• Smiths Group is a technology group driven by innovation.
  • The company work with its customers to create the future. To invent, design and deliver solutions that keep systems working, operations running and the modern world turning.
  • John Crane is a global leader in rotating equipment solutions, supplying engineered technologies
  • Smiths Detection is a global leader in detection and screening technologies for the protection of people and assets, supporting safety, security and freedom of movement in today’s world.


Company Overview

Smiths Group (LSE:SMIN, OTC:SMGKF) is a technology group driven by innovation. The company work with its customers to create the future. To invent, design and deliver solutions that keep systems working, operations running and the modern world turning. 

Smiths Group proud of its 170 year history of being pioneers of progress, improving the world through smarter engineering



When you travel by air, use your phone, go through an airport, cook a meal or heat your home – look closer and you will see it.1

Smiths Group a technology group driven by innovation. The company work with its customers to create the future. To invent, design and deliver solutions that keep systems working, operations running and the modern world turning. 


John Crane is a global leader in rotating equipment solutions, supplying engineered technologies and services to process industries including oil & gas, pharmaceutical, chemical, petrochemical, power generation, mining, water treatment, pulp & paper, and turbo machinery.

John Crane designs and manufactures a variety of products including mechanical seals and systems, couplings, filtration systems and predictive digital monitoring technologies. John Crane sales and service is accessed through a global network of more than 200 sales and service facilities in over 50 countries.

With operations in more than 50 countries, including over 200 sales and service centres, John Crane's technology leadership and field expertise help optimise customers’ manufacturing operations.


Smiths Detection is a global leader in detection and screening technologies for the protection of people and assets, supporting safety, security and freedom of movement in today’s world.

The company work with customers in a broad range of markets including aviation, ports & borders, defence and urban security, providing complete solutions that address existing and emerging threats.

Smiths Detection’s reputation is underpinned by extensive experience, differentiated technology, and a strong track record of success.

The company sell its products in over 200 countries and territories. Smiths Group has five Research & Development centres that design and develop the latest innovations in detection technology. We’re a trusted partner to many of the world’s governments that require the security, scalability and operational efficiency of its solutions to keep populations safe.


Smiths Interconnect is a leading provider of technically differentiated electronic components, subsystems, microwave and radio frequency products that provide secure connectivity of critical applications in the defence, aerospace, communications and industrial markets.

The company's advanced, high-quality solutions ensure high speed connectivity, reliability and safety for demanding applications operating in harsh environments.

The company sell its products in over 50 countries with manufacturing facilities in nine, and offices across North and Central America, Europe and Asia.



Flex-Tek is a global provider of engineered components that heat and move fluids and gases for the aerospace, medical, industrial, construction and domestic appliance markets.

The company's flexible hosing and rigid tubing provide fluid management for fuel and hydraulic applications on commercial and military aircraft, deliver gas and conditioned air in residential and commercial buildings, and provide respiratory care for medical applications.

Flex-Tek heating elements and thermal systems improve the performance of medical and diagnostic equipment as well as that of domestic appliances such as clothes tumble dryers and HVAC equipment.

Flex-Tek operations are principally located in the US and Mexico. Flex-Tek is one of the world’s largest manufacturers of open coil heating elements that are used in domestic appliances.


Safety & Security

The company's threat detection equipment helps keep people and assets safe. Demand in the security market is driven by persistent and evolving terror threats, changing security regulations, and increased global air travel and trade. Aftermarket opportunities rise as the installed base grows. The defence market is served by Smiths Detection through imaging and sensing detection products and by Smiths Interconnect through secure connectivity solutions. Growth in this market is primarily driven by defence and security spending.

General Industrial

Customers put their trust in its products and services to support a wide range of general industrial applications in sectors including petrochemical, mining, pulp & paper, water treatment, semiconductor testing, heating elements, automotive and rail transportation. These sectors and others are served by John Crane, Smiths Interconnect and Flex-Tek, with growth generally tracking increases in GDP worldwide.


John Crane’s mechanical seals and systems support energy operations worldwide including downstream and midstream oil & gas and power generation. Growth is driven by increases in global demand for energy, productivity, and enhanced environmental and safety requirements. There is a growing requirement for aftermarket and service contracts.


Satellite launches, deep space exploration and emerging activities such as asteroid mining are driving demand for high-reliability solutions in the space market. Growth in aerospace is coming from new fuel-efficient aircraft and increasing passenger and freight traffic. Flex-Tek provides hydraulic hoses and fuel lines for airframes and engines and Smiths Interconnect supplies ultra high-quality connectors, microwave components and antenna systems for aircraft and satellite communications.


Financial Highlights

Revenue declined (6)% on a reported basis, for the year ended 31 July 2021 to £2,406m (FY2020: £2,548m). This included £(123)m of adverse foreign exchange translation, and +£35m from the acquisitions of Royal Metal Products LLC (Royal Metal) by Flex-Tek in February 2021 and PathSensors Inc by Smiths Detection in August 2020.2

The Group delivered strong profit conversion, with headline operating profit up +£24m or +7% on an underlying basis. Headline operating profit increased +14% on a reported basis, to £372m (FY2020: £327m). This included £(20)m of adverse foreign exchange translation, +£32m from lower year-on-year restructuring costs and write-downs, and +£9m from acquisitions.

