an important part of doing business employees are regularly provided
with a wide range of information concerning the performance and
prospects of the business in which they are involved by means of
employee councils information and consultation forums and other
consultative bodies that allow their views to be taken into account
communities
smiths contributes positively to the communities in which we operate
in addition to providing employment opportunities and playing a
beneficial role in local economies we support community involvement
through charitable giving and education initiatives
this activity is primarily managed at a divisional level however smiths
does offer some support to community and charitable organisations
from a central budget consideration is given to charities and
organisations that demonstrate how a donation will enhance the
wellbeing of people through improved education health and welfare or
environment projects local to our operational facilities or connected to
the industries in which we operate are the primary focus of smiths
support 
education is a major recipient of our support for example together with
the royal academy of engineering in the uk the smiths technology
education programme is now in its second year through the
programme school students are offered the opportunity to participate
in summer school courses in engineering and technology those
students who then go on to take an engineering or technology degree
course at university are eligible to receive smiths bursaries smiths also
supports the centre for the study of t errorism and political violence at
st andrews university by funding a research assistant 
smiths divisions also deliver significant support the smiths medical
chair of anaesthesia and critical care at university college london is
an important example of longterm funding that has enhanced medical
care
in addition to donations smiths people devote time to local community
projects around the world for further information please see the 2008
corporate responsibility report at wwwsmithscomresponsibility 
controls on defence sales
all sales of defence equipment are undertaken in accordance with
government export and approval procedures and regulations such as
the international traffic in arms regulation and the export
administration regulations in the usa these laws prohibit export of
certain items to specific countries smiths adheres to all relevant
government guidelines designed to ensure that products are not
incorporated into weapons or other equipment used for the purposes of
terrorism or abuse of human rights with internal controls to ensure
compliance with these guidelines
ftse4good
in 2008 smiths was awarded membership of the ftse4good index
which recognises companies that meet globally recognised corporate
responsibility standards whilst we are not complacent about the
ongoing work required we were pleased to receive this external
recognition of our corporate responsibility initiatives and business ethics
programme 36 smiths group plc annual report year ended 31 july 2008
board of directors
1 donald brydon cbe
chairman †
aged 63 british donald brydon was appointed to the board in april
2004 becoming chairman in september 2004 he was previously chief
executive of axa investment managers sa and prior to that had been
chairman and chief executive of bzw investment management he is
chairman of the london metal exchange chairman of taylor nelson
sofres plc and a member of the board of axa investment managers sa
he was formerly chairman of amersham plc 
chairman of the nomination committee
2 philip bowman
chief executive
aged 55 australian philip bowman was appointed chief executive in
december 2007 he is currently the senior independent director of
burberry group plc and is a nonexecutive director of berry brothers
and rudd limited as well a member of the advisory board of alchemy
partners he previously held the positions of chief executive at scottish
power plc from early 2006 until mid 2007 and chief executive at allied
domecq plc between 1999 and 2005 past board appointments include
scottish  newcastle plc british sky broadcasting group plc and coles
myer limited as well as chairman of liberty plc and coral eurobet plc
his earlier career includes five years as a director of bass plc now
mitchells  butler plc and intercontinental hotel group plc where he
held the roles of chief financial officer and subsequently chief executive
of bass t averns
3 david challen cbe
nonexecutive director †
aged 65 british david challen was appointed to the board in september
2004 he is vicechairman of citigroup european investment bank and
former chairman of j henry schroder  co ltd he is senior
independent director at anglo american and deputy chairman of the
t akeover panel
chairman of the audit committee
4 stuart chambers
nonexecutive director †
aged 52 british stuart chambers was appointed to the board in
november 2006 he was chief executive of pilkington plc and became
group chief executive of nippon sheet glass in june 2008 prior to
joining pilkington plc in 1996 he spent ten years at mars corporation
latterly as vice president sales  marketing – mars electronics
international a chemical engineer by training he previously spent ten
years at shell in a variety of european roles he is also chairman of the
north west business leadership t eam
chairman of the remuneration committee
5 peter jackson
nonexecutive director †
aged 61 british peter jackson was appointed to the board as a non
executive director in december 2003 and as senior independent director
in september 2004 he was formerly chief executive of associated
british foods plc he is chairman of kingfisher plc and chair of the
disabilities trust
senior independent director 
6 john langston
finance director
aged 58 british john langston was appointed to the board in
december 2000 on the company’s merger with ti group plc a
chartered accountant he was appointed finance director in september
2006 he previously held positions as head of sealing solutions group
managing director of detection and group managing director of
specialty engineering he joined ti group in 1993 becoming chief
executive of bundy automotive in 1996 and chief executive of ti specialty
polymer products in 1998 he was appointed a director of ti group plc
in october 1998 he formerly worked for lucas industries
7 sir kevin tebbit kcb cmg
nonexecutive director †
aged 61 british sir kevin tebbit was appointed to the board in june
2006 he served widely in policy management and finance posts in the
foreign  commonwealth office nato and finally the ministry of
defence where he was permanent undersecretary of state from july
1998 to his retirement in november 2005 he is chairman of
finmeccanica uk he is also visiting professor at queen mary university
of london
committees
 audit committee
† remuneration committee
 nomination committee
12
456
3
7 principal activities
the principal activities of the company and its subsidiaries the group are and during the year ended 31 july 2008 were the development
manufacture sale and support of
• advanced security equipment including trace detection millimetrewave infrared biological detection and diagnostics that detect and identify
explosives narcotics weapons chemical agents biohazards and contraband
• mechanical seals seal support systems engineered bearings power transmission couplings specialist filtration systems and other hardware
for the oil  gas chemical pharmaceutical pulp  paper and mining sectors
• medical devices aligned to specific therapies principally airway pain and temperature management infusion needle protection critical care
monitoring and vascular access 
• specialised electronic and radio frequency products that connect protect and control critical systems for the global wireless telecommunications
aerospace defence space and medical markets and
• engineered components including ducting hose assemblies and heating elements that move and heat fluids for the aerospace medical industrial
construction and domestic markets
the main manufacturing operations are in the uk the americas continental europe and china 
business reviewfuture developmentresearch and development
the business review is on pages 12 to 35 and is incorporated by reference forming part of this directors ’ report this is a review of the development
and performance of the business of the group including the financial performance during the financial year ended 31 july 2008 key performance
indicators and the principal risks and uncertainties facing the group it also includes information on likely future developments and activities in
the field of research and development the cautionary statement set out on the inside front cover of this annual report forms part of this annual
report and is incorporated by reference into the business review
results and dividends
the results for the financial year ended 31 july 2008 are set out in the consolidated income statement on page 59 sales for the year amounted to
£2321m 2007 £2161m the profit for the year after taxation amounted to £2688m 2007 £17281m 
an interim dividend of 105p per ordinary share of 375p was paid on 25 april 2008 the directors recommend for payment on 21 november 2008
a final cash dividend of 235p on each ordinary share of 375p making a total dividend of 34p for the financial year  
the retained profit of £2688m was transferred to reserves
changes in the company and its interests during the financial year
on 19 september 2007 the company announced that it was no longer proceeding with the conditional agreement with ge to form smiths ge
detection due to differences over a strategic vision for the combined businesses
on 3 november 2007 the company sold the issued share capital of kelvin hughes limited and its associated companies for £44m in cash after a
working capital adjustment
on 15 october 2007 the company acquired the issued share capital of sartorius bearing t echnology gmbh for ¤19m in cash
on 21 december the company acquired a further 21 of the issued share capital of john crane japan limited for ¥862m in cash bringing its interest
in john crane japan to 70
on 4 february 2008 the company acquired the business and assets of fast heat inc for us18m in cash
on 17 april 2008 the company completed the purchase of 4467437 b shares for 365p per share in cash and cancelled the shares 459157 b shares
currently remain in issue
on 28 april 2008 the company acquired the issued share capital of indufil bv for ¤90m in cash
on 2 may 2008 the company acquired the business and assets of the fiber composite company inc known as fiberod for us91m in cash
on 7 may 2008 the company acquired the issued share capital of allrizon t ongguang communication equipment shanghai co ltd for rmb 135m
in cash 
on 1 july 2008 the company acquired the issued share capital of triasx pty ltd for aus29m in cash
on 28 july 2008 the shareholders in general meeting approved the adoption of new articles of association which take effect on 1 october 2008 a
new share incentive plan the smiths group value sharing plan and amendments to the smiths group coinvestment plan details of the value
sharing plan and the amendments to the coinvestment plan are included in the directors’ remuneration report on pages 47 to 56
37 smiths group plc annual report year ended 31 july 2008
group directors’ report  post balance sheet event
on 1 september 2008 the company completed the sale of land in basingstoke for £16m in cash a further amount of up to £12m will be paid
depending on the final terms of such amended planning permission as may be granted
charitable and political donations
during the financial year the company made donations of £469000 for charitable purposes including payments totalling £150000 for the smiths
medical chair of anaesthesia and critical care and other donations made by the company’ s businesses worldwide to miscellaneous charities no
political donations were made 
directors
on 10 december 2007 mr ko butlerwheelhouse retired as a director and chief executive and mr p  bowman was appointed in his stead mr p h
loescher resigned as a nonexecutive director on 4 april 2008 and mr dp  lillycrop resigned as an executive director and company secretary on
3 june 2008 messrs dh brydon dj challen sj chambers p j jackson j langston and sir kevin t ebbit all served throughout the year  
reappointment of director
mr p  bowman will retire from office at the annual general meeting agm having been appointed by the board since the agm in 2007 mr bowman
is willing and eligible to stand for reelection and a resolution will be proposed at the agm to reelect him
directors’ remuneration report
the directors’ remuneration report is on pages 47 to 56 
an ordinary resolution to approve the report will be put to shareholders at the agm
directors’ interests in contracts
details of the executive directors ’ service contracts are as disclosed in the service contracts section of the directors ’ remuneration report on pages
52 and 53 details of the interests of the executive directors in the company’s share option schemes and plans are shown in the directors’
remuneration report on pages 54 to 56
qualifying third party indemnity provisions as defined by section 309b of the companies act 1985 have remained in force for the directors during
the financial year ended 31 july 2008 and at the date of this report are in force for the benefit of the current directors in relation to certain losses
and liabilities which they may incur or may have incurred to third parties in the course of their professional duties
apart from the exceptions referred to above no director had an interest in any contract to which the company or its subsidiaries was a party during
the year 
interests in voting rights
as at 19 september 2008 the company had been notified pursuant to the fsa ’ s disclosure  t ransparency rules of the following notifiable voting
rights in its issued share capital
percentage
of issued
ordinary share 
no of shares capital
axa sa 213m 55
legal  general group plc 157m 41
massachusetts financial services company 191m 49
newton investment management limited 152m 39
percentage of ordinary share capital in issue on 19 september 2008
the company has not acquired or disposed of any interests in its own shares other than in connection with the 2007 return of cash scheme details
of shares purchased and cancelled pursuant to that scheme are shown on page 41
the interests of the directors their families and any connected persons in the issued share capital of the company are shown on page 52 
38 smiths group plc annual report year ended 31 july 2008
group directors’ report continued corporate governance
the report on corporate governance is on pages 43 to 46 pricewaterhousecoopers llp has reviewed the company’ s statements as to compliance
with the june 2006 issue of the combined code to the extent required by the uk listing authority listing rules the results of its review are set
out on page 58
financial instruments
the financial risk management objectives and policies of the group the policy for hedging each major type of forecasted transaction for which hedge
accounting is used and the exposure of the group to price risk credit risk liquidity risk and cashflow risk are outlined in note 21 of the group
financial statements
going concern
the board’s review of the accounts budgets and forward plans together with the internal control system lead the directors to believe that the
company has sufficient resources to continue in operation for the foreseeable future the accounts are therefore prepared on a going concern basis 
policy on payment of creditors
the company’ s policy and practice is to pay creditors promptly in accordance with agreed terms of business the average time taken to pay an invoice
was 33 days 2007 35 for the parent company and 43 days 2007 43 for the group as a whole 
share capital and control
as at 31 july 2008 the company’s authorised share capital was £200228879995 divided into 533333333 ordinary shares of 375p each nominal
value ordinary shares representing 999 of the total share capital and 22888012 noncumulative preference shares of 1p preference shares
representing 01 of the total share capital on 31 july 2008 there were 387879181 ordinary shares and 459157 preference shares in issue the
ordinary shares and the preference shares are listed on the london stock exchange
the holders of ordinary shares are entitled to receive the company’ s reports and accounts to attend and speak at general meetings of the company
to appoint proxies and to exercise voting rights the holders of preference shares are entitled to attend speak and vote at a general meeting only
if the business of the meeting includes the windingup of the company or if at the date of the notice of the meeting the b share continuing
dividend under article 126 has remained unpaid for at least six months preference shareholders are entitled to receive the b share continuing
dividend and have priority over ordinary shareholders on a return of capital on a windingup of 365p per preference share the company has the
right to purchase and thereafter cancel preference shares or to convert them into ordinary shares at any time after 30 april 2008 
there are no restrictions on transfer or limitations on the holding of any class of shares and no requirements for prior approval of any transfers
none of the shares carries any special rights with regard to control of the company the only restrictions on voting rights are those that apply to
the preference shares as described in the preceding paragraph there are no known arrangements under which financial rights are held by a person
other than the holder of the shares and no known agreements or restrictions on share transfers or on voting rights
shares acquired through company share schemes and plans rank pari passu with the shares in issue and have no special rights the company
operates an employee benefit trust with an independent trustee to hold shares pending employees becoming entitled to them under the company’ s
share schemes and plans on 31 july 2008 the trust held 1095965 ordinary shares in the company  the trust waives all but 01p per share of each
dividend entitlement on its holding and abstains from voting the shares at general meetings
the table on page 38 sets out the notifications received by the company pursuant to the fsa ’ s disclosure  t ransparency rules as at 19 september
2008 from persons with significant direct or indirect holdings in the company’s share capital
the rules about the appointment and replacement of directors are contained in the company’s articles of association changes to the articles of
association must be approved by the shareholders in accordance with the legislation in force from time to time new articles of association were
approved by the company in general meeting on 28 july 2008 these take effect on 1 october 2008 and have been adopted primarily to take account
of changes in english company law brought about by certain provisions of the companies act 2006 which have already come into force or which
will come into force on 1 october 2008
the powers of the directors are determined by english law and the memorandum and articles of association of the company in force from time
to time the directors have been authorised to issue and allot ordinary shares pursuant to articles 6 7 and 126 and preference shares pursuant
to article 126 the directors have authority to make market purchases of ordinary and preference shares the powers under articles 6 and 7 are
referred to the shareholders at the agm for renewal at the agm the shareholders are also requested to renew the power to make market purchases
of ordinary shares any ordinary shares so purchased may be cancelled or held in treasury  article 126 authorises the purchase of preference shares
the company has in place credit facility agreements under which a change in control would trigger prepayment clauses and has bonds in issue
the terms of which would allow bondholders to exercise put options and require the company to buy back the bonds at their principal amount plus
interest if a rating downgrade occurs at the same time as a change of control takes effect the company’s share schemes and plans contain
clauses which cause options and awards to vest on a change in control the company is not party to any other significant agreements that would
take effect alter or terminate upon a change of control following a takeover bid 
39 smiths group plc annual report year ended 31 july 2008 if there is a change in control of the company prior to 10 december 2010 the terms of mr bowman’ s service contract allow him at any time during
the three months following the change in control to resign and treat himself as redundant in this event i mr bowman would be entitled to receive
the sum payable on a companyelected termination of his employment as described on page 52 save that his bonus entitlement for the period
from the start of the bonus year in which the termination falls to the end of any unserved notice period would be a minimum of 75 of base salary
less any amount already paid to him in respect of the bonus year and ii all available discretions will be exercised under the company’s share
schemes and in default the company must indemnify mr bowman for the value of any awards that do not vest on the change in control 
no other director or employee is contractually entitled to compensation for loss of office or employment as a result of a change in control except
that provisions of the company’s share schemes may cause options and awards granted to employees under such schemes to vest on a change
in control
article 126 is renumbered as article 129 from 1 october 2008 when the new articles of association approved by the company in general meeting on 28 july 2008 take effect
corporate responsibility
the company has group policies on environmental health and safety matters and operates a code of business ethics the company seeks to
minimise as far as is reasonably practicable any detrimental effects on the environment of its operations and products the group hr director
has responsibility for environmental health and safety matters which are subject to preventative investigatory and consultative systems overseen
by the group environment health and safety committee and reports regularly to the board on these matters issues relevant to the company
pension schemes are likewise covered by means of structured committees including representation from recognised trade unions 
further information on environmental and employee health and safety matters including key performance indicators is contained in the corporate
responsibility summary in the business review on pages 32 to 35 the full corporate responsibility report is available online at
wwwsmithscomresponsibility 
annual general meeting
the 2008 agm will be held at the thomas lord suite lord’s cricket ground grace gate st john’s wood road london nw8 8qn on tuesday 
18 november 2008 at 230 pm
authority to issue shares
at the agm shareholders will be asked to renew the authority given to the directors at the last agm to allot relevant securities for the purposes
of section 80 of the companies act 1985 the authority proposed will expire at the conclusion of the next annual general meeting of the company
or if earlier on 17 february 2010 the amount of relevant securities to which this authority relates £48510168 nominal of ordinary share capital
represents one third of the ordinary share capital in issue on 19 september 2008 the ordinary resolution is set out in the notice of agm
also in the notice is the special resolution to renew the power granted to directors under section 95 of the companies act 1985 the new authority
sought will be on substantially similar terms to those attaching to the existing authority and will expire at the conclusion of the next agm of the
company or if earlier on 17 february 2010 it will permit the directors to allot equity securities for cash
• in connection with a rights issue pro rata to the rights of the existing shareholders
• pursuant to the terms of any share scheme or plan approved by the shareholders in general meeting and
• for any other purpose including the sale on a non preemptive basis of any shares the company may hold in treasury for cash provided that 
the aggregate nominal value of such allotments does not exceed £7276525 approximately 5 of the issued ordinary share capital on 
19 september 2008
the directors intend seeking renewal of these authorities annually  
the directors have no present intention of exercising these authorities except for allotments of shares pursuant to the company’s share option
schemes and would not seek to issue more than 75 of the issued share capital in the company in any rolling three year period without prior
consultation with the investment committees of the association of british insurers and national association of pension funds
during the financial year ended 31 july 2008 the following shares in smiths group plc were issued
• 2268348 ordinary shares of 375p pursuant to the terms of the company’s shareholderapproved share option schemes and
• 112560 ordinary shares of 375p pursuant to the terms of ti group share option schemes
40 smiths group plc annual report year ended 31 july 2008
group directors’ report continued authority to purchase shares
at the agm the company will seek to renew the authority granted at the last agm to the directors to purchase the company’s ordinary shares in
the market the authority will be limited to 10 of the ordinary share capital in issue on 19 september 2008 and will be renewed annually  the price
that may be paid for the shares will be not less than the nominal amount of 375p per share and not more than the higher of 5 above the average
of the middle market quotations of the company’s ordinary shares as derived from the london stock exchange daily official list for the five
business days prior to any purchase and the amount stipulated by article 51 of the buyback and stabilisation regulation 2003 on 19 september
2008 options over approximately 84m shares were outstanding under the company’s share option schemes representing approximately 22 of
the then issued share capital if the existing authority to purchase shares and the new authority being sought at the agm were to be used in full
and the purchased shares were cancelled then the outstanding options would represent approximately 27 of the reduced issued share capital
under the companies act 1985 any shares purchased under this authority may be cancelled or held as treasury shares treasury shares may be
subsequently sold or used to satisfy applications under share schemes 
the directors will exercise the authority only if they are satisfied that any purchase will increase the earnings per share of the ordinary share capital
in issue and will be in the interests of the shareholders the directors will also give careful consideration to the gearing levels of the company and
its general financial position it is the company’ s present intention that in the event that any shares were to be purchased under this authority such
shares would be cancelled the directors will however have regard to any guidelines issued by investor groups which may be published at the time
of any such purchase regarding the merits of the cancellation of such shares as against holding them as treasury shares
purchase of shares
in accordance with the authorities given at the extraordinary general meeting held on 11 june 2007 in connection with the return of cash to
shareholders from the sale of the aerospace division on 17 april 2008 the company purchased 4467437 noncumulative preference shares of 1p
each 907 of the then issued preference share capital for an aggregate consideration of £1630614505 and immediately cancelled them
political donations
a resolution will be proposed at the agm to renew and revise the authority granted by the shareholders in 2004 to the company and its subsidiaries
to make donations to eu political organisations and to incur eu political expenditure the new authority will follow the provisions of part 14 of the
companies act 2006 the 2006 act and permit the company and its subsidiaries present and future to make donations i to political parties ii
to other political organisations or independent election candidates and iii to incur political expenditure the authority will expire at the conclusion
of the next agm of the company or if earlier on 17 february 2010 and will be limited to £50000 in respect of each of items i to iii above as was
the case in 2004 the proposal of this resolution is a precautionary measure in the light of the wide definitions of political donations and expenditure
contained in the 2006 act the resolution proposed is in general terms and does not purport to authorise particular donations the company has
not made any political donations in the past under the expiring resolution and it is not the present intention of the company to make any political
donations or incur any political expenditure in the foreseeable future the directors intend seeking renewal of this authority annually 
auditor
resolutions will be proposed at the agm to reappoint pricewaterhousecoopers llp as auditor and to authorise the directors to determine the
auditor’s remuneration 
disclosure of information to the auditor
as at the date of this report as far as each director is aware there is no relevant audit information of which the company’ s auditor is unaware each
director has taken all the steps as he should have taken as a director in order to make himself aware of any relevant audit information and to establish
that the company’s auditor is aware of that information
electronic communications at wwwsmithscom
the companies act 2006 recognises the growing importance of electronic communication “ecommunication” and enables companies to provide
documentation and communications to shareholders via their websites except to those shareholders who elect to receive hard printed paper copies
by post ecommunication allows shareholders faster access to important information about the company saves the company considerable
overheads by reducing its print production costs and postage and helps the environment by saving the energy and raw materials that would
otherwise be used in producing and dispatching printed documents at the extraordinary general meeting held on 11 june 2007 shareholders
approved the adoption of electronic communications 
electronic copies of the annual report 2008 and the notice of agm are posted on the company’s website wwwsmithscom the company’s
announcements to the stock exchange and press releases are available online through the website shareholding details and practical help on
share transfers and changes of address can be found at wwwshareviewcouk
shareholders wishing to change their election and receive documents in hard copy form can do so at any time by contacting the company’s
registrar see the inside back cover for contact details or by logging on to wwwshareviewcouk
41 smiths group plc annual report year ended 31 july 2008 electronic proxy voting
the company continues to provide electronic proxy voting for this year’s agm shareholders who are not crest members can appoint a proxy and
vote online for or against or consciously not vote on the resolutions to be proposed at the agm by visiting the website wwwsharevotecouk the
onscreen instructions will give details on how to complete the appointment and voting process crest members crest personal members and other
crest sponsored members should consult the crest manual or their sponsor or voting service provider for instructions on electronic proxy
appointment and voting the company may treat as invalid a crest proxy voting instruction in the circumstances set out in regulation 355a of
the uncertificated securities regulations 2001
paper proxy cards have been distributed with the notice of agm to all shareholders other than those who have elected for notification by email 
shareholders who will not be able to attend the agm on 18 november 2008 in person are encouraged to vote their shares by appointing a proxy
and issuing voting instructions either electronically or by completing and returning their proxy cards electronic and paper proxy appointments
and voting instructions must be received by the company’s registrar not later than 48 hours before the agm in order to be valid
in order to facilitate voting by corporate representatives at the meeting arrangements will be put in place at the meeting so that i if a corporate
shareholder has appointed the chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the
directions of all of the other corporate representatives for that shareholder at the meeting then on a poll those corporate representatives will give
voting directions to the chairman and the chairman will vote or withhold a vote as corporate representative in accordance with those directions
and ii if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not
appointed the chairman of the meeting as its corporate representative a designated corporate representative will be nominated from those
corporate representatives who attend to vote on a poll and the other corporate representatives will give voting directions to that designated corporate
representative corporate shareholders are referred to the guidance issued by the institute of chartered secretaries and administrators on proxies
and corporate representatives www icsaorguk for further details of this procedure the guidance includes a sample form of representation letter
if the chairman is being appointed as described in i above
registrar
on 1 october 2007 advent international acquired lloyds tsb registrars and changed its name to equiniti limited equiniti limited continues to
act as the company’s registrar and to provide shareholder services to the members of smiths group plc the address and contact details of
equiniti limited are listed on the inside back cover of this report individual shareholders ’ access to their personal shareholder information continues
to be available online through the wwwshareviewcouk website dividend payments will continue to be made through lloyds tsb bank the
shareholder helpline telephone number has changed to 0871 384 2943 note calls to this number are charged at 8p per minute from a uk bt
landline other telephony providers’ costs may vary  
important information
if you are in any doubt as to what action you should take in relation to the resolutions being proposed at the agm you are recommended to consult
your stockbroker bank manager solicitor accountant or other independent professional adviser authorised under the financial services and
markets act 2000 if you received this document in printed form from the company and have recently sold or transferred all your shares in smiths
group plc please pass this document to the purchaser or transferee or to the agent through whom the sale or transfer was effected for transmission
to the purchaser or transferee
recommendation
y our directors believe that all the proposals to be considered at the agm are in the best interests of the company and its shareholders as a whole
and recommend shareholders to vote in favour of the resolutions the directors intend to vote in favour of the resolutions in respect of their own
beneficial holdings
by order of the board
sarah cameron
secretary
765 finchley road
london nw11 8ds
23 september 2008
42 smiths group plc annual report year ended 31 july 2008
group directors’ report continued compliance with the combined code
