SMITHS GROUP PLC Half Year Results 2024

SMITHS GROUP PLC - HALF YEAR RESULTS FOR 6 MONTHS ENDED 31 JANUARY 2024
Pioneers of progress – improving our world through smarter engineering+3.9% organic revenue growth and +16.5% order growth in H1;
reaffirming full-year guidance of 4-6% organic revenue growth•

Solid ﬁrst half performance with good momentum for the second halfo Organic revenue growth1 of +3.9% against record comparator, led by strong growth atJohn Crane +12.7% and Smiths Detec�on +8.9%
o Revenue declines at Flex-Tek of (4.1)% and Smiths Interconnect of (13.7)%; with improved
performance in the second quarter in both divisionso Group orders2 up +16.5%, driven by John Crane +10.9%, Smiths Detec�on +38.2% and Flex-Tek
aerospace +11.6%; double-digit order growth at Smiths Interconnect in Q2, following adouble-digit decline in Q1•

Commercial wins underpinning full-year guidance and future growtho Con�nued improvement in demand for John Crane’s solu�ons suppor�ng energy security andenergy transi�on, including wins across carbon capture, blue hydrogen and batery manufacturingo Smiths Detec�on secures mul�ple next-genera�on CTiX pla�orm contracts globally; an award fromthe US DOD to supply portable aerosol and vapour chemical detectors and an ini�al £88m contract
with the UK MoD to provide chemical detec�on technology•

Execu�on focus driving performance improvements; SES delivering further tangible beneﬁts
o Headline organic opera�ng proﬁt3 +5.3%; headline opera�ng margin3 expansion of +20bps to16.3%, alongside reinvestment for growtho ROCE4 up +50bps to 15.7%, driven by the proﬁt improvement
o SES beneﬁt of £10m; on track for full-year contribu�on of £20m
o Cash conversion4 up 26 percentage points year-on-year to 89%, resul�ng from working capital
improvement; free cash-ﬂow more than doubled to £112m•

Strong balance sheet supports investment in organic and inorganic growtho Net debt to EBITDA4 of 0.9x
o Acquisi�on of Hea�ng & Cooling Products for <7x EBITDA; integra�on progressing ahead of plano Interim dividend of 13.55p, up 5.0%
o New £100m share buyback programme announced, with first tranche of up to £50m to be completed by
the end of September 2024•

Roland Carter appointed as the Group’s Chief Execu�ve Oﬃcer, with immediate eﬀect, following
Paul Keel’s decision to step down to take on a new role as chief execu�ve of a US public company

FY2024 Outlook• Reaﬃrming FY2024 organic revenue growth within our medium-term target range of 4-6%, withcon�nued margin expansion
Headline3
Revenue
Operating profit
Operating profit margin4
Basic EPS
ROCE4
Operating cash conversion4

HY2024£1,507m
£246m
16.3%
48.7p
15.7%
89%

HY2023£1,497m
£241m
16.1%
46.6p
15.2%
63%

Reported
+0.7%
+2.1%
+20bps+4.5%+50bps+26ppsStatutory
Revenue
Operating profit
Profit for the half year (after tax)
Basic EPS
Dividend per share

HY2024£1,507m
£192m
£111m
32.0p
13.55p

HY2023£1,497m
£187m
£109m
30.6p
12.9p

Reported
+0.7%
+2.7%
+1.8%
+4.6%
+5.0%

1

Organic1
+3.9%
+5.3%
+20bpsSMITHS GROUP PLC Half Year Results 2024

Paul Keel, Chief Execu�ve Oﬃcer, commented:“We are off to a good start in FY24 with +3.9% organic revenue growth and +16.5% order growth in the first
half, against a record comparator last year, and marking our 11th consecutive quarter of revenue growth.
“We con�nue to focus on innova�on as an enduring driver of value, as highlighted through the roll-out of
our next-genera�on threat detec�on technology in airports around the world. We also con�nue tostrengthen our energy transi�on impact, with signiﬁcant project wins in carbon capture, blue hydrogenand electric batery manufacturing.
“We expect growth to improve in the second half, driven by a record order book for Smiths Group, continued
strength in end markets like aerospace, security and energy, as well as gradually improving conditions in theindustrial segments that were softer in the first half. Together, this gives us confidence in reaffirming ourfull-year 2024 guidance of 4-6% organic revenue growth, with continued margin expansion.
"As we con�nually advance our Purpose of improving our world through smarter engineering, we arepleased to announce that the Smiths Group Foundation is now awarding its first set of grants to charities
which are aligned with our Purpose.
“Thank you to my colleagues around the world for all you do. It has been a tremendous honour to have led
this wonderful company over the past three years, working alongside our many talented employees, and I
am proud of everything we have achieved together. I'm excited for what lies ahead for Smiths and to see
Roland continue to build on its successes and deliver further value for all Smiths Group’s stakeholders.”
UPCOMING EVENTS

Date

Event

21 May 2024

Q3 Trading Update

24 September 2024

FY2024 Full Year Results

13 November 2024

Q1 Trading Update and Annual General Mee�ng

Statutory repor�ng
Statutory repor�ng takes account of all items excluded from headline performance.
See accoun�ng policies for an explana�on of the presenta�on of results and note 3 to the ﬁnancial statements for an analysis of
non-headline items.
Deﬁni�ons
The following deﬁni�ons are applied throughout the ﬁnancial report:
1 Organic is headline adjusted to exclude the eﬀects of foreign exchange and acquisi�ons.
2 Order intake growth excludes the eﬀects of foreign exchange.
3 Headline: In addi�on to statutory repor�ng, the Group reports on a headline basis. Deﬁni�ons of headline metrics, and informa�onabout the adjustments to statutory measures, are provided in note 3 to the ﬁnancial statements.
4 Alterna�ve Performance Measures (“APMs”) and Key Performance Indicators (“KPIs”) are deﬁned in note 19 to the ﬁnancial
statements.

Investor enquiries

Siobhán Andrews, Smiths Group+44 (0)7920 230093
siobhan.andrews@smiths.com

Presenta�on

Media enquiries

Tom Steiner, Smiths Group+44 (0) 7787 415891
tom.steiner@smiths.com
Alex Le May, FTI Consulting+44 (0)7702 443312
smiths@fticonsulting.com

The webcast presenta�on and Q&A will begin at 08.30 (UK �me) today at: htps://smiths.com/investors/results-reports-andpresenta�ons. A recording will be available from 13.00 (UK �me).

2

SMITHS GROUP PLC Half Year Results 2024

Legal En�ty Iden�ﬁer (LEI): 213800MJL6IPZS3ASA11
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 inten�ons, beliefs and/or current expecta�ons of Smiths Group plc (the “Company”) and its subsidiaries (together, the “Group”) andthose of their respec�ve oﬃcers, directors and employees concerning, amongst other things, the results of opera�ons, ﬁnancial condi�on, liquidity, prospects,
growth, strategies, and the businesses operated by the Group. By their nature, these statements involve uncertainty since future events and circumstances cancause results and developments to diﬀer materially from those an�cipated. The forward-looking statements reﬂect knowledge and informa�on available atthe date of prepara�on of this document and, unless otherwise required by applicable law, the Company undertakes no obliga�on to update or revise theseforward-looking statements. The Company and its directors accept no liability to third par�es. This document contains brands that are trademarks and areregistered and/or otherwise protected in accordance with applicable law.

3

SMITHS GROUP PLC Half Year Results 2024

Our Purpose
We are pioneers of progress – improving our world through smarter engineering. Smarter engineeringmeans helping to solve the toughest problems for our customers, our communi�es and ourselves. We help
to create a safer, more eﬃcient and beter-connected world.
Our Priori�es and Targets
Smiths is intrinsically strong with world-class engineering, leading posi�ons in cri�cal markets, anddis�nc�ve global capabili�es, all underpinned by a strong ﬁnancial framework. We con�nue to makeprogress and deliver on our poten�al by focusing on three top priori�es of accelera�ng growth,strengthening execu�on and doing ever more to inspire and empower our people.
Our focused plan, the Smiths Value Engine, is the means through which we are delivering the
medium-term targets that we have set. We have con�nued to make solid progress across these targets,
including eleven consecu�ve quarters of organic revenue growth.
Targets

Medium-TermTarget4-6%

HY2023

HY2024 Progress+13.5%+3.9% Reaﬃrmed full-year guidance of 4-6%

7-10%

+52.1%

ROCE

15-17%

15.2%

Opera�ng Proﬁt Margin

18-20%

16.1%

SmiOpera�ng Cash
Conversion

100%+

63%

Organic Revenue Growth
Headline EPS Growth(+ M&A)(+ M&A)EPS growth driven by opera�ng proﬁt growth andbeneﬁt of share buyback, par�ally oﬀset by FX
ROCE within our medium-term target range,
15.7%
reﬂec�ng growth in opera�ng proﬁt
Con�nued margin improvement, beneﬁ�ng from
16.3%
SES, with con�nued investment in growth
Improvement in working capital delivers solid
89%
cash conversion+4.5%

These targets are underpinned by Smiths opera�onal KPIs and environmental targets, including acommitment to Net Zero for Scope 1 and 2 emissions by 2040 and Net Zero for Scope 3 emissions by 2050.

4

SMITHS GROUP PLC Half Year Results 2024

HY2024 Business Performance
Smiths delivered organic revenue growth of +3.9% in the ﬁrst half. We generated £246m of headline
opera�ng proﬁt, up +5.3% on HY2023 on an organic basis, and delivered moderate margin improvement
as we con�nue to drive growth, improve execu�on and invest in our people.

£m
Revenue
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

HY2023Foreignexchange

Acquisi�ons

Organic
movement

HY2024

1,497
241
16.1%

(76)
(14)

31
6

55
13

1,507
246
16.3%

GROWTH
Accelera�ng growth is the primary driver of unlocking enhanced value crea�on for the Group. We have
now delivered eleven consecu�ve quarters of organic revenue growth. Momentum improved in thesecond quarter, with organic growth of 4.2%, following 3.5% organic growth in the ﬁrst quarter, against
record comparators of 13.2% and 13.6% in Q1 and Q2 of FY23.
Organic revenue growth (by business)
John Crane
Smiths Detec�onFlex-Tek
Smiths Interconnect
Smiths Group

H1 2023+14.6%+14.0%+17.0%+3.3%+13.5%

H2 2023+15.8%+18.8%+3.6%(8.4)%+9.9%

HY2024+12.7%+8.9%(4.1)%(13.7)%+3.9%

Strong growth con�nued in the ﬁrst half for our two largest businesses. John Crane posted double digit
growth in both revenue and orders. Smiths Detec�on delivered +8.9% organic revenue growth and +38.2%
order growth, with par�cular strength in computed tomography (“CT”) for airport checkpoints andchemical detec�on for defence. For Flex-Tek, strength in aerospace was not enough to overcome so�nessin the US construc�on market, leading to a (4.1)% overall decline. We an�cipate that Flex-Tek will returnto growth in the second half. Smiths Interconnect declined (13.7%). This was an�cipated, as FY23 orders
were down (17%). We are seeing early signs of recovery in Smiths Interconnect, with posi�ve order growthand ﬂat revenues in the second quarter, a�er a sharply nega�ve ﬁrst quarter.
Revenue grew +0.7% on a reported basis across the Group, to £1,507m (HY2023: £1,497m). This includeda (£76m) nega�ve foreign exchange transla�on impact and +£31m from the acquisi�ons of Plastronics andHea�ng and Cooling Products (“HCP”).
Strong execu�on to access end market opportunity is the ﬁrst of the four levers for accelera�ng growth.
Our business operates across four major global end markets: General Industrial, Safety & Security, Energy,
and Aerospace. Our strong market posi�ons, coupled with the balanced market exposure we have acrossour businesses, are dis�nc�ve long-term advantages for Smiths.
Organic revenue growth(by end market)
General Industrial
Safety & Security
EnergyAerospace
Smiths Group% of Smiths
revenue
39%
31%
23%
7%
100%
5

H1 2023

H2 2023

HY2024+15.4%+9.4%+17.1%+10.1%+13.5%+1.0%+14.4%+21.8%+10.8%+9.9%(5.5)%+7.2%+16.6%+5.4%+3.9%

SMITHS GROUP PLC Half Year Results 2024

Organic revenue in our largest end market, General Industrial, declined (5.5)% in HY2024, with gooddemand in John Crane’s industrial markets more than oﬀset by weaker demand for Flex-Tek’s hea�ng,
ven�la�on and air condi�oning (“HVAC”) products and Smiths Interconnect semiconductor test andconnectors products. Organic revenue growth in Safety & Security was +7.2%, reﬂec�ng Smiths Detec�on’s
strong delivery against its orderbook, par�ally oﬀset by a decline in Smiths Interconnect from the �mingof defence programmes. The +16.6% growth in Energy reﬂected the broad-based strong demand at
John Crane and execu�on against its record order book. Aerospace organic revenue increased +5.4% withnew aircra� build programmes suppor�ng demand at Flex-Tek oﬀse�ng the impact of delays in aerospace
programmes in Smiths Interconnect.
Our second lever for faster growth is improved new product development and commercialisa�on. In
HY2024, 200bps of growth was delivered from high impact new products including John Crane’s nextgenera�on diamond coa�ng product oﬀering for high-speed and high-heat applica�ons, Smiths Detec�on
iCMORE so�ware which uses AI and advanced detec�on algorithms for automated detec�on, and a highdensity electrical connector for the medical market from Smiths Interconnect. Gross vitality, whichmeasures the propor�on of revenues coming from products launched in the last ﬁve years, was 31.5%(HY2023: 29.5%), supported by our successful new product commercialisa�on.
As an industrial technology leader, con�nuing to invest in R&D ensures we capitalise on the wealth ofopportuni�es in our pipeline, with increasing demand from our customers for solu�ons that help themachieve their sustainability objec�ves. In the ﬁrst half, we invested £52m in R&D (HY2023: £59m), of which£35m (HY2023: £41m) was an income statement charge, £7m was capitalised (HY2023: £8m) and £10m
(HY2023: £10m) was funded by customers. Partly accoun�ng for the year-on-year decline is the decision
to move certain R&D projects to lower cost jurisdic�ons, resul�ng in more eﬃcient R&D spend.
To support new product launches, and the strong demand for our exis�ng solu�ons, we increased capex+5.6% in HY2024 to £38m (HY2023: £36m), with a key project being investment in automa�on at
John Crane. This equates to 1.5x deprecia�on and amor�sa�on (HY2023: 1.4x).
Our third growth lever is building out priority adjacencies. Each of our four businesses are execu�ng
strategies to expand beyond their exis�ng core markets and ensure we capitalise on the long-term
megatrends of energy transi�on and sustainability, ever-rising security needs and enhanced connec�vity.
Examples in HY2024 include Flex-Tek’s hea�ng solu�ons used by our customers in various processelectriﬁca�on applica�ons, and building out Smiths Detec�on’s defence business, with two mul�-year
chemical detec�on awards, from the US Department of Defence and an ini�al £88m contract from the UK
Ministry of Defence.
Our fourth growth lever is using disciplined M&A to augment our primarily organic growth focus. We
acquired HCP in August 2023. HCP provides geographic synergy to Flex-Tek’s exis�ng HVAC business andits patented axial and radial seal duct products help our customers meet increasing eﬃciency regula�ons
in residen�al and light commercial construc�on. The acquisi�on is oﬀ to a good start with integra�on
progressing ahead of plan.
EXECUTION
Stronger execu�on is our second key priority.
In HY2024, headline opera�ng proﬁt grew +5.3% (+£13m) on an organic basis, and +2.1% (+£5m) on areported basis, to £246m (HY2023: £241m). Group headline opera�ng proﬁt beneﬁted from +18.3%
organic growth in John Crane and +10.3% in Smiths Detec�on. Flex-Tek delivered +2.6% organic headline
6

SMITHS GROUP PLC Half Year Results 2024

opera�ng proﬁt growth as posi�ve mix impact and good cost control oﬀset the lower sales. Organic
headline opera�ng proﬁt declined (33.3)% in Smiths Interconnect, behind sharply lower volumes.

