REG - Smiths Group PLC - Smiths Group FY25 Results Statement
Tue 07:00
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RNS Number : 3258A Smiths Group PLC 23 September 2025
SMITHS GROUP PLC - FULL YEAR RESULTS FOR 12 MONTHS ENDED 31 JULY 2025
Pioneers of progress - engineering a better future
Strong performance, ahead of guidance, and strategic actions progressing
Delivering on our value creation strategy
· Group(1) delivered strong performance ahead of twice-raised growth
guidance delivering +8.9% organic(2) revenue growth; +60bps organic operating
profit margin expansion to 17.4%; +14.8% headline(3) EPS growth; 18.1% ROCE
and 99% operating cash conversion
· Continuing operations(1) delivered +7.2% organic revenue growth;
17.3% operating profit margin and 18.3% ROCE
· Disciplined capital allocation and balance sheet strength: dividend
+5.1%; £398m of £500m share buyback completed to 10 September; £121m
invested in accretive acquisitions; 0.6x net debt/headline EBITDA
· Progressing well with the previously outlined strategic actions to
focus Smiths as a high-performance industrial engineering business, to enhance
growth, improve the financial profile and deploy capital to deliver strong
cashflow and returns
· Separation processes for Smiths Interconnect and Smiths Detection
progressing; continue to expect an announcement on Smiths Interconnect by end
of December 2025
· Acceleration Plan on track - £22m of costs incurred in FY2025, with
initial benefits being delivered; expected run-rate of £40-45m of benefits
for FY2027 onwards
· FY2026 outlook (continuing operations) - expect organic revenue
growth of 4-6%, with continuing margin expansion; remain confident in
delivering our enhanced medium-term financial targets
Headline(3) FY2025 FY2024 Reported Organic(2)
Group(1)
Group revenue £3,336m £3,132m +6.5% +8.9%
Group operating profit £580m £526m +10.3% +13.1%
Group operating profit margin(4) 17.4% 16.8% +60bps +60bps
Basic EPS 121.2p 105.5p +14.8%
ROCE(4) 18.1% 16.4% +170bps
Operating cash conversion(4) 99% 97% +2pps
Continuing operations
Revenue £2,915m £2,778m +5.0% +7.2%
Operating profit £505m £477m +6.0% +8.5%
Operating profit margin 17.3% 17.1% +20bps +20bps
ROCE 18.3% n/a -
Statutory FY2025 FY2024 Reported
Revenue £2,915m £2,778m +5.0%
Operating profit £410m £369m +11.4%
Profit for the year (after tax) £276m £222m +24.3%
Basic EPS 85.7p 72.3p +18.5%
Dividend per share 46.0p 43.75p +5.1%
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) Group refers to Smiths Group including all four businesses; continuing
operations refers to the combination of John Crane, Flex-Tek and Smiths
Detection (ie excludes Smiths Interconnect) and Smiths refers to the
combination of John Crane and Flex-Tek only
(2) Organic is headline adjusted to exclude the effects of foreign exchange
and acquisitions.
(3) 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.
(4) Alternative Performance Measures (APMs) and Key Performance Indicators
(KPIs) are defined in note 30 to the financial statements.
Roland Carter, Chief Executive Officer, commented:
"This has been another successful year for the Group, building on our strong
track record of consistent growth and returns. We exceeded our twice-raised
organic revenue growth guidance, delivering +8.9% growth, and operating margin
was 17.4%, at the top of our guided range. This strong performance reflects
the quality of our business and agility managing ongoing macro-economic
uncertainties.
"Our order book and momentum in the business support our confidence in our
positive outlook for FY2026, and we expect organic revenue growth of 4-6% and
continuing margin expansion towards our medium-term targets.
"FY2025 has been a pivotal year and the strategic actions we have announced to
focus Smiths as a world-class industrial engineering company to unlock
significant value and enhance returns to shareholders are well underway.
"None of this would be possible without our dedicated people, and I would like
to thank colleagues across Smiths for their support, diligence and commitment,
particularly as we navigate a period of rapid change."
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).
Broadcast interview
Smiths Group plc CEO, Roland Carter, has been interviewed by business
journalist Ian King on the key elements of today's results. The link is here:
https://smiths.com/investors/results-reports-and-presentations
(https://smiths.com/investors/results-reports-and-presentations)
Investor enquiries Media enquiries
Siobhán Andrews, Smiths Tom Steiner, Smiths
+44 (0)7920 230093 +44 (0) 7787 415891
siobhan.andrews@smiths.com (mailto:siobhan.andrews@smiths.com) tom.steiner@smiths.com (mailto:smiths@fticonsulting.com)
Ana Pita da Veiga, Smiths Alex Le May, FTI Consulting
+44 (0)7702 443312
+44 (0)7386 689442
smiths@fticonsulting.com (mailto:smiths@fticonsulting.com)
ana.pitadaveiga@smiths.com (mailto:ana.pitadaveiga@smiths.com)
About Smiths
We focus on solving the toughest problems for our customers, helping address
critical global needs such as decarbonisation and the ever-increasing demand
for process and energy efficiency. We use our deep domain engineering
expertise and strong practical knowledge to develop mission-critical products
and services which support customers in energy, construction and industrial
markets. We share the same goals: to build resilient businesses and create
value from what we do.
We are pioneers of progress. Engineering a better future, we drive efficiency
for customers in mission-critical situations.
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 engineering. For more information
visit www.smiths.com
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
16 October 2025 Final Ex-Dividend Date
17 October 2025 Final Dividend Record Date
19 November 2025 Q1 Trading Update and Annual General Meeting
21 November 2025 Final Dividend Payment Date
SUMMARY
We are pleased to report another year of strong financial performance,
extending our track record to four consecutive years of consistent organic
revenue growth averaging +7.4%. Group organic revenue grew +8.9%, with organic
operating profit growth of +13.1%, a headline operating profit margin of 17.4%
and headline EPS growth of +14.8%. ROCE improved significantly to 18.1% and
operating cash conversion was strong at 99%. Growth was ahead of twice-raised
guidance of +6-8% and operating profit margin was at the top end of the guided
range of a +40-60bps expansion. We exceeded our guidance despite the uncertain
macro and tariff environment, a challenging US construction market and
interruption from the cyber security incident in January, with the most
notable impact being in John Crane.
We deployed capital dynamically, in line with our allocation framework,
investing 4.3% of revenue organically in RD&E (research, development and
engineering) and inorganically, spending £121m on three margin-accretive
acquisitions in Flex-Tek. Reflecting our commitment to delivering attractive
returns to our shareholders, we enhanced returns to shareholders. We have
executed £398m of the £500m share buyback as of 10 September and are
announcing a +5.1% increase in the dividend. This represents the 74(th)
consecutive year of dividend payments to our shareholders. Our balance sheet
remains strong with net debt/headline EBITDA of 0.6x and we enter the next
phase of our growth and value creation journey from a position of financial
strength.
In January, we announced strategic actions designed to maximise value
creation, unlock value in the portfolio and enhance returns to shareholders.
The separation processes of Smiths Interconnect and Smiths Detection are
progressing, with Smiths Interconnect now reported as discontinued operations.
The Acceleration Plan to deliver productivity and capability enhancements and
a streamlined cost base, continues at pace, and will help support the
achievement of the new enhanced medium-term financial targets that we set out
in March.
Smiths is continuing to evolve, and the drivers of our success endure. Our
purpose, values, culture and commitment to operational excellence are the
foundations of how we operate, and we continue to invest in, develop and
support our people. It is their talent and commitment that has delivered the
positive results we are announcing today.
STRATEGY UPDATE
Our strategy is to be a focused, efficient and value creating industrial
engineering company, operating in the attractive and growing market segments
of energy, industrial and construction.
Smiths Interconnect and Smiths Detection separation processes
The separation processes for Smiths Interconnect and Smiths Detection are
progressing with pace and purpose, with separation workstreams in train for
both businesses. A formal sales process is underway for Smiths Interconnect. A
parallel process for both a UK demerger and a sale is being run in relation to
Smiths Detection, with a clear focus to maximise value creation and execution
certainty.
We remain on track to announce a sale of Smiths Interconnect by the end of
calendar year 2025, with the separation of Smiths Detection by way of a UK
demerger or sale to follow.
Our business model going forward
Smiths specialises in high-performance technologies in flow management and
thermal solutions with leading positions in attractive, growing market
segments aligned with structural megatrends. We have valued customer
relationships based on customised technologies, products and solutions with
more than 70% aftermarket, recurring or repeatable revenue. Smiths has a
high-performance culture centred on values, innovation and excellence. It also
has a strong financial profile of sustainable growth, high returns and good
cash generation with both organic and inorganic expansion opportunities.
Our businesses are exposed to similar end market trends and are underpinned by
common capabilities, resources and assets that provide competitive advantage.
Supporting them is a lean corporate centre providing support and focusing on
core competencies including strategy, capital allocation, M&A and
compliance. Common activities and best practice such as supply chain
management, procurement, Smiths Excellence continuous improvement and global
business services are coordinated across Smiths, with product development,
customer focus and operational delivery sitting within the businesses.
Sustainable organic growth drivers
Our key end markets and adjacencies, and their underlying megatrends and
geo-political dynamics, ensure we remain well positioned to access market
growth opportunities. Key trends underpinning demand for our products include
the need for secure energy, emissions reductions, and cleaner industrial
processes, as well as the increased demand for greater efficiency and
productivity improvements by our customers.
In our key end markets of energy, industrial and construction, these trends
underpin a market compound annual growth rate (CAGR) forecast of 4-5% over the
next decade.
Our medium-term targets, announced in March, anticipate above market growth,
driven by:
· Leveraging our existing portfolio of leading brands - supported by
customer intimacy and leading aftermarket expertise;
· Commercial excellence - enhancing operational processes, to deliver
exceptional customer service and drive value add for us and our customers;
· Innovation and new product development - investment in new products,
innovation and commercialisation to support customer needs; and
· Market adjacencies - targeting higher growth and higher margin market
sub-segments across geographies, products or customers.
Organic growth will be augmented with disciplined value accretive M&A in
core and adjacent markets, as demonstrated by Flex-Tek's strong track record,
with a further three businesses added in FY2025.
Margin expansion drivers
We also have several levers supporting our margin expansion ambitions:
· Operating leverage - drive a higher contribution margin as we grow
revenue and build scale;
· Acceleration Plan - execute initiatives that deliver productivity and
capability enhancements, including end-to-end process improvements and
optimising operational footprint. It also targets a lean corporate centre with
central costs remaining at 1.5-1.7% of revenue, following completion of the
separation processes;
o In FY2025, we saw initial benefits and remain on track to deliver £40-45m
annualised benefits in FY2027 and beyond, with approximately half expected in
FY2026. In the year, we incurred £22m of cost, with the remainder of the
total £60-65m expected in FY2026. Around 2/3 relates to the retained
businesses.
· Operational excellence - deliver ongoing efficiency savings and
productivity improvements supported by our continuous improvement programme,
Smiths Excellence; and
· Portfolio - capturing higher margin segments of our markets, for
example a greater share of aftermarket, as well as high-grading the portfolio
towards higher growth and returns.
New enhanced medium-term targets
In March, we announced new enhanced medium-term financial targets. These
targets reflect the superior financial profile of the remaining businesses,
with higher growth, margin and returns and further improvement expected from
Smiths Excellence and the Acceleration Plan, driving enhanced returns and
value creation. The new targets are through-cycle and apply from FY2027
following the completion of both separation processes, with FY2026 being a
transition year towards these new ranges.
Medium-term targets (through-cycle) from FY2027 New target Versus prior targets
Organic revenue growth 5-7% (+ M&A) Increased
Headline EPS growth >10% (+ M&A) Increased
Headline operating profit margin 21-23% Increased
ROCE >20% Increased
Headline operating cash conversion ~100% Maintained
Disciplined capital allocation
In support of these targets, our capital allocation strategy will continue to
prioritise disciplined investment for growth, both organically and
inorganically, and deliver enhanced returns to shareholders, while maintaining
a strong balance sheet:
· Organic investment - investing in capital expenditure and in RD&E
for new product development and commercialisation to support our customers and
drive organic revenue growth, spending ~3-4% of revenue on RD&E;
· Value-accretive acquisitions - investing in core and adjacent markets
to augment organic growth;
· Dividends - a progressive dividend, balancing the cashflow needs of
the business against the delivery of value to our shareholders; and
· Enhanced returns to shareholders - returning excess cash to
shareholders, via share buyback or other appropriate mechanism.
Our intent is to maintain an investment grade credit rating and we will
balance this alongside our desire to have an efficient balance sheet. Our
credit rating is underpinned by our financial track record, leading market
positions, significant share of recurring revenue, including from aftermarket
services, and importantly our financial discipline and commitment to the
rating.
As we progress the separation of Smiths Interconnect and Smiths Detection, we
remain committed to returning a large portion of disposal proceeds to
shareholders, with a decision on the scale that will be returned to be made
when we have certainty on the timing and magnitude of sale proceeds. The
proportion returned will balance our cashflow generation and the use of sales
proceeds in the context of our organic investment in RD&E, acquisition
pipeline, dividend policy and leverage.
FY2026 outlook - continuing operations
We expect organic revenue growth (on a continuing operations basis) to be in
the 4-6% range, noting the strong first quarter comparator in FY2025. This
outlook reflects the strength of our order book, as well as the ongoing macro
environment uncertainty, with tariffs and increased geo-political risks
causing market instability.
· Improving growth for John Crane is supported by the recent momentum
coming into the year, our strong order book and improved execution;
· For Flex-Tek, our outlook assumes a continuing subdued view on US
construction based on current leading indicators (housing starts, building
permits and builders confidence), alongside a strong order book in aerospace;
and
· Smiths Detection's growth will continue to be supported by the
aviation upgrade programme, albeit at a moderated pace compared with FY2025.
We expect continuing margin expansion to be achieved through operating
leverage, the benefits of the Acceleration Plan and continued efficiency
savings supported by Smiths Excellence. This also incorporates the net
negative impact from US tariffs currently in place.
We expect headline cash conversion in the mid-nineties percent.
FY2025 BUSINESS PERFORMANCE
Group performance versus FY2025 guidance
In FY2025, Smiths delivered strong growth, margin expansion, cash flow and
returns. On a Group basis, the performance was ahead of our FY2025 guidance.
FY2025 guidance Group FY2025 outcome
Organic revenue growth Upper end of 6-8% +8.9%
Headline operating profit margin 40-60 bps expansion +60bps to 17.4%
Headline operating cash conversion ~90% 99%
Group revenue grew +8.9% on an organic basis and +6.5% on a reported basis to
£3,336m (FY2024: £3,132m). This included £(108)m of negative foreign
exchange translation and +£41m from acquisitions, including Modular Metal
Fabricators, Inc (Modular Metal), Wattco, Inc (Wattco), Duc-Pac Corporation
(Duc-Pac) in FY2025 and £5m from the Heating and Cooling Products (HCP)
acquisition made in August 2023. Continuing operations revenue increased +7.2%
on an organic basis and 5.0% on a reported basis.
£m FY2024 Foreign exchange Acquisitions Organic FY2025
movement
Revenue (Group) 3,132 (108) 41 271 3,336
Revenue (continuing operations) 2,778 (97) 41 193 2,915
We continue to extend our track record of consistent organic growth. All
businesses contributed to growth this year, and we have now delivered more
than four consecutive years of organic revenue growth, with average growth of
+7.4% over this period.
Organic revenue growth (by business) H1 2025 H2 2025 FY2025
John Crane +3.8% +2.2% +3.0%
Flex-Tek +2.5% +6.3% +4.4%
Smiths +3.3% +3.9% +3.6%
Smiths Detection +15.3% +15.1% +15.2%
Smiths (continuing operations) +6.9% +7.5% +7.2%
Smiths Interconnect +26.8% +18.9% +22.5%
Group +9.1% +8.8% +8.9%
We exceeded our organic revenue growth guidance despite the uncertain macro
environment, a challenging US construction market and interruption from the
now resolved cyber security incident in January, with the most notable impact
being in John Crane.
· John Crane's growth was led by good original equipment (OE) sales,
particularly in the first half. Growth in the second half was constrained by a
number of operational delivery challenges resulting from the upgrade in
machining and testing capabilities and exacerbated by a longer than expected
recovery from the January cyber incident. In H2, the business saw sequential
quarterly improvement in performance;
· Flex-Tek delivered good growth in its construction business, despite
the subdued US construction market, with continued strength in aerospace
reflecting new build programmes;
· Smiths Detection's growth reflected notable strength in aviation as
the airport checkpoint upgrade programmes continued, partly offset by lower
revenue in Other Detection Systems;
· Smiths Interconnect's organic revenue increased strongly in the year,
supported by a recovery in the semiconductor market and an improved market for
connectors, especially in the faster growing aerospace and defence segments,
and the benefit of new product launches.
Organic growth is supported by new product development and commercialisation
and improved pricing. In the year, +165bps of growth was delivered from new
products including John Crane's mechanical seal designed specifically for
ethane and ethylene pipeline operators; initial sales from Flex-Tek's new
sealed duct system and the broadening of Smiths Detection's digital solutions,
in particular its iCMore threat detection software.
We continue to focus on improving operational leverage and enhancing
productivity and efficiency throughout our operations. Group headline
operating profit rose to £580m (FY2024: £526m); +13.1% (+£66m) on an
organic basis, and +10.3% (+£54m) on a reported basis. Acquisitions
contributed £10m to operating profit and were accretive to margin.
For continuing operations, headline operating profit of £505m (FY2024:
£477m) was 8.5% higher organically and 6.0% higher on a reported basis.
FY2024 Foreign Acquisitions Organic FY2025
exchange movement
£m
Headline operating profit (Group) 526 (22) 10 66 580
Headline operating profit margin (Group) 16.8% (10)bps 10bps 60bps 17.4%
Headline operating profit (continuing operations) 477 (21) 10 39 505
Headline operating profit margin (continuing operations) 17.1% (10)bps 10bps 20bps 17.3%
Group headline operating profit margin was 17.4%, up +60bps on both an organic
and a reported basis. Continuing operations headline operating profit margin
was 17.3%. This reflected volume growth, pricing ahead of inflation, benefits
of efficiency savings, including Smiths Excellence, partially offset by
product and business mix, and the impact of tariffs.
The overall margin performance was at the top end of the guided range of
+40-60bps expansion.
Headline operating profit margin (by business) FY2024 FY2025
John Crane 23.2% 23.8%
Flex-Tek 20.5% 19.5%
Smiths 19.5% 19.6%
Smiths Detection 11.9% 12.7%
Smiths (continuing operations) 17.1% 17.3%
Smiths Interconnect 13.9% 17.8%
Group 16.8% 17.4%
· A +60bps margin expansion in John Crane was driven by cost
efficiency, the benefits of Smiths Excellence and other productivity
improvements, partly offset by adverse foreign exchange;
· Margin decline at Flex-Tek reflected operating leverage and Smiths
Excellence savings being offset by adverse mix, with a lower contribution from
higher margin industrial heating contracts. It also reflected an £8m in-year
charge for a non-material balance sheet overstatement related to an isolated
US industrial site, with the issue thoroughly investigated and now resolved;
· Margin improvement in Smiths Detection was driven by notably higher
volumes, alongside pricing and mix benefits, as well as continued enhancement
in operational efficiency.
· Margin improvement in Smiths Interconnect was driven by higher
pricing and volume, alongside positive mix effects, efficiency improvements
and Smiths Excellence benefits.
The Group margin improvement also reflected initial benefits from the
Acceleration Plan, with savings mostly in John Crane and a reduction in
central costs.
Group ROCE increased +170 bps to 18.1% (FY2024: 16.4%), reflecting the higher
profitability and efficient use of capital. ROCE on a continuing operations
basis was 18.3%.
Group headline EPS grew +14.8% to 121.2p (FY2024: 105.5p). This included a
headline tax charge of £137m (25.0% effective tax rate) (FY2024: £122m,
25.0%), a £7m reduction in headline finance costs and the benefit of the
share buyback programme, partially offset by foreign exchange impact.
Group headline operating cash conversion was 99% (FY2024: 97%), supported by
the year-on-year improvement in profit. Headline operating cashflow was £576m
(FY2024: £509m) and free cashflow generation increased +12.8% to £336m
(FY2024: £298m) or 58% of headline operating profit (FY2024: 57%).
Discontinued operations
Smiths Interconnect has been classified as discontinued operations, and the
assets and liabilities have been classified as held for sale. The headline
profit after tax from the discontinued operations was £57m (FY2024: £35m),
and £16m (FY2024: £29m) on a statutory basis.
CAPITAL ALLOCATION
We take a disciplined approach to our use of capital; investing in our
businesses to support organic growth, pursuing strategic and disciplined
acquisitions, adopting a progressive dividend policy 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. Our dividend policy aims to increase
dividends in line with growth in earnings and cashflow, with the objective of
maintaining minimum dividend cover of around two times.
Organic investment
During the year, the Group invested £143m in RD&E (FY2024: £150m), of
which £120m (FY2024: £114m) was an income statement charge, £4m was
capitalised (FY2024: £14m) all in Smiths Detection, primarily next-generation
hold and cabin baggage screening, and £19m (FY2024: £22m) was funded by
customers, largely related to Smiths Detection. This includes £46m spend
(FY2024: £50m) on customer-specific engineering-related projects
predominantly in John Crane. Total spend for FY2025 represents 4.3% of sales
(FY2024: 4.8%).
Capex decreased to £80m (FY2024: £86m) and included planned investment in
capacity and automation at John Crane and initiatives under the Acceleration
Plan.
M&A
During the year, we completed the acquisitions of Modular Metal, Wattco and
Duc-Pac with net acquisition spend of £121m at attractive valuation multiples
and accretive margins. The acquisitions extended Flex-Tek's geographical reach
within its HVAC business and broadened its portfolio of energy efficient
thermal solutions for industrial applications with an operating margin
accretive to that of Flex-Tek.
Shareholder returns - share buyback and dividend
As announced on 31 January 2025, we increased our share buyback programme to
£500m. Since the start of the programme in March 2024 up to 31 July 2025, we
had completed £349m. A further £49m has been completed since the year-end up
to 10 September. The remainder is expected to be completed by the end of
calendar year 2025.
The Board is recommending a final dividend of 31.77p, bringing the total
dividend for the year to 46.0p (FY2024: 43.75p), a year-on-year increase of
+5.1%. The final dividend will be paid on 21 November 2025 to shareholders on
the register at close of business on 17 October 2025.
Net debt
Group net debt at 31 July 2025 increased to £441m (FY2024: £213m) with a net
debt to headline EBITDA ratio of 0.6x (FY2024: 0.3x), with the year-on-year
increase reflecting the share buyback programme, net acquisition spend of
£121m, partly offset by net proceeds of £53m from the sale of the remaining
ICU Medical, Inc shareholding. On a continued operations basis, net debt was
£462m (FY2024: £213m).
Net headline finance costs for the year decreased to £31m (FY2024: £38m),
principally due to interest on higher average cash balances.
As at 31 July 2025, Group borrowings were £677m (FY2024: £659m) comprising a
€650m bond which matures in February 2027 and £118m of lease liabilities.
There are no financial covenants associated with these borrowings. Cash and
cash equivalents as at 31 July 2025 were £226m (FY2024: £459m).
On a continued operations basis, borrowings were £667m (FY2024: £659m)
comprising the €650m bond and £108m of lease liabilities. Cash and cash
equivalents as at 31 July 2025 were £195m (FY2024: £459m).
Together with an $800m (£605m at the year-end exchange rate) revolving credit
facility, which matures in May 2030 and a £200m revolving credit facility,
which matures in June 2027, total liquidity was £1bn at the end of the
period.
STATUTORY RESULTS
Income statement and cashflow
The £95m difference (FY2024: £108m) between continuing operations headline
operating profit of £505m and statutory profit of £410m is non-headline
items. The largest of these relate to the amortisation of acquired intangible
assets of £50m, a £12m net credit for asbestos litigation provision in John
Crane Inc, and £22m of cost in relation to the Acceleration Plan. Smiths
Detection separation costs amounted to £10m and £4m costs were charged in
relation to cyber remediation costs. A £15m impairment charge was recognised
related to prior-year adjustments for non-material working capital balances
which were assessed to be overstated at a standalone Flex-Tek US industrials
business, with the issue thoroughly investigated and now resolved.
The Smiths Interconnect discontinued operation headline operating profit for
the period was £75m (FY2024: £49m), to bring the total Group headline
operating profit to £580m (FY2024: £526m). A further £40m (FY2024: £3m)
was charged through non-headline for Smiths Interconnect specific items,
including a £30m impairment as a result of an agreement to sell its US
sub-systems business unit and £8m of separation costs.
Total Group operating profit (including discontinued operations) for the
period was £445m (FY2024: £415m). Total finance costs for the Group were
£35m, £8m lower than the prior year (FY2024: £43m).
The total Group effective tax rate (including discontinued operations) was
28.8% (FY2024: 32.5%) and includes a non-headline tax credit of £19m (FY2024:
£1m). Statutory profit after tax for the Group was £292m (FY2024: £251m)
and statutory basic EPS was 85.7p (FY2024: 72.3p).
Statutory net cash inflow from operating activities for the Group was £456m
(FY2024: £418m).
Pensions
During the year, £11m of pension contributions (FY2024: £16m) 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 FY2025 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 now fully funded on the Technical Provisions basis and buy-out funding
basis, significantly ahead of target. Smiths and the SIPS Trustee are now
working together to consider the next steps for the scheme.
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 July
2025, 60% of the funded 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 Jul 2025 31 Jul 2024 31 Jul 2025 31 Jul 2024
(12 months)
(12 months)
USD 1.30 1.26 1.32 1.28
EUR 1.19 1.17 1.16 1.19
Sustainability, Excellence and People combine to drive improved execution
During FY2025, our people, sustainability and Smiths Excellence functions were
combined under one leadership to foster a cohesive approach and further embed
them into our businesses and culture. These initiatives also support improved
execution and the delivery of both our sustainability, and our medium-term
financial targets. Our new 'Better Connected' newsletter was launched to
amplify the effect of these combined functions. A great example of this
collaborative approach was in John Crane India, where our team created a new
carbide recycling process that enables this finite material to be used more
efficiently, reduces pollutive waste and brings money back to the business.
We refreshed our double materiality and gap assessment to evaluate our
sustainability focus areas in preparation for future reporting requirements
and are making good progress. We continue proactively to manage reductions in
the environmental impact of our operations and manufacturing processes and
have set new targets for FY2025-2027 for supplier engagement, water, waste and
biodiversity, alongside our SBTi emissions targets. During the year, we
migrated to the Watershed sustainability platform to increase the accuracy of
our energy, GHG, water and waste reporting and audit practices, and enable
more effective modelling and targeted action.
We have made good progress in the deployment of the EcoVadis platform to align
our suppliers with our efforts. By the end of the year, 28% of suppliers by
spend had completed evaluation on the platform. We intend to merge all
supplier onboarding processes into one ecosystem on EcoVadis.
Environmental metrics Target FY2025-2027 FY2025
Energy reduction(1) 2% in FY2025 3.5%
Renewable electricity 80% by FY2027 74%
Scope 1 & 2 GHG(2) emissions reductions(3) 17.5% reduction by FY2027 9.7%
Supplier engagement 40% of supplier spend evaluated on EcoVadis by FY2027 28%
Normalised non-recyclable waste(4) 5% reduction normalised to revenue 6%
Normalised water use in stressed areas(4,5) 5% reduction normalised to revenue 1%
1 The energy reduction target is expressed as the MWh energy consumed
(excluding renewable electricity produced and consumed onsite), compared to a
revenue-adjusted MWh baseline (excluding price growth within the measurement
year), and excludes the acquisitions of Wattco, Modular Metal and Duc-Pac
2 Scope 1, 2 and 3 GHG emissions calculated in accordance with the WRI/WBCSD
Greenhouse Gas Protocol
3 Excluding acquisitions of Wattco, Modular Metal and Duc-Pac
4 Normalised to reported revenue
5 Across 10 identified water stressed areas
Safety, alongside health and well-being, is an essential foundation of our
success and our key focus is to create injury-free workplaces through
continuous improvement. Our FY2025 recordable incident rate was 0.28 (FY2024:
0.44), with the improvement reflecting our enhanced targeted and sustainable
preventative action. Supplementing our focus on physical safety, we also work
to support colleagues' mental health and well-being. We have mental health
first aiders at a number of sites and include mental health and well-being
courses in our training suite. We recognise that colleagues involved in the
separations of businesses may need additional support for their mental health.
Continued development of our people also underpins our success. A key
achievement this year has been the continued roll-out of Smiths Excellence
Fundamentals training. More than 9,000 colleagues have now completed the
module, which delivers grassroots understanding of Smiths Excellence
principles. We also completed deployment of our Lean programme to all sites
with more than 100 colleagues.
Our people are enthusiastic about supporting our communities and our annual
Smiths Day in June celebrated both our culture and our communities, with many
colleagues volunteering for local causes. The Smiths Group Foundation has now
made grants totalling almost £1.7m to 19 charities in 11 countries supporting
STEM, safety and connectedness and environmental sustainability. To support
STEM development and our own businesses in the UK, we joined the Manufacturing
Technology Centre core research programme. This provides an opportunity to
collaborate closely with universities, industry leaders and cutting-edge
engineers to accelerate future waves of innovation and will help us continue
to grow our global competitiveness and better support our customers.
Executive Committee and Board changes
During the year, there were several changes to the Board and Executive
Committee. In February, Julian Fagge was appointed as Chief Financial Officer,
having formerly been President of Smiths Interconnect and Group Financial
Controller, succeeding Clare Scherrer.
As a result of this change, Vera Parker, was appointed President of Smiths
Interconnect; Kini Pathmanathan's role was expanded to include People in
addition to Sustainability and Excellence; and Ruben Álvarez, was promoted to
be President, John Crane, following Bernard Cicut's retirement.