Headline operating profit margin increased +140bps on an underlying basis, reflecting the benefits of the Group’s strategic restructuring programme and disciplined cost control. Headline operating profit margin increased +270bps on a reported basis to 15.5%.

The £(46)m difference between headline operating profit of £372m and statutory operating profit of £326m is non-headline items as defined in note 3 of the financial statements. The largest constituents relate to amortisation of acquired intangible assets, asbestos litigation in John Crane, Inc and subrogation claims in Titeflex Corporation. Statutory operating profit of £326m was £85m higher than last year (FY2020: £241m), reflecting higher headline profit and lower non-headline charges.

Headline finance costs of £(40)m (FY2020: £(49)m) were £9m lower than last year. This reflects the benefit of lower interest rates. Statutory finance costs were £(86)m (FY2020: £(108)m), mainly due to a £(50)m foreign exchange loss on an intercompany loan with Smiths Medical (FY2020: £(62)m); the matching credit in discontinued operations nets out to zero in Total Group earnings.

The Total Group headline effective tax rate was 27% (FY2020: 26%). The headline tax charge for the full year of £(96)m (FY2020: £(79)m) represents an effective tax rate of 29% for continuing operations (FY2020: 28%). The increase in rate is mainly attributable to profit mix. The equivalent effective tax rate for continuing operations in FY2022 is currently expected to be in the range of 26-28%.

A non-headline tax credit of £13m (FY2020: £13m) on non-headline losses resulted in a statutory effective tax rate of 35% (FY2020: 50%). Please refer to notes 3 and 6 of the Financial Statements for further details.

Technology and innovation remain at the forefront of Smiths strategy and are key to driving future growth. To support this, the Group continues to invest in R&D and consistently seeks the best value from its investments. The income statement cost of R&D of £(83)m was marginally below prior year (FY2020: £(89)m). The cash cost decreased to £(94)m or 3.9% of sales (FY2020: £(119)m or 4.7%). Smiths Group is focused on measuring the effectiveness of its investment in innovation and the Vitality Index, which measures the percentage of total revenue derived from products launched in the last three years, remained stable at 20% (FY2020: 20%).

Investment in capex of £(62)m (FY2020: £(67)m) has been protected and represents 1.2x depreciation and amortisation (FY2020: 1.2x).

The Group continues to enhance its strategic positioning through disciplined M&A. In February 2021, the Group acquired Royal Metal, a leading manufacturer of residential and light commercial HVAC products for $107m. Royal Metal is being successfully integrated into Flex-Tek. The acquisition complements the organic growth that Flex-Tek is already driving through the development of innovative air distribution products that support improved energy efficiency and indoor air quality. For more information, please see note 27 of the Financial Statements.

Headline profit after tax increased by +9% on a reported basis. Headline basic EPS was up +8% on an underlying basis and +10% on a reported basis, driven by the strong operational performance. Statutory profit after tax increased by +7% to £285m (FY2020: £267m). Statutory basic EPS was also up +7% to 71.7p (FY2020: 66.9p).

Net debt at 31 July 2021 was £1,018m, a decrease of £(123)m in the period. Headline EBITDA excluding restructuring costs for Total Group was £665m. Net debt to EBITDA was 1.5x (FY2020: 1.7x), 1.6x including restructuring costs (FY2020: 1.9x).

Gross debt was £1,546m (FY2020: £1,609m). There are no covenants associated with this debt. The weighted average maturity was 3.2 years, with the next maturity due in October 2022. Cash balances increased to £453m (FY2020: £386m).


Recent developments

Sale of Smiths Medical

07 January 2022’; The sale of Smiths Medical to ICU Medical, Inc completed on 6 January 2022.

The transaction was originally announced on 8 September 2021. 99.97% of the shareholder votes received at the General Meeting on 17 November 2021 were in support of the sale.3

Terms of the transaction

At the time of announcement, the transaction represented an enterprise value of $2.7bn for Smiths Medical, including approximately $1.85bn in immediate cash proceeds and $0.5bn in ICU shares. The aggregate enterprise value could increase to over $3.0bn if ICU’s share price averages $300 or more for any 30-day period during the next three years, or for any 45-day period in the next four years. This will trigger additional cash consideration of $0.1bn payable to Smiths, plus a $0.25bn increase in the value of ICU shares.

Share buyback and use of proceeds

In connection with the transaction, Smiths announced that it intends to return an amount representing 55% of the initial cash proceeds (equating to $1bn or £742m) to shareholders in the form of a share buyback programme. All shares purchased under the programme will be cancelled. Smiths initiated this programme on 19 November 2021 and has purchased 4.2m shares to date, for a total consideration of £64.3m. The balance of the initial cash proceeds will be used to accelerate value creative growth opportunities and further reinforce Smiths’ strong balance sheet.

Commenting on the announcement, Paul Keel, CEO of Smiths Group plc stated:

“At our capital markets event in November, we emphasised the exciting and tangible opportunity we have to deliver on our significant potential. I am pleased to announce that we have completed the sale of Smiths Medical ahead of schedule, another example of the accelerated pace at which we are now moving. This is our largest portfolio move in over a decade and positions us even more strongly to access the growth available in our industrial technology core.

On behalf of everyone at Smiths, I’d like to thank our Smiths Medical colleagues for their many contributions over the years and wish them every success moving forward with ICU Medical.”



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Created by Asif Farooqui on 2022/02/28 06:18

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