213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 213800MJL6IPZS3ASA11 2024-07-31 213800MJL6IPZS3ASA11 2025-07-31 213800MJL6IPZS3ASA11 2023-07-31 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 smin:HeadlineMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 smin:NonHeadlineMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 ifrs-full:RetainedEarningsMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 smin:ReserveOfCashFlowHedgesAndHedgesOfNetInvestmentsInForeignOperationsMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 ifrs-full:NoncontrollingInterestsMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 ifrs-full:OtherReservesMember 213800MJL6IPZS3ASA11 2024-08-01 2025-07-31 smin:ShareCapitalAndSharePremiumMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 smin:HeadlineMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 smin:NonHeadlineMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 smin:ShareCapitalAndSharePremiumMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 ifrs-full:OtherReservesMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 ifrs-full:RetainedEarningsMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 smin:ReserveOfCashFlowHedgesAndHedgesOfNetInvestmentsInForeignOperationsMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800MJL6IPZS3ASA11 2023-08-01 2024-07-31 ifrs-full:NoncontrollingInterestsMember 213800MJL6IPZS3ASA11 2024-07-31 ifrs-full:NoncontrollingInterestsMember 213800MJL6IPZS3ASA11 2024-07-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800MJL6IPZS3ASA11 2024-07-31 smin:ReserveOfCashFlowHedgesAndHedgesOfNetInvestmentsInForeignOperationsMember 213800MJL6IPZS3ASA11 2024-07-31 ifrs-full:RetainedEarningsMember 213800MJL6IPZS3ASA11 2024-07-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800MJL6IPZS3ASA11 2024-07-31 ifrs-full:OtherReservesMember 213800MJL6IPZS3ASA11 2024-07-31 smin:ShareCapitalAndSharePremiumMember 213800MJL6IPZS3ASA11 2025-07-31 smin:ShareCapitalAndSharePremiumMember 213800MJL6IPZS3ASA11 2025-07-31 ifrs-full:OtherReservesMember 213800MJL6IPZS3ASA11 2025-07-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800MJL6IPZS3ASA11 2025-07-31 ifrs-full:RetainedEarningsMember 213800MJL6IPZS3ASA11 2025-07-31 smin:ReserveOfCashFlowHedgesAndHedgesOfNetInvestmentsInForeignOperationsMember 213800MJL6IPZS3ASA11 2025-07-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800MJL6IPZS3ASA11 2025-07-31 ifrs-full:NoncontrollingInterestsMember 213800MJL6IPZS3ASA11 2023-07-31 ifrs-full:NoncontrollingInterestsMember 213800MJL6IPZS3ASA11 2023-07-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800MJL6IPZS3ASA11 2023-07-31 smin:ReserveOfCashFlowHedgesAndHedgesOfNetInvestmentsInForeignOperationsMember 213800MJL6IPZS3ASA11 2023-07-31 ifrs-full:RetainedEarningsMember 213800MJL6IPZS3ASA11 2023-07-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800MJL6IPZS3ASA11 2023-07-31 ifrs-full:OtherReservesMember 213800MJL6IPZS3ASA11 2023-07-31 smin:ShareCapitalAndSharePremiumMember iso4217:GBP iso4217:GBP xbrli:shares
Engineering
a better
future
Annual Report & Accounts FY2025
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
2
How to navigate this report
Throughout this report you will find navigational tools for additional information in the report and
on our website.
Supporting data and insights
Additional content on our website
Additional content in the report
Highlights and quotes from our team
Business descriptors in this report:
Group
= John Crane, Flex-Tek, Smiths Detection, Smiths Interconnect
Continuing operations
= John Crane, Flex-Tek, Smiths Detection
Discontinued operations
= Smiths Interconnect
Smiths
= John Crane, Flex-Tek
Alternative Performance Measures
(APMs) and
Key Performance Indicators
(KPIs)
are defined in note 30 to the financial statements.
WELCOME
Our purpose
We focus on solving the toughest problems for our customers, helping address
critical global needs such as decarbonisation and the ever-increasing demand
for process and energy efficiency. We use our deep domain engineering expertise
and strong practical knowledge to develop mission-critical products and services
which support customers in energy, construction and industrial markets.
We share the same goals: to build resilient businesses and create value from
what we do.
We are pioneers of progress. Engineering a better future, we drive efficiency
for customers in mission-critical situations.
We are united by our purpose. It is what we do, how we think, and how we will
continue to use our passion for innovative engineering.
OVERVIEW
Our purpose
IFC
FY2025 highlights
1
STRATEGIC REPORT
Chairman’s statement
2
Q&A with our CEO
4
Key performance indicators
6
CEO review
9
Our strategy and business model
11
Markets and megatrends
12
CFO review
15
Our people and culture
24
Risk management
26
Principal risks and uncertainties
29
Sustainability
37
Task Force on Climate-related Financial Disclosures
46
Non-financial and sustainability information Statement
53
Sustainability metrics, targets and performance
55
Going Concern and Viability Statement
60
GOVERNANCE
Chairman’s introduction
63
Board biographies
65
Stakeholder engagement and S172 statement
70
Nomination & Governance Committee report
74
Audit & Risk Committee report
78
Remuneration & People Committee report
85
Innovation, Sustainability & Excellence Committee report
99
Directors’ report
101
Statement of Directors’ responsibilities
103
FINANCIAL STATEMENTS
Independent auditor’s report
104
Consolidated primary statements
119
Accounting policies
124
Notes to the accounts
133
Unaudited Group financial record FY2021–FY2025
180
Unaudited US dollar primary statements
181
Smiths Group plc Company accounts
186
Subsidiary undertakings
194
Sustainability data
200
Shareholder information
210
ABOUT THIS REPORT
This is the
Smiths Group plc
Annual Report &
Accounts FY2025.
Data presented in
this report is for the
12 months to 31 July
2025 unless
otherwise stated.
ACCESS MORE
INFORMATION
Read more
about Smiths
on our website
Scan to visit our website
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
1
ROLAND CARTER
Chief Executive Officer
FY2025
HIGHLIGHTS
This has been another successful year for the Group,
building on our strong track record of consistent
growth and returns. We exceeded our twice-raised
organic revenue growth guidance, delivering +8.9%
growth, and operating margin was 17.4%, at the top of
our guided range. This strong performance reflects
the quality of our business and agility managing
ongoing macro-economic uncertainties.
Our order book and momentum in the business
support our confidence in our positive outlook for
FY2026, and we expect organic revenue growth of
4–6% and continuing margin expansion towards our
medium-term targets.
FY2025 has been a pivotal year and the strategic
actions we have announced to focus Smiths as a
world-class industrial engineering company to unlock
significant value and enhance returns to shareholders
are well underway.
None of this would be possible without our dedicated
people, and I would like to thank colleagues across
Smiths for their support, diligence and commitment,
particularly as we navigate a period of rapid change.
Headline
3
FY2025
FY2024
Reported
Organic
2
Group
1
Group revenue
£3,336m
£3,132m
+6.5%
+8.9%
Group operating profit
£580m
£526m
+10.3%
+13.1%
Group operating profit margin
4
17.4%
16.8%
+60bps
+60bps
Basic EPS
121.2p
105.5p
+14.8%
ROCE
4
18.1%
16.4%
+170bps
Operating cash conversion
4
99%
97%
+2pps
Continuing operations
Revenue
£2,915m
£2,778m
+5.0%
+7.2%
Operating profit
£505m
£477m
+6.0%
+8.5%
Operating profit margin
17.3%
17.1%
+20bps
+20bps
ROCE
18.3%
n/a
–
Statutory
FY2025
FY2024
Reported
Revenue
£2,915m
£2,778m
+5.0%
Operating profit
£410m
£369m
+11.4%
Profit for the year (after tax)
£276m
£222m
+24.3%
Basic EPS
85.7p
72.3p
+18.5%
Dividend per share
46.0p
43.75p
+5.1%
STATUTORY REPORTING AND DEFINITIONS
Statutory reporting takes account of all items excluded from headline performance. See accounting policies for an explanation of the presentation of results and note 3
to the financial statements for an analysis of non-headline items. The following definitions are applied throughout the financial report:
1
Group refers to Smiths Group including all four businesses; continuing operations refers to the combination of John Crane, Flex-Tek and Smiths Detection (ie excludes
Smiths Interconnect) and Smiths refers to the combination of John Crane and Flex-Tek only.
2
Organic is headline adjusted to exclude the effects of foreign exchange and acquisitions.
3
Headline: In addition to statutory reporting, the Group reports on a headline basis. Definitions of headline metrics, and information about the adjustments to statutory
measures, are provided in note 3 to the financial statements.
4
Alternative Performance Measures (APMs) and Key Performance Indicators (KPIs) are defined in note 30 to the financial statements.
Strong performance, ahead of guidance, and strategic actions progressing; delivering on our
value creation strategy
– Group
1
delivered strong performance ahead of twice-raised growth
guidance delivering +8.9% organic
2
revenue growth; +60bps organic
operating profit margin expansion to 17.4%; +14.8% headline
3
EPS
growth; 18.1% ROCE and 99% operating cash conversion
–
Continuing operations
1
delivered +7.2% organic revenue growth;
17.3% operating profit margin and 18.3% ROCE
–
Disciplined capital allocation and balance sheet strength: dividend
+5.1%; £398m of £500m share buyback completed to 10 September;
£121m invested in accretive acquisitions; 0.6x net debt/headline EBITDA
–
Progressing well with the previously outlined strategic actions to
focus Smiths as a high-performance industrial engineering business,
to enhance growth, improve the financial profile and deploy capital to
deliver strong cashflow and returns
–
Separation processes for Smiths Interconnect and Smiths Detection
progressing; continue to expect an announcement on Smiths
Interconnect by end of December 2025
–
Acceleration Plan on track – £22m of costs incurred in FY2025, with
initial benefits being delivered; expected run-rate of £40–45m of
benefits for FY2027 onwards
–
FY2026 outlook (continuing operations) – expect organic revenue
growth of 4-6%, with continuing margin expansion; remain confident
in delivering our enhanced medium-term financial targets
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
2
Dear shareholders,
Welcome to our FY2025
Annual Report.
The Board is extremely pleased
with the performance of the Group
in FY2025, and with the positive
response from our stakeholders
on our progress towards
becoming a more focused,
efficient and value creating
company.
CHAIRMAN’S
STATEMENT
Like many businesses we are navigating a period of
significant instability. Over the past year, while inflation
rates have generally declined and global growth has
modestly increased, the picture is uneven and differs
significantly by region. These challenges have been
exacerbated by shifts in trading relationships and
tariffs, as well as increased geopolitical risk. In such
uncertain times, making investment decisions is more
challenging for businesses, including our customers,
so our financial performance and strategic progress
are a real testament to the inherent strength of the
Group and our customer-centric approach.
This approach enabled us to extend our track record to
four consecutive years of consistent organic revenue
growth averaging +7.4%, and strong operational and
financial performance, with attractive financial returns.
We raised full year growth guidance twice during the
year as we executed our value creation strategy and,
along with strong order books across the Group,
we have confidence for the future. Notably, Smiths
Detection and Smiths Interconnect each delivered
double digit organic revenue growth, marking a step
change in performance.
Our capital allocation strategy has delivered enhanced
returns to shareholders as well as disciplined
investment for growth, and we have maintained a
strong balance sheet with an investment grade rating.
In January, we increased our share buyback
programme to £500m, which is on track to complete
by December 2025, and continued our commitment to
progressive dividend returns with a 5.1% increase in the
dividend. FY2025 represents the 74th consecutive year
of dividend payments to our shareholders.
Our strong cash generation and balance sheet have
enabled us to maintain investment in the business.
We invested organically in research, development
and engineering (4.3% of revenue) and new product
development and commercialisation, and inorganically,
with three disciplined, margin-accretive acquisitions in
HVAC and industrial heating for our Flex-Tek business
during the year.
The Acceleration Plan launched at the beginning of the
year to deliver productivity gains, a streamlined cost
base and higher margins, is also an investment in
future resilience and scalability, taking us even closer
to our customers. The plan is delivering ahead of initial
expectations, with estimated annualised benefits of
£40-45m in FY2027 and beyond. Fully embedding our
Excellence programme in all parts of the business has
supported the Plan.
Of course, the Board’s biggest decision of the year was
to initiate the reshaping of the portfolio to unlock value
through the separation of Smiths Interconnect and
Smiths Detection. Prior to the announcement in
January, we spent considerable time evaluating the
options to maximise shareholder value. Indeed, the
Board continuously reviews strategic options for the
benefit of shareholders.
STEVE WILLIAMS
Chairman
The Board’s biggest decision of the
year was to initiate the reshaping of the
portfolio to unlock value through the
separation of Smiths Interconnect and
Smiths Detection.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
3
CHAIRMAN’S STATEMENT
CONTINUED
We believe that we will create value and address the
valuation gap by creating a best-in-class industrial
engineering company based on our high-performance
businesses which trade under the John Crane and
Flex-Tek brands, as well as delivering enhanced
returns to shareholders generated by these
separations. We have already announced new medium-
term targets for Smiths where we see significant
sustainable growth opportunities, higher margins
and returns from FY2027 once the separations and
Acceleration Plan are complete.
Both Smiths Interconnect and Smiths Detection are
high-quality businesses that are performing well with
long-term growth opportunities. We have a clear
roadmap for executing the separations with minimal
disruption. We have appointed advisers, established
governance processes, including a new Separation
Oversight Committee of the Board, and taken the
appropriate steps to engage with employees. We are
naturally conscious of the impact of these changes on
our people and are managing the processes with
sensitivity. A formal sales process is in progress for
Smiths Interconnect and a parallel process is being
run to either sell or demerge Smiths Detection.
There have been a number of changes to the Board
during the year. We welcomed Julian Fagge as our new
Chief Financial Officer in February. Julian has broad
financial, strategic and commercial expertise, along
with an extensive knowledge of Smiths businesses
and markets after 12 years with the Group. He was
appointed following a formal process after Clare
Scherrer informed us of her intention to step down as
Chief Financial Officer. The transition between Clare
and Julian has been smooth and we thank Clare for her
support in this, as well as her significant contribution
during her time on the Board. We also welcomed Simon
Pryce as a Non-executive Director. Like Julian, Simon
has significant leadership experience, as well as a
strong background in M&A and value creation activities.
As Smiths evolves, as noted above, we have reshaped
the Board’s governance structure with the creation of
a Separation Oversight Committee. Additionally, we
have chosen to retire the Innovation, Sustainability &
Excellence Committee and elevate its sustainability
and innovation responsibilities to the main Board,
recognising the critical importance of these matters
to our future success. I would like to thank Dame Ann
Dowling for her exceptional leadership of this
Committee since its inception.
Mark Seligman, Noel Tata and Karin Hoeing will retire
from the Board at the conclusion of the 2025 AGM.
Their contributions over many years have been
instrumental in creating the high performing
businesses that we have today. I thank them for their
wise advice, as I thank all members of the Board for
their counsel and commitment in this busy year. Dame
Ann Dowling succeeds Mark as Senior Independent
Director and Alister Cowan succeeds Karin as Chair
of the Remuneration & People Committee.
Finally, I extend a huge thank you to our colleagues
around the world. The Board acknowledges that the
changes we have announced have created uncertainty,
and I pay tribute to their talent, and their continued
dedication and exemplary work over the year.
Sincerely,
Steve Williams
Chairman
FY2025 – DIVERSIFIED
INDUSTRIAL
SMITHS – SPECIALIST
INDUSTRIAL
ENGINEERING COMPANY
John Crane:
Mission-critical
technologies and services for
energy and process industries
Page 17
Flex-Tek:
Innovation leader in the
safe and efficient movement and
temperature management of fluids
Page 19
Smiths Detection:
Differentiated
proprietary technologies for security
screening and threat detection
Page 20
Smiths Interconnect:
Leading
provider of technically differentiated
connectivity solutions
Page 22
Retain and grow
–
John Crane
– Flex-Tek
FY2025 indicative revenue split
John Crane
57%
Flek-Tek
43%
Medium-term targets from FY2027
–
Organic revenue growth
5-7%
–
Headline EPS growth
>10%
–
Headline operating profit margin
21-23%
– ROCE
>20%
–
Headline operating cash
conversion
~100%
Separate
–
Smiths Detection
–
Smiths Interconnect
FY2025 revenue split
John Crane
33%
Flek-Tek
25%
Smiths Detection
29%
Smiths Interconnect
13%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
4
WITH
OUR
CEO
Q&A
YOU HAVE JUST COMPLETED YOUR FIRST FULL
YEAR AS CEO – WHAT STANDS OUT FOR YOU?
Our effort is directed towards building on our strengths
and creating an industrial engineering powerhouse that
extends the Smiths legacy. The performance of the Group
in FY2025 was strong, with results ahead of guidance,
and we have set ambitious new medium-term financial
targets for the future, against a fairly unstable external
environment for global business. We also completed our
strategic review and announced our preferred strategy
to reshape the portfolio with John Crane and Flex-Tek
at our core, and focused on the energy, industrials and
construction end markets. These are exciting industrial
engineering businesses that will create significant
long-term value for our stakeholders.
Our R&D machine has continued to deliver. John Crane
launched the next generation Type 93AX coaxial
separation seal, engineered to deliver lower nitrogen
consumption, enhanced reliability in extreme operating
conditions and reduced emissions. Developed using
extensive test data in collaboration with customers, it
helps improve efficiency, protect assets and support
sustainability goals. Flex-Tek launched its ‘Blue Series’
redesigned sealed metal duct system which is more
energy efficient and faster to install. We have also seen
good commercial interest in Smiths Detection’s X-ray
diffraction-based technology designed to improve the
detection and identification of prohibited substances, as
well as expansion of the Smiths Interconnect DaVinci
series of high-speed semiconductor test sockets.
As an engineer, I have been very supportive of the
work being done across the organisation to bring
Smiths Excellence tools into use by a larger cohort
of colleagues. By the end of the year, our Smiths
Excellence Fundamentals training had been completed
by 9,000 colleagues worldwide and all of our sites
with more than 100 colleagues have begun their
formal Lean journey. These game-changing tools are
being used to analyse and improve everything from
safety performance to recycling. I am also pleased
with our greater commitment towards investment in
apprenticeships and early careers. Our future depends
on young people choosing our sector and it is great for
our company as well.
WHAT WAS THE STAKEHOLDER REACTION TO THE
STRATEGIC ACTIONS ANNOUNCEMENT IN JANUARY?
Shareholder feedback has been extremely positive.
Shareholders were pleased to see bold decisions being
taken and appreciated our intended focus on higher
growth, higher returns businesses and the future value
creation potential of John Crane and Flex-Tek with their
attractive, growing markets, as well as opportunities
to expand through M&A. They recognise the quality of
Smiths Detection and Smiths Interconnect but agree
that they are better owned elsewhere. We, like them,
acknowledge that there is much to do in terms of
execution, but we are focused on delivery and will
continue constructive dialogue as we execute our plans.
We have committed to being open and transparent
with our employees and to keeping them informed as
decisions are made, and we are providing support as
needed, including resources for managing change.
Our colleagues are professionals and I thank them
for continuing working to the best of their abilities to
position all our businesses well for the next stage.
WHAT ARE YOUR GROWTH PRIORITIES AND
THOUGHTS ON THE YEAR AHEAD?
Inevitably, FY2026 will be a transition year but, exactly
like this year, we are focused on realising our significant
potential, maximising top line growth, continuing to
expand margins, and accelerating operational
improvement. We are confident that we can grow our
revenues above market through-cycle with continuing
targeted investment in new products and innovation
that meet customer needs. We also continue to see
The performance of the Group in
FY2025 was strong, with results
ahead of guidance, and we have
set ambitious new medium-term
financial targets for the future.
ROLAND CARTER
Chief Executive Officer
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
5
Q&A WITH OUR CEO
CONTINUED
opportunities in higher growth, higher margin sub-
segments of our current business areas in terms of
geography, product and customers. And, of course,
we will continue to drive commercial excellence to
deliver exceptional customer service.
HOW WOULD YOU DESCRIBE THE OPERATIONAL
RESILIENCE OF THE ORGANISATION?
We have invested significant resources to deliver our
Acceleration Plan, which we announced in September
2024. The plan is about productivity and investing for
future resilience and scalability, as well as enhancing
margin performance. Around two thirds of the proposed
investment is directed towards process improvement
and productivity, giving us greater agility to capture
growth and deliver better results, and the balance is
focused on footprint optimisation, taking us closer to
customers and consolidating our local-for-local
approach. The philosophy to make Smiths more resilient,
agile and focused is unchanged as we move into the
second year of the Plan, with early benefits already
being realised. We remain on track to deliver £40-45m
annualised benefits in FY2027 and beyond.
We also recognise the importance of investing in the
resilience of our most important resource – our people
– something that is even more critical at this time of
uncertainty for them. We continue to use our
engagement survey to understand where we need to
focus our attention. While our overall engagement score
fell slightly this year, which was not unexpected given the
strategic actions announcement, it remained close to the
industry benchmark, and we were pleased to score in
the upper quartile for safety, respect and environment.
The safety of our people is, naturally, our top priority.
Our safety performance was strong in the year, but we
will always strive to do more, including increasingly using
our Excellence tools to analyse and improve the working
environment for colleagues. In FY2026 we plan also to
introduce more health and well-being projects.
Stakeholders will be aware of the cyber security incident
that took place at the end of January. We rapidly
responded to isolate our systems and activate business
continuity plans and were able to get critical systems
back up and running as soon as possible. Business
impact was mostly felt at John Crane where some
orders and sales were disrupted, but there was minimal
financial impact at Group level. I am grateful to the team
for the swift response to minimise disruption and their
round the clock work to deal with the challenge. There
are always learnings from events such as this and we
have taken the opportunity to engage with external
experts to test and improve our future resilience.
WHAT ARE YOUR PLANS FOR ALLOCATION OF
CAPITAL GIVEN THE POTENTIAL PROCEEDS
UNDER THE SEPARATION PROCESSES?
We have already increased the scale of our buyback to
£500m, which underpins our EPS progression. We are
on track to complete the programme this calendar year.
Our capital allocation priorities are organic investment
in R&D and innovation to drive growth, as well as
inorganic investment where we continue to see a good
pipeline of value accretive targets in core and near-
adjacent markets.
We made three complementary acquisitions at attractive
valuation multiples for Flex-Tek in FY2025: Modular
Metal Fabricators and Duc-Pac in HVAC and Wattco
in industrial heat. We were really pleased to welcome
colleagues from these businesses to Smiths.
We seek to optimise returns to shareholders so maintain
a progressive dividend policy within the framework
of an efficient balance sheet and we announced our
commitment to return a large portion of the disposal
proceeds from the separations to shareholders.
THIS YEAR YOU BROUGHT TOGETHER THE KEY
AREAS OF PEOPLE, SUSTAINABILITY AND
EXCELLENCE UNDER ONE EXECUTIVE ROLE.
WHAT WAS THE THINKING BEHIND THIS?
There is a natural relationship between these areas,
which I would characterise broadly as culture, and all
three are critical to us achieving our overall objectives.
Excellence and sustainability activities sit most naturally
in the grassroots of the organisation, with devolved
ownership delivered by our people. Taking Excellence
as an example, there is some direction from the centre,
but the expertise lies in our businesses, and they are
empowered to act as they see fit. We have seen
significant progress this year in the number of
completed Excellence projects and in expanding
our cohort of certified Green and Yellow Belts.
Sustainability is similar. It’s something we – and our
customers – think about every day. For example,
John Crane seals can be in the field for anything up to
40 years, maintained in peak working condition by us.
A sustainable solution. And the energy reduction, water
and biodiversity projects that will enable us to deliver
our sustainability goals also come from our businesses
at a site level. We are increasingly using Excellence tools
to deliver these projects as well as the safety
performance already mentioned.
We can already see the value from connecting these
areas more closely in terms of deeper analysis, sharing
best practice, creativity and innovation, and there is
more to come. And, of course, it absolutely makes sense
to build your people strategy around these areas.
CEO review
Page 9
Sustainability
Page 37
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
6
Financial KPIs
Organic revenue growth
Sustainable faster than market growth will deliver
best-in-class value creation.
Medium-term target to FY2026
+4-6%
FY2025 progress
We delivered strong organic revenue growth of +8.9%
ahead of our medium-term target range, supported by
new product development and commercialisation and
improved pricing.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
8.9%
5.4%
11.6%
3.8%
(2.2)%
Read more in CEO review
Page 9
Linked to remuneration
Headline operating profit margin
Stronger execution will drive higher margins.
Medium-term target to FY2026
18-20%
FY2025 progress
We delivered +60bps expansion in headline operating
profit margin to 17.4%, while continuing to invest in
growth driven by operating leverage, price offsetting
inflation and good cost control despite a negative mix
effect.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
17.4%
16.8%
16.5%
16.3%
15.5%
Read more in CEO review
Page 9
Headline earnings per share (EPS) growth
Strong margins will convert revenue growth into
earnings growth.
Medium-term target to FY2026
+7-10%
FY2025 progress
We delivered strong headline EPS growth of +14.8%,
driven by operating profit growth and an enhanced
share buyback programme; growth was +19.6%
when excluding the effects of foreign exchange.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
14.8%
8.3%
39.6%
17.8%
19.3%
Read more in CEO review
Page 9
Linked to remuneration
KEY PERFORMANCE INDICATORS
Alternative Performance Measures (APMs) and KPIs are defined in note 30 of the financial statements.
All measures include Smiths Interconnect.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
7
KEY PERFORMANCE INDICATORS
CONTINUED
Headline return on capital employed (ROCE)
Monitoring our return on capital ensures that both
organic and inorganic investment drive maximum
value from our growth.
Medium-term target to FY2026
15-17%
FY2025 progress
ROCE increased +170bps to 18.1%, above our target
range, driven by operating profit performance.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
18.1%
16.4%
15.7%
14.2%
13.9%
Read more in CEO review
Page 9
Linked to remuneration
Headline operating cash conversion
Maintaining our strong track record of cash conversion
is a key component of our robust financial framework.
Medium-term target to FY2026
~100%
FY2025 progress
Headline operating cash conversion increased +2pps
to 99%, reflecting a marked improvement in working
capital and slightly lower capital expenditure.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
99%
97%
86%
80%
129%
Read more in CEO review
Page 9
Linked to remuneration
Operational and non-financial KPIs
Recordable incident rate (RIR)
Looking after our colleagues in the workplace
and keeping them safe and healthy is our number
one priority.
Medium-term target
RIR <0.4
FY2025 progress
RIR improved to 0.28, reflecting our clear focus on
sustainable preventative action, underpinned by data
analysis and pattern identification, to deliver continuous
improvement towards injury-free workplaces.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
0.28
0.44
0.41
0.56
0.47
Read more in Sustainability.
Page 38
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
8
KEY PERFORMANCE INDICATORS
CONTINUED
Operational and non-financial KPIs
Gross vitality
Measures the revenue contribution of products
launched in the last five years. Improving new
product development and commercialisation is
a key component of our growth strategy.
Existing medium-term target
30%
FY2025 progress
Gross vitality was 30.8% reflecting continued
investment in R&D and new product development
and commercialisation.
FY2022
FY2023
FY2024
FY2025
Performance
30.8%
28.5%
31%
31%
Principal risk:
Technology
Page 32
Greenhouse Gas (GHG) reduction
Meeting our SBTi commitment to deliver Net Zero
Scope 1 & 2 GHG emissions by 2040 is a fundamental
part of our sustainability strategy.
FY2025 progress
Scope 1 & 2 emissions were down 11.4% driven by our
continued focus on energy efficiency, transitioning to
green electricity tariffs and lower carbon fuels, and
investing in solar and electric vehicles. A proportion of
the reduction was due to the restatement of FY2024
data from implementation of the Watershed platform
1
.
FY2023
FY2024
FY2025
1
Performance
(11.4)%
(10.7)%
(11.8)%
Read more in Sustainability.
Page 40
Principal risk: Climate
change
Page 35
Linked to remuneration
My Say survey engagement score
Engaging our people is key to successful
implementation of our strategy. We have been
tracking employee engagement on a range of
important cultural measures since 2017.
Medium-term target
Upper quartile (75+)
FY2025 progress
78% of employees completed the FY2025 survey and
our overall engagement fell slightly to 72, which was
expected given the strategic actions announced in
January, and was still close to industry benchmark of 74.
FY2021
FY2022
FY2023
FY2024
FY2025
Performance
72
75
73
72
71
Read more in Our people
and culture.
Page 24
Principal risk: People
Page 33
Diversity
We are focused on proactively increasing the number
of women in leadership roles at Smiths, with our
measure being percentage of senior leadership
positions held by women.
Medium-term target
30%
FY2025 progress
We continued to make progress towards our target
with 28% of senior leadership positions held by women.
75% of senior leadership roles were taken by internal
candidates during the year.
FY2022
FY2023
FY2024
FY2025
Performance
28%
27%
25%
24%
Read more in
Sustainability metrics,
targets and performance.
Page 58
Principal risk: People
Page 33
1
Calculated vs FY2024 restated emissions. See page 55.
1 Calculated vs FY2024 restated emissions. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
9
Our strategy is to be a focused,
efficient and value creating
industrial engineering company,
operating in the attractive and
growing market segments
of energy, industrial and
construction.
CEO
REVIEW
Strategy update
Smiths Interconnect and Smiths Detection separation
processes
The separation processes for Smiths Interconnect
and Smiths Detection are progressing with pace and
purpose, with separation workstreams in train for both
businesses. A formal sales process is underway for
Smiths Interconnect. A parallel process for both a
UK demerger and a sale is being run in relation to
Smiths Detection, with a clear focus to maximise
value creation and execution certainty.
We remain on track to announce a sale of Smiths
Interconnect by the end of calendar year 2025, with
the separation of Smiths Detection by way of a UK
demerger or sale to follow.
Our business model going forward
Smiths specialises in high-performance technologies
in flow management and thermal solutions with leading
positions in attractive, growing market segments
aligned with structural megatrends. We have valued
customer relationships based on customised
technologies, products and solutions with more than
70% aftermarket, recurring or repeatable revenue.
Smiths has a high-performance culture centred on
values, innovation and excellence. It also has a strong
financial profile of sustainable growth, high returns and
good cash generation with both organic and inorganic
expansion opportunities.
Our businesses are exposed to similar end market
trends and are underpinned by common capabilities,
resources and assets that provide competitive
advantage. Supporting them is a lean corporate centre
providing support and focusing on core competencies
including strategy, capital allocation, M&A and
compliance. Common activities and best practice such
as supply chain management, procurement, Smiths
Excellence continuous improvement and global
business services are coordinated across Smiths, with
product development, customer focus and operational
delivery sitting within the businesses.
Sustainable organic growth drivers
Our key end markets and adjacencies, and their
underlying megatrends and geo-political dynamics,
ensure we remain well positioned to access market
growth opportunities. Key trends underpinning
demand for our products include the need for secure
energy, emissions reductions, and cleaner industrial
processes, as well as the increased demand for
greater efficiency and productivity improvements
by our customers.
In our key end markets of energy, industrial and
construction, these trends underpin a market
compound annual growth rate (CAGR) forecast
of 4–5% over the next decade.
Our medium-term targets, announced in March,
anticipate above market growth, driven by:
–
Leveraging our existing portfolio of leading brands
– supported by customer intimacy and leading
aftermarket expertise;
–
Commercial excellence
– enhancing operational
processes, to deliver exceptional customer service
and drive value add for us and our customers;
–
Innovation and new product development
–
investment in new products, innovation and
commercialisation to support customer needs; and
–
Market adjacencies
– targeting higher growth
and higher margin market sub-segments across
geographies, products or customers.
Organic growth will be augmented with disciplined
value accretive M&A in core and adjacent markets, as
demonstrated by Flex-Tek’s strong track record, with
a further three businesses added in FY2025.
Margin expansion drivers
We also have several levers supporting our margin
expansion ambitions:
–
Operating leverage
– drive a higher contribution
margin as we grow revenue and build scale;
–
Acceleration Plan
– execute initiatives that
deliver productivity and capability enhancements,
including end-to-end process improvements and
optimising operational footprint. It also targets a
ROLAND CARTER
Chief Executive Officer
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
10
CEO REVIEW
CONTINUED
lean corporate centre with central costs remaining
at 1.5-1.7% of revenue, following completion of the
separation processes;
–
In FY2025, we saw initial benefits and remain
on track to deliver £40-45m annualised benefits
in FY2027 and beyond, with approximately half
expected in FY2026. In the year, we incurred £22m
of cost, with the remainder of the total £60-65m
expected in FY2026. Around 2/3 relates to the
retained businesses.
–
Operational excellence
– deliver ongoing efficiency
savings and productivity improvements supported
by our continuous improvement programme,
Smiths Excellence; and
–
Portfolio
– capturing higher margin segments
of our markets, for example a greater share of
aftermarket, as well as high-grading the portfolio
towards higher growth and returns.
New enhanced medium-term targets
In March, we announced new enhanced medium-term
financial targets. These targets reflect the superior
financial profile of the remaining businesses, with
higher growth, margin and returns and further
improvement expected from Smiths Excellence and
the Acceleration Plan, driving enhanced returns and
value creation. The new targets are through-cycle and
apply from FY2027 following the completion of both
separation processes, with FY2026 being a transition
year towards these new ranges.
Medium-term targets (through-cycle)
from FY2027
New target
Versus prior
targets
Organic revenue growth
5-7% (+ M&A)
Increased
Headline EPS growth
>10% (+ M&A)
Increased
Headline operating profit
margin
21-23%
Increased
ROCE
>20%
Increased
Headline operating cash
conversion
~100%
Maintained
Disciplined capital allocation
In support of these targets, our capital allocation
strategy will continue to prioritise disciplined
investment for growth, both organically and
inorganically, and deliver enhanced returns
to shareholders, while maintaining a strong
balance sheet:
–
Organic investment
– investing in capital
expenditure and in RD&E for new product
development and commercialisation to support
our customers and drive organic revenue growth,
spending ~3-4% of revenue on RD&E;
–
Value-accretive acquisitions
– investing in core
and adjacent markets to augment organic growth;
–
Dividends
– a progressive dividend, balancing the
cashflow needs of the business against the delivery
of value to our shareholders; and
–
Enhanced returns to shareholders
– returning
excess cash to shareholders, via share buyback
or other appropriate mechanism.
Our intent is to maintain an investment grade credit
rating and we will balance this alongside our desire
to have an efficient balance sheet. Our credit rating is
underpinned by our financial track record, leading
market positions, significant share of recurring
revenue, including from aftermarket services, and
importantly our financial discipline and commitment
to the rating.
As we progress the separation of Smiths Interconnect
and Smiths Detection, we remain committed to
returning a large portion of disposal proceeds to
shareholders, with a decision on the scale that will be
returned to be made when we have certainty on the
timing and magnitude of sale proceeds. The proportion
returned will balance our cashflow generation and the
use of sales proceeds in the context of our organic
investment in RD&E, acquisition pipeline, dividend
policy and leverage.
FY2026 outlook – continuing operations
We expect organic revenue growth (on a continuing
operations basis) to be in the 4-6% range, noting
the strong first quarter comparator in FY2025.
This outlook reflects the strength of our order book,
as well as the ongoing macro environment uncertainty,
with tariffs and increased geo-political risks causing
market instability.
–
Improving growth for John Crane is supported by
the recent momentum coming into the year, our
strong order book and improved execution;
–
For Flex-Tek, our outlook assumes a continuing
subdued view on US construction based on current
leading indicators (housing starts, building permits
and builders confidence), alongside a strong order
book in aerospace; and
–
Smiths Detection’s growth will continue to be
supported by the aviation upgrade programme,
albeit at a moderated pace compared with FY2025.
We expect continuing margin expansion to be achieved
through operating leverage, the benefits of the
Acceleration Plan and continued efficiency savings
supported by Smiths Excellence. This also incorporates
the net negative impact from US tariffs currently
in place.
We expect headline cash conversion in the mid-nineties
percent.
Executive Committee
changes
During the year, there were
several changes to the
Executive Committee.
In February, Julian Fagge
was appointed as Chief
Financial Officer, having
formerly been President of
Smiths Interconnect and
Group Financial Controller,
succeeding Clare Scherrer.
As a result of this change,
Vera Parker, was appointed
President of Smiths
Interconnect; Kini
Pathmanathan’s role was
expanded to include People
in addition to Sustainability
and Excellence; and Ruben
Álvarez, was promoted to be
President, John Crane,
following Bernard Cicut’s
retirement.
In August 2025, Ted Wan
came off the Executive
Committee as a result of
retiring the China operational
structure; Diana Houghton,
Group Head of Strategy and
Communications, and Pat
McCaffrey, President of
Flex-Tek, both departed
Smiths. Flex-Tek is now
being co-led by Chris
Edwards, President of
Flex-Tek Construction and
Heat, and Mike Stern,
President of Flex-Tek
Aerospace, who have been
at Flex-Tek for 20 years and
six years, respectively.
They joined the Executive
Committee in September
2025.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
11
CEO REVIEW CONTINUED
OUR STRATEGY AND BUSINESS MODEL
Our strategy is to be a focused, efficient and value creating industrial engineering company
operating in the attractive and growing market segments of energy, industrials and construction.
FOUNDATION
EXPERTISE/OWNERSHIP
CLEAR VALUE CREATION
FOR ALL STAKEHOLDERS
High quality businesses with
complementary industry
characteristics and capabilities
–
Focused
industrial engineering company
specialising in high performance technologies
for flow management and thermal solutions
–
Leading positions
in attractive, growing
market segments, aligned with structural
megatrends
–
Capabilities, resources and assets that deliver
competitive advantage
–
Innovation and new product development
to meet evolving customer needs
– Valued
customer relationships
with
customised products and solutions: >70%
aftermarket and recurring revenue
–
High performing culture
centred on Values,
innovation and excellence
–
Strong financial profile
of sustainable growth,
high returns and good cash generation with
low capital intensity
–
Expansion opportunities
– organic and inorganic
End
markets
Businesses
Customers
–
High performance solutions
–
Continuous innovation
–
Commitment to excellence
Shareholders
–
Focused on total shareholder returns
–
Sustained profitable growth
–
Disciplined capital allocation
People
–
Empowered, inclusive and engaged culture
–
High-impact careers
–
Performance-based remuneration
Suppliers
–
Valued partnerships
–
Commitment to sustainability and ethics
Communities
–
Governance, ethics and sustainability
–
Investing where we work (employment,
volunteering, fundraising)
–
Smiths Group Foundation
Regulators and governments
–
Openness and transparency
–
Advancing policy aims
Group
centre
NEW MEDIUM-TERM TARGETS
FROM FY2027
–
Organic revenue growth 5-7%
–
Headline EPS growth >10%
–
Headline operating profit margin
21-23%
–
ROCE >20%
–
Headline operating cash conversion ~100%
Smiths Group
Value add, compliance and cost efficiency
–
Core purpose, vision and
values
–
Portfolio strategy,
management and execution
–
Capital allocation
–
Mergers and acquisitions
–
Financial reporting
–
Cyber security and enterprise
IT
–
Governance, compliance and
risk management
Energy
John Crane
Empowered commercial and operational decision making
Flex-Tek
Industrial
Construction
–
Product and service strategies
–
Operational delivery
–
Health and safety
–
Excellence and sustainability
–
Talent development
and management
John Crane
Flex-Tek
SMITHS
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
12
CEO REVIEW
CONTINUED
We have identified the most relevant megatrends to Smiths under two key themes.
End markets
Products and
services
Customers
Energy
Mechanical
seals, filtration,
control systems
and condition
monitoring
Oil & gas
New energy
Industrial
Mechanical seals,
filtration, control
systems
Rigid and flexible
tubing and ducting
New energy
Process industries
Aerospace OEMs
and assemblers
Specialist hose
Construction
Rigid and flexible
tubing and ducting,
gas piping and heat
kits
Installers and
distributors of
construction
products
Our businesses operate in attractive,
growing end markets aligned with positive
structural megatrends:
–
Rising demand for energy with growing demand
for low-carbon technologies to accelerate
decarbonisation efforts
–
Global drive for increased efficiency and productivity
across a broad range of industrial process,
construction and aerospace customers
–
Regulatory compliance, technological advancement
and investment in infrastructure drive innovation
MARKETS AND
MEGATRENDS
Four primary market forces –
technology, globalisation, environment and demographics
– are evolving in a series of waves.
These forces and the interaction between them gives rise to a range of megatrends that impact Smiths.
HOW WE ARE RESPONDING TO THESE MEGATRENDS
MEGATRENDS
PRIMARY MARKET FORCES
TECHNOLOGY
–
GenAI, quantum computing and Industry 5.0
–
New human/machine ecosystems
– Protectionism
– Security
DEMOGRAPHICS
–
Aging populations
–
Increased urbanisation
–
Focus on health/wellness
ENERGY SECURITY AND EFFICIENCY
–
Energy transition
–
Resource and raw material management
–
Circular economy
GLOBALISATION
–
Social instability
–
Less globalisation
–
Heightened geopolitical risk
PRODUCTIVITY AND SUSTAINABILITY
–
Process efficiency
–
Zero product defects
–
Modular building construction
ENVIRONMENT
–
Climate change and environmental stress
–
Innovation to zero waste/zero emissions/zero
defects
SOLUTIONS THAT HELP OUR CUSTOMERS TO:
–
Reduce emissions and leakage
–
Move to alternative and more secure sources
of energy
–
Capture, transport and sequestrate carbon
SOLUTIONS THAT HELP OUR CUSTOMERS TO:
–
Operate more efficiently
–
Improve performance
–
Use less raw materials
SMITHS
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
13
CEO REVIEW
CONTINUED
We exceeded our organic revenue growth guidance
despite the uncertain macro environment, a
challenging US construction market and interruption
from the now resolved cyber security incident in
January, with the most notable impact being in
John Crane.
–
John Crane’s growth was led by good original
equipment (OE) sales, particularly in the first
half. Growth in the second half was constrained
by a number of operational delivery challenges
resulting from the upgrade in machining and testing
capabilities and exacerbated by a longer than
expected recovery from the January cyber incident.
In H2, the business saw sequential quarterly
improvement in performance;
–
Flex-Tek delivered good growth in its construction
business, despite the subdued US construction
market, with continued strength in aerospace
reflecting new build programmes;
–
Smiths Detection’s growth reflected notable
strength in aviation as the airport checkpoint
upgrade programmes continued, partly offset by
lower revenue in Other Detection Systems;
–
Smiths Interconnect’s organic revenue increased
strongly in the year, supported by a recovery in the
semiconductor market and an improved market
for connectors, especially in the faster growing
aerospace and defence segments, and the benefit
of new product launches.
Organic growth is supported by new product
development and commercialisation and improved
pricing. In the year, +165bps of growth was delivered
from new products including John Crane’s mechanical
seal designed specifically for ethane and ethylene
pipeline operators; initial sales from Flex-Tek’s new
sealed duct system and the broadening of Smiths
Detection’s digital solutions, in particular its iCMore
threat detection software.
FY2025 business performance
Group performance versus FY2025 guidance
In FY2025, Smiths delivered strong growth, margin
expansion, cash flow and returns. On a Group basis,
the performance was ahead of our FY2025 guidance.
Group revenue grew +8.9% on an organic basis and
+6.5% on a reported basis to £3,336m (FY2024:
£3,132m). This included £(108)m of negative foreign
exchange translation and +£41m from acquisitions,
including Modular Metal Fabricators, Inc (Modular
Metal), Wattco, Inc (Wattco), Duc-Pac Corporation
(Duc-Pac) in FY2025 and £5m from the Heating and
Cooling Products (HCP) acquisition made in August
2023. Continuing operations revenue increased +7.2%
on an organic basis and 5.0% on a reported basis.
We continue to extend our track record of consistent
organic growth. All businesses contributed to growth
this year, and we have now delivered more than four
consecutive years of organic revenue growth, with
average growth of +7.4% over this period.
FY2025 guidance
Group FY2025 outcome
Organic revenue growth
Upper end of 6-8%
+8.9%
Headline operating profit margin
40-60 bps expansion
+60bps to 17.4%
Headline operating cash conversion
~90%
99%
£m
FY2024
Foreign
exchange
Acquisitions
Organic
movement
FY2025
Revenue (Group)
3,132
(108)
41
271
3,336
Revenue (continuing operations)
2,778
(97)
41
193
2,915
Organic revenue growth (by business)
H1 2025
H2 2025
FY2025
John Crane
+3.8%
+2.2%
+3.0%
Flex-Tek
+2.5%
+6.3%
+4.4%
Smiths
+3.3%
+3.9%
+3.6%
Smiths Detection
+15.3%
+15.1%
+15.2%
Smiths (continuing operations)
+6.9%
+7.5%
+7.2%
Smiths Interconnect
+26.8%
+18.9%
+22.5%
Group
+9.1%
+8.8%
+8.9%
8.9%
Organic revenue growth
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
14
CEO REVIEW
CONTINUED
We continue to focus on improving operational leverage
and enhancing productivity and efficiency throughout
our operations. Group headline operating profit rose to
£580m (FY2024: £526m); +13.1% (+£66m) on an organic
basis, and +10.3% (+£54m) on a reported basis.
Acquisitions contributed £10m to operating profit and
were accretive to margin.
For continuing operations, headline operating profit of
£505m (FY2024: £477m) was 8.5% higher organically
and 6.0% higher on a reported basis.
Group headline operating profit margin was 17.4%,
up +60bps on both an organic and a reported basis.
Continuing operations headline operating profit margin
was 17.3%. This reflected volume growth, pricing ahead
of inflation, benefits of efficiency savings, including
Smiths Excellence, partially offset by product and
business mix, and the impact of tariffs.
The overall margin performance was at the top end of
the guided range of +40-60bps expansion.
Headline operating profit margin (by business)
FY2024
FY2025
John Crane
23.2%
23.8%
Flex-Tek
20.5%
19.5%
Smiths
19.5%
19.6%
Smiths Detection
11.9%
12.7%
Smiths (continuing operations)
17.1%
17.3%
Smiths Interconnect
13.9%
17.8%
Group
16.8%
17.4%
–
A +60bps margin expansion in John Crane was driven
by cost efficiency, the benefits of Smiths Excellence
and other productivity improvements, partly offset
by adverse foreign exchange;
–
Margin decline at Flex-Tek reflected operating
leverage and Smiths Excellence savings being offset
by adverse mix, with a lower contribution from higher
margin industrial heating contracts. It also reflected
an £8m in-year charge for a non-material balance
sheet overstatement related to an isolated US
industrial site, with the issue thoroughly investigated
and now resolved;
–
Margin improvement in Smiths Detection was driven
by notably higher volumes, alongside pricing and
mix benefits, as well as continued enhancement in
operational efficiency.
–
Margin improvement in Smiths Interconnect was
driven by higher pricing and volume, alongside
positive mix effects, efficiency improvements and
Smiths Excellence benefits.
The Group margin improvement also reflected initial
benefits from the Acceleration Plan, with savings
mostly in John Crane and a reduction in central costs.
Group ROCE increased +170 bps to 18.1% (FY2024:
16.4%), reflecting the higher profitability and efficient
use of capital. ROCE on a continuing operations basis
was 18.3%.
Group headline EPS grew +14.8% to 121.2p (FY2024:
105.5p). This included a headline tax charge of £137m
(25.0% effective tax rate) (FY2024: £122m, 25.0%), a £7m
reduction in headline finance costs and the benefit of the
share buyback programme, partially offset by foreign
exchange impact.
Group headline operating cash conversion was 99%
(FY2024: 97%), supported by the year-on-year
improvement in profit. Headline operating cashflow was
£576m (FY2024: £509m) and free cashflow generation
increased +12.8% to £336m (FY2024: £298m) or 58%
of headline operating profit (FY2024: 57%).
Discontinued operations
Smiths Interconnect has been classified as
discontinued operations, and the assets and liabilities
have been classified as held for sale. The headline
profit after tax from the discontinued operations was
£57m (FY2024: £35m), and £16m (FY2024: £29m) on a
statutory basis.
£m
FY2024
Foreign
exchange
Acquisitions
Organic
movement
FY2025
Headline operating profit (Group)
526
(22)
10
66
580
Headline operating profit margin (Group)
16.8%
(10)bps
10bps
60bps
17.4%
Headline operating profit (continuing operations)
477
(21)
10
39
505
Headline operating profit margin (continuing operations)
17.1%
(10)bps
10bps
20bps
17.3%
17.4%
Group headline operating
profit margin +60bps
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
15
Capital allocation
We take a disciplined approach to our use of capital;
investing in our businesses to support organic growth,
pursuing strategic and disciplined acquisitions,
adopting a progressive dividend policy and returning
excess capital to shareholders. As announced in
January, we are accelerating execution against this
with enhanced returns to shareholders through our
increased share buyback programme. Our dividend
policy aims to increase dividends in line with growth in
earnings and cashflow, with the objective of maintaining
minimum dividend cover of around two times.
Organic investment
During the year, the Group invested £143m in RD&E
(FY2024: £150m), of which £120m (FY2024: £114m)
was an income statement charge, £4m was capitalised
(FY2024: £14m) all in Smiths Detection, primarily
next-generation hold and cabin baggage screening,
and £19m (FY2024: £22m) was funded by customers,
largely related to Smiths Detection. This includes
£46m spend (FY2024: £50m) on customer-specific
engineering-related projects predominantly in John
Crane. Total spend for FY2025 represents 4.3% of
sales (FY2024: 4.8%).
FY2025 was another year of strong
financial performance.
Our headline cash conversion was
better than expected at 99%, and
ROCE was above target at 18.1%.
Our balance sheet remains
strong at 0.6x net debt to headline
EBITDA, giving us ample flexibility
to support our strategic ambitions.
CFO
REVIEW
JULIAN FAGGE
Chief Executive Officer
CLEAR CAPITAL ALLOCATION PRIORITIES WITH ENHANCED RETURNS
Disciplined use of capital
FY2025
Organic investment
–
Capex £76m
–
Research, development and engineering £143m
1
Value accretive acquisitions
–
£121m for acquisitions
2
–
Three acquisitions in Flex-Tek
Progressive dividend policy
–
DPS +5.1%
–
Dividend spend of £152m
–
74 consecutive years of dividend payments
Enhanced returns to shareholders
–
Executed £398m of £500m buyback
3
–
£1.7bn returned via buyback in last 4 years
1
Including John Crane’s customer-specific engineering-related projects.
2
Amount relates to acquisitions of Modular Metal, Wattco in Q1 FY2025 and Duc-Pac in Q3 FY2025.
3
As of 10 September 2025. Overall programme increased to £500m in 31 January 2025 announcement.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
16
CFO REVIEW
CONTINUED
Capex decreased to £80m (FY2024: £86m) and included
planned investment in capacity and automation at John
Crane and initiatives under the Acceleration Plan.
M&A
During the year, we completed the acquisitions of
Modular Metal, Wattco and Duc-Pac with net
acquisition spend of £121m at attractive valuation
multiples and accretive margins. The acquisitions
extended Flex-Tek’s geographical reach within its HVAC
business and broadened its portfolio of energy efficient
thermal solutions for industrial applications with an
operating margin accretive to that of Flex-Tek.
Shareholder returns - share buyback and dividend
As announced on 31 January 2025, we increased our
share buyback programme to £500m. Since the start
of the programme in March 2024 up to 31 July 2025,
we had completed £349m. A further £49m has been
completed since the year-end up to 10 September.
The remainder is expected to be completed by the
end of calendar year 2025.
The Board is recommending a final dividend of 31.77p,
bringing the total dividend for the year to 46.0p (FY2024:
43.75p), a year-on-year increase of +5.1%. The final
dividend will be paid on 21 November 2025 to
shareholders on the register at close of business
on 17 October 2025.
Net debt
Group net debt at 31 July 2025 increased to £441m
(FY2024: £213m) with a net debt to headline EBITDA
ratio of 0.6x (FY2024: 0.3x), with the year-on-year
increase reflecting the share buyback programme,
net acquisition spend of £121m, partly offset by net
proceeds of £53m from the sale of the remaining ICU
Medical, Inc shareholding. On a continued operations
basis, net debt was £462m (FY2024: £213m).
Net headline finance costs for the year decreased to
£31m (FY2024: £38m), principally due to interest on
higher average cash balances.
As at 31 July 2025, Group borrowings were £677m
(FY2024: £659m) comprising a €650m bond which
matures in February 2027 and £118m of lease liabilities.
There are no financial covenants associated with these
borrowings. Cash and cash equivalents as at 31 July
2025 were £226m (FY2024: £459m).
On a continued operations basis, borrowings were
£667m (FY2024: £659m) comprising the €650m bond
and £108m of lease liabilities. Cash and cash equivalents
as at 31 July 2025 were £195m (FY2024: £459m).
Together with an $800m (£605m at the year-end
exchange rate) revolving credit facility, which matures
in May 2030 and a £200m revolving credit facility, which
matures in June 2027, total liquidity was £1bn at the
end of the period.
Statutory results
Income statement and cashflow
The £95m difference (FY2024: £108m) between
continuing operations headline operating profit of
£505m and statutory profit of £410m is non-headline
items. The largest of these relate to the amortisation of
acquired intangible assets of £50m, a £12m net credit
for asbestos litigation provision in John Crane Inc, and
£22m of cost in relation to the Acceleration Plan.
Smiths Detection separation costs amounted to £10m
and £4m costs were charged in relation to cyber
remediation costs. A £15m impairment charge was
recognised related to prior-year adjustments for
non-material working capital balances which were
assessed to be overstated at a standalone Flex-Tek
US industrials business, with the issue thoroughly
investigated and now resolved.
The Smiths Interconnect discontinued operation
headline operating profit for the period was £75m
(FY2024: £49m), to bring the total Group headline
operating profit to £580m (FY2024: £526m). A further
£40m (FY2024: £3m) was charged through non-
headline for Smiths Interconnect specific items,
including a £30m impairment as a result of an
agreement to sell its US sub-systems business unit
and £8m of separation costs.
Total Group operating profit (including discontinued
operations) for the period was £445m (FY2024: £415m).
Total finance costs for the Group were £35m, £8m
lower than the prior year (FY2024: £43m).
The total Group effective tax rate (including
discontinued operations) was 28.8% (FY2024: 32.5%)
and includes a non-headline tax credit of £19m (FY2024:
£1m). Statutory profit after tax for the Group was £292m
(FY2024: £251m) and statutory basic EPS was 85.7p
(FY2024: 72.3p).
Statutory net cash inflow from operating activities for
the Group was £456m (FY2024: £418m).
Pensions
During the year, £11m of pension contributions
(FY2024: £16m) were made, which relate to funded,
unfunded and overseas schemes and healthcare
arrangements. Of this, £5m related to the US defined
benefit pension plan.
No contributions were made in FY2025 to either the
TI Group Pension Scheme (TIGPS) or the Smiths
Industries Pension Scheme (SIPS) and it is not
anticipated that any further contributions will be made.
For the TIGPS, the liabilities have now been insured via
a series of buy-in annuities, with Smiths and the TIGPS
Trustee working toward final buy-out of the scheme.
The SIPS is now fully funded on the Technical Provisions
basis and buy-out funding basis, significantly ahead of
target. Smiths and the SIPS Trustee are now working
together to consider the next steps for the scheme.
These two UK schemes and the US pension plan are
well hedged against changes in interest and inflation
rates. Their assets are invested in third-party annuities,
government bonds, investment grade credit or cash,
with a small proportion of equity investments held by
the US pension plan. As at 31 July 2025, 60% of the
funded UK liabilities had been de-risked through the
purchase of annuities from third party insurers.
Litigation
Smiths Group faces different types of litigation in
different jurisdictions. Please see below an update
on the two significant litigation provisions. For more
information, refer to note 23 of the Financial Statements.
Read more about how
we manage risk
Risk management
Page 26
Going Concern and
Viability Statement
Page 60
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
17
CFO REVIEW
CONTINUED
Titeflex Corporation litigation
Titeflex Corporation, a subsidiary of the Group in the
Flex-Tek business, has received a number of claims
in recent years from insurance companies seeking
recompense on a subrogated basis for the effects of
damages allegedly caused by its flexible gas piping
products being energised by lightning strikes. It has
also received a number of product liability claims
relating to this product, some in the form of purported
class actions. Titeflex Corporation believes that its
products are a safe and effective means of delivering
gas when installed in accordance with the
manufacturer’s instructions and local and national
codes. However, some claims have been settled on
an individual basis without admission of liability.
The continuing progress of claims and the pattern of
settlement, together with recent market-place activity,
provide sufficient evidence to recognise a liability in
the accounts. At 31 July 2025, a provision of £26m
(FY2024: £36m) has been made for the costs which the
John Crane, Inc. litigation
John Crane, Inc. (JCI) a subsidiary of the Group,
continues to actively monitor the conduct and effect of
its current and expected asbestos litigation, including
the effective presentation of its ‘safe product’ defence,
and intends to resist asbestos cases based on this
defence. Approximately 313,000 claims against JCI have
been dismissed before trial over the last 45 years. JCI is
currently a defendant in cases involving approximately
21,000 claims. Despite these large numbers of claims,
since the inception of asbestos litigation against JCI it
has had 157 final judgements against it and has had
to pay awards amounting to approximately $192m. At
31 July 2025, the aggregate 10-year provision for JCI
asbestos litigation, including for adverse judgements
and defence costs, amounted to £191m (FY2024:
£220m) expressed at the then current exchange rate.
In deciding upon the amount of the provision, JCI has
relied on independent expert advice.
FY2025
£m
FY2024
£m
Reported
growth
Organic growth
H1
H2
FY
Revenue
1,115
1,133
(1.6)%
+3.8%
+2.2%
+3.0%
Original Equipment (OE)
174
176
(1.4)%
+12.2%
(6.0)%
+2.3%
Aftermarket
528
550
(3.9)%
+0.6%
+1.8%
+1.2%
Energy
702
726
(3.3)%
+3.3%
(0.2)%
+1.4%
Original Equipment
148
145
+2.5%
+5.8%
+6.6%
+6.2%
Aftermarket
265
262
+0.7%
+4.0%
+6.6%
+5.3%
General Industrial
413
407
+1.4%
+4.6%
+6.6%
+5.6%
Headline operating profit
265
263
+1.1%
+3.9%
+8.5%
+6.3%
Headline operating profit margin
23.8%
23.2%
+60bps
+10bps
+140bps
+80bps
Statutory operating profit
264
229
+15.3%
Return on capital employed
25.2%
25.3%
(10)bps
RD&E
1
cash costs as % of sales
5.1%
5.2%
(10)bps
Revenue
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Revenue
1,133
(50)
32
1,115
Group expects to incur in respect of these claims.
For the Group’s litigation provisions, because of the
significant uncertainty associated with the future level
of claims and of the costs arising out of the related
litigation, there is no guarantee that the assumptions
used to estimate the provision will result in an accurate
prediction of the actual costs that may be incurred.
Foreign exchange
The results of overseas operations are translated into
sterling at average exchange rates. Net assets are
translated at period-end rates. The Group is exposed
to foreign exchange movements, mainly US Dollar and
Euro. The principal exchange rates, expressed in terms
of the value of Sterling, are as follows:
Average rates
Period-end rates
31 Jul 2025
(12 months)
31 Jul 2024
(12 months)
31 Jul 2025
31 Jul 2024
USD
1.30
1.26
1.32
1.28
EUR
1.19
1.17
1.16
1.19
Footnotes
1 Research, development
and customer-specific
engineering
Business review
JOHN CRANE
John Crane is a global leader in mission-
critical technologies for the energy and process
industries and an innovator in rotating equipment,
encompassing mechanical seals, dry gas seals,
couplings, filtration systems and cutting-edge asset
management and digital diagnostics solutions.
63% of revenue is derived from the energy sector
(downstream and midstream oil & gas and power
generation, including renewable and sustainable
energy sources). 37% is from other process
industries including chemical, life sciences, mining,
water treatment and pulp & paper. 71% of John Crane
revenue is from aftermarket sales. John Crane
represents 33% of Group revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
18
CFO REVIEW
CONTINUED
John Crane delivered organic revenue growth of
+3.0% for the year, against a strong prior year
comparator of +9.8% growth. Following a robust first
half performance, growth in the second half was
constrained by a number of operational delivery
challenges resulting from the upgrade in machining
and testing capabilities, and exacerbated by a longer
than expected recovery from the January cyber
incident. In H2, John Crane saw sequential quarterly
improvement in its operation and organic revenue
growth, with momentum gained in the fourth quarter
delivering growth of +3.9%. Growth for the year was
driven by a stronger performance in original equipment
compared to aftermarket, which was more impacted by
the cyber incident, though showed good recovery in the
fourth quarter.
Market demand remains healthy, with a strong order
intake performance in FY2025 resulting in a positive
book to bill ratio providing good coverage for the
upcoming year. Alongside improved execution, as
demonstrated by key operational performance metrics,
this supports a positive outlook for FY2026.
Reported revenue declined (1.6)% to £1,115m, reflecting
the organic growth offset by a negative (4.6)% foreign
exchange impact.
In Energy, organic revenue grew +1.4% (FY2024: +15.9%)
with OE growth of +2.3%, benefiting from a continued
focus on energy security and efficiency, as well as
emissions reduction solutions. Performance was
particularly strong in the first half at +12.2%, with
the second half decline reflecting a strong prior year
comparator of +17.5%. New contracts in the year
included a large scale retrofit project in the Middle East
to upgrade existing seals with patented diamond-
coated technology to reduce friction, increase reliability,
and improve energy efficiency. John Crane also
secured a supply agreement for high-performance
couplings, gas filters, and nitrogen filters as part of a
large-scale energy development. These solutions
contribute to safer, cleaner, and more efficient
operations across critical energy infrastructure.
In energy transition, the pipeline of opportunities John
Crane is pursuing across the portfolio, including CCUS,
hydrogen and biofuels, continues to expand, currently
at c.250 projects (FY2024: c.170). As an example, John
Crane played a critical role in supporting renewable
energy infrastructure in Europe by supplying sealing
systems for more than 300 pumps across three
biorefinery projects. These projects support the
production of lower-carbon fuels and reinforce
environmental compliance across essential transport
and energy sectors.
General Industrial showed good growth of +5.6% and
was broad based across OE and aftermarket. Growth
was largely driven by chemicals, general industry and
marine segments, and supported by good growth in
aftermarket sales. Elsewhere, in pulp & paper, John
Crane renewed and increased the scope of an existing
contract with a leading company in Asia for a 5-year
period, more than doubling the number of pumps and
increasing the use of John Crane Sense Monitor and
Smartflow Control, making it the largest managed
reliability programme in the region.
Headline operating profit of £265m grew +6.3% on an
organic basis, resulting in +80bps of organic margin
expansion to 23.8%. This was largely a result of
productivity improvements, pricing and efficiency
benefits from Smiths Excellence, as well as initial
savings from the Acceleration Plan. This performance
was in the context of higher investment to increase
capacity and efficiency through higher automation and
testing capabilities. The programme is substantially
completed and expected to finalise in FY2026 and is key
to service the current demand and propel future growth.
On a reported basis, headline operating profit was up
+1.1%, including a negative foreign exchange impact.
The difference between statutory and headline
operating profit includes the net cost in relation to the
provision for John Crane, Inc. asbestos litigation and
costs incurred in relation to the Acceleration Plan.
ROCE was 25.2%, down (10)bps, reflecting the higher
level of investment on automation and capacity.
RD&E and new product development
Cash RD&E (research, development and customer-
specific engineering) expenditure was broadly flat at
5.1% of sales (FY2024: 5.2%). Excluding customer-
specific engineering-related projects, the business
spent 1.5% of sales (FY2024: 1.6%). John Crane’s
RD&E focus continues to be on gas compression
projects and enhancing the efficiency, performance
and sustainability of heavy-duty seals and hydrogen
compressors.
In June, John Crane launched its Type 93AX Coaxial
Separation Seal, a next generation dry gas sealing
solution engineered to help customers reduce
emissions, improve equipment reliability, and lower
operational costs. The Type 93AX is designed to
mitigate both operational performance and financial
risks for customers by extending the reliability of the
seal system and reducing nitrogen consumption by
up to 80% compared to conventional radial separation
seals. The initial positive reception of this new
innovative product is encouraging, recognising
that new product uptake ramps up over time.
John Crane is well placed to support energy transition
projects with its extreme temperatures and high-
pressure sealing solutions and continues to work with
universities, such as the University of Sheffield, to
advance on these programmes.
Operating profit and ROCE
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Headline operating profit
263
(13)
15
265
Headline operating profit margin
23.2%
23.8%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
19
CFO REVIEW
CONTINUED
Flex-Tek is well placed for further industrial heating
project wins, further strengthened following the
acquisition of Wattco which brings manufactured
process skid systems. Its products, such as certified
pressure vessels, integral electric heating platforms,
thermodynamic isolation module systems and steam
heating support the ever-expanding clean energy and
data demand opportunities. A notable recent win was
a contract for the provision of electric heaters for an
ultra-low carbon emissions electro-fuel project in
North America.
In Aerospace, organic revenue grew strongly at +6.3%
supported by a healthy order book. Strong growth in the
first quarter was supported by buoyant demand across
the year, reflecting ongoing aerospace build
programmes. In addition, several long-term agreements
are being re-negotiated which will help support the
future growth of the aerospace business. Flex-Tek
aerospace again ended the year with a strong order book
which supports healthy demand into FY2026.
Headline operating profit increased £3m and included an
£8m in-year charge to correct for a non-material balance
sheet overstatement, as further detailed below. The
organic operating margin declined by (120)bps, with the
underlying performance reflecting ongoing cost control,
partly offset by higher materials costs reflecting mix
impacts, and a positive contribution from acquisitions.
On a reported basis, headline operating profit increased
+1.6%, although the margin declined (100)bps.
The difference between statutory and headline operating
profit reflects the amortisation of acquired intangible
assets and the provision for Titeflex Corporation subrogation
claims. It also includes a £15m charge relating to prior
years’ balance sheet overstatements at a standalone US
industrial site. The issue, which is isolated to this site, has
been independently investigated and is now resolved.
ROCE decreased (290)bps to 23.7% reflecting the headline
operating profit decline.
During FY2025, three bolt-on acquisitions were completed
for a combined net acquisition spend of £121m. In
construction, Modular Metal expanded Flex-Tek’s HVAC
presence into the western US market and broadened its
product offering to include Modular Metal’s sealed flexible
duct solution; Duc-Pac expanded its geographical metal
duct coverage into the north-east USA and Wattco
expanded the industrial heating portfolio. Integration of
all acquisitions is proceeding to plan.
RD&E and new product development
Cash RD&E expenditure was 0.7% of sales (FY2024: 0.4%),
with the increase partly reflecting a re-categorisation of
spend from cost of goods sold. RD&E is focused on
developing new products for the construction and
aerospace markets, and new electrification opportunities
within industrial markets.
During FY2025, Flex-Tek launched its ‘Blue Series’ sealed
metal duct system. It uses an innovative approach to
sealing which eliminates leakage to provide a more energy
efficient solution which reduces installation time, saving
contractors cost on materials and labour.
Within General industrial, product development included
new heat exchanger systems and medium voltage
applications to support growth from energy storage
and renewable energy requirements.
FLEX-TEK
Flex-Tek is a global provider of engineered components that heat and move liquids and gases for the
construction, industrial and aerospace markets. 81% of Flex-Tek’s revenue is derived from general industrial,
including construction, and 19% from aerospace. Flex-Tek represents 25% of Group revenue.
FY2025
£m
FY2024
£m
Reported
growth
Organic growth
H1
H2
FY
Revenue
837
786
+6.6%
+2.5%
+6.3%
+4.4%
General Industrial
678
632
+7.4%
+2.0%
+5.9%
+4.0%
Aerospace
159
154
+3.1%
+4.8%
+7.6%
+6.3%
Headline operating profit
164
161
+1.6%
(5.1)%
+2.0%
(1.6)%
Headline operating profit margin
19.5%
20.5%
(100)bps
(160)bps
(80)bps
(120)bps
Statutory operating profit
119
135
(11.9)%
Return on capital employed
23.7%
26.6%
(290)bps
RD&E cash costs as % of sales
0.7%
0.4%
+30bps
Revenue
£m
FY2024
reported
Foreign
exchange
Acquisitions
Organic
movement
FY2025
reported
Revenue
786
(24)
41
34
837
Organic revenue increased +4.4% in the year, with growth
improving in the second half to +6.3%, following first half
growth of +2.5%. Revenue on a reported basis grew +6.6%,
with a £41 million contribution from the acquisitions of
Modular Metal, Wattco and Duc-Pac, partially offset by a
negative foreign exchange translation.
In General Industrial, organic revenue increased +4.0%
despite challenging conditions in the US construction
market which has persisted throughout FY2025. Flex-Tek
has performed strongly against this backdrop reflecting
increased demand for heat kits and a notably strong third
quarter in our HVAC flexible ducting products. Flex-Tek is
well positioned to benefit from a construction market
recovery when mortgage rates moderate and given the
meaningful housing inventory deficit in the USA.
Flex-Tek’s energy efficient solutions for industrial
applications posted flat revenue year-on-year, reflecting
the phasing of heater product deliveries to support one
of its larger contracts, which concludes in H1 FY2026.
Operating profit and ROCE
£m
FY2024
reported
Foreign
exchange
Acquisitions
Organic
movement
FY2025
reported
Headline operating profit
161
(5)
10
(2)
164
Headline operating profit margin
20.5%
19.5%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
20
CFO REVIEW
CONTINUED
SMITHS DETECTION
Smiths Detection is a global leader in threat detection and screening technologies for aviation, ports and
borders, urban security and defence. Smiths Detection delivers the solutions needed to protect society from
the threat and illegal passage of explosives, prohibited weapons, contraband, toxic chemicals, biological
agents and narcotics – helping make the world a safer place. 51% of Smiths Detection’s sales are derived
from the aftermarket. Smiths Detection represents 29% of Group revenue.
FY2025
£m
FY2024
£m
Reported
growth
Organic growth
H1
H2
FY
Revenue
963
859
+12.1%
+15.3%
+15.1%
+15.2%
Original Equipment
339
272
+24.8%
+43.2%
+17.1%
+27.8%
Aftermarket
376
323
+16.4%
+18.4%
+20.9%
+19.6%
Aviation
715
595
+20.2%
+28.7%
+19.0%
+23.4%
Original Equipment
136
144
(5.8)%
(13.4)%
+7.8%
(3.2)%
Aftermarket
112
120
(6.2)%
(8.8)%
+2.1%
(3.4)%
Other Detection Systems (ODS)
1
248
264
(6.0)%
(11.3)%
+5.2%
(3.3)%
Headline operating profit
122
102
+20.1%
+23.2%
+23.3%
+23.3%
Headline operating profit margin
12.7%
11.9%
+80bps
+70bps
+100bps
+80bps
Statutory operating profit
96
83
+15.7%
Return on capital employed
11.4%
9.1%
+230bps
RD&E cash costs as % of sales
5.7%
7.8%
(210)bps
Revenue
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Revenue
859
(23)
127
963
Footnotes
1 Formerly ‘Other Security
Systems’
Smiths Detection delivered +15.2% organic revenue
growth, successfully converting its strong order book
into revenue, driven by significant growth in Aviation,
across both OE and aftermarket segments, partly
offset by a modest decline in Other Detection Systems
(ODS). Looking ahead, its multi-year order book
remains strong with growth to continue to be supported
by the aviation upgrade programme, albeit at a
moderated pace.
Reported revenue was up +12.1% reflecting the strong
organic growth, partially offset by an unfavourable
foreign exchange impact.
In Aviation, organic revenue grew +23.4%, with OE
growth of +27.8%, reflecting the continued strong
demand for the latest range of 3D-image computed
tomography (CT) machines for cabin baggage, CTiX.
Smiths Detection continues to achieve a good win rate
globally in aviation, and to date, has now sold c.1,800
CTiX scanners, which are the first ones to have received
the ‘up to two litres’ re-certification in the UK and EU.
Order intake during the year continued to reflect the
ongoing demand for airport scanner upgrades, with
notable wins in Australia, Germany, Japan, Poland,
Switzerland and the UAE. It is anticipated that the
global upgrade programme will continue with the
current level of cabin baggage activity into FY2026,
along with the associated longer-term aftermarket
revenue stream.
Smiths Detection is well positioned for the next upgrade
cycle of hold baggage, expected to happen later in the
decade. Smiths Detection launched the SDX 10060 XDi,
based on X-ray diffraction technology, which allows
highly accurate material and substance identification
based on an object’s molecular structure. Smiths
Detection is the first company in the aviation sector to
have launched this product, which is currently pending
regulatory certification. As of July 2025, four units were
in operation.
In Aviation aftermarket, Smiths Detection was awarded
the renewal of two significant long-term contracts to
service both hold and passenger baggage X-ray
inspection systems at airports across the USA.
ODS sales declined (3.3)% organically. Following an
(11.3)% decline in the first half, reflecting a strong prior
year comparator and the phasing of certain contracts,
revenue grew +5.2% in the second half driven by ports
& borders and urban security products. In urban
security, Smiths Detection secured a contract to supply
mobile solutions (SDX 6040 X-ray inspection systems)
to a major cruise line.
In ports and borders, the business installed four
state-of-the-art HCVM™ XL mobile scanners to the
Customs and Excise Division of Trinidad & Tobago, as
part of a broader effort to enhance national security.
In the USA, the business installed three Multi-Energy
Portals in Texas enhancing the ability to screen road
cargo for dangerous or illegal items ensuring a safer
and more secure border. Looking ahead, increased
focus on border security controls support improved
growth prospects in ports and borders.
In defence, Smiths Detection generated revenue from
its multi-year chemical detection contract with the UK
Ministry of Defence. It also announced a contract to
supply LCD personal chemical detectors to the
Japanese Ministry of Defence, for delivery in 2025
and 2026.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
21
CFO REVIEW
CONTINUED
Headline operating profit increased +23.3% on an
organic basis for the year, reflecting the strong organic
revenue growth and favourable pricing combined with
a positive mix effect and focus on cost efficiencies.
Headline operating profit margin of 12.7% was up 80bps
on both an organic and reported basis, building further
on a recent history of consistent margin expansion, with
further upside potential.
On a reported basis, headline operating profit was
up +20.1%, including a negative foreign exchange
translation, with the difference between statutory and
headline operating profit reflecting amortisation of
acquired intangibles.
ROCE increased by +230bps to 11.4%, driven by the
headline operating profit growth.
On 1 August 2025, Smiths Detection acquired Med
Graphix Inc. (MGI), based in New Jersey, USA, a service
and repair partner of over two decades and third-party
depot supplier. This acquisition, although small in
nature, enhances Smiths Detection’s sustainable
service offering by extending the lifecycle of critical
components through repair, refurbishment, and reuse.
This capability reduces operational risk and further
improves our ability to meet customer service needs.
RD&E and new product development
Smiths Detection’s strong competitive positioning in
Aviation is a reflection of its technical leadership,
world-class innovation capabilities, and commitment
to quality, reliability and safety. These strengths are
further reinforced by deep, long-standing relationships
with customers and regulators, a comprehensive
global service network, and advanced digital
capabilities.
In FY2025, the business invested 5.7% of sales in RD&E
in cash terms (FY2024: 7.8%) to support investment in
next-generation detection capabilities, with the
year-on-year decline largely a reflection of the strong
revenue growth. This included £17m in customer
funded projects (FY2024: £20m).
As a result, Smiths Detection continues to maintain a
leadership position in aviation security through a series
of industry-first innovations. As an example in FY2025,
its iCMORE APIDS (Automated Prohibited Items
Detection System) software solution became the first
automation platform to receive regulatory approval
for deployment in a live airport environment, with
successful implementation at Schiphol Airport. This
underscores the company’s commitment to innovation,
regulatory alignment, and operational excellence.
Smiths Detection also continues to partner with
companies and universities in the development of
new products. For example, in May 2025 it signed a
partnership with Xbat.ai to develop an innovative battery
sorting solution, and since April 2024, it has been
collaborating with University of Exeter to advance in
the enhancement of our aftermarket service offering
through digital solutions.
Operating profit and ROCE
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Headline operating profit
102
(3)
23
122
Headline operating profit margin
11.9%
12.7%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
22
CFO REVIEW
CONTINUED
SMITHS INTERCONNECT
Smiths Interconnect is a leading provider of high reliability connectivity products and solutions serving
segments of aerospace and defence, medical, semiconductor test and industrial markets. Smiths Interconnect
represents 13% of Group revenue.
FY2025
£m
FY2024
£m
Reported
growth
Organic growth
H1
H2
FY
Revenue
421
354
+18.9%
+26.8%
+18.9%
+22.5%
Headline operating profit
75
49
+51.9%
+80.3%
+41.4%
+57.2%
Headline operating profit margin
17.8%
13.9%
+390bps
+510bps
+300bps
+390bps
Statutory operating profit
35
46
(23.9)%
Return on capital employed
16.7%
10.4%
+630bps
RD&E cash costs as % of sales
6.1%
6.2%
(10)bps
Revenue
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Revenue
354
(11)
78
421
Headline operating profit increased +57.2% on an
organic basis, resulting in a +390bps rise in organic
operating profit margin to 17.8%. The year-on-year
improvement reflected strong operational leverage,
efficiency improvements and Smiths Excellence
benefits, partly offset by higher employee-related costs
in the light of the improved year-on-year performance.
On a reported basis, headline operating profit increased
+51.9% and statutory operating profit declined (23.9)%.
The difference between statutory and headline
operating profit reflects the amortisation of acquired
intangibles and disposal-related costs. In addition, an
impairment on disposal of £30m was recorded as a
result of an agreement to sell its US sub-systems
business unit, as part of the strategic initiative to
separate Smiths Interconnect. (See note 28.)
ROCE improved +630bps to 16.7%, driven by the higher
operating profit.
Smiths Interconnect’s organic revenue increased
+22.5% in FY2025, supported by strong growth in the
semiconductor market, new product launches and
improved market conditions in the growing aerospace
and defence segments in both the USA and in Europe.
Reported revenue increased +18.9%, with the
organic movement partly offset by a negative foreign
exchange impact.
Growth was broad based across all businesses,
demonstrating the strength of the portfolio and the
innovative product offering. There was particularly
strong growth in semi-conductor test reflecting our
leading market position in high performance products.
Semi-test growth reflected large programme wins
from major global technology customers, particularly
in test products for high-speed GPU and AI semi-
conductor chips, which drove revenue growth
significantly above the market.
Growth in aerospace and defence was also strong,
reflecting high demand for differentiated technology in
fibre-optic, radio-frequency and connector products,
with particularly notable demand for our interposer
and optical transceiver products. The robust market
backdrop, combined with our strong customer
programme wins, underpins our growth expectations
for FY2026.
Operating profit and ROCE
£m
FY2024
reported
Foreign
exchange
Organic
movement
FY2025
reported
Headline operating profit
49
(1)
27
75
Headline operating profit margin
13.9%
17.8%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
23
CFO REVIEW
CONTINUED
Smiths Interconnect’s UK facility in Dundee
successfully launched its new CAD-to-FAB capability
this year, accelerating growth in defence and aerospace
programmes by leveraging rapid-prototyping and
design innovation alongside cost-effective production
processes. Supported by the UK Space Agency’s Space
Clusters Infrastructure Fund, CAD-to-FAB initiatives
are now delivering isolators, circulators, filters and
multi-function assemblies to a growing number of
UK and global defence and aerospace customers.
Continued technical advancements and collaborative
efforts in this capability will maintain its leadership in
high-performance RF ferrite device manufacturing,
further expanding its global footprint.
Space grade products are a key development focus,
particularly in radio frequency and optical products.
During the year, Smiths Interconnect’s products
supported several high-profile space campaigns,
including the Europa Clipper mission to explore one
of Jupiter’s moons and the Sentinel-1C satellite, the
EU’s leading Earth observation initiative. Smiths
Interconnect provided cutting-edge connectivity
solutions – supplying isolators, hyperboloid and spring
probe solutions, and circulators, which are designed to
withstand the harsh conditions of space and ensure
consistent performance.
RD&E and new product development
Cash RD&E expenditure as a percentage of sales
was 6.1% of sales (FY2024: 6.2%). RD&E is focused
on developing highly specialised new products
that improve connectivity and product integrity in
demanding operating environments in mission critical
end markets where precision, reliability and durability
are vital.
Following the recent success of the industry award-
winning DaVinci 112 high-speed semiconductor test
socket, Smiths Interconnect launched DaVinci Gen V,
the latest flagship product in this portfolio. It delivers
ultra-reliable testing at the fastest speeds for some of
the most complex functionality of integrated circuits
of chips, used in AI, data centres, 6G communications
and advanced computing applications. As integrated
circuits evolve – doubling in bandwidth and
computational power every two years – DaVinci Gen V
is designed for seamless integration, allowing
manufacturers to transition effortlessly, reduce
development cycles and accelerate time-to-market.
In connectors, Smiths Interconnect launched the
EZiCoax interposer connectors, designed to be used
in high-value aerospace and defence applications,
such as satellites and advanced radar systems,
where it will help enable secure, precise and reliable
communications. Also, Smiths Interconnect extended
its high density modular and mini-modular connectors
ranges with the addition of the Cat5e and Cat6A data
transmission modules. These products deliver reliable
performance in harsh environments providing efficient
signal transmission, reducing data errors and ensuring
high-speed communication for customers.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
24
We have a healthy, values-led and results-driven
culture that inspires Smiths colleagues every day to
contribute, innovate and perform better. To strengthen
our culture, we focus on engagement, communication
and activities that promote belonging through our
shared purpose and Values. Promoting belonging also
means providing physically and psychologically safe
environments and meaningful connections so that
every colleague feels seen, heard and valued.
The Board has ultimate responsibility for ensuring
that our culture is healthy and drives the long-term
success of the Group. We have governance processes
in place to enable the Board to monitor culture and
cultural metrics.
Our culture has three critical pillars:
Our Values
Our Values are the things that are most important to us
as an organisation. They make us reliable, trustworthy
and valued partners, and they make Smiths a great
place to work. We live our Values every day, in each
action and decision that we take.
Code of Business Ethics
Smiths has been built on a foundation of doing business
the right way. Our Code of Business Ethics is the
natural extension of our Values and outlines the
standards of behaviour to which we all commit and that
we expect of our business partners. It is a practical
guide to what ‘doing the right thing’ looks like when
conducting business and relationships legally, ethically
and with integrity. See our Code on www.smiths.com
Excellence and continuous
improvement
We have a common, practical approach to continuous
improvement in our operations and processes – Smiths
Excellence. Smiths Excellence tools and expertise are
deployed throughout the Group to identify, accelerate
and deliver critical operational and functional projects
that make us faster to market, more innovative and
responsive to customer needs, more efficient and more
sustainable. Excellence is also a state of mind at Smiths
– the way we think and go about our daily work.
OUR PEOPLE
AND CULTURE
Smiths is a people-orientated company. Our people are fundamental to
delivering our strategy and enabling a high-performance organisation.
Respect
We
respect
others
Customer
Focus
We earn our
customers’ trust
We are united in
purpose
Passion
We do the
right thing
Integrity
We take
responsibility
Ownership
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
25
BUILDING OUR
CULTURE
Engaging with our people
We work hard to engage our workforce at all levels with
our purpose and strategy and reinforce our culture. Key
communication materials are translated into ten core
languages. We run a global news platform, hold
regular virtual Town Halls, provide training, and our
intranet web portal acts as an online hub for
information and resources.
My Say engagement survey
We have been tracking colleague engagement on
cultural measures since 2017. Our My Say survey helps
us to understand what we are doing well and where
we need to focus attention, both at a high level and in
individual teams.
78% of the Group’s employees participated in our
FY2025 pulse survey. Our overall engagement score
(how happy are you working at your company) fell
slightly versus FY2024 to 72. This was not unexpected
given the strategic update announcement at the end
of January 2025 and our score remains close to the
industry benchmark of 74. We were very pleased to
continue to score in the upper quartile for safety,
respect and environment. We also scored in line with
or close to benchmark for values/ethics, learning and
growth, and well-being.
Results from the survey and recommendations are
reported to, and discussed by, the Executive Committee
and the Smiths Board to ensure that they are reflected
in our planning, and we make efforts to address lower
scoring areas. Our businesses and functions use the
data to identify improvement opportunities to work
on in the coming year.
Speaking out
Ensuring that we engage colleagues on ethical matters
and our Code of Business Ethics is imperative. Our
colleagues and business partners are expected to be
vigilant and report any activity or behaviour – whether
in our business or those of our partners – that they
consider may be in breach of our Code, policies or
inconsistent with our Values. This can be done via
internal channels or by using our confidential Speak Out
reporting hotline, which is accessible to colleagues
and third parties 24 hours a day, seven days a week.
Reports to the hotline can be made anonymously.
We also undertake a regular global Ethics Pulse survey
which delivers data on colleague perceptions on ethical
matters. This data is reported to the Audit & Risk
Committee of the Board, along with Speak Out data.
Engaging with colleagues and building
Smiths culture in FY2025
A healthy culture and sense of belonging needs
continuous care and attention. Here are some of the
ways we built our culture in FY2025:
–
The CEO hosted global town halls for our results
announcements in September 2024 and March 2025
–
Aligned leadership of key aspects of our culture
under one member of the Executive Committee
– our Chief People, Sustainability and Excellence
Officer. Integrating these strands underpins and
powers our culture
–
Held two global leadership summits for our
extended leadership team (c. 470 colleagues).
Board members also held one-to-one meetings
with senior leaders
–
Undertook My Say engagement pulse survey
–
Launched ‘Better Connected’ newsletter to
communicate culture and amplify the effect of our
combined people, sustainability and Excellence
functions
–
Continued our ‘internal first’ approach to people
development and talent progression, with 75% of
senior individual contributor roles taken by internal
candidates
–
Reached the milestone of 9,000 colleagues completing
Smiths Excellence Fundamentals training to deliver
grassroots understanding of Smiths Excellence
principles. We have now celebrated colleagues
achieving 126 black and 439 green belts.
–
Launched interactive Smiths Excellence toolbox
playbook, a comprehensive ‘one-stop-shop’ for all
Excellence needs including Excellence tools, training
resources and real-world examples of applied
continuous improvement from across Smiths
–
Completed deployment of our Lean programme
to all sites with more than 100 colleagues
–
Utilised UK Apprentice Levy funds to expand our UK
apprenticeship programme, including to degree-
level, and upskill existing team members via degree
and Masters qualifications
–
Established a steering committee to develop a
global early careers strategy for John Crane
–
Created a bitesize ‘Respect’ training module in
support of our business ethics engagement activity
–
Relaunched our THRIVE well-being hub in our
communications platform, as well as grassroots
communities for women, veterans, pride, black
and neurodiverse colleagues
–
Celebrated Smiths Day in June 2025. Our teams
worldwide used the day to focus on our culture
and our communities, arranging social events and
undertaking volunteer projects
–
Our businesses recognised and celebrated key
cultural awareness events including International
Women in Engineering Day; International Women’s
Day; Black History Month; Veterans’ Day; and PRIDE
The Smiths Group Foundation made its second
tranche of grants to seven non-profit organisations
focused on expanding access to science, technology,
engineering and maths (STEM) skills, and on using
engineering to improve safety, connectedness and
sustainability. In two years we have made grants
totalling nearly £1.7m to 19 organisations and
worked with recipients to offer volunteering
opportunities for colleagues that benefit both
parties. All Smiths colleagues are supported to
take one paid volunteering day per year.
72
FY2025 overall employee
engagement score
(FY2024: 75)
>9,000
colleagues completed
Smiths Excellence
Fundamentals training
£1.7m
grants made by
The Smiths Group
Foundation over two years
>14,000
individuals directly
benefited from Smiths
Group Foundation grants
made in FY2024. More
than 62,000 people
indirectly benefited
1
1 Data provided by Charities
Aid Foundation.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
26
Effective risk management is integral
to our ability to deliver sustainable
growth and long-term value. It supports
strategic execution, enables us to respond
decisively to an evolving risk landscape,
and helps ensure the resilience of our
operations and portfolio.
Our approach reflects the structure of the Group, the
nature of our markets, and the ambition embedded in
our transformation. Our enterprise-wide framework
provides a clear and consistent structure for managing
risk, while our operating model ensures that those
closest to the business are empowered to make timely,
risk-informed decisions. This combination supports
agility and responsiveness across the Group.
As we reshape our portfolio through the planned
separations of Smiths Interconnect and Smiths
Detection, risk management plays a central role
in guiding how we protect and enhance value for
stakeholders. While Smiths Interconnect is accounted
for as a discontinued business held for sale, we
continue to include it in our assessment of risk and
the potential impact on the Group.
MANAGING
OUR RISKS
Our approach to risk management
Risk management is embedded across all levels of
the organisation. Our businesses and functional
teams are empowered to identify and manage risks
at source, enabling timely, informed decision-making.
This local accountability is aligned with our Group
Values – Integrity, Respect, Ownership, Customer
Focus and Passion – and reinforced through our
enterprise-wide controls.
We take a balanced and forward-looking view of risk,
recognising that well-managed risk-taking supports
innovation and growth. Our framework enables us
to assess both downside exposures and upside
opportunities, supporting delivery of our strategic
priorities in high-performance industrial technologies
that address energy efficiency, productivity and
sustainability.
Our enterprise risk management ‘ERM’ approach is
aligned with our purpose – to engineer a better future
– and integrated into our strategic planning, capital
allocation, and operational management processes.
Evolving risk profile and future risk
assessments
As the transformation of our portfolio progresses, we
recognise that the Group’s risk profile will evolve in line
with changes to our business mix, geographic footprint
and end markets. In particular, the planned separations
of Smiths Interconnect and Smiths Detection will result
in a higher concentration of revenue in markets such as
oil & gas and US construction.
These shifts are expected to introduce new dynamics
to the Group’s risk landscape, including areas of
heightened exposure and opportunities. For example,
increased market concentration may amplify sensitivity
to sector-specific and regional trends, such as
commodity price volatility, regulatory changes, or
macro-economic cycles in particular end market
geographies, notably the United States.
To ensure our principal risks remain relevant and
reflective of the business we are becoming, in FY2026
we will undertake a comprehensive reassessment and
refresh of the Group’s risk universe as the portfolio
transformation progresses. This review will evaluate:
–
Whether existing principal risks require
recalibration to reflect changing exposures
–
The potential for new risks to emerge in connection
with our strategic focus and market concentration
–
The continued appropriateness of our risk
mitigations, controls and assurance mechanisms
in the light of these developments
This proactive approach will ensure that risk
management continues to support the delivery of our
strategy and provides a strong foundation for long-term
sustainable growth.
Governance and oversight
The Board has overall responsibility for risk oversight
and sets the tone from the top, defining the Group’s risk
appetite and ensuring appropriate governance and
culture are maintained across the business. Risk
oversight is exercised through strategic and business
reviews, Committee meetings, management reporting
and thematic deep dives.
The Executive Committee is responsible for ensuring
the ERM framework is embedded and consistently
applied across all businesses and functions. The Audit
& Risk Committee evaluates the effectiveness of the
risk management system and internal controls, while
Internal Audit provides independent assurance over key
processes and risk areas.
This top-down approach helps to define the Group’s
culture and attitude towards risk at all levels of the
business; whilst communication flows between the
Board, Audit & Risk Committee, Executive Committee,
and local teams to ensure risk insight, escalation and
action are effectively coordinated and acted upon.
ERM framework
See our ERM framework
Page 27
Audit & Risk Committee
Read more about
Board oversight of risk
management and internal
control in the Audit & Risk
Committee report
Page 78
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
27
MANAGING OUR RISKS
CONTINUED
Our ERM framework
Development of the Group’s ERM framework is the responsibility of the Executive Committee which ensures it is effectively deployed throughout the Group. The model is
based on ‘Three Lines of Defence’ with processes in place to support open communication on risk between the Board, the Audit & Risk and Executive Committees, our
businesses, functions and sites. It enables us to identify, manage and monitor opportunities and risks which could threaten the successful execution of our strategy and
ensures our strategic, financial, compliance and operational risks are appropriately considered by the Executive Committee and the Board.
Accountability and reporting
Governance and oversight
3RD LINE
Internal Audit
–
Provides independent and objective assurance on internal controls, programmes, systems
and risk management processes
–
Facilitates the ERM process and provides site-based controls and assurance reviews of key
programmes, processes and systems
2ND LINE
Executive Committee and Senior management
–
Design and establish risk management and internal control systems
–
Ensure that the risk appetite of the Board is understood by risk owners and decision makers
–
Ensure risks are adequately managed
–
Conduct an annual assessment of strategic risk
Risk and compliance functions
–
Develop and manage the ERM process
–
Monitor risks and testing of critical controls
–
Develop and manage policies and control frameworks
–
Ensure ﬁnancial, legal and ethical compliance
–
Ensure security, quality and health and safety
Business management
–
Identify, manage and escalate risks
–
Set business strategic objectives
–
Establish and apply internal control systems
–
Escalate issues to the Executive Committee as required
1ST LINE
Operational teams
–
Understand roles and responsibilities
–
Comply with policies
–
Follow risk management processes
Operational risks
RISK
CULTURE
RISK
IDENTIFICATION
GOVERNANCE
Board
–
Approves the strategy
and sets the culture and
risk appetite of the Group
–
Monitors through Board
processes and good
governance
Audit & Risk Committee
–
Reviews and assesses
the effectiveness of the
Group’s ERM framework
and ﬁnancial and non-
ﬁnancial internal control
systems
Strategic risks
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
28
MANAGING OUR RISKS
CONTINUED
Risk identification and assessment is embedded within
the Group’s day-to-day operations and strategic planning
processes. Our businesses and functional teams are
responsible for identifying, assessing and responding to
the risks they face, including the early recognition of
emerging issues. These risks are captured in local
registers and reviewed through both structured
assessments and ongoing management dialogue.
Each year, our businesses conduct a formal assessment
of their risk profiles as part of the Group’s enterprise risk
cycle. These assessments include evaluation of likelihood
and potential impact, review of existing mitigations, and
identification of any required enhancements. In FY2025,
the Principal Risk Register and all business risk registers
were refreshed to ensure the most current insights were
captured. In addition, 19 operational risk workshops
were facilitated across key sites to enhance the bottom-
up view of risk and ensure strong local engagement in the
Group-wide process.
To complement the business-level view, the Executive
Committee leads a top-down risk review that integrates
business inputs, external insights and strategic
considerations. This includes a review of the Group’s
principal and emerging risks, assessment of risk
appetite, and evaluation of current and planned
mitigations. Outcomes are reviewed by the Audit & Risk
Committee and submitted to the Board for approval as
part of its risk oversight responsibilities.
The ERM timetable is agreed annually by the Executive
Committee and includes a schedule of deep-dive
reviews on specific risk areas at Executive, Committee
and Board levels. In FY2025, these included:
– Cyber
–
Legal and compliance
–
Geopolitical risks, including the impact of tariffs
Additional Board and Committee discussions
throughout the year covered a wide range of strategic
and operational risk areas including: financial
performance; tax and treasury; pensions and
insurance; geopolitical risk; artificial intelligence and
digital innovation; health and safety; acquisitions;
litigation; ESG matters; strategic transformation;
and our people strategy.
Controls and assurance
In line with requirements for risk owners to demonstrate
how they provide assurance that controls are working
effectively, examples have been provided as part of our
principal risk descriptions starting on page 29. In
response to the updates to the UK Corporate Governance
Code regarding internal control, we are actively preparing
to meet the requirements of Provision 29 ahead of the
declaration on the effectiveness of material controls due
in the FY2027 Annual Report. This work continues to
build on our existing global control framework with
activities to define and map the Group’s material controls
and assurance processes ongoing.
Control improvements and risk mitigations are monitored
through the Group’s integrated risk, control and
assurance systems. Where actions are required to
enhance management of a specific risk, these are
formally tracked and reviewed through relevant reports
under the Global Controls Framework and through
Internal Audit follow-up. During the year the Audit &
Risk Committee considered those controls relating to
ten principal risks.
In FY2023, we completed our first ESG double materiality
assessment (DMA) which validated our existing
prioritisation of ESG related topics. It provided a robust
analysis of critical enablers and emerging matters of
interest and importance to our multiple stakeholders, as
well as emerging regulatory requirements. Building on
this, in FY2025, we refreshed our DMA to assess
materiality for Smiths of European Sustainability
Reporting Standards (ESRS) topics in our operations
and our value chain in preparation for future reporting
requirements including the Corporate Sustainability
Reporting Directive (CSRD). See page 37 for more
information. We also conducted a new climate scenario
analysis under the Task Force on Climate-related
Financial Disclosure (TCFD) framework to assess our
climate risk over six scenarios (three physical and three
transition). See page 46.
Emerging risks
Emerging risks and horizon scanning are integrated
into our ERM process with activities taking place across
our businesses and sites to identify risks specific to
their business lines. Functions in the business often
take the lead in identifying and promoting risk
awareness and mitigation activities, while raising those
of a material nature up to the attention of the Audit &
Risk Committee.
At present, we are monitoring the regulatory landscape
for changes that could limit the use of certain restricted
substances, IT vendor concentration, cyber threats, and
the risks and opportunities associated with the adoption
of artificial intelligence.
The Directors consider the risk management process
to be effective.
Going Concern and
Viability Statement
Page 60
Sustainability topics
Read more about our
material sustainability
topics and DMAs
Page 37
Climate scenario
analysis
Read more in TCFD
Page 46
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
29
We maintain a register of principal risks and
uncertainties faced by the Group which could materially
impact our financials, operations and achievement of
our strategic ambitions.
Risk review process
On an annual basis we review each risk and rate a
number of factors: gross impact, applying the
hypothetical assumption there are no mitigating
controls in place; residual impact and likelihood,
taking into account existing mitigating controls; the
reputational impact of a risk; and velocity, which
reflects the expected time we would have to react
should a risk materialise. These, in turn, drive
mitigation priorities. A trend metric shows the net
position of the risk year-on-year. We report on the
connectivity between risks to help understand the
potential for one risk to have an impact on another. This
is presented against each risk in the form of a ‘risk
relationship’ chart indicating the linkage between each
principal risk and others on the list. This has been used
as an input to the Viability Statement assessment and
for risk scenario planning and mitigation work.
Changes to principal risks
Our principal risks continue to evolve in response to
our changing risk environment. This year, based on
our monitoring of emerging risks, none have been
deemed material enough to be promoted to being
principal risks.
However, during FY2025, the Group added Strategic
transformation as a new principal risk in recognition
of the scale, complexity, and potential impact of the
ongoing portfolio reshaping. This includes the proposed
separation of Smiths Interconnect and Smiths
PRINCIPAL
RISKS AND
UNCERTAINTIES
Detection, and the strategic ambition to reposition the
Group toward scalable growth in high-performance,
future-oriented industrial engineering.
This risk reflects the potential for disruption or failure in
executing key elements of the transformation, including
transaction risk, dis-synergies, resource capacity, and
integration of new organisational models. It also
considers risks to employee engagement, customer
confidence, and business continuity during the
transition period.
While we continue to monitor and manage a wide range
of risks, the tables that follow summarise those risks
considered to have the greatest potential impact if they
were to materialise.
Principal risks and uncertainties
Principal risk
Gross risk
Residual risk
Likelihood
Velocity
Trend
1. Economy and geopolitics
Economy and geopolitical environment
High
Moderate
Likely
Days
2. Cyber security
Enterprise or product cyber event
High
Moderate
Almost
Certain
Days
3. Business continuity
Business disruption to supply chain or operations
High
Moderate
Probable
Weeks
4. Technology
Disruption by existing or future competitors
Very High
Moderate
Probable
Years
5. Product quality
Failure of product causes serious harm to people/property
Moderate
Low
Probable
Weeks
6. Commercial
Loss of focus on customers, not competing in the right
markets
High
Low
Possible
Years
7. People
Ability to attract and retain people
Moderate
Low
Possible
Months
8. Legal and compliance
Significant ethical breach or failing to meet contractual
obligations
High
Low
Possible
Days
9. Climate change
Missed opportunities in energy transition and change in
climate conditions causing business disruption and economic
loss for the Group
High
Low
Possible
Years
10. Strategic transformation
Failure to deliver operational, financial, or reputational value
when executing strategic transformation
Very
High
Very
High
Possible
Months
Key
Likelihood
Almost certain
>80%
Likely
>60%
Probable
>40%
Possible
>20%
Unlikely
<20%
Trend year over year
New
Stable
Up
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
30
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
1. Economy and geopolitics – Impact of economic and geopolitical environment
The challenging and increasingly unpredictable
economic and geopolitical landscape in which we
operate is subject to external influences including
inflationary pressures, regional conflicts, and
newly imposed trade restrictions. Such factors may
adversely affect demand for our products, increase
input costs, and impact profitability. Trade barriers,
such as recent U.S. tariffs on international imports and
retaliatory measures from other nations, could disrupt
supply chains, reduce market access, and undermine
our global competitiveness.
How this could impact our strategy or business model
–
Geopolitical tensions relating to Russia, China, India
and the Middle East could adversely impact our
operations
–
The introduction of new tariffs and/or taxes could
adversely impact our financial performance
–
A regional or global recession could reduce demand
for our products
–
If we are unable to pass additional inflation on through
pricing, our financial performance may suffer
–
US export controls on high-end mechanical
components (e.g., carbon/graphite face materials)
are tightening. New Chinese non-tariff barriers
(licensing/preferential domestic sourcing) risk
eroding market share
Examples of how we manage this risk
–
Our geographic footprint and diversified portfolio
of businesses mitigate the exposure we have to any
one country or sector
–
Our businesses monitor order flows and other
leading indicators to enable a quick response to
deteriorating market conditions and tariffs/trade
barriers
–
Our government relations team actively monitors
relevant developments and represents our interests
–
Our network of trade compliance officers across
the Group monitors current and future changes in
regulation, oversees import and export activities
and continually assesses trade compliance risks
and the adequacy of the Group’s controls. See also
legal and compliance risk on page 34
–
The Board receives ad-hoc updates from external
speakers on geopolitical events
Examples of how we know the controls are working
effectively
–
Business reporting on order trends at monthly
operating reviews
–
Active tracking of inflation and pricing at monthly
operating reviews
Developments in FY2025
–
In early FY2025 we performed scenario analysis
linked to rising tensions in the South China Sea which
could impact strategic supply chains for our Smiths
Detection business. As a result, we have implemented
robust internal mitigations through adjusting our
approach to inventory management to reduce
the impact of changes in the global geo-political
environment on our critical manufacturing operations
–
We continue to monitor the impact of changing
tariff policies, oil prices, and interest rates on our
critical markets. Geopolitical tensions, particularly
in Eastern Europe and the Middle East, are driving
energy price volatility, influencing global energy
investment, and increasing the risk of supply
chain disruption
Connectivity between principal risks
Principal risk
Economy and
geopolitics
Cyber security
Business
continuity
Technology
Product quality
Commercial
People
Legal and
compliance
Climate change
Strategic
transformation
Economy and geopolitics
Cyber security
Business continuity
Technology
Product quality
Commercial
People
Legal and compliance
Climate change
Strategic transformation
CEO review
Read more in the
CEO review
Page 9
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
31
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
2. Cyber security – Impact of enterprise or product cyber event
Cyber attacks attempting to compromise the
confidentiality, integrity, and availability of IT systems
and operational data are a continuing and intensifying
risk. We operate in markets and product areas which
are known to be of interest to cyber criminals. With
increasing digitalisation and reliance on third-party
platforms, any breach may cause disruption, data loss,
regulatory penalties, and reputational damage.
How this could impact our strategy or business model
–
If a cyber attack compromised confidentiality,
integrity or availability of our assets, it could
adversely affect our ability to deliver to customers
and, ultimately, our financial performance and
reputation
–
If we had a cyber security breach, we could
be exposed to significant losses, particularly
concerning our security products. These could
include not only customer losses but also those of a
potentially large class of third parties
Examples of how we manage this risk
–
Board oversight of the defence in depth approach to
mitigating cyber risk
–
Proactive focus on information and cyber security
risks supported by a robust governance framework
–
Group-wide assessment of critical information
assets and protection to enhance security
–
Information Security Awareness programme
–
Security monitoring to provide early detection of
hostile activity on Smiths networks and an incident
management process
–
Partnership and monitoring arrangements in place
with critical third parties, including communication
service providers
–
Cyber risk analysis and mitigations embedded in
the product lifecycle process to increase resilience
Examples of how we know the controls are working
effectively
–
Formal reviews with the Executive Committee and
the Board
–
Vulnerability scanning/event reporting
–
External reviews of threats, processes, controls
and capabilities
–
Mandatory staff training
–
Compliance with recognised standards
Developments in FY2025
–
In January 2025, our systems were targeted by a
sophisticated cyber attack. Although immediate
containment prevented permanent data loss, there
was significant downtime across multiple systems
and business units impacting procurement,
manufacturing, and customer service
–
Remediation activities were prioritised across the
Group with action being taken to reduce our future
vulnerability. These are being monitored by our
Internal Audit function
3. Business continuity – Business disruption to supply chain or operations
Disruption to our global supply chains, manufacturing
sites, or customer operations due to geopolitical
events, cyber-attacks, or climate-related incidents;
may negatively impact our financial performance,
customer delivery timelines, and operational
resilience.
How this could impact our strategy or business model
–
If we are unable to deliver products and services to
our customers, it will adversely affect our financial
performance and reputation
–
Cost pressure and volatility in commodities, goods
and labour may affect our ability to serve customers
and erode our competitive advantage
Examples of how we manage this risk
–
Smiths Excellence has increased our focus on
resilient and cost-effective supply
–
We have business continuity and disaster recovery
plans in place for critical locations
–
We regularly evaluate key sites against a range
of risk factors using external benchmarks
–
Mitigation plans are in place for sole source
suppliers, sub-contractors and service providers,
including qualifying alternative sources of supply
where appropriate
–
Property damage and business interruption
insurance is in place
Examples of how we know the controls are working
effectively
–
We test business continuity plans annually
–
Business risk mitigation plans are reviewed by the
Audit & Risk Committee
–
Business interruption risk surveys are completed
annually with an external provider at key operational
sites
–
Insurance is reviewed at least annually by the
Audit & Risk Committee
Developments in FY2025
–
In January 2025, we activated our business
continuity plans in response to a sophisticated
cyber attack targeting our systems. Following this,
lessons learned have been identified, and further
enhancements to our business continuity planning
process will take place in FY2026
Operational resilience
Read more in the CEO Q&A
Page 4
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
32
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
4. Technology – Technology disruption by existing or future competitors
If we fail to maintain our technological differentiation
and our innovation pipeline does not meet customers’
evolving requirements, we may lose market share to
a new or existing competitor. This could impact our
financial performance and our ability to attract and
retain talent.
How this could impact our strategy or business model
–
If our technological differentiation were to erode,
it could have an adverse effect on our financial
performance and our ability to attract and retain
talent
–
We may fail to deliver anticipated organic growth,
which may lead to missing strategic growth targets
and shareholder value erosion
Examples of how we manage this risk
–
We proactively position our portfolio around the
most attractive markets where we can sustainably
hold a leadership position based on technology
differentiation
–
We diversify our portfolio to serve a range of sectors
and geographies, and mitigate exposure to any one
sector or area
–
Continued investment in RD&E (4.3% of Group
revenue) with an increasing focus on shared digital
development
–
We focus on nurturing a culture of innovation
–
We focus on processes that support new product
development and commercialisation
–
We track Gross vitality as a KPI
–
We maintain robust intellectual property (IP)
protection via patents and other protections, and
pursue litigation to protect our differentiation,
where appropriate
Examples of how we know the controls are working
