Smiths Group plc (SMGZY) H1 2025 Earnings Call Transcript

2025-03-25 10:30:34 ET

Smiths Group plc (SMGZY)

H1 2025 Earnings Conference Call

March 25, 2025, 04:00 AM ET

Company Participants

Roland Carter – CEO

Julian Fagge - CFO

Conference Call Participants

Lushanthan Mahendrarajah – JPMorgan

Christian Hinderaker - Goldman Sachs

Martin Wilkie - Citi

Mark Jones – Stifel

Stephan Klepp - HSBC

Andrew Simms - Berenberg

Dylan Jones - Kepler Cheuvreux

Presentation

Roland Carter

Good morning, everyone, and thank you for joining us today. I'll start by providing a few opening remarks before handing over to Julian to walk us through the First Half numbers. I'll then come back to you to provide an update on the strategy, and we'll have plenty of time at the end for questions.

As I said in January, since becoming CEO, this time last year, the Board and I have been evaluating the options to maximize shareholder value. Despite making substantial progress with improved performance, the group still trades at a discount to our expected valuation. To address this, we will focus on our high-performance technologies for efficient flow and heat management through John Crane and Flex-Tek, and separate Smiths Interconnect via a sale, followed by Smiths Detection by either a U.K. demerger or sale. In parallel, we have increased our share buyback program to £500 million and will return a large portion of disposal proceeds to shareholders. As we execute this strategy, we will become a more focused business with a higher quality financial profile that has ample potential for growth and very significant value creation. We have made good progress since January, and I'll provide more detail later.

Turning to First Half performance. We delivered a strong set of financial results with growth across all key metrics. We enhanced returns to shareholders, invested in attractive bolt-on acquisitions, and maintained our focus on safety. Given this performance, I'm pleased to reaffirm our FY '25 guidance, which we have raised twice since last September.

Before handing over to Julian, I want to say a few words by way of introduction, since this is his first set of results. Julian has been at Smith's for more than twelve years. His financial and strategic roles alongside his experience at Flex-Tek and Smith Interconnect equip him well to be CFO to drive forward the strategic actions whilst maintaining financial control and discipline of the business. I'm incredibly pleased and fortunate to have him working alongside me to create and deliver value.

With that, I'll hand over to him to talk through the numbers.

Julian Fagge

Thank you, Roland, and good morning, everyone. I'm happy to be presenting my first set of results, and I'm pleased with the progress we've made in the first six months of FY '25, delivering another strong financial performance.

Organic revenue growth was 9.1%, including acquisitions, this increased to 10.2% with reported revenue growth of 6.7%, reflecting the impact of adverse foreign exchange. We grew operating profit 12.6% on an organic basis and 9.5% on a reported basis resulting in margin expansion of 40 basis points to 16.7% or 50 basis points on an organic basis. This is consistent with our full year guidance....

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