£m
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

HY2023Foreignexchange

Acquisi�ons

Organic
movement

HY2024

241
16.1%

(14)
(10)bps

6+10bps13+20bps246
16.3%

Headline opera�ng proﬁt margin was 16.3%, up +20bps on both an organic and a reported basis.
Headline opera�ng proﬁt margin (by business)
John Crane
Smiths Detec�onFlex-Tek
Smiths Interconnect
Smiths GroupHY2023
22.0%
10.5%
19.5%
16.6%
16.1%

HY2024
23.0%
10.7%
21.2%
12.2%
16.3%

By division, strong opera�ng leverage on the higher sales volume resulted in margin expansion at
John Crane. Smiths Detec�on improved its margin moderately. Flex-Tek delivered a higher margin, despite
the lower organic revenue, helped by posi�ve mix impact and good cost control. The sharply lower organic
revenue at Smiths Interconnect resulted in an associated margin decline.
Headline EPS grew +4.5%, driven by the headline opera�ng proﬁt growth and the beneﬁt from the sharebuyback programme, par�ally oﬀset by foreign exchange impacts. The headline tax charge was £59m
(HY2023: £58m) which represents an eﬀec�ve rate of 26.0% (HY2023: 26.0%).
ROCE increased +50bps to 15.7% (HY2023: 15.2%) reﬂec�ng the higher proﬁtability of the Group. For
further detail, please refer to note 19 of the ﬁnancial statements.
Headline opera�ng cash conversion for HY2024 was 89% (HY2023: 63%), supported by a marked
improvement in working capital versus the same period last year. Headline opera�ng cash-ﬂow4 was£218m (HY2023: £151m). In HY2024, free cash-ﬂow4 genera�on more than doubled to £112m (HY2023:£46m) or 45% of headline opera�ng proﬁt (HY2023: 19%).
The Smiths Excellence System (“SES”) is one of the key ini�a�ves to enhance execu�on and support thedelivery of our medium-term ﬁnancial targets. In the ﬁrst half, SES projects delivered a £10m beneﬁt toopera�ng proﬁt (HY2023: £5m). The Group con�nues to expect the full-year beneﬁt to amount to £20m.
Suppor�ng this delivery, there are 46 Black Belt projects currently underway. Our ﬁrst cohort of Black Belts
and Master Black Belts are now comple�ng their roughly two-year assignments and returning toleadership roles across the Group. This accelerates the cultural beneﬁts of SES as programme graduates
incorporate SES learnings into leadership roles across the Group. New Master Black Belts are being
appointed, whilst we con�nue to expand our Black Belt cohort. SES is fast becoming the way we work at
Smiths and to celebrate the contribu�on it is making, the Smiths Excellence Awards in November
recognised a number of outstanding achievements across the Group.
PEOPLE
Inspiring and empowering our people is our third key priority and our people plan is focused around four
key areas of safety; leadership development; diversity, equity and inclusion; and engagement.
7

SMITHS GROUP PLC Half Year Results 2024

The ﬁrst area, safety, alongside health and well-being, is an essen�al founda�on of our success. In the ﬁrst
half of the year, our recordable incident rate was 0.46 (HY2023: 0.42), demonstra�ng the need to con�nue
to focus on strengthening culture and reducing risk across all sites. A key event in the ﬁrst half was our
three-day global HSE conference in February which covered topics including safety culture, the connec�onbetween SES and HSE, and hazard percep�on and risk assessment. Safety leading indicator ac�vi�es,
comprising peer-to-peer observa�ons and leadership tours, reinforce these messages on a day-to-day
basis.
Following the rollout of our Smiths Leadership Behaviours through the course of FY2023, we haveembedded them into our key people-related ac�vi�es such as talent development, performance
management and learning programmes across all our opera�ng businesses and geographies.
In terms of talent development, our Accelerate Leadership Development programme (“Accelerate”) rollout
con�nues. We have doubled the number of workshops to date this year and expanded it to 15 newcountries, including Brazil and Singapore. With 300 employees having par�cipated to date; we expect tohave around 600 par�cipants complete the programme by the ﬁscal year end. Accelerate improves theeﬀec�veness of our leaders and the engagement of our teams. In parallel with this, we have also launched
an ini�a�ve focused speciﬁcally on building capability in leading change. The Leading Change & Ac�on
Learning programme was piloted in John Crane and is now being extended across the Group.
Our commitment to fostering diversity, equity, and inclusion is integral to our people strategy. We priori�seenhancing gender diversity across all organisa�onal levels, striving for equity in advancement
opportuni�es. Our eﬀorts to foster an environment of inclusivity and belonging is further bolstered byac�ve employee resource groups (“ERGs”) such as the Black Employee Network, Veterans Network, Pride
Coali�on and Women@Work, and the recently launched Neurodiversity ERG.
Through this focus on inspiring and empowering our people, our voluntary atri�on rate con�nues toimprove, down 170bps at the end of the ﬁrst half for our global employees, and down 100bps for our
engineering employees.
OUR ESG APPROACH
Environment, Social and Governance (“ESG”) is at the very centre of our Purpose, and fundamental toeach of our three key priori�es.
GrowthAn important element of our ESG plan centres on suppor�ng our customers on their sustainability
journeys. Many of our new products and R&D ini�a�ves are focused on commercialising high-value green
technology, as well as enhancing produc�on eﬃciency for our customers. One example is John Crane’s
growing presence (now more than 100 projects) in hydrogen and carbon capture markets. Anotherexample is Flex-Tek suppor�ng the development of the world’s ﬁrst green steel produc�on facility innorthern Sweden. A third example is in Smiths Detec�on, where our new CTiX scanners improve our
airport customers’ energy eﬃciency by using up to 20% less electricity when compared to alterna�vesystems.
Execu�on
We are execu�ng well against our ESG framework, with signiﬁcant progress and performance against oursustainability metrics, which are now fully incorporated into both our annual and long-term incen�ves.
We were pleased to receive valida�on of our net zero GHG emission targets by the Science Based Targets
ini�a�ve (“SBTi”) in the ﬁrst half. Smiths’ targets align with the UN’s cri�cal global climate objec�ves under
8

SMITHS GROUP PLC Half Year Results 2024

the Paris Agreement and our ambi�on to limit global warming to 1.5°: Net Zero GHG emissions from
Smiths opera�ons (Scope 1&2) by 2040; and Net Zero GHG emissions from Smiths value chain (Scope 3)
by 2050.
Both targets are supported by a robust and credible, botom-up decarbonisa�on pathway and delivery
plan using ﬁscal year 2021 as the baseline year and, in accordance with SBTi methodology, include 2032
interim targets for supplier engagement and reducing Scope 1&2 emissions by 50%. Both overall andinterim targets in the plan have been validated by the SBTi. We con�nue to implement programmes todeliver on our targets, with energy eﬃciency the primary focus, but are also making progress in otherareas such as renewable electricity sourcing and a greater number of ﬂeet cars being switched to EVs.
PeopleEngagement with our communi�es has long been a strength of Smiths. Following the launch in FY2023 of
our new charitable founda�on, “The Smiths Group Founda�on”, we are making our ﬁrst grants, totallingc.£1m, to chari�es around the world. The Founda�on has commited an ini�al £10m of funding alignedwith our Purpose of improving the world through smarter engineering. These cover three key areas:
expanding access to STEM educa�on and skills for under-represented groups; improving safety andconnectedness within communi�es, for example, cleaner air or water or food security; and improving theenvironmental sustainability of communi�es, for example climate change resilience, recycling or water
conserva�on. We look forward to seeing the impacts achieved with these grants at the chari�es supported
in this ﬁrst round.
Governance
The Board has appointed Roland Carter as the Group’s Chief Execu�ve Oﬃcer and as a Director of Smiths,
with immediate eﬀect. This follows Paul Keel’s decision to step down from his posi�on as Chief Execu�veOﬃcer and from the Board with immediate eﬀect, to return to the USA to take on a new role as chief
execu�ve of a US public company. (See separate RNS announcement published today).
In November, Steve Williams was appointed as Chairman for Smiths Group. We announced that Bill Seeger
will re�re from the Board of Smiths on 31 May 2024, at which point Mark Seligman will take over as the
Senior Independent Director.
CAPITAL ALLOCATIONWith our strong technology, market posi�ons and growth opportuni�es, and ﬁnancial framework, ourhighest capital priority con�nues to be organic growth. Accre�ve M&A, either to strengthen core posi�onsor to accelerate penetra�on of priority adjacencies comes second. Third, we have a strong track record ofreturning capital to shareholders, with more than £1.1bn returned to shareholders in the past two and ahalf years, via dividends and the share buyback programme.
Organic investment
In the ﬁrst half, we invested £38m in capex projects, including investment in automa�on at John Crane.
This spend included £7m in capitalised R&D on programmes such as next-genera�on hold and cabinbaggage screening and further advancements in our defence por�olio. A further £35m in R&D was charged
to the income statement, suppor�ng new product development.
M&A
Plastronics, acquired in January 2023, has now successfully been integrated into Smiths Interconnect.
We also completed the acquisi�on of HCP in August 2023, a US-based manufacturer of HVAC solu�ons.
Its integra�on into our Flex-Tek division is progressing ahead of plan.
9

SMITHS GROUP PLC Half Year Results 2024

These acquisi�ons support our strategy to make complementary inorganic investments to accelerate ourpresence in adjacent markets or expand our product oﬀering. We have an ac�ve acquisi�on pipeline anddisciplined M&A approach across the Group.
Shareholder returns
During the ﬁrst half, we completed the Group’s £742m share buyback programme, with the ﬁnal £29m
spent in the period. A new share buyback programme of £100m is now being launched, with up to £50m
to be completed by the end of September 2024.
In line with our progressive dividend policy, the Board is declaring an interim dividend of 13.55p, a yearon-year increase of +5.0% (HY2023: 12.9p). The interim dividend will be paid on 13 May 2024 toshareholders on the register at close of business on 5 April 2024. Our dividend policy aims to increase
dividends in line with growth in earnings and cash-ﬂow, with the objec�ve of maintaining minimum
dividend cover of around two �mes. The policy enables us to retain suﬃcient cash-ﬂow to ﬁnanceinvestment in growth and meet our ﬁnancial obliga�ons. In se�ng the level of dividend payments, theBoard considers prevailing economic condi�ons and future investment plans.
The Company offers a Dividend Reinvestment Plan (“DRIP”) enabling shareholders to use their cash dividend
to buy further shares in the Company – see our website for details. To participate in the DRIP, shareholders
must submit their election notice to be received by 19 April 2024 (“the Election Date”). Elections received
after the Election Date will apply to dividends paid after 13 May 2024. Purchases under the DRIP are madeon, or as soon as practicable after, the dividend payment date and at prevailing market prices.
Net debt
Net debt4 at 31 January 2024 was £505m (FY2023: £387m), as we paid £100m in dividends and returned£29m to shareholders via our share buyback which completed during the half. Net debt to headline
EBITDA4 was 0.9x (FY2023: 0.7x).
As at 31 January 2024, borrowings were £673m (FY2023: £654m) comprising a €650m bond which maturesin February 2027 and £125m of lease liabili�es. There are no ﬁnancial covenants associated with theseborrowings. Cash and cash equivalents as at 31 January 2024 were £180m (FY2023: £285m). Together with
our $800m (c.£629m at the period-end exchange rate) revolving credit facility, which matures in May 2028,
total liquidity was £809m at the end of the period.
ICU Medical stake
Since the sale of Smiths Medical in January 2022, the Group has held a ﬁnancial asset reﬂec�ng our equity
ownership in ICU Medical, Inc (“ICU”). See note 12 of the ﬁnancial statements for further detail.
In February, we sold 830,000 shares in ICU, represen�ng approximately 3.44% of ICU’s issued share capital,and equivalent to approximately 33% of Smiths’ holding in ICU, with net proceeds of c.$88m (£70m) fromthe sale. Smiths con�nues to hold 1,670,000 shares represen�ng approximately 6.92% of ICU’s issued
share capital. In an�cipa�on of Bill Seeger’s re�rement from the Smiths Board on 31 May 2024,
Bill resigned as the Smiths nominated Director on the Board of ICU, eﬀec�ve 28 February 2024.
STATUTORY RESULTS
Income Statement
The £54m diﬀerence between headline opera�ng proﬁt of £246m and statutory opera�ng proﬁt of £192m
is due to non-headline items as deﬁned in note 3 of the ﬁnancial statements. The largest non-headline
items relate to the amor�sa�on of acquired intangible assets of £25m, an increase of £22m in costs forasbestos li�ga�on in John Crane Inc, oﬀset by a provision reduc�on of £7m for subroga�on claims in
Titeﬂex Corpora�on. The statutory opera�ng proﬁt of £192m was £5m higher than last year
(HY2023: £187m), reﬂec�ng the higher headline opera�ng proﬁt.
10

SMITHS GROUP PLC Half Year Results 2024

Statutory ﬁnance costs were £21m, broadly ﬂat with the prior half-year (HY2023: £20m).
The statutory eﬀec�ve tax rate was 35.0% (HY2023 38.4%) and includes a non-headline tax charge of £1m(HY2023 £6m). Please refer to notes 3 and 5 of the ﬁnancial statements for further details
Total Group proﬁt a�er tax and EPS
Statutory proﬁt a�er tax for the Group was £111m (HY2023: £109m) and statutory basic EPS was 32.0p(HY2023: 30.6p).
Statutory cash-ﬂow
Statutory net cash inflow from operating activities for the total Group was £168m (HY2023: £100m). See note
16 of the financial statements for a reconciliation of headline operating cash-flow to statutory cash-flow.
Pensions
Included within free cash-ﬂow was £3m of pension contribu�ons (HY2023: £3m). These contribu�ons
relate to unfunded, overseas schemes and healthcare arrangements.
As previously announced, it is not an�cipated that any further contribu�ons will be made to the TI Group
Pension Scheme (“TIGPS”), as the liabili�es of which have now been insured via a series of buy-in
annui�es. Smiths and the TIGPS Trustee are working toward ﬁnal buy-out of the scheme to delivercertainty for the Scheme’s 20,000 members and remove future risk for Smiths.
The other major pension scheme, Smiths Industries Pension Scheme (“SIPS”) is es�mated to be in surplus
on the Technical Provisions funding basis, and no cash contribu�ons are currently being made. The Groupand the SIPS Trustee con�nue to work together to progress towards the long-term funding target of fullbuy-out funding.
The two main UK pension schemes and the US pension plan are well hedged against changes in interestand inflation rates. The entirety of their assets are invested in third-party annuities, government bonds,
investment grade credit or cash, with no remaining equity investments. As at 31 January 2024, over 60%of the UK liabilities had been de-risked through the purchase of annuities from third party insurers.
Foreign exchange
The results of overseas opera�ons are translated into sterling at average exchange rates. Net assets aretranslated at period-end rates. The Group is exposed to foreign exchange movements, mainly the
US Dollar and the Euro. The principal exchange rates, expressed in terms of the value of Sterling, are shownin the following table.