effectively
–
Product commercialisation progress is assessed as
part of the monthly operating reviews
–
The consideration of technology priorities as part of
our long-term strategic planning
–
Regular reviews by the Innovation, Sustainability
& Excellence (ISE) Committee of both new product
development and commercialisation
5. Product quality – Failure of product causes serious harm to people/property
Failure of one of our products, including failure due to
non-compliance with product regulation, may result in
financial loss and reputational damage. In the ordinary
course of business, we could be subject to material
product liability claims and lawsuits, including
potential class actions from customers or third parties.
How this could impact our strategy or business model
–
If our products were to cause material harm to
people or property and/or business interruption for
customers due to quality issues, design defects,
manufacturing failures or component failures, we
could suffer reputational damage, loss of business
and higher costs beyond anticipated warranty claims
–
These may include contractual claims for penalties,
indemnities and damages, and product liability
claims arising from end-users and other affected
third parties (potentially large classes). If we were to
suffer reputational damage, it could lead to a loss of
customers/future business
Examples of how we manage this risk
–
Business quality risk assessments that address
product failures, product performance, product
safety, product compliance and regulatory
compliance
–
Quality assurance processes embedded in
manufacturing locations for critical equipment,
supporting compliance with customer requirements
and industry regulations
–
Quality development and quality integration built
into new product development processes
–
Risk analysis and mitigation processes relating
to product cyber resilience embedded in the
product lifecycle process. Proactive steps taken to
ensure product cyber-related risks are continually
monitored and managed
–
Insurance cover for product liability and other
related risks such as aviation grounding.
Insurance and legal teams collaborate to ensure
that contracts (and supplier flow-downs) cover
insurance issues, and that claims are notified
–
Contracting and litigation managed under the
oversight of the Group General Counsel with regular
reporting to the Executive Committee and Board
Examples of how we know the controls are working
effectively
–
Regular quality reporting (e.g., cost of poor quality
(COPQ)) and actions to drive improvement in key
metrics
–
Group and business governance frameworks
(including Delegation of Authority) ensure a close
working relationship between legal and commercial
teams (including quality) to manage risks
Going Concern and
Viability Statement
Page 60
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
33
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
6. Commercial – Loss of focus on customers and not competing in the right markets
Failure to adapt our commercial strategies in response
to evolving customer expectations, procurement
models, and sustainability-linked requirements may
reduce market share, impair profitability, and hinder
access to growth opportunities.
How this could impact our strategy or business model
–
If we fail to develop growth markets and
geographies, it could affect our strategic progress
and financial performance
–
Significant disruption to government budgets could
result in fewer contracts being awarded to Smiths,
adversely affecting our financial performance
–
If we do not innovate in line with our customers’
needs, we may lose market share, adversely
impacting our results
–
Lack of growth and/or erosion of our market
leadership positions could impact our ability to
attract and retain talent
–
Both Flex-Tek and John Crane see cyclical
pressures in end markets (oil & gas capex cuts vs
subdued US housing market)
Examples of how we manage this risk
–
New product innovation feedback through market
research and direct feedback from existing and
potential customers
–
Our diversified portfolio of businesses mitigates
exposure to any one country, sector or customer
–
Our growth strategy places emphasis on expanding
operations in higher-growth customer markets
as well as geographic regions which are currently
underserved, including Asia
–
Our regular strategy reviews evaluate adjacent
market opportunities and the evolving competitive
environment including reviewing new/potential
market entrants
–
Our Government Relations function collaborates
with colleagues across the Group to advise on
developments
Examples of how we know the controls are working
effectively
–
Strategic reviews, including commercial excellence
reviews, business deep-dives, and detailed
monitoring of pricing
–
Customer input is gathered frequently to inform new
product development, marketing segmentation/
communication, and customer service improvement
–
Strong and long-term customer relationships
7. People – Ability to attract and retain people
Failing to attract, develop, and retain the right people
with the right skills may affect our ability to achieve
our commercial ambitions, particularly in the light
of the planned separations of Smiths Interconnect
and Smiths Detection and the inherent uncertainty
such plans have created regarding some roles and
functions.
How this could impact our strategy or business model
–
If we do not attract and retain key talent, our
business performance may suffer
–
If we do not retain key management when we make
acquisitions, we may not realise the value of those
acquisitions
–
Remaining staff may interpret the separations as
a signal that rollbacks may occur across Group
functions, leading to retention risk (voluntary
turnover) within the Group, Flex-Tek or John Crane
–
Functional teams including people management,
legal, finance, or other functions that previously
had budgets allocated based on supporting the
entire Group will see funding reallocated. If this isn’t
communicated clearly, it can erode engagement
among experts who worked across functions
–
High potential employees who previously
rotated through our businesses will have fewer
opportunities to gain cross-business experience,
slowing the development and engagement of
future leaders who benefit from multi-disciplinary
exposure
Examples of how we manage this risk
–
Fair and competitive pay practices
–
Focus on people development and promotion from
within
–
Ongoing investment in leadership training
–
Investment in early career programmes
–
Diversity and inclusion initiatives
–
Establishing the talent attraction organisation
–
Increasing internal talent mobility
Examples of how we know the controls are
working effectively
–
Formal and informal measures of culture, for
example, our regular employee engagement
surveys
–
The Remuneration & People Committee’s regular
review of key people metrics
Developments in FY2025
–
In response to the risks to employee retention
related to our strategic transformation, we set
up employee retention programmes to ensure
retention of our critical employees and reduce
uncertainty, disengagement, and attrition among
key personnel
Markets and
megatrends
Read more about our
markets and megatrends
Page 12
People and culture
Read more about people
and culture
Page 24
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
34
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
8. Legal and compliance – Significant ethical breach or failing to meet contractual obligations
We have more than 16,000 colleagues in more than 50
countries. Individuals may not all behave in accordance
with the Group’s Values and in accordance with ethical
and legal requirements. We operate within increasingly
complex legal regimes, often in highly regulated
markets and with governments, customers and
suppliers requiring strict adherence to laws. We may
fail to deliver contracted products and services or fail
in our contractual execution due to delays or breaches
by our suppliers or other counterparties.
How this could impact our strategy or business model
–
An ethics or compliance breach could cause harm
to our reputation, financial performance, customer
relationships and our ability to attract and retain
talent
–
Failure to comply with evolving and increasingly
international trade compliance requirements
(import and export) increases compliance risk
and could lead to significant fines and business
disruption including delays to procurement or
supplies
–
Failure to meet strict conditions within government
contracts, particularly in the US, could prevent us
from bidding for contracts or have other serious
financial and reputational consequences
–
Breach of contract resulting in significant expenses
due to disputes and claims, loss of customers,
damage to our reputation with other customers/
prospective customers, and loss of revenue and
profit due to higher costs, liquidated damages or
other penalties
–
Contracts, particularly those with governments,
may include terms that provide for unlimited
liabilities, including for loss of profits, IP
indemnities, perpetual warranties or allowing
the counterparty to cancel, modify or terminate
unilaterally and seek alternative sources of supply
at our expense
Examples of how we manage this risk
–
Our ethics and compliance team run a proactive
programmatic approach, areas of which are at
different stages of maturity including:
–
Managing an independent Speak Out
reporting line and investigations process with
communications encouraging the reporting
of ethics violations (includes ability to report
anonymously and a non-retaliation policy)
–
Anti-bribery and anti-corruption training is
mandated for all employees online; and in-
person training with a process for monitoring
and reporting compliance
–
Policies and processes to mitigate risks are in
place, including agent and distributor-related
risks through due diligence, contractual controls
and internal approvals
–
Anti-trust training programmes
–
Modern Slavery and Transparency Statement and
procedures to reduce the risk within the Group and
our supply chain
–
Network of trade compliance officers across the
Group who monitor current and future changes in
regulation and oversee import and export activities
and continually assess trade compliance risks and
the adequacy of the Group’s controls
–
Monitoring and acting on upcoming legislative
changes
–
Multi-functional programme for General Data
Protection Regulation (GDPR) compliance
Examples of how we know the controls are working
effectively
–
Multiple measures to assess culture including:
My Say results, Speak Out reports, Ethics Pulse
surveys, internal audit findings, exit interviews and
ethics questions in performance reviews
–
Monitoring and reporting on compliance with ethics
policies, training statistics, investigations and Ethics
Pulse metrics (Executive Committee and Audit &
Risk Committee oversight)
–
Legal teams embedded in the businesses and
working cross-functionally throughout the contract
lifecycle. Contract risk tool rolled out in three
businesses and used to assess mitigation of risk
through contract negotiations
Behaving ethically
and legally
Page 43
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
35
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
9. Climate change – Missed opportunities in energy transition and change in climate conditions causing business
disruption and economic loss for the Group
Failure to identify and act on the significant
opportunities arising from the world’s transition to
a low-carbon economy and/or failure to respond
appropriately to climate change risks and regulation.
How this could impact our strategy or business model
–
If we do not position ourselves to serve our
customers and growing markets in decarbonisation
and energy efficiency we will not reach our full
commercial potential
–
If we do not make progress towards and then
achieve our own Net Zero commitments our
Company reputation and customer relationships
may be damaged
–
We may not be able to attract and retain key talent
if we are not viewed as a socially responsible and
sustainable organisation
–
If we do not communicate sufficiently our approach
to managing climate opportunities and risk, we
may limit the number of interested debt and equity
investors
–
Extreme weather caused by climate change may
have an impact on our markets and our operations if
not identified and addressed
Examples of how we manage this risk
–
The Group has reviewed and is pursuing strategic
market opportunities arising from the energy
transition/decarbonisation
–
Products with a sustainability impact have been
prioritised for commercialisation in our new product
pipelines
–
A comprehensive Net Zero/climate transition plan
for Scope 1, 2 and 3 GHG emissions was submitted
to the Science-Based Targets initiative (SBTi)
–
GHG reduction and energy efficiency targets are
built into our performance scorecard and our
annual and long-term incentive plans
–
We publish sustainability information and
communicate regularly internally and externally on
environmental matters
Examples of how we know the controls are
working effectively
–
All businesses are engaged in new product
development that contributes to sustainability
–
The ISE Committee has met four times a year to
review sustainable products and progress on our
sustainability goals
–
We engage KPMG for limited assurance on GHG
emissions, inventories and energy efficiency and
Ramboll for water and waste measurement
–
We monitor and benchmark our ESG ratings
published by Sustainalytics, ISS, CDP and MSCI
–
The environmental commitment topic scored highly
in our My Say employee survey
Developments in FY2025
–
In response to changes to regulation regarding
climate change (including CSRD and IFRS Climate-
related disclosures), a cross-functional working
group is in place to provide oversight and leadership
in response to reporting requirements
–
We engaged PWC to complete a double materiality
assessment (which will be refreshed as part of
separation activities)
–
We have conducted a review of the property
portfolio for water and biodiversity risks
Sustainability solutions
Read more about how our
products are helping
customers deliver
next-generation efficient
and sustainable
infrastructure
Page 39
Net Zero targets
See our Net Zero targets
and progress
Page 40
TCFD
Read more
Page 46
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
36
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
10. Strategic transformation – Failure to deliver operational, financial, or reputational value when executing
strategic transformations
Execution of strategic transformations, including
the proposed separations of Smiths Interconnect
and Smiths Detection, carry significant operational,
legal, financial, people-related and reputational risks.
Ineffective execution of these transactions could result
in operational disruption, stranded costs, loss of key
personnel, delays in achieving separation, regulatory
hurdles and diminished shareholder confidence. The
ability to reposition the remaining Group as a focused,
high-performing industrial engineering company will
be key to preserving and enhancing long-term value.
How this could impact our strategy or business model
–
Missteps in separating shared IT platforms, finance
functions, and supply chains could delay core
operations and customer deliveries, reducing our
future agility and undermining growth initiatives
–
Failure to fully carve out duplicated overhead
expenses may result in legacy expenses,
compressing margins and constraining
reinvestment capacity
–
Uncertainty around roles in Smiths Interconnect
and Smiths Detection during separation may
accelerate voluntary departures of critical talent,
jeopardising programme continuity and know-how
transfer
–
Macro-economic headwinds (e.g., tightening
financing conditions) and evolving regulatory
approvals in sensitive markets (defence,
transportation) could delay transaction close,
deferring proceeds and extending integration costs
–
If communications are misaligned, investors,
customers, suppliers, and employees may develop
uncertainty around the separations, potentially
undermining confidence in our standalone industrial
engineering position and contributing to share price
underperformance. It is therefore essential that the
strategic vision for Smiths is clearly and effectively
communicated
–
Our sector exposure will become more
concentrated, particularly in oil & gas, and the US
construction market, resulting in increased volatility
due to reduced diversification
Examples of how we manage this risk
–
A structured communications plan, including
investor roadshows, employee town halls, and
customer briefings articulates the strategic
rationale and timeline for the separation of Smiths
Detection and Smiths Interconnect, ensuring
transparency and reducing uncertainty
–
By maintaining rigorous programme governance,
including Board-level oversight by the Separation
Oversight Committee, targeted retention measures,
proactive stakeholder engagement, and clear
repositioning plans, we are effectively managing
the risks associated with executing these strategic
transformations and positioning our company for
long-term success
Examples of how we know the controls are
working effectively
–
Tracking of critical milestones (e.g., IT cutover
readiness, financial reporting carve-out, legal entity
registrations)
–
Retention-rate tracking for identified ‘key roles’
to effectively mitigating attrition risk
–
Post-roadshow surveys of major institutional
investors
–
Tracking of regulatory filing progress to ensure
no material ‘hold’ conditions are imposed
–
Early separation cost forecasts validated by
actual spend
Developments in FY2025
–
Established a Board Separation Oversight
Committee to oversee the transactions and
separation of our operations, IT platforms and
shared functions
–
Engaged strategic advisers to support the sales and
help us navigate current market volatility, tightening
financing conditions, and shifting investor sentiment
which could negatively affect transaction timing,
deal multiples, or buyer appetite, especially in
sensitive sectors such as security and defence
Strategy
Read more about our
strategy in the CEO
Review
Page 9
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
37
We have significantly improved the quality and breadth of
our sustainability disclosures in recent years, taking into
account current and emerging frameworks including the
Global Reporting Initiative (GRI), Sustainability Accounting
Standards Board (SASB), Task Force on Climate-related
Financial Disclosures (TCFD), Taskforce on Nature-
related Financial Disclosures (TNFD), the Corporate
Sustainability Reporting Directive (CSRD), and the
expectations of our stakeholders.
To prepare the organisation for potential future reporting
requirements under CSRD, we refreshed our existing
double materiality assessment (DMA) and gap analysis
at the end of 2024. This was conducted in line with the
European Sustainability Reporting Standards (ESRS),
and assessed the materiality of the ten key ESRS
standards for Smiths and its value chain.
The topics described in this section are the most
material for the Group. Our sustainability framework
topics and the relevant ESRS standards are mapped in
the table below and highlighted in the margin of each
page. All sustainability data and targets presented in
this, and later sections, are for the Group unless
otherwise indicated.
SUSTAINABILITY
We take a pragmatic approach to
sustainability matters, aiming to
minimise our net impact, create positive
impacts where we can, and adopt the
good practices expected of a global
organisation. Sustainability action is a
natural activity for an organisational
culture focused on excellence and
continuous improvement and is
essential for long-term value creation.
Throughout this section you will find extra information,
performance data and pointers to additional content
and data in the right-hand column.
Sustainability framework topic
European Sustainability Reporting Standard (ESRS)
Engagement survey score
Target
United Nations Sustainable
Development Goals (SDGs)
As the transformation of our portfolio and business
mix progresses, we will revisit our DMA work to
re-determine the scope of sustainability reporting
relevant to the business. We will also review and
restate our targets, including our SBTi trajectory for
the new shape of the Group.
FY2025 highlights
–
Strong safety performance
–
Introduction of Watershed sustainability platform,
for enhanced data and decision making
–
Maintained five year trend in Scope 1 & 2 emissions
reductions; down 11.4% vs restated FY2024 and
renewable electricity at 74%. Tracking below SBTi
trajectory
–
Continued progress against FY2025-FY2027
environmental targets. Energy reduction target
continues to be linked to employee bonus scheme
for FY2026
–
Progressed the introduction of suppliers to the
EcoVadis assessment platform
Our business activities, the way we operate, and our
sustainability priorities enable us to contribute in a
meaningful and practical way to seven of the United
Nations Sustainable Development Goals. Read more
about our contribution on www.smiths.com
See our TCFD
disclosure
Page 46
See our
sustainability
targets and
performance
Page 55
See all our
sustainability
data disclosures
Page 200
See our GRI and
SASB disclosures on
www.smiths.com
Material sustainability framework topics FY2023 DMA (bold)
Material ESRS standards FY2025 DMA (bold)
Read more
Commercialising high-value green technologies
Climate change
Pollution
Sustainability solutions page 39
Delivering net zero GHG
Climate change
Climate change and net zero page 40
Respecting natural resources
Pollution
Biodiversity
Resource use and circularity
Natural resources and biodiversity
page 42
Improving safety, health and well-being
Own workforce
Safety page 38
Managing risk and maintaining strong controls
Business conduct
Workers in the value chain
Behaving ethically and legally page 43
Behaving ethically and legally
Business conduct
Workers in the value chain
Behaving ethically and legally page 43
Supply chain
Workers in the value chain
Supply chain page 45
Third party ratings
MSCI:
AA
CDP Climate:
B
ISS QualityScore:
–
Environment 2
–
Social 2
–
Governance 2
Sustainalytics:
29.3
S&P Global ESG Score:
53
LGIM ESG Score:
69
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
38
SUSTAINABILITY
CONTINUED
SAFETY
Safety is our number one priority. We are committed to
excellence in health and safety and providing effective
leadership to create injury-free and supportive
workplaces for our colleagues and anyone working
with us. We target risk reduction and continuous
improvement in our performance through systematic
analysis of data, proactively designing and investing for
safety and health, and building strong and aware safety
cultures at our sites.
Managing safety
We have health and safety policies and standards that
all Smiths operations are required to follow. Each
business sets annual safety improvement plans aligned
to our Group priorities, and our overall target to keep
our recordable incident rate (RIR) below 0.4 (i.e. above
industry average). All operational sites with more than
100 colleagues are required to be certified (or working
towards certification) under ISO 45001 safety
standards. Safety and compliance with our standards
are managed locally by Health, Safety & Environment
(HSE) specialists, with responsibility for safety culture
and performance held by our site and business leaders.
Safety performance
Our Group safety scorecard shows 12 month
recordable incidents for the FY2025 period of 41 against
63 in the prior year and our RIR fell to 0.28 (12 month
scorecard 0.40). Our total number of incidents was
down 44% and we recorded zero work-related
colleague or contractor fatalities.
Site security and travel safety
The challenging and increasingly unpredictable
geopolitical landscape requires constant focus and
proactivity to protect the security of our sites and
anyone travelling.
We have robust security procedures in place to protect
the physical safety of our teams and assets as well as
our data and intellectual property. Security plans are
in place at all locations and risk assessments are
undertaken regularly, as are reviews of business
continuity and crisis management plans. Two serious
security incidents were recorded in FY2025 relating to
physical altercations between employees. Disciplinary
and communication actions were taken to re-inforce the
message that such behaviour is unacceptable at Smiths.
The on-the-road safety of our teams is equally
important. We know where our colleagues are and we
closely monitor trips to high and extreme risk locations,
with all such travel needing to be pre-approved at a
senior level. We also work with external partners to
provide advisory and emergency (including medical and
physical) support to Smiths colleagues at home and in
the field. This includes evacuation if prudent.
Health, mental health and well-being
Supporting colleague well-being and mental and
physical health helps to keep us performing at our best.
We actively promote a sense of belonging through our
shared purpose and Values and by providing safe
environments and meaningful connections so that
every colleague feels seen, heard and valued.
All Smiths colleagues and members of their immediate
families have access to an Employee Assistance
Programme (EAP) which offers practical support on
health, well-being and financial matters. Our THRIVE
resources and sessions aim to create an environment
where people feel confident talking about matters
such as mental health and wellness, recognising it in
others, and reaching out for support if needed. We have
mental health first aiders at some of our sites and
include mental health and well-being courses in our
training suite.
We recognise that colleagues involved in the transition
of our business may need additional support for their
mental health.
Read more about our culture on page 24
Continuous improvement
We perform strongly but recognise that every incident
has a personal impact and is one too many. We are
therefore on a journey to continuously improve, as we
are in all aspects of our work under Smiths Excellence.
Our primary focus is on sustainable preventative action.
This starts with data analysis focusing on the
identification of patterns, common themes, trends and
anomalies that reveal potential hazards and interrogate
the effectiveness of what we are doing. For example,
reviewing a higher-than-expected number of vehicle
related events despite the allocation of online driving
safety training to all business drivers. Or using a
deep dive into data relating to equipment safety and
leadership safety walks to reveal opportunities to
improve ergonomics and PPE.
FY2026 priorities
–
Build on current momentum, through evaluation
of data insights, analysis of the effectiveness of our
training programmes and culture, and increased
adoption of our Excellence tools and methodologies
to identify and effect incremental changes
–
‘Geofence’ our key global locations to enable real-
time security analysis from our external security
partner and promote greater uptake and use of the
International SOS travel safety app to ensure our
business travellers are fully informed and always
supported, wherever they are
Improving safety,
health and well-being
ESRS:
Own workforce
82
engagement score
‘My workplace is safe
for my colleagues
and myself’
Target:
RIR < 0.4
UN SDGs:
See our
performance
against targets
Page 58
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
39
SUSTAINABILITY
CONTINUED
Commercialising high
value green
technologies
ESRS:
Climate change; Pollution
76
engagement score
‘The company is
committed to having a
positive impact on the
environment’
UN SDGs:
Read more about
markets and
megatrends on
page 12
SUSTAINABILITY
SOLUTIONS
Ambitious commitments to mitigating the impact of
climate change and environmental loss are driving
profound transitions and demand for innovative
solutions across the markets we serve. Sustainability
and efficiency go hand-in-hand, reducing waste,
cutting emissions and pollution, and protecting
natural resources.
Our unique engineering capabilities, products and
services enable us to support customers as they seek
to deliver next-generation efficient and sustainable
infrastructure and processes while achieving their
environmental targets.
John Crane
John Crane mechanical seals and couplings prevent
pollution and greenhouse gases, including methane,
from leaking into the environment during the
transportation and refining of fossil fuels, making
infrastructure systems more efficient, and reducing
environmental impact. The same technology is
deployed in hydrogen and carbon capture projects
where performance demands are even higher. In both
new energy and oil & gas, our technology is supported
by service teams that keep our seals and the
infrastructure they protect, operating efficiently
and reliably, extending equipment life.
John Crane is currently pursuing multiple projects in
carbon capture and storage, hydrogen and biofuels.
As an example, John Crane played a critical role in
supporting Europe’s renewable energy infrastructure
by supplying sealing systems for more than 300 pumps
across three biorefinery projects. These projects
support the production of lower-carbon fuels and
reinforce environmental compliance across essential
transport and energy sectors.
John Crane also secured a supply agreement during
the year for high-performance couplings, gas filters
and nitrogen filters as part of a large-scale energy
development. These solutions contribute to safer,
cleaner, more efficient operations across critical
energy infrastructure.
Flex-Tek
Flex-Tek industrial electric heating technology enables
the heating of industrial gases for applications that
need high pressure or high temperatures or both,
with the potential to facilitate the decarbonisation of
industries currently reliant on fossil fuels, like steel.
Our lower range heating technology is used in
applications in emerging markets for dehumidification,
pollution control and energy storage. Flex-Tek products
are also transforming residential and commercial
building efficiency and emissions through off the peg
solutions for the construction industry supporting
HVAC systems and electrical heating.
Flex-Tek is well placed for further energy-efficient
industrial heating projects, especially following the
acquisition of Wattco, which brings manufactured
process skid systems. Its products such as certified
pressure vessels, integral electric heating platforms,
thermodynamic isolation module systems, and steam
heating support ever-expanding clean energy and data
demand opportunities. A notable recent win was a
multi-year contract for the provision of electric heaters
for an ultra-low carbon emissions electro-fuel project
in North America.
During the year, Flex-Tek launched its ‘Blue Series’
redesigned sealed metal duct system. This innovative
approach to sealing combines a light and low-density
polyurethane foam joint fitting with a patented ribbed
collar which eliminates leakage, providing a more
energy efficient solution and reducing install time,
saving contractors cost on materials and labour.
Read more about our products and services on
www.smiths.com
Read about our latest climate scenario analysis and
risks and opportunities for Smiths on page 46
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
40
SUSTAINABILITY
CONTINUED
CLIMATE CHANGE
AND NET ZERO
We are committed to Net Zero targets and playing our
own part to mitigate climate change by changing the
way we operate and power our businesses. Our
transition plan and targets (operations and value chain)
were validated by the Science Based Targets initiative
(SBTi) in FY2024. These are Net Zero Scope 1 & 2
emissions by 2040 and Net Zero Scope 3 emissions
by 2050.
Path to Net Zero
We have consistently delivered reductions in
operational emissions in recent years through our
focus on energy efficiency, transitioning to green
electricity tariffs, and investing in self-supply (solar)
and electric vehicles. Each of our businesses has
a bespoke emissions reduction plan and we have
developed site energy inventories and dashboards to
enable targeted action delivered by our enthusiastic
teams. Smiths Excellence tools are used to support
many of these projects.
Since FY2023 we have had a demanding energy
efficiency/energy reduction metric linked to our Annual
Incentive Plan for approximately 6,000 colleagues. This
will continue in FY2026, with a target of 2% reduction in
MWh, positively impacting both costs and emissions.
We have had emission reduction targets linked to our
Long-term Incentive Plan (LTIP) since FY2022.
Smiths remuneration targets FY2023–FY2025
FY2023
FY2024
FY2025
AIP target
3%
improvement
in energy
efficiency
4.5%
improvement
in energy
efficiency
2%
1
reduction in
energy use
(MWh)
LTIP target
Scope 1 & 2
15-20%
absolute
reduction by
FY2025
Scope 1 & 2
15-20%
absolute
reduction by
FY2026
Scope 1 & 2
15-20%
absolute
reduction by
FY2027
1
1 See table on page 56
Read more about remuneration in the Remuneration
& People Committee report on page 85
Absolute energy reduction in FY2025 was 2% (3.5
1
% for
AIP adjusted calculation). Targets were exceeded in all
businesses other than Smiths Interconnect through the
successful delivery of projects like Flex-Tek adding
auxiliary power units to the Royal Metals truck fleet to
reduce engine idling.
Renewable electricity
74% of the electricity used in our operations now comes
from renewable sources through a combination of
green tariffs and self-supply via solar. Six solar
installations have been connected at suitable locations,
totalling 3.57MW (more than 5,600 panels), with an
average payback on investment of 3-4 years. We have
invested more than £1 million in solar since FY2023
and have more projects planned from FY2026.
FY2025 performance vs trajectory required to hit SBTs
Scope 1 & 2
Scope 1 & 2 emissions fell 11.4% in the year, tracking
significantly ahead of the annual rate required for our
SBTi targets. Material contributions came from the
purchase of renewable energy certificates at John
Crane, solar installation at Smiths Detection Hemel
Hempstead, UK and the switch from gas to hydrogen
furnaces for production ovens at Flex-Tek.
0
10,000
20,000
30,000
40,000
50,000
60,000
FY2021
FY2025
FY2035
FY2030
FY2040
SBT trajectory
FY2025 performance
Delivering
Net Zero GHG
ESRS:
Climate change
Target:
–
Net Zero Scope 1 & 2
emissions by 2040
–
Net Zero Scope 3
emissions by 2050
–
2% reduction in energy
use FY2025 vs FY2024
–
80% renewable
electricity by FY2027
–
17.5% reduction in
Scope 1 & 2 emissions
FY2027 vs FY2024
–
25% of supplier spend
committed to SBTi
targets by FY2027
See our
performance
against targets
Page 56
UN SDGs:
The closer integration of sustainability with Smiths
Excellence has enabled a more programmatic way
of working on sustainability improvement projects
across the organisation. This, along with number of
project targets, has accelerated our progress in
energy reduction, emissions reduction, water and
waste reduction, and biodiversity.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
41
SUSTAINABILITY
CONTINUED
Scope 3 emissions
For Scope 3, our data and reporting are less mature, but
we have established a critical path based on supplier
engagement and reporting, supplier science-based
targets, and external transition including grid
decarbonisation. Supplier reporting is supported by
the EcoVadis supplier platform which is enabling us to
engage more deeply with our supply chain, including our
logistics providers, on a range of sustainability topics and
to target reductions in our Category 1, 4 and 9 emissions
(purchased goods and services and transportation and
distribution). Our Category 11 emissions (use of sold
products) are being targeted through continuous
improvement in the energy efficiency of our products
and preventative maintenance of customer systems
(for example at Smiths Detection).
FY2025 performance vs trajectory required to hit SBTs
Scope 3
Scope 3 emissions increased year on year due to the
FY2024 restatement and an increase in Category 11
emissions from increased product sales at Smiths
Detection. Reduction project examples include John
Crane Morton Grove moving to 3D printing of press
applicators to reduce scrap and waste and Smiths
Detection continuing to expand its use of repaired
and refurbished parts for service.
FY2021
FY2030
FY2040
FY2050
0
400,000
800,000
1,200,000
1,600,000
FY2025
SBT trajectory
FY2025 performance
Read more about the EcoVadis platform on page 45
Read more about Lifecycle Assessment (LCA) on
page 42
Data quality
During the year we migrated to the Watershed
sustainability platform to increase the accuracy and
robustness of our energy, GHG, water and waste
reporting and audit practices, and enable more
confident and effective modelling and targeted action.
Both the FY2024 and FY2025 data presented in this
report uses Watershed global standard methodology.
To support implementation, we undertook a
reconciliation process to assess and investigate
differences between our legacy methods and
Watershed. Variations were primarily driven by
methodology and emission factor differences between
the two approaches. These changes in methodology
have resulted in a restatement of FY2024 GHG data
which is described on page 55. Details of the changes
in methodology can be found in the Inventory
Management Plan reporting criteria on our website
www.smiths.com.
See our Streamlined Energy and Carbon Reporting
(SECR) disclosure on page 57
See all our energy and GHG data disclosures from
page 200
FY2026 priorities
–
Undertake property portfolio review to embed
sustainability culture at the source of decision-
making
–
Review the potential for virtual power purchase
agreements (VPPAs) in Europe and America
to support operational Net Zero (working with
Accenture)
–
Undertake granular review of our Scope 3 data
and how it is collected to improve accuracy
–
In anticipation of the planned separations,
preparation of re-submission to SBTi for Smiths
(John Crane and Flex-Tek) including re-baselining
and revising targets and defining an impactful
strategy for the future
–
Further our commitment to sustainable product
design with an EcoDesign project and the formal
introduction of a product lifecycle analysis (LCA)
initiative integrated with our manufacturing
excellence workstream
Read about our
latest climate
scenario analysis
and risks and
opportunities
for Smiths
Page 46
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
42
SUSTAINABILITY
CONTINUED
NATURAL RESOURCES
AND BIODIVERSITY
Natural resources are finite. We have a responsibility
to use them respectfully and safely – this includes
sourcing responsibly and minimising consumption,
as well as preventing environmental pollution and
biodiversity impact. We have a longstanding
commitment to non-GHG resource targets and
environmental standards and stewardship.
Environmental management
Our comprehensive portfolio of environmental and
safety standards ensures that we manage our sites
responsibly and mitigate any environmental pollution
and safety risks arising from our activities and use
of controlled substances. Performance is overseen
by our internal audit process, and we maintain an
external environmental compliance audit programme.
All operational sites with more than 100 colleagues
are required to be certified (or working towards
certification) under ISO 14001 standards. Our
businesses participate in a regular forum to share
best practice and ensure compliance with global
restricted and controlled substance regulations
including WEEE, RoHS, Prop65, REACH, TSCA
and Responsible Minerals.
We had no spills and only one environmental
compliance penalty in FY2025.
Water, waste and packaging
We continue to focus on reducing unrecycled waste,
water use and unnecessary packaging from our
operations. We set new three-year targets at the
beginning of the year for both waste reduction and
water use in water-stressed areas (10 locations), where
climate resilience is more critical. We operate a project
tracker to record individual site efforts and maintain
momentum, with many projects delivered using
Smiths Excellence tools.
Recent projects include:
–
John Crane India’s new process to recycle carbide
tool scrap
–
Flex-Tek Titeflex’s design and installation of a new
process and system to capture and reuse waste
water from operations and filter final waste water
before expulsion
Water use normalised to revenue in water-stressed
locations was down 6%. Waste disposal normalised to
revenue was down 6%. We recorded 14 water projects
and 21 waste/circularity projects during the year.
Pollution and biodiversity
We are committed to understanding and addressing
the biodiversity-related impact of our products, our
operations and our supply chains in a proactive manner.
We have conducted a high-level biodiversity-related
risk assessment across our main sites using the
WWF Biodiversity Risk Filter and we are preparing a
framework and approach to biodiversity matters and
data guided by the TNFD’s LEAP (Locate, Evaluate,
Assess, Prepare) approach.
We have embedded biodiversity and water stress
considerations into our due diligence processes when
selecting potential new sites. We will also gather
nature-related data from our suppliers using the
EcoVadis platform. This work is complemented by
our ongoing focus on product design and lifecycle
management.
We recorded 11 biodiversity improvement projects
during the year including our Interconnect Suzhou
colleagues undertaking eco-awareness activities and
tree planting in a local botanical garden.
To signal our deepening awareness and commitment
to nature we have become corporate partners of the
World Land Trust (WLT) an international organisation
involved in conservation and land restoration in
environmentally significant and threatened habitats.
In FY2025 we participated in the WLT’s ‘buy an acre’
programme to protect land equivalent to 1.2x the
Group’s operational footprint, contributing to a wildlife
corridor in a biodiversity-sensitive area.
Circularity and efficient design
Smiths products and services score strongly on the
key pillars driving new EU regulations on sustainable
product design – particularly durability, reusability
and repairability. Our significant aftermarket services
revenue at John Crane and Smiths Detection derives
from keeping our products operating efficiently in
service for longer thus limiting unnecessary waste.
Smiths Detection also operates a recycling,
refurbishment and reuse programme of both units
and their components, delivering benefits to natural
resource efficiency, supply chain security and costs.
FY2026 priorities
–
Undertake property portfolio review to embed
sustainability culture at the source of decision-
making
–
Embed biodiversity risk assessment and new
property assessment for water-stress and
biodiversity risk
–
In anticipation of the planned separations,
preparation of revised baselines and targets
for Smiths (John Crane and Flex-Tek)
–
Refresh our water stressed sites list
–
Further our commitment to sustainable product
design with an EcoDesign project and the formal
introduction of a product lifecycle analysis (LCA)
initiative integrated with our manufacturing
excellence workstream
Respecting natural
resources
ESRS:
Climate change; Pollution;
Biodiversity and
ecosystems; Resource use
and circular economy
Targets:
–
5% reduction in water
use in water-stressed
areas normalised to
revenue FY2025 to
FY2027
–
5% reduction in waste
disposal normalised
to revenue FY2025 to
FY2027
–
30 waste/circularity
projects FY2025 to
FY2027
–
30 biodiversity projects
FY2025 to FY2027
–
30 water saving projects
FY2025 to FY2027
See our
performance
against targets
Page 57
UN SDGs:
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
43
SUSTAINABILITY
CONTINUED
BEHAVING ETHICALLY
AND LEGALLY
Behaving ethically is a key pillar of our culture, driven
by our Values. We also operate in certain regulated
markets and sectors, which require strict adherence to
local and international industry regulations. We have
expert teams in place to manage these matters and we
use data and other intelligence to identify performance
gaps and emerging risk, and endeavour to continuously
improve our procedures.
Our policies and internal controls are dynamic to
respond to and accommodate changes in the external
environment, our business priorities and strategy,
and the intelligence and data we gather. All our Group
policies are reviewed and updated periodically,
and more frequently in areas of greater risk.
Governance and implementation
The Smiths Code of Business Ethics (Code) is the
foundational document that outlines standards of
behaviour at Smiths and what we expect of our
partners. It is supplemented by a suite of policies,
procedures and training relating to specific ethics,
compliance and people matters. We have a central
Ethics & Compliance team which oversees our ethics
and compliance programmes and ensures that efforts
are focused on higher risk and critical areas. Day-to-
day responsibility for ethics and compliance is held by
our business teams. Our Business Ethics Council,
comprised of senior leaders from across Smiths, acts
as an advisory and discussion panel for emerging
matters of interest and policies. During the year, the
Ethics & Compliance team supported the investigation
into the balance sheet overstatement at a stand-alone
US site in the industrial business of Flex-Tek and
the related accounting treatment. See page 81 for
more information.
Read more about our legal and compliance controls
on page 34
See the Smiths Code of Business Ethics on
www.smiths.com
Speaking out
Ensuring that we engage colleagues with the Code is
imperative, as is colleague awareness and trust in our
procedures. Our colleagues and business partners
are expected to be vigilant and report any activity or
behaviour that they consider may be in breach of our
Code and Policies or inconsistent with our Values.
This can be done through their line manager, HR, or
the Legal team, or by using our confidential Speak Out
reporting hotline. Speak Out data and outcomes are
reported to the Audit & Risk Committee.
There were 328 Speak Out reports in FY2025. 20% of
reports relating to ethics and compliance matters were
substantiated and recommendations passed back to
the business area to address. In FY2025, Speak Out
data shows a continued rise in anonymous reporting
and a decline in substantiated allegations – indicating
fewer reports that confirm a policy violation. Notably,
there was a significant increase in cluster reporting,
where multiple individuals submitted separate reports
about the same concern. This trend contributed to both
the higher anonymity and lower substantiation rates.
When cluster reports are excluded, rates remain
consistent with prior years.
Training and awareness
Our ethics training operates in two tiers – online
modules delivered in all our core languages, and group
training activities covering specific subjects for relevant
cohorts. We also run regional ethics workshops as
appropriate for middle and senior leaders to embed
deeper understanding and discuss challenges specific
to markets and geographies.
Behaving ethically
and legally
Managing risk and
maintaining strong and
effective controls
ESRS:
Business conduct
71
engagement score
‘People I work with live
the company values’
UN SDGs:
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
44
SUSTAINABILITY
CONTINUED
Human rights and modern slavery
We consider violations of human rights to be appalling
crimes. Conduct that exploits workers or denies them
the rights and benefits to which they are legally entitled
is wholly inconsistent with our Values and policies
and is not tolerated. We recognise the important
responsibility we have, and we support the vision of a
world where everyone can access decent work and
enjoy their universal human rights.
Our Human Rights Policy is guided by international
human rights principles, including those encompassed
in the Universal Declaration of Human Rights and the
United Nations Guiding Principles on Business and
Human Rights. We adhere to national laws and
regulations in our markets and, should we encounter
conflict between internationally recognised human
rights and national laws, we will seek ways to honour
the principles of international human rights. All persons
working for, or on behalf of, Smiths are required to
adhere to our Policy which covers the following areas:
–
Elimination of forced/involuntary labour and
child labour
–
Humane treatment in the workplace
–
Workplace equality/elimination of bias
–
Right to a living wage, reasonable working hours
and vacation
–
Freedom of association
–
Safe and healthy workplace and safe and healthy
accommodation if accommodation is provided for
employees
Our Modern Slavery Statement, which is approved by
the Board, sets out the steps we have taken to address
modern slavery trafficking in our business and supply
chains. All colleagues are provided with training on
modern slavery risks.
We have not identified any serious human rights issues
in our operations or in those of our suppliers in FY2025.
Read more about our supply chain on page 45
See our Modern Slavery Statement on
www.smiths.com
Anti-bribery and anti-corruption
Bribery and corruption matters are covered by the
Code of Business Ethics. We also have specific policies
and procedures relating to activities that create bribery
and corruption risks, and an umbrella Anti-Bribery
and Corruption Policy that provides a single view of
our approach. These policies cover a broad range of
matters including the giving and receiving of gifts,
meals and hospitality; invitations to government
officials; our approach to facilitation payments; and
controls around the appointment of distributors and
agents, customs brokers and freight forwarders. In
FY2025 we undertook an anti-bribery risk assessment
for our China region and prepared for a maquiladora
summit for colleagues in Mexico focused on trade
compliance, anti-bribery and corruption and human
rights. The summit took place in early FY2026.
Data protection and privacy
Smiths does not collect consumer information or
market to consumers, which reduces these risks;
however, we do process data relating to our colleagues
and collect information on business contacts. We have
a common set of principles, policies and processes
to ensure that our teams are aware of their
responsibilities relating to personal data, with data
privacy matters overseen by the Ethics & Compliance
team. Our network of Privacy Champions discusses
evolving privacy regulation as well as emerging issues
and, along with the Ethics & Compliance team, are
responsible for ensuring compliance with regulations
in the jurisdictions in which we operate. Internal Audit
conducts assessments of our data privacy controls.
FY2026 priorities
–
Tailor our ethics and compliance programme
to support the evolving priorities of Smiths
–
Deliver ethics and compliance workshops in South
Korea, Japan and China to strengthen regional
engagement
–
Continue our successful Advanced Investigations
course to enhance HR’s ability to identify and
address modern slavery
Read more about
our controls
relating to product
quality and safety
Page 32
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
45
SUSTAINABILITY
CONTINUED
SUPPLY CHAIN
We purchase materials, components and some finished
goods from many suppliers across the world. Our
businesses, in turn, form part of the supply chains of
our customers. Transparency and the ability to effect
change in these networks helps us manage risk and
make progress on our strategic and sustainability
priorities. We want to work with suppliers who are
explicitly aligned with our Values and that support
our human rights commitments.
Responsible procurement
Our commitment to behaving positively in society
requires a similar commitment from our suppliers.
Our Supplier Code of Conduct makes our expectations
of suppliers and sub-suppliers clear when it comes
to ethical behaviour and compliance with the law,
treatment of personnel, and materials from socially
and environmentally responsible sources. Suppliers
are required to adhere to our Supplier Code of Conduct.
New suppliers are subject to due diligence checks, and
we have a supplier onboarding process to assess risk
and ensure that suppliers can meet our standards. We
undertake risk reviews and regular audits of suppliers
to provide an ongoing check.
See our ESG Supply Chain Due Diligence Policy on
www.smiths.com
In FY2024, we introduced the EcoVadis supplier
platform to standardise our management of suppliers,
assess and mitigate risk areas, and support emerging
disclosure requirements. The platform enables us to
assess suppliers against four standard sustainability
pillars (environment; labour and human resources;
ethics and compliance; and sustainable procurement)
taking into account industry and country risk. Once
suppliers are on the platform, we can collect, report
and validate data across a range of metrics and create,
agree and monitor corrective action plans for alignment
with our needs, including SBTi targets and
ethical practice.
By the end of FY2025 28% of suppliers by spend had
been evaluated on the platform and we completed the
introduction process of more than 50% of the second
group of selected vendors (selected based on risk
profile). Implementation of corrective action plans has
begun for both waves. 9% of our suppliers by spend
have SBTi aligned targets. A first-year maturity review
indicated that we are progressing as planned and
recommended priorities to adopt into our roadmap.
Ultimately, we intend to merge all supplier onboarding
processes into one ecosystem on EcoVadis.
Human rights and modern slavery
We expect suppliers to share our commitment to
human rights and to be free from practices associated
with human rights violations, including forced/
involuntary labour, human trafficking and modern
slavery. We take very seriously any allegations that
human rights are not properly respected in our supply
chains and recognise that, as a global business, we
need to be constantly vigilant.
Our standard supplier contract templates oblige our
suppliers to make various commitments on human
rights and fair labour standards in relation to their own
workforces, and to seek the same commitment from
their suppliers. They are also asked to notify us if they
become aware of any breach. Our onboarding process
seeks information about employees’ work and (if
relevant) housing conditions, employment terms and
labour practices. If migrant workers are contracted, we
ask about their employment terms and any restrictions
placed on their movement and financial arrangements.
In the case of recruitment agencies, we conduct due
diligence on appointment to ensure that we understand
the processes they have in place to manage modern
slavery risks, and that they sign up to our commitments
We have a sustainability working group of procurement
leaders to continue to enhance awareness and drive
positive, preventative actions in our supply chain,
including as relates to human rights and modern slavery.
See our Modern Slavery Statement on
www.smiths.com
Conflict minerals
Our Responsible Minerals Sourcing Policy addresses
our commitment to the sourcing of minerals in an
ethical and sustainable manner that safeguards human
rights. It also ensures that tin, tungsten, tantalum, gold
and cobalt are sourced with due respect for human
rights and in a manner that does not finance armed
groups. To achieve this objective, we take guidance
from the OECD Due Diligence Guidance for Responsible
Supply Chains of Minerals from Conflict-Affected and
High-Risk Areas.
FY2026 priorities
–
Continue with introduction of EcoVadis group 3 (all
suppliers with annual spend >£250k)
–
Plan supplier audits in Latin America
–
Conduct a strategic assessment to define the most
effective, risk-based, and proportionate approach
for evaluating ESG compliance among Tier 2
suppliers
Read about our Scope 3 emissions on page 41
Supply Chain
ESRS:
Business conduct; Climate
change; Resource use and
circular economy; Workers
in the value chain
Targets:
–
40% of supplier spend
evaluated on EcoVadis
by FY2027
–
25% of supplier spend
committed to SBTi
targets by FY2027
UN SDGs:
See our
performance
against targets
Page 56
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
46
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES
FCA Listing Rules
In this Annual Report, we set out climate-related financial disclosures consistent with all of the Task
Force on Climate-related Financial Disclosures (TCFD) recommendations and recommended
disclosures pursuant to Listing Rule 6.6.6(R)8(a)(b). This includes all four of the TCFD pillars and the
11 recommended disclosures set out in the report entitled ‘Implementing the Recommendations of
the Task Force on Climate-related Financial Disclosures’ published in October 2021 by the TCFD.
In completing this work, we made use of TCFD guidance material including the TCFD technical
supplement on the use of scenario analysis, TCFD Guidance on Metrics, Targets and Transition Plans,
and the TCFD Guidance for All Sectors. We are reporting against the TCFD framework in line with the
FCA Listing Rules.
Pages
GOVERNANCE
a) Describe the Board’s oversight of climate-related risks and opportunities
46, 83, 100
b) Describe management’s role in assessing and managing climate-related risks and opportunities
46
STRATEGY
a)
Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long term
49
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy
and financial planning
48
c)
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
47
RISK MANAGEMENT
a) Describe the organisation’s processes for identifying and assessing climate-related risks
48, 26
b) Describe the organisation’s processes for managing climate-related risks
48, 35
c)
Describe how processes for identifying, assessing and managing climate-related risks are integrated into
the organisation’s overall risk management
48, 26
METRICS AND TARGETS
a)
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with
its strategy and risk management processes
52, 40, 56
b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 emissions and the related risks
40, 57
c)
Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets
40, 57
Compliance statement
Governance
Board
The Board has overall responsibility for our approach
to sustainability matters, including climate change.
Oversight during the year has been delegated to
Board sub-Committees. Specifically, the Audit & Risk
Committee has overseen climate risk management
while the Innovation, Sustainability & Excellence (ISE)
Committee has overseen delivery of our commitments
in relation to climate change. The ISE Committee will
be retired in FY2026 and its climate change
responsibilities will be elevated to the Board.
The Board has oversight of our Group-level and
business strategies, receiving performance updates
from our four businesses twice a year. This includes an
annual strategy presentation and operational updates.
Our Board has a collective competency for
sustainability matters, including climate change.
Individual Directors have sustainability experience
gained from current and previous positions held at
other companies. When determining Board Committee
composition, the relevant skills and experience of the
individual Non-executive Directors are considered to
ensure each Committee has the required
competencies. Further detail can be found in the Board
biographies on pages 65 and 66. Our Board governance
framework is described on page 64.
See page 78 for the Audit & Risk Committee report and
page 99 for the ISE Committee report.
Executive Committee
Our Business Presidents sit on the Executive
Committee and are responsible for our businesses’
approach to sustainability, including climate change.
The Executive Committee members report to the CEO,
who reports directly to the Board six times a year.
Discussions at the Executive Committee relate to
Board governance
framework
Read more
Page 64
Audit & Risk
Committee report
Page 78
Innovation,
Sustainability &
Excellence Committee
report
Read more
Page 99
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
47
TCFD
CONTINUED
year’s assessment. This data quantifies financial
exposure to climate risk by risk type, modelled in line
with these three scenarios.
For further detail on how our climate-related risks are
managed and reported in line with our wider risk
management process, refer to page 26.
Net zero scenario (SSP1 – RCP 2.6)
In this scenario, all current net zero pledges are
achieved in full and there are extensive efforts to
realise near-term emissions reductions. Advanced
economies reach net zero emissions by 2050, China
around 2060, and all other countries by 2070 at the
latest. This scenario is consistent with limiting the rise
in global temperature to below 2°C. With some level of
net negative emissions after 2070, global temperature
rise could be reduced to 1.5°C by 2100.
Current trajectory scenario (SSP 2 – RCP 4.5)
This scenario sets out to show to what extent
announced ambitions and targets are on the path to
deliver emissions reductions required to achieve net
zero emissions by 2050. The rise in global temperature
will exceed 2°C by 2100, with a more noticeable shift to
happen in the latter half of the century.
Breach of planetary boundaries scenario
(SSP 5 – RCP 8.5)
This scenario is not aligned to any of the pledges laid
out in the Paris Agreement and is one where countries
are unable to meet the UNSDGs. This scenario will have
the most severe physical consequences for the planet.
The temperature rise will exceed 4°C by 2100, leading
to high loss of biodiversity and species extinction.
Transition scenarios
We also updated our transition scenarios to latest
practice, with three scenarios, including a low carbon
pathway.
High ambition scenario (IEA WEO Net Zero Energy
Scenario/NGFS Net Zero scenario)
This scenario is a pathway where the world achieves
Net Zero by 2050, with advanced economies reaching it
sooner, but with all economies contributing in an orderly
transition with strong and co-ordinated incentives.
Global temperature increase is less than 1.5°C by 2100.
Strategy
Climate-related risks and opportunities
The time horizons considered for identified climate-
related risks and opportunities are found in the table
below. Our strategic planning horizon has three distinct
time periods: short term (5 years), medium term (5-10
years), and long term (beyond 10 years). The level of
uncertainty and number of unknown variables
increases as the timeframe extends.
We have assessed a range of physical and transition
risks and opportunities that could impact our business
over short-, medium- and long-term time horizons:
Short term: 2025–2030
Medium term: 2030–2035
Long term: 2035 and beyond
This assessment determines that climate-related risks
and opportunities are likely to impact the business in
the medium and long term only, and that the business
and its strategy remain resilient to short-term climate
risks with the adaptation and mitigation strategies
currently in place. We have also determined that none
of the climate risks identified represent a material
financial risk to the business in the time periods
considered, although they are identified as a Group
principal risk in aggregation. See page 49 for details of
the recent scenario analysis conducted and page 29 for
principal risks to the Group.
Climate scenarios
We use climate scenarios to inform management and
relevant stakeholders within our businesses about
climate risks and the opportunity environment in order
to assess impact.
Physical scenarios
In FY2025, we updated our physical climate scenario
analysis using the latest Intergovernmental Panel on
Climate Change (IPCC) scenarios to model the impacts
of physical risks where our sites and supply chains are
located. This TCFD disclosure increases our climate
scenarios from two to three and includes a low carbon
aligned climate pathway. Climate risk data from the
Group’s insurers has also been integrated into this
commercial climate activities such as new market
opportunities, innovation and product development,
and operational climate-related activity, such as energy
and GHG reductions and business continuity planning.
The Chief People, Sustainability & Excellence Officer
oversees the Group’s overall direction, targets and
reporting on operational sustainability matters.
The Board considers climate-related issues when
reviewing strategy and performance objectives. The ISE
Committee reviews our net zero operational transition
plans and regularly reviews climate metrics and
targets such as energy efficiency, GHG, water and
waste. These metrics are also discussed in
management reviews.
Climate-related risks are managed and reported in line
with our wider risk management processes, with the
outcomes of business assessments integrated into
executive-level strategic planning and priorities.
A number of key climate-related issues were discussed
by the Executive Committee and/or Board Committees
in FY2025 including:
–
Megatrends driven by climate change covering
energy use, energy sources and energy delivery
and related opportunities for Smiths. See page 12
–
Progress against the Group’s SBTs and transition
planning for Net Zero Scope 1, 2 and 3 emissions,
including investment in solar
–
Alignment of remuneration with environmental
targets. See page 87 of the Remuneration & People
Committee Report
Executive remuneration
We have incorporated climate-related metrics into our
incentive plans since FY2022. In FY2023, we introduced
climate-related metrics into our Annual Incentive Plan
(AIP) and our Long-Term Incentive Plan (LTIP) to more
closely align decision-making and ownership of climate
goals. These continued through to FY2025. In FY2026
we will retain a climate-related metric (reduction in
energy use) in our AIP.
Markets and
megatrends
Page 12
Remuneration & People
Committee report
Page 85
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
48
TCFD
CONTINUED
Scenario analysis outcomes
A Group summary of our risk and opportunities
assessment across each scenario is provided on pages
49 to 52. As described above, risks and opportunities
are categorised as arising in the short, medium or long
term. They are also categorised by financial impact
under the following definitions:
1. Very low
–
Marginal impact on the Group
–
Financial impact less than £25 million effect on
revenue
2. Low
–
Relatively marginal impact on the Group
–
Financial impact £25–50 million effect on revenue
3. Moderate
–
Moderate impact on the Group
–
Financial impact £50–100 million effect on
revenue
4. High
–
Significant impact on the Group
–
Financial impact £100–250 million effect on
revenue
5. Very high
–
Very significant impact on the Group
–
Financial impact more than £250 million effect
on revenue
As part of our ongoing strategic planning work, we
have identified the global decarbonisation agenda
and the fundamental revolution in energy use,
energy sources and energy delivery as continuing
opportunities for our John Crane and Flex-Tek
businesses. These businesses already address a range
of climate-related matters, including: lower emission
oil & gas systems; compression, transportation and
storage of hydrogen; carbon capture and storage;
electrical heat; and building efficiency. See pages 50
and 52 for specific opportunities identified as arising
from our climate scenarios.
Risk management
We have a Group-wide approach to risk management
which is discussed in detail on pages 26 to 28. Details of
how we manage our aggregate Climate change risk can
be found on page 35.
Our discrete climate risk assessment work considers
a wide range of risks relating to climate change
identified with the support of external technical
specialists and then evaluated through Group and
business workshops using the climate scenarios
described above. Risks include impacts relating to
damage to assets from weather events, cost and
availability of resources, safety and comfort of our
people, and regulation relating to GHG emissions. The
identification process includes assessment of our value
chains, for example extreme weather impact on key
assets in our supply chains.
Medium ambition scenario (IEA WEO Announced
Pledges Scenario)
This scenario covers all major national announced
pledges as of August 2024 and assumes countries
implement these national targets in full and on time. It
also assumes achievement of country targets relating
to clean cooking and access to electricity. Global
temperature increase is less than 2°C by 2100.
Low ambition scenario (IEA WEO Stated Policies
Scenario – STEPS)
This scenario is a more conservative benchmark based
on the national policy and sector landscape as of
August 2024, but with ambitions/full implementation
not automatically incorporated into the scenario. Global
temperature increase is 3°C by 2100.
Impact on the business, strategy and financial
planning
Our Net Zero transition plan and GHG emissions
reduction targets for Scopes 1, 2 and 3 were approved
by the Science-Based Target initiative (SBTi) in
December 2023. These outline our operational Net Zero
GHG trajectory to meet a 1.5°C scenario by achieving
Net Zero Scope 1 & 2 emissions by 2040 and Net Zero
Scope 3 emissions by 2050 and milestones in between.
This aligns with the Net Zero by 2050 targets set out
by the UK and US governments (which are our largest
areas of operation). Business-level initiatives and
actions to reduce Scope 1 & 2 emissions are based
on energy efficiency, green electricity and fleet
electrification. The majority of our Scope 3 emissions
will be addressed by in-country grid decarbonisation
and via engaging with significant suppliers on their
own science-based targets. See page 41.
Supply chain
Read more about
sustainability in our supply
chain
Page 45
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
49
TCFD
CONTINUED
A summary of our risk and opportunities assessment across each scenario can be found below.
Potential impact
SSP1 – 2.6
Net Zero
SSP2 – 4.5
Current
trajectory
SSP5 – 8.5
Breach of
planetary
boundaries
Risk and risk description
Time horizon and scope
Response/actions we’re taking and how they are managed
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
Physical risks
Environment (acute physical)
Increased risk of property damage and
business interruption, from climate-
related natural hazards at our
operational sites, e.g. raised severity
of storm activity.
Here, the financial risk
relates to increased costs and resulting
revenue losses due to business
disruption, repair and increasing
insurance costs.
Medium
All businesses
All sites are required by policy to complete annual site-specific risk
assessments through the business continuity plans review, which
considers risks from a wide range of issues, including from severe
weather.
In particular, a number of John Crane and Smiths Interconnect sites
have been identified as vulnerable, so mitigation measures are being
put in place such as relocations; alert systems; guidance from
insurance providers when sites come up for insurance policy renewal;
and local, specific mitigation measures such as independent
generators.
2
3
2
3
5
5
Environment (acute physical)
Health and safety risks,
due to
overheating from heatwaves and water
supply issues due to regional water
scarcity. This could lead to a loss of
revenue due to operations having to be
temporarily shut, as well as additional
costs from heating and cooling.
Medium or
Long
All businesses
A number of our facilities have been identified as vulnerable to the
effects of climate change and extreme weather. There are health and
safety risks associated with the increased frequency and severity of
heatwaves, droughts and higher temperatures.
2
3
2
3
2
3
Environment (acute physical)
Weather events directly impacting
transportation networks,
and the
global value chain. This could lead to a
loss of revenue due to delays in getting
products to market.
Medium
All businesses
We are reviewing and investigating ways to minimise travel distances by
ensuring products are produced as close to customers as possible.
2
3
2
3
2
3
We aim to avoid the use of single-source materials to increase
resilience over regional disruption. This includes looking at reducing
double handling of products by having suppliers send directly to
customers.
2
2
2
2
2
3
Key
Short term
2025–2030
Medium term
2031–2036
Long term
2036 onwards
Risk
Definition
1. Very low
Marginal impact
on the Group
Financial impact:
Less than
£25 million effect
on revenue
2. Low
Relatively
marginal impact
on the Group
Financial impact:
Between
£25-50 million
effect on revenue
3. Moderate
Moderate impact
on the Group
Financial impact:
Between
£50–100 million
effect on revenue.
4. High
Significant impact
on the Group
Financial impact:
£100–250 million
effect on revenue.
5. Very high
Very significant
impact on the
Group
Financial impact:
More than
£250 million effect
on revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
50
TCFD
CONTINUED
Potential impact
SSP1 – 2.6
Net Zero
SSP2 – 4.5
Current trajectory
SSP5 – 8.5
Breach of planetary
boundaries
Opportunity and opportunity description
Time horizon and scope
Response/actions we’re taking and how they are managed
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
Physical opportunities
Environment (chronic physical)
Increased demand for cooling
systems.
Ongoing extreme variation
in global temperatures will increase
demand for heating, ventilation and
air conditioning (HVAC) systems
from Flex-Tek globally.
Medium
Flex-Tek
Increased revenue from increased demand for residential and
domestic cooling systems, driven by ongoing variation in global
temperatures.
2
3
3
3
3
3
Environment (chronic physical)
New clients/market due to
increased frequency and severity
of dry spells/drought.
John Crane
also has the opportunity to develop
sealing and water filtration
technology for transportation and
cleaning of water in water-stressed
locations.
Medium
John Crane
We are reviewing and investigating ways to minimise travel distances
by ensuring products are produced as close to customers as possible.
2
3
2
3
3
3
Environment (chronic physical)
Growth in remote sensing market.
Increasing demand and
requirements for climate change/
weather/environmental tracking
and monitoring.
Medium
Smiths
Interconnect
Increased revenue from growth in demand for satellite technology for
environmental monitoring and tracking.
3
4
3
4
3
5
Key
Short term
2025–2030
Medium term
2031–2036
Long term
2036 onwards
Opportunity
Definition
1. Very low
Marginal impact
on the Group
Financial impact:
Less than
£25 million effect
on revenue
2. Low
Relatively
marginal impact
on the Group
Financial impact:
Between
£25-50 million
effect on revenue
3. Moderate
Moderate impact
on the Group
Financial impact:
Between
£50–100 million
effect on revenue.
4. High
Significant impact
on the Group
Financial impact:
£100–250 million
effect on revenue.
5. Very high
Very significant
impact on the
Group
Financial impact:
More than
£250 million
effect on revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
51
TCFD
CONTINUED
Potential impact
IEA WEO NZE
High ambition
Net Zero
IEA WEO APS
Medium ambition
announced
pledges
IEA WEO STEPS
Low ambition
stated policies
Risk and risk description
Time horizon and scope
Response/actions we’re taking and how they are managed
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
Transition risks
Political and legal risk
Regulations relating to sustainability
and GHG emissions
would lead to
increased costs for compliance and
reporting, as well as costs associated
with emissions reductions and
monitoring.
Medium
All businesses
We have an established Sustainability Group and other cross-functional
working groups to monitor current and emerging regulations.
3
3
2
3
2
3
Market risk
Increased transportation costs due to
greater fuel costs
relating to freight and
internal transportation.
Medium
All businesses
Reduction in double handling of products, optimising space in freight
through reusable and recyclable packaging solutions and exploring
localised business models.
3
3
2
3
2
3
Market risk
Increased cost and reduced availability
of critical raw materials,
leading to
price volatility and production
constraints.
Medium
All businesses
Actions are taken based on trends such as pre-buys or vendor managed
inventory. Businesses also periodically look at alternative materials.
3
3
2
3
2
3
Market risk
R&D and capital costs required to
adapt existing products and processes
to suit evolving needs from customers.
There is a risk of unsuccessful
investment.
Medium
Smiths
Detection and
Flex-Tek
Smiths Detection has an investment programme in place to improve
product performance in anticipation of client and policy demands.
Flex-Tek continually changes and adapts products to meet market
demand for sustainable products.
5
5
5
5
2
2
Market risk
New and emerging competitors.
Reduced accessible market due to
increased competition in Net Zero/
energy efficiency space such as
methane leakage. Increased
competition could lead to reduced
revenue.
Medium
All businesses
John Crane has implemented procedures to track and respond to
changes in demand from traditional oil & gas customers to additionally
target its portfolio of products and services to target new customers
and markets, e.g., hydrogen and carbon capture.
5
2
5
2
3
2
Smiths Detection monitors power consumption of its products relative
to competitors and product durability and strives to be best in class to
lower total cost of ownership.
Key
Short term
2025–2030
Medium term
2031–2036
Long term
2036 onwards
Risk
Definition
1. Very low
Marginal impact
on the Group
Financial impact:
Less than
£25 million effect
on revenue
2. Low
Relatively
marginal impact
on the Group
Financial impact:
Between
£25-50 million
effect on revenue
3. Moderate
Moderate impact
on the Group
Financial impact:
Between
£50–100 million
effect on revenue.
4. High
Significant impact
on the Group
Financial impact:
£100–250 million
effect on revenue.
5. Very high
Very significant
impact on the
Group
Financial impact:
More than
£250 million effect
on revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
52
TCFD
CONTINUED
Potential impact
IEA WEO NZE
High ambition Net
Zero
IEA WEO APS
Medium ambition
announced pledges
IEA WEO STEPS
Low ambition
stated policies
Opportunity and opportunity description
Time horizon and scope
Response/actions we’re taking and how they are managed
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
2030
medium
term
2050
long
term
Transition opportunities
Products and services
Aviation/energy efficiency
requirements, with demand
increasing for efficient detection
products.
Opportunity for
increasing revenue here.
Medium
Smiths
Detection
Smiths Detection monitors power consumption of its products relative
to competitors and product durability and strives to be best in class to
lower total cost of ownership.
3
5
3
4
3
4
Products and services
Growth in energy efficiency
products market, as there’s
increased demand for efficiency
and emission reduction products,
with increased revenue from
sealing solutions that reduce
hydrocarbon leakage.
Medium
John Crane
Continuing development of next generation solutions for oil & gas and
other industrial customers that align with their decarbonisation
targets, such as via digitisation.
3
3
4
3
3
2
Products and services
Demand for new products and
services in the aviation sector,
e.g.
future development of electric
planes. This could generate
additional revenue.
Medium
Flex-Tek
Monitoring progress of electric aviation technology and testing.
Developing relationships with existing and new market players.
2
3
2
3
1
2
Metrics and targets
We have identified relevant metrics and targets to
monitor progress in achieving our sustainability goals,
as well as manage and mitigate identified climate-
related risks and opportunities. They include: energy
use, GHG emissions, % renewable electricity,
reductions in water and waste, and water, packaging
and biodiversity projects. Our metrics and targets are
monitored by the ISE Committee and inform decision-
making to execute our strategic priorities.
See pages 40 to 41 and pages 55 to 57 for our metrics
and targets and discussion of performance in FY2025.
See page 40 for how these metrics are linked to our
incentive arrangements.
Key
Short term
2025–2030
Medium term
2031–2036
Long term
2036 onwards
Opportunity
Definition
1. Very low
Marginal impact
on the Group
Financial impact:
Less than
£25 million effect
on revenue
2. Low
Relatively
marginal impact
on the Group
Financial impact:
Between
£25-50 million
effect on revenue
3. Moderate
Moderate impact
on the Group
Financial impact:
Between
£50–100 million
effect on revenue.
4. High
Significant impact
on the Group
Financial impact:
£100–250 million
effect on revenue.
5. Very high
Very significant
impact on the
Group
Financial impact:
More than
£250 million
effect on revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
53
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
Reporting requirement
Relevant policy or document
More information and related principal risk
Environmental
matters
Environmental Sustainability Policy
– our commitment to minimising the
environmental impact of our business activities, products and services worldwide
Waste Policy
– the principles we have adopted to address our most significant waste
impacts and issues
Water Policy
– the principles we have adopted to address our most significant water
impacts and issues
ESG Supply Chain Due Diligence Policy
– the due diligence processes we have
adopted for supplier selection and monitoring to ensure ESG compliance
Key performance indicators
Risk management and Principal risks and uncertainties
Task Force on Climate-related Financial Disclosures
Sustainability metrics, targets and performance
Innovation, Sustainability & Excellence Committee report
Principal risk: Climate change
Page 6
Page 26
Page 46
Page 55
Page 99
Page 35
Climate-related
financial
disclosures
Environmental Sustainability Policy
– our commitment to minimising the
environmental impact of our business activities, products and services worldwide
Waste Policy
– the principles we have adopted to address our most significant waste
impacts and issues
Water Policy
– the principles we have adopted to address our most significant water
impacts and issues
ESG Supply Chain Due Diligence Policy
– the due diligence processes we have
adopted for supplier selection and monitoring to ensure ESG compliance
Key performance indicators
Task Force on Climate-related Financial Disclosures
Sustainability metrics, targets and performance
Principal risk: Climate change
Page 6
Page 46
Page 55
Page 35
Employees
Code of Business Ethics
– outlines the ethical standards we all commit to
Human Rights Policy
– recognises the important responsibility we have with respect
to human rights
Fair Employment Policy
– designed to make Smiths a fair, inclusive and respectful
place to work
Recruitment Policy
– designed to attract, engage, develop and retain talented people
who share our values and sense of purpose
Health, Safety and Well-being Policy
– describes our commitment to achieving
excellence in the health, safety and well-being of colleagues
Key performance indicators
Our people and culture
Risk management and Principal risks and uncertainties
Behaving ethically and legally
Sustainability metrics, targets and performance
Stakeholder engagement and S172 statement
Remuneration & People Committee report
Principal risk: People
Page 6
Page 24
Page 26
Page 43
Page 55
Page 70
Page 85
Page 33
Social matters
Code of Business Ethics
– outlines the ethical standards we all commit to
Data Protection Code of Conduct
– sets out the standard for collecting and handling
personal data about individuals
Supplier Code of Conduct
– our commitment to doing business safely, sustainably,
lawfully and to the highest business and ethical standards
Modern Slavery Statement
– steps taken by Smiths to address the risk of modern
slavery and human trafficking in its business and supply chains
Key performance indicators
Our strategy and business model
Business review
Sustainability metrics, targets and performance
Stakeholder engagement and S172 Statement
Principal risk: Legal and compliance
Page 6
Page 11
Page 17
Page 55
Page 70
Page 34
Principal risks
Read more about our
principal risks
Page 29
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
54
NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
CONTINUED
Reporting requirement
Relevant policy or document
More information and related principal risk
Respect for
human rights
Code of Business Ethics
– outlines the ethical standards we all commit to
Modern Slavery Statement
– steps taken by Smiths to address the risk of modern
slavery and human trafficking in its business and supply chains
Human Rights Policy
– recognises the important responsibility we have with respect
to human rights
Speak Out Policy
– outlines the circumstances in which an employee should Speak
Out to report suspected wrongdoing and the appropriate channels to do so
Responsible Minerals Sourcing Policy
– addresses our commitment to the sourcing
of minerals in an ethical and sustainable manner that safeguards human rights
Our people and culture
Risk management and Principal risks and uncertainties
Behaving ethically and legally
Principal risk: Legal and compliance
Page 24
Page 26
Page 43
Page 34
Anti-bribery and
anti-corruption
matters
Code of Business Ethics
– outlines the ethical standards we all commit to
Anti-Corruption Policy
– sets out Smiths approach and controls to manage bribery
and corruption risks
Speak Out Policy
– outlines the circumstances in which an employee should Speak
Out to report suspected wrongdoing and the appropriate channels to do so
Risk management and Principal risks and uncertainties
Behaving ethically and legally
Audit & Risk Committee report
Principal risk: Legal and compliance
Page 26
Page 43
Page 78
Page 34
Business model
Key performance indicators
CEO review
Our strategy and business model
Principal risk: Commercial
Page 6
Page 9
Page 11
Page 33
United Nations
Sustainable
Development
Goals
Business has a vital role to play in delivering the UN SDGs. Our business activities, the
way we operate, and our ESG framework and priorities enable us to contribute in a
meaningful and practical way to seven of these critical global goals.
Read more on www.smiths.com
Key performance
indicators
Page 6
Policy due diligence and outcomes
Smiths is committed to maintaining a culture of integrity and accountability. A key part of this commitment is our confidential Speak Out reporting hotline, which enables
employees and stakeholders to report concerns relating to breaches of our Values, policies or the law. This reporting hotline plays an important role in assessing the
effectiveness of our policies and ensuring they are upheld across the Group.
The Internal Audit function supports this by conducting regular audits to assess adherence to key policies and procedures. In FY2025, audits included cyber security and
responsible sourcing, providing valuable insight into how policies are being applied in practice. In parallel, our Ethics & Compliance team issues targeted surveys to selected
sites and functions each year. These surveys include questions on recruitment, employment practices and other relevant topics, and are used to assess compliance with our
Human Rights Policy and broader ethical standards.
Supporting information
More information on the Group’s principal risks and how they are managed can be found on pages 29 to 36. The Group’s key performance indicators, including both financial
and non-financial metrics, can be found on pages 6 to 8. The Company’s S172 Statement is on pages 70 to 71 in the Governance report.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
55
SUSTAINABILITY METRICS,
TARGETS AND PERFORMANCE
ENVIRONMENT
Energy and GHG emissions
GHG inventory
The Group assesses the GHG emissions associated with all its global operations
for all four of its businesses and all sites, as well as the Group function. We have
developed a GHG Inventory Management Plan (IMP) that outlines our methodology to
provide systematic and appropriate GHG inventory data collection, manipulation and
management, to produce a relevant, credible and transparent GHG inventory that will
provide visibility into our near- and long-term goals. The IMP includes methods to
estimate direct emissions from Smiths operations (Scope 1), indirect emissions from
purchased energy (Scope 2), and value chain emissions (Scope 3). The methods
prescribed in the IMP conform to the World Resources Institute (WRI) and World
Business Council for Sustainable Development (WBCSD) GHG Protocol and the
United States Environmental Protection Agency (USEPA) Center for Corporate
Climate Leadership Greenhouse Gas Inventory Guidance.
GHG boundaries
Per the GHG protocol, we have selected the operational control approach to set the
organisational boundary for our GHG inventory, meaning 100% of GHG emissions
from assets which the Company manages and over which it has authority to
implement operational policies will be included. In selecting these organisational
boundaries, we evaluated equity share, financial control and operational control
approaches and primarily considered the comprehensiveness of assets that would
be included in the inventory under each of the three approaches, as well as which
boundary would best reflect the Group’s level of influence over emissions.
As for our operational boundary, which determines the direct (Scope 1) and indirect
(Scope 2 and 3) emissions associated with operations within our organisational
boundary, we defined this as operations where we have the full authority to introduce
and implement operating policies. Operations or activities that are outside of our
operational control, and therefore excluded from our Scope 1 and Scope 2
inventories, may become relevant when accounting for Scope 3 emissions.
GHG emissions are reported in metric tonnes of CO
2
equivalents (MT CO
2
e).
Because individual GHGs have different impacts on climate change, or global
warming potentials (GWPs), CO
2
e is used to express the impact of emissions from
each GHG on a common scale. Smiths uses the IPCC Sixth Assessment Report (AR6)
GWPs. The Group will report all GHG emissions within its organisational and
inventory boundary. Emissions are considered outside of the inventory boundary
when they are quantified as not material.
Inventory boundary
Smiths Group will report all GHG emissions within its organisational and inventory
boundary. Emissions are considered outside of the inventory boundary when they are
quantified as not material.
Limited assurance
KPMG has provided limited assurance under ISAE (UK) 3000 and 3410 over selected
information marked with ∆. See www.smiths.com for full assurance reports.
Long-term targets:
–
Net Zero emissions from our operations (Scope 1 & 2) by 2040 (SBTi)
–
Net Zero emissions from our supply chain and products in use (Scope 3)
by 2050 (SBTi)
FY2024 restatement
The migration to the Watershed sustainability platform has enabled global standard
methodology to be applied to emissions calculations for FY2024 and FY2025. This has
resulted in a restatement of FY2024 emissions for all scopes as described in the
table on page 56.
Read more about
climate change and
Net Zero
Page 40
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
56
SUSTAINABILITY METRICS, TARGETS AND PERFORMANCE
CONTINUED
FY2024 restatement
KPI
FY2024
restatement
FY2024 as
previously
published
Change
Global Scope 1 GHG Emissions (tCO
2
e)
18,758
19,687
(4.7)%
Global Scope 2 (Market Based) GHG Emissions (tCO
2
e)
23,820
21,072
13%
Global Scope 2 (Location Based) GHG Emissions (tCO
2
e)
47,150
48,989
(3.8)%
Global Scope 1& 2 (Market based) GHG emissions (tCO
2
e)
42,578
40,759
4.5%
Global Scope 3 GHG Emissions (tCO
2
e)
1,151,467
1,170,000
(1.6)%
Scope 3 Category 1 – Purchased goods and services
1
671,196
728,000
(7.8)%
Scope 3 Category 2 – Capital goods
9,579
9,410
1.8%
Scope 3 Category 3 – Fuel and energy-related activities
13,308
14,600
(8.8)%
Scope 3 Category 4 – Upstream transportation and distribution
91,134
75,200
21.2%
Scope 3 Category 5 – Waste generated in operations
2,676
5,066
(47.2)%
Scope 3 Category 6 – Business travel
11,559
12,200
(5.3)%
Scope 3 Category 7 – Employee commuting
29,837
23,000
29.7%
Scope 3 Category 8 – Upstream leased assets. Excluded from inventory as immaterial
–
–
–
Scope 3 Category 9 – Downstream transportation and distribution
33,660
29,300
14.9%
Scope 3 Category 10 – Processing of sold products. Excluded from inventory as immaterial
–
–
–
Scope 3 Category 11 – Use of sold products
237,185
240,000
(1.2)%
Scope 3 Category 12 – End of life treatment of sold products
6,869
8,120
(15.4)%
Scope 3 Category 13 – Downstream leased assets. Excluded from inventory as immaterial
–
–
–
Scope 3 Category 14 – Franchises. Excluded from inventory as immaterial
–
–
–
Scope 3 Category 15 – Investments
44,464
23,150
92.1%
Global Energy Use (MWh)
218,344
215,027
1.5%
1
Not impacted by the Flex-Tek subsidiary balance sheet restatement described on page 81.
Performance and short-term targets
FY2025
FY2024
Change
Target
Target
achieved
Linked to remuneration
Read more on page 85
New target
Linked to remuneration
Read more on page 85
Energy use MWh
209,412
3
217,012
2,3
(3.5)%
2%
1
reduction in absolute MWh
FY2025 vs FY2024
Annual Incentive Plan FY2025
2% reduction in absolute MWh FY2026
vs FY2025 adjusted baseline
Annual Incentive Plan FY2026
Renewable electricity
74%
73%
–
80% by FY2027
Scope 1 & 2 emissions
tCO
2
e
36,809
3
40,760
2,3
(9.7)%
17.5% reduction by FY2027
vs FY2024
Long-Term Incentive Plan FY2024
Scope 3 emissions tCO
2
e
1,188,057
Δ
1,151,467
2
3.2%
SBTi trajectory
Supplier engagement
28%
–
–
40% of supplier spend evaluated
on EcoVadis by FY2027
Supplier engagement
Scope 3
9%
–
–
25% of supplier spend committed
to SBTi targets by FY2027
1
Target expressed as the MWh energy consumed (excluding renewable electricity produced and consumed onsite), compared to a revenue-adjusted MWh baseline (excluding price growth within the measurement year), and excludes Wattco, Modular Metal and Duc-Pac.
2
FY2024 restated. See page 55.
3
Excluding Wattco, Modular Metal and Duc-Pac.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
57
SUSTAINABILITY METRICS, TARGETS AND PERFORMANCE
CONTINUED
SECR global energy use and emissions disclosure
FY2025
FY2025
Continuing
operations
FY2025
Discontinued
operations
FY2024 restated
1
FY2024 restated
Continuing
operations
2
FY2024 restated
Discontinued
operations
2
FY2024
3
as previously
published
FY2023
as previously
published
Change
FY2025
vs FY2024
(restated)
Global energy use – absolute values
MWh
213,519
Δ
194,945
18,574
218,344
199,193
19,151
215,027
218,094
(2)%
UK energy use – absolute values
MWh
9,385
–
–
9,661
–
–
17,906
11,394
Global emissions – absolute values
Scope 1 (direct emissions)
t CO
2
e
17,422
Δ
16,962
460
18,758
18,063
695
19,687
19,694
Scope 2 (market-based emissions)
t CO
2
e
20,286
Δ
15,837
4,449
23,820
19,830
3,990
21,072
25,955
Scope 2 (location-based emissions)
t CO
2
e
46,732
41,777
4,955
47,150
42,325
4,825
48,989
47,111
Scope 3 (value chain emissions)
t CO
2
e
1,188,057
Δ
1,031,195
156,862
1,151,467
1,011,150
140,317
1,170,000
1,380,000
Total Scope 1 & 2 emissions (market-based)
t CO
2
e
37,708
Δ
32,799
4,909
42,578
37,893
4,685
40,759
45,649
(11.4)%
∆
Total Scope 1 & 2 emissions (location-based)
t CO
2
e
64,154
58,739
5,415
65,908
60,388
5,520
68,676
66,805
UK Scope 1 & 2 emissions (market-based)
t CO
2
e
1,228
–
–
1,341
–
–
1,290
1,779
Global emissions – normalised values
Scope 1 (direct emissions)
t CO
2
e/£m revenue
5.22
–
–
5.99
–
–
6.29
6.48
Scope 2 (indirect emissions)
t CO
2
e/£m revenue
6.08
–
–
7.61
–
–
6.73
8.55
Scope 3 (value chain emissions)
t CO
2
e/£m revenue
356.13
–
–
367.65
–
–
373.56
454.40
Total Scope 1 & 2 emissions
t CO
2
e/£m revenue
11.30
–
–
13.59
–
–
13.02
15.03
(16.9)%
1. FY2024 restated. See page 55
2. Broken out for comparison purposes.
3. FY2024 as previously published. See page 55.
Water, waste, packaging and biodiversity
Performance and short-term targets
FY2025 vs FY2024
Target
Normalised water use in stressed areas (10 locations
1
)
(6)%
5% reduction in water use in water-stressed areas normalised to revenue FY2025 to FY2027
Normalised waste disposal
(6)%
5% reduction in waste disposal normalised to revenue FY2025 to FY2027
Waste/circularity
21 projects in
FY2025
30 waste/circularity projects FY2025 to FY2027
Biodiversity
11 projects in
FY2025
30 biodiversity projects FY2025 to FY2027
Biodiversity – water
14 projects in
FY2025
30 water saving projects FY2025 to FY2027
1
Updated annually based on the World Resource Institute (WRI) Aqueduct tool.
Read more about natural resources and biodiversity on page 42
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
58
SUSTAINABILITY METRICS, TARGETS AND PERFORMANCE
CONTINUED
SOCIAL
Safety
Target:
continuous improvement towards a zero-harm workplace. Group RIR below 0.4.
Performance
Recordable injuries
Recordable incident rate per 100 employees
Lost time incident rate per 100 employees
FY2025 12 month Group safety scorecard
41
0.28
0.09
FY2024
1
71
0.44
0.21
FY2023
64
0.41
0.14
FY2022
87
0.56
0.25
FY2021
–
0.47
0.20
1
12 month Group safety scorecard for the FY2024 period shows 63 recordable injuries and RIR of 0.40.
Read more about safety on page 38
Gender and ethnic diversity
Medium-term target:
30% of senior leadership positions held by women by FY2025. See definition in the table below.
FY2025
28%
FY2024
27%
FY2023
25%
FY2022
24%
FY2021
23%
Other gender disclosures
As at 31 July 2025
Male # of employees
Female # of employees
Definition
Board of Directors
8
73%
3
27%
Executive Committee
6
67%
3
33%
Senior Leadership Team
473
72%
188
28%
Senior Leadership Team is the metric used to track gender diversity at Smiths. It is defined as all colleagues on permanent and fixed-
term contracts in senior leadership roles. These colleagues are able to influence and drive business results.
Total colleagues
11,412
71%
4,691
29%
Employees on permanent and fixed-term contracts.
Senior managers (Companies
Act)
166
79%
43
21%
Executive Committee plus Directors of subsidiary undertakings as defined by the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
Senior managers (UK Code)
48
62%
30
38%
Executive Committee, including the Company Secretary, and their direct reports as defined by the UK Corporate Governance Code 2018.
Women in Leadership
48
62%
29
38%
Executive Committee and their direct reports as defined by FTSE Women Leaders.
Board diversity disclosures
As at 31 July 2025, the Board did not meet all of its own diversity targets or the targets set out in Listing Rule 6.6.6R(9)(a). As at 31 July 2025, women represented 27% of the Board. This will reduce to 25%
following the 2025 AGM, reflecting the planned retirements of Mark Seligman, Noel Tata and Karin Hoeing, at which point the Board will comprise eight members, two of whom will be female. See page 77
of the Nomination & Governance Committee report for more discussion of this topic.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
59
SUSTAINABILITY METRICS, TARGETS AND PERFORMANCE
CONTINUED
Numerical diversity data, in the format required by Listing Rule 6.6.6R(10), as at 31 July 2025, is set out below. The Board and executive management were asked to disclose which characteristic they
identified with.
Sex/gender representation
Number of
Board members
Percentage of the
Board
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)
Number in executive
management
1
Percentage of executive
management
1
Men
8
73%
4
7
70%
Women
3
27%
0
3
30%
Not specified/prefer not to say
–
–
–
–
–
Ethnicity representation
Number of
Board members
Percentage
of the
Board
Number of senior positions
on the Board (CEO, CFO, SID
and Chair)
Number in executive
management
1
Percentage of executive
management
1
White British or other White (including minority white groups)
9
82%
4
9
90%
Mixed/Multiple Ethnic Groups
–
–
–
–
–
Asian/Asian British
2
18%
–
1
10%
Black/African/Caribbean/Black British
–
–
–
–
–
Other ethnic group including Arab
–
–
–
–
–
Not specified/prefer not to say
–
–
–
–
–
1
Defined as the Executive Committee and the Company Secretary in accordance with Listing Rule 6.6.6R(10).
Parker Review disclosure
The Parker Review sets specific targets to enhance the ethnic diversity of British boards, such as having at least one director from an ethnic minority background on every FTSE 100 board, disclosing the
percentage of UK senior management who are from ethnic minorities, and setting a target for what this percentage should be at the end of 2027. Smiths has accordingly sought this data from its UK senior
management group as defined by the Parker Review and set an FY2027 target. 81% of the population responded to the FY2025 request. Our definition of ethnically diverse covers groups with lower
representation in the organisation including Asian, Black and mixed multiple ethnic backgrounds. Our FY2024 disclosure was for the global senior management population, now a voluntary submission.
UK senior management
1
ethnicity representation
FY2025
FY2027
target
Identifying as ethnically diverse
13%
17%
Identifying as white
87%
1
Defined as the Executive Committee and their direct reports. Based on 81% who responded.
Reward and recognition
Recognising and rewarding colleagues in a fair, open and meaningful way is an important foundation
for developing and attracting talent. We are committed to fair pay practices, ensuring colleagues
are rewarded fairly and equally for the work they do and their performance, and that they have
opportunities to participate in our success.
Colleague benefits, which include access to an Employee Assistance Programme for colleagues
and their families, rights to parental leave, the opportunity to request part-time or job share
working and a paid volunteering day, are aligned across all our geographies, businesses and Group.
Approximately 6,000 colleagues participate in our Group Annual Incentive Plan (AIP).
We have been an accredited Living Wage employer in the UK since 2018. In the UK, we operate
an all-colleague Sharesave Scheme, which enables colleagues to buy Smiths shares at a
discounted rate.
Equal opportunities
We provide equal employment opportunities. We recruit, support and promote our people based on
their qualifications, skills, aptitude and attitude. In employment-related decisions, we comply with
all applicable anti-discrimination requirements in the relevant jurisdictions. We have zero tolerance
for discrimination, harassment or retaliation. Our procedures and training activities advocate and
enforce fair treatment for all. We recruit using balanced slates and interview panels where possible
and have gender-neutral job descriptions.
People with disabilities are given full consideration for employment and subsequent training
(including retraining, if needed, for people who have become disabled), career development and
promotion based on their aptitude and ability. We endeavour to find roles for those who are unable
to continue in their existing job because of disability.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
60
GOING CONCERN AND
VIABILITY STATEMENT
funded by cash on hand in all scenarios due to the
strategic separations currently underway; and
–
The currently announced £500m buyback is modelled
to complete by December 2025 in all scenarios with a
deferral being possible mitigation.
Consideration was then given to the magnitude of the
gross risks and their potential impact, directly or
indirectly, on the Group’s future performance and
liquidity. The assessment included stress testing of the
Group’s financial capacity to absorb the impact of such
adverse events, either individually or in combination, and
what mitigating actions the Group could take to respond
to them in order to protect its business.
The Directors also considered the Group’s ability to raise
additional liquidity. In performing this assessment, the
Directors have taken comfort from the diversity of the
Group’s businesses across different markets, industries,
geographies, products and customers. In order to
ensure consistency, the base case used for the three-
year viability assessment has also been reconciled
against business impairment review models. The base
case viability model includes a sale of Smiths
Interconnect completing in H2 of FY2026 and a sale
of Smiths Detection completing in H1 of FY2027. The
cashflows of the sales along with a share buyback for
the majority of the proceeds, are modelled in the risk
scenarios unless otherwise stated.
Based on the robust assessment of the Group’s
emerging and principal risks, including those that
could threaten its business model, future performance,
solvency or liquidity, the Directors confirm that, given
the current strong cash position, under all scenarios
they have a reasonable expectation the Group will
remain viable for the period being assessed and will
continue to operate and meet its liabilities as they fall
due. The Directors have no reason to doubt that the
Group will continue in business beyond the period
under assessment.
In accordance with the requirements of the 2018 UK
Corporate Governance Code, the Directors have
assessed the longer-term prospects of the Group, taking
into account its current position and a range of internal
and external factors, including the principal risks
detailed on pages 29 to 36 (the ‘viability assessment’).
The Directors have determined that a three-year period
to 31 July 2028 is an appropriate timeframe for the
viability assessment. The selected period is considered
to be appropriate as, based on the historical
performance of the Group, a three-year outlook
represents an optimum balance of long-term projection
and acceptable forecasting accuracy. The three-year
viability assessment timeframe also takes into account
considerations such as the maturity of the Group’s
borrowing facilities and the cyclicality of the
performance of the Group’s underlying markets. In
making this viability assessment, the Directors have
considered the current financial position and prospects
of the Group, including the current year business
performance, the detailed operating plan for 2026 and
forecasts for 2027 and 2028. Against these financial
projections, the Directors took into account the principal
risks (as outlined on pages 29 to 36 to develop a set of
plausible scenarios (as set out overleaf) with potentially
high-impact outcomes.
–
FX rates for £ at US$1.30 and €1.19 and are modelled
to remain at this level in the forecast period;
–
Interest payments have been updated to reflect
latest forecast interest rate increases with no further
refinancing, with overdrafts and the Group’s RCF
drawn to maintain our minimum cash requirements;
–
Dividend payments projected to grow over the viability
assessment period. Even under the various individual
downside scenarios it has been assumed that dividend
increases are maintained, with a lower growth or cuts
representing potential mitigation actions;
–
The bond due to be repaid in FY2027 of £550m is
assumed to be partially refinanced with the balance
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Strategic Report on pages 2 to
62. The financial position of the Company, its cash-flows,
liquidity position and borrowing facilities are described
on pages 15 to 17. In addition, the notes to the financial
statements include the Company’s objectives, policies
and processes for managing its capital; its financial
risk management objectives; details of its financial
instruments and hedging activities; and its exposures
to credit risk and liquidity risk.
The Group has undertaken a detailed going concern
review, as set out on page 61, with a severe but plausible
downside scenario, taking into account everything that
has been learnt since the COVID-19 pandemic.
At 31 July 2025 the net debt of the Group, including
businesses held for sale, was £441m, a £228m increase
from 31 July 2024. At the end of July, the Group, including
businesses held for sale, had available cash and
short-term deposits of £226m. These liquid resources
are immediately available with 93% invested with the
Group’s global banking partners. The Group’s debt
profile shows an average maturity of 1.6 years (from
2.6 years at 31 July 2024). There are no scheduled
repayments of debt due until February 2027.
At 31 July 2025 the Group had two Revolving Credit
Facilities (RCFs) from these banks. A US$800m RCF
which matures in May 2030 and a £200m RCF which
matures in June 2027. These RCFs have no financial
covenants attached and were undrawn at 31 July 2025.
The Directors, having made appropriate enquiries, have
a reasonable expectation that the Company and the
Group have adequate resources to continue in operation
for a period of at least 12 months from the date of this
Report, and that there are no material uncertainties that
could impact the ability to do so. Thus, they continue to
adopt the going concern basis of accounting in preparing
the financial statements of the Company and the Group.
Principal risks
Page 29
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
61
GOING CONCERN AND VIABILITY STATEMENT
CONTINUED
Scenarios modelled
Scenarios
Link to principal risks
Scenario-specific assumptions
Scenario 1
A significant economic shock (political unrest or resurgence of a
pandemic) leads to significant supply chain disruption, low customer
demand and recessionary circumstances spanning several years and
well in excess of the impact felt in FY2020/21.
Business continuity and
Economy and geopolitics
–
20% fall in revenue across the Group in FY2026, with a 10% fall in FY2027 (i.e. a partial slow recovery) and a
5% fall in FY2028 compared to the base case
–
65% reduction in operating profit in FY2026 due to plant closures, customer and supply chain disruption,
a 35% fall in FY2027 and 20% in FY2028
–
Increased working capital due to stock builds and customer defaults
–
No mitigating activities such as restructuring and headcount reductions
–
Strategic separations continue as planned
Scenario 2
Risk scenario 1 is coupled with the inability to separate either Smiths
Interconnect or Smiths Detection in the viability period.
Business continuity and
Economy and geopolitics
–
Assumptions are detailed in the above previous scenario 1
–
Strategic separations unable to continue, Smiths Interconnect and Detection cashflows retained including
the Group-wide downside assumptions from scenario 1
–
No separation proceeds or accompanying buyback are included
–
No mitigating activities such as restructuring and headcount reductions
Scenario 3
One of John Crane’s mechanical seals is identified as faulty and the
cause of an explosion at a major refinery causing the deaths of two staff
and significant damage to the plant. John Crane is sued for the costs of
repair and restoration of the plant in addition to the consequential losses
of plant closure.
Product quality
–
Legal defence costs of £20m per annum plus a one-off payment of £100m in FY2026 in settlement of the
deceaseds’ claims
–
Legal defence costs of £5m per annum over the review period in relation to agreement of restoration costs
–
Restoration costs of £50m spread over the three-year review period
–
Legal defence costs of £25m per annum over the review period in relation to mitigation of consequential
loss claims
–
One-off payment of £250m payable in FY2026 in settlement of the losses claim
–
Insurance claim rejected
Scenario 4
Following a product cyber attack, a terrorism related incident occurs at a
US airport. As a consequence, the US Government revokes Smiths
Detection’s licence. Sales of Smiths Detection’s products to the US
Military and all other governmental contracts are banned and, due to the
reputational damage, the impact of the ban spreads to other Group
businesses.
It is assumed in this scenario that the reputational damage is such to
stop any separation process for Smiths Detection and therefore this
scenario includes Smiths Detection’s cash, albeit at a much lower level
going forwards.
Cyber security and
Product quality
–
Immediate loss of all US-based Government contracts within Smiths Detection
–
25% fall in other Smiths Detection revenue over FY2026
–
Gross margin dilution impacted further by a 20% reduction for Smiths Detection margins in FY2027 and
FY2028
–
Loss of 50% of Smiths Interconnect’s North America revenue
–
Legal defence costs of £10m per annum
–
£100m fine levied by the US Government for security breach
–
£50m compensation paid to the US Government in FY2026 in respect of previous products purchased that
may have security flaws
–
Insurance claim under product liability is not met or delayed outside of the review period
–
Separation of Smiths Detection is not completed in the period and no accompanying share buyback is
included
–
Smiths Detection cashflows retained, adjusted for scenario assumptions
–
Separation of Smiths Interconnect is unaffected
–
No mitigating activities such as restructuring and headcount reductions
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
62
GOING CONCERN AND VIABILITY STATEMENT
CONTINUED
Scenarios modelled
continued
Scenarios
Link to principal risks
Scenario-specific assumptions
Scenario 5
Smiths Detection is found guilty of bribing government officials in Asian
countries in order to land significant contracts. This damages the
Group’s reputation and leads to worldwide regulators imposing
significant sanctions on the Group.
It is assumed in this scenario that the reputational damage is such to
stop any separation process for Smiths Detection and therefore this
scenario includes Smiths Detection’s cash, albeit at a much lower level
going forwards.
Legal and compliance
–
Regulatory fines globally amounting to £100m
–
Loss of all future revenue in both China and India
–
10% sales erosion in Smiths Detection’s USA and EMEA markets due to reputational damage
–
£50m of severance costs incurred
–
10% fall in revenue within other Smiths businesses due to the reputational impact
–
Smiths Detection is not separated, with underlying cashflows modelled back in with the above assumptions
on the base case less 10% noted above
–
No separation proceeds or accompanying buyback are included for Smiths Detection
–
Separation of Smiths Interconnect is unaffected
–
No mitigating activities such as restructuring and headcount reductions
Scenario 6
A major fire at the John Crane plant in the Czech Republic renders the
facility unusable, causing severe disruption to production.
Business continuity
–
Loss of six months EMEA revenue and margin in FY2026
–
20% reduction in future (FY2027 and FY2028) EMEA revenue due to loss in market shares and
competitiveness
–
Breach of supply contracts leading to legal defence costs of £20m per annum plus a one-off settlement of
£50m in FY2026
–
Refurbishment and repair costs of £50m in Czech Republic (net of insurance claims)
–
Costs of increasing capacity at other John Crane sites adds additional £50m of cost
–
Capital expenditure on replacement equipment in Czech Republic of £20m (net of insurance claims)
The Strategic report was approved by the Board on
22 September 2025.
By order of the Board
Roland Carter
Chief Executive
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
63
GOVERNANCE
REPORT
Chairman’s introduction
As the Group progresses its
separation activities, I am pleased
to introduce our Governance report,
which outlines our governance
framework and details how the
Board fulfilled its duties over the
past year.
Board succession planning remained a key
focus throughout FY2025. We were pleased to
announce the appointment of Julian Fagge as
Chief Financial Officer and to welcome Simon
Pryce as a Non-executive Director. Both Julian
and Simon are highly experienced business
leaders with significant experience in M&A.
This will be invaluable as Smiths continues
to evolve. Further details about their
appointments can be found in the Nomination
& Governance Committee report on page 75.
Julian’s appointment to the Board led to
subsequent changes to the Executive
Committee. It is essential that both the Board
and the senior leadership team possess the
right combination of skills, experience and
expertise in order to ensure Smiths long-term
success. As we look ahead to FY2026,
succession planning for both the Board and the
Executive Committee will remain a key focus.
This year we have also made changes to the Board’s
governance framework. In January we established
the Separation Oversight Committee (SOC) to provide
dedicated Board-level oversight of the Group’s
separation activities. The SOC plays a vital role in
ensuring that the separations are executed in a way
that delivers shareholder value, maintains operational
continuity, and supports the strategic direction of the
Group. It also ensures that the Board remains closely
engaged with the risks, opportunities and stakeholder
impacts associated with separation activity.
We also agreed to retire the Innovation, Sustainability
and Excellence (ISE) Committee following the AGM in
November 2025. Since its formation, the ISE Committee
has been instrumental in setting the tone from the top
and driving the importance of innovation, sustainability,
and excellence throughout the business. With these
areas now integrated into our operations, and with only
two businesses remaining post separation, elements of
the ISE Committee’s remit will be moved to the Board,
reflecting the strategic importance of sustainability and
innovation. Assurance, risk and remuneration matters
related to ISE will transition to the Audit & Risk and
Remuneration & People Committees respectively.
I would like to thank the ISE Committee Chair, Dame
Ann Dowling, and all Committee members for their
commitment to innovation, sustainability, and
excellence which remain critical to Smiths success.
I was also pleased with the results of the Board’s
externally facilitated Board review. More information
can be found on page 72.
I hope you find the Governance report informative and
transparent. I look forward to discussing its contents at
our upcoming AGM. Finally, I would like to thank the
Group’s workforce and my fellow Directors for their
hard work on behalf of our shareholders throughout
the year. In particular, I wish to acknowledge Mark
Seligman, Noel Tata and Karin Hoeing, who will be
retiring from the Board following the AGM in November.
I would like to thank Mark, Noel and Karin for their
significant contributions to Smiths. They have each
been instrumental in shaping and developing our
current value creation strategy. We wish them all the
best for the future.
Steve Williams
Chairman
UK Corporate Governance Code compliance
In FY2025, and at the date of this report, the
Company applied the Principles and complied with
all Provisions of the FRC’s UK Corporate Governance
Code 2018 (the Code) as explained throughout
this report.
A copy of the Code is available from the Financial
Reporting Council’s (FRC) website at frc.org.uk.
Further information about how we have applied the
Principles of the Code can be found in this report.
Further information
about our compliance
with the Code can be
found as follows:
Board leadership and
Company purpose
Page 64
Division of
responsibilities
Page 67
Composition, succession
and evaluation
Page 72
Audit, risk and internal
control
Page 78
Remuneration
Page 85
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
64
BOARD LEADERSHIP AND COMPANY PURPOSE
Governance framework
The Board is responsible for the long-
term sustainable success of Smiths.
It leads the Group by setting the strategic
direction and overseeing its execution,
ensuring alignment with our purpose,
culture and Values. In doing so, the Board
aims to deliver value for shareholders
and broader stakeholders alike.
The Board maintains oversight of the Group’s internal
controls, risk management, viability and overall
resilience. These areas are regularly monitored by the
Directors to support effective decision making and
the creation and protection of stakeholder value. To
discharge its responsibilities effectively, the Board has
approved a comprehensive governance framework.
This includes a clearly defined Schedule of Matters
Reserved for the Board and delegated authorities to
its five Committees. The framework ensures that the
Board has the information it needs to assess the risks
and opportunities facing the Group and to provide
appropriate challenge and support to management.
The governance framework, including the Terms of
Reference for each of the Board’s Committees, is
reviewed annually and can be found on our website
at www.smiths.com. The Directors may exercise
all powers of the Company, subject to applicable
legislation, regulation and the Articles of Association.
ROLE OF
THE BOARD
Board
Board Committees
Nomination &
Governance
Committee
Audit & Risk
Committee
Remuneration &
People Committee
Innovation,
Sustainability
& Excellence
Committee
Separation
Oversight
Committee
Advises the Board
on the optimal
structure, size and
composition of the
Board and its
Committees. It also
leads the process for
Director
appointments and
Director and senior
management
succession planning.
Oversees the
ongoing
effectiveness of the
Group’s governance
framework.
Ensures the integrity
of the Group’s
financial reporting
and audit processes,
and the maintenance
of sound internal
control and risk
management
systems, including
oversight of the
Internal Audit
function and the
Group’s ethics and
compliance
activities.
Manages the
relationship with
the external auditor,
including providing
recommendations
to the Board and
shareholders in
relation to the
appointment and
reappointment of the
external auditor.
Responsible for the
Group’s Directors’
Remuneration Policy
and reviews and
oversees the Group’s
remuneration
strategy for the
Executive Directors
and senior
management.
Oversees, on behalf
of the Board, the
implementation of
the People strategy
for the Group,
including the Group’s
approach to
diversity, equity and
inclusion.
Oversees the
Group’s approach
to innovation,
sustainability and
excellence (ISE). This
includes overseeing
strategy in relation
to innovation and
sustainability,
Smiths Excellence
and reviewing and
determining ISE
targets, metrics and
key performance
indicators relating to
remuneration.
This Committee will
be retired at the
conclusion of the
2025 AGM.
This Committee was
formed in FY2025.
Reviews and
recommends to the
Board the method,
terms and timing of
the separations of
Smiths Interconnect
and Smiths
Detection, along
with the use of
any proceeds.
Executive Management Committees
Executive Committee
Investment Committee
Disclosure Committee
Assists the Chief Executive Officer in
discharging his responsibilities and
is collectively responsible for
implementing strategy, ensuring
consistent execution and embedding
the culture and Values.
Assesses high-value and high-risk
proposals, capital expenditure,
M&A, asset disposal and special
revenue expenditure projects which
require Chief Executive Officer or
Board approval.
Advises the Chief Executive Officer
and the Board on the identification of
inside information, and the timing
and method of its disclosure.
Read more
Nomination & Governance
Committee report
Page 74
Read more
Audit & Risk Committee
report
Page 78
Read more
Remuneration & People
Committee report
Page 85
Read more
Innovation, Sustainability &
Excellence Committee
report
Page 99
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
65
BOARD
BIOGRAPHIES
Julian Fagge
Chief Financial Officer
Appointed:
1 February 2025. Julian will be standing for
election by shareholders at the 2025 AGM.
Skills and experience:
Julian is a highly experienced leader,
with a strong focus on value accretion and growth. His skills in
strategy development, M&A and finance were strengthened in
his roles as Group Financial Controller and Group Strategy
and M&A Director at Smiths.
Career experience:
Prior to becoming Chief Financial Officer,
Julian was President of Smiths Interconnect. He joined Smiths
as Group Financial Controller in July 2013 and was appointed
as Group Strategy and M&A Director in October 2017 and CEO
of Flex-Tek in 2019. Before joining Smiths, Julian was the
Finance Director for UK and Ireland at Royal Caribbean
Cruises for two years. Prior to that, he spent 12 years at
Procter & Gamble in Geneva, Switzerland.
Qualifications:
Julian has an MA from the University of
Edinburgh and is a Chartered Accountant qualified with The
Institute of Chartered Accountants of Scotland.
Other significant appointments:
Non-executive Director at
NASCIT plc.
Pam Cheng
Non-executive Director
Appointed:
1 March 2020
Skills and experience:
Pam’s expertise in R&D,
manufacturing, sales, marketing, commercial operations,
supply chain management, and technology enhance the
Board’s discussions about embedding world-class
operations.
Career experience:
Pam is Executive Vice President, Global
Operations, IT & Chief Sustainability Officer at AstraZeneca
plc, a multinational pharmaceutical and biopharmaceutical
company. Prior to joining AstraZeneca in 2015, Pam was the
Head of Global Supply Chain Management & Logistics for
Merck. Pam also held the role of President of MSD China.
Pam previously held various engineering and project
management positions at Universal Oil Products, Union
