REG - Smiths Group PLC - Half-year Financial Report
20/03/2026 07:00
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RNS Number : 3897X Smiths Group PLC 20 March 2026
SMITHS GROUP PLC - HALF YEAR RESULTS FOR 6 MONTHS ENDED 31 JANUARY 2026
Pioneers of progress - engineering a better future
Excellent strategic progress, strengthening focus on higher growth and margin
· Excellent progress on strategic actions to reshape the portfolio:
o Sales of Smiths Interconnect and Smiths Detection agreed at attractive
valuations for a combined enterprise value of £3.3bn, ahead of market
expectations
o Smiths Interconnect approaching completion; Smiths Detection on track to
close in second half of CY2026
· Disciplined capital allocation delivering enhanced shareholder
returns plus growth accretive M&A:
o Current CY2026 £1bn share buyback underway, following completion of CY2025
£500m buyback in December
o Announcing today, a further £1.5bn to be returned to shareholders via a
combination of structured return (tender offer or special dividend) and share
buyback through CY2027, to commence following completion of Smiths Detection
sale
o Dividend +5.4% to 15.00p, continuing track record of dividend growth
o Agreement signed in March to acquire DRC Heat Transfer for £164m, extending
Flex-Tek's offering into industrial cooling technologies with exposure to high
growth markets, including data centres
· Solid financial performance, with positive Q2 momentum into the
second half:
o Group(1) delivered +4.0% organic(2) revenue growth; headline(3) operating
profit margin +50bps to 17.2%
§ John Crane: mid-single digit growth in Q2; order book underpins continuing
momentum into the second half with mid-single digit growth expected
§ Flex-Tek: continuing strong growth in aerospace, offset by weakness in
construction reflecting the continued challenging US construction market
§ Smiths Detection: conversion of strong order book, with growth driven by
aviation
· FY2026 outlook updated for Smiths to exclude Smiths Detection:
o Expect organic(2) revenue growth of 3-4%, with H2 growth within medium-term
5-7% target range and operating profit margin of ~20%, progressing towards
21-23% target range
Headline(3) HY2026 HY2025 Reported Organic(2)
Group(1)
Revenue £1,437m £1,406m +2.2% +4.0%
Operating profit £248m £234m +5.6% +7.2%
Operating profit margin(4) 17.2% 16.7% +50bps +50bps
Continuing operations: Smiths(1)
Revenue £915m £924m (1.0)% +0.4%
Operating profit £181m £181m (0.1)% +1.6%
Operating profit margin(4) 19.8% 19.6% +20bps +20bps
Total Group(1)
Basic EPS 62.0p 55.5p +11.7% +8.4%
ROCE(4) 18.4% 17.1% +130bps
Operating cash conversion(4) 78% 94% (16)pps
Statutory HY2026 HY2025 Reported
Revenue £915m £924m (1.0)%
Operating profit £159m £167m (4.8)%
Profit for the year (after tax) £131m £168m (22.0)%
Basic EPS 40.3p 48.8p (17.4)%
Dividend per share 15.00p 14.23p +5.4%
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 the combination of John Crane, Flex-Tek (including certain
general industrial businesses) and Smiths Detection; Total Group also includes
Smiths Interconnect. Smiths and/or continuing operations refers to the
combination of John Crane and Flex-Tek (i.e. excludes Smiths Detection, Smiths
Interconnect and certain Flex-Tek general industrial businesses, see page 3
and note 16).
(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 19 to the financial statements.
Roland Carter, Chief Executive Officer, commented:
"The first half was important for Smiths with the announcement of the
transformational sale of Smiths Detection and Smiths Interconnect, achieving
multiples above market expectations and ahead of schedule.
"2026 is a significant year of progress as we reposition Smiths towards higher
growth and higher returns markets. We delivered increased momentum in the
second quarter, and our strong order book supports an improved second-half
performance.
"Following the completion of the disposals, Smiths will be a focused, premium
industrial engineering company. Our strategy is delivering significant value
and supporting enhanced, sustainable returns, alongside our continued
investment into Smiths, and commitment to a further £1.5bn of returns to
shareholders.
"During a period of considerable change, I want to recognise our colleagues'
continued dedication to delivering for our customers, living our Values, and
fulfilling our purpose."
Presentation
A webcast presentation and Q&A will begin at 08.00 (UK time) today at:
https://smiths.com/investors/results-reports-and-presentations
(https://smiths.com/investors/results-reports-and-presentations) . A recording
will be available from 13.00 (UK time).
Investor enquiries Media enquiries
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
For 175 years, we have been pioneers of progress, engineering a better future.
Our strategy is to be a focused, efficient and value creating industrial
engineering company operating in the attractive and growing market segments of
energy, industrials, construction and aerospace.
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 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 and its subsidiaries 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
2 April 2026 Interim Ex-Dividend Date
7 April 2026 Interim Dividend Record Date
13 May 2026 Interim Dividend Payment Date
21 May 2026 Q3 Trading Update
SUMMARY
The first half of FY2026 was a period of excellent strategic progress for
Smiths, with the strong execution of the value‑accretive sales of Smiths
Interconnect and Smiths Detection.
As a result of these changes to the Smiths portfolio, we have updated our
guidance for FY2026 to exclude Smiths Detection which is now classified as
discontinued operations. Our guidance reflects momentum building in John Crane
in the second quarter supported by a strong and growing order book, alongside
continuing weakness in the US construction market impacting Flex‑Tek.
In line with our commitment to return a large portion of sale proceeds to
shareholders, today we are announcing plans to return an additional £1.5bn
via a combination of a structured return (tender offer or special dividend)
and further buyback programme utilising proceeds from the sale of Smiths
Detection, to commence post sale completion. This planned return of capital is
in addition to the CY2026 £1bn buyback that is underway.
In March, we announced the acquisition of DRC Heat Transfer ('DRC') for
£164m, broadening Flex-Tek's offering and expanding into higher growth
adjacencies.
We are rapidly repositioning Smiths as a focused premium industrial
engineering company, aligned to structural megatrends, supported by an
enhanced emphasis on innovation, operational excellence, a high-performing
culture and our Smiths Values, to drive long‑term value for all
stakeholders.
STRATEGY UPDATE
Smiths Interconnect and Smiths Detection sales announced and on track for
completion in CY2026
In October, we announced the sale of Smiths Interconnect to Molex Electronic
Technologies Holdings, LLC for £1.3bn enterprise value representing a 15.1x
multiple of FY2025 headline EBITDA. In December, we announced the sale of
Smiths Detection to CVC Capital Partners for £2.0bn enterprise value
representing a 16.3x multiple of FY2025 headline operating profit and 12.5x
headline EBITDA. Both transactions were executed at highly attractive
multiples, demonstrating the quality of the businesses and the quality of
execution.
The separation processes and regulatory clearances for both transactions are
progressing well. Smiths Interconnect is approaching completion and we remain
on track to complete the sale of Smiths Detection in the second half of this
calendar year.
As part of our strategy to refine and high-grade the portfolio, a decision has
been taken to divest parts of the Flex-Tek industrial portfolio and allocate
capital to higher growth and higher margin market sub-segments. This has
resulted in the proposed exit of certain general industrial businesses within
Flex-Tek, improving the growth prospects and the margin profile of Flex-Tek.
In HY2026, these businesses contributed £25m to revenue with a £2m operating
loss (FY2025: £54m revenue and £5m loss) and are now reported as
discontinued operations in the presentation of the half year results.
Enhanced returns to shareholders
The reshaping of our portfolio has enabled enhanced returns to shareholders.
Following the completion of the FY2025 £500m share buyback programme in
December, a new CY2026 £1bn programme was launched, delivering on our
commitment to return a large portion of the proceeds from the sale of Smiths
Interconnect. In the first half, we executed £180m and to date a further
£127m has been executed, with the programme on track for £600m to be
completed by the end of the fiscal year.
Following the close of the Smiths Detection transaction, we intend to return
£1.5bn of the cash proceeds. The precise mechanics and timing will be
announced closer to the time, and we expect to return proceeds using a
combination of a structured return (either tender offer or special dividend)
with an on-market share buyback programme to run from completion of the
current £1bn programme through calendar year 2027. The approach of returning
a large portion of disposal proceeds to shareholders reflects our disciplined
approach to capital allocation, the intent to operate an efficient balance
sheet whilst retaining a solid investment grade credit rating.
Focused on sustainable growth pillars aligned with structural megatrends
The actions we have taken create a focused Smiths, with clear strategic
priorities, a strong financial profile of sustainable growth, structurally
higher margin and returns, with good cash conversion.
Our two businesses, John Crane and Flex-Tek, specialise in high-performance
products and solutions that are positioned in sub-segments of highly
attractive and growing markets. Trends in these markets underpin a market
compounded annual growth rate forecast of 4-5% over the next decade. We are
positioned to leverage the underlying trends in our markets to drive
outperformance and deliver our enhanced medium-term target of 5-7% organic
revenue growth through cycle.
· John Crane
· Flow control (60% of Smiths revenue) - John Crane has a leading
position in industrial flow control focused on highly-engineered mechanical
seals and associated products and aftermarket services. It serves a large and
growing addressable market supported by rising energy demand and a focus on
industrial process efficiency and emissions control. Its leading technologies,
attractive aftermarket model servicing an extensive installed base, global
service network, advanced capabilities in manufacturing and test and expertise
in supporting customers with uptime, safety and reliability are key
competitive strengths from which to drive above-market growth.
· Flex-Tek
· Construction (19%) - Flex-Tek's multi-ducting and tubing portfolio
has been expanded and enhanced through acquisition over the past five years,
establishing itself as one of the few nationwide players in a predominantly
regional US market. With a strong focus on market penetration and innovation
alongside deep distributor relationships, the business is well positioned to
deliver growth as the US housing market recovers, and new capacity is added to
address the North American market's housing deficit.
· Thermal Solutions (9%) - Flex-Tek's industrial heat business has been
enhanced with the acquisitions of Wattco and the recently-announced DRC,
expanding the product offering into the medium-heat market and cooling
solutions, respectively. With the structural growth trends of industrial
electrification, expansion in data centres and power generation underpinning
demand, Flex-Tek's thermal solutions business is well positioned to deliver
sustainable growth with its expanded product portfolio and customised approach
to working with customers.
· Aerospace (12%) - Flex-Tek is well positioned for strong growth in
the commercial and defence aerospace market with its fluid and gas conveyance
solutions for airframe and jet engine manufacturers. Its flexible hosing and
rigid tubing products and growing aftermarket business, coupled with its
global footprint and agility to create strong customer relationships, position
Flex-Tek as a critical supplier in the sector, where surging commercial air
travel demand and increased defence spending is driving new aircraft orders
and underpinning strong growth.
Across both businesses, expectations for above market growth are underpinned
by a combination of leading brands, commercial excellence, innovation,
disciplined pricing, and expansion into high-growth adjacencies:
· Leveraging our portfolio of leading businesses - driving growth
through deep and lasting ways of working with customers supported by our
leading product and aftermarket expertise to deliver customised solutions for
their key challenges, delivering value-add for both parties. Key examples in
the first half Include:
o John Crane signed a multi-year global framework agreement with a major
energy company to improve equipment reliability and standardise performance
across their global operations;
o In Flex-Tek, the aerospace business extended its near 30-year relationship
with the Indian Space Research Organisation to supply advanced space‑enabled
products for their high‑altitude ground test rigs;
· Commercial excellence - enhancing operational processes, for example
the recent automation and new machining capacity upgrades at John Crane is now
allowing us to better react to customer requirements with improved delivery
and lead times to capture orders, and drive value-add for us and our
customers;
· Innovation and new product development - delivering new products and
services that our customers value. Examples in the first half include the
roll-out of John Crane's Type 93AX Coaxial Separation Seal, and the launch of
its Performance Plus modular service offering, deploying John Crane's
aftermarket expertise to advise and partner with customers and capture a
greater share of the aftermarket;
· Pricing - continuing to ensure we capture price that reflects the
value we deliver for our customers, and we continued to deliver pricing above
inflation in the first half;
· Market adjacencies - targeting higher growth and higher margin market
sub-segments, with a recent example being the acquisition of DRC in Flex-Tek,
which provides new market access opportunities to cross-sell our existing
product lines to a wider customer base, adding to organic growth.
Margin expansion drivers
We have several levers supporting our margin expansion plan towards our
medium-term target of 21-23% operating profit margin:
· Operating leverage - drive a higher contribution margin as we grow
revenue and build scale whilst continuing to invest in RD&E (research,
development and engineering);
· Operational excellence - Group-wide programme of continuous
improvement, investment in leading manufacturing, test and automation
capabilities, Smiths Excellence and the application of VAVE (value analysis
and value engineering) supported the first half margin improvement;
· Acceleration Plan - the initiatives to drive productivity and
capability enhancements delivered benefits for Smiths of £8.6m in the first
half and we remain on track for the full annualised benefits to be delivered
in FY2027, and beyond; and
· Portfolio - capturing higher margin segments of our chosen markets,
as well as high-grading the portfolio towards higher growth and returns, as
demonstrated by the decision to exit certain lower margin Flex-Tek general
industrial businesses and the focus within John Crane on capturing a greater
share of higher margin aftermarket revenue.
Disciplined capital allocation
In support of our medium-term targets, our capital allocation strategy will
continue to prioritise disciplined investment for growth, both organically and
inorganically, and deliver enhanced returns to shareholders. Our intent is to
maintain a solid investment grade credit rating, and we will balance this
alongside our desire to have an efficient balance sheet. The issuance of a
€650m bond during the first half supported this approach. Leverage at the
end of the first half was 1.2x net debt to EBITDA with the net proceeds of the
divestments still to be received, ensuring our balance sheet is well
positioned to support ongoing organic and inorganic investment.
Organic investment in RD&E for Smiths was 3.5% of revenue in the half.
John Crane's investment focuses on enhancing the efficiency, performance and
sustainability of heavy-duty seals for traditional applications, as well as
for carbon capture and hydrogen, alongside gas compression and filtration new
product developments. Flex-Tek continues to extend its Blue Series product
programme, as well as improve both product performance and manufacturing
efficiency.
On the acquisition front, in March, an agreement was signed to acquire DRC for
a purchase price of £164m, representing a multiple of 10x adjusted EBITDA
for the calendar year 2025. DRC is a US-based designer and manufacturer of
custom heat transfer and cooling solutions, primarily for the power generators
used in data centres, and will be integrated into Flex-Tek's industrial heat
business. The acquisition is consistent with the strategy of building into
high growth adjacencies and will enable Flex-Tek to serve a wider customer
group in fast-growing end markets through DRC's products and solutions that
are additive to Flex-Tek's existing portfolio, enabling cross-selling
opportunities within its thermal solutions business.
FY2026 outlook - continuing operations
Following the reclassification of Smiths Detection as discontinued operations,
we have updated our FY2026 outlook for continuing operations, i.e. the
combination of John Crane and Flex-Tek.
We expect FY2026 organic revenue growth of 3-4%, with stronger momentum in the
second half and expect H2 growth within our medium-term 5-7% target range.
· Improving growth for John Crane follows a stronger second quarter,
with growth of mid-single digits providing momentum into the second half.
Further supported by a strong order book in both OE and aftermarket, which
gives us visibility through FY2026, and underpinned by the now fully
implemented investments in advanced manufacturing and testing capabilities, we
expect second half growth to be at a similar level to the second quarter;
· Expectations for the second half in Flex-Tek reflect strong growth in
aerospace, with good order book visibility, and continuing weakness in the US
construction market.
