Smiths Group (LSE:SMIN) reported organic revenue growth of 1.2% for the year ended 31 July, alongside an expansion in headline operating profit margin to 20.6%, as the industrial engineering group completed a strategic overhaul of its portfolio.
The FTSE 250 group divested Smiths Interconnect and Smiths Detection for a combined enterprise value of £3.3bn, at valuations of 15.1 times and 12.5 times FY2025 earnings before interest, tax, depreciation and amortisation respectively, which it said came ahead of market expectations.
Net cash stood at £1,747m, strengthened further by pension fund transactions, with operating cash conversion of 96%.
Headline operating profit rose 1.9% organically to £399m, with return on invested capital at 23.5%.
John Crane, the group's seals and sealing systems business, grew organic revenue by 2.3%, absorbing a roughly £20m hit from the conflict in the Middle East; stripping that out, growth ran closer to 4%.
Flex-Tek's organic revenue fell 0.4%, as strong aerospace demand was offset by weaker US residential construction and thermal solutions sales.
The company acquired DRC Heat Transfer for £165m to extend Flex-Tek into data centre cooling markets, while agreeing to sell three Flex-Tek industrial businesses for £40m as part of further portfolio high-grading.
Smiths also launched a process to divest the John Crane US legacy asbestos liability.
It completed a £1.5bn share buyback, with a further £1.5bn still to be returned to shareholders.
For FY2027, Smiths guided to organic revenue growth of approximately 4% and a headline operating profit margin of roughly 21%.
"We are delivering significant value today while creating a clear pathway to substantial long-term value creation and sizeable returns for shareholders," said chief executive Roland Carter.
News Intelligence what this means for the company
Smiths Group completed a £3.3bn portfolio exit (Detection and Interconnect divisions) at valuations ahead of market expectations, leaving the company with £1.75bn net cash and a leaner, higher-margin core. The group guided to ~4% organic revenue growth and ~21% operating margin for FY2027—both material step-ups from FY2026's 1.2% growth and 20.6% margin—signalling confidence that the divested units were drag, not anchor.
The sale prices (15.1x and 12.5x EBITDA) validate that Smiths extracted fair value from non-core assets rather than fire-selling; the £1.75bn cash position and £1.5bn remaining buyback capacity give the board room to fund the DRC Heat Transfer bolt-on (£165m) and pursue further M&A without dilution. The FY2027 guidance—if met—would mark a structural improvement in both growth and profitability, though execution risk remains on the 4% organic growth target in a softening macro.
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