Smiths Group plc
Annual Results for the year ended 31 July 2020
Strong now and for the future
- A robust FY2020 performance despite the disrupted second half, reflecting the Group's market-leading positions and flexible business model
- FY2021 focus continues to be on safeguarding employees and optimising performance
- The strategic restructuring programme is well underway, £70m benefits expected by FY2022
- Strategic intent to separate Smiths Medical unchanged
- Maintaining resilience in the short term, but investing for long-term value creation
Andy Reynolds Smith , Group Chief Executive, commented:
“The strength and flexibility we have built into the business, and the benefits of the Group's strategic positioning, underpinned a robust performance in challenging market conditions.
Our priorities remain the safety of our people and keeping the business running flawlessly to support customers. I'm incredibly grateful to our amazing people for their dedication in difficult times, which ensured we delivered in the year and continue to maximise opportunities for future growth.
The strength of performance during the year and our confidence in the future support the proposed total dividend. We remain prudent as we continue to navigate the ongoing uncertainty.
We have continued to enhance the Group's strategic positioning, through execution of the restructuring programme, completion of three further bolt-on acquisitions and our unchanged commitment to separate Smiths Medical.
We are seeing a stabilisation of recent trends; but we are not complacent and are continuing to strengthen the business to deliver sustainable outperformance in the future.”
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Headline1 |
Statutory |
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FY2020 £m |
FY2019 £m |
Reported growth |
Underlying growth2 |
FY2020 £m |
FY2019 £m |
Reported growth |
|
Smiths continuing operations3 |
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Revenue |
2,548 |
2,498 |
+2% |
(1)% |
2,548 |
2,498 |
+2% |
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Operating profit ex. restructuring & write-downs4,6
|
382 |
427 |
(11)% |
(13)% |
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|
Operating profit |
327 |
427 |
(23)% |
(13)% |
241 |
326 |
(26)% |
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Smiths Medical – discontinued operations3 |
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Revenue |
918 |
874 |
+5% |
+4% |
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|
|
Profit after tax |
139 |
112 |
+24% |
(3)% |
200 |
85 |
+135% |
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Total Group5 |
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Profit for the year |
338 |
385 |
(12)% |
|
267 |
227 |
+18% |
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Basic EPS |
84.8p |
96.8p |
(12)% |
(12)% |
66.9p |
56.8p |
+18% |
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Free Cash-Flow6 |
273 |
234 |
+17% |
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Dividend |
35.0p |
45.9p |
(24)% |
|
35.0p |
45.9p |
(24)% |
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 acquisition related intangible assets and provision for asbestos litigation in John Crane, Inc.
Operational resilience
- Robust topline performance despite significant market disruption
- Strong business continuity and exemplary customer service maintained during the pandemic with temporarily higher costs
- Rewarded with further contract wins
Financial strength
- Headline cash conversion6 at 123% (FY2019: 83%)
- Net debt6 of £1.1bn (including leases) and EBITDA6 (Continuing and Discontinued) of £610m; a ratio of 1.7x (1.9x including restructuring and write-downs)
- Cash of c.£390m and undrawn RCF of c.£610m; total liquidity headroom of £1bn
- Total dividend of 35 pence per share reflecting delayed interim dividend of 11 pence per share and proposed final dividend of 24 pence per share
Attractive strategic fundamentals
- Resilient characteristics: highly-differentiated, market-leading products and services; significant aftermarket activity serving critical industries; flexible cost base and strong cash generation
- Well-positioned in long-term, attractive growth markets
- A culture of innovation, entrepreneurship and relentless execution
- Organic growth complemented by disciplined M&A and portfolio optimisation
Outlook
- Guidance remains withdrawn, given the uncertain depth and duration of the COVID-19 pandemic
- Current trading reflects market conditions, with revenue for the four months to end of August stabilising at (5)% for the Group (continuing operations (8)%) against pre-COVID comparators
- Continued focus on optimising performance, including the strategic restructuring programme which is well underway and expected to deliver £70m of benefits by FY2022
- Strategic intent to separate Smiths Medical unchanged
- Maintaining resilience in the short term, but investing for long-term value creation