REG - Smiths Group PLC - Smiths Group Half Year Results 2025
25/03/2025 07:15
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RNS Number : 9603B Smiths Group PLC 25 March 2025
SMITHS GROUP PLC - HALF YEAR RESULTS FOR 6 MONTHS ENDED 31 JANUARY 2025
Pioneers of progress - engineering a better future
Strong financial results; executing value creation strategy
· Continued strong financial performance: +9.1% organic(1) revenue
growth, +50bps organic operating profit margin expansion to 16.7% and +14.0%
headline(2) EPS growth
· Reaffirming full year guidance, raised twice this fiscal year, of
6-8% organic revenue growth and margin expansion of 40-60bps
· Disciplined capital allocation with enhanced returns: +5% increase in
dividend; £150m of £500m share buyback completed, £97m invested in
accretive acquisitions, with a further £32m bolt-on acquisition announced
today
· Strategic actions to unlock significant value announced in January.
Separation processes for Smiths Interconnect and Smiths Detection underway.
Continued execution of the Acceleration Plan
· Focus on high-performance industrial technology businesses of John
Crane and Flex-Tek with significant opportunities to enhance growth, improve
the financial profile and deliver strong returns
· New, enhanced medium-term financial targets for FutureSmiths(3) with
higher growth, margin and returns
Roland Carter, Chief Executive Officer, commented:
"We have delivered another strong financial performance which, combined with
ongoing strategic and operational progress, underpins our confidence in
achieving our twice-raised full year guidance.
"The portfolio actions that we announced in January 2025 are being advanced
with pace and purpose, with the separation processes for Smiths Interconnect
and Smiths Detection underway.
"The attraction of FutureSmiths is compelling. By focusing on our world-class,
high-performance John Crane and Flex-Tek businesses we will deliver
sustainable growth, higher margins, returns and earnings growth, as reflected
in our new enhanced medium-term financial targets. Our strong cash generation
enables us to continue to invest in the business organically, and
inorganically, whilst being able to distribute significant capital to
shareholders. We believe this will deliver substantial value creation.
"My thanks to all our Smiths colleagues across the world for your ongoing
dedication and commitment as we work through these plans. We remain focused on
achieving our purpose of engineering a better future, for the benefit of all
our stakeholders."
Headline(2) HY2025 HY2024 Reported Organic(1)
Revenue £1,608m £1,507m +6.7% +9.1%
Operating profit £269m £246m +9.5% +12.6%
Operating profit margin(4) 16.7% 16.3% +40bps +50bps
Basic EPS 55.5p 48.7p +14.0%
ROCE(4) 17.1% 15.7% +140bps
Operating cash conversion(4) 94% 89% +5pps
Statutory HY2025 HY2024 Reported
Revenue £1,608m £1,507m +6.7%
Operating profit £242m £192m +26.0%
Profit for the half year (after tax) £168m £111m +51.4%
Basic EPS 48.8p 32.0p +52.5%
Dividend per share 14.23p 13.55p +5.0%
Statutory reporting and definitions
Statutory reporting takes account of all items excluded from headline
performance. See accounting policies for an explanation of the presentation of
results and note 3 to the financial statements for an analysis of non-headline
items. The following definitions are applied throughout the financial report:
(1) Organic is headline adjusted to exclude the effects of foreign exchange
and acquisitions.
(2) Headline: In addition to statutory reporting, the Group reports on a
headline basis. Definitions of headline metrics, and information about the
adjustments to statutory measures, are provided in note 3 to the financial
statements.
(3) FutureSmiths refers to Smiths Group excluding Smiths Detection and Smiths
Interconnect.
(4) Alternative Performance Measures (APMs) and Key Performance Indicators
(KPIs) are defined in note 19 to the financial statements.
Presentation
A webcast presentation and Q&A will begin at 08.00 (UK time) today at:
https://smiths.com/investors/results-reports-and-presentations
(https://smiths.com/investors/results-reports-and-presentations) . A recording
will be available from 13.00 (UK time).
Investor enquiries Media enquiries
Steph Heathers, Smiths Group Tom Steiner, Smiths Group
+44 (0)7584 113633 +44 (0) 7787 415891
stephanie.heathers@smiths.com (mailto:stephanie.heathers@smiths.com) tom.steiner@smiths.com (mailto:smiths@fticonsulting.com)
Siobhán Andrews, Smiths Group Alex Le May, FTI Consulting
+44 (0)7702 443312
+44 (0)7920 230093
smiths@fticonsulting.com (mailto:smiths@fticonsulting.com)
siobhan.andrews@smiths.com (mailto:siobhan.andrews@smiths.com)
Ana Pita da Veiga, Smiths Group
+44 (0)7386 689442
ana.pitadaveiga@smiths.com (mailto:ana.pitadaveiga@smiths.com)
Our Purpose
We are pioneers of progress - engineering a better future. We are focused on
solving the toughest problems for our customers, helping address critical
global needs such as safety and security, decarbonisation and the
ever-increasing demand for connectivity. At the same time, we are building the
long-term strength and resilience of Smiths Group and our global operations.
We are united by our purpose. It is what we do, how we think, and how we will
continue to use our passion for innovative technology and engineering.
Legal Entity Identifier (LEI): 213800MJL6IPZS3ASA11
This document contains certain statements that are forward-looking statements.
They appear in a number of places throughout this document and include
statements regarding the intentions, beliefs and/or current expectations of
Smiths Group plc (the Company) and its subsidiaries (together, the Group) and
those of their respective officers, directors and employees concerning,
amongst other things, the results of operations, financial condition,
liquidity, prospects, growth, strategies, and the businesses operated by the
Group. By their nature, these statements involve uncertainty since future
events and circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements reflect
knowledge and information available at the date of preparation of this
document and, unless otherwise required by applicable law, the Company
undertakes no obligation to update or revise these forward-looking statements.
The Company and its directors accept no liability to third parties. This
document contains brands that are trademarks and are registered and/or
otherwise protected in accordance with applicable law.
UPCOMING EVENTS
Date Event
20 May 2025 Q3 Trading Update
23 September 2025 FY2025 Full Year Results
19 November 2025 Q1 Trading Update and Annual General Meeting
SUMMARY
We are pleased to report another period of strong financial performance.
Organic revenue grew +9.1%, with operating profit growth of +12.6% and a
+50bps margin expansion, both on an organic basis, and headline EPS growth of
+14.0%. First half operating cash conversion was good at 94%.
We deployed capital in line with our allocation framework. We enhanced returns
to shareholders with £213m returned year to date through both the dividend in
the first half and the completion of the first £150m of the £500m share
buyback. We also made two value-accretive acquisitions for a total of £97m in
the first half and announced today the bolt-on acquisition of Duc-Pac
Corporation ("Duc-Pac") for £32m. Our balance sheet remains strong and we
enter the next phase of our growth and value creation journey from a position
of strength.
We are today reaffirming our twice-raised FY2025 outlook for the Group of 6-8%
organic revenue growth and margin expansion of 40-60bps, as well as announcing
new medium-term financial targets for FutureSmiths.
STRATEGY UPDATE
In the first half, we focused on driving the performance of our businesses,
reflected in today's results, and implementing our Group-wide Acceleration
Plan, which is progressing well. We also concluded an evaluation of our
strategic options to address the persistent discount to the significant value
embedded within the Group. This review culminated in the strategic actions
announced on 31 January 2025, designed to maximise value creation and enhance
returns to shareholders. As a result, going forward, Smiths will focus on our
world-class, high performance industrial technology businesses of John Crane
and Flex-Tek, with the sale of Smiths Interconnect, followed by the separation
of Smiths Detection by way of a UK demerger or sale. We also announced a
substantial increase in our share buyback from £150m to £500m, to be
completed by the end of calendar year 2025.
FutureSmiths - focusing on our world-class John Crane and Flex-Tek businesses
Smiths will be a global specialist engineering company, delivering high
performance technologies for efficient flow and heat management. A simplified
and efficient structure will unlock significant value for all stakeholders and
enable greater strategic focus, financial flexibility and operational
efficiency.
John Crane and Flex-Tek are high quality industrial engineering businesses,
and each is well-positioned to deliver sustainable and resilient growth with
high returns. John Crane's product technology, strong customer relationships
and global presence positions it as a leader in its field and as a reliable
and trusted partner. The large installed base provides a high margin revenue
stream from the aftermarket (>70% of revenue) over the long term.
These attractive characteristics position John Crane well to maximise
attractive growth opportunities across both energy and industrial markets. Key
demand drivers include the global demand for secure energy supply and the
increased demand for more efficient and cleaner industrial processes. Market
growth is forecast at a compound annual growth rate ("CAGR") of 3-4% in energy
and 4-5% in industrial from 2024-2029.
Flex-Tek's strong market position is derived from deep customer relationships
based on reliable, high-quality products and customer-led innovation. Flex-Tek
is well-placed to meet the ongoing customer demand for efficiency and
performance improvement, and emissions reduction in its main product markets
of HVAC systems, aerospace tubing and ducting, industrial process heat and
specialist industrial tubing. From an end market perspective, construction is
predicted to grow 3-4% CAGR, industrial 4-5% CAGR and aerospace 5-6% CAGR over
the 2024-2029 period.
We expect to deliver growth above that of our markets, and this organic growth
in both businesses will be augmented with disciplined bolt-on M&A, as has
been demonstrated by Flex-Tek's strong track record of acquisitions.
On a combined, pro-forma basis, FutureSmiths revenue totals £1,919m (FY2024)
with a headline operating profit margin of 19.5% (including FY2024 central
costs of £49m). It has a strong track record of financial performance, above
that of Smiths Group. Going forward, there are significant opportunities to
enhance growth, improve profitability and expand capabilities, supported by
our Acceleration Plan.
Acceleration Plan to enhance performance and drive margin expansion
We have made good progress on our Group-wide Acceleration Plan, announced with
our FY2024 results. The Acceleration Plan initiatives are focused on
productivity and capability enhancements, including delivering end-to-end
process improvements, optimising operational footprint and enhancing margin.
This will further improve our businesses and create a streamlined cost base.
In the first half, we incurred £7m of cost and now expect FY2025 costs to be
£20-25m, following refinements to the programme. The remainder of the total
£60-65m costs will be incurred in FY2026. We now expect the Acceleration Plan
to deliver £40-45m annualised benefits in FY2027 and beyond. Around
two-thirds of both costs and benefits relate to FutureSmiths.
As part of the Acceleration Plan, we have committed to right-sizing the Group
central costs in line with the portfolio changes. Following completion of the
separation processes, we aim for central costs to remain around 1.5-1.7% of
revenue, below the median of our UK industrial peers.
New enhanced medium-term targets
We are announcing today enhanced medium-term financial targets reflecting the
attractive financial profiles and growth potential of FutureSmiths. These new
targets are through-cycle under the FutureSmiths structure, following the
completion of both separation processes, with FY2026 being a transition year.
We have raised our organic revenue growth target from 4-6% to 5-7%. This
reflects the growth opportunities in both our core markets and adjacencies, as
well as from new products and services. As detailed below, EPS growth,
operating profit margin and ROCE are all increased, reflecting the high
returns of these businesses, and the further improvement to be delivered
through operational excellence and the Acceleration Plan. The operating cash
conversion target is unchanged at ~100%, allowing for the opportunity to
invest in future growth whilst maintaining a high level of cash generation.
Medium-term targets Current target New target
(through-cycle)
Organic revenue growth 4-6% (+ M&A) 5-7% (+ M&A)
Headline EPS growth 7-10% (+ M&A) >10% (+ M&A)
Headline operating profit margin 18-20% 21-23%
ROCE 15-17% >20%
Headline operating cash conversion ~100% ~100%
Smiths Interconnect and Smiths Detection separation processes initiated
The separation processes have both started and are progressing with pace and
rigour. We remain on track to announce a sale of Smiths Interconnect by the
end of calendar year 2025 and a UK demerger or sale of Smiths Detection will
follow. Advisers have been appointed and governance committees established to
provide oversight and robust execution to deliver the best value for
shareholders.
Since the announcement, we have engaged with our employees and other
stakeholders, recognising the impact such changes will have, and we remain
committed to respectful and timely engagement as we progress.
Enhanced shareholder returns
As announced on 31 January 2025, we have increased the previously announced
£150m buyback to £500m. As at 24 March 2025, we have completed £150m and
expect to complete the remaining £350m by the end of calendar year 2025. As
previously guided, we will return a large portion of proceeds from divestments
to shareholders via buyback, while aiming to maintain an investment grade
rating.
Update on cyber incident
Our strong first half results were delivered despite a cyber security incident
at the end of January. Due to our rapid response in isolating our systems and
activating business continuity plans, we were able to minimise disruption to
our operations. The most notable financial impact in the half was in John
Crane where recovery took longer due to the number of systems involved. This
affected John Crane's revenue and orders in January which continued into Q3,
moderating our full year growth expectations for this business. In FY2025, we
expect to recognise costs of £4-5m in relation to the cyber incident. All
critical systems across the Group are now fully recovered and operating as
usual.
FY2025 outlook - guidance reaffirmed
We reaffirm our FY2025 guidance of 6-8% organic revenue growth and margin
expansion of 40-60bps for the Group. This guidance reflects continued strength
in our end markets, with the exception of US construction for Flex-Tek where
the market remains subdued. It also incorporates the potential impact of US
tariffs currently in place and we continue to monitor how the landscape
evolves. The second half outlook is supported by good order book visibility
and also reflects the tougher year-on-year comparator (H2 2024: +6.8%).
We expect the 40-60bps of margin expansion to be achieved through operating
leverage and continued savings driven through the Smiths Excellence System
("SES") in the second half, whilst continuing to invest in the business. We
expect cash conversion to be in the low nineties percent, as previously
guided, and which we now expect to be more evenly spread between the first and
the second half of the year, reflecting the timing of increased capital
investment, particularly in John Crane.
HY2025 BUSINESS PERFORMANCE
Current medium-term targets
In the first half, Smiths delivered strong growth, margin expansion and
returns. We exceeded our current Group medium-term financial targets for
organic revenue growth, EPS and ROCE, with operating profit margin and
operating cash conversion both showing year-on-year improvement in line with
our FY2025 guidance.
Targets Medium-term target HY2024 HY2025
Organic revenue growth 4-6% (+ M&A) +3.9% +9.1%
Headline EPS growth 7-10% (+ M&A) +4.5% +14.0%
ROCE 15-17% 15.7% 17.1%
Headline operating profit margin 18-20% 16.3% 16.7%
Headline operating cash conversion ~100% 89% 94%
Growth
Revenue grew +6.7% on a reported basis to £1,608m (HY2024: £1,507m). This
included £(48)m of negative foreign exchange translation and +£16m from
acquisitions, including the first half acquisitions of Modular Metal
Fabricators, Inc ("Modular Metal") and Wattco, Inc ("Wattco") and £4m from
the Heating and Cooling Products ("HCP") acquisition made in August 2023.