throughout the period 1 august 2007 to 31 july 2008 the company has been in full compliance with the june 2006 issue of the combined code on
corporate governance the code except that the value of any fees received by executive directors in respect of external nonexecutive directorships
is not disclosed in the remuneration report as this is not considered relevant to the company  
directors
the board
the board is collectively responsible for the company’s success the board’s role is to provide entrepreneurial leadership within a framework of
controls that allow risk to be assessed and managed the board sets strategic aims and the company’s values ensuring that obligations to
shareholders are met nonexecutive directors have a particular role in overseeing the development of strategy scrutinising management
performance and ensuring the integrity of financial information and systems of risk management the board is satisfied that it has met these
requirements
during the last financial year the membership of the board has changed mr ko butlerwheelhouse retired as chief executive on 10 december
2007 and was succeeded on that date by mr p  bowman mr p h loescher who had been a nonexecutive director since 1 june 2007 resigned on
4 april 2008 mr dp  lillycrop who was appointed as an executive director on 4 december 2000 and as company secretary on 11 december 2000
resigned from both offices on 3 june 2008 ms sl cameron was appointed as the company secretary on 1 july 2008
as at 19 september 2008 the board comprises mr brydon chairman mr bowman chief executive one other executive director and four
independent nonexecutive directors mr jackson is the senior independent director  biographies of these directors giving details of their experience
and other main commitments are set out on page 36 the wideranging experience and backgrounds of the nonexecutive directors ensure that
they can debate and constructively challenge management in relation to both the development of strategy and the evaluation of performance
against the goals set by the board
the board normally holds formal meetings at least six times a year to make and review major business decisions and monitor current trading
against plans which it has approved it additionally exercises control by determining matters specifically reserved to it in a formal schedule which
only the board may change these matters include the acquisition of significant companies the issue of shares significant contractual commitments
the review of the effectiveness of risk management processes and major capital expenditure once a year the board meets with a particular focus
on longterm strategy and developments affecting the company  additional meetings are arranged as necessary to deal with urgent items
the board sets the company’s values and standards and has adopted a code of business ethics which is referred to on page 32
the chairman meets the nonexecutive directors without the executive directors present at least three times per annum the senior independent
director meets the other nonexecutive directors without the chairman present at least annually  
directors and officers of the company and its subsidiaries have the benefit of a directors’ and officers’ liability insurance policy 
the following table shows the number of scheduled board and board committee meetings held during the financial year ended 31 july 2008 and
opposite each director’s name the number of meetings they were eligible to attend and the number actually attended however directors attend
many other meetings and make site visits during the year  the board views directors’ contributions as measured beyond meeting attendance
records
board meetings audit committee remuneration committee nomination committee
eligible to eligible to eligible to eligible to
name attend attended attend attended attend attended attend attended
d h brydon 77––5544
p bowman appointed 10122007 55––––––
d j challen 773355––
s j chambers 77––55––
p j jackson 77333344
j langston 77––––––
sir kevin t ebbit 66223233
k o butlerwheelhouse retired 10122007 22––––––
d p lillycrop resigned 03062008 66––––––
p h loescher resigned 08042008 42––21––
– indicates not a member of that committee in 200708
chairman and chief executive
the board has established clearly defined roles for the chairman and the chief executive in writing the chairman is responsible for leadership
of the board ensuring its effectiveness and setting its agenda once agreed by the board as a whole it is the chief executive’ s responsibility to ensure
delivery of the strategic and financial objectives
43 smiths group plc annual report year ended 31 july 2008
corporate governance report board balance and independence
there is a balance of executive and nonexecutive directors such that no individual or small group can dominate the board’s decision taking
throughout the financial year at least half the board excluding the chairman has comprised independent nonexecutive directors
in deciding the chairmanship and membership of the board committees the need to refresh membership of the committees is taken into account
all the nonexecutive directors are considered to be independent and mr brydon was considered independent at the time of his appointment as
chairman
appointments to the board
the nomination committee has a formal rigorous and transparent procedure for the appointment of new directors which are made on merit and
against objective criteria
information and professional development
the board is provided with detailed information several days in advance on matters to be considered at its meetings and nonexecutive directors
have ready access to the executive directors regular site visits are arranged and nonexecutive directors are encouraged to visit sites independently 
during site visits briefings are arranged and the board is free to discuss aspects of the business with employees at all levels
newlyappointed directors undergo an induction programme to ensure that they have the necessary knowledge and understanding of the company
and its activities they undertake briefing sessions on corporate governance strategy stakeholder issues finance and risk management and hr
strategy as well as meetings and site visits to business locations in the uk and overseas each director’ s individual experience and background is
taken into account in developing a programme tailored to his own requirements
ongoing training is provided as and when necessary  the suitability of external courses is kept under review by the company secretary who is charged
with facilitating the induction of new directors and with assisting in the ongoing training and development of directors
all directors have access to the advice and services of the company secretary and a procedure is in place for them to take independent professional
advice at the company’s expense should this be required
performance evaluation
the board undertakes a formal and rigorous annual evaluation of its own performance and that of its committees and the directors it is confirmed
that all the nonexecutive directors have sufficient time to fulfil their commitments to the company that the chairman does not hold the office of
chairman of another ftse 100 company and that no executive director holds more than one nonexecutive directorship of another ftse 100
company 
a formal evaluation of the performance of the board its committees and the directors was conducted by means of detailed questionnaires
completed by each director  the answers to the questionnaires formed the basis of a review by the whole board led by the chairman
the performance evaluation of the chairman was led by the senior independent director who obtained the views of both the executive and non
executive directors
reelection
nonexecutive directors are appointed for a specified term of three years and reelection for a second term is not automatic in exceptional
circumstances and only after rigorous review a nonexecutive director may serve for a third term any nonexecutive director who has served for
more than nine years is subject to annual reelection directors stand for reelection by the shareholders at the first annual general meeting agm
following their appointment and subsequently at least every three years
remuneration
information regarding the remuneration committee is set out on page 46 and the directors’ remuneration report is on pages 47 to 56
accountability and audit
financial reporting
the board is required to present a balanced and understandable assessment of the company’s position and prospects in the annual report and
in interim and other public reports the board is satisfied that it has met this obligation a summary of the directors ’ responsibilities for the financial
statements is set out on page 57
the ‘going concern’ statement required by the code is set out in the group directors’ report on page 39
internal control
the board maintains a sound system of internal control to safeguard shareholders’ investment and the company’s assets the effectiveness of
the internal control system is reviewed at least annually covering all material controls including financial operational and compliance controls
and risk management systems and the board reports to shareholders that it has done so the financial reporting council’s report “internal
control revised guidance for directors on the combined code october 2005” provides guidance
the company’ s internal control is based on assessment of risk and a framework of control procedures to manage risks and to monitor compliance
with procedures the procedures for accountability and control are outlined below
44 smiths group plc annual report year ended 31 july 2008
corporate governance report continued the company’s internal control systems are designed to meet the company’s particular needs and the risks to which it is exposed and by their
nature can provide only reasonable not absolute assurance against material loss to the company or material misstatement in the financial
accounts
the group has an embedded process for the identification evaluation and management of significant business risks the process is reviewed
through the audit committee and monitored by the group internal audit department the company has during the year identified and evaluated
the key risks under three categories – strategic operational and corporate responsibility including ethical matters and information provision –
and has ensured that effective controls and procedures are in place to manage these risks
in the highly regulated environment of the industries in which the company operates procedures are codified in detailed operating procedures
manuals and are reinforced by regular educational programmes these are designed to ensure compliance not only with the regulatory
requirements but also with general principles of business integrity 
a key element in any system is communication the executive directors and senior corporate staff meet regularly with representatives from the
businesses to address financial human resource risk management and other control issues
throughout the financial year the board through the audit committee reviews the effectiveness of internal control and the management of risks
in addition to financial and business reports the board has reviewed medium and longerterm strategic plans capital expenditure and development
programmes management and product development programmes reports on key operational issues tax treasury risk management insurance
legal matters and audit committee reports including internal and external auditor reports
audit committee and auditor
the audit committee makes formal and transparent arrangements for considering how financial reporting and internal control principles are
applied and for maintaining an appropriate relationship with the external auditor pricewaterhousecoopers llp 
relations with shareholders
dialogue with shareholders
the chief executive finance director and the director investor relations communicate with institutional investors through analysts ’ briefings and
extensive investor roadshows in the uk us and continental europe as well as timely stock exchange announcements meetings with management
and site visits members of the board and in particular nonexecutive directors are kept informed of investors ’ views in the main through distribution
of analysts’ and brokers’ briefings at least twice a year a report is made to the board on the number and types of meetings held with institutional
shareholders the chairman and the nonexecutive directors are available in the event of shareholder concerns which cannot be addressed through
management on appointment new nonexecutive directors are available to meet shareholders on request
constructive use of the agm
all directors normally attend the company’s agm and shareholders are invited to ask questions during the meeting and to meet directors after
the formal proceedings have ended it is intended that there shall be a poll vote on each resolution at the 2008 agm shareholders will be advised
as to the provisional results of the poll vote on each resolution immediately after each poll is taken the audited final results of the poll votes will
be released to the london stock exchange and published on the company’ s website www smithscom as soon as is practicable after the conclusion
of the agm
the chairmen of the audit and nomination committees were available at the 2007 agm to answer shareholders’ questions mr chambers the
chairman of the remuneration committee was not able to attend the meeting mr brydon a member of the committee was available to answer
shareholders’ questions in his stead all the directors apart from mr chambers were in attendance the notice of the agm and related papers
were sent to shareholders 20 working days before the meeting
board committees
the full terms of reference of the following board committees are available upon request and on the company’s website wwwsmithscom
audit committee
the members of the committee during the financial year were mr challen chairman mr jackson and sir kevin t ebbit 
the board has determined that the committee members have the skills and experience necessary to contribute meaningfully to the committee’s
deliberations in addition the chairman of the committee has requisite experience in accounting and financial management
the committee meets at least three times per year to monitor the integrity of the company’s financial statements and the effectiveness of the
external audit process corporate governance issues and in particular the implementation of the company’s code of business ethics and the
arrangements for employees to raise confidentially and anonymously if they so choose concerns about possible wrongdoing in financial reporting
and other matters it is responsible for ensuring that an appropriate relationship between the company and the external auditor is maintained
including reviewing nonaudit services and fees and implementing the company’s audit partner rotation policy the committee has primary
responsibility for making recommendations to the board on the appointment reappointment and removal of the external auditor 
the committee also reviews annually the group’ s systems of internal control the processes for monitoring and evaluating the risks facing the group
and the effectiveness of the internal audit function it is responsible for approving the appointment and removal of the director internal audit the
committee reviews annually its terms of reference and its effectiveness and recommends to the board any changes required as a result of such
review
in july 2008 the annual review of the committee’s terms of reference resulted in a number of largely clarificatory changes 
45 smiths group plc annual report year ended 31 july 2008 in the year to 31 july 2008 the audit committee discharged its responsibilities by reviewing
• the group’s financial statements and interim results statement prior to board approval and the external auditor’s detailed reports thereon
• the audit fee and nonaudit fees payable to the group’s external auditor
• the external auditor’ s effectiveness and plan for the audit of the group’ s 200708 accounts which included confirmations of auditor independence
and the proposed audit fee and approving the terms of engagement for the audit
• an annual report on the group’s systems of internal control and their effectiveness reporting to the board on the results of the review and
receiving regular updates on key risk areas of financial control
• the risks associated with major business programmes and
• the internal audit function’s terms of reference its 200708 work programme and regular reports on its work during the year 
the committee has authority to investigate any matters within its terms of reference to access resources to call for information and to obtain
external professional advice at the cost of the company 
no one other than the members of the committee is entitled to be present at meetings however the chairman and the nonexecutive directors
who are not members of the committee the chief executive finance director group financial controller director internal audit and external
auditor are normally invited to attend others may be invited to attend by the committee the papers for and minutes of each committee meeting
are sent to all directors at least once a year there is an opportunity for the external auditor the director internal audit and the director of business
ethics to discuss matters with the committee without any executive management being present the director internal audit the director of
business ethics and the external auditor have direct access to the chairman of the committee outside formal committee meetings
the committee reviews the nature and extent of nonaudit services provided by the external auditor in order to ensure that objectivity and
independence are maintained under the audit independence policy approved by the committee certain nonaudit services may not be provided
by the external auditor certain services require the approval of the finance director and other services require the approval of the chairman of the
committee where the cost of the services is expected to exceed £100000 the engagement will normally be subject to competitive tender  the
external auditor has in place processes to ensure that its independence is maintained including safeguards to ensure that where it does provide
nonaudit services its independence is not threatened the external auditor has written to the audit committee confirming that in its opinion it
is independent
remuneration committee
mr brydon and mr challen were members of the committee throughout the financial year  mr chambers served as chairman of the committee
throughout the year  mr loescher was a member of the committee until his resignation as a director on 4 april 2008 mr jackson and sir kevin
t ebbit were appointed as members of the committee on 16 april 2008
the committee’s responsibilities and terms of reference are described in the directors’ remuneration report on page 47
nomination committee
during the financial year the members of the committee were mr brydon as chairman of the committee mr jackson and sir kevin t ebbit
the committee leads the process for identifying and makes recommendations to the board regarding candidates for appointment as directors
of the company and as company secretary giving full consideration to succession planning and the leadership needs of the group it also makes
recommendations to the board on the composition of the nomination committee and the composition and chairmanship of the audit and
remuneration committees it reviews regularly the structure size and composition of the board including the balance of skills knowledge and
experience and the independence of the nonexecutive directors and makes recommendations to the board with regard to any changes
the committee meets periodically when required no one other than members of the committee is entitled to be present at meetings but the non
executive directors who are not members of the committee and the chief executive are normally invited to attend and external advisers may be
invited by the committee to attend
the committee has access to such information and advice both from within the group and externally at the cost of the company as it deems
necessary this may include the appointment of external search consultants where appropriate the committee reviews annually its terms of
reference and effectiveness and recommends to the board any changes required as a result of such review in july 2008 the annual review of the
committee’s terms of reference resulted in a number of revisions
the procedures referred to above including the use of an external search consultant were used by the nomination committee in recommending
the appointment of mr bowman as the chief executive on 10 december 2007
46 smiths group plc annual report year ended 31 july 2008
corporate governance report continued the directors’ remuneration report is presented to shareholders by the board the report complies with the directors’ remuneration report
regulations 2002 the regulations a resolution will be put to shareholders at the annual general meeting on 18 november 2008 inviting them to
approve this report
remuneration policy and arrangements
the remuneration committee
responsibilities of the committee include making recommendations to the board on the group’ s executive remuneration policy and determining
on behalf of the board specific remuneration packages for the executive directors and chairman the committee operates within agreed terms
of reference which are available for inspection on the company’s website the company complied with the provisions of the combined code 2006
on corporate governance relating to directors’ remuneration throughout the financial year except as is disclosed on page 43
in 200708 the committee consisted of mr sj chambers chairman of the committee mr dh brydon mr dj challen mr p j jackson member
from 16 april 2008 mr p h loescher resigned on 4 april 2008 and sir kevin t ebbit member from 16 april 2008
mr brydon is absent when his own remuneration as chairman of the company is under consideration the chief executive attends meetings of
the committee by invitation he is absent when his own remuneration is under consideration 
during the year the committee received material assistance and advice from the chief executive the general counsel who was also secretary
to the committee until 3 june 2008 and the hr director who was also secretary to the committee from 3 june 2008
during the year the committee received advice from kepler associates who succeeded t owers perrin as the independent executive remuneration
advisers to the committee in march 2008 and freshfields bruckhaus deringer llp  kepler associates did not provide any other advice to the
group freshfields bruckhaus deringer llp who were appointed by the company also advised the group on various legal matters during the year 
remuneration policy
the committee applies a remuneration policy which has at its core the following objectives
• to align the interests of executives with those of shareholders
• to focus on top line growth improving margins and capital discipline
• to link a significant proportion of remuneration to financial and individual performance both in the shortterm and longterm
• to provide strong linkage between remuneration and performance
• to ensure remuneration is marketcompetitive and helps attract and retain executives of the highest calibre
remuneration arrangements
the remuneration of senior executives balances fixed variable shortterm and longterm remuneration and is reviewed each year to ensure that
they are appropriately incentivised to achieve the group’s objectives
for 200708 executive directors’ remuneration comprised basic salary benefits in kind annual bonus and pension benefits in addition executive
directors and senior executives participated in sharebased incentive schemes which in 200708 included the smiths group sharesave scheme
the smiths group performance share plan psp and the smiths group coinvestment plan cip
during the year the remuneration committee reviewed the group’ s senior executive remuneration arrangements with a view to ensuring that they
support the new strategy of focusing on value creation at both group and divisional levels
on 28 july 2008 shareholders approved the value sharing plan vsp a oneoff longterm incentive plan rewarding executives for value creation
at group and divisional levels over threeyear and fouryear periods commencing with the financial year 200809 the two executive directors and
any other corporate participants will be rewarded under the vsp for value creation at a group level whereas the executives with divisional
responsibilities will be rewarded for value creation within the division for which they are responsible the cip will continue to operate with some
amendments also approved by shareholders the participants in the vsp including executive directors will not be eligible for awards under the
performance share plan in 200809 or 200910
47 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report the main elements of remuneration for executive directors in 200708 and 200809 are summarised below
element objective 200708 policy 200809 policy
base salary •reflects individual performance •reviewed annually •frozen at current levels for
see page 49 and experience size and nature •200708 annual base salaries for at least 2 years
of the role current executive directors range
from £400000 to £800000 pa
annual bonus •incentivises shortterm •rewards group and divisional profit •increased weighting on
see page 49 operational and financial cashflow and individual performance individual performance
performance •maximum opportunity of 120 of •t ougher performance targets
salary for the chief executive and •opportunity increased to 180 of salary
100 of salary for other executive for the chief executive and 150 of
directors salary for any other executive director
coinvestment •encourages executives to build •voluntary investment opportunity of •mandatory investment in smiths shares
plan cip a shareholding in the company up to 100 of net bonus earned of 50 of any net bonus earned
see page 49 •helps align interests of executives or 25 of salary if higher in respect of 200809
and shareholders into smiths shares •2for1 matching opportunity on invested
•1for1 matching opportunity on any shares after 3 years if average roce
invested shares if average 3year exceeds wacc3 pa 1for1 match 
roce exceeds wacc1 pa for roce between wacc1 and 
wacc3 pa
performance •incentivises executives to achieve •annual conditional share awards •replaced by vsp
share plan psp superior longterm performance vesting 13rd on 3 year tsr relative see below
see page 50 and commitment to the goals of to the ftse100 excluding financial
the group services companies and 23rds on
•aligns executives’ interests 3year eps growth
with those of shareholders •awards worth 1333 of salary for
•helps retain key talent the chief executive and 1125 of
salary for other executive directors
value sharing plan •incentivises senior executives •not applicable •oneoff incentive rewarding value
vsp to drive value creation creation over 3 years and 4 years
see page 49 •reinforces and rewards delivery •executives receive a pre defined 
of strategic goals number of shares per £5m of ‘surplus
value created’
•for executive directors 13rd of an award
is based on growth in tsr relative to the
ftse100 excluding financial services
companies and 23rds on the growth in
internal value above the cost of equity
pension •provides competitive retirement •varies between executive directors •as for 200708
see page 50 benefits according to what was agreed at 
time of appointment
share ownership •requires executives to build •150 of salary for executive •increase share ownership guideline for
guidelines and maintain a significant directors the chief executive to 200 of salary
see page 50 shareholding in smiths •150 of salary for other executive
•supports alignment with directors
shareholder interests
the executive directors’ remuneration packages in 200708 and 200809 include fixed and variable elements the fixed element is salary which
remains unchanged for both the chief executive and finance director as described above the variable elements assume that target annual
bonuses will be achieved in respect of each year and include fairvalue assessments of the long term incentive components of the packages
awarded in each year  approximately 60 of the executive directors ’ total remuneration for 200708 is expected to come from the variable elements
of their packages the changes outlined above for 200809 are anticipated to increase the proportion of their remuneration that is derived from
variable elements to approximately 70
48 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report continued elements of remuneration
base salary and benefits
executive directors ’ salaries have typically been reviewed annually taking into account individual performance and experience the size and nature
of the role the relative performance of the company remuneration policy within the company and salaries at comparator companies the salaries
for all participants in the value sharing plan including executive directors will be frozen at current levels until 2010 executive directors’ base
salaries for 200809 are therefore unchanged from 200708 at the following levels
executive director salary last reviewed 200809 salary
mr p bowman 10 december 2007 £800000
mr j langston 1 august 2007 £424000
benefits include a fully expensed company car or an allowance in lieu and health insurance
annual bonus
200708
executive directors were eligible to participate in an annual bonus plan based on a combination of corporate financial goals group and divisional
profit and cashflow and individual performance the maximum annual bonus opportunity for the chief executive was 120 of salary and for other
executive directors was 100 of salary bonuses to be paid to executive directors in respect of the 200708 financial year are set out in the
emoluments table on page 51
200809
maximum annual bonus opportunities will be increased to 180 of salary for the chief executive and 150 of salary for any other executive director 
targets will be made commensurately more demanding and onethird of the bonus opportunity will be linked to the achievement of personal
objectives 50 of any net bonus earned must be invested in smiths shares under the rules of the cip 
coinvestment plan cip
200708
executive directors and selected senior executives were invited to participate in the cip  participants were able to invest up to 100 of their net earned
annual bonus or if greater 25 of salary into smiths shares invested amounts were eligible for a 1for1 matching share award after three years
based on the pretax amount of salary or deferred bonus in question subject to continued employment in the group and the company’ s average
return on capital employed roce over the performance period exceeding the company’ s weighted average cost of capital wacc over the same
period by an average margin of at least 1 per annum 
200809
executive directors and selected senior executives will be required to invest 50 of any net bonus earned in respect of 200809 in smiths shares
the maximum matching opportunity will be increased to 2for1 subject to the average roce exceeding the wacc by at least 3 pa over three
years with a 1for1 match if roce is between wacc1 and wacc3 pa as a change to 200708 notional dividends will be paid on matching
shares that vest
the committee continues to regard roce as an appropriate performance condition for reflecting the operating efficiency of the company 
value sharing plans vsps
the group and divisional vsps are oneoff longterm incentive plans designed to reinforce smiths’ strategy of focusing on shareholder value
creation at the group and divisional levels
group vsp
messrs bowman and langston are participants in the group vsp which rewards executive directors and selected senior executives with a pre
determined number of shares for every £5m of value created above a hurdle over the threeyear and fouryear performance periods from 1 august
2008 or until a vesting event if earlier on 28 july 2008 mr bowman was granted an award under which he will be entitled to receive 1250 smiths
group shares for each £5m of surplus value created in respect of each performance period on the same date mr langston was granted an award
under which he will be entitled to receive 500 smiths group shares for each £5m of surplus value created in respect of each performance period
– tsr element
onethird of the award will depend on the growth over each performance period in smiths’ market capitalisation plus net equity cashflows to
shareholders ie dividends plus share buybacks less share issues over and above the median total shareholder return of the ftse100 companies
excluding financial services companies
– earnings element
the remaining two thirds of each award will be determined by the growth over each performance period in adjusted profit before tax pbt
200708 £3386m times a fixed multiple of 12 plus net equity cashflows to shareholders over and above a cost of equity hurdle return of 95 pa
participants will only be entitled to a vesting of shares under the tsr element if the committee is satisfied that this is justified by the underlying
financial performance of the company over the performance period
no retesting of either performance condition is permitted
49 smiths group plc annual report year ended 31 july 2008 divisional vsps
in addition to the group vsp the committee has introduced divisional plans for each of the five divisions smiths detection smiths medical john
crane smiths interconnect and flext ek the plans are along the same lines as the group vsp to help focus the most senior divisional executives
on maximising the value of their divisions and returning surplus cash further details on the divisional vsps are contained in the circular letter
to shareholders dated 4 july 2008
performance share plan psp
no awards will be made under the psp to executive directors or any other participants in the vsp in 200809 and 200910 grants to executive
directors in 200708 were between 1125 and 1333 of salary  an award of 150 of salary was made to mr bowman on his appointment
awards vest after three years subject to performance conditions onethird of the award vests based on the company’ s tsr performance relative
to the ftse100 companies excluding financial services companies the remaining twothirds of the award vests subject to an earnings per share
eps growth target measured before exceptional items 
sharesave scheme 
the smiths group sharesave scheme which is open to all uk employees with at least 12 months’ service is subject to uk legislation as to the
amount that can be saved participants save a fixed sum per month for three or five years and may use the sum generated by their savings contracts
to exercise the options which are usually granted at a 20 discount to the market price
share ownership guidelines
it is the committee’s policy that executive directors should over time acquire a shareholding with a value equal to at least one and a half years’
gross salary and retain at least 50 of any net vested share awards after sales to meet tax liabilities until those values are achieved in 200809
the share ownership guideline will be increased to two years’ gross salary for the chief executive
share scheme dilution limits
the company follows the guidelines laid down by the association of british insurers these restrict the issue of new shares under all the company’ s