In August 2025, Ted Wan came off the Executive Committee as a result of
retiring the China operational structure; Diana Houghton, Group Head of
Strategy and Communications, and Pat McCaffrey, President of Flex-Tek, both
departed Smiths. Flex-Tek is now being co-led by Chris Edwards, President of
Flex-Tek Construction and Heat, and Mike Stern, President of Flex-Tek
Aerospace, who have been at Flex-Tek for 20 years and six years, respectively.
They joined the Executive Committee in September 2025.
At Board level, Simon Pryce was appointed as a Non-executive Director in
February. In August 2025, as part of its orderly succession planning, and the
strategic actions progress to become a more focused Smiths, it was announced
that Mark Seligman, Noel Tata and Karin Hoeing will retire from the Board at
the conclusion of the AGM in November. Dame Ann Dowling will then be appointed
as the Senior Independent Director.
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, dry gas 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 33% of Group revenue.
FY2025 FY2024 Reported Organic growth
£m £m growth H1 H2 FY
Revenue 1,115 1,133 (1.6)% +3.8% +2.2% +3.0%
Original Equipment (OE) 174 176 (1.4)% +12.2% (6.0)% +2.3%
Aftermarket 528 550 (3.9)% +0.6% +1.8% +1.2%
Energy 702 726 (3.3)% +3.3% (0.2)% +1.4%
Original Equipment 148 145 +2.5% +5.8% +6.6% +6.2%
Aftermarket 265 262 +0.7% +4.0% +6.6% +5.3%
General Industrial 413 407 +1.4% +4.6% +6.6% +5.6%
Headline operating profit 265 263 +1.1% +3.9% +8.5% +6.3%
Headline operating profit margin 23.8% 23.2% +60bps +10bps +140bps +80bps
Statutory operating profit 264 229 +15.3%
Return on capital employed 25.2% 25.3% (10)bps
RD&E(1) cash costs as % of sales 5.1% 5.2% (10)bps
(1) Research, development and customer-specific engineering
Revenue
FY2024 Foreign Organic FY2025
£m reported exchange movement reported
Revenue 1,133 (50) 32 1,115
John Crane delivered organic revenue growth of +3.0% for the year, against a
strong prior year comparator of +9.8% growth. Following a robust first half
performance, growth in the second half was constrained by a number of
operational delivery challenges resulting from the upgrade in machining and
testing capabilities, and exacerbated by a longer than expected recovery from
the January cyber incident. In H2, John Crane saw sequential quarterly
improvement in its operation and organic revenue growth, with momentum gained
in the fourth quarter delivering growth of +3.9%. Growth for the year was
driven by a stronger performance in original equipment compared to
aftermarket, which was more impacted by the cyber incident, though showed good
recovery in the fourth quarter.
Market demand remains healthy, with a strong order intake performance in
FY2025 resulting in a positive book to bill ratio providing good coverage for
the upcoming year. Alongside improved execution, as demonstrated by key
operational performance metrics, this supports a positive outlook for FY2026.
Reported revenue declined (1.6)% to £1,115m, reflecting the organic growth
offset by a negative (4.6)% foreign exchange impact.
In Energy, organic revenue grew +1.4% (FY2024: +15.9%) with OE growth of
+2.3%, benefiting from a continued focus on energy security and efficiency, as
well as emissions reduction solutions. Performance was particularly strong in
the first half at +12.2%, with the second half decline reflecting a strong
prior year comparator of +17.5%. New contracts in the year included a large
scale retrofit project in the Middle East to upgrade existing seals with
patented diamond-coated technology to reduce friction, increase reliability,
and improve energy efficiency. John Crane also secured a supply agreement for
high-performance couplings, gas filters, and nitrogen filters as part of a
large-scale energy development. These solutions contribute to safer, cleaner,
and more efficient operations across critical energy infrastructure.
In energy transition, the pipeline of opportunities John Crane is pursuing
across the portfolio, including CCUS, hydrogen and biofuels, continues to
expand, currently at c.250 projects (FY2024: c.170). As an example, John Crane
played a critical role in supporting renewable energy infrastructure in Europe
by supplying sealing systems for more than 300 pumps across three biorefinery
projects. These projects support the production of lower-carbon fuels and
reinforce environmental compliance across essential transport and energy
sectors.
General Industrial showed good growth of +5.6% and was broad based across OE
and aftermarket. Growth was largely driven by chemicals, general industry and
marine segments, and supported by good growth in aftermarket sales. Elsewhere,
in pulp & paper, John Crane renewed and increased the scope of an existing
contract with a leading company in Asia for a 5-year period, more than
doubling the number of pumps and increasing the use of John Crane Sense
Monitor and Smartflow Control, making it the largest managed reliability
programme in the region.
Operating profit and ROCE
FY2024 Foreign Organic FY2025
reported
reported
£m exchange movement
Headline operating profit 263 (13) 15 265
Headline operating profit margin 23.2% 23.8%
Headline operating profit of £265m grew +6.3% on an organic basis, resulting
in +80bps of organic margin expansion to 23.8%. This was largely a result of
productivity improvements, pricing and efficiency benefits from Smiths
Excellence, as well as initial savings from the Acceleration Plan. This
performance was in the context of higher investment to increase capacity and
efficiency through higher automation and testing capabilities. The programme
is substantially completed and expected to finalise in FY2026 and is key to
service the current demand and propel future growth.
On a reported basis, headline operating profit was up +1.1%, including a
negative foreign exchange impact. The difference between statutory and
headline operating profit includes the net cost in relation to the provision
for John Crane, Inc. asbestos litigation and costs incurred in relation to the
Acceleration Plan.
ROCE was 25.2%, down (10)bps, reflecting the higher level of investment on
automation and capacity.
RD&E and new product development
Cash RD&E (research, development and customer-specific engineering)
expenditure was broadly flat at 5.1% of sales (FY2024: 5.2%). Excluding
customer-specific engineering-related projects, the business spent 1.5% of
sales (FY2024: 1.6%). John Crane's RD&E focus continues to be on gas
compression projects and enhancing the efficiency, performance and
sustainability of heavy-duty seals and hydrogen compressors.
In June, John Crane launched its Type 93AX Coaxial Separation Seal, a next
generation dry gas sealing solution engineered to help customers reduce
emissions, improve equipment reliability, and lower operational costs. The
Type 93AX is designed to mitigate both operational performance and financial
risks for customers by extending the reliability of the seal system and
reducing nitrogen consumption by up to 80% compared to conventional radial
separation seals. The initial positive reception of this new innovative
product is encouraging, recognising that new product uptake ramps up over
time.
John Crane is well placed to support energy transition projects with its
extreme temperatures and high-pressure sealing solutions and continues to work
with universities, such as the University of Sheffield, to advance on these
programmes.
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 general industrial, including
construction, and 19% from aerospace. Flex-Tek represents 25% of Group
revenue.
FY2025 FY2024 Reported Organic growth
£m £m growth H1 H2 FY
Revenue 837 786 +6.6% +2.5% +6.3% +4.4%
General Industrial 678 632 +7.4% +2.0% +5.9% +4.0%
Aerospace 159 154 +3.1% +4.8% +7.6% +6.3%
Headline operating profit 164 161 +1.6% (5.1)% +2.0% (1.6)%
Headline operating profit margin 19.5% 20.5% (100)bps (160)bps (80)bps (120)bps
Statutory operating profit 119 135 (11.9)%
Return on capital employed 23.7% 26.6% (290)bps
RD&E cash costs as % of sales 0.7% 0.4% +30bps
Revenue
FY2024 Foreign Organic FY2025
£m reported exchange Acquisitions movement reported
Revenue 786 (24) 41 34 837
Organic revenue increased +4.4% in the year, with growth improving in the
second half to +6.3%, following first half growth of +2.5%. Revenue on a
reported basis grew +6.6%, with a £41 million contribution from the
acquisitions of Modular Metal, Wattco and Duc-Pac, partially offset by a
negative foreign exchange translation.
In General Industrial, organic revenue increased +4.0% despite challenging
conditions in the US construction market which has persisted throughout
FY2025. Flex-Tek has performed strongly against this backdrop reflecting
increased demand for heat kits and a notably strong third quarter in our HVAC
flexible ducting products. Flex-Tek is well positioned to benefit from a
construction market recovery when mortgage rates moderate and given the
meaningful housing inventory deficit in the USA.
Flex-Tek's energy efficient solutions for industrial applications posted flat
revenue year-on-year, reflecting the phasing of heater product deliveries to
support one of its larger contracts, which concludes in H1 FY2026. Flex-Tek is
well placed for further industrial heating project wins, further strengthened
following the acquisition of Wattco which brings manufactured process skid
systems. Its products, such as certified pressure vessels, integral electric
heating platforms, thermodynamic isolation module systems and steam heating
support the ever-expanding clean energy and data demand opportunities. A
notable recent win was a contract for the provision of electric heaters for an
ultra-low carbon emissions electro-fuel project in North America.
In Aerospace, organic revenue grew strongly at +6.3% supported by a healthy
order book. Strong growth in the first quarter was supported by buoyant demand
across the year, reflecting ongoing aerospace build programmes. In addition,
several long-term agreements are being re-negotiated which will help support
the future growth of the aerospace business. Flex-Tek aerospace again ended
the year with a strong order book which supports healthy demand into FY2026.
Operating profit and ROCE
FY2024 Foreign Organic FY2025
reported
£m Reported exchange Acquisitions movement
Headline operating profit 161 (5) 10 (2) 164
Headline operating profit margin 20.5% 19.5%
Headline operating profit increased £3m and included an £8m in-year charge
to correct for a non-material balance sheet overstatement, as further detailed
below. The organic operating margin declined by (120)bps, with the underlying
performance reflecting ongoing cost control, partly offset by higher materials
costs reflecting mix impacts, and a positive contribution from acquisitions.
On a reported basis, headline operating profit increased +1.6%, although the
margin declined (100)bps.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangible assets and the provision for Titeflex
Corporation subrogation claims. It also includes a £15m charge relating to
prior years' balance sheet overstatements at a standalone US industrial site.
The issue, which is isolated to this site, has been independently investigated
and is now resolved.
ROCE decreased (290)bps to 23.7% reflecting the headline operating profit
decline.
During FY2025, three bolt-on acquisitions were completed for a combined net
acquisition spend of £121m. In construction, Modular Metal expanded
Flex-Tek's HVAC presence into the western US market and broadened its product
offering to include Modular Metal's sealed flexible duct solution; Duc-Pac
expanded its geographical metal duct coverage into the north-east USA and
Wattco expanded the industrial heating portfolio. Integration of all
acquisitions is proceeding to plan.
RD&E and new product development
Cash RD&E expenditure was 0.7% of sales (FY2024: 0.4%), with the increase
partly reflecting a re-categorisation of spend from cost of goods sold.
RD&E is focused on developing new products for the construction and
aerospace markets, and new electrification opportunities within industrial
markets.
During FY2025, Flex-Tek launched its 'Blue Series' sealed metal duct system.
It uses an innovative approach to sealing which eliminates leakage to provide
a more energy efficient solution which reduces installation time, saving
contractors cost on materials and labour.
Within General industrial, product development included new heat exchanger
systems and medium voltage applications to support growth from energy storage
and renewable energy requirements.
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. 51% of Smiths Detection's sales are derived from the aftermarket.
Smiths Detection represents 29% of Group revenue.
FY2025 FY2024 Reported Organic growth
£m £m growth H1 H2 FY
Revenue 963 859 +12.1% +15.3% +15.1% +15.2%
Original Equipment 339 272 +24.8% +43.2% +17.1% +27.8%
Aftermarket 376 323 +16.4% +18.4% +20.9% +19.6%
Aviation 715 595 +20.2% +28.7% +19.0% +23.4%
Original Equipment 136 144 (5.8)% (13.4)% +7.8% (3.2)%
Aftermarket 112 120 (6.2)% (8.8)% +2.1% (3.4)%
Other Detection Systems (ODS) (1) 248 264 (6.0)% (11.3)% +5.2% (3.3)%
Headline operating profit 122 102 +20.1% +23.2% +23.3% +23.3%
Headline operating profit margin 12.7% 11.9% +80bps +70bps +100bps +80bps
Statutory operating profit 96 83 +15.7%
Return on capital employed 11.4% 9.1% +230bps
RD&E cash costs as % of sales 5.7% 7.8% (210)bps
(1) Formerly 'Other Security Systems'
Revenue
FY2024 Foreign Organic FY2025
£m reported exchange movement reported
Revenue 859 (23) 127 963
Smiths Detection delivered +15.2% organic revenue growth, successfully
converting its strong order book into revenue, driven by significant growth in
Aviation, across both OE and aftermarket segments, partly offset by a modest
decline in Other Detection Systems (ODS). Looking ahead, its multi-year order
book remains strong with growth to continue to be supported by the aviation
upgrade programme, albeit at a moderated pace.
Reported revenue was up +12.1% reflecting the strong organic growth, partially
offset by an unfavourable foreign exchange impact.
In Aviation, organic revenue grew +23.4%, with OE growth of +27.8%, reflecting
the continued strong demand for the latest range of 3D-image computed
tomography (CT) machines for cabin baggage, CTiX. Smiths Detection continues
to achieve a good win rate globally in aviation, and to date, has now sold
c.1,800 CTiX scanners, which are the first ones to have received the 'up to
two litres' re-certification in the UK and EU.
Order intake during the year continued to reflect the ongoing demand for
airport scanner upgrades, with notable wins in Australia, Germany, Japan,
Poland, Switzerland and the UAE. It is anticipated that the global upgrade
programme will continue with the current level of cabin baggage activity into
FY2026, along with the associated longer-term aftermarket revenue stream.
Smiths Detection is well positioned for the next upgrade cycle of hold
baggage, expected to happen later in the decade. Smiths Detection launched the
SDX 10060 XDi, based on X-ray diffraction technology, which allows highly
accurate material and substance identification based on an object's molecular
structure. Smiths Detection is the first company in the aviation sector to
have launched this product, which is currently pending regulatory
certification. As of July 2025, four units were in operation.
In Aviation aftermarket, Smiths Detection was awarded the renewal of two
significant long-term contracts to service both hold and passenger baggage
X-ray inspection systems at airports across the USA.
ODS sales declined (3.3)% organically. Following an (11.3)% decline in the
first half, reflecting a strong prior year comparator and the phasing of
certain contracts, revenue grew +5.2% in the second half driven by ports &
borders and urban security products. In urban security, Smiths Detection
secured a contract to supply mobile solutions (SDX 6040 X-ray inspection
systems) to a major cruise line.
In ports and borders, the business installed four state-of-the-art HCVM™ XL
mobile scanners to the Customs and Excise Division of Trinidad & Tobago,
as part of a broader effort to enhance national security. In the USA, the
business installed three Multi-Energy Portals in Texas enhancing the ability
to screen road cargo for dangerous or illegal items ensuring a safer and more
secure border. Looking ahead, increased focus on border security controls
support improved growth prospects in ports and borders.
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 personal chemical detectors to the Japanese Ministry of
Defence, for delivery in 2025 and 2026.
Operating profit and ROCE
FY2024 Foreign Organic FY2025
reported
£m reported exchange movement
Headline operating profit 102 (3) 23 122
Headline operating profit margin 11.9% 12.7%
Headline operating profit increased +23.3% on an organic basis for the year,
reflecting the strong organic revenue growth and favourable pricing combined
with a positive mix effect and focus on cost efficiencies. Headline operating
profit margin of 12.7% was up 80bps on both an organic and reported basis,
building further on a recent history of consistent margin expansion, with
further upside potential.
On a reported basis, headline operating profit was up +20.1%, including a
negative foreign exchange translation, with the difference between statutory
and headline operating profit reflecting amortisation of acquired intangibles.
ROCE increased by +230bps to 11.4%, driven by the headline operating profit
growth.
On 1 August 2025, Smiths Detection acquired Med Graphix Inc. (MGI), based in
New Jersey, USA, a service and repair partner of over two decades and
third-party depot supplier. This acquisition, although small in nature,
enhances Smiths Detection's sustainable service offering by extending the
lifecycle of critical components through repair, refurbishment, and reuse.
This capability reduces operational risk and further improves our ability to
meet customer service needs.
RD&E and new product development
Smiths Detection's strong competitive positioning in Aviation is a reflection
of its technical leadership, world-class innovation capabilities, and
commitment to quality, reliability and safety. These strengths are further
reinforced by deep, long-standing relationships with customers and regulators,
a comprehensive global service network, and advanced digital capabilities.
In FY2025, the business invested 5.7% of sales in RD&E in cash terms
(FY2024: 7.8%) to support investment in next-generation detection
capabilities, with the year-on-year decline largely a reflection of the strong
revenue growth. This included £17m in customer funded projects (FY2024:
£20m).
As a result, Smiths Detection continues to maintain a leadership position in
aviation security through a series of industry-first innovations. As an
example in FY2025, its iCMORE APIDS (Automated Prohibited Items Detection
System) software solution became the first automation platform to receive
regulatory approval for deployment in a live airport environment, with
successful implementation at Schiphol Airport. This underscores the company's
commitment to innovation, regulatory alignment, and operational excellence.
Smiths Detection also continues to partner with companies and universities in
the development of new products. For example, in May 2025 it signed a
partnership with Xbat.ai to develop an innovative battery sorting solution,
and since April 2024, it has been collaborating with University of Exeter to
advance in the enhancement of our aftermarket service offering through digital
solutions.
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.
FY2025 FY2024 Reported Organic growth
£m £m growth H1 H2 FY
Revenue 421 354 +18.9% +26.8% +18.9% +22.5%
Headline operating profit 75 49 +51.9% +80.3% +41.4% +57.2%
Headline operating profit margin 17.8% 13.9% +390bps +510bps +300bps +390bps
Statutory operating profit 35 46 (23.9)%
Return on capital employed 16.7% 10.4% +630bps
RD&E cash costs as % of sales 6.1% 6.2% (10)bps
Revenue
FY2024 Foreign Organic FY2025
£m reported exchange movement reported
Revenue 354 (11) 78 421
Smiths Interconnect's organic revenue increased +22.5% in FY2025, supported by
strong growth in the semiconductor market, new product launches and improved
market conditions in the growing aerospace and defence segments in both the
USA and in Europe.
Reported revenue increased +18.9%, with the organic movement partly offset by
a negative foreign exchange impact.
Growth was broad based across all businesses, demonstrating the strength of
the portfolio and the innovative product offering. There was particularly
strong growth in semi-conductor test reflecting our leading market position in
high performance products. Semi-test growth reflected large programme wins
from major global technology customers, particularly in test products for
high-speed GPU and AI semi-conductor chips, which drove revenue growth
significantly above the market.
Growth in aerospace and defence was also strong, reflecting high demand for
differentiated technology in fibre-optic, radio-frequency and connector
products, with particularly notable demand for our interposer and optical
transceiver products. The robust market backdrop, combined with our strong
customer programme wins, underpins our growth expectations for FY2026.
Operating profit and ROCE
FY2024 Foreign Organic FY2025
reported
£m reported exchange movement
Headline operating profit 49 (1) 27 75
Headline operating profit margin 13.9% 17.8%
Headline operating profit increased +57.2% on an organic basis, resulting in a
+390bps rise in organic operating profit margin to 17.8%. The year-on-year
improvement reflected strong operational leverage, efficiency improvements and
Smiths Excellence benefits, partly offset by higher employee-related costs in
the light of the improved year-on-year performance. On a reported basis,
headline operating profit increased +51.9% and statutory operating profit
declined (23.9)%.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangibles and disposal-related costs. In addition,
an impairment on disposal of £30m was recorded as a result of an agreement to
sell its US sub-systems business unit, as part of the strategic initiative to
separate Smiths Interconnect. (See note 28.)
ROCE improved +630bps to 16.7%, driven by the higher operating profit.
RD&E and new product development
Cash RD&E expenditure as a percentage of sales was 6.1% of sales (FY2024:
6.2%). RD&E is focused on developing highly specialised new products that
improve connectivity and product integrity in demanding operating environments
in mission critical end markets where precision, reliability and durability
are vital.
Following the recent success of the industry award-winning DaVinci 112
high-speed semiconductor test socket, Smiths Interconnect launched DaVinci Gen
V, the latest flagship product in this portfolio. It delivers ultra-reliable
testing at the fastest speeds for some of the most complex functionality of
integrated circuits of chips, used in AI, data centres, 6G communications and
advanced computing applications. As integrated circuits evolve - doubling in
bandwidth and computational power every two years - DaVinci Gen V is designed
for seamless integration, allowing manufacturers to transition effortlessly,
reduce development cycles and accelerate time-to-market.
In connectors, Smiths Interconnect launched the EZiCoax interposer connectors,
designed to be used in high-value aerospace and defence applications, such as
satellites and advanced radar sy--stems, where it will help enable secure,
precise and reliable communications. Also, Smiths Interconnect extended its
high density modular and mini-modular connectors ranges with the addition of
the Cat5e and Cat6A data transmission modules. These products deliver reliable
performance in harsh environments providing efficient signal transmission,
reducing data errors and ensuring high-speed communication for customers.
Smiths Interconnect's UK facility in Dundee successfully launched its new
CAD-to-FAB capability this year, accelerating growth in defence and aerospace
programmes by leveraging rapid-prototyping and design innovation alongside
cost-effective production processes. Supported by the UK Space Agency's Space
Clusters Infrastructure Fund, CAD-to-FAB initiatives are now delivering
isolators, circulators, filters and multi-function assemblies to a growing
number of UK and global defence and aerospace customers. Continued technical
advancements and collaborative efforts in this capability will maintain its
leadership in high-performance RF ferrite device manufacturing, further
expanding its global footprint.
Space grade products are a key development focus, particularly in radio
frequency and optical products. During the year, Smiths Interconnect's
products supported several high-profile space campaigns, including the 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 and spring probe solutions, and circulators, which are designed to
withstand the harsh conditions of space and ensure consistent performance.
Consolidated income statement
Year ended 31 July 2025 Year ended 31 July 2024 - represented*
Notes Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
Continuing operations
Revenue 1 2,915 - 2,915 2,778 - 2,778
Operating costs 2 (2,410) (95) (2,505) (2,301) (108) (2,409)
Operating profit/(loss) 1 505 (95) 410 477 (108) 369
Interest income 4 40 - 40 26 - 26
Interest expense 4 (71) 4 (67) (63) - (63)
Other financing losses 4 - (11) (11) - (11) (11)
Other finance income - retirement benefits 4 - 3 3 - 6 6
Finance costs 4 (31) (4) (35) (37) (5) (42)
Profit/(loss) before taxation 474 (99) 375 440 (113) 327
Taxation 6 (119) 20 (99) (109) 4 (105)
Profit/(loss) for the year 355 (79) 276 331 (109) 222
Discontinued operations
Profit from discontinued operations 28 57 (41) 16 35 (6) 29
Profit/(LOSS) for the year 412 (120) 292 366 (115) 251
Profit/(loss) for the year attributable to:
Smiths Group shareholders - continuing operations 353 (79) 274 330 (109) 221
Smiths Group shareholders - discontinued operations 57 (41) 16 35 (6) 29
Non-controlling interests 2 - 2 1 - 1
412 (120) 292 366 (115) 251
Earnings per share
Basic 85.7p 72.3p
Basic - continuing 81.0p 63.9p
Diluted 85.3p 72.0p
Diluted - continuing 80.6p 63.7p
* Results for the year ended 31 July 2024 have been represented to reflect
the reclassification of the Smiths Interconnect business as a discontinued
operation.
Consolidated statement of comprehensive income
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Profit for the year 292 251
Other comprehensive income (OCI)
OCI which will not be reclassified to the income statement:
Re-measurement of retirement benefit assets and obligations 8 (3) (66)
Taxation on post-retirement benefit movements 6 - 17
Fair value movements on financial assets at fair value through OCI 14 8 (105)
5 (154)
OCI which will be reclassified and reclassifications:
Fair value gains and reclassification adjustments:
- deferred in the period on cash-flow and net investment hedges (1) 4
- reclassified to income statement on cash-flow and net investment hedges 2 -
1 4
Foreign exchange (FX) movements:
Exchange losses on translation of foreign operations (35) (33)
Total other comprehensive income, net of taxation (29) (183)
TOTAL COMPREHENSIVE INCOME 263 68
Attributable to:
Smiths Group shareholders 261 68
Non-controlling interests 2 -
263 68
Total comprehensive income attributable to Smiths Group shareholders arising
from:
Continuing operations 254 41
Discontinued operations 7 27
261 68
* Results for the year ended 31 July 2024 have been represented to reflect the
reclassification of the Smiths Interconnect business as a discontinued
operation.
Consolidated balance sheet
Notes 31 July 2025 31 July 2024
£m £m
Non-current assets
Intangible assets 10 1,284 1,521
Property, plant and equipment 12 244 270
Right of use assets 13 99 110
Financial assets - other investments 14 6 53
Retirement benefit assets 8 128 132
Deferred tax assets 6 98 94
Trade and other receivables 16 90 96
Financial derivatives 20 10 -
1,959 2,276
Current assets
Inventories 15 586 643
Current tax receivable 6 20 24
Trade and other receivables 16 737 826
Cash and cash equivalents 18 195 459
Financial derivatives 20 7 4
Assets held for sale 28 507 -
2,052 1,956
TOTAL ASSETS 4,011 4,232
Current liabilities
Financial liabilities - borrowings 18 (3) (2)
Financial liabilities - lease liabilities 18 (29) (32)
Financial liabilities - financial derivatives 20 (2) (4)
Provisions 23 (56) (75)
Trade and other payables 17 (679) (764)
Current tax payable 6 (66) (70)
Liabilities held for sale 28 (106) -
(941) (947)
Non-current liabilities
Financial liabilities - borrowings 18 (556) (534)
Financial liabilities - lease liabilities 18 (79) (91)
Financial liabilities - financial derivatives 20 - (13)
Provisions 23 (198) (219)
Retirement benefit obligations 8 (96) (103)
Deferred tax liabilities 6 (43) (32)
Trade and other payables 17 (38) (41)
(1,010) (1,033)
TOTAL LIABILITIES (1,951) (1,980)
NET ASSETS 2,060 2,252
SHAREHOLDERS' EQUITY
Share capital 24 124 130
Share premium account 365 365
Capital redemption reserve 26 31 25
Merger reserve 26 235 235
Cumulative translation adjustments 317 353
Retained earnings 1,147 1,306
Hedge reserve 26 (183) (184)
TOTAL SHAREHOLDER'S EQUITY 2,036 2,230
Non-controlling interest equity 26 24 22
TOTAL EQUITY 2,060 2,252
Consolidated statement of changes in equity
Notes Share capital Other Cumulative Retained Hedge Equity Non-controlling Total
and share
reserves
translation
earnings
reserve
interest
equity
premium
£m
adjustments
£m
£m shareholders'
£m
£m
£m
£m
funds
£m
At 31 July 2024 495 260 353 1,306 (184) 2,230 22 2,252
Profit for the year - - - 290 - 290 2 292
Other comprehensive income:
- re-measurement of retirement benefits after tax - - - (3) - (3) - (3)
- FX movements net of recycling - - (36) 1 - (35) - (35)
- fair value gains and related tax - - - 8 1 9 - 9
Total comprehensive income for the year - - (36) 296 1 261 2 263
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust - - - (23) - (23) - (23)
Proceeds received on exercise of employee share options - - - 1 - 1 - 1
Share buybacks 24 (6) 6 - (303) - (303) - (303)
Dividends:
- equity shareholders 25 - - - (152) - (152) - (152)
Share-based payment 9 - - - 22 - 22 - 22
At 31 July 2025 489 266 317 1,147 (183) 2,036 24 2,060
Notes Share capital Other Cumulative Retained Hedge Equity Non-controlling Total
and share
reserves
translation
earnings
reserve
interest
equity
premium
£m
adjustments
£m
£m shareholders'
£m
£m
£m
£m
funds
£m
At 31 July 2023 496 259 386 1,431 (188) 2,384 22 2,406
Profit for the year - - - 250 - 250 1 251
Other comprehensive income:
- re-measurement of retirement benefits after tax - - - (49) - (49) - (49)
- FX movements net of recycling - - (33) 1 - (32) (1) (33)
- fair value gains and related tax - - - (105) 4 (101) - (101)
Total comprehensive income for the year - - (33) 97 4 68 - 68
Transactions relating to ownership interests:
Purchase of shares by Employee Benefit Trust - - - (20) - (20) - (20)
Proceeds received on exercise of employee share options - - - 4 - 4 - 4
Share buybacks 24 (1) 1 - (70) - (70) - (70)
Dividends:
- equity shareholders 25 - - - (147) - (147) - (147)
Share-based payment 9 - - - 11 - 11 - 11
At 31 July 2024 495 260 353 1,306 (184) 2,230 22 2,252
Consolidated cash-flow statement
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Net cash inflow from operating activities 29 456 418
CASH-FLOWS FROM INVESTING ACTIVITIES
Expenditure on capitalised development (4) (14)
Expenditure on other intangible assets (4) (4)
Purchases of property, plant and equipment (72) (68)
Disposal of financial assets 53 190
Acquisition of businesses (net of £9m of cash acquired with businesses) (121) (65)
Disposal of subsidiaries - post-sale expenses (12) -
Net cash-flow used in investing activities (160) 39
CASH-FLOWS FROM FINANCING ACTIVITIES
Share buybacks 24 (303) (70)
Purchase of shares by Employee Benefit Trust 26 (23) (20)
Proceeds received on exercise of employee share options 1 4
Settlement of cash-settled options (1) (2)
Dividends paid to equity shareholders 25 (152) (147)
Lease payments (41) (39)
Cash inflow from matured derivative financial instruments 2 5
Net cash-flow used in financing activities (517) (269)
Net (decrease)/increase in cash and cash equivalents (221) 188
Cash and cash equivalents at beginning of year 459 285
Reclassified to assets held for sale (31) -
Foreign exchange rate movements (12) (14)
Cash and cash equivalents at end of year 18 195 459
Cash and cash equivalents at end of year comprise:
- cash at bank and in hand 102 123
- short-term deposits 93 336
195 459
accounting policies
Basis of preparation
The accounts have been prepared in accordance with UK adopted International
Accounting Standards.