£m HY2024 Foreign exchange Acquisitions Organic HY2025
movement
Revenue 1,507 (48) 16 133 1,608
Headline operating profit 246 (11) 4 30 269
Headline operating profit margin 16.3% 16.7%
We continue to extend a track record of consistent organic growth, and first
half growth was delivered by all four businesses.
Organic revenue growth (by business) H1 2024 H2 2024 HY2025
John Crane +12.7% +7.1% +3.8%
Flex-Tek (4.1)% +2.6% +2.5%
Smiths Detection +8.9% +13.2% +15.3%
Smiths Interconnect (13.7)% +0.4% +26.8%
Smiths Group +3.9% +6.8% +9.1%
FutureSmiths +5.5% +5.3% +3.3%
· John Crane's growth was led by original equipment sales ("OE") across
both energy and industrial. The moderation in growth reflects the strong prior
year comparator of +12.7%, and the impact of the cyber incident in January;
· Flex-Tek delivered growth in its construction business despite a
subdued US construction market, with continued good growth in aerospace;
· Smiths Detection's growth reflected strength in aviation,
particularly for computed tomography for airport checkpoints; and
· Smiths Interconnect's performance reflected strong growth in
semi-conductor, and good growth in fibre-optic, radio-frequency and connector
products reflecting market recovery and product innovation.
Our business currently operates across four major global end markets: General
Industrial, Safety & Security, Energy and Aerospace & Defence.
Organic revenue growth % of Smiths H1 2024 H2 2024 HY2025
(by end market)
revenue
General Industrial 39% (5.5)% (1.5)% +7.7%
Safety & Security 28% +8.9% +13.2% +15.3%
Energy 22% +16.6% +15.3% +3.3%
Aerospace & Defence 11% +2.9% +4.8% +10.9%
Smiths Group 100% +3.9% +6.8% +9.1%
· In General Industrial, growth was driven by John Crane most notably
in water treatment and marine markets, above market growth in Flex-Tek, and
strong growth for Smiths Interconnect semi-test products;
· Safety & Security growth reflected Smiths Detection's continued
strong delivery of its order book;
· Energy growth reflected demand for John Crane's OE offering; and
· In Aerospace & Defence, growth was driven by new aircraft build
programmes at Flex-Tek, and strong demand and new programme wins in Smiths
Interconnect.
Organic growth is supported by new product development and commercialisation.
In the first half, +80bps of growth was delivered from new products including
the continued expansion of John Crane's unique Diamond® Seal Face technology
portfolio, Flex-Tek's heating solution supporting the production of commercial
green steel, the broadening of Smith Detection's digital solutions and next
generation high-speed test sockets in Smiths Interconnect.
Execution
We continue to focus on driving efficient execution throughout our operations
with the support of SES. Headline operating profit rose +12.6% (+£30m) on an
organic basis, and +9.5% (+£23m) on a reported basis, to £269m (HY2024:
£246m). Acquisitions contributed £4m to operating profit.
HY2024 Foreign Acquisitions Organic HY2025
exchange movement
£m
Headline operating profit 246 (11) 4 30 269
Headline operating profit margin 16.3% (20)bps +10bps +50bps 16.7%
Headline operating profit margin was 16.7%, up +50bps on an organic basis,
reflecting volume growth, pricing ahead of inflation, benefits of efficiency
savings, including SES, partially offset by product and business mix. On a
reported basis, margin expanded +40bps including the impact of FX and
acquisitions.
Headline operating profit margin (by business) HY2024 HY2025
John Crane 23.0% 22.9%
Flex-Tek 21.2% 19.8%
Smiths Detection 10.7% 11.3%
Smiths Interconnect 12.2% 17.2%
Smiths Group 16.3% 16.7%
By business, operating margin expansion reflected:
· Pricing and benefits of SES offset by adverse FX and unfavourable mix
from strong OE growth in John Crane, noting this supports future aftermarket
revenue;
· Adverse mix partly due to high margin industrial heating contracts in
the prior year comparator for Flex-Tek;
· Higher volumes and pricing improvement, as well as continued
enhancement in operational efficiency in Smiths Detection; and
· Strong operating leverage from the higher volumes in Smiths
Interconnect.
ROCE increased +140 bps to 17.1% (HY2024: 15.7%), above our medium-term
target, reflecting the higher profitability and efficient use of capital.
Headline EPS grew +14.0% to 55.5p. This reflected a headline tax charge of
£65m (25.5% effective tax rate) (HY2024: £59m, 26.0%), a £5m reduction in
headline finance costs and the benefit of the share buyback programme,
partially offset by foreign exchange impact. We expect the full year tax rate
to be 25.5%.
Headline operating cash conversion was 94% (HY2024: 89%), supported by a
year-on-year improvement in working capital. Headline operating cashflow was
£254m (HY2024: £218m) and free cashflow generation increased +27.7% to
£143m (HY2024: £112m) or 53% of headline operating profit (HY2024: 45%).
Sustainability, Excellence and People
In the first half, we continued to drive sustainable practices throughout the
business and are progressing well towards all our FY2025 and FY2027 targets,
as outlined in our latest Sustainability at Smiths report. SES, now fully
embedded throughout the organisation, continues to yield benefits, as
evidenced by our profit margin expansion.
The safety, health and well-being of our people remain an essential foundation
of our success at Smiths. Our HY2025 recordable incident rate improved to 0.23
(HY2024: 0.46), an industry top quartile ranking, driven by our continued
focus on delivering a zero-harm culture.
Executive Committee and Board changes
Our focus on talent development and succession planning was demonstrated in
the half as we announced a number of changes at the Board and Executive
Committee level. In January, we announced Clare Scherrer's decision to retire
as Chief Financial Officer, being succeeded by Julian Fagge, formerly
President of Smiths Interconnect, from 1 February. Julian has been at Smiths
for over 12 years in financial, strategic and operational roles including
Group Financial Controller, M&A and Strategy Director and President of
Flex-Tek. Julian's experience positions him well to deliver on the strategic
actions currently underway.
As a result of the CFO change, there were other changes to the Executive
Committee, with Vera Parker, previously Chief People Officer, replacing Julian
as President of Smiths Interconnect. Kini Pathmanathan's role was expanded to
include People in addition to Sustainability and Excellence. We also announced
that Bernard Cicut decided to retire as President of John Crane, being
succeeded by Ruben Álvarez, a 27-year veteran of John Crane whose prior role
was Vice President of Portfolios and Customer Operations.
At Board level, we announced the appointment of Simon Pryce as an independent
Non-executive Director, and as a member of both the Audit & Risk Committee
and the Separation Oversight Committee, with effect from 1 February 2025.
Simon is a highly experienced business leader of customer focused, global,
industrial manufacturing and service businesses, with experience that is
directly relevant to Smiths Group's key end markets, customers and supply
chains.
CAPITAL ALLOCATION
We take a disciplined approach to our use of capital; investing in our
businesses to fuel organic growth, pursuing strategic and disciplined bolt-on
acquisitions and returning excess capital to shareholders. As announced in
January, we are accelerating execution against this with enhanced returns to
shareholders through our increased share buyback programme.
Organic investment
In the first half, we invested £48m in R&D (HY2024: £52m), of which
£35m (HY2024: £35m) was an income statement charge, £3m was capitalised
(HY2024: £7m) all in Smiths Detection, primarily next-generation hold and
cabin baggage screening, and £10m (HY2024: £10m) was funded by customers in
Smiths Detection and Smiths Interconnect. In addition, there was a further
£20m spend (HY2024: £20m) on customer-specific engineering-related projects
in John Crane, taking total spend for HY2025 from 3.0% to 4.3% of sales.
Capex increased by £3m to £41m (HY2024: £38m), reflecting planned
investment in capacity and automation at John Crane. Further spend on this, as
well as capex related to the Acceleration Plan, is forecast in the second half
with FY2025 capex expected of ~£100m (FY2024: £86m).
M&A
In the first half, consistent with our strategic and disciplined M&A
approach, we completed the acquisitions of Modular Metal and Wattco with a
combined value of £97m at an EBITDA multiple of c.8x, expanding Flex-Tek's
HVAC and electrical heating solutions platforms. An additional amount of up to
£15m is payable subject to the performance of one of the acquisitions over a
three-year period.
After the period end, in February 2025, we completed the acquisition of
Duc-Pac, a US-based metal ducting manufacturer. This acquisition further
builds on the acquisitions of HCP and Modular Metal in expanding our
geographical coverage for metal and flexible ducting products to include the
north-eastern US through its established brand, deep customer relationships
and strong operational business model. Duc-Pac was acquired for $40.5m
(~£32m), at a 12-month trailing EBITDA multiple of 7.2x, and with an
operating margin accretive to that of Flex-Tek.
Share buyback and dividend
As announced on 31 January 2025, we increased our share buyback programme to
£500m (from £150m announced on 13 November 2024), with the first £150m
having now been completed. The remaining £350m will be launched imminently
and is expected to be completed by the end of calendar year 2025.
The Board is declaring an interim dividend of 14.23p, a year-on-year increase
of +5.0% (HY2024: 13.55p). The interim dividend will be paid on 14 May 2025 to
shareholders on the register at close of business on 4 April 2025.
Net debt
Net debt at 31 January 2025 was £299m (FY2024: £213m) with a net debt to
headline EBITDA ratio of 0.5x (FY2024: 0.3x). Net headline finance costs for
the half decreased by £5m to £13m (HY2024: £18m), principally due to higher
average cash balances.
As at 31 January 2025, borrowings were £675m (FY2024: £659m) comprising a
€650m bond which matures in February 2027 and £131m of lease liabilities.
There are no financial covenants associated with these borrowings. Cash and
cash equivalents as at 31 January 2025 were £392m (FY2024: £459m). Together
with a $800m (£642m at the half-year end exchange rate) revolving credit
facility, which matures in May 2029, total liquidity was £1bn at the end of
the period.
Following the sale of Smiths Medical in January 2022, the Group held a
financial asset reflecting our equity ownership in ICU Medical, Inc ("ICU").
During FY2024, we sold 2,030,000 ICU shares (8.34% of ICU's issued share
capital), with net proceeds of $240m (£187m). During the first half of this
year, we sold the remaining shareholding with net proceeds of $68m (£53m).
STATUTORY RESULTS
Income statement and cashflow
The £27m difference (HY2024: £54m) between headline operating profit of
£269m and statutory operating profit of £242m is non-headline items. The
largest of these relate to the amortisation of acquired intangible assets of
£27m, a £12m net credit for asbestos litigation provision in John Crane Inc,
and £7m of cost in relation to the Acceleration Plan, with a total of £5m
relating to the fair value movement on sale of ICU shares and
acquisition-related costs in Flex-Tek. Statutory finance costs were £14m,
£7m lower than prior year (HY2024: £21m).
The statutory effective tax rate was 26.1% (HY2024: 35.0%) and includes a
non-headline tax credit of £5m (HY2024: £1m charge). Statutory profit after
tax for the Group was £168m (HY2024: £111m) and statutory basic EPS was
48.8p (HY2024: 32.0p).
Statutory net cash inflow from operating activities for the Group was £205m
(HY2024: £168m).
Pensions
During the first half, £7m of pension contributions (HY2024: £3m) were made,
which relate to funded, unfunded and overseas schemes and healthcare
arrangements. Of this, £5m related to the US defined benefit pension plan.
No contributions were made in the first half to either the TI Group Pension
Scheme ("TIGPS") or the Smiths Industries Pension Scheme ("SIPS") and it is
not anticipated that any further contributions will be made. For the TIGPS,
the liabilities have now been insured via a series of buy-in annuities with
Smiths and the TIGPS Trustee working toward final buy-out of the scheme. The
SIPS is in surplus on the Technical Provisions funding basis, and Smiths and
the SIPS Trustee continue to work together to progress towards the long-term
funding target of full buy-out funding.
These two UK schemes and the US pension plan are well hedged against changes
in interest and inflation rates. Their assets are invested in third-party
annuities, government bonds, investment grade credit or cash, with a small
proportion of equity investments held by the US pension plan. As at 31 January
2025, 60% of the UK liabilities had been de-risked through the purchase of
annuities from third party insurers.
Foreign exchange
The results of overseas operations are translated into sterling at average
exchange rates. Net assets are translated at period-end rates. The Group is
exposed to foreign exchange movements, mainly US Dollar and Euro. The
principal exchange rates, expressed in terms of the value of Sterling, are as
follows:
Average rates Period-end rates
31 Jan 2025 31 Jan 2024 31 Jan 2025 31 Jan 2024
(6 months) (6 months)
USD 1.28 1.25 1.25 1.27
EUR 1.19 1.16 1.20 1.17
BUSINESS REVIEW
JOHN CRANE
John Crane is a global leader in mission-critical technologies for the energy
and process industries and an innovator in rotating equipment, encompassing
mechanical seals, couplings, filtration systems and cutting-edge asset
management and digital diagnostics solutions. 63% of revenue is derived from
the energy sector (downstream and midstream oil & gas and power
generation, including renewable and sustainable energy sources). 37% is from
other process industries including chemical, life sciences, mining, water
treatment and pulp & paper. 71% of John Crane revenue is from aftermarket
sales. John Crane represents 34% of Group revenue.
HY2025 HY2024 Reported Organic
£m £m growth growth
Revenue 551 555 (0.9)% +3.8%
Original Equipment ("OE") 87 80 +7.8% +12.2%
Aftermarket 258 271 (4.4)% +0.6%
Energy 345 351 (1.6)% +3.3%
Original Equipment 74 72 +2.2% +5.8%
Aftermarket 132 132 (0.6)% +4.0%
Industrial 206 204 +0.4% +4.6%
Headline operating profit 126 128 (1.4)% +3.9%
Headline operating profit margin 22.9% 23.0% (10)bps +10bps
Statutory operating profit 129 106 +21.7%
Return on capital employed 24.9% 25.1% (20)bps
R&D cash costs as % of sales(1) 5.2% 5.2% -
1 Includes cash R&D expenditure (1.5% of sales) and spend on
customer-specific engineering-related projects (3.7%)
Revenue
HY2024 Foreign Organic HY2025
£m reported exchange movement reported
Revenue 555 (24) 20 551
John Crane delivered organic revenue growth of +3.8% in the first half,
against a strong prior year growth comparator of +12.7%. Growth was partly
constrained by the cyber incident where recovery took longer due to the number
of systems involved.
Reported revenue was down marginally year-on-year at £551m, reflecting the
organic growth, offset by a negative (4.7)% foreign exchange impact.