share schemes in any 10year period to 10 per cent of the issued ordinary share capital and under the company’s discretionary schemes to 5 per
cent in any 10year period as at 31 july 2008 the headroom available under these limits was 38 and 01 respectively excluding the conditional
share awards granted under the vsp on 28 july 2008 
pension
the company operates appropriate pension arrangements for executive directors in the case of mr bowman the company pays a monthly salary
supplement of a percentage of salary approved by the committee to enable him to make his own pension provision in the case of mr langston a
final salary scheme provides a pension of up to twothirds of final pensionable salary  the company continues to apply an earnings cap on a basis
similar to the pre2006 statutory limit to determine the proportion of overall pension payable by the regulated pension scheme with the balance
of pension provided by the company  this arrangement substantially represents a continuation of pre2006 practice and involves no additional cost
for the company  in appropriate cases the company permits the waiver of salary and pension supplement entitlements where the arrangement
does not involve additional cost for the company  where such waivers are made incentives and pension entitlements continue to be calculated by
reference to salaries prior to these reductions details of the salary supplements waiver and other pension provisions are set out in the tables on
pages 51 and 52 
fiveyear historical tsr performance
the following graph shows the company’s total shareholder return tsr performance over the past five years compared to the ftse100 index
the ftse100 index of which the company has been a member throughout the period has been selected to reflect the tsr performance of other
leading uklisted companies the values of hypothetical £100 investments in the ftse100 index and smiths group plc shares after adjustment
for the return of cash in june 2007 were £165 and £166 respectively 
50 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report continued
value of hypothetical £100 holding
£200
£180
£160
£140
£120
£100
£80
july 03 july 04 july 05 july 06 july 07 july 08
smiths group plc
ftse 100 remuneration
the total remuneration of directors excluding the value of shares to which certain directors may become entitled under the performance share
plan and coinvestment plan and also defined benefit pension arrangements was as follows
2008 2007
£000 £000
fees salaries and benefits compensation for loss of office 4098 2740
performancerelated bonuses 1232 1943
aggregate gain from exercise of share options and vesting of share awards 2026 3479
incremental gain from deferred share scheme exercises 109 363
payments in lieu of pension contribution 362 544
7827 9069
the emoluments of the directors are set out below
compensation payments in
for loss lieu of pension
feessalary of office benefits bonus contribution t otal emoluments
2008 2007 2008 2008 2008 2008 2008 2007
£000 £000 £000 £000 £000 £000 £000 £000
chairman
d h brydon 295 273 – 22–– 317 293
chief executive
p bowman appointed 101207 516 – – 14 608 217 1355 –
executive director
j langston 424 400 – 38 346 – 808 788
nonexecutive directors
d j challen 67 65 –––– 67 65
s j chambers appointed 271106 62 40 –––– 62 40
p j jackson 67 65 –––– 67 65
sir kevin t ebbit appointed 140606 52 50 –––– 52 50
directors who resigned in 200708
k o butlerwheelhouse retired 101207 – note 4 310 840 1748 46 – 145 2249 2132
d p lillycrop resigned 030608 – note 5 337 359 – 70 278 – 685 787
p h loescher 
appointed 010607 resigned 080408 36 8 –––– 36 8
directors who resigned in 200607 in aggregate – 412 ––––– 999
2166 2512 1748 190 1232 362 5698 5227
1 shares which may be awarded under the performance share plan coinvestment plan and the group value sharing plan are as set out in the
directors’ share options and awards table on pages 54 to 56
2 under the arrangements approved by the remuneration committee mr butlerwheelhouse waived entitlements to certain of his emoluments
in return for the company making equivalent amounts of contributions to the smiths industries pension scheme to provide money purchase
benefits which does not involve additional cost for the company  under these arrangements mr butlerwheelhouse waived £3890579 during the
year  the amounts waived would otherwise have been paid to mr butlerwheelhouse as payments in lieu of pension contributions and are included
in the table above
3 in common with other uk employees participating in the relevant pension schemes the salaries of messrs langston and lillycrop were each
reduced by £8580 and the company paid the same amount directly to the pension schemes during the year  the salaries shown in the table above
for these directors are the amounts they would have been paid if they had not given up these salary entitlements
4 mr butlerwheelhouse retired on 10 december 2007 the salary benefits and pension contribution information in the table above relates to his
employment from 1 august 2007 to 10 december 2007 further information on mr butlerwheelhouse’ s termination arrangements including his
bonus payment for 200708 is set out below
5 mr lillycrop remained in service on his existing terms and conditions following his resignation from the board the information in the table
reflects salary and benefits up to his resignation and the proportion of the 200708 bonus attributable to his period of service as a director within
that year  during the period 4 june to 31 july 2008 mr lillycrop received £63388 in salary and benefits to the value of £13164 as an employee 
the proportion of his 200708 bonus attributable to that period was £53395 further information on mr lillycrop’ s termination arrangements is set
out below
51 smiths group plc annual report year ended 31 july 2008
payments in
lieu of pension directors’ pension entitlements
accrued annual pension under defined benefit schemes
transfer transfer transfer
additional value of value of value of the amount of
pension earned accrued accrued accrued a – b less
during the benefits at benefits at benefits at contributions
accrued year excluding 31 july 2008 31 july 2007 31 july 2007 made by accrued
entitlement at any increase new basis mfr basis new basis the director entitlement
age at 31 july 2007 for inflation a b c in 2008 at 31 july 2008
31 july 2008 £000 £000 £000 £000 £000 £000 £000 pa
j langston 58 212 20 5670 3656 4183 2014 241
d p lillycrop resigned 030608 52 156 24 3414 2058 2267 1356 186
1 an executive director’s normal retirement age is 60 an early retirement pension based on actual service completed may be paid after age 50
and may be subject to a reduction on account of early payment on death a spouse’s pension of twothirds of the director’s pension or for death
inservice his prospective pension at age 60 is payable all pensions in excess of the guaranteed minimum pension gmp are guaranteed to
increase at the lesser of i 7 per annum compound and ii the annual increase in the retail prices index there has however been a longstanding
practice of granting additional discretionary increases on pensions in excess of the gmp to bring them into line with price inflation
2 see note 3 above the benefits provided under the relevant pension schemes were not affected by these arrangements
3 transfer values of the accrued benefits have been calculated in accordance with actuarial guidance gn11 and represent the amount that the
pension scheme would pay to another pension provider if the member elects to transfer all of his benefits out of the scheme the transfer values
do not represent sums payable or due to the individual directors and therefore cannot be added meaningfully to annual remuneration
4 the transfer basis changed with effect from august 2007 and therefore the transfer value at 31 july 2007 is shown on the revised basis for
comparison purposes see column c in the table above
directors’ interests in the company’s shares
ordinary shares ordinary shares
of 375p each of 375p each
31 july 2008 1 august 2007
d h brydon 8000 8000
p bowman appointed 101207 20000 3000
†
d j challen 1333 1333
s j chambers 1333 1333
p j jackson 0 0
j langston 175650 112824
sir kevin t ebbit 0 0
k o butlerwheelhouse retired 101207 317368 400732
d p lillycrop resigned 030608 91598 80623
p h loescher resigned 040408 0 0
indicates holding of ordinary shares of 375p each at date of resignation
†indicates holding of ordinary shares of 375p each at date of appointment
these interests include beneficial interests of the directors and their families in the company’ s shares held in trusts and holdings through nominee
companies none of the directors has disclosed any nonbeneficial interests in the company’s shares
the company has not been notified of any changes to the holdings of the current directors their families and any connected persons between 
1 august and 19 september 2008
service contracts
the company’s policy is that executive directors are normally employed on terms which include a oneyear rolling period of notice and provision
for the payment of a predetermined sum in the event of termination of employment in certain circumstances but excluding circumstances where
the company is entitled to dismiss without compensation
mr bowman is employed under a service contract with the company dated 15 november 2007 and effective from 10 december 2007 the service
contract is for an indefinite term expressed to end automatically on his anticipated normal retirement date age 60 but may be terminated by 12
months ’ notice given by the company save that during the first 12 months of employment the notice period shall expire on the second anniversary
of the effective date or six months’ notice given by mr bowman the company may elect to terminate the contract by making a payment in lieu of
notice equal to 150 of mr bowman’s basic salary in respect of the unserved notice period in this event the contract provides that mr bowman’s
bonus entitlement for the financial year in which termination occurs and for the unserved notice period will be the subject of a separate good faith
discussion between mr bowman and the chairman the contract also specifies that mr bowman will be treated as a “good leaver” for the purposes
of relevant share plans in certain constructive dismissal events mr bowman is entitled to resign and be treated in the manner set out above
52 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report continued mr langston is employed under a service contract with the company dated 26 september 2001 the service contract is for an indefinite term
expressed to end automatically on the anticipated normal retirement date age 60 but may be terminated by 12 months’ notice given by the
company or six months’ notice given by mr langston the company may at its discretion elect to terminate the contract by making a payment in
lieu of notice on the following terms 
1 the salary receivable during the notice period 
2 an amount equal to 50 of the maximum bonus potential receivable under the executive bonus scheme for the then current bonus year 
3 the annual cost to the company of providing all other benefits to which mr langston is entitled under his contract which has been preagreed
as 10 of basic salary and
4 an amount equal to the cost of securing one year’ s pensionable service in the appropriate pension schemes in addition the company has given
its irrevocable consent to early payment of mr langston’s pension from age 50 and without actuarial reduction from age 55 
mr lillycrop who resigned as a director on 3 june 2008 remains employed under a service contract dated 26 september 2001 under a compromise
agreement dated 14 august 2008 it has been agreed that mr lillycrop will remain in service until 30 november 2008 serving six months of his notice
period continuing to receive normal salary and benefits until that date in accordance with the termination provisions in his service contract which
reflect those of mr langston’s service contract as described above he will on termination become entitled to a payment of £332000 and the
credit of six months ’ additional pensionable service the company has agreed to the continuation of private healthcare cover for mr lillycrop’ s and
his spouse’s lifetimes and to approximately £50000 of educational benefits for his children for the current academic year he will also be entitled
to outplacement counselling and to payment of legal fees relating to the termination in accordance with mr lillycrop’s service contract his share
awards under the psp and matching share awards under the cip will be preserved and will be capable of vesting on the normal vesting dates without
application of time prorating 
mr butlerwheelhouse who resigned as a director on 10 december 2007 was employed under a service contract with the company dated 26
september 2001 as varied by a letter dated 31 july 2007 although it had been anticipated that mr butlerwheelhouse would be retiring on 31july
2008 such that no compensation would have been payable to him under his service contract on retirement his employment was in fact terminated
on 10 december 2007 in order to facilitate handover arrangements to his successor as chief executive he was accordingly entitled under his
contract to receive a termination payment of £833055 representing his entitlement to salary pension allowance and benefits in kind for the period
from 11 december 2007 to 31 july 2008 and a cash bonus of £915363 being an amount equal to the average of the annual bonuses paid to him
over the three financial years 200405 200506 and 200607 he was also entitled to the continuation of private healthcare for his and his spouse’ s
lifetimes and to life cover and car benefits until 31 july 2008 in relation to mr butlerwheelhouse’s share awards under the psp and matching
share awards under the cip the committee agreed to provide him with the most favourable treatment under the rules so that his awards will be
preserved and capable of vesting on the normal vesting dates without application of time prorating 
external appointments
subject to the overriding requirements of the company the committee is prepared to allow executive directors to accept external appointments
where it considers that such appointments will contribute to the director’ s breadth of knowledge and experience directors are permitted to retain
fees associated with such appointments 
chairman and nonexecutive directors
nonexecutive directors which term excludes the chairman were paid fees totalling £284000 in the financial year ended 31 july 2008 their
remuneration is determined by the board in accordance with the articles of association with the nonexecutive directors abstaining from voting
during the year the basic fee was £52000 per annum the chairman and the nonexecutive directors are not eligible for bonuses or participation
in share schemes and no pension contributions are made on their behalf  the chairman and the nonexecutive directors serve the company under
letters of appointment and do not have contracts of service or contracts for services
auditable part
the directors’ remuneration tables and accompanying notes on page 51 the directors’ pensions table and accompanying notes on page 52 and
the directors’ share options and awards table on pages 54 to 56 have been audited
the directors’ remuneration report has been approved by the board and signed on its behalf by
s j chambers
23 september 2008
53 smiths group plc annual report year ended 31 july 2008 directors’ share options and longterm share plans
options options
and and
awards awards
held on held on
31 july 2008 31 july 2007 option and award data options exercised and awards vested 200708
market price market price
performance exercise grant vesting expiry exercise exercise at date of at date of
director and scheme number number test price date date date date number price grant exercise
p bowman – appointed 101207
psp 75543 0 x c na 111207 131110 131110
37771 0 x d na 111207 131110 131110
j langston
95 esos 38462 38462 a 80600p 090402 090405 090412
38461 38461 b 80600p 090402 090405 090412
psp 0 44547 c na 071204 071207 071207 44547 na 78150p 105900p
0  22274 d na 071204 071207 lapsed 071207
38269 38269 c na 071005 201008 201008
19135 19135 d na 071005 201008 201008
44618 44618 c na 290906 251009 251009
22309 22309 d na 290906 251009 251009
38243 0 c na 131107 131110 131110
19121 0 d na 131107 131110 131110
cip 51680 51680 e na 251005 240908 240908
31881 31881 e na 020207 300909 300909
22202 0 e na 131107 290910 290910
saye 0 1795 52500p 050504 010807 010807 1795 52500p 52500p 102500p
1088 1088 86800p 180507 010810 010211
dss 0 17922 010p 071204 071207 071207 17922 010p 78417p 105900p
ti 90 esos 0  18691 121980p 080997 080900 lapsed 080907
d p lillycrop – resigned 030608
95 esos 37221 z 37221 a 80600p 090402 090405 010509
37220 z 37220 b 80600p 090402 090405 010509
psp 0 42491 c na 071204 071207 071207 42491 na 78150p 105900p
0  21246 d na 071204 071207 lapsed 071207 
36503 z 36503 c na 071005 201008 201008
18252 z 18252 d na 071005 201008 201008
40060 z 40060 c na 290906 251009 251009
20030 z 20030 d na 290906 251009 251009
36057 z 0 c na 131107 131110 131110
18029 z 0 d na 131107 131110 131110
cip 45362 z 45362 e na 251005 240908 240908
29994 z 29994 e na 020207 300909 300909
19934 z 0 e na 131107 290910 290910
saye 0 1539 64500p 090502 010807 010807 1539 64500p 64500p 102500p
1185 z 1185 55400p 080503 010808 exercised 010808
1131 z 1131 86800p 180507 010810 010509
899 z 0 72400p 150508 010813 010509
dss 0 21750 010p 071204 071207 071207 21750 010p 78417p 105900p
ti 90 esos 0  19675 121980p 080997 080900 lapsed 080907
0 23364 102666p 130398 130301 291007 23364 102666p 102666p 112290p
54 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report continued
† options options
and and
awards awards
held on held on
31 july 2008 31 july 2007 option and award data options exercised and awards vested 200708
market price market price
performance exercise grant vesting expiry exercise exercise at date of at date of
director and scheme number number test price date date date date number price grant exercise
k o butlerwheelhouse – retired 101207 
95 esos 86849 z 86849 a 80600p 090402 090405 100609
86848z 86848 b 80600p 090402 090405 100609
psp 0 100746 c na 071204 071207 071207 100746 na 78150p 105900p
0  50373 d na 071204 071207 lapsed 071207 
86548z 86548 c na 071005 201008 201008
43274z 43274 d na 071005 201008 201008
93698z 93698 c na 290906 251009 251009
46849z 46849 d na 290906 251009 251009
82308z 0 c na131107131110131110
41154z 0 d na131107131110131110
cip 125937z 125937 e na 251005 240908 240908
75213z 75213 e na 020207 300909 300909
51655z 0 e na131107290910290910
saye 2964z 2964 55400p 080503 010808 exercised 010808
dss 58987z 58987 010p 071204 071207 exercised 200308
value sharing plan
vsp awards vsp awards
held on held on
31 july 2008 31 july 2007 award data awards vested 200708
shares shares market price market price
per £5m per £5m performance exercise grant vesting expiry exercise exercise at date of at date of
director and scheme surplus value surplus value test price date date date date number price grant exercise
p bowman – appointed 101207
vsp 417 0 x f na 280708 oct 2011 oct 2011
833 0 x g na 280708 oct 2011 oct 2011
417 0 x f na 280708 oct 2012 oct 2012
833 0 x g na 280708 oct 2012 oct 2012
j langston
vsp 167 0 f na 280708 oct 2011 oct 2011
333 0 g na 280708 oct 2011 oct 2011
167 0 f na 280708 oct 2012 oct 2012
333 0 g na 280708 oct 2012 oct 2012
key
95 esos the smiths industries 1995 executive share option scheme
psp the smiths group performance share plan
cip the smiths group coinvestment plan
saye the smiths group sharesave scheme
dss the smiths industries senior executive deferred share scheme
ti 90 esos the ti group 1990 executive share option scheme
vsp the smiths group value sharing plan
 the vesting dates shown above in respect of options granted under the 95 esos and awards made under the psp cip and vsp are subject to the relevant performance test
being passed
 market price of a smiths share at date of grant if different from exercise price the exercise price of an option under the smiths group sharesave scheme is set at 20 less
than the midmarket closing price of a smiths share on the business day preceding the date on which employees are invited to participate in the grant the market prices for
dss options are actual prices paid for the matching shares purchased by the optionholders
 the expiry dates shown above apply in normal circumstances no expiry date is shown if the option or award was exercised or vested or lapsed prior to 19 september 2008 in
the case of the two former directors the expiry dates shown are specific to their particular circumstances
† midmarket closing quotation from the london stock exchange daily official list or actual sale price if applicable
 denotes an option that lapsed on the 10th anniversary of its date of grant or a conditional award that lapsed on the 3rd anniversary of the date of its grant
x options and awards held at date of appointment as a director of the company 
z options and awards held at date of cessation of appointment as a director of the company 
‡ indicates the number of shares that will be awarded for each £5m of surplus value created subject to the performance test and hurdle the operation of the vsp is explained
in detail above
55 smiths group plc annual report year ended 31 july 2008
†
† ‡‡ performance tests
a eps growth versus uk rpi index  3 pa
b eps growth versus uk rpi index  4 pa
c psp earnings per share growth test see below
d psp t otal shareholder return rank test see below
e cip return on capital employed test see above
f surplus shareholder value – vsp tsr t est see above
g surplus internal value – vsp pbt t est see above
notes
the high and low market prices of the ordinary shares during the period 1 august 2007 to 31 july 2008 were 1151p and 8915p respectively 
the midmarket closing price on 31 july 2007 was 1047p and on 31 july 2008 was 1047p
the midmarket closing price of a smiths share on the date of awards made to directors under the psp and cip in the 200708 financial year was 1057p
of the 78011 shares under options granted to and held by directors under 95 esos and saye at 31 july 2008 all shares were granted at exercise prices below the market price of a smiths
group share on 19 september 2008 1108p
none of the options or awards listed above was subject to any payment on grant
options and awards which lapsed during the financial year ended 31 july 2008 are indicated in the table above by a hash mark  no other options or awards held by any director lapsed
during the period 1 august 2007 to 31 july 2008 
no other director held any options over the company’s shares during the period 1 august 2007 to 31 july 2008
no options or awards have been granted to or exercised by directors or have lapsed during the period 1 august to 19 september 2008
executive directors received their final grants of options under the 95 esos in october 2003 from 2004 to 2007 senior executives including directors received awards under the psp  the
final grant of options under the dss was issued in december 2004 the dss has been replaced by the cip  
psp awards will be released after three years to the extent a performance condition is met onethird of the award is subject to a tsr target relative to other ftse 100 companies excluding
financial companies and investment trusts for full vesting the company’s tsr must be at or above the 75th percentile over the three year performance period 25 of the award will vest
if the company’s tsr is at median awards will vest on a straightline pro rata basis between median and 75th percentile the remaining twothirds of the award will be subject to an
earnings per share eps growth target measured before exceptional items for each of the three year cycles commencing in 200506 200607 and 200708 full vesting will occur if the
compound annual growth in eps is equivalent to 12 per annum 25 vesting will occur if the compound annual growth in eps is equivalent to 5 per annum with vesting on a straight
line basis between 5 and 12 the committee considered the use of two measures in these proportions to be appropriate the tsr performance measure is dependent on the company’ s
relative longterm share price performance and therefore brings a market perspective to the performance share plan this is balanced by a key internal measure eps growth which is
critical to our longterm success and ties in with the group’s strategic goals the committee determined the threshold and maximum vesting levels operated to date after considering the
company’ s historic performance and future plans and on the basis of external advice there will be no retesting of the tsr and eps performance measures the vsp had replaced the psp
and no awards will be made under the psp in 200809 or 200910
the performance criterion for epselement of the psp awards granted on 7 december 2004 was exceeded and the pspelement of the awards vested in full on 7 december 2007 the
performance criterion for the tsrelement of the 2004 psp awards was not passed and the tsrelement of all those awards lapsed on 7 december 2007
the performance tests for options granted the 95 esos up to and including december 2004 have all been passed with the sole exception of the grant on 9 april 2002 which failed its initial
test and two annual retests no further retests of the april 2002 grant will be undertaken the april 2002 grant can now only be exercised in the event of a change in control of the company
or by certain good leavers in which circumstances the performance tests will be waived
under the dss executive directors were able to use their after tax bonus to purchase the company’s shares at the prevailing market price at the end of a three year period if the director
is still in office he can exercise an option granted to him over matching shares in respect of any shares retained for that period the number of matching shares awarded was determined
by the committee at the end of the year in which the bonus was earned by reference to annual bonus and other corporate financial criteria the last grant under the dss was made on 
7 december 2004 in respect of bonus earned in the year to 31 july 2004 and matched shares purchased in the market by the grantee on that day  
at 31 july 2008 the trustee of the employee share trust held 1095965 shares of which 18582 shares were held for the benefit of senior executives with extant dss options none of the
directors had an interest in these shares at 31 july 2008 as disclosed above the market value of the shares held by the trustee on 31 july 2008 was £1147m and dividends of approximately
£291114 were waived in the year in respect of the shares held by the trustee during the year 
there are no performance criteria for the saye dss or the ti 90 esos
special provisions permit early exercise of options and vesting of awards in the event of redundancy death etc
56 smiths group plc annual report year ended 31 july 2008
directors’ remuneration report continued company law requires the directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the 
company and the group at the end of the year and of the profit or loss of the group for that period in preparing those accounts the directors are
required to
• select suitable accounting policies and then apply them consistently
• make judgements and estimates that are reasonable and prudent
• state that the consolidated financial statements comply with international financial reporting standards and the parent company financial
statements comply with uk gaap
• state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the accounts
and
• prepare the accounts on the going concern basis unless it is inappropriate to assume that the company and the group will continue in business
the directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of
the company and the group and enable them to ensure that the accounts comply with the relevant provisions of the companies acts 1985 to 2006
they are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention of fraud and 
other irregularities
57 smiths group plc annual report year ended 31 july 2008
statement of directors’ responsibilities independent auditors’ report to the members of smiths group plc
we have audited the group financial statements of smiths group plc for the year ended 31 july 2008 which comprise the consolidated income
statement the consolidated statement of recognised income and expense the consolidated balance sheet the consolidated cashflow statement
the accounting policies and the related notes these group financial statements have been prepared under the accounting policies set out therein
we have reported separately on the parent company financial statements of smiths group plc for the year ended 31 july 2008 and on the information
in the directors’ remuneration report that is described as having been audited
respective responsibilities of directors and auditors
the directors ’ responsibilities for preparing the annual report and the group financial statements in accordance with applicable law and international
financial reporting standards ifrss as adopted by the european union are set out in the statement of directors’ responsibilities
our responsibility is to audit the group financial statements in accordance with relevant legal and regulatory requirements and international
standards on auditing uk and ireland this report including the opinion has been prepared for and only for the company’s members as a body
in accordance with section 235 of the companies act 1985 and for no other purpose w e do not in giving this opinion accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing
we report to you our opinion as to whether the group financial statements give a true and fair view and whether the group financial statements
have been properly prepared in accordance with the companies act 1985 and article 4 of the ias regulation we also report to you whether in our
opinion the information given in the group directors report is consistent with the group financial statements the information given in the group
directors’ report includes that specific information presented in the business review that is cross referred from the group directors’ report 
in addition we report to you if in our opinion we have not received all the information and explanations we require for our audit or if information
specified by law regarding directors’ remuneration and other transactions is not disclosed
we review whether the corporate governance report reflects the company’s compliance with the nine provisions of the combined code 2006
specified for our review by the listing rules of the financial services authority and we report if it does not we are not required to consider whether
the board’ s statements on internal control cover all risks and controls or form an opinion on the effectiveness of the group’ s corporate governance
procedures or its risk and control procedures
we read other information contained in the annual report and consider whether it is consistent with the audited group financial statements the
other information comprises only the summary performance group at a glance chairman’s statement the chief executive’s statement the
business review board of directors the group directors ’ report the unaudited part of the directors ’ remuneration report the statement of directors ’
responsibilities the group financial record and the financial calendar  we consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the group financial statements our responsibilities do not extend to any other information
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts and disclosures in the group financial statements it also includes an
assessment of the significant estimates and judgements made by the directors in the preparation of the group financial statements and of whether
the accounting policies are appropriate to the group’s circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the group financial statements are free from material misstatement whether caused
by fraud or other irregularity or error  in forming our opinion we also evaluated the overall adequacy of the presentation of information in the group
financial statements
opinion
in our opinion
• the group financial statements give a true and fair view in accordance with ifrss as adopted by the european union of the state of the group’s
affairs as at 31 july 2008 and of its profit and cash flows for the year then ended
• the group financial statements have been properly prepared in accordance with the companies act 1985 and article 4 of the ias regulation and
• the information given in the group directors report is consistent with the group financial statements
pricewaterhousecoopers llp
chartered accountants and registered auditors
london
23 september 2008
notes
a the maintenance and integrity of the smiths group plc website is the responsibility of the directors the work carried out by the auditors does not involve consideration of these
matters and accordingly the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website
b legislation in the united kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
58 smiths group plc annual report year ended 31 july 2008 consolidated income statement
y ear ended period ended
31 july 2008 31 july 2007
notes £m £m
continuing operations
revenue 1 23212 21609
cost of sales 12655 11591
gross profit 10557 10018
sales and distribution costs 3118 3115
administrative expenses
– normal activities 3964 3942
– provision for john crane inc litigation 4 490 1007
other operating income 2 669
profitloss on disposal of businesses 4 272 52
operating proﬁt 2 3257 2571
interest receivable 22 214
interest payable 432 578
other financing lossesgains 3 61 21
other finance income – retirement benefits 417 337
finance costs 5 54 06
share of posttax losses of associated companies 14 10 05
proﬁt before taxation 3193 2560
comprising
– headline profit before taxation 3 3803 3444
– exceptional items 4
• profitloss on disposal of businesses 272 52
• commutation of insurance policies 429
• provision for john crane inc litigation 537 1007
• other 136 352
– amortisation of acquired intangible assets 192 148
– other financing lossesgains 17 06
– profit on sale of financial asset 240
3193 2560
t axation 6 750 531
proﬁt after taxation – continuing operations 2443 2029
proﬁt after taxation – discontinued operations 7 245 15252
proﬁt for the period 2688 17281
attributable to 
smiths group shareholders 2685 17281
minority interests 03
2688 17281
earnings per share 9
basic 693p 3147p
basic – continuing operations 630p 369p
diluted 685p 3103p
diluted – continuing operations 623p 364p
references in the consolidated income statement consolidated statement of recognised income and expense consolidated balance sheet and
consolidated cashflow statement relate to notes on pages 69 to 108 which form an integral part of the consolidated financial statements
59 smiths group plc annual report year ended 31 july 2008 consolidated statement of recognised income and expense
y ear ended period ended
31 july 2008 31 july 2007
notes £m £m
exchange gainloss 895 722
cumulative exchange losses recycled on disposals 492
fair value gain on acquisition of former associate 04
t axation recognised on exchange losses
– current 24
t axation recognised on sharebased payment
– current 6 52 103
– deferred 6 38 94
actuarial lossesgains on retirement benefits 10 2545 703
t axation recognised on actuarial lossesgains – deferred 6 755 301