We expect to make positive progress towards our medium-term operating profit
margin target through operating leverage, the benefits of the Acceleration
Plan and continued Smiths Excellence efficiency savings, with FY2026 headline
operating margin expected to be ~20%.
The Acceleration Plan updated for Smiths is expected to deliver £30-35m of
annualised benefits in FY2027, and beyond, with around half expected in
FY2026, for £40-45m of total cost.
We expect headline operating cash conversion in the low-to-mid-nineties
percent.
In respect of the Iran conflict, we are prioritising the safety of our people
who work in the region. We continue to monitor the potential size and duration
of any impacts on performance which are not incorporated into our current
guidance. In HY2026, the Middle East region contributed c.7% of revenue for
Smiths, primarily John Crane.
HY2026 BUSINESS PERFORMANCE
Prior FY2026 guidance Group HY2026 outcome
Organic revenue growth 4-6% +4.0%
Headline operating profit margin Continuing margin expansion +50bps to 17.2%
Headline operating cash conversion Mid-nineties percent 78%
Group revenue increased +4.0% on an organic basis and +2.2% on a reported
basis to £1,437m (HY2025: £1,406m). This included £(36)m of negative
foreign exchange translation and a +£12m contribution from the acquisitions
of Modular Metal Fabricators, Inc ('Modular Metal'), Wattco, Inc ('Wattco'),
Duc-Pac Corporation ('Duc-Pac') in FY2025.
£m HY2025 Foreign Acquisitions Organic HY2026
exchange
movement
Revenue (Group) 1,406 (36) 12 55 1,437
Revenue (Smiths) 924 (25) 12 4 915
Revenue from continuing operations increased +0.4% on an organic basis and
declined (1.0)% on a reported basis, with +2.0% organic revenue growth in John
Crane and the contribution from acquisitions partly offset by a (2.0)% organic
revenue decline in Flex-Tek and a (2.8)% impact from foreign exchange
translation.
Organic revenue growth (by business) H1 2025 H2 2025 HY2026
John Crane +3.8% +2.2% +2.0%
Flex-Tek +3.0% +7.1% (2.0)%
Smiths (continuing operations) +3.5% +4.1% +0.4%
Smiths Detection +15.3% +15.1% +11.7%
Flex-Tek general industrial (3.2)% (4.6)% (5.2)%
Group +6.9% +7.5% +4.0%
· John Crane's growth was led by good sales in energy markets,
especially in aftermarket and overall, it saw a sequential quarterly
advancement in performance with mid-single-digit second quarter growth. This
reflected delivery of its order book, which continues to expand, alongside an
improvement in operational execution following the machining capacity
investments;
· Flex-Tek saw continued growth in aerospace reflecting ongoing new
build programmes, more than offset by the impact of the weak US construction
market on HVAC revenue, and lower revenue from thermal solutions largely
reflecting the impact from customer destocking of heat kits;
· Smiths Detection's growth reflected notable strength in aviation as
the airport checkpoint upgrade programmes continued, together with strong
growth in Other Detection Systems.
Group headline operating profit rose to £248m (HY2025: £234m); +7.2%
(+£17m) on an organic basis, and +5.6% (+£14m) on a reported basis.
Acquisitions contributed £3m to operating profit and were accretive to
margin.
For continuing operations, headline operating profit of £181m (HY2025:
£181m) was +1.6% higher organically and flat on a reported basis.
HY2025 Foreign Acquisitions Organic HY2026
£m exchange movement
Headline operating profit (Group) 234 (6) 3 17 248
Headline operating profit margin (Group) 16.7% (10)bps 10bps 50bps 17.2%
Headline operating profit (continuing operations) 181 (6) 3 3 181
Headline operating profit margin (continuing operations) 19.6% (10)bps 10bps 20bps 19.8%
Group headline operating profit margin was 17.2%, up +50bps on both an organic
and a reported basis. This reflected the impact of volume, benefits of
efficiency savings, including Smiths Excellence, partially offset by product
and business mix, and the impact of tariffs.
Continuing operations headline operating profit margin was +20bps higher on
both an organic and a reported basis at 19.8%, demonstrating steady progress
towards the medium-term target range of 21-23%.
Headline operating profit margin (by business) HY2025 HY2026
John Crane 22.9% 23.2%
Flex-Tek 20.8% 20.4%
Smiths (continuing operations) 19.6% 19.8%
Smiths Detection 11.3% 13.8%
Flex-Tek general industrial 6.2% (9.0)%
Group 16.7% 17.2%
· A +50bps organic margin expansion in John Crane was driven by
increased pricing and positive mix, plus Smiths Excellence and Acceleration
Plan benefits, partly offset by the phasing of strategic investments and some
limited impact from US tariffs;
· Margin decline at Flex-Tek reflected mix impacts following the
completion of a higher-margin heating project as well as higher materials
costs, despite strict cost management, positive pricing and Smiths Excellence
savings;
· Margin improvement in Smiths Detection was driven by notably higher
volumes, and pricing improvement, as well as benefits from mix, Smiths
Excellence savings and cost actions, and despite the impact of US tariffs.
The margin improvement also reflected benefits of £8.6m in Smiths from the
Acceleration Plan, with savings mostly in John Crane and a reduction in
central costs.
Total Group ROCE increased to 18.4% (HY2025: 17.1%), reflecting the higher
profitability and efficient use of capital. ROCE on a continuing operations
basis was 23.5% (HY2025: 23.7%).
Total Group headline EPS grew +11.7% to 62.0p (HY2025: 55.5p). This included a
headline tax charge of £72m (HY2025: £65m) and a £9m increase in headline
finance costs. For Smiths, the headline tax charge was £39m (24.4% effective
tax rate) (HY2025: £41m, 24.1%) and a £10m increase in headline finance
costs. On an organic basis, EPS increased +8.4%, benefiting from the share
buyback programme.
Total Group headline operating cash conversion was 78% (HY2025: 94%),
supported by the year-on-year improvement in profit. Headline operating
cashflow was £220m (HY2025: £254m) with the increase in operating profit and
lower capex offset by working capital movements, reflecting an increase in
inventory levels to improve delivery of the order book and service customers.
Free cashflow generation decreased to £74m (HY2025: £143m) or 26% of
headline operating profit (HY2025: 53%), also reflecting the Acceleration Plan
and separation costs.
Discontinued operations
Smiths Detection, Smiths Interconnect and certain general industrial
businesses within Flex-Tek are now 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 £82m (HY2025: £64m),
and £47m (HY2025: £57m) 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.
Organic investment
In the first half for the Total Group, £72m was invested in RD&E (HY2025:
£68m), of which £62m (HY2025: £55m) was an income statement charge.
Primarily related to Smiths Detection, £10m (HY2025: £10m) was funded by
customers. Total Group spend represents 4.5% of sales (HY2025: 4.3%) and
included £24m (HY2025: £22m) on customer-specific engineering-related
projects, predominantly in John Crane.
Capex decreased to £29m (HY2025: £41m) and included planned investment in
capacity and automation and initiatives under the Acceleration Plan.
Value-creative M&A
In March, we announced the agreement to acquire DRC for £164m, with
completion expected in the third quarter of fiscal year 2026. DRC will be
integrated into Flex-Tek's industrial heat business and is consistent with the
strategy of building into high growth adjacencies. DRC generated £73m in
revenue in the calendar year 2025. Integrations of the three acquisitions made
in Flex-Tek in FY2025 are now mostly complete or progressing to plan.
Enhanced shareholder returns - share buyback and dividend
In December, the £500m share buyback programme completed. A new £1bn
programme was subsequently launched to return a large portion of the proceeds
from the sale of Smiths Interconnect. To date, we have completed £307m, of
which £180m was in the first half. £600m is expected to be completed by the
end of fiscal year 2026, with the remainder to be substantially complete by
the end of calendar year 2026.
The Board is recommending an interim dividend of 15.00p, a year-on-year
increase of +5.4%. The interim dividend will be paid on 13 May 2026 to
shareholders on the register at close of business on 7 April 2026.
Net debt
Total Group net debt at 31 January 2026 increased to £843m (HY2025: £299m)
with a net debt to headline EBITDA ratio of 1.2x (HY2025: 0.5x), with the
year-on-year increase primarily reflecting the bond issuance and the share
buyback programme.
Net headline finance costs for the year increased to £23m (HY2025: £13m),
principally due to interest on lower average cash balances and interest
payments related to the new €650m bond.
As at 31 January 2026, borrowings were £1,212m (FY2025: £667m) comprising a
€650m bond which matures in February 2027, a €650m bond which matures in
2033 and £87m of lease liabilities. There are no financial covenants
associated with these borrowings. Cash and cash equivalents as at 31 January
2026 were £345m (FY2025: £195m).
Together with an $800m (£584m at the half 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 £1.1bn at the half
year end.
STATUTORY RESULTS
Income statement and cashflow
The £22m difference (HY2025: £14m) between continuing operations headline
operating profit of £181m and statutory profit of £159m are non-headline
items. The largest of these relate to the amortisation of acquired intangible
assets of £15m, a £8m net credit for asbestos litigation provision in John
Crane Inc, £8m of cost in relation to the Acceleration Plan and £4m of
provision costs for the Titeflex subrogation claims.
Discontinued operations include the Smiths Interconnect, Smiths Detection and
certain Flex-Tek general industrial businesses. Headline operating profit in
discontinued operations was £54m greater than statutory operating profit due
to non-headline items. The largest of these relate to the impairment of the
Flex-Tek general industrial businesses of £25m, separation costs of £20m and
£6m relating to the Acceleration Plan. Amortisation of acquired intangible
assets of £6m was offset by a gain of £3m on the sale of Smiths Interconnect
Inc.
Total Group operating profit (including discontinued operations) for the
period was £219m (HY2025: £242m). Total finance costs for the Group were
£27m (HY2025: £14m).
The tax rate for continuing operations was 32.9% (HY2025: 25.9%) and includes
a non-headline tax charge of £3m (HY2025: £nil). Statutory profit after tax
for the Total Group was £131m (HY2025: £168m) and statutory basic EPS was
40.3p (HY2025: 48.8p).
Statutory net cash inflow from operating activities for the Total Group was
£123m (HY2025: £205m).
Pensions
During the year, £11m of pension contributions (HY2025: £7m) were made,
which relate to funded, unfunded and overseas schemes and healthcare
arrangements. Of this, £10m related to the US defined benefit pension plan.
As at 31 January 2026, 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 Jan 2026 31 Jan 2025 31 Jan 2026 31 Jan 2025
(6 months)
(6 months)
USD 1.34 1.28 1.37 1.25
EUR 1.15 1.19 1.15 1.20
Our people, culture and Values combine to drive improved performance
Smiths has a long and proud history and 2026 represents our 175-year
anniversary year. Our ability to evolve, adapt and grow over this time is
underpinned by our strong purpose and Values. As we navigate this period of
significant organisational change, our Values become more important than ever,
and we have refreshed them this year. We are proud of our heritage and focused
on our future - with our Values to help guide us along the way.
The safety, health and well-being of our people remain an essential foundation
of our success at Smiths. The HY2026 recordable incident rate for the Total
Group was 0.50 (HY2025: 0.23). Although still an industry top quartile
ranking, the year-on-year deterioration is taken seriously, and targeted
activities are being implemented to drive improvements for the second half of
the year to ensure we focus on delivering a zero-harm culture. There has also
been an increased focus on mental health and well-being including a bespoke
wellbeing training session for our people leaders to raise awareness and
skills on mental health and wellbeing to better support their teams, and
specialist training for mental health first aiders.
At Smiths, our goal is to nurture STEM talent, developing the next generation
of engineers who will help shape our future and we are laying the foundations
for that vision through a dedicated focus on talent development and clear,
structured career pathways. We now employ more than 90 apprentices in the UK
on a range of learning pathways across the company and this is the only the
start of our ambition. To support our communities on this front, the Smiths
Group Foundation continues to extend its reach and has now made grants
totalling almost £3m to 32 charities in 16 countries supporting STEM, safety
and connectedness and environmental sustainability.
In the first half, we continued to drive sustainable practices throughout the
business and are progressing well towards our targets, with enhanced data and
decision making following last year's introduction of the Watershed
sustainability platform. This will support the preparation of a re-submission
to SBTi for Smiths (John Crane and Flex-Tek) given the planned separations,
including re-baselining and revising targets and defining an impactful
strategy for the future.
We were pleased to receive an MSCI score of AAA (from AA) and a 'Prime' rating
from ISS in the half as we continue to enhance our sustainability credentials
and reporting thereof. All of these initiatives support improved execution and
the delivery of both our sustainability, and our medium-term financial
targets.
BUSINESS REVIEW
JOHN CRANE (Continuing operations)
John Crane is a global leader in mission-critical technologies, products and
services for the energy and process industries and an innovator in rotating
equipment, encompassing mechanical seals, couplings, filtration systems and
cutting-edge asset management and digital diagnostics solutions. 64% of
revenue is derived from energy (downstream and midstream oil and gas and power
generation, including renewable and sustainable energy sources). 36% is from
other process industries including chemical, pulp and paper, mining and water
treatment. 71% of revenue is from aftermarket sales. John Crane represents 60%
of Smiths revenue.
HY2026 HY2025 Reported Organic
£m £m growth growth
Revenue 551 551 - +2.0%
Original Equipment ('OE') 87 87 +0.5% +1.8%
Aftermarket 264 258 +2.0% +4.6%
Energy 351 345 +1.6% +3.9%
Original Equipment 72 74 (2.2)% (0.9)%
Aftermarket 128 132 (2.9)% (1.2)%
Industrial 200 206 (2.7)% (1.1)%
Headline operating profit 128 126 +1.6% +4.2%
Headline operating profit margin 23.2% 22.9% +30bps +50bps
Statutory operating profit 123 129 (4.7)%
Return on capital employed 25.0% 24.9% +10bps
RD&E cash costs as % of sales(1) 5.3% 5.2% +10bps
1 Includes cash R&D expenditure (1.7% of sales) and spend on
customer-specific engineering-related projects (3.6%)
Revenue
HY2025 Foreign Organic HY2026
£m reported exchange movement reported
Revenue 551 (11) 11 551
John Crane delivered organic revenue growth of +2.0% in the first half with
improving momentum through the period. After a marginal decline against a
strong prior year comparator in the first quarter, John Crane posted
mid-single-digit growth in the second quarter. This reflected strong growth in
energy and improvement in operational execution following the machining
capacity investments, with the prior year having been partly constrained by
the cyber incident.
Growth for John Crane in the second half is expected to be at a similar level
to the second quarter supported by a strong and expanding order book in both
original equipment and aftermarket, with a positive book to bill and
visibility through FY2026. Although demand remains healthy, some market-driven
project timing shifts continue to be witnessed, with certain energy projects
being delayed.
Reported revenue was flat year-on-year at £551m, with the organic growth
offset by a negative (2.0)% foreign exchange impact.
In Energy, organic revenue grew +3.9% (HY2025: +3.3%) with growth in both OE
and aftermarket sales. This was despite some ongoing project phasing delays,
which particularly impacted Europe and parts of Asia and China. Sales were
strong in the USA and in Latin America, reflecting strong customer demand in
both OE and aftermarket. In OE, demand for dry gas seals was good reflecting
both high aftermarket orders from previous OE sales, as well as new OE
gas-related projects delivered in the first half. However, systems sales were
down notably, reflecting ongoing project phasing.
Aftermarket organic revenue increased +4.6% year-on-year, with an increasing
focus on customer aftermarket service contracts. A key highlight was the
signing of a major global framework agreement with a large international
energy company, formalising a long-term partnership focused on improving
equipment reliability, and standardising performance across its global
operations. Under the multi-year framework, John Crane will provide a
comprehensive range of sealing technologies and lifecycle services, providing
the customer with a consistent reliability model across all participating
sites.
