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Smiths Group Plc - Annual Results

 

Smiths Group plc Annual Results for the year ended 31 July 2019

London, Friday 20 September 2019

 

Building on our return to growth

 

 

Headline1

Statutory

 

FY2019
£m

FY20182
£m

Reported
growth

Underlying3
growth

FY2019
£m

FY20182
£m

Reported
growth

Continuing Operations4

 

 

 

 

 

 

 

Revenue

2,498

2,328

+7%

+3%

2,498

2,328

+7%

Operating profit

427

388

+10%

+4%

326

342

(5)%

Operating margin

17.1%

16.7%

+40bps

 

13.1%

   14.7%

  (160)bps

Pre-tax profit

376

333

+13%

 

304

287

+6%

Profit after tax

273

246

+11%

 

142

119

+19%

 

Discontinued Operations5

Profit after tax

112

115

(3)%

 

85

160

(47)%

 

Total Group

Profit for the year

385

361

+7%

 

227

279

(19)%

 

 

 

 

 

 

 

 

Free cash-flow

234

302

(23)%

 

 

 

 

Return on capital employed

14.4%

14.6%

(20)bps

 

 

 

 

Basic EPS

96.8p

90.7p

+7%

+3%

56.8p

70.0p

(19)%

Dividend

45.90p

44.55p

+3%

 

 

 

 

 

Continuing Operations - excluding Smiths Medical

Further good growth, in line with expectations

  • Underlying revenue +3%, building on the Group's return to growth last year.  Strong performances in John Crane, Flex-Tek and Interconnect, moderated by the timing of deliveries in Smiths Detection
  • The net impact of acquisitions and disposals and favourable foreign exchange translation each added a further 2% to revenue growth.  As a result, reported revenue increased 7%

Focused on operational excellence

  • Good underlying headline operating profit growth, +4%
  • Continued margin improvement, +40bps to 17.1%

Value creative investment

  • Continued investment for sustainable growth, with cash R&D 4.5% of sales (FY2018: 4.1%)
  • Further progress on portfolio optimisation - now over 90% well positioned. Two acquisitions completed during the year including Flex-Tek's acquisition of United Flexible for $345m in February 2019

 

Discontinued Operations - Smiths Medical

Separation of Smiths Medical on track for H1 CY2020

  • Returned to growth in H2, with underlying revenue +2%; flat for the year with an improved margin in H2
  • Further New Product Introductions (NPIs) and submission of its large volume pump to the US regulator for first phase review
  • New Smiths Medical CEO, JehanZeb Noor, joined in July

 

Total Group

Strong financial framework

  • The differences between headline and statutory operating profit are non-headline items as defined in note 3 to the accounts, of which the largest constituents are the amortisation of acquired intangibles, and the Guaranteed Minimum Pensions (GMP) equalisation
  • Basic headline EPS up 7% to 96.8p but down 19% on a statutory basis due to the reasons stated above
  • Continued strong balance sheet; net debt to EBITDA 1.8x
  • Operating cash conversion 83%, temporarily impacted by working capital - increase in current receivables following strong end to the year and higher inventory associated with order phasing in Smiths Detection and John Crane
  • Proposed final dividend of 31.80 pence per share.  Full year dividend increased by 3%

 

Outlook

  • Further progress expected in FY2020, with year on year growth weighted towards the first half; resulting in a more even balance in overall performance between the first and second halves
  • If current rates prevail, foreign exchange will provide a tailwind
  • Improved operational excellence and cash generation
  • On course to grow faster than our markets over the medium-term

 

Andy Reynolds Smith, Group Chief Executive, commented:

"FY2019 was a significant year in the evolution of Smiths. We continue to build sustainable growth, paving the way to outperform our markets.  Importantly, this growth was coupled with enhanced margins, we have now delivered a 300 basis points margin improvement since 2016.  In addition, we continued to optimise our portfolio, with two acquisitions completed in the year.

In this context of progress and confidence in the future, we announced plans to separate Smiths Medical to create two stronger, industry-leading companies. I am delighted to have welcomed JehanZeb Noor as CEO of Smiths Medical. The separation process is progressing well; we are on track for demerger by the end of the first half of CY2020.

In FY2020 we expect to make further progress, with year on year growth weighted towards the first half and resulting in a more even balance in overall performance between the first and second halves.  At current rates, foreign exchange will provide a tailwind to revenue and profit.

We remain on course to grow faster than our markets over the medium-term.  Our strategy is to focus the portfolio for growth and deliver world-class competitiveness, within a strong financial framework.  The Board remains confident that this will drive long-term sustainable growth and attractive returns."