In Energy, organic revenue grew +3.3% (HY2024: +16.6%) benefiting from a
continued focus on energy security and efficiency, as well as emissions
reduction solutions, supporting medium-term growth. OE sales were particularly
strong, up +12.2%, especially for John Crane's gas compression and systems
offerings. Aftermarket organic revenue was flat year-on-year, partly
reflecting large one-off orders in the prior year. During the period, a
significant new asset management contract was signed to provide asset
management and predictive maintenance technologies to a customer in Saudi
Arabia, the third of such contracts in the Kingdom.
Within energy transition, the pipeline of opportunities John Crane is pursuing
in CCUS, hydrogen and biofuels continues to expand, currently at 170 projects.
A recent example is a strategic partnership to supply dry gas seals and a gas
seal system for a groundbreaking supercritical CO(2) ("sCO(2)") pilot project
to develop an innovative, economically viable and easily replicable sCO(2)
power block to enhance the flexibility of concentrated solar power plants.
In Industrial, organic revenue grew +4.6% with growth in both OE and
aftermarket. Regionally, growth was largely driven by the Americas and by
industry, in water treatment and marine markets. Notable contract wins in the
first six months included a multi-year gas seal management programme contract
with SK Advanced, a major producer and seller of propylene, located in South
Korea.
Growth in the second half is expected to improve compared to the first half
supported by a robust order book and market demand. However, the cyber
incident disrupted orders in January which continued into Q3, moderating our
growth expectations for the full year.
Operating profit and ROCE
HY2024 Foreign Organic HY2025
reported
reported
£m exchange movement
Headline operating profit 128 (7) 5 126
Headline operating profit margin 23.0% 22.9%
Headline operating profit of £126m grew +3.9% on an organic basis, resulting
in a margin of 22.9%, a +10bps improvement on an organic basis, albeit 10bps
lower on a reported basis reflecting a negative FX translation impact. This
organic improvement was driven by increased pricing and SES benefits partly
offset by a negative mix impact from strong OE sales and higher investment in
growth. This investment to increase capacity and efficiency, including
marketing and commercial, are both key to service current demand and propel
future growth.
On a reported basis, headline operating profit was down (1.4)%, with the
organic improvement offset by a (5.3)% negative foreign exchange impact. The
difference between statutory and headline operating profit includes the net
changes in relation to the provision for John Crane, Inc. asbestos litigation
and costs incurred in relation to the Acceleration Plan.
ROCE was 24.9%, with the headline operating profit growth, offset by a higher
capital base and the impact of FX.
R&D and new product development
Cash R&D expenditure was 1.5% of sales (HY2024: 1.6%). In addition, the
business spent a further 3.7% of sales (HY2024: 3.6%) on customer-specific
engineering-related projects for a total investment in product development of
5.2% of sales (HY2024: 5.2%).
John Crane's R&D is primarily focused on gas compression projects and
enhancing the efficiency, performance and sustainability of heavy-duty seals
and hydrogen compressors. John Crane is also well placed to support energy
transition projects with its extreme temperatures and high-pressure sealing
solutions and continues to work with universities and customers to develop and
bring to market these innovative solutions. In the first half, it announced a
strategic multi-year partnership and collaboration agreement with the
University of Sheffield to advance high-performance sealing technologies,
crucial for the energy transition.
Data services products are also an area of focus and in August 2024, it
launched its John Crane Sense® Monitor solution. This enables customers to
track the health of their assets remotely using near real-time data, notifying
them of potential faults and helping to minimise unplanned downtime.
FLEX-TEK
Flex-Tek is a global provider of engineered components that heat and move
liquids and gases for the construction, industrial and aerospace markets. 81%
of Flex-Tek's revenue is derived from the Industrial sector and 19% from the
Aerospace sector. Flex-Tek represents 25% of Group revenue.
HY2025 HY2024 Reported Organic
£m £m growth growth
Revenue 401 384 +4.4% +2.5%
Industrial 325 310 +4.9% +2.0%
Aerospace 76 74 +2.2% +4.8%
Headline operating profit 80 81 (2.3)% (5.1)%
Headline operating profit margin 19.8% 21.2% (140)bps (160)bps
Statutory operating profit 64 74 (13.5)%
Return on capital employed 24.8% 26.1% (130)bps
R&D cash costs as % of sales 0.3% 0.4% (10)bps
Revenue
HY2024 Foreign Organic HY2025
£m reported exchange Acquisitions movement reported
Revenue 384 (9) 16 10 401
Organic revenue grew +2.5% in the first half, with growth across both
Industrial and Aerospace. Revenue on a reported basis grew +4.4%, supported by
+£16m from acquisitions, primarily related to the acquisitions of Modular
Metal and Wattco (acquired in the first quarter of FY2025), and despite a
negative foreign exchange translation effect.
In Industrial, organic revenue was up +2.0%, a result of a good performance in
our HVAC business, ahead of a subdued US housing market. HVAC growth for the
second half will reflect the pace of market recovery in US housing, the timing
for which remains uncertain.
Flex-Tek's solutions for industrial applications includes the partnership with
Midrex to deliver electrical heating solutions that enable the production of
commercial green steel. Organic revenue declined, as expected, reflecting
contract timing. Revenue was helped by a positive contribution from the Wattco
acquisition and the business is well placed to capitalise from the transition
to electrical industrial heat.
In Aerospace, organic revenue grew +4.8% in the first half, with the second
quarter reflecting a slight moderation in growth largely related to customer
contract scheduling. A continued strong order book supports a positive outlook
for FY2025 and beyond.
Operating profit and ROCE
HY2024 Foreign Organic HY2025
£m reported exchange Acquisitions movement reported
Headline operating profit 81 (2) 4 (3) 80
Headline operating profit margin 21.2% 19.8%
Headline operating profit declined (5.1)% on an organic basis. Despite
positive pricing and SES savings, organic operating margin declined (160)bps
to 19.8% partly as a result of a strong comparator in the prior year related
to mix benefits from high margin industrial heating contracts. On a reported
basis, headline operating profit declined (2.3)% whilst operating margin
declined (140)bps.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangible assets and the provision for Titeflex
Corporation subrogation claims.
ROCE declined (130)bps to 24.8%, reflecting the headline operating profit
decline and the impact of acquisitions.
The integration of Modular Metal is progressing well, with increased revenue
in the year against the challenging construction market background. The
acquisition expanded Flex-Tek's presence in the North American HVAC market by
extending its customer base and product offering of Modular Metal's sealed
flexible duct solution.
The integration of Wattco is also progressing well, with revenue contributing
positively to the electrical industrial heating business. The acquisition
expanded our portfolio to a wider range of industrial electric heating
products, including medium temperature immersion and circulation heating,
which are highly complementary to our existing open coil electrical heating
products.
Building on recent acquisitions, in February, Flex-Tek acquired Duc-Pac,
expanding its HVAC presence into the north-eastern US market. The purchase
price was $40.5m (~£32m), equating to a 7.2x 12-month trailing EBITDA
multiple. Duc-Pac generated revenue of ~£16m in the last twelve months, with
an operating margin accretive to that of Flex-Tek.
R&D and new product development
Cash R&D expenditure was 0.3% of sales (HY2024: 0.4%). R&D is focused
on developing new products for the aerospace markets and construction and new
electrification opportunities within industrial markets.
SMITHS DETECTION
Smiths Detection is a global leader in threat detection and screening
technologies for aviation, ports and borders, urban security and defence.
Smiths Detection delivers the solutions needed to protect society from the
threat and illegal passage of explosives, prohibited weapons, contraband,
toxic chemicals, biological agents and narcotics - helping make the world a
safer place. 52% of Smiths Detection's sales are derived from the aftermarket.
Smiths Detection represents 28% of Group revenue.
HY2025 HY2024 Reported Organic
£m £m growth growth
Revenue 454 404 +12.5% +15.3%
Original Equipment 156 112 +39.9% +43.2%
Aftermarket 181 157 +15.4% +18.4%
Aviation 337 269 +25.6% +28.7%
Original Equipment 63 74 (15.5)% (13.4)%
Aftermarket 54 61 (11.1)% (8.8)%
Other Security Systems ("OSS") 117 135 (13.5)% (11.3)%
Headline operating profit 51 43 +19.3% +23.2%
Headline operating profit margin 11.3% 10.7% +60bps +70bps
Statutory operating profit 39 33 +18.2%
Return on capital employed 10.0% 7.9% +210bps
R&D cash costs as % of sales 5.8% 7.6% (180)bps
Revenue
HY2024 Foreign Organic HY2025
£m reported exchange movement reported
Revenue 404 (10) 60 454
Smiths Detection delivered +15.3% organic revenue growth, converting its
strong order book into revenue. This included significant growth in Aviation,
driven by both strong OE and aftermarket sales, partly offset by a decline in
OSS revenue.
Reported revenue was up +12.5% reflecting the strong organic growth, partially
offset by a (2.8)% unfavourable foreign exchange impact.
Order intake during the period continued to reflect the ongoing demand for
airport scanner upgrades. In aftermarket, Smiths Detection announced the award
of a contract to service hold baggage X-ray inspection systems at airports
across the United States.
In Aviation, organic revenue grew +28.7%, with OE growth of +43.2%, reflecting
the continued strong demand for Smiths Detection's latest range of 3D-image
computed tomography machines for cabin baggage, CTiX. Smiths Detection has now
sold more than 1,600 CTiX scanners and has secured a good win rate of the
contracts awarded to date, which cover around half of the units that it
anticipates will be upgraded. Notable wins during the first half included
airports in Australia, Germany, Japan, Poland and the UAE. Contracts awarded
to date support production through FY2025 and into FY2026, and it is expected
that the airports' upgrade programme will continue for the next 2-3 years.
OSS sales declined (11.3)% organically, primarily reflecting a tough
comparator last year (HY2024 +12.8%), as well as the phasing of service
contracts and defence programmes, with OE growth in ports and borders offset
by declines in defence and urban security.
In defence, Smiths Detection generated revenue from its multi-year chemical
detection contract with the UK Ministry of Defence. It also announced a
contract to supply LCD 4 personal chemical detectors to the Japanese Ministry
of Defence, for delivery in 2025 and 2026.
Operating profit and ROCE
HY2024 Foreign Organic HY2025
reported
£m reported exchange movement
Headline operating profit 43 (1) 9 51
Headline operating profit margin 10.7% 11.3%
Headline operating profit increased +23.2% on an organic basis for the year,
reflecting the strong volume growth and pricing improvement, as well as
benefits from SES savings and cost actions. Headline operating profit margin
increased to 11.3%, +70bps on an organic and +60bps on a reported basis.
On a reported basis, headline operating profit increased +19.3%, including a
negative foreign exchange translation, with the difference between statutory
and headline operating profit reflecting amortisation of acquired intangibles.
ROCE increased +210bps to 10.0%, reflecting the growth in operating profit.
R&D and new product development
Cash R&D was £26m (HY2024: £30m), representing 5.8% of sales (HY2024:
7.6%), to support Smiths Detection investment in next-generation detection
capabilities. Spend included £9m in customer funded projects (HY2024: £9m).
Following the pre-launch last year of its X-ray scanner utilising diffraction
technology, the SDX 10060 XDi is currently undergoing certification in Europe.
Smiths Detection is also advancing its software offering. Its iCMORE Automated
Prohibited Items Detection Systems ('APIDS') algorithm received approval from
the Netherlands' National Coordinator for Security and Counter-terrorism.
Smiths Detection becomes the first and only supplier to receive this approval.
iCMORE APIDS uses AI to identify a wide range of prohibited objects at airport
security checkpoints, automating the detection of an extensive list of
prohibited items while bags pass through CT security screening machines. It
enhances security, creating a faster and more seamless experience for
passengers and is a major step towards full automation and alarm-only viewing,
enabling airports to achieve substantial operational savings.
SMITHS INTERCONNECT
Smiths Interconnect is a leading provider of high reliability connectivity
products and solutions serving segments of aerospace and defence, medical,
semiconductor test and industrial markets. Smiths Interconnect represents 13%
of Group revenue.
HY2025 HY2024 Reported Organic
£m £m growth growth
Revenue 202 164 +23.5% +26.8%
Headline operating profit 35 20 +74.6% +80.3%
Headline operating profit margin 17.2% 12.2% +500bps +510bps
Statutory operating profit 34 19 +78.9%
Return on capital employed 13.8% 10.5% +330bps
R&D cash costs as % of sales 6.1% 6.8% (70)bps
Revenue
HY2024 Foreign Organic HY2025
£m reported exchange movement reported
Revenue 164 (5) 43 202
Smiths Interconnect's organic revenue growth was very strong, up +26.8% in the
first half, with growth across all business units, albeit against a weak
comparator in HY2024 of (13.7)%.
Reported revenue increased +23.5% reflecting a (3.3)% negative foreign
exchange impact.
Growth in Industrial was broad based across businesses demonstrating the
strength of our innovative product offering, particularly in semi-test
markets. We delivered outstanding growth in semi-test reflecting key programme
wins, particularly in high-speed GPUs and AI, and end market recovery. Strong
growth in Aerospace and Defence reflected high demand for our fibre-optic,
radio-frequency and connector products.
The improvement in market activity, together with our view of orders and
upcoming pipeline underpin our second half outlook where we expect the growth
to continue, albeit at a lower rate given the marginal growth booked in the
second half of last year.
Operating profit and ROCE
HY2024 Foreign Organic HY2025
£m reported exchange movement reported
Headline operating profit 20 (1) 16 35
Headline operating profit margin 12.2% 17.2%
Headline operating profit increased +80.3% on an organic basis, resulting in a
+510bps organic improvement in headline operating profit margin to 17.2%. This
primarily reflected the notably higher volume alongside pricing, positive mix
effects and benefits from SES and automation. On a reported basis, headline
operating profit increased +74.6% and statutory operating profit rose +78.9%.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangibles and acquisition-related costs.
ROCE increased +330bps to 13.8%, driven by the notably higher operating
profit.
R&D and new product development
Cash R&D expenditure was £13m (HY2024:£11m) representing 6.1% as a
percentage of sales (HY2024: 6.8%). R&D is focused on developing and
customising new products that improve connectivity and product integrity in
demanding operating environments.
Within Aerospace and Defence, space grade products in particular are a key
development focus especially in radio frequency and optical products. During
the period, Smiths Interconnect's products supported several high-profile
space campaigns, including the forthcoming Europa Clipper mission to explore
one of Jupiter's moons and the Sentinel-1C satellite, the EU's leading Earth
observation initiative. Smiths Interconnect provided cutting-edge connectivity
solutions - supplying isolators, hyperboloid
(https://www.smithsinterconnect.com/products/connectors/contact-technologies/hyperboloid/)
and spring probe
(https://www.smithsinterconnect.com/products/connectors/contact-technologies/spring-probe/)
solutions, and circulators
(https://www.smithsinterconnect.com/products/ferrite-related-passive-components/coaxial-isolators-and-circulators/isolators-and-circulators/)
, which are designed to withstand the harsh conditions of space and ensure
consistent performance.