The consolidated financial statements have been prepared under the historical
cost convention modified to include revaluation of certain financial
instruments, share options and pension assets and liabilities, held at fair
value as described below.
Going concern
The Directors have prepared a going concern assessment, covering a period of
at least 12 months from the date of approval of the financial statements,
which takes into account the current financial projections and the borrowing
facilities available to the Group and then applies a severe but plausible
downside scenario.
This assessment is consistent with the conclusions of the Group's 'Going
concern and viability statement' within the Annual Report 2025, which has been
based on the Group's strategy, balance sheet and financing position, including
our undrawn US$800m committed Revolving Credit Facility which matures in May
2030 and our undrawn £200m Revolving Credit Facility which matures in June
2027. Having assessed the principal and emerging risks, especially those most
relevant during the going concern assessment period, stress testing confirmed
that the Group will have adequate headroom over that period.
Consequently, the Directors are satisfied that the Group and Company has
sufficient resources for its operational needs and will be able to meet its
liabilities as they fall due for a period of at least 12 months from the date
of approval of these financial statements. The financial statements have
therefore been prepared on a going concern basis.
Climate change
Climate change is recognised as a principal risk and uncertainty for the
Group, both in terms of the risk of climate-related incidents causing
disruption to our supply chain or operations and the risk of changes in
climate conditions cause business disruption and economic loss for the Group.
In preparing the financial statements, the directors have considered the
impact of climate change, particularly in the context of the risks identified
in the TCFD disclosures within the Annual Report 2025, and in the preparation
of our Strategic Plan, which underpins our viability statement and going
concern review modelling.
There has been no material impact identified on the financial reporting
judgements and estimates. Overall, sustainability is recognised as a growth
driver for the Group and a key part of our investment case. This is consistent
with our assessment that climate change is not expected to have a detrimental
impact on the viability of the Group in the medium-term.
These financial statements cover the financial year from 1 August 2024 to 31
July 2025 (FY2025) with comparative figures from 1 August 2023 to 31 July
2024 (FY2024).
Key estimates and significant judgements
The preparation of the accounts in conformity with generally accepted
accounting principles requires management to make estimates and judgements
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the accounts and the reported
amounts of revenues and expenses during the reporting period. Actual results
may differ from these estimates.
The key sources of estimation uncertainty together with the significant
judgements and assumptions used for these consolidated financial statements
are set out below.
Sources of estimation uncertainty
Business combinations
The Group acquired three businesses during FY2025, Wattco, Inc., Modular Metal
and Duc-Pac. On the acquisition of a business, the Group is required to
identify specific intangible assets which are recognised separately from
goodwill and then amortised over their estimated useful lives. The assumptions
involved in determining the fair values for assets and liabilities acquired,
including the separate identification of intangible assets, and the useful
economic life of such items use management estimates and are therefore
subjective.
Management engages third party specialists to assist with the valuation of
acquired intangible assets. Depending on the nature of the assets the Group
has used different valuation methodologies to arrive at the fair value
including the excess earnings method, the relief from royalty method and the
cost savings method. In FY2025, third party specialists were engaged to
assist with the valuation of the Wattco, Inc. and Modular Metal acquisitions,
see note 27 for further information.
Impairment reviews of intangible assets
In carrying out impairment reviews of intangible assets, a number of
significant assumptions have to be made when preparing cash-flow projections
to determine the value in use of the asset or cash generating unit (CGU).
These include the future rate of market growth, discount rates, the market
demand for the products acquired, the future profitability of acquired
businesses or products, levels of reimbursement, and success in obtaining
regulatory approvals. If actual results differ or changes in expectations
arise, impairment charges may be required which would adversely impact
operating results.
Critical estimates, and the effect of variances in these estimates, are
disclosed in note 11.
Retirement benefits
Determining the value of the future defined benefit obligation involves
significant estimates in respect of the assumptions used to calculate present
values. These include future mortality, discount rate and inflation. The Group
uses previous experience and independent actuarial advice to select the values
for critical estimates. A portion of UK pension liabilities are insured via
bulk annuity policies that match all or part of the scheme obligation to
identified groups of pensioners. These assets are valued by an external
qualified actuary at the actuarial valuation of the corresponding liability,
reflecting this matching relationship.
The Group's principal defined benefit pension plans are in the UK and the US
and these have been closed so that no future benefits are accrued. Critical
estimates for these plans, and the effect of variances in these estimates, are
disclosed in note 8.
Provisions for liabilities and charges
The Group has made provisions for claims and litigations where it has had to
defend itself against proceedings brought by other parties. These provisions
have been made for the best estimate of the expected expenditure required to
settle each obligation, 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. The most significant of these litigation provisions is described
below.
John Crane, Inc. (JCI), a subsidiary of the Group, is one of many
co-defendants in litigation relating to products previously manufactured which
contained asbestos. Provision of £191m (FY2024: £220m) has been made for the
future defence costs which the Group is expected to incur and the expected
costs of future adverse judgements against JCI. Whilst well-established
incidence curves can be used to estimate the likely future pattern of
asbestos-related disease, JCI's claims experience is significantly impacted by
other factors which influence the US litigation environment. These can
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. Because of the significant uncertainty associated with the future
level of asbestos claims and of the costs arising out of the related
litigation, there can be no guarantee that the assumptions used to estimate
the provision will result in an accurate prediction of the actual costs that
will be incurred.
In quantifying the expected costs JCI takes account of the advice of an expert
in asbestos liability estimation. The following estimates were made in
preparing the provision calculation:
- The period over which the expenditure can be reliably estimated is
judged to be ten years, based on past experience regarding significant changes
in the litigation environment that have occurred every few years and on the
amount of time taken in the past for some of those changes to impact the
broader asbestos litigation environment. See note 23 for a sensitivity
analysis showing the impact on the provision of reducing or increasing
this time horizon; and
- The future trend of legal costs, the rate of future claims filed, the
rate of successful resolution of claims, and the average amount of judgements
awarded have been projected based on the past history of JCI claims and
well-established tables of asbestos incidence projections, since this is the
best available evidence. Claims history from other defendants is not used to
calculate the provision because JCI's defence strategy generates a
significantly different pattern of legal costs and settlement expenses. See
note 23 for a sensitivity analysis showing the range of expected future
spend.
Taxation
Taxation liabilities included provisions of £35m (FY2024: £44m), the
majority of which related to the risk of challenge to the geographic
allocation of profits by tax authorities.
In addition to the risks provided for, the Group faces a variety of other tax
risks, which result from operating in a complex global environment, including
the ongoing reform of both international and domestic tax rules, new and
ongoing tax audits in the Group's larger markets and the challenge to fulfil
ongoing tax compliance filing and transfer pricing obligations given the scale
and diversity of the Group's global operations.
The Group anticipates that a number of tax audits are likely to conclude in
the next 12 to 24 months. Due to the uncertainty associated with such tax
items, it is possible that the conclusion of open tax matters may result in a
final outcome that varies significantly from the amounts noted above.
Significant judgements made in applying accounting policies
Business combinations
As stated in the previous section 'Sources of estimation uncertainty', in
FY2025 the Group has applied judgement on the identification of specific
intangible assets on the Wattco, Inc, Modular Metal and Duc-Pac business
acquisitions, see note 27 for further information. These include items such as
brand names, customer lists and non-compete agreements, to which value is
first attributed at the time of acquisition. Judgement is also applied in
determining the value of the acquisition consideration, where the
consideration is contingent on the post-acquisition performance of the
business a probability weighted expected return model is used to determine
fair value.
In FY2025, appropriate professional advice has been sought on the allocation
of value for the Wattco, Inc and Modular Metal acquisitions.
Retirement benefits
At 31 July 2025 the Group has recognised £128m of retirement benefit assets
(FY2024: £132m) and a net pension asset of £32m (FY2024: £29m), principally
relating to the Smiths Industries Pension Scheme (SIPS), which arises from the
rights of the employers to recover the surplus at the end of the life of
the scheme.
The recognition of this surplus is a significant judgement. There is a
judgement required in determining whether an unconditional right of refund
exists based on the provision of the relevant Trust deed and rules. Having
taken legal advice with regard to the rights of the Company under the relevant
Trust deed and rules, it has been determined that an unconditional right of
refund does exist and therefore the surplus is recoverable by the Company and
can be recognised.
Capitalisation of development costs
Expenditure incurred in the development of major new products is capitalised
as internally generated intangible assets only when it has been judged that
strict criteria are met, specifically in relation to the products' technical
feasibility and commercial viability (the ability to generate probable future
economic benefits).
The assessment of technical feasibility and future commercial viability of
development projects requires significant judgement and the use of
assumptions. Key judgements made in the assessment of future commercial
viability include:
- Scope of work to achieve regulatory clearance (where required) -
including the level of testing evidence and documentation;
- Competitor activity - including the impact of potential competitor
product launches on the marketplace and customer demand; and
- Launch timeline - including time and resource required to establish and
support the commercial launch of a new product.
Taxation
As stated in the previous section 'Sources of estimation uncertainty', the
Group has applied judgement in the decisions made to recognise provisions
against uncertain tax positions; please see note 6 for further details.
Presentation of the Smiths Interconnect and Smiths Detection divestments
Following the Group's announcement on the planned strategic moves to separate
the Smiths Interconnect and Smiths Detection businesses, judgement is required
to determine the most appropriate financial reporting treatment of these
businesses and their performance.
Smiths Interconnect
Management has determined that sufficient progress has been achieved on the
project to sell the Smiths Interconnect business to meet the criteria for
classification as discontinued and held for sale.
The key judgement for this reclassification is that the following conditions
were met at the balance sheet date:
- Management is committed to the plan to sell the business and an active
programme to locate a buyer and complete the plan must have been initiated;
- The disposal group must be actively marketed for sale at a price that is
reasonable in relation to its current fair value;
- Shareholder and regulatory approval is highly probable and the plan is
unlikely to be significantly changed or withdrawn; and
- Sale is expected to be completed within 12 months from the date of
classification.
Following this reclassification, the results of Smiths Interconnect are
presented as profit from discontinued operations in FY2025 and FY2024 and its
assets and liabilities reported in assets and liabilities held for sale in
FY2025; please see note 28 for further details.
Smiths Detection
Management has determined that the progress achieved by the balance sheet date
on the twin track project to divest the Smiths Detection business was not
sufficient to fully meet the criteria for classification as a discontinued
operation or held for sale / held for distribution to owners.
Therefore the results of Smiths Detection continue to be presented within
continuing operations on the consolidated income statement and the assets and
liabilities of the Smiths Detection business are not separately reported on
the consolidated balance sheet.
Presentation of headline profits and organic growth
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 addition, the Group reports
organic growth rates for sales and profit measures.
See note 1 for disclosures of headline operating profit and note 30 for more
information about the alternative performance measures ('APMs') used by the
Group.
Judgement is required in determining which items should be included as
non-headline. The amortisation/impairment 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.
Calculating organic growth also requires judgement. Organic growth adjusts the
movement in headline performance to exclude the impact of foreign exchange
and acquisitions.
Other estimates and judgements
Revenue recognition
Revenue is recognised as the performance obligations to deliver products or
services are satisfied and revenue is recorded based on the amount of
consideration expected to be received in exchange for satisfying the
performance obligations.
Smiths Detection, Smiths Interconnect and Flex-Tek have multi-year contractual
arrangements for the sale of goods and services. Where these contracts have
separately identifiable components with distinct patterns of delivery and
customer acceptance, revenue is accounted for separately for each identifiable
component.
The Group enters into certain contracts for agreed fees that are performed
across more than one accounting period and revenue is recognised over time.
Estimates are required at the balance sheet date when determining the stage of
completion of the contract activity. This assessment requires the expected
total costs of the contract and the remaining costs to complete the contract
to be estimated.
At 31 July 2025, the Group held contracts with a total value of £158m (2024:
£195m), of which £114m (2024: £131m) had been delivered and £44m (2024:
£64m) remains fully or partially unsatisfied. £36m of the unsatisfied amount
is expected to be recognised in the coming year, with the remainder being
recognised within two years. A 20% increase in the remaining cost to complete
the contracts would have reduced Group revenue and operating profit in the
current year by less than £7m (2024: £9m).
Significant accounting policies
Basis of consolidation
The Group's consolidated accounts include the financial statements of Smiths
Group plc (the 'Company') and all entities controlled by the Company (its
subsidiaries). A list of the subsidiaries of Smiths Group plc is provided
within the Annual Report 2025.
The Company controls an entity when it (i) has power over the entity; (ii) is
exposed or has rights to variable returns from its involvement with the
entity; and (iii) has the ability to affect those returns through its power
over the entity. The Group reassesses whether or not it controls a subsidiary
if facts and circumstances indicate that there are changes to one or more of
these three elements of control. Subsidiaries are fully consolidated from the
date on which control is obtained by the Company to the date that control
ceases.
Where the Group loses control of a subsidiary, the assets and liabilities are
derecognised along with any related non-controlling interest and other
components of equity. Any resulting gain or loss is recognised in the income
statement. Any interest retained in the former subsidiary is measured at fair
value when control is lost.
The non-controlling interests in the Group balance sheet represent the share
of net assets of subsidiary undertakings held outside the Group. The movement
in the year comprises the profit attributable to such interests together with
any dividends paid, movements in respect of corporate transactions and related
exchange differences.
Interests in associates are accounted for using the equity method. They are
initially recognised at cost, which includes transaction costs. Subsequent to
initial recognition, the Group financial statements include the Group's share
of the profit or loss and other comprehensive income of equity-accounted
investees, until the date on which significant influence ceases.
All intercompany transactions, balances, and gains and losses on transactions
between Group companies are eliminated on consolidation.
Foreign currencies
The Company's presentational currency and functional currency is sterling. The
financial position of all subsidiaries and associates that have a functional
currency different from sterling are translated into sterling at the rate of
exchange at the date of that balance sheet, and the income and expenses are
translated at average exchange rates for the period. All resulting foreign
exchange rate movements are recognised as a separate component of equity.
Foreign exchange rate movements arising on the translation of non-monetary
assets and liabilities held in hyperinflationary subsidiaries are recognised
in OCI. The amounts taken to the Cumulative Translation Adjustments reserve
represent the combined effect of restatement and translation and are expressed
as a net change for the year.
On consolidation, foreign exchange rate movements arising from the translation
of the net investment in foreign entities, and of borrowings and other
currency instruments designated as hedges of such investments, are taken to
shareholders' equity. When a foreign operation is sold, the cumulative amount
of such foreign exchange rate movements is recognised in the income statement
as part of the gain or loss on sale.
Foreign exchange rate movements arising on transactions are recognised in the
income statement. Those arising on trading are taken to operating profit;
those arising on borrowings are classified as finance income or cost.
Revenue
Revenue is measured at the fair value of the consideration received, net of
trade discounts (including distributor rebates) and sales taxes. Revenue is
discounted only where the impact of discounting is material.
When the Group enters into complex contracts with multiple, separately
identifiable components, the terms of the contract are reviewed to determine
whether or not the elements of the contract should be accounted for
separately. If a contract is being split into multiple components, the
contract revenue is allocated to the different components at the start of the
contract. The basis of allocation depends on the substance of the contract.
The Group considers relative stand-alone selling prices, contractual prices
and relative cost when allocating revenue.
The Group has identified the following different types of revenue:
(i) Sale of goods recognised at a point in time - generic products
manufactured by Smiths
Generic products are defined as either:
- Products that are not specific to any particular customer;
- Products that may initially be specific to a customer but can be
reconfigured at minimal cost, i.e., retaining a margin, for sale to an
alternative customer; or
- Products that are specific to a customer but are manufactured at Smiths
risk, i.e., we have no right to payment of costs plus margin if the customer
refuses to take control of the goods.
For established products with simple installation requirements, revenue is
recognised when control of the product is passed to the customer. The point in
time that control passes is defined in accordance with the agreed shipping
terms and is determined on a case-by-case basis. The time of dispatch or
delivery of the goods to the customer is normally the point at which invoicing
occurs. However for some generic products, revenue is recognised when the
overall performance obligation has been completed, which is often after the
customer has completed its acceptance procedures and has assumed control.
Products that are sold under multiple element arrangements, i.e., contracts
involving a combination of products and services, are bundled into a single
performance obligation unless the customer can benefit from the goods or
services either on their own, or together with other resources that are
readily available to the customer and are distinct within the context of the
contract.
For contracts that pass control of the product to the customer only on
completion of installation services, revenue is recognised upon completion of
the installation.
An obligation to replace or repair faulty products under the standard warranty
terms is recognised as a provision. If the contract includes terms that either
extend the warranty beyond the standard term or imply that maintenance is
provided to keep the product working, these are service warranties and revenue
is deferred to cover the performance obligation in an amount equivalent to the
relative stand-alone selling price of that service.
(ii) Sale of goods recognised over time - customer-specific products where the
contractual terms include rights to payment for work performed to date
Customer-specific products are defined as being:
- Products that cannot be reconfigured economically such that it remains
profitable to sell to another customer;
- Products that cannot be sold to another customer due to contractual
restrictions; and
- Products that allow Smiths to charge for the work performed to date in
an amount that represents the costs incurred to date plus a margin, should the
customer refuse to take control of the goods.
For contracts that meet the terms listed above, revenue is recognised over the
period that the Group is engaged in the manufacture of the product, calculated
using the input method based on the amount of costs incurred to date compared
to the overall costs of the contract. This is considered to be a faithful
depiction of the transfer of the goods to the customer as the costs incurred,
total expected costs and total order value are known. The time of dispatch or
delivery of the goods to the customer is normally the point at which invoicing
occurs.
An obligation to provide a refund for faulty products under the standard
warranty terms is recognised as a provision. If the contract includes terms
that either extend the warranty beyond the standard term or imply that
maintenance is provided to keep the product working, these are service
warranties and revenue is deferred to cover the performance obligation in an
amount equivalent to the relative stand-alone selling price of that service.
(iii) Services recognised over time - services relating to the installation,
repair and ongoing maintenance of equipment
Services include installation, commissioning, testing, training, software
hosting and maintenance, product repairs and contracts undertaking extended
warranty services.
For complex installations where the supply of services cannot be separated
from the supply of product, revenue is recognised upon acceptance of the
combined performance obligation (see Sale of goods (i) above).
For services that can be accounted for as a separate performance obligation,
revenue is recognised over time, assessed on the basis of the actual service
provided as a proportion of the total services to be provided.
Depending on the nature of the contract, revenue is recognised as follows:
- Installation, commissioning and testing services (when neither linked to
the supply of product nor subject to acceptance) are recognised rateably as
the services are provided;
- Training services are recognised on completion of the training course;
- Software hosting and maintenance services are recognised rateably over
the life of the contract;
- Product repair services, where the product is returned to Smiths
premises for remedial action, are recognised when the product is returned to
the customer and they regain control of the asset;
- Onsite ad hoc product repair services are recognised rateably as the
services are performed;
- Long-term product repair and maintenance contracts are recognised
rateably over the contract term; and
- Extended service warranties are recognised rateably over the contract
term.
Invoicing for services depends on the nature of the service provided with some
services charged in advance and others in arrears.
Where contracts are accounted for under the revenue recognised over time
basis, the proportion of costs incurred is used to determine the percentage of
contract completion.
Contracts for the construction of substantial assets, which normally last in
excess of one year, are accounted for under the revenue recognised over time
basis, using an input method.
For fixed-price contracts, revenue is recognised based upon an assessment of
the amount of cost incurred under the contract, compared to the total expected
costs that will be incurred under the contract. This calculation is applied
cumulatively with any over/under recognition being adjusted in the current
period.
For cost-plus contracts, revenue is recognised based upon costs incurred to
date plus any agreed margin.
For both fixed-price and cost-plus contracts, invoicing is normally based on a
schedule with milestone payments.
Customer funded R&D
Customer funded R&D relates to specific contracts whereby a third party,
e.g. government or commercial customer, has requested for the development of a
new product and they will fund the project.
The work carried out for the customer is expensed through cost of sales. Once
the performance obligations have been recognised as per IFRS 15, this is
classified as revenue.
Contract costs
The Group has taken the practical expedient of not capitalising contract costs
as they are expected to be expensed within one year from the date of signing.
Leases
Lease liabilities are initially measured at the present value of the future
lease payments at the commencement date, discounted by using either the rate
implicit in the lease, or if not observable, the Group's incremental borrowing
rate. Lease payments comprise contractual lease payments; variable lease
payments that depend on an index or rate, initially measured using the index
or rate at the commencement date; and the amount expected to be payable under
residual value guarantees.
Right of use assets are measured at commencement date at the amount of the
corresponding lease liability and initial direct costs incurred. Right of use
assets are depreciated over the shorter of the lease term and the useful life
of the right of use assets, unless there is a transfer of ownership or
purchase option which is reasonably certain to be exercised at the end of the
lease term, in which case depreciation is charged over the useful life of the
underlying asset. Right of use assets are subject to impairment.
When a lease contract is modified, either from a change to the duration of the
lease or a change to amounts payable, the Group remeasures the lease liability
by discounting the revised future lease payments at a revised discount rate. A
corresponding adjustment is made to the carrying value of the related right of
use asset.
Leases of buildings typically have lease terms between one and seven years,
while plant and machinery generally have lease terms between one and three
years. The Group also has certain leases of machinery with lease terms of 12
months or less and leases of office equipment with low value (typically below
£5,000). The Group applies the 'short-term lease' and 'lease of low-value
assets' recognition exemptions for these leases and recognises the lease
payments associated with these leases as an expense on a straight-line basis
over the lease term.
Interest on lease liabilities is presented as a financing activity in the
Consolidated Cash-Flow Statement, included under the heading lease payments.
Taxation
The charge for taxation is based on profits for the year and takes into
account taxation deferred because of temporary differences between the
treatment of certain items for taxation and accounting purposes.
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to taxation authorities. Tax benefits are not
recognised unless it is likely that the tax positions are sustainable. Tax
positions taken are then reviewed to assess whether a provision should be made
based on prevailing circumstances. Tax provisions are included in current tax
liabilities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date in the
countries where the Group operates and generates taxable income.
The Group operates and is subject to taxation in many countries. Tax
legislation is different in each country, is often complex and is subject to
interpretation by management and government authorities. These matters of
judgement give rise to the need to create provisions for uncertain tax
positions which are recognised when it is considered more likely than not that
there will be a future outflow of funds to a taxing authority. Provisions are
made against individual exposures and take into account the specific
circumstances of each case, including the strength of technical arguments,
recent case law decisions or rulings on similar issues and relevant external
advice.
The amounts are measured using one of the following methods, depending on
which of the methods the Directors expect will better reflect the amount the
Group will pay to the tax authority:
- The single best estimate method is used where there is a single outcome
that is more likely than not to occur. This will happen, for example, where
the tax outcome is binary or the range of possible outcomes is very limited;
or
- Alternatively, a probability weighted expected value is used where, on
the balance of probabilities, there will be a payment to the tax authority but
there are a number of possible outcomes. In this case, a probability is
assigned to each outcome and the amount provided is the sum of these
risk-weighted amounts. In assessing provisions against uncertain tax
positions, management uses in-house tax experts, professional firms and
previous experience of the taxing authority to evaluate the risk.
Deferred tax is provided in full using the balance sheet liability method. A
deferred tax asset is recognised where it is probable that future taxable
income will be sufficient to utilise the available relief. Deferred tax is
provided on temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary
differences is controlled by the Company and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax
liabilities and assets are not discounted.
Tax is charged or credited to the income statement except when it relates to
items charged or credited directly to equity, in which case the tax is also
dealt with in equity.
IAS 12 International Tax Reform: Pillar Two Model Rules
On 19 July 2023, the UK Endorsement Board adopted the Amendments to IAS
12 International Tax Reform: Pillar Two Model Rules, issued by the IASB in
May 2023. The Amendments introduce a temporary mandatory exception from
accounting for deferred taxes arising from the Pillar Two model rules and the
Group has applied this exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two income taxes.
Employee benefits
Share-based compensation
The fair value of share awards and share options granted are recognised as an
expense over their vesting period to reflect the value of the employee
services received. The fair value of options granted, excluding the impact of
any non-market vesting conditions, is calculated using established option
pricing models, principally binomial models. The probability of meeting
non-market vesting conditions, which include profitability targets, is used to
estimate the number of share awards which are likely to vest.
For cash-settled share-based payment, a liability is recognised based on the
fair value of the payment earned by the balance sheet date. For equity-settled
share-based payment, the corresponding credit is recognised directly in
reserves.
Pension obligations and post-retirement benefits
Pensions and similar benefits (principally healthcare) are accounted for under
IAS 19. The retirement benefit obligation in respect of the defined benefit
plans is the liability (the present value of all expected future obligations)
less the fair value of the plan assets.
The income statement expense is allocated between current service costs,
reflecting the increase in liability due to any benefit accrued by employees
in the current period, any past service costs/credits and settlement losses or
gains which are recognised immediately, and the scheme administration costs.
Actuarial gains and losses are recognised in the statement of comprehensive
income in the year in which they arise. These comprise the impact on the
liabilities of changes in demographic and financial assumptions compared with
the start of the year, actual experience being different to assumptions and
the return on plan assets being above or below the amount included in the net
pension interest cost.
Payments to defined contribution schemes are charged as an income statement
expense as they fall due.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the identifiable net assets of the acquired
subsidiary at the date of acquisition.
The goodwill arising from acquisitions of subsidiaries after 1 August 1998 is
included in intangible assets, tested annually for impairment and carried at
cost less accumulated impairment losses. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the entity sold.
The goodwill arising from acquisitions of subsidiaries before 1 August 1998
was set against reserves in the year of acquisition.
Goodwill is tested for impairment at least annually. Should the test indicate
that the net realisable value of the CGU is less than current carrying value,
an impairment loss will be recognised immediately in the income statement.
Subsequent reversals of impairment losses for goodwill are not recognised.
Research and development
Expenditure on research and development is charged to the income statement in
the year in which it is incurred with the exception of:
- Amounts recoverable from third parties; and
- Expenditure incurred in respect of the development of major new products
where the outcome of those projects is assessed as being reasonably certain as
regards viability and technical feasibility. Such expenditure is capitalised
and amortised over the estimated period of sale for each product, commencing
in the year that the product is ready for sale. Amortisation is charged
straight line or based on the units produced, depending on the nature of the
product and the availability of reliable estimates of production volumes.
The cost of development projects which are expected to take a substantial
period of time to complete includes attributable borrowing costs.
Intangible assets acquired in business combinations
The identifiable net assets acquired as a result of a business combination may
include intangible assets other than goodwill. Any such intangible assets are
amortised straight line over their expected useful lives as follows:
Patents, licences and trademarks up to 20 years
Technology up to 13 years
Customer relationships up to 15 years
The assets' useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date.
Software, patents and intellectual property
The estimated useful lives are as follows:
Software up to seven years
Patents and intellectual property shorter of the economic life and the period the right is legally enforceable
The assets' useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and any recognised impairment losses.
Land is not depreciated. Depreciation is provided on other assets estimated to
write off the depreciable amount of relevant assets by equal annual
instalments over their estimated useful lives. In general, the rates used are:
Freehold and long leasehold buildings 2% per annum
Short leasehold property over the period of the lease
Plant, machinery, etc. 10% to 20% per annum
Fixtures, fittings, tools and other equipment 10% to 33% per annum
The cost of any assets which are expected to take a substantial period of time
to complete includes attributable borrowing costs.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in, first-out method. The cost of finished goods
and work in progress comprises raw materials, direct labour, other direct
costs and related production overheads (based on normal operating capacity).
The cost of items of inventory which take a substantial period of time to
complete includes attributable borrowing costs.
The net realisable value of inventories is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
Provisions are made for any slow-moving, obsolete or defective inventories.
Trade and other receivables
Trade receivables and contract assets are either classified as 'held to
collect' and initially recognised at fair value and subsequently measured at
amortised cost, less any appropriate provision for expected credit losses or
as 'held to collect and sell' and measured at fair value through other
comprehensive income (FVOCI).
A provision for expected credit losses is established when there is objective
evidence that it will not be possible to collect all amounts due according to
the original payment terms. Expected credit losses are determined using
historical write-offs as a basis, adjusted for factors that are specific to
the debtor, general economic conditions of the industry in which the debtor
operates and with a default risk multiplier applied to reflect country risk
premium. The Group applies the IFRS 9 simplified lifetime expected credit loss
approach for trade receivables and contract assets which do not contain a
significant financing component.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually
certain.
Provisions for warranties and product liability, disposal indemnities,
restructuring costs, property dilapidations and legal claims are recognised
when: the Company has a legal or constructive obligation as a result of a past
event; it is probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Provisions are discounted where the time value of money is material.
Where there is a number of similar obligations, for example where a warranty
has been given, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole. A provision
is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
Businesses held for sale
Businesses classified as held for sale are measured at the lower of carrying
amount and fair value less costs to sell. Impairment losses on initial
classification as held for sale and gains or losses on subsequent
remeasurements are included in the income statement. No depreciation is
charged on assets and businesses classified as held for sale.
Businesses are classified as held for sale if their carrying amount will be
settled principally through a sale rather than through continuing use and the
following criteria are met:
- The business must be a separate major line of business, available for
immediate sale in its present condition;
- Management is committed to the plan to sell the business and an active
programme to locate a buyer and complete the plan must have been initiated;
- The disposal group must be actively marketed for sale at a price that is
reasonable in relation to its current fair value;
- Shareholder and regulatory approval is highly probable and the plan is
unlikely to be significantly changed or withdrawn; and
- Sale is expected to be completed within 12 months of the balance sheet
date.
The assets and liabilities of businesses held for sale are presented as
separate lines on the balance sheet.