Within energy transition, the pipeline of opportunities John Crane is pursuing
in CCUS, hydrogen and biofuels continues to expand. A recent example was the
supply of dry gas seals for use in centrifugal compressors at a new carbon
dioxide compression facility in north Wales, to transport carbon dioxide
captured from industrial plants in the region and permanently store it in
depleted offshore fields. In the USA, John Crane was selected to supply a
comprehensive suite of sealing technologies for high-performance
turbomachinery applications for a next generation geothermal power generation
project, ensuring operational reliability and safety in a technically
demanding environment, and expanding John Crane's presence in energy
transition.
In Industrial, organic revenue declined (1.1)% and was lower in both OE and
aftermarket against a strong comparator. Growth in mining and pulp and paper
sectors in the Americas, Saudi Arabia and Australia, was offset by
over-capacity in the Chinese chemicals market. Notable contract wins in the
first six months included the installation of mechanical sealing solutions to
an international pulp and paper mill customer in the USA, enabling a 90%
reduction in water usage.
Operating profit and ROCE
HY2025 Foreign Organic HY2026
reported
reported
£m exchange movement
Headline operating profit 126 (3) 5 128
Headline operating profit margin 22.9% 23.2%
Headline operating profit of £128m grew +4.2% on an organic basis, resulting
in a margin of 23.2%, a +50bps improvement on an organic basis, and +30bps
higher on a reported basis.
This organic improvement was driven by increased pricing and positive
aftermarket mix, Smiths Excellence and Acceleration Plan programme benefits,
partly offset by the phasing of strategic investments projects more heavily
weighted to the first half this year, and some limited impact of US tariffs.
On a reported basis, headline operating profit was up +1.6%, with the organic
improvement partly offset by a (2.6)% negative foreign exchange impact. The
difference between statutory and headline operating profit includes the net
changes in relation to the provision for John Crane, Inc. asbestos litigation
and costs in relation to the Acceleration Plan.
ROCE was 25.0%, with the headline operating profit growth partly offset by a
higher capital base and the FX impact.
RD&E and new product development
Cash RD&E expenditure increased in the half to 5.3% of sales (HY2025:
5.2%) of which 3.6% (HY2025: 3.7%) related to customer-specific
engineering-related projects, reflecting a continued focus on product
innovation.
John Crane's R&D is focused on enhancing the efficiency, performance and
sustainability of heavy-duty seals for traditional applications, alongside new
platforms for gas compression and filtration product developments. Following
the FY2025 launch of the Type 93AX Coaxial Separation Seal, uptake has been
positive and it is currently being tested for a number of installations.
During the half, John Crane launched the Type 8628VL, a next generation
mechanical seal engineered to address the challenge of maintaining seal
integrity in multi-phase ethane and ethylene pipelines. The product launch was
supported by a leading ethane transmission company operating along the US Gulf
Coast which experienced measurable operational improvements following the seal
installation.
Enhancing its service offering is also a key focus and in November, John Crane
re-launched Performance Plus™ - a next-generation modular service framework
- to support our ambition to expand our aftermarket offering. The tailored
service solutions adapt to each customer's operational experience, bringing
together smart technology, data insights and expertise to keep operations
running smoothly, reliably, safely and sustainably. Its seal reliability
management contracts or long-term agreements help customers achieve continuous
reliability improvement and predictable maintenance costs enhancing customer
intimacy for John Crane, a value-add proposition for both parties.
FLEX-TEK (Continuing operations)
Flex-Tek is a global provider of engineered components that heat and move
liquids and gases for the construction, thermal and aerospace markets. 47% of
Flex-Tek's revenue is derived from Construction, 23% from Thermal Solutions
and 30% from Aerospace. Flex-Tek represents 40% of Smiths revenue.
HY2026 HY2025(1) Reported Organic
£m £m growth growth
Revenue 364 373 (2.5)% (2.0)%
Construction 171 177 (3.6)% (5.8)%
Thermal Solutions 85 94 (10.5)% (7.8)%
Aerospace 108 102 +6.9% +10.1%
Headline operating profit 74 78 (4.4)% (4.6)%
Headline operating profit margin 20.4% 20.8% (40)bps (60)bps
Statutory operating profit 52 62 (16.1)%
Return on capital employed 27.3% 28.4% (110)bps
R&D cash costs as % of sales 0.8% 0.4% +40bps
1. The comparatives for HY2025 have been represented to reflect the
reclassification of certain Flex-Tek's general industrial businesses as
discontinued operations with HY2026 contribution of £25m to revenue with a
£2m to operating loss (FY2025: £54m revenue and £5m loss)
Revenue
HY2025(1) Foreign Organic HY2026
£m reported exchange Acquisitions movement reported
Revenue 373 (14) 12 (7) 364
Organic revenue declined (2.0)% in the first half, with market-driven weakness
in construction and revenue phasing in thermal projects, partly offset by
strong growth in aerospace.
Reported revenue declined (2.5)%, with a positive contribution from
acquisitions (+£12m), offset by a significant negative foreign exchange
translation effect.
In Construction, organic revenue declined (5.8)%, impacted by weak market
conditions in the US residential construction market. Year-on-year performance
was also a reflection of the strength in the prior year comparator which
benefited from post-acquisition revenue synergies from flexible ducting
products, as well as market consolidation amongst major customers. Second half
performance in Construction will largely reflect the pace of market recovery
in US housing, the timing for which remains uncertain. Flex-Tek is well
positioned to benefit from a construction market recovery as mortgage rates
moderate and given the meaningful housing inventory deficit in the USA. The
integration of Modular Metal is mostly complete and that of Duc-Pac continues
to progress to plan, both of which strengthen our geographical coverage,
positioning us well for when the market returns to growth.
Organic revenue in Thermal Solutions declined (7.8)%, following the impact
from customer destocking of heat kits, particularly in the second quarter.
Revenue was supported by the Wattco acquisition which adds to our portfolio of
products for industrial electrification applications, positioning the business
well to capitalise from the ongoing electrification trend. The pipeline of
projects in Thermal Solutions remains positive, including the provision of
electric heaters for ultra-low emission electro-fuel and data-centre
safety-power projects. The integration of Wattco is largely complete, and the
business is focused on driving growth following its move to a larger facility
enabling capacity increases.
As part of the strategic decision to high-grade the Flex-Tek portfolio to
focus on higher growth and higher margin market subsegments, Flex-Tek
classified certain general industrial businesses as assets held for sale.
Further information can be found in note 16.
In March, Smiths announced the acquisition of DRC Heat Transfer, a US-based
designer and manufacturer of custom heat transfer and cooling solutions for
power generators used in data centre, general industrial, transit, and energy
markets. This acquisition extends Flex-Tek Heat's offering into cooling
applications, establishing broader thermal solutions capabilities and
strengthening its presence in the power generation market offering significant
structural growth trends. DRC generated £73m in revenue in calendar year
2025.
In Aerospace, organic revenue grew +10.1%, reflecting continued strong demand
with a full and growing order book across commercial and defence aircrafts.
The second quarter included a new contract with the Indian Space Research
Organisation to provide advanced space-enabled components for high altitude
ground test rigs, strengthening a 30-year partnership. A continued strong
order book with good visibility, alongside a positive trend in achieving
long-term contract renewals, supports a positive outlook for the remainder of
FY2026, and beyond.
Operating profit and ROCE
HY2025(1) Foreign Organic HY2026
£m reported exchange Acquisitions movement reported
Headline operating profit 78 (3) 3 (4) 74
Headline operating profit margin 20.8% 20.4%
Headline operating profit declined (4.6)% on an organic basis. Organic
operating margin declined (60)bps to 20.4% largely as a result of mix impacts,
following the completion of higher-margin ultra-high heating project, and
higher materials costs, partly offset by good cost management, positive
pricing and operational efficiency savings. On a reported basis, headline
operating profit declined (4.4)% whilst operating margin declined (40)bps.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangible assets, the provision for Titeflex
Corporation subrogation claims and costs in relation to the Acceleration Plan.
ROCE declined (110)bps to 27.3%, reflecting the headline operating profit
decline and the impact of acquisitions on the capital base.
RD&E and new product development
Cash RD&E expenditure was 0.8% of sales (HY2025: 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 aerospace markets,
construction and new electrification opportunities.
As an example, in HVAC, Flex-Tek continued to extend its Blue Series
programme. Here, RD&E focuses on improving both product performance and
manufacturing efficiency. Key efforts include ongoing refinement of tooling
and molding processes, as well as the introduction of a heat‑tunnel system
that enhances quality and reduces cycle times. The business is also conducting
research into improved polyurethane foam chemistry aimed at lowering heat
input requirements, which would further optimise production. Alongside these
initiatives, Flex-Tek's innovation team have reduced packaging to almost half
to enable more efficient transportation.
SMITHS DETECTION (Discontinued operations)
Smiths Detection is a global leader in threat detection and screening
technologies for aviation, ports and borders, urban security and defence.
HY2026 HY2025 Reported Organic
£m £m growth growth
Revenue 497 454 +9.3% +11.7%
Original Equipment 169 156 +8.4% +10.3%
Aftermarket 203 181 +11.8% +14.6%
Aviation 372 337 +10.3% +12.6%
Original Equipment 69 63 +9.2% +11.8%
Aftermarket 56 54 +3.5% +6.0%
Other Detection Systems ('ODS') 125 117 +6.6% +9.1%
Headline operating profit (underlying) 69 51 +33.3% +34.4%
Headline operating profit margin 13.8% 11.3% +250bps +230bps
Statutory operating profit 51 39 +30.8%
Return on capital employed 13.2% 10.0% +320bps
R&D cash costs as % of sales 5.7% 5.8% (10)bps
Revenue
HY2025 Foreign Organic HY2026
£m reported exchange movement reported
Revenue 454 (9) 52 497
Smiths Detection delivered strong organic revenue growth at +11.7%,
successfully converting its strong order book into revenue, driven by growth
in Aviation and Other Detection Systems ('ODS'), across both OE and
aftermarket. Reported revenue was up +9.3% reflecting the strong organic
growth, partially offset by unfavourable foreign exchange movement.
In Aviation, organic revenue grew +12.6% reflected the continued strong demand
for CtiX scanners, with more than 2,000 now sold. ODS sales grew +9.1%
organically, with strong growth in Ports & Borders and Urban Security.
Operating profit and ROCE
HY2025 Foreign Organic HY2026
reported
£m reported exchange movement
Headline operating profit 51 0 18 69
Headline operating profit margin 11.3% 13.8%
Headline operating profit increased +34.4% on an organic basis, reflecting the
strong volume growth and favourable mix from higher aftermarket growth in
Aviation, as well as efficiency and Acceleration Plan benefits, and despite
the impact of US tariffs. Headline operating profit margin increased to 13.8%,
+230bps on an organic and +250bps on a reported basis. On a reported basis,
headline operating profit increased +33.3%, with the difference between
statutory and headline operating profit reflecting amortisation of acquired
intangibles and costs in relation to the Acceleration Plan.
ROCE increased +320bps to 13.2%, reflecting the growth in headline operating
profit.
RD&E and new product development
Cash RD&E expenditure as a percentage of sales was 5.7% (HY2025: 5.8%), to
support investment in next-generation detection capabilities. Spend included
£10m in customer funded projects (HY2025: £9m).
SMITHS INTERCONNECT (Discontinued operations)
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.
HY2026 HY2025 Reported Organic
£m £m growth growth
Revenue 189 202 (6.5)% +6.3%
Headline operating profit (underlying) 35 35 +0.8% (1.0)%
Headline operating profit margin 18.6% 17.2% +140bps (140)bps
Statutory operating profit 36 34 +5.9%
Return on capital employed 17.8% 13.8% +400bps
RD&E cash costs as % of sales 6.1% 6.1% -
Revenue
HY2025 Foreign Divestment Organic HY2026
£m reported exchange movement reported
Revenue 202 (6) (18) 11 189
Smiths Interconnect's organic revenue increased +6.3% in the first half, led
by continued momentum in the semi-test business with demand from key customers
across multiple AI and data-centre programmes.
Reported revenue declined (6.5)%, largely reflecting the sale of
Interconnect's US sub-systems business unit, together with negative foreign
exchange.
Operating profit and ROCE
HY2025 Foreign Divestment Organic HY2026
£m reported exchange movement reported
Headline operating profit 35 (2) 2 0 35
Headline operating profit margin 17.2% 18.6%
Headline operating profit increased +0.8% on a reported basis, resulting in a
+140bps rise in reported operating profit margin to 18.6%. The benefit from
the sale of its US sub-systems business unit as well as efficiency
improvements and Smiths Excellence benefits, were partly offset by negative
mix effects and higher materials costs. On a statutory basis, operating profit
increased +5.9%.
The difference between statutory and headline operating profit reflects the
amortisation of acquired intangibles and disposal-related costs.
ROCE improved +400bps to 17.8%, driven by the lower capital employed following
the sale of its US-subsystems business.
RD&E and new product development
Cash RD&E expenditure as a percentage of sales was 6.1% (HY2025: 6.1%).
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.
Smiths Interconnect continues to be a leader in innovation, with its efforts
having been externally recognised at the 2025 Instrumentation &
Electronics Awards. In semi-test, the business has considerably expanded its
customer base within the semiconductor sector through the development of the
most advanced and technically complex semi-test products, including the
DaVinci product portfolio, and meeting the rapidly evolving technological
customer requirements.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has a risk management structure and internal controls in place which
are designed to identify, manage and mitigate business risks. Smiths faces a
number of risks and uncertainties which could have a material impact on
long-term performance. The Group's principal risks and uncertainties at 31
July 2025 are detailed on pages 30 to 36 of the 2025 Annual Report. The
principal risks and uncertainties affecting the Group for the remaining six
months of the financial year continue to be those set out briefly below and
more fully in the Annual Report.
• Economy and geopolitics: The challenging and increasingly unpredictable
economic and geopolitical landscape in which we operate is subject to external
influences including inflationary pressures, regional conflicts, and newly
imposed trade restrictions. Such factors may adversely affect demand for our
products, increase input costs, and impact profitability. Trade barriers, such
as recent US tariffs on international imports and retaliatory measures from
other nations, could disrupt supply chains, reduce market access, and
undermine our global competitiveness.
• Cyber security: Cyber attacks attempting to compromise the
confidentiality, integrity, and availability of IT systems and operational
data are a continuing and intensifying risk. We operate in markets and product
areas which are known to be of interest to cyber criminals. With increasing
digitalisation and reliance on third-party platforms, any breach may cause
disruption, data loss, regulatory penalties, and reputational damage.
• Business continuity: Disruption to our global supply chains, manufacturing
sites, or customer operations due to geopolitical events, cyber-attacks, or
climate-related incidents; may negatively impact our financial performance,
customer delivery timelines, and operational resilience.
• Technology: If we fail to maintain our technological differentiation and
our innovation pipeline does not meet customers' evolving requirements, we may
lose market share to a new or existing competitor. This could impact our
financial performance and our ability to attract and retain talent.
• Product quality: Failure of one of our products, including failure due to
non-compliance with product regulation, may result in financial loss and
reputational damage. In the ordinary course of business, we could be subject
to material product liability claims and lawsuits, including potential class
actions from customers or third parties.
• Commercial: Failure to adapt our commercial strategies in response to
evolving customer expectations, procurement models, and sustainability-linked
requirements may reduce market share, impair profitability, and hinder access
to growth opportunities.
