Looking forward, Smiths’ business environment appears more stable than for several years. Recent trading has had to contend with the aftermath to the 1990s technology boom, the tragedy of 9/11 and the events of the Iraq War as well as a civil aerospace downturn. We expect greater stability ahead, with US-led global economic recovery under way and civil aerospace volumes recovering over the next two years. The risks to this scenario are further US dollar weakness, which would reduce the sterling value of US sales, and general levels of economic growth.

Steps taken to enhance Smiths' performance are also improving prospects. Increased research and development investment over several years is now being rewarded by notable contract wins. Within Specialty Engineering's Interconnect business, successful product launches are already leading to higher sales. In Medical and Detection, technology leadership is beginning to increase sales. Medical's Cozmo™ diabetes pump is in a robust US growth phase, and has recently been launched in other countries, while Detection will be bringing new products to market. But the most significant business win in the past 12 months was the Common Core Computing System for the new Boeing 7E7 mid-size commercial jet. While this contract will not feed through to higher sales for some time, it will generate substantial revenue in the longer term.

Restructuring is transforming the efficiency of some of our businesses. The purpose of the restructuring programme is to evolve autonomous businesses into larger scale, integrated operations. As mentioned earlier, this will lead to cost reductions, primarily in manufacturing and component supply, improving competitiveness across the board. The restructuring within Medical and Detection also fosters a more coordinated approach to sales growth.

In summary, the combination of more stable business conditions, technology leadership and restructuring benefits has enhanced the prospects for profitable growth. Delivery of an excellent second half performance in 2004 demonstrates that we have gained the momentum in all divisions which we expect to deliver increased sales and profit in 2005. With recent contract wins, the acquisitions made last year and investment in R&D and restructuring, we believe that growth can be sustained. The proposed final dividend reflects our confidence in the improved outlook for the Company.