Carbide Corporation and GAF Chemicals.
Qualifications:
Pam holds Bachelor’s and Master’s degrees in
Chemical Engineering from Stevens Institute of Technology,
New Jersey and an MBA in Marketing from Pace University,
New York.
Steve Williams
Chairman
Appointed:
1 September 2023
Skills and experience:
Steve has over four decades of
international experience, most recently as Chairman and CEO
of global businesses. Steve has a proven history of driving
growth and transformation, creating value for shareholders,
customers, employees, and communities in both executive
and non-executive roles.
Career experience:
Steve was previously Chairman at Alcoa
Corporation and a non-executive director at TC Energy
Corporation. He served as an advisory Board member of
Canada’s Ecofiscal Commission and a Board member of the
business council of Canada until 2019. Steve served as Chief
Executive Officer of Suncor Energy Inc., the US and Canadian
listed integrated energy company, from 2012 to 2019 and as
President from 2011 to 2018. Steve spent the first 18 years of
his career at ExxonMobil in the UK, in a variety of commercial,
operational, and technical roles.
Qualifications:
Steve has a BSc in Engineering and is a
graduate of the business economics program at Oxford
University and the advanced management program at
Harvard Business School.
Other significant appointments:
Chairman of Enbridge Inc.
Roland Carter
Chief Executive Officer
Appointed:
26 March 2024
Skills and experience:
Roland has a strong track record of
innovation, sustainability and delivering results, with deep
operational and strategic experience developed over 30 years
at Smiths. He has extensive international experience, having
worked in France, Germany, the US and China.
Career experience:
Prior to Roland’s appointment as Chief
Executive Officer, he had been with Smiths Group for more
than three decades, holding numerous leadership roles within
the business. Before being appointed Chief Executive Officer,
Roland was President of Smiths Detection, President of Asia
Pacific for Smiths Group and President of Smiths Interconnect.
Qualifications:
Roland is a Chartered Engineer, holding both a
Bachelor’s degree in Mechanical Engineering and a Master’s
degree in Electronics.
Alister Cowan
Non-executive Director
Appointed:
1 July 2024. Alister will be appointed as the Chair
of the Remuneration & People Committee at the conclusion
of the 2025 AGM.
Skills and experience:
Alister has extensive experience at
complex global public companies and brings deep and
wide-ranging knowledge of key end markets for Smiths,
notably in the energy and chemical sectors.
Career experience:
Alister was Chief Financial Officer of
Suncor Energy Inc., the US and Canadian listed integrated
energy company, from 2014 to 2023. Prior to joining Suncor,
Alister served as Chief Financial Officer of Husky Energy Inc.
from 2008 to 2014. Before joining Husky Energy, he held
various positions with companies throughout Europe, New
Zealand and Canada.
Qualifications:
Alister has a Bachelor’s degree in Accounting
and Finance from the Heriot-Watt University and is a Member
of The Institute of Chartered Accountants of Scotland.
Other significant appointments:
Lead Independent Director
and Chair of the Audit, Risk and Finance Committee at The
Chemours Co. Non-executive Director and member of the HR
& Compensation Committee and Audit Committee at Pembina
Pipeline Corporation.
Dame Ann Dowling
Non-executive Director
Appointed:
19 September 2018. Dame Ann will be appointed
as the Senior Independent Director at the conclusion of the
2025 AGM.
Skills and experience:
Dame Ann is internationally
recognised for her contribution to engineering research. Her
expertise in engineering, innovation, and sustainability
provides a unique perspective to Board discussions.
Career experience:
Dame Ann has had a distinguished
academic career and is currently an Emeritus Professor of
Mechanical Engineering at the University of Cambridge.
Dame Ann was Deputy Vice Chancellor at the University of
Cambridge from 2015 to 2025, and served as Head of
Engineering for five years until 2014. Additionally, Dame Ann
was the President and Chairman of Trustees of The Royal
Academy of Engineering from 2014 to 2019. She also served
as Non-executive Director of BP plc from 2012 to 2021, where
she was a member of the Safety and Sustainability Committee.
Qualifications:
Dame Ann has a degree in Mathematics and a
PhD in Engineering from the University of Cambridge.
Key
Nomination &
Governance
Committee
Audit & Risk
Committee
Remuneration &
People Committee
Innovation,
Sustainability
& Excellence
Committee
Separation
Oversight Committee
Committee Chair
All Non-executive
Directors are independent
and, in the Chairman’s
case, independent on
appointment.
Other Directors who
served during FY2025
Clare Scherrer retired
from the Board in FY2025.
Her biography can be
found in our FY2024
Annual Report.
Read more
The biographies of our
Executive Committee
members can be found
on our website.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
66
BOARD BIOGRAPHIES
CONTINUED
Simon Pryce
Non-executive Director
Appointed:
1 February 2025. Simon will be standing for
election by shareholders at the 2025 AGM.
Skills and experience:
Simon is a highly experienced
business leader of customer focused, global, industrial
manufacturing and service businesses, with a strong track
record of value creation. He has held several Chief Executive
Officer positions at listed companies with direct experience of
Smiths Group’s key end markets, customers and supply
chains.
Career experience:
Simon is the Chief Executive of RS Group
plc, a FTSE listed, global omni-channel provider of product
and service solutions. He was appointed into the role in 2023.
Prior to that he was Chief Executive of Ultra Electronics
Holdings plc between 2018 and 2022 and Chief Executive of
BBA Aviation plc between 2007 and 2018. He was a non-
executive Director of RS Group from 2016 and Remuneration
Committee Chairman from 2020 until his appointment
as CEO.
Qualifications:
Simon has a BSc from Reading University and
is a Member of The Institute of Chartered Accountants in
England and Wales.
Mark Seligman
Senior Independent Director
Appointed:
16 May 2016. Mark will retire from the Board
at the conclusion of the 2025 AGM.
Skills and experience:
Mark’s extensive non-executive
background, including as senior independent director and
audit committee chairman at several FTSE 100 companies,
is valuable to our Board. Mark has significant experience in
corporate finance and capital markets, which supports Board
discussions on portfolio management and strategy.
Career experience:
During his career as a senior investment
banker, Mark held various roles at Credit Suisse, including
Chairman of UK Investment Banking. Mark was previously
Senior Independent Director at NatWest Group plc.
Qualifications:
Mark has an MA in Philosophy, Politics and
Economics from Oxford University.
Other significant appointments:
Alternate member at
Panel on Takeovers and Mergers for the Association for
Financial Markets in Europe; Chairman of the Trustees,
Brooklands Museum.
Karin Hoeing
Non-executive Director
Appointed:
2 April 2020. Karin will retire from the Board at the
conclusion of the 2025 AGM.
Skills and experience:
Karin’s experience in oil & gas,
defence, security, and aerospace bring considerable guidance
in these sectors and in ESG and sustainability matters. As
Chair of the Smiths Remuneration & People Committee, Karin
oversees workforce engagement by the Non-executive
Directors.
Career experience:
Karin is Group ESG, Culture and Business
Transformation Director at BAE Systems plc. Prior to this she
was Group Human Resources Director. Before joining BAE
in 2018, Karin led one of the major international business
divisions at Schlumberger, a multinational oil services
company. Karin spent 20 years at Schlumberger, where she
held several senior HR, marketing, technology and line
management leadership positions across Europe, the Middle
East and Asia.
Qualifications:
Karin holds a Diploma in Geophysics (MSc
Geophysics) from the University of Hamburg, Germany.
Richard Howes
Non-executive Director
Appointed:
1 September 2022
Skills and experience:
Richard brings significant, current
expertise in M&A activity to the Board. His broad experience
in senior financial roles across various sectors within large,
listed companies provides valuable insight to Board
discussions.
Career experience:
Richard currently serves as Chief
Financial Officer of Bunzl plc, the specialist international
distribution and services Group. Richard qualified as a
Chartered Accountant with Ernst & Young before moving to
the investment bank Dresdner Kleinwort Benson. Prior to
joining Bunzl in 2019, Richard held CFO positions at various
multinational businesses including Inchcape plc, Coats Group
plc and Bakkavor plc.
Qualifications:
Richard holds a BSc in Geography from
Loughborough University and is a Fellow of The Institute of
Chartered Accountants in England and Wales.
Noel Tata
Non-executive Director
Appointed:
1 January 2017. Noel will retire from the Board at
the conclusion of the 2025 AGM.
Skills and experience:
Noel has had a long and successful
global business career, providing him with extensive
knowledge of the high-growth economies which are crucial
for our strategy.
Career experience:
Noel was appointed as Chairman of Tata
Trusts in 2024 and in that capacity, he chairs all the Trusts that
comprise the Tata Trusts. Noel joined the Board of Tata Sons
Pvt Ltd in 2024 and is Non-Executive Chairman and Director
of Tata International Limited, having served as Managing
Director until November 2021. Noel has been associated with
the Tata Group for over 40 years.
Qualifications:
Noel has a BA in Economics from the
University of Sussex.
Other significant appointments:
Each of the following
companies forms part of the Tata Group: Non-independent
Non-executive Chairman at Tata Investment Corporation,
Trent Ltd and Voltas Ltd. Non-independent Non-executive Vice
Chairman at Tata Steel Limited and Titan Company Ltd.
Matthew Whyte
Company Secretary
Appointed:
1 August 2021
Skills and experience:
Matthew is a Chartered Company
Secretary and a Fellow of The Chartered Governance Institute
UK and Ireland. Matthew joined Smiths in 2017 having
previously gained governance and legal experience in senior
roles in large multinational listed groups in a variety of
sectors, most recently at Schroders plc and Rio Tinto plc.
Matthew is a member of the GC100 Executive Committee.
Key
Nomination &
Governance
Committee
Audit & Risk
Committee
Remuneration &
People Committee
Innovation,
Sustainability
& Excellence
Committee
Separation
Oversight Committee
Committee Chair
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
67
DIVISION OF RESPONSIBILITIES
HOW THE BOARD
OPERATES
There is a clear division of responsibilities between the
leadership of the Board and the executive management
of the Group. The Chairman is responsible for leading
the Board and ensuring its effectiveness, while the
Chief Executive Officer is responsible for the day-to-day
management of the business and for developing and
implementing the Group’s strategy, as approved by
the Board.
Executive management provide the Board with the
information and insight required to support informed
decision-making. At each Board meeting, the Chief
Executive Officer and Chief Financial Officer report on
business performance and progress against strategic
objectives. Business Presidents, functional leaders and
subject matter experts are regularly invited to present
to the Board, providing visibility of talent and supporting
succession planning. External advisers attend Board
and Committee meetings as required.
The Board operates under a formal
Schedule of Matters Reserved for its
decision, covering issues of strategic,
financial or reputational significance.
This ensures that key decisions are taken
at the appropriate level and supports
effective oversight and accountability.
The Schedule forms part of our wider
governance framework.
The Chairman meets with the Non-executive Directors
without the Executive Directors present after each
Board meeting and holds regular discussions with the
Senior Independent Director and Committee Chairs.
He also meets each Non-executive Director individually
at least once a year. The Senior Independent Director
meets with the Non-executive Directors annually
without the Chairman present to assess the Chairman’s
performance.
The Company Secretary supports the Board by
ensuring the timely provision of clear, concise and
balanced materials.
Director attendance at Board and Committee meetings
during FY2025 is set out below.
Director attendance
Board
Nomination & Governance
Committee
Audit & Risk
Committee
Remuneration & People
Committee
Innovation, Sustainability &
Excellence Committee
Separation Oversight
Committee
Ad hoc Board
Committees
1
Steve Williams
9/9
6/6
–
6/6
–
4/4
2/2
Roland Carter
9/9
–
–
–
–
–
2/2
Clare Scherrer
2
5/5
–
–
–
–
–
–
Julian Fagge
3
4/4
–
–
–
–
–
1/1
Alister Cowan
9/9
–
4/4
–
–
4/4
1/1
Pam Cheng
9/9
–
–
6/6
4/4
–
–
Dame Ann Dowling
9/9
–
–
6/6
4/4
–
–
Karin Hoeing
9/9
6/6
–
6/6
4/4
–
–
Richard Howes
4
9/9
6/6
4/4
–
–
3/4
2/2
Mark Seligman
5
9/9
5/6
4/4
–
–
4/4
1/1
Noel Tata
6
8/9
6/6
–
–
4/4
–
–
Simon Pryce
7
4/4
–
2/2
–
–
4/4
–
1
Two additional ad hoc Board Committees were held to consider the Group’s response to the cyber
security incident and the strategic review (before the formation of the Separation Oversight Committee)
2
Clare Scherrer retired as Chief Financial Officer in February 2025
3
Julian Fagge was appointed as Chief Financial Officer in February 2025
4
Richard Howes was unable to attend a Separation Oversight Committee meeting which was held
at short notice
5
Mark Seligman did not attend one meeting of the Nomination & Governance Committee as his
own succession was being considered
6
Noel Tata was unable to attend an ad hoc Board meeting which was held at short notice
7
Simon Pryce was appointed as Non-executive Director in February 2025
Board review
Page 72
Board activity and key
decisions
Page 69
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
68
HOW THE BOARD OPERATES
CONTINUED
Division of responsibilities
Chairman
Senior Independent Director
–
Ensures the Board’s continued effectiveness
–
Shapes Boardroom culture and encourages individual Director engagement
–
Leads the Board and sets the Board agenda, determining the style and
tone of discussions at Board meetings
–
Leads the annual Board review
–
Supports the Chairman in the delivery of the Board’s objectives
–
Serves as an intermediary for the other Directors, if necessary
–
Is available to shareholders if they wish to raise any concerns
–
Leads the Chairman succession process
Chief Executive Officer
Non-executive Directors
–
Develops and proposes strategy to the Board
–
Sets and communicates the Group’s culture and Values
–
Leads the Executive Committee
–
Manages the day-to-day operations of the Company
–
Manages relationships with key stakeholders
–
Provide constructive challenge and strategic guidance to Board and
Committee discussions
–
Oversee management and the business and offer specialist advice
–
Assess the effectiveness of the systems of internal control and risk
management
Chief Financial Officer
Company Secretary
–
Supports the Chief Executive Officer in ensuring the development and
execution of strategy
–
Ensures the accuracy and completeness of the Group’s financial
statements to ensure they are a true and accurate reflection of the
Company’s performance
–
Ensures the Group operates robust risk management and internal
control systems to ensure accurate and timely financial and non-financial
reporting and ultimately to safeguard stakeholders’ interests
–
Supports the Chairman in the efficient and effective functioning of the
Board and its Committees
–
Ensures the Board receives quality information in a timely manner
–
Advises the Board on governance matters
commitment to Smiths. After serving on the Board for
almost nine years, Noel will not be seeking re-election
at the 2025 AGM.
Independent advice and insurance
Directors are able to seek independent professional
advice, at the expense of Smiths, to enable them to fulfil
their obligations as members of the Board. In addition,
the Directors and Officers of Smiths and its subsidiaries
benefit from Directors’ and Officers’ liability insurance
policy. Throughout FY2025, and at the date of this
report, qualifying third-party indemnity provisions (as
defined by section 234 of the Companies Act 2006) were
in force for the Directors and the Company Secretary of
the Company. These provisions cover specific liabilities
incurred in the course of their duties to the Company or
its subsidiaries.
directorship in a FTSE 100 company, or any other
significant external appointment. The Board reviews
all new external appointments in advance, to consider
potential conflicts and time commitments.
In FY2025 the Board concluded that the Chairman and
the Non-executive Directors devoted sufficient time
to fulfil their commitments to Smiths. This included
considering the Directors’ positions held at other
organisations.
Particular consideration was given to Noel Tata’s other
commitments as he holds a number of board-level
positions outside the Group as shown in his biography
on page 66. These roles, all held within the Tata Group,
were reviewed by the Board and were found not to
impact his ability to meet his responsibilities and time
Time commitment
All Directors must allocate sufficient time to discharge
their responsibilities effectively. The letter of
appointment for Non-executive Directors sets out an
expected time commitment of 25 days per annum.
However, the Chairman, Committee Chairs and the
Senior Independent Director commit additional time as
required by the demands of their roles. In the normal
course of business, Directors are expected to
familiarise themselves with business priorities and
challenges, attend and prepare thoroughly for Board
and Committee meetings, engage with stakeholders
and participate in the Board review process.
Executive Directors are not permitted to hold the
chairmanship or more than one non-executive
Read more
Nomination & Governance
Committee report
Page 74
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
69
BOARD ACTIVITY
AND KEY
DECISIONS
–
Discussed senior management succession planning,
including the talent pipeline across the Group, and
endorsed changes to the Executive Committee
–
Received updates from the Non-executive Directors
on their workforce engagement activities
–
Received regular health and safety reports and
statistics
–
Reviewed the implementation of the Group’s People
strategy and were provided with a deep-dive on
culture
–
Received updates about the Group’s pension
arrangements
–
Reviewed the work of the Smiths Group Foundation
–
Approved the Board Diversity Policy and the Modern
Slavery Statement for publication on the website
Finance
Key decisions
–
Agreed the Company’s capital allocation
priorities in the context of its investment strategy
and growth agenda. This included approving the
enhanced share buyback programme, M&A-
related expenditure, the final dividend for FY2024
and the FY2025 interim dividend
–
Considered the Group’s financing arrangements
and approved the proposal to re-establish the
Group’s Euro Medium Term Note programme
–
Approved the Group’s FY2026 financial budget
–
Approved the Group’s financial results
announcements and the FY2024 Annual Report,
and the updated guidance for full-year organic
revenue growth
Stakeholders considered: Investors, Governments
and regulators
Strategy
Key decision
–
In January, the Board agreed several strategic
actions to unlock value and enhance returns
to shareholders. These included the planned
separation of the Smiths Interconnect and
Smiths Detection businesses
Stakeholders considered: Our people, Customers,
Suppliers, Communities, Governments and
regulators, Investors
–
Evaluated acquisition opportunities and approved
the acquisition of Duc-Pac Corporation, Modular
Metal Fabricators, Inc. and Wattco, Inc.
–
Received regular performance updates on all of
the businesses
–
Received updates on the progress of the
Acceleration Plan
–
Held discussions with external experts on
strategically significant topics including energy
transition and the current macro-economic
environment
–
Received regular sustainability updates and reports
on progress against our sustainability targets
People and culture
Key decision
–
Discussed Board succession planning and
approved the appointment of a new Chief
Financial Officer and Non-executive Director.
See page 75 for more information.
Stakeholders considered: Our people, Investors
–
Considered individual business performance
through deep-dives as part of the annual Board
and Committee meeting cycle
–
Approved the Tax Strategy for publication on the
website
Governance and oversight
Key decisions
–
Approved the Group’s principal risks
–
Oversaw the Group’s response to the cyber
security incident
Stakeholders considered: Our people, Customers,
Suppliers, Communities, Governments and
regulators, Investors
–
Continued oversight of the internal control
framework
–
Approved and provided oversight of the Ethics &
Compliance annual work programme, including
regular updates on the Group’s Speak Out
whistleblowing hotline
–
Completed an external review of Board
effectiveness and agreed on areas of development.
See page 72 for more information
–
Approved changes to the Board’s governance
framework, including the addition of the Separation
Oversight Committee and the retirement of the
Innovation, Sustainability & Excellence Committee
–
Considered investor feedback following the Group’s
financial results, strategic actions announcements
and investor roadshows, and held a UK Shareholder
Association Event to engage with current and
potential retail shareholders
A summary of the Board’s activities and key decisions taken in FY2025 is set out below.
The stakeholder groups considered as part of the decision-making process are listed
in the blue boxes denoting key decisions.
Read more
Section 172 Statement and
stakeholder engagement
Page 70
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
70
SECTION 172 STATEMENT AND
STAKEHOLDER ENGAGEMENT
to work. The Board is closely monitoring the impact
of the announcement of the strategic actions on
our people. The Chief Executive Officer provides
regular written and verbal updates about how our
people are being supported through the significant
ongoing change.
–
The Board and Remuneration & People Committee
receive regular updates and deep-dives from the
Chief People, Sustainability & Excellence Officer on
employee engagement, reward, talent, and diversity
and inclusion. They also monitor KPI metrics in
these areas. Engagement can be measured through
our annual employee engagement survey ‘My Say’,
with results available on page 25.
–
Our commitment to our people begins with their
safety and health. Workplace safety is our top
priority, and Directors receive health and safety
reports at every Board meeting. These reports
also cover well-being and physical security
management. Over the year, the Board has been
updated on the status of colleagues working
or travelling in areas where there is conflict or
geopolitical uncertainty.
–
As part of our Non-executive Director workforce
engagement programme, Directors meet with
colleagues across the business. In FY2025, these
included informal introductions and sites visits in
China, the UK and the US. They also joined meetings
with teams in the business and in corporate
functions, both in person and virtually.
–
Engaging and communicating on ethical matters is
vitally important, as is colleagues having trust in our
procedures. The Audit & Risk Committee receives
updates on Speak Out, our confidential reporting
hotline, and other reports and statistics relating
to the Group’s ethical policies and performance.
More information on page 43.
During the year ended 31 July 2025, the Directors acted
in accordance with their duties under Section 172 of the
Companies Act 2006, promoting the long-term success
of the Group for the benefit of shareholders while
considering the interests of wider stakeholders.
The Board’s decisions were guided by our strategic
objectives and Values, and were made with a clear
focus on sustainable growth, responsible business
conduct, and the creation of long-term value. Directors
considered a broad range of stakeholder perspectives,
balancing commercial priorities with the needs of
employees, customers, suppliers, shareholders,
and the communities in which we operate. This
engagement, through a range of mechanisms detailed
in this section, enables the Board to understand
competing priorities and make informed, fair decisions,
particularly where interests may conflict. The Board
receives regular reports on stakeholder views and
engages directly where appropriate. Our governance
framework, supported by robust processes and a
commitment to transparency, ensures that stakeholder
considerations are integral to decision-making and that
high standards of conduct are maintained. The Board
continues to act fairly between shareholders, providing
regular updates and encouraging dialogue through the
AGM and other channels.
Engaging with our stakeholders
Our people
–
Our people are vital to the success of the Group.
We aim to attract and retain talent by creating an
environment based on respect, personal growth,
recognition, talent development and a sense of
belonging and purpose. Our culture, guided by our
Values, empowers our people to deliver our purpose
and makes Smiths a place where people are proud
Our customers
–
Meeting customer needs and exceeding their
expectations is a fundamental part of our operating
model and our Values. Management teams engage
with customers through formal feedback activities
such as surveys, quarterly business reviews,
aftermarket service team reviews, and senior
team meetings as well as informal feedback from
operational and field-based teams. As appropriate,
our customers have been engaged regarding
the planned strategic actions announced during
the year.
–
Transparency with our customers was a critical part
of our response to the cyber incident earlier in the
year. The Board were updated on engagement with
this stakeholder group as part of their oversight of
the Group’s response.
–
The Board considers a deep-dive from each
business on their performance and strategy. At
a Board level this includes customer data and
commentary. The Innovation, Sustainability &
Excellence (ISE) Committee reviews reports from
each business on innovation and new product
development. For more information see the ISE
Committee report on pages 99.
–
Customer needs and market challenges are
considered in monthly business performance
updates to the Executive Committee, with a
deep-dive every quarter.
Read more
Our people and culture
Page 24
Read more
Behaving ethically
and legally
Page 43
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
71
STAKEHOLDER ENGAGEMENT
CONTINUED
giving and education initiatives with a strong focus
on Science, Technology, Engineering and Maths
(STEM). The ISE Committee was also engaged
with John Crane’s strategic partnership with the
University of Sheffield, an important collaboration
aimed at accelerating innovation and advancing
clean energy solutions. The ISE Committee Chair
attended the formal signing of the partnership.
–
The Board receives updates on the Group’s
operations which impact the wider community,
including the Group’s Tax Strategy. This outlines
our approach to the responsible management
of tax affairs to enhance long-term shareholder
value while contributing to public expenditure and
community welfare.
Governments and regulators
–
Governments and regulators are vital to our
business as they set policy and influence the
markets where we operate. In the normal course of
business, we build relationships with governments,
policymakers and regulators across the world
so that we can operate effectively and ensure our
interests, and those of the industries we serve, are
represented in decision-making. Engaging with
various regulatory bodies was a critical part of
the Group’s response to the cyber incident.
–
Our Government Relations team based in the
UK, US, Europe and Asia leads our outreach and
relationship programme with government bodies
and regulators, promoting a deeper understanding
of the Smiths culture, business and products.
–
Updates on regulatory processes for new
product approvals are provided during business
performance reviews at the Executive Committee
and communicated to the Board by the Chief
Executive Officer.
Our suppliers
–
Building resilience, quality, efficiency and
adaptability across our supply chain is fundamental
to our customer offering. We operate a total value
supply chain approach, that considers all aspects
of a supplier’s contribution to generate and
capture value.
–
Management teams meet regularly with suppliers
to review performance, explore new business
opportunities, set goals and work on improvement
areas. For higher value or more complex products,
we partner with our suppliers on R&D, new product
introduction, quality and continuous improvement
projects. As required, the Board receives updates
from the Chief Executive Officer.
–
Our Supplier Code of Conduct requires suppliers
to meet our anti-bribery and corruption and labour
rights standards and to comply with quality, health
and safety, and the environment standards. We
use the EcoVadis supplier management platform
to manage supplier relationships and support our
sustainability commitments and reporting.
Our communities
–
We aim to make a positive impact on our
communities and society. Our products and
services support critical global industries,
creating social and environmental value by making
the world safer and improving environmental
performance. Our global operations benefit local
economies through job creation, skills development,
procurement, tax revenues and by operating safely,
responsibly and ethically. This fosters a sense of
pride and ownership among our people.
–
The ISE Committee oversee our community
engagement, receiving updates on the Smiths
Group Foundation which provides grants to
charitable organisations nominated by our
colleagues. Our teams engage with local
communities through fundraising, charitable
Our investors
–
We are committed to openness and transparency
with all capital providers, reporting routinely to
shareholders through formal results activities.
Over the past year, shareholder engagement has
increased, particularly around portfolio structure
and strategic actions.
–
Following the announcement of our strategic
update and the appointment of Julian Fagge as
Chief Financial Officer, the Chairman met with
key shareholders. We also issued a market
announcement during the Group’s management
of the cyber incident to ensure transparency.
–
The Chief Executive Officer and Chief Financial
Officer host results presentations and Q&A
sessions for current and prospective investors,
engage proactively with shareholders, and attend
investor conferences.
–
Shareholders are invited to our AGM, where they
can submit questions to the Board either in person
or in advance. We also hold regular meetings and
one-off events such as capital markets days to
maintain active dialogue with investors.
–
In FY2025, our Senior Independent Director
hosted a UK Shareholder Association Event.
Read more
Supply chain
Page 45
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
72
BOARD
REVIEW
The Chairman is responsible for
overseeing the annual review of the
performance of the Board, its Committees
and individual Directors.
As disclosed in the FY2024 Annual Report, the Board
agreed to defer its externally facilitated Board review
to FY2025. This decision reflected the significant
leadership and governance changes made during
FY2024, including the appointment of a new Chairman
and Chief Executive Officer, a revised Committee
structure and changes to the Committee memberships
and Chairs. The deferral allowed time for these
changes to take effect, ensuring the Board review
results would provide more meaningful insights.
Progress against the priorities identified in the
FY2024 review is set out here.
FY2025 – externally facilitated
Board review
In FY2025, the Board engaged Dr Tracy Long of
Boardroom Review Limited (‘Boardroom Review’), to
facilitate the external Board review. Boardroom Review
is independent of the Group and does not provide any
other services to the Group. Dr Long attended the
Board’s May strategy session and held individual
interviews with each Director and the Company
Secretary. Dr Long presented the outcomes of the
Board review to the Board in July 2025.
A discussion document was circulated to Directors in
advance, which summarised Boardroom Review’s
assessment of the Board’s strengths and priorities,
together with challenges and recommendations for the
future. Directors welcomed the opportunity to discuss
Boardroom Review’s findings and recommendations
with Dr Long and were pleased to note Boardroom
Review’s conclusion that the Board is operating
effectively.
FY2024 priorities
Progress made in FY2025
–
Maintain focus on Group strategy,
including inorganic growth
–
The Board approved the planned separation of Smiths
Interconnect and Smiths Detection in January 2025, following
strategic discussions earlier in FY2024 and FY2025. A dedicated
Separation Oversight Committee was established. Strategy
remains a standing item on all Board agendas.
–
Strengthen longer-term succession
planning for both Non-executive
and Executive roles and focus on
executive talent development
–
The Nomination & Governance Committee regularly reviewed
Board composition, skills and experience. Executive succession
planning received increased focus, with particular attention
on internal talent development and future leadership needs.
A number of executive and non-executive changes were made
during FY2025 and early in FY2026.
–
Enhance external insight into
stakeholders, including customers,
suppliers and the competitive
landscape. Additional Board site
visits and external speakers should
be considered
–
The Board received updates from external speakers, including
an independent third party economist and a session about energy
transition. Annual business reviews provided deeper insight into
customer and supplier relationships. A planned site visit to India
was cancelled at short notice due to unforeseen circumstances.
Read more
Nomination & Governance
Committee report
Page 74
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
73
BOARD REVIEW
CONTINUED
Challenges
Challenges identified and agreed as FY2026 priorities
included:
–
Continuing to develop the Group’s longer-term
strategy including the Board’s evolving risk appetite
–
Increasing visibility of the external landscape
–
Managing transformational change with an ongoing
focus on Board composition, executive leadership
development and overall culture
–
Developing the Board to work as a trusted team with
increasing opportunities for informal collaboration
among Board members
–
Increasing site visits and workforce engagement
opportunities
The Board noted the work currently underway in these
areas, including Board succession planning which
continues to focus on enhancing diversity and ensuring
the Board possesses the right blend of skills and
experience to support future strategy.
Next steps
Following Dr Long’s presentation of the outcomes
of the Board effectiveness review, the Chairman
committed to developing and consulting on actions for
further consideration and implementation by the Board.
The Board concluded that it and its Committees
continue to operate effectively and that good progress
had been made across all areas identified in the
previous review.
Subsequent to the review process, the Senior
Independent Director met with the other Non-executive
Directors without the Chairman present to consider his
performance. Feedback from this session was shared
with the Chairman.
Strengths
Boardroom Review concluded that:
–
The Board has a shared perspective on the short
term and continuous strategy review with Directors
preparing for the future with strong domain
knowledge and a shared priority of value creation
–
The culture of the Board encourages openness
and challenge between the parties. There is a
strong relationship and healthy engagement
between Executive management and Non-executive
Directors
–
Directors are well led and informed by the
Chairman, Senior Independent Director, Committee
Chairs, the CEO and CFO, with diversity of tenure,
voice and experience
–
There is a clear focus on executive and non-
executive succession planning, including a
commitment to leadership development
–
The lines of defence are clear with a strong
understanding of the risk factors, including
technology and cyber
–
Board time is carefully planned with strong support
from the governance team
Directors noted that the Board strategy sessions had
received positive feedback during the review.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
74
NOMINATION &
GOVERNANCE
COMMITTEE
REPORT
Succession planning and the development of an
effective and high-performing Board continued to be
a priority throughout the year. We were pleased to
welcome Julian Fagge to the Board as Chief Financial
Officer and Simon Pryce as a Non-executive Director.
Both Directors bring significant leadership experience,
including in M&A and separation activities. Further
details of the appointment processes can be found on
pages 75. I would also like to take this opportunity to
thank Clare Scherrer, who stepped down as Chief
Financial Officer in January 2025, for her significant
contribution to Smiths during her time on the Board.
In addition, Mark Seligman, Noel Tata and Karin Hoeing
will be retiring from the Board at the conclusion of the
2025 AGM. I would like to thank them for their dedicated
service and wise counsel. Upon Mark Seligman’s
retirement, Dame Ann Dowling will be appointed as
the Senior Independent Director and she will join the
Nomination & Governance Committee.
In anticipation of Karin Hoeing’s retirement, Alister
Cowan joined the Remuneration & People Committee
in September, and he will succeed Karin Hoeing as
Chair of that Committee and as the Board’s workforce
engagement lead at the conclusion of the AGM. At that
time Alister will also join the Nomination & Governance
Committee. Pam Cheng will join the Audit & Risk
Committee at the conclusion of the AGM.
The Board believes that diversity is not just a regulatory
requirement, it is a cornerstone of good governance
and a driver of better decision-making.
Our commitment to diversity is embedded in our
Board Diversity Policy and underpinned by our Values.
Following the changes outlined above, we acknowledge
that we will no longer meet the gender diversity targets
set out in the UK Listing Rules or our own Diversity
Policy. However, this does not reflect a shift in our
priorities. Board balance remains a critical focus for us.
As such, we will commence a search for a new
Non-executive Director in FY2026. The Committee and
the Board remain resolute in our ambition to build a
Board that reflects the breadth of perspectives and
experiences across our global business.
During the year we oversaw the continued development
of senior management succession plans and the
Chairman’s statement
I am pleased to present the
Committee’s report for FY2025. A key
focus for the Committee was reviewing
the structure, size and composition
of the Board and its Committees,
particularly as we look ahead to the
future shape of Smiths following the
separation of Smiths Interconnect
and Smiths Detection.
Steve Williams
Chairman of the
Nomination & Governance
Committee
Committee
membership
Steve Williams
Karin Hoeing
Richard Howes
Mark Seligman
Noel Tata
Top Committee
activities this year
–
Board succession
planning, including
the appointment
of a new Chief
Financial Officer
and a Non-
executive Director
–
Review of
the Board’s
governance
framework
–
Oversight of
the governance
preparatory work
for a demerged
Smiths Detection
Group’s talent pipeline. We endorsed the internal
appointment of Ruben Alvarez as President of
John Crane and Vera Parker as President of Smiths
Interconnect, both of which demonstrate our strong
focus on developing internal talent. We also supported
the expansion of Kini Pathmanathan’s role to include
Chief People Officer responsibilities, in addition to her
existing remit as Sustainability & Excellence Officer,
further aligning these important functions.
The Committee also undertook a review of the Board’s
governance framework, recommending several
changes. This included the retirement of the Innovation,
Sustainability & Excellence (ISE) Committee, with its
responsibilities being integrated into the Board and
relevant Committees. We also recommended the
establishment of the Separation Oversight Committee
(SOC), which provides focused governance and oversight
of the Group’s separation activities. In addition, the
Committee has begun to consider the governance
arrangements that may be required for Smiths
Detection, should a demerger of that business proceed.
More information about our activities can be found on
the following pages. I would like to thank my fellow
Committee members for their continued commitment
and contributions throughout the year.
Steve Williams
Chairman of the Nomination & Governance Committee
Committee membership and meetings
The members of the Committee, their biographies and
attendance at meetings during the year can be found on
pages 65 to 67. The Chief Executive Officer is normally
invited to attend Committee meetings. The Company
Secretary acts as secretary to the Committee. Other
members of senior management, including the Chief
Financial Officer and the Chief People, Sustainability &
Excellence Officer, are invited to attend as necessary.
Committee performance review
In FY2025, the performance of the Committee was
considered as part of the wider Board review process
described on page 72. Overall, it was confirmed that
the Committee continues to operate effectively.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
75
NOMINATION & GOVERNANCE COMMITTEE REPORT
CONTINUED
Selection and appointment of a new Chief Financial Officer
The Committee oversaw the selection and
appointment of Julian Fagge, following the
retirement of Clare Scherrer. This appointment
formed part of the Board’s ongoing commitment
to robust succession planning and leadership
continuity.
Identify
The Board has a strong executive succession
planning process in place which is regularly
reviewed by the Board and takes into account
diversity in all its forms. As part of this process, the
senior leadership team had been actively developed
to ensure a strong internal pipeline of potential
successors for key executive roles, including the
Chief Financial Officer. To ensure a comprehensive
and objective process, the Committee engaged two
independent executive search firms, Egon Zehnder
and Russell Reynolds Associates (Russell Reynolds),
to benchmark internal candidates against a diverse
pool of external talent. These firms have no other
connection to the Group beyond their role in
supporting senior appointments. Both firms are
signatories to the Enhanced Code of Conduct for
Executive Search Firms, which promotes best
practice in Board appointments.
Select
Following a rigorous assessment process, the
Committee considered Julian Fagge to be the most
suitable candidate for the role. Julian brings broad
financial, strategic and commercial expertise,
having served as Group Financial Controller and
Group Strategy Director, as well as successfully
leading both the Flex-Tek and Smiths Interconnect
businesses. His appointment ensured a smooth
transition and continuity of leadership at an
important time for the Group.
Appoint
The Committee recommended Julian’s appointment
to the Board, which was subsequently approved. His
appointment as Chief Financial Officer and as an
Executive Director took effect on 1 February 2025.
Julian will stand for election by shareholders at the
2025 AGM.
Succession and internal considerations
Julian’s transition from President of Smiths
Interconnect created further opportunities for
internal progression. Vera Parker, formerly Chief
People Officer, was appointed as President of Smiths
Interconnect, and all subsequent vacancies were
filled internally. This reflects the strength of Smiths
talent pipeline and the effectiveness of its
succession planning processes.
Induction
A tailored induction programme was implemented
immediately following Julian’s appointment. While
Julian had extensive knowledge of the Group and its
markets, the programme focused on the
responsibilities of a UK listed company director,
including briefings with corporate advisers,
investors and key stakeholders. In addition, he held
one-to-one meetings with each Non-executive
Director and visited several of the Group’s
operational sites.
Non-executive succession
As part of the Committee’s ongoing succession
planning, the Chairman led the search for a new
Non-executive Director, supported by Russell Reynolds.
The Board regularly reviews its composition to ensure
it has the right balance of skills, experience and
diversity to support the delivery of the Group’s strategy.
A role profile was developed for a new Non-executive
Director to reflect the evolving needs of the business.
Russell Reynolds provided a longlist of diverse,
high-calibre candidates, from which a shortlist was
selected for interview.
Members of the Board interviewed shortlisted
candidates and, following a thorough evaluation of their
experience, capabilities and alignment with the role
profile, the Committee unanimously recommended the
appointment of Simon Pryce. Simon brings extensive
experience in international business leadership, M&A
and transformation, which will complement the existing
skills and experience on the Board. These skills were a
particular consideration as Mark Seligman and Noel
Tata approached their nine year tenure.
Prior to confirming the appointment, the Board
reviewed Simon’s external commitments and was
satisfied that there were no conflicts of interest and that
he would have sufficient time to discharge his
responsibilities as a Director effectively.
Simon’s appointment as a Non-executive Director took
effect in FY2025. A comprehensive and tailored
induction programme was developed to support his
transition onto the Board. This included meetings with
senior leaders across the Group, the external auditor,
and planned visits to key operational sites, ensuring
Simon gained a deep understanding of the business,
its culture and its stakeholders.
In early FY2026, the Committee considered the
composition of the Board and its Committees and a
number of changes were announced in August 2025.
These included the following changes to be effective at
the conclusion of the 2025 AGM. Dame Ann Dowling will
succeed Mark Seligman as Senior Independent
Director, Alister Cowan will succeed Karin Hoeing as
Remuneration & People Committee Chair, and Pam
Cheng will join the Audit & Risk Committee. Both Dame
Ann Dowling and Alister Cowan will join the Nomination
& Governance Committee.
Read more
Board biographies
Page 65
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
76
NOMINATION & GOVERNANCE COMMITTEE REPORT
CONTINUED
Governance
The Committee is responsible for keeping the Board’s
governance framework under review to ensure it
remains effective, fit for purpose, and aligned with
evolving best practice for UK-listed companies.
The Committee reviews the structure and remit of
the Board Committees, assessing the alignment of
our governance practices with the UK Corporate
Governance Code, and considering emerging trends
and regulatory developments.
In March, the Committee recommended the approval
of the Terms of Reference for the newly constituted
Separation Oversight Committee (SOC) to the Board.
The SOC had been established to review and
recommend to the Board the method, terms and timing
of the separations of Smiths Interconnect and Smiths
Detection, along with the use of any proceeds. The
Committee also recommended the membership of
the SOC to the Board, to ensure it was appropriately
constituted with relevant skills and experience. In
addition, after consultation with the ISE Committee
Chair, the Committee recommended to the Board that
the ISE Committee be retired. This was approved and
will take effect from the conclusion of the 2025 AGM.
Looking ahead, the Committee remains committed
to ensuring the Board’s governance arrangements
continue to evolve in line with the Group’s strategic
priorities. In particular, the governance requirements
for Smiths post separation, and for Smiths Detection, in
the event of a demerger, will remain a key area of focus
in FY2026. The Committee will also continue to monitor
developments in corporate governance, regulation and
investor expectations to ensure the Board remains well
positioned to meet its responsibilities.
Induction
Each of our Directors undergoes a comprehensive
induction programme upon joining the Board. These
programmes are designed to ensure all Directors
are equipped to contribute meaningfully to Board
discussions and decision-making from the outset.
This programme is tailored to reflect each Director’s
background, experience and knowledge, and provides
essential insights into the Group’s strategy, operations,
markets, and key stakeholders.
During the year, individual induction programmes were
prepared for Julian Fagge and Simon Pryce. These
included site visits to key operations, meetings with
senior leaders across the business, and briefings with
the Group’s external advisers.
Information and training
To function effectively, our Directors must have access
to accurate, timely, and high-quality information.
The Company Secretary and his team support the
Chairman and Chief Executive Officer in maintaining
efficient information flows, ensuring that Directors
receive all relevant materials necessary to fulfil their
responsibilities. To support continuous improvement,
employees responsible for preparing Board and
Committee papers attend bi-annual workshops on
effective paper writing. These sessions are designed to
enhance the clarity and quality of materials presented
to the Board.
Directors are provided with regular opportunities to
refresh and deepen their knowledge. During the year
the Board received briefings on energy transition and
the current macro-economic environment. Directors
also received updates from the businesses and
functional leaders, as well as external advisers, to
ensure they remain informed of key business priorities
and external developments. Individual development
needs are reviewed and discussed during the annual
performance evaluation process.
Independence and objectivity
The Committee is responsible for assessing the
independence of the Non-executive Directors in line
with the Code. In July 2025, the Committee undertook
its annual review and concluded that all Non-executive
Directors continued to demonstrate independence of
judgement and character.
Mark Seligman, who joined the Board in May 2016, has
served for more than nine years. Following a rigorous
review, the Board concluded that Mark continued to
provide robust challenge and independent oversight.
Similarly, the continued independence of Dame Ann
Dowling and Noel Tata, both of whom have served for
more than six years, was reviewed and confirmed.
Director election and re-election
Each year the Directors are subject to election or
re-election by shareholders at the AGM. The Chairman,
on behalf of the Board, has confirmed that each
Non-executive Director standing for election or
re-election at this year’s AGM continues to be an
effective member of the Board and has demonstrated
the necessary commitment to the role. For more
information about the expected time commitment of
our Directors, see page 68. On behalf of the Board, the
Senior Independent Director has confirmed that the
Chairman continues to be effective and supports his
re-election to the Board at the AGM. The rules
regarding the appointment and replacement of
Directors are determined by our Articles of Association
and the Act. The Articles of Association can be found on
our website and can only be amended by a special
resolution of shareholders.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
77
NOMINATION & GOVERNANCE COMMITTEE REPORT
CONTINUED
Conflicts of interest
All Directors must avoid situations where they have a
direct or indirect interest that conflicts, or may possibly
conflict, with the best interests of the Group. In
accordance with the Articles of Association and the
Companies Act 2006, the Board has the authority to
authorise potential conflicts. Board approval must be
granted before a Director accepts a new external
appointment, whether it amounts to a conflict or not.
The Company Secretary maintains a Register of
Conflicts which is reviewed by the Directors at least
twice a year, and the Board retains the power to vary
or terminate any authorisation previously provided.
Diversity
Diversity of thought and background is essential
and will remain one of the key criteria by which
candidates are selected for the Board, for individual
Committee membership, and the pipeline for senior
leadership positions.
The Group maintains a diverse Board and management
team and acknowledges the recommendations in the
FTSE Women Leaders Review on gender diversity and
the Parker Review on ethnic diversity. In addition, as
a UK listed FTSE 100 company, we aim to meet the
provisions of the Code and UK Listing Rules as they
relate to diversity, and these are reflected in the Board’s
own Diversity Policy.
Diversity performance
against targets
Gender – Board
Policy target
At least 40% of the Board to be female
Female
27%
Male
73%
Policy target 40%
31 July 2025
Gender – Key Board positions
Policy target
At least one of the Chairman, Senior
Independent Director, Chief Executive Officer
or Chief Financial Officer position will be held
by a female
Female
None
Male
4
Policy target 1
31 July 2025
Ethnicity
Policy target
At least one Director from an ethnic minority
background
Ethnic minority
2
White
9
Policy target 1
31 July 2025
Diversity information for
the Group, including the
disclosure required by the
UK Corporate Governance
Code, can be found on
page 58.
The Board Diversity Policy
can be found on our
website.
Following the retirement of Clare Scherrer in January
2025 and the appointment of two male Directors during
the year, the Board no longer meets its own gender
diversity target or the UK Listing Rule requirement that
at least 40% of the Board be women. As at 31 July 2025,
women represented 27% of the Board. This will reduce
to 25% following the 2025 AGM, reflecting the planned
retirements of Mark Seligman, Noel Tata and Karin
Hoeing, at which point the Board will comprise eight
members, two of whom will be female. The Committee
recognises the importance of diversity for the Board
and its Committees in all its forms, including gender,
and remains mindful of both regulatory expectations
and those of our shareholders.
The Committee intends to conduct a Non-executive
Director appointment process during FY2026. In doing
so, the Committee will consider diversity in its broadest
sense, including gender, ethnicity, age, disability, sexual
orientation, socio-economic background, and cognitive
and personal strengths and skills. Appointments are
made on merit, following a formal, rigorous and
transparent process, and with due regard to the
balance of skills, experience and independence
required to support the Group’s strategy.
The Committee only engages executive search firms
that are accredited under the Enhanced Code of
Conduct for Executive Search Firms. This ensures that
women and candidates from ethnic minority groups
are included on shortlists for Board appointments.
Numerical diversity data, in the format required by
Listing Rule 6.6.6R(10), is set out on page 59.
As at
31 July 2025, the Board did not meet all of its own
diversity targets or the targets set out in Listing Rule
6.6.6R(9)(a). The unmet targets are the requirement
that at least 40% of the Board members be women, and
that at least one of the senior positions on its Board be
held by a woman. Dame Ann Dowling will be appointed
as Senior Independent Director at the conclusion of the
2025 AGM.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
78
AUDIT & RISK
COMMITTEE
REPORT
The Committee’s agenda has been wide-ranging and
demanding. We oversaw the Group’s response to a
cyber security incident, supported strategic actions
including preparations for the separation of Smiths
Interconnect and Smiths Detection, and provided
oversight of a review of a Flex-Tek subsidiary balance
sheet overstatement. In response to the cyber security
incident, we reviewed management’s actions with
a particular focus on IT General Controls and the
financial close process. We challenged the remediation
and were pleased to note that the incident did not
compromise the integrity of the month-end
reconciliation or management review controls
ahead of the half-year FY2025 reporting.
A key judgement this year related to the classification
of Smiths Interconnect and Smiths Detection under
IFRS 5. We challenged management’s assessment
and agreed that Smiths Interconnect met the criteria
for classification as held-for-sale and a discontinued
operation. While the process to sell or demerge Smiths
Detection remains on track, the Committee concurred
that the IFRS 5 criteria for classification as held-for-
sale, held-for-distribution or discontinued operations
have not yet been satisfied.
We continued to oversee the effectiveness of material
controls across the Group, including progress on the
Internal Controls Enhancement programme. The
review at Flex-Tek, as noted above, has reinforced the
importance of this work. The Committee received
regular updates and business deep-dives. While further
progress is required, the Committee is encouraged by
the momentum and the broader operational benefits
emerging from the programme. We also reviewed the
Group’s risk and assurance mapping exercise, which is
helping to clarify the scope and maturity of key controls.
In parallel, we conducted a review of the Group’s
emerging and principal risks, considering factors
such as geopolitical tensions, cyber threats, and talent
retention challenges. A new principal risk, Strategic
transformation, has been introduced to address
the challenges associated with the sale of Smiths
Interconnect, the proposed sale or demerger of
Smiths Detection, and the strategic repositioning
of the remaining Group.
Chair’s statement
I am pleased to present the Audit &
Risk Committee’s report for the year
ended 31 July 2025. This has been a
year of continued progress, against a
backdrop of geopolitical complexity and
strategically significant developments
for the Group.
In March, we were pleased to welcome
Simon Pryce to the Committee.
Simon brings deep experience from
global industrial businesses and,
as a chartered accountant, further
strengthens the Committee’s financial
and governance expertise.
Richard Howes
Chair of the Audit & Risk
Committee
Committee membership
Richard Howes
Alister Cowan
Simon Pryce
Mark Seligman
Top Committee
activities this year
–
Monitored the integrity
of the Group’s financial
reporting and the work
of the auditor
–
Monitored the Group’s
control environment
–
Assessed the Group’s
principal risks
Our collaboration with the Innovation, Sustainability &
Excellence (ISE) Committee continued, particularly in
relation to ESG reporting. We held a joint session to
consider the implications of upcoming ESG regulatory
requirements and reviewed the Group’s approach to
ESG data quality and assurance. This included the
limited assurance provided by KPMG over greenhouse
gas emissions and energy efficiency data.
Ethical conduct and legal compliance remain central
to our culture. This year, we undertook a detailed review
of the Group’s legal and compliance principal risk, with
a particular focus on international trade compliance.
This included oversight of export controls, sanctions,
customs compliance and anti-boycott laws. We also
reviewed the Smiths Modern Slavery and Human
Trafficking Statement and received an update on the
adoption of EcoVadis to assess our high-risk suppliers.
Finally, the Committee continued to monitor the
integrity of the Group’s financial reporting and the
effectiveness of the external audit. We remain satisfied
with the quality of the reporting process and the
robustness of the controls that support it.
I would like to thank my fellow Committee members
and the Deputy Company Secretary for their diligence,
insight and commitment throughout the year. I am also
pleased to welcome Pam Cheng to the Committee later
this year. The Committee remains committed to
supporting the Board in maintaining the highest
standards of governance, risk management and
internal control.
Richard Howes
Chair of the Audit & Risk Committee
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
79
AUDIT & RISK COMMITTEE REPORT
CONTINUED
Committee membership and meetings
The Audit & Risk Committee is comprised solely of
independent Non-executive Directors, all of whom
bring recent and relevant financial, accounting, and
sector-specific experience to their roles. The Board
considers each member to possess the financial
expertise required under the UK Corporate Governance
Code. Full biographies and details of meeting attendance
during the year are set out on pages 65 to 67.
To support the Committee in discharging its
responsibilities effectively, the Chief Executive Officer,
Chief Financial Officer, and the lead audit partner from
KPMG attended all meetings at the invitation of the
Committee Chair. Regular attendees also included the
Group Financial Controller, Director of Internal Audit
and Risk, and the Head of Ethics and Compliance.
Business Presidents and Finance Directors, the Vice
President Finance Excellence, and other senior
executives were invited to attend as appropriate,
depending on the matters under discussion. The Deputy
Company Secretary acts as secretary to the Committee.
At the conclusion of each meeting, the Committee held
private sessions with both the external auditor and the
Director of Internal Audit and Risk, without executive
management present. This practice ensures open and
candid dialogue on matters of audit, risk, and control.
The Committee maintains open access for the heads of
Internal Audit, and Ethics & Compliance, as well as the
external auditor, who may raise concerns directly with
the Committee outside of formal meetings if required.
Meetings are scheduled in line with the Group’s
financial reporting cycle and follow a structured annual
programme of work. This enables the Committee
to provide effective oversight of the Group’s risk
management framework and internal control systems
on behalf of the Board. Following each meeting, the
Committee Chair provides a formal report to the Board,
ensuring transparency and alignment with the Group’s
broader governance arrangements.
Committee performance review
Through the annual Board review process described
on page 72, the Board has again confirmed the
effectiveness of this Committee in fulfilling its
responsibilities and supporting the Board in meeting
its obligations.
Committee activities
Financial and Narrative Reporting
The Committee reviewed the Group’s full-year and
half-year results announcements, the Annual Report
and the Viability and Going Concern Statements before
recommending them to the Board for approval.
The Group maintains a framework of internal controls
and risk management processes to support the
integrity of its financial reporting. These arrangements
are designed to provide reasonable assurance that
the financial statements are prepared in accordance
with applicable accounting standards. As part of this
process, the Committee received confirmations from
business units that the reported information presents a
true and fair view of the Group’s performance and that
appropriate records are maintained to ensure accurate
and transparent reporting. Further detail on the
Group’s risk management and internal control systems
can be found on pages 26 to 28.
An important responsibility of the Committee is to
review and challenge the most significant accounting
estimates and judgements made by management.
The key areas of judgement for the year are outlined
overleaf. Following detailed reports and discussions
with both management and KPMG, the Committee
concluded that the judgements applied were
appropriate and had been properly reflected in the
financial statements.
Fair, balanced and understandable
In line with the UK Corporate Governance Code, the
Committee undertook a thorough review to assess
whether the FY2025 Annual Report is fair, balanced
and understandable. This assessment followed the
same rigorous approach as in previous years and was
supported by the Group’s internal verification processes.
In forming its view, the Committee considered:
–
Various materials on risk management and internal
controls, going concern and the assessment of the
Group’s long-term viability;
–
Accuracy, integrity and consistency of the messages
conveyed in the Annual Report;
–
Appropriateness of the level of detail in the narrative
reporting;
–
Correlation between judgements, estimation
of uncertainties and issues, and the associated
disclosures; and
–
Explanations of the differences between statutory
and headline reported results.
In addition, as part of its routine review programme,
the Financial Reporting Council (FRC) reviewed
Smiths Group plc’s FY2024 Annual Report. The FRC did
not identify any material issues, which was welcomed
by the Committee. Minor disclosure enhancements
recommended by the FRC have been reflected in the
FY2025 Annual Report.
Having taken into account the factors above, together
with the views of KPMG, the Committee recommended
to the Board, and the Board subsequently confirmed,
that the FY2025 Annual Report, taken as a whole,
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Group’s position, performance, business model
and strategy.
Read more
Board review
Page 72
Managing our risks
Page 26
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
80
AUDIT & RISK COMMITTEE REPORT
CONTINUED
Significant financial reporting matters
The key areas of judgement for FY2025 are as follows:
Areas of focus
Actions taken
Provisions for liabilities and charges
The Group holds significant material provisions for
John Crane, Inc. asbestos litigation and the Titeflex
Corporation CSST product claims.
The Committee considered the appropriateness of the provisions for the John Crane, Inc. asbestos litigation and the Titeflex
Corporation CSST claims. They specifically evaluated the treatment of potential liabilities, adjustments to assumptions used in
calculating the provisions, sensitivity to changes in these assumptions, and advice from the Group’s specialist external advisers.
The Committee agreed with the judgement regarding the John Crane, Inc. asbestos litigation and confirmed that the ten-year period
for John Crane, Inc. asbestos litigation remained appropriate. Despite the large number of claims filed against John Crane, Inc. and
other defendants every year, the evolving nature of the US legal system and other factors affecting the asbestos legal environment
make it difficult to reliably estimate costs beyond 10 years. In both cases, the assumptions were deemed to fairly reflect the position.
See note 23 of the financial statements for more details.
Impairment – intangible assets (including goodwill)
The Group’s consolidated balance sheet includes
£1.6bn of intangible assets. The largest elements of
this balance relate to goodwill (£1.3bn), acquired
customer relationships (£0.1bn) and capitalised
development costs (£0.1bn).
The impairment assessment of goodwill is a key
area of management judgement, particularly in
relation to Smiths Detection, the Group’s only
cash-generating unit (CGU) where impairment
headroom is limited. The recoverable amount is
determined using a value in use calculation, which is
inherently subjective due to the uncertainty involved
in forecasting and discounting future cash flows.
In the prior year, Smiths Detection was the only CGU with limited impairment headroom. However, Smiths Detection’s FY2025
performance has been very strong, with headline earnings significantly outperforming the FY2024 impairment model. The FY2025
base case impairment model shows headroom of £499m, up from £254m in the previous year. This increase in impairment
headroom has been driven by an improved base from the FY2025 performance, following strong organic revenue growth and
contract wins experienced in FY2025.
The Committee reviewed the Group’s impairment testing results and challenged the assumptions used within the CGU’s
impairment testing model, including the voluntary downside scenarios used to assess the business’s sensitivity to key assumption
changes. The Committee noted the sensitivity of Smiths Detection’s CGU impairment headroom to variations in the discount rate
and reviewed the methodology for calculating the discount rate used in the impairment testing. See note 11 of the financial
statements for more details.
Post-retirement benefits
The Group has material pension plan assets and
liabilities and there is a high degree of estimation
uncertainty.
The Committee reviewed and agreed the methods, assumptions, and benchmarks used by the actuaries to calculate the position
of the UK and US schemes as of 31 July 2025. The IAS 19 valuation of post-retirement benefit obligations at that date showed a net
accounting surplus of £32m, representing a £3m increase during FY2025.
The Committee noted that the movement in valuation during the year was mainly due to £3m of actuarial losses, principally arising
from the actual loss on plan assets lower than the interest income as a result of the asset returns underperforming the discount
rate, therefore leading to a loss.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
81
AUDIT & RISK COMMITTEE REPORT
CONTINUED
Areas of focus
Actions taken
Flex-Tek subsidiary balance sheet review
Review of investigations into the balance sheet
overstatement at a stand-alone US site in the
industrial business of Flex-Tek and the related
accounting treatment.
The Committee has overseen and closely monitored an investigation into the balance sheet overstatement, which was undertaken
in the fourth quarter of FY2025 and during the year end close of the financial statements. The Committee received investigation
reports from Internal Audit, Ethics & Compliance, and a legal review from external counsel into the matter. In addition, at the
Committee’s request, KPMG increased its scope for the year end audit. The Committee reviewed management’s lessons learned
and proposed response which included changes to internal controls processes and plans for monitoring under the Group Internal
Audit and Internal Controls Enhancement programme in the next financial year. The Committee agreed that, whilst significant in the
context of Flex-Tek, the impact in prior years was not material at the Group level and did not require a restatement of the Group’s
prior year accounts. It also challenged and reviewed the proposed current year impact of the adjustment of £8m recorded within
headline profit and the prior year impact adjustment of £15m treated as a non-headline charge under the Group’s Accounting Policy
for non-headline items.
At the August 2025 Committee meeting, the Committee concurred with management’s final assessments on the matter and the
proposed external disclosures on this topic in the Annual Report. See note 3 of the financial statements.
Discontinued operation and businesses held for sale
Following the Group’s announcement on 31 January
2025 regarding the planned strategic actions to
separate the Smiths Interconnect and Smiths
Detection businesses, the financial reporting
presentation of these two businesses is a significant
judgement for the preparation of the FY2025 annual
report and accounts.
Throughout the second half of FY2025, the Committee has been closely monitoring and challenging management on the progress
of the projects to separate Smiths Interconnect and Smiths Detection. The Committee recognises that a key IFRS 5 requirement for
classifying a business as held for sale is that the sale must be highly probable, with the expectation that it will be completed within
one year from the date of classification.
At the July 2025 Committee meeting, the Committee concurred with management’s assessment that Smiths Interconnect met the
IFRS 5 criteria for classification as a held-for-sale business and a discontinued operation. These criteria have been met because the
project to sell the Smiths Interconnect businesses was sufficiently advanced, with active programmes initiated and current project
timelines anticipating completion before 31 July 2026. The Committee concurred with the treatment of the impairment recorded on
investment in its US sub-systems unit (Smiths Interconnect Inc) following an agreement to sell the business separately in advance
of a disposal of the rest of Smiths Interconnect.
The disclosure implications of this reclassification for the Group’s primary statements are as follows:
–
The consolidated income statement will be restated to show Smiths Interconnect’s net results separately in a single ‘profit from
discontinued operation’ row.
–
The July 2025 consolidated balance sheet will present Smiths Interconnect’s total assets in a single ‘assets held for sale’ row
and Smiths Interconnect’s gross liabilities in a separate ‘liabilities held for sale’ disclosure note to the primary statements.
The July 2025 Committee meeting also concurred with management’s assessment that, although the dual-track project
workstreams to separate Smiths Detection were on schedule, the IFRS 5 criteria for held-for-sale, held-for-distribution, or
discontinued operations disclosure had not yet been satisfied. As of 31 July 2025, the projects did not meet the ‘highly probable’
criteria required for sale or distribution within the next 12 months.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
82
AUDIT & RISK COMMITTEE REPORT
CONTINUED
External audit
The Committee places great importance on the quality,
effectiveness and independence of the external audit
process. KPMG has served as the Company’s external
auditor since its appointment at the 2019 AGM. Michael
Maloney acted as the lead audit engagement partner
until his retirement following the FY2022 audit, after
which Mike Barradell assumed the role from FY2023.
In line with professional standards and KPMG’s internal
partner rotation policies, Mike’s tenure will be limited to
five years.
To comply with the requirements of the Statutory Audit
Services Order 2014, which mandates a competitive
tender for statutory audit services at least every ten
years, the Committee has agreed to conduct an audit
tender in 2027, to coincide with the planned rotation
of the audit partner. This will ensure that a tender is
completed well in advance of the 2029 deadline.
The Committee confirms that the Company complied
with all relevant provisions of the Statutory Audit
Services Order throughout the year under review
and as at the date of this report.
External audit plan and fees
The Committee reviewed and approved KPMG’s audit
plan and fee proposal for the FY2025 audit. It continued
to monitor the delivery of the audit throughout the year,
ensuring alignment with the agreed scope and timelines.
Independence and objectivity
The Committee is responsible for overseeing the
Group’s policies on external audit, which are designed
to safeguard the independence and objectivity of the
external auditor. These policies, reviewed annually,
govern the provision of non-audit services and the
employment of former audit firm employees.
As part of its oversight, the Committee received written
confirmation from KPMG affirming its independence
and objectivity in accordance with applicable
professional standards. The Committee also assessed
the performance of the audit engagement partner and
the audit team more broadly.
Non-audit services
Notwithstanding developing practice being adopted
by audit firms not to provide non-audit services to
audit clients, the Committee recognises that certain
permissible non-audit services can be completed more
efficiently by, and be purchased more cost-effectively
from, the incumbent auditor due to the audit firm’s
existing knowledge of the Group and its systems. Under
the policy approved by the Committee, it has delegated
its responsibility for authorising the purchase of
non-audit services from the external auditor to the
Chair of the Committee and/or the Chief Financial
Officer within specific limits.
Areas of focus
Actions taken
Financial and IT control impact of January 2025 cyber incident
The cyber security incident at the end of January
2025 required taking the Group’s core IT systems
offline for several days at the start of the FY2025
half-year close process. As the systems came back
online, our finance teams experienced varied
connectivity and systems access issues. These
issues impacted the standard close processes,
financial controls workflows, and reporting
timelines.
The Committee reviewed management’s response to the cyber security incident, focusing on the IT General Controls (ITGC)
environment and the impact on the Group’s financial close process and management review controls. They considered the
management presentation on the ITGC actions taken to mitigate future cyber risks and challenged management on the
measures implemented to ensure that month-end reconciliation and management review controls were completed ahead of the
half-year reporting.
Presentation of headline profits and organic growth
The Group presents headline profits and organic
growth measures which require adjustment to IFRS
data. This is a material judgement and requires a
consistent application of the Group’s accounting
policy on this topic.
The Committee evaluated the policy, presentation, and judgements related to the Group’s performance, with a particular focus on
distinguishing between headline and non-headline items. This involved determining which items related to the Group’s ongoing
trading activities and which should be classified as non-headline and for FY2025 included the expenses related to separation
exercises and the Acceleration Programme.
The Committee challenged management on the value and nature of items recognised as non-headline and reviewed the level of
disclosure for these items in FY2025. In addition, the Committee considered the judgements regarding items that should be
reflected or adjusted in organic performance. For more details, see note 3 of the financial statements.
Read more
Independent Auditor’s
report
Page 104
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
83
AUDIT & RISK COMMITTEE REPORT
CONTINUED
In FY2025, non-audit fees represented 10% of audit fees
(FY2024: 8%), and primarily related to audit-related
assurance services, including the review of the FY2025
half-year results, limited assurance over the Group’s
Scope 1–3 GHG emissions and energy metrics, and
services related to the reestablishment of the Euro
Medium Term Note Programme. The Group’s policy
limits non-audit fees to no more than 20% of the
average audit fees over the previous three years, except
in exceptional circumstances. The Committee confirms
that all non-audit work was appropriately assessed and
authorised in line with this policy.
Effectiveness of the external audit
The Committee continuously evaluates the
effectiveness of the external audit, considering factors
such as:
–
The robustness of audit processes, including the
FY2024 audit conclusion, FY2025 interim review,
and early-stage delivery of the FY2025 audit;
–
The quality of audit work, including the handling of
key accounting and audit judgements;
–
The skills, experience and professional scepticism
of the audit team;
–
The quality and insight of formal reporting, including
management’s responses to audit findings;
–
Feedback from prior effectiveness reviews and the
extent to which these were addressed; and
–
The auditor’s understanding of the Group’s
business, risks and controls.
Following its assessment of the audit process and
ongoing engagement with KPMG, the Committee was
satisfied that the external audit remained effective.
Accordingly, it recommended to the Board that the
reappointment of KPMG as the Company’s auditor be
proposed to shareholders at the 2025 AGM. A further
review of the FY2025 audit will be undertaken ahead of
the FY2026 half-year results.
Risk management and internal control
The Board is responsible for ensuring that effective risk
management and internal control systems are in place
across the Group. These systems are designed to
identify, assess, manage and monitor the risks that
could impact the achievement of the Group’s strategic
objectives. The Executive Committee is accountable for
designing and implementing these systems and for
ensuring they are embedded throughout the
organisation.
Throughout the year, the Executive Committee and risk
owners reviewed the Group’s principal risks, assessed
the effectiveness of existing controls, evaluated the
resulting residual risks, and identified any further
actions required. These activities have supported the
maintenance of the Group’s risk management and
internal control systems, which provide reasonable,
though not absolute, assurance against material
misstatement or loss. Further detail on the Group’s
approach to risk management and internal controls is
provided on pages 26 to 28.
Effectiveness of the Group’s risk management and
internal controls
On behalf of the Board, the Committee monitored,
reviewed and assessed the effectiveness of the
Group’s risk management and internal control systems
throughout FY2025, with support from the Internal
Audit function. This assessment was conducted in the
context of the Group’s strategy, business model and
risk appetite.
To support this work, the Committee received deep-
dive risk reports from business leadership teams and
principal risk owners on a rotational basis, ensuring
comprehensive coverage of all principal risks over time.
Topics reviewed by the businesses this year included
cyber security risk, supply chain risk and geopolitical
risk. These sessions enabled the Committee to
evaluate the effectiveness of controls and gain insight
into the evolving risk landscape.
The Committee also received a deep dive on the
Group’s international trade compliance programme,
and considered thematic risk areas, which provided
further insight into the Group’s risk culture, assurance
processes and emerging risk trends.
No material failings or weaknesses in the risk
management or internal control systems were
identified during the year.
The Committee received regular updates on the
Internal Controls Enhancement programme, which
is focused on improving and standardising finance
processes across the Group. This work is strengthening
the Group’s financial control framework and positioning
the Group well for the changes to the UK Corporate
Governance Code relating to internal controls over
financial reporting.
Principal risks update
The Committee carried out a robust assessment of
the Group’s emerging and principal risks, including
those that could threaten its business model, future
performance, solvency or liquidity. As part of this
review, the Group reassessed its principal risks to
ensure they remain aligned with the evolving external
environment. Key developments considered included
rising geopolitical tensions, increased cyber threat
activity, and challenges around talent retention. These
changes have been reflected in the Group’s risk register
to enhance transparency and ensure alignment with
current operating conditions.
A new principal risk, Strategic transformation, was
introduced to reflect the significant change underway
across the Group. This risk captures the potential
operational, financial, legal and reputational challenges
associated with the sale of Smiths Interconnect, the
proposed sale or demerger of Smiths Detection, and
the strategic repositioning of the remaining Group as a
focused, innovation-led industrial engineering company.
A description of the principal risks facing the Group and
how these were reviewed to assess the Group’s viability
can be found on pages 60 to 62.
Read more
Managing our risks
Page 26
Going Concern and
Viability Statement
Page 60
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
84
AUDIT & RISK COMMITTEE REPORT
CONTINUED
Internal Audit
The Internal Audit function operates independently of
the business and has no operational management
responsibilities. This independence underpins the
integrity and objectivity of its work, including the
development of the annual Internal Audit Plan, which
is approved by the Committee. The authority of
the Internal Audit function is derived from the
Committee, and the Director of Internal Audit and Risk
is accountable to the Board through the Committee
Chair, while reporting administratively to the Chief
Financial Officer.
In line with its charter, approved by the Committee,
Internal Audit has:
–
Full and unrestricted access to all records, property
and personnel;
–
Independent access to the Committee Chair and
members of the Committee;
–
The right to request meetings with the Committee;
and
–
The authority and obligation to report significant
findings or other concerns to the Committee.
During the year, the Committee received regular
progress updates on the delivery of the FY2025 Internal
Audit Plan, including high-priority control enhancement
opportunities and associated management action
plans. The Committee also reviewed and approved
the FY2026 Internal Audit Plan, including its scope,
approach, coverage, resource allocation and budget.
The Committee monitors the performance of Internal
Audit through regular engagement with the Director
of Internal Audit and Risk, review of audit outputs, and
tracking of key performance indicators reported at
each meeting. In FY2025, the Committee conducted
an effectiveness review of the Internal Audit function,
led by the Deputy Company Secretary. The review
concluded that Internal Audit continues to perform
strongly. Opportunities for further enhancement were
identified, including exploring opportunities to enhance
communication of the audit plan to ensure it reaches
a broader audience more regularly. This would be
addressed in the FY2026 Plan.
Ethics and compliance
The Committee maintained oversight of the Group’s
Ethics and Compliance programme throughout the
year, including the review and approval of the annual
work plan and monitoring of investigations into potential
breaches of the Code of Business Ethics. This included
matters raised through the Group’s ethics reporting
channels, notably the Group’s Speak Out hotline, which
enables employees and other stakeholders to report
concerns, anonymously if they wish, via multiple
channels operated by an independent third party across
the Group’s global operations.
The Committee also received updates on the Group’s
legal and compliance principal risks, with a particular
focus on international trade compliance covering key
areas such as export controls, financial and trade
sanctions, customs compliance, and anti-boycott laws.
The Committee also reviewed the Smiths Modern
Slavery and Human Trafficking Statement and received
an update on the adoption of EcoVadis to assess
high-risk suppliers.
During the year, the Committee oversaw an
investigation into a balance sheet overstatement at
a stand-alone US site within the Flex-Tek industrial
business. In relation to this, the Committee received
investigation reports from Internal Audit, Ethics &
Compliance, and a legal review from external counsel
into the matter. Further details are provided on page 81.
No investigations during the year resulted in a material
financial loss to the Group or had a significant impact
on customers or suppliers.
The Committee received regular reports on the
volume and nature of ethics cases by region, the
proportion of anonymous versus attributed reports,
and the ratio of substantiated to unsubstantiated cases.
The anonymous reporting metric is used as an indicator
of trust in the Group’s reporting systems.
Based on these insights, the Committee concluded that
the Group’s arrangements for raising and investigating
concerns, confidentially, anonymously, and without fear
of retaliation, remain appropriate and effective.
More information on the Group’s approach to behaving
ethically and legally can be found on page 43.
Assessment of internal control and risk
management arrangements
The Committee was satisfied that the Group’s
processes governing financial reporting and controls,
its culture, ethical standards and its relationships with
stakeholders continued to be effective.
The Committee was also satisfied with the
appropriateness and adequacy of the Group’s risk
management arrangements, internal control
framework and three lines of defence model.
Read more
Behaving ethically and
legally
Page 43
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
85
REMUNERATION
& PEOPLE
COMMITTEE
REPORT
Business context and leadership
changes
On 31 January 2025, Smiths announced several
material strategic actions to unlock significant value
and enhance returns to shareholders, including the
planned separation of Smiths Interconnect, followed
by the separation of Smiths Detection, either by sale
or demerger. The Board believes that the attraction
of Smiths is compelling and, in focusing on our high
performing John Crane and Flex-Tek businesses, we
will deliver sustainable growth, higher margins, returns
and earnings growth, as reflected in our enhanced
medium-term financial targets.
In January 2025, we announced that Clare Scherrer,
former Group Chief Financial Officer (CFO), had
informed the Board of her decision to retire from
Smiths. Clare remained as CFO until 31 January 2025,
continuing to support a smooth and orderly handover
until her departure on 30 April 2025. Reflecting the
Board’s robust succession planning process, Julian
Fagge was appointed as CFO with effect from
1 February 2025. Julian is an exceptional and highly
regarded leader, with broad financial, strategic and
commercial experience and a strong track record in
the execution of complex M&A activity. Together, our
CEO Roland and CFO Julian bring an unparalleled
knowledge of the company and its growth and
value drivers.
Given the material nature of the strategic activity
planned during FY2025 and FY2026, and mindful of
the leadership changes we have experienced in the last
15 months, the Board considers it imperative to retain
and incentivise our leadership team to successfully
execute our strategic plans, aligning them to the
delivery of significant value creation and providing
stability of leadership through the critical next phase
of Smiths journey.
Key decisions during FY2025
Appointment of CFO – Julian Fagge
Julian was appointed on a salary of £625,000, below
that of his predecessor, and a pension contribution of
12% of salary, in line with the UK workforce. For
FY2025, his Annual Incentive Plan (AIP) opportunity
was set at 180% of salary, with one third of any earned
bonus deferred into shares for three years, in line with
our Remuneration Policy.
In line with our Policy, the Board awards a fixed number
of shares under the Long-Term Incentive Plan (LTIP).
Julian’s normal LTIP award was set at 102,500 shares
on appointment. Given he was appointed part way
through the financial year, an award of 21,219 shares
(equivalent to c.60% of salary based on share price at
grant) was granted on 8 April 2025, as a pro-rated ‘top
up’ award to the LTIP grant made in respect of his prior
role as President of Smiths Interconnect. Each of the
elements of Julian’s remuneration are within those
previously agreed for the previous CFO.
Retirement terms for the former CFO – Clare Scherrer
Clare was paid her salary and pension contribution until
her departure date on 30 April 2025. In line with the
Remuneration Policy, she was treated as a ‘good leaver’
for incentive purposes, with LTIP awards pro-rated for
time and subject to performance testing on the normal
dates. Clare will be eligible to receive a pro-rated
FY2025 AIP award in October, subject to performance
criteria, and one-third of any bonus will be delivered in
deferred shares. Other deferred shares will vest on
their normal vesting dates. Clare is also required to
maintain a post-employment shareholding of at least
33,116 shares for two years post-employment.
Chair’s statement
I am pleased to present the
Remuneration Report for the year to
31 July 2025. I am delighted that our
Directors’ Remuneration Report and
Policy was supported by 95.2% and
92.3% of shareholders, respectively,
at the November 2024 AGM and
I am grateful to the shareholders
and proxy agencies that provided
valuable feedback and constructive
engagement on the proposals.
A key role of the Committee is to provide
oversight of the implementation of the Group’s
people strategy. As such, at each meeting, the
Committee reviews elements of the strategy to
ensure it supports our business objectives and
desired culture. This includes particular focus
on motivation, retention and engagement within
the leadership team and wider workforce,
considering the extent of business change
announced during the financial year.
Karin Hoeing
Chair of the Remuneration
& People Committee
Committee membership
Karin Hoeing
Pam Cheng
Alister Cowan
Dame Ann Dowling
Steve Williams
Top Committee activities
this year
–
Approved FY2026 salary
increases for the Board
& Executive Committee,
aligned to the wider
workforce
– Considered
remuneration
matters for Executive
Directors and the wider
workforce, aligned with
the company’s strategic
update during the year
–
Approved retirement
terms for Clare
Scherrer
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
86
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
AIP and LTIP outturns for FY2025
The Committee considered outcomes under the
FY2025 AIP and the FY2023 LTIP awards in the context
of strong organic revenue growth, continued operating
profit margin expansion, and improved headline
operating cash conversion. Based on performance
during the year, a bonus of 85.4% of maximum
opportunity for FY2025 was awarded, representing an
achievement between target and maximum against the
financial and non-financial metrics. One third of the
bonus earned will be deferred into shares for the
Executive Directors. The FY2023 LTIP award vested
at 88.0% of maximum, reflecting performance over
a three-year period aligned to the sustainable growth
of the business during that time.
In determining the final outcomes, the Committee
considered the Flex-Tek balance sheet overstatement
as discussed on page 81, including the impact on
FY2025 AIP and FY2023 LTIP outturns. Overall, the
current year headline profit charge was reflected in the
FY2025 AIP outturn of 85.4%. The prior years’ impact,
classified as a non-headline charge, resulted in a
reduction in the FY2023 LTIP outturn from 91.7% to
88.0% of maximum for current Executive Directors and
the former CFO. The Committee agreed that the overall
impact on remuneration was fair and appropriate, and
no further adjustments were required.
Review of LTIP and AIP for FY2026
As a Committee, we endeavour to ensure that pay is
consistently aligned to business performance and this
philosophy continues to underpin our decisions on pay.
A comprehensive review of remuneration
arrangements for FY2026, including both design and
performance metrics, was carried out over the
summer, incorporating feedback from several of
our shareholders. During the Policy review in 2024,
we increased the headroom for the maximum AIP
opportunity from 200% of salary to 250% with the broad
support of shareholders. This was to ensure that the
Policy has the flexibility to support the attraction and
retention of Executive Directors. For FY2025 the CEO
was eligible for a maximum opportunity of 230% and
the incoming CFO was eligible for a maximum
opportunity of 180% (200% for the outgoing CFO). Given
the significant strategic update and the importance of
motivating and retaining our Executive Directors
through this period of extensive change and value
creation for shareholders, the Committee considered it
appropriate to increase the maximum AIP opportunity
for both the CEO and CFO whilst remaining within the
approved headroom. For FY2026 the maximum AIP
opportunity is 250% for the CEO and 220% for the CFO.
We remain committed to our fixed number of shares
approach to granting LTIP awards. It has been in place
through two full Policy cycles and it has delivered
strong alignment with the shareholder experience, with
the value of awards increasing and decreasing in line
with Smiths Group plc share price. The approach
applies to all LTIP participants across the Group. The
headroom for LTIP awards was increased to 500% in
the most recently approved Policy, with the intention
being to incentivise further share price growth and
value creation. In line with our fixed shares approach,
the CEO and CFO will receive a grant of 190,000 shares
and 102,500 respectively for FY2026.
Implementation for FY2026
The base salaries of the Executive Directors have been
increased by 3.5% effective from 1 October 2025. This
is aligned with the salary increase budget across all
employees in the wider UK workforce. The new annual
salaries will be £1,002,100 and £646,900 for Roland and
Julian respectively.
Enhanced LTIP award – April 2025
Taking into account the strategic update, the Committee
carefully considered remuneration arrangements for
the wider leadership team, including Executive
Directors. Given the material actions underway (the
separation of the Smiths Interconnect and Smiths
Detection businesses) to unlock significant value and
enhance returns for shareholders - as well as the
importance of providing stability of leadership through
this critical phase of Smiths journey – an enhanced
LTIP award was granted, directly linked to the delivery
of stretch relative total shareholder return (TSR)
performance versus the FTSE 100 (excluding financial
services and investment trusts) over the three financial
years beginning FY2025. The award was equivalent to
50% of salary for the CEO and CFO (26,877 shares and
17,353 shares, respectively).
Threshold vesting (25% of the award) will only be
delivered subject to Smiths delivering TSR
performance at the 60th percentile level compared to
the peer group, increasing on a straight-line basis to
maximum vesting at the 90th percentile – significantly
above typical market practice of threshold to maximum
vesting of median (50th percentile) to upper quartile
(75th percentile) performance. Therefore, delivery
of 60th percentile performance would equate to an
additional 12.5% of salary (or 6,719 and 4,338 shares
for the CEO and CFO respectively). Full vesting of the
shares would only occur in the event of 90th percentile
TSR performance.
The Committee was mindful of the intention to use
the overall headroom in the Policy in exceptional
circumstances only. On balance, it determined that it
was appropriate for the CEO and CFO to participate
in the additional LTIP award alongside other senior
executives, recognising the ‘stretch’ outperformance
targets linked to superior shareholder value creation.
Read more
Implementation of
Remuneration Policy
in FY2025
Page 88
Statement of
implementation of
Remuneration Policy
in FY2026
Page 89
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
87
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Committee performance review
In FY2025, the performance of the Committee was
considered as part of the wider Board review process
described on page 72. Overall, it was confirmed that
the Committee continues to operate effectively.
Looking forward
I hope you find this report a clear explanation of
the Committee’s considerations, decisions and
remuneration outcomes for FY2025. This is my last
statement as Chair of the Committee before I retire at
the 2025 AGM and I would like to thank the numerous
investors, other stakeholders, and my fellow
Committee members who have helped inform our
remuneration decisions since I took over the role, and
particularly last year when we reviewed our Directors’
Remuneration Policy.
In the coming year, the Committee will continue to
monitor the Remuneration Policy and its effectiveness
in supporting the execution of our strategy and delivery
of value creation potential for Smiths, as well as the
retention and motivation of our highly talented executive
leadership team. In the event that any changes are
proposed, the Committee will engage with institutional
shareholders and proxy voting agencies as appropriate.
Alister Cowan will succeed me as Chair of the
Committee with effect from the 2025 AGM so please
join me in welcoming him and I trust that we will have
your support when voting at the AGM.
Karin Hoeing
Chair of the Remuneration & People Committee
Changes are proposed to the AIP measures for FY2026
which will support significant business change during
the year. Operating profit margin is introduced as a key
value creation driver as well as delivering absolute
budgeted profit. The aggregate of profit measures is
also weighted more highly. The proposed financial
measures of revenue, profit margin, absolute operating
profit and cash conversion are relevant for both future
Smiths and separating businesses. The overall
weighting of financial and non-financial metrics is
proposed at 80%/20%. The 20% weighting is on
non-financial strategic measures which are aligned to
the company scorecard and includes a robust energy
reduction metric.
Changes have been made to the design of the FY2026
LTIP to reflect that most of the performance period will
relate to the future Smiths organisation following the
separation of the Smiths Interconnect and Smiths
Detection businesses and to include value creation
measures which closely align to our strategy and
targets. The key changes are to reduce the weighting
on revenue, introduce a relative TSR measure,
increase our focus on headline EPS, and retain cash.
Greenhouse gas emission reduction will be retained
in our company scorecard, but will no longer be a
standalone LTIP metric. Two inflight LTIP awards will
continue to be subject to GHG reduction metrics, and
we are on track to meet the reduction targets that have
been communicated.
Committee membership and meetings
The members of the Committee, their biographies and
attendance at meetings during the year can be found
on pages 65 to 67. The CEO and Chief People,
Sustainability & Excellence Officer usually attend
Committee meetings. Other members of senior
management are invited to attend as necessary. The
Company Secretary acts as secretary to the Committee.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
88
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Roland Carter:
Julian Fagge:
£0
£500
£1,000
£1,500
£4,500
£2,000
£2,500
£3,000
£3,500
£4,000
£4,383m
£2,064m
Base salary
Implementation of Remuneration Policy in FY2025
Single figure (£000)
Roland Carter
Julian Fagge
Salary
964
313
Pension and benefits
153
43
Annual bonus
1,893
481
Long term incentives
1,373
1,227
Roland Carter received:
£963,500
Julian Fagge received:
£312,500
Pension and benefits
–
Pension contributions of 12% of base salary for Roland Carter and
Julian Fagge, in line with the rate available to the wider UK workforce.
–
Benefits included healthcare, insurances and car benefit.
Annual Incentive Plan (AIP)
Total bonus payout (% of maximum):
Roland Carter:
85.4%
Julian Fagge:
85.4%
Performance measure
Threshold
(25%
payout)
Outturn
Maximum
(full
payout)
Achievement
(% of max)
Revenue (30%)
£3,042m
£3,317m
£3,363m
85.5%
Operating profit (30%)
£506m
£575m
£591m
81.7%
Headline operating cash conversion (20%)
H1 (10%)
70%
92%
90%
100%
FY (10%)
80%
96%
100%
78%
Energy reduction (10%)
-1.0%
-3.0%
-3.0%
100%
Strategic business measure
n/a
7.5%
n/a
75%
Long-Term Incentive Plan (LTIP)
Total vesting (% of maximum):
Roland Carter:
88.0%
Julian Fagge:
88.0%
Performance measure
Threshold
(25%
payout)
Outturn
Maximum
(full
payout)
Achievement
(% of max)
Revenue growth (30%)
3.5%
9.4%
6.5%
100.0%
Headline EPS growth after
tax (20%)
6.0%
14.9%
11.0%
100.0%
Free cash-flow (20%)
45%
50.2%
55%
64.0%
Average ROCE (15%)
14.0%
16.7%
17.0%
92.9%
Reduction in GHG
emissions (15%)
15.0%
28.9%
20%
100%
Salary, benefits and bonus for Julian Fagge represent six months since his appointment as Executive Director.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
89
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Statement of implementation of Remuneration Policy in FY2026
Performance measures and link to strategy
Element
Outcome
AIP
LTIP
Customer
Attractive end markets
Revenue/revenue growth
Leading businesses
Operating profit/profit margin
Customer relationships
Headline EPS growth
People
Purpose and Values
Scorecard of strategic measures key to Group
and business performance
High performance culture
Execution
Invest behind growth
Relative total shareholder return
Operational excellence
Headline operating cash conversion
Free cash-flow
Energy reduction
Base salary
Roland Carter:
£1,002,100
3.5% increase
Julian Fagge:
£646,900
3.5% increase
UK wider workforce increase of 3.5%.
Long-term incentive (LTIP)
Annual bonus (maximum opportunity)
Roland Carter:
190,000
shares
Julian Fagge:
102,500
shares
Performance measure
Weighting
Threshold
(25%
vesting)
Maximum
(full
vesting)
Revenue growth
20%
4%
8%
Relative TSR
20%
50%
75%
Headline EPS
growth after tax
40%
7%
12%
Average free
cash-flow
20%
45%
60%
–
Two-year post-vesting holding period applies
Roland Carter:
250%
of base salary
Julian Fagge:
220%
of base salary
Performance measure
Weighting
Revenue
20%
Operating profit margin
20%
Operating profit
20%
Headline operating cash conversion
20%
Strategic business measure
20%
–
33% of annual bonus deferred into shares for
three years
–
Strategic business measure includes energy
reduction
–
Specific targets are considered to be
commercially sensitive and will be disclosed
retrospectively
Shareholding requirements
Pension Benefits
Executive Directors should build a
minimum shareholding equivalent
to the annual fixed number of
shares awarded under the LTIP
within five years and are required to
hold shares equivalent to their full
in-employment shareholding
guideline, or actual holding if lower,
for two years post-employment.
Roland Carter:
12%
of base salary
Benefits package consisting of
healthcare, insurances and
car benefit
Julian Fagge:
12%
of base salary
Benefits package consisting
of healthcare, insurances and
car benefit
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
90
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Alignment with the UK Corporate Governance Code
The table below details how the Committee addresses the factors set out within Provision 40 of the Code:
Clarity
–
The Committee welcomes transparency and regular engagement with shareholders with regard to executive remuneration. During FY2025,
the Committee Chair consulted with several key shareholders on Executive Director remuneration
Simplicity
–
Participants in incentive plans receive annual communications to confirm award levels and performance measures. Supporting guidance
documents and educational webinars are made available. The Remuneration Policy for Executive Directors underpins that of the wider
workforce
Risk
–
The Committee considers the effective management of risk throughout the delivery of incentive plans, applying reasonable discretion to
override formulaic outcomes if necessary
–
The Committee considers that the structure of incentive arrangements does not encourage unnecessary risk taking
–
For Executive Directors, one third of the annual bonus payment is deferred into shares with an additional three years until vesting
–
Robust malus and clawback provisions are in place for incentive plans and are clearly communicated
Predictability
–
Our Remuneration Policy clearly outlines the maximum award levels and vesting outcomes applicable to AIP and LTIP. As stated above under
‘Risk’, the Committee has the ability to apply discretion to formulaic outcomes and clear malus and clawback provisions exist
Proportionality
–
There is a link between strategic business objectives and performance outcomes, as outlined on page 89
–
Our Policy for our incentive plans outlines threshold, target and maximum opportunity levels, with actual outcomes dependent on
performance achieved against predetermined measures
–
Through the design of the Remuneration Policy and the discretion of the Committee, poor performance is not rewarded
Alignment to culture
–
The Smiths Values of passion, integrity, respect, ownership and customer focus underpin the design and operation of our incentive
programmes. The business strategy is supported by these Values which are widely communicated across the company.
Consideration of wider workforce
The Committee considers all stakeholder groups when setting executive pay, including our people. The Committee is briefed on pay arrangements across the business
and receives reports on people priorities within each of the businesses. In addition, a summary of remuneration-related issues raised by employees through the employee
engagement survey is presented to the Committee. Our overarching reward philosophy applies to all employees; it is based on fairness and consistency, applying principles
of equity and transparency in pay structures. Whilst considering market competitiveness of base remuneration, the principles of pay for performance cascade to the wider
workforce, linking reward outcomes to both financial and non-financial performance measures. Details of workforce engagement by the Non-executive Directors over the
year can be found on page 78. The overall responsibility for workforce engagement sits with the Chair of the Committee.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
91
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Salary
Julian Fagge was appointed to the Board as CFO on 1 February 2025 with an annual
base salary of £625,000. The values in the single figure table above in respect of
FY2025 reflect the remuneration paid from 1 February 2025. The full value is
included for FY2023 long-term incentive award and has not been pro-rated.
Clare Scherrer retired on 30 April 2025 and the remuneration above in respect of
FY2025 is in respect of the period to the date of retirement and includes values for
AIP and LTIP pro-rated to this date.
Benefits
Benefits for Executive Directors include life assurance, disability insurance,
private healthcare insurance, car related benefits and tax return preparation
(Clare Scherrer only).
Pension
Executives may choose either to participate in the company’s defined contribution
pension plan or to receive a pension allowance in lieu thereof. Roland Carter,
Julian Fagge and Clare Scherrer received an allowance in lieu of pension contribution
equivalent to 12% of salary. This is aligned to the rate available to the wider UK
workforce.
FY2025 annual bonus outcome
The maximum annual bonus opportunity for FY2025 was 230% of salary for Roland
Carter. The maximum bonus opportunity for Julian Fagge from 1 February 2025
was 180% of salary. Julian also received an annual bonus payment in respect of his
Smiths Interconnect service, prior to becoming CFO, of £290,912, which has been
excluded from the figures above. The maximum annual bonus opportunity for Clare
Scherrer was 200% of salary for FY2025. The bonus has been pro-rated up to and
including the retirement date of 30 April 2025. For FY2025, financial metrics made up
80% of the annual bonus, with the final 20% based on performance against energy
reduction and strategic business objectives. The table (right) summarises the
financial targets and the company’s actual performance (restated at budget
exchange rates) against those for the FY2025 annual bonus.
Performance targets, actual performance and outturn
Measure
Weighting
Threshold
25% payout
Target
50% payout
Maximum
100% payout
Actual
Outturn
Revenue
30%
£3,042m
£3,202m
£3,363m
£3,317 25.7%
Operating profit
30%
£506m
£547m
£591m £575m 24.4%
Headline operating cash conversion
H1
10%
70%
80%
90%
92% 10.0%
FY
10%
80%
90%
100%
96%
7.8%
Total financial
80%
67.9%
Energy reduction
10%
(1.0%)
(2.0%)
(3.0%)
(3.0%)
10%
Strategic objectives (AP)
10%
–
–
–
–
7.5%
Total
100%
85.4%
Overall FY2025 annual bonus outturn
The following table sets out the FY2025 bonus outturn for Executive Directors:
Maximum opportunity
Outturn (percentage of maximum)
Roland Carter
230%
85.4%
Julian Fagge
180%
85.4%
Clare Scherrer
200%
85.4%
The strategic objectives for Executive Directors are based on achievements against
the Acceleration Plan (AP). The AP is designed to deliver productivity gains, a
streamlined cost base and higher margins, with investment directed towards
process improvement and productivity. Excellent progress has been made with the
AP delivering ahead of expectations, including fully embedding our Excellence
programme in all parts of the business; higher investment to increase capacity and
efficiency through higher automation and testing capabilities and the delivery of cost
savings between target and maximum. The Committee determined a performance
achievement at 75% of maximum for this measure.
The Committee considered the overall outturn carefully in the context of the Group
and individual performance and determined that the amounts were a fair reflection of
performance in the year. One third of the annual bonus will be deferred into Smiths
shares for three years.
Single figure of annual remuneration (audited)
Executive Directors
Salary
Benefits
Payments in lieu of
pension contribution
Total fixed
Annual bonus
Long-term incentives
Total
performance related
Total
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
Roland Carter
964
320
37
13
116
37
1,117
370
1,893
400
1,373
886
3,266
1,286
4,383
1,656
Julian Fagge
313
–
12
–
31
–
356
–
481
–
1,227
–
1,708
–
2,064
–
Clare Scherrer
500
600
67
32
60
72
627
704
854
649
1,711
–
2,565
649
3,192
1,353
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
92
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
FY2023 long-term incentive plan outcome
Roland Carter, Julian Fagge and Clare Scherrer received an award under the FY2023 LTIP, subject to the following performance conditions:
Measure
Weighting
Performance period
Threshold 25%
Maximum 100%
Actual
Outturn (% of vesting)
Average revenue growth
30%
1 August 2022 to 31 July 2025
3.5%
6.5%
9.4%
30.0%
Average annual Group headline EPS growth after tax
20%
1 August 2022 to 31 July 2025
6.0%
11.0%
14.9%
20.0%
Average ROCE
15%
1 August 2022 to 31 July 2025
14.0%
17.0%
16.7%
13.9%
Free cash-flow
20%
1 August 2022 to 31 July 2025
45%
55%
50.2%
12.8%
Reduction in GHG emissions
15%
1 August 2022 to 31 July 2025
15%
20%
28.9%
15.0%
Vesting
91.7%
Adjustment for non-headline profit reduction
(3.7%)
Total vesting
88.0%
The outturn includes the impact of the adjustment applied, as discussed in the Remuneration & People Committee Chair statement on page 85. The Group headline EPS
growth after tax performance has been calculated to exclude the impact of the share buyback scheme in order to ensure the targets were not materially easier to achieve
than when originally set. The value in the single figure table has been calculated using an estimated share price, based on the average price over the last five days of the
financial year (£23.22). The share price appreciation attributable to the FY2023 LTIP for Roland Carter was 41.1% (£377,879). For Julian Fagge it was 41.1% (£337,741) and for
Clare Scherrer it was 41.1% (£470,831) based on the average share price for the 3 months to 31 July 2025 (£21.93). An additional holding period of two years will apply to the
shares vesting.
Scheme interests awarded in FY2025 (audited)
Scheme
Form of award
Date of grant
Number of
shares awarded
Award price
Face value
(£000)
% vesting at threshold
performance
Performance
period end date
Roland Carter
LTIP
Conditional shares
14 November 2024
190,000
£16.94
3,219
25%
31 July 2027
Roland Carter
Deferred bonus
Conditional shares
1 October 2024
7,668
£17.26
132
N/A
N/A
Roland Carter
Enhanced LTIP
Conditional shares
17 April 2025
26,877
£17.94
482
25%
31 July 2027
Julian Fagge
LTIP
Conditional shares
1 November 2024
60,062
£15.42
926
25%
31 July 2027
Julian Fagge
LTIP
Conditional shares
8 April 2025
21,219
£17.49
371
25%
31 July 2027
Julian Fagge
Enhanced LTIP
Conditional shares
17 April 2025
17,353
£17.94
311
25%
31 July 2027
Clare Scherrer
LTIP
Conditional shares
14 November 2024
110,000
£16.94
1,863
25%
31 July 2027
Clare Scherrer
Deferred bonus
Conditional shares
1 October 2024
12,457
£17.26
215
N/A
N/A
An Enhanced LTIP Award was granted to the Executive Directors in April 2025, equivalent to 50% of salary for the CEO and CFO. The award will be based fully on relative
Total Shareholder Return compared to the FTSE 100 (excluding financial services and investment trusts) over the three financial years beginning FY2025. Threshold vesting
(25% of the award) will only be delivered subject to Smiths delivering TSR performance at the 60th percentile level, increasing on a straight-line basis to maximum vesting at
the 90th percentile.
The performance measures for the FY2025 LTIP award are as follows:
Measure
Weighting
Threshold (25% vesting)
Maximum
Revenue growth (3-year CAGR)
30%
3.5%
6.5%
Headline EPS growth after tax (3-year CAGR)
20%
6.0%
11.0%
Free cash-flow (average annual)
20%
45.0%
55.0%
Average ROCE
15%
14.0%
17.0%
Absolute reduction in GHG emissions
15%
15.0%
20.0%
Total
100%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
93
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Key
LTIP
The Smiths Group
Long-Term Incentive
Plan 2015 & 2024.
SAYE
The Smiths Group
Sharesave Scheme.
+
The vesting dates
shown in respect of
awards made under
the LTIP are subject to
the relevant
performance test(s)
being passed.
++
The expiry dates
shown apply in normal
circumstances.
Performance tests
–
LTIP awards granted
between 5 November
2021 and 8 April 2025
have the following
performance tests – 20%
headline EPS growth;
15% ROCE; 20% free
cash-flow; 30% revenue
growth; 15% reduction
in GHG emissions.
–
Enhanced LTIP awards
based on relative TSR
compared to the FTSE
100 (excluding financial
services and investment
trusts) over the three
financial years beginning
FY2025. Threshold vesting
(25% of the award) for
performance at the 60th
percentile level, increasing
on a straight-line basis to
maximum vesting at the
90th percentile.
–
No performance criteria for
the deferred bonus awards
or SAYE.
Directors’ share options and long-term share plans (audited)
Director and Plan
Options and
awards held
on 31 July
2025
Options and
awards held
on 31 July
2024
Exercise
price
Grant
date
Vesting date+
Expiry
date++
Date vested
Number
Exercise
price
Market price
at date
of grant
Market
price at
date of
vesting
Roland Carter
LTIP
0
67,200
N/A
05/11/21
01/10/24
16/10/24
55,090
N/A
1,621p
67,200
67,200
N/A
02/11/22
08/10/25
67,200
67,200
N/A
01/11/23
15/10/26
40,900
40,900
N/A
08/04/24
15/10/26
190,000
0
N/A
14/11/24
15/10/27
Enhanced LTIP
26,877
0
N/A
17/04/25
15/10/27
Deferred bonus award
7,668
0
N/A
01/10/24
01/10/27
SAYE
773
773
1,163p
17/05/22
01/08/25
01/02/26
01/08/25
773
1163p
1454p
2308p
725
725
1,278p
16/05/24
01/08/27
01/02/28
Julian Fagge
LTIP
0
60,062
N/A
05/11/21
01/10/24
16/10/24
49,238
N/A
1,621p
60,062
60,062
N/A
02/11/22
08/10/25
60,062
60,062
N/A
01/11/23
15/10/26
60,062
0
N/A
01/11/24
15/10/27
21,219
0
N/A
08/04/25
15/10/27
Enhanced LTIP
17,353
0
N/A
17/04/25
15/10/27
SAYE
1,346
1,346
1,337p
16/05/23
01/08/26
Clare Scherrer
LTIP
91,342
91,342
N/A
02/11/22
08/10/25
91,342
91,342
N/A
01/11/23
15/10/26
10,961
10,961
N/A
08/04/24
15/10/26
110,000
0
N/A
14/11/24
15/10/27
Deferred bonus award
2,009
2,009
N/A
03/10/22
03/10/25
13,303
13,303
N/A
03/10/23
03/10/26
12,457
0
N/A
01/10/24
01/10/27
SAYE
0
1,346
1,337p
16/05/23
30/04/25
31/10/2025
30/04/25
822
1,337p
1,671p
1,864p
Notes
– The high and low market prices of the ordinary shares during the period 1 August 2024 to 31 July 2025 were 2,384p and 1,515p respectively. The mid-market closing price on 31 July 2024 was 1,786p and on
31 July 2025 was 2,351p.
– The five-day average closing price of a Smiths Group plc share on the dates of the LTIP awards made to Directors in the FY2025 financial year was 1,559p 1 November 2024, 1,595p on 14 November 2024, 1,811p
on 8 April 2025 and 1,805p on 17 April 2025.
– The SAYE options granted to and held by Executive Directors at 31 July 2025 were granted at an exercise price below the market price of a Smiths Group plc share. The market price of a Smiths Group plc share
was 1,454p at 17 May 2022, 1,671p at 16 May 2023 and 1,598p at 16 May 2025. Shares are granted in May but the savings period commences in August.
– Clare Scherrer’s SAYE was pro-rated to the date of retirement. Clare exercised 822 shares and the remaining 524 lapsed. During the year the gain on exercise of these shares was £4,311.94.
– None of the options or awards listed above was subject to any payment on grant.
– No options or awards have been granted to or exercised by Directors or have lapsed during the period 1 August to 23 September 2025.
– At 31 July 2025, the trustee of the Employee Benefit Trust held 1,662,267 shares. The market value of the shares held by the trustee on 31 July 2025 was £39,079,897 and all dividends were waived in the year in
respect of the shares held by the trustee.
– Special provisions permit early exercise of options and vesting of awards in the event of retirement, redundancy or death.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
94
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Payments to past Directors (audited)
In FY2024 a benefit value of £119,000 was reported for Paul Keel. This included
estimates of the UK and US taxes to be settled by the company totalling £48,278 in
accordance with his service contract, which provided housing, car and relocation
payments on a net of tax basis. The actual figures paid were UK tax of £44,814 and US
tax of $23,594, resulting in a total benefit amount for FY2024 of £133,969.
Details of remuneration payments made or to be made to Clare Scherrer on
her retirement from Smiths were included in the RNS announcement dated
14 January 2025 and are in the single figure table on page 91.
Clare received a pro-rated FY2025 AIP payment of £853,909 based on 85.4% of
maximum payout. Clare’s share awards under the Company’s LTIP were preserved
in accordance with the good leaver provisions of the LTIP, subject to a time pro-rating
and performance adjustment and normal vesting dates. In respect of the FY2023
LTIP, 83,730 shares will vest at 88.0% of maximum 73,682 shares with a value
of £1,711m.
Payments for loss of office
There were no payments for loss of office in FY2025.
Share ownership requirement for Executive Directors
Executive Directors are required to build a minimum shareholding equivalent to the
annual fixed number of shares awarded under the LTIP within five years. Executive
Directors are required to retain at least 50% of any net vested share awards (after
sales to meet tax liabilities) until those guidelines are achieved. Shares under
deferred bonus awards and LTIP awards which have vested but are subject to a
further holding period (net of assumed income tax) count towards the requirement.
Awards that are still subject to performance conditions do not count towards
the requirement.
Executive Directors will be required to hold shares equivalent to their full in-
employment shareholding guideline, or actual holding if lower, for two years
post-employment, in line with best practice guidance. To help enforce this
requirement, a hold is put on vested shares held in broker accounts with Smiths
Group’s share plan administrator. This policy applies to Paul Keel who resigned from
the Group during FY2024 and Clare Scherrer who retired from the Group during
FY2025. Mr Keel is required to hold 92,660 shares in the Company until 31 March
2026. Ms Scherrer is required to hold 33,116 shares in the Company until 30 April 2027.
Share scheme dilution limits
The Company complies with the guidelines laid down by the Investment Association.
These restrict the issue of new shares under all the Company’s share schemes in
any ten-year period to 10% of the issued ordinary share capital. As at 31 July 2025
the headroom available under this limit was 7.99%
Executive Directors’ shareholdings (audited)
The table below shows the shareholding for each Executive Director against their respective shareholding requirement as at 31 July 2025.
Director
Shareholding
requirement
Shares owned
outright
Shares
subject to
performance
Vested
shares in
holding period
Shares
arising from
bonus deferral
Save As
You Earn
(SAYE)
Current
shareholding
(% of requirement)
1
Shareholding
requirement
met
Roland Carter
190,000
130,733
392,177
54,296
4,064
1,498
99.5%
N
Julian Fagge
102,500
6,511
218,758
26,096
–
1,346
31.8%
N
Roland Carter acquired 776 shares on 1 August 2025 following exercise of the Save As You Earn shares awarded on 17 May 2022. There have been no other changes to the
