Smiths Group completed a major reshaping of its business over the past year, selling two of its four divisions for £3.3bn and returning billions to shareholders, as it recast itself as a focused industrial engineering group.
The 175-year-old company, whose remaining businesses are the flow-control specialist John Crane and the thermal and aerospace group Flex-Tek, said it completed the disposals of Smiths Detection and Smiths Interconnect at attractive valuations.
It is returning the proceeds to investors, having completed £1.5bn of buybacks with a further £1.5bn to come by the end of 2027, and raised its dividend 5.4%, its 75th consecutive annual increase.
Underlying trading was robust, with organic revenue rising 1.2% to £1.94bn, but the conflict in the Middle East knocked around £20m off John Crane’s sales, and a weak US residential construction market weighed on Flex-Tek.
Even so, the operating margin edged up to 20.6%, and headline earnings per share from continuing operations rose 6%. Statutory operating profit fell, reflecting the cost of the reshaping.
Smiths also said it would launch a process to offload the legacy US asbestos liabilities at John Crane which, if successful, would remove them from its balance sheet.
During the year it bought DRC Heat Transfer for £165m, adding exposure to the fast-growing data-centre cooling market.
Looking ahead, Smiths guided to organic revenue growth of about 4% in the new financial year and said it expected to move into its medium-term margin target range, pointing to structural demand from energy security, industrial electrification, data centres and aviation.
Investors were content with the update today, and shares rose 4% in early trade.
“Stripping away the disposals, the underlying performance was resilient,” said Mark Crouch, market analyst for etoro.
“Organic growth was modest at 1.2%, but margins edged higher to 20.6% and profit beat expectations. More importantly, the balance sheet has been transformed, with £1.75bn of net cash and £1.5bn still earmarked for shareholders, giving Smiths considerable firepower to invest and return capital.
“The big question now is how much further this new Smiths can go. Shares have risen around 50% over 18 months, despite significant geopolitical disruption, suggesting investors have already bought into the transformation. DRC Heat Transfer adds exposure to booming data-centre cooling, while the planned asbestos liability disposal could remove another piece of uncertainty.”