19 September 2012

Annual results for the year ended 31 July 2012

£m Headline*     Statutory
Continuing activities 2012 2011 Growth Underlying# 2012 2011
Revenue 3,038 2,842 7% 5% 3,030 2,842
Operating profit 554 517 7% 7% 407 438
Operating margin 18.2% 18.2% - - 13.4% 15.4%
Pre-tax profit 497 463 7% 7% 366 398
Basic EPS 92.6p 86.5p 7%   65.4p 77.8p
Free cash flow 217 236        
Dividend 38.0p 36.25p 5%   38.0p 36.25p
Return on capital employed 16.5% 16.4% 10 bps      

*In addition to statutory reporting, Smiths Group reports its continuing operations on a headline basis. Headline revenue and profit is before exceptional items, amortisation and impairment of acquired intangible assets, profit/loss on disposal of businesses, costs of acquisitions, pension finance credit and financing gains/losses from currency hedging. Free cash-flow and return on capital employed are described in the Financial review.  2011 headline pre-tax profit, headline basic EPS and return on capital have been restated (see notes 1 and 3 to the accounts).
#Organic growth at constant currency.

You can click here to view the full press release.

The presentation slides and a live webcast of the presentation to analysts is available at www.smiths.com/results.


  • Headline revenue 7% higher; growth across all divisions
  • Headline operating profit up 7% - as investment in growth drivers is increased
  • Company-funded investment in new product development up 9% to £107m
  • Emerging market revenue up 14%; now representing 15% of Group revenues
  • Performance improvement initiatives on track in Smiths Detection; improving order book
  • Strong headline operating cash conversion at 99% – with free cash-flow of £217m
  • Dividend up 5%

"Smiths Group has performed well in a persistently tough economic environment, growing revenue across all divisions with a stronger performance in the second half.  Headline margins were maintained while we significantly increased our investment in sales, marketing and new product development. We achieved strong cash conversion, and return on capital was also ahead of last year.

"The economic environment remains uncertain. Pressures on government spending are expected to continue, particularly given the risk of budget sequestration in the US and widespread concerns over national debt levels in parts of Europe.  These conditions are likely to continue to constrain those parts of our business with government-funded customers.

"However, our investment initiatives are building a solid foundation to accelerate medium-term revenue growth. We will continue to deliver operational improvements and efficiencies, while balancing increased investment in the drivers of long-term profitable growth with opportunities to enhance margins and returns.  Subject to economic conditions, I am confident we can continue to grow sales, deliver further operational improvements, achieve strong cash conversion and improve returns."

Philip Bowman

Chief Executive
Smiths Group plc

Divisional highlights*

    Headline operating profit margin Headline return on capital employed
  % of Group headline revenue Underlying headline revenue growth* Underlying headline profit growth* 2012 2011 2012 2011
John Crane 32% 9% 11% 21.6% 21.1% 24.0% 21.8%
Smiths Medical 28% 2% 2% 23.5% 23.4% 17.6% 16.9%
Smiths Detection 17% 3% 13% 13.3% 12.8% 10.3% 9.8%
Smiths Interconnect 15% 3% (9)% 14.7% 17.8% 12.3% 15.7%
Flex-Tek 8% 5% 36% 16.3% 12.5% 28.4% 21.9%
Group 100% 5% 7% 18.2% 18.2% 16.5% 16.4%

John Crane

  • Revenue up 9% driven by both original equipment and aftermarket revenue, particularly in the oil and gas sector
  • Margins improved 50 basis points to 21.6%, while increasing investment in future growth drivers
  • TCE acquisition completed and integration well underway; expands our bearings aftermarket offering
  • Order book provides visibility for continued growth through the first half of financial year 2013.

Smiths Medical

  • Revenue growth of 2% driven by strong H2 with new product launches and growth in emerging markets
  • Growth despite tough operating environment with healthcare spend constraints and pricing pressures
  • Invested £7m in additional sales capabilities in emerging markets; 9% increase in new product development
  • Investment initiatives will continue in the coming year to drive future sales growth

Smiths Detection

  • Revenue up 3% with strong H2 recovery; driven by transportation, critical infrastructure and ports and borders
  • Margins benefiting from £8m of efficiency savings, net of restructuring costs
  • Performance improvement programme on track with site rationalisation and 8% headcount reduction
  • Significant recent contract wins and strong product pipeline lay a solid foundation for 2013

Smiths Interconnect

  • Revenue up 3% driven by strong growth in microwave offset by declines in connectors and power management
  • Revenue also helped by acquisition of Power Holdings, Inc., by expanding our product offering into new markets
  • Margins reduced by adverse pricing/mix and the dilutive impact of Power Holdings acquisition
  • Markets remain challenging, particularly for defence customers


  • Revenue up 5% driven primarily by aerospace and US residential construction
  • Improved volumes, mix and pricing contributed to a strong increase in margins
  • The aerospace and US construction sectors are expected to support continued sales growth
  • Margins are geared to volume improvements across Flex-Tek's end markets

*All figures are on a headline basis. Revenue and profit growth are at constant currency and exclude the impact of acquisitions and disposals