USD
EUR

31 Jan 2024
(6 months)
1.25
1.16

Average rates
31 Jan 2023
(6 months)
1.18
1.15

Period-end rates
31 Jan 2024
31 Jan 2023
1.27
1.17

1.23
1.13

Outlook
For FY2024, we reaﬃrm our guidance of organic revenue growth within our medium-term target range of
4-6%, underpinned by record order books. We expect growth to improve in the second half, supported bycon�nued strength in end markets such as aerospace, security and energy, and gradually improving market
condi�ons in US HVAC and semiconductors. We also reaﬃrm our expecta�on for con�nued margin
expansion in FY2024.

11

Business review

SMITHS GROUP PLC Half Year Results 2024

JOHN CRANE
John Crane is a leading provider of mission-cri�cal engineered solu�ons, improving customers' reliability
and sustainability in process industries. 63% of revenue is derived from the energy sector (downstream
and midstream oil & gas and power genera�on, including renewable and sustainable energy sources).
37% is from other process industries including chemical, life sciences, mining, water treatment andpulp & paper. 73% of John Crane revenue is from a�ermarket sales. John Crane represents 37% of Grouprevenue.
HY2024
£m
555
80
271
351
72
132
204
128
23.0%
106
25.1%
1.6%

HY2023
£m
519
83
233
316
73
130
203
114
22.0%
99
21.7%
2.0%

Reported
growth+7.1%(4.3)%+16.5%+11.0%(0.0)%+1.7%+1.1%+12.7%+100bps

Organic
growth+12.7%+0.3%+22.5%+16.6%
+5.0%
+7.4%
+6.5%
+18.3%+110bps

HY2023reported
519

Foreignexchange(26)

Organic
movement
62

HY2024reported
555

Revenue
Original Equipment
A�ermarket
EnergyOriginal Equipment
A�ermarket
General Industrial
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin
Statutory opera�ng proﬁt
Return on capital employed
R&D cash costs as % of sales

Revenue£m
RevenueJohn Crane con�nued its strong organic growth performance and has now delivered eleven consecu�vequarters of growth as it executes on its record order book. For the ﬁrst half, John Crane delivered organic
revenue growth of +12.7%, with a par�cularly strong performance in the ﬁrst quarter. A�ermarket sales,
which comprise 73% of sales (HY2023: 70%), grew +17.1%, while OE grew +2.5%, both on an organic basis.
Order intake grew +10.9% in the half, and the sustained high order book supports a posi�ve outlook andcon�nued growth through the second half of the year.
Reported revenue grew to £555m, which was up +7.1%, reﬂec�ng strong organic growth, par�ally oﬀset
by a nega�ve foreign exchange impact.
In Energy, organic revenue grew +16.6%, beneﬁ�ng from an increased focus on energy security and higher
demand for energy eﬃciency and emissions reduc�on. Regionally, there was a strong performance in the
Middle East and Asia for our advanced seals and gas compression products.
John Crane is well posi�oned to support customers with their decarbonisa�on goals with 30% of its sales
coming from products and services which provide some type of decarbonisa�on beneﬁt. John Crane won
several notable energy transi�on project contracts in the ﬁrst half – including one to supply dry gas seals
for three supercri�cal CO2 compressors of a large-scale blue hydrogen project in the USA, and a signiﬁcant
contract to supply wet seals for almost a hundred pumps to a zero-emission vehicle electric baterymanufacturing facility, also in the USA.

12

SMITHS GROUP PLC Half Year Results 2024

In January, John Crane celebrated a key milestone for its CCUS oﬀering, supplying its 1,100th sealing
product for CO2-related applica�ons. John Crane has been a constant enabler of technology since installing
its very ﬁrst dry gas seal at a carbon capture facility in 1996, working to reduce emissions for its customers.
The pipeline of opportuni�es John Crane is pursuing within energy transi�on in CCUS, hydrogen andbiofuels con�nues to expand rapidly.
The Industrial segment grew +6.5% organically, with good growth across both OE and a�ermarket sales,
driven by broad-based demand and par�cular strength in water, pharmaceu�cal and marine sales.
Opera�ng proﬁt and ROCE£m
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

HY2023reported114
22.0%

Foreignexchange(6)

Organic
movement20

HY2024reported
128
23.0%

Headline opera�ng proﬁt of £128m grew +18.3% on an organic basis, resul�ng in +110bps of margin
expansion. This was driven by increased volumes with good opera�ng leverage, par�ally oﬀset by higher
investment in growth to service the strong demand and deliver future opportuni�es. Pricing oﬀse�ng
inﬂa�on and the beneﬁts from SES projects supported margin expansion to 23.0%.
On a reported basis, headline opera�ng proﬁt was up +12.7%, which included a nega�ve foreign exchange
impact. The diﬀerence between statutory and headline opera�ng proﬁt mainly relates to the net cost of
the provision for John Crane, Inc. asbestos li�ga�on.
ROCE was 25.1%, up 340bps, reﬂec�ng headline opera�ng proﬁt growth.
R&D
Cash R&D expenditure was 1.6% of sales (HY2023: 2.0%). John Crane’s con�nued investment in R&D isprimarily focused on gas compression projects and enhancing the eﬃciency, performance andsustainability of heavy-duty seals and hydrogen compressors.
John Crane is well placed to support energy transi�on projects with its extreme temperatures/highpressure sealing solu�ons. John Crane con�nues to work with universi�es to develop and bring to market
these innova�ve technologies and solu�ons that will help solve customer challenges and accelerate thedecarbonisa�on agenda.

13

SMITHS GROUP PLC Half Year Results 2024

SMITHS DETECTION
Smiths Detec�on is a global leader in the detec�on and iden�ﬁca�on of threats and contraband,suppor�ng safety, security and freedom of movement. It produces equipment for customers in the
Avia�on market and Other Security Systems for ports & borders, defence and urban security markets.
54% of Smiths Detec�on’s sales are derived from the a�ermarket. Smiths Detec�on represents 27% ofGroup revenue.
HY2024
£m
404
112
157
269
74
61
135
43
10.7%
33
7.9%
7.6%

HY2023
£m
390
110
153
263
79
48
127
41
10.5%
24
7.2%
8.4%

Reported
growth
+3.6%
+0.8%
+2.7%
+1.9%
(5.3)%+27.8%+7.2%+4.1%+20bpsOrganic
growth
+8.9%
+5.7%
+8.0%
+7.0%
(0.1)%+34.1%+12.8%+10.3%+20bps

HY2023reported
390

Foreignexchange(19)

Organic
movement
33

HY2024reported
404

Revenue
Original Equipment
A�ermarket
Avia�onOriginal Equipment
A�ermarket
Other Security Systems
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin
Statutory opera�ng proﬁt
Return on capital employed
R&D cash costs as % of sales

Revenue£m
Revenue

Smiths Detec�on delivered +8.9% organic revenue growth in the ﬁrst half, conver�ng strong orders torevenue, with growth across most segments. A�ermarket revenue grew +14.2% organically, making up
54% of sales (FY2023: 51%).
Orders grew +38.2% in the half, with several large mul�-year contracts awarded, suppor�ng revenue
growth in FY2024 and beyond.
Reported revenue was up +3.6% reﬂec�ng organic growth, par�ally oﬀset by an unfavourable foreignexchange impact.
In Avia�on, organic revenue grew +7.0%, reﬂec�ng con�nued strong demand for Smith Detec�on’s latest
range of 3D-image computed tomography (“CT”) machines for cabin baggage, CTiX. Smiths Detec�oncon�nues to achieve a strong win rate in avia�on with key contract wins in all regions globally and to date,
has now sold more than 1,200 CTiX scanners. Notable wins in the ﬁrst half included Australia,
Czech Republic, France, Germany, Japan, Saudi Arabia, the UK and the USA.
Other Security Systems sales grew +12.8% organically, notably in a�ermarket. Order intake in defence waspar�cularly strong for chemical detec�on, driven by a mul�-year contract for an ini�al£88 million from the UK Ministry of Defence, for next genera�on chemical detec�on equipment. This
followed an award from the US Department of Defense to supply next genera�on portable aerosol andvapour chemical agent detectors. In urban security, Smiths Detec�on provided security screening at COP28
and its X-ray screening equipment was used to protect the NFL Super Bowl.

14

SMITHS GROUP PLC Half Year Results 2024

Opera�ng proﬁt and ROCE£m
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

HY2023reported41
10.5%

Foreignexchange(2)

Organic
movement
4

HY2024reported
43
10.7%

Headline opera�ng proﬁt was up +10.3% on an organic basis for the year, supported by the strong organic
revenue growth and SES beneﬁts. On a reported basis, headline opera�ng proﬁt was up +4.1%, including
a moderate nega�ve foreign exchange transla�on.
Headline opera�ng proﬁt margin of 10.7% was up 20bps on both an organic and a reported basis reﬂec�ng
the posi�ve beneﬁts of SES and cost ac�ons. This was partly oﬀset by the expansion in ﬁeld service
engineers to support the high installa�on ac�vity. Further, over the longer term, higher margin a�ermarket
revenue associated with new OE sales, our con�nued SES ini�a�ves, and a posi�ve mix impact from new
defence contracts coming online are expected to support con�nued margin expansion.
The diﬀerence between statutory and headline opera�ng proﬁt primarily reﬂects amor�sa�on of acquired
intangibles.
ROCE increased by +70bps to 7.9%, driven by the headline opera�ng proﬁt growth.
R&D
Cash R&D represen�ng 7.6% of sales (HY2023: 8.4%) supports Smiths Detec�on investment in
next-genera�on detec�on capabili�es and included £9m in customer funded projects (FY2023: £9m).
Smiths Detec�on also beneﬁts from external R&D funding, and during the ﬁrst half, was selected for EU
funding as part of a consor�um to develop new AI-based algorithms for automa�c detec�on of narco�cs
in passenger baggage, and to develop a mari�me customs border control screening system for portablescreening technology for shipping containers.

15

SMITHS GROUP PLC Half Year Results 2024

FLEX-TEK
Flex-Tek provides innova�ve solu�ons to heat and move ﬂuids and gases for industrial and aerospace
applica�ons that support energy eﬃciency and improved air quality. 81% of Flex-Tek’s revenue is derived
from Industrials and 19% from the Aerospace sector. Flex-Tek represents 25% of Group revenue.
HY2024
£m
384
310
74
81
21.2%
74
26.1%
0.4%

Revenue
General Industrial
Aerospace
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin
Statutory opera�ng proﬁt
Return on capital employed
R&D cash costs as % of sales

HY2023
£m
395
326
69
77
19.5%
64
26.6%
0.4%

Reported
growth(2.8)%(4.8)%+6.3%+5.3%+170bps

Organic
growth(4.1)%(7.6)%+12.1%+2.6%+140bps

Organic
movement(15)

HY2024reported
384

Revenue£m
Revenue

HY2023reported395

Foreignexchange Acquisi�ons(22)
26

Organic revenue declined (4.1)% in the ﬁrst half. Revenue on a reported basis declined (2.8)%, with a(£15m) organic decline and a (£22m) nega�ve foreign exchange transla�on impact, partly oﬀset by a+£26m contribu�on from HCP, which was acquired in August 2023.
In General Industrial, organic revenue was (7.6)% lower in the ﬁrst half versus a tough comparator lastyear. As expected, so� US residen�al construc�on ac�vity con�nued to impact our HVAC sales, whichstarted to slow in the second half of last year. Market expecta�ons that mortgage rates will con�nue tomoderate, combined with a meaningful housing inventory deﬁcit and improving builder conﬁdence,
inform our expecta�on that our HVAC sales will improve in the second half. Combined with con�nued
strong aerospace sales, we an�cipate that Flex-Tek will return to growth in the second half.
In Aerospace, organic revenue grew +12.1% in the ﬁrst half, supported by an increasing number of aircra�
builds. A strong order book supports our expecta�on for con�nued good growth into the second half.
Opera�ng proﬁt and ROCE£m

HY2023reported

Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

77

Foreignexchange Acquisi�ons
6(4)

Organic
movement2

19.5%

HY2024reported
81
21.2%

Headline opera�ng proﬁt grew +2.6% on an organic basis. The decline in revenue was oﬀset by a higher
gross margin, reﬂec�ng �ght cost control in light of the lower volume, plus posi�ve mix impacts reﬂec�ng
new industrial hea�ng contracts and the contribu�on of HCP.
The diﬀerence between statutory and headline opera�ng proﬁt is due to amor�sa�on of acquired
intangible assets and the provision for Titeﬂex Corpora�on subroga�on claims.
ROCE decreased (50)bps to 26.1%, with proﬁt growth oﬀset by the foreign exchange impact.

16

SMITHS GROUP PLC Half Year Results 2024

The integra�on of HCP is progressing ahead of plan. The acquisi�on expanded Flex-Tek’s presence in the
North American HVAC market by extending its customer base in the midwest and north-east, andbroadened its product range, including HCP’s patented axial and radial seal duct technology.
R&D
Cash R&D expenditure grew in-line with sales, remaining at 0.4% of sales (HY2023: 0.4%). R&D is focusedon developing new products for the construc�on and aerospace markets, and new electriﬁca�onopportuni�es within industrial markets.

