Smiths Group (SMIN) H2 2026 earnings summary

Executive summary

• Completed sales of Interconnect and Detection businesses, unlocking £3.3bn in value and repositioning as a focused premium industrial engineering company.

• Executed portfolio transformation, exited lower-growth Flex-Tek businesses, and expanded into high-growth data centre markets through the DRC Heat Transfer acquisition.

• Delivered resilient organic revenue growth, margin expansion, and strong cash flow despite challenging energy, construction markets, and Middle East conflict.

• Enhanced free cash flow and strengthened the balance sheet, supporting a positive FY2027 outlook.

• Announced process to divest John Crane US legacy asbestos liability to enhance cash flow and strengthen balance sheet.

Financial highlights

• Organic revenue grew 1.2% to £1.9bn; headline operating profit up 1.9% organically to £399m.

• Headline operating margin increased 20bps to 20.6%; return on capital employed at 23.5%.

• Headline EPS up 6% to 86.8p; total group headline EPS up 12% to 135.7p, aided by share buybacks.

• Operating cash conversion at 96%; final dividend of 33.5p, full-year dividend up 5.4% to 48.5p.

• Acquisitions contributed 2.6% to growth, notably DRC Heat Transfer.

Outlook and guidance

• Guiding to organic revenue growth of ~4% and operating margin of ~21% for FY2027; operating cash conversion expected in low 90s range.

• Medium-term targets: 5%-7% organic revenue growth, 21%-23% operating margin, >10% EPS growth, >20% ROCE, and ~100% cash conversion.

• John Crane growth expected to be H2-weighted, with Middle East recovery anticipated in H2.

• Flex-Tek growth weighted to H1; aerospace strong, thermal solutions returning to growth, US construction subdued.

• FX headwinds expected to impact FY2027 revenue and profit by ~1%.