fair value lossesgains
– on cashflow hedges 21 05 119
– on net investment hedges 21 475 82
net expenseincome recognised directly in equity 1357 168
profit for the period 2688 17281
total recognised income and expense 27 1331 17449
attributable to 
smiths group shareholders 1328 17449
minority interests 03
1331 17449
60 smiths group plc annual report year ended 31 july 2008 consolidated balance sheet
2008 2007
notes £m £m
noncurrent assets
intangible assets 12 12532 10213
property plant and equipment 13 2963 2609
investments accounted for using the equity method 14 91 120
financial assets – other investments 36 07
retirement benefit assets 10 1742 3337
deferred tax assets 6 962 940
trade and other receivables 16 146 147
financial derivatives 22 14 04
18486 17377
current assets
inventories 15 3803 3197
trade and other receivables 16 5654 4898
cash and cash equivalents 17 1325 1862
financial derivatives 22 65 135
10847 10092
assets of businesses held for sale 18 313
total assets 29333 27782
noncurrent liabilities
financial liabilities
– borrowings 20 7207 5671
– financial derivatives 22 01 25
provisions for liabilities and charges 23 2006 1434
retirement benefit obligations 10 1847 1501
deferred tax liabilities 6 643 1180
trade and other payables 19 275 225
11979 10036
current liabilities
financial liabilities
– borrowings 20 1824 2121
– financial derivatives 22 215 28
provisions for liabilities and charges 23 700 901
trade and other payables 19 4207 4126
current tax payable 1226 1375
8172 8551
liabilities of businesses held for sale 18 162
total liabilities 20151 18749
net assets 9182 9033
shareholders’ equity
share capital 26 1455 1446
share premium account 27 3036 2890
capital redemption reserve 27 58 57
revaluation reserve 27 17 17
merger reserve 27 2348 2348
retained earnings 27 2537 2089
hedge reserve 27 292 186
t otal shareholders’ equity 9159 9033
minority interest equity 23
total equity 9182 9033
the accounts on pages 59 to 108 were approved by the board of directors on 23 september 2008 and were signed on its behalf by
philip bowman john langston
chief executive finance director
61 smiths group plc annual report year ended 31 july 2008 consolidated cashflow statement
y ear ended period ended
31 july 2008 31 july 2007
notes £m £m
net cash inﬂow from operating activities 28 1981 2460
cashﬂows from investing activities
expenditure on capitalised development 198 874
expenditure on other intangible assets 161 296
purchases of property plant and equipment 642 1183
disposals of property plant and equipment 27 256
investment in financial assets 34
proceeds from sale of financial asset 11 150
acquisition of businesses 29 1497 349
disposal of aerospace 7 63 24950
disposals of businesses 30 432 91
net cashﬂow usedgenerated in investing activities 2125 22745
cashﬂows from ﬁnancing activities
proceeds from exercise of share options 27 210 777
purchase of own shares 207 70
dividends paid to equity shareholders 8 1314 1824
cash paid to shareholders under b share scheme 164 20909
increase in new borrowings 1359 190
reduction and repayment of borrowings 110 2847
net cashﬂow used in ﬁnancing activities 226 24683
net decreaseincrease in cash and cash equivalents 370 522
cash and cash equivalents at beginning of period 31 511
exchange differences 61 20
cash and cash equivalents at end of period 17 400 31
cash and cash equivalents at end of period comprise
– cash at bank and in hand 1225 1485
– shortterm deposits 100 408
– bank overdrafts 1725 1862
400 31
included in cash and cash equivalents per the balance sheet 17 1325 1862
included in overdrafts per the balance sheet 17 1725 1862
included in the assets of the disposal group 18 31
17 400 31
the consolidated cashflow statement includes cashflows relating to discontinued operations see note 7 for details of these cashflows 
62 smiths group plc annual report year ended 31 july 2008 accounting policies
basis of preparation
the accounts have been prepared in accordance with the companies act 1985 applicable to companies reporting under international financial
reporting standards ifrs and international financial reporting interpretations committee ifric interpretations as adopted by the european
union in response to the ias regulation ec 16062002 under the historic cost convention modified to include revaluation of certain financial
instruments share options and pension assets and liabilities held at fair value as described below for smiths group plc there are no differences
between ifrs as adopted for use in the european union and full ifrs as published by the international accounting standards board
the accounting policies adopted are consistent with those of the previous financial period except that the group has adopted ‘ifrs 7 financial
instruments disclosures ’ and the amendment to ‘ias 1 presentation of financial statements ’ adoption of these standards has required additional
disclosures on the credit quality of trade receivables and capital management 
significant judgements key assumptions and estimates
the preparation of the accounts in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts
and the reported amounts of revenues and expenses during the reporting period actual results may differ from these estimates the key estimates
and assumptions used in these consolidated financial statements are set out below
revenue recognition
the timing of revenue recognition on longterm funded contracts depends on the assessed stage of completion of contract activity at the balance
sheet date this assessment requires the expected total contract revenues and costs to be estimated based on the current progress of the contract
revenue of £633m 2007 £581m has been recognised in respect of contracts in progress at the year end with a total expected value of £1975m
2007 £1415m a 5 increase in the proportion of the contract activity recognised in the current year would have increased operating profit by an
estimated £06m 2007 £05m 
impairment
goodwill is tested at least annually for impairment in accordance with the accounting policy for goodwill set out below the recoverable amounts
of cash generating units are determined based on value in use calculations these calculations require the use of estimates including projected
future cash flows and other future events see note 12 for details of the critical assumptions made and disclosures on the sensitivity of the
impairment testing to these key assumptions 
provisions for liabilities and charges
the consolidated financial statements include a provision for litigation of £1637m 2007 £1212m 
as previously reported john crane inc a subsidiary of the company is one of many codefendants in litigation relating to products previously
manufactured which contain asbestos provision has been made for the future legal defence costs which the group is expected to incur and the
expected costs of potential future judgments against john crane inc the actual future costs could be materially higher or lower than this estimate
depending on the progress of the claims that are ongoing see note 23 for details 
retirement benefits
the consolidated financial statements include costs in relation to and provision for retirement benefit obligations the costs and the present value
of any related pension assets and liabilities depend on such factors as life expectancy of the members the salary progression of current employees
the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities the group uses previous experience
and impartial actuarial advice to select the values of critical estimates the estimates and the effect of variances in key estimates are disclosed
in note 10
taxation
the group has recognised deferred tax assets relating to uk losses of £94m the recognition of assets pertaining to these losses involves judgement
by management as to the likelihood of realisation of these deferred tax assets and this is based on a number of factors which seek to assess the
expectation that the benefit of deferred tax assets will be realised including appropriate taxable temporary timing differences and it has been
concluded that there are sufficient taxable profits in future periods to support recognition 
further detail on the group’s deferred taxation position is included in note 6
the accounts have been prepared in accordance with the accounting policies as described below
basis of consolidation
the consolidated financial statements incorporate the financial statements of the company and its subsidiary undertakings together with the
group’s share of the results of its associates
subsidiaries are all entities over which the company has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights subsidiaries are fully consolidated from the date on which this power is transferred to the
company  they are deconsolidated from the date that control ceases
associates are entities over which the group has significant influence but does not control generally accompanied by a share of between 20 and
50 of the voting rights investments in associates are accounted for using the equity method
63 smiths group plc annual report year ended 31 july 2008 accounting policies continued
foreign currencies
the company’s presentational currency is sterling the results and financial position of all subsidiaries and associates that have a functional
currency different from sterling are translated into sterling as follows
• assets and liabilities are translated at the rate of exchange at the date of that balance sheet
• income and expenses are translated at average exchange rates for the period and
• all resulting exchange differences are recognised as a separate component of equity 
on consolidation exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency
instruments designated as hedges of such investments are taken to shareholders ’ equity  when a foreign operation is sold the cumulative amount
of such exchange differences is recognised in the income statement as part of the gain or loss on sale
exchange differences arising on transactions are recognised in the income statement those arising on trading are taken to operating profit those
arising on borrowings are classified as finance income or cost 
revenue
revenue from the sale of goods is recognised when the risks and rewards of ownership have been transferred to the customer which is usually
when title passes 
revenue from services is recognised in accounting periods in which the services are rendered by reference to completion of the specific transaction
assessed on the basis of the actual service provided as a proportion of the total services to be provided
revenue is measured at the fair value of the consideration received net of trade discounts and sales taxes
longterm funded contracts
where the outcome of a contract can be estimated reliably revenue and costs are recognised by reference to the stage of completion of the contract
activity at the balance sheet date the group uses the ‘percentage of completion method’ to determine the appropriate amount to recognise in a
given period the assessment of the stage of completion is dependent on the nature of the contract but will generally be based on the estimated
proportion of the total contract costs which have been incurred to date if a contract is expected to be lossmaking a provision is recognised for the
entire loss
employee benefits
pension obligations and postretirement benefits
the group has both defined benefit and defined contribution plans
for defined benefit plans the liability for each scheme recognised in the balance sheet is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets the defined benefit obligation is calculated annually by independent actuaries using the
projected unit credit method the present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms
to maturity approximating to the terms of the related pension liability  actuarial gains and losses arising from experience adjustments and changes
in actuarial assumptions are recognised in full in the period in which they occur outside of the income statement and are presented in the statement
of recognised income and expense past service costs are recognised immediately in the income statement unless the changes to the pension
plan are conditional on the employees remaining in service for a specified period of time the vesting period in this case the past service costs
are amortised on a straightline basis over the vesting period
for defined contribution plans the group pays contributions to publicly or privately administered pension insurance plans on a mandatory
contractual or voluntary basis contributions are expensed as incurred 
the group also has certain postretirement healthcare schemes which are accounted for on a similar basis to the defined benefit plans
sharebased compensation
the group operates a number of equitysettled and cashsettled sharebased compensation plans 
the fair value of the shares or share options granted is recognised as an expense over the vesting period to reflect the value of the employee
services received 
the fair value of options granted excluding the impact of any nonmarket vesting conditions is calculated using established option pricing models
principally binomial models the probability of meeting nonmarket vesting conditions which include profitability targets is used to estimate the
number of share options which are likely to vest 
for cashsettled sharebased payment a liability is recognised based on the fair value of the payment earned by the balance sheet date for equity
settled sharebased payment the corresponding credit is recognised directly in reserves 
in accordance with the transitional provisions of ‘ifrs 2 sharebased payment’ no charge has been recognised for grants of equity instruments
made before 7 november 2002
64 smiths group plc annual report year ended 31 july 2008 exceptional items
items which are material either because of their size or their nature and which are nonrecurring are presented within their relevant consolidated
income statement category but highlighted separately on the face of the income statement the separate reporting of exceptional items helps
provide a better picture of the company’s underlying performance items which may be included within the exceptional category include
• profitslosses on disposal of businesses
• spend on the integration of significant acquisitions and other major restructuring programmes
• significant goodwill or other asset impairments
• income and expenditure relating to john crane inc asbestos litigation and
• other particularly significant or unusual items
exceptional items are excluded from the headline profit measures used by the group the basis of calculation of these measures is explained in
note 3 
discontinued operations
a discontinued operation is a component of the group’s business that represents a separate major line of business or geographical area of
operations that has been disposed of has been abandoned or meets the criteria to be classified as held for sale
discontinued operations are presented on the income statement as a separate line and are shown net of tax
assets and businesses held for sale
assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell impairment losses
on initial classification as held for sale and gains or losses on subsequent remeasurements are included in the income statement no depreciation
is charged on assets and businesses classified as held for sale 
assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather
than through continuing use the asset or business must be available for immediate sale and the sale must be highly probable within one year 
intangible assets
goodwill
goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the identifiable net assets of the acquired
subsidiary at the date of acquisition
goodwill arising from acquisitions of subsidiaries after 1 august 1998 is included in intangible assets tested annually for impairment and carried
at cost less accumulated impairment losses gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold goodwill arising from acquisitions of subsidiaries before 1 august 1998 was set against reserves in the year of acquisition
goodwill is tested for impairment at least annually  any impairment is recognised immediately in the income statement subsequent reversals of
impairment losses for goodwill are not recognised
research and development
expenditure on research and development is charged to the income statement in the year in which it is incurred with the exception of
• amounts recoverable from third parties and
• expenditure incurred in respect of the development of major new products where the outcome of those projects is assessed as being reasonably
certain as regards viability and technical feasibility  such expenditure is capitalised and amortised straight line over the estimated period of sale
for each product commencing in the year that sales of the product are first made
other intangible assets
the identifiable net assets acquired as a result of a business combination may include intangible assets other than goodwill any such intangible
assets are amortised straight line over their expected future lives
the estimated useful lives are as follows
patents licences and trademarks up to 20 years
t echnology 7 to 12 years
customer relationships up to 7 years
the assets’ useful lives are reviewed and adjusted if appropriate at each balance sheet date
65 smiths group plc annual report year ended 31 july 2008 accounting policies continued
property plant and equipment
property plant and equipment is stated at historical cost less accumulated depreciation and any recognised impairment losses 
land is not depreciated depreciation is provided on other assets estimated to write off the depreciable amount of relevant assets by equal annual
instalments over their estimated useful lives in general the rates used are freehold and long leasehold buildings – 2 short leasehold property
– over the period of the lease plant machinery etc – 10 to 20 motor vehicles – 25 t ools and other equipment – 10 to 33 
the assets’ residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date an asset’s carrying amount is
written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount
no borrowing costs are capitalised as part of property plant and equipment
leases
leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases payments
made under operating leases are charged to the income statement on a straightline basis over the period of the lease
inventories
inventories are stated at the lower of cost and net realisable value cost is determined using the firstin firstout fifo method the cost of finished
goods and work in progress comprises raw materials direct labour other direct costs and related production overheads based on normal operating
capacity it excludes borrowing costs net realisable value is the estimated selling price in the ordinary course of business less applicable variable
selling expenses
trade and other receivables
trade receivables are initially recognised at fair value and subsequently measured at amortised cost less any appropriate provision for estimated
irrecoverable amounts a provision is established for irrecoverable amounts when there is objective evidence that amounts due under the original
payment terms will not be collected
cash and cash equivalents
cash and cash equivalents include cash at bank and in hand and highly liquid interestbearing securities with maturities of three months or less
in the cashflow statement cash and cash equivalents are shown net of bank overdrafts which are included as current borrowings in liabilities on
the balance sheet 
provisions
provisions for warranties and product liability disposal indemnities restructuring costs vacant leasehold property and legal claims are recognised
when the company has a legal or constructive obligation as a result of a past event it is probable that an outflow of resources will be required to
settle the obligation and the amount has been reliably estimated provisions are not recognised for future operating losses
provisions are discounted where the time value of money is material
where there are a number of similar obligations for example where a warranty provision has been given the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole a provision is recognised even if the likelihood of an outflow
with respect to any one item included in the same class of obligations may be small
where a leasehold property is vacant or sublet under terms such that the rental income is insufficient to meet all outgoings provision is made
for the anticipated future shortfall up to termination of the lease or the termination payment if smaller 
taxation
the charge for taxation is based on profits for the year and takes into account taxation deferred because of temporary differences between the
treatment of certain items for taxation and accounting purposes 
deferred tax is provided in full using the balance sheet liability method a deferred tax asset is recognised where it is probable that future taxable
income will be sufficient to utilise the available relief t ax is charged or credited to the income statement except when it relates to items charged
or credited directly to equity in which case the tax is also dealt with in equity 
deferred tax is provided on temporary differences arising on investments in subsidiaries and associates except where the timing of the reversal
of the temporary differences is controlled by the company and it is probable that the temporary difference will not reverse in the foreseeable future
deferred tax liabilities and assets are not discounted 
financial assets
the classification of financial assets depends on the purpose for which the assets were acquired management determines the classification of an
asset at initial recognition and reevaluates the designation at each reporting date financial assets are classified as loans and receivables or
financial assets where changes in fair value are charged or credited to the income statement
financial assets are initially recognised at transaction price when the group becomes party to contractual obligations the transaction price used
includes transaction costs unless the asset is being fair valued through the income statement
66 smiths group plc annual report year ended 31 july 2008 financial assets continued
the subsequent measurement of financial assets depends on their classification loans and receivables are measured at amortised cost using
the effective interest method financial assets where changes in fair value are charged or credited to the income statement are subsequently
measured at fair value realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through
the income statement’ category are included in the income statement in the period in which they arise 
financial assets are derecognised when the right to receive cashflows from the assets has expired or has been transferred and the company
has transferred substantially all of the risks and rewards of ownership
financial assets are classified as current if they are expected to be realised within 12 months of the balance sheet date
financial liabilities
borrowings are initially recognised at the fair value of the proceeds net of related transaction costs these transaction costs and any discount or
premium on issue are subsequently amortised under the effective yield method through the income statement as interest over the life of the loan
and added to the liability disclosed in the balance sheet related accrued interest is included in the borrowings figure
borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least one year
after the balance sheet date
derivative financial instruments and hedging activities
derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value
the method of recognising any resulting gain or loss depends on whether the derivative is designated as a hedging instrument and if so the
nature of the item being hedged
changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement
fair value hedge
changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in the income statement together with
any changes in the fair values of the hedged assets or liabilities that are attributable to the hedged risk
cashflow hedge
the effective portions of changes in the fair values of derivatives that are designated and qualify as cashflow hedges are recognised in equity  the
gain or loss relating to any ineffective portion is recognised immediately in the income statement 
amounts accumulated in equity are recycled in the income statement in the periods when the hedged items will affect profit or loss for instance
when the forecast sale that is hedged takes place if a forecast transaction that is hedged results in the recognition of a nonfinancial asset for
example inventory or a liability the gains and losses previously deferred in equity are transferred from equity reserves and included in the initial
measurement of the cost of the asset or liability 
when a hedging instrument expires or is sold or when a hedge no longer meets the criteria for hedge accounting any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement
when a forecast transaction is no longer expected to occur the cumulative gain or loss that was reported in equity is immediately transferred to
the income statement
net investment hedge
hedges of net investments in foreign operations are accounted for similarly to cashflow hedges any gain or loss on the hedging instrument
relating to the effective portion of the hedge is recognised in equity the gain or loss relating to any ineffective portion is recognised immediately in
the income statement
when a foreign operation is disposed of gains and losses accumulated in equity related to that operation are included in the income statement 
embedded derivatives
derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics
are not closely related to those of the host contracts and the host contracts are not carried at their fair value unrealised gains and losses on these
embedded derivatives are recognised in the income statement
fair value of financial assets and liabilities
the fair values of financial assets and financial liabilities are the amounts at which the instrument could be exchanged in a current transaction
between willing parties other than in a forced or liquidation sale 
the following methods are used to estimate the fair values of the financial instruments
• cash trade receivables and payables and floating rate borrowings – the carrying value is a good approximation of the fair value 
• fixed rate borrowings – quoted market prices of equivalent instruments and
• forward exchange contracts currency swaps interest rate instruments and embedded derivatives – net present value of the future cashflows
calculated using market data at the balance sheet date principally exchange rates and yield curves
borrowings are carried on the balance sheet at amortised cost adjusted for fair value interest rate hedging the fair value of fixed rate borrowings
is only used for supplementary disclosures
67 smiths group plc annual report year ended 31 july 2008 accounting policies continued
financial guarantees
financial guarantees are initially recognised at the fair value of the consideration received 
at each subsequent balance sheet date an estimate is made of the payments which will be required under the guarantee in accordance with ‘ias
37 provisions contingent liabilities and contingent assets’ the guarantee is then valued at the higher of its initial value less revenue recognised
to date and the best estimate of the total payments which will be required under the contract 
any gains or losses on the contract are recognised in the income statement
dividends
dividends are recognised as a liability in the period in which they are authorised the interim dividend is recognised when it is paid and the final
dividend is recognised when it has been approved by shareholders at the annual general meeting
recent accounting developments
the following standards and interpretations have been issued by the iasb and are likely to affect future annual reports and accounts
‘ifrs 8 operating segments ’ was issued in february 2007 and will be adopted by smiths from 1 august 2008 the new standard requires segment
information to be prepared on the same basis as information reported to management for decisionmaking purposes following the restructuring
of internal reporting from 1 august 2008 five divisions will be reported in the 2009 annual report in addition the operating profit reported will be
calculated on the basis used for management reporting and some detailed disclosures will change
smiths will determine an appropriate implementation date for the following standards amendments and interpretations after they have been
adopted by the european union
an amendment to ‘ias 23 borrowing costs’ was issued in march 2007 this eliminates the option currently used by the group of expensing all
borrowing costs when they are incurred as retrospective adoption is not required there will be no changes to the information previously reported
when this standard is adopted the impact of the new policy on future reported performance is expected to be limited because the only qualifying
assets have short construction periods
‘ifric 12 service concession arrangements ’ was issued in december 2006 and ‘ifric 13 customer loyalty programmes ’ was issued in june 2007
neither interpretation is expected to have a material impact on the group because it does not have any material contracts or programmes within
the scope of these interpretations 
‘ifric 14 the limit on a defined benefit asset minimum funding requirements and their interaction’ was issued on 6 july 2007 this interpretation
provides guidance on the extent to which a pension scheme surplus should be recognised as an asset based on current actuarial advice this
interpretation is not expected to reduce the assets recognised at 31 july 2008 in respect of pension schemes 
‘ifric 15 agreements for the construction of real estate’ was issued on 3 july 2008 the group is not involved in the construction or sale of
residential real estate however a review of contract accounting is being undertaken to establish whether or not the same principles apply to any
transactions undertaken by the group the impact of adopting this interpretation will be determined once this review has been completed 
‘ifric 16 hedges of a net investment in a foreign operation’ was issued on 3 july 2007 an initial review of the group’s net investment hedging
indicated that this interpretation is not likely to affect their accounting treatment a detailed review of the impact of this interpretation is still 
in progress 
‘ifrs 3 revised business combinations’ and ‘ias 27 revised consolidated and separate financial statements’ were issued in january 2008
implementing ifrs 3 revised will significantly change the recognition of goodwill acquisition costs and contingent consideration relating to
acquisitions however it only applies to acquisitions made after it has been adopted ias 27 revised requires different accounting treatment for
minority interest but it is not expected to affect the group’s financial results or position materially  
an amendment to ‘ifrs 2 share based payment’ was issued in january 2008 this provides a definition of vesting conditions and specifies the
accounting treatment for nonvesting conditions it is not expected to materially affect the share based payment charge recognised in the group
accounts because only a small proportion of awards under employee share schemes are affected by failures to comply with nonvesting conditions 
‘ias 1 revised presentation of financial statements’ was issued in january 2008 this changes the presentation requirements for other
comprehensive income and transactions with shareholders and requires increased disclosures when there is a restatement of comparatives
adopting this standard will not affect the recognition measurement or disclosure of any transactions or events 
in february 2008 amendments to ‘ias 32 financial instruments presentation’ and ‘ias 1 revised presentation of financial statements’ 
were issued clarifying the treatment of puttable financial instruments the adoption of these amendments is not expected to have any impact on
the group 
parent company
the accounts of the parent company smiths group plc have been prepared in accordance with uk gaap  the company accounts are presented
in separate financial statements on pages 111 to 120
the principal subsidiaries of the parent company are listed in the above accounts
the ultimate parent company of the group is smiths group plc a company incorporated in england and listed on the london stock exchange
68 smiths group plc annual report year ended 31 july 2008 notes to the accounts
1 segment information
analysis by business segments
for management purposes the group has been organised into three business segments – detection medical and specialty engineering these
business segments are the basis on which the group reported its primary segment information for reporting purposes specialty engineering is
analysed into two segments john crane and specialty – other  
y ear ended 31 july 2008
specialty engineering
specialty
detection medical john crane – other total
£m £m £m £m £m
revenue 5093 7034 6258 4827 23212
headline operating profit 856 1278 959 713 3806
exceptional operating items note 4 03 100 515 264 354
amortisation of acquired intangible assets 04 113 55 20 192
financing losses 01 04 01 01 03
operating profit 850 1061 388 958 3257
exceptional finance costs – adjustment to discounted provision note 4 47 47
net finance costs – other 07
share of posttax lossesprofits of associated companies 14 04 10
profit before taxation 3193
t axation 750
profit for the period – continuing operations 2443
period ended 31 july 2007
specialty engineering
specialty
detection medical john crane – other t otal
£m £m £m £m £m
revenue 4375 6906 5324 5004 21609
headline operating profit 786 1273 753 664 3476
exceptional operating items note 4 130 96 732 24 982
amortisation of acquired intangible assets 04 115 06 23 148
financing losses 01 02 02 10 15
651 1060 13 607 2331
profit on sale of financial assets 240
operating profit 2571
net finance costs 06
share of posttax lossesprofits of associated companies 11 06 05
profit before taxation 2560
t axation 531
profit for the period – continuing operations 2029
the group’s revenue is analysed as follows
y ear ended period ended
31 july 2008 31 july 2007
£m £m
sale of goods 20778 19652
contracts 1321 984
services 1113 973
23212 21609
69 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
1 segment information continued
the noncash expenditure included in operating costs by division is shown below
y ear ended 31 july 2008 period ended 31 july 2007
other noncash other noncash
goodwill and expenses goodwill and expenses
other asset excluding other asset excluding
depreciation amortisation impairments impairments depreciation amortisation impairments impairments
£m £m £m £m £m £m £m £m
detection 78 44 27 62 25 18
medical 265 166 03 41 183 189 36
specialty engineering
john crane 100 72 35 83 21 26
specialty – other 89 28 26 110 24 103 24
continuing operations 532 310 03 129 438 259 103 104
discontinued operations 84 38 35
total 532 310 03 129 522 297 103 139
included in goodwill and other asset impairments in 2007 is £81m relating to disposal group impairment of assets on remeasurement to fair value
less costs of sale 
capital expenditure
y ear ended period ended
31 july 2008 31 july 2007
£m £m
detection 323 259
medical 378 425