• People: Failing to attract, develop, and retain the right people with the
right skills may affect our ability to achieve our commercial ambitions,
particularly in the light of the planned separations of Smiths Interconnect
and Smiths Detection and the inherent uncertainty such plans have created
regarding some roles and functions.
• Legal and compliance: We have more than 16,000 colleagues in more than 50
countries. Individuals may not all behave in accordance with the Group's
Values and in accordance with ethical and legal requirements. We operate
within increasingly complex legal regimes, often in highly regulated markets
and with governments, customers and suppliers requiring strict adherence to
laws. We may fail to deliver contracted products and services or fail in our
contractual execution due to delays or breaches by our suppliers or other
counterparties.
• Climate change: Failure to identify and act on the significant
opportunities arising from the world's transition to a low-carbon economy
and/or failure to respond appropriately to climate change risks and
regulation.
• Strategic transformation: Execution of strategic transformation, including
the sale of Smiths Interconnect and sale of Smiths Detection, carry
significant operational, legal, financial, people-related, and reputational
risks. Ineffective execution of these transactions could result in operational
disruption, stranded costs, loss of key personnel, delays in achieving
separation, regulatory hurdles, and diminished shareholder confidence. The
ability to reposition the remaining business ('Smiths') as a focused,
high-performing industrial engineering company will be key to preserving and
enhancing long-term value.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that, to the best of our knowledge:
the condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the United Kingdom and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006; and
· the interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
For and on behalf of the Board of directors:
Julian Fagge
Roland Carter
Chief Executive Officer Chief Financial Officer
19 March 2026
Independent review report to Smiths Group plc
Conclusion
We have been engaged by Smiths Group plc ("the Company") to review the
condensed set of financial statements in the half-yearly financial report for
the six months ended 31 January 2026 which comprises the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes in equity,
the consolidated cash-flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 January 2026 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
19 March 2026
Consolidated income statement (unaudited)
Six months ended 31 January 2026 Six months ended 31 January 2025 - Represented*
Notes Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
CONTINUING OPERATIONS
Revenue 2 915 - 915 924 - 924
Operating costs 2 (734) (22) (756) (743) (14) (757)
Operating profit/(loss) 181 (22) 159 181 (14) 167
Interest receivable 12 - 12 18 - 18
Interest payable (35) - (35) (31) - (31)
Other financing losses - (13) (13) - (4) (4)
Other finance income - retirement benefits - 3 3 - 2 2
Finance costs (23) (10) (33) (13) (2) (15)
Profit/(loss) before taxation 158 (32) 126 168 (16) 152
Taxation 5 (39) (3) (42) (41) - (41)
PROFIT/(LOSS) FOR THE PERIOD 119 (35) 84 127 (16) 111
DISCONTINUED OPERATIONS
Profit from discontinued operations 82 (35) 47 64 (7) 57
PROFIT/(LOSS) FOR THE PERIOD 201 (70) 131 191 (23) 168
Attributable to:
Smiths Group shareholders - continuing operations 118 (35) 83 126 (16) 110
Smiths Group shareholders - discontinued operations 82 (35) 47 64 (7) 57
Non-controlling interests 1 - 1 1 - 1
201 (70) 131 191 (23) 168
4
Earnings per share
Basic 40.3p 48.8p
Basic - continuing 25.7p 32.1p
Diluted 40.2p 48.7p
Diluted - continuing 25.7p 32.1p
Dividends per share (declared) 15 15.00p 14.23p
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
Consolidated statement of comprehensive income (unaudited)
Notes Six months ended Six months ended
31 January 2026
31 January 2025
£m
Represented*
£m
Profit for the period 131 168
Other comprehensive income (OCI)
OCI which will not be reclassified to the income statement:
Re-measurement of post-retirement benefits assets and obligations (10) (8)
Taxation on post-retirement benefits movements 2 1
Fair value movements on financial assets at fair value through OCI - 8
(8) 1
OCI which will be reclassified and reclassifications:
Fair value gains and reclassification adjustments:
- deferred in the period on cash-flow and net investment hedges 6 (7)
- reclassified to income statement on cash-flow hedges (1) 1
5 (6)
Foreign exchange movements net of recycling:
Exchange (losses)/gains on translation of foreign operations (52) 42
Exchange gains recycled to the income statement on disposal of business (10) -
(62) 42
Total other comprehensive (expenditure)/income for the period, net of taxation (65) 37
TOTAL COMPREHENSIVE INCOME 66 205
Attributable to:
Smiths Group shareholders 66 204
Non-controlling interests - 1
66 205
Total comprehensive income attributable to Smiths Group shareholders arising
from
Continuing operations 29 125
Discontinued operations 37 79
66 204
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
Consolidated balance sheet (unaudited)
Notes 31 January 31 July
2026
2025
£m
£m
Non-current assets
Intangible assets 7 499 1,284
Property, plant and equipment 8 192 244
Right of use assets 9 82 99
Financial assets - other investments 10 5 6
Retirement benefit assets 6 123 128
Deferred tax assets 77 98
Trade and other receivables 79 90
Financial derivatives 24 10
1,081 1,959
Current assets
Inventories 272 586
Current tax receivable 18 20
Trade and other receivables 408 737
Cash and cash equivalents 11 345 195
Financial derivatives 11 6 7
Assets held for sale 16 2,009 507
3,058 2,052
Total assets 4,139 4,011
Current liabilities
Financial liabilities:
- short-term borrowings 11 (13) (3)
- lease liabilities 11 (18) (29)
- financial derivatives 11 (2) (2)
Provisions 13 (38) (56)
Trade and other payables (288) (679)
Current tax payable (53) (66)
Liabilities held for sale 16 (595) (106)
(1,007) (941)
Non-current liabilities
Financial liabilities:
- long-term borrowings 11 (1,112) (556)
- lease liabilities 11 (69) (79)
- financial derivatives 11 (16) -
Provisions 13 (176) (198)
Retirement benefit obligations 6 (54) (96)
Deferred tax liabilities (15) (43)
Trade and other payables (10) (38)
(1,452) (1,010)
Total liabilities (2,459) (1,951)
Net assets 1,680 2,060
Shareholders' equity
Share capital 14 119 124
Share premium account 365 365
Capital redemption reserve 36 31
Merger reserve 235 235
Cumulative translation adjustments 256 317
Retained earnings 808 1,147
Hedge reserve (163) (183)
Total shareholders' equity 1,656 2,036
Non-controlling interest equity 24 24
Total equity 1,680 2,060
Consolidated statement of changes in equity (unaudited)
Notes Share capital Other Cumulative Retained earnings Hedge Equity Non-controlling Total
and share
reserves
translation
£m
reserve
shareholders'
Interest
equity
premium
£m
adjustments
£m
funds
£m
£m
£m
£m
£m
At 31 July 2025 489 266 317 1,147 (183) 2,036 24 2,060
Profit for the period - - - 130 - 130 1 131
Other comprehensive income:
- foreign exchange movements net of recycling - - (36) (15) - (51) (1) (52)
- foreign exchange differences recycled to the income statement on - - (25) - 15 (10) - (10)
disposal of business
- re-measurement of post-retirement benefits and related tax - - - (8) - (8) - (8)
- fair value gains/(losses) and related tax - - - - 5 5 - 5
Total comprehensive income for the period - - (61) 107 20 66 - 66
Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust - - - (35) - (35) - (35)
Proceeds on exercise of employee share options - - - 2 - 2 - 2
Share buybacks 14 (5) 5 - (320) - (320) - (320)
Dividends:
- equity shareholders 15 - - - (104) - (104) - (104)
Share-based payment - - - 11 - 11 - 11
At 31 January 2026 484 271 256 808 (163) 1,656 24 1,680
Notes Share capital Other Cumulative Retained earnings Hedge Equity shareholders' Non-controlling Total
and share
reserves
translation
£m
reserve
funds
Interest
equity
premium
£m
adjustments
£m
£m
£m
£m
£m
£m
At 31 July 2024 495 260 353 1,306 (184) 2,230 22 2,252
Profit for the period - - - 167 - 167 1 168
Other comprehensive income:
- foreign exchange movements net of recycling - - 42 - - 42 - 42
- re-measurement of post-retirement benefits and related tax - - - (7) - (7) - (7)
- fair value gains/(losses) and related tax - - - 9 (7) 2 - 2
Total comprehensive income for the period - - 42 169 (7) 204 1 205
Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust - - - (22) - (22) - (22)
Share buybacks 14 (1) 1 - (44) - (44) - (44)
Dividends:
- equity shareholders 15 - - - (104) - (104) - (104)
Share-based payment - - - 8 - 8 - 8
At 31 January 2025 494 261 395 1,313 (191) 2,272 23 2,295
Consolidated cash-flow statement (unaudited)
Notes Six months ended Six months ended
31 January 2026
31 January 2025
£m
£m
Net cash inflow from operating activities 17 123 205
Cash-flows from investing activities
Expenditure on capitalised development - (3)
Expenditure on other intangible assets - (1)
Purchase of property, plant and equipment (29) (37)
Disposals of property, plant and equipment 1 -
Disposal of financial assets - 53
Acquisition of businesses 16 (5) (89)
Disposal of subsidiaries - net cash received/(paid) 16 - (12)
Net cash-flow used in investing activities (33) (89)
Cash-flows from financing activities
Share buybacks 14 (320) (44)
Purchase of shares by Employee Benefit Trust (35) (22)
Proceeds received on exercise of employee share options 2 -
Dividends paid to equity shareholders and non-controlling interests (104) (104)
Cash inflow/(outflow) from matured derivative financial instruments 2 2
Increase in new borrowings 565 -
Lease payments (21) (21)
Net cash-flow generated by/(used in) financing activities 89 (189)
Net Increase/(decrease) in cash and cash equivalents 179 (73)
Cash and cash equivalents at beginning of the period 195 459
Increase in cash held in disposal groups (17) -
Exchange differences (12) 6
Cash and cash equivalents at end of the period 345 392
Cash and cash equivalents at end of the period comprise:
- cash at bank and in hand 73 193
- short-term deposits 272 199
345 392
Notes to the condensed interim financial statements (unaudited)
1 Basis of preparation
The financial information for the period ended 31 January 2026 does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the year ended 31 July 2025 has
been delivered to the Registrar of Companies. The auditor's report on those
accounts was not qualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying the
report, and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
The condensed consolidated interim financial report for the half-year
reporting period ended 31 January 2026 included in this announcement has been
prepared on a going concern basis using accounting policies consistent with
UK-adopted International Accounting Standards, in accordance with IAS 34
Interim Financial Reporting, and in accordance with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 July 2025, which
has been prepared in accordance with UK-adopted International Accounting
Standards.
The interim financial statements are prepared on a going concern basis. The
Directors have assessed the principal risks discussed on page 17. The
Directors believe that the Group is well placed to manage its financing and
other business risks satisfactorily, and have a reasonable expectation that
the Group will have adequate resources to continue in operation for at least
12 months from the signing date of these condensed consolidated interim
financial statements. They therefore consider it appropriate to adopt the
going concern basis of accounting in preparing the financial statements.
The interim financial information was approved by the Board on 19 March 2026.
Accounting policies
The same accounting policies, estimates, presentation and methods of
computation are followed in the condensed interim financial statements as
applied in the Group's latest annual audited financial statements.
New standards and interpretations not yet adopted
With the exception of IFRS 18 'Presentation and Disclosures in Financial
Statements' which, subject to UK endorsement, will become effective in the
consolidated Group financial statements for the financial year ending 31 July
2028, no new standards, new interpretations, or amendments to standards or
interpretations have been published which are expected to have a significant
impact on the Group's financial statements.
Presentation of results
In order to provide users of the accounts with a clear and consistent
presentation of the performance of the Group's ongoing trading activity, the
income statement is presented in a three column format with 'headline' profits
shown separately from 'non-headline' items in a form consistent with the prior
year.
Judgement is required in determining which items should be included as
non-headline. The amortisation of acquired intangibles, legacy liabilities,
material one-off items and certain re-measurements are included in a separate
column of the income statement. See note 3 for a breakdown of the items
excluded from headline profit.
Performance measures for the Group's ongoing trading activity are described as
'headline' and used by management to measure and monitor performance. See note
2 for disclosures of headline operating profit and note 19 for more
information about the alternative performance measures ('APMs') used by the
Group.
In addition, the Group reports organic growth rates for revenue and underlying
growth rates for profit where the determination of adjustments requires
judgement. See note 19 for more information about the key performance
indicators (KPIs) used by the Group.
2 Analysis of revenue, operating costs and segment information
Analysis by operating segment
The Group is organised into two major business segments: John Crane and
Flex-Tek. These business segments design and manufacture the following
products:
- John Crane - mechanical seals, seal support systems, power
transmission couplings and specialised filtration systems;
- Flex-Tek - engineered components, flexible hosing and rigid tubing
that heat and move fluids and gases; and
The segmental information of the Smiths Interconnect, Smiths Detection and
Flex-Tek general industrial discontinued operations is disclosed in note 16.
The position and performance of each business segment is reported at each
Board meeting to the Board of Directors. This information is prepared using
the same accounting policies as the consolidated financial information, except
that the Group uses headline operating profit to monitor segmental results and
operating assets to monitor segmental position. See note 3 and note 19 for
more information on which items are excluded from headline profit measures.
Intersegment sales and transfers are charged at arm's-length prices.
Segment trading performance
Six months ended 31 January 2026
John Crane Flex-Tek Corporate Total
£m
£m
costs
£m
£m
Revenue 551 364 - 915
Segmental headline operating profit 128 74 - 202
Corporate headline operating costs - - (21) (21)
Headline operating profit/(loss) 128 74 (21) 181
Items excluded from headline measures (note 3) (5) (22) 5 (22)
Operating profit/(loss) for the period 123 52 (16) 159
Headline operating margin 23.2% 20.4% 19.8%
Six months ended 31 January 2025 - Represented*
John Crane Flex-Tek Corporate Total
£m
£m
costs
£m
£m
Revenue 551 373 - 924
Segmental headline operating profit 126 78 - 204
Corporate headline operating costs - - (23) (23)
Headline operating profit/(loss) 126 78 (23) 181
Items excluded from headline measures (note 3) 3 (16) (1) (14)
Operating profit/(loss) for the period 129 62 (24) 167
Headline operating margin 22.9% 20.8% 19.6%
Segment assets and liabilities
Segment assets
31 January 2026
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 190 90 - 10 290
intangibles and investments
Inventory, trade and other receivables 526 210 - 23 759
Segment assets 716 300 - 33 1,049
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
Non-headline assets comprise receivables relating to non-headline items,
acquisitions and disposals.
Segment liabilities
31 January 2026
John Crane Flex-Tek Smiths Corporate and Total
£m
£m
Detection
non-headline
£m
£m
£m
Segmental liabilities 150 91 - - 241
Corporate and non-headline liabilities - - - 271 271
Segment liabilities 150 91 - 271 512
31 July 2025
John Crane Flex-Tek Smiths Corporate and Total
£m
£m
Detection
non-headline
£m
£m
£m
Segmental liabilities 173 105 374 - 652
Corporate and non-headline liabilities - - - 319 319
Segment liabilities 173 105 374 319 971
Non-headline liabilities comprise provisions and accruals relating to
non-headline items, acquisitions and disposals.
Reconciliation of segment assets and liabilities to statutory assets and
liabilities
Assets Liabilities
31 January 31 July 31 January 31 July
2026
2025
2026
2025
£m
£m
£m
£m
Segment assets and liabilities 1,049 1,854 (512) (971)
Goodwill and acquired intangibles 488 1,192 - -
Derivatives 30 17 (18) (2)
Current and deferred tax 95 118 (68) (109)
Retirement benefit assets and obligations 123 128 (54) (96)
Cash and borrowings 345 195 (1,212) (667)
Assets and liabilities held for sale 2,009 507 (595) (106)
Statutory assets and liabilities 4,139 4,011 (2,459) (1,951)
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 £475m
(31 July 2025: £478m), and eliminate post-retirement benefit assets and
liabilities and litigation provisions relating to non-headline items, both net
of related tax, and net debt. See note 19 for additional details.