Executive Directors’ shareholdings between 1 August 2025 and 23 September 2025.
Footnotes
1 Shares owned outright
(including vested shares
in holding period), and
the net of income tax
value of shares arising
from bonus deferral, are
taken into account for the
shareholding requirement.
Executive Directors have
five years from the date
of appointment to meet
the required personal
shareholding. Roland
Carter has until 26 March
2029 and Julian Fagge has
until 1 February 2030 to
meet the requirement.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
95
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
TSR performance
The following graph shows the company’s total shareholder return (TSR) performance over the past ten years compared to the FTSE 100 Index. The FTSE 100 Index, of which
the company has been a member throughout the period, has been selected to reflect the TSR performance of other leading UK-listed companies. The values of hypothetical
£100 investments in the FTSE 100 Index and Smiths Group plc shares at 31 July 2025 were £198.52 and £270.67 respectively.
Total Shareholder Return
£80
£100
£120
£140
£160
£180
£200
£220
£240
£260
£280
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
£100
£110.36
£104.04
£150.59
£120.29
£161.45
£129.63
£161.35
£133.66
£147.25
£113.39
£167.42
£133.95
£157.97
£142.50
£182.53
£153.99
£174.96
£198.63
£270.67
£198.52
£100
Smiths
FTSE 100
Chief Executive’s remuneration for the last ten years
FY2025
R Carter
FY2024
R Carter
FY2024
P Keel
FY2023
P Keel
FY2022
P Keel
FY2021
P Keel
FY2021
A Reynolds
Smith
FY2020
A Reynolds
Smith
FY2019
A Reynolds
Smith
FY2018
A Reynolds
Smith
FY2017
A Reynolds
Smith
FY2016
A Reynolds
Smith
FY2016
P Bowman
Total remuneration £000
4,383
1,656
814
4,285
1,832
450
2,753
2,196
4,130
3,251
2,320
2,964
1,602
Annual bonus outcome (% max)
85.4%
60.5%
0%
70%
39%
76%
70%
17%
41%
42%
96%
89%
88%
Common Investment Plan outcome (% max)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100%
LTIP outcome (% max)
88.0%
76.7%
0%
76%
n/a
n/a
19%
31%
75%
32%
n/a
n/a
18%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
96
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Chief Executive pay ratios
These ratios set out the comparison between the Chief Executive’s remuneration and
that for employees in the UK workforce.
Total remuneration
Year
Method
25th percentile
ratio
Median pay
ratio
75th percentile
ratio
FY2025
Option B
108:1
82:1
53:1
FY2024
Option B
69:1
46:1
30:1
FY2023
Option B
128:1
92:1
62:1
FY2022
Option B
58:1
39:1
26:1
FY2021
Option B
105:1
75:1
47:1
Salary
Year
Method
25th percentile
ratio
Median pay
ratio
75th percentile
ratio
FY2025
Option B
26:1
18:1
12:1
FY2024
Option B
27:1
19:1
13:1
FY2023
Option B
27:1
19:1
13:1
FY2022
Option B
28:1
20:1
13:1
FY2021
Option B
35:1
25:1
17:1
Salary
(£)
Total
remuneration
(£)
Chief Executive
963,500
4,382,789
25th percentile employee
37,011
40,748
Median employee
53,021
53,326
75th percentile employee
77,250
82,991
The pay data for employees in the UK workforce has been calculated using Option B,
based on the data used for gender pay reporting, due to the availability of data at the
time the Annual Report was published. The gender pay reporting basis comprises
salary and benefits as at 15 April 2025 and incentive payments payable in respect of
FY2025. The Committee considers that this provides an outcome that is representative
of the employees at these pay levels. It is assumed that the value of employee
benefits is 7.0% of base salary as an average across the workforce.
The workforce remuneration figures are those paid to UK employees whose pay
is at the 25th, median and 75th percentile of pay for the Group’s UK employees.
Figures are shown on both the prescribed basis using total pay and also salary only,
which provides a useful ongoing comparison as it is a less volatile basis. The CEO pay
ratio for salary is consistent as he has received a pay increase in line with the wider
workforce. The ratio has increased for total remuneration as both short and long-
term incentives have paid out significantly above target this year.
Percentage change in Directors’ remuneration
FY2024 to FY2025
FY2023 to FY2024
FY2022 to FY2023
FY2021 to FY2022
Salary/
fees
(%)
Benefits
(%)
Bonus
(%)
Salary/
fees
(%)
Benefits
(%)
Bonus
(%)
Salary/
fees
(%)
Benefits
(%)
Bonus
(%)
Salary/
fees
(%)
Benefits
(%)
Bonus
(%)
CEO
201
206
373
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
Previous
CEO
n/a
n/a
n/a -45.0
-48.5
-100
2.1
-24.1
185
0
239
204
CFO*
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Outgoing
CFO
-17
22
32
8.3
7.2
2.2
0.0
10.7
176
n/a
n/a
n/a
NED
3.0
125
n/a
5.0
-45
n/a
2.5
12.0
n/a
2.5
100
n/a
All
employee
average
3.0
3.0
41
5.0
5.0
-14
2.5
2.5
180
2.5
2.5
-34
*
Julian Fagge was appointed to the Board in February 2024 and year on year change can therefore not
be calculated.
‘All employees’ is defined as all UK Group employees. This was 167 employees at
all grades in FY2025. It was 196, 190 and 200 employees for FY2024, FY2023 and
FY2022 respectively.
Former CEO Paul Keel was pro-rated for service from 25 May 2021 – 31 July 2021
for FY2021. Paul Keel forfeited his annual bonus for FY2024 upon his resignation
on 25 March 2024. Remuneration for Roland Carter was pro-rated for service from
26 March 2024 for FY2024 as the incoming CEO.
Remuneration for the outgoing CFO Clare Scherrer was pro-rated for service to
the date of her retirement on 30 April 2025. Remuneration for Clare Scherrer
was also pro-rated for service from 29 April 2022 – 31 July 2022 for FY2022.
Remuneration for the CFO Julian Fagge was pro-rated for service from
1 February 2025.
Relative importance of spend on pay
The table below shows shareholder distributions (i.e., dividends and share
buybacks) and total employee pay expenditure for FY2025 and FY2024 and the
percentage change. The distributions are higher for FY2025 owing to a higher
number of share buybacks than FY2024.
FY2025
£m
FY2024
£m
Change
Shareholder distributions
455
217
110%
Employee costs
1,027
992
3.5%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
97
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Executive Directors’ service contracts
The Company’s policy is that Executive Directors are normally employed on
terms which include a one-year rolling period of notice from the Company and six
months’ notice from the individual. The contract includes 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). In addition to payment of basic salary, pension
allowance and benefits in respect of the unexpired portion of the one-year notice
period and for good leavers only, the predetermined sum would include annual
bonus and share awards only in respect of the period they have served, payable
following the end of the relevant performance period and subject to the normal
performance conditions.
Roland Carter is employed under a service contract with the Company dated and
effective from 25 March 2024. He became an Executive Director with effect from
25 March 2024.
Julian Fagge is employed under a service contract with the Company dated and
effective from 1 February 2025. He became an Executive Director with effect from
1 February 2025.
Clare Scherrer was employed under a service contract with the Company dated
13 April 2022 and effective 29 April 2022. She became an Executive Director with
effect from 29 April 2022 and stepped down as an Executive Director with effect
from 31 January 2025.
The Company may elect to terminate the contract by making a payment in lieu of
notice equal to the Director’s base salary and benefits (including pension allowance)
in respect of any unserved period of notice. The service contracts contain specific
provisions enabling a reduction in any phased payments in lieu of notice, in the event
that the Director finds alternative employment during the notice period. The service
contracts are available for viewing at the Company’s Registered Office.
Change of control provisions
In the event of a change of control, LTIP awards will vest to the extent that each of the
performance conditions is met based on the Committee’s assessment of performance
over the performance period to the date of change of control. For internal
performance measures, the Committee may exercise its judgement in determining
the outcome based on its assessment of whether or not the performance conditions
would have been met to a greater or lesser extent at the end of the full performance
period. Awards will also normally be pro-rated to reflect the time that has elapsed
between the grant of the award and the date of change of control. The Committee
retains discretion to vary these provisions on a case-by-case basis.
Non-executive Directors
Single figure of annual remuneration (audited)
Salary/fees
Benefits
1
Total
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
FY2025
£000
FY2024
£000
Steve Williams
2
479
354
–
–
479
354
Pam Cheng
97
94
–
–
97
94
Alister Cowan
3
111
7
–
–
111
7
Dame Ann Dowling
4
101
98
3
3
104
101
Karin Hoeing
5
101
92
1
–
102
92
Richard Howes
6
111
92
2
–
113
92
Simon Pryce
7
50
–
2
–
52
–
Mark Seligman
8
107
95
1
1
108
96
Noel Tata
101
102
–
–
101
102
Non-executive Director fees
Non-executive Director fees paid during FY2025 and payable during FY2026 are
shown below. It was determined that the fee increase for the Chairman and the
Non-executive Directors’ base fee should mirror that awarded to the wider UK
workforce. For FY2026 a 3.5% increase was agreed by the Chairman and Executive
Directors. This will apply from 1 October 2025.
FY2026
FY2025
Fee payable to Chairman of the Board for all responsibilities
£497,845
£481,000
Non-executive Director base fee
£83,789
£80,956
Additional fee payable to the Senior Independent Director
£20,000
£20,000
Additional fee for Committee Chairs
£20,000
£20,000
Additional fee payable to members of the Separation Oversight
Committee
£20,000
–
Attendance allowance for each meeting outside the Non-executive
Director’s home continent
£4,000
£4,000
During the year it was agreed to pay members of the Separation Oversight
Committee an additional £20,000 fee per annum in recognition of the material
increase in time commitment expected from those Directors in overseeing the
separations of Smiths Interconnect and Smiths Detection. Steve Williams serves
as Chairman of the Committee but agreed to waive his fee, noting the nature of his
all-encompassing fee received as Chairman of the Board. The payment of the fee will
be kept under review and it is expected that the Committee will be retired and the fee
will cease to be paid on conclusion of the separations of Smiths Interconnect and
Smiths Detection.
Share ownership guidance for Non-executive Directors
Non-executive Directors are encouraged to acquire shares in the company with a
value of one times the annual base fee, over a five-year period. The five-year period is
from the later of 1 August 2021 or the date of appointment to the Board. In addition,
the Non-executive Directors are encouraged to retain a shareholding of one times
the annual base fee for at least two years after the Director leaves the Board.
Footnotes
1
Benefits for the Chairman
and Non-executive
Directors relate to
reimbursed travel-related
and other expenses
(including flight costs
and tax support where
applicable), which are
grossed up for the UK
income tax and National
Insurance contributions
paid by the company on
their behalf.
2
Steve Williams’ fee
is in respect of all
responsibilities as
Chairman
3
Alister Cowan’s fees
include the fee for
membership of the
Separation Oversight
Committee.
4
Dame Ann Dowling’s
fees include the fee for
chairing the Innovation,
Sustainability & Excellence
Committee.
5
Karin Hoeing’s fees include
the fee for chairing the
Remuneration & People
Committee.
6
Richard Howes’ fees
include the fees for
chairing the Audit &
Risk Committee and
his membership of the
Separation Oversight
Committee.
7
Simon Pryce joined the
Board on 1 February 2025.
His fees include the fee
for membership of the
Separation Oversight
Committee
8
Mark Seligman’s fees
include the additional fees
as Senior Independent
Director and for his
membership of the
Separation Oversight
Committee.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
98
REMUNERATION & PEOPLE COMMITTEE REPORT
CONTINUED
Non-executive Directors’ shareholdings (audited)
The table below shows the shareholding for each Non-executive Director.
31 July 2025
Steve Williams
34,000
Pam Cheng
6,000
Alister Cowan
13,000
Dame Ann Dowling
5,813
Karin Hoeing
3,414
Richard Howes
4,135
Simon Pryce
–
Mark Seligman
10,000
Noel Tata
6,000
Following a quarterly acquisition of ordinary shares, under a share purchase
agreement using a fixed proportion of their after-tax fees received from the company
(20%), Karin Hoeing acquired 242 shares and Richard Howes acquired 76 shares on
1 August 2025. There have been no further changes between 1 August 2025 and
23 September 2025.
Chairman’s and Non-executive Directors’ letters of appointment
The Chairman and the Non-executive Directors serve the Company under letters of
appointment and do not have contracts of service or contracts for services. Except
where appointed at a General Meeting, Directors stand for election by shareholders
at the first AGM following appointment. The Board has resolved that all Directors
who are willing to continue in office will stand for re-election by the shareholders
each year at the AGM. Either party can terminate the appointment on one month’s
written notice and no compensation is payable in the event of an appointment being
terminated early. The letters of appointment or other applicable agreements are
available for viewing at the Company’s Registered Office.
Date of appointment
Steve Williams
1 September 2023
Pam Cheng
1 March 2020
Alister Cowan
1 July 2024
Dame Ann Dowling
19 September 2018
Karin Hoeing
2 April 2020
Richard Howes
1 September 2022
Simon Pryce
1 February 2025
Mark Seligman
16 May 2016
Noel Tata
1 January 2017
Statement of shareholder voting
The table below sets out the Company voting outcome of the advisory resolution for
approval of the Directors’ Remuneration Report at the 2024 AGM and the approval of
the Directors’ Remuneration Policy at the 2024 AGM:
Resolution
Votes for
% of votes
cast for
Votes
against
% of votes
cast
against
Total
votes cast
Votes
withheld
(abstentions)
Directors’
Remuneration Report
244,711,754
95.2%
12,260,023
4.8% 256,971,777
2,250,218
Directors’
Remuneration Policy
237,176,139
92.3%
19,849,822
7.7%
257,025,961
2,196,034
Advisers to the Committee
During the year, the Committee received material assistance and advice from
the CEO, the Chief People, Sustainability & Excellence Officer, the Global Reward
Director, Deloitte LLP and Freshfields LLP. The Committee’s appointed independent
remuneration adviser is Deloitte LLP. The Company Secretary is secretary to
the Committee.
The Company paid a total fee of £61,000 to Deloitte LLP in relation to remuneration
advice to the Committee during the year. Fees were determined on the basis of time
and expenses. During FY2025, Deloitte LLP provided the Committee with information
on market, compliance support for this year’s Directors’ Remuneration Report and
the provision of other advice relating to remuneration governance and market
practice. Deloitte LLP is a founding member of the Remuneration Consultants Group
and a signatory to its Code of Conduct. Deloitte LLP provided additional tax advisory
services including global corporation tax compliance and employee mobility advice,
as well as company secretarial, internal audit co-source, transaction and
consultancy services.
The Committee is satisfied that the advice provided by Deloitte LLP is objective and
independent and that it does not have connections with the Group that may impair
its independence.
The Directors’ Remuneration Report has been approved by the Board and signed on
its behalf by:
Karin Hoeing
Chair of the Remuneration & People Committee
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
99
INNOVATION,
SUSTAINABILITY
& EXCELLENCE
COMMITTEE
REPORT
The Committee, established in 2021, has played a key
role in embedding ISE priorities across the Group and
setting the tone from the top. Its remit has included
oversight of innovation and new product development,
environmental and sustainability performance, and the
implementation of operational excellence. The decision
to unify the leadership of people, sustainability and
excellence reflects the growing strategic and cultural
importance of these areas to the Group.
During the year, the Committee met four times to
review business innovation strategies and monitor the
integration of sustainability and excellence across the
Group. These discussions highlighted the cultural
transformation underway, particularly through the
deployment of Lean and the alignment of the people,
sustainability and excellence functions. We also
reaffirmed our commitment to sustainability by
recommending environmental performance targets to
the Remuneration & People Committee and welcomed
continued momentum in community engagement
through the Smiths Group Foundation.
The Committee has been well supported by the Board,
with Directors regularly attending beyond the formal
membership, reflecting the significance and broad
interest these topics command. It was particularly
encouraging to hear, during the recent Board Review
facilitated by Dr Tracy Long, how highly valued these
areas are by the Board and the benefit derived from
engaging directly with our talented R&D teams.
Chair’s statement
Innovation, Sustainability and
Excellence (ISE) remain critical to the
successful delivery of our strategy,
and I am pleased to report continued
progress in these areas over the
past year.
Dame Ann Dowling
Chair of the Innovation,
Sustainability & Excellence
Committee
Committee membership
Dame Ann Dowling
Pam Cheng
Karin Hoeing
Noel Tata
Top Committee
activities this year
–
Received updates from
the businesses on new
product development
and innovation
–
Continued to monitor
the implementation
of Smiths Excellence
including Lean
deployment
– Recommended
environmental
performance targets
for FY2026 to the
Remuneration & People
Committee
As these priorities have become more deeply
embedded in our operations and culture and as the
Group simplifies, the Board has taken the decision to
retire the Committee following the 2025 AGM. Its
responsibilities will be absorbed by the Board, with ISE
related assurance, risk and remuneration matters
considered by the Audit & Risk and Remuneration &
People Committees. Innovation and R&D, as integral
components of our strategy, will be covered through
regular deep dives by the Board as part of business
review updates.
I would like to thank my fellow Committee members for
their commitment and contributions, and all colleagues
across the Group who continue to drive innovation,
sustainability and continuous improvement. I look
forward to continuing these important discussions at
Board level.
Dame Ann Dowling
Chair of the Innovation, Sustainability & Excellence
Committee
Committee membership and meetings
The members of the Committee, their biographies and
attendance at meetings during the year can be found on
pages 65 to 67. Several other Board members attended
meetings throughout the year. The Chief Executive
Officer, Chief Financial Officer and the Chief People,
Sustainability & Excellence Officer usually attend the
meetings. Other members of senior management are
invited to attend as necessary. The Deputy Company
Secretary acts as secretary to the Committee.
Committee performance review
In FY2025, the performance of the Committee was
considered as part of the wider Board Review process
described on page 72. Overall, it was confirmed that the
Committee continues to operate effectively.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
100
INNOVATION, SUSTAINABILITY & EXCELLENCE COMMITTEE REPORT
CONTINUED
Committee activities
Innovation
The Committee received regular updates on innovation
strategy, including progress against FY2025 initiatives,
the development pipeline for new products and plans
for FY2026. These updates included Flex-Tek’s
collaboration with Midrex on the Green Steel project
and John Crane’s advancement on dry gas seals and
innovation-led culture. Through the business deep-
dives, the Committee also explored how emerging
megatrends are shaping market dynamics, and the
Group’s proactive efforts to identify and respond to
these opportunities. These insights informed broader
Committee discussions on how innovation, technology,
sustainability and customer-centricity are influencing
the next generation of products. As part of the update
from John Crane, the Committee discussed its
strategic partnership with the University of Sheffield,
an important collaboration aimed at accelerating
innovation and advancing clean energy solutions.
Dame Ann Dowling attended the formal signing of
the partnership at the university, highlighting the
significance of this initiative to Smiths innovation agenda.
Sustainability
The Committee oversaw significant progress across
the Group’s environmental agenda and was pleased to
note a 2% absolute reduction in energy use and an
11.4% absolute reduction in greenhouse gas emissions.
Solar energy investments totalling £1 million were
completed, with further projects planned for the
coming year. We reviewed the Group’s medium-term
environmental goals, which remain on track. These
include increasing renewable electricity usage,
improving waste and water management at water-
stressed sites, and strengthening supplier engagement
through EcoVadis and the Science-Based Targets
initiative (SBTi). The Committee received an update on
the activities of the Smiths Group Foundation, which
awarded £675,000 in grants during the year to support
STEM education, community safety, and environmental
sustainability. We also welcomed the continued
employee engagement in global community
programmes.
Our climate risk assessment now incorporates the
Intergovernmental Panel on Climate Change (IPCC)
aligned scenarios to better reflect physical climate
risks and we noted improvements in ESG data quality
following the adoption of new software. Finally, the
Committee continued to monitor regulatory
developments and climate-related risks, including
through a joint session with the Audit & Risk Committee
to review the evolving ESG regulatory landscape. We
also held discussions on the effectiveness of external
sustainability reporting and the Group’s participation in
benchmarking indices.
Excellence
The Committee oversaw continued progress in the
Group’s Excellence programme, which remains
central to driving operational efficiency and cultural
transformation. We were pleased to note that the Group
exceeded its FY2025 profit savings target and broader
efficiency goals. Delivery was strong, with significant
expansion of our cohort of Green and Yellow Belt
certifications and Lean deployment completed at all
sites with over 100 colleagues. We welcomed the
Group’s Tier 2 membership of the UK’s Manufacturing
Technology Centre, enabling deeper collaboration on
manufacturing optimisation, digitisation, and emerging
technologies. Participation in the Core Research
Programme provides access to leading research
and intellectual property. The Committee was also
encouraged by the Communities of Practice between
the John Crane and Flex-Tek businesses, which
supports cross-business learning and innovation in
areas such as automation, additive manufacturing, and
digital technologies and the sharing of best practice and
technical expertise.
Looking ahead, the Committee is confident that the
Group enters FY2026 with a well-established culture
of continuous improvement and an ability to deliver
enterprise-wide impact, well positioned to capture
future opportunities and drive enhanced performance.
Roll out of training
>9,000
colleagues completed
Smiths Excellence
Fundamentals training
Read more
Sustainability
Page 37
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
101
Other information that is relevant to the Directors’ report, and which is also incorporated by reference, can be
found as follows:
Disclosure
Location
Likely future developments in the Company
Strategic report pages 2 to 23
Directors’ dividend recommendation
Strategic report page 16
Research and development activities
Strategic report pages 17 to 23
Employment of disabled persons
Sustainability metrics, targets and performance page 59
Engagement with UK employees
Our people and culture page 24
Building our culture page 25
Sustainability metrics, targets and performance page 59
Section 172 Statement and Stakeholder engagement pages 70
to 71
Engagement with suppliers, customers and others in a
business relationship with the Company
Board activity and key decisions page 69
Section 172 Statement and Stakeholder engagement pages 70
to 71
Political donations and expenditure
Directors’ report page 102
GHG emissions, energy consumption and energy efficiency
ESG data disclosures pages 55 to 57
Corporate Governance Statement
Governance report pages 63 to 100
Directors during FY2025
Governance report pages 65 to 66
Director appointment
Governance report page 75
Amendment of Articles of Association
Governance report page 64
Indemnities
Governance report page 68
Change of control
Remuneration & People Committee report page 97
Directors’ report page 101
Borrowings and net debt note 18
Directors’ responsibility statement
Statement of Directors’ responsibilities page 103
Disclosure of information to the auditor
Statement of Directors’ responsibilities page 103
Financial instruments
Financial risk management note 19
Share capital disclosures
Share capital note 24
Acquisition of own shares (share buyback programme)
Share capital note 24
Directors’ powers
Governance report page 64
Share capital note 24
Post balance sheet event
Post balance sheet event note 31
Overseas branches
Subsidiary undertakings page 199
Change of control
The Company and two of its businesses, Smiths Detection and Smiths Interconnect, have Special Security
Agreements with the US Department of Defense in order to comply with the US government’s national security
requirements. In the event of a change of control of the Company, the agreements may be terminated or altered by
the US Department of Defense.
DIRECTORS’
REPORT
The Strategic report is a requirement of the
Companies Act 2006 (the Act) and can be found
on pages 2 to 62. The Company has chosen,
in accordance with section 414C(11) of the Act,
to include certain matters in its Strategic report
that would otherwise be disclosed in this Directors’
report. The Strategic report and the Directors’
report together are the management report for
the purposes of Rules 4.1.8R to 4.1.12R of the
Disclosure Guidance and Transparency Rules.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
102
DIRECTORS’ REPORT
CONTINUED
Listing Rules disclosure
Information required by the FCA’s Listing Rules can be found as set out below. There are no further disclosures required in accordance with Listing Rule 6.6.1R.
Listing Rule
Disclosure
Location
6.6.1R(1)
Capitalised interest
There was no interest capitalised during FY2025
6.6.1(R)(4)(5)
Director emoluments
Remuneration & People Committee Report page 97
6.6.1R(11)(12)
Dividend waiver
Dividend note 25
6.6.6R(1)
Directors’ interests
Remuneration & People Committee Report pages 94 and 98
6.6.6R(2)
Major shareholders’ interests
Directors' report page 102
6.6.6R(3)
Going Concern and Viability Statement
Strategic report pages 60 to 62
6.6.6R(4)(a)
Purchase of own shares
Share capital note 24
6.6.6R(5)(6)
UK Corporate Governance Code compliance
Governance report page 63
6.6.6R(7)
Unexpired term of service contract
Remuneration & People Committee report page 97
6.6.6R(8)
TCFD disclosures
Task Force on Climate-related Financial Disclosures pages 46 to 52
6.6.6R(9)(10)(11)
Board and executive management diversity
Sustainability metrics, targets and performance page 59
Governance report page 77
Political donations
The Group did not give any money for political purposes in the UK, the EU or outside of the EU, nor did it make any political donations to political parties or other political
organisations, or to any independent election candidates, or incur any political expenditure during the year. In accordance with the US Federal Election Campaign Act, Smiths
provides administrative support to a federal Political Action Committee (PAC) in the US funded by the voluntary political contributions of eligible employees. The PAC is not
controlled by the Company and all decisions regarding the amounts and recipients of contributions are directed by a steering committee comprising Government Relations
employees. Contributions to political organisations reported by the PAC during FY2025 totalled US$61,500 (FY2024: US$28,000).
Major shareholders’ interests
As at 31 July 2025, the Company had been notified under the FCA’s Disclosure Guidance & Transparency Rules of the following holdings of voting rights:
Number of voting rights
% of total voting rights
Date of notification
BlackRock, Inc.
33.1m
10.0
16 July 2025
Wellington Management Group LLP
16.7m
5.1
28 July 2025
Harris Associates L.P.
19.7m
5.0
22 July 2019
Dodge & Cox
19.2m
5.0
12 March 2022
Ameriprise Financial, Inc.
17.7m
5.0
5 December 2022
Artemis Investment Management LLP
17.6m
4.9
25 October 2022
The following notifications were received between 1 August and 10 September 2025:
Number of voting rights
% of total voting rights
Date of notification
BlackRock, Inc.
34.3m
10.3
4 August 2025
Wellington Management Group LLP
16.6m
5.1
1 September 2025
By order of the Board
Matthew Whyte
Company Secretary
22 September 2025
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
103
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT
OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
–
Assess the Group and Parent Company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern; and
–
Use the going concern basis of accounting unless
they either intend to liquidate the Group or the
Parent Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Parent Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable
them to ensure that its financial statements comply
with the Act and, as regards the Group financial
statements, Article 4 of the IAS Regulation. The
Directors are also responsible for such internal control
as they determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error
and have a general responsibility for taking such steps
as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate governance and financial
information included on the Company’s website.
Legislation in the United Kingdom governing the
preparation and dissemination of the financial
statements may differ from legislation in other
jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule (‘DTR’) 4.1.16R, the financial
statements will form part of the annual financial report
prepared under DTR 4.1.17R and 4.1.18R. The auditor’s
report on these financial statements provides no
assurance over whether the annual financial report has
been prepared in accordance with those requirements.
The Directors are responsible for preparing the Annual
Report, including a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate
Governance Statement, and the Group and Parent
Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group
and Parent Company financial statements for each
financial year. Under that law the Directors have elected
to prepare the Group financial statements in accordance
with UK-adopted international accounting standards
and applicable law and have elected to prepare the
parent Company financial statements in accordance
with UK accounting standards and applicable law,
including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the
financial statements
unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and parent company and of the Group’s profit or
loss for that period. In preparing each of the Group and
Parent Company financial statements, the Directors are
required to:
–
Select suitable accounting policies and then apply
them consistently;
–
For the Group financial statements, make judgements
and estimates that are reasonable, relevant, and
reliable;
–
For the parent Company financial statements, make
judgements and estimates that are reasonable,
relevant, reliable and prudent.
–
For the Group financial statements, state whether
applicable UK-adopted international accounting
standards have been followed;
–
For the Parent Company financial statements, state
whether applicable United Kingdom Accounting
Standards have been followed subject to any material
departures disclosed and explained in the Parent
Company financial statements;
Directors’ responsibility statement
Each of the Directors (who are listed on pages 65 to 66)
confirms that to the best of his or her knowledge:
–
The financial statements, which have been prepared
in accordance with the applicable set of accounting
standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of
the Company and the undertakings included in the
consolidation taken as a whole;
–
The Strategic Report and Directors’ Report,
together the management report, includes a fair
review of the development and performance of the
business and the position of the Company and the
undertakings included in the consolidation taken as
a whole, together with a description of the principal
risks and uncertainties that they face; and
–
As at the date of this Annual Report and financial
statements, there is no relevant audit information
of which the Company’s auditor is unaware. Each
Director has taken all the steps he or she should
have taken as a Director in order to make himself or
herself aware of any relevant audit information and
to establish that the Company’s auditor is aware of
that information.
We consider the Annual Report and financial
statements, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model
and strategy.
Signed on behalf of the Board of Directors:
Roland Carter
Chief Executive Officer
22 September 2025
Read more
Board biographies
Page 65
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
104
KPMG LLP’S INDEPENDENT
AUDITOR’S REPORT
To the members of Smiths Group plc
Independent auditor’s report
104
Consolidated primary statements
119
Consolidated income statement
119
Consolidated statement of
comprehensive income
120
Consolidated balance sheet
121
Consolidated statement of changes
in equity
122
Consolidated cash-flow statement
123
Accounting policies
124
Notes to the accounts
133
1.
Segment information
133
2.
Operating costs
136
3.
Non-statutory profit measures
137
4.
Net finance costs
139
5.
Earnings per share
140
6. Taxation
140
7. Employees
143
8.
Retirement benefits
143
9.
Employee share schemes
150
10. Intangible assets
151
11. Impairment testing
152
12. Property, plant and equipment
154
13. Right of use assets
154
14. Financial assets – other investments
155
15. Inventories
155
16. Trade and other receivables
155
17. Trade and other payables
156
18.
Borrowings and net debt
157
19. Financial risk management
158
20. Derivative financial instruments
165
21. Fair value of financial instruments
167
22. Commitments
168
23. Provisions and contingent liabilities
168
24. Share capital
171
25. Dividends
172
26. Reserves
172
27. Acquisitions
173
28.
Discontinued operations and
businesses held for sale
174
29. Cash-flow
175
30.
Alternative performance measures and
key performance indicators
176
31. Post balance sheet events
179
32. Audit exemption taken for subsidiaries
179
Unaudited Group financial record 2021–2025
180
Unaudited US dollar primary statements
181
Smiths Group plc Company accounts
186
Company balance sheet
186
Company statement of changes in equity
187
Company accounting policies
188
Notes to the Company accounts
190
Subsidiary undertakings
194
1. Our opinion is unmodified
In our opinion:
–
the financial statements of Smiths Group plc give a true and fair view of the state of the Group’s and
of the Parent Company’s affairs as at 31 July 2025, and of the Group’s profit for the year then ended;
–
the Group financial statements have been properly prepared in accordance with UK-adopted
international accounting standards;
–
the Parent Company financial statements have been properly prepared in accordance with UK
accounting standards, including FRS 101 Reduced Disclosure Framework; and
–
the Group and Parent Company financial statements have been prepared in accordance with the
requirements of the Companies A
ct 2006.
What our opinion covers
We have audited the Group and Parent Company financial statements of Smiths Group plc (“the Company”)
for the year
ended 31 July 2025 (FY2025) included in the Annual Report and Accounts, which comprise:
Group
Parent Company (Smiths Group plc)
Consolidated income statement, consolidated
statement of comprehensive income,
consolidated balance sheet, consolidated
statement of changes in equity, and
consolidated cash-flow statement.
Company balance sheet, and company statement of
changes in equity.
Notes 1 to 32 to the Group financial statements,
including the accounting policies.
Notes 1 to 13 to the Parent Company financial
statements, including the accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion and matters included in this report are
consistent with those discussed and included in our reporting to the Audit & Risk Committee (“ARC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.
FINANCIAL
STATEMENTS
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
105
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
2. Overview of our audit
Factors driving our view
of risks
Following our FY2024 audit, and considering developments affecting the Group since then, we have updated
our risk assessment decisions.
The Group recognises a provision of £191m (FY2024: £220m) arising from ongoing asbestos litigation claims in
John Crane, Inc. (JCI). There are significant judgements and estimates involved in the assumptions underlying
this provision, including the period over which potential claims are projected to be made, the forecast number
of future claims, and associated claim defence costs and complex estimation methodology. Consistent with
FY2024, there is significant auditor judgement involved in evaluating the assumptions, and our assessment of
the risk associated with this as a key audit matter remained consistent with prior year.
The Group recognises a goodwill balance in the Smiths Detection CGU of £623m (FY2024: £625m) which is
subject to impairment assessment annually. The impairment assessment relies on assumptions and
estimates which are subject to a high degree of uncertainty. The recoverability of goodwill is sensitive to
changes in these assumptions. Consistent with FY2024, there is significant auditor judgement involved in
evaluating the assumptions, and our assessment of the risk associated with this as a key audit matter
remained consistent with prior year.
The Parent Company has material pension plan assets and liabilities, especially in the UK. Small changes in
the assumptions used to determine the liabilities, those relating to discount rates, inflation and mortality, can
have a significant impact on the valuation of the liabilities. The effect of these matters is that we determined
that the valuation of liabilities has a high degree of estimation uncertainty. Consistent with FY2024, there is
significant auditor judgement involved in evaluating the assumptions, and our assessment of the risk
associated with this as a key audit matter remained consistent with prior year.
Key Audit Matters
vs FY2024 Item
Estimation of litigation provisions for asbestos in
John Crane, Inc. (a)
4.1
Recoverability of goodwill in respect of the Smiths
Detection CGU (a)
4.2
Defined benefit pension plan liabilities for SIPS (b)
4.3
(a) Key audit matter to the Group financial statements
(b) Key audit matter to the Parent Company financial statements
Audit & Risk Committee
Interaction
During the year, the ARC met 4 times. KPMG is invited to attend all ARC meetings and is provided with an opportunity to meet with the ARC in private sessions without the Executive
Directors being present. For each key audit matter, we have set out communications with the ARC in section 4, including matters that required particular judgement for each.
The matters included in the Audit & Risk Committee Chair’s report on pages 78 to 84 are materially consistent with our observations of those meetings.
Our Independence
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.
We have not performed any non-audit services during FY2025 or subsequently which are prohibited by the
FRC Ethical Standard.
We were first appointed as auditor by the shareholders for the year ended 31 July 2020. The period of total
uninterrupted engagement is for the 6 financial years ended 31 July 2025.
The Group engagement partner is required to rotate every 5 years. As these are the third set of the Group’s financial
statements signed by Mike Barradell, he will be required to rotate off after the FY2027 audit.
The average tenure of component engagement partners as set out in section 7 below is 2 years, with the shortest
being 1 and the longest being 5
.
Total audit fee
£6m
Audit related fees (including interim review)
1
£2.1m
Other services
£0.2m
Non-audit fee as a % of total audit and audit
related fee %
1
9.1%
Date first appointed
13 November 2019
Uninterrupted audit tenure
6 years
Next financial period which requires a tender
FY2030
Tenure of Group engagement partner
3 years
Average tenure of component engagement
partners
2 years
1
Audit related assurance services includes £0.4M for review of interim report and £1.7M for services delivered in FY2025 related to the reporting accountant engagement in respect of the historical financial information of the Detection
business of the Group. This engagement is required by regulation and supports the Company in fulfilling its legal obligations under UK law. Accordingly, the related fees of £1.7M has been excluded from the calculation of non-audit services as
a percentage of total audit and audit related fees disclosed above.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
106
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
Materiality
(Item 6 below)
The scope of our work is influenced by our view of materiality and our assessed risk of material misstatement.
We have determined overall materiality for the Group financial statements as a whole at £21m (FY2024:
£21m) and for the Parent Company financial statements as a whole at £16.5m (FY2024: £20.8m).
Consistent with FY2024, we determined that Group profit before tax from continuing operations (PBTCO)
normalised to exclude the effect of specific items as explained in section 6 of this report remains the
benchmark for the Group as profitability along with prospects of future cash flows are important to the
users of the financial statements. As such, we based our Group materiality on normalised PBTCO of £412.7m
(FY2024: £398m), of which it represents 5.1% (FY2024: 5.3%).
Materiality for the Parent Company financial statements was determined with reference to a benchmark
of Parent Company total assets, limited to be less than Group materiality as a whole of which it represents
0.4% (FY2024: 0.7%).
Materiality levels used in our audit
21
21
15.7
15.7
16.5
20.8
16.5
20.8
1.5
1.8
1
1
Group
GPM
HCM
PLC
LCM
AMPT
FY2025 £m
FY2024 £m
Group
Group Materiality
GPM
Group Performance Materiality
HCM
Highest Component Materiality
PLC
Parent Company Materiality
LCM
Lowest Component Materiality
AMPT
Audit Misstatement Posting Threshold
Group Scope
(Item 7 below)
We have performed risk assessment procedures to determine which of the Group’s components are likely to
include risks of material misstatement to the Group financial statements, what audit procedures to perform
at these components and the extent of involvement required from our component auditors around the world.
Based on this assessment, we determined 2 components as quantitatively significant components, 2
components as components where special audit consideration is necessary and 23 other components where
we performed procedures to obtain further audit coverage.
In addition, for the remaining components for which we performed no audit procedures, we performed
analysis at an aggregated Group level to re-examine our assessment that there is not a reasonable
possibility of a material misstatement in these components.
We consider the scope of our audit, as communicated to the Audit & Risk Committee, to be an appropriate
basis for our audit opinion.
Coverage of Group financial statements
Our audit procedures covered 71% of Group revenue from continuing
operations:
Group
Revenue
71%
We performed audit procedures in relation to components that
accounted for the following percentages:
Group
PBTCO
82%
Group
Total assets
77%
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
107
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
The impact of climate
change on our audit
We have considered the potential impacts of climate change on the financial statements as
part of planning our audit. As the Group has set out on page 46, climate change has the
potential to give rise to several transition risks and opportunities and physical risks and
opportunities. The Group has stated its commitment to achieve Net Zero for Scope 1 & 2
emissions by 2040 and to achieve Net Zero for Scope 3 emissions by 2050. The area of the
financial statements that is most likely to be potentially affected by climate-related
changes and initiatives is future loss of revenue due to supply chain challenges. The Group
considered the impact of climate change and the Group’s targets in the preparation of the
financial statements, as described on page 47 and page 124, and concluded this did not
have a material effect on the consolidated financial statements. We performed a risk
assessment, considering climate change risks and the commitments made by the Group.
We made inquiries of management regarding their processes for assessing the potential
impact of climate change risk on the Group’s financial statements and held discussions
with our own climate change professionals to challenge our risk assessment.
Based on our risk assessment, we determined that there was no significant impact of
climate change on our key audit matters included in section 4 or other key areas of the
audit. We have read the Group’s disclosure of climate-related information in the front half
of the Annual Report and Accounts as set out on pages 46 to 52 and considered consistency
with the financial statements and our audit knowledge.
3. Going concern, viability and principal risks and uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the
Parent Company or to cease their operations, and as they have concluded that the Group’s
and the Parent Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Going concern
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and Parent Company’s financial resources or ability to continue operations
over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Parent Company’s available
financial resources over this period were:
–
Adverse trading conditions and impact on the Group’s operations or that of its suppliers and customers, such as delays and cancellations
of orders and deliveries, driven by geo-political and economic factors, resulting in a significant deterioration in the Group’s liquidity
position.
–
Product quality failure which would result in reputational damage amongst customers and therefore reduction in orders and customer
loss as well as potential significant liability claims raised against the Group.
–
Adverse impact of the announcement in relation to the separation of Smiths Interconnect and Smiths Detection on the overall cash flow
forecasts and Group’s liquidity position.
We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe but plausible
downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated
by the Group’s financial forecasts. We also assessed the completeness of the going concern disclosure.
Accordingly, based on those procedures, we found the Directors’ use of the going concern basis of accounting without any material
uncertainty for the Group and Parent Company to be acceptable. However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group or the Parent Company will continue in operation.
Our conclusions
–
We consider that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate;
–
We have not identified, and concur with the Directors’ assessment that
there is not, a material uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s or
Parent Company’s ability to continue as a going concern for the going
concern period;
–
We have nothing material to add or draw attention to in relation to the
Directors’ statement on page 60 to the financial statements on the use of
the going concern basis of accounting with no material uncertainties that
may cast significant doubt over the Group and Parent Company’s use of
that basis for the going concern period, and we found the going concern
disclosure on page 60 to be acceptable; and
–
The same statement under the UK Listing Rules is materially consistent
with the financial statements and our audit knowledge.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
108
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
–
the Directors’ confirmation within the Going Concern and Viability Statement on page 60 that they have carried out a robust assessment
of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance,
solvency and liquidity;
–
the risk management disclosures describing these risks and how emerging risks are identified and explaining how they are being
managed and mitigated; and
–
the Directors’ explanation in the going concern and viability statement of how they have assessed the prospects of the Group, over
what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the going concern and viability statement set out on page 60 under the UK Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s
and Parent Company’s longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation to these
disclosures.
We have concluded that these disclosures are materially consistent with the
financial statements and our audit knowledge.
4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on:
–
the overall a
udit strategy;
–
the allocation of resources in the audit; and
–
directing the efforts
of the engagement team.
We include below the key audit matters in decreasing order of audit significance together with our key audit procedures to address those matters and our results from those procedures. These matters were addressed, and
our results are based on procedures undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
109
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
4.1 Estimation of litigation provisions for asbestos in John Crane, Inc. (Group)
Financial statement elements
Our assessment of risk vs FY2024
Our results
FY2025
FY2024
We have not identified any significant changes to our assessment of
the level of risk relating to estimation of litigation provisions for
asbestos in John Crane, Inc. compared to FY2024.
FY2025: Acceptable
FY2024: Acceptable
Estimation of litigation provisions for John Crane, Inc.
(‘JCI’) asbestos
£191m
£220m
Description of the key audit matter
Subjective estimate
There are significant judgements and estimates involved in the assumptions underlying the provision in
respect of JCI asbestos litigation, including the period over which potential claims are projected to be made,
the forecast number of future claims and associated claim defence costs and complex estimation
methodology.
The effect of these matters is that, as part of our risk assessment, we determined that the asbestos
litigation provision has a high degree of estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements as a whole.
Our response to the risk
We performed the tests below rather than seeking to rely on any of the Group’s controls because the
nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures to address the risk included:
Controls assessment:
Assessment of design and implementation of controls addressing significant risk.
Our actuarial expertise:
Assessing the appropriateness of the ten-year projection period used by the Group in
estimating the litigation provision using our own actuarial specialist and our sector knowledge and expertise.
Benchmarking assumptions:
Using our own actuarial specialists, we derived our own independent range of
the estimated provision and assessed whether the provision calculated by the Group falls within this range.
Enquiry of lawyers:
Obtaining external independent legal confirmations of historical and ongoing claims data
used by the Group’s expert for estimating the future projected cost and claims.
Assessment of the Group’s expert:
Assessing the competency, knowledge and independence of the expert
using our own specialist.
Assessing methodology:
We evaluated the methodology applied by the Group to determine the provision to
assess whether it is in line with applicable accounting standards.
Historical comparison:
Assessing and challenging the projected indemnity and defence expenditure through
retrospective review of incurred cost.
Assessing transparency:
Assessing whether the disclosures of the effect of reasonably possible changes in
key judgements and assumptions reflect the risks inherent in the provisions’ estimation.
Communications with the Smiths Group plc’s Audit & Risk Committee
Our discussions with and reporting to the Audit & Risk Committee included:
–
Details of our audit approach and planned audit procedures, including engaging our valuation specialist
team to assess the provision recognised in the year.
–
Our conclusion on the overall assessment of the assumptions supporting the litigation provision.
–
Assessment of the adequacy of the disclosures in the financial statements in respect of the sensitivity
of the provision to changes in key assumptions.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
–
Appropriateness of the ten-year projection period used by the Group in estimating the litigation provision;
and
–
The range of possible outcomes for the litigation provision considering court judgements from past claims.
Our results
We found the level of litigation provisioning in respect of John Crane Inc. asbestos litigation to be acceptable
(FY2024: Acceptable).
Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 80 for details on how the Audit & Risk Committee considered the estimation of litigation provision for John Crane,
Inc. (‘JCI’) as an area of significant attention, page 125 for the accounting policy on provisions for liabilities and charges, and page 168, note 23 for the financial disclosures.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
110
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
4.2 Recoverability of Goodwill for Smiths Detection business (Group)
Financial statement elements
Our assessment of risk vs FY2024
Our results
FY2025
FY2024
We have not identified any significant changes to our assessment of
the level of risk relating to recoverability of goodwill for the Smiths
Detection business compared to FY2024.
FY2025: Acceptable
FY2024: Acceptable
Carrying value of goodwill for Smiths Detection business
£623m
£625m
Description of the key audit matter
Forecast-based assessment
The Group holds a significant amount of goodwill, especially in relation to the Smiths Detection cash
generating unit (CGU).
The value in use calculation for the CGU, which represents the estimated recoverable amount, is subjective
due to the inherent uncertainty involved in forecasting and discounting estimated future cash flows.
Based on our review of the FY2025 impairment model and business plan, whilst there has been
significantly improved financial performance in the current year, we still consider that in severe downside
scenario, with the combined sensitivity of all the key assumptions (notably 5-year revenue growth rate,
discount rate, and cost of sales within earnings before interest and tax), this would significantly reduce the
CGU’s recoverable amount.
The effect of these matters is that, as part of our initial risk assessment, we determined that the value in
use of the Smiths Detection CGU has a high degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the financial statements as a whole, and possibly
many times that amount. In conducting our final audit work, we concluded that reasonably possible
changes to individual assumptions would not be expected to result in a material impairment, but in a
combined sensitivity there remains a potential range greater than our materiality for the financial
statements.
Our response to the risk
We performed the tests below rather than seeking to rely on any of the Group’s controls because the nature of
the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures
described. Our procedures to address the risk included:
Controls assessment:
Assessment of design and implementation of controls addressing significant risk.
Benchmarking assumptions and historical comparison:
Assessing and challenging the key assumptions in
the business plan through retrospective review, inspection of the orderbook and contracted revenue and
comparison to external industry forecasts.
Our valuation expertise:
Using our valuations specialists to challenge the appropriateness of discount rates
by deriving our own independent range and using external market data to challenge the Group’s assumption of
5-year revenue growth rates and EBIT margin.
Mathematical accuracy:
Assess the mathematical accuracy and appropriateness of the adjustments made to
the impairment model, in-line with IAS 36.
Sensitivity analysis:
We performed sensitivity and scenario analysis on key assumptions.
Assessing transparency:
We assessed the Group’s disclosures in respect of the judgement and estimates
around goodwill recoverability for the Smiths Detection CGU, including disclosures of the sensitivity in the
value in use calculations to changes in key assumptions.
Communications with the Smiths Group plc’s Audit & Risk Committee
Our discussions with and reporting to the Audit & Risk Committee included:
–
Details of our audit approach and planned audit procedures, including engaging our valuation specialist
team to test discount rate assumption and compare the revenue growth in the impairment model to
external market data.
–
Our conclusion on the overall assessment of the assumptions underlying the impairment model.
–
Assessment of the adequacy of the disclosures in the financial statements in respect of the sensitivity
of the recoverable amount of the goodwill to changes in key assumptions.
Area of particular auditor judgement
We identified the following as the area of particular auditor judgement:
–
Assessing whether the estimates used by the Group of the cumulative average revenue growth rate and
EBIT margin projections over the forecast period are acceptable.
Our results
We found the Group’s conclusion that there is no impairment of goodwill to be acceptable (FY2024 result:
Acceptable).
Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 80 for details on how the Audit & Risk Committee considered the recoverability of goodwill for the Smiths Detection
business as an area of significant attention, page 129 for the accounting policy on goodwill, and page 151, note 10 for the financial disclosures.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
111
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
4.3 Valuation of UK defined benefit SIPS pension scheme liabilities (Parent Company)
Financial statement elements
Our assessment of risk vs FY2024
Our results
FY2025
FY2024
We have not identified any significant changes to our assessment
of the level of risk relating to valuation of UK defined benefit SIPS
pension scheme liabilities compared to FY2024.
FY2025: Acceptable
FY2024: Acceptable
UK defined benefit SIPS pension scheme liabilities
£1,185m
£1,307m
Description of the key audit matter
Subjective estimate
The Parent Company has material pension plan assets and liabilities, especially in the UK. Small changes
in the assumptions used to determine the liabilities, in particular those relating to discount rates, inflation
and mortality can have a significant impact on the valuation of the liabilities.
The effect of these matters is that we determined that the valuation of liabilities has a high degree of
estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the
financial statements as a whole, and possibly many times that amount.
Our response to the risk
We performed the tests below rather than seeking to rely on any of the Company’s controls because the
nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures to address the risk included:
Controls assessment:
Assessment of design and implementation, and operating effectiveness, of controls
linked to the key assumptions.
Benchmarking assumptions:
Challenging the key assumptions applied in the calculation of the liability,
including the discount rates, inflation rates, mortality and pension increases with the support of our own
actuarial specialists by comparing against market data.
Assessing actuary’s credentials:
Assessing the competence, independence and integrity of he Group’s
actuarial expert involved in the valuation of defined benefit pension obligation.
Assessing transparency:
Assessing the adequacy of the disclosures in respect of the sensitivity of the
obligation to key assumptions.
Communications with the Smiths Group plc’s Audit & Risk Committee
Our discussions with and reporting to the Audit & Risk Committee included:
–
Our conclusion on the overall assessment of the assumptions and key judgements supporting the
estimation of the defined benefit liabilities.
–
Assessment of the adequacy of the disclosures in respect of the pension scheme liabilities (including
risks, assumptions and sources of estimation uncertainty).
Area of particular auditor judgement
We identified the following as the area of particular auditor judgement:
–
Assessment of the assumptions supporting the valuation of the defined benefit liabilities.
Our results
We found the valuation of the UK defined benefit SIPS pension scheme liabilities to be acceptable
(FY2024: Acceptable).
Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 80 for details on how the Audit & Risk Committee considered the valuation of UK defined benefit SIPS pension
scheme as an area of significant attention, page 124 for the accounting policy on pension obligations and post-retirement benefits, and page 143, note 8 for the financial disclosures.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
112
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
5. Our ability to detect irregularities, and our response
Fraud – Identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. Our risk assessment procedures included:
–
Enquiring of Directors, the Audit & Risk Committee, internal audit and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect
fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.
–
Reading Board, Audit & Risk, Disclosure, Transactions, Nomination & Governance, Remuneration & People, and Finance Committee minutes.
–
Considering remuneration incentive schemes and performance targets for management and Directors including the organic revenue growth targets and EPS target for the
Directors’ long-term incentive plan.
–
Using analytical procedures to identify any unusual or unexpected relationships.
–
Involving forensic specialists to discuss identified events or conditions and findings of risk assessment procedures.
Risk communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group
auditor to component auditors of relevant fraud risks identified at the Group level and requesting component auditors performing procedures at the component level to report to the
Group auditor any identified fraud risk factors or identified or suspected instances of fraud.
Fraud risks
As required by auditing standards and considering possible pressures to meet profit targets, and our overall knowledge of the control environment, we perform procedures to
address the risk of management override of controls, in particular the risk that Group and Component management may be in a position to make inappropriate accounting entries. On
this audit we do not believe there is a fraud risk related to revenue recognition due to limited opportunity from simplicity of revenue transactions, except for the Detection division. This
is because within the Detection division, there are multi-year contracts (programme revenue) where determination of performance obligations can be complex, and there was an
increased amount of this revenue recognised in the last month of the year. Therefore, there is a risk of revenue being overstated during the year end closing period through the
manipulation of the timing of recording the revenue.
We also identified a financial statement level fraud risk related to the separation of Smiths Interconnect and Detection announcement. This is in response to the divestment incentive
scheme linked to sales price, pressure to meet profitability or trend-level expectations and planned or completed significant business sales or planned IPO.
Procedures to address
fraud risks
We performed procedures including:
–
Identifying journal entries to test for all components where we performed audit procedures based on risk criteria and comparing the identified entries to supporting documentation.
These included unusual entries in revenue accounts, cash and cash equivalents or borrowings accounts, entries posted by a seldom user crediting an expense or revenue account,
journal entries with keywords, and entries posted by senior finance management including the individuals directly involved in divestment incentive scheme.
–
Testing consolidation adjustment entries posted and comparing the identified entries to supporting documentation.
–
Specified procedures were completed by relevant component teams over period end revenue recognition. These procedures included tests over pre-year end and post year end
revenue transactions.
–
Challenging key judgements and estimates across the Group, with particular focus on the Smiths Interconnect and Smiths Detection businesses.
Significant actual
or suspected fraud
discussed with ARC
We assessed the disclosures in Note 3 related to the impairment of prior year working capital balances.
We discussed these matters with the Audit & Risk Committee and considered
any implications for our audit, including increasing the scope of audit procedures for the year-end audit.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
113
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
Laws and regulations – Identifying and responding to risks of material misstatement relating to compliance with laws and regulations
Laws and regulations
risk assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector
experience, through discussion with the Directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal
correspondence, and discussed with the Directors and other management the policies and procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the controls environment including the entity’s procedures for complying with regulatory
requirements.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication
from the Group auditor to component auditors of relevant laws and regulations identified at the Group level, and a request for component auditors to report to the Group audit team
any instances of non-compliance with laws and regulations that could give rise to a material misstatement at Group level.
Direct laws context
and link to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements, including financial reporting legislation (including related companies’ legislation),
distributable profits legislation, taxation legislation and pensions legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on
the related financial statement items.
Most significant indirect
law/regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery and
corruption, considering dealings with government officials, employment law, and certain aspects of company legislation, recognising the nature of the Group’s activities and its legal form.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of
regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect
that breach.
Context
Context of the ability of
the audit to detect fraud
or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we
have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any
audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance
with all laws and regulations.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
114
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of
our procedures, and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
£21m (FY2024: £21m)
Materiality for the Group
financial statements as
a whole
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at £21m (FY2024: £21m).
This was determined with reference to a benchmark of Group normalised profit before tax
from continuing operations (PBTCO).
Consistent with FY2024, we determined that normalised PBTCO remains the main
benchmark for the Group. We normalised PBTCO for the following items because they do
not represent normal, continuing operations of the Group. The items we adjusted for were
corporate restructuring costs of £22m and impairment of prior year working capital
balances of £15m stated in note 3 of the financial statements. (FY2024: PBTCO was
normalised to include retirement benefit obligation for past service equalisation costs of
£4m and loss on disposal of financial assets and their related fair value loss of contingent
consideration of £22m.)
Our Group materiality of £21m was determined by applying a percentage to the normalised
PBTCO. When using a benchmark of normalised PBTCO to determine overall materiality,
KPMG’s approach for listed entities considers a guideline range of 3%-5% of the measure.
In setting Group materiality, we applied a percentage of 5.1% (FY2024: 5.3%) to the
benchmark.
Materiality for the Parent Company financial statements as a whole was set at £16.5m
(FY2024: £20.8m), determined with reference to a benchmark of Parent Company total
assets, of which it represents 0.4% (FY2024: 0.7%).
£15.7m (FY2024: £15.7m)
Performance materiality
What we mean
Our procedures on individual account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable level the risk that
individually immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY2024: 75%) of materiality
for Smiths Group plc Group financial statements as a whole to be appropriate.
The Parent Company performance materiality was set at £12.3m (FY2024: £15.6m), which
equates to 75% (FY2024: 75%) of materiality for the Parent Company financial statements
as a whole.
We applied this percentage in our determination of performance materiality because we
did not identify any factors indicating an elevated level of risk.
£1m (FY2024: £1m)
Audit misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly
trivial from a quantitative point of view. We may become aware of misstatements below
this threshold which could alter the nature, timing and scope of our audit procedures,
for example if we identify smaller misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to
Smiths Group plc’s Audit & Risk Committee.
Basis for determining the audit misstatement posting threshold and
judgements applied
We set our audit misstatement posting threshold at 5% (FY2024: 5%) of our materiality for
the Group financial statements. We also report to the Audit & Risk Committee any other
identified misstatements that warrant reporting on qualitative grounds.
The overall materiality for the Group financial statements of £21m (FY2024: £21m) compares as follows to the main financial statement caption amounts:
Total Group revenue
Group PBTCO
Total Group assets
FY2025
FY2024
1
FY2025
FY2024
1
FY2025
FY2024
Financial statement caption
£2,915m
£3,132m
£375m
£372m
£4,011m
£4,232m
Group materiality as % of caption
0.7%
0.7%
5.6%
5.6%
0.5%
0.5%
1 The comparative for Total Group revenue and Group PBTCO is on a total operations basis as reported in the FY2024 financial statements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
115
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
7. The scope of our audit
Group scope
What we mean
How the Group auditor determined the procedures to be performed across the Group.
This year, we applied the revised group auditing standard in our audit of the consolidated
financial statements. The revised standard changes how an auditor approaches the
identification of components, and how the audit procedures are planned and executed
across components.
In particular, the definition of a component has changed, shifting the focus from how the
entity prepares financial information to how we, as the group auditor, plan to perform audit
procedures to address group risks of material misstatement (“RMMs”). Similarly, the
group auditor has an increased role in designing the audit procedures as well as making
decisions on where these procedures are performed (centrally and/or at component level)
and how these procedures are executed and supervised. As a result, we assess scoping
and coverage in a different way and comparisons to prior period coverage figures are not
meaningful. In this report we provide an indication of scope coverage on the new basis.
We performed risk assessment procedures to determine which of the Group’s components
are likely to include risks of material misstatement to the Group financial statements and
which procedures to perform at these components to address those risks.
In total, we identified 246 components, having considered our evaluation of the Group’s
operational structure, the Group’s legal structure, the existence of common information
systems, the existence of common risk profile across entities/divisions, geographical
locations, and our ability to perform audit procedures centrally.
Of those, we identified quantitatively significant components which contained the largest
percentages of either total revenue or total assets of the Group, for which we performed
audit procedures.
We also identified components that required special audit consideration, owing to Group
risks relating to revenue and balance sheet irregularities identified in these components
respectively.
Additionally, having considered qualitative and quantitative factors, we selected additional
components with accounts contributing to the specific RMMs of the Group financial
statements.
The below summarises where we performed audit procedures:
Component type
Number of
components where
we performed audit
procedures
Range of materiality
applied
Quantitatively significant components
2
£3m – £16.5m
Components requiring special audit consideration
2
£1.5m – £2m
Other components where we performed procedures
23
£1.8m – £8m
Total
27
We involved component auditors in performing the audit work on 26 out of 27 components
and the audit of the Parent Company, as a component, was performed by the Group audit
team. We performed audit procedures on the items excluded from the normalised Group
PBTCO used as the benchmark for our materiality. We set the component materialities
having regard to the mix of size and risk profile of the Group across the components.
We also performed the audit of the Parent Company.
Our audit procedures covered 71% of Group revenue from continuing operations. We
performed audit procedures in relation to components that accounted for 82% of Group
PBTCO and 77% of Group total assets.
For the remaining components for which we performed no audit procedures, no
component represented more than 7% of Group total revenue, Group PBTCO or Group total
assets. We performed analysis at an aggregated Group level to re-examine our
assessment that there is not a reasonable possibility of a material misstatement in these
components.
The Group audit team has also performed audit procedures on the following areas on
behalf of the components:
–
Intercompany balances and transactions
–
Data and analytics
i) Revenue data and analytics routines
ii) Journal entry analysis
–
IT audit involvement over:
i) Understanding of information technology environment
ii) Test of design and implementation over general IT controls and automated controls
–
Controls environment, risk assessment, monitoring and information and communication
components of internal control over financial reporting
–
Review of transfer pricing arrangements across the Group
These items were audited by the Group team because of the centralised nature of the data
processing activities within the Group. The Group team communicated the results of these
procedures to the component auditors where relevant.
Impact of controls on our Group audit
The Group utilises a diverse range of IT systems across its operating businesses. For all of
the components where we performed audit procedures, we, with the assistance of our IT
specialists, obtained an understanding of the relevant IT systems for the purposes of our
audit work. On this audit, we take a predominantly substantive audit approach in all areas
of the audit due to the diverse nature of the Group’s information systems and IT general
controls, as well as having considered the efficiency and effectiveness of approaches to
gaining the appropriate audit evidence.
Given we did not rely upon manual or IT controls, we performed additional substantive
testing to respond to the risks identified. This included direct manual testing over the
completeness and reliability of data used in our data-orientated approach over testing
journals and revenue.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
116
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
Group auditor oversight
What we mean
The extent of the Group auditor’s involvement in work performed by component auditors.
In working with component auditors, we:
–
Included the component auditors’ engagement partners and managers in the Group
planning discussions to facilitate inputs from component auditors in the identification
of matters relevant to the Group audit.
–
Issued Group audit instructions to component auditors on the scope and nature of
their work.
–
Visited five component auditors in person as the audit progressed to understand and
evaluate their work, and organised multiple video conferences with the component
auditors. At these visits, meetings and video conferences, the results of the planning
procedures and further audit procedures communicated to us were discussed in more
detail and any further work required by us was then performed by the component auditors.
–
We inspected the work performed by the component auditors for the purpose of
the Group audit and evaluated the appropriateness of conclusions drawn from the
audit evidence obtained and consistencies between communicated findings and
work performed, with a particular focus on areas involving significant risks such as
management override of controls and revenue recognition.
8. Other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material misstatements or
inconsistencies in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
–
we have not identified material misstatements in the Strategic report and the Directors’ report;
–
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
–
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
117
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the financial statements
and our audit knowledge, and:
–
the Directors’ statement that they consider that the annual report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
–
the section of the annual report and accounts describing the work of the Audit & Risk Committee, including the significant
issues that the Audit & Risk Committee considered in relation to the financial statements, and how these issues were
addressed; and
–
the section of the annual report and accounts that describes the review of the effectiveness of the Group’s risk management
and internal control systems.
Our reporting
Based on those procedures, we have concluded that each of these disclosures is
materially consistent with the financial statements and our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the
provisions of the UK Corporate Governance Code specified by the UK Listing Rules for our review.
We have nothing to report in this respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
–
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
–
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
–
certain disclosures of Directors’ remuneration specified by law are not made; or
–
we have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these respects.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
118
KPMG LLP’S INDEPENDENT AUDITOR’S REPORT
CONTINUED
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 103, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control
as they determine is necessary is in place to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over
whether the annual financial report has been prepared in accordance with those requirements.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Mike Barradell
(Senio
r Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London, E14 5GL
22 September 2
025
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
119
CONSOLIDATED PRIMARY STATEMENTS
CONSOLIDATED INCOME STATEMENT
Year ended 31 July 2025
Year ended 31 July 2024 – represented*
Notes
Headline
£m
Non-headline
(note 3)
£m
Total
£m
Headline
£m
Non-headline
(note 3)
£m
Total
£m
CONTINUING OPERATIONS
Revenue
1
2,915
–
2,915
2,778
–
2,778
Operating costs
2
(2,410)
(95)
(2,505)
(2,301)
(108)
(2,409)
Operating profit/(loss)
1
505
(95)
410
477
(108)
369
Interest income
4
40
–
40
26
–
26
Interest expense
4
(71)
4
(67)
(63)
–
(63)
Other financing losses
4
–
(11)
(11)
–
(11)
(11)
Other finance income – retirement benefits
4
–
3
3
–
6
6
Finance costs
4
(31)
(4)
(35)
(37)
(5)
(42)
Profit/(loss) before taxation
474
(99)
375
440
(113)
327
Taxation
6
(119)
20
(99)
(109)
4
(105)
Profit/(loss) for the year
355
(79)
276
331
(109)
222
DISCONTINUED OPERATIONS
Profit from discontinued operations
28
57
(41)
16
35
(6)
29
PROFIT/(LOSS) FOR THE YEAR
412
(120)
292
366
(115)
251
Profit/(loss) for the year attributable to:
Smiths Group shareholders – continuing operations
353
(79)
274
330
(109)
221
Smiths Group shareholders – discontinued operations
57
(41)
16
35
(6)
29
Non-controlling interests
2
–
2
1
–
1
412
(120)
292
366
(115)
251
EARNINGS PER SHARE
5
Basic
85.7p
72.3p
Basic – continuing
81.0p
63.9p
Diluted
85.3p
72.0p
Diluted – continuing
80.6p
63.7p
*
Results for the year ended 31 July 2024 have been represented to reflect the reclassification of the Smiths Interconnect business as a discontinued operation.
References in the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity and consolidated
cash-flow statement relate to notes on pages 133 to 179, which form an integral part of the consolidated accounts.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
120
CONSOLIDATED PRIMARY STATEMENTS
CONTINUED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes
Year ended
31 July 2025
£m
Year ended
31 July 2024
represented*
£m
PROFIT FOR THE YEAR
292
251
Other comprehensive income (OCI)
OCI which will not be reclassified to the income statement:
Re-measurement of retirement benefit assets and obligations
8
(3)
(66)
Taxation on post-retirement benefit movements
6
–
17
Fair value movements on financial assets at fair value through OCI
14
8
(105)
5
(154)
OCI which will be reclassified and reclassifications:
Fair value gains and reclassification adjustments:
– deferred in the period on cash-flow and net investment hedges
(1)
4
– reclassified to income statement on cash-flow and net investment hedges
2
–
1
4
Foreign exchange (FX) movements:
Exchange losses on translation of foreign operations
(35)
(33)
Total other comprehensive income, net of taxation
(29)
(183)
TOTAL COMPREHENSIVE INCOME
263
68
Attributable to:
Smiths Group shareholders
261
68
Non-controlling interests
2
–
263
68
Total comprehensive income attributable to Smiths Group shareholders arising from:
Continuing operations
254
41
Discontinued operations
7
27
261
68
* Results for the year ended 31 July 2024 have been represented to reflect the reclassification of the Smiths Interconnect business as a discontinued operation.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
121
CONSOLIDATED PRIMARY STATEMENTS
CONTINUED
CONSOLIDATED BALANCE SHEET
Notes
31 July 2025
£m
31 July 2024
£m
NON-CURRENT ASSETS
Intangible assets
10
1,284
1,521
Property, plant and equipment
12
244
270
Right of use assets
13
99
110
Financial assets – other investments
14
6
53
Retirement benefit assets
8
128
132
Deferred tax assets
6
98
94
Trade and other receivables
16
90
96
Financial derivatives
20
10
–
1,959
2,276
CURRENT ASSETS
Inventories
15
586
643
Current tax receivable
6
20
24
Trade and other receivables
16
737
826
Cash and cash equivalents
18
195
459
Financial derivatives
20
7
4
Assets held for sale
28
507
–
2,052
1,956
TOTAL ASSETS
4,011
4,232
CURRENT LIABILITIES
Financial liabilities – borrowings
18
(3)
(2)
Financial liabilities – lease liabilities
18
(29)
(32)
Financial liabilities – financial derivatives
20
(2)
(4)
Provisions
23
(56)
(75)
Trade and other payables
17
(679)
(764)
Current tax payable
6
(66)
(70)
Liabilities held for sale
28
(106)
–
(941)
(947)
NON-CURRENT LIABILITIES
Financial liabilities – borrowings
18
(556)
(534)
Financial liabilities – lease liabilities
18
(79)
(91)
Financial liabilities – financial derivatives
20
–
(13)
Provisions
23
(198)
(219)
Retirement benefit obligations
8
(96)
(103)
Deferred tax liabilities
6
(43)
(32)
Trade and other payables
17
(38)
(41)
(1,010)
(1,033)
TOTAL LIABILITIES
(1,951)
(1,980)
NET ASSETS
2,060
2,252
Notes
31 July 2025
£m
31 July 2024
£m
SHAREHOLDERS’ EQUITY
Share capital
24
124
130
Share premium account
365
365
Capital redemption reserve
26
31
25
Merger reserve
26
235
235
Cumulative translation adjustments
317
353
Retained earnings
1,147
1,306
Hedge reserve
26
(183)
(184)
TOTAL SHAREHOLDER’S EQUITY
2,036
2,230
Non-controlling interest equity
26
24
22
TOTAL EQUITY
2,060
2,252
The accounts on pages 119 to 179 were approved by the Board of Directors on 22 September 2025
and were signed on its behalf by:
Roland Carter
Julian Fagge
Chief Executive Officer
Chief Financial Officer
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
122
CONSOLIDATED PRIMARY STATEMENTS
CONTINUED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
Share capital
and share
premium
£m
Other
reserves
£m
Cumulative
translation
adjustments
£m
Retained
earnings
£m
Hedge
reserve
£m
Equity
shareholders’
funds
£m
Non-controlling
interest
£m
Total
equity
£m
At 31 July 2024
495
260
353
1,306
(184)
2,230
22
2,252
Profit for the year
–
–
–
290
–
290
2
292
Other comprehensive income:
– re-measurement of retirement benefits after tax
–
–
–
(3)
–
(3)
–
(3)
– FX movements net of recycling
–
–
(36)
1
–
(35)
–
(35)
– fair value gains and related tax
–
–
–
8
1
9
–
9
Total comprehensive income for the year
–
–
(36)
296
1
261
2
263
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust
–
–
–
(23)
–
(23)
–
(23)
Proceeds received on exercise of employee share options
–
–
–
1
–
1
–
1
Share buybacks
24
(6)
6
–
(303)
–
(303)
–
(303)
Dividends:
– equity shareholders
25
–
–
–
(152)
–
(152)
–
(152)
Share-based payment
9
–
–
–
22
–
22
–
22
At 31 July 2025
489
266
317
1,147
(183)
2,036
24
2,060
Notes
Share capital
and share
premium
£m
Other
reserves
£m
Cumulative
translation
adjustments
£m
Retained
earnings
£m
Hedge
reserve
£m
Equity
shareholders’
funds
£m
Non-controlling
interest
£m
Total
equity
£m
At 31 July 2023
496
259
386
1,431
(188)
2,384
22
2,406
Profit for the year
–
–
–
250
–
250
1
251
Other comprehensive income:
– re-measurement of retirement benefits after tax
–
–
–
(49)
–
(49)
–
(49)
– FX movements net of recycling
–
–
(33)
1
–
(32)
(1)
(33)
– fair value gains and related tax
–
–
–
(105)
4
(101)
–
(101)
Total comprehensive income for the year
–
–
(33)
97
4
68
–
68
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust
–
–
–
(20)
–
(20)
–
(20)
Proceeds received on exercise of employee share options
–
–
–
4
–
4
–
4
Share buybacks
24
(1)
1
–
(70)
–
(70)
–
(70)
Dividends:
– equity shareholders
25
–
–
–
(147)
–
(147)
–
(147)
Share-based payment
9
–
–
–
11
–
11
–
11
At 31 July 2024
495
260
353
1,306
(184)
2,230
22
2,252
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
123
CONSOLIDATED PRIMARY STATEMENTS
CONTINUED
CONSOLIDATED CASH-FLOW STATEMENT
Notes
Year ended
31 July 2025
£m
Year ended
31 July 2024
£m
Net cash inflow from operating activities
29
456
418
CASH-FLOWS FROM INVESTING ACTIVITIES
Expenditure on capitalised development
(4)
(14)
Expenditure on other intangible assets
(4)
(4)
Purchases of property, plant and equipment
(72)
(68)
Disposal of financial assets
53
190
Acquisition of businesses (net of £9m of cash acquired with businesses)
(121)
(65)
Disposal of subsidiaries – post-sale expenses
(12)
–
Net cash-flow used in investing activities
(160)
39
CASH-FLOWS FROM FINANCING ACTIVITIES
Share buybacks
24
(303)
(70)
Purchase of shares by Employee Benefit Trust
26
(23)
(20)
Proceeds received on exercise of employee share options
1
4
Settlement of cash-settled options
(1)
(2)
Dividends paid to equity shareholders
25
(152)
(147)
Lease payments
(41)
(39)
Cash inflow from matured derivative financial instruments
2
5
Net cash-flow used in financing activities
(517)
(269)
Net (decrease)/increase in cash and cash equivalents
(221)
188
Cash and cash equivalents at beginning of year
459
285
Reclassified to assets held for sale
(31)
–
Foreign exchange rate movements
(12)
(14)
Cash and cash equivalents at end of year
18
195
459
Cash and cash equivalents at end of year comprise:
– cash at bank and in hand
102
123
– short-term deposits
93
336
195
459
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
124
ACCOUNTING POLICIES
Basis of preparation
The accounts have been prepared in accordance with UK adopted International Accounting
Standards.
The consolidated financial statements have been prepared 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 described below.
Going concern
The Directors have prepared a going concern assessment, covering a period of at least 12 months
from the date of approval of the financial statements, which takes into account the current
financial projections and the borrowing facilities available to the Group and then applies a severe
but plausible downside scenario.
This assessment is consistent with the conclusions of the Group’s ‘Going concern and viability
statement’ on pages 60 to 62, which has been based on the Group’s strategy, balance sheet and
financing position, including our undrawn US$800m committed Revolving Credit Facility which
matures in May 2030 and our undrawn £200m Revolving Credit Facility which matures in June
2027. Having assessed the principal and emerging risks, especially those most relevant during
the going concern assessment period, stress testing confirmed that the Group will have adequate
headroom over that period.
Consequently, the Directors are satisfied that the Group and Company has sufficient resources
for its operational needs and will be able to meet its liabilities as they fall due for a period of at
least 12 months from the date of approval of these financial statements. The financial statements
have therefore been prepared on a going concern basis.
Climate change
Climate change is recognised as a principal risk and uncertainty for the Group, both in terms of
the risk of climate-related incidents causing disruption to our supply chain or operations and the
risk of changes in climate conditions cause business disruption and economic loss for the Group.
In preparing the financial statements, the directors have considered the impact of climate
change, particularly in the context of the risks identified in the TCFD disclosures on pages 46 to
52, and in the preparation of our Strategic Plan, which underpins our viability statement and going
concern review modelling.
There has been no material impact identified on the financial reporting judgements and
estimates. Overall, sustainability is recognised as a growth driver for the Group and a key part of
our investment case. This is consistent with our assessment that climate change is not expected
to have a detrimental impact on the viability of the Group in the medium-term.
These financial statements cover the financial year from 1 August 2024 to 31 July 2025 (FY2025)
with comparative figures from 1 August 2023 to 31 July 2024 (FY2024).
Key estimates and significant judgements
The preparation of the accounts in conformity with generally accepted accounting principles
requires management to make estimates and judgements 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 sources of estimation uncertainty together with the significant judgements and
assumptions used for these consolidated financial statements are set out below.
Sources of estimation uncertainty
Business combinations
The Group acquired three businesses during FY2025, Wattco, Inc., Modular Metal and Duc-Pac.
On the acquisition of a business, the Group is required to identify specific intangible assets which are
recognised separately from goodwill and then amortised over their estimated useful lives. The
assumptions involved in determining the fair values for assets and liabilities acquired, including the
separate identification of intangible assets, and the useful economic life of such items use management
estimates and are therefore subjective.
Management engages third party specialists to assist with the valuation of acquired intangible assets.
Depending on the nature of the assets the Group has used different valuation methodologies to arrive at
the fair value including the excess earnings method, the relief from royalty method and the cost savings
method.
In FY2025, third party specialists were engaged to assist with the valuation of the Wattco, Inc.
and Modular Metal acquisitions, see note 27 for further information.
Impairment reviews of intangible assets
In carrying out impairment reviews of intangible assets, a number of significant assumptions have
to be made when preparing cash-flow projections to determine the value in use of the asset or cash
generating unit (CGU). These include the future rate of market growth, discount rates, the market
demand for the products acquired, the future profitability of acquired businesses or products, levels
of reimbursement, and success in obtaining regulatory approvals. If actual results differ or changes
in expectations arise, impairment charges may be required which would adversely impact
operating results.
Critical estimates, and the effect of variances in these estimates, are disclosed in note 11.
Retirement benefits
Determining the value of the future defined benefit obligation involves significant estimates in respect
of the assumptions used to calculate present values. These include future mortality, discount rate and
inflation. The Group uses previous experience and independent actuarial advice to select the values for
critical estimates. A portion of UK pension liabilities are insured via bulk annuity policies that match all
or part of the scheme obligation to identified groups of pensioners. These assets are valued by an
external qualified actuary at the actuarial valuation of the corresponding liability, reflecting this
matching relationship.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
125
ACCOUNTING POLICIES
CONTINUED
The Group’s principal defined benefit pension plans are in the UK and the US and these have been
closed so that no future benefits are accrued. Critical estimates for these plans, and the effect of
variances in these estimates, are disclosed in note 8.
Provisions for liabilities and charges
The Group has made provisions for claims and litigations where it has had to defend itself against
proceedings brought by other parties. These provisions have been made for the best estimate of the
expected expenditure required to settle each obligation, although there can be no guarantee that such
provisions (which may be subject to potentially material revision from time to time) will accurately
predict the actual costs and liabilities that may be incurred. The most significant of these litigation
provisions is described below.
John Crane, Inc. (JCI), a subsidiary of the Group, is one of many co-defendants in litigation relating to
products previously manufactured which contained asbestos. Provision of £191m (FY2024: £220m) has
been made for the future defence costs which the Group is expected to incur and the expected costs of
future adverse judgements against JCI. Whilst well-established incidence curves can be used to
estimate the likely future pattern of asbestos-related disease, JCI’s claims experience is significantly
impacted by other factors which influence the US litigation environment. These can include: changing
approaches on the part of the plaintiffs’ bar; changing attitudes amongst the judiciary at both trial and
appellate levels; and legislative and procedural changes in both the state and federal court systems.
Because of the significant uncertainty associated with the future level of asbestos claims and of the
costs arising out of the related litigation, there can be no guarantee that the assumptions used to
estimate the provision will result in an accurate prediction of the actual costs that will be incurred.
In quantifying the expected costs JCI takes account of the advice of an expert in asbestos liability
estimation. The following estimates were made in preparing the provision calculation:
–
The period over which the expenditure can be reliably estimated is judged to be ten years,
based on past experience regarding significant changes in the litigation environment that
have occurred every few years and on the amount of time taken in the past for some of those
changes to impact the broader asbestos litigation environment. See note 23 for a sensitivity
analysis showing the impact on the provision of reducing or increasing this time horizon; and
–
The future trend of legal costs, the rate of future claims filed, the rate of successful resolution of
claims, and the average amount of judgements awarded have been projected based on the past
history of JCI claims and well-established tables of asbestos incidence projections, since this is the
best available evidence. Claims history from other defendants is not used to calculate the provision
because JCI’s defence strategy generates a significantly different pattern of legal costs and settlement
expenses. See note 23 for a sensitivity analysis showing the range of expected future spend.
Taxation
Taxation liabilities included provisions of £35m (FY2024: £44m), the majority of which related to the risk
of challenge to the geographic allocation of profits by tax authorities.
In addition to the risks provided for, the Group faces a variety of other tax risks, which result from
operating in a complex global environment, including the ongoing reform of both international and
domestic tax rules, new and ongoing tax audits in the Group’s larger markets and the challenge to fulfil
ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of the
Group’s global operations.
The Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24 months.
Due to the uncertainty associated with such tax items, it is possible that the conclusion of open tax
matters may result in a final outcome that varies significantly from the amounts noted above.
Significant judgements made in applying accounting policies
Business combinations
As stated in the previous section ‘Sources of estimation uncertainty’, in FY2025 the Group has applied
judgement on the identification of specific intangible assets on the Wattco, Inc, Modular Metal and
Duc-Pac business acquisitions, see note 27 for further information. These include items such as brand
names, customer lists and non-compete agreements, to which value is first attributed at the time of
acquisition. Judgement is also applied in determining the value of the acquisition consideration, where
the consideration is contingent on the post-acquisition performance of the business a probability
weighted expected return model is used to determine fair value.
In FY2025, appropriate professional advice has been sought on the allocation of value for the Wattco, Inc
and Modular Metal acquisitions.
Retirement benefits
At 31 July 2025 the Group has recognised £128m of retirement benefit assets (FY2024: £132m) and a net
pension asset of £32m (FY2024: £29m), principally relating to the Smiths Industries Pension Scheme
(SIPS), which arises from the rights of the employers to recover the surplus at the end of the life of
the scheme.
The recognition of this surplus is a significant judgement. There is a judgement required in determining
whether an unconditional right of refund exists based on the provision of the relevant Trust deed and
rules. Having taken legal advice with regard to the rights of the Company under the relevant Trust deed
and rules, it has been determined that an unconditional right of refund does exist and therefore the
surplus is recoverable by the Company and can be recognised.
Capitalisation of development costs
Expenditure incurred in the development of major new products is capitalised as internally generated
intangible assets only when it has been judged that strict criteria are met, specifically in relation to
the products’ technical feasibility and commercial viability (the ability to generate probable future
economic benefits).
The assessment of technical feasibility and future commercial viability of development projects
requires significant judgement and the use of assumptions. Key judgements made in the assessment
of future commercial viability include:
–
Scope of work to achieve regulatory clearance (where required) – including the level of testing
evidence and documentation;
–
Competitor activity – including the impact of potential competitor product launches on the
marketplace and customer demand; and
–
Launch timeline – including time and resource required to establish and support the commercial
launch of a new product.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
126
ACCOUNTING POLICIES
CONTINUED
Taxation
As stated in the previous section ‘Sources of estimation uncertainty’, the Group has applied judgement
in the decisions made to recognise provisions against uncertain tax positions; please see note 6 for
further details.
Presentation of the Smiths Interconnect and Smiths Detection divestments
Following the Group’s announcement on the planned strategic moves to separate the Smiths
Interconnect and Smiths Detection businesses, judgement is required to determine the most
appropriate financial reporting treatment of these businesses and their performance.
Smiths Interconnect
Management has determined that sufficient progress has been achieved on the project to sell the
Smiths Interconnect business to meet the criteria for classification as discontinued and held for sale.
The key judgement for this reclassification is that the following conditions were met at the balance
sheet date:
–
Management is committed to the plan to sell the business and an active programme to locate a buyer
and complete the plan must have been initiated;
–
The disposal group must be actively marketed for sale at a price that is reasonable in relation to its
current fair value;
–
Shareholder and regulatory approval is highly probable and the plan is unlikely to be significantly
changed or withdrawn; and
–
Sale is expected to be completed within 12 months from the date of classification.
Following this reclassification, the results of Smiths Interconnect are presented as profit from
discontinued operations in FY2025 and FY2024 and its assets and liabilities reported in assets and
liabilities held for sale in FY2025; please see note 28 for further details.
Smiths Detection
Management has determined that the progress achieved by the balance sheet date on the twin track
project to divest the Smiths Detection business was not sufficient to fully meet the criteria for
classification as a discontinued operation or held for sale / held for distribution to owners.
Therefore the results of Smiths Detection continue to be presented within continuing operations on the
consolidated income statement and the assets and liabilities of the Smiths Detection business are not
separately reported on the consolidated balance sheet.
Presentation of headline profits and organic growth
In order to provide users of the accounts with a clear and consistent presentation of the performance of
the Group’s ongoing trading activity, the income statement is presented in a three-column format with
‘headline’ profits shown separately from non-headline items. In addition, the Group reports organic
growth rates for sales and profit measures.
See note 1 for disclosures of headline operating profit and note 30 for more information about the
alternative performance measures (‘APMs’) used by the Group.
Judgement is required in determining which items should be included as non-headline. The
amortisation/impairment of acquired intangibles, legacy liabilities, material one-off items and certain
re-measurements are included in a separate column of the income statement. See note 3 for a
breakdown of the items excluded from headline profit.
Calculating organic growth also requires judgement. Organic growth adjusts the movement in headline
performance to exclude the impact of foreign exchange and acquisitions.
Other estimates and judgements
Revenue recognition
Revenue is recognised as the performance obligations to deliver products or services are satisfied and
revenue is recorded based on the amount of consideration expected to be received in exchange for
satisfying the performance obligations.
Smiths Detection, Smiths Interconnect and Flex-Tek have multi-year contractual arrangements for
the sale of goods and services. Where these contracts have separately identifiable components with
distinct patterns of delivery and customer acceptance, revenue is accounted for separately for each
identifiable component.
The Group enters into certain contracts for agreed fees that are performed across more than one
accounting period and revenue is recognised over time. Estimates are required at the balance sheet
date when determining the stage of completion of the contract activity. This assessment requires the
expected total costs of the contract and the remaining costs to complete the contract to be estimated.
At 31 July 2025, the Group held contracts with a total value of £158m (2024: £195m), of which
£114m (2024: £131m) had been delivered and £44m (2024: £64m) remains fully or partially unsatisfied.
£36m of the unsatisfied amount is expected to be recognised in the coming year, with the remainder
being recognised within two years. A 20% increase in the remaining cost to complete the contracts
would have reduced Group revenue and operating profit in the current year by less than £7m
(2024: £9m).
Significant accounting policies
Basis of consolidation
The Group’s consolidated accounts include the financial statements of Smiths Group plc (the ‘Company’)
and all entities controlled by the Company (its subsidiaries). A list of the subsidiaries of Smiths Group plc
is provided on pages 194 to 199.
The Company controls an entity when it (i) has power over the entity; (ii) is exposed or has rights to
variable returns from its involvement with the entity; and (iii) has the ability to affect those returns
through its power over the entity. The Group reassesses whether or not it controls a subsidiary if facts
and circumstances indicate that there are changes to one or more of these three elements of control.
Subsidiaries are fully consolidated from the date on which control is obtained by the Company to the
date that control ceases.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any
related non-controlling interest and other components of equity. Any resulting gain or loss is
recognised in the income statement. Any interest retained in the former subsidiary is measured at fair
value when control is lost.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
127
ACCOUNTING POLICIES
CONTINUED
The non-controlling interests in the Group balance sheet represent the share of net assets of subsidiary
undertakings held outside the Group. The movement in the year comprises the profit attributable to
such interests together with any dividends paid, movements in respect of corporate transactions and
related exchange differences.
Interests in associates are accounted for using the equity method. They are initially recognised at cost,
which includes transaction costs. Subsequent to initial recognition, the Group financial statements
include the Group’s share of the profit or loss and other comprehensive income of equity-accounted
investees, until the date on which significant influence ceases.
All intercompany transactions, balances, and gains and losses on transactions between Group
companies are eliminated on consolidation.
Foreign currencies
The Company’s presentational currency and functional currency is sterling. The financial position of all
subsidiaries and associates that have a functional currency different from sterling are translated into
sterling at the rate of exchange at the date of that balance sheet, and the income and expenses are
translated at average exchange rates for the period. All resulting foreign exchange rate movements are
recognised as a separate component of equity.
Foreign exchange rate movements arising on the translation of non-monetary assets and liabilities
held in hyperinflationary subsidiaries are recognised in OCI. The amounts taken to the Cumulative
Translation Adjustments reserve represent the combined effect of restatement and translation and are
expressed as a net change for the year.
On consolidation, foreign exchange rate movements 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 foreign exchange rate movements is recognised in the income statement as part of the gain or
loss on sale.
Foreign exchange rate movements 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 is measured at the fair value of the consideration received, net of trade discounts (including
distributor rebates) and sales taxes. Revenue is discounted only where the impact of discounting
is material.
When the Group enters into complex contracts with multiple, separately identifiable components, the
terms of the contract are reviewed to determine whether or not the elements of the contract should be
accounted for separately. If a contract is being split into multiple components, the contract revenue is
allocated to the different components at the start of the contract. The basis of allocation depends on the
substance of the contract. The Group considers relative stand-alone selling prices, contractual prices
and relative cost when allocating revenue.
The Group has identified the following different types of revenue:
(i) Sale of goods recognised at a point in time – generic products manufactured by Smiths
Generic products are defined as either:
–
Products that are not specific to any particular customer;
–
Products that may initially be specific to a customer but can be reconfigured at minimal cost, i.e.,
retaining a margin, for sale to an alternative customer; or
–
Products that are specific to a customer but are manufactured at Smiths risk, i.e., we have no right to
payment of costs plus margin if the customer refuses to take control of the goods.
For established products with simple installation requirements, revenue is recognised when control of
the product is passed to the customer. The point in time that control passes is defined in accordance
with the agreed shipping terms and is determined on a case-by-case basis. The time of dispatch or
delivery of the goods to the customer is normally the point at which invoicing occurs. However for some
generic products, revenue is recognised when the overall performance obligation has been completed,
which is often after the customer has completed its acceptance procedures and has assumed control.
Products that are sold under multiple element arrangements, i.e., contracts involving a combination of
products and services, are bundled into a single performance obligation unless the customer can
benefit from the goods or services either on their own, or together with other resources that are readily
available to the customer and are distinct within the context of the contract.
For contracts that pass control of the product to the customer only on completion of installation
services, revenue is recognised upon completion of the installation.
An obligation to replace or repair faulty products under the standard warranty terms is recognised as a
provision. If the contract includes terms that either extend the warranty beyond the standard term or
imply that maintenance is provided to keep the product working, these are service warranties and
revenue is deferred to cover the performance obligation in an amount equivalent to the relative
stand-alone selling price of that service.
(ii) Sale of goods recognised over time – customer-specific products where the contractual terms
include rights to payment for work performed to date
Customer-specific products are defined as being:
–
Products that cannot be reconfigured economically such that it remains profitable to sell to another
customer;
–
Products that cannot be sold to another customer due to contractual restrictions; and
–
Products that allow Smiths to charge for the work performed to date in an amount that represents
the costs incurred to date plus a margin, should the customer refuse to take control of the goods.
For contracts that meet the terms listed above, revenue is recognised over the period that the Group is
engaged in the manufacture of the product, calculated using the input method based on the amount of
costs incurred to date compared to the overall costs of the contract. This is considered to be a faithful
depiction of the transfer of the goods to the customer as the costs incurred, total expected costs and
total order value are known. The time of dispatch or delivery of the goods to the customer is normally
the point at which invoicing occurs.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
128
ACCOUNTING POLICIES
CONTINUED
An obligation to provide a refund for faulty products under the standard warranty terms is recognised
as a provision. If the contract includes terms that either extend the warranty beyond the standard term
or imply that maintenance is provided to keep the product working, these are service warranties and
revenue is deferred to cover the performance obligation in an amount equivalent to the relative
stand-alone selling price of that service.
(iii) Services recognised over time – services relating to the installation, repair and ongoing
maintenance of equipment
Services include installation, commissioning, testing, training, software hosting and maintenance,
product repairs and contracts undertaking extended warranty services.
For complex installations where the supply of services cannot be separated from the supply of
product, revenue is recognised upon acceptance of the combined performance obligation (see Sale of
goods (i) above).
For services that can be accounted for as a separate performance obligation, revenue is recognised
over time, assessed on the basis of the actual service provided as a proportion of the total services to
be provided.
Depending on the nature of the contract, revenue is recognised as follows:
–
Installation, commissioning and testing services (when neither linked to the supply of product nor
subject to acceptance) are recognised rateably as the services are provided;
–
Training services are recognised on completion of the training course;
–
Software hosting and maintenance services are recognised rateably over the life of the contract;
–
Product repair services, where the product is returned to Smiths premises for remedial action, are
recognised when the product is returned to the customer and they regain control of the asset;
–
Onsite ad hoc product repair services are recognised rateably as the services are performed;
–
Long-term product repair and maintenance contracts are recognised rateably over the contract
term; and
–
Extended service warranties are recognised rateably over the contract term.
Invoicing for services depends on the nature of the service provided with some services charged in
advance and others in arrears.
Where contracts are accounted for under the revenue recognised over time basis, the proportion of
costs incurred is used to determine the percentage of contract completion.
Contracts for the construction of substantial assets, which normally last in excess of one year, are
accounted for under the revenue recognised over time basis, using an input method.
For fixed-price contracts, revenue is recognised based upon an assessment of the amount of cost
incurred under the contract, compared to the total expected costs that will be incurred under the
contract. This calculation is applied cumulatively with any over/under recognition being adjusted in the
current period.
For cost-plus contracts, revenue is recognised based upon costs incurred to date plus any
agreed margin.
For both fixed-price and cost-plus contracts, invoicing is normally based on a schedule with
milestone payments.
Customer funded R&D
Customer funded R&D relates to specific contracts whereby a third party, e.g. government
or commercial customer, has requested for the development of a new product and they will fund
the project.
The work carried out for the customer is expensed through cost of sales. Once the performance
obligations have been recognised as per IFRS 15, this is classified as revenue.
Contract costs
The Group has taken the practical expedient of not capitalising contract costs as they are expected to be
expensed within one year from the date of signing.
Leases
Lease liabilities are initially measured at the present value of the future lease payments at the
commencement date, discounted by using either the rate implicit in the lease, or if not observable, the
Group’s incremental borrowing rate. Lease payments comprise contractual lease payments; variable
lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date; and the amount expected to be payable under residual value guarantees.
Right of use assets are measured at commencement date at the amount of the corresponding lease
liability and initial direct costs incurred. Right of use assets are depreciated over the shorter of the lease
term and the useful life of the right of use assets, unless there is a transfer of ownership or purchase
option which is reasonably certain to be exercised at the end of the lease term, in which case
depreciation is charged over the useful life of the underlying asset. Right of use assets are subject
to impairment.
When a lease contract is modified, either from a change to the duration of the lease or a change to
amounts payable, the Group remeasures the lease liability by discounting the revised future lease
payments at a revised discount rate. A corresponding adjustment is made to the carrying value of the
related right of use asset.
Leases of buildings typically have lease terms between one and seven years, while plant and machinery
generally have lease terms between one and three years. The Group also has certain leases of
machinery with lease terms of 12 months or less and leases of office equipment with low value (typically
below £5,000). The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition
exemptions for these leases and recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Interest on lease liabilities is presented as a financing activity in the Consolidated Cash-Flow Statement,
included under the heading lease payments.
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.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to taxation authorities. Tax benefits are not recognised unless it is likely that the tax positions are
sustainable. Tax positions taken are then reviewed to assess whether a provision should be made based
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
129
ACCOUNTING POLICIES
CONTINUED
on prevailing circumstances. Tax provisions are included in current tax liabilities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted, at the reporting
date in the countries where the Group operates and generates taxable income.
The Group operates and is subject to taxation in many countries. Tax legislation is different in each
country, is often complex and is subject to interpretation by management and government authorities.
These matters of judgement give rise to the need to create provisions for uncertain tax positions which
are recognised when it is considered more likely than not that there will be a future outflow of funds to a
taxing authority. Provisions are made against individual exposures and take into account the specific
circumstances of each case, including the strength of technical arguments, recent case law decisions
or rulings on similar issues and relevant external advice.
The amounts are measured using one of the following methods, depending on which of the methods the
Directors expect will better reflect the amount the Group will pay to the tax authority:
–
The single best estimate method is used where there is a single outcome that is more likely than
not to occur. This will happen, for example, where the tax outcome is binary or the range of possible
outcomes is very limited; or
–
Alternatively, a probability weighted expected value is used where, on the balance of probabilities,
there will be a payment to the tax authority but there are a number of possible outcomes. In this case,
a probability is assigned to each outcome and the amount provided is the sum of these risk-weighted
amounts. In assessing provisions against uncertain tax positions, management uses in-house tax
experts, professional firms and previous experience of the taxing authority to evaluate the risk.
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.
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.
Tax 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.
IAS 12 International Tax Reform: Pillar Two Model Rules
On 19 July 2023, the UK Endorsement Board adopted the Amendments to IAS 12 International Tax
Reform: Pillar Two Model Rules, issued by the IASB in May 2023. The Amendments introduce a
temporary mandatory exception from accounting for deferred taxes arising from the Pillar Two model
rules and the Group has applied this exception to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes.
Employee benefits
Share-based compensation
The fair value of share awards and share options granted are recognised as an expense over their
vesting period to reflect the value of the employee services received. The fair value of options granted,
excluding the impact of any non-market vesting conditions, is calculated using established option
pricing models, principally binomial models. The probability of meeting non-market vesting conditions,
which include profitability targets, is used to estimate the number of share awards which are likely
to vest.
For cash-settled share-based 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.
Pension obligations and post-retirement benefits
Pensions and similar benefits (principally healthcare) are accounted for under IAS 19. The retirement
benefit obligation in respect of the defined benefit plans is the liability (the present value of all expected
future obligations) less the fair value of the plan assets.
The income statement expense is allocated between current service costs, reflecting the increase
in liability due to any benefit accrued by employees in the current period, any past service costs/
credits and settlement losses or gains which are recognised immediately, and the scheme
administration costs.
Actuarial gains and losses are recognised in the statement of comprehensive income in the year in
which they arise. These comprise the impact on the liabilities of changes in demographic and financial
assumptions compared with the start of the year, actual experience being different to assumptions and
the return on plan assets being above or below the amount included in the net pension interest cost.
Payments to defined contribution schemes are charged as an income statement expense as they
fall due.
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.
The 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.
The 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. Should the test indicate that the net realisable value
of the CGU is less than current carrying value, an impairment loss will be 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 over the estimated period of sale for each product,
commencing in the year that the product is ready for sale. Amortisation is charged straight line or
based on the units produced, depending on the nature of the product and the availability of reliable
estimates of production volumes.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
130
ACCOUNTING POLICIES
CONTINUED
The cost of development projects which are expected to take a substantial period of time to complete
includes attributable borrowing costs.
Intangible assets acquired in business combinations
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 useful
lives as follows:

Patents, licences and trademarks | up to 20 years
Technology | up to 13 years
Customer relationships | up to 15 years

The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Software, patents and intellectual property
The estimated useful lives are as follows:

Software | up to seven years
| shorter of the economic life and the period the right is
Patents and intellectual property | legally enforceable

The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Property, plant and equipment
Property, plant and equipment are 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% per annum
Short leasehold property | over the period of the lease
Plant, machinery, etc. | 10% to 20% per annum
Fixtures, fittings, tools and other equipment | 10% to 33% per annum

The cost of any assets which are expected to take a substantial period of time to complete includes
attributable borrowing costs.
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.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in,
first-out 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).
The cost of items of inventory which take a substantial period of time to complete includes attributable
borrowing costs.
The net realisable value of inventories is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses. Provisions are made for any slow-moving, obsolete or
defective inventories.
Trade and other receivables
Trade receivables and contract assets are either classified as ‘held to collect’ and initially recognised at
fair value and subsequently measured at amortised cost, less any appropriate provision for expected
credit losses or as ‘held to collect and sell’ and measured at fair value through other comprehensive
income (FVOCI).
A provision for expected credit losses is established when there is objective evidence that it will not be
possible to collect all amounts due according to the original payment terms. Expected credit losses are
determined using historical write-offs as a basis, adjusted for factors that are specific to the debtor,
general economic conditions of the industry in which the debtor operates and with a default risk
multiplier applied to reflect country risk premium. The Group applies the IFRS 9 simplified lifetime
expected credit loss approach for trade receivables and contract assets which do not contain a
significant financing component.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where
the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain.
Provisions for warranties and product liability, disposal indemnities, restructuring costs, property
dilapidations 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 is a number of similar obligations, for example where a warranty 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.
Businesses held for sale
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.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
131
ACCOUNTING POLICIES
CONTINUED
Businesses are classified as held for sale if their carrying amount will be settled principally through a
sale rather than through continuing use and the following criteria are met:
–
The business must be a separate major line of business, available for immediate sale in its present
condition;
–
Management is committed to the plan to sell the business and an active programme to locate a buyer
and complete the plan must have been initiated;
–
The disposal group must be actively marketed for sale at a price that is reasonable in relation to its
current fair value;
–
Shareholder and regulatory approval is highly probable and the plan is unlikely to be significantly
changed or withdrawn; and
–
Sale is expected to be completed within 12 months of the balance sheet date.
The assets and liabilities of businesses held for sale are presented as separate lines on the
balance sheet.
Discontinued operations
A discontinued operation is either:
–
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;
–
Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical
area of operations; or
–
A business acquired solely for the purpose of selling it.
Discontinued operations are presented on the income statement as a separate line and are shown net
of tax.
In accordance with IAS 21, gains and losses on intra-group monetary assets and liabilities are not
eliminated. Therefore foreign exchange rate movements on intercompany loans with discontinued
operations are presented on the income statement as non-headline finance cost items.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing
securities with maturities of three months or less.
In the cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which are
included as current borrowings in liabilities on the balance sheet.
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 re-evaluates the
designation at each reporting date. Financial assets are classified as: measured at amortised cost,
fair value through other comprehensive income or fair value through profit and loss.
Financial assets primarily include trade receivables, cash and cash equivalents (comprising cash at
bank, money-market funds, and short-term deposits), short-term investments, derivatives (foreign
exchange contracts and interest rate derivatives) and unlisted investments.
–
Trade receivables are classified either as ‘held to collect’ and measured at amortised cost or as
‘held to collect and sell’ and measured at fair value through other comprehensive income (FVOCI).
The Group may sell trade receivables due from certain customers before the due date. Any trade
receivables from such customers that are not sold at the reporting date are classified as ‘held to
collect and sell’.
–
Cash and cash equivalents (consisting of balances with banks and other financial institutions, money-
market funds and short-term deposits) and short-term investments are subject to low market risk.
Cash balances, short-term deposits and short-term investments are measured at amortised cost.
Money market funds are measured at fair value through profit and loss (FVPL).
–
Derivatives are measured at FVPL.
–
Listed and unlisted investments are measured at FVOCI.
–
Deferred contingent consideration are measured at FVPL.
Financial assets are derecognised when the right to receive cash-flows from the assets has
expired, or has been transferred, and the Group has transferred substantially all of the risks and
rewards of ownership.
On initial recognition, the Group may make an irrevocable election to designate certain investments as
FVOCI, if they are not held for trading or relate to contingent consideration on a business combination.
When securities measured at FVOCI are sold or impaired, the accumulated fair value adjustments
remain in reserves.
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 interest rate 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
The Group uses derivative financial instruments to hedge its exposures to foreign exchange and interest
rates arising from its operating and financing activities.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is
entered into and are subsequently re-measured at their fair value. The method of recognising any
resulting gain or loss depends on whether the derivative financial instrument is designated as a hedging
instrument and, if so, the nature of the item being hedged.
Where derivative financial instruments are designated into hedging relationships, the Group formally
documents the following:
–
The risk management objective and strategy for entering the hedge;
–
The nature of the risks being hedged and the economic relationship between the hedged item and the
hedging instrument; and
–
Whether the change in cash-flows of the hedged item and hedging instrument are expected to offset
each other.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
132
ACCOUNTING POLICIES
CONTINUED
Changes in the fair value of any derivative financial instruments that do not qualify for hedge accounting
are recognised immediately in the income statement.
Fair value hedge
The Group uses derivative financial instruments to convert part of its fixed rate debt to floating rate in
order to hedge the risks arising from its external borrowings.
The Group designates these as fair value hedges of interest rate risk. Changes in the hedging
instrument 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 to the extent that the hedge is
effective. Gains or losses relating to any ineffectiveness are immediately recognised in the income
statement.
Cash-flow hedge
Cash-flow hedging is used by the Group to hedge certain exposures to variability in future cash-flows.
The effective portions of changes in the fair values of derivatives that are designated and qualify as
cash-flow hedges are recognised in equity. The gain or loss relating to any ineffective portion is
recognised immediately in the income statement. Amounts accumulated in the hedge reserve are
recycled in the income statement in the periods when the hedged items will affect profit or loss (for
example, when the forecast sale that is hedged takes place).
If a forecast transaction that is hedged results in the recognition of a non-financial asset (for example,
inventory) or a liability, the gains and losses previously deferred in the hedge reserve are transferred
from the reserve 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 the hedge reserve at that time remains in the reserve
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 other comprehensive income is immediately transferred to the income statement.
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash-flow hedges. Any
gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in
other comprehensive income; 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 for that period.
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.
IFRS 13: ‘Fair value measurement’ requires fair value measurements to be classified according to the
following hierarchy:
–
Level 1 – quoted prices in active markets for identical assets or liabilities;
–
Level 2 – valuations in which all inputs are observable either directly (i.e., as prices) or indirectly (i.e.,
derived from prices); and
–
Level 3 – valuations in which one or more inputs that are significant to the resulting value are not
based on observable market data.
See note 21 for information on the methods which the Group uses to estimate the fair values of its
financial instruments.
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.
New accounting standards effective 2025
The accounting policies adopted in the preparation of these consolidated financial statements are
consistent with those followed in the previous financial year.
The following amendments to IFRS were in effect during the reporting period ended 31 July 2025 that
are potentially relevant to the Group, and which have not been applied in these financial statements:
–
Amendment to IAS 7 and IFRS 7 – Supplier finance arrangements
Management have reviewed the supplier finance arrangements in effect around the Group and
determined that there is no material impact on the consolidated financial statements or the Group’s
liquidity risk.
New standards and interpretations not yet adopted
At the date of authorisation of these Consolidated Financial Statements, the Group has not applied the
following new and revised IFRS Standards that have been issued but are not yet effective:
–
Amendments to IAS 21 – Lack of Exchangeability
–
Amendments to IFRS 7 and IFRS 9 – Classification and measurement of financial instruments and
for Power Purchase Agreements
–
IFRS 18 – Presentation and Disclosures in Financial Statements
–
IFRS 19 – Subsidiaries without Public Accountability: Disclosures
The Group has yet to assess the full outcome of these new standards, amendments and
interpretations, however with the exception of IFRS 18 these other new standards, amendments
and interpretations are not expected to have a significant impact on the Group’s financial
statements. The Group intends to adopt these new standards, amendments and interpretations,
if applicable, when they become effective.
Parent Company
The ultimate Parent Company of the Group is Smiths Group plc, a company incorporated in
England and Wales and listed on the London Stock Exchange.
The accounts of the Parent Company, Smiths Group plc, have been prepared in accordance with
the Companies Act 2006 and Financial Reporting Standard 101, ‘Reduced Disclosure Framework’.
The Company accounts are presented in separate financial statements on pages 186 to 193.
The principal subsidiaries of the Parent Company are listed in the above accounts.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
133
NOTES TO THE ACCOUNTS
1. Segment information
Analysis by operating segment
The Group is organised into four major business segments: John Crane; Flex-Tek; Smiths Detection;
and Smiths Interconnect. These business segments design, manufacture and support the
following products:
–
John Crane
– mechanical seals, seal support systems, power transmission couplings and
specialised filtration systems;
–
Flex-Tek
– engineered components, flexible hosing and rigid tubing that heat and move fluids
and gases;
–
Smiths Detection
– sensors and systems that detect and identify explosives, narcotics,
weapons, chemical agents, biohazards and contraband; and
–
Smiths Interconnect
– specialised electronic and radio frequency board-level and waveguide
devices, connectors, cables, test sockets and sub-systems used in high-speed, high-reliability,
secure connectivity applications.
The position and performance of each business segment are reported at each Board meeting to
the Board of Directors. This information is prepared using the same accounting policies as the
consolidated financial information except that the Group uses headline operating profit to monitor
the segmental results and operating assets to monitor the segmental position. See note 3 and note
30 for an explanation of which items are excluded from headline measures.
Following the reclassification of the Smiths Interconnect business as a discontinued operation, the
segmental information of Smiths Interconnect is disclosed in note 28.
Intersegment sales and transfers are charged at arm’s length prices.
Segment trading performance

|  |  | Year ended 31 July 2025
|  |  | Smiths | Corporate |
| John Crane | Flex-Tek | Detection | costs | Total
| £m | £m | £m | £m | £m
Revenue | 1,115 | 837 | 963 | – | 2,915
Segmental headline operating profit | 265 | 164 | 122 | – | 551
Corporate headline operating costs | – | – | – | (46) | (46)
Headline operating profit/(loss) | 265 | 164 | 122 | (46) | 505
Items excluded from headline measures |  |  |  |  |
(note 3) | (1) | (45) | (26) | (23) | (95)
Operating profit/(loss) | 264 | 119 | 96 | (69) | 410
Headline operating margin | 23.8% | 19.5% | 12.7% |  | 17.3%

|  |  | Year ended 31 July 2024 – represented*
|  |  | Smiths | Corporate |
| John Crane | Flex-Tek | Detection | costs | Total
| £m | £m | £m | £m | £m
Revenue | 1,133 | 786 | 859 | – | 2,778
Segmental headline operating profit | 263 | 161 | 102 | – | 526
Corporate headline operating costs | – | – | – | (49) | (49)
Headline operating profit/(loss) | 263 | 161 | 102 | (49) | 477
Items excluded from headline measures |  |  |  |  |
(note 3) | (34) | (26) | (19) | (29) | (108)
Operating profit/(loss) | 229 | 135 | 83 | (78) | 369
Headline operating margin | 23.2% | 20.5% | 11.9% |  | 17.1%

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
Operating profit is stated after charging the following items:

|  |  | Year ended 31 July 2025
|  |  | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | non-headline | Total
| £m | £m | £m | £m | £m
Depreciation – property, plant and equipment | 16 | 9 | 10 | 3 | 38
Depreciation – right of use assets | 14 | 7 | 9 | 1 | 31
Amortisation – capitalised development costs | – | – | 10 | – | 10
Amortisation of software, patents and |  |  |  |  |
intellectual property | 4 | – | 9 | 1 | 14
Amortisation of acquired intangibles | – | – | – | 50 | 50
Restructuring costs | – | – | – | 22 | 22
Impairment – prior year working capital | – | – | – | 15 | 15
Share-based payment | 4 | 3 | 3 | 8 | 18

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
134
NOTES TO THE ACCOUNTS
CONTINUED

|  |  | Year ended 31 July 2024 – represented*
|  |  | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | non-headline | Total
| £m | £m | £m | £m | £m
Depreciation – property, plant and equipment | 17 | 9 | 11 | – | 37
Depreciation – right of use assets | 15 | 7 | 8 | 1 | 31
Amortisation – capitalised development costs | – | – | 2 | – | 2
Amortisation of software, patents and |  |  |  |  |
intellectual property | 1 | – | 1 | 1 | 3
Amortisation of acquired intangibles | – | – | – | 47 | 47
Share-based payment | 3 | 2 | 2 | 5 | 12

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation, including the allocation of costs between Smiths Interconnect and
Flex-Tek.
The corporate and non-headline column comprises central information technology, human
resources and headquarters costs and non-headline expenses (see note 3).
Segment assets and liabilities
Segment assets

|  |  |  |  | 31 July 2025
|  |  | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | non-headline | Total
| £m | £m | £m | £m | £m
Property, plant, equipment, right of use |  |  |  |  |
assets, development projects, other |  |  |  |  |
intangibles and investments | 185 | 113 | 132 | 11 | 441
Inventory, trade and other receivables | 518 | 251 | 622 | 22 | 1,413
Segment assets | 703 | 364 | 754 | 33 | 1,854

|  |  |  |  |  | 31 July 2024
|  |  | Smiths | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | Interconnect | non-headline | Total
| £m | £m | £m | £m | £m | £m
Property, plant, equipment, |  |  |  |  |  |
right of use assets, development |  |  |  |  |  |
projects, other intangibles and |  |  |  |  |  |
investments | 168 | 103 | 153 | 65 | 61 | 550
Inventory, trade and other |  |  |  |  |  |
receivables | 528 | 254 | 612 | 153 | 18 | 1,565
Segment assets | 696 | 357 | 765 | 218 | 79 | 2,115

Non-headline assets comprise receivables relating to non-headline items, acquisitions & disposals.
Segment liabilities

|  |  |  |  | 31 July 2025
|  |  | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | non-headline | Total
| £m | £m | £m | £m | £m
Segmental liabilities | 173 | 105 | 374 | – | 652
Corporate and non-headline liabilities | – | – | – | 319 | 319
Segment liabilities | 173 | 105 | 374 | 319 | 971

|  |  |  |  |  | 31 July 2024
|  |  | Smiths | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | Interconnect | non-headline | Total
| £m | £m | £m | £m | £m | £m
Segmental liabilities | 202 | 99 | 398 | 59 | – | 758
Corporate and non-headline |  |  |  |  |  |
liabilities | – | – | – | – | 341 | 341
Segment liabilities | 202 | 99 | 398 | 59 | 341 | 1,099

Non-headline liabilities comprise provisions and accruals relating to non-headline items,
acquisitions & disposals.
Reconciliation of segment assets and liabilities to statutory assets and liabilities

|  | Assets |  | Liabilities
| 31 July | 31 July | 31 July | 31 July
| 2025 | 2024 | 2025 | 2024
| £m | £m | £m | £m
Segment assets and liabilities | 1,854 | 2,115 | (971) | (1,099)
Goodwill and acquired intangibles | 1,192 | 1,404 | – | –
Derivatives | 17 | 4 | (2) | (17)
Current and deferred tax | 118 | 118 | (109) | (102)
Retirement benefit assets and obligations | 128 | 132 | (96) | (103)
Cash and borrowings | 195 | 459 | (667) | (659)
Assets and liabilities held for sale | 507 | – | (106) | –
Statutory assets and liabilities | 4,011 | 4,232 | (1,951) | (1,980)

Segment capital expenditure
The capital expenditure on property, plant and equipment, capitalised development and other
intangible assets for each business segment is:

|  |  | Smiths | Corporate and |
| John Crane | Flex-Tek | Detection | non-headline | Total
| £m | £m | £m | £m | £m
Capital expenditure year ended 31 July 2025 | 41 | 13 | 13 | – | 67
Capital expenditure year ended 31 July 2024 | 34 | 10 | 28 | 3 | 75

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
135
NOTES TO THE ACCOUNTS
CONTINUED
Segment capital employed
Capital employed is a non-statutory measure of invested resources. It comprises statutory net
assets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired
before 1 August 1998 of £478m (FY2024: £478m) and eliminate retirement benefit assets and
obligations and litigation provisions relating to non-headline items, both net of related tax, and net
debt. See note 30 for a reconciliation of net assets to capital employed.
The 12-month rolling average capital employed by business segment, which Smiths uses to
calculate segmental return on capital employed, is:

|  |  |  | 31 July 2025
|  |  | Smiths |
| John Crane | Flex-Tek | Detection | Total
| £m | £m | £m | £m
Average segmental capital employed | 1,051 | 689 | 1,079 | 2,819
Average capital employed – assets held for sale |  |  |  | 447
Average corporate capital employed |  |  |  | (62)
Average total capital employed – continuing operations |  |  |  | 3,204

|  |  |  | 31 July 2024
|  |  | Smiths |
| John Crane | Flex-Tek | Detection | Total
| £m | £m | £m | £m
Average segmental capital employed | 1,035 | 606 | 1,124 | 2,765
Average capital employed – assets held for sale |  |  |  | 472
Average corporate capital employed |  |  |  | (31)
Average total capital employed – continuing operations |  |  |  | 3,206

The Smiths Interconnect division has been accounted for as a business held for sale. Further details
of the segmental asset and liabilities of the Smiths Interconnect division is disclosed in note 28.
Analysis of revenue
The revenue for the main product and service lines for each business segment is:

| Original |  |
| equipment | Aftermarket | Total
John Crane | £m | £m | £m
Revenue year ended 31 July 2025 | 322 | 793 | 1,115
Revenue year ended 31 July 2024 | 321 | 812 | 1,133
| Aerospace | Industrials | Total
Flex-Tek | £m | £m | £m
Revenue year ended 31 July 2025 | 159 | 678 | 837
Revenue year ended 31 July 2024 | 154 | 632 | 786

|  | Other detection |
| Aviation | systems | Total
Smiths Detection | £m | £m | £m
Revenue year ended 31 July 2025 | 715 | 248 | 963
Revenue year ended 31 July 2024 | 595 | 264 | 859

John Crane aftermarket sales were £793m (FY2024: £812m) and Smiths Detection aftermarket
sales were £488m (FY2024: £443m).
Segmental revenue is analysed by the Smiths Group key global markets as follows:

| General | Safety & |  | Aerospace |
| Industrial | Security | Energy | & Defence | Total
| £m | £m | £m | £m | £m
John Crane revenue |  |  |  |  |
Revenue year ended 31 July 2025 | 413 | – | 702 | – | 1,115
Revenue year ended 31 July 2024 | 407 | – | 726 | – | 1,133
Flex-Tek revenue |  |  |  |  |
Revenue year ended 31 July 2025 | 678 | – | – | 159 | 837
Revenue year ended 31 July 2024 | 632 | – | – | 154 | 786
Smiths Detection revenue |  |  |  |  |
Revenue year ended 31 July 2025 | – | 963 | – | – | 963
Revenue year ended 31 July 2024 | – | 859 | – | – | 859
Total revenue |  |  |  |  |
Revenue year ended 31 July 2025 | 1,091 | 963 | 702 | 159 | 2,915
Revenue year ended 31 July 2024 – |  |  |  |  |
represented* | 1,039 | 859 | 726 | 154 | 2,778

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
136
NOTES TO THE ACCOUNTS
CONTINUED
The Group’s statutory revenue is analysed as follows:

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented*
| £m | £m
Sale of goods recognised at a point in time | 2,080 | 1,962
Sale of goods recognised over time | 10 | 11
Services recognised over time | 825 | 805
| 2,915 | 2,778

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
Analysis by geographical areas
The Group’s revenue by destination and non-current operating assets by location are shown below:

| Americas | Europe | Asia Pacific | Rest of World | Total
| £m | £m | £m | £m | £m
Revenue year ended 31 July 2025 | 1,616 | 529 | 435 | 335 | 2,915
Revenue year ended 31 July 2024 – |  |  |  |  |
represented | 1,494 | 541 | 421 | 322 | 2,778

31 July 2025 – non-current operating assets by geographical location: |  |  |  |  |
Intangible assets | 794 | 476 | 14 | – | 1,284
Property, plant and equipment | 140 | 61 | 23 | 20 | 244
Right of use assets | 51 | 33 | 10 | 5 | 99
Other receivables | 56 | 22 | 1 | 5 | 84
Non-current operating assets | 1,041 | 592 | 48 | 30 | 1,711

31 July 2024 represented* – non-current operating assets by geographical location: |  |  |  |  |
Intangible assets | 1,045 | 462 | 14 | – | 1,521
Property, plant and equipment | 162 | 63 | 29 | 16 | 270
Right of use assets | 55 | 38 | 12 | 5 | 110
Other receivables | 56 | 17 | – | 14 | 87
Non-current operating assets - restated | 1,318 | 580 | 55 | 35 | 1,988

*
The FRC’s review of the Group’s FY2024 annual report and accounts identified a small number of reporting improvement
matters. Following the FRC’s review, the non-current operating assets by geographical location disclosure has been
represented to fully align with the disclosure requirements of IFRS 8, and the total has been restated to include non-current
assets not previously reported.
The other receivables balance in the table above comprises current and non-current other
receivables (see note 16) excluding financial instruments.
Revenue by destination attributable to the United Kingdom was £107m (FY2024: £108m).
Other revenue found to be significant included, the United States of America, totalling £1,324m
(FY2024: £1,217m), China (excluding Hong Kong) £112m (FY2024: £119m) and Canada £130m
(FY2024: £113m). Revenue by destination has been selected as the basis for attributing revenue
to geographical areas as this was the geographic attribution of revenue used by management
to review business performance.
Non-current assets located in the United Kingdom total £180m (FY2024: £171m). Significant
non-current assets held in the United States of America £902m (FY2024: £1,245m) and Germany
£370m (FY2024: £360m).
2. Operating costs
The Group’s operating costs for continuing operations are analysed as follows:

| Year ended 31 July 2025 | Year ended 31 July 2024 – represented*
|  | Non-headline |  |  | Non-headline |
| Headline | (note 3) | Total | Headline | (note 3) | Total
| £m | £m | £m | £m | £m | £m
Cost of sales – direct materials, |  |  |  |  |  |
labour, production and |  |  |  |  |  |
distribution overheads | 1,839 | – | 1,839 | 1,742 | – | 1,742
Selling costs | 194 | – | 194 | 200 | – | 200
Administrative expenses | 379 | 95 | 474 | 361 | 108 | 469
Research and development tax |  |  |  |  |  |
credits | (2) | – | (2) | (2) | – | (2)
Total | 2,410 | 95 | 2,505 | 2,301 | 108 | 2,409

Operating profit is stated after charging:

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented*
| £m | £m
Research, development and customer-specific engineering expense | 96 | 94
Depreciation of property, plant and equipment | 38 | 37
Depreciation of right of use assets | 31 | 31
Amortisation of intangible assets | 74 | 53

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation and the changes in definition of research, development and customer-
specific engineering (RD&E) which is defined in note 30 of the accounts.
RD&E cash costs were £117m (FY2024: £128m) comprising £96m (FY2024: £94m) of RD&E
expensed to the income statement, £4m (FY2024: £14m) of capitalised costs and £17m (FY2024:
£20m) of customer-funded R&D.
Administrative expenses include £1m (FY2024: £1m) in respect of lease payments for short-term
and low-value leases which were not included within right of use assets and lease liabilities.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
137
NOTES TO THE ACCOUNTS
CONTINUED
Auditors’ remuneration
The following fees were paid or are payable to the Company’s auditors, KPMG LLP and other firms
in the KPMG network, for the year ended 31 July 2025.