specialty engineering
john crane 218 173
specialty – other 82 147
continuing operations 1001 1004
discontinued operations 1277
1001 2281
included in discontinued operations for the period ended 31 july 2007 is capital expenditure of £909m incurred during the period after being
classified as a disposal group
70 smiths group plc annual report year ended 31 july 2008 1 segment information continued
balance sheet
2008 2007
£m £m
assets
detection 7117 6048
medical 9121 8999
specialty engineering
john crane 4905 3360
specialty – other 3751 3576
operating assets by segment – continuing operations 24894 21983
unallocated corporate assets 3114 3937
cash and cash equivalents 1325 1862
t otal assets 29333 27782
liabilities
detection 1436 1642
medical 930 1362
specialty engineering
john crane 2821 2534
specialty – other 776 932
operating liabilities by segment 5963 6470
unallocated corporate liabilities 5157 4487
borrowings 9031 7792
t otal liabilities 20151 18749
unallocated corporate assets and liabilities include net taxation liabilities of £907m r etir ement benefit assets of £1742m r etir ement benefit obligations
of £1847m and property plant and equipment of £168m all these assets and liabilities are not directly attributable to the operating activities
analysis by geographical location
the groups revenue by destination is shown below
y ear ended period ended
31 july 2008 31 july 2007
£m £m
united kingdom 1483 1346
north america 11075 10384
europe 5863 5462
other overseas 4791 4417
23212 21609
the following analysis shows the carrying amounts of the group’s assets and additions to intangible assets and property plant and equipment
additions to intangible
segment assets and property
assets plant and equipment
y ear ended period ended
2008 2007 31 july 2008 31 july 2007
£m £m £m £m
united kingdom 3938 5836 166 769
north america 14055 12764 534 1188
europe 7463 5540 200 133
other overseas 2552 1780 101 191
28008 25920 1001 2281
cash and cash equivalents 1325 1862
29333 27782 1001 2281
included in additions to intangible assets and property plant and equipment above were the following in relation to discontinued operations united
kingdom £nil 2007 £534m north america £nil 2007 £667m europe £nil 2007 £06m and other overseas £nil 2007 £70m of the additions
relating to discontinued operations in 2007 the following amounts were incurred during the period after being classified as a disposal group
united kingdom £375m north america £470m europe £nil and other overseas £64m
71 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
1 segment information continued
additional voluntary segment disclosure of the impact of the restructuring
as set out in the chief executive’ s statement the roles of the divisions and the corporate centre are being restructured with the new management
structure in place from 1 august 2008 the following information which is presented with no comparatives illustrates how the result would have
been reported if the new structure had been in place for the year ended 31 july 2008
y ear ended 31 july 2008
detection john crane medical interconnect flextek other corporate total
£m £m £m £m £m £m £m £m
revenue 5093 6258 7034 2606 2061 160 23212
headline operating profit 933 1038 1396 540 243 08 352 3806
exceptional operating items note 4 01 510 94 13 01 283 20 354
amortisation of acquired intangible assets 04 55 113 20 192
financing losses 04 01 03
operating profit 930 473 1185 507 243 291 372 3257
exceptional finance costs – adjustment 
to discounted provision note 4 47 47
net finance costs – other 07
share of posttax lossesprofits 
of associated companies 14 04 10
profit before taxation 3193
t axation 750
profit for the period – continuing operations 2443
the assets and liabilities of the five new operating segments are set out below 
y ear ended 31 july 2008
other 
unallocated  cash 
detection john crane medical interconnect flextek corporate borrowings total
£m £m £m £m £m £m £m £m
assets 7117 4905 9121 2674 1062 3129 1325 29333
liabilities 1436 2821 930 470 292 5171 9031 20151
net assets 5681 2084 8191 2204 770 2042 7706 9182
2 operating proﬁt is stated after charging
y ear ended period ended
31 july 2008 31 july 2007
£m £m
cost of inventories recognised as an expense 17764 15821
employee costs note 11 6624 6452
depreciation of property plant and equipment including impairment of £03m 2007 £81m 535 519
amortisation of intangible assets including impairment of £nil 2007 £22m 310 281
impairment losses recognised in the period on receivables 06 13
research and development expense 527 523
operating leases
– land and buildings 202 189
– other 79 72
fair value movements on derivatives
– embedded 08
– held for trading 03 07
for the period ending 31 july 2007 other operating income comprises the income received following the commutation of insurance policies £429m
– see note 4 and the profit on sale of a financial asset
72 smiths group plc annual report year ended 31 july 2008 2 operating proﬁt is stated after charging continued
y ear ended period ended
31 july 2008 31 july 2007
£m £m
audit services
fees payable to the company’s auditors for the audit of the parent company and consolidated accounts 05 04
fees payable to the company’s auditors and its associates for other services 
– the audit of the company’s subsidiaries pursuant to legislation 35 36
– other services pursuant to legislation 01
40 41
t ax services
– compliance services 01 01
– advisory services 01 07
services in relation to corporate acquisition and disposal transactions
– sale of aerospace 18
– aborted transaction 11
– bshare issue 03
– due diligence 01 09
all other services 02 02
other services relate to oneoff projects 
3 headline profit measures
the company seeks to present a measure of underlying performance which is not impacted by exceptional items or items considered non
operational in nature this measure of profit is described as ‘headline’ and is used by management to measure and monitor performance 
the following items have been excluded from the headline measure
• exceptional items including income and expenditure relating to john crane inc asbestos litigation
• amortisation of intangible assets acquired in a business combination – the amortisation charge is a noncash item and the directors believe that
it should be added back to give a clearer picture of underlying performance and
• other financing gains and losses which represent the potentially volatile gains and losses on derivatives and other financial instruments which
do not fall to be hedge accounted under ias 39
y ear ended period ended
31 july 2008 31 july 2007
£m £m
other ﬁnancing gains and losses
financing gains and losses on financial instruments 14 21
exceptional finance costs – adjustment to discounted provision note 4 47
61 21
financing gains and losses reported in operating proﬁt
financing gains and losses on financial instruments 03 15
64 06
73 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
4 exceptional items
an analysis of the amounts presented as exceptional items in these financial statements is given below
y ear ended period ended
31 july 2008 31 july 2007
£m £m
operating items
restructuring of corporate and divisional headquarters 45
integration of acquisitions 91 90
impairment of goodwill and other assets 103
profitloss on disposal of businesses note 30 272 52
aborted transaction costs 127
litigation 
– commutation of insurance policies note 23 429
– provision for john crane inc asbestos litigation note 23 490 1007
– provision for other litigation note 23 86
– class action settlement 54
354 982
financing items
exceptional finance costs – adjustment to discounted provision note 23 47
401 982
y ear ended 31 july 2008
on 3 june 2008 the company announced a number of changes to its corporate centre and divisional headquarters the total cost of this
restructuring including redundancy relocation and consolidation of manufacturing is considered exceptional by virtue of its size it is expected to
amount to approximately £48m over the period to 2010 of which £45m has been charged in the current year  
in addition restructuring costs in connection with the integration of medex amounting to £91m have been incurred in the period no further costs
relating to this restructuring are anticipated 
the operating charge of £490m in respect of john crane inc asbestos litigation comprises a £400m provision for the expected costs of future
asbestos judgments £52m in respect of adverse legal judgments net of insurer contributions previously lodged as collateral and £38m arising
from movements in the discounting due to changes in us interest rates see note 23
period ended 31 july 2007
restructuring costs in connection with the integration of medex amounting to £90m were incurred in the period
impairment of goodwill and other assets includes £81m in respect of the impairment of a disposal group john crane automotive prior to its
eventual sale
costs of £127m in relation to the proposed joint venture with ge were written off in the light of the decision not to proceed with the joint venture 
john crane inc commuted certain insurance policies and received £429m in cash for the period at the same time a provision of £1007m in respect
of legal defence costs for asbestos cases was established note 23 
the progression of other litigation cases arising in 2007 gave rise to an exceptional charge
the exceptional charge recognised in 2006 in respect of the class action settlement has now been finalised that element of the provision which
was surplus was therefore released
74 smiths group plc annual report year ended 31 july 2008 5 net finance costs
y ear ended period ended
31 july 2008 31 july 2007
£m £m
interest receivable 22 214
interest payable
– bank loans and overdrafts 196 285
– other loans 236 293
interest payable 432 578
other financing lossesgains
– fair value losses on hedged debt 40 10
– fair value gains on fair value hedge 40 10
– net foreign exchange lossesgains 14 21
– exceptional finance costs – adjustment to discounted provision 47
other financing lossesgains 61 21
retirement benefits
– return on plan assets 2173 1912
– interest cost 1756 1575
retirement benefits 417 337
net ﬁnance costs 54 06
6 taxation
continuing continuing discontinued discontinued
y ear ended period ended y ear ended period ended
31 july 2008 31 july 2007 31 july 2008 31 july 2007
£m £m £m £m
the taxation charge for the year comprises
– current income taxation 670 136 876
– deferred taxation 80 395 23 06
total taxation expense in the income statement 750 531 23 882
current income taxation
– uk corporation tax
– foreign tax 670 136 626
– discontinued tax 250
670 136 876
75 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
6 taxation continued
reconciliation of the total tax charge
the tax expense on the profit for the period is different from the standard rate of corporation tax in the uk of 293 2007 30 the difference is
reconciled as follows
continuing continuing discontinued discontinued
y ear ended period ended y ear ended period ended
31 july 2008 31 july 2007 31 july 2008 31 july 2007
£m £m £m £m
proﬁt before tax 3193 2560 268 16134
notional taxation expense at uk rate of 293 2007 30 937 768 79 4840
effect of overseas taxation 82 157 50
compliance benefits 124 165 40
local incentives 161 161 70
sale of investment 72
t ax effect of other nonheadline items 16 04
t ax effect of aerospace sale 56 3898
750 531 23 882
comprising
– taxation on headline profit 913 864
– tax relief on nonheadline loss 163 333
– taxation on discontinued profit 369
– tax on sale of discontinued operations 23 513
total taxation expense in the income statement 750 531 23 882
y ear ended period ended
31 july 2008 31 july 2007
£m £m
tax on items chargedcredited to equity
current tax credit
– sharebased payment 52 103
– exchange gains 24
52 127
deferred tax creditcharge
– retirement benefit schemes 755 301
– sharebased payment 38 94
769 268
76 smiths group plc annual report year ended 31 july 2008 6 taxation continued
deferred taxation
excess tax
depreciation retirement capitalised
on fixed assets sharebased benefit development
and goodwill payment obligations expenditure other t otal
£m £m £m £m £m £m
at 5 august 2006 459 245 327 118 431 426
chargecredit to income statement 413 23 556 228 317 401
charge to equity 94 301 395
other 15 15
disposals 120 220 274 174
exchange adjustments 31 17 22 08 29 29
at 31 july 2007 721 157 552 102 978 240
deferred tax assets 111 127 44 746 940
deferred tax liabilities 832 157 679 58 232 1180
at 31 july 2007 721 157 552 102 978 240
creditcharge to income statement 97 03 313 16 126 103
charge to equity 38 755 717
other 60 60
disposals 128 128
exchange adjustments 19 05 02 29 13
at 31 july 2008 643 122 105 120 1065 319
deferred tax assets 26 03 197 46 834 962
deferred tax liabilities 617 119 302 74 231 643
at 31 july 2008 643 122 105 120 1065 319
included in other above is a deferred tax liability of £93m 2007 £10m relating to unremitted overseas earnings no additional tax liabilities have
been recognised because the group is in a position to control the timing of other temporary differences and it is probable that such differences will
not reverse in the future other deferred tax also includes the tax benefits of losses carried forward amounting to £267m 2007 £154m
the group has not recognised deferred tax assets relating to tax losses of £1022m 2007 £179m due to uncertainty as to their recoverability  the
expiry date of operating losses carried forward is dependent upon the law of the various territories in which the losses arise a summary of expiry
dates for losses in respect of which restrictions apply is set out below
restricted losses
2008 expiry of 2007 expiry of
£m losses £m losses
t erritory
– americas 107 20192025 106 20192025
– europe 50 2014
t otal restricted losses 107 156
unrestricted losses
– operating losses 915 no expiry 23 no expiry
total 1022 179
77 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
7 discontinued operations
on 5 may 2007 the company sold its aerospace operations to general electric company  the aerospace operations sold comprised the aerospace
business segment as reported in previous annual reports and accounts plus the us microwave company previously reported in specialty – other 
the revenue and profit before taxation of the us microwave company in the period ended 31 july 2007 were £322m and £76m respectively  as the
aerospace operations represented a separate business segment the disposal group was treated as a discontinued operation in the 2007 annual
report and accounts the posttax result of the aerospace operations was disclosed as a discontinued operation in the consolidated income
statement in the cashflow statement the operating cashflows of the aerospace group for the period ended 31 july 2007 were aggregated with
those of the continuing operations but are shown separately in the note below
profit on disposal of operation
y ear ended period ended
31 july 2008 31 july 2007
£m £m
t otal consideration 61 25854
foreign exchange recycled to the income statement on disposal 484
provisions and disposal costs 171 760
pension curtailment gains 633
provision for settlement loss 36 243
268 25000
net assets disposed 10304
pretax profit on disposal 268 14696
£m
cash received from disposal of aerospace operations 30 25854
disposal costs 93 319
cash and cash equivalents of subsidiaries disposed 625
borrowings of subsidiaries disposed 40
net cash outflowinflow on disposal 63 24950
the £61m consideration recognised in the year ended 31 july 2008 arises from the finalisation of the working capital adjustment 
the provisions and disposal costs movement for the year ended 31 july 2008 include £43m other finance income relating to retirement benefits
and £127m relating to the reassessment of the carrying value of other assets and liabilities 
assets and liabilities of discontinued operations at the date of disposal
£m
assets
intangible assets 5530
property plant and equipment 2561
retirement benefit assets 68
inventories 2970
trade and other receivables 13571
intercompany receivables 10245
cash and cash equivalents 625
financial derivatives 121
total assets 35691
liabilities
financial liabilities
– borrowings 40
– financial derivatives 25
provisions for liabilities and charges 206
retirement benefit obligations 05
deferred tax liabilities 174
trade and other payables 24937
total liabilities 25387
net assets 10304
78 smiths group plc annual report year ended 31 july 2008 7 discontinued operations continued
financial information for the aerospace operations after group eliminations is presented below
results from discontinued operations
y ear ended period ended
31 july 2008 31 july 2007
£m £m
revenue 9556
cost of sales 6679
gross proﬁt 2877
sales and distribution costs 299
administrative expenses 1166
loss on disposal of business
operating proﬁt 1412
interest payable 12
other financing gains 07
other finance income – retirement benefits 31
proﬁt before taxation 1438
t axation relating to performance of discontinued operations note 6 369
profit on disposal 268 14696
attributable tax charge note 6 23 513
proﬁt for the period 245 15252
earnings per share from discontinued operations – pence
basic 63p 2778p
diluted 62p 2739p
the profit before taxation for the period ended 31 july 2007 represents the results of the operations for the period to the date of disposal
analysis by geographical location
the groups revenue from discontinued operations by destination is shown below
y ear ended period ended
31 july 2008 31 july 2007
£m £m
revenue
united kingdom 1257
north america 6886
europe 950
other overseas 463
9556
the group operating profit from discontinued operations was after charging
y ear ended period ended
31 july 2008 31 july 2007
£m £m
cost of inventories recognised as an expense 5946
employee costs note 11 3425
depreciation of property plant and equipment 84
amortisation of intangible assets 38
impairment losses recognised in the period on receivables 01
research and development costs 294
operating leases
– land and buildings 41
– other 10
fair value movements on derivatives
– embedded 01
– held for trading 07
79 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
7 discontinued operations continued
cashflows from discontinued operations
y ear ended period ended
31 july 2008 31 july 2007
£m £m
profit before taxation including profit on disposal of aerospace operations 268 16134
net interest payable 12
financing gainslosses
– charged to financing 07
other finance income – retirement benefits 31
profit on disposal of discontinued operations 268 14696
1412
amortisation of intangible assets 38
profit on disposal of property plant and equipment 02
profit on disposal of business
depreciation of property plant and equipment 84
sharebased payment expense 35
retirement benefits 226
increase in inventories 510
increasedecrease in trade and other receivables 173
decreaseincrease in trade and other payables 164
decreaseincrease in provisions 11
cash generated from operations 487
interest 12
t ax paid 69
net cash inflow from operating activities 406
y ear ended period ended
31 july 2008 31 july 2007
£m £m
operating activities 406
investing activities 63 23731
financing activities 142
63 24279
8 dividends
the following dividends were declared and paid in the period
y ear ended period ended
31 july 2008 31 july 2007
£m £m
ordinary final dividend of 235p for 2007 2006 215p paid 23 november 2007 908 1223
ordinary interim dividend of 105p for 2008 2007 105p paid 25 april 2008 406 601
1314 1824
the final dividend for the year ended 31 july 2008 of 235p per share was declared by the board on 23 september 2008 and will be paid to
shareholders on 21 november 2008 this dividend has not been included as a liability in these accounts and is payable to all shareholders on the
register of members at close of business on 24 october 2008
80 smiths group plc annual report year ended 31 july 2008 9 earnings per share
basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders of the parent company by the
average number of ordinary shares in issue during the year 
y ear ended period ended
31 july 2008 31 july 2007
£m £m
profit attributable to equity shareholders for the year
– continuing 2440 2029
– total 2685 17281
average number of shares in issue during the year 387446186 549153733
diluted earnings per share are calculated by dividing the profit attributable to ordinary shareholders by 391851712 2007 556934401 ordinary
shares being the average number of ordinary shares in issue during the period adjusted by the dilutive effect of employee share schemes for the
year ended 31 july 2008 options over 1376331 2007 847762 shares were excluded from this calculation because their effect was antidilutive
for continuing operations 
the average number of shares in issue has reduced as a result of the share consolidation in june 2007 following the disposal of the aerospace
business the average number of shares in issue during the period ended 31 july 2007 was a reflection of the capital structure appropriate to both
the continuing and the discontinued business
a reconciliation of basic and headline earnings per share – continuing is as follows
y ear ended 31 july 2008 period ended 31 july 2007
eps eps
£m p £m p
profit attributable to equity shareholders of the parent company 2440 630 2029 369
exclude
– exceptional operating items note 4 354 982
– profit on saleimpairment of financial asset 240
– amortisation of acquired intangible assets 192 148
– financing gains – charged to administrative expenses 03 15
– exceptional finance cost – adjustment to discounted provision note 4 47
– charged to financing 14 21
610 884
– less tax 163 333
447 115 551 101
headline 2887 745 2580 470
headline eps – diluted p 737 463
81 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
10 postretirement benefits
smiths operates a number of defined benefit plans throughout the world the principal schemes are in the united kingdom and in the united states
and assets held in separate trusteeadministered funds the group also provides a defined contribution 401k plan for its us employees
pension costs are assessed in accordance with the advice of independent professionallyqualified actuaries the most recent actuarial valuations
of the two principal uk schemes were performed using the projected unit method as at 31 march 2006 the most recent valuations of the six
principal us pension and postretirement healthcare plans were performed at 1 january 2008 these valuations have been updated by independent
qualified actuaries in order to assess the liabilities of the schemes as at 31 july 2008 scheme assets are stated at their market values
contributions to the schemes are made on the advice of the actuaries with the objective that the benefits be fully funded during the scheme
members’ average working lives 
the principal assumptions used in updating the valuations are set out below
2008 2007
uk us other uk us other
rate of increase in salaries 41 38 37 41 38 30
rate of increase in pensions in payment 36 na 14 31 na 10
rate of increase in deferred pensions 35 na 07 31 na 06
discount rate 66 68 60 58 64 51
inflation rate 36 33 25 31 28 16
healthcare cost increases 50  38 50  27
8 pa reducing 05 pa to 5 in 2014
9 pa reducing 1 pa to 5 in 2012
the assumptions used are estimates chosen from a range of possible actuarial assumptions which due to the timescale covered may not
necessarily occur in practice for countries outside the uk and usa these are disclosed as a weighted average 
the mortality assumptions used in the uk schemes are based on the recent actual mortality experience of members within each scheme the
assumptions are based on the pa92 birth year tables with relevant scaling factors based on the experience of the schemes the assumption also
allows for future improvements in life expectancy in line with the medium cohort and a 1 underpin the assumptions are that a member who
retires next year at age 65 will live on average for a further 22 years after retirement if they are male and for a further 25 years if they are female
for a member who is currently 45 when they retire in 20 years’ time they are assumed to live on average for a further 23 years after retirement if
they are male and for a further 27 years if they are female
the mortality assumptions used in the principal us schemes are based on the most recent mortality study table produced for retired pensioners
in the us rp 2000 table the table selected allows for future mortality improvements and applies an adjustment for job classification blue collar
versus white collar the assumptions are that a member who retires at age 65 will live on average for a further 18 years after retirement if they
are male and for a further 20 years after retirement if they are female for a member who is currently 45 when they retire in 20 years time they
are assumed to live on average for a further 19 years after retirement if they are male and for a further 21 years if they are female 
the assets in the scheme and the expected rates of return as at 31 july 2008 were
2008
uk schemes us schemes other countries
longterm value longterm value longterm value
rate of return £m rate of return £m rate of return £m
equities 82 11658 88 1875 88 71
government bonds 48 4451 53 838 66 49
corporate bonds 66 2584 68 258 71 18
insured liabilities 66 2714 68 15 na
property 72 1887 72 32 02
other 58 2890 60 179 50 110
t otal market value 26184 3165 250
present value of funded scheme liabilities 24688 3570 307
surplusdeficit 1496 405 57
unfunded pension plans 343 37 164
postretirement healthcare 152 420 08
unrecognised asset due to surplus restriction 15
net pension assetliability 1001 862 244
during the year the trustees of the ti pension scheme invested £2500m in annuities which are matched with specific liabilities of the fund as a
result this investment category is separately analysed 
other assets in the uk and us comprise cash and current assets 
82 smiths group plc annual report year ended 31 july 2008 10 postretirement benefits continued
2007
uk schemes us schemes other countries
longterm value longterm value longterm value
rate of return £m rate of return £m rate of return £m
equities 82 16241 88 2029 82 71
government bonds 49 5916 50 949 65 36
corporate bonds 58 3649 64 238 77 25
property 72 2018 na na
other 60 1867 50 60 41 90
t otal market value 29691 3276 222
present value of funded scheme liabilities 26376 3550 266
surplusdeficit 3315 274 44
unfunded pension plans 336 38 141
postretirement healthcare 159 454 09
unrecognised asset due to surplus restriction 24
net pension assetliability 2820 766 218
the scheme assets do not include any of the group’ s own financial instruments nor any property occupied by nor other assets used by the group
the expected rates of return on individual categories of scheme assets are determined by reference to relevant industries the overall rate of
return is calculated by weighting the individual rates in accordance with the anticipated balance in the scheme’s investment portfolios 
amounts recognised in the income statement – continuing and discontinued operations
y ear ended 31 july 2008 period ended 31 july 2007
unfunded unfunded 
pensionpost pensionpost
retirement retirement 
healthcare healthcare
funded deﬁned beneﬁt pension schemes plans funded defined benefit pension schemes plans
uk us other uk us other
£m £m £m £m £m £m £m £m
current service cost 113 76 13 24 282 106 12 26
past service cost 10 01 07 02 04
settlement lossesgains 207 04 28
curtailment gains 11 365 206 93
t otal chargecredit 309 86 14 24 80 70 12 63
expected return on pension scheme assets 1995 245 15 1796 242 12
interest on pension scheme liabilities 1483 230 15 67 1363 235 14 70
net return 512 15 67 433 07 02 70
t otal creditedcharged to income statement 203 71 14 91 513 77 14 07
the actual return on scheme assets was a loss of £1245m 2007 gain of £3007m
83 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
10 postretirement benefits continued
the operating cost is charged as follows
y ear ended period ended
31 july 2008 31 july 2007
£m £m
cost of sales 66 73
sales and distribution costs 50 44
administrative expenses 121 113
discontinued operations 207 205
exceptional operating items 03
profit on disposal of businesscurtailment gain 11 633
actuarial losses of £2545m 2007 gains of £703m have been reported in the statement of recognised income and expense this includes a gain
of £09m 2007 loss of £19m in respect of unrecognised assets owing to surplus restriction cumulative actuarial losses from 1 august 2004
reported in the statement of recognised income and expense are £1131m 2007 cumulative gain of £1414m
during the year the pension settlement relating to the active aerospace employees was completed resulting in a £207m settlement charge to
discontinued operations in 2007 a provision of £243m was made to cover the expected costs of this settlement the balance of the provision has
been released in the current year  
amounts recognised in the balance sheet
y ear ended 31 july 2008 period ended 31 july 2007
unfunded unfunded 
pensionpost pensionpost
retirement retirement 
healthcare healthcare
funded deﬁned beneﬁt pension schemes plans funded defined benefit pension schemes plans
uk us other uk us other
£m £m £m £m £m £m £m £m
present value of funded obligations 24688 3570 307 26376 3550 266
fair value of scheme assets 26184 3165 250 29691 3276 222
1496 405 57 3315 274 44
present value of unfunded obligations 1124 1137
irrecoverable surplus 15 24
net assetliability recognised in the balance sheet 1496 405 72 1124 3315 274 68 1137
changes in present value of defined benefit obligations
y ear ended 31 july 2008 period ended 31 july 2007
unfunded unfunded 
pensionpost pensionpost
retirement retirement 
healthcare healthcare
funded deﬁned beneﬁt pension schemes plans funded defined benefit pension schemes plans
uk us other uk us other
£m £m £m £m £m £m £m £m
at beginning of period 26376 3550 266 1137 26301 3943 114 1268
transfers in of territories outside uk and usa 01 52 71
liabilities assumed on acquisitions 01 13 02
liabilities transferred on disposal 03
current service cost 113 76 13 24 282 106 12 26
interest on obligations 1483 230 15 67 1363 235 14 70
employee contributions 02 02 04 02
past service cost 10 01 07 02 04
actuarial gainloss on liabilities 667 203 09 67 140 104 93 102
curtailment gain 11 365 206 93
liabilities extinguished on settlements 1313 127 236
exchange adjustments 13 97 27 38 240 08 37
benefits paid 1308 190 09 86 1229 158 13 72
at end of period 24688 3570 307 1124 26376 3550 266 1137
84 smiths group plc annual report year ended 31 july 2008 10 postretirement benefits continued
changes in present value of scheme assets
y ear ended 31 july 2008 period ended 31 july 2007
unfunded unfunded 
pensionpost pensionpost
retirement retirement 
healthcare healthcare
funded deﬁned beneﬁt pension schemes plans funded defined benefit pension schemes plans
uk us other uk us other
£m £m £m £m £m £m £m £m
at beginning of period 29691 3276 222 27704 3328 78
transfers in of territories outside uk and usa 51
expected return on assets 1995 245 15 1796 242 12
actuarial lossesgains on scheme assets 3121 354 25 672 204 81
employer contributions 435 100 26 86 867 139 19 72
employee contributions 02 02 04 02
assets distributed on settlements 1520 123 264
exchange adjustments 10 88 19 215 08
benefits paid 1308 190 09 86 1229 158 13 72
at end of period 26184 3165 250 29691 3276 222
cash contributions
company contributions to the funded defined benefit pension plans for 2008 totalled £561m 2007 £1025m 2008 included special uk contributions
of £171m 2007 £559m including £131 2007 £131m for special covenant payments £40m 2007 £206m arising from the sale of aerospace
and £nil 2007 £222m in respect of backdated payments resulting from trustee valuations cash payments in 2009 are expected to be £517m
history of schemes
2008 2007 2006 2005
£m £m £m £m
balance sheet
present value of defined benefit obligation 29689 31329 31626 31274
fair value of scheme assets 29599 33189 31110 28908
unrecognised asset due to surplus restriction 15 24 05
deficitsurplus 105 1836 521 2366
postretirement assets 1742 3337 1837 1346
postretirement liabilities 1847 1501 2358 3712
deficitsurplus 105 1836 521 2366
y ear ended period ended period ended y ear ended
31 july 2008 31 july 2007 5 august 2006 31 july 2005
£m £m £m £m
experience gainslosses
experience gainslosses on scheme liabilities 64 576 176 05
experience lossesgains on scheme assets 3500 957 766 2429
movement on restricted surplus 09 19 05
the disclosures above are determined prospectively from 2005 the experience gains and losses on scheme liabilities have been represented to
exclude gains and losses arising from changes in actuarial assumptions 
85 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
10 postretirement benefits continued
balance sheet reconciliation
the balance sheet records the retirement assets and liabilities as follows 
2008 2007
£m £m
uk surplus 1496 3315
us deficit 405 274
other countries deficit 72 68
unfunded 1124 1137
deficitsurplus 105 1836
postretirement assets 1742 3337
postretirement liabilities 1847 1501
deficitsurplus 105 1836
at 31 july 2008 the net uk funded pension surplus of £1496m 2007 £3315m represented individual plan surpluses of £1742m 2007 £3337m
and deficits of £246m 2007 £22m
sensitivity 
valuation of postretirement schemes involves judgements about uncertain future events sensitivities in respect of the key assumptions used to
measure the principal pension schemes as at 31 july 2008 are set out below  these sensitivities show the hypothetical impact of a change in each
of the listed assumptions in isolation with the exception of the sensitivity to inflation which incorporates the impact of certain correlating assumptions
such as salary increases while each of these sensitivities holds all other assumptions constant in practice such assumptions rarely change in
isolation and the impacts may offset to some extent
increase
profit before tax increase decrease in
for year ended decrease in scheme
31 july 2009 scheme assets liabilities
£m £m £m
rate of mortality – 1 year increase in life expectancy 60 868
rate of mortality – 1 year decrease in life expectancy 63 898
rate of inflation – 025 increase 50 658
discount rate – 025 increase 13 1007
expected return on scheme assets – 025 increase 74
market value of scheme assets – 25 increase 50 739
healthcare cost trends – 1 increase 06 54
healthcare cost trends – 1 decrease 05 47
the effect on profit before tax reflects the impact of current service cost interest cost and expected return on assets 
defined contribution plans
the group operates a number of defined contribution plans the total expense recognised in the income statement in respect of these plans was
£137m 2007 £191m
86 smiths group plc annual report year ended 31 july 2008 11 employees
y ear ended 31 july 2008 period ended 31 july 2007
total 
all continuing continuing discontinued t otal
£m £m £m £m
staff costs during the period
wages and salaries 5458 5281 2956 8237
social security 673 624 254 878
sharebased payment note 31 129 104 35 139
pension costs including defined contribution schemes note 10 364 443 180 623
6624 6452 3425 9877
the average number of persons employed was
y ear ended period ended
31 july 2008 31 july 2007
detection 2300 2100
medical 8400 8000
specialty engineering
john crane 6400 5600
specialty – other 5500 5100
continuing operations 22600 20800
discontinued operations 8300
22600 29100
key management
the key management of the group comprises smiths group plc board directors and group managing directors who are not board members