The 12-month rolling average capital employed by business segment, which
Smiths uses to calculate segmental return on capital employed, is set out
below:
31 January 2026
John Crane Flex-Tek Total
£m
£m
£m
Average segmental capital employed 1,071 607 1,678
Average capital employed - assets held for sale 1,570
Average corporate capital employed (28)
Average total capital employed - continuing operations 3,220
31 January 2025 - Represented*
John Crane Flex-Tek Total
£m
£m
£m
Average segmental capital employed 1,048 547 1,595
Average capital employed - assets held for sale 1,655
Average corporate capital employed (34)
Average total capital employed - continuing operations 3,216
* The Smiths Interconnect, Smiths Detection and Flex-Tek general industrial
businesses have been accounted for as businesses held for sale. Further
details of the segmental assets and liabilities of these businesses are
disclosed in note 16.
Analysis of revenue
The revenue for the main product and service lines for each business segment
is:
John Crane Original Aftermarket Total
equipment
£m
£m
£m
Revenue six months ended 31 January 2026 159 392 551
Revenue six months ended 31 January 2025 161 390 551
Flex-Tek Aerospace Construction Thermal Solutions Total
£m
£m
£m
£m
Revenue six months ended 31 January 2026 108 171 85 364
Revenue six months ended 31 January 2025* 102 177 94 373
* The comparatives for the period ended 31 January 2025 have been represented
to reflect the reclassification of the Flex-Tek general industrial businesses
as discontinued operations. Following the classification of Flex-Tek general
industrial businesses as discontinued operations, the Group has reviewed and
reanalysed the Flex-Tek segmental revenue reporting by main product line.
The driver of this reanalysis being to realign this analysis of segmental
revenue with how management review the performance of the remaining Flex-Tek
segment.
The impact of this reanalysis is that £325m of HY2025 revenue that had
previously been reported as Industrials has been represented with £177m
recognised as Construction, £94m recognised as Thermal Solutions, £26m
recognised as Aerospace and £28m reclassified to discontinued operations.
Segmental revenue is analysed by the Group's key global markets as follows:
John Crane General Energy Aerospace & Total
Industrial
£m
Defence
£m
£m
£m
Revenue six months ended 31 January 2026 200 351 - 551
Revenue six months ended 31 January 2025 206 345 - 551
Flex-Tek
Revenue six months ended 31 January 2026 256 - 108 364
Revenue six months ended 31 January 2025* 271 - 102 373
Total
Revenue six months ended 31 January 2026 456 351 108 915
Revenue six months ended 31 January 2025* 477 345 102 924
* The comparatives for the period ended 31 January 2025 have been represented
to reflect the reclassification of the Smiths Interconnect, Smiths Detection
and Flex-Tek general industrial businesses as discontinued operations.
Following the classification of Flex-Tek general industrial businesses as
discontinued operations, the Group has reviewed and reanalysed the Flex-Tek
segmental revenue reporting by main key global market. The driver of this
reanalysis being to realign this analysis of segmental revenue with how
management review the performance of the remaining Flex-Tek segment.
The impact of this reanalysis is that £54m of HY2025 revenue that was
previously reported in the general industrial key global market has been
represented, with £26m disclosed in the Aerospace key global market and £28m
reclassified to discontinued operations.
The Group's statutory revenue is analysed as follows:
Six months ended Six months ended
31 January 2026
31 January 2025
£m
Represented*
£m
Sale of goods recognised at a point in time 677 746
Sale of goods recognised over time 7 7
Services recognised over time 231 171
Revenue 915 924
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
Operating costs
Headline operating costs are analysed as follows:
Six months ended 31 January 2026 Six months ended 31 January 2025 - 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 529 - 529 537 - 537
distribution overheads
Selling costs 79 - 79 77 - 77
Administrative expenses 126 22 148 129 14 143
Operating costs 734 22 756 743 14 757
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
3 Non-statutory profit measures
Headline profit measures
The Group seeks to present a measure of performance which is not impacted by
material non-recurring items or items considered non-operational in nature.
This measure of profit is described as 'headline' and is used by management to
measure and monitor performance. See the disclosures on presentation of
results in accounting policies for an explanation of the adjustments. The
items excluded from 'headline' are referred to as 'non-headline' items.
Non-headline operating profit items
i. Continuing Operations
The non-headline items included in statutory operating profit are as follows:
Six months ended Six months ended
31 January 2026
31 January 2025
£m
Represented*
£m
Acquisition and disposal related transaction costs
Post-acquisition integration costs and fair value adjustment unwind (2) (1)
Business acquisition costs - (2)
Fair value movement on contingent consideration 1 -
Loss on disposal of financial asset - (3)
Legacy pension scheme arrangements
Scheme administration costs (2) (2)
Non-headline litigation provision movements
Provision for John Crane, Inc. asbestos litigation 8 12
Provision held against Titeflex Corporation subrogation claims (4) 3
Other items
Corporate restructuring costs (8) (6)
Amortisation of acquisition related intangible assets (15) (15)
Non-headline items in operating profit (22) (14)
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
Acquisition and disposal related costs
The £2m (31 January 2025: £1m) of post-acquisition integration costs and
fair value adjustment unwind principally relate to Flex-Tek's recent corporate
acquisitions. These include £1m of defined project costs for the integration
of these businesses into the existing Flex-Tek business and a £1m 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.
In the prior year, the £2m business acquisition costs represent incremental
costs related to Group's Merger and Acquisitions.
The £1m fair value movement on contingent consideration relates to the
revaluation of deferred consideration for Flex-Tek's recent acquisitions.
In the prior year, the Group sold the remainder of its equity investment in
ICU Medical, Inc. (ICU). The £3m loss on disposal of financial assets relates
to the block sale discount on the disposal of these remaining ICU shares.
Legacy pension scheme arrangements
Scheme administration costs of £2m (31 January 2025: £2m) relates to the
TIGPS legacy pension scheme and SIPS 'path to buy-in' costs. As the Group has
no expectation of receiving a refund from the scheme, an economic benefit
value of zero has been placed on the TIGPS surplus. These are non-headline
charges as the Group effectively has no economic exposure to these costs and
they are paid from cash retained in the scheme.
Non-headline litigation provision movements
The following litigation costs and recoveries have been treated as
non-headline items because the provisions were treated as non-headline when
originally recognised and the subrogation claims and litigation relate to
products that the Group no longer sells in these markets:
- The £8m credit (31 January 2025: £12m charge) in respect of John Crane,
Inc. asbestos litigation is principally driven by a reduction in future
expected defence costs; and
- The £4m charge (31 January 2025: £3m credit) recognised by Titeflex
Corporation is principally due to an increase in the number of open cases at
31 January, which has driven an increase in the expected number of future
claims.
Other items
Corporate restructuring charges of £8m (31 January 2025: £6m) were incurred
on the previously announced Group-wide Acceleration Plan and are treated as
non-headline due to being material and part of a pre-approved programme.
Acquisition related intangible asset amortisation costs of £15m (31 January
2025: £15m) 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.
Non-headline finance (costs)/income items
The non-headline items included in finance (costs)/income are as follows:
Six months ended Six months ended
31 January 2026
31 January 2025
£m
Represented*
£m
Unwind of discount on provisions (4) (5)
Other finance income - retirement obligations 3 2
Foreign exchange loss on intercompany loan with discontinued operations (5) -
Other financing (losses)/gains (4) 1
Non-headline items in finance costs - continuing operations (10) (2)
Continuing operations - non-headline loss before taxation (32) (16)
The financing elements of non-headline legacy liabilities, including the £4m
(31 January 2025: £5m) unwind of discount on provisions, are excluded from
headline finance costs because these provisions were originally recognised as
non-headline and this treatment has been maintained for ongoing costs and
credits.
Other finance income comprises £3m (31 January 2025: £2m) of financing
credits relating to retirement benefits. These are excluded from headline
finance costs because the ongoing costs and credits are a legacy of previous
employee pension arrangements.
Foreign exchange gains or losses on intercompany financing between Smiths
Detection and the continuing group are recognised on the face of the income
statement as a non-headline item due to the classification of Smiths Detection
as a discontinued operation. The £5m foreign exchange loss above (31 January
2025: £nil) matches the foreign exchange loss in discontinued operations.
This is excluded from headline net finance costs as these fair value movements
are non-operational in nature and are purely a consequence of the
presentational requirements for discontinued operations.
The £4m of other financing losses (31 January 2025: £1m gain) represent
foreign exchange movements on borrowings and fair value movements on financial
instruments. The current period loss arises from includes £2m of losses (31
January 2025: £nil) due to foreign exchange translation and £2m losses (31
January 2025: £1m gain) due to hedge ineffectiveness on the Group's 2027 and
2033 Eurobonds, which will reverse over the remaining period to maturity.
These foreign exchange and fair value movements are excluded from headline net
finance costs when the following requirements are met:
- Fair value gains and losses on the interest element of derivative
financial instruments hedging the Group's net debt exposures are excluded from
headline, as they will either reverse over time or be matched in future
periods by interest charges.
- Fair value gains and losses on the currency element of derivative
financial instruments hedging the Group's net debt and exposures, and exchange
gains and losses on borrowings are excluded, as the relevant foreign exchange
gains and losses on the commercially hedged items are recognised as a separate
component of other comprehensive income, in accordance with the Group's
foreign currencies accounting policy.
Non-headline taxation items
The non-headline items included in taxation are as follows:
Six months ended Six months ended
31 January 2026
31 January 2025 Represented*
£m
£m
Increase in unrecognised UK deferred tax asset (2) (1)
Tax credit on non-headline loss (1) 1
Non-headline taxation charge (3) -
Continuing operations - non-headline loss for the year (35) (16)
The £3m non-headline taxation charge (31 January 2025: £nil) comprises a
charge of £2m (31 January 2025: £1m charge), being a reduction in the UK
deferred tax asset. This is offset by credits for the non-headline items
above.
ii. Discontinued Operations
The non-headline items for discontinued operations, see note 16 for additional
disclosures, were as follows:
Six months ended Six months ended
31 January 2026
31 January 2025
£m
£m
Non-headline operating profit items
Amortisation of acquisition related intangible assets (6) (12)
Corporate restructuring costs (6) (1)
Separation-related costs (20) -
Impairment loss on reclassification to held for sale (25) -
Gain on sale of Smiths Interconnect, Inc (SII) - see note 16 3 -
Non-headline finance costs items
Foreign exchange gain on intercompany loan with parent 5 -
Other financing gains - 1
Non-headline taxation items
Tax on non-headline loss 14 5
Non-headline items in discontinued operations (35) (7)
Acquisition related intangible asset amortisation costs of £6m (31 January
2025: £12m) were recognised in the current period. This is considered to be a
non-headline item on the basis that these charges result from acquisition
accounting and do not relate to current trading activity.
Corporate restructuring charges of £6m (31 January 2025: £1m) were incurred
on the previously announced Group-wide Acceleration Plan and are treated as
non-headline due to being material and part of a pre-approved programme.
The £20m of separation-related costs (31 January 2025: £nil) recognised
during HY26 are the expenses that the Group has incurred on the divestment
projects for the Smiths Detection and Smiths Interconnect discontinued
operations. These costs have been reported as non-headline as the total cost
of the project is both material and non-recurring.
Following the reclassification of the Flex-Tek general industrial business as
held for sale, the carrying value of net assets have been impaired to their
fair value less costs to sell. This has resulted in a £25m impairment loss
being recognised in the current period.
The completion of the sale of SII, Smiths Interconnect's US sub-systems
business and the recycling of cumulative foreign exchange translation
adjustments has resulted in the Group recognising a £3m net gain in HY26 (31
January 2025: £nil), see note 16 for further details.
The £5m foreign exchange gain on intercompany loan with parent (31 January
2025: £nil) directly offsets the foreign exchange loss in continuing
operations. This is excluded from headline net finance costs as these fair
value movements are non-operational in nature and are purely a consequence of
the presentational requirements for discontinued operations.
The £1m of other financing gains in the prior period represent foreign
exchange translation gains.
The £14m non-headline taxation credit (31 January 2025: £5m) comprises
credits for the non-headline items above.
4 Earnings per share
Basic earnings per share are calculated by dividing the profit for the period
attributable to equity shareholders of the Company by the average number of
ordinary shares in issue during the period.
Six months ended Six months ended
31 January 2026
31 January 2025
Represented*
Profit attributable to equity shareholders for the period - £m
- Continuing 83 110
- Discontinued 47 57
Total 130 167
Weighted average number of shares in issue for basic earnings per share 322,802,891 342,492,542
Adjustment for potentially dilutive shares 357,488 142,927
Weighted average number of shares in issue for diluted earnings per share 323,160,379 342,635,469
Statutory earnings per share total - basic 40.3p 48.8p
Statutory earnings per share total - diluted 40.2p 48.7p
Statutory earnings per share continuing operations - basic 25.7p 32.1p
Statutory earnings per share continuing operations - diluted 25.7p 32.1p
Statutory earnings per share discontinued operations - basic 14.6p 16.7p
Statutory earnings per share discontinued operations - diluted 14.5p 16.6p
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
A reconciliation of statutory and headline earnings per share is as follows:
Six months ended 31 January 2026 Six months ended 31 January 2025 - Represented*
£m Basic EPS Diluted EPS £m Basic EPS Diluted EPS
(p)
(p)
(p)
(p)
Basic earnings per share:
Total profit attributable to equity shareholders of the Parent Company 130 40.3p 40.2p 167 48.8p 48.7p
Exclude: Non-headline items (note 3) 70 23
Headline earnings per share 200 62.0p 61.9p 190 55.5p 55.5p
Profit from continuing operations attributable to equity shareholders 83 25.7p 25.7p 110 32.1p 32.1p
of the Parent Company
Exclude: Non-headline items (note 3) 35 16
Headline earnings per share - continuing operations 118 36.6p 36.5p 126 36.8p 36.8p
5 Taxation
The interim tax rate for continuing operations of 32.9% (31 January 2025:
25.9%) is calculated by applying the estimated effective headline tax rate of
24.4% (31 January 2025: 24.1%) for the year ended 31 July 2026 to headline
profit before tax and then taking into account the tax effect of non-headline
items in the interim period.
A reconciliation of headline and total tax charge for continuing operations is
as follows:
Six months ended 31 January 2026 Six months ended 31 January 2025
Represented*
£m Tax rate £m Tax rate
Headline tax rate
Headline profit before taxation 158 168
Taxation on headline profit (39) 24.4% (41) 24.1%
Adjustments
Non-headline items excluded from profit before taxation (note 3) (32) (16)
Taxation on non-headline items and non-headline tax adjustment (3) -
Total interim tax rate
Profit before taxation 126 152
Taxation (42) 32.9% (41) 25.9%
The changes in the value of the net tax asset in the period were:
Current Deferred Net tax
tax
tax
balance
£m
£m
£m
At 31 July 2025 (46) 55 9
Foreign exchange gains/(losses) 1 (2) (1)
Charge to income statement (43) 1 (42)
Charge to other comprehensive income - 4 4
Tax paid 42 - 42
Transfer to held for sale 11 4 15
At 31 January 2026 (35) 62 27
Developments in the Group tax position
The Pillar Two (global minimum taxes legislation) charge borne by Group does
not have a material impact on the Group's FY26 effective tax rate.
