Regulatory News Item
Smiths was ready to publish its interim financial results today. However, it is complying with regulatory guidance to all
The key focus remains the safety of staff, business continuity, and actions to ensure resilience in the context of market uncertainty.
Good growth in the half
· Continuing Operations1 delivered underlying2 revenue growth for the 4th consecutive period, up +3%. Reported revenue increased +8%, including the acquisition of United Flexible.
· Flex-Tek revenue increased +3% on an underlying2 basis, with growth in both aerospace and industrial end markets.
· Smiths Interconnect revenue declined (7)% on an underlying2 basis, driven by previously communicated market weakness and a strong comparative period. Lower volumes, plus the relocation of production capacity, temporarily impacted margins.
Financial strength and resilience
In HY2020 the Group again delivered strong cash generation, driven by operating cash conversion of 98%.
The Group has a strong balance sheet. At the end of HY2020;
· Net debt was
· Total liquidity headroom was in excess of
It is our understanding that Smiths should also be eligible to access up to
The Group's pension plans are well funded, hedged and invested. Taken together, the two large
Smiths also benefits from a purposefully resilient business model;
· Leading positions in attractive markets
· Capex-light, with a significant proportion of recurring aftermarket and service revenues
· A flexible cost base with c.60% of cost of sales being materials and other variable costs
· Serving critical industries with sustainable growth characteristics
· Operational excellence
· High structural cash conversion and strong balance sheet
Smiths activated its central crisis management team in
The health and safety of our people is paramount and we have put measures in place to ensure that they remain safe. These measures include working from home for employees who can, alternating shift schedules and infection controls in manufacturing sites.
Impact on trading year-to-date
Group trading to the end of March was affected to some extent by early COVID-19 disruption, which is now accelerating. In HY2020 only the Chinese operations of
For the 8 weeks ended
We have adopted measures to reduce cost and conserve cash including hiring freezes, cancellation of discretionary expenditure and postponement of non-essential capex. We have reinforced controls around receivables and payables, including cash tax (corporate, indirect and payroll).
We are now seeing generally weaker demand, but with some mitigating factors;
· Some customers have temporarily closed their facilities and have not been able to accept delivery of equipment and services.
· Together with lower oil prices, energy customers have announced reductions in capital expenditure.
· Passenger airports are closing or operating at significantly reduced capacity, with knock-on impact on both OE and aftermarket revenue. However,
· Smiths is making a significant contribution to meeting the global demand for ventilators and other critical care devices.
We have experienced some disruption to supply chain and production;
· As of
· We are pre-emptively obtaining government authorisation for sites to remain open where applicable, given the critical nature of our products.
· A central coordination team is working in real time with operating units and suppliers, to identify and resolve potential operations and supply chain issues.
We are moving decisively on a number of fronts to address the near-term challenges. Although we believe that we are in a strong position, it is too early to assess the full impact of COVID-19. Therefore we are withdrawing forward guidance for FY2020.
Delay to the separation of
The previously announced separation of
We remain confident in the strength of the Group's financial position. However, at this time of unprecedented uncertainty, the Board considers it prudent not to declare an interim dividend for HY2020. Recognising the importance of the dividend to shareholders, the Board will review this decision again later in the financial year as trading conditions become clearer.
Beyond the near-term challenges of COVID-19, the Group is well placed to deliver consistent outperformance;
· Businesses well-positioned in long term, attractive growth markets
· Products and services differentiated by market-leading, innovative technology
· World-class operational excellence
· A culture of innovation, entrepreneurship and relentless execution
· Organic growth complemented by disciplined M&A
"I have been inspired and am so proud of everything our people are doing around the world as we navigate Smiths through these unprecedented and challenging times. Smiths is a strong and naturally resilient business and we will come through this period well positioned for the future. Our business benefits from financial strength, flexibility and a strong balance sheet with significant liquidity. We are keeping our customers running, whilst staying safe and looking out for each other through the disruption. I'm very grateful to our global team for all their efforts."
1 Continuing Operations exclude
2 Underlying modifies headline performance to adjust prior year to reflect an equivalent period of ownership for divested businesses, and excludes the effects of foreign exchange and acquisitions.
3 Smiths Industries Pension Scheme (SIPS) and TI Group Pension Scheme (TIGPS).
Legal Entity Identifier (LEI): 213800MJL6IPZS3ASA11
Original high-resolution photography is available to the media from the media contacts above or from http://www.smiths-images.com/
This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding the intentions, beliefs and/or current expectations of
This information is provided by RNS, the news service of the