during the year and their aggregate compensation is shown below  details of directors ’ remuneration are contained in the report of the remuneration
committee on pages 47 to 56
y ear ended period ended
31 july 2008 31 july 2007
£m £m
key management compensation
salaries and shortterm employee benefits 76 66
cost of postretirement benefits 10 12
cost of sharebased incentive plans 56 28
no member of key management had any material interest during the period in a contract of significance other than a service contract or a qualifying
third party indemnity provision with the company or any of its subsidiaries options and awards held at the end of the period by key management
in respect of the company’s sharebased incentive plans were
y ear ended 31 july 2008 period ended 31 july 2007
number of number of
instruments weighted instruments weighted
’000 average price ’000 average price
cip 306 £000 425 £000
dss 109 £000
esos 177 £806 413 £857
psp 795 £000 1067 £000
saye 9 £832 14 £696
the disclosure above does not include options held by individuals who retired before the year end
87 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
12 intangible assets
acquired
intangibles
development see table on
goodwill costs next page other t otal
£m £m £m £m £m
cost
at 6 august 2006 12416 2937 1391 1125 17869
exchange adjustments 392 19 85 17 513
business combinations 168 121 289
adjustments to prior year business combinations 09 09
additions 22 441 180 643
transfers to disposal group held for sale at year end 12 11 23
transfer to disposal group sold by the year end 3010 2835 104 502 6451
disposals 01 12 13
at 31 july 2007 9213 512 1313 763 11801
exchange adjustments 654 25 57 33 769
business combinations 870 745 07 1622
adjustments to prior year business combinations 17 13 13 17
additions 198 161 359
disposals 02 08 10
at 31 july 2008 10718 735 2128 943 14524
amortisation
at 6 august 2006 1337 395 202 629 2563
exchange adjustments 29 04 13 16 62
charge for the period 66 150 81 297
impairment 22 22
transfers to disposal groups held for sale at year end 04 04
transfer to disposal group sold by the year end 560 332 48 287 1227
disposals 01 01
at 31 july 2007 770 125 291 402 1588
exchange adjustments 53 07 18 25 103
adjustments to prior year business combinations 05 05
charge for the year 56 192 62 310
disposals 02 07 09
at 31 july 2008 821 188 506 477 1992
net book value at 31 july 2008 9897 547 1622 466 12532
net book value at 31 july 2007 8443 387 1022 361 10213
net book value at 6 august 2006 11079 2542 1189 496 15306
for the period ending 31 july 2007 the additions and amortisation include the respective costs and charge for discontinued operations and disposal groups for the period prior to
becoming a disposal group
88 smiths group plc annual report year ended 31 july 2008 12 intangible assets continued
in addition to goodwill the acquired intangible assets comprise
patents licences customer t otal acquired
and trademarks t echnology relationships intangibles
£m £m £m £m
cost
at 6 august 2006 389 586 416 1391
exchange adjustments 28 37 20 85
business combinations 36 85 121
adjustments to prior year business combinations 06 02 17 09
transfer to disposal group sold by the year end 104 104
disposals 01 01
at 31 july 2007 402 551 360 1313
exchange adjustments 11 19 27 57
business combinations note 29 120 188 437 745
adjustments to prior year business combinations 13 13
at 31 july 2008 533 771 824 2128
amortisation
at 6 august 2006 34 69 99 202
exchange adjustments 01 06 06 13
charge for the period 23 56 71 150
transfer to disposal group sold by the year end 48 48
at 31 july 2007 56 119 116 291
exchange adjustments 02 07 09 18
adjustments to prior year business combinations 05 05
charge for the year 27 61 104 192
at 31 july 2008 85 192 229 506
net book value at 31 july 2008 448 579 595 1622
net book value at 31 july 2007 346 432 244 1022
net book value at 6 august 2006 355 517 317 1189
significant cash generating units
goodwill is not amortised but is tested for impairment at least annually  value in use calculations are utilised to determine the recoverable amount
of goodwill held within each cash generating unit cgu value in use is calculated as the net present value of the projected riskadjusted posttax
cashflows of the cgu in which the goodwill is contained applying a discount rate based on the group’s posttax weighted average cost of capital
of 8 adjusted where appropriate for risks specific to the cgu this approximates to applying a pretax discount rate to pretax cashflows these
forecast cashflows are based on approved budgets and represent a best estimate of future performance
the goodwill held in the smiths medical critical care and smiths detection civil cgus with net book values of £2915m 2007 £2837m and
£2888m 2007 £2520m respectively is considered significant in comparison to the total carrying value of goodwill following a reorganisation of
the management of the detection business the allocation of goodwill to cgus was updated the detection civil cgu incorporates the business
activities reported as smiths detection imaging systems in 2007 the comparative net book value has been restated to reflect the new allocation 
the following key assumptions were used in the discounted cashflow projections for the critical care and detection civil cgus
• growth rates of 225 2007 200 have been used for the critical care and detection civil cgus to extrapolate beyond the most recent forecasts
representing a view of the longterm average growth rates for the industries in which the businesses operate the growth rates used to estimate
future performance beyond the periods covered by our annual planning and strategic planning processes do not exceed the longterm average
growth rates for similar projects and do not reflect longterm planning assumptions used by the group for investment planning and
• in addition to discount rates and longterm growth rates the key assumptions used to determine the recoverable amounts of the critical care
and detection civil cgus include future sales prices and volumes with reference to specific customer relationships and product lines operating
margins the cost structure of each cgu and the ability to realise planned productivity improvements
the assumptions used in the discounted cashflow forecasts incorporate past performance and historical growth rates and margins achievable in
our key markets as a guide 
sensitivity analysis performed around the base case assumptions has indicated that no reasonable changes in key assumptions would cause the
carrying amount of the critical care and detection civil cgus to exceed their respective recoverable amount
the balance of the goodwill represents smaller individual amounts which have been allocated to specific operating companies and smaller cgus
these amounts are tested for impairment at this level 
89 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
13 property plant and equipment
fixtures
fittings
land and plant and tools and
buildings machinery equipment t otal
£m £m £m £m
cost or valuation
at 6 august 2006 2451 6530 3373 12354
exchange adjustments 50 138 46 234
reclassification 146 146
business combinations 10 10 20
additions 94 403 232 729
transfers to disposal groups held for sale at year end 07 66 73
transfer to disposal group sold by the year end 891 3385 1615 5891
disposals 42 137 147 326
at 31 july 2007 1555 3429 1595 6579
exchange adjustments 84 181 108 373
reclassification 10 18 08
business combinations 28 29 22 79
additions 99 312 231 642
disposals 48 101 72 221
adjustments to acquisitions and disposals in prior years 14 67 53
at 31 july 2008 1714 3899 1892 7505
depreciation
at 6 august 2006 783 4070 2523 7376
exchange adjustments 23 82 35 140
reclassification 104 104
charge for the period 54 286 182 522
impairment charge 59 22 81
transfers to disposal groups held for sale at year end 02 42 44
transfer to disposal group sold by the year end 237 2107 1285 3629
disposals 03 101 92 196
at 31 july 2007 631 2192 1147 3970
exchange adjustments 26 121 77 224
reclassification 08 11 03
charge for the year 54 289 189 532
impairment charge 03 03
disposals 37 73 66 176
adjustments to acquisitions and disposals in prior years 78 67 11
at 31 july 2008 607 2585 1350 4542
net book value at 31 july 2008 1107 1314 542 2963
net book value at 31 july 2007 924 1237 448 2609
net book value at 6 august 2006 1668 2460 850 4978
for the period ending 31 july 2007 the additions and the depreciation charge include the respective costs and charge for discontinued operations and disposal groups for the period prior
to becoming a disposal group
the impairment charge of £81m in the period ended 31 july 2007 arose when property plant and equipment was written down to fair value less
costs to sell prior to being classified as being held for sale the charge has been recognised in the results of john crane 
2008 2007
£m £m
capital expenditure commitments – contracted but not provided for 115 169
90 smiths group plc annual report year ended 31 july 2008 14 investments accounted for using the equity method
2008 2007
£m £m
investments in associated companies
at start of period 120 140
exchange adjustment 23 03
share of results after tax 10 05
dilution of interest 09 12
acquisition of a controlling interest 33
at end of period 91 120
the group acquired a controlling interest in an associate on 21 december 2007 and it has been consolidated as a subsidiary since that date
y ear ended period ended
31 july 2008 31 july 2007
£m £m
group share of results of associated companies
revenue 176 253
operating costs and other income 188 250
profitloss before taxation 12 03
t axation 02 08
share of posttax result from associated companies 10 05
net assets and liabilities of associated companies
2008 2007
£m £m
noncurrent assets 201 99
current assets 248 369
t otal assets 449 468
noncurrent liabilities 62 50
current liabilities 79 165
t otal liabilities 141 215
net assets 308 253
the above table principally represents the assets and liabilities of cross match t echnologies inc the group share of those assets and liabilities
attributable to smiths group is 34 2007 37
in 2007 the interest in cross match t echnologies inc was diluted as a result of warrants and options being exercised in the period
15 inventories
2008 2007
£m £m
inventories comprise
raw materials and consumables 1497 1142
work in progress 680 580
finished goods 1735 1585
3912 3307
less payments on account 109 110
3803 3197
the group consumed £17764m 2007 £21767m of inventories during the period £118m 2007 £134m was recognised as an expense resulting
from the writedown of inventory and £15m 2007 £40m was released to the income statement from inventory provisions charged in earlier
years but no longer required
91 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
16 trade and other receivables
2008 2007
£m £m
noncurrent
trade receivables 88 89
prepayments and accrued income 16 08
other debtors 42 50
146 147
current
amounts due from customers for contract work 53
trade receivables 5091 4272
other debtors 198 166
prepayments and accrued income 365 407
5654 4898
trade receivables do not carry interest management considers that the carrying value of trade and other receivables approximates the fair value 
t rade and other receivables including prepayments accrued income and other debtors qualifying as financial instruments are classified as “loans
and receivables” the maximum credit exposure arising from these financial assets is £5367m 2007 £4501m
credit risk is managed separately for each customer and where appropriate a credit limit is set for the customer based on previous experience
of the customer and third party credit ratings
provision for bad and doubtful debts
trade receivables are disclosed net of a provision for bad and doubtful debts movement on the provision is as follows 
y ear ended period ended
31 july 2008 31 july 2007
£m £m
balance at the beginning of the period 105 163
exchange differences 08 03
charged 44 30
utilised 14 28
released 31 29
disposal of businesses 28
balance at the end of the period 112 105
the provision for bad and doubtful debts is based on specific risk assessment and reference to past default experience
the group has no significant concentration of credit risk with exposure spread over a large number of customers the largest single customer is
the us federal government representing less than 7 2007 4 of group turnover  
ageing of trade receivables
2008 2007
£m £m
trade receivables which are not impaired and not yet due 4124 3131
ageing analysis of trade receivables which are overdue but not impaired
– less than three months 792 934
– more than three months 226 241
gross value of partially and fully provided debtors 149 160
5291 4466
provision for bad and doubtful debts 112 105
trade receivables 5179 4361
92 smiths group plc annual report year ended 31 july 2008 17 cash and cash equivalents
2008 2007
£m £m
cash at bank and in hand – including impact of cash pooling gross up £1006m 2007 £1232m 1225 1485
shortterm deposits 100 408
cash and cash equivalents 1325 1893
cash included in assets of disposal group note 18 31
cash and cash equivalents per balance sheet 1325 1862
cash and cash equivalents 1325 1893
bank overdrafts 1725 1862
net cash and cash equivalents 400 31
cash and cash equivalents include highly liquid investments with maturities of three months or less 
18 disposal group
during the second half of 2007 the company invited offers for the purchase of its marine operations which formed part of specialty engineering
– other  these operations were disposed of on 8 november 2007 the assets and liabilities of this operation were disclosed as held for sale in the
consolidated balance sheet as at 31 july 2007 no impairment loss was recorded when the assets were revalued to fair value less disposal costs
2008 2007
£m £m
noncurrent assets
intangible assets 19
property plant and equipment 29
deferred tax assets 01
49
current assets
inventories 74
trade and other receivables 157
cash and cash equivalents 31
financial derivatives 02
total assets of disposal group 313
noncurrent liabilities
financial derivatives 08
provisions for liabilities and charges 06
14
current liabilities
financial liabilities
– financial derivatives 05
provisions for liabilities and charges 06
trade and other payables 127
current tax payable 10
total liabilities of disposal group 162
93 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
19 trade and other payables
2008 2007
£m £m
noncurrent
other creditors 275 225
current
trade creditors 1567 1648
bills of exchange payable 11 17
other creditors 510 380
other taxation and social security costs 231 205
accruals and deferred income 1888 1876
4207 4126
t rade and other payables including accrued expenses and other creditors qualifying as financial instruments are accounted for at amortised cost
and are categorised as other financial liabilities 
20 borrowings and net debt
this note sets out the calculation of net debt a measure considered important in explaining our financing position the net debt figure includes
accrued interest and the fair value adjustments relating to hedge accounting 
2008 2007
£m £m
cash and cash equivalents
net cash and deposits including assets of disposal group note 17 1325 1893
shortterm borrowings
bank overdrafts including impact of cash pooling gross up £1006m 2007 £1232m 1725 1862
bank loans 03 02
other loans 35 31
b shares note 26 17 181
interest accrual 44 45
1824 2121
longterm borrowings
7875 sterling eurobond 2010 1496 1495
725 sterling eurobond 2016 1488 1487
545 us private placement 2013 1274 1200
floating rate revolving credit facility 2012 multicurrency 2102 672
eib sterling r  d loan 2010 700 700
bank and other loans 147 117
7207 5671
borrowings 9031 7792
net debt 7706 5899
borrowings are accounted for at amortised cost and are categorised as other financial liabilities 
see note 21 for a maturity analysis of borrowings the repayment dates on borrowings repayable after five years range from 2014 to 2022 
interest of £225m 2007 £225m was charged to the consolidated income statement in this period in respect of public bonds 
secured loans
loans amounting to £132m 2007 £115m were secured by charges on freehold properties with a book value of £110m 2007 £98m
94 smiths group plc annual report year ended 31 july 2008 21 financial risk management
the group’s international operations and debt financing expose it to financial risks including the effects of changes in foreign exchange rates
changes in debt market prices interest rates credit risks and liquidity risks 
risk management policies are set by the board the treasury policy sets out specific guidelines to manage foreign exchange risk interest rate risk
credit risk and the use of financial instruments to manage risk the instruments and techniques used to manage risk exposures include foreign
currency derivatives debt and other interest rate derivatives the central treasury function monitors financial risks and compliance with risk
management policies using regular reports from all the businesses
the management of operational credit risk is discussed in note 16
a foreign exchange risk
transactional currency exposure
the group is exposed to foreign currency risks arising from sales or purchases by businesses in currencies other than their functional currency
it is group policy that when such a sale or purchase is certain or highly probable the net foreign exchange exposure is hedged using forward foreign
exchange contracts the net exposure is calculated by adjusting the expected cashflow for payments or receipts in the same currency linked to
the sale or purchase this policy minimises the risk that the profits generated from the transaction will be affected by foreign exchange movements
which occur after the price has been determined
hedge accounting documentation and effectiveness testing are only undertaken if it is cost effective at 31 july 2008 the group had outstanding foreign
currency contracts with a nominal value of £130m 2007 £131m which were being used to manage transactional foreign exchange exposures but
were not accounted for as cashflow hedges
the following table shows the currency of financial instruments it excludes loans and derivatives designated as net investment hedges
at 31 july 2008
sterling us euro other total
£m £m £m £m £m
financial assets and liabilities
financial instruments included in trade and other receivables 406 2374 1622 965 5367
financial instruments included in trade and other payables 499 1214 869 401 2983
cash and cash equivalents 327 165 480 353 1325
borrowings not designated as net investment hedges 4121 1632 138 1038 6929
3887 307 1095 121 3220
exclude balances held in operations with the same functional currency 3893 564 356 620 3481
exposure arising from intragroup loans 155 112 267
forward foreign exchange contracts 489 500 19 30
495 398 720 823 06
at 31 july 2007
sterling us euro other t otal
£m £m £m £m £m
financial assets and liabilities
financial instruments included in trade and other receivables 436 1980 1225 860 4501
financial instruments included in trade and other payables 219 943 597 210 1969
cash and cash equivalents 683 116 625 469 1893
borrowings not designated as net investment hedges 4392 1402 1016 309 7119
3492 249 237 810 2694
exclude balances held in operations with the same functional currency 3508 548 221 739 3096
exposure arising from intragroup loans 55 184 239
forward foreign exchange contracts 24 396 146 274
08 152 162 161 163
financial instruments included in trade and other receivables comprise trade receivables accrued income and other debtors which qualify as
financial instruments similarly financial instruments included in trade and other payables comprise trade payables accrued expenses and other
creditors which qualify as financial instruments 
in the period ended 31 july 2007 smiths entered into a oneoff hedge contract to fix the sterling equivalent of the projected net proceeds arising
from the aerospace disposal note 7 this hedge contract had a nominal value of us42 billion a maturity date of 8 may 2007 and an effective
exchange rate of 19791 the gain of £185m realised on this contract was recognised in calculating the fair value of the consideration
95 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
21 financial risk management continued
based on the assets and liabilities held at the year end if the specified currencies were to strengthen 10 while all other market rates remained
constant the change in the fair value of financial instruments not designated as net investment hedges would have the following effect 
gainloss gainloss
impact on proﬁt recognised in impact on profit recognised in
for the year reserves for the year reserves
31 july 2008 31 july 2008 31 july 2007 31 july 2007
£m £m £m £m
us dollar 01 33 15 17
euro 48 10 07 26
sterling 21 28 11 23
these sensitivities were calculated before adjusting for tax and do not include the effect of intragroup loans which have been designated as 
quasiequity 
cashflow hedging
the group uses foreign currency contracts to hedge future foreign currency sales and purchases at 31 july 2008 contracts with a nominal value
of £2222m 2007 £2110m were designated as hedging instruments the fair value of the hedging instruments is disclosed in note 22
the majority of hedged transactions will be recognised in the income statement in the same period that the cashflows are expected to occur with
the only differences arising as a result of normal commercial credit terms on sales and purchases of the foreign exchange contracts designated
as hedging instruments 99 are for periods of 12 months or less 2007 93
the movements in the cashflow hedge reserve during the period are summarised in the table below
y ear ended period ended
31 july 2008 31 july 2007
£m £m
brought forward cashflow hedge reserve at start of period 14 133
exchange adjustments 02
gains and losses on effective cashflow hedges recognised in equity 10 48
amounts removed from the hedge reserve and recognised in the following lines on the income statement
– revenue 02 27
– cost of sales 03 11
– profit after taxation – discontinued operations 151
carried forward cashflow hedge reserve at end of period 11 14
96 smiths group plc annual report year ended 31 july 2008 21 financial risk management continued
translational currency exposure
the group has a significant investment in overseas operations particularly in america and europe as a result the sterling value of the group’s
balance sheet can be affected by movements in exchange rates the group seeks to mitigate the effect of these translational currency exposures
by matching the net investment in overseas operations with borrowings denominated in their functional currencies except where significant
adverse interest differentials or other factors would render the cost of such hedging activity uneconomic this is achieved by borrowing either
directly in the local currency or indirectly through the use of rolling annual forward foreign exchange contracts 
the table below sets out the currency of loans designated as net investment hedges and crosscurrency swap contracts
at 31 july 2008
sterling us euro other total
£m £m £m £m £m
loans designated as net investment hedges 1396 706 2102
cross currency swap contracts 3714 1506 1630 578
3714 2902 2336 578 2102
at 31 july 2007
sterling us euro other t otal
£m £m £m £m £m
loans designated as net investment hedges 673 673
cross currency swap contracts 2559 895 1250 414
2559 895 1923 414 673
the fair values of these net investment hedges are subject to exchange rate movements based on the hedging instruments in place at the year
end a 10 increase in the value of the us dollar while all other market rates remained constant would lead to a fair value loss of £149m 2007
£82m and a 10 increase in the value of the euro while all other market rates remained constant would lead to a fair value loss of £174m 2007
£190m these movements would be recognised in equity and fully offset by an opposite movement on the retranslation of the net assets of the
overseas subsidiaries these sensitivities were calculated before adjusting for tax
net investment hedges
crosscurrency swap contracts for us dollars euros yen renminbi and canadian dollars with a nominal value of £371m 2007 £238m and
foreign currency borrowings of us 277m 2007 nil and ¤90m 2007 ¤100m have been designated as net investment hedges in respect of the
currency translation risk arising on foreign operations the contracts mature within twelve months see note 22 for the fair value of the contracts
the gains and losses that have been deferred in the net investment hedge reserve are shown in the table below
y ear ended period ended
31 july 2008 31 july 2007
£m £m
brought forward net investment hedge reserve at start of period 172 132
amounts deferred in the period on effective net investment hedges 475 82
amounts removed from the hedge reserve and recognised in the income statement 42
carried forward net investment hedge reserve at end of period 303 172
97 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
21 financial risk management continued
b interest rate risk
the group operates an interest rate policy designed to optimise interest cost and reduce volatility in reported earnings the group’s normal policy
is to require interest rates to be fixed for 30 to 70 of the level of underlying borrowings forecast to arise over a threeyear horizon this is achieved
partly through fixed rate borrowings and partly through the use of interest rate swaps excluding the cash pool gross up at 31 july 2008 46
2007 55 of the group’s borrowings were at fixed interest rates after adjusting for interest rate swaps
the weighted average interest rate on borrowings and cross currency swaps at 31 july 2008 after interest rate swaps is 46 2007 53
interest rate profile of financial assets and liabilities and the fair value of borrowings
the following table shows the interest rate risk exposure of cash and borrowings the other financial assets and liabilities do not earn or bear interest
and for all financial instruments except for borrowings the carrying value is not materially different from their fair value
cash and fair value of cash and fair value of
cash equivalents borrowings borrowings cash equivalents borrowings borrowings
31 july 2008 31 july 2008 31 july 2008 31 july 2007 31 july 2007 31 july 2007
£m £m £m £m £m £m
fixed interest adjusted for interest rate hedging 
less than one year 38 40 141 30 30
between one and five years 2035 2071 1511 1573
greater than five years 1601 1662 2079 2168
t otal fixed interest financial assetsliabilities adjusted for interest 
rate hedging 3674 3773 141 3620 3771
floating rate interest financial assetsliabilities 1221 5357 5357 1656 4172 4172
t otal interest bearing financial assetsliabilities 1221 9031 9130 1797 7792 7943
noninterest bearing assetsliabilities in the same category 104 96
total 1325 9031 9130 1893 7792 7943
interest rate hedging
the group has designated us150m interest rate swaps which mature on 28 january 2013 as fair value hedges on the us private placement
which matures on the same date this hedges the risk of variability in the fair value of borrowings arising from interest rate fluctuations the fair
value of the hedging instrument is disclosed in note 22 the effect of the interest rate swap is to convert £757m 2007 £737m debt from fixed rate
to floating rate 
sensitivity of interest charges to interest rate movements
the group has exposure to sterling us dollar and euro interest rates however the group does not have a significant exposure to interest rate
movements for any individual currency based on the composition of net debt and foreign exchange rates at 31 july 2008 and taking into
consideration all fixed rate borrowings and interest rate swaps in place a one percentage point 100 basis points change in average floating interest
rates for all three currencies would have a £43m 2007 39m impact on the group’s profit before tax
c financial credit risk
the group is exposed to creditrelated losses in the event of nonperformance by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations credit risk is mitigated by the group’s boardapproved policy of only selecting counterparties with
a strong investment graded longterm credit rating for cash deposits normally at least aa or equivalent and assigning financial limits to individual
counterparties in the normal course of business the group operates notional cash pooling systems where a legal right of setoff applies 
the maximum credit risk exposure in the event of other parties failing to perform their obligations under financial assets excluding trade and other
receivables totals £1325m at 31 july 2008 2007 £1893m this includes cash of £1006m 2007 £1232m held in interest compensation pools
where smiths has a legal right of setoff and the net pool balance at the year end was a creditor  
the maximum exposure with a single bank for deposits and cash is £124m 2007 £278m whilst the maximum mark to market exposure for foreign
exchange contracts at 31 july 2008 to a single bank is £15m 2007 £46m these banks had credit ratings of aa and aa respectively  
98 smiths group plc annual report year ended 31 july 2008 21 financial risk management continued
d liquidity risk
borrowing facilities
the group actively maintains committed unused credit facilities of at least £200m or equivalent free cash at all times to ensure it has sufficient
available funds for operations and planned expansions in 2007 the principal £660m revolving credit facility was extended to 2012 at the balance
sheet date the group had the following undrawn credit facilities 
2008 2007
£m £m
expiring within one year 500
expiring between one and two years
expiring after two years 4498 5930
4498 6430
cash deposits
as at 31 july 2008 £100m 2007 £408m of cash and cash equivalents was on deposit with various banks and in money market funds of which
£72m 2007 £322m was on deposit in the uk
gross contractual cashflows for borrowings 
contractual total contractual t otal
borrowings fair value interest contractual borrowings fair value interest contractual
note 20 adjustments payments cashﬂows note 20 adjustments payments cashflows
31 july 2008 31 july 2008 31 july 2008 31 july 2008 31 july 2007 31 july 2007 31 july 2007 31 july 2007
£m £m £m £m £m £m £m £m
less than one year 1824 423 2247 2121 377 2498
between one and two years 1509 04 415 1928 05 370 375
between two and three years 713 264 977 1499 05 363 1867
between three and four years 2107 05 250 2362 703 212 915
between four and five years 1277 12 146 1411 676 06 204 886
greater than five years 1601 12 344 1957 2788 41 486 3315
total 9031 09 1842 10882 7792 52 2012 9856
the figures presented in the borrowings column include the noncash adjustments which are highlighted in the adjacent column the contractual
interest reported for borrowings is before the effect of interest rate swaps
gross contractual cashflows for derivative financial instruments 
receipts payments net cashﬂow receipts payments net cashflow
31 july 2008 31 july 2008 31 july 2008 31 july 2007 31 july 2007 31 july 2007
£m £m £m £m £m £m
assets
less than one year 2564 2477 87 3981 3828 153
greater than one year 639 601 38 444 436 08
liabilities
less than one year 3798 4006 208 1093 1125 32
greater than one year 281 284 03 424 456 32
total 7282 7368 86 5942 5845 97
this table presents the undiscounted future contractual cashflows for all derivative financial instruments for this disclosure cashflows in foreign
currencies are translated using the spot rates at the balance sheet date the fair values of these financial instruments are presented in note 22
gross contractual cashflows for other financial liabilities
the contractual cashflows for financial liabilities included in trade and other payables are £2858m 2007 £1923m due in less than one year
£109m 2007 £46m due between one and five years and £16m 2007 £nil due after more than five years
99 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
22 financial derivatives
the tables below set out the nominal amount and fair value of derivative contracts held by the group identifying the derivative contracts which qualify
for hedge accounting treatment 
contract or underlying
nominal amount fair value
assets liabilities net
at 31 july 2008 £m £m £m £m
foreign exchange contracts cashflow hedges 2222 38 29 09
foreign exchange contracts not hedge accounted 1301 14 07 07
t otal foreign exchange contracts 3523 52 36 16
crosscurrency swaps net investment hedges 3714 15 180 165
interest rate swaps fair value hedges 757 12 12
t otal financial derivatives 7994 79 216 137
balance sheet entries
noncurrent 14 01 13
current 65 215 150
t otal financial derivatives 79 216 137
contract or underlying
nominal amount fair value
assets liabilities net
at 31 july 2007 £m £m £m £m
foreign exchange contracts cashflow hedges 2110 26 08 18
foreign exchange contracts not hedge accounted 1314 09 17 08
t otal foreign exchange contracts 3424 35 25 10
crosscurrency swaps net investment hedges 2382 90 90
crosscurrency swaps not hedge accounted 177 14 14
t otal crosscurrency swaps 2559 104 104
interest rate swaps fair value hedges 737 28 28
embedded derivatives 158 02 13 11
t otal financial derivatives 6878 141 66 75
balance sheet entries
noncurrent 04 25 21
included in assetsliabilities of disposal group 02 13 11
current 135 28 107
t otal financial derivatives 141 66 75
accounting for other derivative contracts
any foreign exchange contracts which are not formally designated as hedges and tested are classified as ‘held for trading’ and not hedge accounted 
amounts recognised in 2007 in respect of embedded derivatives primarily represent the value of currency terms in commercial contracts between
smiths european subsidiaries and customers and suppliers outside the usa which are denominated in us dollars
100 smiths group plc annual report year ended 31 july 2008 23 provisions for liabilities and charges
unwind of
at exchange provisions provisions provision at
31 july 2007 adjustments charged released discount utilisation 31 july 2008
£m £m £m £m £m £m £m
warranty provision and product liability 345 38 300 55 166 462
reorganisation 108 03 52 02 63 98
property 67 06 33 05 35
disposal 603 114 36 207 474
litigation 1212 33 468 22 47 101 1637
2335 74 940 148 47 542 2706
analysed as
2008 2007
£m £m
current liabilities 700 901
noncurrent liabilities 2006 1434
2706 2335
warranty provision and product liability
warranties over the group’s products typically cover periods of between one and three years provision is made for the likely cost of aftersales
support based on the recent past experience of individual businesses
reorganisation
on 3 june 2008 the company announced a number of changes to its corporate centre and divisional headquarters the total cost of this
restructuring including redundancy relocation and consolidation of manufacturing is expected to amount to approximately £48m over the period
to 2010 of which £45m has been charged in the current year  
reorganisation provisions include £47m 2007 £60m costs relating to restructuring supply arrangements following the automotive seals disposal
these costs are expected to be spread over the next six years the residual balance at 31 july 2007 related mainly to medical and was utilised during
2008
property
where a property is vacant or sublet under terms such that rental income is insufficient to meet all outgoings the group provides for the expected
future shortfall up to termination of the lease provision is also made for the cost of reinstatement work on leased properties where there is an
