Smiths Group upbeat on half-year performance, acquires Duc-Pac

(Sharecast News) - Smiths Group reported a strong set of half-year results on Tuesday, underpinned by continued execution of its value creation strategy and supported by organic growth and margin expansion, as it also announced the acquisition of the US-based Duc-Pac. The FTSE 100 industrial technology group recorded organic revenue growth of 9.1% for the six months ended 31 January, with headline operating profit rising 12.6% organically, leading to a 50 basis point expansion in organic operating margin to 16.7%.

Headline earnings per share increased 14%, and the interim dividend was raised by 5% to 14.23p per share.

Statutory results also showed marked improvements, with operating profit up 26% to £242m and profit after tax growing 51.4% to £168m.

Return on capital employed improved by 140 basis points to 17.1%, while operating cash conversion rose to 94%.

The group reaffirmed its full-year guidance, previously upgraded twice during the financial year, targeting organic revenue growth of 6% to 8% and operating margin expansion of between 40 and 60 basis points.

Smiths said it was focussed on enhancing shareholder returns, having completed £150m of its ongoing £500m share buyback and invested £97m in acquisitions during the period.

A further £32m bolt-on acquisition was announced alongside the results.

Smiths Group said it was continuing to reshape its portfolio, with the separation processes for Smiths Interconnect and Smiths Detection now underway following the January announcement of strategic actions to unlock value.

The company said it was focusing on its core high-performance industrial technology businesses, John Crane and Flex-Tek, which it saw as offering greater opportunities for growth and improved returns.

New, enhanced medium-term financial targets have been set for the 'FutureSmiths' portfolio, with higher expectations for growth, margins and returns.

"We have delivered another strong financial performance which, combined with ongoing strategic and operational progress, underpins our confidence in achieving our twice-raised full year guidance," said chief executive officer Roland Carter.

"The portfolio actions that we announced in January 2025 are being advanced with pace and purpose, with the separation processes for Smiths Interconnect and Smiths Detection underway.

"The attraction of 'FutureSmiths' is compelling - by focusing on our world-class, high-performance John Crane and Flex-Tek businesses we will deliver sustainable growth, higher margins, returns and earnings growth, as reflected in our new enhanced medium-term financial targets."

Carter said the company's strong cash generation enabled it to continue to invest in the business both organically and inorganically, while being able to distribute significant capital to shareholders.

"We believe this will deliver substantial value creation."

In a separate announcement, Smiths Group confirmed the acquisition of Duc-Pac Corporation, a US-based manufacturer of metal ducts for HVAC applications, for $40.5m (£32m).

The business would be integrated into the construction segment of Flex-Tek.

Smiths said the acquisition would extend its geographical footprint in the north-east US and support its strategy to build an integrated national offering in its North American construction segment.

The company said it expected to benefit from increased market presence and cross-selling opportunities.

"We see an exciting future in our Flex-Tek business as we continue to invest for growth," CEO Roland Carter added.

"We are building a strong track record of successfully integrating bolt on acquisitions to augment our strong organic growth.

"The acquisition of Duc-Pac enhances our North American construction business, with many customer synergies and growth opportunities."

Smiths said that as with its previous construction bolt-on acquisitions, the Duc-Pac acquisition would be accretive to group margin.

It said it was acquired for a 7.2x trailing 12 months reported EBITDA.

At 0814 GMT, shares in Smiths Group were down 1.2% at 1,972p.

Reporting by Josh White for Sharecast.com.