Smiths Group reports strong organic revenue growth and two new acquisitions

Smiths Group Plc (LON:SMIN) has announced its full year results for the 12 months ended 31 July 2024.

Continued good delivery against our strategy; well positioned for ongoing value creation

·    Good financial results for the year: +5.4% organic¹ revenue growth, 16.8% headline² operating profit margin and +8.3% headline² EPS growth

·    Headline² operating cash conversion of 97%; strong balance sheet 0.3x net debt/EBITDA; proposed final dividend of 30.2p, up +5.2%

·    Announcing today two strategic and disciplined acquisitions for up to £110m, enhancing Flex-Tek’s HVAC³ and industrial heating businesses

·    Continued focus on high-performance, purpose-based culture and ESG initiatives

·    Launching a Group-wide Acceleration Plan to enhance profitability and productivity, for one-off costs totalling £60-65m in the period FY2025-FY2026; £30-35m of annualised benefits in FY2027

·    Expect FY2025 organic revenue growth of 4-6%, with continued margin expansion

·    Reaffirming medium-term financial targets and strategic focus on growth, people and execution

Roland Carter, Smiths Group Chief Executive Officer, commented:

“I am pleased to report strong organic revenue growth against a record comparator, continued headline operating profit margin expansion and two new acquisitions. I am also pleased to guide to further growth and margin expansion in FY2025 and reaffirm our medium-term financial targets. We are making good strategic, operational and financial progress, and all our businesses are well positioned for compelling value creation.

“We have high-quality teams, an incredible breadth of engineering excellence, and a relentless focus on our customers. Effective strategy execution is enhancing our performance – and we will build on, and out from, this solid foundation, enabling us to grow more profitably to make Smiths even better. This will be delivered through improved prioritisation of investment in R&D and innovation to power organic growth; the Group-wide Acceleration Plan, which is designed to drive productivity and profitability – bringing delivery of our medium-term margin target closer; and disciplined M&A, all of which offer the opportunity to augment overall performance.

“As a team, we focus on solving our customers’ toughest problems and are united by our purpose of engineering a better future. Thank you to all my colleagues for a great year. I look forward to achieving even more together, as we continue to accelerate value creation for all our stakeholders.”

We also augment our organic growth with disciplined M&A and today have announced two acquisitions with a combined value of £95m at an EBITDA multiple of c.8x, enabling expansion in Flex-Tek’s HVAC and electrical heating solutions platforms. An additional amount of up to £15m is payable subject to the performance of one of the acquisitions over a three-year period.

·    Modular Metal Fabricators, Inc. (Modular Metal) is a US-based metal and flexible ducting manufacturer which expands Flex-Tek’s geographical presence in the western US and broadens its product range to include Modular Metal’s sealed flexible duct solution. This acquisition builds on our August 2023 acquisition of HCP, which expanded our geographical coverage in North America and added HCP’s patented axial and radial seal duct products.

·    Through the acquisition of Wattco, Inc. (Wattco), Flex-Tek expands into medium temperature immersion and circulation heating – an attractive market adjacency and highly complementary to our existing open coil electrical heating businesses. This acquisition follows our successful acquisition of SureHeat in 2017. Wattco also brings additional capability in terms of supplying vertically integrated heating solutions and will be integrated into the Flex-Tek heat solutions business.

·    The acquisition of Wattco has already completed, while Modular Metal is expected to complete in Q1 FY2025.

Statutory reporting and definitions

Statutory reporting takes account of all items excluded from headline performance. See accounting policies for an explanation of the presentation of results and note 3 to the financial statements for an analysis of non-headline items. The following definitions are applied throughout the financial report:
¹ Organic is headline adjusted to exclude the effects of foreign exchange and acquisitions.

² Headline: In addition to statutory reporting, the Group reports on a headline basis. Definitions of headline metrics, and information about the adjustments to statutory measures, are provided in note 3 to the financial statements.

³ Heating, ventilation and air conditioning.

⁴ Alternative Performance Measures (APMs) and Key Performance Indicators (KPIs) are defined in note 29 to the financial statements.

Presentation

A webcast presentation and Q&A will begin at 08.30 (UK time) today at: https://smiths.com/investors/results-reports-and-presentations. A recording will be available from 13.00 (UK time).

UPCOMING EVENTS

Smiths Group are pioneers of progress – engineering a better future. We are focused on solving the toughest problems for our customers, helping address critical global needs such as safety and security, decarbonisation and the ever-increasing demand for connectivity. At the same time, we are building the long-term strength and resilience of Smiths Group and our global operations. We are united by our purpose. It is what we do, how we think, and how we will continue to use our passion for innovative technology and engineering.