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Audit services |  |
Fees payable to the Company’s auditors for the audit of the Company’s |  |
annual financial statements | 2.5 | 2.8
Fees payable to the Company’s auditors and its associates for other |  |
services: |  |
– the audit of the Company’s subsidiaries | 3.5 | 3.6
| 6.0 | 6.4
Audit related assurance services (i) | 2.1 | 0.4
Other assurance services (ii) | 0.2 | 0.1
Total fees | 8.3 | 6.9

(i) Audit related assurance services includes £0.4m (FY2024: £0.4m) for review of interim report
and £1.7m (FY2024: £nil) for services delivered in FY2025 related to the reporting accountant
engagement in respect of the historical financial information of the Detection business of the
Group. This engagement is required by regulation and supports the Company in fulfilling its legal
obligations under UK law. Accordingly, the related fees have been excluded from the calculation of
non-audit services as a percentage of audit fees calculated below.
(ii) Other assurance services include £0.1m (FY2024: £0.1m) for limited assurance over the Group’s
Scope 1–3 greenhouse gas emissions metrics and £0.1m (FY2024: nil) for services related to the
reestablishment of the Euro Medium Term Note (EMTN) programme.
Total fees for non-audit services comprise 10% (FY2024: 8%) of audit fees, as noted above in FY2025
£1.7m of reporting accountant services have been excluded from the calculation of this ratio.
3. Non-statutory profit measures
Headline profit measures
The Group has identified and defined a ‘headline’ measure of performance which is not impacted by
material non-recurring items or items considered non-operational/trading in nature. This non-
GAAP measure of profit is not intended to be a substitute for any IFRS measures of performance,
but is a key measure used by management to understand and manage performance. See the
disclosures on presentation of results in accounting policies for an explanation of the adjustments.
The items excluded from ‘headline’ are referred to as ‘non-headline’ items.
Non-headline operating profit items
i. Continuing operations
The non-headline items included in statutory operating profit for continuing operations were
as follows:

|  |  | Year ended
|  | Year ended | 31 July 2024
|  | 31 July 2025 | represented*
| Notes | £m | £m
Acquisition and disposal related costs |  |  |
Detection separation costs |  | (10) | –
Post-acquisition integration costs and fair value adjustment unwind |  | (4) | (3)
Fair value movement on contingent consideration |  | 4 | (13)
Loss on disposal of financial asset |  | (3) | (9)
Business acquisition costs and related expenses |  | (2) | (4)
Legacy pension scheme arrangements |  |  |
Scheme administration costs | 8 | (4) | (6)
Past service costs for benefit equalisation | 8 | – | (4)
Non-headline provision movements |  |  |
Environmental remediation provision |  | (2) | –
Provision held against Titeflex Corporation subrogation claims | 23 | 5 | 5
Provision for John Crane, Inc. asbestos litigation | 23 | 12 | (29)
Cost recovery for John Crane, Inc. asbestos litigation |  | 1 | 3
Other items |  |  |
Corporate restructuring costs |  | (22) | –
Impairment of prior year working capital balances |  | (15) | –
Cyber incident remediation costs |  | (4) | –
Amortisation of acquired intangible assets | 10 | (50) | (47)
Funding of charitable foundation |  | (1) | (1)
Non-headline items in operating profit – continuing operations |  | (95) | (108)

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
Acquisition and disposal related costs
Detection separation costs amounted to £10m (FY2024: £nil); this represents the incremental costs
incurred by the Group to demerge/sell the Smiths Detection business. These costs have been
reported as non-headline as the total cost of the project is both material and non-recurring.
The £4m (FY2024: £3m) of post-acquisition integration costs and fair value adjustment unwind
principally relate to Flex-Tek’s recent corporate acquisitions. These include £2m of defined
project costs for the integration of these businesses into the existing Flex-Tek business and a £2m
expense for unwinding the acquisition balance sheet fair value adjustments required by IFRS 3
‘Business combinations’. These have been recognised as non-headline as the charge did not relate
to trading activity.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
138
NOTES TO THE ACCOUNTS
CONTINUED
The £4m current year fair value gain on contingent consideration is attributable to the revaluation of
deferred contingent consideration payable on Flex-Tek’s recent acquisitions. The prior year £13m
loss related to the write down of the remaining fair value of the Group’s contingent consideration
from the sale of Smiths Medical. These are considered to be a non-headline item on the basis that
these fair value charges do not relate to trading activity.
The £3m loss (FY2024: £9m) on disposal of financial asset relates to the block sale discount on the
disposal of the Group’s remaining investment in ICU shares. This is considered a non-headline
charge as it did not relate to trading activity.
The £2m (FY2024: £4m) of business acquisition costs and related expenses represent incremental
deal costs related to the Group’s business acquisition activity. These items do not include the cost of
employees working on transactions and are reported as non-headline because they are dependent
on the level of activity being undertaken and do not relate to trading activity.
Legacy pension scheme arrangements
Scheme administration costs of £4m (FY2024: £6m) relate to the TIGPS legacy pension scheme
and SIPS ‘path to buy-in’ costs. As the Group is not anticipating receiving a refund from the scheme,
an economic benefit value of zero has been placed on the TIGPS surplus. These are non-headline
charges as the Smiths Group effectively has no economic exposure to these costs and they are paid
from cash retained in the scheme.
The prior year £4m credit for past service costs for benefit equalisation represents the recognition
of additional Smith Industries Pension Scheme (SIPS) liabilities following the agreement of new
methodologies to achieve Guaranteed Minimum Pension (GMP) equalisation retirement benefits
for men and women.
Non-headline provision movements
In the current year a £2m (FY2024: £nil) environmental provision has been raised for the present
value of the costs that the Group’s Flex-Tek division is required to incur to remediate a legacy
environment contamination at one of its US sites. The provision made in the current year on the
receipt of a reliable estimate of the amount of the obligation. The provision is considered to be
non-headline as it is due to a legacy site contamination, that arose prior to the Smiths Group
ownership, and do not relate to current trading activity.
The following litigation costs and recoveries have been treated as non-headline items because the
provisions were treated as non-headline when originally recognised and the subrogation claims
and litigation relate to products that the Group no longer sells in these markets:
–
The £5m credit (FY2024: £5m credit) recognised by Titeflex Corporation was principally driven
by a reduction in the number of expected claims. See note 23 for further details; and
–
The £12m credit (FY2024: £29m charge) in respect of John Crane, Inc. asbestos litigation is due
to a reduction in the future expected indemnity costs. See note 23 for further details; and
–
In FY2025 £1m (FY2024: £3m) of asbestos litigation costs were recovered by John Crane, Inc.
via insurer settlements.
Other items
Corporate restructuring costs of £22m (FY2024: £nil) were incurred on the previously announced
Group-wide Acceleration Plan. These costs are treated as non-headline due to being material and
part of a pre-approved two year programme.
Following a balance sheet investigation at a stand-alone Flex-Tek US industrial business, certain
non-material working capital balances were identified as overstated and have been impaired.
A £15m impairment charge has been recognised, in FY2025, against working capital balances in
relation to matters relating to prior years. It has been recognised as a non-headline item as the
charge is a significant non-recurring item that relates to multiple prior years.
At the end of January 2025 the Group incurred a cyber security incident that involved unauthorised
access to the Company’s systems. £4m of remediation costs have been incurred in the current year,
these have been recognised as non-headline as this was a significant non-recurring event for the
Group and did not relate to trading activity.
Acquisition related intangible asset amortisation costs of £50m (FY2024: £47m) were recognised in
the current period. This is considered to be a non-headline item on the basis that these charges
result from acquisition accounting and do not relate to current trading activity.
The £1m funding of charitable foundation charge is the FY2025 funding (FY2024: £1m) of the Smiths
Group Foundation, a charitable giving foundation with a committed initial £10m of funding linked to
engineering-related good causes. This is recognised as non-headline as the charge did not relate to
trading activity.
Non-headline finance costs items
The non-headline items included in finance costs for continuing operations were as follows:

|  |  | Year ended
|  | Year ended | 31 July 2024
|  | 31 July 2025 | represented
| Notes | £m | £m
Unwind of discount on provisions | 23 | (9) | (9)
Unwind of discount on other payables |  | (1) | –
Other finance income – retirement benefits | 8 | 3 | 6
Release of interest payment on overdue VAT |  | 4 | –
Other sundry financing losses |  | (1) | (2)
Non-headline items in finance costs – continuing operations |  | (4) | (5)
Continuing operations – non-headline loss before taxation |  | (99) | (113)

The financing elements of non-headline legacy liabilities, including the £10m (FY2024: £9m) unwind
of discount on provisions, were excluded from headline finance costs because these provisions
were originally recognised as non-headline and this treatment has been maintained for ongoing
costs and credits.
Other finance income comprises £3m (FY2024: £6m) of financing credits relating to retirement
benefits. These were excluded from headline finance costs because the ongoing costs and credits
are a legacy of previous employee pension arrangements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
139
NOTES TO THE ACCOUNTS
CONTINUED
The £4m release of interest payable on overdue VAT relates to a historic classification error on chain
export transactions.
Non-headline taxation credit
The non-headline items included in taxation for continuing operations were as follows:

|  |  | Year ended
|  | Year ended | 31 July 2024
|  | 31 July 2025 | represented
| Notes | £m | £m
Tax credit on non-headline loss | 6 | 23 | 23
Increase in unrecognised UK deferred tax asset | 6 | (3) | (19)
Non-headline taxation credit – continuing operations |  | 20 | 4
Continuing operations – non-headline loss for the year |  | (79) | (109)

Movement in unrecognised UK deferred tax asset
These movements are reported as non-headline because the original credit was reported as
non-headline.
ii. Discontinued operations
The non-headline items for discontinued operations, see note 28 for additional disclosures, were as
follows:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
Notes | £m | £m
Impairment loss on reclassification to held for sale | (30) | –
Interconnect separation costs | (8) | –
Amortisation of acquisition related intangible assets | (2) | (2)
Business acquisition costs and related expenses | – | (1)
Tax on non-headline loss | (1) | (3)
Non-headline items in profit – discontinued operations | (41) | (6)
Loss for the year – non headline items for continuing and |  |
discontinued operations | (120) | (115)

In June 2025 Interconnect agreed to sell its US sub-systems business. The business has been
reclassified as held for sale and the £37m carrying value of its net assets have been impaired to
their fair value less costs to sell of £7m. This has resulted in a £30m impairment loss being
recognised.
Interconnect separation costs amounted to £8m (FY2024: £nil); this represents the incremental
costs incurred by the Group to sell the Smiths Interconnect business. These costs have been
reported as non-headline as they were both material and non-recurring.
Acquisition related intangible asset amortisation costs of £2m (FY2024: £2m) were recognised in the
current period. This is considered to be a non-headline item on the basis that these charges result
from acquisition accounting and do not relate to current trading activity.
4. Net finance costs

|  |  | Year ended
|  | Year ended | 31 July 2024
|  | 31 July 2025 | represented*
| Notes | £m | £m
Interest income |  | 40 | 26
Interest expense: |  |  |
– bank loans and overdrafts, including associated fees |  | (52) | (46)
– other loans |  | (12) | (12)
– interest on leases |  | (6) | (5)
– interest on uncertain tax provisions |  | (1) | –
Interest expense |  | (71) | (63)
Headline net finance costs |  | (31) | (37)
Other financing (losses)/gains: |  |  |
– valuation movements on fair value hedged debt |  | (13) | 5
– valuation movements on fair value derivatives |  | 15 | (5)
– foreign exchange and ineffectiveness on net |  |  |
investment hedges |  | (3) | (2)
– unwind of discount on provisions and other payables | 3 | (10) | (9)
Other financing losses |  | (11) | (11)
Other non-headline finance cost items: |  |  |
– release of interest payment on overdue VAT |  | 4 | –
– other finance income – Interest on retirement benefits | 8 | 3 | 6
Other non-headline finance cost items |  | 7 | 6
Net finance costs |  | (35) | (42)

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
140
NOTES TO THE ACCOUNTS
CONTINUED
5. Earnings per share
Basic earnings per share are calculated by dividing the profit for the year attributable to equity
shareholders of the Company by the average number of ordinary shares in issue during the year.

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented*
| £m | £m
Profit attributable to equity shareholders for the year: |  |
– continuing | 274 | 221
– discontinued | 16 | 29
Total | 290 | 250

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| Number of shares | Number of shares
Number of shares in issue, net of shares held in Employee Benefit Trust: |  |
Weighted average number for basic earnings per share | 338,390,299 | 345,901,957
Adjustment for potentially dilutive shares | 1,576,039 | 1,389,223
Weighted average number for diluted earnings per share | 339,966,338 | 347,291,180

Nil options (FY2024: nil) were excluded from this calculation because their effect was anti-dilutive.

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented
| pence | pence
Statutory earnings per share total – basic | 85.7p | 72.3p
Statutory earnings per share total – diluted | 85.3p | 72.0p
Statutory earnings per share continuing operations – basic | 81.0p | 63.9p
Statutory earnings per share continuing operations – diluted | 80.6p | 63.7p

A reconciliation of statutory and headline earnings per share is as follows:

| Year ended 31 July 2025 | Year ended 31 July 2024 represented
|  | Basic EPS | Diluted EPS |  | Basic EPS | Diluted EPS
| £m | (p) | (p) | £m | (p) | (p)
Total profit attributable to equity |  |  |  |  |  |
shareholders of the Parent Company | 290 | 85.7p | 85.3p | 250 | 72.3p | 72.0p
Exclude: Non-headline items (note 3) | 120 |  |  | 115 |  |
Headline earnings per share | 410 | 121.2p | 120.6p | 365 | 105.5p | 105.2p
Profit from continuing operations |  |  |  |  |  |
attributable to equity shareholders of the |  |  |  |  |  |
Parent Company | 274 | 81.0p | 80.6p | 221 | 63.9p | 63.7p
Exclude: Non-headline items (note 3) | 79 |  |  | 109 |  |
Headline earnings per share – |  |  |  |  |  |
continuing operations | 353 | 104.3p | 103.8p | 330 | 95.4p | 95.1p

6. Taxation
This note only provides information about corporate income taxes under IFRS. Smiths companies
operate in over 50 countries across the world. They pay and collect many different taxes in addition
to corporate income taxes including: payroll taxes; value added and sales taxes; property taxes;
product-specific taxes; and environmental taxes. The costs associated with these other taxes are
included in profit before tax.

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented*
| £m | £m
The taxation charge in the consolidated income statement for the year comprises: |  |
Continuing operations |  |
Current taxation: |  |
– current income tax charge | 98 | 101
– current tax adjustments in respect of prior periods | – | 2
Current taxation | 98 | 103
Deferred taxation | 1 | 2
Total taxation expense – continuing operations | 99 | 105
Discontinued operations |  |
Current taxation: |  |
– current income tax charge | 19 | 12
– deferred taxation | – | 4
Total taxation expense – discontinued operations | 19 | 16
Analysed as: |  |
Headline taxation expense | 137 | 122
Non-headline taxation credit | (19) | (1)
Total taxation expense in the consolidated income statement | 118 | 121

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.

Year ended Year ended |  |
| 31 July 2025 | 31 July 2024
| £m | £m
Tax on items credited to equity |  |
Deferred tax: |  |
– share based payments | (1) | –
– retirement benefit schemes | – | (17)
Taxation on retirement benefit movements | (1) | (17)

The FY2024: £17m credit to equity for retirement benefit schemes principally related to UK
retirement schemes.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
141
NOTES TO THE ACCOUNTS
CONTINUED
Current taxation liabilities

| Current tax
| £m
At 31 July 2023 | (30)
Charge to income statement | (115)
Tax paid | 99
At 31 July 2024 | (46)
Comprising: |
Current tax receivable | 24
Current tax payable within one year | (70)
At 31 July 2024 | (46)
Charge to income statement – continuing operations | (98)
Charge to income statement – discontinued operations | (19)
Tax paid | 113
Transfer to held for sale | 4
At 31 July 2025 | (46)
Comprising: |
Current tax receivable | 20
Current tax payable within one year | (66)
At 31 July 2025 | (46)

Total provisions for tax liabilities amount to £35m of which £30m relates to current tax (FY2024: total
£44m, current tax £39m). The majority of which relates to the risk of challenge from tax authorities
to the geographic allocation of profits across the Group.
In addition to the risks provided for the Group faces a variety of other tax risks, which result from
operating in a complex global environment, including the ongoing reform of both international and
domestic tax rules, new and ongoing tax audits in the Group’s larger markets and the challenge to
fulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of
the Group’s global operations.
The Group anticipates that a number of tax audits are likely to conclude in the next 12 to 24 months
for which provisions are recognised based on best estimates and management’s judgements
concerning the ultimate outcome of the audit. Due to the uncertainty associated with such items,
it is possible at a future date, on conclusion of open tax matters, the final outcome may vary
significantly from the amounts noted above.
Reconciliation of the tax charge
The headline tax charge for the year of £119m (FY2024: £109m) represents an effective rate of 25.0%
(FY2024: 25.0%).
The tax charge on the profit for the year for continuing operations is different from the standard rate
of corporation tax in the UK, with a rate for FY2025 of 25.0% (FY2024: 25.0%). The differences are
reconciled as follows:

|  | Year ended
| Year ended | 31 July 2024
| 31 July 2025 | represented*
| £m | £m
Profit before taxation | 375 | 327
Notional taxation expense at UK corporate rate of 25.0% (FY2024: 25%) | 94 | 82
Different tax rates on non-UK profits and losses | (6) | (5)
Non-deductible expenses and other charges | 21 | 19
Tax credits and non-taxable income | (10) | (6)
Non-headline UK deferred tax asset recognition adjustment | 3 | 19
Other adjustments to unrecognised deferred tax | (5) | (6)
Prior year true-up | 2 | 2
Taxation on continuing operations | 99 | 105
Taxation on discontinued operations | 19 | 16
Total taxation expense in the consolidated income statement | 118 | 121
Comprising: |  |
Taxation on headline profit | 119 | 109
Non-headline taxation items: |  |
– Tax credit on non-headline loss | (23) | (23)
– UK deferred tax asset recognition adjustment | 3 | 19
Taxation on non-headline items | (20) | (4)
Taxation on discontinued operations | 19 | 16
Total taxation expense in the consolidated income statement | 118 | 121

The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual
total tax charge. As a group operating in multiple countries, the actual tax rates applicable to profits
in those countries are different from the UK tax rate. The impact is shown above as different tax
rates on non-UK profits and losses. The Group’s worldwide business leads to the consideration of a
number of important factors which may affect future tax charges, such as: the levels and mix of
profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax regime
reforms, acquisitions, disposals, restructuring activities, and settlements or agreements with
tax authorities.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
142
NOTES TO THE ACCOUNTS
CONTINUED
Deferred taxation assets/(liabilities)

| Property, plant, |  |  |  |  |
| equipment and |  | Losses |  |  |
| intangible | Employment | carried |  |  |
| assets | benefits | forward | Provisions | Other | Total
| £m | £m | £m | £m | £m | £m
At 31 July 2023 | (86) | (25) | 75 | 66 | 22 | 52
Reallocations | (9) | (1) | 5 | – | 5 | –
Charge to income statement – |  |  |  |  |  |
continuing operations | 16 | (2) | (15) | 4 | (9) | (6)
Charge to income statement – |  |  |  |  |  |
discontinued operations |  |  |  |  |  |
Credit to equity | – | 17 | – | – | – | 17
Foreign exchange rate |  |  |  |  |  |
movements | – | (1) | – | 1 | (1) | (1)
At 31 July 2024 | (79) | (12) | 65 | 71 | 17 | 62
Comprising: |  |  |  |  |  |
Deferred tax assets | (9) | (15) | 31 | 63 | 24 | 94
Deferred tax liabilities | (70) | 3 | 34 | 8 | (7) | (32)
At 31 July 2024 | (79) | (12) | 65 | 71 | 17 | 62
Reallocations | 6 | – | (4) | 4 | (6) | –
Charge to income statement – |  |  |  |  |  |
continuing operations | 5 | (1) | (3) | (6) | 4 | (1)
Credit to equity | – | 1 | – | – | – | 1
Acquisitions in the year | (9) | – | – | – | – | (9)
Foreign exchange rate |  |  |  |  |  |
movements | 1 | – | (1) | (3) | – | (3)
Transfer to held for sale | 18 | – | (9) | (2) | (2) | 5
At 31 July 2025 | (58) | (12) | 48 | 64 | 13 | 55
Comprising: |  |  |  |  |  |
Deferred tax assets | (12) | (15) | 28 | 60 | 37 | 98
Deferred tax liabilities | (46) | 3 | 20 | 4 | (24) | (43)
At 31 July 2025 | (58) | (12) | 48 | 64 | 13 | 55

Of the amounts included within ‘Other’, shown in the above table, as at 31 July 2025, amounts
relating to tax on unremitted earnings were £22m (FY2024: £22m). The aggregate amount of
temporary differences associated with investments in subsidiaries for which deferred tax liabilities
have not been recognised is immaterial.
The deferred tax asset relating to losses has been recognised on the basis of strong evidence of
future taxable profits against which the unutilised tax losses can be relieved or it is probable that
they will be recovered against the reversal of deferred tax liabilities. The closing net deferred tax
asset balance attributable to UK activities and included in the balance at 31 July 2025 amounted to
£nil (FY2024: £nil). Deferred tax attributable to provisions includes £46m (FY2024: £54m) relating to
John Crane Inc litigation provision, and £6m (FY2024: £9m) relating to Titeflex Corporation. See note
23 for additional information on provisions.
Losses with unrecognised deferred tax
The Group does not recognise deferred tax on losses of £572m (FY2024: £603m).
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 in respect of which deferred tax has
not been recognised is set out below:

| 2025 | Expiry of | 2024 | Expiry of
| £m | losses | £m | losses
Unrestricted losses – operating losses | 572 | No expiry | 603 | No expiry

Losses with deferred tax unrecognised have increased by £31m (FY2024: £82m increase). This is
mainly due to the utilisation of unrecognised losses in Smiths Detection Inc of £42m as it was
profitable, offset by an increase in losses in the UK of £14m.
Developments in the Group tax position
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which
the Group operates and the legislation is effective for the Group’s financial year beginning
1 August 2024.
The UK substantively enacted the BEPS Pillar Two global minimum taxes legislation on 20 June
2023, for accounting periods beginning on or after 1 January 2024.
The pillar two charge borne by Smiths Group does not have a material impact on the Group’s
FY2025 ETR.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
143
NOTES TO THE ACCOUNTS
CONTINUED
7. Employees

| Year ended 31 July 2025 | Year ended 31 July 2024 represented*
| Continuing | Discontinued |  | Continuing | Discontinued |
| Operations | Operations | Total | Operations | Operations | Total
| £m | £m | £m | £m | £m | £m
Staff costs during the period |  |  |  |  |  |
Wages and salaries | 751 | 114 | 865 | 743 | 101 | 844
Social security | 90 | 16 | 106 | 85 | 14 | 99
Share-based payment (note 9) | 19 | 2 | 21 | 13 | 1 | 14
Pension costs (including defined |  |  |  |  |  |
contribution schemes) (note 8) | 33 | 2 | 35 | 33 | 2 | 35
Total | 893 | 134 | 1,027 | 874 | 118 | 992

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
The average number of persons employed, including employees on permanent, fixed term and
temporary contracts, rounded to the nearest 50 employees, was:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
John Crane | 6,250 | 6,200
Flex-Tek | 4,200 | 4,050
Smiths Detection | 3,500 | 3,400
Smiths Interconnect | 2,650 | 2,600
Corporate (including central/shared IT services) | 350 | 300
Total | 16,950 | 16,550

Key management
The key management of the Group comprises Smiths Group plc Board Directors and Executive
Committee members. Their aggregate compensation is shown below. Further information for the
Executive Directors is available in the single figure remuneration table on page 91. Further
information for the Non-executive Directors is available in the single figure remuneration table on
page 97.

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Key management compensation |  |
Salaries and short-term employee benefits | 16.3 | 12.6
Cost of retirement benefits | 0.6 | 0.7
Cost of share-based incentive plans | 9.4 | 3.4

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
share-based incentive plans were:

| Year ended 31 July 2025 | Year ended 31 July 2024
|  | Weighted |  | Weighted
| Number of | average | Number of | average
| instruments | exercise | instruments | exercise
| ’000 | price | ’000 | price
LTIP | 1,375 |  | 1,389 |
SAYE | 10 | £13.09 | 11 | £13.06

Related party transactions
The only related party transactions in FY2025 were key management compensation
(FY2024: key management compensation).
8. Retirement benefits
The Group provides retirement benefits to employees in a number of countries. This includes
defined benefit and defined contribution plans and, mainly in the United Kingdom (UK) and United
States of America (US), post-retirement healthcare.
Defined contribution plans
The Group operates defined contribution plans across many countries. In the UK a defined
contribution plan has been offered since the closure of the UK defined benefit pension plans. In the
US a 401(k) defined contribution plan operates. The total expense recognised in the consolidated
income statement in respect of all these plans was £33m (FY2024: £31m).
Defined benefit and post-retirement healthcare plans
The principal defined benefit pension plans are in the UK and in the US and these have been closed
so that no future benefits are accrued.
For all schemes, pension costs are assessed in accordance with the advice of independent,
professionally qualified actuaries. These valuations have been updated by independent qualified
actuaries in order to assess the liabilities of the schemes as at 31 July 2025. Contributions to the
schemes are made on the advice of the actuaries, in accordance with local funding requirements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
144
NOTES TO THE ACCOUNTS
CONTINUED
The changes in the present value of the net pension asset in the period were:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
At beginning of period | 29 | 89
Foreign exchange rate movements | – | 1
Current service cost | (2) | (4)
Headline scheme administration costs | (2) | (3)
Non-headline scheme administration costs | (4) | (6)
Past service cost, curtailments, settlements – continuing operations | – | (4)
Finance income – retirement benefits | 3 | 6
Contributions by employer | 11 | 16
Actuarial losses | (3) | (66)
Net retirement benefit asset | 32 | 29

UK pension schemes
The Group’s funded UK pension schemes are subject to a statutory funding objective, as set out in
UK pension legislation. Scheme trustees need to obtain regular actuarial valuations to assess the
scheme against this funding objective. The trustees and sponsoring companies need to agree
funding plans to improve the position of a scheme when it is below the acceptable funding level.
The UK Pensions Regulator has extensive powers to protect the benefits of members, promote good
administration and reduce the risk of situations arising which may require compensation to be paid
from the Pension Protection Fund. These include imposing a schedule of contributions or the
calculation of the technical provisions, where a trustee and company fail to agree appropriate
calculations.
Smiths Industries Pension Scheme (SIPS)
This scheme was closed to future accrual effective 1 November 2009. SIPS provides index-linked (to
applicable caps) pension benefits based on final earnings at date of closure. SIPS is governed by a
corporate trustee (S.I. Pension Trustees Limited, a wholly owned subsidiary of Smiths Group plc).
The board of trustee directors currently comprises three Company-nominated trustees and four
member-nominated trustees, with an independent chairman selected by Smiths Group plc. Trustee
directors are responsible for the management, administration, funding and investment strategy of
the scheme.
The most recent actuarial valuation of this scheme has been performed using the Projected Unit
Method as at 31 March 2023. The valuation showed a surplus of £26m on the Technical Provisions
funding basis at the valuation date and the funding position has improved since then. As part of the
valuation agreement, no contributions are currently being paid to SIPS and the Group’s current
expectation is that contributions will not recommence. The next actuarial valuation is due as at
31 March 2026.
The duration of SIPS liabilities is around 19 years (FY2024: 20 years) for active deferred members,
16 years (FY2024: 17 years) for deferred members and 9 years (FY2024: 10 years) for pensioners
and dependants.
Under the governing documentation of SIPS, any future surplus would be returnable to
Smiths Group plc by refund, assuming gradual settlement of the liabilities over the lifetime
of the scheme.
In SIPS, as part of ongoing data cleansing work being undertaken to prepare the scheme for a
potential full buy-out in the future, a wider review is being carried out to determine if the method
used in the early 1990s to equalise retirement ages between men and women was implemented
correctly. In FY2024, a liability of £3m was recognised as a past service cost, to reflect the expected
impact of data cleansing work for the scheme of £0.4m, as well as an updated cost estimate for the
impact of GMP equalisation of £2.6m. Whilst the wider review of scheme data remains on-going, no
liabilities have been recognised in FY2025 or are expected to arise in future in respect of data
cleansing work.
SIPS uses a Liability Driven Investment (LDI) strategy to hedge against interest and inflation rate
changes, which is tested regularly to ensure leverage is appropriate and there is sufficient collateral
to withstand any market shocks.
TI Group Pension Scheme (TIGPS)
This scheme was closed to future accrual effective 1 November 2009. TIGPS provides index-linked
(to applicable caps) pension benefits based on final earnings at the date of closure. TIGPS is
governed by a corporate trustee (TI Pension Trustee Limited, an independent company). The board
of trustee directors comprises three Company-nominated trustees and four member-nominated
trustees, with an independent trustee director selected by the trustee. The trustee is responsible for
the management, administration, funding and investment strategy of the scheme.
In June 2022 the TIGPS trustee completed a deal to secure its remaining uninsured pension
liabilities, by way of a bulk annuity buy-in with Rothesay Life plc. This means all of the scheme’s
liabilities are insured via seven buy-in policies. In terms agreed between the Group and the TIGPS
trustee prior to the transaction, the trustee will use any surplus remaining, after the costs of buying-
out and winding up the scheme have been met, to improve member benefits. The FY2022 income
statement recognised a past service cost of £24m in relation to the derecognition of the remaining
surplus, though the cost of benefit improvements was not paid until FY2025 and will not be applied
to member benefits until FY2026. The Group currently has no expectation of receiving a refund
from the scheme and has placed an economic benefit value of zero on the TIGPS surplus from
10 June 2022.
As TIGPS currently retains the legal obligation to pay all scheme benefits, TIGPS liabilities
remain part of the retirement benefit obligations on the balance sheet alongside the corresponding
buy-in assets. These liabilities and assets will be derecognised at the point the buy-in policies
are converted to buy-outs and the legal obligation for payment of benefits is transferred to the
relevant insurers.
The most recent actuarial valuation of this scheme has been performed using the Projected Unit
Method as at 5 April 2023. The valuation showed a surplus of £44m on the Technical Provisions
funding basis at the valuation date and the funding position remains in surplus. Given TIGPS’s
circumstances, the Group’s current expectation is that no further contributions to TIGPS will be
required. The next actuarial valuation is due as at 5 April 2026.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
145
NOTES TO THE ACCOUNTS
CONTINUED
The duration of the TIGPS liabilities is around 17 years (FY2024: 18 years) for active deferred
members, 15 years (FY2024: 16 years) for deferred members and 8 years (FY2024: 9 years) for
pensioners and dependants.
US pension plans
The valuations of the principal US pension and post-retirement healthcare plans were performed
using census data at 1 January 2025.
The pension plans were closed with effect from 30 April 2009 and benefits were calculated as at that
date and are not revalued. Governance of the US pension plans is overseen by a Settlor Committee
appointed by Smiths Group Services Corp, a wholly owned subsidiary of the Group.
The duration of the liabilities for the largest US plan is around 14 years (FY2024: 15 years) for active
deferred members, 13 years (FY2024: 14 years) for deferred members and 9 years (FY2024: 10 years)
for pensioners and dependants.
Risk management
In respect of uninsured liabilities, the pensions schemes are exposed to risks that:
–
Investment returns are below expectations, leaving the schemes with insufficient assets in
future to pay all their pension obligations;
–
Members and dependants live longer than expected, increasing the value of the pensions which
the schemes have to pay;
–
Inflation rates are higher than expected, causing amounts payable under index-linked pensions
to be higher than expected; and
–
Increased contributions are required to meet funding targets if lower interest rates increase
the current value of liabilities.
These risks are managed separately for each pension scheme. However, the Group has adopted a
common approach of closing defined benefit schemes to cap members’ entitlements and of
supporting trustees in adopting investment strategies which aim to hedge the value of assets
against changes in the value of liabilities caused by changes in interest and inflation rates.
Across SIPS and TIGPS, approximately 60% of all liabilities are now de-risked through 11
bulk annuities.
TIGPS
TIGPS has covered roughly 100% of liabilities with matching annuities, eliminating investment
return, longevity, inflation and funding risks in respect of those liabilities.
SIPS
SIPS has covered roughly 33% of liabilities with matching annuities, eliminating investment return,
longevity, inflation and funding risks in respect of those liabilities. It has also adopted a LDI strategy
to hedge interest and inflation risks of the scheme’s uninsured liabilities by investment in gilts
together with the use of gilt repurchase arrangements, total return swaps, inflation swaps and
interest rate swaps. The strategy also takes into account the scheme’s corporate bond investments.

The critical estimates and principal assumptions used in updating the valuations are set out below: |  |  |  |  |  |
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024
| UK | US | Other | UK | US | Other
Rate of increase in salaries | n/a | n/a | 0.2% | n/a | n/a | 2.8%
Rate of increase for active deferred |  |  |  |  |  |
members | 4.1% | n/a | n/a | 4.0% | n/a | n/a
Rate of increase in pensions in payment | 3.1% | n/a | 1.8% | 3.3% | n/a | 0.5%
Rate of increase in deferred pensions | 3.1% | n/a | n/a | 3.3% | n/a | n/a
Discount rate | 5.6% | 5.5% | 2.6% | 5.0% | 5.2% | 2.8%
Inflation rate | 3.1% | n/a | 0.9% | 3.3% | n/a | 2.1%

The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension
plans are set by the Group after consultation with independent professionally qualified actuaries.
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 the US, assumptions are disclosed as a weighted average.
Inflation rate assumptions
The RPI inflation assumption of 3.1% has been derived using the Aon UK Government Gilt Prices
Only Curve with an Inflation Risk Premium of 0.1% p.a. (FY2024: 0.1%).
The Government’s response to its consultation on RPI reform was published on 25 November 2020,
and strongly implied that RPI will become aligned with CPI-H from 2030. No specific allowance
(beyond anything already priced into markets) has been factored into the RPI assumptions for
potential changes. The assumption for the long-term gap between RPI and CPI is 0.4% p.a.
(FY2024: 0.5%) reflecting the Group’s view on the market pricing of this gap over the lifetime of the
UK schemes’ liabilities, i.e., 0.9% p.a. (FY2024: 0.9%) pre-2030 and 0.1% p.a. post-2030 (FY2024: 0.1%).
Discount rate assumptions
The UK schemes use a discount rate based on the annualised yield on the Aon GBP Single Agency
Curve, using the expected cash-flows from a notional scheme with obligations of the same duration
as that of the UK schemes. This is the same approach as was adopted for FY2024.
The US Plan uses a discount rate based on the annualised yield derived from Willis Towers Watson’s
RATE:Link (10th – 90th) model using the Plan’s expected cash-flows.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
146
NOTES TO THE ACCOUNTS
CONTINUED
Mortality assumptions
The mortality assumptions used in the principal UK schemes are based on the ‘SAPS S3’ birth
year tables with relevant scaling factors based on the recent experience of the schemes. The
assumption allows for future improvements in life expectancy in line with the 2023 CMI projections,
with a smoothing factor of 7.0 and ‘A’ parameter of 0.5%/0.25% (SIPS/TIGPS) and blended to a
long-term rate of 1.5%. The CMI projections incorporate allowance for the impact of COVID-19 by
placing a weighting of 0% on 2020 and 2021 mortality data and a weighting of 15% on 2022 and 2023
mortality data.
The mortality assumptions used in the principal US schemes are based on generational mortality
using the latest Pri-2012 sex-distinct, employee/non-disabled annuitant table, with a 2012 base year,
projected forward generationally with the latest MP-2021 mortality scale. No explicit adjustment
has been made to mortality assumptions in respect of COVID-19. The impact of COVID-19 remains
uncertain and further data studies are underway to better predict the impact on future mortality.
Expected further years of life

|  |  | UK schemes
| Male | Female | Male | Female
| 31 July 2025 | 31 July 2025 | 31 July 2024 | 31 July 2024
Member who retires next year at age 65 | 22 | 24 | 22 | 24
Member, currently 45, when they retire in 20 years’ time | 23 | 25 | 23 | 25

|  |  | US schemes
| Male | Female | Male | Female
Expected further years of life | 31 July 2025 | 31 July 2025 | 31 July 2024 | 31 July 2024
Member who retires next year at age 65 | 21 | 22 | 21 | 22
Member, currently 45, when they retire in 20 years’ time | 22 | 24 | 22 | 24

Sensitivity
Sensitivities in respect of the key assumptions used to measure the principal pension schemes as
at 31 July 2025 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. In practice, such assumptions rarely
change in isolation.

| Profit before | Increase/ | (Increase)/ | Profit before | Increase/ | (Increase)/
| tax | (decrease) in | decrease in | tax | (decrease) in | decrease in
| for year | scheme | scheme | for year | scheme | scheme
| ended | assets | liabilities | ended | assets | liabilities
| 31 July 2025 | 31 July 2025 | 31 July 2025 | 31 July 2024 | 31 July 2024 | 31 July 2024
| £m | £m | £m | £m | £m | £m
Rate of mortality – one year |  |  |  |  |  |
increase in life expectancy | (2) | 53 | (90) | (2) | 66 | (108)
Rate of mortality – one year |  |  |  |  |  |
decrease in life expectancy | 2 | (55) | 93 | 2 | (67) | 110
Rate of inflation – 0.25% increase | (1) | 19 | (37) | (1) | 21 | (39)
Discount rate – 0.25% increase | 2 | (28) | 56 | 2 | (33) | 65
Market value of scheme assets – |  |  |  |  |  |
2.5% increase | 2 | 28 | – | 2 | 30 | –

The effect on profit before tax reflects the impact of current service cost and net interest cost.
The value of the scheme assets is affected by changes in mortality rates, inflation and discounting
because they affect the carrying value of the insurance assets.
Asset valuation
The pension schemes hold assets in a variety of pooled funds, in which the underlying assets
typically are invested in credit and cash assets. These funds are valued. The price of the funds is
set by administrators/custodians employed by the investment managers and based on the value
of the underlying assets held in the funds. Prices are generally updated daily, weekly or quarterly
depending upon the frequency of the fund’s dealing.
Bonds are valued using observable broker quotes. Gilt repurchase obligations are valued
by the relevant manager, which derives the value using an industry recognised model with
observable inputs.
Total return, interest and inflation swaps and forward FX contracts are bilateral agreements
between counterparties and do not have observable market prices. These derivative contracts
are valued using observable inputs.
Insured liabilities comprise annuity policies that match all or part of the scheme obligation to
identified groups of members. These assets are valued by an external qualified actuary at the
actuarial valuation of the corresponding liability, reflecting this matching relationship.
The insurance policies are treated as qualifying insurance policies as none of the insurers are
related parties of the Group, and the proceeds of the policies can only be used to pay or fund
employee benefits for the respective schemes, are not available to the Group’s creditors and cannot
be paid to the Group.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
147
NOTES TO THE ACCOUNTS
CONTINUED
Retirement benefit plan assets

|  |  | 31 July 2025 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
Cash and cash equivalents | 30 | 20 | 1 | 51
Pooled funds: |  |  |  |
– Pooled equity | – | 21 | 5 | 26
– Pooled Diversified Growth | – | – | 13 | 13
– Pooled credit | 340 | – | – | 340
Corporate bonds | 131 | 50 | – | 181
Government bonds/LDI | 436 | 89 | 3 | 528
Insured liabilities | 1,199 | – | – | 1,199
Total market value | 2,136 | 180 | 22 | 2,338
|  |  |  | 31 July 2024 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
Cash and cash equivalents | 63 | 8 | 1 | 72
Pooled funds: |  |  |  |
– Pooled equity | – | – | 5 | 5
– Pooled Diversified Growth | – | – | 12 | 12
– Pooled credit | 337 | – | – | 337
Corporate bonds | 208 | 141 | – | 349
Government bonds/LDI | 427 | 41 | 3 | 471
Insured liabilities | 1,337 | – | – | 1,337
Total market value | 2,372 | 190 | 21 | 2,583

The UK Government bonds/LDI portfolios contain £763m (FY2024: £691m) of UK Government bonds
(gilts), £341m (FY2024: £270m) of gilt repurchase obligations and £15m of interest and inflation
swaps (FY2024: £5m) and forward FX contracts with a net obligation of £1m (FY2024: £nil asset).
These are held to hedge against foreign currency risk. The pooled funds and insured liabilities are
unquoted. The scheme assets do not include any property occupied by, or other assets used by, the
Group.
The asset valuations are effective as at the end of the period, consistent with the calculations
determining the obligations.
The Group acknowledges that responsibility for the effective management of the schemes’
assets lies primarily with the trustees, but also accepts that any risks inherent in the investment
strategy, including ESG and climate risk, are ultimately underwritten by the Group. Consequently,
the Group ensures that the trustees’ investment strategy and statements of investment principles
are compatible with the Group’s wider sustainability strategy. For TIGPS, where all benefits are now
secured by way of annuity purchase, all investment risks including ESG and climate risk, have
effectively now been eliminated. For SIPS, a significant portion of investment risks have already
been eliminated through annuity purchase and the scheme’s time horizon to full buy-in, hence
exposure to investment risks including ESG and climate risk, continues to reduce.
Present value of funded scheme liabilities and assets for the main UK and US schemes

|  |  | 31 July 2025 – £m
|  |  | US
| SIPS | TIGPS | schemes
Present value of funded scheme liabilities: |  |  |
– Active deferred members | (12) | (8) | (26)
– Deferred members | (332) | (260) | (71)
– Pensioners | (841) | (544) | (91)
Present value of funded scheme liabilities | (1,185) | (812) | (188)
Market value of scheme assets | 1,313 | 823 | 180
Surplus restriction | – | (11) | –
Surplus/(deficit) | 128 | – | (8)
|  |  | 31 July 2024 – £m
|  |  | US
| SIPS | TIGPS | schemes
Present value of funded scheme liabilities: |  |  |
– Active deferred members | (13) | (9) | (28)
– Deferred members | (379) | (304) | (80)
– Pensioners | (915) | (609) | (93)
Present value of funded scheme liabilities | (1,307) | (922) | (201)
Market value of scheme assets | 1,439 | 933 | 190
Surplus restriction | – | (11) | –
Surplus/(deficit) | 132 | – | (11)

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
148
NOTES TO THE ACCOUNTS
CONTINUED
Net retirement benefit obligations

|  |  | 31 July 2025 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
Market value of scheme assets | 2,136 | 180 | 22 | 2,338
Present value of funded scheme liabilities | (1,997) | (188) | (28) | (2,213)
Surplus restriction | (11) |  |  | (11)
Surplus/(deficit) | 128 | (8) | (6) | 114
Unfunded pension plans | (33) | (5) | (41) | (79)
Post-retirement healthcare | (2) | (1) | – | (3)
Present value of unfunded obligations | (35) | (6) | (41) | (82)
Net pension asset/(liability) | 93 | (14) | (47) | 32
Comprising: |  |  |  |
Retirement benefit assets | 128 | – | – | 128
Retirement benefit liabilities | (35) | (14) | (47) | (96)
Net pension asset/(liability) | 93 | (14) | (47) | 32
|  |  |  | 31 July 2024 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
Market value of scheme assets | 2,372 | 190 | 21 | 2,583
Present value of funded scheme liabilities | (2,229) | (201) | (26) | (2,456)
Surplus restriction | (11) | – | – | (11)
Surplus/(deficit) | 132 | (11) | (5) | 116
Unfunded pension plans | (37) | (6) | (38) | (81)
Post-retirement healthcare | (2) | (1) | (3) | (6)
Present value of unfunded obligations | (39) | (7) | (41) | (87)
Net pension asset/(liability) | 93 | (18) | (46) | 29
Comprising: |  |  |  |
Retirement benefit assets | 132 | – | – | 132
Retirement benefit liabilities | (39) | (18) | (46) | (103)
Net pension asset/(liability) | 93 | (18) | (46) | 29

Where any individual scheme shows a recoverable surplus under IAS 19, this is disclosed on the
balance sheet as a retirement benefit asset. The IAS 19 surplus of any one scheme is not available to
fund the IAS 19 deficit of another scheme. The retirement benefit asset disclosed arises from the
rights of the employers to recover the surplus at the end of the life of the scheme, i.e., when the last
beneficiary’s obligation has been met.
Amounts recognised in the consolidated income statement

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Amounts charged to operating profit |  |
Current service cost | 2 | 4
Past service costs – benefit equalisations | – | 4
Headline scheme administration costs | 2 | 3
Non-headline scheme administration costs | 4 | 6
| 8 | 17
The operating cost is charged as follows: |  |
Headline administrative expenses | 4 | 7
Non-headline administrative expenses | 4 | 10
| 8 | 17
Amounts credited to finance costs |  |
Non-headline other finance income – retirement benefits | (3) | (6)

Amounts recognised directly in the consolidated statement of comprehensive income

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Re-measurements of retirement defined benefit assets and liabilities |  |
Difference between interest credit and return on assets | (197) | 54
Experience gains/(losses) on scheme liabilities | 25 | (103)
Actuarial gains arising from changes in demographic assumptions | – | 4
Actuarial gains/(losses) arising from changes in financial assumptions | 169 | (26)
Movement in surplus restriction | – | 5
| (3) | (66)

Changes in present value of funded scheme assets

|  |  | 31 July 2025 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
At beginning of period | 2,372 | 190 | 21 | 2,583
Foreign exchange rate movements | – | (6) | – | (6)
Interest on assets | 115 | 9 | 1 | 125
Actuarial movement on scheme assets | (192) | (6) | 1 | (197)
Employer contributions | – | 5 | – | 5
Scheme administration costs | (5) | (1) | – | (6)
Benefits paid | (154) | (11) | (1) | (166)
At end of period | 2,136 | 180 | 22 | 2,338

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
149
NOTES TO THE ACCOUNTS
CONTINUED

|  |  | 31 July 2024 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
At beginning of period | 2,367 | 186 | 20 | 2,573
Interest on assets | 117 | 9 | 1 | 127
Actuarial movement on scheme assets | 54 | (1) | 1 | 54
Employer contributions | – | 10 | – | 10
Scheme administration costs | (7) | (2) | – | (9)
Benefits paid | (159) | (12) | (1) | (172)
At end of period | 2,372 | 190 | 21 | 2,583

Changes in present value of funded defined benefit obligations

|  |  | 31 July 2025 – £m |
| UK | US | Other |
| schemes | schemes | countries | Total
At beginning of period | (2,229) | (201) | (26) | (2,456)
Foreign exchange rate movements | – | 6 | – | 6
Past service costs | – | – | – | –
Interest on obligations | (107) | (10) | (2) | (119)
Actuarial movement on liabilities | 185 | 6 | (1) | 190
Benefits paid | 154 | 11 | 1 | 166
At end of period | (1,997) | (188) | (28) | (2,213)

|  |  | 31 July 2024 – £m
| UK | US | Other |
| schemes | schemes | countries | Total
At beginning of period | (2,156) | (202) | (25) | (2,383)
Foreign exchange rate movements | – | – | 1 | 1
Past service costs | (3) | – | (1) | (4)
Interest on obligations | (106) | (11) | (1) | (118)
Actuarial movement on liabilities | (123) | – | (1) | (124)
Benefits paid | 159 | 12 | 1 | 172
At end of period | (2,229) | (201) | (26) | (2,456)

Changes in present value of unfunded defined benefit pensions and post-retirement healthcare plans

|  | Assets |  | Obligations
| Year ended | Year ended | Year ended | Year ended
| 31 July 2025 | 31 July 2024 | 31 July 2025 | 31 July 2024
| £m | £m | £m | £m
At beginning of period | – | – | (87) | (85)
Current service cost | – | – | (2) | (4)
Interest on obligations | – | – | (3) | (3)
Actuarial movement | – | – | 4 | (1)
Employer contributions | 6 | 6 | – | –
Benefits paid | (6) | (6) | 6 | 6
At end of period | – | – | (82) | (87)

Changes in the effect of the asset ceiling over the year

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Irrecoverable asset at beginning of period | (11) | (16)
Actuarial movement on scheme assets | – | 5
At end of period | (11) | (11)

Cash contributions
Company contributions to the defined benefit pension plans and post-retirement healthcare plans
totalled £11m (FY2024: £16m). This comprised a one-off additional £5m contribution to the US
funded scheme (FY2024: £5m) and £6m (FY2024: £6m) on providing benefits under unfunded
defined benefit pension and post-retirement healthcare plans.
In FY2026, cash contributions to the Group’s schemes are expected to be up to £17m in total.
Recent legal rulings
In July 2024, the UK Court of Appeal upheld the High Court’s June 2023 ruling in the Virgin Media v
NTL Pension Trustees II court case relating to section 37 of the Pension Schemes Act 1993 and
amendments to benefits for contracted-out defined benefit schemes, such as SIPS and TIGPS.
The ruling confirmed the need for an actuarial certificate where such schemes made changes to
benefits between 6 April 1997 and 5 April 2016, and any amendments were void without the
appropriate certificate. On 2 September 2025, the Government published draft amendments to
legislation that aim to give affected pension schemes the ability to retrospectively obtain any
necessary actuarial certifications confirming historic benefit changes met the applicable standards.
These amendments are unlikely to come into force until 2026. The Group does not expect this ruling
to have any impact on its defined benefit obligations and SIPS and TIGPS will continue to be
administered on the current basis.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
150
NOTES TO THE ACCOUNTS
CONTINUED
9. 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:
Long-Term Incentive Plan (LTIP)
The LTIP is a share plan under which an award over a capped number of shares will vest after the
end of a three-year performance period if performance conditions are met. LTIP awards are made
to selected senior executives, including the Executive Directors.
LTIP performance conditions
Each performance condition has a threshold below which no shares vest and a maximum
performance target at or above which the award vests in full. For performance between ‘threshold’
and ‘maximum’, awards vest on a straight-line sliding scale. The performance conditions are
assessed separately; so performance on one condition does not affect the vesting of the other
elements of the award. To the extent that the performance targets are not met over the three-year
performance period, awards lapse. There is no re-testing of the performance conditions.
LTIP awards have performance conditions relating to organic revenue growth, growth in headline
EPS, ROCE, free cash-flow and meeting ESG targets.
Restricted stock
Restricted stock is used by the Remuneration & People Committee, as a part of recruitment
strategy, to make awards in recognition of incentive arrangements forfeited on leaving a previous
employer and for retention purposes. If an award is considered appropriate, the award will
take account of relevant factors including the fair value of awards forfeited, any performance
conditions attached, the likelihood of those conditions being met and the proportion of the vesting
period remaining.
Save as you earn (SAYE)
The SAYE scheme is an HM Revenue & Customs approved all-employee savings-related share
option scheme which is open to all UK employees. Participants enter into a contract to save a
fixed amount per month of up to £500 in aggregate for three years and are granted an option
over shares at a fixed option price, set at a discount to market price at the date of invitation to
participate. The number of shares 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.

Ordinary shares under option/ | Long-term | Restricted | Save as you earn |  | Weighted average
award (’000) | incentive plans | stock | scheme | Total | exercise price
31 July 2023 | 4,828 | 87 | 958 | 5,873 | £1.78
Granted | 1,919 | 45 | 243 | 2,207 | £1.34
Exercised | (1,140) | (10) | (437) | (1,587) | £2.54
Lapsed | (1,218) | (8) | (79) | (1,305) | £0.73
31 July 2024 | 4,389 | 114 | 685 | 5,188 | £1.62
Granted | 1,909 | 132 | 184 | 2,225 | £1.06
Exercised | (968) | (52) | (100) | (1,120) | £1.03
Lapsed | (759) | – | (38) | (797) | £0.61
31 July 2025 | 4,571 | 194 | 731 | 5,496 | £1.65

Options and awards were exercised on an irregular basis during the period. The average closing
share price over the financial year was 1,900p (FY2024: 1,656.2p). There has been no change to the
effective option price of any of the outstanding options during the period. The number of exercisable
share options at 31 July 2025 was nil (31 July 2024: nil).

|  | Weighted average |  | Weighted average
| Total shares under | remaining | Total shares under | remaining
| options/awards | contractual | options/awards | contractual
| at 31 July 2025 | life at 31 July 2025 | at 31 July 2024 | life at 31 July 2024
Range of exercise prices | (’000) | (months) | (’000) | (months)
£0.00 – £2.00 | 4,765 | 17 | 4,503 | 17
£6.01 – £10.00 | – | – | 2 | –
£10.01 – £12.00 | 731 | 26 | 683 | 29

For the purposes of valuing options to arrive at the share-based payment charge, the binomial
option pricing model has been used. The key assumptions used in the model were volatility of
25% to 20% (FY2024: 25% to 20%) and dividend yield of 2.3% (FY2024: 2.6%), based on historical
data, for the period corresponding with the vesting period of the option. These generated a weighted
average fair value for LTIP of £15.66 (FY2024: £15.73), and restricted stock of £11.34 (FY2024: £15.29).
Staff costs included £22m (FY2024: £14m) for share-based payments, of which £21m (FY2024:
£11m) related to equity-settled share-based payments.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
151
NOTES TO THE ACCOUNTS
CONTINUED
10. Intangible assets

|  |  | Acquired | Software, |
|  |  | intangibles | patents and |
|  | Development | (see table | intellectual |
| Goodwill | costs | below) | property | Total
| £m | £m | £m | £m | £m
Cost |  |  |  |  |
At 31 July 2023 | 1,273 | 193 | 612 | 159 | 2,237
Foreign exchange rate movements | (7) | (2) | (1) | – | (10)
Business combinations | 10 | – | 34 | – | 44
Additions | – | 14 | – | 4 | 18
Disposals | – | – | – | (1) | (1)
At 31 July 2024 | 1,276 | 205 | 645 | 162 | 2,288
Foreign exchange rate movements | (16) | – | (17) | (2) | (35)
Business combinations | 77 | – | 59 | – | 136
Additions | – | 5 | – | 3 | 8
Disposals | – | – | – | (5) | (5)
Reclassified to assets held for sale | (282) | – | (98) | (24) | (404)
At 31 July 2025 | 1,055 | 210 | 589 | 134 | 1,988
Amortisation and impairments |  |  |  |  |
At 31 July 2023 | 64 | 124 | 406 | 122 | 716
Foreign exchange rate movements | – | (2) | (2) | – | (4)
Amortisation charge for the year | – | 2 | 49 | 5 | 56
Disposals | – | – | – | (1) | (1)
At 31 July 2024 | 64 | 124 | 453 | 126 | 767
Foreign exchange rate movements | – | – | (10) | (1) | (11)
Amortisation charge for the year | – | 10 | 52 | 15 | 77
Impairment charge for the year | – | – | – | 1 | 1
Disposals | – | – | – | (4) | (4)
Reclassified to assets held for sale | (25) | – | (82) | (19) | (126)
At 31 July 2025 | 39 | 134 | 413 | 118 | 704
Net book value at 31 July 2025 | 1,016 | 76 | 176 | 16 | 1,284
Net book value at 31 July 2024 | 1,212 | 81 | 192 | 36 | 1,521
Net book value at 31 July 2023 | 1,209 | 69 | 206 | 37 | 1,521

The charge associated with the amortisation of intangible assets is included in operating costs on
the consolidated income statement.
In addition to goodwill, acquired intangible assets comprise:

| Patents, |  |  |
| licences |  |  | Total
| and |  | Customer | acquired
| trademarks | Technology | relationships | intangibles
| £m | £m | £m | £m
Cost |  |  |  |
At 31 July 2023 | 20 | 145 | 447 | 612
Foreign exchange rate movements | – | – | (1) | (1)
Business combinations | 3 | – | 31 | 34
At 31 July 2024 | 23 | 145 | 477 | 645
Foreign exchange rate movements | (1) | (4) | (12) | (17)
Business combinations | 12 | – | 47 | 59
Reclassified to assets held for sale | (3) | (39) | (56) | (98)
At 31 July 2025 | 31 | 102 | 456 | 589
Amortisation |  |  |  |
At 31 July 2023 | 9 | 92 | 305 | 406
Foreign exchange rate movements | – | – | (2) | (2)
Charge for the year | 2 | 10 | 37 | 49
At 31 July 2024 | 11 | 102 | 340 | 453
Foreign exchange rate movements | – | (3) | (7) | (10)
Charge for the year | 4 | 11 | 37 | 52
Reclassified to assets held for sale | (3) | (33) | (46) | (82)
At July 2025 | 12 | 77 | 324 | 413
Net book value at 31 July 2025 | 19 | 25 | 132 | 176
Net book value at 31 July 2024 | 12 | 43 | 137 | 192
Net book value at 31 July 2023 | 11 | 53 | 142 | 206

Individually material intangible assets comprise:
–
£22m of customer-related intangibles attributable to United Flexible (remaining amortisation
period: 2 years);
–
£27m of customer-related intangibles attributable to Morpho Detection (remaining
amortisation period: 3 years);
–
£24m of customer-related intangibles attributable to Heating & Cooling Products (remaining
amortisation period: 8 years);
–
£32m of development cost intangibles attributable to a computed tomography programme in
Detection (remaining amortisation period: 15 years); and
–
£21m of development cost intangibles attributable to an X-ray diffraction programme in
Detection (remaining amortisation period: 6 years).
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
152
NOTES TO THE ACCOUNTS
CONTINUED
11. Impairment testing
Goodwill
Goodwill is tested for impairment at least annually or whenever there is an indication that the
carrying value may not be recoverable.
Further details of the impairment review process and judgements are included in the ‘Sources
of estimation uncertainty’ section of the ‘Basis of preparation’ for the consolidated financial
statements.
For the purpose of impairment testing, assets are grouped at the lowest levels for which there
are separately identifiable cash-flows, known as cash generating units (CGUs), taking into
consideration the commonality of reporting, policies, leadership and intra-segmental trading
relationships. Goodwill acquired through business combinations is allocated to groups of CGUs at
a segmental (or operating segment) level, being the lowest level at which management monitors
performance separately.
The carrying value of goodwill at 31 July is allocated by business segment as follows:

|  | 2025 |  | 2024
| 2025 | Number of | 2024 | Number of
| £m | CGUs | £m | CGUs
John Crane | 130 | 1 | 130 | 1
Flex-Tek | 263 | 1 | 193 | 1
Smiths Detection | 623 | 1 | 625 | 1
Smiths Interconnect – reclassified to assets held for sale |  |  |  |
at 31 July 2025 (note 28) | – | 1 | 264 | 1
| 1,016 | 4 | 1,212 | 4

Critical estimates used in impairment testing
The recoverable amount for impairment testing is determined from the higher of fair value less
costs of disposal and value in use of the CGU. In assessing value in use, the estimated future cash-
flows are discounted to their present value using a post-tax discount rate that reflects current
market assessments of the time value of money, from which pre-tax discount rates are determined.
Fair value less costs of disposal is calculated using available information on past and expected
future profitability, valuation multiples for comparable quoted companies and similar transactions
(adjusted as required for significant differences) and information on costs of similar transactions.
Fair value less costs to sell models are used when trading projections in the strategic plan cannot
be adjusted to eliminate the impact of a major restructuring.
The value in use of CGUs is calculated as the net present value of the projected risk-adjusted
cash-flows of each CGU. These cash-flow forecasts are based on the FY2025 business plan and the
five-year detailed segmental strategic plan projections which have been prepared by segmental
management and approved by the Board.
The principal assumptions used in determining the value in use were:
–
Revenue: Projected sales were built up with reference to markets and product categories.
They incorporated past performance, historical growth rates and projections of developments
in key markets;
–
Average earnings before interest and tax margin: Projected margins reflect historical
performance, our expectations for future cost inflation and the impact of all completed projects
to improve operational efficiency and leverage scale. The projections did not include the impact
of future restructuring projects to which the Group was not yet committed;
–
Projected capital expenditure: The cash-flow forecasts for capital expenditure were based
on past experience and included committed ongoing capital expenditure consistent with the
FY2026 budget and the segmental strategic projections. The forecast did not include any
future capital expenditure that improved/enhanced the operation/asset in excess of its current
standard of performance;
–
Discount rate: The discount rates have been determined with reference to illustrative weighted
average cost of capital (WACC) for each CGU. In determining these discount rates, management
have considered systematic risks specific to each of the Group’s CGUs. These risk adjusted
discount rates have then been validated against the Group’s WACC, the WACCs of the CGU’s
peer group and an average of discount rates used by other companies for the industries in
which Smiths divisions operate. Pre-tax rates of 12.2% to 13.6% (FY2024: 11.9% to 12.8%) have
been used for the impairment testing; and
–
Long-term growth rates: For the purposes of the Group’s value in use calculations, a long-term
growth rate into perpetuity was applied immediately at the end of the five-year detailed forecast
period. CGU specific long-term growth rates have been calculated by revenue weighting the
long-term GDP growth rates of the markets that each CGU operates in. The long-term growth
rates used in the testing ranged from 2.1% to 2.6% (FY2024: 2.1% to 2.6%). These rates do not
reflect the long-term assumptions used by the Group for investment planning.
Of the principal assumptions above, the key assumptions that the impairment models are most
sensitive to are: the revenue growth assumption; the average earnings before interest and tax
margin assumption; and the discount rate assumption.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
153
NOTES TO THE ACCOUNTS
CONTINUED
The assumptions used in the impairment testing of CGUs with significant goodwill balances were
as follows:

|  |  |  |  | As at 31 May 2025
|  |  |  | Smiths | Smiths
|  | John Crane | Flex-Tek | Detection | Interconnect
Net book value of goodwill (£m) |  | 128 | 255 | 610 | 252
Basis of valuation |  | Value in use | Value in use | Value in use | Value in use
Discount rate | – pre-tax | 11.8% | 13.6% | 12.8% | 12.7%
| – post-tax | 9.4% | 10.7% | 9.7% | 10.3%
Period covered by management projections |  | 5 years | 5 years | 5 years | 5 years
Capital expenditure – annual average over projection |  |  |  |  |
period (£m) |  | 29 | 11 | 14 | 11
Revenue – compound annual growth rate (CAGR) |  |  |  |  |
over projection period |  | 6.4% | 3.5% | 4.6% | 6.2%
Average earnings before interest and tax margin |  | 25.7% | 21.4% | 13.3% | 21.1%
Long-term growth rates |  | 2.6% | 2.1% | 2.1% | 2.3%
|  |  |  |  | As at 31 May 2024
|  |  |  | Smiths | Smiths
|  | John Crane | Flex-Tek | Detection | Interconnect
Net book value of goodwill (£m) |  | 135 | 191 | 649 | 279
Basis of valuation |  | Value in use | Value in use | Value in use | Value in use
Discount rate | – pre-tax | 11.9% | 12.6% | 12.8% | 12.5%
| – post-tax | 9.4% | 10.0% | 9.5% | 10.1%
Period covered by management projections |  | 5 years | 5 years | 5 years | 5 years
Capital expenditure – annual average over projection |  |  |  |  |
period (£m) |  | 31 | 10 | 19 | 12
Revenue – CAGR over projection period |  | 6.1% | 3.6% | 3.8% | 4.4%
Average earnings before interest and tax margin |  | 22.2% | 20.5% | 12.9% | 15.8%
Long-term growth rates |  | 2.6% | 2.1% | 2.3% | 2.5%

Forecast earnings before interest and tax have been projected using:
–
Expected future sales based on the strategic plan, which was constructed at a market level
with input from key account managers, product line managers, business development and
sales teams. An assessment of the market and existing contracts/programmes was made to
produce the sales forecast; and
–
Current cost structure and production capacity, which include our expectations for future cost
inflation. The projections did not include the impact of future restructuring projects to which
the Group was not yet committed.
Smiths Detection CGU – Sensitivity analysis
Management have concluded from the results of the Group’s CGU impairment testing, that there is
no reasonably plausible scenario where any change in one of the individual assumptions would
result in an impairment of the Detection CGU. However management recognise that a severe
downside scenario, with a combined sensitivity of the key assumptions, would significantly reduce
the CGU’s headroom but not result in a material impairment. The recoverable amount of all CGUs
exceeds their carrying value, on the basis of the assumptions set out in the tables above and any
reasonably possible changes thereof.
The Smiths Detection CGU has a lower amount of goodwill impairment testing headroom than the
Group’s other CGUs. Though there is no reasonably plausible downside scenario that would cause a
material impairment, management have included the following voluntary sensitivity disclosures for
the CGU:
–
The estimated recoverable amount of the Smiths Detection CGU exceeded the carrying value by
£499m (FY2024: £254m). Any decline in estimated value-in-use in excess of this amount would
result in the recognition of impairment charges.
–
If the assumptions used in the impairment review was changed to a greater extent than as
presented in the following table, the changes would, in isolation, lead to impairment losses
being recognised for the year ended 31 July 2025:

Change required for carrying value to equal recoverable amount | FY2025 | FY2024
Revenue – CAGR over five-year projection period | -940 bps decrease | -470 bps decrease
Average earnings before interest and tax margin | -400 bps decrease | -220 bps decrease
Post-tax discount rate | +340 bps increase | +150 bps increase

Note: The information in the sensitivity table above has been provided voluntarily to aid the users of
the accounts. Projected capital expenditure and long-term growth rates are not included in the
table above as management consider that there is no reasonably possible change in the projected
capital expenditure or long-term growth rate that would result in an impairment.
Property, plant and equipment, right of use assets and finite-life intangible assets
At each reporting period date, the Group reviews the carrying amounts of its property, plant,
equipment, right of use assets and finite-life intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss.
The Group has no indefinite life intangible assets other than goodwill. During the year, impairment
tests were carried out for capitalised development costs that have not yet started to be amortised
and acquired intangibles where there were indications of impairment. Value in use calculations
were used to determine the recoverable values of these assets.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
154
NOTES TO THE ACCOUNTS
CONTINUED
12. Property, plant and equipment

|  |  | Fixtures, |
|  |  | fittings, |
| Land and | Plant and | tools and |
| buildings | machinery | equipment | Total
| £m | £m | £m | £m
Cost or valuation |  |  |  |
At 31 July 2023 | 178 | 463 | 120 | 761
Foreign exchange rate movements | (3) | (7) | (2) | (12)
Business combinations | – | 7 | – | 7
Additions | 10 | 50 | 8 | 68
Disposals | (4) | (17) | (12) | (33)
At 31 July 2024 | 181 | 496 | 114 | 791
Foreign exchange rate movements | (3) | (8) | – | (11)
Business combinations | – | 5 | – | 5
Additions | 6 | 60 | 6 | 72
Disposals | (5) | (22) | (7) | (34)
Reclassified to assets held for sale | (8) | (101) | (26) | (135)
At 31 July 2025 | 171 | 430 | 87 | 688
Depreciation |  |  |  |
At 31 July 2023 | 110 | 302 | 102 | 514
Foreign exchange rate movements | (1) | (3) | (1) | (5)
Charge for the year | 8 | 32 | 5 | 45
Disposals | (4) | (17) | (12) | (33)
At 31 July 2024 | 113 | 314 | 94 | 521
Foreign exchange rate movements | (2) | (5) | – | (7)
Charge for the year | 9 | 31 | 5 | 45
Disposals | (4) | (21) | (7) | (32)
Impairment charge for the year | 3 | 6 | 1 | 10
Reclassified to assets held for sale | (8) | (63) | (22) | (93)
At July 2025 | 111 | 262 | 71 | 444
Net book value at 31 July 2025 | 60 | 168 | 16 | 244
Net book value at 31 July 2024 | 68 | 182 | 20 | 270
Net book value at 31 July 2023 | 68 | 161 | 18 | 247

13. Right of use assets

| Properties | Vehicles | Equipment | Total
| £m | £m | £m | £m
Cost or valuation |  |  |  |
At 31 July 2023 | 190 | 27 | 2 | 219
Foreign exchange rate movements | (3) | (1) | – | (4)
Business combinations | 12 | – | – | 12
Recognition of right of use asset | 18 | 10 | – | 28
Derecognition of right of use asset | (5) | – | – | (5)
At 31 July 2024 | 212 | 36 | 2 | 250
Foreign exchange rate movements | (5) | – | – | (5)
Business combinations | 6 | – | – | 6
Recognition of right of use asset | 23 | 5 | – | 28
Derecognition of right of use asset | (42) | (18) | (1) | (61)
Reclassified to assets held for sale | (23) | – | – | (23)
At 31 July 2025 | 171 | 23 | 1 | 195
Depreciation |  |  |  |
At 31 July 2023 | 94 | 19 | 1 | 114
Foreign exchange rate movements | (2) | (1) | – | (3)
Charge for the year | 29 | 5 | – | 34
Derecognition of right of use asset | (5) | – | – | (5)
At 31 July 2024 | 116 | 23 | 1 | 140
Foreign exchange rate movements | (2) | – | – | (2)
Charge for the year | 28 | 6 | – | 34
Derecognition of right of use asset | (42) | (18) | (1) | (61)
Impairment charge for the year | 2 | – | – | 2
Reclassified to assets held for sale | (17) | – | – | (17)
At 31 July 2025 | 85 | 11 | – | 96
Net book value at 31 July 2025 | 86 | 12 | 1 | 99
Net book value at 31 July 2024 | 96 | 13 | 1 | 110
Net book value at 31 July 2023 | 96 | 8 | 1 | 105

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
155
NOTES TO THE ACCOUNTS
CONTINUED
14. Financial assets – other investments

| Investment in | Deferred | Investments | Cash |
| ICU Medical, | contingent | in early stage | collateral |
| Inc equity | consideration | businesses | deposit | Total
| £m | £m | £m | £m | £m
Cost or valuation |  |  |  |  |
At 31 July 2023 | 347 | 13 | 7 | 4 | 371
Fair value change through profit and loss | – | (13) | – | – | (13)
Fair value change through other |  |  |  |  |
comprehensive income | (103) | – | (2) | – | (105)
Disposals | (197) | – | – | (3) | (200)
At 31 July 2024 | 47 | – | 5 | 1 | 53
Fair value change through profit and loss | – | – | – | – | –
Fair value change through other |  |  |  |  |
comprehensive income | 8 | – | – | – | 8
Disposals | (55) | – | – | – | (55)
At 31 July 2025 | – | – | 5 | 1 | 6

In the current year, the Group has disposed of the remainder of its equity investment in ICU Medical,
Inc equity. This transaction resulted in a £3m non-headline loss (see note 3) relating to the block
sale discount on the disposal of these shares.
The Group’s investments in early-stage businesses are in businesses that are developing or
commercialising related technology. Cash collateral deposits represent amounts held on deposit
with banks as security for liabilities or letters of credit.
15. Inventories

| 31 July 2025 | 31 July 2024
| £m | £m
Raw materials and consumables | 133 | 192
Work in progress | 140 | 148
Finished goods | 313 | 303
Total inventories | 586 | 643

In FY2025, operating costs included £1,470m (FY2024: £1,629m) of inventory consumed, £16m
(FY2024: £13m) was charged for the write-down of inventory and £7m (FY2024: £11m) was released
from provisions no longer required.
Inventory provisioning

| 31 July 2025 | 31 July 2024
| £m | £m
Gross inventory carried at full value | 505 | 560
Gross value of inventory partly or fully provided for | 138 | 146
| 643 | 706
Inventory provision | (57) | (63)
Inventory after provisions | 586 | 643

16. Trade and other receivables

| 31 July 2025 | 31 July 2024
| £m | £m
Non-current |  |
Trade receivables | 3 | –
Prepayments | – | 1
Contract assets | 82 | 86
Other receivables | 5 | 9
| 90 | 96
Current |  |
Trade receivables | 504 | 544
Prepayments | 36 | 58
Contract assets | 114 | 123
Other receivables | 83 | 101
| 737 | 826

Trade receivables do not carry interest. Management considers that the carrying value of trade and
other receivables approximates to the fair value. Trade and other receivables, including accrued
income and other receivables qualifying as financial instruments, are accounted for at amortised
cost. The maximum credit exposure arising from these financial assets was £727m
(FY2024: £788m).
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
156
NOTES TO THE ACCOUNTS
CONTINUED
Contract assets comprise unbilled balances not yet due on contracts, where revenue recognition
does not align with the agreed payment schedule. The main movements in the year arose from the
reclassification of Interconnect balances to held for sale and increases in contract asset balances of
£5m (FY2024: £23m) principally within John Crane and Smiths Detection, offset by a £2m (FY2024:
£1m) decrease due to foreign currency translation losses.
A number of Flex-Tek’s customers provide supplier finance schemes which allow their suppliers to
sell trade receivables, without recourse, to banks. This is commonly known as invoice discounting
or factoring. During FY2025 the Group collected £70m of receivables through these schemes
(FY2024: £126m). The impact of invoice discounting on the FY2025 balance sheet was that trade
receivables were reduced by £18m (FY2024: £23m). Costs of discounting were £1m (FY2024: £2m),
charged to the income statement within financing costs. The cash received via these schemes was
classified as an operating cash inflow as it had arisen from operating activities.
Trade receivables are disclosed net of provisions for expected credit loss, with historical write-offs
used as a basis, adjusted for factors that are specific to the debtor, general economic conditions of
the industry in which the debtor operates and a default risk multiplier applied to reflect country risk
premium. 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. The Group has no significant concentration of credit risk, with exposure spread over a large
number of customers. The largest single customer was the US Federal Government, representing
9% (FY2024: 8%) of Group revenue.
Ageing of trade receivables

| 31 July 2025 | 31 July 2024
| £m | £m
Trade receivables which are not yet due | 388 | 436
Trade receivables which are between 1-30 days overdue | 49 | 56
Trade receivables which are between 31-60 days overdue | 22 | 17
Trade receivables which are between 61-90 days overdue | 13 | 13
Trade receivables which are between 91-120 days overdue | 6 | 5
Trade receivables which are more than 120 days overdue | 44 | 46
| 522 | 573
Expected credit loss allowance provision | (15) | (29)
Trade receivables | 507 | 544

Movement in expected credit loss allowance

| 31 July 2025 | 31 July 2024
| £m | £m
Brought forward loss allowance at the start of the period | 29 | 30
Exchange adjustments | – | 1
Increase in allowance recognised in the income statement | 8 | 4
Amounts written off or recovered during the year | (19) | (6)
Amounts reclassed to discontinued operations | (3) | –
Carried forward loss allowance at the end of the year | 15 | 29

17. Trade and other payables

| 31 July 2025 | 31 July 2024
| £m | £m
Non-current |  |
Other payables | 12 | 15
Contract liabilities | 26 | 26
| 38 | 41
Current |  |
Trade payables | 229 | 274
Other payables | 46 | 35
Other taxation and social security costs | 27 | 60
Accruals | 222 | 204
Contract liabilities | 155 | 191
| 679 | 764

Trade and other payables, including accrued expenses and other payables qualifying as financial
instruments, are accounted for at amortised cost and are categorised as ‘Trade and other financial
payables’ in note 21.
Contract liabilities comprise deferred income balances of £181m (FY2024: £217m) in respect of
payments being made in advance of revenue recognition. The movement in the year arises primarily
from the long-term contracts of the Smiths Detection business segment where invoicing under
milestones precedes the delivery of the programme performance obligations. Revenue recognised
in the year includes £176m (FY2024: £166m) that was included in the opening contract liabilities
balance. This revenue primarily relates to the delivery of performance obligations in the Smiths
Detection business.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
157
NOTES TO THE ACCOUNTS
CONTINUED
18. Borrowings and net debt
This note sets out the calculation of net debt, an important measure in explaining our
financing position. Net debt includes accrued interest and fair value adjustments relating to
hedge accounting.

| 31 July 2025 | 31 July 2024
| £m | £m
Cash and cash equivalents |  |
Net cash and deposits | 195 | 459
Short-term borrowings |  |
Lease liabilities | (29) | (32)
Interest accrual | (3) | (2)
| (32) | (34)
Long-term borrowings |  |
€650m 2.00% Eurobond 2027 | (556) | (534)
Lease liabilities | (79) | (91)
| (635) | (625)
Borrowings/gross debt | (667) | (659)
Derivatives managing interest rate risk and currency profile of the debt | 10 | (13)
Net debt (excludes £21m of net cash in discontinued operations) | (462) | (213)

Net debt for the total Group (including £21m of net cash held in discontinued operations) is £441m
(FY2024: £213m).
Cash and cash equivalents

| 31 July 2025 | 31 July 2024
| £m | £m
Cash at bank and in hand | 102 | 123
Short-term deposits | 93 | 336
Cash and cash equivalents | 195 | 459

Cash and cash equivalents include highly liquid investments with maturities of three months or less.
Borrowings are accounted for at amortised cost and are categorised as other financial liabilities.
See note 19 for a maturity analysis of borrowings. Interest of £12m (FY2024: £12m) was charged to
the consolidated income statement in the period in respect of public bonds.
Analysis of financial derivatives on balance sheet

| Non-current | Current | Current | Non-current |
| assets | assets | liabilities | liabilities | Net balance
| £m | £m | £m | £m | £m
Derivatives managing interest rate risk and |  |  |  |  |
currency profile of the debt | 10 | – | – | – | 10
Foreign exchange forward contracts | – | 7 | (2) | – | 5
At 31 July 2025 | 10 | 7 | (2) | – | 15
Derivatives managing interest rate risk and |  |  |  |  |
currency profile of the debt | – | – | – | (13) | (13)
Foreign exchange forward contracts | – | 4 | (4) | – | –
At 31 July 2024 | – | 4 | (4) | (13) | (13)

Movements in assets/(liabilities) arising from financing activities

|  |  |  | Changes in net debt |  |  |
|  |  |  | Interest rate |  | Changes in | Total
| Cash | Other |  | and cross- |  | other financing | liabilities
| and cash | short-term | Long-term | currency |  | items: FX from financing |
| equivalents | borrowings | borrowings | swaps | Net debt | contracts | activities
| £m | £m | £m | £m | £m | £m | £m
At 31 July 2024 | 459 | (34) | (625) | (13) | (213) | – | (213)
Foreign exchange |  |  |  |  |  |  |
gains/(losses) | (12) | 1 | (11) | – | (22) | – | (22)
Net cash inflow |  |  |  |  |  |  |
from continuing |  |  |  |  |  |  |
operations | (221) | – | – | – | (221) | – | (221)
Reclassified to |  |  |  |  |  |  |
asset/liability held |  |  |  |  |  |  |
for sale | (31) | 2 | 8 | – | (21) | – | (21)
Lease payments | – | 41 | – | – | 41 | – | 41
Interest paid | – | 63 | – | – | 63 | – | 63
Interest expense | – | (71) | – | – | (71) | – | (71)
Cash inflow from |  |  |  |  |  |  |
matured derivative |  |  |  |  |  |  |
contracts | – | – | – | – |  | 2 | 2
Fair value |  |  |  |  |  |  |
movements | – | – | (7) | 23 | 16 | 3 | 19
Lease liabilities |  |  |  |  |  |  |
acquired | – | (1) | (5) | – | (6) | – | (6)
Net movement |  |  |  |  |  |  |
from new leases |  |  |  |  |  |  |
and modifications | – | (28) | – | – | (28) | – | (28)
Reclassifications | – | (5) | 5 | – | – | – | –
At 31 July 2025 | 195 | (32) | (635) | 10 | (462) | 5 | (457)

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
158
NOTES TO THE ACCOUNTS
CONTINUED

|  |  |  | Changes in net debt |  |  |
|  |  |  | Interest rate |  | Changes in | Total
| Cash | Other |  | and cross- |  | other financing | liabilities
| and cash | short-term | Long-term | currency |  | items: FX from financing |
| equivalents | borrowings | borrowings | swaps | Net debt | contracts | activities
| £m | £m | £m | £m | £m | £m | £m
At 31 July 2023 | 285 | (29) | (625) | (18) | (387) | 3 | (384)
Foreign exchange |  |  |  |  |  |  |
gains/(losses) | (14) | 1 | 10 | – | (3) | – | (3)
Net cash inflow |  |  |  |  |  |  |
from continuing |  |  |  |  |  |  |
operations | 188 | – | – | – | 188 | – | 188
Lease payments | – | 39 | – | – | 39 | – | 39
Interest paid | – | 57 | – | – | 57 | – | 57
Interest expense* | – | (63) | – | – | (63) | – | (63)
Cash inflow from |  |  |  |  |  |  |
matured derivative |  |  |  |  |  |  |
contracts | – | – | – | – | – | 5 | 5
Fair value |  |  |  |  |  |  |
movements | – | – | (9) | 5 | (4) | (8) | (12)
Lease liabilities |  |  |  |  |  |  |
acquired | – | – | (12) | – | (12) | – | (12)
Net movement |  |  |  |  |  |  |
from new leases |  |  |  |  |  |  |
and modifications | – | (28) | – | – | (28) | – | (28)
Reclassifications | – | (11) | 11 | – | – | – | –
At 31 July 2024 | 459 | (34) | (625) | (13) | (213) | – | (213)