17

SMITHS GROUP PLC Half Year Results 2024

SMITHS INTERCONNECT
Smiths Interconnect designs high performance connec�vity solu�ons for demanding applica�ons in theaerospace and defence, semiconductor test, and industrial end-markets. Smiths Interconnect represents
11% of Group revenue.
HY2024
£m
164
20
12.2%
19
10.5%
6.8%

Revenue
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin
Statutory opera�ng proﬁt
Return on capital employed
R&D cash costs as % of sales

Revenue£m
Revenue

HY2023reported
193

Foreignexchange(9)

HY2023
£m
193
32
16.6%
30
15.8%
6.5%

Acquisi�ons
5

Reported
growth(15.3)%(37.4)%(440)bps

Organic
movement(25)

Organic
growth(13.7)%(33.3)%(370)bps

HY2024
Reported
164

Smiths Interconnect’s organic revenue declined in the ﬁrst half, reﬂec�ng con�nued weakness in thesemiconductor market and a slower market in connectors resul�ng in part from customer destocking, as
well as a tough year-on-year comparator in both these segments. A double-digit contrac�on in the ﬁrst
quarter was followed by a ﬂat second quarter, resul�ng in a (13.7)% organic decline overall for the ﬁrst
half.
Reported revenue decreased (15.3)% reﬂec�ng a nega�ve foreign exchange impact and a £5m
contribu�on from Plastronics which has strengthened the semiconductor product portfolio and provided
greater exposure to automotive and industrial end markets.
Although the semiconductor market downturn has been longer than expected, ac�vity levels are star�ng
to increase and alongside good growth in space and defence-related programmes, orders returned to
growth in the second quarter, with a posi�ve book to bill for the division.
Opera�ng proﬁt and ROCE£m
Headline opera�ng proﬁt
Headline opera�ng proﬁt margin

HY2023reported32
16.6%

Foreignexchange(2)

Acquisi�ons(0)

Organic
movement(10)

HY202420
12.2%

Headline opera�ng proﬁt declined (33.3)% on an organic basis, resul�ng in a (370)bps reduc�on in
opera�ng proﬁt margin to 12.2%. The decline was driven by lower volumes more than oﬀse�ng pricing,
SES beneﬁts and the impact of cost control ini�a�ves. Headline opera�ng proﬁt was down (37.4)%, mostly
reﬂec�ng the organic revenue decline.
The diﬀerence between statutory and headline opera�ng proﬁt reﬂects the amor�sa�on of acquired
intangibles, acquisi�on costs.
ROCE reduced (530)bps to 10.5% driven by the lower opera�ng proﬁt.
R&D
Cash R&D expenditure as a percentage of sales was 6.8% of sales (HY2023: 6.5%). R&D is focused on
developing new products that improve connec�vity and product integrity in demanding opera�ng
18

SMITHS GROUP PLC Half Year Results 2024

environments. Product launches during the ﬁrst half included a high-density electrical connector for the
medical market and a new series of ﬁxed atenuators and Thermopad® products for use in space, defence
and aerospace applica�ons.
Space grade products are a key development focus, and in the ﬁrst half, Smiths Interconnect received
funding from the UK Space Agency of around £2m through its ‘Space Clusters Infrastructure Fund’. Smiths
Interconnect will use the funding to enhance its Dundee-based Space Qualiﬁca�on Laboratory, which
simulates the extreme condi�ons of space to assure the quality and durability of space components.

19

SMITHS GROUP PLC Half Year Results 2024

PRINCIPAL RISKS AND UNCERTAINTIESThe Group has a risk management structure and internal controls in place which are designed to iden�fy,
manage and mi�gate business risks. Smiths faces a number of risks and uncertain�es which could have amaterial impact on the Group's long-term performance.
Principal risks and uncertain�es
The Group has a risk management structure and internal controls in place which are designed to iden�fy,
manage and mi�gate business risks. Smiths faces a number of risks and uncertain�es which could have amaterial impact on the Group's long-term performance. The Group's principal risks and uncertain�es at
31 July 2023 are detailed on pages 68 to 74 of the 2023 Annual Report. The principal risks and uncertain�es
aﬀec�ng the Group for the remaining six months of the ﬁnancial year con�nue to be those set out brieﬂy
below and more fully in the Annual Report.
• Organic growth: Failure to deliver anticipated organic growth, which may lead to missing strategic
growth targets and shareholder value erosion.
• Climate change: Failure to identify and act on the significant opportunities arising from the world’s
transition to a low-carbon economy and/or failure to respond appropriately to climate change risks
and regulation.
• Technology: If we fail to maintain our technological differentiation and our innovation pipeline does
not meet customers’ evolving requirements, we may lose market share to a new or existing
competitor. This could impact our financial performance and our ability to attract and retain talent.
• People: Failing to attract, develop, and retain the right people with the right skills may affect ourability to achieve our commercial ambitions.
• Business continuity: Disruption to our supply chain, manufacturing or service operations, or
customers’ operations could impact our financial performance.
• Economy and geopolitics: The challenging economic and geopolitical environment in which we
operate may have an adverse effect on demand for our products, our cost structure, pricing
strategies, profitability and market share. External adverse events could cause an unanticipated andsudden disruption to our business.
• Commercial: Failure to act in a timely manner and adapt our market strategy in response to changes
in the commercial environment in which we operate may result in an adverse effect on our financial
performance and market share.
• Product quality: Failure of one of our products, including failure due to non-compliance with productregulation, may result in financial loss and reputational damage. In the ordinary course of business,
we could be subject to material product liability claims and lawsuits, including potential class actions
from customers or third parties.
• Cyber security: Cyber-attacks attempting to compromise the confidentiality, integrity and availabilityof IT systems and the data held on them are a continuing risk. We operate in markets and productareas which are known to be of interest to cyber criminals. Digitalisation and increased
interconnectivity of our products intensifies the risk.
• Legal and compliance: We have more than 15,000 colleagues in more than 50 countries. Individuals
may not all behave in accordance with the Group’s Values and in accordance with ethical and legal
requirements. We operate within increasingly complex legal regimes, often in highly regulated
markets and with governments, customers and suppliers requiring strict adherence to laws. We may
fail to deliver contracted products and services or fail in our contractual execution due to delays or
breaches by our suppliers or other counterparties.

20

SMITHS GROUP PLC Half Year Results 2024

STATEMENT OF DIRECTORS’ RESPONSIBILITIESThe directors conﬁrm that, to the best of our knowledge:• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the United Kingdom and in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006; and• the interim management report includes a fair review of the information required by:a)DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important
events that have occurred during the first six months of the financial year and their impact on
the condensed set of financial statements; and a description of the principal risks anduncertainties for the remaining six months of the year; andb) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions
that have taken place in the first six months of the current financial year and that have materiallyaffected the financial position or performance of the entity during that period; and any changes
in the related party transactions described in the last annual report that could do so.
For and on behalf of the Board of directors:
Paul Keel
Chief Execu�ve Oﬃcer

Clare Scherrer
Chief Financial Oﬃcer

25 March 2024

21

INDEPENDENT REVIEW REPORT TO SMITHS GROUP PLC
Conclusion
We have been engaged by Smiths Group Plc (“the Company”) to review the condensed set of financial statements in the half-yearly financial reportfor the six months ended 31 January 2024 which comprises the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 31 January 2024 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial
Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules (“the DTR”) of the UK’s Financial Conduct Authority(“the UK FCA”).
Basis for conclusion
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity (“ISRE (UK) 2410”) issued for use in the UK. A review of interim financial information consistsof making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half- yearly financial report and consider whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of thisreport, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis ofaccounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause
the Group to cease to continue as a going concern, and the above conclusions are not a guarantee that the Group will continue in operation.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the halfyearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK-adopted international accounting
standards.
The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with
IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report basedon our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of
the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in thisreport and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.

Mike Barradellfor and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
LondonE14 5GL
25 March 202422

Consolidated income statement (unaudited)
Six months ended 31 January 2024

Notes

CONTINUING OPERATIONSRevenue
Operating costs

Headline£m

Non-headline(note 3)£m

Six months ended 31 January 2023
Total
£m

Headline£m

Non-headline(note 3)
£m

Total
£m

1,507
(1,261)

–
(54)

1,507
(1,315)

1,497(1,256)

–
(54)

1,497
(1,310)Operating profit/(loss)

246

(54)

192

241

(54)

187

Interest receivable
Interest payable
Other financing losses
Other finance income – retirement benefits

11
(29)
–
–

–
–
(6)
3

11
(29)
(6)
3

21
(38)
–
–

–
(2)
(5)
4

21
(40)
(5)
4

Finance costs

(18)

(3)

(21)

(17)

(3)

(20)

Profit/(loss) before taxation

228

(57)

171

224

(57)

167

(59)

(1)

(60)

(58)

(6)

(64)

169

(58)

111

166

(63)

103

–

–

–

–

6

6

PROFIT/(LOSS) FOR THE PERIOD

169

(58)

111

166

(57)

109

Attributable to
Smiths Group shareholders – continuing operations
Smiths Group shareholders – discontinued operations

169
–

(58)
–

111
–

166
–

(63)
6

103
6

169

(58)

111

166

(57)

109

Taxation2
2

5Profit/(loss) for the period from continuing operations
DISCONTINUED OPERATIONSProfit for the period from discontinued operations

Earnings per share
Basic
Basic – continuing
Diluted
Diluted – continuing
Dividends per share (declared)

3

4

14

23

32.0p
32.0p
32.0p
32.0p

30.6p
28.9p
30.5p
28.9p

13.55p12.90p

Consolidated statement of comprehensive income(unaudited)
Six months
ended
31 January 2024£m

Six months
ended
31 January 2023
£m

111

109

(100)
12
(167)

(109)
14
27

(255)

(68)

(2)
–

(13)
3

(2)

(10)

5

2

5

2

Total other comprehensive expenditure for the period, net of taxation

(252)

(76)

Total comprehensive income

(141)

33

Attributable to
Smiths Group shareholders
Non-controlling interests

(141)
–

33
–

(141)

33

(141)
–

27
6

(141)

33

Notes

Profit for the period
Other comprehensive income (OCI)
OCI which will not be reclassified to the income statement:
Re-measurement of post-retirement benefits assets and obligations
Taxation on post-retirement benefits movements
Fair value movements on financial assets at fair value through OCI
OCI which will be reclassified and reclassifications:
Fair value gains and reclassification adjustments:– deferred in the period on cash-flow and net investment hedges– reclassified to income statement on cash-flow hedges
Foreign exchange movements net of recycling:
Exchange gains on translation of foreign operations

Total comprehensive income attributable to Smiths Group shareholders arising from
Continuing operations
Discontinued operations

24

Consolidated balance sheet (unaudited)
31 January2024£m

31 July
2023
£m

1,557
259
112
193
101
97
86

1,521
247
105
371
195
95
75

2,405

2,609

649
51
777
180
3

637
47
772
285
5

1,660

1,746

4,065

4,355

(8)
(32)
(3)
(71)
(679)
(76)

(3)
(26)
(2)
(70)
(723)
(74)

(869)

(898)

(540)
(93)
(12)
(225)
(114)
(3)
(43)
(40)

(534)
(91)
(18)
(216)
(106)
(3)
(43)
(40)

(1,070)(1,051)

Total liabilities(1,939)(1,949)Net assets

2,126

2,406

130
365
25
235
391
1,148
(190)

131
365
24
235
386
1,431
(188)

Total shareholders’ equity
Non-controlling interest equity

2,104
22

2,384
22

Total equity

2,126

2,406

Notes

Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Financial assets – other investments
Retirement benefit assets
Deferred tax assets
Trade and other receivables

7
8
9
10
6

Current assets
Inventories
Current tax receivable
Trade and other receivables
Cash and cash equivalents
Financial derivatives

11
11

Total assets
Current liabilities
Financial liabilities:– short-term borrowings– lease liabilities– financial derivatives
Provisions
Trade and other payables
Current tax payable

11
11
11
13

Non-current liabilities
Financial liabilities:– long-term borrowings– lease liabilities– financial derivatives
Provisions
Retirement benefit obligations
Corporation tax payable
Deferred tax liabilities
Trade and other payables

11
11
11
13
6

Shareholders’ equity
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Cumulative translation adjustments
Retained earnings
Hedge reserve

18
18

25

Consolidated statement of changes in equity (unaudited)
Share capitaland share
premium£m

Otherreserves£m

Cumulativetranslation
adjustments£mRetainedearnings£m

Hedge
reserve£m

Equityshareholders’
funds
£m

Non-controlling
Interest£m

Total
equity
£m

496

259

386

1,431

(188)

2,384

22

2,406

Profit for the period
Other comprehensive income:– foreign exchange movements net of recycling– re-measurement of post-retirement benefits
and related tax– fair value gains/(losses) and related tax

–

–

–

111

–

111

–

111

–
–

–
–

5
–

–
(88)

–
–

5
(88)

–
–

5
(88)

–

–

–

(167)

(2)

(169)

–

(169)

Total comprehensive income for the period

–

–

5

(144)

(2)

(141)

–

(141)

–
(1)

–
1

–
–

(16)
(29)

–
–

(16)
(29)

–
–

(16)
(29)

–
–

–
–

–
–

(100)
6

–
–

(100)
6

–
–

(100)
6

495

260

391

1,148

(190)

2,104

22

2,126

Share capitaland share
premium£m

Otherreserves£m

Cumulativetranslation
adjustments£mRetainedearnings£m

Hedge
reserve£m

Equityshareholders’
funds
£m

Non-controlling
Interest£m

Total
equity
£m

501

254

487

1,659

(202)

2,699

22

2,721

Profit for the period
Other comprehensive income:– foreign exchange movements net of recycling– re-measurement of post-retirement benefits
and related tax– fair value losses and related tax

–

–

–

109

–

109

–

109

–
–

–
–

2
–

–
(95)

–
–

2
(95)

–
–

2
(95)

–

–

–

27

(10)

17

–

17

Total comprehensive income for the period

–

–

2

41

(10)

33

–

33

–
(3)

–
3

–
–

(24)
(144)

–
–

(24)
(144)

–
–

(24)
(144)

–
–

–
–

–
–

(97)
8

–
–

(97)
8

–
–

(97)
8

498

257

489

1,443

(212)

2,475

22

2,497

Notes

At 31 July 2023

Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust
Share buybacks
Dividends:– equity shareholders
Share-based payment

18

14

At 31 January 2024

Notes

At 31 July 2022

Transactions relating to ownership interests
Purchase of shares by Employee Benefit Trust
Share buybacks
Dividends:– equity shareholders
Share-based payment
At 31 January 2023

18

14

26

Consolidated cash-flow statement (unaudited)
Notes

Net cash inflow from operating activities

Six months
Six months
ended
ended
31 January 2024 31 January 2023
£m
£m

168

100

Cash-flows from investing activities
Expenditure on capitalised development
Expenditure on other intangible assets
Purchase of property, plant and equipment
Return of capital from financial assets
Acquisition of businesses
Payments on disposal of subsidiaries, net of cash disposed

(7)
(1)
(30)
1
(65)
–

(7)
(3)
(26)
–
(22)
(7)

Net cash-flow used in investing activities

(102)

(65)

(29)
(16)
(2)
(100)
1
(19)

(144)
(24)
–
(97)
(10)
(18)

Net cash-flow used in financing activities

(165)

(293)

Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange differences

(99)
285
(6)

(258)
1,055
(2)

Cash and cash equivalents at end of the period

180

795

Cash and cash equivalents at end of the period comprise:– cash at bank and in hand
– short-term deposits

111
69

197
598

180

795

16

Cash-flows from financing activities
Share buybacks
Purchase of shares by Employee Benefit TrustSettlement of share awards in cash
Dividends paid to equity shareholders and non-controlling interests
Cash inflow/(outflow) from matured derivative financial instruments
Lease payments

18

27

Notes to the condensed interim financial statements(unaudited)
1 Basis of preparation
The financial information for the period ended 31 January 2024 does not constitute statutory accounts as defined in section 434 of the Companies
Act 2006. A copy of the statutory accounts for the year ended 31 July 2023 has been delivered to the Registrar of Companies. The auditor’s reporton those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without
qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The condensed consolidated interim financial report for the half-year reporting period ended 31 January 2024 included in this announcement has
been prepared on a going concern basis using accounting policies consistent with UK-adopted International Accounting Standards, in accordancewith IAS 34 Interim Financial Reporting, and in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be readin conjunction with the annual report for the year ended 31 July 2023, which has been prepared in accordance with UK-adopted International
Accounting Standards.
The interim financial statements are prepared on a going concern basis. The Directors have assessed the principal risks discussed on page 19.
The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectationthat the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these condensed consolidated
interim financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial
statements.
The interim financial information was approved by the Board on 25 March 2024.
Accounting policies
The same accounting policies, estimates, presentation and methods of computation are followed in the condensed interim financial statements asapplied in the Group’s latest annual audited financial statements.
New standards and interpretations not yet adopted
No new standards, new interpretations, or amendments to standards or interpretations have been published which are expected to have a significant
impact on the Group’s financial statements.
Presentation of results
In order to provide users of the accounts with a clear and consistent presentation of the performance of the Group’s ongoing trading activity, theincome statement is presented in a three column format with ‘headline’ profits shown separately from non-headline items in a form consistent withthe prior year.
Judgement is required in determining which items should be included as non-headline. The amortisation of acquired intangibles, legacy liabilities,
material one-off items and certain re-measurements are included in a separate column of the income statement. See note 3 for a breakdown of theitems excluded from headline profit.
Performance measures for the Group’s ongoing trading activity are described as ‘headline’ and used by management to measure and monitor
performance. See note 2 for disclosures of headline operating profit and note 19 for more information about the alternative performance measures('APMs') used by the Group.
In addition, the Group reports organic growth rates for revenue and underlying growth rates for profit where the determination of adjustments
requires judgement. See note 19 for more information about the key performance indicators (KPIs) used by the Group.

