Smiths Group plc Interim Results for the half year ended 31 January 2020
Strength & Resilience
- Good growth that continued into the first 2 months of the second half.
- Excellent cash conversion.
- Strong balance sheet.
- Increasing trend of weakening demand with the exception of Smiths Medical.
- Resilient business model and actions in place to respond to market changes.
|Reported growth||Underlying growth3||HY 2020
|Profit after tax||70||54||+30%||-||133||67||+99%|
|Profit for the half year||187||160||+17%||-||145||121||+20%|
The differences between headline and statutory operating profit are non-headline items as defined in note 3 to the accounts, of which the largest constituents are the offsetting impact of foreign exchange on an intercompany loan between the continuing and discontinued operations, amortisation of acquisition related intangible assets and provision for asbestos litigation in John Crane, Inc.
Smiths Continuing Operations: strong results
- 4th consecutive half of good growth with underlying revenue up +3%, and United Flexible acquisition adding a further 5% of growth. As a result, reported revenue increased +8%.
- Strong profit growth across John Crane, Smiths Detection and Flex-Tek, held back by market weakness in Smiths Interconnect.
- Excellent cash generation; 109% cash conversion.
Smiths Medical discontinued operations: excellent further progress
- Another period of revenue and profit growth, both up +1% on an underlying basis.
- As previously announced, separation delayed due to uncertain conditions.
- A strong start to the second half with increasing demand for critical care products globally.
- Free Cash Flow £132m, up 86%.
- Net debt of £1.3bn (including leases) and EBITDA (Continuing and Discontinued) of £699m; a ratio of 1.8x.
- Issued debt has average maturity of 4.6 years, no maturities until October 2022 & no covenants.
- Cash of c.£250m and undrawn RCF of c.£600m; total liquidity headroom in excess of £850m.
- Based on credit rating, eligible for up to £600m in funding via the CCFF.
- Pension plans well hedged, well funded and well invested.
- In HY2020 only the Chinese operations of John Crane and Interconnect were disrupted.
- Trading to the end of March was affected to some extent by early COVID-19 disruption; this is now accelerating with impact on both demand and supply in the near-term.
- Resilient characteristics: capex-light, flexible cost base, significant aftermarket activity serving critical industries and strong cash generation.
- Actions to reduce costs and protect cash in place.
Attractive strategic fundamentals
- Well-positioned in long term, attractive growth markets.
- Highly-differentiated, market-leading products and services.
- Organic growth complemented by disciplined M&A.
- World-class operational excellence.
- A culture of innovation, entrepreneurship and relentless execution.
Andy Reynolds Smith, Group Chief Executive, commented:
“We started the year strongly, delivering good growth and cash across the Group. This positive start has also continued during the first two months of the second half, demonstrating the quality and financial strength of our business.
Over the coming months, COVID-19 presents significant uncertainty and our number one priority is to keep our people safe and well. We enter this period confident in our resilience and preparedness; financially, operationally and strategically. We have clear plans underway to contain costs, flex our operations, maximise business continuity and conserve cash. This combined with the significant built-in resilience and our diverse critical end markets with long term structural drivers, will deliver the very best performance through this period and position us well for the future. I’m deeply grateful to our incredible people who are handling this terrible situation with real grit and determination in these challenging times.”
Statutory reporting takes account of all items excluded from headline performance. On a statutory basis, total Group profit for the half year was £145m (HY 2019: £121m) and basic earnings per share were 36.3p (HY 2019: 30.3p).
See accounting policies for an explanation of the presentation of results and note 3 to the financial statements for an analysis of non-headline items.
The following definitions are applied throughout the document:
1Headline: In addition to statutory reporting, the Group reports on a headline basis. Definitions of headline metrics, and information about the adjustments to statutory measures, are provided in note 3 to the financial statements.
2 HY 2019 has been restated for the reclassification of Smiths Medical as discontinued operations.
3 Underlying modifies headline performance to adjust prior year to reflect an equivalent period of ownership for divested businesses, excludes the effects of foreign exchange and acquisitions, and adds back the depreciation and amortisation of discontinued operations for comparability purposes.
4 Continuing operations exclude Smiths Medical which is accounted for as ‘discontinued operations – businesses held for distribution to owners’.
5 Discontinued operations are defined in note 17 to the financial statements.
Marion Le Bot, Smiths Group
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Deborah Scott, FTI Consulting
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Alex Le May, FTI Consulting
+44 (0)20 3727 1308
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The presentation slides and a live webcast of the analyst presentation will be available at https://smiths.com/investors/results-reports-and-presentations at 09.00 (UK time) today. A recording of the webcast will be made available from 13.00 (UK time).
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 Smiths Group plc (the “Company”) and its subsidiaries (together, the “Group”) and those of their respective officers, directors and employees concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and the businesses operated by the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and, unless otherwise required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements. Nothing in this document should be construed as a profit forecast. The Company and its directors accept no liability to third parties. This document contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law.