The success of DaVinci 112, the next generation of Smiths Interconnect's
high-speed semiconductor test sockets, has been noted by industry with the
receipt of several awards, recognising its significant impact on electronics
innovation. Smiths Interconnect received the prestigious Best Test Measurement
Award of the Year at the Global Electronics Achievement Awards and Emerging
Technology of the Year at the UK's Institution of Engineering and Technology
Excellence and Innovation Awards. The DaVinci 112 technology is engineered to
meet the high-speed demands of IC chips driven by advancement in AI, data
centres, high speed computing and self-driving vehicles.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has a risk management structure and internal controls in place which
are designed to identify, manage and mitigate business risks. Smiths faces a
number of risks and uncertainties which could have a material impact on the
Group's long-term performance. The Group's principal risks and uncertainties
are detailed on pages 42 to 48 of the 2024 Annual Report. The principal risks
and uncertainties affecting the Group for the second half of the financial
year continue to be those set out briefly below and more fully in the Annual
Report.
· Economy and geopolitics: The challenging economic and
geopolitical environment in which we operate may have an adverse effect on
demand for our products, our cost structure, pricing strategies, profitability
and market share. External adverse events could cause an unanticipated and
sudden disruption to our business. The US government has recently proposed new
tariffs on international trade, which could affect our profits if we are
unable to fully pass-through this cost.
· Cyber security: Cyber-attacks attempting to compromise the
confidentiality, integrity and availability of IT systems and the data held on
them are a continuing risk. We operate in markets and product areas which are
known to be of interest to cyber criminals. Digitalisation and increased
interconnectivity of our products intensifies the risk. We were affected by a
cyber security incident at the end of January 2025. However, due to our rapid
response in isolating our systems and activating business continuity plans,
there was minimal disruption to our operations. Our cyber risk remains
elevated, with an increased likelihood of a cyber event occurring.
· Business continuity: Disruption to our supply chain,
manufacturing or service operations, or customers' operations could impact our
financial performance.
· Technology: If we fail to maintain our technological
differentiation and our innovation pipeline does not meet customers' evolving
requirements, we may lose market share to a new or existing competitor. This
could impact our financial performance and our ability to attract and retain
talent.
· Product quality: Failure of one of our products, including
failure due to non-compliance with product regulation, may result in financial
loss and reputational damage. In the ordinary course of business, we could be
subject to material product liability claims and lawsuits, including potential
class actions from customers or third parties.
· Commercial: Failure to act in a timely manner and adapt our
market strategy in response to changes in the commercial environment in which
we operate may result in an adverse effect on our financial performance and
market share.
· People: Failing to attract, develop, and retain the right people
with the right skills may affect our ability to achieve our commercial
ambitions.
· Legal and compliance: We have c. 15,750 colleagues in more than
50 countries. Individuals may not all behave in accordance with the Group's
Values and in accordance with ethical and legal requirements. We operate
within increasingly complex legal regimes, often in highly regulated markets
and with governments, customers and suppliers requiring strict adherence to
laws. We may fail to deliver contracted products and services or fail in our
contractual execution due to delays or breaches by our suppliers or other
counterparties.
· Climate change: Failure to identify and act on the significant
opportunities arising from the world's transition to a low-carbon economy
and/or failure to respond appropriately to climate change risks and
regulation. We operate in more than 50 countries, each with varying levels of
vulnerability to extreme weather events, which could potentially lead to
disruptions at one or more of our sites.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that, to the best of our knowledge:
the condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the United Kingdom and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006; and
· the interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
For and on behalf of the Board of directors:
Julian Fagge
Roland Carter
Chief Executive Officer Chief Financial Officer
24 March 2025
Independent review report to Smiths Group plc
Conclusion
We have been engaged by Smiths Group Plc ("the Company") to review the
condensed set of financial statements in the half-yearly financial report for
the six months ended 31 January 2025 which comprises the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes in equity,
the consolidated cash-flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 January 2025 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
24 March 2025
Consolidated income statement (unaudited)
Six months ended 31 January 2025 Six months ended 31 January 2024
Notes Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
Revenue 2 1,608 - 1,608 1,507 - 1,507
Operating costs 2 (1,339) (27) (1,366) (1,261) (54) (1,315)
Operating profit/(loss) 269 (27) 242 246 (54) 192
Interest receivable 19 - 19 11 - 11
Interest payable (32) - (32) (29) - (29)
Other financing losses - (3) (3) - (6) (6)
Other finance income - retirement benefits - 2 2 - 3 3
Finance costs (13) (1) (14) (18) (3) (21)
Profit/(loss) before taxation 256 (28) 228 228 (57) 171
Taxation 5 (65) 5 (60) (59) (1) (60)
PROFIT/(LOSS) FOR THE PERIOD 191 (23) 168 169 (58) 111
4
Earnings per share
Basic 48.8p 32.0p
Diluted 48.7p 32.0p
Dividends per share (declared) 14 14.23p 13.55p
Consolidated statement of comprehensive income (unaudited)
Notes Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Profit for the period 168 111
Other comprehensive income (OCI)
OCI which will not be reclassified to the income statement:
Re-measurement of post-retirement benefits assets and obligations (8) (100)
Taxation on post-retirement benefits movements 1 12
Fair value movements on financial assets at fair value through OCI 8 (167)
1 (255)
OCI which will be reclassified and reclassifications:
Fair value gains and reclassification adjustments:
- deferred in the period on cash-flow and net investment hedges (7) (2)
- reclassified to income statement on cash-flow hedges 1 -
(6) (2)
Foreign exchange movements net of recycling:
Exchange gains on translation of foreign operations 42 5
Total other comprehensive expenditure for the period, net of taxation 37 (252)
TOTAL COMPREHENSIVE INCOME 205 (141)
Attributable to:
Smiths Group shareholders 204 (141)
Non-controlling interests 1 -
205 (141)
Consolidated balance sheet (unaudited)
Notes 31 January 31 July
2025
2024
£m
£m
Non-current assets
Intangible assets 7 1,622 1,521
Property, plant and equipment 8 288 270
Right of use assets 9 117 110
Financial assets - other investments 10 6 53
Retirement benefit assets 6 122 132
Deferred tax assets 99 94
Trade and other receivables 97 96
2,351 2,276
Current assets
Inventories 709 643
Current tax receivable 35 24
Trade and other receivables 801 826
Cash and cash equivalents 11 392 459
Financial derivatives 11 3 4
1,940 1,956
Total assets 4,291 4,232
Current liabilities
Financial liabilities:
- short-term borrowings 11 (8) (2)
- lease liabilities 11 (35) (32)
- financial derivatives 11 (5) (4)
Provisions 13 (67) (75)
Trade and other payables (761) (764)
Current tax payable (83) (70)
(959) (947)
Non-current liabilities
Financial liabilities:
- long-term borrowings 11 (536) (534)
- lease liabilities 11 (96) (91)
- financial derivatives 11 (16) (13)
Provisions 13 (217) (219)
Retirement benefit obligations 6 (97) (103)
Deferred tax liabilities (43) (32)
Trade and other payables (32) (41)
(1,037) (1,033)
Total liabilities (1,996) (1,980)
Net assets 2,295 2,252
Shareholders' equity
Share capital 18 129 130
Share premium account 365 365
Capital redemption reserve 26 25
Merger reserve 235 235
Cumulative translation adjustments 395 353
Retained earnings 1,313 1,306
Hedge reserve (191) (184)
Total shareholders' equity 2,272 2,230
Non-controlling interest equity 23 22
Total equity 2,295 2,252
Consolidated statement of changes in equity (unaudited)
Notes Share capital Other Cumulative Retained earnings Hedge Equity shareholders' Non-controlling Total
and share
reserves
translation
£m
reserve
funds
Interest
equity
premium
£m
adjustments
£m
£m
£m
£m
£m
£m
At 31 July 2024 495 260 353 1,306 (184) 2,230 22 2,252
Profit for the period - - - 167 - 167 1 168
Other comprehensive income:
- foreign exchange movements net of recycling - - 42 - - 42 - 42
- re-measurement of post-retirement benefits and related tax - - - (7) - (7) - (7)
- fair value losses and related tax - - - 9 (7) 2 - 2
Total comprehensive income for the period - - 42 169 (7) 204 1 205
Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust - - - (22) - (22) - (22)
Share buybacks 18 (1) 1 - (44) - (44) - (44)
Dividends:
- equity shareholders 14 - - - (104) - (104) - (104)
Share-based payment - - - 8 - 8 - 8
At 31 January 2025 494 261 395 1,313 (191) 2,272 23 2,295
Notes Share capital Other Cumulative Retained earnings Hedge Equity shareholders' Non-controlling Total
and share
reserves
translation
£m
reserve
funds
Interest
equity
premium
£m
adjustments
£m
£m
£m
£m
£m
£m
At 31 July 2023 496 259 386 1,431 (188) 2,384 22 2,406
Profit for the period - - - 111 - 111 - 111
Other comprehensive income:
- foreign exchange movements net of recycling - - 5 - - 5 - 5
- re-measurement of post-retirement benefits and related tax - - - (88) - (88) - (88)
- fair value losses and related tax - - - (167) (2) (169) - (169)
Total comprehensive income for the period - - 5 (144) (2) (141) - (141)
Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust - - - (16) - (16) - (16)
Share buybacks 18 (1) 1 - (29) - (29) - (29)
Dividends:
- equity shareholders 14 - - - (100) - (100) - (100)
Share-based payment - - - 6 - 6 - 6
At 31 January 2024 495 260 391 1,148 (190) 2,104 22 2,126
Consolidated cash-flow statement (unaudited)
Notes Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Net cash inflow from operating activities 16 205 168
Cash-flows from investing activities
Expenditure on capitalised development (3) (7)
Expenditure on other intangible assets (1) (1)
Purchase of property, plant and equipment (37) (30)
Disposal of financial assets 53 1
Acquisition of businesses (net of £8m of cash acquired with businesses) 15 (89) (65)
Disposal of subsidiaries - post-sale expenses (12) -
Net cash-flow used in investing activities (89) (102)
Cash-flows from financing activities
Share buybacks 18 (44) (29)
Purchase of shares by Employee Benefit Trust (22) (16)
Settlement of share awards in cash - (2)
Dividends paid to equity shareholders and non-controlling interests (104) (100)
Cash inflow/(outflow) from matured derivative financial instruments 2 1
Lease payments (21) (19)
Net cash-flow used in financing activities (189) (165)
Decrease in cash and cash equivalents (73) (99)
Cash and cash equivalents at beginning of the period 459 285
Exchange differences 6 (6)
Cash and cash equivalents at end of the period 392 180
Cash and cash equivalents at end of the period comprise:
- cash at bank and in hand 193 111
- short-term deposits 199 69
392 180
Notes to the condensed interim financial statements (unaudited)
1 Basis of preparation
The financial information for the period ended 31 January 2025 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the year ended 31 July 2024 has
been delivered to the Registrar of Companies. The auditor's report on those
accounts was not qualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
The condensed consolidated interim financial report for the half-year
reporting period ended 31 January 2025 included in this announcement has been
prepared on a going concern basis using accounting policies consistent with
UK-adopted International Accounting Standards, in accordance with IAS 34
Interim Financial Reporting, and in accordance with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 July 2024, which
has been prepared in accordance with UK-adopted International Accounting
Standards.
The interim financial statements are prepared on a going concern basis. The
Directors have assessed the principal risks discussed on page 18. The
Directors believe that the Group is well placed to manage its financing and
other business risks satisfactorily, and have a reasonable expectation that
the Group will have adequate resources to continue in operation for at least
12 months from the signing date of these condensed consolidated interim
financial statements. They therefore consider it appropriate to adopt the
going concern basis of accounting in preparing the financial statements.
The interim financial information was approved by the Board on 24 March 2025.
Accounting policies
The same accounting policies, estimates, presentation and methods of
computation are followed in the condensed interim financial statements as
applied in the Group's latest annual audited financial statements.
New standards and interpretations not yet adopted
No new standards, new interpretations, or amendments to standards or
interpretations have been published which are expected to have a significant
impact on the Group's financial statements.
Presentation of results
In order to provide users of the accounts with a clear and consistent
presentation of the performance of the Group's ongoing trading activity, the
income statement is presented in a three column format with 'headline' profits
shown separately from non-headline items in a form consistent with the prior
year.
Judgement is required in determining which items should be included as
non-headline. The amortisation of acquired intangibles, legacy liabilities,
material one-off items and certain re-measurements are included in a separate
column of the income statement. See note 3 for a breakdown of the items
excluded from headline profit.
Performance measures for the Group's ongoing trading activity are described as
'headline' and used by management to measure and monitor performance. See note
2 for disclosures of headline operating profit and note 19 for more
information about the alternative performance measures ('APMs') used by the
Group.
In addition, the Group reports organic growth rates for revenue and underlying
growth rates for profit where the determination of adjustments requires
judgement. See note 19 for more information about the key performance
indicators (KPIs) used by the Group.
2 Analysis of revenue, operating costs and segment information
Analysis by operating segment
The Group is organised into four major business segments: John Crane,
Flex-Tek, Smiths Detection and Smiths Interconnect. These business segment
design and manufacture the following products:
- John Crane - mechanical seals, seal support systems, power
transmission couplings and specialised filtration systems;
- Flex-Tek - engineered components, flexible hosing and rigid tubing
that heat and move fluids and gases; and
- Smiths Detection - sensors and systems that detect and identify
explosives, narcotics, weapons, chemical agents, biohazards and contraband;
- Smiths Interconnect - specialised electronic and radio frequency
board-level and waveguide devices, connectors, cables, test sockets and
sub-systems used in high-speed, high reliability, secure connectivity
applications.
The position and performance of each business segment is reported at each
Board meeting to the Board of Directors. This information is prepared using
the same accounting policies as the consolidated financial information, except
that the Group uses headline operating profit to monitor segmental results and
operating assets to monitor segmental position. See note 3 and note 19 for
more information on which items are excluded from headline profit measures.
Intersegment sales and transfers are charged at arm's-length prices.
