Smiths Group (LSE:SMIN) reported headline operating profit of £399 million for the year ended 31 July 2026, exceeding the company-compiled analyst consensus of £388 million, as the industrial engineering group continued to restructure its portfolio.
Headline operating profit increased 2.7% from £388 million a year earlier, while revenue rose 2.1% to £1.94 billion. Organic revenue growth was 1.2%.
The company also announced that it had launched a process to divest a legacy US asbestos liability associated with its John Crane business.
Smiths shares rose more than 5% in early London trading following the announcement.
Revenue Rises 2.1% to £1.94 Billion
Smiths Group reported annual revenue of £1.94 billion, representing an increase of 2.1% compared with the previous financial year.
Organic revenue growth, which excludes the effects of acquisitions, disposals and currency movements, was 1.2%.
Headline operating profit increased 2.7% to £399 million, ahead of the company-compiled analyst consensus of £388 million.
The headline operating margin improved to 20.6% from 20.5%, while return on capital employed stood at 23.5%.
Headline earnings per share rose 6.0% to 86.8 pence.
On a statutory basis, operating profit declined 16.6% to £289 million, reflecting one-off items associated with the group’s portfolio restructuring.
The difference between headline and statutory operating profit reflects the impact of these adjustments on the reported results.
John Crane Records 2.3% Organic Growth
John Crane, Smiths Group’s industrial engineering business, reported organic revenue growth of 2.3% during FY2026.
Performance was supported by original equipment sales and activity in the Americas.
However, the division absorbed an estimated £20 million impact associated with the Middle East conflict.
The company did not provide further details of the disruption or its potential implications for FY2027 in the supplied announcement.
John Crane remains a central part of Smiths Group’s industrial engineering operations following the disposal of other businesses.
Flex-Tek Revenue Declines 0.4% Organically
Flex-Tek reported a 0.4% decline in organic revenue for the financial year.
Growth in aerospace was offset by weaker sales in construction and thermal solutions.
Smiths has been adjusting Flex-Tek’s portfolio through acquisitions and disposals as part of its wider restructuring programme.
During the year, the company sold three Flex-Tek industrial businesses for £40 million.
It also acquired DRC HeatTransfer for £165 million, expanding Flex-Tek’s activities into cooling and data centre markets.
The acquisition forms part of the group’s efforts to develop its remaining industrial engineering businesses.
Interconnect and Detection Disposals Reach £3.3 Billion
Smiths Group completed the disposals of its Interconnect and Detection businesses for a combined enterprise value of £3.3 billion.
The transactions formed part of the company’s strategy to concentrate its operations on industrial engineering.
The combined disposal value exceeded market expectations, according to the company.
Smiths also completed the £40 million sale of three Flex-Tek industrial businesses and acquired DRC HeatTransfer for £165 million.
Chief Executive Roland Carter described FY2026 as a year of significant strategic progress as the company moved towards a more focused industrial engineering portfolio.
The transactions have changed the composition of the group, with its future financial performance increasingly dependent on its remaining operations.
Process Launched to Divest US Asbestos Liability
Smiths Group announced that it had initiated a process to divest a legacy US asbestos liability associated with John Crane.
The proposed transaction is intended to remove the liability from the group’s balance sheet and reduce earnings volatility.
The company has not confirmed a buyer, transaction value or completion timetable.
Any reduction in liabilities and earnings volatility remains conditional on the successful completion of a disposal.
The announcement represents a further element of Smiths Group’s efforts to simplify its financial and operational structure following its portfolio disposals.
Net Cash Reaches £1.75 Billion
Smiths Group ended FY2026 with net cash of £1.75 billion.
The balance sheet position was strengthened by pension fund transactions during the year.
The company also progressed its capital return programme, completing £1.5 billion of a planned £3 billion share buyback.
A further £1.5 billion remains to be returned under the programme.
The buyback is taking place alongside the group’s restructuring and investment in its remaining businesses.
Smiths has not specified a completion date for the outstanding share repurchases in the supplied announcement.
FY2027 Organic Revenue Growth Forecast at Approximately 4%
Smiths Group expects organic revenue growth of approximately 4% in FY2027.
The company is also targeting a headline operating margin of around 21% for the financial year.
The guidance follows FY2026 organic revenue growth of 1.2% and a headline operating margin of 20.6%.
Smiths reiterated its medium-term targets of 5% to 7% organic revenue growth and a headline operating margin of 21% to 23%.
These targets reflect management’s expectations for the remaining industrial engineering portfolio following the recent disposals and acquisitions.
Actual performance will depend on trading conditions, the contribution from the group’s businesses and the execution of its restructuring plans.
Outlook
Smiths Group enters FY2027 following the disposal of its Interconnect and Detection businesses, further changes to Flex-Tek’s portfolio and the completion of half of its planned £3 billion share buyback.
The company expects organic revenue growth of approximately 4% and a headline operating margin of around 21% in the new financial year.
Management is also pursuing the disposal of John Crane’s legacy US asbestos liability, although the proposed transaction has not yet been completed.
The group’s medium-term objectives remain organic revenue growth of 5% to 7% and a headline operating margin of 21% to 23%, as it focuses on its remaining industrial engineering operations.
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