Smiths Group raises outlook after strong Q1 growth

(Sharecast News) - Smiths Group has raised its growth and margin guidance and beefed up its share buyback programme after an "outstanding" first quarter. As a result of the strong start to the year and a record order book, the engineering company now expects full-year organic revenue growth of 5-7%, up from earlier guidance of 4-6%.

Operating profit margins are also tipped to improve by 40-60 basis points after increasing by 30bps to 16.8% in the year to 31 July 2024. Previously, the company had simply guided to "continued margin expansion" this year.



Revenues in the first quarter ended 1 November were up 15.8% year-on-year on an organic basis, with double-digit growth at Smiths Detection and Smiths Interconnect, and single-digit improvements at John Crane and Flex-Tek aerospace.

Smiths Interconnect was the stand-out performer in terms of organic revenue growth, at 30% given weak comparatives with last year, as semi-test activity significantly improved.

"Innovation and execution remain a major focus as we advance our new product development and commercialisation capabilities, and our productivity improvements, which contributed to the strong quarter," said chief executive Roland Carter.

"We also benefited from a strong performance in our US business, which represents around 45% of revenue, and which was accretive to our overall growth."

Smiths Group said it was resuming its share buyback by initiating the second tranche of a previously announced programme, but has decided to raise it from £100m to £150m, "reflecting the strong balance sheet, cashflow dynamics and considered approach to capital allocation".

The first tranche of £50m was completed in September, and the second tranche, now totalling £100m, is expected to complete by the end of the financial year.