Segment trading performance
Six months ended 31 January 2025
John Crane Flex-Tek Smiths Smiths Interconnect Corporate Total
£m
£m
Detection
£m
costs
£m
£m
£m
Revenue 551 401 454 202 - 1,608
Segmental headline operating profit 126 80 51 35 - 292
Corporate headline operating costs - - - - (23) (23)
Headline operating profit/(loss) 126 80 51 35 (23) 269
Items excluded from headline measures (note 3) 3 (16) (12) (1) (1) (27)
Operating profit/(loss) for the period 129 64 39 34 (24) 242
Headline operating margin 22.9% 19.8% 11.3% 17.2% 16.7%
Six months ended 31 January 2024
John Crane Flex-Tek Smiths Smiths Interconnect Corporate Total
£m
£m
Detection
£m
costs
£m
£m
£m
Revenue 555 384 404 164 - 1,507
Segmental headline operating profit 128 81 43 20 - 272
Corporate headline operating costs - - - - (26) (26)
Headline operating profit/(loss) 128 81 43 20 (26) 246
Items excluded from headline measures (note 3) (22) (7) (10) (1) (14) (54)
Operating profit/(loss) for the period 106 74 33 19 (40) 192
Headline operating margin 23.0% 21.2% 10.7% 12.2% 16.3%
Segment assets and liabilities
Segment assets
31 January 2025
John Crane Flex-Tek Smiths Smiths Corporate and Total
£m
£m
Detection
Interconnect
non-headline
£m
£m
£m
£m
Property, plant, equipment, right of use assets, development projects, other 184 116 142 65 12 519
intangibles and investments
Inventory, trade and other receivables 522 280 636 157 12 1,607
Segment assets 706 396 778 222 24 2,126
31 July 2024
John Crane Flex-Tek Smiths Smiths Corporate and Total
£m
£m
Detection
Interconnect
non-headline
£m
£m
£m
£m
Property, plant, equipment, right of use assets, development projects, other 168 103 153 65 61 550
intangibles and investments
Inventory, trade and other receivables 528 254 612 153 18 1,565
Segment assets 696 357 765 218 79 2,115
Non-headline assets comprise receivables relating to non-headline items,
acquisitions and disposals.
Segment liabilities
31 January 2025
John Crane Flex-Tek Smiths Smiths Corporate and Total
£m
£m
Detection
Interconnect
non-headline
£m
£m
£m
£m
Segmental liabilities (197) (102) (389) (68) - (756)
Corporate and non-headline liabilities - - - - (321) (321)
Segment liabilities (197) (102) (389) (68) (321) (1,077)
31 July 2024
John Crane Flex-Tek Smiths Smiths Corporate and Total
£m
£m
Detection
Interconnect
non-headline
£m
£m
£m
£m
Segmental liabilities (202) (99) (398) (59) - (758)
Corporate and non-headline liabilities - - - - (341) (341)
Segment liabilities (202) (99) (398) (59) (341) (1,099)
Non-headline liabilities comprise provisions and accruals relating to
non-headline items, acquisitions and disposals.
Reconciliation of segment assets and liabilities to statutory assets and
liabilities
Assets Liabilities
31 January 31 July 31 January 31 July
2025
2024
2025
2024
£m
£m
£m
£m
Segment assets and liabilities 2,126 2,115 (1,077) (1,099)
Goodwill and acquired intangibles 1,514 1,404 - -
Derivatives 3 4 (21) (17)
Current and deferred tax 134 118 (126) (102)
Retirement benefit assets and obligations 122 132 (97) (103)
Cash and borrowings 392 459 (675) (659)
Statutory assets and liabilities 4,291 4,232 (1,996) (1,980)
Segment capital employed
Capital employed is a non-statutory measure of invested resources. It
comprises statutory net assets adjusted to add goodwill recognised directly in
reserves in respect of subsidiaries acquired before 1 August 1998 of £478m
(31 July 2024: £478m), and eliminate post-retirement benefit assets and
liabilities and litigation provisions relating to non-headline items, both net
of related tax, and net debt. See note 19 for additional details.
The 12-month rolling average capital employed by business segment, which
Smiths uses to calculate segmental return on capital employed, is set out
below:
31 January 2025
John Crane Flex-Tek Smiths Smiths Total
£m
£m
Detection
Interconnect
£m
£m
£m
Average segmental capital employed 1,048 641 1,098 463 3,250
Average corporate capital employed (34)
Average total capital employed 3,216
31 January 2024
John Crane Flex-Tek Smiths Smiths Total
£m
£m
Detection
Interconnect
£m
£m
£m
Average segmental capital employed 1,026 587 1,158 477 3,248
Average corporate capital employed (30)
Average total capital employed 3,218
Analysis of revenue
The revenue for the main product and service lines for each business segment
is:
John Crane Original Aftermarket Total
equipment
£m
£m
£m
Revenue six months ended 31 January 2025 161 390 551
Revenue six months ended 31 January 2024 152 403 555
Flex-Tek Aerospace Industrials Total
£m
£m
£m
Revenue six months ended 31 January 2025 76 325 401
Revenue six months ended 31 January 2024 74 310 384
Smiths Detection Aviation Other security Total
£m
systems
£m
£m
Revenue six months ended 31 January 2025 337 117 454
Revenue six months ended 31 January 2024 269 135 404
Smiths Interconnect Components, Connectors & Subsystems
£m
Revenue six months ended 31 January 2025 202
Revenue six months ended 31 January 2024 164
Segmental revenue is analysed by the Smiths Group key global markets as
follows:
John Crane General Safety & Energy Aerospace & Total
Industrial
Security
£m
Defence
£m
£m
£m
£m
Revenue six months ended 31 January 2025 206 - 345 - 551
Revenue six months ended 31 January 2024 204 - 351 - 555
Flex-Tek
Revenue six months ended 31 January 2025 325 - - 76 401
Revenue six months ended 31 January 2024 310 - - 74 384
Smiths Detection
Revenue six months ended 31 January 2025 - 454 - - 454
Revenue six months ended 31 January 2024 - 404 - - 404
Smiths Interconnect *
Revenue six months ended 31 January 2025 101 - - 101 202
Revenue six months ended 31 January 2024 74 66 - 24 164
Total
Revenue six months ended 31 January 2025 632 454 345 177 1,608
Revenue six months ended 31 January 2024 588 470 351 98 1,507
* Following a review of the Smiths Interconnect segmental revenue
reporting in August 2024, the Group has reanalysed this segment's revenue by
key global market. The driver of this reanalysis is to better align Smiths
Interconnect's reporting with how the business is run and the revenue
reporting of Smiths Interconnect's peer group. The updated revenue analysis
has been applied prospectively from August 2024 onwards. The Aerospace key
global market has been renamed Aerospace & Defence and £79m of HY25
revenue that would have previously been reported as Safety & Security
revenue is now reported as Aerospace & Defence revenue.
The Group's statutory revenue is analysed as follows:
Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Sale of goods recognised at a point in time 1,177 1,093
Sale of goods recognised over time 26 28
Services recognised over time 405 386
Revenue 1,608 1,507
Operating costs
Headline operating costs are analysed as follows:
Six months ended 31 January 2025 Six months ended 31 January 2024
Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
Cost of sales - direct materials, labour, production and 1,011 - 1,011 945 - 945
distribution overheads
Selling costs 109 - 109 107 - 107
Administrative expenses 219 27 246 209 54 263
Operating costs 1,339 27 1,366 1,261 54 1,315
3 Non-statutory profit measures
Headline profit measures
The Group seeks to present a measure of performance which is not impacted by
material non-recurring items or items considered non-operational in nature.
This measure of profit is described as 'headline' and is used by management to
measure and monitor performance. See the disclosures on presentation of
results in accounting policies for an explanation of the adjustments. The
items excluded from 'headline' are referred to as 'non-headline' items.
Non-headline operating profit items
The non-headline items included in statutory operating profit are as follows:
Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Acquisition and disposal related transaction costs
Post-acquisition integration costs and fair value adjustment unwind (1) -
Business acquisition costs (2) (1)
Fair value loss on contingent consideration - (10)
Loss on disposal of financial asset (3) -
Legacy pension scheme arrangements
Scheme administration costs (2) (3)
Non-headline litigation provision movements
Provision for John Crane, Inc. asbestos litigation 12 (22)
Movement in provision held against Titeflex Corporation subrogation claims 3 7
Other items
Amortisation of acquisition related intangible assets (27) (25)
Corporate restructuring costs (7) -
Non-headline items in operating profit (27) (54)
Acquisition and disposal related costs
The £1m (31 January 2024: £nil) of post-acquisition integration costs and
fair value adjustment unwind relate to Flex-Tek's acquisitions of HCP, Wattco
and Modular Metal Fabricators (Modular Metal). These include £1m of defined
project costs for the integration of these businesses into the existing
Flex-Tek business and the unwinding of the acquisition balance sheet fair
value adjustments required by IFRS 3 'Business Combinations'. These have been
recognised as a non-headline as the charge did not relate to trading activity.
The £2m (31 January 2024: £1m) of business acquisition costs represent
incremental costs related to the Group's Mergers & Acquisitions (M&A)
activity. These items do not include the cost of employees working on
transactions and are reported as non-headline because they are dependent on
the level of M&A activity being undertaken and do not relate to trading
activity.
In the prior year, the £10m fair value loss on contingent consideration
represents the write down of the remaining fair value of the Group's
contingent consideration from the sale of the Smiths Medical to ICU Medical,
Inc. (ICU).
In the current year, the Group sold the remainder of its equity investment in
ICU. The £3m loss (31 January 2024: £nil) on disposal of financial assets
relates to the block sale discount on the disposal of these remaining ICU
shares. This is considered a non-headline charge as it did not relate to
trading activity.
Legacy pension scheme arrangements
Scheme administration costs of £2m (31 January 2024: £3m) relates to the
TIGPS legacy pension scheme and SIPS 'path to buy-in' costs. As the Group has
no expectation of receiving a refund from the scheme, an economic benefit
value of zero has been placed on the TIGPS surplus. These are non-headline
charges as the Smiths Group effectively has no economic exposure to these
costs and they are paid from cash retained within the scheme.
Non-headline litigation provision movements
The following litigation costs and recoveries have been treated as
non-headline items because the provisions were treated as non-headline when
originally recognised and the subrogation claims and litigation relate to
products that the Group no longer sells in these markets:
- The £12m credit (31 January 2024: £22m charge) in respect of John Crane,
Inc. asbestos litigation is principally driven by a reduction in future
expected indemnity costs; and
- The £3m credit (31 January 2024: £7m credit) recognised by Titeflex
Corporation is principally driven by a continued reduction in the number of
claimants.
Other items
Acquisition related intangible asset amortisation costs of £27m (31 January
2024: £25m) were recognised in the current period. This is considered to be a
non-headline item on the basis that these charges result from acquisition
accounting and do not relate to current trading activity.
Corporate restructuring charges of £7m (31 January 2024: £nil) were incurred
on the previously announced Group-wide Acceleration Plan and are treated as
non-headline due to being material and part of a pre-approved programme.
Non-headline finance (costs)/income items
The non-headline items included in finance (costs)/income are as follows:
Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Other financing gains/(losses) 2 (2)
Unwind of discount on provisions (5) (4)
Other finance income - retirement benefits 2 3
Non-headline items in finance (costs)/income (1) (3)
Non-headline loss before taxation (28) (57)
The £2m of other financing gains (31 January 2024: £2m losses) represent
foreign exchange movements on borrowings and fair value movements on financial
instruments. The current period gain includes £1m (31 January 2024: £1m
loss) due to foreign exchange translation gains and £1m gain (31 January
2024: £1m loss) due to hedge ineffectiveness on the Group's 2027 Eurobonds,
which will reverse over the remaining period to maturity. These foreign
exchange and fair value movements are excluded from headline net finance costs
when the following requirements are met:
- Fair value gains and losses on the interest element of derivative
financial instruments hedging the Group's net debt exposures are excluded from
headline, as they will either reverse over time or be matched in future
periods by interest charges.
- Fair value gains and losses on the currency element of derivative
financial instruments hedging the Group's net debt and exposures, and exchange
gains and losses on borrowings are excluded, as the relevant foreign exchange
gains and losses on the commercially hedged items are recognised as a separate
component of other comprehensive income, in accordance with the Group's
foreign currencies accounting policy.
The financing elements of non-headline legacy liabilities, including the £5m
(31 January 2024: £4m) unwind of discount on provisions, are excluded from
headline finance costs because these provisions were originally recognised as
non-headline and this treatment has been maintained for ongoing costs and
credits.
Other finance income comprises £2m (31 January 2024: £3m) of financing
credits relating to retirement benefits. These are excluded from headline
finance costs because the ongoing costs and credits are a legacy of previous
employee pension arrangements.
Non-headline taxation items
The non-headline items included in taxation are as follows:
Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Increase in unrecognised UK deferred tax asset 6 (12)
Tax credit on non-headline loss (1) 11
Non-headline taxation (charge)/credit 5 (1)
Continuing operations - non-headline gain/(loss) for the year (23) (58)
The £5m non-headline taxation credit (31 January 2024: £1m charge) comprises
a charge of £1m (31 January 2024: £12m charge), being a reduction in the UK
deferred tax asset. This is offset by credits for the non-headline items
above.
4 Earnings per share
Basic earnings per share are calculated by dividing the profit for the period
attributable to equity shareholders of the Company by the average number of
ordinary shares in issue during the period.
Six months ended Six months ended
31 January 2025
31 January 2024
Profit attributable to equity shareholders for the period - £m 167 111
Weighted average number of shares in issue for basic earnings per share 342,492,542 346,626,154
Adjustment for potentially dilutive shares 142,927 161,251
Weighted average number of shares in issue for diluted earnings per share 342,635,469 346,787,405
Statutory earnings per share total - basic 48.8p 32.0p
Statutory earnings per share total - diluted 48.7p 32.0p
A reconciliation of statutory and headline earnings per share is as follows:
Six months ended 31 January 2025 Six months ended 31 January 2024
£m Basic EPS Diluted EPS £m Basic EPS Diluted EPS
(p)
(p)
(p)
(p)
Basic earnings per share:
Total profit attributable to equity shareholders of the Parent Company 167 48.8p 48.7p 111 32.0p 32.0p
Exclude: Non-headline items (note 3) 23 58
Headline earnings per share 190 55.5p 55.5p 169 48.7p 48.7p
5 Taxation
The interim tax rate of 26.1% (31 January 2024: 35.0%) is calculated by
applying the estimated effective headline tax rate of 25.5% (31 January 2024:
26.0%) for the year ended 31 July 2025 to headline profit before tax and then
taking into account the tax effect of non-headline items in the interim
period.
A reconciliation of headline and total tax charge is as follows:
Six months ended 31 January 2025 Six months ended 31 January 2024
£m Tax rate £m Tax rate
Headline tax rate
Headline profit before taxation 256 228
Taxation on headline profit (65) 25.5% (59) 26.0%
Adjustments
Non-headline items excluded from profit before taxation (note 3) (28) (57)
Taxation on non-headline items and non-headline tax adjustment 5 (1)
Total interim tax rate
Profit before taxation 228 171
Taxation (60) 26.1% (60) 35.0%
The changes in the value of the net tax asset in the period were:
Current Deferred Net tax
tax
tax
balance
£m
£m
£m
At 31 July 2024 (46) 62 16
Foreign exchange gains/(losses) - 2 2
Charge to income statement (60) - (60)
Charge to other comprehensive income - 2 2
Acquisitions - (10) (10)
Tax paid 58 - 58
At 31 January 2025 (48) 56 8
Developments in the Group tax position
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates and the legislation will be
effective for the Group's financial year beginning 1 January 2024. On 11 July
2023, the UK government enacted Pillar Two legislation and Smiths Group plc, a
UK incorporated company falls within the scope of the legislation. The rules
apply to Smiths Group from 1 August 2024.