6 Post-retirement benefits
The Group provides post-retirement benefits to employees in a number of
countries throughout the world. The arrangements include defined benefit and
defined contribution plans and, mainly in the United Kingdom (UK) and United
States of America (US), post-retirement healthcare. The principal defined
benefit pension plans are in the UK and US, and these have been closed so that
no future benefits are accrued.
Following a competitive tender process, a new external qualified actuary has
been appointed to provide UK actuarial advice to the Group. However, there are
no material changes to the methods used to derive the assumptions or calculate
the liabilities.
Where any individual scheme shows a post restriction surplus under IAS 19,
this is disclosed on the balance sheet as a retirement benefit asset. The IAS
19 surplus of any one scheme is not available to fund the IAS 19 deficit of
another scheme. The surplus is recognised as a retirement benefit asset to the
extent the employers have the right to recover the surplus at the end of the
life of the scheme, assuming all liabilities have been extinguished. The
schemes are mature with a duration averaged over all scheme participants of 10
years.
The amounts recognised in the balance sheet are as follows:
31 January 31 July
2026
2025
£m
£m
Market value of scheme assets 2,327 2,338
Present value of funded scheme liabilities (2,204) (2,213)
Surplus restriction (5) (11)
Surplus 118 114
Unfunded pension plans (82) (79)
Post-retirement healthcare (4) (3)
Present value of unfunded obligations (86) (82)
Net retirement benefit asset 32 32
Retirement benefit assets 123 128
Retirement benefit liabilities (54) (96)
Businesses held for sale - retirement benefit liabilities (37) -
Net retirement benefit asset 32 32
The decrease in the value of scheme liabilities is principally due to changes
in market conditions offset by the decrease in the discount rate assumptions.
The changes in market conditions also led to a corresponding decrease in the
value of scheme assets which was broadly in line with the decrease in
liabilities, leading to the surplus recognised in the balance sheet remaining
unchanged at 31 January 2026.
The changes in market conditions have had no impact on any funding
arrangements.
The principal assumptions used in updating the valuations are set out below:
31 January 2026 31 July 2025
UK US UK US
Weighted average rate of increase in benefits for active deferred members 4.2% n/a 4.1% n/a
Rate of increase in pensions in payment 3.2% n/a 3.1% n/a
Rate of increase in deferred pensions 3.2% n/a 3.1% n/a
Discount rate 5.5% 5.4% 5.6% 5.5%
The methods for setting the assumptions are consistent with those used for the
31 July 2025 valuation. The UK discount rate has been set based on the
weighted average duration across the two key pension arrangements. During
the year, a change was made to our UK actuarial provider resulting in minor
differences in how the IAS 19 discount rate and inflation assumptions are
derived. However the underlying principles for how these assumptions are
derived remains unchanged and so the impact of the change in provider is
expected to be de-minimis.
Present value of funded scheme liabilities and assets for the main UK and US
schemes
31 January 2026 - £m 31 July 2025 - £m
SIPS TIGPS US schemes SIPS TIGPS US schemes
Present value of funded scheme liabilities
- Active deferred members (35) (16) (25) (12) (8) (26)
- Deferred members (307) (260) (69) (332) (260) (71)
- Pensioners (838) (538) (88) (841) (544) (91)
Present value of funded scheme liabilities (1,180) (814) (182) (1,185) (812) (188)
Market value of scheme assets 1,300 819 185 1,313 823 180
Surplus restriction - (5) - - (11) -
Surplus/(deficit) 120 - 3 128 - (8)
Contributions
Company contributions to funded and unfunded defined benefit pension and
post-retirement healthcare plans totalled £11m (HY25: £7m), which included a
planned £10m (HY25: £5m) contribution to the US funded pension scheme.
The changes in the present value of the net pension balance in the period
were:
Six months ended Year ended
31 January
31 July
2026
2025
£m
£m
At beginning of period 32 29
Current service cost (1) (2)
Headline scheme administration costs (1) (2)
Non-headline scheme administration costs (2) (4)
Finance income - retirement benefits 3 3
Contributions by employer 11 11
Actuarial losses (10) (3)
Net retirement benefit asset at end of period 32 32
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 confirmation where such schemes made
changes to benefits between 6 April 1997 and 5 April 2016, and any amendments
were void without the appropriate confirmation.
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 confirmations confirming historical benefit
changes met the applicable standards. These amendments are unlikely to come
into force until later in 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.
7 Intangible assets
Goodwill Development Acquired Software, Total
£m
costs
intangibles
patents and intellectual property
£m
£m
£m
£m
Cost
At 31 July 2025 1,055 210 589 134 1,988
Exchange adjustments (19) (3) (17) (2) (41)
Business combinations 6 - - - 6
Disposals - - (7) - (7)
Reclassification of assets held for sale (658) (207) (223) (51) (1,139)
At 31 January 2026 384 - 342 81 807
Amortisation
At 31 July 2025 39 134 413 118 704
Exchange adjustments (1) (2) (11) (2) (16)
Charge for the period - 4 21 2 27
Disposals - - (7) - (7)
Reclassification of assets held for sale (38) (136) (178) (48) (400)
At 31 January 2026 - - 238 70 308
Net book value at 31 January 2026 384 - 104 11 499
Net book value at 31 July 2025 1,016 76 176 16 1,284
Review for impairment assessment trigger events
In accordance with IAS 34 'Interim financial reporting', management has
undertaken a review for indications of impairment and concluded that no
impairment assessment trigger events have occurred in the half year.
8 Property, plant and equipment
Land and Plant and Fixtures, Total
buildings
machinery
fittings,
£m
£m
£m
tools and
equipment
£m
Cost or valuation
At 31 July 2025 171 430 87 688
Exchange adjustments (3) (7) (1) (11)
Additions 4 16 3 23
Disposals (5) (5) (1) (11)
Reclassification of assets held for sale (49) (85) (32) (166)
At 31 January 2026 118 349 56 523
Depreciation
At 31 July 2025 111 262 71 444
Exchange adjustments (2) (5) (1) (8)
Charge for the period 3 11 2 16
Disposals (5) (5) (1) (11)
Impairment charge for the year 2 10 1 13
Reclassification of assets held for sale (31) (63) (29) (123)
At 31 January 2026 78 210 43 331
Net book value at 31 January 2026 40 139 13 192
Net book value at 31 July 2025 60 168 16 244
9 Right of use assets
Properties Vehicles Equipment Total
£m
£m
£m
£m
Cost
At 31 July 2025 171 23 1 195
Foreign exchange rate movements (4) - - (4)
Business combinations 1 - - 1
Recognition of right of use assets 20 1 - 21
Derecognition of right of use assets (4) (3) - (7)
Reclassification of assets held for sale (41) (6) (1) (48)
At 31 January 2026 143 15 - 158
Depreciation
At 31 July 2025 85 11 - 96
Foreign exchange rate movements (3) - - (3)
Charge for the year 12 3 - 15
Impairment charge for the year 2 - - 2
Derecognition of right of use assets (4) (3) - (7)
Reclassification of assets held for sale (24) (3) - (27)
At 31 January 2026 68 8 - 76
Net book value at 31 January 2026 75 7 - 82
Net book value at 31 July 2025 86 12 1 99
10 Financial assets - other investments
Investments in early stage businesses Cash collateral deposit Total
£m
£m
£m
At 31 July 2025 5 1 6
Reclassification of assets held for sale (1) - (1)
At 31 January 2026 4 1 5
11 Borrowings and net debt
This note sets out the calculation of net debt, an important measure in
explaining our financing position. The net debt figure includes accrued
interest and fair value adjustments to debt relating to hedge accounting.
31 January 31 July
2026
2025
£m
£m
Cash and cash equivalents
Net cash and cash equivalents 345 195
Short-term borrowings
Lease liabilities (18) (29)
Interest accrual (13) (3)
(31) (32)
Long-term borrowings
€650m 2.00% Eurobond 2027 (560) (556)
€650m 3.625% Eurobond 2033 (552) -
Lease liabilities (69) (79)
(1,181) (635)
Borrowings/gross debt (1,212) (667)
Derivatives managing interest rate risk and currency profile of the debt 8 10
Net debt (excludes £16m of net cash in discontinued operations) (859) (462)
Analysis of financial derivatives on balance sheet
Non-current assets Current Current Non-current liabilities Net
£m
assets
liabilities
balance
£m
£m £m
£m
Derivatives managing interest rate risk and currency profile of the debt 24 - - (16) 8
Foreign exchange forward contracts - 6 (2) - 4
At 31 January 2026 24 6 (2) (16) 12
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
Movements in net debt
Cash and cash equivalents Short-term borrowings Long-term borrowings Interest rate and cross currency swaps Net
£m
£m
£m
£m debt
£m
At 31 July 2025 195 (32) (635) 10 (462)
Foreign exchange gains/(losses) (12) - 9 - (3)
Net increase in cash and cash equivalents 179 - - - 179
Movement in net debt items held in disposal group (17) 4 15 - 2
Lease payments - 21 - - 21
Interest paid - 26 - - 26
Interest expense - (35) - - (35)
Changes due to proceeds from debt - - (565) - (565)
Fair value movements - - 1 (2) (1)
Net movement from new leases and modifications - (21) - - (21)
Reclassifications - 6 (6) - -
At 31 January 2026 345 (31) (1,181) 8 (859)
12 Fair value of financial instruments
As at 31 January 2026 As at 31 July 2025
Basis for determining fair value At amortised At fair value through profit or loss At fair value through OCI Total Total At amortised cost At fair value through profit or loss At fair value through OCI Total carrying Total
cost
£m
£m
carrying
£m
£m
fair value £m value fair value
£m value
£m £m £m
£m
Financial assets
Other investments A - 1 - 1 1 - 1 - 1 1
Other investments F - - 4 4 4 - - 5 5 5
Cash and cash equivalents A 345 - - 345 345 195 - - 195 195
Trade and other financial receivables B/C 438 - - 438 438 744 - - 744 744
Derivative financial instruments C - 30 - 30 30 - 17 - 17 17
Total financial assets 783 31 4 818 818 939 18 5 962 962
Financial liabilities
Trade and other financial payables B (238) - - (238) (238) (468) (14) - (482) (482)
Short-term borrowings B/D (13) - - (13) (13) (3) - - (3) (3)
Long-term borrowings D (1,112) - - (1,112) (1,123) (556) - - (556) (557)
Lease liabilities E (87) - - (87) (87) (108) - - (108) (108)
Derivative financial instruments C - (18) - (18) (18) - (2) - (2) (2)
Total financial liabilities (1,450) (18) - (1,468) (1,479) (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 Fair Value
Measurement).
B Carrying value is assumed to be a reasonable approximation to fair value for
all of these assets and liabilities (Level 2 as defined by IFRS 13 Fair Value
Measurement).
C Fair values of derivative financial assets and liabilities and trade
receivables held to collect or sell are estimated by discounting expected
future contractual cash-flows using prevailing interest rate curves. Amounts
denominated in foreign currencies are valued at the exchange rate prevailing
at the balance sheet date. These financial instruments are included on the
balance sheet at fair value, derived from observable market prices (Level 2 as
defined by IFRS 13 Fair Value Measurement).
D Borrowings are carried at amortised cost. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the balance sheet
date. The fair value of borrowings is estimated using quoted prices (Level 1
as defined by IFRS 13).
E Leases are carried at amortised cost. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the balance sheet
date. The fair value of the lease contract is estimated by discounting
contractual future cash-flows (Level 2 as defined by IFRS 13).
F The fair value of instruments is estimated by using unobservable inputs to the
extent that relevant observable inputs are not available. Unobservable
inputs are developed using the best information available in the
circumstances, which may include the Group's own data, taking into account all
information about market participation assumptions that is reliably available
(Level 3 as defined by IFRS 13).
IFRS 13 defines a three level valuation hierarchy:
Level 1 - quoted prices for similar instruments
Level 2 - directly observable market inputs other than Level 1 inputs
Level 3 - inputs not based on observable market data
13 Provisions and contingent liabilities
Headline Non-headline and legacy Total
£m John Crane, Inc. Titeflex Other £m
litigation
Corporation
£m
£m
litigation
£m
Current liabilities 12 23 7 14 56
Non-current liabilities 7 168 19 4 198
At 31 July 2025 19 191 26 18 254
Foreign exchange rate movements (1) (7) (1) - (9)
Provision charged 7 - 4 2 13
Provision released (1) (8) - - (9)
Unwind of provision discount - 4 - - 4
Utilisation (2) (6) (1) (6) (15)
Reclassification of liability held for sale (21) - - (3) (24)
At 31 January 2026 1 174 28 11 214
Current liabilities - 22 8 8 38
Non-current liabilities 1 152 20 3 176
At 31 January 2026 1 174 28 11 214
The John Crane, Inc. and Titeflex Corporation litigation provisions are the
only provisions which are discounted.
Headline provisions and contingent liabilities:
Warranty provision and product liability
At 31 January 2026 there are warranty and product liability provisions of £1m
(31 July 2025: £1m continuing operations, £16m discontinued operations).
Warranties over the Group's products typically cover periods of between one
and three years. Provision is made for the likely cost of after-sales support
based on the recent past experience of individual businesses.
Commercial disputes and litigation in respect of ongoing business activities
The Group has on occasion been required to take legal action to protect its
intellectual property and other rights against infringement. It has also had
to defend itself against proceedings brought by other parties, including
product liability and insurance subrogation claims. Provision is made for any
expected costs and liabilities in relation to these proceedings where
appropriate, although there can be no guarantee that such provisions (which
may be subject to potentially material revision from time to time) will
accurately predict the actual costs and liabilities that may be incurred.
Contingent liabilities
In the ordinary course of its business, the Group is subject to commercial
disputes and litigation such as government price audits, product liability
claims, employee disputes and other kinds of lawsuits, and faces different
types of legal issues in different jurisdictions. The high level of activity
in the US, for example, exposes the Group to the likelihood of various types
of litigation commonplace in that country, such as 'mass tort' and 'class
action' litigation, legal challenges to the scope and validity of patents,
and product liability and insurance subrogation claims. These types of
proceedings (or the threat of them) are also used to create pressure to
encourage negotiated settlement of disputes. Any claim brought against the
Group (with or without merit) could be costly to defend. These matters are
inherently difficult to quantify. In appropriate cases a provision is
recognised based on best estimates and management judgement, but there can be
no guarantee that these provisions (which may be subject to potentially
material revision from time to time) will result in an accurate prediction of
the actual costs and liabilities that may be incurred. There are also
contingent liabilities in respect of litigation for which no provisions are
made.
The Group operates in some markets where the risk of unethical or corrupt
behaviour is material and has procedures, including an employee 'Ethics
Alertline', to help it identify potential issues. Such procedures will, from
time to time, give rise to internal investigations, sometimes conducted with
external support, to ensure that the Group properly understands risks and
concerns and can take steps both to manage immediate issues and to improve its
practices and procedures for the future. The Group is not aware of any issues
which are expected to generate material financial exposures.
Non-headline and legacy provisions and contingent liabilities:
John Crane, Inc.
John Crane, Inc. ("JCI") is one of many co-defendants in numerous lawsuits
pending in the US in which plaintiffs are claiming damages arising from
alleged exposure to, or use of, products previously manufactured which
contained asbestos. The JCI products generally referred to in these cases
consist of industrial sealing product, primarily packing and gaskets. The
asbestos was encapsulated within these products in such a manner that causes
JCI to believe, based on tests conducted on its behalf, that the products were
safe. JCI ceased manufacturing products containing asbestos in 1985.