Discontinued operations
A discontinued operation is either:
- A component of the Group's business that represents a separate major
line of business or geographical area of operations that has been disposed of,
has been abandoned or meets the criteria to be classified as held for sale;
- Is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations; or
- A business acquired solely for the purpose of selling it.
Discontinued operations are presented on the income statement as a separate
line and are shown net of tax.
In accordance with IAS 21, gains and losses on intra-group monetary assets and
liabilities are not eliminated. Therefore foreign exchange rate movements on
intercompany loans with discontinued operations are presented on the income
statement as non-headline finance cost items.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and highly liquid
interest-bearing securities with maturities of three months or less.
In the cash-flow statement, cash and cash equivalents are shown net of bank
overdrafts, which are included as current borrowings in liabilities on the
balance sheet.
Financial assets
The classification of financial assets depends on the purpose for which the
assets were acquired. Management determines the classification of an asset at
initial recognition and re-evaluates the designation at each reporting date.
Financial assets are classified as: measured at amortised cost, fair value
through other comprehensive income or fair value through profit and loss.
Financial assets primarily include trade receivables, cash and cash
equivalents (comprising cash at bank, money-market funds, and short-term
deposits), short-term investments, derivatives (foreign exchange contracts and
interest rate derivatives) and unlisted investments.
- Trade receivables are classified either as 'held to collect' and
measured at amortised cost or as 'held to collect and sell' and measured at
fair value through other comprehensive income (FVOCI). The Group may sell
trade receivables due from certain customers before the due date. Any trade
receivables from such customers that are not sold at the reporting date are
classified as 'held to collect and sell'.
- Cash and cash equivalents (consisting of balances with banks and other
financial institutions, money-market funds and short-term deposits) and
short-term investments are subject to low market risk. Cash balances,
short-term deposits and short-term investments are measured at amortised cost.
Money market funds are measured at fair value through profit and loss (FVPL).
- Derivatives are measured at FVPL.
- Listed and unlisted investments are measured at FVOCI.
- Deferred contingent consideration are measured at FVPL.
Financial assets are derecognised when the right to receive cash-flows from
the assets has expired, or has been transferred, and the Group has transferred
substantially all of the risks and rewards of ownership.
On initial recognition, the Group may make an irrevocable election to
designate certain investments as FVOCI, if they are not held for trading or
relate to contingent consideration on a business combination. When securities
measured at FVOCI are sold or impaired, the accumulated fair value adjustments
remain in reserves.
Financial assets are classified as current if they are expected to be realised
within 12 months of the balance sheet date.
Financial liabilities
Borrowings are initially recognised at the fair value of the proceeds, net of
related transaction costs. These transaction costs, and any discount or
premium on issue, are subsequently amortised under the effective interest rate
method through the income statement as interest over the life of the loan and
added to the liability disclosed in the balance sheet. Related accrued
interest is included in the borrowings figure.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least one year
after the balance sheet date.
Derivative financial instruments and hedging activities
The Group uses derivative financial instruments to hedge its exposures to
foreign exchange and interest rates arising from its operating and financing
activities.
Derivative financial instruments are initially recognised at fair value on the
date a derivative contract is entered into and are subsequently re-measured at
their fair value. The method of recognising any resulting gain or loss depends
on whether the derivative financial instrument is designated as a hedging
instrument and, if so, the nature of the item being hedged.
Where derivative financial instruments are designated into hedging
relationships, the Group formally documents the following:
- The risk management objective and strategy for entering the hedge;
- The nature of the risks being hedged and the economic relationship
between the hedged item and the hedging instrument; and
- Whether the change in cash-flows of the hedged item and hedging
instrument are expected to offset each other.
Changes in the fair value of any derivative financial instruments that do not
qualify for hedge accounting are recognised immediately in the income
statement.
Fair value hedge
The Group uses derivative financial instruments to convert part of its fixed
rate debt to floating rate in order to hedge the risks arising from its
external borrowings.
The Group designates these as fair value hedges of interest rate risk. Changes
in the hedging instrument are recorded in the income statement, together with
any changes in the fair values of the hedged assets or liabilities that are
attributable to the hedged risk to the extent that the hedge is effective.
Gains or losses relating to any ineffectiveness are immediately recognised in
the income statement.
Cash-flow hedge
Cash-flow hedging is used by the Group to hedge certain exposures to
variability in future cash-flows.
The effective portions of changes in the fair values of derivatives that are
designated and qualify as cash-flow hedges are recognised in equity. The gain
or loss relating to any ineffective portion is recognised immediately in the
income statement. Amounts accumulated in the hedge reserve are recycled in the
income statement in the periods when the hedged items will affect profit or
loss (for example, when the forecast sale that is hedged takes place).
If a forecast transaction that is hedged results in the recognition of a
non-financial asset (for example, inventory) or a liability, the gains and
losses previously deferred in the hedge reserve are transferred from the
reserve and included in the initial measurement of the cost of the asset or
liability. When a hedging instrument expires or is sold, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in the hedge reserve at that time remains in the reserve and is
recognised when the forecast transaction is ultimately recognised in the
income statement.
When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in other comprehensive income is immediately
transferred to the income statement.
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to
cash-flow hedges. Any gain or loss on the hedging instrument relating to the
effective portion of the hedge is recognised in other comprehensive income;
the gain or loss relating to any ineffective portion is recognised immediately
in the income statement. When a foreign operation is disposed of, gains and
losses accumulated in equity related to that operation are included in the
income statement for that period.
Fair value of financial assets and liabilities
The fair values of financial assets and financial liabilities are the amounts
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale.
IFRS 13: 'Fair value measurement' requires fair value measurements to be
classified according to the following hierarchy:
- Level 1 - quoted prices in active markets for identical assets or
liabilities;
- Level 2 - valuations in which all inputs are observable either directly
(i.e., as prices) or indirectly (i.e., derived from prices); and
- Level 3 - valuations in which one or more inputs that are significant to
the resulting value are not based on observable market data.
See note 21 for information on the methods which the Group uses to estimate
the fair values of its financial instruments.
Dividends
Dividends are recognised as a liability in the period in which they are
authorised. The interim dividend is recognised when it is paid and the final
dividend is recognised when it has been approved by shareholders at the Annual
General Meeting.
New accounting standards effective 2025
The accounting policies adopted in the preparation of these consolidated
financial statements are consistent with those followed in the previous
financial year.
The following amendments to IFRS were in effect during the reporting period
ended 31 July 2025 that are potentially relevant to the Group, and which have
not been applied in these financial statements:
- Amendment to IAS 7 and IFRS 7 - Supplier finance arrangements
Management have reviewed the supplier finance arrangements in effect around
the Group and determined that there is no material impact on the consolidated
financial statements or the Group's liquidity risk.
New standards and interpretations not yet adopted
At the date of authorisation of these Consolidated Financial Statements, the
Group has not applied the following new and revised IFRS Standards that have
been issued but are not yet effective:
- Amendments to IAS 21 - Lack of Exchangeability
- Amendments to IFRS 7 and IFRS 9 - Classification and measurement of
financial instruments and for Power Purchase Agreements
- IFRS 18 - Presentation and Disclosures in Financial Statements
- IFRS 19 - Subsidiaries without Public Accountability: Disclosures
The Group has yet to assess the full outcome of these new standards,
amendments and interpretations, however with the exception of IFRS 18 these
other new standards, amendments and interpretations are not expected to have a
significant impact on the Group's financial statements. The Group intends to
adopt these new standards, amendments and interpretations, if applicable,
when they become effective.
Parent Company
The ultimate Parent Company of the Group is Smiths Group plc, a company
incorporated in England and Wales and listed on the London Stock Exchange.
The accounts of the Parent Company, Smiths Group plc, have been prepared in
accordance with the Companies Act 2006 and Financial Reporting Standard 101,
'Reduced Disclosure Framework'.
The Company accounts are presented in separate financial statements within the
Annual Report 2025. The principal subsidiaries of the Parent Company are
listed in the above accounts.
Notes to the accounts
1. 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 segments
design, manufacture and support 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;
- Smiths Detection - sensors and systems that detect and identify
explosives, narcotics, weapons, chemical agents, biohazards and contraband;
and
- 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 are 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 the segmental results
and operating assets to monitor the segmental position. See note 3 and note 30
for an explanation of which items are excluded from headline measures.
Following the reclassification of the Smiths Interconnect business as a
discontinued operation, the segmental information of Smiths Interconnect is
disclosed in note 28.
Intersegment sales and transfers are charged at arm's length prices.
Segment trading performance
Year ended 31 July 2025
John Crane Flex-Tek Smiths Detection Corporate Total
£m £m £m costs £m
£m
Revenue 1,115 837 963 - 2,915
Segmental headline operating profit 265 164 122 - 551
Corporate headline operating costs - - - (46) (46)
Headline operating profit/(loss) 265 164 122 (46) 505
Items excluded from headline measures (note 3) (1) (45) (26) (23) (95)
Operating profit/(loss) 264 119 96 (69) 410
Headline operating margin 23.8% 19.5% 12.7% 17.3%
Year ended 31 July 2024 - represented*
John Crane Flex-Tek Smiths Corporate Total
£m £m Detection costs £m
£m £m
Revenue 1,133 786 859 - 2,778
Segmental headline operating profit 263 161 102 - 526
Corporate headline operating costs - - - (49) (49)
Headline operating profit/(loss) 263 161 102 (49) 477
Items excluded from headline measures (note 3) (34) (26) (19) (29) (108)
Operating profit/(loss) 229 135 83 (78) 369
Headline operating margin 23.2% 20.5% 11.9% 17.1%
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
Operating profit is stated after charging the following items:
Year ended 31 July 2025
John Crane Flex-Tek Smiths Detection Corporate and Total
£m £m £m non-headline £m
£m
Depreciation - property, plant and equipment 16 9 10 3 38
Depreciation - right of use assets 14 7 9 1 31
Amortisation - capitalised development costs - - 10 - 10
Amortisation of software, patents and intellectual property 4 - 9 1 14
Amortisation of acquired intangibles - - - 50 50
Restructuring costs - - - 22 22
Impairment - prior year working capital - - - 15 15
Share-based payment 4 3 3 8 18
Year ended 31 July 2024 - represented*
John Crane Flex-Tek Smiths Corporate and Total
£m £m Detection non-headline £m
£m £m
Depreciation - property, plant and equipment 17 9 11 - 37
Depreciation - right of use assets 15 7 8 1 31
Amortisation - capitalised development costs - - 2 - 2
Amortisation of software, patents and intellectual property 1 - 1 1 3
Amortisation of acquired intangibles - - - 47 47
Share-based payment 3 2 2 5 12
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation, including the allocation of costs between Smiths
Interconnect and Flex-Tek.
The corporate and non-headline column comprises central information
technology, human resources and headquarters costs and non-headline expenses
(see note 3).
Segment assets and liabilities
Segment assets
31 July 2025
John Crane Flex-Tek Smiths Corporate and Total
£m £m Detection non-headline £m
£m £m
Property, plant, equipment, right of use assets, development projects, other 185 113 132 11 441
intangibles and investments
Inventory, trade and other receivables 518 251 622 22 1,413
Segment assets 703 364 754 33 1,854
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 & disposals.
Segment liabilities
31 July 2025
John Crane Flex-Tek Smiths Corporate and Total
£m
non-headline
£m
£m Detection
£m
£m
Segmental liabilities 173 105 374 - 652
Corporate and non-headline liabilities - - - 319 319
Segment liabilities 173 105 374 319 971
31 July 2024
John Crane Flex-Tek Smiths Smiths Corporate and Total
£m
Interconnect
non-headline
£m
£m Detection
£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 & disposals.
Reconciliation of segment assets and liabilities to statutory assets and
liabilities
Assets Liabilities
31 July 31 July 31 July 31 July
2025
2024
2025
2024
£m
£m
£m £m
Segment assets and liabilities 1,854 2,115 (971) (1,099)
Goodwill and acquired intangibles 1,192 1,404 - -
Derivatives 17 4 (2) (17)
Current and deferred tax 118 118 (109) (102)
Retirement benefit assets and obligations 128 132 (96) (103)
Cash and borrowings 195 459 (667) (659)
Assets and liabilities held for sale 507 - (106) -
Statutory assets and liabilities 4,011 4,232 (1,951) (1,980)
Segment capital expenditure
The capital expenditure on property, plant and equipment, capitalised
development and other intangible assets for each business segment is:
John Crane Flex-Tek Smiths Corporate and Total
£m
£m
Detection
non-headline
£m
£m
£m
Capital expenditure year ended 31 July 2025 41 13 13 - 67
Capital expenditure year ended 31 July 2024 34 10 28 3 75
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
(FY2024: £478m) and eliminate retirement benefit assets and obligations and
litigation provisions relating to non-headline items, both net of related tax,
and net debt. See note 30 for a reconciliation of net assets to capital
employed.
The 12-month rolling average capital employed by business segment, which
Smiths uses to calculate segmental return on capital employed, is:
31 July 2025
John Crane Flex-Tek Smiths Total
£m
£m
£m Detection
£m
Average segmental capital employed 1,051 689 1,079 2,819
Average capital employed - assets held for sale 447
Average corporate capital employed (62)
Average total capital employed - continuing operations 3,204
31 July 2024
John Crane Flex-Tek Smiths Total
£m
£m
Detection
£m
£m
Average segmental capital employed 1,035 606 1,124 2,765
Average capital employed - assets held for sale 472
Average corporate capital employed (31)
Average total capital employed - continuing operations 3,206
The Smiths Interconnect division has been accounted for as a business held for
sale. Further details of the segmental asset and liabilities of the Smiths
Interconnect division is disclosed in note 28.
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 year ended 31 July 2025 322 793 1,115
Revenue year ended 31 July 2024 321 812 1,133
Flex-Tek Aerospace Industrials Total
£m
£m
£m
Revenue year ended 31 July 2025 159 678 837
Revenue year ended 31 July 2024 154 632 786
Smiths Detection Aviation Other detection Total
£m
systems
£m
£m
Revenue year ended 31 July 2025 715 248 963
Revenue year ended 31 July 2024 595 264 859
John Crane aftermarket sales were £793m (FY2024: £812m) and Smiths Detection
aftermarket sales were £488m (FY2024: £443m).
Segmental revenue is analysed by the Smiths Group key global markets as
follows:
General Industrial Safety & Security Energy Aerospace Total
£m
£m
£m
& Defence
£m
£m
John Crane revenue
Revenue year ended 31 July 2025 413 - 702 - 1,115
Revenue year ended 31 July 2024 407 - 726 - 1,133
Flex-Tek revenue
Revenue year ended 31 July 2025 678 - - 159 837
Revenue year ended 31 July 2024 632 - - 154 786
Smiths Detection revenue
Revenue year ended 31 July 2025 - 963 - - 963
Revenue year ended 31 July 2024 - 859 - - 859
Total revenue
Revenue year ended 31 July 2025 1,091 963 702 159 2,915
Revenue year ended 31 July 2024 - represented* 1,039 859 726 154 2,778
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
The Group's statutory revenue is analysed as follows:
Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Sale of goods recognised at a point in time 2,080 1,962
Sale of goods recognised over time 10 11
Services recognised over time 825 805
2,915 2,778
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
Analysis by geographical areas
The Group's revenue by destination and non-current operating assets by
location are shown below:
Americas Europe Asia Pacific Rest of World Total
£m £m £m £m £m
Revenue year ended 31 July 2025 1,616 529 435 335 2,915
Revenue year ended 31 July 2024 - represented 1,494 541 421 322 2,778
31 July 2025 - non-current operating assets by geographical location:
Intangible assets 794 476 14 - 1,284
Property, plant and equipment 140 61 23 20 244
Right of use assets 51 33 10 5 99
Other receivables 56 22 1 5 84
Non-current operating assets 1,041 592 48 30 1,711
31 July 2024 represented* - non-current operating assets by geographical
location:
Intangible assets 1,045 462 14 - 1,521
Property, plant and equipment 162 63 29 16 270
Right of use assets 55 38 12 5 110
Other receivables 56 17 - 14 87
Non-current operating assets - restated 1,318 580 55 35 1,988
* The FRC's review of the Group's FY2024 annual report and accounts
identified a small number of reporting improvement matters. Following the
FRC's review, the non-current operating assets by geographical location
disclosure has been represented to fully align with the disclosure
requirements of IFRS 8, and the total has been restated to include non-current
assets not previously reported.
The other receivables balance in the table above comprises current and
non-current other receivables (see note 16) excluding financial instruments.
Revenue by destination attributable to the United Kingdom was £107m (FY2024:
£108m). Other revenue found to be significant included, the United States of
America, totalling £1,324m (FY2024: £1,217m), China (excluding Hong Kong)
£112m (FY2024: £119m) and Canada £130m (FY2024: £113m). Revenue by
destination has been selected as the basis for attributing revenue to
geographical areas as this was the geographic attribution of revenue used by
management to review business performance.
Non-current assets located in the United Kingdom total £180m (FY2024:
£171m). Significant non-current assets held in the United States of America
£902m (FY2024: £1,245m) and Germany £370m (FY2024: £360m).
2. Operating costs
The Group's operating costs for continuing operations are analysed as follows:
Year ended 31 July 2025 Year ended 31 July 2024 - represented*
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 distribution 1,839 - 1,839 1,742 - 1,742
overheads
Selling costs 194 - 194 200 - 200
Administrative expenses 379 95 474 361 108 469
Research and development tax credits (2) - (2) (2) - (2)
Total 2,410 95 2,505 2,301 108 2,409
Operating profit is stated after charging:
Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Research, development and customer-specific engineering expense 96 94
Depreciation of property, plant and equipment 38 37
Depreciation of right of use assets 31 31
Amortisation of intangible assets 74 53
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation and the changes in definition of research, development
and customer-specific engineering (RD&E) which is defined in note 30 of
the accounts.
RD&E cash costs were £117m (FY2024: £128m) comprising £96m (FY2024:
£94m) of RD&E expensed to the income statement, £4m (FY2024: £14m) of
capitalised costs and £17m (FY2024: £20m) of customer-funded R&D.
Administrative expenses include £1m (FY2024: £1m) in respect of lease
payments for short-term and low-value leases which were not included within
right of use assets and lease liabilities.
Auditors' remuneration
The following fees were paid or are payable to the Company's auditors, KPMG
LLP and other firms in the KPMG network, for the year ended 31 July 2025.
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Audit services
Fees payable to the Company's auditors for the audit of the Company's annual 2.5 2.8
financial statements
Fees payable to the Company's auditors and its associates for other services:
- the audit of the Company's subsidiaries 3.5 3.6
6.0 6.4
Audit related assurance services (i) 2.1 0.4
Other assurance services (ii) 0.2 0.1
Total fees 8.3 6.9
(i) Audit related assurance services includes £0.4m (FY2024: £0.4m) for
review of interim report and £1.7m (FY2024: £nil) for services delivered in
FY2025 related to the reporting accountant engagement in respect of the
historical financial information of the Detection business of the Group. This
engagement is required by regulation and supports the Company in fulfilling
its legal obligations under UK law. Accordingly, the related fees have been
excluded from the calculation of non-audit services as a percentage of audit
fees calculated below.
(ii) Other assurance services include £0.1m (FY2024: £0.1m) for limited
assurance over the Group's Scope 1-3 greenhouse gas emissions metrics and
£0.1m (FY2024: nil) for services related to the reestablishment of the Euro
Medium Term Note (EMTN) programme.
Total fees for non-audit services comprise 10% (FY2024: 8%) of audit fees, as
noted above in FY2025 £1.7m of reporting accountant services have been
excluded from the calculation of this ratio.
3. Non-statutory profit measures
Headline profit measures
The Group has identified and defined a 'headline' measure of performance which
is not impacted by material non-recurring items or items considered
non-operational/trading in nature. This non-GAAP measure of profit is not
intended to be a substitute for any IFRS measures of performance, but is a key
measure used by management to understand and manage 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
i. Continuing operations
The non-headline items included in statutory operating profit for continuing
operations were as follows:
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Acquisition and disposal related costs
Detection separation costs (10) -
Post-acquisition integration costs and fair value adjustment unwind (4) (3)
Fair value movement on contingent consideration 4 (13)
Loss on disposal of financial asset (3) (9)
Business acquisition costs and related expenses (2) (4)
Legacy pension scheme arrangements
Scheme administration costs 8 (4) (6)
Past service costs for benefit equalisation 8 - (4)
Non-headline provision movements
Environmental remediation provision (2) -
Provision held against Titeflex Corporation subrogation claims 23 5 5
Provision for John Crane, Inc. asbestos litigation 23 12 (29)
Cost recovery for John Crane, Inc. asbestos litigation 1 3
Other items
Corporate restructuring costs (22) -
Impairment of prior year working capital balances (15) -
Cyber incident remediation costs (4) -
Amortisation of acquired intangible assets 10 (50) (47)
Funding of charitable foundation (1) (1)
Non-headline items in operating profit - continuing operations (95) (108)
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
Acquisition and disposal related costs
Detection separation costs amounted to £10m (FY2024: £nil); this represents
the incremental costs incurred by the Group to demerge/sell the Smiths
Detection business. These costs have been reported as non-headline as the
total cost of the project is both material and non-recurring.
The £4m (FY2024: £3m) of post-acquisition integration costs and fair value
adjustment unwind principally relate to Flex-Tek's recent corporate
acquisitions. These include £2m of defined project costs for the integration
of these businesses into the existing Flex-Tek business and a £2m expense for
unwinding the acquisition balance sheet fair value adjustments required by
IFRS 3 'Business combinations'. These have been recognised as non-headline as
the charge did not relate to trading activity.
The £4m current year fair value gain on contingent consideration is
attributable to the revaluation of deferred contingent consideration payable
on Flex-Tek's recent acquisitions. The prior year £13m loss related to the
write down of the remaining fair value of the Group's contingent consideration
from the sale of Smiths Medical. These are considered to be a non-headline
item on the basis that these fair value charges do not relate to trading
activity.
The £3m loss (FY2024: £9m) on disposal of financial asset relates to the
block sale discount on the disposal of the Group's remaining investment in ICU
shares. This is considered a non-headline charge as it did not relate to
trading activity.
The £2m (FY2024: £4m) of business acquisition costs and related expenses
represent incremental deal costs related to the Group's business acquisition
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 activity being undertaken and do not relate to trading activity.
Legacy pension scheme arrangements
Scheme administration costs of £4m (FY2024: £6m) relate to the TIGPS legacy
pension scheme and SIPS 'path to buy-in' costs. As the Group is not
anticipating 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 in the scheme.
The prior year £4m credit for past service costs for benefit equalisation
represents the recognition of additional Smith Industries Pension Scheme
(SIPS) liabilities following the agreement of new methodologies to achieve
Guaranteed Minimum Pension (GMP) equalisation retirement benefits for men and
women.
Non-headline provision movements
In the current year a £2m (FY2024: £nil) environmental provision has been
raised for the present value of the costs that the Group's Flex-Tek division
is required to incur to remediate a legacy environment contamination at one of
its US sites. The provision made in the current year on the receipt of a
reliable estimate of the amount of the obligation. The provision is considered
to be non-headline as it is due to a legacy site contamination, that arose
prior to the Smiths Group ownership, and do not relate to current trading
activity.
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 £5m credit (FY2024: £5m credit) recognised by Titeflex Corporation
was principally driven by a reduction in the number of expected claims. See
note 23 for further details; and
- The £12m credit (FY2024: £29m charge) in respect of John Crane, Inc.
asbestos litigation is due to a reduction in the future expected indemnity
costs. See note 23 for further details; and
- In FY2025 £1m (FY2024: £3m) of asbestos litigation costs were
recovered by John Crane, Inc. via insurer settlements.
Other items
Corporate restructuring costs of £22m (FY2024: £nil) were incurred on the
previously announced Group-wide Acceleration Plan. These costs are treated as
non-headline due to being material and part of a pre-approved two year
programme.
Following a balance sheet investigation at a stand-alone Flex-Tek US
industrial business, certain non-material working capital balances were
identified as overstated and have been impaired. A £15m impairment charge
has been recognised, in FY2025, against working capital balances in relation
to matters relating to prior years. It has been recognised as a non-headline
item as the charge is a significant non-recurring item that relates to
multiple prior years.
At the end of January 2025 the Group incurred a cyber security incident that
involved unauthorised access to the Company's systems. £4m of remediation
costs have been incurred in the current year, these have been recognised as
non-headline as this was a significant non-recurring event for the Group and
did not relate to trading activity.
Acquisition related intangible asset amortisation costs of £50m (FY2024:
£47m) 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.
The £1m funding of charitable foundation charge is the FY2025 funding
(FY2024: £1m) of the Smiths Group Foundation, a charitable giving foundation
with a committed initial £10m of funding linked to engineering-related good
causes. This is recognised as non-headline as the charge did not relate to
trading activity.
Non-headline finance costs items
The non-headline items included in finance costs for continuing operations
were as follows:
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
represented
£m
Unwind of discount on provisions 23 (9) (9)
Unwind of discount on other payables (1) -
Other finance income - retirement benefits 8 3 6
Release of interest payment on overdue VAT 4 -
Other sundry financing losses (1) (2)
Non-headline items in finance costs - continuing operations (4) (5)
Continuing operations - non-headline loss before taxation (99) (113)
The financing elements of non-headline legacy liabilities, including the £10m
(FY2024: £9m) unwind of discount on provisions, were 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 £3m (FY2024: £6m) of financing credits
relating to retirement benefits. These were excluded from headline finance
costs because the ongoing costs and credits are a legacy of previous employee
pension arrangements.
The £4m release of interest payable on overdue VAT relates to a historic
classification error on chain export transactions.
Non-headline taxation credit
The non-headline items included in taxation for continuing operations were as
follows:
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
represented
£m
Tax credit on non-headline loss 6 23 23
Increase in unrecognised UK deferred tax asset 6 (3) (19)
Non-headline taxation credit - continuing operations 20 4
Continuing operations - non-headline loss for the year (79) (109)
Movement in unrecognised UK deferred tax asset
These movements are reported as non-headline because the original credit was
reported as non-headline.
ii. Discontinued operations
The non-headline items for discontinued operations, see note 28 for additional
disclosures, were as follows:
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Impairment loss on reclassification to held for sale (30) -
Interconnect separation costs (8) -
Amortisation of acquisition related intangible assets (2) (2)
Business acquisition costs and related expenses - (1)
Tax on non-headline loss (1) (3)
Non-headline items in profit - discontinued operations (41) (6)
Loss for the year - non headline items for continuing and discontinued (120) (115)
operations
In June 2025 Interconnect agreed to sell its US sub-systems business. The
business has been reclassified as held for sale and the £37m carrying value
of its net assets have been impaired to their fair value less costs to sell of
£7m. This has resulted in a £30m impairment loss being recognised.
Interconnect separation costs amounted to £8m (FY2024: £nil); this
represents the incremental costs incurred by the Group to sell the Smiths
Interconnect business. These costs have been reported as non-headline as they
were both material and non-recurring.
Acquisition related intangible asset amortisation costs of £2m (FY2024: £2m)
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.
4. Net finance costs
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Interest income 40 26
Interest expense:
- bank loans and overdrafts, including associated fees (52) (46)
- other loans (12) (12)
- interest on leases (6) (5)
- interest on uncertain tax provisions (1) -
Interest expense (71) (63)
Headline net finance costs (31) (37)
Other financing (losses)/gains:
- valuation movements on fair value hedged debt (13) 5
- valuation movements on fair value derivatives 15 (5)
- foreign exchange and ineffectiveness on net investment hedges (3) (2)
- unwind of discount on provisions and other payables 3 (10) (9)
Other financing losses (11) (11)
Other non-headline finance cost items:
- release of interest payment on overdue VAT 4 -
- other finance income - Interest on retirement benefits 8 3 6
Other non-headline finance cost items 7 6
Net finance costs (35) (42)
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
5. Earnings per share
Basic earnings per share are calculated by dividing the profit for the year
attributable to equity shareholders of the Company by the average number of
ordinary shares in issue during the year.
Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Profit attributable to equity shareholders for the year:
- continuing 274 221
- discontinued 16 29
Total 290 250
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
Year ended Year ended
31 July 2025
31 July 2024
Number of shares
Number of shares
Number of shares in issue, net of shares held in Employee Benefit Trust:
Weighted average number for basic earnings per share 338,390,299 345,901,957
Adjustment for potentially dilutive shares 1,576,039 1,389,223
Weighted average number for diluted earnings per share 339,966,338 347,291,180
Nil options (FY2024: nil) were excluded from this calculation because their
effect was anti‑dilutive.
Year ended Year ended
31 July 2025
31 July 2024 represented
pence
pence
Statutory earnings per share total - basic 85.7p 72.3p
Statutory earnings per share total - diluted 85.3p 72.0p
Statutory earnings per share continuing operations - basic 81.0p 63.9p
Statutory earnings per share continuing operations - diluted 80.6p 63.7p
A reconciliation of statutory and headline earnings per share is as follows:
Year ended 31 July 2025 Year ended 31 July 2024 represented
£m Basic EPS Diluted EPS £m Basic EPS Diluted EPS
(p)
(p)
(p)
(p)
Total profit attributable to equity shareholders of the Parent Company 290 85.7p 85.3p 250 72.3p 72.0p
Exclude: Non-headline items (note 3) 120 115
Headline earnings per share 410 121.2p 120.6p 365 105.5p 105.2p
Profit from continuing operations attributable to equity shareholders of the 274 81.0p 80.6p 221 63.9p 63.7p
Parent Company
Exclude: Non-headline items (note 3) 79 109
Headline earnings per share - continuing operations 353 104.3p 103.8p 330 95.4p 95.1p
6. Taxation
This note only provides information about corporate income taxes under IFRS.
Smiths companies operate in over 50 countries across the world. They pay and
collect many different taxes in addition to corporate income taxes including:
payroll taxes; value added and sales taxes; property taxes; product-specific
taxes; and environmental taxes. The costs associated with these other taxes
are included in profit before tax.
Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
The taxation charge in the consolidated income statement for the year
comprises:
Continuing operations
Current taxation:
- current income tax charge 98 101
- current tax adjustments in respect of prior periods - 2
Current taxation 98 103
Deferred taxation 1 2
Total taxation expense - continuing operations 99 105
Discontinued operations
Current taxation:
- current income tax charge 19 12
- deferred taxation - 4
Total taxation expense - discontinued operations 19 16
Analysed as:
Headline taxation expense 137 122
Non-headline taxation credit (19) (1)
Total taxation expense in the consolidated income statement 118 121
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Tax on items credited to equity
Deferred tax:
- share based payments (1) -
- retirement benefit schemes - (17)
Taxation on retirement benefit movements (1) (17)
The FY2024: £17m credit to equity for retirement benefit schemes principally
related to UK retirement schemes.
Current taxation liabilities
Current tax
£m
At 31 July 2023 (30)
Charge to income statement (115)
Tax paid 99
At 31 July 2024 (46)
Comprising:
Current tax receivable 24
Current tax payable within one year (70)
At 31 July 2024 (46)
Charge to income statement - continuing operations (98)
Charge to income statement - discontinued operations (19)
Tax paid 113
Transfer to held for sale 4
At 31 July 2025 (46)
Comprising:
Current tax receivable 20
Current tax payable within one year (66)
At 31 July 2025 (46)
Total provisions for tax liabilities amount to £35m of which £30m relates to
current tax (FY2024: total £44m, current tax £39m). The majority of which
relates to the risk of challenge from tax authorities to the geographic
allocation of profits across the Group.
In addition to the risks provided for the Group faces a variety of other tax
risks, which result from operating in a complex global environment, including
the ongoing reform of both international and domestic tax rules, new and
ongoing tax audits in the Group's larger markets and the challenge to fulfil
ongoing tax compliance filing and transfer pricing obligations given the scale
and diversity of the Group's global operations.
The Group anticipates that a number of tax audits are likely to conclude in
the next 12 to 24 months for which provisions are recognised based on best
estimates and management's judgements concerning the ultimate outcome of the
audit. Due to the uncertainty associated with such items, it is possible at a
future date, on conclusion of open tax matters, the final outcome may vary
significantly from the amounts noted above.
Reconciliation of the tax charge
The headline tax charge for the year of £119m (FY2024: £109m) represents an
effective rate of 25.0% (FY2024: 25.0%).
The tax charge on the profit for the year for continuing operations is
different from the standard rate of corporation tax in the UK, with a rate for
FY2025 of 25.0% (FY2024: 25.0%). The differences are reconciled as follows:
Year ended Year ended
31 July 2025
31 July 2024
£m
represented*
£m
Profit before taxation 375 327
Notional taxation expense at UK corporate rate of 25.0% (FY2024: 25%) 94 82
Different tax rates on non-UK profits and losses (6) (5)
Non-deductible expenses and other charges 21 19
Tax credits and non-taxable income (10) (6)
Non-headline UK deferred tax asset recognition adjustment 3 19
Other adjustments to unrecognised deferred tax (5) (6)
Prior year true-up 2 2
Taxation on continuing operations 99 105
Taxation on discontinued operations 19 16
Total taxation expense in the consolidated income statement 118 121
Comprising:
Taxation on headline profit 119 109
Non-headline taxation items:
- Tax credit on non-headline loss (23) (23)
- UK deferred tax asset recognition adjustment 3 19
Taxation on non-headline items (20) (4)
Taxation on discontinued operations 19 16
Total taxation expense in the consolidated income statement 118 121
The table above reconciles the notional taxation charge calculated at the UK
tax rate, to the actual total tax charge. As a group operating in multiple
countries, the actual tax rates applicable to profits in those countries are
different from the UK tax rate. The impact is shown above as different tax
rates on non-UK profits and losses. The Group's worldwide business leads to
the consideration of a number of important factors which may affect future tax
charges, such as: the levels and mix of profitability in different
jurisdictions, transfer pricing regulations, tax rates imposed and tax regime
reforms, acquisitions, disposals, restructuring activities, and settlements or
agreements with tax authorities.
Deferred taxation assets/(liabilities)
Property, plant, Employment Losses Provisions Other Total
equipment and
benefits
carried
£m
£m
£m
intangible
£m
forward
assets
£m
£m
At 31 July 2023 (86) (25) 75 66 22 52
Reallocations (9) (1) 5 - 5 -
Charge to income statement - continuing operations 16 (2) (15) 4 (9) (6)
Charge to income statement - discontinued operations
Credit to equity - 17 - - - 17
Foreign exchange rate movements - (1) - 1 (1) (1)
At 31 July 2024 (79) (12) 65 71 17 62
Comprising:
Deferred tax assets (9) (15) 31 63 24 94
Deferred tax liabilities (70) 3 34 8 (7) (32)
At 31 July 2024 (79) (12) 65 71 17 62
Reallocations 6 - (4) 4 (6) -
Charge to income statement - continuing operations 5 (1) (3) (6) 4 (1)
Credit to equity - 1 - - - 1
Acquisitions in the year (9) - - - - (9)
Foreign exchange rate movements 1 - (1) (3) - (3)
Transfer to held for sale 18 - (9) (2) (2) 5
At 31 July 2025 (58) (12) 48 64 13 55
Comprising:
Deferred tax assets (12) (15) 28 60 37 98
Deferred tax liabilities (46) 3 20 4 (24) (43)
At 31 July 2025 (58) (12) 48 64 13 55
Of the amounts included within 'Other', shown in the above table, as at 31
July 2025, amounts relating to tax on unremitted earnings were £22m (FY2024:
£22m). The aggregate amount of temporary differences associated with
investments in subsidiaries for which deferred tax liabilities have not been
recognised is immaterial.
The deferred tax asset relating to losses has been recognised on the basis of
strong evidence of future taxable profits against which the unutilised tax
losses can be relieved or it is probable that they will be recovered against
the reversal of deferred tax liabilities. The closing net deferred tax asset
balance attributable to UK activities and included in the balance at 31 July
2025 amounted to £nil (FY2024: £nil). Deferred tax attributable to
provisions includes £46m (FY2024: £54m) relating to John Crane Inc
litigation provision, and £6m (FY2024: £9m) relating to Titeflex
Corporation. See note 23 for additional information on provisions.
Losses with unrecognised deferred tax
The Group does not recognise deferred tax on losses of £572m (FY2024:
£603m).
The expiry date of operating losses carried forward is dependent upon the law
of the various territories in which the losses arise. A summary of expiry
dates in respect of which deferred tax has not been recognised is set out
below:
2025 Expiry of 2024 Expiry of
£m
losses
£m
losses
Unrestricted losses - operating losses 572 No expiry 603 No expiry
Losses with deferred tax unrecognised have increased by £31m (FY2024: £82m
increase). This is mainly due to the utilisation of unrecognised losses in
Smiths Detection Inc of £42m as it was profitable, offset by an increase in
losses in the UK of £14m.
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 is effective for
the Group's financial year beginning 1 August 2024.
The UK substantively enacted the BEPS Pillar Two global minimum taxes
legislation on 20 June 2023, for accounting periods beginning on or after 1
January 2024.
The pillar two charge borne by Smiths Group does not have a material impact on
the Group's FY25 ETR.
7. Employees
Year ended 31 July 2025 Year ended 31 July 2024 represented*
Continuing Operations Discontinued Operations Total Continuing Operations Discontinued Operations Total
£m
£m
£m
£m
£m
£m
Staff costs during the period
Wages and salaries 751 114 865 743 101 844
Social security 90 16 106 85 14 99
Share-based payment (note 9) 19 2 21 13 1 14
Pension costs (including defined contribution schemes) (note 8) 33 2 35 33 2 35
Total 893 134 1,027 874 118 992
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
The average number of persons employed, including employees on permanent,
fixed term and temporary contracts, rounded to the nearest 50 employees, was:
Year ended Year ended
31 July 2025
31 July 2024
John Crane 6,250 6,200
Flex-Tek 4,200 4,050
Smiths Detection 3,500 3,400
Smiths Interconnect 2,650 2,600
Corporate (including central/shared IT services) 350 300
Total 16,950 16,550
Key management
The key management of the Group comprises Smiths Group plc Board Directors and
Executive Committee members. Their aggregate compensation is shown below.
Further information for the Executive Directors is available in the single
figure remuneration table of the Renumeration & People Committee report
within the Annual Report 2025. Further information for the Non-executive
Directors is available in the single figure remuneration table in the
Renumeration & People Committee report within the Annual Report 2025.
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Key management compensation
Salaries and short-term employee benefits 16.3 12.6
Cost of retirement benefits 0.6 0.7
Cost of share-based incentive plans 9.4 3.4
No member of key management had any material interest during the period in a
contract of significance (other than a service contract or a qualifying
third-party indemnity provision) with the Company or any of its subsidiaries.
Options and awards held at the end of the period by key management in respect
of the Company's share-based incentive plans were:
Year ended 31 July 2025 Year ended 31 July 2024
Number of Weighted Number of Weighted
instruments
average
instruments
average
'000
exercise
'000
exercise
price
price
LTIP 1,375 1,389
SAYE 10 £13.09 11 £13.06
Related party transactions
The only related party transactions in FY2025 were key management compensation
(FY2024: key management compensation).
8. Retirement benefits
The Group provides retirement benefits to employees in a number of countries.
This includes defined benefit and defined contribution plans and, mainly in
the United Kingdom (UK) and United States of America (US), post-retirement
healthcare.
Defined contribution plans
The Group operates defined contribution plans across many countries. In the UK
a defined contribution plan has been offered since the closure of the UK
defined benefit pension plans. In the US a 401(k) defined contribution plan
operates. The total expense recognised in the consolidated income statement in
respect of all these plans was £33m (FY2024: £31m).
Defined benefit and post-retirement healthcare plans
The principal defined benefit pension plans are in the UK and in the US and
these have been closed so that no future benefits are accrued.
For all schemes, pension costs are assessed in accordance with the advice of
independent, professionally qualified actuaries. These valuations have been
updated by independent qualified actuaries in order to assess the liabilities
of the schemes as at 31 July 2025. Contributions to the schemes are made on
the advice of the actuaries, in accordance with local funding requirements.
The changes in the present value of the net pension asset in the period were:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
At beginning of period 29 89
Foreign exchange rate movements - 1
Current service cost (2) (4)
Headline scheme administration costs (2) (3)
Non-headline scheme administration costs (4) (6)
Past service cost, curtailments, settlements - continuing operations - (4)
Finance income - retirement benefits 3 6
Contributions by employer 11 16
Actuarial losses (3) (66)
Net retirement benefit asset 32 29
UK pension schemes
The Group's funded UK pension schemes are subject to a statutory funding
objective, as set out in UK pension legislation. Scheme trustees need to
obtain regular actuarial valuations to assess the scheme against this funding
objective. The trustees and sponsoring companies need to agree funding plans
to improve the position of a scheme when it is below the acceptable funding
level.
The UK Pensions Regulator has extensive powers to protect the benefits of
members, promote good administration and reduce the risk of situations
arising which may require compensation to be paid from the Pension Protection
Fund. These include imposing a schedule of contributions or the calculation
of the technical provisions, where a trustee and company fail to agree
appropriate calculations.
Smiths Industries Pension Scheme (SIPS)
This scheme was closed to future accrual effective 1 November 2009. SIPS
provides index-linked (to applicable caps) pension benefits based on final
earnings at date of closure. SIPS is governed by a corporate trustee (S.I.
Pension Trustees Limited, a wholly owned subsidiary of Smiths Group plc). The
board of trustee directors currently comprises three Company-nominated
trustees and four member-nominated trustees, with an independent chairman
selected by Smiths Group plc. Trustee directors are responsible for the
management, administration, funding and investment strategy of the scheme.
The most recent actuarial valuation of this scheme has been performed using
the Projected Unit Method as at 31 March 2023. The valuation showed a surplus
of £26m on the Technical Provisions funding basis at the valuation date and
the funding position has improved since then. As part of the valuation
agreement, no contributions are currently being paid to SIPS and the Group's
current expectation is that contributions will not recommence. The next
actuarial valuation is due as at 31 March 2026.
The duration of SIPS liabilities is around 19 years (FY2024: 20 years) for
active deferred members, 16 years (FY2024: 17 years) for deferred members and
9 years (FY2024: 10 years) for pensioners and dependants.
Under the governing documentation of SIPS, any future surplus would be
returnable to Smiths Group plc by refund, assuming gradual settlement of the
liabilities over the lifetime of the scheme.
In SIPS, as part of ongoing data cleansing work being undertaken to prepare
the scheme for a potential full buy-out in the future, a wider review is being
carried out to determine if the method used in the early 1990s to equalise
retirement ages between men and women was implemented correctly. In FY2024, a
liability of £3m was recognised as a past service cost, to reflect the
expected impact of data cleansing work for the scheme of £0.4m, as well as an
updated cost estimate for the impact of GMP equalisation of £2.6m. Whilst the
wider review of scheme data remains on-going, no liabilities have been
recognised in FY2025 or are expected to arise in future in respect of data
cleansing work.
SIPS uses a Liability Driven Investment (LDI) strategy to hedge against
interest and inflation rate changes, which is tested regularly to ensure
leverage is appropriate and there is sufficient collateral to withstand any
market shocks.
TI Group Pension Scheme (TIGPS)
This scheme was closed to future accrual effective 1 November 2009. TIGPS
provides index-linked (to applicable caps) pension benefits based on final
earnings at the date of closure. TIGPS is governed by a corporate trustee (TI
Pension Trustee Limited, an independent company). The board of trustee
directors comprises three Company-nominated trustees and four member-nominated
trustees, with an independent trustee director selected by the trustee. The
trustee is responsible for the management, administration, funding and
investment strategy of the scheme.
In June 2022 the TIGPS trustee completed a deal to secure its remaining
uninsured pension liabilities, by way of a bulk annuity buy-in with Rothesay
Life plc. This means all of the scheme's liabilities are insured via seven
buy-in policies. In terms agreed between the Group and the TIGPS trustee prior
to the transaction, the trustee will use any surplus remaining, after the
costs of buying-out and winding up the scheme have been met, to improve member
benefits. The FY2022 income statement recognised a past service cost of £24m
in relation to the derecognition of the remaining surplus, though the cost of
benefit improvements was not paid until FY2025 and will not be applied to
member benefits until FY2026. The Group currently has no expectation of
receiving a refund from the scheme and has placed an economic benefit value of
zero on the TIGPS surplus from 10 June 2022.
As TIGPS currently retains the legal obligation to pay all scheme benefits,
TIGPS liabilities remain part of the retirement benefit obligations on the
balance sheet alongside the corresponding buy-in assets. These liabilities and
assets will be derecognised at the point the buy-in policies are converted to
buy-outs and the legal obligation for payment of benefits is transferred to
the relevant insurers.
The most recent actuarial valuation of this scheme has been performed using
the Projected Unit Method as at 5 April 2023. The valuation showed a surplus
of £44m on the Technical Provisions funding basis at the valuation date and
the funding position remains in surplus. Given TIGPS's circumstances, the
Group's current expectation is that no further contributions to TIGPS will be
required. The next actuarial valuation is due as at 5 April 2026.
The duration of the TIGPS liabilities is around 17 years (FY2024: 18 years)
for active deferred members, 15 years (FY2024: 16 years) for deferred members
and 8 years (FY2024: 9 years) for pensioners and dependants.
US pension plans
The valuations of the principal US pension and post-retirement healthcare
plans were performed using census data at 1 January 2025.
The pension plans were closed with effect from 30 April 2009 and benefits were
calculated as at that date and are not revalued. Governance of the US pension
plans is overseen by a Settlor Committee appointed by Smiths Group Services
Corp, a wholly owned subsidiary of the Group.
The duration of the liabilities for the largest US plan is around 14 years
(FY2024: 15 years) for active deferred members, 13 years (FY2024: 14 years)
for deferred members and 9 years (FY2024: 10 years) for pensioners and
dependants.
Risk management
In respect of uninsured liabilities, the pensions schemes are exposed to risks
that:
- Investment returns are below expectations, leaving the schemes with
insufficient assets in future to pay all their pension obligations;
- Members and dependants live longer than expected, increasing the value
of the pensions which the schemes have to pay;
- Inflation rates are higher than expected, causing amounts payable under
index-linked pensions to be higher than expected; and
- Increased contributions are required to meet funding targets if lower
interest rates increase the current value of liabilities.
These risks are managed separately for each pension scheme. However, the Group
has adopted a common approach of closing defined benefit schemes to cap
members' entitlements and of supporting trustees in adopting investment
strategies which aim to hedge the value of assets against changes in the value
of liabilities caused by changes in interest and inflation rates.
Across SIPS and TIGPS, approximately 60% of all liabilities are now de-risked
through 11 bulk annuities.
TIGPS
TIGPS has covered roughly 100% of liabilities with matching annuities,
eliminating investment return, longevity, inflation and funding risks in
respect of those liabilities.
SIPS
SIPS has covered roughly 33% of liabilities with matching annuities,
eliminating investment return, longevity, inflation and funding risks in
respect of those liabilities. It has also adopted a LDI strategy to hedge
interest and inflation risks of the scheme's uninsured liabilities by
investment in gilts together with the use of gilt repurchase arrangements,
total return swaps, inflation swaps and interest rate swaps. The strategy also
takes into account the scheme's corporate bond investments.
The critical estimates and principal assumptions used in updating the
valuations are set out below:
2025 2025 2025 2024 2024 2024
UK
US
Other
UK
US
Other
Rate of increase in salaries n/a n/a 0.2% n/a n/a 2.8%
Rate of increase for active deferred members 4.1% n/a n/a 4.0% n/a n/a
Rate of increase in pensions in payment 3.1% n/a 1.8% 3.3% n/a 0.5%
Rate of increase in deferred pensions 3.1% n/a n/a 3.3% n/a n/a
Discount rate 5.6% 5.5% 2.6% 5.0% 5.2% 2.8%
Inflation rate 3.1% n/a 0.9% 3.3% n/a 2.1%
The assumptions used in calculating the costs and obligations of the Group's
defined benefit pension plans are set by the Group after consultation with
independent professionally qualified actuaries. The assumptions used are
estimates chosen from a range of possible actuarial assumptions which, due to
the timescale covered, may not necessarily occur in practice. For countries
outside the UK and the US, assumptions are disclosed as a weighted average.
Inflation rate assumptions
The RPI inflation assumption of 3.1% has been derived using the Aon UK
Government Gilt Prices Only Curve with an Inflation Risk Premium of 0.1% p.a.
(FY2024: 0.1%).
The Government's response to its consultation on RPI reform was published on
25 November 2020, and strongly implied that RPI will become aligned with CPI-H
from 2030. No specific allowance (beyond anything already priced into markets)
has been factored into the RPI assumptions for potential changes. The
assumption for the long-term gap between RPI and CPI is 0.4% p.a.
(FY2024: 0.5%) reflecting the Group's view on the market pricing of this gap
over the lifetime of the UK schemes' liabilities, i.e., 0.9% p.a. (FY2024:
0.9%) pre-2030 and 0.1% p.a. post-2030 (FY2024: 0.1%).
Discount rate assumptions
The UK schemes use a discount rate based on the annualised yield on the Aon
GBP Single Agency Curve, using the expected cash-flows from a notional scheme
with obligations of the same duration as that of the UK schemes. This is the
same approach as was adopted for FY2024.
The US Plan uses a discount rate based on the annualised yield derived from
Willis Towers Watson's RATE:Link (10th - 90th) model using the Plan's expected
cash-flows.
Mortality assumptions
The mortality assumptions used in the principal UK schemes are based on the
'SAPS S3' birth year tables with relevant scaling factors based on the recent
experience of the schemes. The assumption allows for future improvements in
life expectancy in line with the 2023 CMI projections, with a smoothing factor
of 7.0 and 'A' parameter of 0.5%/0.25% (SIPS/TIGPS) and blended to a long-term
rate of 1.5%. The CMI projections incorporate allowance for the impact of
COVID-19 by placing a weighting of 0% on 2020 and 2021 mortality data and a
weighting of 15% on 2022 and 2023 mortality data.
The mortality assumptions used in the principal US schemes are based on
generational mortality using the latest Pri-2012 sex-distinct,
employee/non-disabled annuitant table, with a 2012 base year, projected
forward generationally with the latest MP-2021 mortality scale. No explicit
adjustment has been made to mortality assumptions in respect of COVID-19. The
impact of COVID-19 remains uncertain and further data studies are underway to
better predict the impact on future mortality.
Expected further years of life UK schemes
Male Female Male Female
31 July 2025
31 July 2025
31 July 2024
31 July 2024
Member who retires next year at age 65 22 24 22 24
Member, currently 45, when they retire in 20 years' time 23 25 23 25
Expected further years of life US schemes
Male Female Male Female
31 July 2025
31 July 2025
31 July 2024
31 July 2024
Member who retires next year at age 65 21 22 21 22
Member, currently 45, when they retire in 20 years' time 22 24 22 24
Sensitivity
Sensitivities in respect of the key assumptions used to measure the principal
pension schemes as at 31 July 2025 are set out below. These sensitivities
show the hypothetical impact of a change in each of the listed assumptions in
isolation, with the exception of the sensitivity to inflation which
incorporates the impact of certain correlating assumptions. In practice, such
assumptions rarely change in isolation.
Profit before tax Increase/ (Increase)/ Profit before tax Increase/ (Increase)/
for year ended
(decrease) in
decrease in
for year
(decrease) in
decrease in
31 July 2025
scheme
scheme
scheme
scheme
£m
assets
liabilities ended
assets
liabilities
31 July 2025
31 July 2025
31 July 2024
31 July 2024
31 July 2024
£m
£m
£m
£m
£m
Rate of mortality - one year increase in life expectancy (2) 53 (90) (2) 66 (108)
Rate of mortality - one year decrease in life expectancy 2 (55) 93 2 (67) 110
Rate of inflation - 0.25% increase (1) 19 (37) (1) 21 (39)
Discount rate - 0.25% increase 2 (28) 56 2 (33) 65
Market value of scheme assets - 2.5% increase 2 28 - 2 30 -
The effect on profit before tax reflects the impact of current service cost
and net interest cost. The value of the scheme assets is affected by changes
in mortality rates, inflation and discounting because they affect the carrying
value of the insurance assets.
Asset valuation
The pension schemes hold assets in a variety of pooled funds, in which the
underlying assets typically are invested in credit and cash assets. These
funds are valued. The price of the funds is set by administrators/custodians
employed by the investment managers and based on the value of the underlying
assets held in the funds. Prices are generally updated daily, weekly or
quarterly depending upon the frequency of the fund's dealing.
Bonds are valued using observable broker quotes. Gilt repurchase obligations
are valued by the relevant manager, which derives the value using an industry
recognised model with observable inputs.
Total return, interest and inflation swaps and forward FX contracts are
bilateral agreements between counterparties and do not have observable market
prices. These derivative contracts are valued using observable inputs.
Insured liabilities comprise annuity policies that match all or part of the
scheme obligation to identified groups of members. These assets are valued by
an external qualified actuary at the actuarial valuation of the corresponding
liability, reflecting this matching relationship.
The insurance policies are treated as qualifying insurance policies as none of
the insurers are related parties of the Group, and the proceeds of the
policies can only be used to pay or fund employee benefits for the respective
schemes, are not available to the Group's creditors and cannot be paid to the
Group.
Retirement benefit plan assets
31 July 2025 - £m
UK US Other Total
schemes
schemes
countries
Cash and cash equivalents 30 20 1 51
Pooled funds:
- Pooled equity - 21 5 26
- Pooled Diversified Growth - - 13 13
- Pooled credit 340 - - 340
Corporate bonds 131 50 - 181
Government bonds/LDI 436 89 3 528
Insured liabilities 1,199 - - 1,199
Total market value 2,136 180 22 2,338
31 July 2024 - £m
UK US Other Total
schemes
schemes
countries
Cash and cash equivalents 63 8 1 72
Pooled funds:
- Pooled equity - - 5 5
- Pooled Diversified Growth - - 12 12
- Pooled credit 337 - - 337
Corporate bonds 208 141 - 349
Government bonds/LDI 427 41 3 471
Insured liabilities 1,337 - - 1,337
Total market value 2,372 190 21 2,583
The UK Government bonds/LDI portfolios contain £763m (FY2024: £691m) of UK
Government bonds (gilts), £341m (FY2024: £270m) of gilt repurchase
obligations and £15m of interest and inflation swaps (FY2024: £5m) and
forward FX contracts with a net obligation of £1m (FY2024: £nil asset).
These are held to hedge against foreign currency risk. The pooled funds and
insured liabilities are unquoted. The scheme assets do not include any
property occupied by, or other assets used by, the Group.
The asset valuations are effective as at the end of the period, consistent
with the calculations determining the obligations.
The Group acknowledges that responsibility for the effective management of the
schemes' assets lies primarily with the trustees, but also accepts that any
risks inherent in the investment strategy, including ESG and climate risk, are
ultimately underwritten by the Group. Consequently, the Group ensures that the
trustees' investment strategy and statements of investment principles are
compatible with the Group's wider sustainability strategy. For TIGPS, where
all benefits are now secured by way of annuity purchase, all investment risks
including ESG and climate risk, have effectively now been eliminated. For
SIPS, a significant portion of investment risks have already been eliminated
through annuity purchase and the scheme's time horizon to full buy-in, hence
exposure to investment risks including ESG and climate risk, continues to
reduce.
Present value of funded scheme liabilities and assets for the main UK and US
schemes
31 July 2025 - £m
SIPS TIGPS US
schemes
Present value of funded scheme liabilities:
- Active deferred members (12) (8) (26)
- Deferred members (332) (260) (71)
- Pensioners (841) (544) (91)
Present value of funded scheme liabilities (1,185) (812) (188)
Market value of scheme assets 1,313 823 180
Surplus restriction - (11) -
Surplus/(deficit) 128 - (8)
31 July 2024 - £m
SIPS TIGPS US
schemes
Present value of funded scheme liabilities:
- Active deferred members (13) (9) (28)
- Deferred members (379) (304) (80)
- Pensioners (915) (609) (93)
Present value of funded scheme liabilities (1,307) (922) (201)
Market value of scheme assets 1,439 933 190
Surplus restriction - (11) -
Surplus/(deficit) 132 - (11)
Net retirement benefit obligations
31 July 2025 - £m
UK US Other Total
schemes
schemes
countries
Market value of scheme assets 2,136 180 22 2,338
Present value of funded scheme liabilities (1,997) (188) (28) (2,213)
Surplus restriction (11) (11)
Surplus/(deficit) 128 (8) (6) 114
Unfunded pension plans (33) (5) (41) (79)
Post-retirement healthcare (2) (1) - (3)
Present value of unfunded obligations (35) (6) (41) (82)
Net pension asset/(liability) 93 (14) (47) 32
Comprising:
Retirement benefit assets 128 - - 128
Retirement benefit liabilities (35) (14) (47) (96)
Net pension asset/(liability) 93 (14) (47) 32
31 July 2024 - £m
UK US Other Total
schemes
schemes
countries
Market value of scheme assets 2,372 190 21 2,583
Present value of funded scheme liabilities (2,229) (201) (26) (2,456)
Surplus restriction (11) - - (11)
Surplus/(deficit) 132 (11) (5) 116
Unfunded pension plans (37) (6) (38) (81)
Post-retirement healthcare (2) (1) (3) (6)
Present value of unfunded obligations (39) (7) (41) (87)
Net pension asset/(liability) 93 (18) (46) 29
Comprising:
Retirement benefit assets 132 - - 132
Retirement benefit liabilities (39) (18) (46) (103)
Net pension asset/(liability) 93 (18) (46) 29
Where any individual scheme shows a recoverable 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 retirement benefit asset disclosed arises from the rights
of the employers to recover the surplus at the end of the life of the scheme,
i.e., when the last beneficiary's obligation has been met.
Amounts recognised in the consolidated income statement
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Amounts charged to operating profit
Current service cost 2 4
Past service costs - benefit equalisations - 4
Headline scheme administration costs 2 3
Non-headline scheme administration costs 4 6
8 17
The operating cost is charged as follows:
Headline administrative expenses 4 7
Non-headline administrative expenses 4 10
8 17
Amounts credited to finance costs
Non-headline other finance income - retirement benefits (3) (6)
Amounts recognised directly in the consolidated statement of comprehensive
income
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Re-measurements of retirement defined benefit assets and liabilities
Difference between interest credit and return on assets (197) 54
Experience gains/(losses) on scheme liabilities 25 (103)
Actuarial gains arising from changes in demographic assumptions - 4
Actuarial gains/(losses) arising from changes in financial assumptions 169 (26)
Movement in surplus restriction - 5
(3) (66)
Changes in present value of funded scheme assets
31 July 2025 - £m
UK US Other Total
schemes
schemes
countries
At beginning of period 2,372 190 21 2,583
Foreign exchange rate movements - (6) - (6)
Interest on assets 115 9 1 125
Actuarial movement on scheme assets (192) (6) 1 (197)
Employer contributions - 5 - 5
Scheme administration costs (5) (1) - (6)
Benefits paid (154) (11) (1) (166)
At end of period 2,136 180 22 2,338
31 July 2024 - £m
UK US Other Total
schemes
schemes
countries
At beginning of period 2,367 186 20 2,573
Interest on assets 117 9 1 127
Actuarial movement on scheme assets 54 (1) 1 54
Employer contributions - 10 - 10
Scheme administration costs (7) (2) - (9)
Benefits paid (159) (12) (1) (172)
At end of period 2,372 190 21 2,583
Changes in present value of funded defined benefit obligations
31 July 2025 - £m
UK US Other Total
schemes
schemes
countries
At beginning of period (2,229) (201) (26) (2,456)
Foreign exchange rate movements - 6 - 6
Past service costs - - - -
Interest on obligations (107) (10) (2) (119)
Actuarial movement on liabilities 185 6 (1) 190
Benefits paid 154 11 1 166
At end of period (1,997) (188) (28) (2,213)
31 July 2024 - £m
UK US Other Total
schemes
schemes
countries
At beginning of period (2,156) (202) (25) (2,383)
Foreign exchange rate movements - - 1 1
Past service costs (3) - (1) (4)
Interest on obligations (106) (11) (1) (118)
Actuarial movement on liabilities (123) - (1) (124)
Benefits paid 159 12 1 172
At end of period (2,229) (201) (26) (2,456)
Changes in present value of unfunded defined benefit pensions and
post-retirement healthcare plans
Assets Obligations
Year ended Year ended Year ended Year ended
31 July 2025
31 July 2024
31 July 2025
31 July 2024
£m
£m
£m
£m
At beginning of period - - (87) (85)
Current service cost - - (2) (4)
Interest on obligations - - (3) (3)
Actuarial movement - - 4 (1)
Employer contributions 6 6 - -
Benefits paid (6) (6) 6 6
At end of period - - (82) (87)
Changes in the effect of the asset ceiling over the year
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Irrecoverable asset at beginning of period (11) (16)
Actuarial movement on scheme assets - 5
At end of period (11) (11)
Cash contributions
Company contributions to the defined benefit pension plans and post-retirement
healthcare plans totalled £11m (FY2024: £16m). This comprised a one-off
additional £5m contribution to the US funded scheme (FY2024: £5m) and £6m
(FY2024: £6m) on providing benefits under unfunded defined benefit pension
and post-retirement healthcare plans.