obligation under the lease and the costs can be reasonably estimated where evidence of contamination is found on property in the group’s
occupation provision is made for estimated remedial costs pending action on the affected site most of the balance is expected to be utilised within
the next five years
disposal
a provision has been made in 2008 in respect of obligations arising from the disposal of the group’ s marine systems business see note 30 for details
of this disposal
the terms of the disposal of the aerospace operations included certain obligations for which provision was made in 2007 including £243m in respect
of costs of transferring aerospace active pensioners in 2008 the pensioners were transferred utilising £207m of this provision the balance of £36m
has been released to the income statement 
most of the balance is expected to be utilised within the next five years
101 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
23 provisions for liabilities and charges continued
litigation
john crane inc
john crane inc “ jci” is one of many codefendants in litigation relating to products previously manufactured which contained asbestos until 2006
the awards the related interest and all material defence costs were met directly by insurers in 2007 jci secured the commutation of certain
insurance policies in respect of product liability  while substantial insurance remains in place jci has begun to meet defence costs directly seeking
appropriate contribution from insurers thereafter  provision is made in respect of the expected costs of defending known and predicted future
claims and of adverse judgments in relation thereto to the extent that such costs can be reliably estimated no account has been taken of recoveries
from insurers as their nature and timing are not yet sufficiently certain to permit recognition as an asset for these purposes 
the jci products generally referred to in these cases are ones in which the asbestos fibres were encapsulated in such a manner that according
to tests conducted on behalf of jci the products were safe jci ceased manufacturing products containing asbestos in 1985 jci has resisted
every case in which it has been named and will continue its robust defence of all asbestosrelated claims based upon this ‘safe product’ defence
as a result of its defence policy jci has been dismissed before trial from cases involving approximately 159000 claims over the last 29 years jci
is currently a defendant in cases involving approximately 136000 claims jci has had final judgments against it after appeals in only 70 cases
amounting to awards of some us70m over the 29 year period
the assumptions made in assessing the appropriate level of provision include
• the periods over which the expenditure can be reliably estimated projections used range between 10 and 20 years
• the future trend of legal costs allowing for 3 cost inflation
• the rate of future claims 
• the rate of successful resolution of claims
• the average level of judgments 
the provision is based on past history and allows for decreasing costs based on published tables of asbestos incidence projections in the light of
the significant uncertainty associated with asbestos claims there can be no guarantee that the assumptions used to estimate the provision will be
an accurate prediction of the actual costs that may be incurred and as a result the provision may be subject to revision from time to time as more
information becomes available
the provision shown in the table above is a discounted pretax provision using discount rates being the riskfree rate on us debt instruments for
the appropriate period the deferred tax asset related to this provision is shown within the deferred tax balance note 6 set out below is the gross
discounted and posttax information relating to this provision
2008 2007
£m £m
gross provision 1859 1422
discount 470 458
discounted pretax provision 1389 964
deferred tax 375 366
discounted posttax provision 1014 598
other litigation
the group has on occasion been required to take legal action to protect its patents and other business intellectual property rights against
infringement and similarly to defend itself against proceedings brought by other parties provision is made for the expected fees and associated
costs based on professional advice as to the likely duration of each case provisions totalling £22m 2007 £89m were released relating to litigation
settled at less than the expected cost most of the balance is expected to be utilised within the next five years
apart from that relating to jci none of the other provisions is discounted
24 operating lease commitments – minimum lease payments
the minimum uncancellable lease payments which the group is committed to make are
2008 2007
land and land and
buildings other buildings other
£m £m £m £m
payments due
– not later than one year 205 78 175 73
– later than one year and not later than five years 470 81 431 80
– later than five years 203 01 247 01
878 160 853 154
102 smiths group plc annual report year ended 31 july 2008 25 contingent liabilities and commitments
john crane inc
as stated in note 23 john crane inc “ jci” is involved in numerous law suits pending in the united states in which plaintiffs are claiming damages
arising from exposure to or use of products containing asbestos the jci products generally referred to in these cases are ones in which the
asbestos fibres were encapsulated in such a manner that according to tests conducted on behalf of jci the products were safe jci ceased
manufacturing products containing asbestos in 1985
provision has been made for the cost of adverse judgements expected to occur  the group anticipates that asbestos litigation will continue beyond
the period covered by this provision however because of the uncertainty surrounding the outcome of litigation beyond this period the cost of
adverse judgments cannot be reliably estimated 
other contingent liabilities and commitments
at 31 july 2008 contingent liabilities comprising bonds and guarantees arising in the normal course of business amounted to £75m 2007 £88m 
the group is currently cooperating with the relevant authorities in investigating certain allegations of improper business conduct based on the
work completed to date these are not expected to give rise to any material financial exposure 
the parent company has arranged two letters of credit to support the group’ s pension plans one for £1000m and one for £500m at 31 july 2008
total usage of the two facilities was £1249m 2007 £1328m
26 share capital
issued capital consideration
number of shares £m £m
ordinary shares
at 31 july 2007 385498273 1446
exercise of share options 2380908 09 155
at 31 july 2008 387879181 1455
b shares
at 31 july 2007 4926594 01
purchased and cancelled 4467437 01
at 31 july 2008 459157
share capital classified as equity at 31 july 2008 1455
share capital classified as debt at 31 july 2008
total share capital at 31 july 2008 1455
on 17 april 2008 45 million b shares were purchased and cancelled the remaining b shares carry annual interest of 75 of 12 month libor
payable in arrears in april smiths may redeem and cancel the remaining b shares up to november 2008 for a consideration of 365p per share in
cash or convert them to ordinary shares b shares have no voting rights 
in 2007 the group issued 5776 million b shares with a nominal value of £58m £42m of associated costs were charged to the share premium
account of these shares 5726 million were redeemed on 25 june 2007 for a consideration of 365p per share including 3482 million b shares which
had been converted into deferred shares 
after the allotment of the b shares in 2007 a capital reorganisation was undertaken the shareholders received two new 375p ordinary shares for
every three 25p ordinary shares which they previously held 
the authorised capital at 31 july 2008 consisted of
• 533333333 2007 533333333 ordinary shares of 375p each and
• 600000000 2007 600000000 noncumulative b shares of 1p each 
at 31 july 2008 all of the issued share capital was in free issue all issued shares are fully paid
103 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
27 reconciliation of movements in equity
share equity
share premium other hedge retained shareholders’ minority total
capital account reserves reserve earnings funds interest equity
£m £m £m £m £m £m £m £m
at 5 august 2006 1418 2241 2365 265 7340 13629 13629
exercises of share options 28 749 777 777
purchase of own shares 70 70 70
return of capital to shareholders and redemption 
of b shares 100 57 21046 21089 21089
t otal recognised income and expenses for the period 79 17528 17449 17449
dividends paid to equity shareholders 1824 1824 1824
dilution of interest in associated company 12 12 12
sharebased payment 173 173 173
at 31 july 2007 1446 2890 2422 186 2089 9033 9033
exercises of share options 09 146 55 210 210
purchase of own shares 207 207 207
redemption of b shares 01 01
acquisition note 29 20 20
t otal recognised income and expenses for the period 478 1806 1328 03 1331
dividends paid to equity shareholders 1314 1314 1314
dilution of interest in associated company 09 09 09
sharebased payment 118 118 118
at 31 july 2008 1455 3036 2423 292 2537 9159 23 9182
other reserves comprise a capital redemption reserve of £58m 2007 £57m a revaluation reserve of £17m 2007 £17m and a merger reserve
of £2348m 2007 £2348m the movements in other reserves relate to the recognition of transfers to the capital redemption reserve required
following the redemption of the b shares 
the retained earnings include the purchase of smiths group plc shares by the smiths industries employee benefit trust the consideration paid
was £207m 2007 £70m at 31 july 2008 the trust held 1095965 2007 634274 ordinary shares with a nominal value of £04m 2007 £02m
and a market value of £115m 2007 £66m
capital management
capital comprises shareholders ’ equity adjusted for goodwill recognised directly in reserves for the period ended 31 july 2008 the average group
capital was £17281m 2007 £17323m 
the capital structure is based on the directors’ judgement of the balance required to maintain flexibility while achieving an efficient cost of capital
the group has a target gearing calculated on a market value basis of approximately 20 at the balance sheet date the group had gearing of 18
2007 15 this generated a weighted average cost of capital of 8 2007 9 
as part of this process the group maintains its target of a solid investment grade credit rating by monitoring the factors utilised by ratings agencies
and evaluating the impact of potential distributions and future funding requirements at the 31 july 2008 the group had a credit rating of bbbbaa2
2007 bbbbaa2 with standard  poor’s and moody’s respectively  
hedge reserve
2008 2007
the hedge reserve on the balance sheet comprises £m £m
cashflow hedge reserve 11 14
net investment hedge reserve 303 172
292 186
see transactional currency exposure risk management disclosures in note 21 for additional details of cashflow hedges and translational currency
exposure risk management disclosure also in note 21 for additional details of net investment hedges
104 smiths group plc annual report year ended 31 july 2008 28 cashflow from operating activities
y ear ended period ended
31 july 2008 31 july 2007
£m £m
profit before taxation – continuing and discontinued 3461 18694
net interest payable 410 376
financing lossesgains
– charged to administrative expenses 03 15
– charged to financing 61 28
share of posttax loss from associate 10 05
other finance income – retirement benefits 417 368
profit on saleimpairment of financial asset 240
profit on disposal of discontinued operation 268 14696
3260 3758
amortisation of intangible assets 310 297
impairment of intangible assets 22
profit on disposal of property plant and equipment 03 04
profitloss on disposal of business 272 52
depreciation of property plant and equipment 532 522
impairment of property plant and equipment 03 82
sharebased payment expense 129 139
retirement benefits 370 662
increase in inventories 214 842
increase in trade and other receivables 100 848
decreaseincrease in trade and other payables 569 297
increase in provisions 499 845
cash generated from operations 3205 3658
interest 486 270
t ax paid 738 928
net cash inﬂow from operating activities 1981 2460
29 acquisitions
during the period ended 31 july 2008 the group made a number of acquisitions sartorius bearing technology 15 october 2007 a controlling
interest over an associate john crane japan limited 21 december 2007 indufil bv 28 april 2008 and fiber composite company inc “fiberod”
2 may 2008 all on behalf of john crane fast heat 4 february 2008 allrizon t ongguang 7 may 2008 and triasx pty  ltd 1 july 2008 on behalf
of specialty – other  
from the date of acquisition to 31 july 2008 the acquisitions contributed £381m to revenue £59m to headline profit before taxation and £14m to
profit before taxation if smiths had acquired the businesses at the beginning of the financial period the acquisitions would have contributed £924m
to revenue and £138m to headline profit before tax
the fair value adjustments in respect of intangible assets are due to the recognition of £437m in respect of customer relationships £188m in respect
of technology and £120m in respect of patents licenses and trademarks goodwill represents the value of synergies arising from the acquisitions
and the acquirees’ assembled workforces the adjustments to current assets and liabilities relate to valuation adjustments and are provisional
based on management’s best estimates 
the values set out below are provisional pending finalisation of the fair values attributable and will be finalised in the year ending 31 july 2009
goodwill and other net assets in respect of prior year acquisitions as previously reported have been adjusted as a result of finalising their attributable
fair values and changes in the estimated value of contingent considerations accordingly goodwill has increased by £05m on one transaction and
reduced by £22m on another 
the minority interest and assets accounted for using the equity method adjustment represents assets not acquired by smiths group plc when a
controlling interest in an associate was acquired the asset revaluation surplus represents fair value gains and losses on the associate’ s net assets
105 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
29 acquisitions continued
indufil bv other acquisitions t otal
fair value provisional fair value provisional provisional
book value adjustments fair value book value adjustments fair value fair value
£m £m £m £m £m £m £m
noncurrent assets
– intangible assets 02 312 314 05 433 438 752
– property plant and equipment 13 13 68 02 66 79
current assets
– cash and cash equivalents 40 40 40
– other current assets 145 145 290 06 284 429
noncurrent liabilities
– other liabilities 81 81 01 55 54 135
current liabilities
– overdrafts 25 25 25
– other current liabilities 45 45 204 08 212 257
minority interest and assets accounted for using 
the equity method 51 51 51
net assets acquired 90 231 321 200 311 511 832
asset revaluation surplus 04 04
goodwill on current year acquisitions 387 483 870
goodwill adjustments on prior year acquisitions 17 17
total consideration 708 973 1681
cash paid during the period – current year acquisitions 705 768 1473
direct costs relating to current year acquisitions 03 25 28
deferred consideration accrued on current year acquisitions 197 197
deferred consideration and costs paidreleased on 
prior year acquisitions 17 17
total consideration 708 973 1681
30 disposals
the most significant disposal transaction during the year was the sale of the group’ s marine systems business to k h finance limited a company
owned by eci partners llp on 8 november 2007 in addition to the consideration recognised there is a deferred payment of £4m contingent on
the terms of any future disposal of k h finance limited by the purchaser  the assets and liabilities held for sale at 31 july 2007 relate to the marine
systems business 
the group has adjusted provisions held in respect of disposals made in prior years following determination of the warranties and other liabilities
provided for at the time of disposal
£m
consideration 468
less transaction costs 32
less disposal provisions 28
net consideration received 408
net assets disposed of 
– intangible assets 22
– property plant and equipment 42
– inventory 95
– trade and other receivables 155
– cash and cash equivalents 09
– liabilities 181
net assets 142
profit on disposals in the current year 266
other disposal adjustments 06
proﬁt on disposal of businesses 272
106 smiths group plc annual report year ended 31 july 2008 31 employee share schemes
the group operates share schemes and plans for the benefit of employees the nature of the principal schemes and plans including general
conditions is set out below
smiths group sharesave scheme saye
the saye scheme is an hm revenue  customsapproved allemployee savingsrelated share option scheme which is open to all uk employees
including directors with 12 months ’ service or more participants enter into a contract to save a fixed amount per month of up to £250 in aggregate
for three or five years and are granted an option over shares at a fixed option price set at a 20 discount to market price at the date of invitation to
participate in the case of fiveyear savings contracts participants can elect to delay maturity of the contract until its seventh anniversary the
number of shares comprising the option is determined by the monthly amount saved and the bonus paid on maturity of the savings contract
options granted under the saye scheme are not subject to any performance conditions
smiths group us sharesave scheme us sharesave
the us sharesave scheme is a savingsrelated share appreciation rights scheme which is open to all us employees with 12 months’ service or
more participants enter into a contract to save a fixed amount per month for two years and are granted share appreciation rights based on a fixed
initial price determined using the market price and the us dollar exchange rate at the date of invitation to participate the number of shares used
in the calculation is based on the monthly amount saved and the bonus paid on maturity of the savings contract rights granted under the us
sharesave scheme are not subject to any performance conditions
smiths industries 1995 executive share option scheme 95 esos
options granted under the 95 esos can only be exercised after three years if a performance requirement determined by the remuneration
committee has been met options granted under the 95 esos up to 2001 are subject to performance testing based on total shareholder return
of the group versus the total return of the general industrials sector of the ftse allshare index options granted from 2002 are subject to a
performance test based on growth in the group’s earnings per share if the performance requirement is not satisfied at the end of the third year
the performance period may be extended for up to two further years so that performance is tested over a fouryear period at the end of the fourth
year and a fiveyear period at the end of the fifth year  the performance requirement is that the growth in the group’ s normalised earnings per share
over the threefourfive financial years beginning immediately prior to the option grant must exceed the increase in the uk retail prices index over
the same period by 3 per annum for options up to one times base salary and by 4 per annum for the excess up to two times base salary
executive directors received their final grants of options under the 95 esos in october 2003 from 2004 senior executives including directors have
received awards under the psp see below grants under the 95 esos continue to be made to other executives
smiths group performance share plan psp
the psp was introduced in 2004 and replaced the 95 esos for executive directors and senior executives conditional awards of up to 15 times salary
and exceptionally three times salary are granted annually the awards will be released following the third anniversary of the date of grant to the
extent the psp’s performance tests have been met onethird of the award is subject to a total shareholder return ‘tsr’ target relative to other
ftse 100 companies excluding financial companies and investment trusts for full vesting the company’s tsr must be at or above the 75th
percentile over the three year performance period 25 of the award will vest if the company’s tsr is at median awards will vest on a straight
line prorata basis between median and 75th percentile the remaining twothirds of the award is subject to an earnings per share ‘eps’ growth
target measured before exceptional items full vesting will occur if the compound annual growth in eps is equivalent to 12 per annum 25
vesting will occur if the compound annual growth in eps is equivalent to 5 per annum with vesting on a straightline basis between 5 and 12
the psp has been replaced by the vsp see below
value sharing plan vsp
the vsp is a oneoff longterm incentive plan approved by the shareholders in july 2008 rewarding executives for value creation at group and
divisional levels over threeyear and fouryear periods commencing with the financial year 200809 corporate participants will be rewarded under
the vsp for value creation at a group level whereas the executives with divisional responsibilities will be rewarded for value creation within the division
for which they are responsible for the group scheme onethird of the award will depend on the growth in smiths ’ tsr over and above the median
for the companies comprising the ftse100 excluding financial services companies and the remaining two thirds of each award will be determined
by the growth in internal value in excess of 95 a year  the growth in internal value is calculated as follows adjusted profit before tax ‘pbt’ times
the ratio of pbt to market capitalisation determined at the date of grant plus net equity cashflows to shareholders the divisional awards will depend
on meeting an internal value growth target set for the division in which the participant works 
the participants in the vsp will not be eligible for awards under the performance share plan in 200809 or 200910
smiths group coinvestment plan cip 
under the cip as introduced in october 2005 the executive directors and senior executives are able if invited to use their after tax bonus or 25
of their basic salary after tax whichever is the greater to invest in the company’s shares at the prevailing market price at the end of a three year
period if the executive is still in office and provided the performance test is passed he will be awarded matching shares in respect of any invested
shares retained for that period the number of matching shares to be awarded is determined by the remuneration committee at the end of the
year in which the bonus is earned by reference to annual bonus and other corporate financial criteria the maximum award will not exceed the
value before tax of the bonus or salary invested in shares by the executive vesting of matching shares will occur and the matching shares will be
released at the end of the three year period if the group’s return on capital employed ‘roce’ over the performance period exceeds the group’s
weighted average cost of capital ‘wacc’ over the performance period by an average margin of at least 1 per annum
in july 2008 the cip was amended from 2009 participants will be required to invest 50 of their post tax bonus in purchased shares the
performance conditions have been expanded to include an enhanced performance condition of roce exceeding wacc by an average margin of
3 per annum if the enhanced performance condition is met two matching shares will be issued for every purchased share 
107 smiths group plc annual report year ended 31 july 2008 notes to the accounts continued
31 employee share schemes continued
weighted
average price
saye and esos dss and for option plans
sharesave inc sars cip psp t otal £
ordinary shares under option 000
6 august 2006 4283 19307 1363 1934 26887 £650
granted 917 2795 459 1070 5241 £623
exercised 599 11789 363 12751 £703
lapsed 573 963 53 72 1661 £718
31 july 2007 4028 9350 1406 2932 17716 £598
granted 639 1838 245 743 3465 £732
exercised 2159 1455 235 645 4494 £567
lapsed 992 1101 9 369 2471 £732
31 july 2008 1516 8632 1407 2661 14216 £623
options were exercised on an irregular basis during the period the average closing share price over the financial year was 101432p 2007
101215p there has been no change to the effective option price of any of the outstanding options during the period
exercisable
weighted
weighted average
average options options exercise price
t otal shares remaining exercisable at exercisable at for options
under option contractual life 31 july 2008 31 july 2007 exercisable at
range of exercise prices ’000 months ’000 ’000 31 july 2008
£000 – £200 4068 14 19 1 £000
£201 – £400
£401 – £600 234 18 2 956 £525
£601 – £800 2518 57 1735 2236 £740
£801 – £1000 5505 73 587 633 £877
£1001 – £1200 1891 108 129 185 £242
£1201 – £1400 175
for the purposes of valuing options to arrive at the sharebased payment charge the binomial option pricing model has been used for most
schemes and the monte carlo method is used for schemes with total shareholder return performance targets the assumptions used in the
models for 2008 and 2007 are as follows
period ended 31 july 2008 period ended 31 july 2007
saye 95 esos dsscip psp saye 95 esos dsscip psp
weighted average fair value £ 248 173 860 714 219 194 781 640
key assumptions used
weighted average share price 914 869 961 951 825 832 872 866
range of exercise prices £ 525912 6691097 525868 669901
range of expected volatility 1733 1830 1720 1736 1834 1618
riskfree interest rate 3956 4352 4348 3756 4355 4348
range of expected option term life 2272 yrs 5 yrs 3 yrs 3 yrs 2272 yrs 5 yrs 3 yrs 3 yrs
dividend yield 375 375 375 375 375 375 375 375
assumptions on expected volatility and expected option term have been made on the basis of historical data wherever available for the period
corresponding with the vesting period of the option best estimates have been used where historical data is not available in this respect
included within staff costs is an expense arising from sharebased payment transactions of £129m 2007 £193m of which £118m 2007 £173m
relates to equitysettled sharebased payment the charge in respect of continuing operations is £129m 2007 £104m the total sharebased
payment charge includes £nil 2007 £35m relating to discontinued operations and £nil £2007 £54m relating to the accelerated vesting of share
options on business disposals 
at 31 july 2008 the creditor relating to cashsettled schemes is £15m 2007 £19m
32 events after the balance sheet date
on 1 september 2008 the company completed the sale of land in basingstoke for £16m in cash a further amount of up to £12m will be paid
depending on the final terms of such amended planning permission as may be granted
on 8 september 2008 the trustees of the ti pension scheme invested £250m in annuities which are matched with specific liabilities of the fund
108 smiths group plc annual report year ended 31 july 2008 group financial record under ifrs 20052008
y ear ended period ended period ended y ear ended
31 july 2008 31 july 2007 5 august 2006 31 july 2005
£m £m £m £m
revenue 23212 21609 21803 30054
headline operating proﬁt 3806 3476 3448 4157
amortisation of acquired intangible assets 192 148 130 57
exceptional items including profit on saleimpairment of financial asset 354 742 3378 280
financing losses 03 15 18
operating proﬁtloss 3257 2571 78 3820
net finance costs 54 06 284 161
share of posttax losses of associated companies 10 05 11
proﬁtloss before taxation 3193 2560 373 3659
taxation 750 531 654 941
proﬁtloss after taxation – continuing operations 2443 2029 1027 2718
proﬁt after taxation – discontinued operations 245 15252 1269
shareholders’ equity 9159 9033 13629 14838
represented by
– intangible assets 12532 10213 15306 14817
– property plant  equipment and investments 3090 2736 5126 8313
– net current assetsprovisionsretirement benefit liabilities 1243 1983 2464 1016
net borrowings 7706 5899 9267 9308
funds employed 9159 9033 13629 14838
ratios
operating profit before amortisation of acquired intangible assets turnover  164 161 148 138
effective tax rate before amortisation of acquired intangible assets and exceptional items  240 251 256 264
return on shareholders’ funds  167 149 136 112
cashﬂow
cashflow from normal operating activities 2805 2659 4376 2776
less capital expenditure net 80 67 180 189
operating cash after capital expenditure 2725 2592 4196 2587
free cashflow before acquisitions and dividends after capital expenditure 906 1007 1704 1470
free cashﬂow per share p 234 183 301 261
earnings per share before amortisation of acquired intangible assets and exceptional items p 745 470 648 528
dividends
pence per share 340 340 313 290
times covered before amortisation of acquired intangible assets and exceptional items 22 17 21 18
number of employees 000s
united kingdom 22 28 73 72
overseas 206 186 245 234
228 214 318 306
the return on shareholders’ funds for the period ended 31 july 2007 has been calculated using the closing net assets adjusted for movements in goodwill setoff against reserves relating
to continuing operations in order to adjust for the aerospace disposal
the income statement for the period ended 5 august 2006 has been restated for discontinued operations however information on shareholders’ equity ratios cashflow dividends and
employee numbers is presented for the entire group 
results for the year ended 31 july 2005 have not been restated for discontinued operations
109 smiths group plc annual report year ended 31 july 2008 110 smiths group plc annual report year ended 31 july 2008
independent auditors’ report to the members of smiths group plc
we have audited the parent company financial statements of smiths group plc for the year ended 31 july 2008 which comprise the company
balance sheet the accounting policies and the related notes these parent company financial statements have been prepared under the accounting
policies set out therein we have also audited the information in the directors’ remuneration report that is described as having been audited
we have reported separately on the group financial statements of smiths group plc for the year ended 31 july 2008 
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report the directors’ remuneration report and the parent company financial statements
in accordance with applicable law and united kingdom accounting standards united kingdom generally accepted accounting practice are set
out in the statement of directors’ responsibilities
our responsibility is to audit the parent company financial statements and the part of the directors ’ remuneration report to be audited in accordance
with relevant legal and regulatory requirements and international standards on auditing uk and ireland this report including the opinion has
been prepared for and only for the company’s members as a body in accordance with section 235 of the companies act 1985 and for no other
purpose we do not in giving this opinion accept or assume responsibility for any other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our prior consent in writing
we report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent company
financial statements and the part of the directors ’ remuneration report to be audited have been properly prepared in accordance with the companies
act 1985 we also report to you whether in our opinion the information given in the group directors report is consistent with the parent company
financial statements the information given in the group directors’ report includes that specific information presented in the business review that
is cross referred from the group directors’ report 
in addition we report to you if in our opinion the company has not kept proper accounting records if we have not received all the information and
explanations we require for our audit or if information specified by law regarding directors’ remuneration and other transactions is not disclosed
we read other information contained in the annual report and consider whether it is consistent with the audited parent company financial
statements the other information comprises only the summary performance group at a glance chairman’s statement the chief executive’s
statement the business review board of directors the group directors’ report the unaudited part of the directors’ remuneration report the
statement of directors’ responsibilities the group financial record and the financial calendar  we consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the parent company financial statements our responsibilities do
not extend to any other information
basis of audit opinion
we conducted our audit in accordance with international standards on auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts and disclosures in the parent company financial statements and the part
of the directors’ remuneration report to be audited it also includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the parent company financial statements and of whether the accounting policies are appropriate to the company’s
circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the parent company financial statements and the part of the directors’ remuneration
report to be audited are free from material misstatement whether caused by fraud or other irregularity or error  in forming our opinion we also
evaluated the overall adequacy of the presentation of information in the parent company financial statements and the part of the directors’
remuneration report to be audited
opinion
in our opinion
• the parent company financial statements give a true and fair view in accordance with united kingdom generally accepted accounting practice
of the state of the company’s affairs as at 31 july 2008
• the parent company financial statements and the part of the directors’ remuneration report to be audited have been properly prepared in
accordance with the companies act 1985 and
• the information given in the group directors report is consistent with the parent company financial statements
pricewaterhousecoopers llp
chartered accountants and registered auditors
london
23 september 2008
notes
a the maintenance and integrity of the smiths group plc website is the responsibility of the directors the work carried out by the auditors does not involve consideration of these
matters and accordingly the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website
b legislation in the united kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions company balance sheet
31 july 2007
31 july 2008 restated
notes £m £m
fixed assets
t angible assets 3 167 167
investments and advances 4 32161 30878
32328 31045
current assets
debtors 
– amounts falling due within one year 5 522 1040
– amounts falling due after more than one year 5 52 103
cash at bank and on deposit 13 328
financial derivatives 27 104
614 1575
creditors amounts falling due within one year 6 952 1057
net current liabilitiesassets 338 518
total assets less current liabilities 31990 31563
creditors amounts falling due after more than one year 6 5090 3676
provisions for liabilities and charges 7 83 251
financial derivatives 180 28
net assets excluding pension assetsliabilities 26637 27608
retirement benefit assets 8 297
retirement benefit liabilities 8 517
net assets including pension assetsliabilities 26120 27905
capital and reserves
called up share capital 9 1455 1446
share premium account 10 3036 2890