*
Interest expense presented in note 4 also includes a £1m accrual movement that does not form part of net debt.
Cash pooling
Cash and overdraft balances in interest compensation cash pooling systems are reported gross on
the balance sheet. The cash pooling agreements incorporate a legally enforceable right of
net settlement. However, as there is no intention to settle the balances net, these arrangements do
not qualify for net presentation. At 31 July 2025 the total value of overdrafts on accounts in interest
compensation cash pooling systems was £nil (FY2024: £nil). The balances held in zero balancing
cash pooling arrangements have daily settlement of balances. Therefore, netting is not relevant.
Change of control
The Company has in place credit facility agreements under which a change of control would trigger
prepayment clauses. The Company has one bond 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.
Lease liabilities
Lease liabilities have been measured at the present value of the remaining lease payments.
The weighted average incremental borrowing rate applied to lease liabilities in FY2025 was 4.69%
(FY2024: 4.42%).
19. Financial risk management
The Group’s international operations and debt financing expose it to financial risks which include the
effects of changes in foreign exchange rates, debt market prices, interest rates, credit risks and
liquidity risks. The management of operational credit risk is discussed in note 16.
Treasury Risk Management Policy
The Board maintains a Treasury Risk Management Policy, which governs the treasury operations of
the Group and its subsidiary companies and the consolidated financial risk profile to be maintained.
A report on treasury activities, financial metrics and compliance with the Policy is circulated to the
Chief Financial Officer each month and key elements to the Audit & Risk Committee on a semi-
annual basis.
The Policy maintains a treasury control framework within which counterparty risk, financing
and debt strategy, cash and liquidity, interest rate risk and currency translation management
are reserved for Group Treasury, while currency transaction management is devolved to operating
divisions.
Centrally directed cash management systems exist globally to manage overall liquid resources
efficiently across the divisions. The Group uses financial instruments to raise financing for its global
operations, to manage related interest rate and currency financial risk, and to hedge transaction
risk within subsidiary companies.
The Group does not speculate in financial instruments. All financial instruments hedge existing
business exposures and all are recognised on the balance sheet.
The Policy defines four treasury risk components and for each component a set of financial metrics
to be measured and reported monthly against pre-agreed objectives.
1) Credit quality
The Group’s strategy is to maintain a solid investment-grade rating to ensure access to the widest
possible sources of financing at the right time and to optimise the resulting cost of debt capital. The
credit ratings at the end of July 2025 were BBB+ / Baa2 (both negative outlook) from Standard &
Poor’s and Moody’s respectively. An essential element of an investment-grade rating is consistent
and robust cash-flow metrics. The Group’s objective is to maintain a net debt/headline EBITDA ratio
of two times or lower over the medium term. Capital management is discussed in more detail in
note 26.
2) Debt and interest rate
The Group’s risk management objectives are to ensure that the majority of funding is drawn from
the public debt markets, the average maturity profile of gross debt is to be at or greater than three
years, and between 40-60% of gross debt (excluding leases) is at fixed rates. At 31 July 2025 these
measures were 100% (FY2024: 100%), 1.6 years (FY2024: 2.6 years) and 54% (FY2024: 54%).
The Group has no financial covenants in its external debt agreements. Interest rate risk
management is discussed in note 19(b).
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
159
NOTES TO THE ACCOUNTS
CONTINUED
3) Liquidity management
The Group’s objective is to ensure that at any time undrawn committed facilities, net of short-term
overdraft financing, are at least £300m and that committed facilities have at least 12 months to run
until maturity. At 31 July 2025, these measures were £805m (FY2024: £623m) and a weighted
average maturity of 49 months (FY2024: 57 months). At 31 July 2025, net cash resources were
£195m (FY2024: £459m). Liquidity risk management is discussed in note 19(d).
4) Currency management
The Group is an international business with the majority of its net assets denominated in
foreign currency. It protects the balance sheet and reserves from adverse foreign exchange
movements by financing foreign currency assets where appropriate in the same currency.
The Group’s objective for managing transaction currency exposure is to reduce medium-term
volatility to cash-flow, margins and earnings. Foreign exchange risk management is discussed
in note 19(a) below.
(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 the net foreign
exchange exposure to known future sales and purchases is material, this exposure is hedged using
forward foreign exchange contracts. The net exposure is calculated by adjusting the expected
cash-flow 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.
The following table shows the currency of financial instruments. It excludes loans and derivatives
designated as net investment hedges.

|  |  |  |  | At 31 July 2025
| Sterling | US$ | Euro | Other | Total
| £m | £m | £m | £m | £m
Financial assets and liabilities |  |  |  |  |
Financial instruments included in trade and |  |  |  |  |
other receivables | 30 | 395 | 176 | 143 | 744
Financial instruments included in trade and |  |  |  |  |
other payables | (58) | (221) | (96) | (107) | (482)
Cash and cash equivalents | 18 | 99 | 26 | 52 | 195
Borrowings not designated as net investment |  |  |  |  |
hedges | (24) | (51) | (11) | (22) | (108)
| (34) | 222 | 95 | 66 | 349
Exclude balances held in operations with the |  |  |  |  |
same functional currency | 33 | (386) | (74) | 28 | (399)
Exposure arising from intra-Group loans | – | 154 | (15) | (46) | 93
Future forward foreign exchange contract |  |  |  |  |
cash-flows | (85) | (52) | 32 | 105 | –
| (86) | (62) | 38 | 153 | 43

|  |  |  |  | At 31 July 2024
| Sterling | US$ | Euro | Other | Total
| £m | £m | £m | £m | £m
Financial assets and liabilities |  |  |  |  |
Financial instruments included in trade and |  |  |  |  |
other receivables | 38 | 417 | 147 | 195 | 797
Financial instruments included in trade and |  |  |  |  |
other payables | (45) | (222) | (117) | (111) | (495)
Cash and cash equivalents | 139 | 222 | 19 | 79 | 459
Borrowings not designated as net investment |  |  |  |  |
hedges | (26) | (61) | (14) | (22) | (123)
| 106 | 356 | 35 | 141 | 638
Exclude balances held in operations with the |  |  |  |  |
same functional currency | (108) | (305) | (38) | (153) | (604)
Exposure arising from intra-Group loans | – | 65 | 37 | (71) | 31
Future forward foreign exchange contract |  |  |  |  |
cash-flows | 13 | (93) | 6 | 74 | –
| 11 | 23 | 40 | (9) | 65

Financial instruments included in trade and other receivables comprise trade receivables, accrued
income and other receivables which qualify as financial instruments. Similarly, financial
instruments included in trade and other payables comprise trade payables, accrued expenses and
other payables that qualify as financial instruments.
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:

| Impact on | Gain/(loss) | Impact on | Gain/(loss)
| profit | recognised in | profit | recognised in
| for the year | reserves | for the year | reserves
| FY2025 | FY2025 | FY2024 | FY2024
| £m | £m | £m | £m
US dollar | 4 | 2 | 1 | 2
Euro | (1) | (2) | (1) | (3)
Sterling | 3 | (2) | (2) | –

These sensitivities were calculated before adjusting for tax and exclude the effect of quasi-equity
intra-Group loans.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
160
NOTES TO THE ACCOUNTS
CONTINUED
Cash-flow hedging
The Group uses forward foreign exchange contracts to hedge future foreign currency sales and
purchases. At 31 July 2025, contracts with a nominal value of £103m (FY2024: £178m) were
designated as hedging instruments. In addition, the Group had outstanding foreign currency
contracts with a nominal value of £357m (FY2024: £315m) which were being used to manage
transactional foreign exchange exposures, but were not accounted for as cash-flow hedges. The fair
value of the contracts is disclosed in note 20.
The majority of hedged transactions will be recognised in the consolidated income statement in
the same period that the cash-flows are expected to occur, with the only differences arising because
of normal commercial credit terms on sales and purchases. It is the Group’s policy to hedge 80%
of certain exposures for the next two years and 50% of highly probable exposures for the next
12 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic
prospective effectiveness assessments to ensure that an economic relationship exists between the
hedged item and hedging instrument. The foreign exchange forward contracts have similar critical
terms to the hedged items, such as the notional amounts and maturities. Therefore, there is an
economic relationship and the hedge ratio is established as 1:1.
The main sources of hedge ineffectiveness in these hedging relationships are the effect of the
Group’s and the counterparty credit risks on the fair value of the foreign exchange forward
contracts, which is not reflected in the fair value of the hedged item and the risk of over-hedging
where the hedge relationship requires re-balancing. No other sources of ineffectiveness emerged
from these hedging relationships. Any hedge ineffectiveness is recognised immediately in the
income statement in the period that it occurs. Of the foreign exchange contracts designated as
hedging instruments, 100% are for periods of 12 months or less (FY2024: 100%).
The following table presents a reconciliation by risk category of the cash-flow hedge reserve and
analysis of other comprehensive income in relation to hedge accounting:

|  | Year ended | Year ended
|  | 31 July 2025 | 31 July 2024
|  | £m | £m
Brought forward cash-flow hedge reserve at start of year |  | – | –
Foreign exchange forward contracts: | Net fair value gains on effective hedges | (2) | –
| Amount reclassified to income statement |  |
| – finance costs | 3 | –
Carried forward cash-flow hedge reserve at end of year |  | 1 | –

The following tables set out information regarding the change in value of the hedged item used in
calculating hedge ineffectiveness as well as the impacts on the cash-flow hedge reserve:

|  |  |  |  | Changes in value |
|  |  |  | Changes in value | of the hedging |
|  |  |  | of the hedged item | instrument |
|  |  |  | for calculating | for calculating | Cash-flow hedge
|  |  | Financial | ineffectiveness | ineffectiveness | reserve
Hedged item | Hedged exposure | Hedging instrument | year | £m | £m | £m
|  |  | FY2025 | (2) | 2 | (2)
Sales and | Foreign | Foreign exchange |  |  |  |
purchases | currency risk | contracts | FY2024 | – | – | –

Cash-flow hedges generated £nil of ineffectiveness in FY2025 (FY2024: £nil) which was recognised
in the income statement through finance costs.
Translational currency exposure
The Group has significant investments in overseas operations, particularly in the US and Europe. As
a result, the sterling value of the Group’s balance sheet can be significantly 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 primarily in the
relevant currency or in some cases indirectly using cross-currency swaps.
Net investment hedges
The table below sets out the currency of loans and swap contracts designated as net
investment hedges:

|  |  | At 31 July 2025 |  |  | At 31 July 2024
| US$ | Euro | Total | US$ | Euro | Total
| £m | £m | £m | £m | £m | £m
Loans designated as net |  |  |  |  |  |
investment hedges | – | (296) | (296) | – | (288) | (288)
Cross-currency swap | (240) | – | (240) | (248) | – | (248)
| (240) | (296) | (536) | (248) | (288) | (536)

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
161
NOTES TO THE ACCOUNTS
CONTINUED
At 31 July 2025, cross-currency swaps hedged the Group’s exposure to US dollars and euros
(FY2024: US dollars and euros). All the cross-currency swaps designated as net investment hedges
were non-current (FY2024: non-current). Swaps generating £240m of the US dollar exposure
(FY2024: £248m) will mature in February 2027.
In addition, non-swapped borrowings were also used to hedge the Group’s exposure to euros
(FY2024: euros). Borrowings generating £296m of the euro exposure (FY2024: £288m) will mature
in February 2027.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic
prospective effectiveness assessments to ensure that an economic relationship exists between the
hedged item and hedging instrument. The swaps and borrowings have the same notional amount as
the hedged items and, therefore, there is an economic relationship with the hedge ratio established
as 1:1.
The main sources of hedge ineffectiveness in these hedging relationships are the effect of the
counterparty and the Group’s own credit risk on the fair value of the foreign exchange forward
contracts which is not reflected in the fair value of the hedged item and the risk of over-hedging
where the hedge relationship requires re-balancing. No other sources of ineffectiveness emerged
from these hedging relationships. Any hedge ineffectiveness is recognised immediately in the
income statement in the period that it occurs.
The following table presents a reconciliation by risk category of the net investment hedge reserve
and analysis of other comprehensive income in relation to hedge accounting:

|  | Year ended | Year ended
|  | 31 July 2025 | 31 July 2024
|  | £m | £m
Brought forward net investment hedge reserve at start of year |  | (191) | (196)
Cross-currency swaps | Net fair value gains on effective hedges | 7 | –
Bonds | Net fair value gains on effective hedges | (7) | 5
Carried forward net investment hedge reserve at end of year |  | (191) | (191)

The following table sets out information regarding the change in value of the hedged item used in
calculating hedge ineffectiveness as well as the impacts on the net investment hedge reserve as at
31 July 2025 and 31 July 2024:

|  |  |  |  | Changes in value |
|  |  |  | Changes in value | of the hedging |
|  |  |  | of the hedged item | instrument |
|  |  |  | for calculating | for calculating | Net investment
|  |  |  | ineffectiveness | ineffectiveness | hedge reserve
Hedged item | Hedged exposure | Hedging instrument | Financial year | £m | £m | £m
Overseas | Foreign | Bonds | FY2025 | 7 | (7) | (7)
operation | currency risk | Cross-currency | FY2025 | (7) | 8 | 7
|  | swaps |  |  |  |
|  |  |  |  |  | –
Overseas | Foreign | Bonds | FY2024 | (5) | 5 | –
operation | currency risk |  |  |  |  |

Net investment hedges generated £1m of ineffectiveness in FY2025 (FY2024: £nil) which was
recognised in the income statement through finance costs.
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, if the specified currencies were to strengthen 10%
while all other market rates remained constant, it would have the following effect:

| Loss | Loss
| recognised | recognised
| in hedge | in hedge
| reserve | reserve
| 31 July 2025 | 31 July 2024
| £m | £m
US dollar | 27 | 28
Euro | 33 | 32

These movements would be 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.
(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 current policy is to require interest rates to be fixed within a band of
between 40% and 60% of the level of gross debt (excluding leases). This is achieved through fixed
rate borrowings and interest rate swaps. At 31 July 2025 54% (FY2024: 54%) of the Group’s gross
borrowings (excluding leases) were at fixed interest rates, after adjusting for interest rate swaps
and the impact of short maturity derivatives designated as net investment hedges.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
162
NOTES TO THE ACCOUNTS
CONTINUED
The Group monitors its fixed rate risk profile against both gross and net debt. For medium-term
planning, it focuses on gross debt to eliminate the fluctuations of variable cash levels over the cycle.
The weighted average interest rate on borrowings and cross-currency swaps at 31 July 2025, after
interest rate swaps, was 4.25% (FY2024: 4.60%).
Interest rate profile of financial assets and liabilities and the fair value of borrowings
The following table shows the interest rate risk exposure of investments, cash and borrowings, with
the borrowings adjusted for the impact of interest rate hedging. Other financial assets and liabilities
do not earn or bear interest, and for all financial instruments except borrowings, the carrying value
is not materially different from their fair value.

|  |  |  | As at 31 July 2025
| At fair value | Cash and |  |
| through | cash |  | Fair value of
| profit or loss | equivalents | Borrowings | borrowings
| £m | £m | £m | £m
Fixed interest |  |  |  |
Less than one year | – | – | (32) | (32)
Between one and five years | – | – | (353) | (352)
Greater than five years | – | – | (27) | (27)
Total fixed interest financial liabilities | – | – | (412) | (411)
Floating rate interest financial assets/(liabilities) | 1 | 142 | (255) | (257)
Total interest-bearing financial assets/(liabilities) | 1 | 142 | (667) | (668)
Non-interest-bearing assets in the same category | – | 53 | – | –
Total | 1 | 195 | (667) | (668)
|  |  |  | As at 31 July 2024
| At fair value | Cash and |  |
| through profit | cash |  | Fair value of
| or loss | equivalents | Borrowings | borrowings
| £m | £m | £m | £m
Fixed interest |  |  |  |
Less than one year | – | – | (34) | (34)
Between one and five years | – | – | (351) | (343)
Greater than five years | – | – | (33) | (33)
Total fixed interest financial liabilities | – | – | (418) | (410)
Floating rate interest financial assets/(liabilities) | 1 | 393 | (241) | (244)
Total interest-bearing financial assets/(liabilities) | 1 | 393 | (659) | (654)
Non-interest-bearing assets in the same category | – | 66 | – | –
Total | 1 | 459 | (659) | (654)

Interest rate hedging
The Group also has exposures to the fair values of non-derivative financial instruments such as EUR
fixed rate borrowings. To manage the risk of changes in these fair values, the Group has entered into
fixed-to-floating interest rate swaps and cross-currency interest rate swaps, which for accounting
purposes are designated as fair value hedges.
At 31 July 2025, the Group had designated the following hedge against variability on the fair value of
borrowings arising from fluctuations in base rates:
–
€300m of the fixed/floating and € exchange exposure of EUR/USD interest rate swaps
maturing on 23 February 2027 partially hedging the € 2027 Eurobond.
At 31 July 2024, the Group had designated the following hedge against variability on the fair value of
borrowings arising from fluctuations in base rates:
–
€300m of the fixed/floating and € exchange exposure of EUR/USD interest rate swaps
maturing on 23 February 2027 partially hedging the € 2027 Eurobond.
The fair values of the hedging instruments are disclosed in note 20. The effect of the swaps was to
convert £259m (FY2024: £253m) debt from fixed rate to floating rate. The swaps have similar critical
terms to the hedged items, such as the reference rate, reset dates, notional amounts, payment
dates and maturities. Therefore, there is an economic relationship and the hedge ratio is
established as 1:1. Hedge effectiveness is determined at the inception of the hedge relationship, and
through periodic prospective effectiveness assessments to ensure that an economic relationship
exists between the hedged item and hedging instrument.
The main source of hedge ineffectiveness in these hedging relationships is the effect of the currency
basis risk on cross-currency interest rate swaps which are not reflected in the fair value of the
hedged item. No other sources of ineffectiveness emerged from these hedging relationships.
Any hedge ineffectiveness was recognised immediately in the income statement in the period in
which it occurred.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
163
NOTES TO THE ACCOUNTS
CONTINUED
The following table sets out the details of the hedged exposures covered by the Group’s fair value hedges:

|  |  |  | Changes in value |  |  |  |
|  |  | Changes in value | of the hedging |  |  | Accumulated fair value |
|  |  | of hedged item | instrument |  | Carrying amount | adjustments on hedged item |
|  |  | for calculating | for calculating |  |  |  |
|  |  | ineffectiveness | ineffectiveness | Assets | Liabilities | Assets | Liabilities
Hedged item | Hedged exposure | Financial year | £m | £m | £m | £m | £m | £m
Fixed rate bonds (a) | Interest rate and currency rate risk | FY2025 | (7) | 8 | – | 251 | – | (5)
Fixed rate bonds (a) | Interest rate and currency rate risk | FY2024 | (9) | 9 | – | 253 | – | (12)

(a) Classified as borrowings.
Fair value hedges generated a £1m ineffectiveness in gain FY2025 (FY2024: £nil) which was recognised in the income statement through finance costs.
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 investments at 31 July 2025, 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 £2m impact (FY2024: £2m
impact) on the Group’s profit before tax.
(c) Financial credit risk
The Group is exposed to credit-related losses in the event of non-performance by counterparties to
financial instruments, but does not currently expect any counterparties to fail to meet their
obligations. Credit risk is mitigated by the Board-approved policy of only placing cash deposits with
highly rated relationship bank counterparties within counterparty limits established by reference to
their Standard & Poor’s long-term debt rating. In the normal course of business, the Group
operates cash pooling systems, where a legal right of set-off 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 and derivatives, totals £201m at
31 July 2025 (FY2024: £465m).

| 31 July 2025 | 31 July 2024
| £m | £m
Cash in AAA liquidity funds | 76 | 196
Cash at banks with at least a AA- credit rating | 33 | 26
Cash at banks with all other A credit ratings | 79 | 185
Cash at other banks | 7 | 52
Investments in bank deposits | 1 | 1
Other investments | 5 | 5
Total | 201 | 465

At 31 July 2025, the maximum exposure with a single bank for deposits and cash was £54m
(FY2024: £128m). The bank has a credit rating of AAA (FY2024: A+). The maximum mark to market
exposure with a single bank for derivatives was £3m, the bank has a credit rating of AA-. In the prior
year derivatives were out of the money and did not represent a credit risk.
(d) Liquidity risk
Borrowing facility
Board policy specifies the maintenance of an unused committed credit facility of at least £300m
at all times to ensure that the Group has sufficient available funds for operations and planned
development. The Group has a Revolving Credit Facility of US$800m maturing 5 May 2030 and a
Revolving Credit Facility of £200m maturing 17 June 2027. At the balance sheet date, the Group had
the following undrawn credit facility:

| 31 July 2025 | 31 July 2024
| £m | £m
Expiring between one and two years (FY2024: n/a) | 200 | –
Expiring after more than four years (FY2024: four years) | 605 | 623
Total 805 |  | 623

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
164
NOTES TO THE ACCOUNTS
CONTINUED
Cash deposits
As at 31 July 2025, £93m (FY2024: £336m) of cash and cash equivalents was on deposit with various
banks of which £76m (FY2024: £196m) was in liquidity funds. £1m (FY2024: £1m) of investments
comprised bank deposits held to secure liabilities and letters of credit.
Gross contractual cash-flows for borrowings

|  |  |  | As at 31 July 2025
|  |  |  | Contractual | Total
|  | Fair value | Lease | interest | contractual
| Borrowings | adjustments | liabilities | payments | cash-flows
| £m | £m | £m | £m | £m
Less than one year | (3) | – | (29) | (11) | (43)
Between one and two years | (561) | 5 | (19) | (11) | (586)
Between two and three years | – | – | (14) | – | (14)
Between three and four years | – | – | (11) | – | (11)
Between four and five years | – | – | (8) | – | (8)
Greater than five years | – | – | (27) | – | (27)
Total | (564) | 5 | (108) | (22) | (689)
|  |  |  | As at 31 July 2024 - represented*
|  |  |  | Contractual | Total
| Borrowings | Fair value | Lease | interest | contractual
| represented* | adjustments | liabilities | payments | cash-flows
| £m | £m | £m | £m | £m
Less than one year | (2) | – | (32) | (11) | (45)
Between one and two years | – | – | (21) | (11) | (32)
Between two and three years | (546) | 12 | (18) | (11) | (563)
Between three and four years | – | – | (11) | – | (11)
Between four and five years | – | – | (8) | – | (8)
Greater than five years | – | – | (33) | – | (33)
Total | (548) | 12 | (123) | (33) | (692)

* The FRC’s review of the Group’s FY2024 annual report and accounts identified a small number of reporting
improvement matters. Following the FRC’s review, borrowings in the table above has been represented to
separately disclose the maturity analysis of lease liabilities. The table has also been restated to show the correct
bond repayment date.
The figures presented in the borrowings column include the non-cash adjustments which are
highlighted in the adjacent column. The contractual interest reported for borrowings is before the
effect of interest rate swaps.
Gross contractual cash-flows for derivative financial instruments

|  | As at 31 July 2025
|  |  | Net
| Receipts | Payments | cash-flow
| £m | £m | £m
Assets |  |  |
Less than one year | 238 | (231) | 7
Greater than one year | 271 | (261) | 10
Liabilities |  |  |
Less than one year | 208 | (210) | (2)
Greater than one year | 7 | (7) | –
Total | 724 | (709) | 15
|  | As at 31 July 2024
|  |  | Net
| Receipts | Payments | cash-flow
| £m | £m | £m
Assets |  |  |
Less than one year | 260 | (256) | 4
Greater than one year | 4 | (4) | –
Liabilities |  |  |
Less than one year | 223 | (227) | (4)
Greater than one year | 254 | (267) | (13)
Total | 741 | (754) | (13)

The table above presents the undiscounted future contractual cash-flows for all derivative financial
instruments. For this disclosure, cash-flows 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 20.
Gross contractual cash-flows for other financial liabilities
The contractual cash-flows for financial liabilities included in trade and other payables were
£461m (FY2024: £481m) due in less than one year, £21m (FY2024: £14m) due between one and
five years.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
165
NOTES TO THE ACCOUNTS
CONTINUED
20. Derivative financial instruments
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.

|  |  |  | At 31 July 2025
| Contract or |  |  | Fair value
| underlying |  |  |
| nominal |  |  |
| amount | Assets | Liabilities | Net
| £m | £m | £m | £m
Foreign exchange contracts (cash-flow hedges) | 103 | 2 | (1) | 1
Foreign exchange contracts (not hedge accounted) | 357 | 5 | (1) | 4
Total foreign exchange contracts | 460 | 7 | (2) | 5
Cross-currency swaps (fair value and net investment |  |  |  |
hedges) | 240 | 10 | – | 10
Total financial derivatives | 700 | 17 | (2) | 15
Balance sheet entries: |  |  |  |
Non-current | 258 | 10 | – | 10
Current | 442 | 7 | (2) | 5
Total financial derivatives | 700 | 17 | (2) | 15
|  |  |  | At 31 July 2024
| Contract or |  |  | Fair value
| underlying |  |  |
| nominal |  |  |
| amount | Assets | Liabilities | Net
| £m | £m | £m | £m
Foreign exchange contracts (cash-flow hedges) | 178 | 2 | (2) | –
Foreign exchange contracts (not hedge accounted) | 315 | 2 | (2) | –
Total foreign exchange contracts | 493 | 4 | (4) | –
Cross-currency swaps (fair value and net investment |  |  |  |
hedges) | 248 | – | (13) | (13)
Total financial derivatives | 741 | 4 | (17) | (13)
Balance sheet entries: |  |  |  |
Non-current | 255 | – | (13) | (13)
Current | 486 | 4 | (4) | –
Total financial derivatives | 741 | 4 | (17) | (13)

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.
Netting
International Swaps and Derivatives Association (ISDA) master netting agreements are in place with
derivative counterparties except for contracts traded on a dedicated international electronic trading
platform used for operational foreign exchange hedging. Under these agreements if a credit event
occurs, all outstanding transactions under the ISDA are terminated and only a single net amount
per counterparty is payable in settlement of all transactions. The ISDA agreements do not meet the
criteria for offsetting, since the offsetting is enforceable only if specific events occur in the future,
and there is no intention to settle the contracts on a net basis.

| Assets | Liabilities | Assets | Liabilities
| 31 July 2025 | 31 July 2025 | 31 July 2024 | 31 July 2024
| £m | £m | £m | £m
Gross value of assets and liabilities | 17 | (2) | 4 | (17)
Related assets and liabilities subject to master netting |  |  |  |
agreements | (2) | 2 | (4) | 4
Net exposure | 15 | – | – | (13)

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
166
NOTES TO THE ACCOUNTS
CONTINUED
The maturity profile, average interest and foreign currency exchange rates of the hedging instruments used in the Group’s hedging strategies are as follows:

|  |  | Maturity at 31 July 2025 |  | Maturity at 31 July 2024 |
|  |  | Up to |  | Up to |
Hedged exposure | Hedging instrument |  | one year | One to five years | one year | One to five years
Fair value hedges |  |  |  |  |  |
Interest rate/ | Cross-currency swaps (EUR:GBP) | – Notional amount (£m) | – | 254 | – | 254
foreign currency risk |  | – Historical average exchange rate | – | 0.845 | – | 0.845
|  | – Average spread over three-month BBP SONIA | – | 1.860% | – | 1.860%
Net investment hedges |  |  |  |  |  |
Foreign currency risk | Cross-currency swaps (GBP:USD) | – Notional amount (£m) | – | 240 | – | 248
|  | – Historical average exchange rate | – | 1.2534 | – | 1.2534
Cash-flow hedges |  |  |  |  |  |
Foreign currency risk | Foreign exchange contracts (USD:GBP) | – Notional amount (£m) | 29 | – | 41 | –
|  | – Average exchange rate | 1.3076 | – | 1.2593 | –
| Foreign exchange contracts (EUR:USD) | – Notional amount (£m) | 16 | – | 24 | –
|  | – Average exchange rate | 0.8017 | – | 0.9277 | –
| Foreign exchange contracts (GBP:EUR) | – Notional amount (£m) | 15 | – | 66 | –
|  | – Average exchange rate | 0.8729 | – | 0.8588 | –
| Foreign exchange contracts (CHF:EUR) | – Notional amount (£m) | 11 | 3 | – | –
|  | – Average exchange rate | 0.9240 | 0.9049 | – | –
| Foreign exchange contracts (AED:EUR) | – Notional amount (£m) | 13 | – | – | –
|  | – Average exchange rate | 4.0632 | – | – | –
| Foreign exchange contracts (CZK:GBP) | – Notional amount (£m) | 10 | – | 25 | –
|  | – Average exchange rate | 29.4206 | – | 28.6952 | –
| Foreign exchange contracts (AUD:EUR) | – Notional amount (£m) | 4 | – | 9 | –
|  | – Average exchange rate | 1.7473 | – | 1.6564 | –

At 31 July 2025, the Group had forward foreign exchange contracts with a nominal value of £103m (FY2024: £178m) designated as cash-flow hedges. These forward foreign exchange contracts are in
relation to sale and purchase of multiple currencies with varying maturities up to 16 February 2027. The largest single currency pairs are disclosed above and make up 98% of the notional hedged
exposure. The notional and fair values of these foreign exchange forward derivatives are shown in the nominal amount and fair value of derivative contracts table on page 165.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
167
NOTES TO THE ACCOUNTS
CONTINUED
21. Fair value of financial instruments

|  |  |  | At fair value |  | Total |
|  | Basis for | At amortised | through profit | At fair value | carrying | Total
|  | determining | cost | or loss | through OCI | value | fair value
As at 31 July 2025 | Notes | fair value | £m | £m | £m | £m | £m
Financial assets |  |  |  |  |  |  |
Other investments | 14 | A | – | 1 | – | 1 | 1
Other investments | 14 | F | – | – | 5 | 5 | 5
Cash and cash |  |  |  |  |  |  |
equivalents | 18 | B | 195 | – | – | 195 | 195
Trade and other financial |  |  |  |  |  |  |
receivables |  | B/C | 744 | – | – | 744 | 744
Derivative financial |  |  |  |  |  |  |
instruments | 20 | C | – | 17 | – | 17 | 17
Total financial assets |  |  | 939 | 18 | 5 | 962 | 962
Financial liabilities |  |  |  |  |  |  |
Trade and other financial |  |  |  |  |  |  |
payables |  | B | (468) | (14) | – | (482) | (482)
Short-term borrowings | 18 | B/D | (3) | – | – | (3) | (3)
Long-term borrowings | 18 | D | (556) | – | – | (556) | (557)
Lease liabilities | 18 | E | (108) | – | – | (108) | (108)
Derivative financial |  |  |  |  |  |  |
instruments | 20 | C | – | (2) | – | (2) | (2)
Total financial liabilities |  |  | (1,135) | (16) | – | (1,151) | (1,152)

The fair value of a financial instrument is the price at which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an arm’s-length transaction. Fair values
have been determined with reference to available market information at the balance sheet date,
using the methodologies described below:
A
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
and liabilities (Level 1 as defined by IFRS 13).
B
Carrying value is assumed to be a reasonable approximation to fair value for all of these assets
and liabilities (Level 2 as defined by IFRS 13).
C
Fair values of derivative financial assets and liabilities, and trade receivables held to collect or
sell, are estimated by discounting expected future contractual cash-flows using prevailing
interest rate curves. Amounts denominated in foreign currencies are valued at the exchange rate
prevailing at the balance sheet date. These financial instruments are included on the balance
sheet at fair value, derived from observable market prices (Level 2 as defined by IFRS 13).

At fair value Total |  |  |  |  |  |  |
|  | Basis for | At amortised | through profit | At fair value | carrying | Total
|  | determining | cost | or loss | through OCI | value | fair value
As at 31 July 2024 | Notes | fair value | £m | £m | £m | £m | £m
Financial assets |  |  |  |  |  |  |
Other investments | 14 | A | – | 1 | 47 | 48 | 48
Other investments | 14 | F | – | – | 5 | 5 | 5
Cash and cash |  |  |  |  |  |  |
equivalents | 18 | B | 459 | – | – | 459 | 459
Trade and other financial |  |  |  |  |  |  |
receivables |  | B/C | 797 | – | – | 797 | 797
Derivative financial |  |  |  |  |  |  |
instruments | 20 | C | – | 4 | – | 4 | 4
Total financial assets |  |  | 1,256 | 5 | 52 | 1,313 | 1,313
Financial liabilities |  |  |  |  |  |  |
Trade and other financial |  |  |  |  |  |  |
payables |  | B | (495) | – | – | (495) | (495)
Short-term borrowings | 18 | B/D | (2) | – | – | (2) | (2)
Long-term borrowings | 18 | D | (534) | – | – | (534) | (529)
Lease liabilities | 18 | E | (123) | – | – | (123) | (123)
Derivative financial |  |  |  |  |  |  |
instruments | 20 | C | – | (17) | – | (17) | (17)
Total financial liabilities |  |  | (1,154) | (17) | – | (1,171) | (1,166)

D
Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are
valued at the exchange rate prevailing at the balance sheet date. The fair value of borrowings is
estimated using quoted prices (Level 1 as defined by IFRS 13).
E
Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued at
the exchange rate prevailing at the balance sheet date. The fair value of the lease contract is
estimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).
F
The fair value of instruments is estimated by using unobservable inputs to the extent that
relevant observable inputs are not available. Unobservable inputs are developed using the best
information available in the circumstances, which may include the Group’s own data, taking into
account all information about market participation assumptions that is reliably available (Level 3
as defined by IFRS 13).
IFRS 13 defines a three-level valuation hierarchy:
Level 1 – quoted prices for similar instruments
Level 2 – directly observable market inputs other than Level 1 inputs
Level 3 – inputs not based on observable market data
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
168
NOTES TO THE ACCOUNTS
CONTINUED
22. Commitments
At 31 July 2025, commitments, comprising bonds and guarantees arising in the normal course of
business, amounted to £180m (FY2024: £187m), including pension commitments of £44m (FY2024:
£44m) and charitable funding commitments for the Smiths Group Foundation of £8m (FY2024:
£9m). In addition, the Group has committed expenditure on capital projects amounting to £4m
(FY2024: £14m).
23. Provisions and contingent liabilities

| Trading |  | Non-headline and legacy | Total
|  | John Crane, | Titeflex |  |
|  | Inc. | Corporation |  |
|  | litigation | litigation | Other |
| £m | £m | £m | £m | £m
At 31 July 2023 | 8 | 204 | 41 | 33 | 286
Business combinations | 1 | – | – | – | 1
Provision charged | 12 | 29 | – | 5 | 46
Provision released | (2) | – | (5) | (5) | (12)
Unwind of provision discount | – | 8 | 1 | – | 9
Utilisation | (6) | (21) | (1) | (8) | (36)
At 31 July 2024 | 13 | 220 | 36 | 25 | 294
Comprising: |  |  |  |  |
Current liabilities | 10 | 32 | 13 | 20 | 75
Non-current liabilities | 3 | 188 | 23 | 5 | 219
At 31 July 2024 | 13 | 220 | 36 | 25 | 294
Foreign exchange rate movements | – | (6) | (1) | – | (7)
Provision charged | 16 | – | 1 | 8 | 25
Provision released | (4) | (12) | (6) | – | (22)
Unwind of provision discount | – | 8 | 1 | – | 9
Utilisation | (5) | (19) | (5) | (15) | (44)
Reclassified to liability held for sale | (1) | – | – | – | (1)
At 31 July 2025 | 19 | 191 | 26 | 18 | 254
Comprising: |  |  |  |  |
Current liabilities | 12 | 23 | 7 | 14 | 56
Non-current liabilities | 7 | 168 | 19 | 4 | 198
At 31 July 2025 | 19 | 191 | 26 | 18 | 254

The John Crane, Inc. and Titeflex Corporation litigation provisions were the only provisions that were
discounted; other provisions have not been discounted as the impact would be immaterial.
Trading
The provisions included as trading represent amounts provided for in the ordinary course of
business. Trading provisions are charged and released through headline profit.
Warranty provision and product liability
At 31 July 2025, the Group had warranty and product liability provisions of £17m (FY2024: £9m).
Warranties over the Group’s products typically cover periods of between one and three years.
Provision is made for the likely cost of after-sales support based on the recent past experience of
individual businesses.
Commercial disputes and litigation in respect of ongoing business activities
The Group has on occasion been required to take legal action to protect its intellectual property and
other rights against infringement. It has also had to defend itself against proceedings brought by
other parties, including product liability and insurance subrogation claims. Provision is made for any
expected costs and liabilities in relation to these proceedings where appropriate, although there can
be no guarantee that such provisions (which may be subject to potentially material revision from
time to time) will accurately predict the actual costs and liabilities that may be incurred.
Contingent liabilities
In the ordinary course of its business, the Group is subject to commercial disputes and litigation
such as government price audits, product liability claims, employee disputes and other kinds of
lawsuits, and faces different types of legal issues in different jurisdictions. The high level of activity
in the US, for example, exposes the Group to the likelihood of various types of litigation
commonplace in that country, such as ‘mass tort’ and ‘class action’ litigation, legal challenges to the
scope and validity of patents, and product liability and insurance subrogation claims. These types of
proceedings (or the threat of them) are also used to create pressure to encourage negotiated
settlement of disputes. Any claim brought against the Group (with or without merit) could be costly
to defend. These matters are inherently difficult to quantify. In appropriate cases a provision is
recognised based on best estimates and management judgement but there can be no guarantee
that these provisions (which may be subject to potentially material revision from time to time) will
result in an accurate prediction of the actual costs and liabilities that may be incurred. There are
also contingent liabilities in respect of litigation for which no provisions are made.
The Group operates in some markets where the risk of unethical or corrupt behaviour is material
and has procedures, including an employee ethics alert line, to help it identify potential issues. Such
procedures will, from time to time, give rise to internal investigations, sometimes conducted with
external support, to ensure that the Group properly understands risks and concerns and can take
steps both to manage immediate issues and to improve its practices and procedures for the future.
The Group is not aware of any issues which are expected to generate material financial exposures.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
169
NOTES TO THE ACCOUNTS
CONTINUED
Non-headline and legacy
John Crane, Inc.
John Crane, Inc. (JCI) is one of many co-defendants in numerous lawsuits pending in the United
States in which plaintiffs are claiming damages arising from alleged exposure to, or use of, 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. Provision is made in respect of the expected
costs of defending known and predicted future claims and of adverse judgements in relation
thereto, to the extent that such costs can be reliably estimated.
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 causes JCI to understand, based on tests conducted on its behalf, that the products
were safe. JCI ceased manufacturing products containing asbestos in 1985.
JCI continues to actively monitor the conduct and effect of its current and expected asbestos
litigation, including the most efficacious presentation of its ‘safe product’ defence, and intends to
continue to resist these asbestos claims based upon this defence. The table below summarises the
JCI claims experience over the last 45 years since the start of this litigation:

| Year ended | Year ended | Year ended | Year ended | Year ended
| 31 July 2025 | 31 July 2024 | 31 July 2023 | 31 July 2022 | 31 July 2021
JCI claims experience |  |  |  |  |
Claims against JCI that have been dismissed | 313,000 | 312,000 | 310,000 | 306,000 | 305,000
Claims JCI is currently a defendant in | 21,000 | 20,000 | 20,000 | 22,000 | 22,000
Cumulative final judgements, after appeals, |  |  |  |  |
against JCI since 1979 | 157 | 156 | 154 | 149 | 149
Cumulative value of awards (US$m) |  |  |  |  |
since 1979 | 192 | 191 | 190 | 175 | 175

The number of claims outstanding at 31 July 2025 reflected the benefit of 1,000 (FY2024: 2,000)
claims being dismissed in the year.
JCI has also incurred significant additional defence costs. The litigation involves claims for a
number of allegedly asbestos-related diseases, with awards, when made, for mesothelioma tending
to be larger than those for the other diseases. JCI’s ability to defend mesothelioma cases
successfully is, therefore, likely to have a significant impact on its annual aggregate adverse
judgement and defence costs.
John Crane, Inc. litigation provision
The provision is based on past history of JCI claims and well-established tables of asbestos-related
disease incidence projections. The provision is determined using advice from asbestos valuation
experts, Bates White LLC. The assumptions made in assessing the appropriate level of provision
include: the period over which the expenditure can be reliably estimated; the future trend of legal
costs; the rate of future claims filed; the rate of successful resolution of claims; and the average
amount of judgements awarded.
Established incidence curves can be used to estimate the likely future pattern of asbestos-related
disease. However, JCI’s claims experience is also significantly impacted by other factors which
influence the US litigation environment. These can include: changing approaches on the part of the
plaintiffs’ bar; changing attitudes amongst the judiciary at both trial and appellate levels in specific
jurisdictions which move the balance of risk and opportunity for claimants; and legislative and
procedural changes in both the state and federal court systems.
The projections use a limited time horizon on the basis that Bates White LLC consider that there is
substantial uncertainty in the asbestos litigation environment. So probable expenditures are
not reasonably estimable beyond this time horizon. Asbestos is the longest-running mass tort
litigation in American history and is constantly evolving in ways that cannot be anticipated. JCI’s
defence strategy also generates a significantly different pattern of legal costs and settlement
expenses from other defendants. Thus JCI is in an extremely rare position, and evidence from other
litigation cannot be used to improve the reliability of the projections. A ten-year (FY2024: ten-year)
time horizon has been used based on past experience regarding significant changes in the litigation
environment that have occurred every few years and on the amount of time taken in the past for
some of those changes to impact the broader asbestos litigation environment.
The rate of future claims filed has been estimated using well-established tables of asbestos
incidence projections to determine the likely population of potential claimants, and JCI’s past
experience to determine what proportion of this population will make a claim against JCI. The JCI
products generally referred to in claims had industrial and marine applications. As a result, the
incidence curve used for JCI projections excludes construction workers, and is a composite of the
curves that predict asbestos exposure-related disease from shipyards and other occupations. This
is consistent with JCI’s litigation history.
The rate of successful resolution of claims and the average amount of any judgements awarded are
projected based on the past history of JCI claims, since this is the best available evidence, given
JCI’s strategy of defending all claims.
The future trend of legal costs is estimated based on JCI’s past experience, adjusted to reflect the
assumed levels of claims and trial activity, since the number of trials is a key driver of legal costs.
John Crane, Inc. litigation insurance recoveries
While JCI has certain excess liability insurance, JCI has met defence costs directly. The calculation
of the provision does not take account of any potential recoveries from insurers.
John Crane, Inc. litigation provision sensitivities
The provision may be subject to potentially material revision from time to time if new information
becomes available as a result of future events. There can be no guarantee that the assumptions
used to estimate the provision will result in an accurate prediction of the actual costs that will be
incurred because of the significant uncertainty associated with the future level of asbestos claims
and of the costs arising out of related litigation, including the unpredictability of jury verdicts.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
170
NOTES TO THE ACCOUNTS
CONTINUED
John Crane, Inc. statistical reliability of projections over the ten-year time horizon
In order to evaluate the statistical reliability of the projections, a population of outcomes is modelled
using randomised verdict outcomes. This generated a distribution of outcomes with future spend at
the 5th percentile of £170m and future spend at the 95th percentile of £230m (FY2024: £200m and
£258m, respectively). Statistical analysis of the distribution of these outcomes indicates that there is
a 50% probability that the total future spend will fall between £214m and £242m (FY2024: between
£245m and £271m), compared to the gross provision value of £231m (FY2024: £261m).
John Crane, Inc. litigation provision history
The JCI asbestos litigation provision of £191m (FY2024: £220m) is a discounted pre-tax provision
using discount rates, being the risk-free 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).
The JCI asbestos litigation provision has developed over the last five years as follows:

| Year ended | Year ended | Year ended | Year ended | Year ended
| 31 July 2025 | 31 July 2024 | 31 July 2023 | 31 July 2022 | 31 July 2021
| £m | £m | £m | £m | £m
John Crane, Inc. litigation provision |  |  |  |  |
Gross provision | 231 | 261 | 246 | 258 | 220
Discount | (40) | (41) | (42) | (29) | (8)
Discounted pre-tax provision | 191 | 220 | 204 | 229 | 212
Deferred tax | (46) | (54) | (51) | (57) | (54)
Discounted post-tax provision | 145 | 166 | 153 | 172 | 158
Operating profit charge/(credit) |  |  |  |  |
(Decreased)/Increased provisions for adverse |  |  |  |  |
judgements and legal defence costs | (11) | 28 | 28 | 24 | 10
Change in US risk-free rates | (1) | 1 | (15) | (18) | (5)
Subtotal – items charged to the provision | (12) | 29 | 13 | 6 | 5
Litigation management, legal fees in |  |  |  |  |
connection with litigation against insurers |  |  |  |  |
and defence strategy | – | – | 2 | 1 | 1
Recoveries from insurers | (1) | (3) | (7) | – | (9)
Total operating profit (credit)/charge | (13) | 26 | 8 | 7 | (3)
Cash-flow |  |  |  |  |
Provision utilisation – legal defence costs and |  |  |  |  |
adverse judgements | (18) | (21) | (32) | (21) | (13)
Litigation management expense | – | – | (2) | (1) | –
Recoveries from insurers | 1 | 3 | 7 | – | 9
Net cash outflow | (17) | (18) | (27) | (22) | (4)

John Crane, Inc. sensitivity of the projections to changes in the time horizon used
If the asbestos litigation environment becomes more volatile and uncertain, the time horizon over
which the provision can be calculated may reduce. Conversely, if the environment became more
stable, or JCI changed approach and committed to long-term settlement arrangements, the time
period covered by the provision might be extended.
The projections use a ten-year time horizon. Reducing the time horizon by one year would reduce
the provision by £15m (FY2024: £16m) and reducing it by five years would reduce the provision by
£85m (FY2024: £87m).
We consider, after obtaining advice from Bates White LLC, that to forecast beyond ten years requires
that the litigation environment remains largely unchanged with respect to the historical experience
used for estimating future asbestos expenditures. Historically, the asbestos litigation environment
has undergone significant changes more often than every ten years. If one assumed that the
asbestos litigation environment would remain unchanged for longer and extended the time horizon
by one year, it would increase the pre-tax provision by £13m (FY2024: £13m) and extending it by five
years would increase the pre-tax provision by £45m (FY2024: £47m). However, there are also
reasonable scenarios that, given certain recent events in the US asbestos litigation environment,
would result in no additional asbestos litigation for JCI beyond ten years. At this time, how the
asbestos litigation environment will evolve beyond ten years is not reasonably estimable.
John Crane, Inc. contingent liabilities
Provision has been made for future defence costs and the cost of adverse judgements expected to
occur. JCI’s claims experience is significantly impacted by other factors which influence the US
litigation environment. These can include: changing approaches on the part of the plaintiffs’ bar;
changing attitudes amongst the judiciary at both trial and appellate levels; and legislative and
procedural changes in both the state and federal court systems. As a result, whilst the Group
anticipates that asbestos litigation will continue beyond the period covered by the provision, the
uncertainty surrounding the US litigation environment beyond this point is such that the costs
cannot be reliably estimated.
Although the methodology used to calculate the JCI litigation provision can in theory be applied to
show claims and costs for longer periods, the Directors consider, based on advice from Bates White
LLC, that the level of uncertainty regarding the factors used in estimating future costs is too great to
provide for reasonable estimation of the numbers of future claims, the nature of such claims or the
cost to resolve them for years beyond the ten-year time horizon.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
171
NOTES TO THE ACCOUNTS
CONTINUED
Titeflex Corporation
Titeflex Corporation, a subsidiary of the Group in the Flex-Tek business segment, has received a
number of claims in the US from insurance companies seeking recompense on a subrogated basis
for the effects of damage allegedly caused by lightning strikes in relation to its flexible gas piping
product. It has also received product liability claims regarding this product in the US, some in the
form of purported class actions. Titeflex Corporation believes that its products are a safe and
effective means of delivering gas when installed in accordance with the manufacturer’s instructions
and local and national codes. However, some claims have been settled on an individual basis
without admission of liability. Equivalent third-party products in the US marketplace face
similar challenges.
Titeflex Corporation litigation provision
The continuing progress of claims and the pattern of settlement, together with recent marketplace
activity, provide sufficient evidence to recognise a liability in the accounts. Therefore a provision has
been made for the costs which the Group is expected to incur in respect of future claims to the
extent that such costs can be reliably estimated. Titeflex Corporation sells flexible gas piping with
extensive installation and safety guidance designed to assure the safety of the product and minimise
the risk of damage associated with lightning strikes.
The assumptions made in assessing the appropriate level of provision, which are based on past
experience, include: the period over which expenditure can be reliably estimated; the number of
future settlements; the average amount of settlements; and the impact of statutes of repose and
safe installation initiatives on the expected number of future claims.
The provision of £26m (FY2024: £36m) is a discounted pre-tax provision using discount rates, being
the risk-free 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).

| 31 July 2025 | 31 July 2024
| £m | £m
Gross provision | 56 | 69
Discount | (30) | (33)
Discounted pre-tax provision | 26 | 36
Deferred tax | (6) | (9)
Discounted post-tax provision | 20 | 27

Titeflex Corporation litigation provision history
A credit of £5m (FY2024: £5m credit) has been recognised by Titeflex Corporation in respect of
changes to the estimated cost of future claims from insurance companies seeking recompense for
damage allegedly caused by lightning strikes. The lower gross provision value has been principally
driven by a reduction in the number of claims.
Other non-headline and legacy provisions
Non-headline provisions comprise all provisions that were disclosed as non-headline items when
they were charged to the consolidated income statement. Legacy provisions comprise non-material
provisions relating to former business activities and discontinued operations and properties no
longer used by Smiths.
These non-material provisions include non-headline reorganisation, disposal indemnities, litigation
and arbitration in respect of old products and discontinued business activities. Provision is made
for the best estimate of the expected expenditure related to the defence and/or resolution of such
matters. There is an inherent risk in legal proceedings that the outcome may be unfavourable to the
Group, and as such there can be no guarantee that such provisions (which may be subject to
potentially material revision from time to time) will be sufficient.
Reorganisation
At 31 July 2025, there were reorganisation provisions of £5m (FY2024: £1m) relating to the various
restructuring programmes that are expected to be utilised in the next 18 months.
Property
At 31 July 2025, there were provisions of £7m (FY2024: £6m) related to actual and potential
environmental issues for sites currently or previously occupied by Smiths operations.
24. Share capital

|  | Issued |
|  | capital | Consideration
| Number of shares | £m | £m
Ordinary shares of 37.5p each |  |  |
Total share capital at 31 July 2023 | 349,302,990 | 131 |
Share buybacks | (4,205,196) | (1) | (70)
Total share capital at 31 July 2024 | 345,097,794 | 130 |
Share buybacks | (15,413,491) | (6) | (303)
Total share capital at 31 July 2025 | 329,684,303 | 124 |

Share capital structure
As at 31 July 2025, the Company’s issued share capital was 329,684,303 ordinary shares with a
nominal value of 37.5p per share. All of the issued share capital was in free issue and all issued
shares are fully paid.
The Company’s ordinary shares are listed and admitted to trading on the Main Market of the London
Stock Exchange. The Company has an American Depositary Receipt (ADR) programme and one
ADR equates to one ordinary share. As at 31 July 2025, 2,816,482 ordinary shares were held by the
nominee of the programme in respect of the same number of ADRs in issue.
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. None of the ordinary shares carry any special rights with regard to control of the Company
or distributions made by the Company.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
172
NOTES TO THE ACCOUNTS
CONTINUED
There are no known agreements relating to, or restrictions on, voting rights attached to the ordinary
shares (other than the 48-hour cut-off for casting proxy votes prior to a General Meeting). There are
no restrictions on the transfer of shares, and there is no requirement to obtain approval for a share
transfer. There are no known arrangements under which financial rights are held by a person other
than the holder of the ordinary shares. There are no known limitations on the holding of shares.
Powers of Directors
The Directors are authorised to issue and allot shares and to buy back shares subject to receiving
shareholder approval at the General Meeting. Such authorities were granted by shareholders at the
2024 Annual General Meeting. At the 2025 AGM, it will be proposed that the Directors be granted
new authorities to allot and buy back shares.
Share buybacks
As at 10 September 2025 (the latest practicable date for inclusion in this report), the Company had
an unexpired authority to repurchase ordinary shares up to a maximum of 17.2 million ordinary
shares (FY2024: 31.8 million). As at 10 September 2025, the Company did not hold any shares in
treasury. Any ordinary shares purchased may be cancelled or held in treasury.
On 26 March 2024, the Company announced a £100m share buyback programme to purchase
ordinary shares in the capital of the Company. The programme has since been extended to £500m.
Under this scheme, 15,413,491 ordinary shares of 37.5p were repurchased during the period for a
total consideration of £303m of which 300,000 shares with a value of £7m were yet to settle and
be cancelled.
A further 2,099,395 ordinary shares have been repurchased during the period of 1 August 2025 to
10 September 2025. The programme is expected to be completed by the end of the calendar year.
In total since the start of the £500m Programme, 20,253,422 shares have been repurchased, for a
total consideration of £398m, representing 6% of the called-up ordinary share capital outstanding
at the start of the Programme.
Employment share schemes
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 2025, the Trust held 1,662,267 (FY2024: 1,388,730)
ordinary shares in the Company. The Trust waived its dividend entitlement on its holding during the
year, and the Trust abstains from voting any shares held at General Meetings.
25. Dividends
The following dividends were declared and paid in the period:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Ordinary final dividend of 30.2p (FY2024: 28.70p) paid 22 November 2024 | 104 | 100
Ordinary interim dividend of 14.23p (FY2024: 13.55p) paid 14 May 2025 | 48 | 47
| 152 | 147

In the current year a final dividend of
30.2
p was paid on 22 November 2024 in respect of FY2024 and
an interim dividend of 14.23p was paid in respect of FY2025. In the prior year a total dividend of
42.25
p was paid, comprising a final dividend of
28.7
p paid in respect of FY2023 and an interim
dividend of 13.55p paid in respect of FY2024.
The final dividend for the year ended 31 July 2025 of 31.77p per share was recommended by the
Board on 22 September 2025 and will be paid to shareholders on 21 November 2025, subject to
approval by the shareholders. This dividend is payable to all shareholders on the register of
members at 6.00pm on 17 October 2025 (the record date).
Waiver of dividends
Winterflood Client Nominees Limited (Smiths Industries Employee Share Trust) waived all dividends
payable in the year, and all future dividends, on their shareholdings in the Company.
26. Reserves
Retained earnings include the value of Smiths Group plc shares held by the Smiths Industries
Employee Benefit Trust. In the year the Company issued nil (FY2024: nil) shares to the Trust, the
Trust purchased 1,318,518 shares (FY2024: 1,251,530 shares) in the market for a consideration of
£23m (FY2024: £20m) and redeemed 1,044,561 shares (FY2024: 1,605,729) to employees for a
cumulative option cost of £1m (FY2024: £4m). At 31 July 2025, the Trust held 1,662,267 (FY2024:
1,388,730) ordinary shares.
Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve,
which arose from share repurchases, revaluations of property, plant and equipment, and merger
accounting for business combinations before the adoption of IFRS, respectively.
Capital management
Capital employed comprises total equity adjusted for goodwill recognised directly in reserves, net
retirement benefit-related assets and liabilities, net litigation provisions relating to non-headline
items and net debt. The efficiency of the allocation of capital to the divisions is monitored through
the return on capital employed (ROCE). This ratio is calculated over a rolling 12-month period and is
the percentage that headline operating profit comprises of monthly average capital employed. In
FY2025 ROCE was 18.1% (FY2024: 16.4%); see note 30.
Capital structure is based on the Directors’ judgement of the balance required to maintain flexibility,
whilst achieving an efficient cost of capital.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
173
NOTES TO THE ACCOUNTS
CONTINUED
The FY2025 ratio of net debt to headline EBITDA of 0.6 (FY2024: 0.3) is within the Group’s stated
policy of 2.0 or less over the medium term. The Group’s robust balance sheet and record of strong
cash generation are more than able to fund immediate investment needs and legacy obligations.
See note 30 for the definition of headline EBITDA and the calculation of this ratio.
As part of its capital management, the Group maintains a solid investment grade credit rating to
ensure access to the widest possible sources of financing and to optimise the resulting cost of
capital. At 31 July 2025, the Group had a credit rating of BBB+/Baa2 (FY2024: BBB+/Baa2) with
Standard & Poor’s and Moody’s respectively.
The Board has a progressive dividend policy for future payouts, with the aim of increasing dividends
in line with the long-term underlying growth in earnings. In setting the level of dividend payments,
the Board will take into account prevailing economic conditions and future investment plans, along
with the objective to maintain a minimum dividend cover of at least two times.
Hedge reserve
The hedge reserve on the balance sheet records the cumulative gain or loss on designated hedging
instruments, and comprises:

| 31 July 2025 | 31 July 2024
| £m | £m
Net investment hedge reserve | (191) | (191)
Deferred tax on net investment hedge reserve | 7 | 7
Cashflow hedge reserve | 1 | –
Hedge reserve total | (183) | (184)

See transactional currency exposure risk management disclosures in note 19 for additional details
of cash-flow hedges, and translational currency exposure risk management disclosure also in note
19 for additional details of net investment hedges.
Non-controlling interest
The Group has recorded non-controlling interests of £24m (FY2024: £22m), of which the most
significant balance is in John Crane Japan Inc., which represented £22m (FY2024: £20m) of the total
non-controlling interests.
The non-controlling interest in John Crane Japan Inc. represents a 30% interest. John Crane
Japan Inc. generated operating profits of £10m in the period (FY2024: £4m), and cash inflows from
operating activities of £6m (FY2024: £4m). It paid dividends of £1m (FY2024: £1m) and tax of £2m
(FY2024: £1m). At 31 July 2025, the company contributed £57m (FY2024: £53m) of net assets to
the Group.
27. Acquisitions
During September 2024, the Group acquired 100% of the share capital of Wattco, Inc. (19 September
2024) and acquired 100% of the share capital of Modular Metal (1 October 2024). On 28 February
2025, the Group acquired 100% of the share capital of Duc-Pac.
Wattco is a manufacturer of industrial heating solutions and control panels which will expand
Flex-Tek’s industrial heat business. The total cash consideration for this acquisition was £68m, with
deferred contingent consideration valued at £8m. The deferred consideration is contingent on the
post-acquisition performance of the business and has been valued using a probability weighted
expected return model. The maximum return from the deferred contingent consideration is £15m
and the minimum is £nil, it has been classified as other payables within the Group balance sheet.
Modular Metal is a manufacturer of metal and flexible duct which will expand Flex-Tek’s HVAC
business. The total cash consideration for this acquisition was £31m, with deferred consideration
being circa £4m.
Duc-Pac is a manufacturer of metal and flexible ducting products and will expand Flex-Tek’s
presence in the North-Eastern American HVAC market. The total cash consideration for this
acquisition was £31m, with deferred consideration being circa £4m.
All acquisitions were financed using the Group’s own cash resources. The intangible assets
recognised on acquisition comprise customer relationships, trade names and non-compete
agreements. Goodwill represents the expected synergies from the strategic fit of the acquisition
and the value of the expertise in the assembled workforce.
From the date of acquisition to 31 July 2025, Wattco contributed £12m to revenue and £2m to profit
before taxation and amortisation. If the Group had acquired Wattco at the beginning of the financial
year, the acquisition would have contributed an additional £6m to revenue and £2m to profit before
taxation and amortisation.
From the date of acquisition to 31 July 2025, Modular Metal contributed £18m to revenue and £4m to
profit before taxation and amortisation. If the Group had acquired Modular Metal at the beginning of
the financial year, the acquisition would have contributed an additional £5m to revenue and £1m to
profit before taxation and amortisation.
From the date of acquisition to 31 July 2025, Duc-Pac contributed £6m to revenue and £2m to profit
before taxation and amortisation. If the Group had acquired Duc-Pac at the beginning of the financial
year, the acquisition would have contributed an additional £9m to revenue and £2m to profit before
taxation and amortisation.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
174
NOTES TO THE ACCOUNTS
CONTINUED
The balances at the date of acquisition have been provided in the table below. The amounts for
Duc-Pac are provisional due to the fair value of the acquisition balance sheet not being finalised.

|  | Wattco | Modular Metal | Duc-Pac | Total
|  | £m | £m | £m | £m
Non-current assets | – acquired intangible assets | 24 | 17 | 18 | 59
| – plant and machinery | 1 | 2 | 2 | 5
| – right of use assets | 4 | 1 | 1 | 6
Current assets | – inventory | 2 | 7 | 3 | 12
| – trade and other receivables | 1 | – | – | 1
| – cash and cash equivalents | 2 | 6 | 1 | 9
Current liabilities | – trade and other payables | (6) | (1) | (1) | (8)
Non-current liabilities | – deferred tax | (6) | (3) | – | (9)
| – lease liability | (4) | (1) | (1) | (6)
Net assets acquired |  | 18 | 28 | 23 | 69
Goodwill on current period acquisitions |  | 58 | 7 | 12 | 77
Total |  | 76 | 35 | 35 | 146
Cash paid during the period |  | 68 | 31 | 31 | 130
Deferred/contingent consideration |  | 8 | 4 | 4 | 16
Total consideration |  | 76 | 35 | 35 | 146

Post balance sheet date acquisition
On 1 August 2025 the Group’s Smiths Detection business completed on the acquisition of 100% of
the assets of Med Graphix Inc. for total consideration of £6m. Due to the short time between the
completion of the acquisition and the announcement date, it has not been possible to complete the
determination of the fair values of the acquired balance sheet.
28. Discontinued operations and businesses held for sale
On 31 January 2025, the Group announced a number of strategic actions to unlock significant value
and enhance returns to shareholders. These strategic actions included Smiths Interconnect being
divested, targeting a transaction announcement by end of calendar year 2025 and Smiths Detection
being separated either by UK demerger or sale following the sale of Smiths Interconnect.
At the July 2025 Smith Group Board meeting, it was determined that the Smiths Interconnect
divestment project had progressed sufficiently for the Smiths Interconnect business to be
accounted for as a discontinued operation and as a business held for sale. Smiths Interconnect
is a separate major line of business for the Group.
Separately management have determined that Smiths Detection separation project was
progressing to schedule but had not yet progressed sufficiently for the Smiths Detection business
to be accounted for as a discontinued operation or a business held for sale or distribution to owners.
Interconnect’s US sub-systems business unit (Smiths Interconnect, Inc (SII)) has been disclosed as
a separate disposal group, following an agreement to sell the business separately from the rest of
Smiths Interconnect. The value of SII’s net assets have been impaired to their fair value less costs to
sell, this has resulted in a £30m impairment loss being recognised.
The sale of the rest of Smiths Interconnect remains on schedule with a sale announcement
expected by the end of the calendar year 2025.
Discontinued operations
The financial performance of discontinued operations in the current and prior years is presented
below:

|  | Year ended 31 July 2025 |  | Year ended 31 July 2024
|  | Non-headline |  |  | Non-headline |
| Headline | (note3) | Total | Headline | (note 3) | Total
| £m | £m | £m | £m | £m | £m
Revenue | 421 | – | 421 | 354 | – | 354
Operating costs | (346) | (10) | (356) | (305) | (3) | (308)
Impairment loss | – | (30) | (30) | – | – | –
Operating profit/(loss) | 75 | (40) | 35 | 49 | (3) | 46
Finance costs | – | – | – | (1) | – | (1)
Profit/(loss) before taxation | 75 | (40) | 35 | 48 | (3) | 45
Taxation | (18) | (1) | (19) | (13) | (3) | (16)
Profit/(loss) from discontinued |  |  |  |  |  |
operations | 57 | (41) | 16 | 35 | (6) | 29

Cash-flow from discontinued operations included in the consolidated cash-flow statement is as
follows:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Net cash inflow from operating activities | 65 | 20
Net cash-flow used in investing activities | (13) | (11)
Net cash-flow used in financing activities | (14) | (4)
Net increase in cash and cash equivalents | 38 | 5

Additional segmental information for discontinued operations
Headline operating profit for discontinued operations is stated after charging depreciation £10m
(FY2024: £11m), amortisation £1m (FY2024: £2m) and share based payments £3m (FY2024: £2m).
The capital expenditure on property, plant and equipment, capitalised development and other
intangible assets for discontinued operations is £13m (FY2024: £11m).
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
175
NOTES TO THE ACCOUNTS
CONTINUED
Businesses held for sale
At 31 July 2025 the SII and the rest of Smiths Interconnect disposal groups both met the criteria
for classification as held for sale. The carrying value of the assets and liabilities of these disposal
groups are as follows:

|  |  | Total
| SII | Interconnect | 31 July 2025
| £m | £m | £m
Assets classified as held for sale: |  |  |
Intangible assets | – | 278 | 278
Property, plant and equipment | – | 43 | 43
Right of use assets | – | 6 | 6
Inventories | 9 | 65 | 74
Deferred tax assets | – | 1 | 1
Current tax receivable | – | 2 | 2
Trade and other receivables | 12 | 60 | 72
Cash and cash equivalents | – | 31 | 31
Assets classified as held for sale | 21 | 486 | 507
Liabilities classified as held for sale: |  |  |
Financial liabilities - leases | (4) | (6) | (10)
Trade and other payables | (9) | (74) | (83)
Current tax payable | – | (6) | (6)
Deferred tax liabilities | (1) | (5) | (6)
Provisions for liabilities and charges | – | (1) | (1)
Liabilities classified as held for sale | (14) | (92) | (106)

Analysis by geographical areas
The Interconnect’s revenue by destination and selected operating assets by geographical location
are shown below:

| Americas | Europe | APAC | ROW | Total
| £m | £m | £m | £m | £m
Revenue by geographical location |  |  |  |  |
Revenue year ended 31 July 2025 | 214 | 76 | 116 | 15 | 421
Revenue year ended 31 July 2024 | 200 | 81 | 54 | 19 | 354
Year ended 31 July 2025 – Selected operating assets by geographical location |  |  |  |  |
Intangible assets | 275 | 3 | – | – | 278
Property, plant and equipment | 26 | 11 | 6 | – | 43
Right of use asset | 5 | 1 | – | – | 6
Total | 306 | 15 | 6 | – | 327

29. Cash-flow
Cash-flow from operating activities

|  | Year ended 31 July 2025 | Year ended 31 July 2024 – represented*
| Headline | Non-headline | Total | Headline | Non-headline | Total
| £m | £m | £m | £m | £m | £m
Operating profit: |  |  |  |  |  |
– continuing operations | 505 | (95) | 410 | 477 | (108) | 369
– discontinued operations | 75 | (40) | 35 | 49 | (3) | 46
Amortisation of intangible assets | 25 | 52 | 77 | 7 | 49 | 56
Impairment on sale of SII | – | 30 | 30 | – | – | –
Depreciation of property, plant |  |  |  |  |  |
and equipment | 43 | 2 | 45 | 44 | 1 | 45
Depreciation of right of use |  |  |  |  |  |
assets | 34 | – | 34 | 34 | – | 34
Loss on disposal of property, |  |  |  |  |  |
plant and equipment | 2 | – | 2 | 1 | – | 1
Loss on fair value of contingent |  |  |  |  |  |
consideration | – | – | – | – | 13 | 13
Share-based payment expense | 21 | – | 21 | 13 | – | 13
Retirement benefits** | 4 | (7) | (3) | 7 | (8) | (1)
Loss on disposal of financial |  |  |  |  |  |
asset | – | 3 | 3 | – | 9 | 9
Recycling of cash flow hedge |  |  |  |  |  |
reserve | (2) | – | (2) | – | – | –
Decrease/(increase) in |  |  |  |  |  |
inventories | (20) | 4 | (16) | (4) | – | (4)
Decrease/(increase) in trade |  |  |  |  |  |
and other receivables | (35) | 35 | – | (107) | 26 | (81)
Increase/(decrease) in trade |  |  |  |  |  |
and other payables | (5) | 7 | 2 | 71 | (21) | 50
Increase/(decrease) in |  |  |  |  |  |
provisions | 9 | (55) | (46) | 3 | (5) | (2)
Cash generated from |  |  |  |  |  |
operations | 656 | (64) | 592 | 595 | (47) | 548
Interest paid | (63) | – | (63) | (57) | – | (57)
Interest received | 40 | – | 40 | 26 | – | 26
Tax paid | (113) | – | (113) | (99) | – | (99)
Net cash inflow from operating |  |  |  |  |  |
activities | 520 | (64) | 456 | 465 | (47) | 418

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
**
The retirement benefits within non-headline operating activities principally relate to employer contributions to legacy
defined benefit and post-retirement healthcare plans.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
176
NOTES TO THE ACCOUNTS
CONTINUED
Headline cash measures – continuing operations
The Group measure of headline operating cash excludes interest and tax, and includes capital
expenditure supporting organic growth. The Group uses operating cash-flow for the calculation
of cash conversion and free cash-flow for management of capital purposes. See note 30 for
additional details.
The table below reconciles the Group’s net cash-flow from operating activities to headline operating
cash-flow and free cash-flow:

|  | Year ended 31 July 2025 |  |  | Year ended 31 July 2024 |
| Headline | Non-headline | Total | Headline | Non-headline | Total
| £m | £m | £m | £m | £m | £m
Net cash inflow from |  |  |  |  |  |
operating activities | 520 | (64) | 456 | 465 | (47) | 418
Include: |  |  |  |  |  |
Expenditure on capitalised |  |  |  |  |  |
development, other intangible |  |  |  |  |  |
assets and property, plant and |  |  |  |  |  |
equipment | (80) | – | (80) | (86) | – | (86)
Repayment of lease liabilities | (41) | – | (41) | (39) | – | (39)
Funding of charitable |  |  |  |  |  |
foundation | – | 1 | 1 | – | 1 | 1
Movement in cash collateral | – | – | – | 4 | – | 4
Free cash-flow |  |  | 336 |  |  | 298
Exclude: |  |  |  |  |  |
Repayment of lease liabilities | 41 | – | 41 | 39 | – | 39
Interest paid | 63 | – | 63 | 57 | – | 57
Interest received | (40) | – | (40) | (26) | – | (26)
Tax paid | 113 | – | 113 | 99 | – | 99
Funding of charitable |  |  |  |  |  |
foundation | – | (1) | (1) | – | (1) | (1)
Movement in cash collateral | – | – | – | (4) | – | (4)
Operating cash-flow | 576 | (64) | 512 | 509 | (47) | 462

Headline cash conversion
Headline operating cash conversion for the total Group is calculated as follows:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Headline operating profit | 580 | 526
Headline operating cash-flow | 576 | 509
Headline operating cash conversion | 99% | 97%

Reconciliation of free cash-flow to net movement in cash and cash equivalents:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
| £m | £m
Free cash-flow | 336 | 298
Disposal of financial assets | 53 | 186
Disposal of subsidiaries – post-sale expenses | (12) | –
Acquisition of businesses | (121) | (65)
Funding of charitable foundation | (1) | (1)
Other net cash-flows used in financing activities |  |
(note: repayment of lease liabilities is included in free cash-flow) | (476) | (230)
Net (decrease)/increase in cash and cash equivalents | (221) | 188

30. Alternative performance measures and key performance indicators
The Group uses several alternative performance measures (APMs) in order to provide additional
useful information on underlying trends and the performance and position of the Group. APMs are
non-GAAP and not defined by IFRS; therefore, they may not be directly comparable with other
companies’ APMs and should not be considered a substitute for IFRS measures.
The Group uses these measures, which are common across the industry, for planning and
reporting purposes, to enhance the comparability of information between reporting periods and
business units. The measures are also used in discussions with the investment analyst community
and by credit rating agencies.
We have identified and defined the following key measures which are used within the business by
management to assess the performance of the Group’s businesses:

APM term | Definition and purpose
Capital employed | Capital employed is a non-statutory measure of invested resources.
| It comprises statutory net assets and is adjusted as follows:
| – To add goodwill recognised directly in reserves in respect of subsidiaries
| acquired before 1 August 1998;
| – To eliminate the Group's investment in ICU Medical, Inc. equity and
| deferred consideration contingent on the future share price performance
| of ICU Medical, Inc; and
| – To eliminate post-retirement benefit assets and liabilities and non-
| headline litigation provisions related to John Crane, Inc. and Titeflex
| Corporation, both net of deferred tax, and net debt.
| It is used to monitor capital allocation within the Group. See below for a
| reconciliation from net assets to capital employed.
Capital expenditure | Comprises additions to property, plant and equipment, capitalised
| development and other intangible assets, excluding assets acquired
| through business combinations: see note 1 for an analysis of capital
| expenditure. This measure quantifies the level of capital investment into
| ongoing operations.

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
177
NOTES TO THE ACCOUNTS
CONTINUED

APM term | Definition and purpose
Divisional headline | DHOP comprises divisional earnings before central costs, finance costs
operating profit (DHOP) | and taxation. DHOP is used to monitor divisional performance.
| A reconciliation of DHOP to operating profit is shown in note 1.
Free cash-flow | Free cash-flow is calculated by adjusting the net cash inflow from
| operating activities to include capital expenditure, the repayment of lease
| liabilities, the proceeds from the disposal of property, plant and equipment
| and the investment in financial assets relating to operating activities and
| pensions financing outstanding at the balance sheet date. The measure
| shows cash generated by the Group before discretionary expenditure on
| acquisitions and returns to shareholders. A reconciliation of free cash-flow
| is shown in note 29.
Gross debt | Gross debt is total borrowings (bank, bonds and lease liabilities). It is used
| to provide an indication of the Group's overall level of indebtedness. See
| note 18 for an analysis of gross debt.
Headline | The Group has defined a 'headline' measure of performance that excludes
| material non-recurring items or items considered non-operational/
| trading in nature. Items excluded from headline are referred to as non-
| headline items. This measure is used by the Group to measure and monitor
| performance excluding material non-recurring items or items considered
| non-operational. See note 3 for an analysis of non-headline items.
Headline EBITDA | EBITDA is a widely used profit measure, not defined by IFRS, being
| earnings before interest, taxation, depreciation and amortisation. A
| reconciliation of headline operating profit to headline EBITDA is shown in
| the note below.
Net debt | Net debt is total borrowings (bank, bonds and lease liabilities) less cash
| balances and derivatives used to manage the interest rate risk and
| currency profile of the debt. This measure is used to provide an indication
| of the Group's overall level of indebtedness and is widely used by investors
| and credit rating agencies. See note 18 for an analysis of net cash/(debt).
Non-headline | The Group has defined a 'headline' measure of performance that excludes
| material non-recurring items or items considered non-operational/trading
| in nature. Items excluded from headline are referred to as non-headline
| items. This is used by the Group to measure and monitor material non-
| recurring items or items considered non-operational. See note 3 for an
| analysis of non-headline items.

APM term | Definition and purpose
Operating cash-flow | Comprises free cash-flow and excludes cash-flows relating to the
| repayment of lease liabilities, interest and taxation. The measure shows
| how cash is generated from operations in the Group. A reconciliation of
| operating cash-flow is shown in note 29.
Operating profit | Operating profit is earnings before finance costs and tax. A reconciliation
| of operating profit to profit before tax is shown on the income statement
| on page 119. This common measure is used by the Group to measure and
| monitor performance.
Return on capital | Smiths ROCE is calculated over a rolling 12-month period and is the
| percentage that headline operating profit represents of the monthly
employed (ROCE) |
| average capital employed on a rolling 12-month basis. This measure of
| return on invested resources is used to monitor performance and capital
| allocation within the Group. See below for Group ROCE and note 1 for
| divisional headline operating profit and divisional capital employed.

The key performance indicators (KPIs) used by management to assess the performance of the
Group’s businesses are as follows:

KPI term | Definition and purpose |
Dividend cover – | Dividend cover is the ratio of headline earnings per share (see note 5) to |
headline | dividend per share (see note 25). This commonly used measure indicates |
| the number of times the dividend in a financial year is covered by headline |
| earnings. |
Headline Earnings per | Headline EPS growth is the growth in headline basic EPS (see note 5), on |
share (EPS) growth | a reported basis. Headline EPS growth is used to measure and monitor |
| performance. |
Free cash-flow (as a % of | This measure is defined as free cash-flow divided by headline operating |
operating profit) | profit averaged over a three-year performance period. This cash |
| generation measure is used by the Group as a performance measure for |
| remuneration purposes. |
Greenhouse gas (GHG) | GHG reduction is calculated as the percentage change in normalised |
emissions reduction | Scope 1 & 2 GHG emissions. Normalised is calculated as tCO 2 e per £m of |
| revenue. This measure is used to monitor environmental performance. |

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
178
NOTES TO THE ACCOUNTS
CONTINUED

KPI term | Definition and purpose
Gross vitality | Gross vitality is calculated as the percentage of revenue derived from new
| products and services launched in the last five years. This measure is used
| to monitor the effectiveness of the Group's new product development and
| commercialisation.
My Say engagement | The overall score in our My Say employee engagement survey. The
score | biannual survey is undertaken Group-wide. This measure is used by the
| Group to monitor employee engagement.
Operating cash | Comprises headline operating cash-flow, excluding restructuring costs,
conversion | as a percentage of headline operating profit. This measure is used to show
| the proportion of headline operating profit converted into cash-flow from
| operations before investment, finance costs, non-headline items and
| taxation. The calculation is shown in note 29.
Operating profit margin | Operating profit margin is calculated by dividing headline operating profit
| by revenue. This measure is used to monitor the Group’s ability to drive
| profitable growth and control costs.
Organic growth | Organic growth adjusts the movement in headline performance to exclude
| the impact of foreign exchange and acquisitions. Organic growth is used by
| the Group to aid comparability when monitoring performance.
Organic revenue growth | Organic revenue growth (remuneration) is compounded annualised growth
(remuneration) | in revenue after excluding the impact of foreign exchange and acquisitions.
| The measure used for remuneration differs from organic revenue growth
| in that it is calculated on a compounded annualised basis. This measure
| has historically been used by the Group for aligning remuneration with
| business performance.
Percentage of senior | Percentage of senior leadership positions taken by females is calculated
leadership positions | as the percentage of senior leadership roles (G14+ group) held by females.
taken by females | This measure is used by the Group to monitor diversity performance.
RD&E cash costs as a % | This measure is defined as the cash cost of research, development,
of sales | and customer-specific engineering activities (RD&E) as a percentage of
revenue. | RD&E includes capitalised RD&E, RD&E directly charged to the
| P&L and customer-funded projects. Innovation is an important driver of
| sustainable growth for the Group and this measures our investment in
| research and development to drive innovation.
| This KPI has replaced “R&D cash costs as a % of sales” as the Group’s
| measure of research and development investment.

KPI term | Definition and purpose
Recordable Incident Rate | Recordable Incident Rate is calculated as the number of recordable
(RIR) | incidents – where an incident requires medical attention beyond first aid
| – per 100 colleagues, per year across Smiths. This measure is used by the
| Group to monitor health and safety performance.

Capital employed
Capital employed is a non-statutory measure of invested resources. It comprises statutory net
assets adjusted to add goodwill recognised directly in reserves in respect of subsidiaries acquired
before 1 August 1998 of £478m (FY2024: £478m), to eliminate the Group’s investment in ICU Medical,
Inc. equity and deferred consideration contingent on the future share price performance of ICU
Medical, Inc. and to eliminate post-retirement benefit assets and liabilities and non-headline
litigation provisions related to John Crane, Inc. and Titeflex Corporation, both net of related tax, and
net debt.

|  | 31 July 2025 | 31 July 2024
| Notes | £m | £m
Net assets |  | 2,060 | 2,252
Adjust for: |  |  |
Goodwill recognised directly in reserves |  | 478 | 478
Retirement benefit assets and obligations | 8 | (32) | (29)
Tax related to retirement benefit assets and obligations |  | 18 | 17
John Crane, Inc. litigation provisions and related tax | 23 | 145 | 166
Titeflex Corporation litigation provisions and related tax | 23 | 20 | 27
Investment in ICU Medical, Inc. equity | 14 | – | (47)
Net debt (includes £21m of net cash from discontinued |  |  |
operations) | 18 | 441 | 213
Capital employed |  | 3,130 | 3,077

Return on capital employed (ROCE)

|  | Year ended | Year ended
|  | 31 July 2025 | 31 July 2024
| Notes | £m | £m
Headline operating profit for previous 12 months – including |  |  |
discontinued operations |  | 580 | 526
Average capital employed – including discontinued operations |  |  |
(excluding investment in ICU Medical, Inc. equity) | 1 | 3,204 | 3,206
ROCE |  | 18.1% | 16.4%

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
179
NOTES TO THE ACCOUNTS
CONTINUED
Total Group revenue and headline operating profit
Revenue and headline operating profit for the total Smiths Group including discontinued operations
is calculated as follows:

| Year ended | Year ended
| 31 July 2025 | 31 July 2024
Notes | £m | £m
Revenue |  |
Continuing operations | 2,915 | 2,778
Discontinued operations | 421 | 354
Total Group | 3,336 | 3,132
Headline operating profit |  |
Continuing operations | 505 | 477
Discontinued operations | 75 | 49
Total Group | 580 | 526

Credit metrics
Smiths Group monitors the ratio of net debt to headline EBITDA as part of its management of credit
ratings; see note 26 for details. This ratio is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation (headline EBITDA) – total Group

|  | Year ended | Year ended
|  | 31 July 2025 | 31 July 2024
| Notes | £m | £m
Headline operating profit – total Group |  | 580 | 526
Exclude: |  |  |
– depreciation of property, plant and equipment | 29 | 43 | 44
– depreciation of right of use assets | 13 | 34 | 34
– amortisation and impairment of development costs | 10 | 10 | 2
– amortisation of software, patents and intellectual property | 10 | 15 | 5
Headline EBITDA |  | 682 | 611

Ratio of net debt to headline EBITDA – total Group

|  | Year ended | Year ended
|  | 31 July 2025 | 31 July 2024
| Notes | £m | £m
Headline EBITDA |  | 682 | 611
Net debt (including £21m of net cash from discontinued |  |  |
operations) | 18 | 441 | 213
Ratio of net debt to headline EBITDA |  | 0.6 | 0.3

Headline EBITDA for continuing operations is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation (headline EBITDA) – continuing
operations

Year ended |  |
| Year ended | 31 July 2024
| 31 July 2025 | represented*
Notes | £m | £m
Headline operating profit – continuing operations | 505 | 477
Exclude: |  |
– depreciation of property, plant and equipment | 36 | 37
– depreciation of right of use assets | 31 | 31
– amortisation and impairment of development costs | 10 | 2
– amortisation of software, patents and intellectual property | 14 | 3
Headline EBITDA | 596 | 550

*
The comparatives for the year to 31 July 2024 have been represented to reflect the reclassification of the Smiths
Interconnect business as a discontinued operation.
31. Post balance sheet events
Details of the proposed final dividend announced since the end of the reporting period are given in
note 25. Details of the post balance sheet date acquisition are given in note 27.
32. Audit exemption taken for subsidiaries
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to
the audit of individual accounts by virtue of Section 479A of that Act for FY2025.