In FY2026, cash contributions to the Group's schemes are expected to be up to
£17m in total.
Recent legal rulings
In July 2024, the UK Court of Appeal upheld the High Court's June 2023 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
were void without the appropriate certificate. On 2 September 2025, the
Government published draft amendments to legislation that aim to give affected
pension schemes the ability to retrospectively obtain any necessary actuarial
certifications confirming historic benefit changes met the applicable
standards. These amendments are unlikely to come into force until 2026. The
Group does not expect this ruling to have any impact on its defined benefit
obligations and SIPS and TIGPS will continue to be administered on the current
basis.
9. Employee share schemes
The Group operates share schemes and plans for the benefit of employees. The
nature of the principal schemes and plans, including general conditions, is
set out below:
Long-Term Incentive Plan (LTIP)
The LTIP is a share plan under which an award over a capped number of shares
will vest after the end of a three-year performance period if performance
conditions are met. LTIP awards are made to selected senior executives,
including the Executive Directors.
LTIP performance conditions
Each performance condition has a threshold below which no shares vest and a
maximum performance target at or above which the award vests in full. For
performance between 'threshold' and 'maximum', awards vest on a straight-line
sliding scale. The performance conditions are assessed separately; so
performance on one condition does not affect the vesting of the other
elements of the award. To the extent that the performance targets are not
met over the three-year performance period, awards lapse. There is no
re-testing of the performance conditions.
LTIP awards have performance conditions relating to organic revenue growth,
growth in headline EPS, ROCE, free cash-flow and meeting ESG targets.
Restricted stock
Restricted stock is used by the Remuneration & People Committee, as a part
of recruitment strategy, to make awards in recognition of incentive
arrangements forfeited on leaving a previous employer and for retention
purposes. If an award is considered appropriate, the award will take account
of relevant factors including the fair value of awards forfeited, any
performance conditions attached, the likelihood of those conditions being met
and the proportion of the vesting period remaining.
Save as you earn (SAYE)
The SAYE scheme is an HM Revenue & Customs approved all-employee
savings-related share option scheme which is open to all UK employees.
Participants enter into a contract to save a fixed amount per month of up to
£500 in aggregate for three years and are granted an option over shares at a
fixed option price, set at a discount to market price at the date of
invitation to participate. The number of shares is determined by the monthly
amount saved and the bonus paid on maturity of the savings contract. Options
granted under the SAYE scheme are not subject to any performance conditions.
Ordinary shares under option/award ('000) Long-term Restricted Save as you earn Total Weighted average
incentive plans
stock
scheme
exercise price
31 July 2023 4,828 87 958 5,873 £1.78
Granted 1,919 45 243 2,207 £1.34
Exercised (1,140) (10) (437) (1,587) £2.54
Lapsed (1,218) (8) (79) (1,305) £0.73
31 July 2024 4,389 114 685 5,188 £1.62
Granted 1,909 132 184 2,225 £1.06
Exercised (968) (52) (100) (1,120) £1.03
Lapsed (759) - (38) (797) £0.61
31 July 2025 4,571 194 731 5,496 £1.65
Options and awards were exercised on an irregular basis during the period. The
average closing share price over the financial year was 1,900p (FY2024:
1,656.2p). There has been no change to the effective option price of any of
the outstanding options during the period. The number of exercisable share
options at 31 July 2025 was nil (31 July 2024: nil).
Range of exercise prices Total shares under Weighted average Total shares under Weighted average
options/awards
remaining contractual
options/awards
remaining contractual
at 31 July 2025
life at 31 July 2025
at 31 July 2024
life at 31 July 2024
('000)
(months)
('000)
(months)
£0.00 - £2.00 4,765 17 4,503 17
£6.01 - £10.00 - - 2 -
£10.01 - £12.00 731 26 683 29
For the purposes of valuing options to arrive at the share-based payment
charge, the binomial option pricing model has been used. The key assumptions
used in the model were volatility of 25% to 20% (FY2024: 25% to 20%) and
dividend yield of 2.3% (FY2024: 2.6%), based on historical data, for the
period corresponding with the vesting period of the option. These generated a
weighted average fair value for LTIP of £15.66 (FY2024: £15.73), and
restricted stock of £11.34 (FY2024: £15.29). Staff costs included £22m
(FY2024: £14m) for share-based payments, of which £21m (FY2024: £11m)
related to equity-settled share-based payments.
10. Intangible assets
Goodwill Development Acquired Software, Total
£m
costs
intangibles
patents and
£m
£m
(see table
intellectual
below)
property
£m
£m
Cost
At 31 July 2023 1,273 193 612 159 2,237
Foreign exchange rate movements (7) (2) (1) - (10)
Business combinations 10 - 34 - 44
Additions - 14 - 4 18
Disposals - - - (1) (1)
At 31 July 2024 1,276 205 645 162 2,288
Foreign exchange rate movements (16) - (17) (2) (35)
Business combinations 77 - 59 - 136
Additions - 5 - 3 8
Disposals - - - (5) (5)
Reclassified to assets held for sale (282) - (98) (24) (404)
At 31 July 2025 1,055 210 589 134 1,988
Amortisation and impairments
At 31 July 2023 64 124 406 122 716
Foreign exchange rate movements - (2) (2) - (4)
Amortisation charge for the year - 2 49 5 56
Disposals - - - (1) (1)
At 31 July 2024 64 124 453 126 767
Foreign exchange rate movements - - (10) (1) (11)
Amortisation charge for the year - 10 52 15 77
Impairment charge for the year - - - 1 1
Disposals - - - (4) (4)
Reclassified to assets held for sale (25) - (82) (19) (126)
At 31 July 2025 39 134 413 118 704
Net book value at 31 July 2025 1,016 76 176 16 1,284
Net book value at 31 July 2024 1,212 81 192 36 1,521
Net book value at 31 July 2023 1,209 69 206 37 1,521
The charge associated with the amortisation of intangible assets is included
in operating costs on the consolidated income statement.
In addition to goodwill, acquired intangible assets comprise:
Patents, Technology Customer Total
licences
£m
relationships
acquired
and
£m
intangibles
trademarks
£m
£m
Cost
At 31 July 2023 20 145 447 612
Foreign exchange rate movements - - (1) (1)
Business combinations 3 - 31 34
At 31 July 2024 23 145 477 645
Foreign exchange rate movements (1) (4) (12) (17)
Business combinations 12 - 47 59
Reclassified to assets held for sale (3) (39) (56) (98)
At 31 July 2025 31 102 456 589
Amortisation
At 31 July 2023 9 92 305 406
Foreign exchange rate movements - - (2) (2)
Charge for the year 2 10 37 49
At 31 July 2024 11 102 340 453
Foreign exchange rate movements - (3) (7) (10)
Charge for the year 4 11 37 52
Reclassified to assets held for sale (3) (33) (46) (82)
At July 2025 12 77 324 413
Net book value at 31 July 2025 19 25 132 176
Net book value at 31 July 2024 12 43 137 192
Net book value at 31 July 2023 11 53 142 206
Individually material intangible assets comprise:
- £22m of customer-related intangibles attributable to United Flexible
(remaining amortisation period: 2 years);
- £27m of customer-related intangibles attributable to Morpho Detection
(remaining amortisation period: 3 years);
- £24m of customer-related intangibles attributable to Heating &
Cooling Products (remaining amortisation period: 8 years);
- £32m of development cost intangibles attributable to a computed
tomography programme in Detection (remaining amortisation period: 15 years);
and
- £21m of development cost intangibles attributable to an X-ray
diffraction programme in Detection (remaining amortisation period: 6 years).
11. Impairment testing
Goodwill
Goodwill is tested for impairment at least annually or whenever there is an
indication that the carrying value may not be recoverable.
Further details of the impairment review process and judgements are included
in the 'Sources of estimation uncertainty' section of the 'Basis of
preparation' for the consolidated financial statements.
For the purpose of impairment testing, assets are grouped at the lowest levels
for which there are separately identifiable cash-flows, known as cash
generating units (CGUs), taking into consideration the commonality of
reporting, policies, leadership and intra-segmental trading relationships.
Goodwill acquired through business combinations is allocated to groups of CGUs
at a segmental (or operating segment) level, being the lowest level at which
management monitors performance separately.
The carrying value of goodwill at 31 July is allocated by business segment as
follows:
2025 2025 2024 2024
£m
Number of
£m
Number of
CGUs
CGUs
John Crane 130 1 130 1
Flex-Tek 263 1 193 1
Smiths Detection 623 1 625 1
Smiths Interconnect - reclassified to assets held for sale at 31 July 2025 - 1 264 1
(note 28)
1,016 4 1,212 4
Critical estimates used in impairment testing
The recoverable amount for impairment testing is determined from the higher of
fair value less costs of disposal and value in use of the CGU. In assessing
value in use, the estimated future cash-flows are discounted to their present
value using a post-tax discount rate that reflects current market assessments
of the time value of money, from which pre-tax discount rates are determined.
Fair value less costs of disposal is calculated using available information on
past and expected future profitability, valuation multiples for comparable
quoted companies and similar transactions (adjusted as required for
significant differences) and information on costs of similar transactions.
Fair value less costs to sell models are used when trading projections in the
strategic plan cannot be adjusted to eliminate the impact of a major
restructuring.
The value in use of CGUs is calculated as the net present value of the
projected risk-adjusted cash-flows of each CGU. These cash-flow forecasts are
based on the FY2025 business plan and the five-year detailed segmental
strategic plan projections which have been prepared by segmental management
and approved by the Board.
The principal assumptions used in determining the value in use were:
- Revenue: Projected sales were built up with reference to markets and
product categories. They incorporated past performance, historical growth
rates and projections of developments in key markets;
- Average earnings before interest and tax margin: Projected margins
reflect historical performance, our expectations for future cost inflation and
the impact of all completed projects to improve operational efficiency and
leverage scale. The projections did not include the impact of future
restructuring projects to which the Group was not yet committed;
- Projected capital expenditure: The cash-flow forecasts for capital
expenditure were based on past experience and included committed ongoing
capital expenditure consistent with the FY2026 budget and the segmental
strategic projections. The forecast did not include any future capital
expenditure that improved/enhanced the operation/asset in excess of its
current standard of performance;
- Discount rate: The discount rates have been determined with reference to
illustrative weighted average cost of capital (WACC) for each CGU. In
determining these discount rates, management have considered systematic risks
specific to each of the Group's CGUs. These risk adjusted discount rates have
then been validated against the Group's WACC, the WACCs of the CGU's peer
group and an average of discount rates used by other companies for the
industries in which Smiths divisions operate. Pre-tax rates of 12.2% to 13.6%
(FY2024: 11.9% to 12.8%) have been used for the impairment testing; and
- Long-term growth rates: For the purposes of the Group's value in use
calculations, a long-term growth rate into perpetuity was applied immediately
at the end of the five-year detailed forecast period. CGU specific long-term
growth rates have been calculated by revenue weighting the long-term GDP
growth rates of the markets that each CGU operates in. The long-term growth
rates used in the testing ranged from 2.1% to 2.6% (FY2024: 2.1% to 2.6%).
These rates do not reflect the long-term assumptions used by the Group for
investment planning.
Of the principal assumptions above, the key assumptions that the impairment
models are most sensitive to are: the revenue growth assumption; the average
earnings before interest and tax margin assumption; and the discount rate
assumption.
The assumptions used in the impairment testing of CGUs with significant
goodwill balances were as follows:
As at 31 May 2025
John Crane Flex-Tek Smiths Smiths
Detection
Interconnect
Net book value of goodwill (£m) 128 255 610 252
Basis of valuation Value in use Value in use Value in use Value in use
Discount rate - pre-tax 11.8% 13.6% 12.8% 12.7%
- post-tax 9.4% 10.7% 9.7% 10.3%
Period covered by management projections 5 years 5 years 5 years 5 years
Capital expenditure - annual average over projection period (£m) 29 11 14 11
Revenue - compound annual growth rate (CAGR) over projection period 6.4% 3.5% 4.6% 6.2%
Average earnings before interest and tax margin 25.7% 21.4% 13.3% 21.1%
Long-term growth rates 2.6% 2.1% 2.1% 2.3%
As at 31 May 2024
John Crane Flex-Tek Smiths Smiths
Detection
Interconnect
Net book value of goodwill (£m) 135 191 649 279
Basis of valuation Value in use Value in use Value in use Value in use
Discount rate - pre-tax 11.9% 12.6% 12.8% 12.5%
- post-tax 9.4% 10.0% 9.5% 10.1%
Period covered by management projections 5 years 5 years 5 years 5 years
Capital expenditure - annual average over projection period (£m) 31 10 19 12
Revenue - CAGR over projection period 6.1% 3.6% 3.8% 4.4%
Average earnings before interest and tax margin 22.2% 20.5% 12.9% 15.8%
Long-term growth rates 2.6% 2.1% 2.3% 2.5%
Forecast earnings before interest and tax have been projected using:
- Expected future sales based on the strategic plan, which was constructed
at a market level with input from key account managers, product line managers,
business development and sales teams. An assessment of the market and existing
contracts/programmes was made to produce the sales forecast; and
- Current cost structure and production capacity, which include our
expectations for future cost inflation. The projections did not include the
impact of future restructuring projects to which the Group was not yet
committed.
Smiths Detection CGU - Sensitivity analysis
Management have concluded from the results of the Group's CGU impairment
testing, that there is no reasonably plausible scenario where any change in
one of the individual assumptions would result in an impairment of the
Detection CGU. However management recognise that a severe downside scenario,
with a combined sensitivity of the key assumptions, would significantly reduce
the CGU's headroom but not result in a material impairment. The recoverable
amount of all CGUs exceeds their carrying value, on the basis of the
assumptions set out in the tables above and any reasonably possible changes
thereof.
The Smiths Detection CGU has a lower amount of goodwill impairment testing
headroom than the Group's other CGUs. Though there is no reasonably plausible
downside scenario that would cause a material impairment, management have
included the following voluntary sensitivity disclosures for the CGU:
- The estimated recoverable amount of the Smiths Detection CGU exceeded
the carrying value by £499m (FY2024: £254m). Any decline in estimated
value-in-use in excess of this amount would result in the recognition of
impairment charges.
- If the assumptions used in the impairment review was changed to a
greater extent than as presented in the following table, the changes would, in
isolation, lead to impairment losses being recognised for the year ended 31
July 2025:
Change required for carrying value to equal recoverable amount FY2025 FY2024
Revenue - CAGR over five-year projection period -940 bps decrease -470 bps decrease
Average earnings before interest and tax margin -400 bps decrease -220 bps decrease
Post-tax discount rate +340 bps increase +150 bps increase
Note: The information in the sensitivity table above has been provided
voluntarily to aid the users of the accounts. Projected capital expenditure
and long-term growth rates are not included in the table above as management
consider that there is no reasonably possible change in the projected capital
expenditure or long-term growth rate that would result in an impairment.
Property, plant and equipment, right of use assets and finite-life
intangible assets
At each reporting period date, the Group reviews the carrying amounts of its
property, plant, equipment, right of use assets and finite-life intangible
assets to determine whether there is any indication that those assets have
suffered an impairment loss.
The Group has no indefinite life intangible assets other than goodwill. During
the year, impairment tests were carried out for capitalised development costs
that have not yet started to be amortised and acquired intangibles where there
were indications of impairment. Value in use calculations were used to
determine the recoverable values of these assets.
12. 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 2023 178 463 120 761
Foreign exchange rate movements (3) (7) (2) (12)
Business combinations - 7 - 7
Additions 10 50 8 68
Disposals (4) (17) (12) (33)
At 31 July 2024 181 496 114 791
Foreign exchange rate movements (3) (8) - (11)
Business combinations - 5 - 5
Additions 6 60 6 72
Disposals (5) (22) (7) (34)
Reclassified to assets held for sale (8) (101) (26) (135)
At 31 July 2025 171 430 87 688
Depreciation
At 31 July 2023 110 302 102 514
Foreign exchange rate movements (1) (3) (1) (5)
Charge for the year 8 32 5 45
Disposals (4) (17) (12) (33)
At 31 July 2024 113 314 94 521
Foreign exchange rate movements (2) (5) - (7)
Charge for the year 9 31 5 45
Disposals (4) (21) (7) (32)
Impairment charge for the year 3 6 1 10
Reclassified to assets held for sale (8) (63) (22) (93)
At July 2025 111 262 71 444
Net book value at 31 July 2025 60 168 16 244
Net book value at 31 July 2024 68 182 20 270
Net book value at 31 July 2023 68 161 18 247
13. Right of use assets
Properties Vehicles Equipment Total
£m
£m
£m
£m
Cost or valuation
At 31 July 2023 190 27 2 219
Foreign exchange rate movements (3) (1) - (4)
Business combinations 12 - - 12
Recognition of right of use asset 18 10 - 28
Derecognition of right of use asset (5) - - (5)
At 31 July 2024 212 36 2 250
Foreign exchange rate movements (5) - - (5)
Business combinations 6 - - 6
Recognition of right of use asset 23 5 - 28
Derecognition of right of use asset (42) (18) (1) (61)
Reclassified to assets held for sale (23) - - (23)
At 31 July 2025 171 23 1 195
Depreciation
At 31 July 2023 94 19 1 114
Foreign exchange rate movements (2) (1) - (3)
Charge for the year 29 5 - 34
Derecognition of right of use asset (5) - - (5)
At 31 July 2024 116 23 1 140
Foreign exchange rate movements (2) - - (2)
Charge for the year 28 6 - 34
Derecognition of right of use asset (42) (18) (1) (61)
Impairment charge for the year 2 - - 2
Reclassified to assets held for sale (17) - - (17)
At 31 July 2025 85 11 - 96
Net book value at 31 July 2025 86 12 1 99
Net book value at 31 July 2024 96 13 1 110
Net book value at 31 July 2023 96 8 1 105
14. Financial assets - other investments
Investment in ICU Medical, Inc equity Deferred contingent consideration Investments in early stage businesses Cash collateral deposit Total
£m
£m
£m
£m
£m
Cost or valuation
At 31 July 2023 347 13 7 4 371
Fair value change through profit and loss - (13) - - (13)
Fair value change through other comprehensive income (103) - (2) - (105)
Disposals (197) - - (3) (200)
At 31 July 2024 47 - 5 1 53
Fair value change through profit and loss - - - - -
Fair value change through other comprehensive income 8 - - - 8
Disposals (55) - - - (55)
At 31 July 2025 - - 5 1 6
In the current year, the Group has disposed of the remainder of its equity
investment in ICU Medical, Inc equity. This transaction resulted in a £3m
non-headline loss (see note 3) relating to the block sale discount on the
disposal of these shares.
The Group's investments in early-stage businesses are in businesses that are
developing or commercialising related technology. Cash collateral deposits
represent amounts held on deposit with banks as security for liabilities or
letters of credit.
15. Inventories
31 July 2025 31 July 2024
£m
£m
Raw materials and consumables 133 192
Work in progress 140 148
Finished goods 313 303
Total inventories 586 643
In FY2025, operating costs included £1,470m (FY2024: £1,629m) of inventory
consumed, £16m (FY2024: £13m) was charged for the write-down of inventory
and £7m (FY2024: £11m) was released from provisions no longer required.
Inventory provisioning
31 July 2025 31 July 2024
£m
£m
Gross inventory carried at full value 505 560
Gross value of inventory partly or fully provided for 138 146
643 706
Inventory provision (57) (63)
Inventory after provisions 586 643
16. Trade and other receivables
31 July 2025 31 July 2024
£m
£m
Non-current
Trade receivables 3 -
Prepayments - 1
Contract assets 82 86
Other receivables 5 9
90 96
Current
Trade receivables 504 544
Prepayments 36 58
Contract assets 114 123
Other receivables 83 101
737 826
Trade receivables do not carry interest. Management considers that the
carrying value of trade and other receivables approximates to the fair value.
Trade and other receivables, including accrued income and other receivables
qualifying as financial instruments, are accounted for at amortised cost. The
maximum credit exposure arising from these financial assets was £727m
(FY2024: £788m).
Contract assets comprise unbilled balances not yet due on contracts, where
revenue recognition does not align with the agreed payment schedule. The main
movements in the year arose from the reclassification of Interconnect balances
to held for sale and increases in contract asset balances of £5m (FY2024:
£23m) principally within John Crane and Smiths Detection, offset by a £2m
(FY2024: £1m) decrease due to foreign currency translation losses.
A number of Flex-Tek's customers provide supplier finance schemes which allow
their suppliers to sell trade receivables, without recourse, to banks. This is
commonly known as invoice discounting or factoring. During FY2025 the Group
collected £70m of receivables through these schemes (FY2024: £126m). The
impact of invoice discounting on the FY2025 balance sheet was that trade
receivables were reduced by £18m (2024: £23m). Costs of discounting were
£1m (FY2024: £2m), charged to the income statement within financing costs.
The cash received via these schemes was classified as an operating cash inflow
as it had arisen from operating activities.
Trade receivables are disclosed net of provisions for expected credit loss,
with historical write-offs used as a basis, adjusted for factors that are
specific to the debtor, general economic conditions of the industry in which
the debtor operates and a default risk multiplier applied to reflect country
risk premium. Credit risk is managed separately for each customer and, where
appropriate, a credit limit is set for the customer based on previous
experience of the customer and third-party credit ratings. The Group has no
significant concentration of credit risk, with exposure spread over a large
number of customers. The largest single customer was the US Federal
Government, representing 9% (FY2024: 8%) of Group revenue.
Ageing of trade receivables
31 July 2025 31 July 2024
£m
£m
Trade receivables which are not yet due 388 436
Trade receivables which are between 1-30 days overdue 49 56
Trade receivables which are between 31-60 days overdue 22 17
Trade receivables which are between 61-90 days overdue 13 13
Trade receivables which are between 91-120 days overdue 6 5
Trade receivables which are more than 120 days overdue 44 46
522 573
Expected credit loss allowance provision (15) (29)
Trade receivables 507 544
Movement in expected credit loss allowance
31 July 2025 31 July 2024
£m
£m
Brought forward loss allowance at the start of the period 29 30
Exchange adjustments - 1
Increase in allowance recognised in the income statement 8 4
Amounts written off or recovered during the year (19) (6)
Amounts reclassed to discontinued operations (3) -
Carried forward loss allowance at the end of the year 15 29
17. Trade and other payables
31 July 2025 31 July 2024
£m
£m
Non-current
Other payables 12 15
Contract liabilities 26 26
38 41
Current
Trade payables 229 274
Other payables 46 35
Other taxation and social security costs 27 60
Accruals 222 204
Contract liabilities 155 191
679 764
Trade and other payables, including accrued expenses and other payables
qualifying as financial instruments, are accounted for at amortised cost and
are categorised as 'Trade and other financial payables' in note 21.
Contract liabilities comprise deferred income balances of £181m (FY2024:
£217m) in respect of payments being made in advance of revenue recognition.
The movement in the year arises primarily from the long-term contracts of the
Smiths Detection business segment where invoicing under milestones precedes
the delivery of the programme performance obligations. Revenue recognised in
the year includes £176m (FY2024: £166m) that was included in the opening
contract liabilities balance. This revenue primarily relates to the delivery
of performance obligations in the Smiths Detection business.
18. Borrowings and net debt
This note sets out the calculation of net debt, an important measure in
explaining our financing position. Net debt includes accrued interest and
fair value adjustments relating to hedge accounting.
31 July 2025 31 July 2024
£m
£m
Cash and cash equivalents
Net cash and deposits 195 459
Short-term borrowings
Lease liabilities (29) (32)
Interest accrual (3) (2)
(32) (34)
Long-term borrowings
€650m 2.00% Eurobond 2027 (556) (534)
Lease liabilities (79) (91)
(635) (625)
Borrowings/gross debt (667) (659)
Derivatives managing interest rate risk and currency profile of the debt 10 (13)
Net debt (excludes £21m of net cash in discontinued operations) (462) (213)
Net debt for the total Group (including £21m of net cash held in discontinued
operations) is £441m (FY2024: £213m).
Cash and cash equivalents
31 July 2025 31 July 2024
£m
£m
Cash at bank and in hand 102 123
Short-term deposits 93 336
Cash and cash equivalents 195 459
Cash and cash equivalents include highly liquid investments with maturities of
three months or less. Borrowings are accounted for at amortised cost and are
categorised as other financial liabilities. See note 19 for a maturity
analysis of borrowings. Interest of £12m (FY2024: £12m) was charged to the
consolidated income statement in the period in respect of public bonds.
Analysis of financial derivatives on balance sheet
Non-current assets Current Current Non-current liabilities Net balance
assets
£m
£m
liabilities £m
£m
£m
Derivatives managing interest rate risk and currency profile of the debt 10 - - - 10
Foreign exchange forward contracts - 7 (2) - 5
At 31 July 2025 10 7 (2) - 15
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 assets/(liabilities) arising from financing activities
Changes in net debt Changes in other financing items: FX contracts Total liabilities from financing
£m
activities
£m
Cash Other Long-term Interest rate and cross-currency Net debt
and cash
short-term
borrowings
swaps
£m
equivalents
borrowings
£m
£m
£m
£m
At 31 July 2024 459 (34) (625) (13) (213) - (213)
Foreign exchange gains/(losses) (12) 1 (11) - (22) - (22)
Net cash inflow from continuing operations (221) - - - (221) - (221)
Reclassified to asset/liability held for sale (31) 2 8 - (21) - (21)
Lease payments - 41 - - 41 - 41
Interest paid - 63 - - 63 - 63
Interest expense - (71) - - (71) - (71)
Cash inflow from matured derivative contracts - - - - 2 2
Fair value movements - - (7) 23 16 3 19
Lease liabilities acquired - (1) (5) - (6) - (6)
Net movement from new leases and modifications - (28) - - (28) - (28)
Reclassifications - (5) 5 - - - -
At 31 July 2025 195 (32) (635) 10 (462) 5 (457)
Changes in net debt Changes in other financing items: FX contracts Total liabilities from financing
£m
activities
£m
Cash Other Long-term Interest rate and cross-currency Net debt
and cash
short-term
borrowings
swaps
£m
equivalents
borrowings
£m
£m
£m
£m
At 31 July 2023 285 (29) (625) (18) (387) 3 (384)
Foreign exchange gains/(losses) (14) 1 10 - (3) - (3)
Net cash inflow from continuing operations 188 - - - 188 - 188
Lease payments - 39 - - 39 - 39
Interest paid - 57 - - 57 - 57
Interest expense* - (63) - - (63) - (63)
Cash inflow from matured derivative contracts - - - - - 5 5
Fair value movements - - (9) 5 (4) (8) (12)
Lease liabilities acquired - - (12) - (12) - (12)
Net movement from new leases and modifications - (28) - - (28) - (28)
Reclassifications - (11) 11 - - - -
At 31 July 2024 459 (34) (625) (13) (213) - (213)
* Interest expense presented in note 4 also includes a £1m accrual movement
that does not form part of net debt.
Cash pooling
Cash and overdraft balances in interest compensation cash pooling systems are
reported gross on the balance sheet. The cash pooling agreements incorporate a
legally enforceable right of net settlement. However, as there is no
intention to settle the balances net, these arrangements do not qualify for
net presentation. At 31 July 2025 the total value of overdrafts on accounts in
interest compensation cash pooling systems was £nil (FY2024: £nil). The
balances held in zero balancing cash pooling arrangements have daily
settlement of balances. Therefore, netting is not relevant.
Change of control
The Company has in place credit facility agreements under which a change of
control would trigger prepayment clauses. The Company has one bond in issue,
the terms of which would allow bondholders to exercise put options and require
the Company to buy back the bonds at their principal amount plus interest if a
rating downgrade occurs at the same time as a change of control takes effect.
Lease liabilities
Lease liabilities have been measured at the present value of the remaining
lease payments. The weighted average incremental borrowing rate applied to
lease liabilities in FY2025 was 4.69% (FY2024: 4.42%).
19. Financial risk management
The Group's international operations and debt financing expose it to financial
risks which include the effects of changes in foreign exchange rates, debt
market prices, interest rates, credit risks and liquidity risks. The
management of operational credit risk is discussed in note 16.
Treasury Risk Management Policy
The Board maintains a Treasury Risk Management Policy, which governs the
treasury operations of the Group and its subsidiary companies and the
consolidated financial risk profile to be maintained. A report on treasury
activities, financial metrics and compliance with the Policy is circulated to
the Chief Financial Officer each month and key elements to the Audit &
Risk Committee on a semi-annual basis.