A Pillar Two impact assessment using financial data for year ended 31 July
2024, has been carried out, taking into account known changes impacting the
constituent entities within Smiths Group. The impact assessment included
considering eligibility for the Transitional Country by County Reporting Safe
Harbours on a jurisdiction by jurisdiction basis. The Group considers that
implementation of Pillar Two income taxes by countries with qualified
domestic minimum top-up taxes and the income inclusion rule in the UK will not
have a material impact on the Group's ETR for the Year Ended 31 July 2025.
The Group is continuing to assess the impact of the Pillar Two income taxes
legislation on future financial performance.
6 Post-retirement benefits
The Group provides post-retirement benefits to employees in a number of
countries throughout the world. The arrangements include defined benefit and
defined contribution plans and, mainly in the United Kingdom (UK) and United
States of America (US), post-retirement healthcare. The principal defined
benefit pension plans are in the UK and US, and these have been closed so that
no future benefits are accrued.
Where any individual scheme shows a post restriction surplus under IAS 19,
this is disclosed on the balance sheet as a retirement benefit asset. The IAS
19 surplus of any one scheme is not available to fund the IAS 19 deficit of
another scheme. The surplus is recognised as a retirement benefit asset to the
extent the employers have the right to recover the surplus at the end of the
life of the scheme, assuming all liabilities have been extinguished. The
schemes are mature with a duration averaged over all scheme participants of 11
years (HY24: 12 years).
The amounts recognised in the balance sheet are as follows:
31 January 31 July
2025
2024
£m
£m
Market value of scheme assets 2,458 2,583
Present value of funded scheme liabilities (2,339) (2,456)
Surplus restriction (9) (11)
Surplus 110 116
Unfunded pension plans (81) (81)
Post-retirement healthcare (4) (6)
Present value of unfunded obligations (85) (87)
Net retirement benefit asset 25 29
Post-retirement assets 122 132
Post-retirement liabilities (97) (103)
Net retirement benefit asset 25 29
The decrease in the value of scheme liabilities is principally due to changes
in market conditions and the resulting increase in the discount rate
assumptions. The changes in market conditions also led to a corresponding
decrease in the value of scheme assets which was broadly in line with the
decrease in liabilities, leading to a small reduction in the surplus
recognised in the balance sheet at 31 January 2025.
The changes in market conditions has had no impact on any funding
arrangements.
The principal assumptions used in updating the valuations are set out below:
31 January 2025 31 July 2024
UK US UK US
Weighted average rate of increase in benefits for active deferred members 4.1% n/a 4.0% n/a
Rate of increase in pensions in payment 3.4% n/a 3.3% n/a
Rate of increase in deferred pensions 3.4% n/a 3.3% n/a
Discount rate 5.4% 5.6% 5.0% 5.2%
The methods for setting the assumptions are consistent with those used for the
31 July 2024 valuation. The UK discount rate has been set based on the
weighted average duration across the two key pension arrangements.
Present value of funded scheme liabilities and assets for the main UK and US
schemes
31 January 2025 - £m 31 July 2024 - £m
SIPS TIGPS US schemes SIPS TIGPS US schemes
Present value of funded scheme liabilities
- Active deferred members (12) (9) (26) (13) (9) (28)
- Deferred members (360) (287) (79) (379) (304) (80)
- Pensioners (871) (575) (92) (915) (609) (93)
Present value of funded scheme liabilities (1,243) (871) (197) (1,307) (922) (201)
Market value of scheme assets 1,365 880 191 1,439 933 190
Surplus restriction - (9) - - (11) -
Surplus/(deficit) 122 - (6) 132 - (11)
Contributions
Company contributions to funded and unfunded defined benefit pension and
post-retirement healthcare plans totalled £7m (HY24: £3m), which included a
planned £5m (HY24: £nil) contribution to the US funded pension scheme.
The changes in the present value of the net pension balance in the period
were:
Six months ended Year ended
31 January
31 July
2025
2024
£m
£m
At beginning of period 29 89
Foreign exchange rate movements - 1
Current service cost (1) (4)
Headline scheme administration costs (2) (3)
Non-headline scheme administration costs (2) (6)
Past service costs, curtailments and settlements - benefit equalisations - (4)
Finance income - retirement benefits 2 6
Contributions by employer 7 16
Actuarial losses (10) (66)
Unrecognised assets due to surplus restriction 2 -
Net retirement benefit asset at end of period 25 29
Recent legal rulings
In July 2024, the UK Court of Appeal upheld the High Court's ruling in the
Virgin Media v NTL Pension Trustees II court case relating to section 37 of
the Pension Schemes Act 1993 and amendments to benefits for contracted-out
defined benefit schemes, such as SIPS and TIGPS. The ruling confirmed the need
for an actuarial certificate where such schemes made changes to benefits
between 6 April 1997 and 5 April 2016, and any amendments that affected
relevant benefits were void without the appropriate certificate. The Trustees
of SIPS and TIGPS have sought legal advice on what actions, if any, should be
taken and are awaiting the outcome of further legal cases associated with this
matter, which are expected to be heard later in 2025. In the meantime, SIPS
and TIGPS will continue to be administered on the current basis until the
legal position has been clarified.
7 Intangible assets
Goodwill Development Acquired Software, Total
£m
costs
intangibles
patents and intellectual property
£m
£m
£m
£m
Cost
At 31 July 2024 1,276 205 645 162 2,288
Exchange adjustments 23 1 18 1 43
Additions - 3 - 1 4
Business combinations 67 - 40 - 107
At 31 January 2025 1,366 209 703 164 2,442
Amortisation
At 31 July 2024 64 124 453 126 767
Exchange adjustments - 1 11 1 13
Charge for the period - 6 27 7 40
At 31 January 2025 64 131 491 134 820
Net book value at 31 January 2025 1,302 78 212 30 1,622
Net book value at 31 July 2024 1,212 81 192 36 1,521
Review for impairment assessment trigger events
In accordance with IAS 34 'Interim financial reporting', management has
undertaken a review for indications of impairment and concluded that no
impairment assessment trigger events have occurred in the half year.
8 Property, plant and equipment
Land and Plant and Fixtures, Total
buildings
machinery
fittings,
£m
£m
£m
tools and
equipment
£m
Cost or valuation
At 31 July 2024 181 496 114 791
Exchange adjustments 3 8 1 12
Additions 2 33 2 37
Business combinations - 1 - 1
Disposals (3) (5) (4) (12)
At 31 January 2025 183 533 113 829
Depreciation
At 31 July 2024 113 314 94 521
Exchange adjustments 2 5 1 8
Charge for the period 4 15 2 21
Disposals (2) (4) (3) (9)
At 31 January 2025 117 330 94 541
Net book value at 31 January 2025 66 203 19 288
Net book value at 31 July 2024 68 182 20 270
9 Right of use assets
Properties Vehicles Equipment Total
£m
£m
£m
£m
Cost
At 31 July 2024 212 36 2 250
Foreign exchange rate movements 3 - - 3
Business combinations 4 - - 4
Recognition of right of use assets 17 3 - 20
Derecognition of right of use assets (6) - - (6)
At 31 January 2025 230 39 2 271
Depreciation
At 31 July 2024 116 23 1 140
Foreign exchange rate movements 2 - - 2
Charge for the year 15 3 - 18
Derecognition of right of use assets (6) - - (6)
At 31 January 2025 127 26 1 154
Net book value at 31 January 2025 103 13 1 117
Net book value at 31 July 2024 96 13 1 110
10 Financial assets - other investments
Investment in ICU Medical, Inc equity Investments in early stage businesses Cash collateral deposit Total
£m
£m
£m
£m
At 31 July 2024 47 5 1 53
Fair value change through Other Comprehensive Income 8 - - 8
Disposals (55) - - (55)
At 31 January 2025 - 5 1 6
11 Borrowings and net debt
This note sets out the calculation of net debt, an important measure in
explaining our financing position. The net debt figure includes accrued
interest and fair value adjustments to debt relating to hedge accounting.
31 January 31 July
2025
2024
£m
£m
Cash and cash equivalents
Net cash and cash equivalents 392 459
Short-term borrowings
Lease liabilities (35) (32)
Interest accrual (8) (2)
(43) (34)
Long-term borrowings
€650m 2.00% Eurobond 2027 (536) (534)
Lease liabilities (96) (91)
(632) (625)
Borrowings/gross debt (675) (659)
Derivatives managing interest rate risk and currency profile of the debt (16) (13)
Net debt (299) (213)
Analysis of financial derivatives on balance sheet
Non-current assets Current Current Non-current liabilities Net
£m
assets
liabilities
balance
£m
£m £m
£m
Derivatives managing interest rate risk and currency profile of the debt - - - (16) (16)
Foreign exchange forward contracts - 3 (5) - (2)
At 31 January 2025 - 3 (5) (16) (18)
Derivatives managing interest rate risk and currency profile of the debt - - - (13) (13)
Foreign exchange forward contracts - 4 (4) - -
At 31 July 2024 - 4 (4) (13) (13)
Movements in net debt
Cash and cash equivalents Short-term borrowings Long-term borrowings Interest rate and cross currency swaps Net
£m
£m
£m
£m debt
£m
At 31 July 2024 459 (34) (625) (13) (213)
Foreign exchange gains/(losses) 6 (1) 2 - 7
Net decrease in cash and cash equivalents (73) - - - (73)
Lease payments - 21 - - 21
Interest paid - 23 - - 23
Interest expense - (32) - - (32)
Fair value movements - - (5) (3) (8)
Lease liabilities acquired - (4) - - (4)
Net movement from new leases and modifications - (20) - - (20)
Reclassifications - 4 (4) - -
At 31 January 2025 392 (43) (632) (16) (299)
12 Fair value of financial instruments
As at 31 January 2025 As at 31 July 2024
Basis for determining fair value At amortised At fair value through profit or loss At fair value through OCI Total Total At amortised cost At fair value through profit or loss At fair value through OCI Total carrying Total
cost
£m
£m
carrying
£m
£m
fair value £m value fair value
£m value
£m £m £m
£m
Financial assets
Other investments A - 1 - 1 1 - 1 47 48 48
Other investments F - - 5 5 5 - - 5 5 5
Cash and cash equivalents A 392 - - 392 392 459 - - 459 459
Trade and other financial receivables B/C 784 - - 784 784 797 - - 797 797
Derivative financial instruments C - 3 - 3 3 - 4 - 4 4
Total financial assets 1,176 4 5 1,185 1,185 1,256 5 52 1,313 1,313
Financial liabilities
Trade and other financial payables B (486) - - (486) (486) (495) - - (495) (495)
Short-term borrowings B/D (8) - - (8) (8) (2) - - (2) (2)
Long-term borrowings D (536) - - (536) (535) (534) - - (534) (529)
Lease liabilities E (131) - - (131) (131) (123) - - (123) (123)
Derivative financial instruments C - (21) - (21) (21) - (17) - (17) (17)
Total financial liabilities (1,161) (21) - (1,182) (1,181) (1,154) (17) - (1,171) (1,166)
The fair value of a financial instrument is the price at which an asset could
be exchanged, or a liability settled, between knowledgeable, willing parties
in an arm's-length transaction. Fair values have been determined with
reference to available market information at the balance sheet date, using the
methodologies described below:
A Carrying value is assumed to be a reasonable approximation to fair value for
all of these assets and liabilities (Level 1 as defined by IFRS 13 Fair Value
Measurement).
B Carrying value is assumed to be a reasonable approximation to fair value for
all of these assets and liabilities (Level 2 as defined by IFRS 13 Fair Value
Measurement).
C Fair values of derivative financial assets and liabilities and trade
receivables held to collect or sell are estimated by discounting expected
future contractual cash-flows using prevailing interest rate curves. Amounts
denominated in foreign currencies are valued at the exchange rate prevailing
at the balance sheet date. These financial instruments are included on the
balance sheet at fair value, derived from observable market prices (Level 2 as
defined by IFRS 13 Fair Value Measurement).
D Borrowings are carried at amortised cost. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the balance sheet
date. The fair value of borrowings is estimated using quoted prices (Level 1
as defined by IFRS 13).
E Leases are carried at amortised cost. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the balance sheet
date. The fair value of the lease contract is estimated by discounting
contractual future cash-flows (Level 2 as defined by IFRS 13).
F The fair value of instruments is estimated by using unobservable inputs to the
extent that relevant observable inputs are not available. Unobservable
inputs are developed using the best information available in the
circumstances, which may include the Group's own data, taking into account all
information about market participation assumptions that is reliably available
(Level 3 as defined by IFRS 13).
IFRS 13 defines a three level valuation hierarchy:
Level 1 - quoted prices for similar instruments
Level 2 - directly observable market inputs other than Level 1 inputs
Level 3 - inputs not based on observable market data
13 Provisions and contingent liabilities
Headline Non-headline and legacy Total
£m John Crane, Inc. Titeflex Other £m
litigation
Corporation
£m
£m
litigation
£m
Current liabilities 10 32 13 20 75
Non-current liabilities 3 188 23 5 219
At 31 July 2024 13 220 36 25 294
Foreign exchange rate movements - 6 - - 6
Business combinations - - - 17 17
Provision charged 6 - 1 - 7
Provision released (2) (12) (3) - (17)
Unwind of provision discount - 4 1 - 5
Utilisation (3) (8) (4) (13) (28)
At 31 January 2025 14 210 31 29 284
Current liabilities 12 28 10 17 67
Non-current liabilities 2 182 21 12 217
At 31 January 2025 14 210 31 29 284
The John Crane, Inc. and Titeflex Corporation litigation provisions are the
only provisions which are discounted.
Headline provisions and contingent liabilities:
Warranty provision and product liability
At 31 January 2025 there are warranty and product liability provisions of £9m
(31 July 2024: £9m). Warranties over the Group's products typically cover
periods of between one and three years. Provision is made for the likely cost
of after-sales support based on the recent past experience of individual
businesses.
Commercial disputes and litigation in respect of ongoing business activities
The Group has on occasion been required to take legal action to protect its
intellectual property and other rights against infringement. It has also had
to defend itself against proceedings brought by other parties, including
product liability and insurance subrogation claims. Provision is made for any
expected costs and liabilities in relation to these proceedings where
appropriate, although there can be no guarantee that such provisions (which
may be subject to potentially material revision from time to time) will
accurately predict the actual costs and liabilities that may be incurred.