Company name | Company number
EIS Group Limited | 61407
Flexibox International Limited | 394688
Flex-Tek Group Limited | 11545405
Graseby Limited | 894638
SI Properties Limited | 160881
Smiths Detection Group Limited | 5138140
Smiths Detection Investments Limited | 5146644
Smiths Finance Limited | 7888063
Smiths Group Innovation Limited | 10953689
Smiths Interconnect Group Limited | 6641403
Smiths Pensions Limited | 2197444

Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
180
UNAUDITED GROUP FINANCIAL RECORD 2021–2025
UNAUDITED GROUP FINANCIAL RECORD 2021–2025
CONTINUED
UNAUDITED GROUP FINANCIAL RECORD 2021–2025
Year ended
31 July 2025
£m
Year ended
31 July 2024
represented*
£m
Year ended
31 July 2023
£m
Year ended
31 July 2022
£m
Year ended
31 July 2021
£m
Income statement metrics – headline*
Continuing operations
Revenue
2,915
2,778
3,037
2,566
2,406
Headline operating profit
505
477
501
417
372
Headline profit before tax
474
440
466
376
332
Discontinued operations
Revenue
421
354
–
356
849
Headline operating profit
75
49
–
66
177
Headline profit before tax
75
48
–
65
176
Income statement metrics – statutory**
Revenue
2,915
2,778
3,037
2,566
2,406
Operating profit
410
369
403
117
326
Profit before taxation
375
327
360
103
240
Profit for the year
276
222
232
1,035
285
Balance sheet metrics***
Net debt
(462)
(213)
(387)
(150)
(1,018)
Shareholders’ equity
2,036
2,230
2,384
2,699
2,402
Average capital employed
3,204
3,206
3,196
2,940
4,165
Ratios
Headline operating profit: revenue (%) **
17.3
17.1
16.5
16.5
16.9
Headline effective tax rate (%)**
25.0
25.0
26.0
27.2
27.1
Return on capital employed (%)***
18.1
16.4
15.7
14.2
13.2
Return on shareholders’ funds (%)***
15.6
13.0
11.3
10.0
11.6
Cash-flow metrics***
Headline operating cash
576
509
433
318
630
Headline operating cash conversion (%)
99
97
86
76
125
Free cash-flow
336
298
178
130
383
Free cash-flow per share (p)
101.9
86.4
51.0
35.9
96.6
Earnings per share***
Headline earnings per share (p)
121.2
105.5
97.5
82.5
93.1
Dividends and dividend cover***
Pence per share
46.00
43.75
41.60
39.60
37.70
Headline dividend cover
2.6
2.4
2.3
2.1
2.5
*
The headline income statement metrics in the above five-year record have been presented to classify the Smiths Interconnect business as a discontinued operation in FY2025 and FY2024 and the Smiths Medical business as a discontinued
operation in FY2022 and FY2021.
**
The statutory income statement metrics and income statement ratios are presented based on continuing operations for both the current and comparative years.
***
Balance sheet metrics, ratios, cash-flow metrics, earnings per share, dividend cover and number of employees are presented based on both continuing and discontinued operations for all years.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
181
UNAUDITED US DOLLAR PRIMARY STATEMENTS
UNAUDITED US DOLLAR PRIMARY STATEMENTS
CONTINUED
UNAUDITED SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT – US DOLLAR TRANSLATION
Year ended 31 July 2025
Year ended 31 July 2024 represented*
Headline
$m
Non-headline
(note 3)
$m
Total
$m
Headline
$m
Non-headline
(note 3)
$m
Total
$m
CONTINUING OPERATIONS
Revenue
3,788
–
3,788
3,499
–
3,499
Operating costs
(3,132)
(123)
(3,255)
(2,898)
(136)
(3,034)
Operating profit/(loss)
656
(123)
533
601
(136)
465
Interest income
52
–
52
33
–
33
Interest expense
(92)
5
(87)
(80)
–
(80)
Other financing losses
–
(14)
(14)
–
(14)
(14)
Other finance charges – retirement benefits
–
4
4
–
8
8
Finance costs
(40)
(5)
(45)
(47)
(6)
(53)
Profit/(loss) before taxation
616
(128)
488
554
(142)
412
Taxation
(155)
26
(129)
(137)
5
(132)
Profit/(loss) for the year
461
(102)
359
417
(137)
280
DISCONTINUED OPERATIONS
Profit on discontinued operations
74
(53)
21
43
(8)
35
PROFIT/(LOSS) FOR THE YEAR
535
(155)
380
460
(145)
315
Profit/(loss) for the year attributable to:
Smiths Group shareholders – continuing operations
458
(155)
303
416
(145)
271
Smiths Group shareholders – discontinued operations
74
–
74
43
–
43
Non-controlling interests
3
–
3
1
–
1
535
(155)
380
460
(145)
315
EARNINGS PER SHARE
Basic
111.4c
91.1c
Basic – continuing
105.3c
91.1c
Diluted
110.9c
90.7c
Diluted – continuing
104.8c
90.7c
Assets and liabilities have been translated into US dollars at the exchange rate at the date of that balance sheet and income, expenses and cash-flows are translated at average exchange rates
for the period. This reflects the accounting approach that Smiths Group plc would use if the Group moved to reporting in US dollars without making any changes to its Group structure or
financing arrangements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
182
UNAUDITED US DOLLAR PRIMARY STATEMENTS
CONTINUED
UNAUDITED SUPPLEMENTARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – US DOLLAR TRANSLATION
Year ended
31 July 2025
$m
Year ended
31 July 2024
$m
Profit for the year
380
315
Other comprehensive income (OCI):
OCI which will not be reclassified to the income statement:
Re-measurement of post-retirement benefits assets and obligations
(4)
(83)
Taxation on post-retirement benefits movements
–
21
Fair value movements on financial assets at fair value through OCI
10
(132)
6
(194)
OCI which will be reclassified and reclassifications:
Fair value gains/(losses) and reclassification adjustments:
– deferred in the year on cash-flow and net investment hedges
(1)
5
– reclassified to income statement on cash-flow and net investment hedges
3
–
2
5
Foreign exchange (FX) movements net of recycling:
Exchange losses on translation of foreign operations
(45)
(42)
Total other comprehensive income, net of taxation
(37)
(231)
TOTAL COMPREHENSIVE INCOME
343
84
Attributable to:
Smiths Group shareholders
340
84
Non-controlling interests
3
–
343
84
Total comprehensive income attributable to Smiths Group shareholders arising from:
Continuing operations
331
51
Discontinued operations
9
33
340
84
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
183
UNAUDITED US DOLLAR PRIMARY STATEMENTS
CONTINUED
UNAUDITED SUPPLEMENTARY CONSOLIDATED BALANCE SHEET – US DOLLAR TRANSLATION
31 July 2025
$m
31 July 2024
$m
NON-CURRENT ASSETS
Intangible assets
1,698
1,953
Property, plant and equipment
323
347
Right of use assets
131
141
Financial assets – other investments
8
68
Retirement benefit assets
169
169
Deferred tax assets
130
121
Trade and other receivables
119
123
Financial derivatives
13
–
2,591
2,922
CURRENT ASSETS
Inventories
775
825
Current tax receivable
26
31
Trade and other receivables
974
1,060
Cash and cash equivalents
258
589
Financial derivatives
9
5
Assets held for sale
670
–
2,712
2,510
TOTAL ASSETS
5,303
5,432
CURRENT LIABILITIES
Financial liabilities – borrowings
(4)
(3)
Financial liabilities – lease liabilities
(38)
(41)
Financial liabilities – financial derivatives
(3)
(5)
Provisions for liabilities and charges
(74)
(96)
Trade and other payables
(898)
(980)
Current tax payable
(87)
(90)
Liabilities held for sale
(140)
–
(1,244)
(1,215)
NON-CURRENT LIABILITIES
Financial liabilities – borrowings
(735)
(685)
Financial liabilities – lease liabilities
(104)
(117)
Financial liabilities – financial derivatives
–
(17)
Provisions for liabilities and charges
(262)
(281)
Retirement benefit obligations
(127)
(132)
Deferred tax liabilities
(57)
(41)
Trade and other payables
(50)
(52)
(1,335)
(1,325)
TOTAL LIABILITIES
(2,579)
(2,540)
NET ASSETS
2,724
2,892
31 July 2025
$m
31 July 2024
$m
SHAREHOLDERS’ EQUITY
Share capital
164
167
Share premium account
483
469
Capital redemption reserve
41
32
Merger reserve
311
302
Retained earnings
1,935
2,130
Hedge reserve
(242)
(236)
TOTAL SHAREHOLDERS’ EQUITY
2,692
2,864
Non-controlling interest equity
32
28
TOTAL EQUITY
2,724
2,892
* The comparatives have been restated after adoption of an amendment to IAS12 ‘Income Taxes’, please see page 140
and note 6 for further information.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
184
UNAUDITED US DOLLAR PRIMARY STATEMENTS
CONTINUED
UNAUDITED SUPPLEMENTARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – US DOLLAR TRANSLATION
Share capital
and share
premium
$m
Other
reserves
$m
Retained
earnings
$m
Hedge
reserve
$m
Equity
shareholders’
funds
$m
Non-controlling
interest
$m
Total
equity
$m
At 31 July 2024
636
334
2,130
(236)
2,864
28
2,892
Profit for the year
–
–
377
–
377
3
380
Other comprehensive income:
– re-measurement of retirement benefits after tax
–
–
(4)
–
(4)
–
(4)
– FX movements net of recycling
19
10
14
(8)
35
1
36
– fair value gains and related tax
–
–
10
2
12
–
12
Total comprehensive income for the year
19
10
397
(6)
420
4
424
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust
–
–
(30)
–
(30)
–
(30)
Proceeds received on exercise of employee share options
(8)
8
1
–
1
–
1
Share buybacks
–
–
(394)
–
(394)
–
(394)
Dividends:
– equity shareholders
–
–
(198)
–
(198)
–
(198)
Share-based payment
–
–
29
–
29
–
29
At 31 July 2025
647
352
1,935
(242)
2,692
32
2,724
Share capital
and share
premium
$m
Other
reserves
$m
Retained
earnings
$m
Hedge
reserve
$m
Equity
shareholders’
funds
$m
Non-controlling
interest
$m
Total
equity
$m
At 31 July 2023
637
333
2,337
(242)
3,065
28
3,093
Profit for the year
–
–
314
–
314
1
315
Other comprehensive income:
– re-measurement of retirement benefits after tax
–
–
(62)
–
(62)
–
(62)
– FX movements net of recycling
–
–
(48)
1
(47)
(1)
(48)
– fair value gains/(losses) and related tax
–
–
(132)
5
(127)
–
(127)
Total comprehensive income for the year
–
–
72
6
78
–
78
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust
–
–
(25)
–
(25)
–
(25)
Proceeds received on exercise of employee share options
–
–
5
–
5
–
5
Share buybacks
(1)
1
(88)
–
(88)
–
(88)
Dividends:
– equity shareholders
–
–
(185)
–
(185)
–
(185)
Share-based payment
–
–
14
–
14
–
14
At 31 July 2024
636
334
2,130
(236)
2,864
28
2,892
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
185
UNAUDITED US DOLLAR PRIMARY STATEMENTS
CONTINUED
UNAUDITED SUPPLEMENTARY CONSOLIDATED CASH-FLOW STATEMENT – US DOLLAR TRANSLATION
Year ended
31 July 2025
$m
Year ended
31 July 2024
$m
Net cash inflow from operating activities
593
526
CASH-FLOWS FROM INVESTING ACTIVITIES
Expenditure on capitalised development
(5)
(18)
Expenditure on other intangible assets
(5)
(5)
Purchases of property, plant and equipment
(94)
(86)
Disposals of property, plant and equipment
–
–
Income from financial assets
69
239
Acquisition of businesses
(157)
(82)
Proceeds on disposal of subsidiaries, net of cash disposed
(16)
–
Net cash-flow used in investing activities
(208)
48
CASH-FLOWS FROM FINANCING ACTIVITIES
Share buybacks
(394)
(88)
Purchase of shares by Employee Benefit Trust
(30)
(25)
Proceeds received on exercise of employee share options
1
5
Settlement of cash-settled options
(1)
(3)
Dividends paid to equity shareholders
(198)
(185)
Receipt of capital from non-controlling interest
–
–
Lease payments
(53)
(49)
Reduction and repayment of borrowings
–
–
Cash inflow from matured derivative financial instruments
3
6
Net cash-flow used in financing activities
(672)
(339)
Net decrease in cash and cash equivalents
(287)
235
Cash and cash equivalents at beginning of year
589
366
Reclassified to assets held for sale
(41)
–
Exchange differences
(3)
(12)
Cash and cash equivalents at end of year
258
589
Cash and cash equivalents at end of year comprise:
– cash at bank and in hand
135
158
– short-term deposits
123
431
258
589
Overview
Overview
Strategic report
Strategic report
Governance
Governance
Financial statements
Financial statements
Smiths Group plc Annual Report FY2025
Smiths Group plc Annual Report FY2025
186
SMITHS GROUP PLC COMPANY ACCOUNTS
COMPANY BALANCE SHEET
Notes
31 July 2025
£m
31 July 2024
£m
NON-CURRENT ASSETS
Property, plant and equipment
2
3
3
Investments
3
2,255
2,439
Loans due from subsidiaries
3
1,410
–
Financial derivatives
9
10
–
Retirement benefit assets
10
128
132
3,806
2,574
CURRENT ASSETS
Trade and other receivables
5
57
155
Cash and cash equivalents
7
85
306
Financial derivatives
9
8
7
150
468
Total assets
3,956
3,042
Current liabilities
Trade and other payables
6
(105)
(159)
Financial derivatives
9
(8)
(7)
(113)
(166)
NON-CURRENT LIABILITIES
Borrowings
7
(563)
(549)
Loans due to subsidiaries
(2)
(103)
Provisions for liabilities and charges
8
(1)
–
Retirement benefit liabilities
10
(35)
(39)
Financial derivatives
9
–
(13)
(601)
(704)
Total liabilities
(714)
(870)
Net assets
3,242
2,172
Notes
31 July 2025
£m
31 July 2024
£m
SHAREHOLDERS’ EQUITY
Called up share capital
11
124
130
Share premium account
11
365
365
Capital redemption reserve
11
31
25
Other reserves
11
181
181
Profit and loss account
11
2,541
1,471
Total equity
3,242
2,172
The Company’s profit for the period was £1,528m (FY2024: £5m profit).
The accounts on pages 186 to 193 were approved by the Board of Directors on 22 September 2025
and were signed on its behalf by:
Roland Carter
Julian Fagge
Chief Executive Officer
Chief Financial Officer
Smiths Group plc – registered number 137013
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
187
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Retained
profit
£m
Shareholders’
equity
£m
At 31 July 2024
130
365
25
181
1,471
2,172
Profit for the year
–
–
–
–
1,528
1,528
Other comprehensive income:
– re-measurement of retirement benefits
–
–
–
–
(3)
(3)
– taxation recognised on retirement benefits
–
–
–
–
1
1
Total comprehensive income for the year
–
–
–
–
1,526
1,526
Transactions with owners:
Purchase of shares by Employee Benefit Trust
–
–
–
–
(23)
(23)
Proceeds received on exercise of employee share options
–
–
–
–
1
1
Shares purchased under a buyback programme
(6)
–
6
–
(303)
(303)
Dividends paid to equity shareholders
–
–
–
–
(152)
(152)
Share-based payment
–
–
–
–
21
21
Total transactions with owners recognised in equity
(6)
–
6
–
(456)
(456)
At 31 July 2025
124
365
31
181
2,541
3,242
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Retained
profit
£m
Shareholders’
equity
£m
At 31 July 2023
131
365
24
181
1,736
2,437
Profit for the year
–
–
–
–
5
5
Other comprehensive income:
– re-measurement of retirement benefits
–
–
–
–
(64)
(64)
– taxation recognised on retirement benefits
–
–
–
–
16
16
Total comprehensive income for the year
–
–
–
–
(43)
(43)
Transactions with owners:
Purchase of shares by Employee Benefit Trust
–
–
–
–
(20)
(20)
Proceeds received on exercise of employee share options
–
–
–
–
4
4
Shares purchased under a buyback programme
(1)
–
1
–
(70)
(70)
Dividends paid to equity shareholders
–
–
–
–
(147)
(147)
Share-based payment
–
–
–
–
11
11
Total transactions with owners recognised in equity
(1)
–
1
–
(222)
(222)
At 31 July 2024
130
365
25
181
1,471
2,172
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
188
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
COMPANY ACCOUNTING POLICIES
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101). In preparing these financial statements, the Company
applies the recognition, measurement and disclosure requirements of UK-adopted international
accounting standards (Adopted IFRSs), but makes amendments where necessary in order to
comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure
exemptions has been taken.
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 408(3) of the Companies Act 2006, the Company’s income statement and
statement of comprehensive income have not been presented. As permitted by Section 408(2),
information about the Company’s employee numbers and costs is not presented.
Going concern
The Directors are satisfied that the Group, (of which the Company is the holding company) has
adequate resources to continue to operate for a period not less than 12 months from the date of
approval of the financial statements and that there are no material uncertainties around their
assessment. Accordingly, the Directors continue to adopt the going concern basis of accounting.
Details of the going concern assessment for the Group are provided in the accounting policies note
of the consolidated financial statements.
Exemptions from the requirements of IFRS applied in accordance with FRS 101
The following exemptions from the requirements of IFRS have been applied in the preparation of
these financial statements, in accordance with FRS 101:
–
Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and
weighted-average exercise prices of share options, and how the fair value of goods or services
received was determined);
–
IFRS 7, ‘Financial Instruments: Disclosures’;
–
Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques
and inputs used for fair value measurement of assets and liabilities);
–
Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information
requirements in respect of:
–
paragraph 79(a)(iv) of IAS 1; and
–
paragraph 73(e) of IAS 16 ‘Property, plant and equipment’;
–
The following paragraphs of IAS 1, ‘Presentation of financial statements’:
–
10(d) (statement of cash-flows);
–
16 (statement of compliance with all IFRS);
–
38A (requirement for minimum of two primary statements, including cash flow statements);
–
38B-D (additional comparative information);
–
111 (cash flow statement information); and
–
134-136 (capital management disclosures).
–
IAS 7, ‘Statement of cash-flows’;
–
Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’
(requirement for the disclosure of information when an entity has not applied a new IFRS that
has been issued but is not yet effective);
–
Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation);
–
The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions
entered into between two or more members of a group; and
–
The requirements of paragraphs 52 and 58 of IFRS 16 Leases.
Significant judgements, key assumptions and estimates
The preparation of the accounts in conformity with generally accepted accounting principles
requires management to make estimates and judgements 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 sources of estimation uncertainty together with the significant judgements and
assumptions used in these Parent Company financial statements are set out below.
Sources of estimation uncertainty
Taxation
The Company has recognised deferred tax assets of £23m (FY2024: £24m) relating to revenue
losses brought forward. The recognition of these assets requires management to make significant
estimates as to the ability to recover them against the unwind of other tax positions and forecast UK
taxable profits of the tax group. Further detail on the Company’s deferred taxation position is
included in note 4.
Retirement benefits
Determining the value of the future defined benefit obligation involves significant estimates in
respect of the assumptions used to calculate present values. These include future mortality,
discount rate and inflation. The Company uses previous experience and independent actuarial
advice to select the values for critical estimates. A portion of the Company’s pension liabilities are
insured via bulk annuity policies that match all or part of the scheme obligation to identified groups
of pensioners. These assets are valued by an external qualified actuary at the actuarial valuation of
the corresponding liability, reflecting this matching relationship.
The Company’s principal defined benefit pension plans have been closed so that no future benefits
are accrued. Critical estimates for these plans, and the effect of variances in these estimates, are
disclosed in note 8 to the consolidated financial statements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
189
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
Significant judgements made in applying accounting policies
Taxation
As stated in the previous section ‘Sources of estimation uncertainty’, the Company has recognised
deferred tax assets of £23m (FY2024: £24m) relating to revenue losses brought forward. The
decision to recognise deferred tax assets requires judgement in determining whether the Company
will be able to utilise historical tax losses in future periods. It has been concluded that there are
sufficient taxable profits in future periods to support recognition.
Retirement benefits
At 31 July 2025 the Company has recognised £128m of retirement benefit assets (FY2024: £132m),
which arises from the rights of the employers to recover the surplus at the end of the life of
the scheme.
The recognition of this surplus is a significant judgement. There is a judgement required in
determining whether an unconditional right of refund exists based on the provision of the relevant
Trust deed and rules. Having taken legal advice with regard to the rights of the Company under the
relevant Trust deed and rules, it has been determined that an unconditional right of refund does
exist and therefore the surplus is recoverable by the Company and can be recognised.
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.
Investments in and loans to Group companies
The Company’s investments 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.
The recoverability of intercompany loans is assessed applying the methodology of IFRS 9 by looking
at the credit quality of the subsidiary and any support available to the entity. These calculations
require the use of estimates including projected future cash-flows and other future events. The
application of the expected credit loss model has not had a material impact on the Company’s loan
receivables provisioning position.
Financial instruments
The policies disclosed in the Group accounting policies on pages 131 to 132 for recognition,
measurement and presentation of financial instruments are applied in the Company accounts.
Taxation
Deferred tax is provided 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.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, except
where the timing of the reversal of the temporary difference is controlled by the Company and it is
probable that the temporary difference will not reverse in the foreseeable future.
Provisions
Provisions for disposal indemnities, restructuring costs, property dilapidations 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.
Retirement benefits
The Company has both defined benefit and defined contribution plans. The policies disclosed in the
Group accounting policies on pages 124 to 125 for recognition, measurement and presentation of
retirement benefits are applied in the Company accounts. Note 8 to the consolidated accounts
explains the valuation basis for the Company’s retirement benefit schemes assets and liabilities.
Share-based payment
The Company operates a number of equity-settled and cash-settled share-based
compensation plans.
The fair value of the share awards and 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 non-market vesting conditions, is
calculated using established option pricing models, principally binomial models. The probability of
meeting non-market vesting conditions, which include profitability targets, is used to estimate the
number of share awards that are likely to vest.
For cash-settled share-based payment schemes, a liability is recognised based on the fair value of
the payment earned by the balance sheet date. For equity-settled share-based payment schemes,
the corresponding credit is recognised directly in reserves.
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.
Intra-group financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of
other companies within its group, the Company considers these to be in the scope of IFRS 9 and
accounts for them as such. Financial guarantee contracts issued are initially measured at fair value.
Subsequently, they are measured at the higher of the loss allowance determined in accordance with
IFRS 9 and the amount initially recognised less, when appropriate, the cumulative amount of income
recognised in accordance with the principles of IFRS 15.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
190
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
NOTES TO THE COMPANY ACCOUNTS
1. Audit fee and Directors’ emoluments
The audit fee paid to KPMG LLP for the Parent Company was £0.1m (FY2024: £0.1m).
Directors’ emoluments in the year amounted to £11m (FY2024: £5m). Further information for
the Executive Directors is available in the single figure remuneration table on page 91. Further
information for the Non-executive Directors is available in the single figure remuneration table
on page 97.
2. Property, plant and equipment
Fixtures and fittings
£m
Cost or valuation
At 31 July 2023
–
Additions
3
At 31 July 2024
3
Additions
–
At 31 July 2025
3
Depreciation
At 31 July 2023
–
Charge for the year
–
At 31 July 2024
–
Charge for the year
–
At 31 July 2025
–
Net book value at 31 July 2025
3
Net book value at 31 July 2024
3
Net book value at 31 July 2023
–
3. Investments and loans due from subsidiaries
Shares in
subsidiary
undertakings
£m
Loans
due from
subsidiaries
£m
Total
£m
Cost or valuation
At 31 July 2023
2,436
2,448
4,884
Foreign exchange rate movements
–
(2)
(2)
Contribution through share options
8
–
8
Decrease in advances due from subsidiaries
–
(2,445)
(2,445)
At 31 July 2024
2,444
1
2,445
Foreign exchange rate movements
–
(9)
(9)
Contribution through share options
13
–
13
Increase in advances due from subsidiaries
–
1,419
1,419
Disposals
(69)
–
(69)
At 31 July 2025
2,388
1,411
3,799
Provision for impairment
At 31 July 2023 and 31 July 2024
5
1
6
Impairment charge for the year
128
–
128
At 31 July 2025
133
1
134
Net book value at 31 July 2025
2,255
1,410
3,665
Net book value at 31 July 2024
2,439
–
2,439
Net book value at 31 July 2023
2,431
2,447
4,878
Loans due to subsidiaries are offset against loans due from subsidiaries only to the extent that there
is a legal right of set-off. At 31 July 2025 £1,242m of loans receivable are offset against loans payable
(FY2024: £2,303m). The Company has large offsetting loan balances because it uses loans to reduce
its foreign currency exposures and separately monitor net cash generated from trading activities.
Loans due from subsidiaries are receivable at maturity, £486m (FY2024: £1m) are receivable
between one and two year and £924m (FY202: £nil) are receivable between two and five years.
Due to corporate restructuring, the net book value of the Company’s investments in Graseby
Limited and EIS Group Limited were written down. After filing for strike off and the request
subsequently being accepted, a disposal of £69m was recognised in relation to Graseby Limited.
In preparation for the strike off of EIS Group Limited, the Company has written down the net book
value of its investment to its carrying value by recognising a £128m impairment charge in the period.
The Company’s subsidiaries are largely held according to business lines by the following holding
companies, which are incorporated in England:
Smiths Group International Holdings Limited
Smiths Detection Group Limited
John Crane Group Limited
Flex-Tek Group Limited
Smiths Interconnect Group Limited
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
191
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
The principal subsidiaries and their countries of incorporation are:
England
Smiths Detection – Watford Ltd
John Crane UK Limited
Smiths Group International Holdings Limited
Other
Smiths Detection Germany GmbH (Germany)
Smiths Detection (Asia-Pacific) Pte Ltd (Singapore)
John Crane Middle East FZE (UAE)
John Crane Technology (Tianjin) Co Limited (China)
John Crane Saudi Arabia Ltd (Saudi Arabia)
John Crane Canada Inc (Canada)
United States
Smiths Detection, Inc.
John Crane, Inc.
Titeflex Corporation
Flexible Technologies, LLC
Tutco, LLC
Royal Metal Products, LLC
Smiths Interconnect Americas, Inc.
Smiths Interconnect, Inc.
Kreisler Manufacturing Corp
Smiths Tubular Systems – Laconia Inc.
Of the companies above, Smiths Group International Holdings Limited is 100% owned directly by
the Company. The others are 100% owned through intermediate holding companies. Shareholdings
are of ordinary shares or common stock. All of the above subsidiaries operate in their country
of incorporation.
See pages 194 to 199 for a complete list of subsidiary undertakings.
4. Deferred tax assets and liabilities
The Company has recognised the following deferred tax assets and liabilities:
Share-
based
payment
£m
Retirement
benefit
obligations
£m
Losses
carried
forward
£m
Other
£m
Total
£m
At 31 July 2023
–
(40)
40
–
–
(Charge)/credit to income statement
–
–
(16)
–
(16)
Charge to equity
–
16
–
–
16
At 31 July 2024
–
(24)
24
–
–
(Charge)/credit to income statement
–
–
(1)
–
(1)
Charge to equity
–
1
–
–
1
At 31 July 2025
–
(23)
23
–
–
The Company is part of a UK tax group including all its UK-based subsidiaries. The Company
has recognised deferred tax assets of £23m (FY2024: £24m) relating to revenue losses carried
forward. The recognition of these assets is dependent on the ability to recover them against the
unwind of other tax positions and forecast of the UK tax group. The treatment of these assets is
reviewed regularly.
At 31 July 2025 the Company has unrecognised deferred tax assets of £75m (FY2024: £75m)
relating to losses £70m (FY2024: £72m), share-based payments £2m (FY2024: £1m) and other
£3m (FY2024: £2m).
Deferred tax has been calculated at a rate of 25% in both the current and prior years.
5. Trade and other receivables
31 July 2025
£m
31 July 2024
£m
Amounts owed by subsidiaries
47
147
Other receivables
10
8
57
155
Amounts owed by subsidiaries are unsecured and are either repayable on demand or at maturity on
or before 31 July 2026.
6. Trade and other payables
31 July 2025
£m
31 July 2024
£m
Amounts owed to subsidiaries
67
136
Other creditors
8
6
Accruals and deferred income
30
17
105
159
7. Borrowings and net debt
31 July 2025
£m
31 July 2024
£m
Cash at bank
9
4
Short-term deposits
76
302
Cash and cash equivalents
85
306
Term loans falling due within one year
–
–
Term loans falling due after one year
(563)
(549)
Borrowings
(563)
(549)
Net debt
(478)
(243)
Term loans
The currency and coupons for the term loans are disclosed in note 18 of the Group accounts.
31 July 2025
£m
31 July 2024
£m
Less than one year
–
–
Between one and two years
563
–
Between two and five years
–
549
Greater than five years
–
–
Smiths Group plc term loans
563
549
See the liquidity risk disclosures in note 19 in the Group accounts for information on the cash
and borrowing facilities available to the Group. Smiths has revolving credit facilities of US$800m
maturing on 5 May 2030 and £200m maturing on 17 June 2027.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
192
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
8. Provisions for liabilities and charges
At
31 July 2024
£m
Charged
against profit
£m
Utilisation
£m
At
31 July 2025
£m
Disposals
–
1
–
1
The disposal provision related to warranties and other obligations in respect of a past disposal.
9. Derivatives
The tables below set out the nominal amount and fair value of derivative contracts held by
the Company:
At 31 July 2025
Contract or underlying
nominal amount
£m
Fair value
Assets
£m
Liabilities
£m
Net
£m
Foreign exchange contracts (not hedge
accounted)
824
8
(8)
–
Cross-currency swaps (fair value and net
investment hedges)
240
10
–
10
Total financial derivatives
1,064
18
(8)
10
Balance sheet entries
Comprising:
Non-current
10
–
10
Current
8
(8)
–
Total financial derivatives
18
(8)
10
At 31 July 2024
Contract or underlying
nominal amount
£m
Fair value
Assets
£m
Liabilities
£m
Net
£m
Foreign exchange contracts (not hedge
accounted)
843
7
(7)
–
Cross-currency swaps (fair value and net
investment hedges)
248
–
(13)
(13)
Total financial derivatives
1,091
7
(20)
(13)
Balance sheet entries
Comprising:
Non-current
–
(13)
(13)
Current
7
(7)
–
Total financial derivatives
7
(20)
(13)
Derivatives, including forward exchange contracts, currency swaps, interest rate instruments and
embedded derivatives are Level 2 fair value instruments and are valued at the net present value of
the future cash-flows calculated using market data at the balance sheet date (principally exchange
rates and yield curves).
The credit to the income statement arising from change in fair value in the year was £23m
(FY2024: £9m credit).
10. Post-retirement benefits
The Company is the principal employer for the two major defined benefit plans in the UK. The
Company is accounting for all the UK defined benefit schemes (funded and unfunded) and virtually
all of the post-retirement healthcare schemes.
The retirement benefit assets and liabilities comprise:
31 July 2025
£m
31 July 2024
£m
Market value of scheme assets
2,136
2,372
Present value of funded scheme liabilities
(1,997)
(2,229)
Surplus restriction
(11)
(11)
Surplus
128
132
Unfunded pension plans
(33)
(37)
Post-retirement healthcare
(2)
(2)
Present value of unfunded obligations
(35)
(39)
Net pension asset
93
93
Comprising:
Retirement benefit assets
128
132
Retirement benefit liabilities
(35)
(39)
Net pension asset
93
93
See the disclosures for UK schemes in note 8 to the consolidated accounts for the circumstances of
the major schemes, risk management, principal assumptions, assets and liabilities and the funding
position of the two major schemes.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
193
SMITHS GROUP PLC COMPANY ACCOUNTS
CONTINUED
11. Share capital and reserves
Share capital
Number of shares
Issued
capital
£m
Consideration
£m
Ordinary shares of 37.5p each
Total share capital at 31 July 2023
349,302,990
131
Shares purchased under a buyback programme
(4,205,196)
(1)
(70)
Total share capital at 31 July 2024
345,097,794
130
Shares purchased under a buyback programme
(15,413,491)
(6)
(303)
Total share capital at 31 July 2025
329,684,303
124
At 31 July 2025, all of the issued share capital was in free issue. All issued shares are fully paid.
See note 9 to the consolidated accounts for information about share schemes, including total shares
under options and options exercisable at the balance sheet date.
Smiths Employee Benefit Trust
The retained earnings include the purchase of Smiths Group plc shares by Smiths Employee
Benefit Trust (EBT). The EBT holds shares pending employees becoming entitled to them under
the Company’s share schemes and plans. The consideration paid was £23m (2024: £20m) and
£1m (2024: £4m) was received as a result of employees exercising share options under the SAYE
scheme. At 31 July 2025 the Trust held 1,662,267 (2024: 1,388,730) ordinary shares.
Distributable profits
Smiths Group plc, the Parent Company of the Group, holds investments in subsidiaries and operates
as a financing entity for the Group. Its profits are derived from dividend receipts, royalties, corporate
recharges, and loan interests from its subsidiary companies. Prior to the declaration of interim and
final dividends to shareholders, the Board conducts a review of the level of distributable profits of
the Parent Company. This ensures the profits provide sufficient coverage for dividend payments;
see note 26 in the Group accounts for a discussion of capital management and the factors which the
Board considers when proposing dividends.
In accordance with the UK Companies Act 2006 Section 831(1), a public company may only make
a distribution if, after fulfilling this distribution, the amount of its net assets is not less than the
aggregate of its called-up share capital and non-distributable reserves as it appears in the relevant
accounts. The Company establishes what is realised and unrealised in accordance with the
guidance provided by ICAEW TECH 02/17BL and the requirements of UK law.
Profits available for distribution at 31 July 2025 and 31 July 2024 were comprised as follows:
2025
£m
2024
£m
Net assets
3,242
2,172
Less:
Issued share capital
(124)
(130)
Share premium
(365)
(365)
Capital redemption reserve
(31)
(25)
Other non-distributable reserves
(1,074)
(1,069)
Distributable profits
1,648
583
Other reserves
Other reserves arose from the cancellation of the share premium arising from an equity-funded
acquisition in the year ended 30 July 1988.
Differential between consolidated and Parent Company net assets
The Group’s consolidated balance sheet shows net assets that are £1,182m lower (FY2024: £80m
greater) than the net assets shown on the Parent Company’s balance sheet. The deficit has been
caused by the payment of a dividend to the Parent Company in preparation for the separation of
Smiths Detection and Smiths Interconnect from the Group.
12. Contingent liabilities
The Company has arranged letter of credit facilities to support the Group’s pension plans.
The current amount outstanding under letters of credit is £44m (FY2024: £44m).
The Company has guaranteed US$800m and £200m revolving credit facilities available to
a subsidiary.
13. Post balance sheet event
Details of the proposed final dividend announced since the end of the reporting period are given
in note 25 to the Group consolidated financial statements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
194
Subsidiary undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of Smiths Group plc’s related undertakings, the address and effective percentage owned by Smiths Group, as at 31 July 2025, are
disclosed below. The percentage held is 100% unless another holding is stated. Related undertakings include subsidiaries, associated undertakings, joint ventures and associates.
Wholly owned subsidiaries (direct ownership)
Name
Security
Address
CVE TRUSTEE LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
EIS GROUP LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
FLIGHTSPARES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
GRASEBY LIMITED*
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
ROOF UNITS (GROUP) LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
S.I. PENSION TRUSTEES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SI PROPERTIES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS AEROSPACE COMPONENTS TYSELEY LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS DETECTION LIMITED
Ordinary
c/o Smiths Detection-Watford Limited, Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE, England
SMITHS GROUP INTERNATIONAL HOLDINGS LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS HEIMANN LIMITED
Ordinary
c/o Smiths Detection-Watford Limited, Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE, England
SMITHS INDUSTRIES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS NOMINEES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS PENSIONS LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
TI CORPORATE SERVICES LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
TI GROUP LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
TI PENSION TRUSTEE LIMITED
Units
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
TIGRUP NO. 7 LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
XDG LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
* Voluntary strike off proceedings for this entity commenced on 19 August 2025. Refer to note 3 in the parent company financial statements.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
195
SUBSIDIARY UNDERTAKINGS
CONTINUED
Name
Security
Address
AIR LOG LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
AMNITEC B.V.
Ordinary
Abraham van Stolkweg 118, Rotterdam, 3041 JA, Netherlands
AMNITEC LIMITED
Ordinary
Abercanaid, Merthyr Tydfil, Mid Glamorgan, CF48 1UX
ANTARES ADVANCED TEST TECHNOLOGIES (SUZHOU) CO. LTD
Ordinary
No. 14 Unit, No. 78, XingLin Road, Suzhou Industrial Park, Suzhou, 215026, China
CHANGSHU FLEX-TEK THERMAL FLUID SYSTEMS MANUFACTURER CO. LTD
Ordinary
No. 7, Factory Building, Maqiao Industrial Square, Changshu Economic Development Zone, Changshu, Jiangsu,
215536, China
DETECTION TECHNOLOGIES EGYPT
Ordinary
Nile City Towers, North Tower, 22nd Floor, Ramlet Boulaq, Nile Cournich, Cairo, Egypt
FLEXIBLE DUCTING MALAYSIA SDN BHD
Redeemable
Suite 13.03, 13th Floor, Menara Tan & Tan, 207 Jalan Tun Razak, 50400, Kuala Lumpar, Malaysia
FLEXIBLE DUCTING, LIMITED
Ordinary
29 DUNSINANE AVENUE, DUNDEE, DD2 3QF, Scotland
FLEXIBLE TECHNOLOGIES (CANADA) LTD
Ordinary
4610, Eastgate Parkway, Unit 3, Mississauga, ON, L4W 3W6, Canada
FLEXIBLE TECHNOLOGIES, LLC
Ordinary
Corporation Trust Centre, 1209 Orange Street, Wilmington, DE, 19801, United States
FLEXIBOX INTERNATIONAL LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
FLEXIBOX PTY LIMITED
Ordinary
549-551, Somerville Rd, Sunshine, Victoria, 3020, Australia
FLEXSCHLAUCH PRODUKTIONS GMBH
Ordinary
Reepschlager Str., 10b, Lubeck, 23556, Germany
FLEX-TEK GROUP (US) LLC
Units
500, Gould Drive, Cookeville, TN 38506, United States
FLEX-TEK GROUP LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
FRANCIS SHAW AND COMPANY (MANCHESTER) LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
FRANCIS SHAW P L C
Ordinary,
Preference,
Deferred
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
FULTON BELLOWS LLC
Ordinary
2801 Red Dog Lane, Knoxville, TN, TN 37914, United States
GASTITE SYSTEMS LIMITED
Ordinary
Amnitec, Abercanaid, Merthyr Tydfil, CF48 1UX, England & Wales
HABIA TEKNOFLUOR AB
Ordinary
Habia Teknofluor AB, Knivsta, 74180, Sweden
HERKULES HOLDING GMBH
Ordinary
Neckarweg 3, Vellmar, 34246, Germany
HYPERTAC GMBH
Ordinary
Gewerbedorf Petraching 10, Grafling, Deggendorf, 94539, Germany
HYPERTAC LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
HYPERTAC S.A.
Ordinary
31 RUE ISIDORE MAILLE, SAINT-AUBIN-LES-ELBEUF, 76410, France
HYPERTAC SPA
Ordinary
VIA DA BISSONE 7A, GENOVA, 16153, Italy
INDUFIL BV
Ordinary
Rijnpoort, Groningensingel 1,6835 EA Arnhem, Netherlands, 6835
INDUSTRIAS JOHN CRANE MEXICO SA DE CV
Ordinary
679, PONIENTE 152, VALLEJO DELEGACION AZCAPOTZALCO, MEXICO CITY, MEXICO, 2300
JOHN CRANE (ANGOLA) PRESTACAO DE SERVICES LTD
Ordinary
Rue Kwamme Nkrumah, Torres Impor-Africa, 3 Andar, APT A, Luanda, Angola
JOHN CRANE (IRELAND) LIMITED
Ordinary
T53/54, Shannon Industrial Estate, Shannon, Co. Clare, Ireland
JOHN CRANE (SWITZERLAND) AG
Ordinary
Hohenrainstrasse 10, 4133 Pratteln, Switzerland
JOHN CRANE (THAILAND) LIMITED
Ordinary
9/311, 31st FLOOR, UM TOWER, RAMKHAMHAENG ROAD, SUANLUANG DISTRICT, BANGKOK, THAILAND
JOHN CRANE A.S.
Ordinary
JANA SIGMUNDA 78, LUTIN, 783 49, Czech Republic
JOHN CRANE ARGENTINA SA
Ordinary
AV. LEANDRO N. ALEM 1110, 13 FLOOR, Baker Mackenzie Office, BUENOS AIRES, Argentina
JOHN CRANE ASSET MANAGEMENT SOLUTIONS LIMITED
Ordinary
Grampian House, Mugiemoss Road, Bucksburn, Aberdeen, AB21 9NP, Scotland
JOHN CRANE AUSTRALIA PTY LIMITED
Ordinary
549-551, Somerville Rd, Sunshine, Victoria, 3020, Australia
Wholly owned subsidiaries (indirect ownership)
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
196
SUBSIDIARY UNDERTAKINGS
CONTINUED
Name
Security
Address
JOHN CRANE BAKU LLC
Ordinary
32, Dostluq Street, Salyan Highway PO Box AZ1023, Baku, Azerbaijan
JOHN CRANE BELGIUM NV
Ordinary
Glasstraat 37, Antwerpen, 2170, Belgium
JOHN CRANE CANADA INC
Ordinary
423, GREEN NORTH ROAD, STONEY CREEK, ONTARIO, L8E 3A1, Canada
JOHN CRANE CARIBE LTD
Ordinary
654 Plaza, Suite #933, 654 Munoz Rivera Ave, San Juan, Puerto Rico, 00918
JOHN CRANE CHILE SA
Ordinary
Av. Presidente Eduardo Frei Montalva, Centro Empresarial El Cortijo, Conchali, Santiago, 6001-44, Chile
JOHN CRANE CHINA CO LIMITED
Ordinary
Room 1668, No. 14F Floor 3 Datong Building, Huanghe Avenue, Nankai District, Tianjin, China
JOHN CRANE COLOMBIA SA
Ordinary
CALLE 46A NO 82-54 INT 14, PARQUE EMPRESARIAL SAN CAYETANO, BOGOTA, Colombia
JOHN CRANE DOMINICANA SA
Ordinary
CALLE EL RECODO, #2 BELLA VISTA, SANTA DOMINGO, Dominican Republic
JOHN CRANE EGYPT LLC
Ordinary
139, Mogamaa El Masanea Street, El Amireya, CAIRO, EGYPT
JOHN CRANE EGYPT SEALING SYSTEMS LLC
Ordinary
139, Mogamaa El Masanea Street, El Amireya, CAIRO, EGYPT
JOHN CRANE ENDUSTRIYEL SIZDIRMAZLIK SISTEMLERI LTD
Ordinary
Sok. No:41-43, Ferhat Paşa Mah. 25., Ataşehir/İST, 34888
JOHN CRANE FILTRATION TECHNOLOGIES GMBH
Ordinary
Am Zirkus 2, Berlin, 10117, Germany
JOHN CRANE FRANCE SAS
Ordinary
114, RUE JULES FERRY, B.P.35, DEVILLE-LES-ROUEN, 76250, France
JOHN CRANE GMBH
Ordinary
WERNER – VON – SIEMENS – STR.6, FULDA, 36041, Germany
JOHN CRANE GROUP LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
JOHN CRANE HELLAS – ENGINEERED SEALING SYSTEMS MONOPROSOPI EPE
Ordinary
3 STRATIGOU TOBRE STREET, Municipality of Agia Paraskevi, ATHENS, 153 42, Greece
JOHN CRANE HOLLAND BV
Ordinary
BERGEN 9 – 17, BARENDRECHT, ZUID, 2993LR, Netherlands
JOHN CRANE HUNGARY KFT
Ordinary
2040, 2040 BUDAORS, GYAR U. 2, Hungary
JOHN CRANE IBERICA SA
Ordinary
CEMENTO 1, TORREJON DE ARDOZ, MADRID, Spain
JOHN CRANE INC
Ordinary,
Preference
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States
JOHN CRANE INVESTMENTS LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
JOHN CRANE ITALIA SPA
Ordinary
VIA GIOTTO 3, MUGGIO, 20835, Italy
JOHN CRANE KAZAKHSTAN
Units
Atyrau Region, Gatyrau, Station K Arabathan, House Production Site 14, 060000, Kazakhstan
JOHN CRANE KOREA CO LTD
Ordinary
Migeundong, WestgateTower 15F, 70 Chungjeong-ro, SEODAEMUN-GU, SEOUL, Korea (the Republic of)
JOHN CRANE MALAYSIA SDN. BHD.
Ordinary
Level 11, Menara LGB, 1, Jalan Wan Kadir Taman Tun Dr Ismail, 60000 Kuala Lumpur, WPKL, Malaysia
JOHN CRANE MIDDLE EAST FZE
Ordinary
S20113, JEBEL ALI FREE ZONE, DUBAI, 61040
JOHN CRANE PERU SAC
Ordinary
Av. Guillermo Dansey 2124, Urbanizacion Industrial Conde, Lima, Peru
JOHN CRANE POLAND SP Z O.O.
Ordinary
1327, ul. Bielska, Poland, 43-374 Buczkowi
JOHN CRANE SAFEMATIC OY
Ordinary
PO BOX 10, PUNASILLANTIE 15, MUURAME, 40950, Finland
JOHN CRANE SAUDI ARABIA LTD
Ordinary
129 DAMMAM INDUSTRIAL CITY, DAMMAM, SAUDI ARABIA, 3243
JOHN CRANE SEALING SYSTEMS INDIA PRIVATE LIMITED
Ordinary
No. 11, 1ST PHASE, PEENYA, INDUSTRIAL AREA, BANGALORE, 560058, India
JOHN CRANE SINGAPORE PTE LIMITED
Ordinary
15 Tuas View Place, 637432, Singapore
JOHN CRANE SLOVAKIA SRO
Ordinary
Dvorákovo nábrežie 10, Bratislava – mestská cast Staré Mesto, 811 02, Slovakia
JOHN CRANE SOCIEDAD DE RESPONSIBILIDAD LIMITADA DE CAPITAL VARIABLE
Ordinary
CARRETERA CIUDAD VICTORIA MATAMOROS, KM.173+600, SOLONIA SAN FERNANDO CENTRO, TAMAULIPAS, SAN
FERNANDO, CP 87600, Mexico
JOHN CRANE SVERIGE AB
Ordinary
FALTSPATSGATAN 4, SE-421 30 VASTRA FROLUNDA, Sweden
JOHN CRANE TAIWAN CO LTD.
Ordinary
324-4, FONG-JEN ROAD, Renwu District, KAOHSIUNG CITY 814, Taiwan (Province of China)
Wholly owned subsidiaries (indirect ownership)
continued
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
197
SUBSIDIARY UNDERTAKINGS
CONTINUED
Name
Security
Address
JOHN CRANE TECHNOLOGY (TIANJIN) CO LIMITED
Ordinary
No.9, No. 1, Haitai Huake Road, Huayuan Industrial District (Outside the ring(, Binhai Hi-Tech, Industrial Park,
Tianjin, China
JOHN CRANE UK LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
JOHN CRANE VENEZUELA CA
Ordinary
Carretera Vía a Perijá, Km 8 ½, Avenida 50, Local N° 185-72, Zona Industrial El Silencio, MARACAIBO, 4001, Venezuela
KREISLER INDUSTRIAL CORP
Ordinary
180 Van Riper Avenue, Elmwood Park, NJ, NJ 07407, United States
KREISLER MANUFACTURING CORP
Ordinary
180 Van Riper Avenue, Elmwood Park, NJ, NJ 07407, United States
LAKES REGION TUBULAR PRODUCTS INC.
Ordinary
51 Growth Road, Laconia, NH, 03246, United States
LLC JOHN CRANE RUS
Ordinary
B.SAVVINSKY PER, D.11, MOSCOW, 119435, Russian Federation
MODULAR METAL FABRICATORS, INC.
Ordinary
24600, Nandina Ave, Moreno Valley, CA, 92551, United States
PLAS2 LLC
Units
2601, Texas Drive, Irving, TX, 75062
PLASTRONICS H-PIN, LTD
Units
2601, Texas Drive, Irving, TX, 75062
PLASTRONICS SOCKET PARTNERS, LTD
Ordinary
2601, Texas Drive, Irving, TX, 75062
PLENTY INDIA LIMITED
Ordinary
D-196 Okhla Industrial Area, Phase-1, New Dehli, 110020, India
PROJECT SUGAR LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
ROYAL METAL PRODUCTS, LLC
Ordinary
100 ROYAL WAY, TEMPLE, GEORGIA, 30179, United States
SDI REWORK AND SUSTAINING, LLC
Ordinary
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States
SEEBACH FILTER SOLUTIONS INDIA PVT. LTD.
Ordinary
Shirwal, Maharashtra 412801, India
SEEBACH GMBH
Ordinary
Neckarweg 3, Vellmar, 34246, Germany
SMITHS (SHANGHAI) MANAGEMENT CO., LTD.
Ordinary
3rd and 4th Floor, No. 1, Lane 65, Huanlong Road, Pudong New District, Shanghai, China
SMITHS AEROSPACE GLOUCESTER LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS BRASIL LTDA
Ordinary
INDUSTRIAL DISTRICT OF THE CITY OF RIO CLARO, STATE OF SAO PAULO, AV. BRASIL NUMBER 4.700,
CEP 13505-600, Brazil
SMITHS BUSINESS INFORMATION SERVICES LIMITED
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
SMITHS BUSINESS INFORMATION SERVICES, INC.
Ordinary
CT Corporation System, 357 East Center Street, Ste. 2J, Manchester, CT 06040-4471, USA
SMITHS CONNECTORS ASIA PTE. LTD.
Ordinary
450, ALEXANDRA ROAD #05-02, SINGAPORE, 119960
SMITHS CONNECTORS ASIA PTE. LTD. KOREA BRANCH
Units
707-ho, 42, Cheongnyong 1-gil, Gwanak-gu, Seoul
SMITHS CONNECTORS TUNISIA SARL
Ordinary
ZONE INDUSTRIELLE ROUTE DE KHNISS, MONASTIR, 5000, Tunisia
SMITHS DETECTION (ASIA PACIFIC) PTE. LTD
Ordinary
450, Alexandra Road, #05-02 UE Bizhub, West Singapore, Singapore
SMITHS DETECTION (AUSTRALIA) PTY LIMITED
Ordinary
BOTANY GROVE ESTATE' UNIT 5 , 14A BAKER STREET , BOTANY NSW 2019, AUSTRALIA
SMITHS DETECTION (THAILAND) LIMITED
Ordinary,
Preference
99/3 Moo 5, Kingkaew Road, Tambol Rajatheva, Amphoe Bangplee, Samutprakarn Province, 10540, Thailand
SMITHS DETECTION BENELUX B.V.
Ordinary
BERGEN 9 – 17, BARENDRECHT, ZUID, 2993LR, Netherlands
SMITHS DETECTION FRANCE SAS
Ordinary
36 Rue Charles Heller, Vitry sur Seine, F-94400, France
SMITHS DETECTION GERMANY GMBH
Ordinary
Im Herzen 4, Wiesbaden, 65205, Germany
SMITHS DETECTION GMBH
Ordinary
Im Herzen 4, Wiesbaden, 65205, Germany
SMITHS DETECTION GROUP LIMITED
Ordinary
Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE, England
SMITHS DETECTION HONG KONG LIMITED
Ordinary
4008-4009, 40/F, One Pacific Place, 88 Queensway, Hong Kong
Wholly owned subsidiaries (indirect ownership)
continued
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
198
SUBSIDIARY UNDERTAKINGS
CONTINUED
Name
Security
Address
SMITHS DETECTION INC.
Ordinary
THE CORPORATION TRUST COMPANY OF NEVADA, 701 S Carson Street, SUITE 200, Carson City, NV,
89701, United States
SMITHS DETECTION INTERNATIONAL, LLC
Equity
Interest
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE,
DE 19801, United States
SMITHS DETECTION INVESTMENTS LIMITED
Ordinary
c/o Smiths Detection-Watford Limited, Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire,
HP2 7DE, England
SMITHS DETECTION IRELAND LIMITED
Ordinary
Deloitte Offices, 6 Lapps Quay, Cork, Ireland
SMITHS DETECTION ITALIA SRL
Ordinary
VIA GIOTTO 3, MUGGIO, 20835, Italy
SMITHS DETECTION KUWAIT SECURITY DEVICES AND SYSTEMS, THEIR
INSTALLATION AND MAINTENENCE (LLC)
Ordinary
Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE, England*
SMITHS DETECTION MALAYSIA SDN BHD
Redeemable
Level 11, Menara LGB, 1, Jalan Wan Kadir Taman Tun Dr Ismail, 60000 Kuala Lumpur, WPKL, Malaysia
SMITHS DETECTION MEXICO S. DE RL DE C.V.
Ordinary
Paseo de la Reforma 505, Col, Cuauhtemoc, 6500, Cudad de Mexico, Mexico
SMITHS DETECTION MIDDLE EAST FZE
Ordinary
Dubai Airport Free Zone, PO Box 48225, Building No. 8WA (West Side), 401, Dubai, United Arab Emirates
SMITHS DETECTION MONTREAL INC.
Ordinary
3700, Stock Exchange Tower, P.O Box 242, 800 Place Victoria, Montreal, PQ, H4Z 1E9, Canada
SMITHS DETECTION NEW ZEALAND LIMITED
Ordinary
Deloitte Centre, Level 20, 1 Queen Street,Auckland, 1010, New Zealand
SMITHS DETECTION RUS LLC
Ordinary
5-104, Room 501, floor 5, bld.1, Octyabrskaya Emb., St. Petersburg, 193079, Russian Federation
SMITHS DETECTION SAUDI ARABIA LTD
Ordinary
Level 1, Building 7, Zone A, Airport road, Business Gate, P.O Box Riyadh 11683, Kingdom of Saudi Arabia 93597
SMITHS DETECTION SYSTEMS PRIVATE LIMITED
Ordinary
601, Hemkunt Tower, 98 Nehru place, New Delhi, India, 110019
SMITHS DETECTION US HOLDINGS, LLC
Units
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States
SMITHS DETECTION US, LLC
Ordinary
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States
SMITHS DETECTION-WATFORD LIMITED
Ordinary
Century House, Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE, England
SMITHS FINANCE LIMITED
Ordinary,
Redeemable
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS GROUP HOLDINGS NETHERLANDS BV
Ordinary
BUCKINGHAM HOUSE, 361-366 BUCKINGHAM AVENUE, SLOUGH, BERKSHIRE, SL1 4LU, England
SMITHS GROUP INNOVATION LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS GROUP INSURANCE LIMITED
Ordinary
LEVEL 5, MILL COURT, LA CHARROTERIE, ST PETER PORT, GY1 1EJ, Guernsey
SMITHS GROUP ITALIA SRL
Ordinary
VIA GIOTTO 3, MUGGIO, 20835, Italy
SMITHS GROUP SERVICE CORPORATION
Ordinary
Corporation Trust Center, 1209 Orange Street, Wilmington, DE, 19801, United States
SMITHS INDIA SERVICES PRIVATE LIMITED
Ordinary
TowerB Cummins India Office, Campus Flr4 SN21 Balewadi, Baner Gaon, Pune, 411045, India
SMITHS INDUSTRIES INDUSTRIAL GROUP LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS INTERCONNECT AMERICAS, INC.
Ordinary
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE, DE 19801,
United States
SMITHS INTERCONNECT CANADA INC.
Ordinary
16771, Sainte Marie Rd, Kirkland, Quebec, H9H 5H3
SMITHS INTERCONNECT GROUP (HK) CO LTD
Ordinary
4008-4009, 40/F, One Pacific Place, 88 Queensway, Hong Kong
SMITHS INTERCONNECT GROUP LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMITHS INTERCONNECT HONG KONG CO LIMITED
Ordinary
4008-4009, 40/F, One Pacific Place, 88 Queensway, Hong Kong
SMITHS INTERCONNECT INDIA PRIVATE LIMITED
Ordinary
Vaswani Centropolis, Ground Floor, Vaswani Centropolis, Langford Rd,Akkithmana Halli,Bheemanna Garden, Shanti
nagar, Near Jayanagar, Bangalore South, India, Shanthinagar, Bangalore South, 560027, India
* address of Parent Company
Wholly owned subsidiaries (indirect ownership)
continued
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
199
SUBSIDIARY UNDERTAKINGS
CONTINUED
New Subsidiaries
SMITHS DETECTION RWANDA LTD*
Ordinary
Remera, Gasabo, Umijyi wa Kigali, Rwanda, PO Box 5208
Non wholly-owned subsidiaries, including joint ventures, associates and investments
Name
% of Group ownership
Security
Address
HUAFENG SMITHS INTERCONNECT (SICHUAN) CO., LTD.
60
Ordinary
No. 120, Sanjiang Avenue, Economic Development Zone, Mianyang, Sichuan Province, China
JOHN CRANE JAPAN INC
70
Ordinary
2222, KAMITOYAMA RITTO CITY, RITTO-SHI, SHIGA-KEN, JAPAN
JOHN CRANE PTY LTD
75
Ordinary
2, JANSEN ROAD, NUFFIELD INDUSTRIAL SITES, SPRINGS GAUTENG, SOUTH AFRICA, 1559
LLC JOHN CRANE ISKRA
50
Ordinary
28, Academica Vedeneeva Street, Perm, Permskiy Region, 614038, Russian Federation
PT JOHN CRANE INDONESIA
99
Ordinary
CILANDAK COMMERCIAL ESTATE BLDG 401A, JI. KKO CILANDAK, JAKARTA, 12560, Indonesia
SMITHS DETECTION SECURITY SYSTEMS LLC
49
Ordinary
Building No B10, Industrial Mussaffah M44, Sector 15, Offices No (O1, O3), Abu Dhabi, United Arab Emirates
XDG SERVICES LIMITED
99
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
Overseas Branches
The Company does not operate through any branches. Some Group subsidiary companies have established branch operations outside the UK.
* This entity was incorporated on 16 September 2025.
Name
Security
Address
SMITHS INTERCONNECT MEXICO, S.DE R.L. DE C.V.
Ordinary
Carretera Libre Antiguo Camino Tijuana 20221-B, Fideicomiso el Florido, Tijuana, Baja California, 22234, Mexico
SMITHS INTERCONNECT SOCIEDAD ANONIMA
Ordinary
Zona Franca Coyol, Edificio B25.1 La Garita Alajuela 20113, Costa Rica
SMITHS INTERCONNECT, INC.
Ordinary
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, DE, DE 19801,
United States
SMITHS TUBULAR SYSTEMS-LACONIA, INC
Ordinary
CT Corporation System, 9 Capitol Street, Concord, NH 03301, United States
SMITHS WOLVERHAMPTON LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
SMO DETECTION EQUIPMENT (SHANGHAI) CO., LTD
Ordinary
Room 923B, No 55, Xili Road, Shanghai, (China) Pilot Free Trade Zone, China
STS TITEFLEX INDIA PVT LTD
Ordinary
No 38, KIADB Industrial Area, Bangalor, 561203, India
THE DUC-PAC CORPORATION
1125 Page Boulevard, Springfield, MA, 01028, United States
T I S A (FRANCE)
Ordinary
114, RUE JULES FERRY, B.P.35, DEVILLE-LES-ROUEN, 76250, France
TI GROUP AUTOMOTIVE SYSTEMS (ARGENTINA) SA
Ordinary
AV. LEANDRO N. ALEM 1110, 13 FLOOR, Baker Mackenzie Office, BUENOS AIRES, Argentina
TIGRUP NO. 14 LIMITED
Ordinary
Level 10, 255 Blackfriars Road, London, SE1 9AX, England
TITEFLEX COMMERCIAL, INC.
Ordinary
CT Corporation System, 155 Federal Street, Suite 700, Boston, MA 02110, United States
TITEFLEX CORPORATION
Ordinary
One Corporate Center, Hartford, CT 06103-3220, United States
TITEFLEX EUROPE SAS
Ordinary
22, Avenue Maurice Chevalier, 77833 Ozoir-la-Ferriere, Paris, France
TRAK MICROWAVE LIMITED
Ordinary
29 DUNSINANE AVENUE, DUNDEE, DD2 3QF, Scotland
TUTCO DE MEXICO SRL DE CV
Ordinary
Av. Primero de Mayo Lote 3 Edificio 1B, Prologis Park, Reynosa, 88780, Mexico
TUTCO, LLC
Ordinary
116, Pine Street, 3rd Floor, Suite 320, Harrisburg, PA 17101, United States
US HOSE CORP
Ordinary
815 Forestwood Drive, Romeoville, IL, IL 60446, United States
WATTCO INC.
Ordinary
121 Boulevard, Hymus, Pointe-Clare, QC, Canada
Wholly owned subsidiaries (indirect ownership)
continued
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
200
SUSTAINABILITY DATA
DISCLOSURES UNAUDITED
Data is for the global operations of Smiths Group for the 12 months ending 31 July 2025 and the two preceding years.
KPMG has provided limited assurance under ISAE (UK) 3000 and 3410 over selected information in respect of FY2025 marked within the column named ‘FY2025 assured in
FY2025’ with Δ. See www.smiths.com for full assurance reports.
ENVIRONMENT – GROUP DATA
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
GREENHOUSE GAS
GREENHOUSE GAS EMISSIONS
Scope 1
Scope 1 – Road fleet
tCO
2
e
4,851
5,694
5,376
5,390
Scope 1
Scope 1 – Site energy
tCO
2
e
12,571
13,064
14,311
14,304
Scope 1
Scope 1 – Site non-energy
tCO
2
e
243
241
241
241
Scope 1
Scope 1 – Total
tCO
2
e
17,422
18,758
19,687
19,694
Δ
Scope 2
Scope 2 – Purchased electricity and gas
tCO
2
e
20,286
23,820
21,072
25,955
Scope 2
Scope 2 – Total (market-based)
tCO
2
e
20,286
23,820
21,072
25,955
Δ
Scope 2
Scope 2 – Total (location-based)
tCO
2
e
46,732
47,150
48,989
47,111
Scope 3
Scope 3 Category 1 – Purchased goods and
services
tCO
2
e
658,938
671,196
728,000
782,000
Scope 3
Scope 3 Category 2 – Capital goods
tCO
2
e
11,159
9,579
9,410
6,990
Scope 3
Scope 3 Category 3 – Fuel and energy-related
activities
tCO
2
e
12,751
13,308
14,600
20,300
Scope 3
Scope 3 Category 4 – Upstream transportation
and distribution
tCO
2
e
82,920
91,134
75,200
114,000
Scope 3
Scope 3 Category 5 – Waste generated in
operations
tCO
2
e
2,984
2,676
5,066
4,700
Scope 3
Scope 3 Category 6 – Business travel
tCO
2
e
10,458
11,559
12,200
12,500
Scope 3
Scope 3 Category 7 – Employee commuting
tCO
2
e
29,017
29,837
23,000
27,500
Scope 3
Scope 3 Category 8 – Upstream leased assets.
Excluded from inventory as immaterial
tCO
2
e
–
–
–
–
Scope 3
Scope 3 Category 9 – Downstream
transportation and distribution
tCO
2
e
29,179
33,660
29,300
50,100
Scope 3
Scope 3 Category 10 – Processing of sold
products. Excluded from inventory as immaterial
tCO
2
e
–
–
–
–
Scope 3
Scope 3 Category 11 – Use of sold products
tCO
2
e
345,426
237,185
240,000
326,000
Scope 3
Scope 3 Category 12 – End of life treatment of
sold products
tCO
2
e
4,767
6,869
8,120
8,820
Scope 3
Scope 3 Category 13 – Downstream leased
assets. Excluded from inventory as immaterial
tCO
2
e
–
–
–
–
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
201
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
Scope 3
Scope 3 Category 14 – Franchises.
Excluded from inventory as immaterial
tCO
2
e
–
–
–
–
Scope 3
Scope 3 Category 15 – Investments
tCO
2
e
458
44,464
23,150
31,500
Total
Total Scope 1&2 (market-based)
tCO
2
e
37,708
42,578
40,759
45,649
17.5% reduction
by FY2027
Net Zero by 2030
Δ
Total
Total Scope 1&2 (location-based)
tCO
2
e
64,154
65,908
68,676
66,805
Total
Total Scope 3
tCO
2
e
1,188,057
1,151,467
1,170,000
1,380,000
Net Zero by 2050
Δ
Total
Total Scope 1, 2, 3 GHG (market-based)
tCO
2
e
1,225,765
1,194,045
1,210,759
1,425,649
Total
Total Scope 1, 2, 3 GHG (location-based)
tCO
2
e
1,252,211
1,217,375
1,238,676
1,446,805
GREENHOUSE GAS EMISSIONS (INTENSITY)
GHG emissions intensity
Scope 1 – Intensity
tCO
2
e/£m revenue
5.22
5.99
6.29
6.48
GHG emissions intensity
Scope 2 – Intensity (market-based)
tCO
2
e/£m revenue
6.08
7.61
6.73
8.55
GHG emissions intensity
Scope 1&2 – Intensity (market-based)
tCO
2
e/£m revenue
11.30
13.59
13.02
15.03
GHG emissions intensity
Scope 3 – Intensity
tCO
2
e/£m revenue
356.13
367.65
374.00
454.00
GHG emissions intensity
Scope 1, 2 & 3 GHG emissions intensity, location-
based
tCO
2
e/£m revenue
375.36
386.40
395.49
476.39
GHG emissions intensity
Scope 1, 2 & 3 GHG emissions intensity, market-
based
tCO
2
e/£m revenue
367.44
378.95
386.58
469.43
UK GREENHOUSE GAS EMISSIONS
UK GHG emissions
Total Scope 1&2 GHG
tCO
2
e
1,228
1,341
1,290
1,779
NON-GREENHOUSE GAS EMISSIONS
Volatile Organic Compounds (VOCs)
Consumed volatile organic compounds (VOCs)
kg
40,125
44,641
44,641
51,146
ENERGY
RENEWABLE ENERGY
Total
Total energy consumption from renewable
resources
MWh
89,205
93,891
88,158
93,780
Total
Total renewable energy consumption used for
electricity
MWh
89,205
93,891
88,158
88,165
80% by FY2027
Total % of electricity from renewable sources
%
74%
73%
73%
70%
Total
Total % of energy derived from renewable
sources
%
42%
43%
41%
43%
Total
Total renewable energy produced on-site
MWh
2,599
1,745
1,745
1,120
Solar: No. of manufacturing sites of
over 10,000sq ft with solar/%
6
3
3
1
ENERGY (RENEWABLE AND NON-RENEWABLE)
Total
Total energy consumption
MWh
213,519
218,344
215,027
218,094
2% reduction
FY2026 vs FY2025
Δ
Total
Total non-renewable energy consumption
MWh
124,314
124,453
126,869
129,929
Total
Total energy consumption used for electricity
(renewable and non-renewable)
MWh
128,468
128,212
125,535
125,950
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
202
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
TOTAL ENERGY BY SOURCE (NON-RENEWABLE)
Energy consumption by type
Breakdown by type of fuel consumption for
energy purposes – Natural gas
MWh
49,683
51,215
51,764
58,342
Energy consumption by type
Breakdown by type of fuel consumption for
energy purposes – LPG or Propane
MWh
2,473
2,729
2,729
2,686
Energy consumption by type
Breakdown by type of fuel consumption for
energy purposes – Petrol
MWh
502
558
558
538
Energy consumption by type
Breakdown by type of fuel consumption for
energy purposes – Gasoline
MWh
31,256
34,700
33,519
30,578
Energy consumption by type
Breakdown by type of fuel consumption for
energy purposes – Other
MWh
1,136
929
929
–
Energy consumption by type
Total energy consumption from fossil fuels
(excl. electricity)
MWh
85,050
90,131
89,499
92,144
ENERGY EFFICIENCY
Total
Energy efficiency
MWh/£m revenue
64
70
69
72
Δ
Total energy efficiency/reduction
projects
Total projects completed in FY2025
Number
175
–
–
–
WATER
WATER STRESS – CONSUMPTION
Total water consumption
Total water consumption in water-stressed
areas
m
3
37,999
–
37,872
36,582
WATER STRESS – BY SOURCE
Total water withdrawal
Total water withdrawal in water-stressed areas
m
3
7,811
–
7,785
7,225
Water withdrawal by source
Ground water used
m
3
7,811
–
7,785
7,225
Water withdrawal by source
Reservoir water used
m
3
0
–
0
–
Water usage by source
Public system water used
m
3
15,820
–
15,767
16,693
Water usage by source
Water used – other supply
m
3
14,368
–
14,320
12,664
Water intensity ratio
Water intensity ratio – water stressed sites
m
3
/£m revenue
11.39
–
12.09
12.05
5% reduction
FY2025-FY2027
Water policy
Water policy
Narrative
Yes
–
Yes
Yes
Water-stress risk assessment
framework
Disclosure of a water-stress risk
assessment process
Narrative
Yes
–
–
–
Water scarcity rating for large sites
Number of sites with an ‘extremely high’ water
stress rating
No. of sites
10
–
10
10
Water stress exposure percentage
Water stress exposure percentage
%
17%
–
16%
14%
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
203
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
GLOBAL WATER DATA – BY SOURCE
Total water consumption by source for
all monitored sites
Total water consumption
m
3
220,133
–
239,603
263,024
Water usage by source for all
monitored sites
Public system water used
m
3
175,966
–
191,530
215,030
Water usage by source for all
monitored sites
Water used – other supply
m
3
34,947
–
38,038
37,343
Total water withdrawal from all
monitored sites
Total water withdrawals
m
3
9,220
–
10,035
10,651
Water withdrawal by source for all
monitored sites
Ground water used
m
3
9,086
–
9,889
10,651
Water withdrawal by source for all
monitored sites
Reservoir water used
m
3
134
–
146
–
Water usage by source for all
monitored sites
Water intensity ratio – global sites
m
3
65.99
–
76.50
86.61
Water usage for all other sites
Estimated water consumption for all other sites
m
3
18,674
–
20,326
22,313
WASTE & RECYCLING
RECYCLING
Recycling
Total recycled waste
Tonnes
9,766
–
9,606
9,015
Recycling
Non-hazardous waste recycled
Tonnes
9,183
–
8,577
8,296
HAZARDOUS WASTE
Hazardous waste
Total hazardous waste
Tonnes
1,037
–
1,333
1,165
NON-HAZARDOUS WASTE
Waste by type
Total non-hazardous
Tonnes
13,282
–
12,459
11,957
Waste by type
Non-hazardous waste recycled
Tonnes
9,183
–
8,577
8,296
Waste by type
Non-hazardous waste incinerated
Tonnes
116
–
129
129
TOTAL WASTE MANAGEMENT
Waste by type
Total waste
Tonnes
14,319
–
13,792
13,122
Waste by type
Total hazardous waste
Tonnes
1,037
–
1,333
1,165
Waste by type
Total non-hazardous waste
Tonnes
13,282
–
12,459
11,957
Waste by type
Total recycled waste
Tonnes
9,766
–
9,606
9,015
Waste by type
Total incinerated waste
Tonnes
233
–
156
205
Waste by type
Total non-recycled waste
Tonnes
3,981
–
4,158
4,029
Waste by type
Total non-recycled waste (%)
%
28%
–
30%
31%
Waste by type
Non-hazardous waste recycled
Tonnes
9,183
–
8,577
8,296
Waste by type
Non-hazardous waste incinerated
Tonnes
116
–
129
129
Normalised waste
Normalised waste
Tonnes/£m
revenue
1.25
–
1.32
1.30
5% reduction
FY2025-FY2027
Waste policy
Waste policy
Narrative
Yes
–
Yes
Yes
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
204
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
ENVIRONMENTAL POLICIES AND PROJECTS
ENVIRONMENTAL POLICIES
Environmental sustainability policy
Yes
–
Yes
Yes
ENVIRONMENTAL PROJECTS
Total water reduction projects
Water projects completed in year
Number
14
–
30
22
30 water saving
projects
FY2025-2027
Total waste/circularity projects
Waste/circularity projects completed in year
Number
9
new disclosure for FY2025
30 waste/
circularity projects
FY2025-2027
Total biodiversity projects
Biodiversity projects completed in year
Number
9
new disclosure for FY2025
30 biodiversity
projects
FY2025-2027
Total packaging projects
Packaging projects completed in year
Number
7
–
29
11
Total energy efficiency/reduction projects
Energy projects completed in year
Number
136
new disclosure for FY2025
Total investment into energy/
sustainability projects
Total investment (CapEx) into projects
£’million
3.26
new disclosure for FY2025
Total savings from energy projects (£)
Total savings from energy projects (£)
£’000
205
new disclosure for FY2025
Total savings from energy projects (MWh)
Total savings from energy projects (MWh)
MWh
13,471
new disclosure for FY2025
Total savings from energy projects
(tCO
2
e)
Total savings from energy projects (tCO
2
e)
tCO
2
e
new disclosure for FY2025
Total solar panels installed
Total solar panels installed cumulatively
Number
2,150
–
1,702
1,800
Total spend on solar projects
Total spend on solar projects in the year
£
140,000
–
528,000
400,000
ROAD FLEET
GLOBAL ROAD FLEET BY TYPE
Road fleet
Total vehicles
Number
1,245
–
1,167
1,025
Road fleet
Percentage of hybrid vehicles
%
5%
–
4%
4%
Road fleet
Number of battery electric vehicles (BEVs)
Number
193
–
112
17
Road fleet
Percentage of vehicles that are BEVs
%
16%
–
10%
0%
GLOBAL ROAD FLEET (ENERGY)
Road fleet
Vehicle GHG intensity
tCO
2
e
4,851
5,694
5,376
5,390
Road fleet
Fleet fuel consumed
litres
506,459
627,167
587,215
573,231
Road fleet
Fleet energy
MWh
19,758
22,620
21,261
21,033
BIODIVERSITY
Number of operational sites in
biodiversity sensitive areas
Number of operational sites in biodiversity
sensitive areas
Number
0
–
0
–
Area of operational sites in
biodiversity sensitive areas
Area of operational sites in biodiversity
sensitive areas
sq ft
0
–
0
–
Disclosure of biodiversity risk
assessment framework
Disclosure of a biodiversity risk assessment
Qualitative
Yes
–
–
–
Partnership with environmental
conservation charity
Disclosure of a corporate partnership with an
environmental conservation charity
Qualitative
Yes
–
–
–
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
205
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
1
FY2024 as
previously
published
FY2023 as
previously
published
Target
FY2025
assured in
FY2025
OTHER DATA
R&D
Group Total – Gross vitality (revenue
contribution of products launched in
the last five years)
Gross vitality (revenue contribution of products
launched in the last five years)
%
30.8%
–
28.5%
31%
Group Total – R&D spend
R&D spend
million £
143
–
109
113
Group Total – R&D spend as a
percentage of sales
R&D spend as a percentage of sales
%
4.3%
–
3.5%
3.7%
RESPONSIBLE SUPPLY CHAIN
Percentage of supplier spend with
verified SBTs
Group total
%
9%
–
10%
–
25% of supplier
spend SBTi aligned
by FY2027
Percentage of supplier spend
assessed by EcoVadis (achieving a
score over 45)
Group total
%
28%
–
12%
–
40% of supplier
spend evaluated
by FY2027
Ethical behaviour of suppliers policy
Ethical behaviour of suppliers policy
Narrative
Yes
–
Yes
Yes
Supplier Code
Supplier Code
Narrative
Yes
–
Yes
Yes
ESG due diligence supply chain policy
ESG due diligence supply chain policy
Narrative
Yes
–
Yes
–
Human rights supply chain due
diligence policy
Human rights supply chain due diligence policy
Narrative
Yes
–
Yes
Yes
Supplier assessments
Total supplier assessments via EcoVadis
Number
214
–
–
–
ISO 14001 CERTIFICATION
Total sites certified to ISO 14001
Group total
% of eligible sites
100%
–
–
–
Total sites certified to ISO 14001
Group total
Number of sites
100
–
68
68
Total sites certified to ISO 14001
John Crane
Number of sites
73
–
41
41
Total sites certified to ISO 14001
Detection
Number of sites
5
–
5
5
Total sites certified to ISO 14001
Interconnect
Number of sites
13
–
14
14
Total sites certified to ISO 14001
FlexTek
Number of sites
9
–
8
8
ISO 45001 CERTIFICATION
Total manufacturing sites certified
to ISO 45001
Group total
% of
manufacturing
sites
100%
–
–
–
Total manufacturing sites certified
to ISO 45001
Group total
Number of sites
95
–
71
71
Total manufacturing sites certified
to ISO 45001
John Crane
Number of sites
66
–
43
43
Total manufacturing sites certified
to ISO 45001
Detection
Number of sites
6
–
5
5
Total manufacturing sites certified
to ISO 45001
Interconnect
Number of sites
13
–
14
14
Total manufacturing sites certified
to ISO 45001
FlexTek
Number of sites
10
–
9
9
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
206
ESG DATA DISCLOSURES
CONTINUED
Data point
Unit
FY2025
FY2024
restated
FY2024
FY2023
Target
Assured
in FY2025
ENVIRONMENT – BUSINESS DATA
ENERGY
ENERGY BY BUSINESS
Total electrical power use by business
John Crane
MWh
45,365
45,805
44,167
46,778
Total electrical power use by business
Smiths Detection
MWh
11,978
12,620
12,323
11,997
Total electrical power use by business
Flex-Tek
MWh
54,311
53,247
52,993
50,884
Total electrical power use by business
Interconnect
MWh
16,164
15,817
15,763
15,948
Total electrical power use by business
Group/Corporate
MWh
652
723
289
344
Total energy use by region or business (MWh)
John Crane
MWh
83,058
88,079
85,589
93,425
Total energy use by region or business (MWh)
Smiths Detection
MWh
21,407
21,391
21,385
21,462
Total energy use by region or business (MWh)
Flex-Tek
MWh
89,503
88,771
88,373
83,519
Total energy use by region or business (MWh)
Interconnect
MWh
18,574
19,151
19,289
19,139
Total energy use by region or business (MWh)
Group/Corporate
MWh
977
952
392
549
Total energy use by region or business (MWh)
Total Energy (UK)
MWh
9,385
9,661
17,906
11,394
RENEWABLE ENERGY PERCENTAGE BY BUSINESS
Total renewable energy percentage
by business
John Crane
%
74%
69%
72%
71%
Total renewable energy percentage
by business
Smiths Detection
%
100%
99%
99%
98%
Total renewable energy percentage
by business
Flex-Tek
%
77%
70%
73%
66%
Total renewable energy percentage
by business
Interconnect
%
50%
61%
59%
59%
Total renewable energy percentage
by business
Smiths Group
%
74%
71%
73%
71%
GREENHOUSE GAS
TOTAL GHG EMISSIONS BY BUSINESS
Total Scope 1 & 2 GHG emissions
by business
John Crane
tCO
2
e
14,673
18,629
17,295
21,044
Total Scope 1 & 2 GHG emissions
by business
Smiths Detection
tCO
2
e
2,898
2,621
2,526
2,621
Total Scope 1 & 2 GHG emissions
by business
Flex-Tek
tCO
2
e
14,846
16,230
15,625
16,988
Total Scope 1 & 2 GHG emissions
by business
Interconnect
tCO
2
e
4,909
4,685
5,119
4,818
Total Scope 1 & 2 GHG emissions
by business
Group/Corporate
tCO
2
e
382
412
193
178
Footnotes
1 FY2024 energy and GHG
data restated. See page 55.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
207
ESG DATA DISCLOSURES
CONTINUED
Data is for the global operations of Smiths Group for the 12 months ending 31 July 2025 and the two preceding years.
SOCIAL
Unit
FY2025
FY2024
FY2023
Target
EMPLOYEES
Number of employees – John Crane
Number
6,395
6,229
6,109
Number of employees – Smiths Detection
Number
3,430
3,267
3,123
Number of employees – Flex-Tek
Number
3,721
3,655
3,327
Number of employees – Smiths Interconnect
Number
2,045
2,016
2,052
Number of employees – Group
Number
512
566
545
Total number of employees
Number
16,103
Women percentage of Smiths employees
%
29%
29%
29%
Men percentage of Smiths employees
%
71%
71%
71%
MANAGEMENT DIVERSITY
Women percentage of Smiths Executive Committee
%
33%
36%
25%
Men percentage of Smiths Executive Committee
%
67%
64%
75%
Women percentage of Smiths Senior Leadership Team
%
28%
27%
25%
30% by FY2025
Men percentage of Smiths Senior Leadership Team
%
72%
73%
75%
Women percentage of senior management (Companies Act definition)
%
21%
17%
17%
Men percentage of senior management (Companies Act definition)
%
79%
83%
83%
Women percentage of senior management (UK Code definition)
%
38%
38%
36%
Men percentage of senior management (UK Code definition)
%
62%
62%
64%
Women percentage of senior management (FTSE Women Leaders definition)
%
38%
35%
36%
Men percentage of senior management (FTSE Women Leaders definition)
%
62%
65%
64%
Women percentage of Smiths management
%
25%
24%
23%
Men percentage of Smiths management
%
75%
76%
77%
Ethnic diversity percentage of UK senior management (Parker Review definition)
%
13%
–
–
17% by 2027
Number in executive management – Men
Number
7
8
10
Number in executive management – Women
Number
3
4
3
Number in executive management – White British or Other White (including minority White groups)
Number
9
10
12
Number in executive management – Asian/Asian British
Number
1
2
1
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
208
ESG DATA DISCLOSURES
CONTINUED
Unit
FY2025
FY2024
FY2023
Target
BOARD DIVERSITY
Number of Board members – Men
Number
8
6
6
Number of Board members – Women
Number
3
4
4
Number of senior positions on the Board (CEO, CFO, SID and Chair) – Men
Number
4
3
3
Number of senior positions on the Board (CEO, CFO, SID and Chair) – Women
Number
0
1
1
Number of Board members – White British or Other White (including minority White groups)
Number
9
8
8
Number of Board members – Asian/Asian British
Number
2
2
2
Number of senior positions on the Board (CEO, CFO, SID and Chair) – White British or Other White (including minority White groups)
Number
4
4
4
Number of senior positions on the Board (CEO, CFO, SID and Chair) – Asian/Asian British
Number
0
0
0
EMPLOYEE SATISFACTION
Overall employee engagement score
Number
72
75
73
Top quartile
Survey response rate
%
78%
85%
84%
Employee perceptions of the opportunities for personal development and growth
Number
68
69
68
Employee perceptions of respectful treatment
Number
77
80
n/a
Employee perceptions of commitment to mental well-being
Number
65
68
n/a
Employee perceptions of commitment to safety
Number
82
84
82
Employee perceptions of commitment to ethical behaviour
Number
71
72
70
Employee perceptions of commitment to environment
Number
76
77
75
EMPLOYEE RECRUITMENT AND RETENTION
Overall rate of roles taken by internal candidates
%
75%
75%
70%
60%
Voluntary employee turnover – recent hires
%
17.6%
16.9%
24.5%
Voluntary employee turnover – total
%
8.7%
8.9%
12.5%
Employee turnover rate
%
13.5%
13.7%
20.2%
Number of Early Careers participants
Number
431
323
278
WORKPLACE HEALTH AND SAFETY
Total recordable injury rate (RIR)
Number
0.28
0.44
1
0.41
<0.4
Total recordable injuries
Number
41
71
1
64
Lost time injury rate (per thousand hours worked) (employees)
Number
0.9
0.21
0.14
Fatalities (employees)
Number
0
0
0
Fatalities (contractors)
Number
0
0
0
Health, safety and well-being policy
Narrative
Yes
Yes
Yes
HSE reporting policy
Narrative
Yes
Yes
Yes
POLICIES
Fair employment policy
Narrative
Yes
Yes
Yes
Human rights policy
Narrative
Yes
Yes
Yes
Diversity and inclusion policy
Narrative
Yes
Yes
Yes
COMMUNITY/PHILANTHROPY
Total funds granted by Smiths Group Foundation cumulatively
Million £
£1.675m
c.£1m
–
Number of organisations supported through Smiths Group Foundation grants
Number
7
12
–
Footnotes
1
12 month Group safety
scorecard for the FY2024
period shows 0.40 RIR and
63 recordable injuries.
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
209
ESG DATA DISCLOSURES
CONTINUED
Unit
FY2025
FY2024
FY2023
Target
GOVERNANCE
BUSINESS ETHICS
Ethics policy
Narrative
Yes
Yes
Yes
Speak out policy
Narrative
Yes
Yes
Yes
Agents and distributors policy
Narrative
Yes
Yes
Yes
Anti-corruption policy
Narrative
Yes
Yes
Yes
Concerns reported through company Speak Out helpline
Number
328
283
299
Percentage substantiated
%
20%
38%
23%
POLITICAL DONATIONS
Contributions to political parties
£
0
0
0
Political activities policy
Narrative
Yes
Yes
Yes
Charitable donations policy
Narrative
Yes
Yes
Yes
Overview
Strategic report
Governance
Financial statements
Smiths Group plc Annual Report FY2025
210
Financial calendar
2025
2026 (provisional)
Announcement of FY2025 Results
23 September
Dividend ex-dividend date
16 October
Dividend record date
17 October
Last DRIP election date
31 October
Annual General Meeting
19 November
Q1 Trading Update
19 November
Dividend payment date
21 November
Announcement of FY2026 Interim Results
24 March
Interim dividend ex-dividend date
2 April
Interim dividend record date
7 April
Last DRIP election date
21 April
Interim dividend payment date
13 May
Q3 Trading Update
26 May
FY2026 financial year end
31 July
Announcement of FY2026 Results
22 September
Registered Office
Smiths Group plc
Level 10
255 Blackfriars Road
London, SE1 9AX
+44 (0)20 7004 1600
Incorporated in England & Wales
Company No. 137013
www.smiths.com
Registrars
Our share register is maintained by Equiniti. If you have any questions about your Smiths shares,
please contact Equiniti www.shareview.co.uk.
Telephone:
T: + 44 (0)371 384 2943 (in the UK)
Lines open 8.30am to 5.30pm (UK time), Monday to Friday (excluding public holidays in England
and Wales).
For deaf and speech impaired customers, Equiniti welcomes calls via Relay UK. Please see
www.relayuk.bt.com for more information.
Write to:
Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
Equiniti offers the Shareview portfolio service to investors; visit www.shareview.co.uk to register
for an account. Through Shareview you can access information about your investments, including
balance movements and indicative share prices, as well as practical help about transferring your
shares or updating your personal details.
Dividends
Smiths has not issued dividend cheques since November 2019. In order to have your dividends paid
directly to your bank or building society account please contact Equiniti for a copy of the Bank
Mandate Form, or register your nominated bank or building society account by visiting
www.shareview.co.uk. By registering your account all future dividends will be paid securely by
direct credit on the dividend payment date. Alternatively, Smiths offers a Dividend Reinvestment
Plan. For more information please visit our website or contact Equiniti.
Ordinary shares
The market value of an ordinary share of the Company on 31 March 1982 for the purposes of
capital gains tax was 136.875p (taking into account the sub-division of 50p shares into 25p shares
on 14 January 1985 and the sub-division and consolidation of 25p shares into 37.5p shares on
18 June 2007).
Annual General Meeting (AGM)
The 2025 Smiths Group plc AGM will be held at 11.00am on Wednesday 19 November 2025 at
Freshfields LLP, 100 Bishopsgate, London EC2P 2SR. The Notice of AGM is a separate document
which is sent out at least 20 working days before the AGM and made available on our website. 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. The meeting will be webcast and may be viewed online by registering on our website
www.smiths.com.
Shareholders, their appointed proxies and authorised corporate representatives have the right to
ask questions at the AGM relating to the business of the meeting. Such persons will also be able
to submit questions to the AGM in advance by emailing secretary@smiths.com by 6.00pm on
Wednesday 12 November 2025. Shareholders who submit questions in advance of the AGM should
include their full name and Shareholder Reference Number in their email. The responses to the
pre-submitted questions will be answered at the AGM. Please note that where a number of similar
questions have been asked, we will group these accordingly.
Shareholders who are unable to attend the AGM in person are encouraged to vote their shares by
appointing a proxy and issuing voting instructions. Electronic and paper proxy appointments and
voting instructions must be received by the Company’s Registrar not later than 48 hours before the
AGM is held in order to be valid. Shareholders who are not CREST members can appoint a proxy
and vote online by visiting www.shareview.co.uk. 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.
SHAREHOLDER INFORMATION
This publication has been printed on Revive Offset which is
100% recycled and FSC
®
certified. Printed sustainably in
the UK by Pureprint, a CarbonNeutral
®
company with FSC
®
chain of custody and an ISO 14001 certified environmental
management system recycling 100% of all dry waste.
Front cover photography by Marcus Harvey
Designed and produced by Conran Design Group
www.conrandesigngroup.com
Smiths Group plc
Level 10
255 Blackfriars Road
London SE1 9AX, UK
+44 (0)20 7004 1600
www.smiths.com
LSE: SMIN
ADR: SMGZY
view this report online at
www.smiths.com/investors