capital redemption reserve 10 58 57
merger reserve 10 1805 1805
profit and loss account 10 19766 21707
shareholders’ equity 26120 27905
the accounts on pages 111 to 120 were approved by the board of directors on 23 september 2008 and were signed on its behalf by
philip bowman john langston
chief executive finance director
111 smiths group plc annual report year ended 31 july 2008 accounting policies
basis of preparation
the accounts have been prepared in accordance with the companies act 1985 and all applicable accounting standards in the united kingdom 
uk gaap
these accounts have been prepared on a going concern basis and under the historical cost convention modified to include revaluation of certain
financial instruments share options and pension assets and liabilities held at fair value
as permitted by section 2303 of the companies act 1985 the company’s entity profit and loss account and statement of total recognised gains
and losses have not been presented
the company has taken advantage of the exemption in ‘frs 8 related party disclosures’ not to disclose transactions with other members of the
smiths group
changes in accounting policies
as required the company has adopted uitf 44 ‘group and t reasury share t ransactions ’ “uitf 44” in these financial statements uitf 44 requires
the fair value of the award of share options to subsidiary company employees to be treated as a capital contribution
consequently the company has recognised an addition to investments of the aggregate amount of these contributions for all grants of equity
instruments made subsequent to 7 november 2002 the addition to investments in 2008 was £33m the adoption of this pronouncement has
required the restatement of the comparative balance sheet an adjustment of £26m was made to the 5 august 2006 balance sheet with a further
£39m recognised in 2007
foreign currencies
foreign currency transactions are recorded at the exchange rate ruling on the date of transaction foreign exchange gains and losses resulting
from the settlement of such transactions and from the retranslation at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the profit and loss account
operating leases
payments made under operating leases are charged to the profit and loss account as incurred over the term of the lease
where a leasehold property is vacant or sublet under terms such that the rental income is insufficient to meet all outgoings provision is made
for the anticipated future shortfall up to termination of the lease
tangible fixed assets
depreciation is provided at rates estimated to write off the relevant assets by equal annual amounts over their expected useful lives in general
the rates used are freehold and long leasehold buildings – 2 short leasehold property – over the period of the lease plant machinery etc –
10 to 20 motor vehicles – 25 t ools and other equipment – 10 to 33 
fixed asset investments
the company’ s investment in shares in group companies are stated at cost less provision for impairment any impairment is charged to the profit
and loss account as it arises
financial instruments
the policies disclosed in the group accounting policies on pages 63 to 68 for recognition measurement and presentation of financial instruments
are applied in the company accounts 
where there are no differences between the disclosures required for the group and the company in respect of a class of financial instruments an
appropriate cross reference is made to the group accounts
taxation
deferred tax is recognised in respect of timing differences that have originated but not reversed as at the balance sheet date timing differences
are differences between the company’s taxable profits and its results as disclosed in the accounts arising from the inclusion of gains and losses
in tax assessments in periods different from those in which they are recognised in the accounts
deferred tax is recognised in respect of the retained earnings of overseas subsidiaries and associates only to the extent that at the balance sheet
date dividends have been declared or an obligation is present to distribute past earnings deferred tax is not recognised on any fixed assets that
have been revalued unless there is a binding agreement to sell the asset
provisions
provisions for disposal indemnities restructuring costs vacant leasehold property and legal claims are recognised when the company has a
legal or constructive obligation as a result of a past event it is probable that an outflow of resources will be required to settle the obligation and
the amount has been reliably estimated provisions are not recognised for future operating losses
provisions are discounted where the time value of money is material
112 smiths group plc annual report year ended 31 july 2008 postretirement benefits
for defined benefit schemes the cost of benefits accruing during the year in respect of current and past service is charged against operating profit
the expected return on the schemes’ assets and the increase in the present value of the schemes’ liabilities arising from the passage of time are
included in other finance income actuarial gains and losses are recognised in the statement of total recognised gains and losses the balance sheet
includes the surplusdeficit in schemes taking assets at their yearend market values and liabilities at their actuarially calculated values discounted
at yearend aa corporate bond interest rates
the company has adopted the amendment to frs 17 issued in december 2006 
sharebased payment
the company operates a number of equitysettled and cashsettled sharebased compensation plans 
the fair value of the shares or share options granted is recognised over the vesting period to reflect the value of the employee services received
the charge relating to grants to employees of the company is recognised as an expense in the profit and loss account and the charge for grants
to employees of other group companies is recognised as an investment in the relevant subsidiary  
the fair value of options granted excluding the impact of any nonmarket vesting conditions is calculated using established option pricing models
principally binomial models the probability of meeting nonmarket vesting conditions which include profitability targets is used to estimate the
number of share options which are likely to vest 
for cashsettled sharebased payment a liability is recognised based on the fair value of the payment earned by the balance sheet date for equity
settled share based payment the corresponding credit is recognised directly in reserves 
in accordance with the transitional provisions of ‘frs 20 sharebased payment’ no charge has been recognised for grants of equity instruments
made before 7 november 2002
dividends
dividends are recognised as a liability in the period in which they are authorised the interim dividend is recognised when it is paid and the final
dividend is recognised when it has been approved by shareholders at the annual general meeting
113 smiths group plc annual report year ended 31 july 2008 notes to the company accounts
1 employees
y ear ended period ended
31 july 2008 31 july 2007
£m £m
staff costs during the period
wages and salaries 701 1483
social security 81 147
cost of sharebased incentive plans 85 72
pension costs note 8 76 216
943 1918
for details of smiths group plc’s employee share option schemes and other sharebased plans refer to note 31 relating to the group accounts
the average number of persons employed during the period was 1736 2007 6555
2 audit fee
the audit fee for the parent company was £01m 2007 £01m
3 property plant and equipment
fixtures
land and plant and fittings tools
buildings machinery and equipment t otal
£m £m £m £m
cost or valuation
at 31 july 2007 158 10 37 205
additions 03 03 04 10
disposals 01 02 03
at 31 july 2008 161 12 39 212
depreciation
at 31 july 2007 10 04 24 38
charge for the period 01 01 06 08
disposals 01 01
at 31 july 2008 11 05 29 45
net book value at 31 july 2008 150 07 10 167
net book value at 31 july 2007 148 06 13 167
31 july 2008 31 july 2007
£m £m
land and buildings – cost
freehold 159 156
long leasehold 02 02
161 158
114 smiths group plc annual report year ended 31 july 2008 4 investments and advances
31 july 2007
31 july 2008 restated
£m £m
investments in subsidiaries
shares at cost 23867 22834
due from subsidiaries 14703 17896
38570 40730
due to subsidiaries 6409 9852
32161 30878
investments in subsidiaries have been restated following the adoption of uitf 44 shares at cost at 31 july 2007 have increased by £65m from
£22769m to £22834m to reflect the value in 2007 and earlier years of share options granted to employees of subsidiaries 
the company’s subsidiaries are largely held according to business lines by the following holding companies which are incorporated in england
unless otherwise stated 
smiths medical group limited 
smiths detection group limited 
smiths specialty engineering group limited 
smiths group international holdings limited 
smiths group holdings netherlands bv incorporated in the netherlands
the principal subsidiaries and their countries of incorporation are
england
smiths detection – watford ltd
smiths medical international limited
john crane uk limited
europe
smiths heimann sas france
smiths heimann gmbh germany
smiths medical france sa france
smiths medical deutschland gmbh germany
hypertac sa france
hypertac gmbh germany
other
smiths detection asiapacific pte ltd singapore
smiths medical japan limited japan
john crane middle east fze uae
of the companies above smiths group international holdings limited is 100 owned directly by the company and smiths medical japan limited
is 60 owned directly by the company  the others are 100 owned through intermediate holding companies shareholdings are of ordinary shares
or common stock all subsidiaries operate in their country of incorporation
5 debtors
31 july 2008 31 july 2007
£m £m
amounts falling due within one year
amounts owed by subsidiaries 454 951
other debtors 53 65
corporation tax 08
prepayments and accrued income 15 16
522 1040
amounts falling after more than one year
deferred taxation 52 103
574 1143
115 smiths group plc annual report year ended 31 july 2008
united states
smiths detection inc
smiths medical asd inc 
smiths medical md inc 
smiths medical pm inc
medex inc 
john crane inc 
flexible t echnologies inc 
tutco inc 
hypertronics corporation 
polyphaser corporation 
sabritec inc
transtector systems inc  notes to the company accounts continued
6 creditors
31 july 2008 31 july 2007
£m £m
amounts falling due within one year
overdrafts 387 278
b shares note 9 17 181
amounts owed to subsidiaries 324 336
other creditors 66 106
other taxation and social security costs 15 30
accruals and deferred income 143 126
952 1057
amounts falling due after more than one year
t erm loans 5086 3654
other creditors 04 22
5090 3676
7 provisions for liabilities and charges
at provisions provisions at
31 july 2007 charged released utilisation 31 july 2008
£m £m £m £m £m
property 12 10 02
disposals 239 51 31 176 83
251 51 41 178 83
the opening disposals provisions included £207m in respect of the costs of transferring aerospace active pensioners in 2008 the pensioners were
transferred utilising £176m of this provision the balance of £31m has been released 
a provision has been made in 2008 in respect of obligations of the company arising from the disposal of the group’s marine systems business
see note 30 relating to the group accounts for details of this disposal most of the balance is expected to be utilised within the next five years
8 postretirement benefits
the company operates three defined benefit plans in the uk the largest of them is a funded scheme with assets held in a separate trustee
administered fund the company is the sole employer in that scheme and accordingly accounts for it as a defined benefit pension plan in
accordance with frs 17 
pension costs are assessed in accordance with the advice of independent professionally qualified actuaries the most recent actuarial valuation
of the funded scheme was performed using the projected unit method as at 31 march 2006 this has been rolled forward to 31 july 2008
contributions to the funded scheme are made on the advice of the actuaries with the objective that the benefits be fully funded during the scheme
members’ average working lives
the principal assumptions used in updating the valuations are set out below
2008 2007
rate of increase in salaries 41 41
rate of increase in pensions in payment 35 31
rate of increase in deferred pensions 36 31
discount rate 66 58
inflation rate 36 31
healthcare cost increases 50 50
the assumptions used are estimates chosen from a range of possible actuarial assumptions which due to the timescale covered may not
necessarily occur in practice
the mortality assumptions used in the principal uk schemes are based on the recent actual mortality experience of members within each scheme
the assumptions are based on the pa92 birth tables with relevant scaling factors based on the experience of the schemes the assumption also
allows for future improvements in life expectancy in line with the medium cohort and a 1 underpin the assumptions are that a member who
retires next year at age 65 will live on average for a further 22 years after retirement if they are male and for a further 25 years after retirement if
they are female for a member who is currently 45 when they retire in 20 years’ time they are assumed to live on average for a further 23 years
after retirement if they are male and for a further 27 years after retirement if they are female
116 smiths group plc annual report year ended 31 july 2008 8 postretirement benefits continued
the assets in the scheme and the expected rates of return as at 31 july 2008 were
2008 2007
uk schemes uk schemes
longterm value longterm value
rate of return £m rate of return £m
equities 82 6202 82 9598
government bonds 48 309 49 774
corporate bonds 66 2427 58 1699
property 72 1881 72 2014
other 58 2291 60 1190
t otal market value 13110 15275
present value of funded pension scheme liabilities 13335 14433
deficitsurplus 225 842
unfunded pension plans 343 336
postretirement healthcare 152 159
720 347
related deferred tax assetliability 203 50
net pension liability asset 517 297
the scheme assets do not include any of the group’ s own financial instruments nor any property occupied by nor other assets used by the group
the expected rates of return on individual categories of scheme assets are determined by reference to relevant industries the overall rate of
return is calculated by weighting the individual rates in accordance with the anticipated balance in the scheme’s investment portfolios
history of experience gains and losses 
2008 2007 2006 2005
£m £m £m £m
actual return less expected return on pension scheme assets 1839 526 235
as a percentage of scheme assets 14 3 2
experience gains and losses arising on the scheme liabilities 45 367 16 19
as a percentage of present value scheme liabilities 0 2 0 5
changes in present value of defined benefit obligations
2008 2007
£m £m
at beginning of the period 14928 14641
current service cost 76 205
past service cost 11
interest on obligations 839 761
contributions by employees 01
actuarial gainloss on liabilities 360 236
curtailment gain 11 325
liabilities extinguished on settlements 972
benefits paid 670 602
at end of the period 13830 14928
changes in present value of scheme assets
2008 2007
£m £m
at beginning of the period 15275 13804
expected return on assets 1091 965
contributions by employer 401 600
contributions by employees 01
assets distributed on settlements 1148
actuarial lossgain on assets 1839 507
benefits paid 670 602
at end of the period 13110 15275
117 smiths group plc annual report year ended 31 july 2008 notes to the company accounts continued
8 postretirement benefits continued
cash contributions
cash payments in 2009 are expected to be £390m
a one percentage point change in assumed healthcare cost trend rates would have the following effects
one percentage one percentage
point increase point decrease
£m £m
effect on the aggregate of service cost and interest cost 01 01
effect on defined benefit obligations 13 12
9 share capital
issued capital consideration
number of shares £m £m
ordinary shares
at 31 july 2007 385498273 1446
exercise of share options 2380908 09 155
at 31 july 2008 387879181 1455
b shares
at 31 july 2007 4926594 01
purchased and cancelled 4467437 01
at 31 july 2008 459157
share capital classified as equity at 31 july 2008 1455
share capital classified as debt at 31 july 2008
total share capital at 31 july 2008 1455
on 17 april 2008 4467437 b shares were purchased and cancelled the remaining b shares carry annual interest of 75 of 12 month libor payable
in arrears in april smiths may redeem and cancel the remaining b shares up to november 2008 for a consideration of 365p per share in cash or
convert them to ordinary shares b shares have no voting rights
the authorised capital at 31 july 2008 consisted of
• 533333333 2007 533333333 ordinary shares of 375p each and
• 600000000 2007 600000000 noncumulative b shares of 1p each 
at 31 july 2008 all of the issued share capital was in free issue all issued shares are fully paid
118 smiths group plc annual report year ended 31 july 2008 9 share capital continued
31 july 2008 31 july 2007
number of ordinary shares issuable under outstanding options 8777181 11585441
y ear number of subscription dates normally
issued shares prices exercisable
smiths sharesave scheme 2001 30990 60800p 20042008
2002 11851 64500p 20052009
2003 118006 55400p 20062010
2004 115973 52500p 20072011
2005 194283 70400p 20082012
2006 227085 79800p 20092013
2007 189534 86800p 20102014
2008 326309 109700p 20112015
smiths industries executive share option schemes 1998 19244 76500p 20012008
1999 64845 85850p 20022009
2000 69653 75000p 20032010
2001 97076 79000p 20042011
2002 1213113 80600p 20052012
2002 143500 65400p 20052012
2003 214800 66900p 20062013
2004 1007600 77400p 20072014
2005 1146437 90100p 20082015
2006 1845427 89650p 20092016
2007 1610500 109700p 20102017
ti group executive share option schemes 1998 8607 84979p 20012008
1999 19183 90723p 20022009
1999 87181 110392p 20022009
2000 2459 66123p 20032010
2000 13525 62616p 20032010
119 smiths group plc annual report year ended 31 july 2008 notes to the company accounts continued
10 share premium account and reserves
capital
redemption merger profit and
share premium reserve reserve loss account
£m £m £m £m
at 31 july 2007 as previously reported 2890 57 1805 21642
uitf 44 adoption 65
at 31 july 2007 as restated 2890 57 1805 21707
exercise of share options 146 55
purchase of own shares 207
redemption of b shares 01 01
profit for the period 472
dividends paid to equity shareholders 1314
actuarial loss on retirement benefits 1479
deferred tax credit related thereto 415
sharebased payment 118
at 31 july 2008 3036 58 1805 19766
the retained profit of the company represents a profit for the year of £472m less dividends paid of £1314m
the retained earnings include the purchase of smiths group plc shares by the smiths industries employee benefit trust and the issue of these
shares upon the exercise of share options the consideration paid was £207m 2007£70m and £55m was received as a result of the issue of shares
at 31 july 2008 the trust held 1095965 2007 634274 ordinary shares with a nominal value of £04m 2007 £02m and a market value of £115m
2007 £66m
the company’s profit and loss reserve of £19766m includes £8957m 2007 £9261m not available for distribution as dividend 
during the year the company received £155m 2007 £777m on the issue of shares in respect of the exercise of options awarded under various
share option schemes 
11 contingent liabilities
the company has arranged letter of credit facilities to support the group’s pension plans the current amount outstanding is £1249m 2007
£1328m
the company has guaranteed the us250m 545 senior notes 2013 privately placed by a subsidiary and the £660m revolving credit facility used
by a subsidiary 
other contingent liabilities of the company are not expected to give rise to a material loss
12 post balance sheet event
the directors propose a final dividend of 235p per share totalling approximately £91m for the period ended 31 july 2008 the dividend will be
submitted for formal approval at the annual general meeting to be held on 18 november 2008 
in accordance with frs 21 these financial statements do not reflect this dividend payable which will be accounted for in shareholders’ equity as
an appropriation of retained earnings in the year ending 31 july 2009 during the period ended 31 july 2008 a final dividend of 235p per share
totalling £91m was paid in respect of the dividend declared for the period ended 31 july 2007
on 1 september 2008 the company completed the sale of land in basingstoke for £16m in cash a further amount of up to £12m will be paid
depending on the final terms of such amended planning permission as may be granted
13 deferred tax
y ear ended period ended
31 july 2008 31 july 2007
£m £m
deferred taxation
at beginning of period 53 411
chargecredit to profit and loss account 213 278
chargecredit to equity 415 80
at end of period 255 53
analysed as follows
postretirement benefits 203 50
sharebased payments 46 39
shortterm timing differences 06 64
255 53
120 smiths group plc annual report year ended 31 july 2008 financial calendar
2008
preliminary announcement of results for 200708 24 september
ordinary shares final dividend exdividend date 22 october
ordinary shares final dividend record date 24 october
annual general meeting 18 november
ordinary shares final dividend payment date 21 november
2009
200809 interim results announced 25 march provisional
ordinary shares interim dividend exdividend date 1 april provisional
ordinary shares interim dividend record date 3 april provisional
ordinary shares interim dividend payment date 24 april provisional
smiths group financial year end 31 july
preliminary announcement of results for 200809 30 september provisional
ordinary shares final dividend exdividend date 21 october provisional
ordinary shares final dividend record date 23 october provisional
annual general meeting 17 november provisional
ordinary shares final dividend payment date 20 november provisional
the market value of an ordinary share of the company on 31 march 1982 for the purposes of capital gains tax was 136875p taking into account
the subdivision of 50p shares into 25p shares on 14 january 1985 and the subdivision and consolidation of 25p shares into 375p shares on 
18 june 2007
the 2008 annual general meeting will be held at the thomas lord suite lord’s cricket ground grace gate st john’s wood road london 
nw8 8qn on tuesday 18 november 2008 at 230pm
registered office
smiths group plc
765 finchley road
london nw11 8ds
t 44 020 8458 3232
f 44 020 8458 4380
e plcsmithscom
wwwsmithscom
incorporated in england no 137013
front cover images 1 flext ek tutco heating elements
2 smiths medical epidural needles being
manufactured in keene new hampshire usa
3 john crane dry gas seal
4 smiths medical assembling an ambulatory
pump system in st paul minnesota usa
5 smiths detection cargo scanning image
6 smiths interconnect assembling microwave
electronics in tecom industries thousand
oakes california usa
7 smiths medical cadd®solis ambulatory
pump units
8 smiths detection positioning an xray
source at wiesbaden germany
9 smiths interconnect ground data terminals
1 2 3
4 5 6
7 8 9
designed and produced by 020 7378 1457 wwwlangsfordcouk
printed by moore an fsc forest stewardship council accredited printer
location and product photography except p25 charlie fawellpeter t enzer 
portrait photography by charlie fawell 
this report is printed on revive 75 silk which contains 50 deinked 
postconsumer waste 25 preconsumer waste and 25 virgin fibre 
the pulp is a mix partly bleached using an ecf elemental chlorine free
process and partly bleached using a tcf t otally chlorine free process 
this material can be disposed of by recycling or incineration for energy 
recovery  this product is carbonneutral® awarded the napm recycled 
mark and produced at a mill that is certified with the iso14001 environmental
management standard this product is fsc mixed sources accredited 
and comes from recycled wood or fibre wellmanaged forests and 
other controlled sources
registrars
equiniti limited formerly known as lloyds tsb registrars
aspect house
spencer road
lancing
west sussex bn99 6da
t 0871 384 2943 united kingdom
t 44 0121 415 7130
wwwshareviewcouk
wwwequiniticom
auditor
pricewaterhousecoopers llp smiths group plc
765 finchley road london nw11 8ds uk
t 44 020 8457 8272
f 44 020 8458 8412
wwwsmithscom


Summary:
 10 smiths group plc annual report year ended 31 july 2008
chief executive’s statement
we have delivered strong sales and profit
growth driven by good performances from
john crane smiths detection and smiths
interconnect a performance improvement
programme is underway to address the
operational issues that have held back
smiths medical over the past two years
the portfolio has been strengthened this
year through one divestment and seven
acquisitions which bring new technologies
and extend smiths geographic footprint –
particularly in developing markets
our focus is on topline growth and margin
enhancement while there are significant
opportunities to improve performance and
generate value across the group we have 
begun a substantial restructuring
programme that will deliver operating
efficiencies and improve customer service
the scale of the opportunities is
demonstrated by the new divisional targets
set out here for the first time
the sustained upheaval in the world
economy is creating uncertainty in many
markets and may disrupt government
spending patterns – particularly in the 
us and india where there are forthcoming
elections however smiths group is well
placed among global businesses to meet 
these challenges
looking at this year’ s results sales rose by 7 and the headline pretax
profit increased by 10 after adjusting for currency translation and
acquisitions and disposals the underlying improvement was 6 and 8
respectively the headline numbers exclude various exceptional items
which are detailed in the business review one of these is a charge of
£40m in respect of john crane inc litigation a full explanation of which
is on page 29
since joining smiths some nine months ago i have undertaken a
thorough review of operations it is a group with a strong set of
technologybased businesses applying some of the world’s most
advanced industrial sciences – from airport xray scanning machines to
mechanical seals for the oil industry  in addition the businesses operate
in markets sustained by longterm secular growth smiths medical’s
market is growing as populations age and increase in prosperity john
crane by energy consumption and interconnect by the need for
increased bandwidth and upgraded wireless infrastructure smiths
detection is driven by demand for increased security and protection
although flextek is exposed to more cyclical markets such as us
housing it has a portfolio of highperformance products that supply the
aerospace market
my review of operations identified significant opportunities to improve
performance progressively over a twoyear period and maximise value
for shareholders t o deliver these benefits the board has already taken
some key decisions
• manage the group as five divisions from 1 august 2008 and restructure
each to improve customer service and deliver efficiencies
• restructure and reduce the corporate centre to cut cost and focus it on
delivering returns from the business
• improve business systems and dataflow which over time will support
datadriven decisionmaking and enable the group to be more
responsive to changing market conditions and opportunities
• build the business through acquisitions which will add complementary
technologies expand the geographic footprint or leverage existing
scale
• increase investment in research and development and focus it more
intensely on higher growth areas that will deliver greater returns and
• introduce an incentive scheme for senior management that reinforces
our new culture of performance improvement and delivery against
recently established divisional targets
in june we announced that the specialty engineering division would be
disbanded so that its three constituent businesses – john crane
interconnect and flext ek – report directly to me this reduces cost and
gives greater accountability to each of the businesses in addition all
smiths divisions will now be managed from divisional headquarters that
are closer to their operations key markets and customers
we also aim to realise value by restructuring the divisions themselves
for example john crane which had historically been managed as two
separate operations from the uk and us is now combined under the
leadership of paul cox and headquartered at morton grove near
chicago in medical the management structure in the us will be
simplified and we will introduce a global approach to rd there are
also further opportunities to reorganise flextek’s portfolio of
businesses to drive efficiencies and improve operational effectiveness
at the same time we have defined more clearly the roles of the divisions
and their interface with the corporate centre these changes will reduce
substantially the size of the corporate office and improve the way we
work by introducing better defined governance and decisionmaking
the small head office will concentrate on three areas setting the
group’ s strategic direction and capital allocation leveraging the group’ s
scale where appropriate and ensuring compliance as a uklisted
company  in future we will report the corporate centre costs separately
which will give greater clarity to the underlying margins of the divisions
and provide a clear incentive to minimise corporate costs 11 smiths group plc annual report year ended 31 july 2008
philip bowman
chief executive
t aken together these restructuring programmes are expected to deliver
annual cost savings of £47m once they are complete in three years 
time the cost of delivering these programmes will be £48m which will 
be treated as an exceptional item further details are given in the
divisional reviews
we are also investing more to improve dataflow and speed up decision
making through the implementation of better information systems for
example erp systems are currently being deployed in detection john
crane and medical at a group level a new information platform is being
introduced which will help capture operational data from the divisions
this creates opportunities to leverage the scale of the group for the first
time by groupwide procurement of travel it and other services we
have already launched a programme to consolidate it service delivery
across the group improving service quality and cutting costs we have
also signed a deal with att to supply a range of communication
services such as mobile telephones remote access etc which will
deliver annual savings of at least 5m
our management team has also been strengthened reflecting the
importance of the it investment brian jones has joined us as chief
information officer  he brings many years’ experience in implementing
erp systems and improving information flow within large organisations
michael herlihy has been appointed general counsel and is also a
member of the executive committee and peter durman has joined to
lead an invigorated investor relations programme the mix of talent at
smiths will continue to be refreshed and reinforced with external
appointments bringing different competencies and innovative ideas to
the group
there are valuable opportunities to build smiths through bolton
acquisitions – particularly in john crane interconnect and detection
such acquisitions bring complementary technologies support
geographic expansion or leverage existing infrastructure john crane
acquired indufil a specialist in filtration systems and sartorius bearing
t echnology a leading provider of high performance rotating equipment
for the oil and gas industry both have added valuable new technologies
that can be leveraged through john crane’ s global network of more than
220 sales and service centres john crane also acquired fiberod which
further extends our upstream energy services capability and
complements the cdi acquisition made last year  in addition john crane
expanded its presence in japan the world’s second largest market for
oem pump manufacturers by increasing its ownership share of john
crane japan from 49 to 70 in interconnect the acquisitions of
shanghaibased allrizon t ongguang and brisbanebased t riasx pty ltd
have strengthened its position in the growing asian market flext ek’s
acquisition of fast heat has extended its range of specialty heating
solutions
we are also driving higher levels of revenue growth organically through
an increase in research and development rd investment focused
more tightly on growth areas that can deliver the most attractive returns
rd investment for the group increased by 8 or £7m to £86m in
detection our spend has been focused on xray detection systems for
both airports and cargo screening while we have extended our portfolio
of chemical and trace detectors we are at the cutting edge of a number
of technologies – xray screening millimetre wave imaging and
biological detection in medical we have launched a number of new
products during the year as we begin to benefit from the introduction of
a streamlined product development process it has resulted in a 50
increase in the number of product launches this year 
to reinforce our new culture of performance improvement we have
established tar gets for sales gr owth and mar gins for each of the divisions
these are the ranges we anticipate the divisions will operate within over
the next three years based on organic growth at constant currency and
assume a financial and macroeconomic environment consistent with
that of recent years alongside this we have introduced a new incentive
plan for senior management and divisional leadership it more closely
links remuneration with performance and ultimately value creation and
places much greater accountability on the divisional leadership for the
performance of their businesses the new incentive plan means that
each division will have its own targets to meet reward will be bound
together by one common currency the smiths share price in that way
we will reflect the valuecreating performance of each division
sales
2008 2008 t arget
£m growth

growth range

detection 509 12 1012
john crane 626 8 68
medical 703 0 35
interconnect 261 13 610
flext ek 206 4 07
total 2305
headline operating profit
2008 2008 t arget
£m margin margin range
detection 93 18 1720
john crane 104 17 1722
medical 140 20 2024
interconnect 54 21 2123
flext ek 24 12 1116
corporate centre 35
total 380
the above analysis reflects the revised operating structure for 200809 see page 72 and
excludes three months of trading for marine systems which was sold in november 2007

organic growth at constant currency 
delivering these returns will be a team effort and i would like to thank
our 22000 employees around the world for their hard work and support
during a time of very real change both within smiths group and the wider
economy 
in summary i believe that most divisions have the opportunity to improve
margins significantly the greater responsibility accountability and
incentivisation of the divisional management teams combined with the
availability of better data to underpin management decisions should
progressively unlock value for the benefit of shareholders