The principal activities of the Company and its subsidiaries are the development, manufacture, sale and support of:

•	integrated aerospace systems, including electronic and actuation systems and precision components, for civil and military aircraft;
•	advanced security equipment, using the power of trace detection and x-ray imaging, to detect and identify explosives, chemical and biological agents, weapons and contraband;
•	medical devices and critical care equipment aligned to specific therapies, principally airway, pain and temperature management and infusion. Also needle protection, critical care monitoring, women's healthcare and vascular access; and
•	mechanical seals used in industries ranging from petrochemical processing to aerospace; interconnect products to connect and protect safety-critical electrical and electronic equipment; air movement systems and components; navigational radar, marine electronics and charts; and rigid tubular and flexible hose assemblies.

The main manufacturing operations are in the UK, the Americas and continental Europe.

RESULTS AND DIVIDENDS
The results for the year to 31 July 2004 are set out in the Summary Consolidated Profit and Loss Account. Sales for the year amounted to £2,733m, against £3,056m last year. The profit for the year after taxation and goodwill amortisation amounted to £213m (2003 £112m).

An interim dividend of 8.75p per ordinary share of 25p was paid on 16 April 2004. The directors recommend for payment on 19 November 2004 a final cash dividend on each ordinary share of 18.25p, making a total dividend of 27p for the year.

BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Chairman's Statement, Chief Executive's Review and the Financial Review report on the Company's operations and development during the year, the year-end position and likely future development.

CHANGES DURING THE YEAR
Disposals
Matzen & Timm division (sold 29 August 2003 for €1.35m cash).

Polymer Sealing Solutions businesses (sold 30 September 2003 for £493m cash).

Lapmaster (sold 14 October 2003 for £1.5m cash).

Icore International (sold 5 January 2004 for £20m cash).

Sodiamex (sold 19 March 2004 for €1.6m cash).

Acquisitions
Cyrano Sciences, Inc (acquired 2 February 2004 for US$15m cash).

Smiths Medical Japan Ltd (minority interests acquired for £16m cash over the period December 2003 to March 2004).

Dynamic Gunver Technologies (business acquired 30 April 2004 for US$102m cash).

Trak Holdings Corp (acquired 28 May 2004 for US$111.5m cash).

SensIR Technologies (acquired 14 June 2004 for US$75m cash).

DHD Holding Company (acquired 30 June 2004 for US$55m cash).

POST BALANCE SHEET EVENTS
There have been no post balance sheet events at the date of this Report.

CHARITABLE AND POLITICAL DONATIONS
Charitable donations	–£602,000.
Political donations	– None.

The Company's policy of not making contributions to any political party will continue. However, as a precautionary measure in the light of the wide definitions in the Political Parties, Elections and Referendums Act 2000, a resolution to permit the Company to make political donations and incur political expenditure will be proposed at the Annual General Meeting. This is explained in the Chairman's letter and Notice of AGM.

DIRECTORS
The directors at the end of the financial year, with the exception of Mr K Orrell-Jones who retired from the Board on 21 September 2004, are shown in the Board of Directors section. Mr D H Brydon, Mr P J Jackson and the Rt Hon Lord Robertson of Port Ellen were appointed as non-executive directors during the year and will seek reappointment at the AGM. Mr Brydon succeeded Mr Orrell-Jones as Chairman on 21 September 2004. Mr D J Challen was appointed as a non-executive director on the same day and will seek reappointment at the AGM. Sir Nigel Broomfield and Messrs Langston, Lillycrop, Lindh and Thomson have all served for more than 30 months since their previous reappointments and will retire at the AGM. They are all eligible for and will seek reappointment at the AGM. Sir Colin Chandler will retire at the conclusion of the AGM and will not seek reappointment.

A summary of the executive directors' service contracts and the directors' remuneration and interests in share options are contained in the Summary Directors' Remuneration Report.

DIRECTORS' INTERESTS IN THE COMPANY'S SHARES

	Ordinary shares of 25p
	31 July 2004	31 July 2003
Sir Nigel Broomfield	103	103
D H Brydon	12,000	0*
K O Butler-Wheelhouse	212,685	156,715
Sir Colin Chandler	8,778	8,778
J Ferrie	51,939	32,911
Sir Julian Horn-Smith	6,682	6,682
P J Jackson	0	0*
L H N Kinet	9,968	2,152
J Langston	81,361	63,270
D P Lillycrop	70,043	67,144
E Lindh	91,410	68,887
R W O'Leary	0	2,642
K Orrell-Jones	3,226	3,226
Lord Robertson of Port Ellen	0	0*
A M Thomson	72,014	62,178
*indicates holding at date of appointment

These interests include beneficial interests of the directors and their families in the Company's shares held in PEPs, ISAs, trusts and holdings through nominee companies. Except as reported below, none of the directors has disclosed any non-beneficial interests in the Company's shares.

Mr J Langston and Mr D P Lillycrop also both have a technical interest in 438,569 ordinary shares in the Company as discretionary beneficiaries under the TI Group Jersey Employee Share Trust and the TI Group Employee Share Trust. These shares may be transferred to employees who exercise options granted under the TI Group share option schemes. In addition, Mr Langston has a contingent interest in 125,000 ordinary shares and Mr Lillycrop has a contingent interest in 100,000 ordinary shares, arising from contractual arrangements entered into following the merger of TI Group plc with the Company, which are expected to vest on or after 27 September 2004.

The Company has not been notified of any changes to the holdings of the directors, their families and any connected persons between 31 July and 21 September 2004, except that Messrs Kinet, Langston and Lindh each exercised options under the Smiths Industries 1982 SAYE Share Option Scheme on 4 August 2004 and were each allotted 1,593 shares.

Mr D J Challen held 2,000 shares on his appointment as a director on 21 September 2004.