Smiths Group shares climb as new buyback offsets profit fall

Smiths Group PLC shares rose on Tuesday after it announced a new share buyback despite reporting a decline in annual profit.

Shares in the London-based engineering company were up 6.5% at 2,759.00 pence each.

Smiths said pretax profit in the year to July 31 fell 23% to £245.0 million from £317.0 million the year before. Headline pretax profit, however, increased marginally to £363.0 million, from £361.0 million.

The company said headline operating profit increased 2.7% to £399.0 million from £388.0 million a year earlier. Excluding the effects of foreign exchange and acquisitions, this represented organic growth of 1.9%, ahead of expectations.

Smiths said non-headline costs partly related to Flex-Tek's recent acquisitions of Wattco and DRC Heat Transfer.

Revenue rose 2.1% to £1.94 billion, from £1.90 billion a year earlier.

Revenue beat the company-compiled consensus of £1.92 billion, but organic revenue growth of 1.2% fell short of expectations for a 1.4% hike.

Operating costs were 6.3% higher at £1.65 billion.

Smiths said it was starting a new £1.5 billion share buyback on Tuesday, using cash proceeds from the sale of Smiths Detection.

The company said that, following the completion in December of the £500 million share buyback programme announced in March 2024, a further £1 billion from the proceeds of the Smiths Interconnect sale had been returned to shareholders.

Smiths said £1.5 billion remained to be returned from the proceeds of the Smiths Detection sale, with the return expected to be substantially completed by the end of calendar 2027.

Chief Executive Officer Roland Carter said: "2026 was a year of significant strategic progress. We transformed our portfolio and unlocked over £3 billion of value which repositioned Smiths as a focused, premium industrial engineering company. We delivered a resilient performance with growth in revenue, profit and margin, and strong cash generation in the face of ongoing macro uncertainty."

Carter continued: "As we enter financial 2027, underlying market conditions remain challenging, but our robust order book and business momentum underpins our expectation of organic revenue growth."

Smiths said it expects organic revenue growth of around 4% in financial 2027 and further improvement in its operating margin towards its medium-term target range.

It said it had a "strong conviction" in achieving its 21% to 23% operating margin target, and 5% to 7% organic revenue growth view, supported by the "positive addition of DRC and data centre exposure, the structural tailwinds in global energy resulting from the anticipated response to energy security and the positive portfolio development in Flex-Tek."

In financial 2026, the headline operating profit margin improved slightly to 20.6% from 20.5%.

Smiths recommended a final dividend of 33.5 pence per share, an increase of 5.4% from last year, bringing the total dividend for the year to 48.5 pence, also up 5.4% from 46.0 pence.

Smiths said: "The portfolio reshaping has enabled enhanced returns to shareholders, with £2.6 billion returned in the past five years."

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