28

2 Analysis of revenue, operating costs and segment information
Analysis by operating segment
The Group is organised into four divisions: John Crane, Smiths Detection, Flex-Tek and Smiths Interconnect. These divisions design andmanufacture the following products:-

John Crane – mechanical seals, seal support systems, power transmission couplings and specialised filtration systems;-

Smiths Detection – sensors and systems that detect and identify explosives, narcotics, weapons, chemical agents, biohazards andcontraband;-Flex-Tek – engineered components, flexible hosing and rigid tubing that heat and move fluids and gases; and-Smiths Interconnect – specialised electronic and radio frequency board-level and waveguide devices, connectors, cables, test sockets andsub-systems used in high-speed, high reliability, secure connectivity applications.

The position and performance of each division is reported at each Board meeting to the Board of Directors. This information is prepared using thesame accounting policies as the consolidated financial information, except that the Group uses headline operating profit to monitor divisional results
and operating assets to monitor divisional position. See note 3 and note 19 for more information on which items are excluded from headline profit
measures.
Intersegment sales and transfers are charged at arm’s-length prices.
Segment trading performanceSix months ended 31 January 2024
John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate
costs
£m

Total
£m

Revenue

555

404

384

164

–

1,507

Divisional headline operating profit
Corporate headline operating costs

128
–

43
–

81
–

20
–

–
(26)

272
(26)

Headline operating profit/(loss)
Items excluded from headline measures (note 3)

128
(22)

43
(10)

81
(7)

20
(1)

(26)
(14)

246
(54)

Operating profit/(loss) for the period

106

33

74

19

(40)

192

23.0%

10.7%

21.2%

12.2%

John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate
costs
£m

Total
£m

Revenue

519

390

395

193

–

1,497

Divisional headline operating profit
Corporate headline operating costs

114
–

41
–

77
–

32
–

–
(23)

264
(23)

Headline operating profit/(loss)
Items excluded from headline measures (note 3)

114
(15)

41
(17)

77
(13)

32
(2)

(23)
(7)

241
(54)

Operating profit/(loss) for the period

99

24

64

30

(30)

187

22.0%

10.5%

19.5%

16.6%

John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate andnon-headline
£m

Total
£m

Property, plant, equipment, right of use assets, development
projects, other intangibles and investments
Inventory, trade and other receivables

161

147

101

66

200

675

513

571

244

164

20

1,512

Segment assets

674

718

345

230

220

2,187

John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate andnon-headline
£m

Total
£m

Property, plant, equipment, right of use assets, development
projects, other intangibles and investments
Inventory, trade and other receivables

162

142

84

66

375

829

489

599

226

160

10

1,484

Segment assets

651

741

310

226

385

2,313

Headline operating margin

16.3%
Six months ended 31 January 2023

Headline operating margin

16.1%

Segment assets and liabilities
Segment assets
31 January 2024

31 July 2023

Non-headline assets comprise receivables relating to non-headline items, acquisitions and disposals.

29

Segment liabilities
31 January 2024
John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate andnon-headline
£m

Total
£m

Divisional liabilities
Corporate and non-headline liabilities

(192)
–

(340)
–

(87)
–

(56)
–

–
(340)

(675)
(340)

Segment liabilities

(192)

(340)

(87)

(56)

(340)

(1,015)

John Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect£m

Corporate andnon-headline
£m

Total
£m

(200)

(357)

(91)

(62)

–

(710)

–

–

–

–

(339)

(339)

(200)

(357)

(91)

(62)

(339)

(1,049)31 July 2023

Divisional liabilities
Corporate and non-headline liabilities
Segment liabilities

Non-headline liabilities comprise provisions and accruals relating to non-headline items, acquisitions and disposals.
Reconciliation of segment assets and liabilities to statutory assets and liabilities
AssetsLiabilities

31 January2024£m

31 July2023£m

31 January2024£m

31 July2023£m

Segment assets and liabilities
Goodwill and acquired intangibles
Derivatives
Current and deferred tax
Retirement benefit assets and obligations
Cash and borrowings

2,187
1,446
3
148
101
180

2,313
1,415
5
142
195
285

(1,015)
–
(15)
(122)
(114)
(673)

(1,049)
–
(20)
(120)
(106)
(654)

Statutory assets and liabilities

4,065

4,355

(1,939)(1,949)Segment capital employed
Capital employed is a non-statutory measure of invested resources. It comprises statutory net assets adjusted to add goodwill recognised directly
in reserves in respect of subsidiaries acquired before 1 August 1998 of £478m (31 July 2023: £478m), and eliminate post-retirement benefit assets
and liabilities and litigation provisions relating to non-headline items, both net of related tax, and net debt. See note 19 for additional details.
The 12-month rolling average capital employed by division, which Smiths uses to calculate divisional return on capital employed, is set out below:
31 January 2024

Average divisional capital employedJohn Crane£m

Smiths
Detection
£m

1,026

1,158

Flex-Tek£mSmithsInterconnect
£m

Total
£m

587

477

3,248

Average corporate capital employed(30)

Average capital employed

3,218
31 January 2023

Average divisional capital employed
Average corporate capital employedJohn Crane£m

Smiths
Detection£mFlex-Tek£mSmithsInterconnect
£m

Total
£m

1,006

1,088

558

435

3,087
(4)

Average capital employed – continuing operations

3,083

30

Analysis of revenue
The revenue for the main product and service lines for each division is:
Original
equipment£m

Aftermarket
£m

Total
£m

Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023

152
156

403
363

555
519

Smiths Detection

Aviation£m

Other security
systems
£m

Total
£m

Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023

269
263

135
127

404
390

Aerospace£m

Industrials
£m

Total
£m

74
69

310
326

384
395

John Crane

Flex-Tek
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023

Components,
Connectors &Subsystems£mSmiths Interconnect
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023

164
193

Divisional revenue is analysed by the Smiths Group key global markets as follows:
GeneralIndustrial£m

Safety &Security£mEnergy£m

Aerospace
£m

Total
£m

204
203

–
–

351
316

–
–

555
519

–
–

404
390

–
–

–
–

404
390

310
326

–
–

–
–

74
69

384
395

74
95

66
71

–
–

24
27

164
193

588
624

470
461

351
316

98
96

1,507
1,497

Six months
ended
31 January 2024£m

Six months
ended
31 January 2023£m

Sale of goods recognised at a point in time
Sale of goods recognised over time
Services recognised over time

1,093
28
386

1,113
31
353

Revenue

1,507

1,497

John Crane
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023
Smiths Detection
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023
Flex-Tek
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023
Smiths Interconnect
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023
Total
Revenue six months ended 31 January 2024
Revenue six months ended 31 January 2023
The Group’s statutory revenue is analysed as follows:

Operating costs
Headline operating costs are analysed as follows:
Six months ended 31 January 2024

Cost of sales - direct materials, labour, production anddistribution overheads
Selling costs
Administrative expenses
Operating costs

31

Six months ended 31 January 2023

Headline£m

Non-headline(note 3)
£m

Total
£m

Headline£m

Non-headline(note 3)
£m

Total
£m

945

–

945

945

–

945

107
209

–
54

107
263

112
199

–
54

112
253

1,261

54

1,315

1,256

54

1,310

3 Non-statutory profit measures
Headline profit measures
The Group seeks to present a measure of performance which is not impacted by material non-recurring items or items considered non-operationalin nature. This measure of profit is described as ‘headline’ and is used by management to measure and monitor performance. See the disclosureson presentation of results in accounting policies for an explanation of the adjustments. The items excluded from 'headline' are referred to as ‘nonheadline’ items.
Non-headline operating profit items
i. CONTINUING OPERATIONSThe non-headline items included in statutory operating profit are as follows:

Fair value adjustment changes to financial assets
Fair value (loss) / gain on contingent consideration
Acquisition and disposal related transaction costs
Business acquisition costs
Legacy pension scheme arrangements
Past service costs for benefit equalisation
Scheme administration costs
Settlement losses on post-retirement benefit schemes
Non-headline litigation provision movements
Provision for John Crane, Inc. asbestos litigation
Cost recovery for John Crane, Inc. asbestos litigation
Movement in provision held against Titeflex Corporation subrogation claims
Other items
Amortisation of acquisition related intangible assets
Restructuring costs
Irrecoverable VAT on chain export transactions
Non-headline items in operating profit

Six months
ended
31 January 2024£m

Six months
ended
31 January 2023
£m

(10)

5

(1)

(1)

–
(3)
–

(10)
(1)
(1)

(22)
–
7

(13)
3
–

(25)
–
–

(26)
(8)
(2)

(54)

(54)

Fair value adjustment changes to financial assets
Following the sale of Smiths Medical to ICU Medical, Inc. (ICU) in FY22, the Group holds a financial asset for the fair value of $100m additionalsales consideration that is contingent on the future share price performance of ICU. In HY24 a fair value loss of £10m (31 January 2023: £5m gain)
has been recognised on this financial asset. This is considered to be a non-headline item on the basis that these charges result from acquisition
accounting and do not relate to current trading activity.
Acquisition and disposal related transaction costs
The £1m (31 January 2023: £1m) business acquisition costs represented incremental transaction costs including the acquisition of HCP in HY24.
These costs did not include the cost of employees working on transactions and were reported as non-headline because they are dependent on thelevel of acquisition and disposal activity in the year.
Legacy pension scheme arrangements
In the prior year, £10m of past service costs were recognised in respect of the equalisation of retirement benefits for men and women, no further
costs have been recognised in the current year. These were treated as non-headline items as they are non-recurring and relate to legacy pension
schemes.
Scheme administration costs of £3m (31 January 2023: £1m) relates to the TIGPS legacy pension scheme and SIPS ‘path to buy-in’ costs. As theGroup has no expectation of receiving a refund from the scheme, an economic benefit value of zero has been placed on the TIGPS surplus. These
are non-headline charges as the Smiths Group effectively has no economic exposure to these costs and they are paid from cash retained in thescheme.
Non-headline litigation provision movements
The following litigation costs and recoveries have been treated as non-headline items because the provisions were treated as non-headline when
originally recognised and the subrogation claims and litigation relate to products that the Group no longer sells in these markets:- The £22m charge (31 January 2023: £13m) in respect of John Crane, Inc. asbestos litigation is driven primarily by adverse judgements impacting

the future expected indemnity costs. In the prior period, £3m of costs were recovered via insurer settlements. See note 13 for further details; and- The £7m credit (31 January 2023: £nil) recognised by Titeflex Corporation was principally driven by a continued reduction in the number ofclaimants.

Other items
Acquisition related intangible asset amortisation costs of £25m (31 January 2023: £26m) were recognised in the current period. This is considered
to be a non-headline item on the basis that these charges result from acquisition accounting and do not relate to current trading activity.
In the prior year, £8m of restructuring charges were incurred and treated as non-headline due to being material and part of a pre-approved
programme, no further charges have been recognised in the current year.

32

In the prior year, £2m irrecoverable VAT was recognised that relates to a historic VAT classification error. This error had resulted in certain
intercompany chain export transactions being treated as VAT exempt when they should have been initially classified as subject to German VAT,
no further charges have been recognised in the current year. This was treated as non-headline as it relates to six years of past VAT practice andinvolves the payment and recovery of German VAT over multiple financial years.
Non-headline finance (costs)/income items
The non-headline items included in finance (costs)/income are as follows:
Six months
ended
31 January 2024£m

Six months
ended
31 January 2023
£m–

Interest on overdue VAT
Other financing losses
Unwind of discount on provisions
Other finance income – retirement benefits

(2)
(4)
3

(2)
(1)
(4)
4

Non-headline items in finance (costs)/income

(3)

(3)

Non-headline loss before taxation

(57)

(57)

In the prior half year a £2m loss was recognised in respect of interest on the late payment of German VAT noted above, no further charges havebeen recognised in the current year. This interest charge was excluded from headline finance costs to maintain consistent treatment with theunderlying issue to which it related.
Other financing losses represent foreign exchange movements on borrowings and fair value movements on financial instruments. The current
period loss includes £1m (31 January 2023: £nil) due to foreign exchange translation losses and £1m (31 January 2023: £1m) due to hedge
ineffectiveness on the Group’s 2027 Eurobonds, which will reverse over the remaining period to maturity. These foreign exchange and fair value
movements are excluded from headline net finance costs when the following requirements are met:
- Fair value gains and losses on the interest element of derivative financial instruments hedging the Group’s net debt exposures are excluded fromheadline, as they will either reverse over time or be matched in future periods by interest charges.

- Fair value gains and losses on the currency element of derivative financial instruments hedging the Group’s net debt and exposures, and exchange

gains and losses on borrowings are excluded, as the relevant foreign exchange gains and losses on the commercially hedged items arerecognised as a separate component of other comprehensive income, in accordance with the Group’s foreign currencies accounting policy.

The financing elements of non-headline legacy liabilities, including the £4m (31 January 2023: £4m) unwind of discount on provisions, are excluded
from headline finance costs because these provisions were originally recognised as non-headline and this treatment has been maintained forongoing costs and credits.
Other finance income comprises £3m (31 January 2023: £4m) of financing credits relating to retirement benefits. These are excluded from headline
finance costs because the ongoing costs and credits are a legacy of previous employee pension arrangements.
Non-headline taxation items
The non-headline items included in taxation are as follows:
Six months
ended
31 January 2024£m

Six months
ended
31 January 2023
£m

Increase in unrecognised UK deferred tax asset
Tax credit on non-headline loss

(12)
11

(14)
8

Non-headline taxation (charge)/credit– continuing operations

(1)

(6)

Continuing operations – non-headline gain/(loss) for the year

(58)

(63)

The non-headline taxation charge comprises a charge of £12m (31 January 2023: £14m charge) to adjust non-recognition of a deferred tax asset,
where the offsetting deferred tax liability related to the UK legacy pension scheme surplus has been taken to OCI. Offsetting this charge are credits
for the tax attributable to the non-headline items above.
ii. DISCONTINUED OPERATIONSThe non-headline items for discontinued operations are as follows:
Six months
ended
31 January 2024£m

Six months
ended
31 January 2023
£m

Gain on sale of discontinued operation
Gain on the sale of Smiths Medical to ICU Medical, Inc.

