A slimmed-down Smiths Group cheers investors with fatter margins, a 75th straight dividend rise and £1.5bn more buybacks on the way.
Smiths Group (LSE: SMIN) shares climbed 4% in early trade after the 175-year-old engineer confirmed it has completed a sweeping overhaul of its business, selling two of its four divisions for £3.3bn and channelling the proceeds back to shareholders through buybacks and a record 75th consecutive dividend increase.
The rally came as investors digested a robust set of underlying numbers alongside the reshaping: organic revenue rose 1.2% to £1.94bn, the operating margin ticked up to 20.6%, and headline earnings per share from continuing operations grew 6%, even as statutory operating profit fell to reflect the cost of exiting Smiths Detection and Smiths Interconnect.
With those two units sold at what the company called attractive valuations, Smiths now stands as a tighter industrial group built around flow-control specialist John Crane and thermal and aerospace business Flex-Tek. The group has already completed £1.5bn of share buybacks, with a further £1.5bn earmarked for return to shareholders by the end of 2027, and net cash on the balance sheet has swelled to £1.75bn, giving management scope for further investment or capital return.
Trading was not without friction: the conflict in the Middle East is estimated to have cost John Crane around £20m in sales, while a soft US residential construction market weighed on Flex-Tek. Smiths also used some of its newly freed-up firepower to buy DRC Heat Transfer for £165m, adding exposure to the fast-growing data-centre cooling market, and said it would launch a process aimed at removing legacy US asbestos liabilities at John Crane from its balance sheet.
Looking ahead, management guided to organic revenue growth of around 4% for the new financial year and said it expects to move into its medium-term margin target range, citing structural demand from energy security, industrial electrification, data centres and aviation. With shares up roughly 50% over the past 18 months, analysts note the market has largely bought into the transformation story already, meaning execution on the asbestos disposal and the remaining buyback programme will be closely watched.
This report is based on Smiths Group’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Homa Appliances on Unsplash.
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