The Policy maintains a treasury control framework within which counterparty
risk, financing and debt strategy, cash and liquidity, interest rate risk and
currency translation management are reserved for Group Treasury, while
currency transaction management is devolved to operating divisions.
Centrally directed cash management systems exist globally to manage overall
liquid resources efficiently across the divisions. The Group uses financial
instruments to raise financing for its global operations, to manage related
interest rate and currency financial risk, and to hedge transaction risk
within subsidiary companies.
The Group does not speculate in financial instruments. All financial
instruments hedge existing business exposures and all are recognised on the
balance sheet.
The Policy defines four treasury risk components and for each component a set
of financial metrics to be measured and reported monthly against pre-agreed
objectives.
1) Credit quality
The Group's strategy is to maintain a solid investment-grade rating to ensure
access to the widest possible sources of financing at the right time and to
optimise the resulting cost of debt capital. The credit ratings at the end of
July 2025 were BBB+ / Baa2 (both negative outlook) from Standard & Poor's
and Moody's respectively. An essential element of an investment-grade rating
is consistent and robust cash-flow metrics. The Group's objective is to
maintain a net debt/headline EBITDA ratio of two times or lower over the
medium term. Capital management is discussed in more detail in note 26.
2) Debt and interest rate
The Group's risk management objectives are to ensure that the majority of
funding is drawn from the public debt markets, the average maturity profile of
gross debt is to be at or greater than three years, and between 40-60% of
gross debt (excluding leases) is at fixed rates. At 31 July 2025 these
measures were 100% (FY2024: 100%), 1.6 years (FY2024: 2.6 years) and 54%
(FY2024: 54%).
The Group has no financial covenants in its external debt agreements. Interest
rate risk management is discussed in note 19(b).
3) Liquidity management
The Group's objective is to ensure that at any time undrawn committed
facilities, net of short-term overdraft financing, are at least £300m and
that committed facilities have at least 12 months to run until maturity. At 31
July 2025, these measures were £805m (FY2024: £623m) and a weighted average
maturity of 49 months (FY2024: 57 months). At 31 July 2025, net cash resources
were £195m (FY2024: £459m). Liquidity risk management is discussed in note
19(d).
4) Currency management
The Group is an international business with the majority of its net assets
denominated in foreign currency. It protects the balance sheet and reserves
from adverse foreign exchange movements by financing foreign currency assets
where appropriate in the same currency. The Group's objective for managing
transaction currency exposure is to reduce medium-term volatility to
cash-flow, margins and earnings. Foreign exchange risk management is discussed
in note 19(a) below.
(a) Foreign exchange risk
Transactional currency exposure
The Group is exposed to foreign currency risks arising from sales or purchases
by businesses in currencies other than their functional currency. It is Group
policy that, when the net foreign exchange exposure to known future sales and
purchases is material, this exposure is hedged using forward foreign exchange
contracts. The net exposure is calculated by adjusting the expected cash-flow
for payments or receipts in the same currency linked to the sale or purchase.
This policy minimises the risk that the profits generated from the transaction
will be affected by foreign exchange movements which occur after the price has
been determined. Hedge accounting documentation and effectiveness testing are
only undertaken if it is cost-effective.
The following table shows the currency of financial instruments. It excludes
loans and derivatives designated as net investment hedges.
At 31 July 2025
Sterling US$ Euro Other Total
£m
£m
£m
£m
£m
Financial assets and liabilities
Financial instruments included in trade and other receivables 30 395 176 143 744
Financial instruments included in trade and other payables (58) (221) (96) (107) (482)
Cash and cash equivalents 18 99 26 52 195
Borrowings not designated as net investment hedges (24) (51) (11) (22) (108)
(34) 222 95 66 349
Exclude balances held in operations with the same functional currency 33 (386) (74) 28 (399)
Exposure arising from intra-Group loans - 154 (15) (46) 93
Future forward foreign exchange contract cash-flows (85) (52) 32 105 -
(86) (62) 38 153 43
At 31 July 2024
Sterling US$ Euro Other Total
£m
£m
£m
£m
£m
Financial assets and liabilities
Financial instruments included in trade and other receivables 38 417 147 195 797
Financial instruments included in trade and other payables (45) (222) (117) (111) (495)
Cash and cash equivalents 139 222 19 79 459
Borrowings not designated as net investment hedges (26) (61) (14) (22) (123)
106 356 35 141 638
Exclude balances held in operations with the same functional currency (108) (305) (38) (153) (604)
Exposure arising from intra-Group loans - 65 37 (71) 31
Future forward foreign exchange contract cash-flows 13 (93) 6 74 -
11 23 40 (9) 65
Financial instruments included in trade and other receivables comprise trade
receivables, accrued income and other receivables which qualify as financial
instruments. Similarly, financial instruments included in trade and other
payables comprise trade payables, accrued expenses and other payables that
qualify as financial instruments.
Based on the assets and liabilities held at the year-end, if the specified
currencies were to strengthen 10% while all other market rates remained
constant, the change in the fair value of financial instruments not designated
as net investment hedges would have the following effect:
Impact on profit Gain/(loss) Impact on profit Gain/(loss)
for the year
recognised in reserves
for the year
recognised in reserves
FY2025
FY2025
FY2024
FY2024
£m
£m
£m
£m
US dollar 4 2 1 2
Euro (1) (2) (1) (3)
Sterling 3 (2) (2) -
These sensitivities were calculated before adjusting for tax and exclude the
effect of quasi-equity intra-Group loans.
Cash-flow hedging
The Group uses forward foreign exchange contracts to hedge future foreign
currency sales and purchases. At 31 July 2025, contracts with a nominal value
of £103m (FY2024: £178m) were designated as hedging instruments. In
addition, the Group had outstanding foreign currency contracts with a nominal
value of £357m (FY2024: £315m) which were being used to manage transactional
foreign exchange exposures, but were not accounted for as cash-flow hedges.
The fair value of the contracts is disclosed in note 20.
The majority of hedged transactions will be recognised in the consolidated
income statement in the same period that the cash-flows are expected to occur,
with the only differences arising because of normal commercial credit terms on
sales and purchases. It is the Group's policy to hedge 80% of certain
exposures for the next two years and 50% of highly probable exposures for the
next 12 months.
Hedge effectiveness is determined at the inception of the hedge relationship,
and through periodic prospective effectiveness assessments to ensure that an
economic relationship exists between the hedged item and hedging instrument.
The foreign exchange forward contracts have similar critical terms to the
hedged items, such as the notional amounts and maturities. Therefore, there is
an economic relationship and the hedge ratio is established as 1:1.
The main sources of hedge ineffectiveness in these hedging relationships are
the effect of the Group's and the counterparty credit risks on the fair value
of the foreign exchange forward contracts, which is not reflected in the fair
value of the hedged item and the risk of over-hedging where the hedge
relationship requires re-balancing. No other sources of ineffectiveness
emerged from these hedging relationships. Any hedge ineffectiveness is
recognised immediately in the income statement in the period that it occurs.
Of the foreign exchange contracts designated as hedging instruments, 100% are
for periods of 12 months or less (FY2024: 100%).
The following table presents a reconciliation by risk category of the
cash-flow hedge reserve and analysis of other comprehensive income in relation
to hedge accounting:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Brought forward cash-flow hedge reserve at start of year - -
Foreign exchange forward contracts: Net fair value gains on effective hedges (2) -
Amount reclassified to income statement - finance costs 3 -
Carried forward cash-flow hedge reserve at end of year 1 -
The following tables set out information regarding the change in value of the
hedged item used in calculating hedge ineffectiveness as well as the impacts
on the cash-flow hedge reserve:
Hedged item Hedged exposure Hedging instrument Financial year Changes in value of the hedged item for calculating ineffectiveness Changes in value of the hedging instrument for calculating ineffectiveness Cash-flow hedge reserve
£m
£m
£m
Sales and purchases Foreign currency risk Foreign exchange contracts FY2025 (2) 2 (2)
FY2024 - - -
Cash-flow hedges generated £nil of ineffectiveness in FY2025 (FY2024: £nil)
which was recognised in the income statement through finance costs.
Translational currency exposure
The Group has significant investments in overseas operations, particularly in
the US and Europe. As a result, the sterling value of the Group's balance
sheet can be significantly affected by movements in exchange rates. The Group
seeks to mitigate the effect of these translational currency exposures by
matching the net investment in overseas operations with borrowings denominated
in their functional currencies, except where significant adverse interest
differentials or other factors would render the cost of such hedging activity
uneconomic. This is achieved by borrowing primarily in the relevant currency
or in some cases indirectly using cross-currency swaps.
Net investment hedges
The table below sets out the currency of loans and swap contracts designated
as net investment hedges:
At 31 July 2025 At 31 July 2024
US$ Euro Total US$ Euro Total
£m
£m
£m
£m
£m
£m
Loans designated as net investment hedges - (296) (296) - (288) (288)
Cross-currency swap (240) - (240) (248) - (248)
(240) (296) (536) (248) (288) (536)
At 31 July 2025, cross-currency swaps hedged the Group's exposure to US
dollars and euros (FY2024: US dollars and euros). All the cross-currency swaps
designated as net investment hedges were non-current (FY2024: non-current).
Swaps generating £240m of the US dollar exposure (FY2024: £248m) will mature
in February 2027.
In addition, non-swapped borrowings were also used to hedge the Group's
exposure to euros (FY2024: euros). Borrowings generating £296m of the euro
exposure (FY2024: £288m) will mature in February 2027.
Hedge effectiveness is determined at the inception of the hedge relationship,
and through periodic prospective effectiveness assessments to ensure that an
economic relationship exists between the hedged item and hedging instrument.
The swaps and borrowings have the same notional amount as the hedged items
and, therefore, there is an economic relationship with the hedge ratio
established as 1:1.
The main sources of hedge ineffectiveness in these hedging relationships are
the effect of the counterparty and the Group's own credit risk on the fair
value of the foreign exchange forward contracts which is not reflected in the
fair value of the hedged item and the risk of over-hedging where the hedge
relationship requires re-balancing. No other sources of ineffectiveness
emerged from these hedging relationships. Any hedge ineffectiveness is
recognised immediately in the income statement in the period that it occurs.
The following table presents a reconciliation by risk category of the net
investment hedge reserve and analysis of other comprehensive income in
relation to hedge accounting:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Brought forward net investment hedge reserve at start of year (191) (196)
Cross-currency swaps Net fair value gains on effective hedges 7 -
Bonds Net fair value gains on effective hedges (7) 5
Carried forward net investment hedge reserve at end of year (191) (191)
The following table sets out information regarding the change in value of the
hedged item used in calculating hedge ineffectiveness as well as the impacts
on the net investment hedge reserve as at 31 July 2025 and 31 July 2024:
Hedged item Hedged exposure Hedging instrument Financial year Changes in value of the hedged item for calculating ineffectiveness Changes in value of the hedging instrument for calculating ineffectiveness Net investment hedge reserve
£m
£m
£m
Overseas operation Foreign currency risk Bonds FY2025 7 (7) (7)
Cross-currency swaps FY2025 (7) 8 7
-
Overseas operation Foreign currency risk Bonds FY2024 (5) 5 -
Net investment hedges generated £1m of ineffectiveness in FY2025 (FY2024:
£nil) which was recognised in the income statement through finance costs.
The fair values of these net investment hedges are subject to exchange rate
movements. Based on the hedging instruments in place at the year-end, if
the specified currencies were to strengthen 10% while all other market rates
remained constant, it would have the following effect:
Loss Loss
recognised
recognised
in hedge
in hedge
reserve
reserve
31 July 2025
31 July 2024
£m
£m
US dollar 27 28
Euro 33 32
These movements would be fully offset by an opposite movement on the
retranslation of the net assets of the overseas subsidiaries. These
sensitivities were calculated before adjusting for tax.
(b) Interest rate risk
The Group operates an interest rate policy designed to optimise interest cost
and reduce volatility in reported earnings. The Group's current policy is to
require interest rates to be fixed within a band of between 40% and 60% of the
level of gross debt (excluding leases). This is achieved through fixed rate
borrowings and interest rate swaps. At 31 July 2025 54% (FY2024: 54%) of the
Group's gross borrowings (excluding leases) were at fixed interest rates,
after adjusting for interest rate swaps and the impact of short maturity
derivatives designated as net investment hedges.
The Group monitors its fixed rate risk profile against both gross and net
debt. For medium-term planning, it focuses on gross debt to eliminate the
fluctuations of variable cash levels over the cycle. The weighted average
interest rate on borrowings and cross-currency swaps at 31 July 2025, after
interest rate swaps, was 4.25% (FY2024: 4.60%).
Interest rate profile of financial assets and liabilities and the fair value
of borrowings
The following table shows the interest rate risk exposure of investments, cash
and borrowings, with the borrowings adjusted for the impact of interest rate
hedging. Other financial assets and liabilities do not earn or bear interest,
and for all financial instruments except borrowings, the carrying value is not
materially different from their fair value.
As at 31 July 2025
At fair value Cash and Borrowings Fair value of
through
cash
£m
borrowings
profit or loss
equivalents
£m
£m
£m
Fixed interest
Less than one year - - (32) (32)
Between one and five years - - (353) (352)
Greater than five years - - (27) (27)
Total fixed interest financial liabilities - - (412) (411)
Floating rate interest financial assets/(liabilities) 1 142 (255) (257)
Total interest-bearing financial assets/(liabilities) 1 142 (667) (668)
Non-interest-bearing assets in the same category - 53 - -
Total 1 195 (667) (668)
As at 31 July 2024
At fair value through profit or loss Cash and Borrowings Fair value of
£m
cash
£m
borrowings
equivalents
£m
£m
Fixed interest
Less than one year - - (34) (34)
Between one and five years - - (351) (343)
Greater than five years - - (33) (33)
Total fixed interest financial liabilities - - (418) (410)
Floating rate interest financial assets/(liabilities) 1 393 (241) (244)
Total interest-bearing financial assets/(liabilities) 1 393 (659) (654)
Non-interest-bearing assets in the same category - 66 - -
Total 1 459 (659) (654)
Interest rate hedging
The Group also has exposures to the fair values of non-derivative financial
instruments such as EUR fixed rate borrowings. To manage the risk of changes
in these fair values, the Group has entered into fixed-to-floating interest
rate swaps and cross-currency interest rate swaps, which for accounting
purposes are designated as fair value hedges.
At 31 July 2025, the Group had designated the following hedge against
variability on the fair value of borrowings arising from fluctuations in base
rates:
- €300m of the fixed/floating and € exchange exposure of EUR/USD
interest rate swaps maturing on 23 February 2027 partially hedging the €
2027 Eurobond.
At 31 July 2024, the Group had designated the following hedge against
variability on the fair value of borrowings arising from fluctuations in base
rates:
- €300m of the fixed/floating and € exchange exposure of EUR/USD
interest rate swaps maturing on 23 February 2027 partially hedging the €
2027 Eurobond.
The fair values of the hedging instruments are disclosed in note 20. The
effect of the swaps was to convert £259m (FY2024: £253m) debt from fixed
rate to floating rate. The swaps have similar critical terms to the hedged
items, such as the reference rate, reset dates, notional amounts, payment
dates and maturities. Therefore, there is an economic relationship and the
hedge ratio is established as 1:1. Hedge effectiveness is determined at the
inception of the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic relationship exists
between the hedged item and hedging instrument.
The main source of hedge ineffectiveness in these hedging relationships is the
effect of the currency basis risk on cross-currency interest rate swaps which
are not reflected in the fair value of the hedged item. No other sources of
ineffectiveness emerged from these hedging relationships. Any hedge
ineffectiveness was recognised immediately in the income statement in the
period in which it occurred.
The following table sets out the details of the hedged exposures covered by
the Group's fair value hedges:
Hedged item Hedged exposure Financial year Changes in value of hedged item for calculating ineffectiveness Changes in value of the hedging instrument for calculating ineffectiveness
£m
£m
Carrying amount Accumulated fair value
adjustments on hedged item
Assets Liabilities Assets Liabilities
£m
£m
£m
£m
Fixed rate bonds (a) Interest rate and currency rate risk FY2025 (7) 8 - 251 - (5)
Fixed rate bonds (a) Interest rate and currency rate risk FY2024 (9) 9 - 253 - (12)
(a) Classified as borrowings.
Fair value hedges generated a £1m ineffectiveness in gain FY2025 (FY2024:
£nil) which was recognised in the income statement through finance costs.
Sensitivity of interest charges to interest rate movements
The Group has exposure to sterling, US dollar and euro interest rates.
However, the Group does not have a significant exposure to interest rate
movements for any individual currency. Based on the composition of net debt
and investments at 31 July 2025, and taking into consideration all fixed rate
borrowings and interest rate swaps in place, a one percentage point (100 basis
points) change in average floating interest rates for all three currencies
would have a £2m impact (FY2024: £2m impact) on the Group's profit before
tax.
(c) Financial credit risk
The Group is exposed to credit-related losses in the event of non-performance
by counterparties to financial instruments, but does not currently expect any
counterparties to fail to meet their obligations. Credit risk is mitigated by
the Board-approved policy of only placing cash deposits with highly rated
relationship bank counterparties within counterparty limits established by
reference to their Standard & Poor's long-term debt rating. In the normal
course of business, the Group operates cash pooling systems, where a legal
right of set-off applies.
The maximum credit risk exposure in the event of other parties failing to
perform their obligations under financial assets, excluding trade and other
receivables and derivatives, totals £201m at 31 July 2025 (FY2024: £465m).
31 July 2025 31 July 2024
£m
£m
Cash in AAA liquidity funds 76 196
Cash at banks with at least a AA- credit rating 33 26
Cash at banks with all other A credit ratings 79 185
Cash at other banks 7 52
Investments in bank deposits 1 1
Other investments 5 5
Total 201 465
At 31 July 2025, the maximum exposure with a single bank for deposits and cash
was £54m (FY2024: £128m). The bank has a credit rating of AAA (FY2024: A+).
The maximum mark to market exposure with a single bank for derivatives was
£3m, the bank has a credit rating of AA-. In the prior year derivatives were
out of the money and did not represent a credit risk.
(d) Liquidity risk
Borrowing facility
Board policy specifies the maintenance of an unused committed credit facility
of at least £300m at all times to ensure that the Group has sufficient
available funds for operations and planned development. The Group has a
Revolving Credit Facility of US$800m maturing 5 May 2030 and a Revolving
Credit Facility of £200m maturing 17 June 2027. At the balance sheet date,
the Group had the following undrawn credit facility:
31 July 2025 31 July 2024
£m
£m
Expiring between one and two years (FY2024: n/a) 200 -
Expiring after more than four years (FY2024: four years) 605 623
Total 805 623
Cash deposits
As at 31 July 2025, £93m (FY2024: £336m) of cash and cash equivalents was on
deposit with various banks of which £76m (FY2024: £196m) was in liquidity
funds. £1m (FY2024: £1m) of investments comprised bank deposits held to
secure liabilities and letters of credit.
Gross contractual cash-flows for borrowings
As at 31 July 2025
Borrowings Fair value Lease liabilities Contractual Total
£m
adjustments
£m
interest
contractual
£m
payments
cash-flows
£m
£m
Less than one year (3) - (29) (11) (43)
Between one and two years (561) 5 (19) (11) (586)
Between two and three years - - (14) - (14)
Between three and four years - - (11) - (11)
Between four and five years - - (8) - (8)
Greater than five years - - (27) - (27)
Total (564) 5 (108) (22) (689)
As at 31 July 2024 - represented*
Borrowings represented* Fair value Lease liabilities Contractual Total
£m
adjustments
£m
interest
contractual
£m
payments
cash-flows
£m
£m
Less than one year (2) - (32) (11) (45)
Between one and two years - - (21) (11) (32)
Between two and three years (546) 12 (18) (11) (563)
Between three and four years - - (11) - (11)
Between four and five years - - (8) - (8)
Greater than five years - - (33) - (33)
Total (548) 12 (123) (33) (692)
* The FRC's review of the Group's FY2024 annual report and accounts identified
a small number of reporting improvement matters. Following the FRC's review,
borrowings in the table above has been represented to separately disclose the
maturity analysis of lease liabilities. The table has also been restated to
show the correct bond repayment date.
The figures presented in the borrowings column include the non-cash
adjustments which are highlighted in the adjacent column. The contractual
interest reported for borrowings is before the effect of interest rate swaps.
Gross contractual cash-flows for derivative financial instruments
As at 31 July 2025
Receipts Payments Net
£m
£m
cash-flow
£m
Assets
Less than one year 238 (231) 7
Greater than one year 271 (261) 10
Liabilities
Less than one year 208 (210) (2)
Greater than one year 7 (7) -
Total 724 (709) 15
As at 31 July 2024
Receipts Payments Net
£m
£m
cash-flow
£m
Assets
Less than one year 260 (256) 4
Greater than one year 4 (4) -
Liabilities
Less than one year 223 (227) (4)
Greater than one year 254 (267) (13)
Total 741 (754) (13)
The table above presents the undiscounted future contractual cash-flows for
all derivative financial instruments. For this disclosure, cash-flows in
foreign currencies are translated using the spot rates at the balance sheet
date. The fair values of these financial instruments are presented in
note 20.
Gross contractual cash-flows for other financial liabilities
The contractual cash-flows for financial liabilities included in trade and
other payables were £461m (FY2024: £481m) due in less than one year, £21m
(FY2024: £14m) due between one and five years.
20. Derivative financial instruments
The tables below set out the nominal amount and fair value of derivative
contracts held by the Group, identifying the derivative contracts which
qualify for hedge accounting treatment.
At 31 July 2025
Contract or Fair value
underlying
nominal
amount
£m
Assets Liabilities Net
£m
£m
£m
Foreign exchange contracts (cash-flow hedges) 103 2 (1) 1
Foreign exchange contracts (not hedge accounted) 357 5 (1) 4
Total foreign exchange contracts 460 7 (2) 5
Cross-currency swaps (fair value and net investment hedges) 240 10 - 10
Total financial derivatives 700 17 (2) 15
Balance sheet entries:
Non-current 258 10 - 10
Current 442 7 (2) 5
Total financial derivatives 700 17 (2) 15
At 31 July 2024
Contract or Fair value
underlying
nominal
amount
£m
Assets Liabilities Net
£m
£m
£m
Foreign exchange contracts (cash-flow hedges) 178 2 (2) -
Foreign exchange contracts (not hedge accounted) 315 2 (2) -
Total foreign exchange contracts 493 4 (4) -
Cross-currency swaps (fair value and net investment hedges) 248 - (13) (13)
Total financial derivatives 741 4 (17) (13)
Balance sheet entries:
Non-current 255 - (13) (13)
Current 486 4 (4) -
Total financial derivatives 741 4 (17) (13)
Accounting for other derivative contracts
Any foreign exchange contracts which are not formally designated as hedges and
tested are classified as 'held for trading' and not hedge accounted.
Netting
International Swaps and Derivatives Association (ISDA) master netting
agreements are in place with derivative counterparties except for contracts
traded on a dedicated international electronic trading platform used for
operational foreign exchange hedging. Under these agreements if a credit event
occurs, all outstanding transactions under the ISDA are terminated and only a
single net amount per counterparty is payable in settlement of all
transactions. The ISDA agreements do not meet the criteria for offsetting,
since the offsetting is enforceable only if specific events occur in the
future, and there is no intention to settle the contracts on a net basis.
Assets Liabilities Assets Liabilities
31 July 2025
31 July 2025
31 July 2024
31 July 2024
£m
£m
£m
£m
Gross value of assets and liabilities 17 (2) 4 (17)
Related assets and liabilities subject to master netting agreements (2) 2 (4) 4
Net exposure 15 - - (13)
The maturity profile, average interest and foreign currency exchange rates of
the hedging instruments used in the Group's hedging strategies are as follows:
Hedged exposure Hedging instrument Maturity at 31 July 2025 Maturity at 31 July 2024
Up to One to five years Up to One to five years
one year
one year
Fair value hedges
Interest rate/ Cross-currency swaps (EUR:GBP) - Notional amount (£m) - 254 - 254
foreign currency risk
- Historical average exchange rate - 0.845 - 0.845
- Average spread over three-month BBP SONIA - 1.860% - 1.860%
Net investment hedges
Foreign currency risk Cross-currency swaps (GBP:USD) - Notional amount (£m) - 240 - 248
- Historical average exchange rate - 1.2534 - 1.2534
Cash-flow hedges
Foreign currency risk Foreign exchange contracts (USD:GBP) - Notional amount (£m) 29 - 41 -
- Average exchange rate 1.3076 - 1.2593 -
Foreign exchange contracts (EUR:USD) - Notional amount (£m) 16 - 24 -
- Average exchange rate 0.8017 - 0.9277 -
Foreign exchange contracts (GBP:EUR) - Notional amount (£m) 15 - 66 -
- Average exchange rate 0.8729 - 0.8588 -
Foreign exchange contracts (CHF:EUR) - Notional amount (£m) 11 3 - -
- Average exchange rate 0.9240 0.9049 - -
Foreign exchange contracts (AED:EUR) - Notional amount (£m) 13 - - -
- Average exchange rate 4.0632 - - -
Foreign exchange contracts (CZK:GBP) - Notional amount (£m) 10 - 25 -
- Average exchange rate 29.4206 - 28.6952 -
Foreign exchange contracts (AUD:EUR) - Notional amount (£m) 4 - 9 -
- Average exchange rate 1.7473 - 1.6564 -
At 31 July 2025, the Group had forward foreign exchange contracts with a
nominal value of £103m (FY2024: £178m) designated as cash-flow hedges. These
forward foreign exchange contracts are in relation to sale and purchase of
multiple currencies with varying maturities up to 16 February 2027. The
largest single currency pairs are disclosed above and make up 98% of the
notional hedged exposure. The notional and fair values of these foreign
exchange forward derivatives are shown in the nominal amount and fair value of
derivative contracts table above.
21. Fair value of financial instruments
As at 31 July 2025 Notes Basis for determining fair value At amortised At fair value through profit or loss At fair value through OCI Total Total
cost
£m
£m
carrying
fair value
£m
value
£m
£m
Financial assets
Other investments 14 A - 1 - 1 1
Other investments 14 F - - 5 5 5
Cash and cash equivalents 18 B 195 - - 195 195
Trade and other financial receivables B/C 744 - - 744 744
Derivative financial instruments 20 C - 17 - 17 17
Total financial assets 939 18 5 962 962
Financial liabilities
Trade and other financial payables B (468) (14) - (482) (482)
Short-term borrowings 18 B/D (3) - - (3) (3)
Long-term borrowings 18 D (556) - - (556) (557)
Lease liabilities 18 E (108) - - (108) (108)
Derivative financial instruments 20 C - (2) - (2) (2)
Total financial liabilities (1,135) (16) - (1,151) (1,152)
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).
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).
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).
Notes Basis for determining fair value At amortised At fair value through profit or loss At fair value through OCI Total Total
cost
£m
£m
carrying
fair value
£m
value
£m
£m
As at 31 July 2024
Financial assets
Other investments 14 A - 1 47 48 48
Other investments 14 F - - 5 5 5
Cash and cash equivalents 18 B 459 - - 459 459
Trade and other financial receivables B/C 797 - - 797 797
Derivative financial instruments 20 C - 4 - 4 4
Total financial assets 1,256 5 52 1,313 1,313
Financial liabilities
Trade and other financial payables B (495) - - (495) (495)
Short-term borrowings 18 B/D (2) - - (2) (2)
Long-term borrowings 18 D (534) - - (534) (529)
Lease liabilities 18 E (123) - - (123) (123)
Derivative financial instruments 20 C - (17) - (17) (17)
Total financial liabilities (1,154) (17) - (1,171) (1,166)
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
22. Commitments
At 31 July 2025, commitments, comprising bonds and guarantees arising in the
normal course of business, amounted to £180m (FY2024: £187m), including
pension commitments of £44m (FY2024: £44m) and charitable funding
commitments for the Smiths Group Foundation of £8m (FY2024: £9m). In
addition, the Group has committed expenditure on capital projects amounting
to £4m (FY2024: £14m).
23. Provisions and contingent liabilities
Trading Non-headline and legacy Total
£m John Crane, Inc. Titeflex Other £m
litigation
Corporation
£m
£m
litigation
£m
At 31 July 2023 8 204 41 33 286
Business combinations 1 - - - 1
Provision charged 12 29 - 5 46
Provision released (2) - (5) (5) (12)
Unwind of provision discount - 8 1 - 9
Utilisation (6) (21) (1) (8) (36)
At 31 July 2024 13 220 36 25 294
Comprising:
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) (1) - (7)
Business combinations - - - - -
Provision charged 16 - 1 8 25
Provision released (4) (12) (6) - (22)
Unwind of provision discount - 8 1 - 9
Utilisation (5) (19) (5) (15) (44)
Reclassified to liability held for sale (1) - - - (1)
At 31 July 2025 19 191 26 18 254
Comprising:
Current liabilities 12 23 7 14 56
Non-current liabilities 7 168 19 4 198
At 31 July 2025 19 191 26 18 254
The John Crane, Inc. and Titeflex Corporation litigation provisions were the
only provisions that were discounted; other provisions have not been
discounted as the impact would be immaterial.
Trading
The provisions included as trading represent amounts provided for in the
ordinary course of business. Trading provisions are charged and released
through headline profit.
Warranty provision and product liability
At 31 July 2025, the Group had warranty and product liability provisions of
£17m (FY2024: £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 alert
line, 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
John Crane, Inc.
John Crane, Inc. (JCI) is one of many co-defendants in numerous lawsuits
pending in the United States in which plaintiffs are claiming damages arising
from alleged exposure to, or use of, products previously manufactured which
contained asbestos. Until 2006, the awards, the related interest and all
material defence costs were met directly by insurers. In 2007, JCI secured the
commutation of certain insurance policies in respect of product liability.