Contingent liabilities
In the ordinary course of its business, the Group is subject to commercial
disputes and litigation such as government price audits, product liability
claims, employee disputes and other kinds of lawsuits, and faces different
types of legal issues in different jurisdictions. The high level of activity
in the US, for example, exposes the Group to the likelihood of various types
of litigation commonplace in that country, such as 'mass tort' and 'class
action' litigation, legal challenges to the scope and validity of patents, and
product liability and insurance subrogation claims. These types of proceedings
(or the threat of them) are also used to create pressure to encourage
negotiated settlement of disputes. Any claim brought against the Group (with
or without merit) could be costly to defend. These matters are inherently
difficult to quantify. In appropriate cases a provision is recognised based on
best estimates and management judgement, but there can be no guarantee that
these provisions (which may be subject to potentially material revision from
time to time) will result in an accurate prediction of the actual costs and
liabilities that may be incurred. There are also contingent liabilities in
respect of litigation for which no provisions are made.
The Group operates in some markets where the risk of unethical or corrupt
behaviour is material and has procedures, including an employee 'Ethics
Alertline', to help it identify potential issues. Such procedures will, from
time to time, give rise to internal investigations, sometimes conducted with
external support, to ensure that the Group properly understands risks and
concerns and can take steps both to manage immediate issues and to improve its
practices and procedures for the future. The Group is not aware of any issues
which are expected to generate material financial exposures.
Non-headline and legacy provisions and contingent liabilities:
John Crane, Inc.
John Crane, Inc. ("JCI") is one of many co-defendants in numerous lawsuits
pending in the US in which plaintiffs are claiming damages arising from
alleged exposure to, or use of, products previously manufactured which
contained asbestos. The JCI products generally referred to in these cases
consist of industrial sealing product, primarily packing and gaskets. The
asbestos was encapsulated within these products in such a manner that causes
JCI to believe, based on tests conducted on its behalf, that the products were
safe. JCI ceased manufacturing products containing asbestos in 1985.
The table below summarises the JCI claims experience over the last 40 years
since the start of this litigation:
31 January 2025 31 July 2024 31 July 2023 31 July 2022 31 July 2021
JCI claims experience
Claims against JCI that have been dismissed 312,000 312,000 310,000 306,000 305,000
Claims in which JCI is currently a defendant 21,000 20,000 20,000 22,000 22,000
Cumulative final judgments, after appeals, against JCI since 1979 156 156 154 149 149
Cumulative value of awards ($m) since 1979 191 191 190 175 175
John Crane, Inc. litigation insurance recoveries
JCI has certain excess liability insurance which may provide coverage for
certain asbestos claims. JCI has also collected recoveries from its insurers
in settlement of now concluded litigation in the US. JCI meets its asbestos
defence costs directly. The calculation of the provision does not take account
of any recoveries from insurers. See table below for the cost recovery
achieved in both the current and prior periods.
John Crane, Inc. litigation provision
The provision is based on past history and published tables of asbestos
incidence projections and is determined using asbestos valuation experts,
Bates White LLC. The assumptions made in assessing the appropriate level of
provision include: the period over which the expenditure can be reliably
estimated; the future trend of legal costs; the rate of future claims filed;
the rate of successful resolution of claims; and the average amount of
judgments awarded.
The JCI asbestos litigation provision has developed in the period as follows:
Six months ended
31 January 2025
£m Year ended Year ended Year ended Year ended
31 July
31 July
31 July
31 July
2024
2023
2022
2021
£m
£m
£m
£m
John Crane, Inc. litigation provision
Gross provision 255 261 246 258 220
Discount (45) (41) (42) (29) (8)
Discounted provision 210 220 204 229 212
Taxation (52) (54) (51) (57) (54)
Discounted post-tax provision 158 166 153 172 158
Operating profit (credit)/charge
(Decreased)/Increased provision for adverse judgments and legal defence costs (8) 28 28 24 10
Change in US risk free rates (4) 1 (15) (18) (5)
Subtotal - items (released)/charged to the provision (12) 29 13 6 5
Litigation management expense - legal fees in connection with litigation - - 2 1 1
against insurers and defence strategy
Recoveries from insurers - (3) (7) - (9)
Total operating profit (credit)/charge (12) 26 8 7 (3)
Cash-flow
Provision utilisation - legal defence costs and adverse judgements (8) (21) (32) (21) (13)
Litigation management expense - - (2) (1) -
Recoveries from insurers - 3 7 - 9
Net cash outflow (8) (18) (27) (22) (4)
John Crane, Inc. litigation provision sensitivities
The provision may be subject to potentially material revision from time to
time if new information becomes available as a result of future events. There
can be no guarantee that the assumptions used to estimate the provision will
result in an accurate prediction of the actual costs that may be incurred
because of the significant uncertainty associated with the future level of
asbestos claims and of the costs arising out of related litigation.
Statistical reliability of projections over the ten year time horizon
In order to evaluate the statistical reliability of the projections, a
population of outcomes is modelled using randomised verdict outcomes. This
generated a distribution of outcomes with future spend at the 5th percentile
of £187m and future spend at the 95th percentile of £251m (31 July
2024: £200m and £258m, respectively). Statistical analysis of the
distribution of these outcomes indicates that there is a 50% probability that
the total future spend will fall between £237m and £268m (31 July 2024:
between £245m and £271m), compared with the gross provision value of £255m
(31 July 2024: £261m).
Sensitivity of the projections to changes in the time horizon used
If the asbestos litigation environment becomes more volatile and uncertain,
the time horizon over which the provision can be calculated may reduce.
Conversely, if the environment became more stable, or JCI changed approach and
committed to long term settlement arrangements, the time period covered by the
provision might be extended.
The projections use a 10 year time horizon. Reducing the time horizon by one
year would reduce the discounted pre-tax provision by £15m (31 July 2024:
£16m) and reducing it by five years would reduce the discounted pre-tax
provision by £86m (31 July 2024: £87m).
We consider, after obtaining advice from Bates White LLC, that to forecast
beyond ten years requires that the litigation environment remains largely
unchanged with respect to the historical experience used for estimating future
asbestos expenditures. Historically, the asbestos litigation environment has
undergone significant changes more often than every ten years. If one assumed
that the asbestos litigation environment would remain unchanged for longer and
extended the time horizon by one year, it would increase the discounted
pre-tax provision by £13m (31 July 2024: £13m); extending it by five years
would increase the discounted pre-tax provision by £45m (31 July 2024:
£47m). However, there are also reasonable scenarios that, given certain
recent events in the US asbestos litigation environment, would result in no
additional asbestos litigation for JCI beyond ten years. At this time, how the
asbestos litigation environment may evolve beyond 10 years is not reasonably
estimable.
John Crane, Inc. contingent liabilities
Provision has been made for future defence costs and the cost of adverse
judgments expected to occur. JCI's claims experience is significantly impacted
by other factors which influence the US litigation environment. These include:
changing approaches on the part of the plaintiffs' bar; changing attitudes
amongst the judiciary at both trial and appellate levels; and legislative and
procedural changes in both the state and federal court systems. As a result,
whilst the Group anticipates that asbestos litigation will continue beyond the
period covered by the provision, the uncertainty surrounding the US litigation
environment beyond this point is such that the costs cannot be reliably
estimated.
Although the methodology used to calculate the JCI litigation provision can in
theory be applied to show claims and costs for longer periods, the directors
consider, based on advice from Bates White LLC, that the level of uncertainty
regarding the factors used in estimating future costs is too great to provide
for reasonable estimation of the number of future claims, the nature of such
claims or the cost to resolve them for years beyond the 10 year time horizon.
Titeflex Corporation litigation
In recent years Titeflex Corporation, a subsidiary of the Group in the
Flex-Tek business segment, has received a number of claims from insurance
companies seeking recompense on a subrogated basis for the effects of damage
allegedly caused by lightning strikes in relation to its flexible gas piping
product. It has also received a number of product liability claims regarding
this product, some in the form of purported class actions. Titeflex
Corporation believes that its products are a safe and effective means of
delivering gas when installed in accordance with the manufacturer's
instructions and local and national codes; however some claims have been
settled on an individual basis without admission of liability. Equivalent
third-party products in the US marketplace face similar challenges.
Titeflex Corporation litigation provision
The continuing progress of claims and the pattern of settlement provide
sufficient evidence to recognise a liability in the accounts. Therefore
provision has been made for the costs which the Group is expected to incur in
respect of future claims to the extent that such costs can be reliably
estimated. Titeflex Corporation sells flexible gas piping with extensive
installation and safety guidance (revised in 2008) designed to assure the
safety of the product and minimise the risk of damage associated with
lightning strikes.
The assumptions made in assessing the appropriate level of provision, which
are based on past experience, include: the period over which expenditure can
be reliably estimated; the number of future settlements; the average amount of
settlements; and the impact of statutes of repose and safe installation
initiatives on the expected number of future claims. The assumptions relating
to the number of future settlements exclude FY21 claims history as the number
of claims arising in this financial year is considered to be artificially
deflated due to the impact of COVID-19 lockdowns.
The provision of £31m (31 July 2024: £36m) is a discounted pre-tax provision
using discount rates, being the risk-free rate on US debt instruments for the
appropriate period. The deferred tax asset related to this provision is shown
within the deferred tax balance.
31 January 31 July
2025
2024
£m
£m
Gross provision 63 69
Discount (32) (33)
Discounted pre-tax provision 31 36
Taxation (7) (9)
Discounted post-tax provision 24 27
Titeflex Corporation litigation provision sensitivities
The significant uncertainty associated with the future level of claims and of
the costs arising out of related litigation means that there can be no
guarantee that the assumptions used to estimate the provision will result in
an accurate prediction of the actual costs that may be incurred. Therefore
the provision may be subject to potentially material revision from time to
time, if new information becomes available as a result of future events.
The projections incorporate a long-term assumption regarding the impact of
safe installation initiatives on the level of future claims. If the assumed
annual benefit of bonding and grounding initiatives were 0.5% higher, the
discounted pre-tax provision would be £1m (31 July 2024: £2m) lower, and if
the benefit were 0.5% lower, the discounted pre-tax provision would be £2m
(31 July 2024: £2m) higher.
The projections use assumptions of future claims that are based on both the
number of future settlements and the average amount of those settlements. If
the assumed average number of future settlements increased 10%, the discounted
pre-tax provision would rise by £2m (31 July 2024: £2m), with an equivalent
fall for a reduction of 10%. If the assumed amount of those settlements
increased 10%, the discounted pre-tax provision would rise by £2m (31 July
2024: £2m), also with an equivalent fall for a reduction of 10%.
Other non-headline and legacy
Legacy provisions comprise provisions relating to former business activities
and properties no longer used by Smiths. Non-headline provisions comprise
provisions that were disclosed as non-headline items when they were charged to
the consolidated income statement and provisions recognised as a result of
business acquisition. These provisions include non-headline reorganisation,
separation expenses, acquisition earnouts, disposal indemnities and litigation
in respect of old products and discontinued business activities.
14 Dividends
The following dividends were declared and paid in the period:
Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Dividends paid in the period 104 100
In the current period an ordinary final dividend of 30.2p (31 January 2024:
28.7p) was paid on 22 November 2024.
An interim dividend of 14.23 pence per share was declared by the Board on 24
March 2025 and will be paid to shareholders on 14 May 2025. This dividend has
not been included as a liability in these accounts and is payable to all
shareholders on the register of members at close of business on 4 April 2025.
The Company offers a Dividend Reinvestment Plan ("DRIP") enabling shareholders
to use their cash dividend to buy further shares in the Company - see
www.shareview.co.uk/info/drip
(https://urldefense.com/v3/__http:/www.shareview.co.uk/info/drip__;!!JUyETn1neQ!9U_3F94LE9h427CQXO9NKKcm4KE2XeJRwc6jI7sUk2SZZqrEc8DenhZhclOzlOWM4-2YWVWx94zk5dLK6onDjX1vK0VLgg$)
and our website for details. The DRIP is provided by Equiniti Financial
Services Limited. To participate in the DRIP, shareholders must submit their
election notice to be received by 22 April 2025 ("the Election Date").
Elections received after the Election Date will apply to dividends paid after
14 May 2025. Purchases under the DRIP are made on, or as soon as practicable
after, the dividend payment date and at prevailing market prices.
15 Acquisitions
During September 2024, the Group acquired 100% of the share capital of Wattco,
Inc. (19th September 2024) and acquired 100% of the share capital of Modular
Metal (1st October 2024).
Wattco is a manufacturer of industrial heating solutions and control panels
which will expand Flex-Tek's industrial heat business. The total cash
consideration for this acquisition was £66m, with deferred contingent
consideration valued at £12m. The deferred consideration is contingent on
the post-acquisition performance of the business and has been valued using a
probability weighted expected return model.
Modular Metal is a manufacturer of metal and flexible duct which will expand
Flex-Tek's HVAC business. The total cash consideration for this acquisition
was £31m, with deferred consideration being circa £4m.
Both acquisitions were financed using the Group's own cash resources. The
intangible assets recognised on acquisition comprise customer relationships,
trade names and non-compete agreements. Goodwill represents the expected
synergies from the strategic fit of the acquisition and the value of the
expertise in the assembled workforce.
From the date of acquisition to 31 January 2025, Wattco contributed £5m to
revenue and £1m to profit before taxation and amortisation. If the Group had
acquired Wattco at the beginning of the financial year, the acquisition would
have contributed an additional £6m to revenue and £2m to profit before
taxation and amortisation.
From the date of acquisition to 31 January 2025, Modular Metal contributed
£7m to revenue and £2m to profit before taxation and amortisation. If the
Group had acquired Modular Metal at the beginning of the financial year, the
acquisition would have contributed an additional £5m to revenue and £1m to
profit before taxation and amortisation.
The provisional balance sheets at the dates of acquisition are:
Wattco Modular Metal Total
£m
£m
£m
Non-current assets - acquired intangible assets 23 17 40
- plant and machinery 1 - 1
- right of use assets 3 1 4
Current assets - inventory 3 8 11
- trade and other receivables 1 - 1
- cash and cash equivalents 2 6 8
Current liabilities - trade and other payables (5) (1) (6)
Non-current liabilities - deferred tax (6) (3) (9)
- lease liability (3) (1) (4)
Net assets acquired 19 27 46
Goodwill on current period acquisitions 59 8 67
Cash paid during the period 66 31 97
Deferred/contingent consideration 12 4 16
Total consideration 78 35 113
Post balance sheet date acquisition
On 28 February 2025, the Group acquired 100% of the share capital of Duc-Pac,
for consideration of approximately £32m, financed using the Group's own cash
resources. Duc-Pac is a manufacturer of metal and flexible ducting products,
and will expand Flex-Tek's presence in the North-Eastern American HVAC market.