The table below summarises the JCI claims experience over the last 40 years
since the start of this litigation:
31 January 2026 31 July 2025 31 July 2024 31 July 2023 31 July 2022
JCI claims experience
Claims against JCI that have been dismissed 314,000 313,000 312,000 310,000 306,000
Claims in which JCI is currently a defendant 21,000 21,000 20,000 20,000 22,000
Cumulative final judgments, after appeals, against JCI since 1979 157 157 156 154 149
Cumulative value of awards ($m) since 1979 192 192 191 190 175
John Crane, Inc. litigation insurance recoveries
JCI has certain excess liability insurance which may provide coverage for
certain asbestos claims. JCI has also collected recoveries from its insurers
in settlement of now concluded litigation in the US. JCI meets its asbestos
defence costs directly. The calculation of the provision does not take account
of any recoveries from insurers. See table below for the cost recovery
achieved in both the current and prior periods.
John Crane, Inc. litigation provision
The provision is based on past history and published tables of asbestos
incidence projections and is determined using asbestos valuation experts,
Bates White LLC. The assumptions made in assessing the appropriate level of
provision include: the period over which the expenditure can be reliably
estimated; the future trend of legal costs; the rate of future claims filed;
the rate of successful resolution of claims; and the average amount of
judgments awarded.
The JCI asbestos litigation provision has developed in the period as follows:
Six months ended
31 January 2026
£m Year ended Year ended Year ended Year ended
31 July
31 July
31 July
31 July
2025
2024
2023
2022
£m
£m
£m
£m
John Crane, Inc. litigation provision
Gross provision 208 231 261 246 258
Discount (34) (40) (41) (42) (29)
Discounted provision 174 191 220 204 229
Taxation (42) (46) (54) (51) (57)
Discounted post-tax provision 132 145 166 153 172
Operating profit (credit)/charge
(Decreased)/Increased provision for adverse judgments and legal defence costs (7) (11) 28 28 24
Change in US risk free rates (2) (1) 1 (15) (18)
Subtotal - items (released)/charged to the provision (9) (12) 29 13 6
Litigation management expense - legal fees in connection with litigation 1 - - 2 1
against
insurers and defence strategy
Recoveries from insurers - (1) (3) (7) -
Total operating profit (credit)/charge (8) (13) 26 8 7
Cash-flow
Provision utilisation - legal defence costs and adverse judgements (6) (18) (21) (32) (21)
Litigation management expense (1) - - (2) (1)
Recoveries from insurers - 1 3 7 -
Net cash outflow (7) (17) (18) (27) (22)
John Crane, Inc. litigation provision sensitivities
The provision may be subject to potentially material revision from time to
time if new information becomes available as a result of future events. There
can be no guarantee that the assumptions used to estimate the provision will
result in an accurate prediction of the actual costs that may be incurred
because of the significant uncertainty associated with the future level of
asbestos claims and of the costs arising out of related litigation.
Statistical reliability of projections over the ten year time horizon
In order to evaluate the statistical reliability of the projections, a
population of outcomes is modelled using randomised verdict outcomes. This
generated a distribution of outcomes with future spend at the 5th percentile
of £156m and future spend at the 95(th) percentile of £210m (31 July
2025: £170m and £230m, respectively). Statistical analysis of the
distribution of these outcomes indicates that there is a 50% probability that
the total future spend will fall between £193m and £218m and (31 July 2025:
between £214m and £242m), compared with the gross provision value of £208m
(31 July 2025: £231m).
Sensitivity of the projections to changes in the time horizon used
If the asbestos litigation environment becomes more volatile and uncertain,
the time horizon over which the provision can be calculated may reduce.
Conversely, if the environment became more stable, or JCI changed approach and
committed to long term settlement arrangements, the time period covered by the
provision might be extended.
The projections use a 10 year time horizon. Reducing the time horizon by one
year would reduce the discounted pre-tax provision by £14m (31 July 2025:
£15m) and reducing it by five years would reduce the discounted pre-tax
provision by £75m (31 July 2025: £85m).
We consider, after obtaining advice from Bates White LLC, that to forecast
beyond ten years requires that the litigation environment remains largely
unchanged with respect to the historical experience used for estimating future
asbestos expenditures. Historically, the asbestos litigation environment has
undergone significant changes more often than every ten years. If one assumed
that the asbestos litigation environment would remain unchanged for longer and
extended the time horizon by one year, it would increase the discounted
pre-tax provision by £11m (31 July 2025: £13m); extending it by five years
would increase the discounted pre-tax provision by £40m (31 July 2025:
£45m). However, there are also reasonable scenarios that, given certain
recent events in the US asbestos litigation environment, would result in no
additional asbestos litigation for JCI beyond ten years. At this time, how the
asbestos litigation environment may evolve beyond 10 years is not reasonably
estimable.
John Crane, Inc. contingent liabilities
Provision has been made for future defence costs and the cost of adverse
judgments expected to occur. JCI's claims experience is significantly impacted
by other factors which influence the US litigation environment. These include:
changing approaches on the part of the plaintiffs' bar; changing attitudes
amongst the judiciary at both trial and appellate levels; and legislative and
procedural changes in both the state and federal court systems. As a result,
whilst the Group anticipates that asbestos litigation will continue beyond the
period covered by the provision, the uncertainty surrounding the US litigation
environment beyond this point is such that the costs cannot be reliably
estimated.
Although the methodology used to calculate the JCI litigation provision can in
theory be applied to show claims and costs for longer periods, the directors
consider, based on advice from Bates White LLC, that the level of uncertainty
regarding the factors used in estimating future costs is too great to provide
for reasonable estimation of the number of future claims, the nature of such
claims or the cost to resolve them for years beyond the 10 year time horizon.
Titeflex Corporation litigation
In recent years Titeflex Corporation, a subsidiary of the Group in the
Flex-Tek business segment, has received a number of claims from insurance
companies seeking recompense on a subrogated basis for the effects of damage
allegedly caused by lightning strikes in relation to its flexible gas piping
product. It has also received a number of product liability claims regarding
this product, some in the form of purported class actions. Titeflex
Corporation believes that its products are a safe and effective means of
delivering gas when installed in accordance with the manufacturer's
instructions and local and national codes; however some claims have been
settled on an individual basis without admission of liability. Equivalent
third-party products in the US marketplace face similar challenges.
Titeflex Corporation litigation provision
The continuing progress of claims and the pattern of settlement provide
sufficient evidence to recognise a liability in the accounts. Therefore
provision has been made for the costs which the Group is expected to incur in
respect of future claims to the extent that such costs can be reliably
estimated. Titeflex Corporation sells flexible gas piping with extensive
installation and safety guidance (revised in 2008) designed to assure the
safety of the product and minimise the risk of damage associated with
lightning strikes.
The assumptions made in assessing the appropriate level of provision, which
are based on past experience, include: the period over which expenditure can
be reliably estimated; the number of future settlements; the average amount of
settlements; and the impact of statutes of repose and safe installation
initiatives on the expected number of future claims. The assumptions relating
to the number of future settlements exclude FY21 claims history as the number
of claims arising in this financial year is considered to be artificially
deflated due to the impact of COVID-19 lockdowns.
The provision of £28m (31 July 2025: £26m) is a discounted pre-tax provision
using discount rates, being the risk-free rate on US debt instruments for the
appropriate period. The deferred tax asset related to this provision is shown
within the deferred tax balance.
31 January 31 July
2026
2025
£m
£m
Gross provision 59 56
Discount (31) (30)
Discounted pre-tax provision 28 26
Taxation (7) (6)
Discounted post-tax provision 21 20
Other non-headline and legacy
Legacy provisions comprise provisions relating to former business activities
and properties no longer used by Smiths. Non-headline provisions comprise
provisions that were disclosed as non-headline items when they were charged to
the consolidated income statement and provisions recognised as a result of
business acquisition. These provisions include non-headline reorganisation,
separation expenses, acquisition earnouts, disposal indemnities and litigation
in respect of old products and discontinued business activities.
14 Share capital
Number of Issued capital Consideration
shares
£m
£m
Ordinary shares of 37.5p each
At 31 July 2024 345,097,794 130
Share buybacks (2,485,179) (1) (44)
At 31 January 2025 342,612,615 129
At 31 July 2025 329,684,303 124
Share buybacks (13,184,199) (5) (320)
At 31 January 2026 316,500,104 119
Share buybacks
On 26 March 2024, the Group announced a series of share buybacks culminating,
on 31 January 2025, in an announcement to increase the previously announced
£150m programme to £500m. The additional £350m commenced on 25 March 2025
and completed on 3 December 2025. During the current period, the Group
purchased and cancelled 6,579,144 shares for a total consideration of £159m.
On 26 November 2025, the Group announced a new £1bn share buyback programme,
the first tranche of which will total £600m, to be completed by July 2026. At
31 January 2026, the Group had purchased and cancelled 6,605,055 shares for a
total consideration of £161m. In addition, 750,000 shares had been purchased
for a total consideration of £19m but were yet to settle and be cancelled.
15 Dividends
The following dividends were declared and paid in the period:
Six months ended Six months ended
31 January 2026
31 January 2025
£m
£m
Dividends paid in the period 104 104
In the current period an ordinary final dividend of 31.77p (31 January 2025:
30.2p) was paid on 21 November 2025.
An interim dividend of 15.0 pence per share was declared by the Board on 19
March 2026 and will be paid to shareholders on 13 May 2026.This dividend has
not been included as a liability in these accounts and is payable to all
shareholders on the register of members at close of business on 7 April 2026.
The Company offers a Dividend Reinvestment Plan ("DRIP") enabling shareholders
to use their cash dividend to buy further shares in the Company - see
www.shareview.co.uk/info/drip
(https://urldefense.com/v3/__http:/www.shareview.co.uk/info/drip__;!!JUyETn1neQ!9U_3F94LE9h427CQXO9NKKcm4KE2XeJRwc6jI7sUk2SZZqrEc8DenhZhclOzlOWM4-2YWVWx94zk5dLK6onDjX1vK0VLgg$)
and our website for details. The DRIP is provided by Equiniti Financial
Services Limited. To participate in the DRIP, shareholders must submit their
election notice to be received by 21 April 2026 ("the Election Date").
Elections received after the Election Date will apply to dividends paid after
13 May 2026. Purchases under the DRIP are made on, or as soon as practicable
after, the dividend payment date and at prevailing market prices.
16 Discontinued operations and businesses held for sale
On 31 January 2025 Smiths Group plc announced the intention to divest of the
Smiths Interconnect business in the calendar year 2025 and that Smiths
Detection would be separated either by UK demerger or sale following the sale
of Smiths Interconnect. For the FY25 annual report and accounts it was
concluded that the Smiths Interconnect businesses met the classification
criteria for discontinued operations and held for sale, whilst Smiths
Detection separation was not yet sufficiently advanced for the Smiths
Detection business to be accounted for as a discontinued operation or a
business held for sale or distribution to owners.
During HY26 Smiths Group plc has agreed the sale of both the Smiths Detection
and Smiths Interconnect businesses and completion of these transactions is
expected in the calendar year 2026, subject to works council consultation and
customary regulatory approvals. Additionally the Group has commenced a
disposal programme for Flex-Tek's general industrial businesses, this
programme is anticipated to be completed within FY26.
The Smiths Interconnect, Smiths Detection and Flex-Tek general industrial
divestment projects have progressed sufficiently for these disposal groups to
be accounted for as businesses held for sale. Smiths Interconnect and Smiths
Detection are separate major lines of business for the Group and therefore are
presented as discontinued operations. Although not quantitatively material,
the Flex-Tek general industrial businesses have been presented as discontinued
operations to ensure a fair presentation of the continuing Group's results.
The financial performance of discontinued operations in the current and prior
period is presented below:
Six months ended 31 January 2026 Six months ended 31 January 2025 - Represented*
Headline Non-headline) Total Headline Non-headline Total
£m
£m
£m
£m
£m
£m
Revenue 711 - 711 684 - 684
Operating costs (597) (54) (651) (596) (13) (609)
Operating profit/(loss) 114 (54) 60 88 (13) 75
Interest receivable 5 - 5 1 - 1
Interest payable (4) - (4) (1) - (1)
Other financing (losses)/gains - 5 5 - 1 1
Finance income 1 5 6 - 1 1
Profit/(loss) before taxation 115 (49) 66 88 (12) 76
Taxation (33) 14 (19) (24) 5 (19)
PROFIT/(LOSS) FOR THE PERIOD 82 (35) 47 64 (7) 57
Additional segmental information for discontinued operations
Six months ended 31 January 2026
Smiths Interconnect Smiths Other Total
£m
Detection
£m
£m
£m
Revenue 189 497 25 711
Headline operating profit/(loss) 40 76 (2) 114
Items excluded from headline measures (note 3) (4) (25) (25) (54)
Operating profit/(loss) for the period 36 51 (27) 60
Operating profit for the period is stated after charging:
Depreciation - 7 1 8
Amortisation - 10 - 10
Share-based payments 1 1 - 2
Reconciliation of statutory headline operating profit to reported underlying
headline operating profit:
Headline operating profit/(loss) 40 76 (2) 114
Headline amortisation and depreciation paused under IFRS5 (5) (7) - (12)
Reported underlying headline operating profit/(loss) 35 69 (2) 102
Six months ended 31 January 2025
Smiths Interconnect Smiths Detection Other Total
£m
£m
£m
£m
Revenue 202 454 28 684
Headline operating profit/(loss) * 35 51 2 88
Items excluded from headline measures (note 3) (1) (12) - (13)
Operating profit for the period 34 39 2 75
Operating profit for the period is stated after charging:
Depreciation 5 10 1 16
Amortisation 2 22 - 24
Share-based payments 1 1 - 2
* Headline operating profit/(loss) and underlying reported headline operating
profit/(loss) are the same for HY25.
Gain on sale of Smiths Interconnect, Inc (SII)
The sale of SII, Interconnect's US sub-systems business completed on 1st
October 2025. The effect of this disposal on the financial position of the
Group is as follows:
Six months
ended
31 January 2026
£m
Inventories 10
Trade and other receivables 11
Cash and cash equivalents 3
Lease liabilities (2)
Trade and other payables (9)
Deferred tax liabilities (1)
Net assets disposed of 12
Consideration received:
Cash and cash equivalents received 3
Cash and cash equivalents deferred 3
Transaction costs (1)
Cash and cash equivalents, net of transaction costs 5
Loss on sale before reclassification of foreign currency translation reserve (7)
Exchange movements recycled to the income statement 25
Net Investment hedge reserve recycled to the income statement (15)
Gain on sale of discontinued operation 3
Net investing activity cashflows arising on disposal:
Consideration received in cash and cash equivalents 3
Less cash and cash equivalents disposed of (3)
-
Smiths Detection acquisition of Med Graphix, Inc
In August 2025, Smiths Detection completed the acquisition of 100% of the
assets of Med Graphix, Inc. for consideration of £6m. The business
acquisition created £6m of goodwill. The acquisition will provide repair and
refurbishment services for Smiths Detection in North America.
