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Smiths Group PLC on Tuesday reported mixed full-year results and cautioned that demand in its two biggest divisions will moderate in the year ahead. In the financial year that ended July 31, the London-based engineering firm said pretax profit increased 3.3% to £372 million from £360 million the year before. Revenue rose 3.1% to £3.13 billion from £3.04 billion, slightly below the company-compiled consensus of £3.15 billion. Operating profit rose 3.0% to £415 million from £403 million with the operating profit margin of 16.8%, improving from 16.5% a year ago but below the 17.0% analyst consensus. Smiths increased its final dividend by 5.2% to 30.2 pence per share from 28.7p, bringing the annual total likewise up 5.2% to 43.75p from 41.6p. However, this was below the 44.1p consensus expectation. Smiths Group said organic revenue growth was 5.4%, ahead of the 5.2% consensus, and versus 5.2% reported in the first nine months of the financial year. In response, shares in Smiths Group fell 7.5% to 1,684.00p in London on Tuesday morning. The wider FTSE 100 index was up 0.4%. Alongside the results, Smiths announced an acceleration plan aimed at delivering productivity and capability enhancements across the group. The programme has identified £30 million to £35 million of potential annualised benefits, of which around a quarter are planned to be realised during financial 2026, with the full benefit in the following financial year. Delivering these savings will result in one-off costs totalling around £60 million to £65 million, of which around £30 million to £35 million will be spent in financial 2025 and £30 million in financial 2026, plus an additional £10 million of capital expenditure in financial 2025. Looking ahead, Smiths reaffirmed its medium-term targets. It expects financial 2025 organic revenue growth of 4% to 6%, with continued margin expansion. However, while noting strong demand and good order book visibility at John Crane and Smiths Detection, Smiths cautioned that growth is expected to moderate in both divisions from the strong performance seen in the financial year just ended. ‘Good demand in aerospace, alongside the pace of market recovery in US construction, will determine the pace of growth in Flex-Tek, and recovery in semiconductor test alongside growth in aerospace and defence-related programmes underpins our expectation for an improving performance in Smiths Interconnect.’ In addition, the firm said it has acquired two North American companies, Modular Metal Fabricators Inc and Wattco Inc, for up to £110 million in total. It will integrate them into its Heating, Ventilation & Air Conditioning and electrical heating solutions platforms in its Flex-Tek business. Chief Executive Roland Carter said: ‘Each business brings a highly complementary customer base, product range and approach to technology, while enhancing our geographical coverage.’ Smiths noted the companies were acquired for a combined around eight times trailing 12 months earnings before interest, tax, depreciation and amortisation and are accretive to Flex-Tek’s operating margin. Copyright 2024 Alliance News Ltd. All Rights reserved.
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