The acquisition has historically contributed £16m of annualised revenue and
£5m of annualised earnings before interest, tax, depreciation and
amortisation. Due to the short time between the completion of the acquisition
and the announcement date, it has not been possible to complete the
determination of the fair values of the acquired balance sheet.
16 Cash-flow from operating activities
Six months ended 31 January 2025 Six months ended 31 January 2024
Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
Operating profit/(loss) 269 (27) 242 246 (54) 192
Amortisation of intangible assets 13 27 40 4 25 29
Depreciation of property, plant and equipment 21 - 21 22 - 22
Depreciation of right of use assets 18 - 18 17 - 17
Loss/(gain) on fair value of contingent consideration - - - - 10 10
Loss on disposal of property, plant and equipment 2 - 2 - - -
Loss on disposal of financial asset - 3 3 - - -
Share-based payment expense 8 - 8 8 - 8
Retirement benefits 2 (5) (3) 4 - 4
(Increase) in inventories (48) - (48) (2) - (2)
(Increase)/decrease in trade and other receivables 35 1 36 (7) 3 (4)
(Decrease)/increase in trade and other payables (27) 2 (25) (38) (8) (46)
Increase/(decrease) in provisions 2 (29) (27) 2 (1) 1
Cash generated from operations 295 (28) 267 256 (25) 231
Interest paid (23) - (23) (22) - (22)
Interest received 19 - 19 11 - 11
Tax paid (58) - (58) (63) 11 (52)
Net cash inflow/(outflow) from operating activities 233 (28) 205 182 (14) 168
The split of tax payments between headline and non-headline only considers the
nature of payments made. No adjustment has been made for reductions in tax
payments required as a result of tax relief received on non-headline items.
Headline cash measures - continuing operations
The Group measure of headline operating cash excludes interest and tax, and
includes capital expenditure supporting organic growth. The Group uses
operating cash-flow for the calculation of cash conversion and free cash-flow
for management of capital purposes. See note 19 for additional details.
The table below reconciles the Group's net cash-flow from operating activities
to headline operating cash-flow and free cash-flow:
Six months ended 31 January 2025 Six months ended 31 January 2024
Headline Non-headline Total Headline Non-headline Total
£m
£m
£m
£m
£m
£m
Net cash inflow/(outflow) from operating activities 233 (28) 205 182 (14) 168
Include:
Expenditure on capitalised development, other intangible assets and property, (41) - (41) (38) - (38)
plant and equipment
Repayment of lease liabilities (21) - (21) (19) - (19)
Investment in financial assets relating to operating activities - - - 1 - 1
Free cash-flow 143 112
Exclude:
Investment in financial assets relating to operating activities - - - (1) - (1)
Repayment of lease liabilities 21 - 21 19 - 19
Interest paid 23 - 23 22 - 22
Interest received (19) - (19) (11) - (11)
Tax paid 58 - 58 63 - 63
Operating cash-flow 254 (28) 226 218 (14) 204
Headline cash conversion
Headline operating cash conversion for continuing operations is calculated as
follows:
Six months Six months ended
ended
31 January 2024
31 January 2025
£m
£m
Headline operating profit 269 246
Headline operating cash-flow 254 218
Headline operating cash conversion 94% 89%
Reconciliation of free cash-flow to total movement in cash and cash
equivalents
Six months Six months ended
ended
31 January 2024
31 January 2025
£m
£m
Free cash-flow 143 112
Acquisition of businesses (89) (65)
Disposal of subsidiaries - post-sale expenses (12) -
Disposal of financial assets 53 -
Other net cash-flows used in financing activities (note: repayment of lease (168) (146)
liability is included in free cash-flow)
Decrease in cash and cash equivalents (73) (99)
17 Related party transactions
The related party transactions in the period were consistent with the nature
and size of transactions disclosed in the Annual Report for the year ended 31
July 2024.
18 Share capital and share premium
Number of Issued capital Consideration
shares
£m
£m
Ordinary shares of 37.5p each
At 31 July 2023 349,302,990 131
Share buybacks (1,764,660) (1) (29)
At 31 January 2024 347,538,330 130
At 31 July 2024 345,097,794 130
Share buybacks (2,485,179) (1) (44)
At 31 January 2025 342,612,615 129
Share buybacks
On 26 March 2024, the Company announced a £10 0m share buyback programme to
purchase ordinary shares in the capital of the Company. The first £50m
tranche completed on 6 September 2024. Under this scheme, 534,006 ordinary
shares of 37.5p were repurchased during the period, for a total consideration
of £9,389,882.
On 13 November 2024, the Company announced the increase in its original March
2024 share buyback programme from £100m to £150m. Under the second £100m
tranche, 1,951,173 ordinary shares of 37.5p each were repurchased during the
period, for a total consideration £34,083,668, of which 27,000 shares with a
value of £504,207 were yet to settle and be cancelled.
A further 2,281,502 ordinary shares have been repurchased during the period of
1 February 2025 to 7 March 2025. The programme completed on 21 March 2025.
On 31 January 2025, the Company announced an increase in the £150m share
buyback programme to £500m. Following completion of the previous £150m
tranche, the additional £350m will commence and is expected to be completed
by the end of calendar year 2025.
19 Alternative performance measures
The Group uses several alternative performance measures ('APMs') in order to
provide additional useful information on underlying trends and the performance
and position of the Group. APMs are non-GAAP and not defined by IFRS;
therefore they may not be directly comparable with other companies' APMs and
should not be considered a substitute for IFRS measures.
The Group uses APMs which are common across the industry, in both planning and
reporting, to enhance the comparability of information between reporting
periods and business units. The measures are also used in discussions with the
investment analyst community and by credit rating agencies.
We have identified and defined the following key measures which are used
within the business by management to assess the performance of the Group's
businesses:
APM term Definition and purpose
Capital employed Capital employed is a non-statutory measure of invested resources. It
comprises statutory net assets and is adjusted as follows:
· to add goodwill recognised directly in reserves in respect of
subsidiaries acquired before 1 August 1998;
· to eliminate the Group's investment in ICU Medical, Inc equity and
deferred consideration contingent on the future share price performance of ICU
Medical, Inc; and
· to eliminate post-retirement benefit assets and liabilities and
non-headline litigation provisions related to John Crane, Inc. and Titeflex
Corporation, both net of deferred tax, and net debt.
It is used to monitor capital allocation within the Group. See below for a
reconciliation from net assets to capital employed.
Capital expenditure Comprises additions to property, plant and equipment, capitalised development
and other intangible assets, excluding assets acquired through business
combinations; see notes 7 & 8 for an analysis of capital expenditure. This
measure quantifies the level of capital investment into ongoing operations.
Divisional headline operating profit ('DHOP') DHOP comprises divisional earnings before central costs, finance costs and
taxation. DHOP is used to monitor divisional performance. A reconciliation of
DHOP to operating profit is shown in note 2.
Free cash-flow Free cash-flow is calculated by adjusting the net cash inflow from operating
activities to include capital expenditure, the repayment of lease liabilities,
the proceeds from the disposal of property, plant and equipment and the
investment in financial assets relating to operating activities and pensions
financing outstanding at the balance sheet date. The measure shows cash
generated by the Group before discretionary expenditure on acquisitions and
returns to shareholders. A reconciliation of free cash-flow is shown in note
16.
Gross debt Gross debt is total borrowings (bank, bonds and lease liabilities). It is used
to provide an indication of the Group's overall level of indebtedness. See
note 11 for an analysis of gross debt.
Headline The Group has defined a 'headline' measure of performance that excludes
material non-recurring items or items considered non-operational/trading in
nature. Items excluded from headline are referred to as non-headline items.
This measure is used by the Group to measure and monitor performance excluding
material non-recurring items or items considered non-operational. See note 3
for an analysis of non-headline items.
Headline EBITDA EBITDA is a widely used profit measure, not defined by IFRS, being earnings
before interest, taxation, depreciation and amortisation. See below for a
reconciliation of headline operating profit to headline EBITDA.
Net debt Net debt is total borrowings (bank, bonds and lease liabilities) less cash
balances and derivatives used to manage the interest rate risk and currency
profile of the debt. This measure is used to provide an indication of the
Group's overall level of indebtedness and is widely used by investors and
credit rating agencies. See note 11 for an analysis of net debt.
Non-headline The Group has defined a 'headline' measure of performance that excludes
material non-recurring items or items considered non-operational/trading in
nature. Items excluded from headline are referred to as non-headline items.
This is used by the Group to measure and monitor material non-recurring items
or items considered non-operational. See note 3 for an analysis of
non-headline items.
Operating cash-flow Comprises free cash-flow and excludes cash-flows relating to the repayment of
lease liabilities, interest and taxation. The measure shows how cash is
generated from operations in the Group. A reconciliation of operating
cash-flow is shown in note 16.
Operating profit Operating profit is earnings before finance costs and tax. A reconciliation of
operating profit to profit before tax is shown on the consolidated income
statement. This common measure is used by the Group to measure and monitor
performance.
Return on capital Smiths ROCE is calculated over a rolling 12-month period and is the percentage
employed ('ROCE') that headline operating profit represents of the monthly average capital
employed on a rolling 12-month basis. This measure of return on invested
resources is used to monitor performance and capital allocation within the
Group. See below for Group ROCE and note 2 for divisional headline operating
profit and divisional capital employed.
The key performance indicators ('KPIs') used by management to assess the
performance of the Group's businesses are as follows:
KPI term Definition and purpose
Dividend cover - headline Dividend cover is the ratio of headline earnings per share (see note 4) to
dividend per share (see note 14). This commonly used measure indicates the
number of times the dividend in a financial year is covered by headline
earnings.
Earnings per share ('EPS') growth EPS growth is the growth in headline basic EPS (see note 4), on a reported
basis. EPS growth is used to measure and monitor performance.
Free cash-flow (as a % of operating profit) This measure is defined as free cash-flow divided by headline operating profit
averaged over a three-year performance period. This cash generation measure is
used by the Group as a performance measure for remuneration purposes.
Greenhouse Gas (GHG) Emissions Reduction GHG reduction is calculated as the percentage change in normalised Scope 1
& 2 GHG emissions. Normalised is calculated as tCO(2)e per £m of revenue.
This measure is used to monitor environmental performance.
Gross Vitality Gross Vitality is calculated as the percentage of revenue derived from new
products and services launched in the last five years. This measure is used to
monitor the effectiveness of the Group's new product development and
commercialisation.
My Say Engagement Score The overall score in our My Say employee engagement survey. The biannual
survey is undertaken Group-wide. This measure is used by the Group to monitor
employee engagement.
Operating cash conversion Comprises cash-flow from operations before non-headline items, as a percentage
of headline operating profit. This measure is used to show the proportion of
headline operating profit converted into cash-flow from operations before
investment, finance costs, non-headline items and taxation. The calculation is
shown in note 16.
Operating profit margin Headline operating profit margin is calculated by dividing headline operating
profit by revenue. This measure is used to monitor the Group's ability to
drive profitable growth and control costs.
Organic growth Organic growth adjusts the movement in headline performance to exclude the
impact of foreign exchange and acquisitions. Organic growth is used by the
Group to aid comparability when monitoring performance.
Organic revenue growth (Remuneration) Organic revenue growth (remuneration) is compounded annualised growth in
revenue after excluding the impact of foreign exchange and acquisitions. The
measure used for remuneration differs from organic revenue growth in that it
is calculated on a compounded annualised basis. This measure has historically
been used by the Group for aligning remuneration with business performance.
Percentage of senior leadership positions taken by females Percentage of senior leadership positions taken by females is calculated as
the percentage of senior leadership roles (G14+ group) held by females. This
measure is used by the Group to monitor diversity performance.
R&D cash costs as a This measure is defined as the cash cost of research and development
% of sales activities (including capitalised R&D, R&D directly charged to the
P&L and customer-funded projects) as a percentage of revenue. Innovation
is an important driver of sustainable growth for the Group and this measures
our investment in research and development to drive innovation.
Recordable Incident Rate (RIR) Recordable Incident Rate is calculated as the number of recordable incidents -
where an incident requires medical attention beyond first aid - per 100
colleagues, per year across Smiths. This measure is used by the Group to
monitor health and safety performance.
Capital employed
Capital employed is a non-statutory measure of invested resources. It
comprises statutory net assets adjusted to add goodwill recognised directly in
reserves in respect of subsidiaries acquired before 1 August 1998 of £478m
(31 January 2024: £478m), and to eliminate post-retirement benefit assets and
liabilities, litigation provisions relating to John Crane, Inc. and Titeflex
Corporation, both net of related tax, the investment in ICU Medical, Inc.
equity, the deferred consideration contingent on ICU Medical, Inc's share
price and net debt.
Notes 31 January 31 January
2025
2024
£m
£m
Net assets 2,295 2,126
Adjust for:
Goodwill recognised directly in reserves 478 478
Retirement benefit assets and obligations 6 (25) 13
Tax related to retirement benefit assets and obligations 18 19
John Crane, Inc. litigation provisions and related tax 158 167
Titeflex Corporation litigation provisions and related tax 24 26
Investment in ICU Medical, Inc equity - (180)
Deferred contingent consideration - (3)
Net debt 299 505
Capital employed 3,247 3,151
Return on capital employed
Notes 31 January 31 January
2025
2024
£m
£m
Headline operating profit for previous 12 months 549 506
Average capital employed 3,216 3,218
Return on capital employed ("ROCE") 17.1% 15.7%
Credit metrics
The Group monitors the ratio of net debt to headline earnings before interest,
tax, depreciation and amortisation as part of its management of credit
ratings. This ratio is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation
("headline EBITDA")
Notes Six months ended Six months ended
31 January 2025
31 January 2024
£m
£m
Headline operating profit 2 269 246
Exclude:
- depreciation of property, plant and equipment 8 21 22
- depreciation of right of use assets 9 18 17
- amortisation of development costs 7 6 1
- amortisation of software, patents and intellectual property 7 7 3
Headline EBITDA 321 289
Annualised headline EBITDA
Notes Year ended Year ended
31 January 2025
31 January 2024
£m
£m
Headline EBITDA for the period 321 289
Add: Headline EBITDA for the previous year 611 584
Exclude: Headline EBITDA for the first six (289) (284)
months of the previous year
Annualised headline EBITDA 643 589
Ratio of net debt to annualised headline EBITDA
Year ended Year ended
31 January 2025
31 January 2024
£m
£m
Annualised headline EBITDA 643 589
Net debt 299 505
Ratio of net debt to headline EBITDA 0.5 0.9
20 Post balance sheet events
On 28 February 2025, the Group completed the acquisition of Duc-Pac, see note
15 for details.
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