Smiths Group Reports Strong FY2025 Results, Exceeding Guidance
Why we think this is good
The company has delivered a robust performance in FY2025, surpassing its twice-raised growth guidance with an 8.9% organic revenue increase. Headline operating profit grew by 10.3% to £580m, with margin expansion of 60bps to 17.4%. The 14.8% growth in headline EPS to 121.2p is particularly noteworthy. However, the outlook for FY2026 suggests a moderation in growth to 4-6%, indicating some headwinds. The increase in net debt to £441m, primarily due to strategic investments and share buybacks, warrants attention. While the company demonstrates strong cash generation and operational efficiency, ongoing macro-economic uncertainties and the execution risks associated with the separation of Smiths Interconnect and Smiths Detection temper the overall positive sentiment.
Key Points
- Organic revenue growth of 8.9%, exceeding twice-raised guidance
- Headline operating profit up 10.3% to £580m
- Headline operating profit margin expanded 60bps to 17.4%
- Headline EPS grew 14.8% to 121.2p
- Free cash flow increased to £336m from £298m
- Net debt increased to £441m from £213m
- FY2026 outlook: organic revenue growth expected at 4-6%
- Separation processes for Smiths Interconnect and Smiths Detection progressing
- Final dividend increased by 5.1% to 31.77p per share
- Acceleration Plan on track with £22m costs incurred in FY2025
Summary
Smiths Group has reported a strong performance for FY2025, exceeding its twice-raised growth guidance with an 8.9% organic revenue increase to £3,336m. The company saw headline operating profit grow by 10.3% to £580m, with a margin expansion of 60bps to 17.4%. Notably, headline EPS grew by 14.8% to 121.2p. All businesses contributed to this growth, demonstrating the strength across the Group's portfolio. However, the outlook for FY2026 suggests a moderation in organic revenue growth to 4-6%, reflecting ongoing macro-economic uncertainties. The company's strategic actions, including the planned separations of Smiths Interconnect and Smiths Detection, are progressing. While these moves aim to unlock value, they also present execution risks. The increase in net debt to £441m from £213m, primarily due to share buybacks and acquisitions, requires monitoring. Despite these challenges, Smiths Group maintains a strong balance sheet with a net debt to headline EBITDA ratio of 0.6x and continues to demonstrate strong cash generation with free cash flow increasing to £336m.