GROUP PROSPECTS
In the course of 2002, we have narrowed our focus on chosen growth areas and reduced costs. Smiths has performed well in difficult markets, mainly as a result of the cost savings which have limited the reduction in operating profit. The high level of cash generation demonstrates the substance to these profits.

A number of actions will benefit future performance. We have reduced debt by £1bn since the formation of Smiths Group in December 2000, and the balance sheet is strong. R&D has been substantially increased. The reshaping of the company to focus on growth opportunities continues to make good progress.

The company is not counting on an upturn in the general economic climate, although we expect specific sectors, including defence, healthcare and detection equipment, to continue to grow. With our constant focus on operational improvement, we are confident that, even under these mixed conditions, the performance of Smiths will remain robust in the period ahead.