–

6

Non-headline items in profit from discontinued operations

–

6

(58)

(57)

Profit for the period – non-headline items for continuing and discontinued operations

In the prior half year the Group recognised an additional £6m gain on the sale of Smiths Medical following the release of provisions that are nolonger required, no further gain has been recognised in the current year.

33

4 Earnings per share
Basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders of the Company by the average
number of ordinary shares in issue during the period.
Six months ended
31 January 2024£m

Six months ended
31 January 2023
£m

Profit attributable to equity shareholders for the period- Continuing- Discontinued

111
–

103
6

Total

111

109

Six months ended
31 January 2024
No. of shares

Six months ended
31 January 2023
No. of shares

346,626,154

356,572,308

161,251

294,496346,787,405

356,866,804

Six months ended
31 January 2024
pence

Six months ended
31 January 2023
pence

Statutory earnings per share continuing operations – basic

32.0p

28.9p

Statutory earnings per share continuing operations – diluted

32.0p

28.9p

Statutory earnings per share total – basic

32.0p

30.6p

Statutory earnings per share total – diluted

32.0p

30.5p

Weighted average number of shares in issue for basic earnings per share
Adjustment for potentially dilutive shares
Weighted average number of shares in issue for diluted earnings per share

A reconciliation of statutory and headline earnings per share is as follows:
Six months ended 31 January 2024£m

Six months ended 31 January 2023

Basic EPS(p)

Diluted EPS(p)£m

Basic EPS(p)

Diluted EPS(p)

Basic earnings per share:
Total profit attributable to equity shareholders of the Parent Company
Exclude: Non-headline items (note 3)

111
58

32.0p

32.0p

109
57

30.6

30.5

Headline earnings per share

169

48.7p

48.7p

166

46.6

46.5

Profit from continuing operations attributable to equity shareholders of
the Parent Company
Exclude: Non-headline items (note 3)

111
58

32.0p

32.0p

103
63

28.9

28.9

Headline earnings per share – continuing operations

169

48.7p

48.7p

166

46.6

46.5

5 Taxation
The interim tax rate of 35.0% (31 January 2023: 38.4%) is calculated by applying the estimated effective headline tax rate for continuing operationsof 26.0% (31 January 2023: 26.0%) for the year ended 31 July 2024 to headline profit before tax and then taking into account the tax effect of nonheadline items in the interim period.
A reconciliation of headline and total tax charge is as follows:
Six months ended 31 January 2024

Six months ended 31 January 2023

Continuing
operations£mTax rate

Continuing
operations£mTax rate

Headline tax rate
Headline profit before taxation
Taxation on headline profit

228
(59)

26.0%

224
(58)

26.0%

Adjustments
Non-headline items excluded from profit before taxation (note 3)
Taxation on non-headline items and non-headline tax adjustment

(57)
(1)

Total interim tax rate
Profit before taxation
Taxation

171
(60)

34

(57)
(6)

35.0%

167
(64)

38.4%

The changes in the value of the net tax asset in the period were:
Currenttax£mDeferredtax£mNet tax
balance£m

At 31 July 2023
Charge to income statement
Charge to other comprehensive income
Tax paid

(30)
(50)
–
52

52
(10)
12
–

22
(60)
12
52

At 31 January 2024

(28)

54

26

Developments in the Group tax position
In December 2021, the Organisation for Economic Co-operation and Development ("OECD") published rules relating to global minimum taxation
called “Pillar 2 rules” and the UK Finance (No.2) Act 2023 was enacted in July 2023, addressing the implementation of BEPS Pillar 2 to apply in
the UK to accounting periods beginning on or after 1 January 2024 (year ending 31 July 2025 for Smiths). Smiths is actively working to fully
understand the impact of the new rules and developing processes to enable compliance. The current estimate of additional tax payable is notexpected to have a material impact on the Group.
6 Post-retirement benefits
The Group provides post-retirement benefits to employees in a number of countries throughout the world. The arrangements include defined benefit
and defined contribution plans and, mainly in the United Kingdom (UK) and United States of America (US), post-retirement healthcare. The principal
defined benefit pension plans are in the UK and US, and these have been closed so that no future benefits are accrued.
Where any individual scheme shows a post restriction surplus under IAS 19, this is disclosed on the balance sheet as a retirement benefit asset.
The IAS 19 surplus of any one scheme is not available to fund the IAS 19 deficit of another scheme. The surplus is recognised as a retirement
benefit asset to the extent the employers have the right to recover the surplus at the end of the life of the scheme, assuming all liabilities have been
extinguished. The schemes are mature with a duration averaged over all scheme participants of 12 years.
The amounts recognised in the balance sheet are as follows:
31 January2024£m

31 July
2023
£m

2,635
(2,547)(14)

2,573(2,383)(16)

Surplus
Unfunded pension plans
Post-retirement healthcare

74
(81)
(6)

174
(79)
(6)

Present value of unfunded obligations

(87)

(85)

Net retirement benefit (obligation)/asset

(13)

89

Post-retirement assets
Post-retirement liabilities

101
(114)

195
(106)

Net retirement benefit (obligation)/asset

(13)

89

Market value of scheme assets
Present value of funded scheme liabilities
Surplus restriction

The increase in the value of scheme liabilities is principally due to changes in market conditions and the resulting reduction in the discount rate
assumptions, as well as actuarial experience losses arising from the calibration to the latest valuation data. The changes in market conditions also
led to a corresponding increase in the value of scheme assets and whilst this increase was broadly sufficient to offset the reduction in discount rate
assumptions, it was not sufficient to offset the actuarial experience losses, leading to an overall reduction in the surplus recognised in the balance
sheet at 31 January 2024.
The change in market conditions has had no impact on any funding arrangements.
The principal assumptions used in updating the valuations are set out below:
31 January 2024

Weighted average rate of increase in benefits for active deferred members
Rate of increase in pensions in payment
Rate of increase in deferred pensions
Discount rate

31 July 2023

UK

US

UK

US

4.0%
3.3%
3.3%
4.8%

n/a
n/a
n/a
5.1%

4.0%
3.3%
3.3%
5.1%

n/a
n/a
n/a
5.2%

The preliminary results of the 2023 triennial funding valuations for TIGPS and SIPS have been considered in order to determine the DBO as at 31
January 2024. The methods for setting the mortality assumptions for TIGPS and the US scheme are consistent with those used for the 31 July
2023 valuation. The method for setting the mortality assumptions for SIPS has been updated following analysis undertaken by the Scheme Actuary
for the triennial funding valuation at 31 March 2023. The RPI inflation assumption of 3.3% has been derived using the Aon UK Government Gilt
Prices Only Curve with an Inflation Risk Premium of 0.1% p.a. The Inflation Risk Premium used for the 31 July 2023 valuation was 0.2% p.a. The
impact of changing the Inflation Risk Premium was to increase the DBO for TIGPS by £10m and for SIPS by £14m. The UK discount rate has been
set based on the weighted average duration across the two key pension arrangements.

35

Present value of funded scheme liabilities and assets for the main UK and US schemes
31 January 2024 – £m

31 July 2023 – £m

SIPS

TIGPS

US schemes

SIPS

TIGPS

US schemes

Present value of funded scheme liabilities– Active deferred members– Deferred members– Pensioners

(14)
(408)
(937)

(10)
(316)
(631)

(31)
(88)
(87)

(25)
(388)
(838)

(18)
(326)
(561)

(31)
(86)
(85)

Present value of funded scheme liabilities(1,359)

(957)

(206)

(1,251)

(905)

(202)

Market value of scheme assets
Surplus restriction

1,460
–

971
(14)

187
–

1,446
–

921
(16)

186
–

101

–

(19)

195

–

(16)

Surplus/(deficit)
Contributions

Company contributions to unfunded defined benefit pension and post-retirement healthcare plans totalled £3m (FY23: £3m). There have been nocontributions to funded schemes in either the current or prior year.
The changes in the present value of the net pension balance in the period were:Six months ended
31 January2024£mYear ended
31 July2023£m

At beginning of period
Foreign exchange rate movements
Current service cost
Headline scheme administration costs
Non-headline scheme administration costs
Past service costs, curtailments and settlements – benefit equalisations
Finance income – retirement benefits
Contributions by employer
Actuarial (losses)/gains

89
(1)
(2)
(2)
(3)
–
3
3
(100)

194
1
(2)
(4)
(2)
4
7
5
(114)

Net retirement benefit (obligation)/asset at end of period

(13)

89

Past service costs, curtailments and settlements
In SIPS, it has been discovered that the methods used in the early 1990s to equalise retirement ages between men and women in some of its
smaller benefits sections was incorrect. An additional liability of £12m was recognised within the defined benefit obligation at 31 July 2023 to reflect
these equalisation obligations, whilst £16m of previously recognised additional liabilities were released following the identification of additional
evidence, resulting in a net past service credit of £4m at 31 July 2023. A wider review is being undertaken to determine if equalisation wasundertaken correctly in other sections, with no further material additional liabilities currently identified or expected. This review is expected to becompleted by the FY24 year-end.
7 Intangible assets
Goodwill£mDevelopment
costs
£m

Acquiredintangibles£m

Software,patents andintellectual
property
£m

Total
£m

Cost
At 31 July 2023
Exchange adjustments
Additions
Business combinations

1,273
7
–
12

193
–
7
–

612
5
–
34

159
1
1
–

2,237
13
8
46

At 31 January 2024

1,292

200

651

161

2,304

Amortisation
At 31 July 2023
Exchange adjustments
Charge for the period

64
–
–

124
–
1

406
2
25

122
–
3

716
2
29

At 31 January 2024

64

125

433

125

747

1,228
1,209

75
69

218
206

36
37

1,557
1,521

Net book value at 31 January 2024
Net book value at 31 July 2023
Review for impairment assessment trigger events

In accordance with IAS 34 ‘Interim financial reporting’, management has undertaken a review for indications of impairment and concluded that no
impairment assessment trigger events have occurred in the half year. It was noted in the FY23 annual report that Smiths Detection was the onlyGroup CGU where a reasonable change in the impairment testing assumptions could result in the recognition of impairment charges.

36

8 Property, plant and equipment
Land andbuildings£mPlant andmachinery£m

Fixtures,fittings,
tools andequipment
£m

Total
£m

Cost or valuation
At 31 July 2023
Exchange adjustments
Additions
Business combinations
Disposals

178
–
4
–
(2)

463
1
22
5
(7)

120
–
4
–
(1)

761
1
30
5
(10)

At 31 January 2024

180

484

123

787

Depreciation
At 31 July 2023
Exchange adjustments
Charge for the period
Disposals

110
1
4
(2)

302
1
14
(7)

102
–
4
(1)

514
2
22
(10)

At 31 January 2024

113

310

105

528

Net book value at 31 January 2024
Net book value at 31 July 2023

67
68

174
161

18
18

259
247

Properties£m

Vehicles£m

Equipment
£m

Total
£m

Cost
At 31 July 2023
Business combinations
Recognition of right of use assets
Derecognition of right of use assets

190
12
7
(5)

27
–
5
–

2
–
–
–

219
12
12
(5)

At 31 January 2024

204

32

2

238

Depreciation
At 31 July 2023
Charge for the year
Derecognition of right of use assets

94
14
(5)

19
3
–

1
–
–

114
17
(5)

At 31 January 2024

103

22

1

126

Net book value at 31 January 2024
Net book value at 31 July 2023

101
96

10
8

1
1

112
105

Investment in
ICU Medical, Incequity£m

Deferredcontingent
consideration£m

Investments inearly stage
businesses£mCash collateraldeposit
£m

Total
£m

At 31 July 2023
Fair value change through Profit and Loss
Fair value change through Other Comprehensive Income

347
–
(167)

13
(10)
–

7
(1)
–

4
–
–

371
(11)
(167)

At 31 January 2024

180

3

6

4

193

9 Right of use assets

10 Financial assets – other investments

Following the sale of Smiths Medical the Group has recognised a financial asset for its investment in 10% of the equity in ICU Medical, Inc (ICU)
and a financial asset for the fair value of $100m additional sales consideration that is contingent on the future share price performance of ICU. In
February 2024, the Group sold 830,000 shares in ICU representing approximately 33% of Smiths’ holding in ICU for net proceeds of circa £70m.

37

11 Borrowings and net cash/(debt)
This note sets out the calculation of net debt, an important measure in explaining our financing position. The net debt figure includes accrued
interest and fair value adjustments to debt relating to hedge accounting.
31 January2024£m

31 July2023£mCash and cash equivalents
Net cash and cash equivalents

180

285

Short-term borrowings
Lease liabilities
Interest accrual

(32)
(8)

(26)
(3)

(40)

(29)

(540)
(93)

(534)
(91)

(633)

(625)

Borrowings/gross debt

(673)

(654)

Derivatives managing interest rate risk and currency profile of the debt

(12)

(18)

Net debt

(505)

(387)

Long-term borrowings€650m 2.00% Eurobond 2027
Lease liabilities

Analysis of financial derivatives on balance sheet
Non-current
assets£m

Current
assets£m

Current
liabilities£mNon-current
liabilities£mNetbalance£m

Derivatives managing interest rate risk and currency profile of the debt
Foreign exchange forward contracts

–
–

–
3

–
(3)

(12)
–

(12)
–

At 31 January 2024

–

3

(3)

(12)

(12)

Derivatives managing interest rate risk and currency profile of the debt
Foreign exchange forward contracts

–
–

–
5

–
(2)

(18)
–

(18)
3

At 31 July 2023

–

5

(2)

(18)

(15)

Cash and cash
equivalents£m

Short-termborrowings£mLong-term
borrowings£mInterest rate andcross currency
swaps
£m

Net
debt
£m

At 31 July 2023
Foreign exchange gains/(losses)
Net (decrease)/increase in cash and cash equivalents
Lease liabilities acquired in a business combination
Net movement in lease liabilities
Fair value movement from interest rate hedging
Revaluation of derivative contracts
Net movement in finance cost accruals
Reclassification to short-term

285
(6)
(99)
–
–
–
–
–
–

(29)
–
15
–
(12)
–
–
(4)
(10)

(625)
2
–
(12)
–
(8)
–
–
10

(18)
–
–
–
–
–
6
–
–

(387)
(4)
(84)
(12)
(12)
(8)
6
(4)
–

At 31 January 2024

180

(40)

(633)

(12)

(505)

Movements in net debt

38

12 Fair value of financial instruments
As at 31 January 2024
Basis fordetermining
fair value

Financial assets
Other investments
Other investments
Cash and cash equivalents
Trade and other financial receivables
Derivative financial instruments

A
F
A
B/C
C

Total financial assets
Financial liabilities
Trade and other financial payables
Short-term borrowings
Long-term borrowings
Lease liabilities
Derivative financial instruments

B
B/D
D
E
C

Total financial liabilities

At fair value
At amortised through profit
cost
or loss£m£m

As at 31 July 2023

At fair value
through OCI
£m

Total
carrying
value
£m

Total
fair value£m

At fair value
At amortised through profit
cost
or loss£m£m

At fair value
through OCI
£m

Total
carrying
value
£m

Total
fair value
£m

–
–
180
719
–

4
3
–
–
3

180
6
–
–
–

184
9
180
719
3

184
9
180
719
3

–
–
285
726
–

4
13
–
–
5

347
7
–
–
–

351
20
285
726
5

351
20
285
726
5

899

10

186

1,095

1,095

1,011

22

354

1,387

1,387

(426)
(8)
(540)
(125)
–

–
–
–
–
(15)

–
–
–
–
–

(426)
(8)
(540)
(125)
(15)

(426)
(8)
(535)
(125)
(15)

(476)
(3)
(534)
(117)
–

–
–
–
–
(20)

–
–
–
–
–

(476)
(3)
(534)
(117)
(20)

(476)
(3)
(520)
(117)
(20)

(1,099)(15)–(1,114)(1,109)(1,130)(20)–(1,150)(1,136)

The fair value of a financial instrument is the price at which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm’s-length transaction. Fair values have been determined with reference to available market information at the balance sheet date,using the methodologies described below:
A

Carrying value is assumed to be a reasonable approximation to fair value for all of these assets and liabilities (Level 1 as defined by IFRS 13
Fair Value Measurement).

