Smiths posts 'solid' first-half results but outlook disappoints

(Sharecast News) - Shares in Smiths Group fell sharply on Friday despite a "solid" first-half performance, after the outlook underwhelmed. The 175-year old engineer saw headline group revenues rise 2.2% in the six months to January end to £1.4bn, or by 4.0% on an organic basis. Operating profits were 7.2% stronger at £248m, with total group basic earnings per share up 8.4% at 62p.

Smiths, which is undergoing a major reorganisation, called the first half a "solid financial performance". The group agreed to sell its electrical connectors unit Smiths Interconnect last year along with Smiths Detection, which makes baggage-screening scanners for airports, for a combined enterprise value of £3.3bn.

Of its remaining units, Smiths said seals and components specialist John Crane had seen mid-single digit growth in the second quarter, with that momentum continuing into the last six months of the year.

Heating elements manufacturer Flex-Tek, meanwhile, had seen strong growth in aerospace offset by ongoing weakness in the US construction market.

Roland Carter, chief executive, said: "2026 is a significant year of progress as we reposition Smiths towards higher growth and higher returns markets.

"We delivered increased momentum in the second quarter, and our strong order book supports an improved second-half performance."

The blue chip also announced plans to return a further £1.5bn to shareholders through a special dividend and share buyback throughout 2027. However, looking to the current full-year, and Smiths' outlook disappointed.

Updated to reflect continuing businesses only, the group now expects organic revenue growth of between 3% and 4%, with stronger momentum in the second half.

It also confirmed it was keeping a close eye on the crisis in Middle East. "We are prioritising the safety of our people who work in the region. We continue to monitor the potential size and duration of any impacts on performance which are not incorporated into our current guidance." The region contributed around 7% of group revenues, primarily through John Crane, in the first half.

As at 1030 GMT, Smiths was off 7% at 2,178p.

Jefferies, which has a 'hold' rating on the blue chip, said first-half sales were slightly below consensus, while the outlook figures "look light".

Panmure Liberum, which has a 'buy' rating, said: "Noting a 3% forex headwind to sales and a lower net interest guidance of £30m to £35m, as the Interconnect disposal, is nearing completion, in aggregate we expect consensus full-year pre-tax profit to be revised down around 2%."

On a statutory basis, reported revenues from continuing operations dipped 1% to £915m while operating profits fell 4.8% to £159m.

The sale of Interconnect is due to complete imminently, while Smiths said Detection was on track to close by the end of the current calendar year.

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