Cash-flow from discontinued operations included in the consolidated cash-flow
statement is as follows:
Year ended Year ended
31 January 2026
31 January 2025
£m
£m
Net cash inflow from operating activities 40 74
Net cash-flow used in investing activities (10) (10)
Net cash-flow used in financing activities (47) (37)
Net increase in cash and cash equivalents (17) 27
Businesses held for sale
At 31 January 2026 the Smiths Interconnect, Smiths Detection and the Flex-Tek
general industrials disposal groups met the criteria for classification as
held for sale. The carrying value of the assets and liabilities of these
disposal groups are as follows:
Detection Interconnect Other Total
31 January 2026
£m £m £m
£m
Assets classified as held for sale:
Intangible assets 739 269 - 1,008
Property, plant and equipment 44 48 - 92
Right of use assets 20 7 1 28
Financial assets - other investments 1 - - 1
Inventories 328 73 3 404
Deferred tax assets 23 2 5 30
Current tax receivable 8 3 6 17
Trade and other receivables 309 63 9 381
Cash and cash equivalents 24 24 - 48
Assets classified as held for sale 1,496 489 24 2,009
Liabilities classified as held for sale:
Financial liabilities - leases (21) (7) (4) (32)
Trade and other payables (348) (73) (7) (428)
Current tax payable (31) (8) - (39)
Retirement benefit obligations (37) - - (37)
Deferred tax liabilities (29) (5) - (34)
Provisions for liabilities and charges (22) (1) (2) (25)
Liabilities classified as held for sale (488) (94) (13) (595)
17 Cash-flow from operating activities
Six months ended 31 January 2026 Six months ended 31 January 2025
Headline Non-headline Total Headline Non-headline Total
£m
(note 3)
£m
£m
(note 3)
£m
£m
£m
Operating profit:
- Continuing 181 (22) 159 181 (14) 167
- Discontinued 114 (54) 60 88 (13) 75
Amortisation of intangible assets 6 21 27 13 27 40
Impairment loss on reclassification to held for sale - 25 25 - - -
Depreciation of property, plant and equipment 15 1 16 21 - 21
Depreciation of right of use assets 15 - 15 18 - 18
Gain on disposal of business - (3) (3) - - -
Loss on disposal of property, plant and equipment - - - 2 - 2
Loss on disposal of financial asset - - - - 3 3
Share-based payment expense 9 - 9 8 - 8
Retirement benefits 3 (9) (6) 2 (5) (3)
Recycling of cash flow hedge reserve (3) - (3) - - -
Increase in inventories (49) - (49) (48) - (48)
Decrease in trade and other receivables 7 - 7 35 1 36
(Decrease)/increase in trade and other payables (55) - (55) (27) 2 (25)
Increase/(decrease) in provisions 5 (16) (11) 2 (29) (27)
Cash generated from operations 248 (57) 191 295 (28) 267
Interest paid (26) - (26) (23) - (23)
Interest received 17 - 17 19 - 19
Tax paid (59) - (59) (58) - (58)
Net cash inflow/(outflow) from operating activities 180 (57) 123 233 (28) 205
The split of tax payments between headline and non-headline only considers the
nature of payments made. No adjustment has been made for reductions in tax
payments required as a result of tax relief received on non-headline items.
Headline cash measures - continuing operations
The Group measure of headline operating cash excludes interest and tax, and
includes capital expenditure supporting organic growth. The Group uses
operating cash-flow for the calculation of cash conversion and free cash-flow
for management of capital purposes. See note 19 for additional details.
The table below reconciles the Group's net cash-flow from operating activities
to headline operating cash-flow and free cash-flow:
Six months ended 31 January 2026 Six months ended 31 January 2025
Headline Non-headline Total Headline Non-headline Total
£m
£m
£m
£m
£m
£m
Net cash inflow/(outflow) from operating activities 180 (57) 123 233 (28) 205
Include:
Expenditure on capitalised development, other intangible assets and property, (29) - (29) (41) - (41)
plant and equipment
Repayment of lease liabilities (21) - (21) (21) - (21)
Disposal of property, plant and equipment 1 - 1 - - -
Free cash-flow 74 143
Exclude:
Repayment of lease liabilities 21 - 21 21 - 21
Interest paid 26 - 26 23 - 23
Interest received (17) - (17) (19) - (19)
Tax paid 59 - 59 58 - 58
Operating cash-flow 220 (57) 163 254 (28) 226
Headline cash conversion
Headline operating cash conversion for the total Group is calculated as
follows:
Six months Six months ended
ended
31 January 2025 Represented*
31 January 2026
£m
£m
Headline operating profit 295 269
Headline amortisation and depreciation paused under IFRS5 (12) -
Reported underlying headline operating profit/(loss) 283 269
Headline operating cash-flow 220 254
Headline operating cash conversion 78% 94%
Reconciliation of free cash-flow to total movement in cash and cash
equivalents
Six months Six months ended
ended
31 January 2025
31 January 2026
£m
£m
Free cash-flow 74 143
Acquisition of businesses (5) (89)
Disposal of subsidiaries - post-sale expenses - (12)
Disposal of financial assets - 53
Other net cash-flows used in financing activities (note: repayment of lease 110 (168)
liability is included in free cash-flow)
Increase/(decrease) in cash and cash equivalents 179 (73)
18 Related party transactions
The related party transactions in the period were consistent with the nature
and size of transactions disclosed in the Annual Report for the year ended 31
July 2025.
19 Alternative performance measures
The Group uses several alternative performance measures ('APMs') in order to
provide additional useful information on underlying trends and the performance
and position of the Group. APMs are non-GAAP and not defined by IFRS;
therefore they may not be directly comparable with other companies' APMs and
should not be considered a substitute for IFRS measures.
The Group uses APMs which are common across the industry, in both planning and
reporting, to enhance the comparability of information between reporting
periods and business units. The measures are also used in discussions with the
investment analyst community and by credit rating agencies.
We have identified and defined the following key measures which are used
within the business by management to assess the performance of the Group's
businesses:
APM term Definition and purpose
Capital employed Capital employed is a non-statutory measure of invested resources. It
comprises statutory net assets and is adjusted as follows:
· to add goodwill recognised directly in reserves in respect of
subsidiaries acquired before 1 August 1998; and
· to eliminate post-retirement benefit assets and liabilities and
non-headline litigation provisions related to John Crane, Inc. and Titeflex
Corporation, both net of deferred tax, and net debt.
It is used to monitor capital allocation within the Group. See below for a
reconciliation from net assets to capital employed.
Capital expenditure Comprises additions to property, plant and equipment, capitalised development
and other intangible assets, excluding assets acquired through business
combinations; see notes 7 & 8 for an analysis of capital expenditure. This
measure quantifies the level of capital investment into ongoing operations.
Divisional headline operating profit ('DHOP') DHOP comprises divisional earnings before central costs, finance costs and
taxation. DHOP is used to monitor divisional performance. A reconciliation of
DHOP to operating profit is shown in note 2.
Free cash-flow Free cash-flow is calculated by adjusting the net cash inflow from operating
activities to include capital expenditure, the repayment of lease liabilities,
the proceeds from the disposal of property, plant and equipment and the
investment in financial assets relating to operating activities and pensions
financing outstanding at the balance sheet date. The measure shows cash
generated by the Group before discretionary expenditure on acquisitions and
returns to shareholders. A reconciliation of free cash-flow is shown in note
17.
Gross debt Gross debt is total borrowings (bank, bonds and lease liabilities). It is used
to provide an indication of the Group's overall level of indebtedness. See
note 11 for an analysis of gross debt.
Headline The Group has defined a 'headline' measure of performance that excludes
material non-recurring items or items considered non-operational/trading in
nature. Items excluded from headline are referred to as non-headline items.
This measure is used by the Group to measure and monitor performance excluding
material non-recurring items or items considered non-operational. See note 3
for an analysis of non-headline items.
Headline EBITDA EBITDA is a widely used profit measure, not defined by IFRS, being earnings
before interest, taxation, depreciation and amortisation. See below for a
reconciliation of headline operating profit to headline EBITDA.
Net debt Net debt is total borrowings (bank, bonds and lease liabilities) less cash
balances and derivatives used to manage the interest rate risk and currency
profile of the debt. This measure is used to provide an indication of the
Group's overall level of indebtedness and is widely used by investors and
credit rating agencies. See note 11 for an analysis of net debt.
Non-headline The Group has defined a 'headline' measure of performance that excludes
material non-recurring items or items considered non-operational/trading in
nature. Items excluded from headline are referred to as non-headline items.
This is used by the Group to measure and monitor material non-recurring items
or items considered non-operational. See note 3 for an analysis of
non-headline items.
Operating cash-flow Comprises free cash-flow and excludes cash-flows relating to the repayment of
lease liabilities, interest and taxation. The measure shows how cash is
generated from operations in the Group. A reconciliation of operating
cash-flow is shown in note 17.
Operating profit Operating profit is earnings before finance costs and tax. A reconciliation of
operating profit to profit before tax is shown on the consolidated income
statement. This common measure is used by the Group to measure and monitor
performance.
Return on capital Smiths ROCE is the percentage that headline operating profit represents of the
employed ('ROCE') monthly average capital employed over a rolling 12-month basis. Headline
operating profit in this measure is adjusted to include the amortisation and
depreciation charges for discontinued operations that have been paused in
accordance with IFRS 5.
This measure of return on invested resources is used to monitor performance
and capital allocation within the Group. See below for Group ROCE and note 2
for divisional headline operating profit and divisional capital employed.
The key performance indicators ('KPIs') used by management to assess the
performance of the Group's businesses are as follows:
KPI term Definition and purpose
Dividend cover - headline Dividend cover is the ratio of headline earnings per share (see note 4) to
dividend per share (see note 14). This commonly used measure indicates the
number of times the dividend in a financial year is covered by headline
earnings.
Earnings per share ('EPS') growth EPS growth is the growth in headline basic EPS (see note 4), on a reported
basis. EPS growth is used to measure and monitor performance.
Free cash-flow (as a % of operating profit) This measure is defined as free cash-flow divided by headline operating profit
averaged over a three-year performance period. This cash generation measure is
used by the Group as a performance measure for remuneration purposes.
Greenhouse Gas (GHG) Emissions Reduction GHG reduction is calculated as the percentage change in normalised Scope 1
& 2 GHG emissions. Normalised is calculated as tCO(2)e per £m of revenue.
This measure is used to monitor environmental performance.
Gross Vitality Gross Vitality is calculated as the percentage of revenue derived from new
products and services launched in the last five years. This measure is used to
monitor the effectiveness of the Group's new product development and
commercialisation.
My Say Engagement Score The overall score in our My Say employee engagement survey. The biannual
survey is undertaken Group-wide. This measure is used by the Group to monitor
employee engagement.
Operating cash conversion Comprises cash-flow from operations before non-headline items, as a percentage
of headline operating profit. This measure is used to show the proportion of
headline operating profit converted into cash-flow from operations before
investment, finance costs, non-headline items and taxation. The calculation is
shown in note 17.
Operating profit margin Headline operating profit margin is calculated by dividing headline operating
profit by revenue. This measure is used to monitor the Group's ability to
drive profitable growth and control costs.
Organic growth Organic growth adjusts the movement in headline performance to exclude the
impact of foreign exchange and acquisitions. Organic growth is used by the
Group to aid comparability when monitoring performance.
Organic revenue growth (Remuneration) Organic revenue growth (remuneration) is compounded annualised growth in
revenue after excluding the impact of foreign exchange and acquisitions. The
measure used for remuneration differs from organic revenue growth in that it
is calculated on a compounded annualised basis. This measure has historically
been used by the Group for aligning remuneration with business performance.
Percentage of senior leadership positions taken by females Percentage of senior leadership positions taken by females is calculated as
the percentage of senior leadership roles (G14+ group) held by females. This
measure is used by the Group to monitor diversity performance.
R&D cash costs as a This measure is defined as the cash cost of research and development
% of sales activities (including capitalised R&D, R&D directly charged to the
P&L and customer-funded projects) as a percentage of revenue. Innovation
is an important driver of sustainable growth for the Group and this measures
our investment in research and development to drive innovation.
Recordable Incident Rate (RIR) Recordable Incident Rate is calculated as the number of recordable incidents -
where an incident requires medical attention beyond first aid - per 100
colleagues, per year across Smiths. This measure is used by the Group to
monitor health and safety performance.
Capital employed
Capital employed is a non-statutory measure of invested resources. It
comprises statutory net assets adjusted to add goodwill recognised directly in
reserves in respect of subsidiaries acquired before 1 August 1998 of £475m
(31 January 2025: £478m), and to eliminate post-retirement benefit assets and
liabilities, litigation provisions relating to John Crane, Inc. and Titeflex
Corporation, both net of related tax, and net debt.
Notes 31 January 31 January
2026
2025
£m
£m
Net assets 1,680 2,295
Adjust for:
Goodwill recognised directly in reserves 475 478
Retirement benefit assets and obligations 6 (32) (25)
Tax related to retirement benefit assets and obligations 15 18
John Crane, Inc. litigation provisions and related tax 132 158
Titeflex Corporation litigation provisions and related tax 21 24
Net debt (includes £16m of net cash from discontinued operations) 843 299
Capital employed 3,134 3,247
Return on capital employed ("ROCE")
Notes 31 January 31 January
2026
2025
£m
£m
Headline operating profit for previous 12 months - including discontinued 606 549
operations
Headline amortisation and depreciation paused under IFRS5 (12) -
Reported underlying headline operating profit/(loss) 594 549
Average capital employed - including discontinued operations 3,220 3,216
ROCE 18.4% 17.1%
Credit metrics
The Group monitors the ratio of net debt to headline earnings before interest,
tax, depreciation and amortisation as part of its management of credit
ratings. This ratio is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation
("headline EBITDA") - total Group
Notes Six months ended Six months ended
31 January 2026
31 January 2025
£m
£m
Headline operating profit - total Group 2 295 269
Exclude:
- depreciation of property, plant and equipment 8 15 21
- depreciation of right of use assets 9 15 18
- amortisation of development costs 7 4 6
- amortisation of software, patents and intellectual property 7 2 7
Headline EBITDA 331 321
Annualised headline EBITDA - total Group
Notes Year ended Year ended
31 January 2026
31 January 2025
£m
£m
Headline EBITDA for the period 331 321
Add: Headline EBITDA for the previous year 682 611
Exclude: Headline EBITDA for the first six (321) (289)
months of the previous year
Annualised headline EBITDA 692 643
Ratio of net debt to annualised headline EBITDA - total Group
Year ended Year ended
31 January 2026
31 January 2025
£m
£m
Annualised headline EBITDA 692 643
Net debt (including £16m of net cash from discontinued operations) 843 299
Ratio of net debt to headline EBITDA 1.2 0.5
Headline earnings before interest, tax, depreciation and amortisation
("headline EBITDA") - continuing operations
Notes Six months ended Six months ended
31 January 2026
31 January 2025 Represented*
£m
£m
Headline operating profit - continuing operations 2 181 181
Exclude:
- depreciation of property, plant and equipment 8 10 11
- depreciation of right of use assets 9 11 12
- amortisation of development costs 7 - -
- amortisation of software, patents and intellectual property 7 2 1
Headline EBITDA 204 205
Annualised headline EBITDA - continuing operations
Notes Year ended Year ended
31 January 2026
31 January 2025 Represented*
£m
£m
Headline EBITDA for the period 204 205
Add: Headline EBITDA for the previous year 439 417
Exclude: Headline EBITDA for the first six (205) (204)
months of the previous year
Annualised headline EBITDA 438 418
* The comparatives for the period ended 31 January 2025 have been
represented to reflect the reclassification of the Smiths Interconnect, Smiths
Detection and Flex-Tek general industrial businesses as discontinued
operations.
20 Post balance sheet events
On 3 March 2026, the Group announced an agreement to acquire DRC Heat Transfer
(DRC), a US-based designer and manufacturer of custom heat transfer and
cooling solutions, for a purchase price of £164m. DRC will be integrated into
the Flex-Tek business to extend Flex-Tek's offering into cooling applications,
adding broader thermal solutions capabilities and strengthen Flex-Tek's
presence in the power generation market.
The Group will assume control of the business on completion, which is expected
in the second half of FY26.
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