B

Carrying value is assumed to be a reasonable approximation to fair value for all of these assets and liabilities (Level 2 as defined by IFRS 13
Fair Value Measurement).

C

Fair values of derivative financial assets and liabilities and trade receivables held to collect or sell are estimated by discounting expected
future contractual cash-flows using prevailing interest rate curves. Amounts denominated in foreign currencies are valued at the exchange
rate prevailing at the balance sheet date. These financial instruments are included on the balance sheet at fair value, derived from observable
market prices (Level 2 as defined by IFRS 13 Fair Value Measurement).

D

Borrowings are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at thebalance sheet date. The fair value of borrowings is estimated using quoted prices (Level 1 as defined by IFRS 13).

E

Leases are carried at amortised cost. Amounts denominated in foreign currencies are valued at the exchange rate prevailing at the balance
sheet date. The fair value of the lease contract is estimated by discounting contractual future cash-flows (Level 2 as defined by IFRS 13).

F

The fair value of instruments is estimated by using unobservable inputs to the extent that relevant observable inputs are not available.
Unobservable inputs are developed using the best information available in the circumstances, which may include the Group’s own data,taking into account all information about market participation assumptions that is reliably available (Level 3 as defined by IFRS 13).
IFRS 13 defines a three level valuation hierarchy:
Level 1 - quoted prices for similar instruments
Level 2 - directly observable market inputs other than Level 1 inputs
Level 3 - inputs not based on observable market data

13 Provisions and contingent liabilities
Headline

Non-headline and legacy

Total

£m

John Crane, Inc.
litigation£m

Titeflex
Corporation
litigation£m

Current liabilities
Non-current liabilities

6
2

27
177

13
28

24
9

70
216

At 31 July 2023
Foreign exchange rate movements
Business combinations
Provision charged
Provision released
Unwind of provision discountUtilisation

8
–
1
6
(1)
–
(3)

204
2
–
22
–
3
(8)

41
–
–
–
(7)
1
(1)

33
–
–
–
–
–
(5)

286
2
1
28
(8)
4
(17)

At 31 January 2024

11

223

34

28

296

Current liabilities
Non-current liabilities

9
2

31
192

12
22

19
9

71
225

At 31 January 2024

11

223

34

28

296

The John Crane, Inc. and Titeflex Corporation litigation provisions are the only provisions which are discounted.

39

Other
£m

£m

Headline provisions and contingent liabilities:
Warranty provision and product liability
At 31 January 2024 there are warranty and product liability provisions of £8m (31 July 2023: £6m). Warranties over the Group’s products typicallycover periods of between one and three years. Provision is made for the likely cost of after-sales support based on the recent past experience ofindividual businesses.
Commercial disputes and litigation in respect of ongoing business activities
The Group has on occasion been required to take legal action to protect its intellectual property and other rights against infringement. It has also
had to defend itself against proceedings brought by other parties, including product liability and insurance subrogation claims. Provision is madefor any expected costs and liabilities in relation to these proceedings where appropriate, although there can be no guarantee that such provisions(which may be subject to potentially material revision from time to time) will accurately predict the actual costs and liabilities that may be incurred.
Contingent liabilities
In the ordinary course of its business, the Group is subject to commercial disputes and litigation such as government price audits, product liability
claims, employee disputes and other kinds of lawsuits, and faces different types of legal issues in different jurisdictions. The high level of activity in
the US, for example, exposes the Group to the likelihood of various types of litigation commonplace in that country, such as ‘mass tort’ and ‘classaction’ litigation, legal challenges to the scope and validity of patents, and product liability and insurance subrogation claims. These types ofproceedings (or the threat of them) are also used to create pressure to encourage negotiated settlement of disputes. Any claim brought against theGroup (with or without merit) could be costly to defend. These matters are inherently difficult to quantify. In appropriate cases a provision isrecognised based on best estimates and management judgement, but there can be no guarantee that these provisions (which may be subject topotentially material revision from time to time) will result in an accurate prediction of the actual costs and liabilities that may be incurred. There arealso contingent liabilities in respect of litigation for which no provisions are made.
The Group operates in some markets where the risk of unethical or corrupt behaviour is material and has procedures, including an employee ‘Ethics
Alertline’, to help it identify potential issues. Such procedures will, from time to time, give rise to internal investigations, sometimes conducted withexternal support, to ensure that the Group properly understands risks and concerns and can take steps both to manage immediate issues and to
improve its practices and procedures for the future. The Group is not aware of any issues which are expected to generate material financial
exposures.
Non-headline and legacy provisions and contingent liabilities:
John Crane, Inc.
John Crane, Inc. (“JCI”) is one of many co-defendants in numerous lawsuits pending in the US in which plaintiffs are claiming damages arising fromalleged exposure to, or use of, products previously manufactured which contained asbestos. The JCI products generally referred to in these cases
consist of industrial sealing product, primarily packing and gaskets. The asbestos was encapsulated within these products in such a manner thatcauses JCI to believe, based on tests conducted on its behalf, that the products were safe. JCI ceased manufacturing products containing asbestos
in 1985.
The table below summarises the JCI claims experience over the last 40 years since the start of this litigation:
JCI claims experience
Claims against JCI that have been dismissed
Claims in which JCI is currently a defendant
Cumulative final judgments, after appeals, against JCI since 1979
Cumulative value of awards ($m) since 1979

31 January 2024

31 July 2023

31 July 2022

31 July 2021

31 July 2020

311,000
20,000154
190

310,000
20,000154
190

306,000
22,000149
175

305,000
22,000149
175

297,000
25,000149
175

John Crane, Inc. litigation insurance recoveries
JCI has certain excess liability insurance which may provide coverage for certain asbestos claims. JCI has also collected recoveries from its insurers
in settlement of now concluded litigation in the US. JCI meets its asbestos defence costs directly. The calculation of the provision does not takeaccount of any recoveries from insurers. See table below for the cost recovery achieved in both the current and prior periods.
John Crane, Inc. litigation provision
The provision is based on past history and published tables of asbestos incidence projections and is determined using asbestos valuation experts,
Bates White LLC. The assumptions made in assessing the appropriate level of provision include: the period over which the expenditure can bereliably estimated; the future trend of legal costs; the rate of future claims filed; the rate of successful resolution of claims; and the average amountof judgments awarded.

40

The JCI asbestos litigation provision has developed in the period as follows:
Six months
ended
31 January2024£mYear ended
31 July
2023£mYear ended
31 July2022£mYear ended
31 July
2021£mYear ended
31 July
2020£mJohn Crane, Inc. litigation provision
Gross provision
Discount

264
(41)

246
(42)

258
(29)

220
(8)

235
(4)

Discounted provision
Taxation

223
(56)

204
(51)

229
(57)

212
(54)

231
(59)

Discounted post-tax provision

167

153

172

158

172

Operating profit (credit)/charge
Increased provision for adverse judgments and legal defence costs
Change in US risk free rates

19
2

28
(15)

24
(18)

10
(5)

14
16

Subtotal – items charged to the provision
Litigation management expense - legal fees in connection with litigation
against insurers and defence strategy
Recoveries from insurers

21
1

13
2

6
1

5
1

30
1

–

(7)

–

(9)

(3)

Total operating profit charge/(credit)

22

8

7

(3)

28

Cash-flow
Provision utilisation - legal defence costs and adverse judgements
Litigation management expense
Recoveries from insurers

(8)
–
–

(32)
(2)
7

(21)
(1)
–

(13)
–
9

(23)
(1)
3

Net cash outflow

(8)

(27)

(22)

(4)

(21)

John Crane, Inc. litigation provision sensitivities
The provision may be subject to potentially material revision from time to time if new information becomes available as a result of future events.
There can be no guarantee that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be
incurred because of the significant uncertainty associated with the future level of asbestos claims and of the costs arising out of related litigation.
Statistical reliability of projections over the ten year time horizon
In order to evaluate the statistical reliability of the projections, a population of outcomes is modelled using randomised verdict outcomes. This
generated a distribution of outcomes with future spend at the 5th percentile of £202m and future spend at the 95th percentile of £259 (31 July
2023: £180m and £245m, respectively). Statistical analysis of the distribution of these outcomes indicates that there is a 50% probability that the
total future spend will fall between £248m and £274m (31 July 2023: between £228m and £257m), compared with the gross provision value of£264m (31 July 2023: £246m).
Sensitivity of the projections to changes in the time horizon used
If the asbestos litigation environment becomes more volatile and uncertain, the time horizon over which the provision can be calculated may reduce.
Conversely, if the environment became more stable, or JCI changed approach and committed to long term settlement arrangements, the time
period covered by the provision might be extended.
The projections use a 10 year time horizon. Reducing the time horizon by one year would reduce the discounted pre-tax provision by £16m (31 July
2023: £16m) and reducing it by five years would reduce the discounted pre-tax provision by £89m (31 July 2023: £87m).
We consider, after obtaining advice from Bates White LLC, that to forecast beyond ten years requires that the litigation environment remains largely
unchanged with respect to the historical experience used for estimating future asbestos expenditures. Historically, the asbestos litigation
environment has undergone significant changes more often than every ten years. If one assumed that the asbestos litigation environment would
remain unchanged for longer and extended the time horizon by one year, it would increase the discounted pre-tax provision by £14m (31 July 2023:£13m); extending it by five years would increase the discounted pre-tax provision by £49m (31 July 2023: £48m). However, there are also
reasonable scenarios that, given certain recent events in the US asbestos litigation environment, would result in no additional asbestos litigation
for JCI beyond ten years. At this time, how the asbestos litigation environment may evolve beyond 10 years is not reasonably estimable.
John Crane, Inc. contingent liabilities
Provision has been made for future defence costs and the cost of adverse judgments expected to occur. JCI’s claims experience is significantly
impacted by other factors which influence the US litigation environment. These include: changing approaches on the part of the plaintiffs’ bar;changing attitudes amongst the judiciary at both trial and appellate levels; and legislative and procedural changes in both the state and federal
court systems. As a result, whilst the Group anticipates that asbestos litigation will continue beyond the period covered by the provision, theuncertainty surrounding the US litigation environment beyond this point is such that the costs cannot be reliably estimated.
Although the methodology used to calculate the JCI litigation provision can in theory be applied to show claims and costs for longer periods, thedirectors consider, based on advice from Bates White LLC, that the level of uncertainty regarding the factors used in estimating future costs is too
great to provide for reasonable estimation of the number of future claims, the nature of such claims or the cost to resolve them for years beyond
the 10 year time horizon.

41

Titeflex Corporation litigation
In recent years Titeflex Corporation, a subsidiary of the Group in the Flex-Tek division, has received a number of claims from insurance companies
seeking recompense on a subrogated basis for the effects of damage allegedly caused by lightning strikes in relation to its flexible gas piping
product. It has also received a number of product liability claims regarding this product, some in the form of purported class actions. Titeflex
Corporation believes that its products are a safe and effective means of delivering gas when installed in accordance with the manufacturer’s
instructions and local and national codes; however some claims have been settled on an individual basis without admission of liability. Equivalent
third-party products in the US marketplace face similar challenges.
Titeflex Corporation litigation provision
The continuing progress of claims and the pattern of settlement provide sufficient evidence to recognise a liability in the accounts. Therefore
provision has been made for the costs which the Group is expected to incur in respect of future claims to the extent that such costs can be reliably
estimated. Titeflex Corporation sells flexible gas piping with extensive installation and safety guidance (revised in 2008) designed to assure thesafety of the product and minimise the risk of damage associated with lightning strikes.
The assumptions made in assessing the appropriate level of provision, which are based on past experience, include: the period over which
expenditure can be reliably estimated; the number of future settlements; the average amount of settlements; and the impact of statutes of repose
and safe installation initiatives on the expected number of future claims. The assumptions relating to the number of future settlements exclude
FY21 claims history as the number of claims arising in this financial year is considered to be artificially deflated due to the impact of COVID-19
lockdowns.
The provision of £34m (31 July 2023: £41m) is a discounted pre-tax provision using discount rates, being the risk-free rate on US debt instruments
for the appropriate period. The deferred tax asset related to this provision is shown within the deferred tax balance.
31 January2024£m

31 July2023£mGross provision
Discount

64
(30)

78
(37)

Discounted pre-tax provision
Taxation

34
(8)

41
(9)

Discounted post-tax provision

26

32

Titeflex Corporation litigation provision sensitivities
The significant uncertainty associated with the future level of claims and of the costs arising out of related litigation means that there can be no
guarantee that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred.
Therefore the provision may be subject to potentially material revision from time to time, if new information becomes available as a result of future
events.
The projections incorporate a long-term assumption regarding the impact of safe installation initiatives on the level of future claims. If the assumed
annual benefit of bonding and grounding initiatives were 0.5% higher, the discounted pre-tax provision would be £2m (31 July 2023: £2m) lower,
and if the benefit were 0.5% lower, the discounted pre-tax provision would be £2m (31 July 2023: £2m) higher.
The projections use assumptions of future claims that are based on both the number of future settlements and the average amount of thosesettlements. If the assumed average number of future settlements increased 10%, the discounted pre-tax provision would rise by £3m (31 July
2023: £3m), with an equivalent fall for a reduction of 10%. If the assumed amount of those settlements increased 10%, the discounted pre-tax
provision would rise by £2m (31 July 2023: £2m), also with an equivalent fall for a reduction of 10%.
Other non-headline and legacy
Legacy provisions comprise provisions relating to former business activities and properties no longer used by Smiths. Non-headline provisions
comprise all provisions that were disclosed as non-headline items when they were charged to the consolidated income statement. These provisions
include non-headline reorganisation, separation expenses, disposal indemnities and litigation in respect of old products and discontinued businessactivities.
14 Dividends
The following dividends were declared and paid in the period:
Six months ended Six months ended
31 January 2024 31 January 2023
£m
£m

Dividends paid in the period

100

97

In the current period an ordinary final dividend of 28.7p (31 January 2023: 27.3p) was paid on 24 November 2023.
An interim dividend of 13.55 pence per share was declared by the Board on 26 March 2024 and will be paid to shareholders on 13 May 2024. This
dividend has not been included as a liability in these accounts and is payable to all shareholders on the register of members at close of businesson 5 April 2024.