Provision is made in respect of the expected costs of defending known and
predicted future claims and of adverse judgements in relation thereto, to the
extent that such costs can be reliably estimated.
The JCI products generally referred to in these cases consist of industrial
sealing products, primarily packing and gaskets. The asbestos was encapsulated
within these products in such a manner that causes JCI to understand, based on
tests conducted on its behalf, that the products were safe. JCI ceased
manufacturing products containing asbestos in 1985.
JCI continues to actively monitor the conduct and effect of its current and
expected asbestos litigation, including the most efficacious presentation of
its 'safe product' defence, and intends to continue to resist these asbestos
claims based upon this defence. The table below summarises the JCI claims
experience over the last 45 years since the start of this litigation:
Year ended Year ended Year ended Year ended Year ended
31 July 2025
31 July 2024
31 July 2023
31 July 2022
31 July 2021
JCI claims experience
Claims against JCI that have been dismissed 313,000 312,000 310,000 306,000 305,000
Claims JCI is currently a defendant in 21,000 20,000 20,000 22,000 22,000
Cumulative final judgements, after appeals, against JCI since 1979 157 156 154 149 149
Cumulative value of awards (US$m) since 1979 192 191 190 175 175
The number of claims outstanding at 31 July 2025 reflected the benefit of
1,000 (FY2024: 2,000) claims being dismissed in the year.
JCI has also incurred significant additional defence costs. The litigation
involves claims for a number of allegedly asbestos-related diseases, with
awards, when made, for mesothelioma tending to be larger than those for the
other diseases. JCI's ability to defend mesothelioma cases successfully is,
therefore, likely to have a significant impact on its annual aggregate adverse
judgement and defence costs.
John Crane, Inc. litigation provision
The provision is based on past history of JCI claims and well-established
tables of asbestos-related disease incidence projections. The provision is
determined using advice from 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 judgements awarded.
Established incidence curves can be used to estimate the likely future pattern
of asbestos-related disease. However, JCI's claims experience is also
significantly impacted by other factors which influence the US litigation
environment. These can include: changing approaches on the part of the
plaintiffs' bar; changing attitudes amongst the judiciary at both trial and
appellate levels in specific jurisdictions which move the balance of risk and
opportunity for claimants; and legislative and procedural changes in both the
state and federal court systems.
The projections use a limited time horizon on the basis that Bates White LLC
consider that there is substantial uncertainty in the asbestos litigation
environment. So probable expenditures are not reasonably estimable beyond
this time horizon. Asbestos is the longest-running mass tort litigation in
American history and is constantly evolving in ways that cannot be
anticipated. JCI's defence strategy also generates a significantly different
pattern of legal costs and settlement expenses from other defendants. Thus JCI
is in an extremely rare position, and evidence from other litigation cannot be
used to improve the reliability of the projections. A ten-year (FY2024:
ten-year) time horizon has been used based on past experience regarding
significant changes in the litigation environment that have occurred every few
years and on the amount of time taken in the past for some of those changes to
impact the broader asbestos litigation environment.
The rate of future claims filed has been estimated using well-established
tables of asbestos incidence projections to determine the likely population of
potential claimants, and JCI's past experience to determine what proportion of
this population will make a claim against JCI. The JCI products generally
referred to in claims had industrial and marine applications. As a result, the
incidence curve used for JCI projections excludes construction workers, and
is a composite of the curves that predict asbestos exposure-related disease
from shipyards and other occupations. This is consistent with JCI's litigation
history.
The rate of successful resolution of claims and the average amount of any
judgements awarded are projected based on the past history of JCI claims,
since this is the best available evidence, given JCI's strategy of defending
all claims.
The future trend of legal costs is estimated based on JCI's past experience,
adjusted to reflect the assumed levels of claims and trial activity, since the
number of trials is a key driver of legal costs.
John Crane, Inc. litigation insurance recoveries
While JCI has certain excess liability insurance, JCI has met defence costs
directly. The calculation of the provision does not take account of any
potential recoveries from insurers.
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 will be incurred
because of the significant uncertainty associated with the future level of
asbestos claims and of the costs arising out of related litigation, including
the unpredictability of jury verdicts.
John Crane, Inc. 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 £170m and future spend at the 95th percentile of £230m (FY2024: £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 £214m and £242m (FY2024: between £245m and £271m),
compared to the gross provision value of £231m (FY2024: £261m).
John Crane, Inc. litigation provision history
The JCI asbestos litigation provision of £191m (FY2024: £220m) 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 (note 6).
The JCI asbestos litigation provision has developed over the last five years
as follows:
Year ended Year ended Year ended Year ended Year ended
31 July 2025
31 July 2024
31 July 2023
31 July 2022
31 July 2021
£m
£m
£m
£m
£m
John Crane, Inc. litigation provision
Gross provision 231 261 246 258 220
Discount (40) (41) (42) (29) (8)
Discounted pre-tax provision 191 220 204 229 212
Deferred tax (46) (54) (51) (57) (54)
Discounted post-tax provision 145 166 153 172 158
Operating profit charge/(credit)
(Decreased)/Increased provisions for adverse judgements and legal defence (11) 28 28 24 10
costs
Change in US risk-free rates (1) 1 (15) (18) (5)
Subtotal - items charged to the provision (12) 29 13 6 5
Litigation management, legal fees in connection with litigation against - - 2 1 1
insurers
and defence strategy
Recoveries from insurers (1) (3) (7) - (9)
Total operating profit (credit)/charge (13) 26 8 7 (3)
Cash-flow
Provision utilisation - legal defence costs and adverse judgements (18) (21) (32) (21) (13)
Litigation management expense - - (2) (1) -
Recoveries from insurers 1 3 7 - 9
Net cash outflow (17) (18) (27) (22) (4)
John Crane, Inc. 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 ten-year time horizon. Reducing the time horizon by one
year would reduce the provision by £15m (FY2024: £16m) and reducing it by
five years would reduce the provision by £85m (FY2024: £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 pre-tax provision
by £13m (FY2024: £13m) and extending it by five years would increase the
pre-tax provision by £45m (FY2024: £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
will evolve beyond ten years is not reasonably estimable.
John Crane, Inc. contingent liabilities
Provision has been made for future defence costs and the cost of adverse
judgements expected to occur. JCI's claims experience is significantly
impacted by other factors which influence the US litigation environment. These
can 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 numbers of future claims, the nature of such
claims or the cost to resolve them for years beyond the ten-year time horizon.
Titeflex Corporation
Titeflex Corporation, a subsidiary of the Group in the Flex-Tek business
segment, has received a number of claims in the US 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 product liability claims regarding this product in the US,
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, together with
recent marketplace activity, provide sufficient evidence to recognise a
liability in the accounts. Therefore a 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 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 provision of £26m (FY2024: £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 (note 6).
31 July 2025 31 July 2024
£m
£m
Gross provision 56 69
Discount (30) (33)
Discounted pre-tax provision 26 36
Deferred tax (6) (9)
Discounted post-tax provision 20 27
Titeflex Corporation litigation provision history
A credit of £5m (FY2024: £5m credit) has been recognised by Titeflex
Corporation in respect of changes to the estimated cost of future claims from
insurance companies seeking recompense for damage allegedly caused by
lightning strikes. The lower gross provision value has been principally driven
by a reduction in the number of claims.
Other non-headline and legacy provisions
Non-headline provisions comprise all provisions that were disclosed as
non-headline items when they were charged to the consolidated income
statement. Legacy provisions comprise non-material provisions relating to
former business activities and discontinued operations and properties no
longer used by Smiths.
These non-material provisions include non-headline reorganisation, disposal
indemnities, litigation and arbitration in respect of old products and
discontinued business activities. Provision is made for the best estimate of
the expected expenditure related to the defence and/or resolution of such
matters. There is an inherent risk in legal proceedings that the outcome may
be unfavourable to the Group, and as such there can be no guarantee that such
provisions (which may be subject to potentially material revision from time to
time) will be sufficient.
Reorganisation
At 31 July 2025, there were reorganisation provisions of £5m (FY2024: £1m)
relating to the various restructuring programmes that are expected to be
utilised in the next 18 months.
Property
At 31 July 2025, there were provisions of £7m (FY2024: £6m) related to
actual and potential environmental issues for sites currently or previously
occupied by Smiths operations.
24. Share capital
Number of shares Issued Consideration
capital
£m
£m
Ordinary shares of 37.5p each
Total share capital at 31 July 2023 349,302,990 131
Share buybacks (4,205,196) (1) (70)
Total share capital at 31 July 2024 345,097,794 130
Share buybacks (15,413,491) (6) (303)
Total share capital at 31 July 2025 329,684,303 124
Share capital structure
As at 31 July 2025, the Company's issued share capital was 329,684,303
ordinary shares with a nominal value of 37.5p per share. All of the issued
share capital was in free issue and all issued shares are fully paid.
The Company's ordinary shares are listed and admitted to trading on the Main
Market of the London Stock Exchange. The Company has an American Depositary
Receipt (ADR) programme and one ADR equates to one ordinary share. As at 31
July 2025, 2,816,482 ordinary shares were held by the nominee of the programme
in respect of the same number of ADRs in issue.
The holders of ordinary shares are entitled to receive the Company's Reports
and Accounts, to attend and speak at General Meetings of the Company, to
appoint proxies and to exercise voting rights. None of the ordinary shares
carry any special rights with regard to control of the Company or
distributions made by the Company.
There are no known agreements relating to, or restrictions on, voting rights
attached to the ordinary shares (other than the 48-hour cut-off for casting
proxy votes prior to a General Meeting). There are no restrictions on the
transfer of shares, and there is no requirement to obtain approval for a share
transfer. There are no known arrangements under which financial rights are
held by a person other than the holder of the ordinary shares. There are no
known limitations on the holding of shares.
Powers of Directors
The Directors are authorised to issue and allot shares and to buy back shares
subject to receiving shareholder approval at the General Meeting. Such
authorities were granted by shareholders at the 2024 Annual General Meeting.
At the 2025 AGM, it will be proposed that the Directors be granted new
authorities to allot and buy back shares.
Share buybacks
As at 10 September 2025 (the latest practicable date for inclusion in this
report), the Company had an unexpired authority to repurchase ordinary shares
up to a maximum of 17.2 million ordinary shares (FY2024: 31.8 million). As at
10 September 2025, the Company did not hold any shares in treasury. Any
ordinary shares purchased may be cancelled or held in treasury.
On 26 March 2024, the Company announced a £100m share buyback programme to
purchase ordinary shares in the capital of the Company. The programme has
since been extended to £500m. Under this scheme, 15,413,491 ordinary shares
of 37.5p were repurchased during the period for a total consideration of
£303m of which 300,000 shares with a value of £7m were yet to settle and be
cancelled.
A further 2,099,395 ordinary shares have been repurchased during the period of
1 August 2025 to 10 September 2025. The programme is expected to be completed
by the end of the calendar year.
In total since the start of the £500m Programme, 20,253,422 shares have been
repurchased for a total consideration of £398m, representing 6% of the
called-up ordinary share capital outstanding at the start of the Programme.
Employment share schemes
Shares acquired through Company share schemes and plans rank pari passu with
the shares in issue and have no special rights. The Company operates an
Employee Benefit Trust, with an independent trustee, to hold shares pending
employees becoming entitled to them under the Company's share schemes and
plans. On 31 July 2025, the Trust held 1,662,267 (FY2024: 1,388,730) ordinary
shares in the Company. The Trust waived its dividend entitlement on its
holding during the year, and the Trust abstains from voting any shares held at
General Meetings.
25. Dividends
The following dividends were declared and paid in the period:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Ordinary final dividend of 30.2p (FY2024: 28.70p) paid 22 November 2024 104 100
Ordinary interim dividend of 14.23p (FY2024: 13.55p) paid 14 May 2025 48 47
152 147
In the current year a final dividend of 30.2p was paid on 22 November 2024 in
respect of FY2024 and an interim dividend of 14.23p was paid in respect of
FY2025. In the prior year a total dividend of 42.25p was paid, comprising a
final dividend of 28.7p paid in respect of FY2023 and an interim dividend of
13.55p paid in respect of FY2024.
The final dividend for the year ended 31 July 2025 of 31.77p per share was
recommended by the Board on 22 September 2025 and will be paid to shareholders
on 21 November 2025, subject to approval by the shareholders. This dividend is
payable to all shareholders on the register of members at 6.00pm on 17 October
2025 (the record date).
Waiver of dividends
Winterflood Client Nominees Limited (Smiths Industries Employee Share Trust)
waived all dividends payable in the year, and all future dividends, on their
shareholdings in the Company.
26. Reserves
Retained earnings include the value of Smiths Group plc shares held by the
Smiths Industries Employee Benefit Trust. In the year the Company issued nil
(FY2024: nil) shares to the Trust, the Trust purchased 1,318,518 shares
(FY2024: 1,251,530 shares) in the market for a consideration of £23m (FY2024:
£20m) and redeemed 1,044,561 shares (FY2024: 1,605,729) to employees for a
cumulative option cost of £1m (FY2024: £4m). At 31 July 2025, the Trust
held 1,662,267 (FY2024: 1,388,730) ordinary shares.
Other reserves comprise the capital redemption reserve, revaluation reserve
and merger reserve, which arose from share repurchases, revaluations of
property, plant and equipment, and merger accounting for business combinations
before the adoption of IFRS, respectively.
Capital management
Capital employed comprises total equity adjusted for goodwill recognised
directly in reserves, net retirement benefit-related assets and liabilities,
net litigation provisions relating to non-headline items and net debt. The
efficiency of the allocation of capital to the divisions is monitored through
the return on capital employed (ROCE). This ratio is calculated over a rolling
12-month period and is the percentage that headline operating profit comprises
of monthly average capital employed. In FY2025 ROCE was 18.1% (FY2024: 16.4%);
see note 30.
Capital structure is based on the Directors' judgement of the balance required
to maintain flexibility, whilst achieving an efficient cost of capital.
The FY2025 ratio of net debt to headline EBITDA of 0.6 (FY2024: 0.3) is within
the Group's stated policy of 2.0 or less over the medium term. The Group's
robust balance sheet and record of strong cash generation are more than able
to fund immediate investment needs and legacy obligations. See note 30 for the
definition of headline EBITDA and the calculation of this ratio.
As part of its capital management, the Group maintains a solid investment
grade credit rating to ensure access to the widest possible sources of
financing and to optimise the resulting cost of capital. At 31 July 2025, the
Group had a credit rating of BBB+/Baa2 (FY2024: BBB+/Baa2) with Standard
& Poor's and Moody's respectively.
The Board has a progressive dividend policy for future payouts, with the aim
of increasing dividends in line with the long-term underlying growth in
earnings. In setting the level of dividend payments, the Board will take into
account prevailing economic conditions and future investment plans, along with
the objective to maintain a minimum dividend cover of at least two times.
Hedge reserve
The hedge reserve on the balance sheet records the cumulative gain or loss on
designated hedging instruments, and comprises:
31 July 2025 31 July 2024
£m
£m
Net investment hedge reserve (191) (191)
Deferred tax on net investment hedge reserve 7 7
Cashflow hedge reserve 1 -
Hedge reserve total (183) (184)
See transactional currency exposure risk management disclosures in note 19 for
additional details of cash-flow hedges, and translational currency exposure
risk management disclosure also in note 19 for additional details of net
investment hedges.
Non-controlling interest
The Group has recorded non-controlling interests of £24m (FY2024: £22m), of
which the most significant balance is in John Crane Japan Inc., which
represented £22m (FY2024: £20m) of the total non-controlling interests.
The non-controlling interest in John Crane Japan Inc. represents a 30%
interest. John Crane Japan Inc. generated operating profits of £10m in the
period (FY2024: £4m), and cash inflows from operating activities of £6m
(FY2024: £4m). It paid dividends of £1m (FY2024: £1m) and tax of £2m
(FY2024: £1m). At 31 July 2025, the company contributed £57m (FY2024: £53m)
of net assets to the Group.
27. Acquisitions
During September 2024, the Group acquired 100% of the share capital of Wattco,
Inc. (19 September 2024) and acquired 100% of the share capital of Modular
Metal (1 October 2024). On 28 February 2025, the Group acquired 100% of the
share capital of Duc-Pac.
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 £68m, with deferred contingent
consideration valued at £8m. The deferred consideration is contingent on the
post-acquisition performance of the business and has been valued using a
probability weighted expected return model. The maximum return from the
deferred contingent consideration is £15m and the minimum is £nil, it has
been classified as other payables within the Group balance sheet.
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.
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
total cash consideration for this acquisition was £31m, with deferred
consideration being circa £4m.
All 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 July 2025, Wattco contributed £12m to
revenue and £2m 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 July 2025, Modular Metal contributed £18m
to revenue and £4m 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.
From the date of acquisition to 31 July 2025, Duc-Pac contributed £6m to
revenue and £2m to profit before taxation and amortisation. If the Group had
acquired Duc-Pac at the beginning of the financial year, the acquisition would
have contributed an additional £9m to revenue and £2m to profit before
taxation and amortisation.
The balances at the date of acquisition have been provided in the table below.
The amounts for Duc-Pac are provisional due to the fair value of the
acquisition balance sheet not being finalised.
Wattco Modular Metal Duc-Pac Total
£m £m £m £m
Non-current assets - acquired intangible assets 24 17 18 59
- plant and machinery 1 2 2 5
- right of use assets 4 1 1 6
Current assets - inventory 2 7 3 12
- trade and other receivables 1 - - 1
- cash and cash equivalents 2 6 1 9
Current liabilities - trade and other payables (6) (1) (1) (8)
Non-current liabilities - deferred tax (6) (3) - (9)
- lease liability (4) (1) (1) (6)
Net assets acquired 18 28 23 69
Goodwill on current period acquisitions 58 7 12 77
Total 76 35 35 146
Cash paid during the period 68 31 31 130
Deferred/contingent consideration 8 4 4 16
Total consideration 76 35 35 146
Post balance sheet date acquisition
On 1 August 2025 the Group's Smiths Detection business completed on the
acquisition of 100% of the assets of Med Graphix Inc. for total consideration
of £6m. 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.
28. Discontinued operations and businesses held for sale
On 31 January 2025, the Group announced a number of strategic actions to
unlock significant value and enhance returns to shareholders. These strategic
actions included Smiths Interconnect being divested, targeting a transaction
announcement by end of calendar year 2025 and Smiths Detection being separated
either by UK demerger or sale following the sale of Smiths Interconnect.
At the July 2025 Smith Group Board meeting, it was determined that the Smiths
Interconnect divestment project had progressed sufficiently for the Smiths
Interconnect business to be accounted for as a discontinued operation and as a
business held for sale. Smiths Interconnect is a separate major line of
business for the Group.
Separately management have determined that Smiths Detection separation project
was progressing to schedule but had not yet progressed sufficiently for the
Smiths Detection business to be accounted for as a discontinued operation or a
business held for sale or distribution to owners.
Interconnect's US sub-systems business unit (Smiths Interconnect, Inc (SII))
has been disclosed as a separate disposal group, following an agreement to
sell the business separately from the rest of Smiths Interconnect. The value
of SII's net assets have been impaired to their fair value less costs to sell,
this has resulted in a £30m impairment loss being recognised.
The sale of the rest of Smiths Interconnect remains on schedule with a sale
announcement expected by the end of the calendar year 2025.
Discontinued operations
The financial performance of discontinued operations in the current and prior
years is presented below:
Year ended 31 July 2025 Year ended 31 July 2024
Headline Non-headline (note3) Total Headline Non-headline (note 3) Total
£m
£m
£m
£m
£m
£m
Revenue 421 - 421 354 - 354
Operating costs (346) (10) (356) (305) (3) (308)
Impairment loss - (30) (30) - - -
Operating profit/(loss) 75 (40) 35 49 (3) 46
Finance costs - - - (1) - (1)
Profit/(loss) before taxation 75 (40) 35 48 (3) 45
Taxation (18) (1) (19) (13) (3) (16)
Profit/(loss) from discontinued operations 57 (41) 16 35 (6) 29
Cash-flow from discontinued operations included in the consolidated cash-flow
statement is as follows:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Net cash inflow from operating activities 65 20
Net cash-flow used in investing activities (13) (11)
Net cash-flow used in financing activities (14) (4)
Net increase in cash and cash equivalents 38 5
Additional segmental information for discontinued operations
Headline operating profit for discontinued operations is stated after charging
depreciation £10m (FY2024: £11m), amortisation £1m (FY2024: £2m) and share
based payments £3m (FY2024: £2m).
The capital expenditure on property, plant and equipment, capitalised
development and other intangible assets for discontinued operations is £13m
(FY2024: £11m).
Businesses held for sale
At 31 July 2025 the SII and the rest of Smiths Interconnect disposal groups
both met the criteria for classification as held for sale. The carrying value
of the assets and liabilities of these disposal groups are as follows:
SII Interconnect Total
31 July 2025
£m £m
£m
Assets classified as held for sale:
Intangible assets - 278 278
Property, plant and equipment - 43 43
Right of use assets - 6 6
Inventories 9 65 74
Deferred tax assets - 1 1
Current tax receivable - 2 2
Trade and other receivables 12 60 72
Cash and cash equivalents - 31 31
Assets classified as held for sale 21 486 507
Liabilities classified as held for sale:
Financial liabilities - leases (4) (6) (10)
Trade and other payables (9) (74) (83)
Current tax payable - (6) (6)
Deferred tax liabilities (1) (5) (6)
Provisions for liabilities and charges - (1) (1)
Liabilities classified as held for sale (14) (92) (106)
Analysis by geographical areas
The Interconnect's revenue by destination and selected operating assets by
geographical location are shown below:
Americas Europe APAC ROW Total
£m £m £m £m £m
Revenue by geographical location
Revenue year ended 31 July 2025 214 76 116 15 421
Revenue year ended 31 July 2024 200 81 54 19 354
Year ended 31 July 2025 - Selected operating assets by geographical location
Intangible assets 275 3 - - 278
Property, plant and equipment 26 11 6 - 43
Right of use asset 5 1 - - 6
Total 306 15 6 - 327
29. Cash-flow
Cash-flow from operating activities
Year ended 31 July 2025 Year ended 31 July 2024 - represented*
Headline Non-headline Total Headline Non-headline Total
£m
£m
£m
£m
£m
£m
Operating profit:
- continuing operations 505 (95) 410 477 (108) 369
- discontinued operations 75 (40) 35 49 (3) 46
Amortisation of intangible assets 25 52 77 7 49 56
Impairment on sale of SII - 30 30 - - -
Depreciation of property, plant and equipment 43 2 45 44 1 45
Depreciation of right of use assets 34 - 34 34 - 34
Loss on disposal of property, plant and equipment 2 - 2 1 - 1
Loss on fair value of contingent consideration - - - - 13 13
Share-based payment expense 21 - 21 13 - 13
Retirement benefits** 4 (7) (3) 7 (8) (1)
Loss on disposal of financial asset - 3 3 - 9 9
Recycling of cash flow hedge reserve (2) - (2) - - -
Decrease/(increase) in inventories (20) 4 (16) (4) - (4)
Decrease/(increase) in trade and other receivables (35) 35 - (107) 26 (81)
Increase/(decrease) in trade and other payables (5) 7 2 71 (21) 50
Increase/(decrease) in provisions 9 (55) (46) 3 (5) (2)
Cash generated from operations 656 (64) 592 595 (47) 548
Interest paid (63) - (63) (57) - (57)
Interest received 40 - 40 26 - 26
Tax paid (113) - (113) (99) - (99)
Net cash inflow from operating activities 520 (64) 456 465 (47) 418
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
** The retirement benefits within non-headline operating activities
principally relate to employer contributions to legacy defined benefit and
post-retirement healthcare plans.
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 30 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:
Year ended 31 July 2025 Year ended 31 July 2024
Headline Non-headline Total Headline Non-headline Total
£m
£m
£m
£m
£m
£m
Net cash inflow from operating activities 520 (64) 456 465 (47) 418
Include:
Expenditure on capitalised development, other intangible assets and property, (80) - (80) (86) - (86)
plant and equipment
Repayment of lease liabilities (41) - (41) (39) - (39)
Funding of charitable foundation - 1 1 - 1 1
Movement in cash collateral - - - 4 - 4
Free cash-flow 336 298
Exclude:
Repayment of lease liabilities 41 - 41 39 - 39
Interest paid 63 - 63 57 - 57
Interest received (40) - (40) (26) - (26)
Tax paid 113 - 113 99 - 99
Funding of charitable foundation - (1) (1) - (1) (1)
Movement in cash collateral - - - (4) - (4)
Operating cash-flow 576 (64) 512 509 (47) 462
Headline cash conversion
Headline operating cash conversion for the total Group is calculated as
follows:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Headline operating profit 580 526
Headline operating cash-flow 576 509
Headline operating cash conversion 99% 97%
Reconciliation of free cash-flow to net movement in cash and cash equivalents:
Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Free cash-flow 336 298
Disposal of financial assets 53 186
Disposal of subsidiaries - post-sale expenses (12) -
Acquisition of businesses (121) (65)
Funding of charitable foundation (1) (1)
Other net cash-flows used in financing activities (476) (230)
(note: repayment of lease liabilities is included in free cash-flow)
Net (decrease)/increase in cash and cash equivalents (221) 188
30. Alternative performance measures and key performance indicators
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 these measures, which are common across the industry, for
planning and reporting purposes, 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 note 1 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 1.
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
29.
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 18 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. A reconciliation of
headline operating profit to headline EBITDA is shown in the note below.
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 18 for an analysis of net cash/(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 29.
Operating profit Operating profit is earnings before finance costs and tax. A reconciliation of
operating profit to profit before tax is shown on the income statement. This
common measure is used by the Group to measure and monitor performance.
Return on capital employed (ROCE) Smiths ROCE is calculated over a rolling 12-month period and is the percentage
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 1 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 5) to
dividend per share (see note 25). This commonly used measure indicates the
number of times the dividend in a financial year is covered by headline
earnings.
Headline Earnings per share (EPS) growth Headline EPS growth is the growth in headline basic EPS (see note 5), on a
reported basis. Headline 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 tCO2e 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 headline operating cash-flow, excluding restructuring costs, 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 29.
Operating profit margin 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.
RD&E cash costs as a % of sales This measure is defined as the cash cost of research, development, and
customer-specific engineering activities (RD&E) as a percentage of
revenue. RD&E includes capitalised RD&E, RD&E directly charged
to the P&L and customer-funded projects. Innovation is an important driver
of sustainable growth for the Group and this measures our investment in
research and development to drive innovation.
This KPI has replaced "R&D cash costs as a % of sales" as the Group's
measure of research and development investment.
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
(FY2024: £478m), 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 related tax, and net debt.
Notes 31 July 2025 31 July 2024
£m
£m
Net assets 2,060 2,252
Adjust for:
Goodwill recognised directly in reserves 478 478
Retirement benefit assets and obligations 8 (32) (29)
Tax related to retirement benefit assets and obligations 18 17
John Crane, Inc. litigation provisions and related tax 23 145 166
Titeflex Corporation litigation provisions and related tax 23 20 27
Investment in ICU Medical, Inc. equity 14 - (47)
Net debt (includes £21m of net cash from discontinued operations) 18 441 213
Capital employed 3,130 3,077
Return on capital employed (ROCE)
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Headline operating profit for previous 12 months - including discontinued 580 526
operations
Average capital employed - including discontinued operations (excluding 1 3,204 3,206
investment in ICU Medical, Inc. equity)
ROCE 18.1% 16.4%
Total Group revenue and headline operating profit
Revenue and headline operating profit for the total Smiths Group including
discontinued operations is calculated as follows:
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Revenue
Continuing operations 2,915 2,778
Discontinued operations 421 354
Total Group 3,336 3,132
Headline operating profit
Continuing operations 505 477
Discontinued operations 75 49
Total Group 580 526
Credit metrics
Smiths Group monitors the ratio of net debt to headline EBITDA as part of its
management of credit ratings; see note 26 for details. This ratio is
calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation
(headline EBITDA) - total Group
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Headline operating profit - total Group 580 526
Exclude:
- depreciation of property, plant and equipment 29 43 44
- depreciation of right of use assets 13 34 34
- amortisation and impairment of development costs 10 10 2
- amortisation of software, patents and intellectual property 10 15 5
Headline EBITDA 682 611
Ratio of net debt to headline EBITDA - total Group
Notes Year ended Year ended
31 July 2025
31 July 2024
£m
£m
Headline EBITDA 682 611
Net debt (including £21m of net cash from discontinued operations) 18 441 213
Ratio of net debt to headline EBITDA 0.6 0.3
Headline EBITDA for continuing operations is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation
(headline EBITDA) - continuing operations
Notes Year ended Year ended
31 July 2025
31 July 2024 represented*
£m
£m
Headline operating profit - continuing operations 505 477
Exclude:
- depreciation of property, plant and equipment 36 37
- depreciation of right of use assets 31 31
- amortisation and impairment of development costs 10 2
- amortisation of software, patents and intellectual property 14 3
Headline EBITDA 596 550
* The comparatives for the year to 31 July 2024 have been represented to
reflect the reclassification of the Smiths Interconnect business as a
discontinued operation.
31. Post balance sheet events
Details of the proposed final dividend announced since the end of the
reporting period are given in note 25. Details of the post balance sheet date
acquisition are given in note 27.
32. Audit exemption taken for subsidiaries
The following subsidiaries are exempt from the requirements of the Companies
Act 2006 relating to the audit of individual accounts by virtue of Section
479A of that Act for FY2025.
Company name Company number
EIS Group Limited 61407
Flexibox International Limited 394688
Flex-Tek Group Limited 11545405
Graseby Limited 894638
SI Properties Limited 160881
Smiths Detection Group Limited 5138140
Smiths Detection Investments Limited 5146644
Smiths Finance Limited 7888063
Smiths Group Innovation Limited 10953689
Smiths Interconnect Group Limited 6641403
Smiths Pensions Limited 2197444
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