42

15 Acquisitions
On 30 August 2023, the Group acquired the business of Heating & Cooling Products (HCP), for consideration of £64m, financed using the Group's
own cash resources. HCP is a US-based manufacturer of Heating, Ventilation & Air Conditioning (HVAC) solutions. This acquisition will further
expand the Flex-Tek division's presence in the North American HVAC market, enabling Smiths to serve customers with an even broader productrange.
The intangible assets recognised on acquisition comprise customer relationships, intellectual property and technology. Goodwill represents the
expected synergies from the strategic fit of the acquisition and the value of the expertise in the assembled workforce. From the date of acquisition
to 31 January 2024, HCP contributed £26m to revenue and £6m to profit before taxation and amortisation. If the Group had acquired this businessat the beginning of the financial year, the acquisition would have contributed a further £4m to revenue and £1m to profit before taxation.
On 27 October 2023, the Group’s Flex-Tek division acquired the business of Burns Machine (Burns) for consideration of approximately £1m,
financed using the Group’s own cash resources.
The provisional balance sheets at the dates of acquisition are:
HCP
£m

Burns
£m

Total
£m

34
4
12
10
7
(3)
(12)

–
1
–
–
–
–
–

34
5
12
10
7
(3)
(12)

Net assets acquired

52

1

53

Goodwill on current period acquisitions

12

–

12

Total consideration

64

1

65

Non-current assets
Current assets
Current liabilities
Non-current liabilities- acquired intangible assets- plant and machinery- right of use assets- inventory- trade and other receivables- trade and other payables- deferred tax

16 Cash-flow from operating activities
Six months ended 31 January 2024

Six months ended 31 January 2023

Headline£m

Non-headline(note 3)
£m

Total
£m

Headline£m

Non-headline(note 3)
£m

Total
£m

Operating profit/(loss)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use assets
Loss/(gain) on fair value of contingent consideration
Share-based payment expense
Retirement benefits(Increase) in inventories(Increase)/decrease in trade and other receivables(Decrease)/increase in trade and other payables
Increase/(decrease) in provisions

246
4
22
17
–
8
4
(2)
(7)
(38)
2

(54)
25
–
–
10
–
–
–
3
(8)
(1)

192
29
22
17
10
8
4
(2)
(4)
(46)
1

241
5
21
17
–
8
1
(116)
21
(8)
(3)

(54)
26
–
–
(5)
–
10
–
–
2
(16)

187
31
21
17
(5)
8
11
(116)
21
(6)
(19)

Cash generated from operations
Interest paid
Interest received
Tax paid

256
(22)
11
(63)

(25)
–
–
11

231
(22)
11
(52)

187
(29)
22
(43)

(37)
–
–
–

150
(29)
22
(43)

Net cash inflow/(outflow) from operating activities

182

(14)

168

137

(37)

100

The split of tax payments between headline and non-headline only considers the nature of payments made. No adjustment has been made for
reductions in tax payments required as a result of tax relief received on non-headline items.
Headline cash measures – continuing operations
The Group measure of headline operating cash excludes interest and tax, and includes capital expenditure supporting organic growth. The Group
uses operating cash-flow for the calculation of cash conversion and free cash-flow for management of capital purposes. See note 19 for additional
details.

43

The table below reconciles the Group’s net cash-flow from operating activities to headline operating cash-flow and free cash-flow:
Six months ended 31 January 2024

Net cash inflow/(outflow) from operating activities
Include:Expenditure on capitalised development, other intangible assets andproperty, plant and equipment
Repayment of lease liabilities
Investment in financial assets relating to operating activities

Six months ended 31 January 2023

Headline£m

Non-headline
£m

Total
£m

Headline£m

Non-headline
£m

Total
£m

182

(14)

168

137

(37)

100

(38)

–

(38)

(36)

–

(36)

(19)
1

–
–

(19)
1

(18)
–

–
–

(18)
–

Free cash-flow

112

46

Exclude:Investment in financial assets relating to operating activities
Repayment of lease liabilities
Interest paid
Interest received
Tax paid

(1)
19
22
(11)
63

–
–
–
–
–

(1)
19
22
(11)
63

–
18
29
(22)
43

–
–
–
–
–

–
18
29
(22)
43

Operating cash-flow

218

(14)

204

151

(37)

114

Six months
ended
31 January 2024£m

Six months
ended
31 January 2023£m

Headline operating profit
Headline operating cash-flow

246
218

241
151

Headline operating cash conversion

89%

63%

Headline cash conversion
Headline operating cash conversion for continuing operations is calculated as follows:

Reconciliation of free cash-flow to total movement in cash and cash equivalents
Six months
Six months
ended
ended
31 January 2024 31 January 2023
£m
£m

Free cash-flow
Investment in financial assets and acquisition of businesses
Disposal of businesses and discontinued operations
Other net cash-flows used in financing activities (note: repayment of lease liability is included in free cash-flow)

112
(65)
–
(146)

46
(22)
(7)
(275)

Decrease in cash and cash equivalents

(99)

(258)

17 Related party transactions
The related party transactions in the period were consistent with the nature and size of transactions disclosed in the Annual Report for the year
ended 31 July 2023.
18 Share capital and share premium
Number of shares

Share capital andshare premium£mConsideration£mOrdinary shares of 37.5p eachAt 31 July 2022
Share buybacks

362,356,159(9,295,685)

501
(3)

(144)

At 31 January 2023

353,060,474

498

At 31 July 2023
Share buybacks

349,302,990(1,764,660)

496
(1)

At 31 January 2024

347,538,330

495

(29)

Share buybacks
On 29 September 2023, the Group completed its share buyback programme announced in FY21 to return approximately $1bn (or c.£742m) toshareholders. All shares purchased under the programme have been cancelled.
In total the Group has purchased 48,970,726 shares for a total consideration of £742m. The average price paid per share for buybacks during the
programme was £15.15p.

44

19 Alternative performance measures
The Group uses several alternative performance measures (‘APMs’) in order to provide additional useful information on underlying trends and theperformance and position of the Group. APMs are non-GAAP and not defined by IFRS; therefore they may not be directly comparable with othercompanies’ APMs and should not be considered a substitute for IFRS measures.
The Group uses APMs which are common across the industry, in both planning and reporting, to enhance the comparability of information between
reporting periods and business units. The measures are also used in discussions with the investment analyst community and by credit rating
agencies.
We have identified and defined the following key measures which are used within the business by management to assess the performance of theGroup’s businesses:
APM term

Definition and purpose

Capital employed

Capital employed is a non-statutory measure of invested resources. It comprises statutory net assets and isadjusted as follows:• to add goodwill recognised directly in reserves in respect of subsidiaries acquired before 1 August 1998;• to eliminate the Group's investment in ICU Medical, Inc equity and deferred consideration contingent on the
future share price performance of ICU Medical, Inc; and• to eliminate post-retirement benefit assets and liabilities and non-headline litigation provisions related to John
Crane, Inc. and Titeflex Corporation, both net of deferred tax, and net debt.
It is used to monitor capital allocation within the Group. See below for a reconciliation from net assets to capital
employed.

Capital expenditure

Comprises additions to property, plant and equipment, capitalised development and other intangible assets,
excluding assets acquired through business combinations; see notes 7 & 8 for an analysis of capital expenditure.
This measure quantifies the level of capital investment into ongoing operations.

Divisional headline
operating profit ('DHOP')

DHOP comprises divisional earnings before central costs, finance costs and taxation. DHOP is used to monitor
divisional performance. A reconciliation of DHOP to operating profit is shown in note 2.

Free cash-flow

Free cash-flow is calculated by adjusting the net cash inflow from operating activities to include capital expenditure,
the repayment of lease liabilities, the proceeds from the disposal of property, plant and equipment and theinvestment in financial assets relating to operating activities and pensions financing outstanding at the balance
sheet date. The measure shows cash generated by the Group before discretionary expenditure on acquisitions andreturns to shareholders. A reconciliation of free cash-flow is shown in note 16.

Gross debt

Gross debt is total borrowings (bank, bonds and lease liabilities). It is used to provide an indication of the Group's
overall level of indebtedness. See note 11 for an analysis of gross debt.

Headline

The Group has defined a 'headline' measure of performance that excludes material non-recurring items or items
considered non-operational/trading in nature. Items excluded from headline are referred to as non-headline items.
This measure is used by the Group to measure and monitor performance excluding material non-recurring items
or items considered non-operational. See note 3 for an analysis of non-headline items.

Headline EBITDA

EBITDA is a widely used profit measure, not defined by IFRS, being earnings before interest, taxation, depreciation
and amortisation. See below for a reconciliation of headline operating profit to headline EBITDA.

Net debt

Net debt is total borrowings (bank, bonds and lease liabilities) less cash balances and derivatives used to manage
the interest rate risk and currency profile of the debt. This measure is used to provide an indication of the Group's
overall level of indebtedness and is widely used by investors and credit rating agencies. See note 11 for an analysisof net debt.

Non-headline

The Group has defined a 'headline' measure of performance that excludes material non-recurring items or items
considered non-operational/trading in nature. Items excluded from headline are referred to as non-headline items.
This is used by the Group to measure and monitor material non-recurring items or items considered nonoperational. See note 3 for an analysis of non-headline items.

Operating cash-flow

Comprises free cash-flow and excludes cash-flows relating to the repayment of lease liabilities, interest andtaxation. The measure shows how cash is generated from operations in the Group. A reconciliation of operating
cash-flow is shown in note 16.

Operating profit

Operating profit is earnings before finance costs and tax. A reconciliation of operating profit to profit before tax isshown on the consolidated income statement. This common measure is used by the Group to measure and monitor
performance.

Return on capital
employed ('ROCE')

Smiths ROCE is calculated over a rolling 12-month period and is the percentage that headline operating profit
represents of the monthly average capital employed on a rolling 12-month basis. This measure of return on invested
resources is used to monitor performance and capital allocation within the Group. See below for Group ROCE andnote 2 for divisional headline operating profit and divisional capital employed.

45

The key performance indicators ('KPIs') used by management to assess the performance of the Group’s businesses are as follows:
KPI term

Definition and purpose

Dividend cover –headline

Dividend cover is the ratio of headline earnings per share (see note 4) to dividend per share (see note 14). This
commonly used measure indicates the number of times the dividend in a financial year is covered by headline
earnings.

Earnings per share('EPS') growth

EPS growth is the growth in headline basic EPS (see note 5), on a reported basis. EPS growth is used to measureand monitor performance.

Free cash-flow (as a %of operating profit)

This measure is defined as free cash-flow divided by headline operating profit averaged over a three-year
performance period. This cash generation measure is used by the Group as a performance measure forremuneration purposes.

Greenhouse Gas (GHG)
Emissions Reduction

GHG reduction is calculated as the percentage change in normalised Scope 1 & 2 GHG emissions. Normalised is
calculated as tCO2e per £m of revenue. This measure is used to monitor environmental performance.

Gross Vitality

Gross Vitality is calculated as the percentage of revenue derived from new products and services launched in thelast five years. This measure is used to monitor the effectiveness of the Group's new product development andcommercialisation.

My Say Engagement
Score

The overall score in our My Say employee engagement survey. The biannual survey is undertaken Group-wide.
This measure is used by the Group to monitor employee engagement.

Operating cash
conversion

Comprises cash-flow from operations before non-headline items, as a percentage of headline operating profit. Thismeasure is used to show the proportion of headline operating profit converted into cash-flow from operations before
investment, finance costs, non-headline items and taxation. The calculation is shown in note 16.

Operating profit margin

Headline operating profit margin is calculated by dividing headline operating profit by revenue. This measure isused to monitor the Group’s ability to drive profitable growth and control costs.

Organic growth

Organic growth adjusts the movement in headline performance to exclude the impact of foreign exchange andacquisitions. Organic growth is used by the Group to aid comparability when monitoring performance.

Organic revenue growth(Remuneration)

Organic revenue growth (remuneration) is compounded annualised growth in revenue after excluding the impactof foreign exchange and acquisitions. The measure used for remuneration differs from organic revenue growth inthat it is calculated on a compounded annualised basis. This measure has historically been used by the Group foraligning remuneration with business performance.

Percentage of seniorleadership positions
taken by females

Percentage of senior leadership positions taken by females is calculated as the percentage of senior leadershiproles (G14+ group) held by females. This measure is used by the Group to monitor diversity performance.

R&D cash costs as a
% of sales

This measure is defined as the cash cost of research and development activities (including capitalised R&D, R&D
directly charged to the P&L and customer-funded projects) as a percentage of revenue. Innovation is an importantdriver of sustainable growth for the Group and this measures our investment in research and development to drive
innovation.

Recordable Incident
Rate (RIR)

Recordable Incident Rate is calculated as the number of recordable incidents – where an incident requires medical
attention beyond first aid – per 100 colleagues, per year across Smiths. This measure is used by the Group tomonitor health and safety performance.

46

Capital employed
Capital employed is a non-statutory measure of invested resources. It comprises statutory net assets adjusted to add goodwill recognised directly
in reserves in respect of subsidiaries acquired before 1 August 1998 of £478m (31 January 2023: £478m), and to eliminate post-retirement benefit
assets and liabilities, litigation provisions relating to John Crane, Inc. and Titeflex Corporation, both net of related tax, the investment in ICU Medical,
Inc. equity, the deferred consideration contingent on ICU Medical, Inc’s share price and net debt.
31 January
2024£m

31 January
2023
£m

2,126

2,497

478
13
19
167
26
(180)
(3)
505

478
(75)
40
161
39
(392)
(24)
429

3,151

3,153

31 January
2024£m

31 January
2023£m

Headline operating profit for previous 12 months
Average capital employed

506
3,218

469
3,083

Return on capital employed (“ROCE”)

15.7%

15.2%

Notes

Net assets
Adjust for:Goodwill recognised directly in reserves
Retirement benefit assets and obligations
Tax related to retirement benefit assets and obligations
John Crane, Inc. litigation provisions and related tax
Titeflex Corporation litigation provisions and related tax
Investment in ICU Medical, Inc equity
Deferred contingent consideration
Net debt

6

Capital employed
Return on capital employed
Notes

Credit metrics
The Group monitors the ratio of net debt to headline earnings before interest, tax, depreciation and amortisation as part of its management of credit
ratings. This ratio is calculated as follows:
Headline earnings before interest, tax, depreciation and amortisation (“headline EBITDA”)
Notes

Headline operating profit
Exclude:– depreciation of property, plant and equipment– depreciation of right of use assets– amortisation of development costs– amortisation of software, patents and intellectual property

Six months ended Six months ended
31 January 2024 31 January 2023
£m
£m

246

241

22
17
1
3

21
17
1
4

289

284

Year ended
31 January 2024£m

Year ended
31 January 2023£m

Headline EBITDA for the period
Add:
Headline EBITDA for the previous year
Exclude: Headline EBITDA for the first six months of the previous year

289
584
(284)

284
495
(228)

Annualised headline EBITDA

589

551

Year ended
31 January 2024£m

Year ended
31 January 2023
£m

Annualised headline EBITDA
Net debt

589
505

551
429

Ratio of net debt to headline EBITDA

0.9

0.8

2

8
9
7
7

Headline EBITDA
Annualised headline EBITDA
Notes

Ratio of net debt to annualised headline EBITDA

47