Smiths Group hikes guidance amid strong second quarter

Smiths Group raised its guidance for the 2023 financial year in a trading update on Wednesday, as strong growth continued through its second quarter.

The FTSE 100 company said in November that it delivered 13.2% organic revenue growth in the first three months of the financial year, which had continued.

It said it now expected to deliver “low double-digit” organic revenue growth for the first half ending 31 January through a combination of volume growth and price increases to offset cost inflation.

To support that growth and to mitigate supply chain impacts, the group said it was continuing to invest in working capital.

The board said that while uncertainty remained high and supply chain impacts were persisting, growth was continuing across all of its businesses.

It said John Crane was ramping supply to service strong demand, which had supported accelerated growth in both energy and industrials in the second quarter.

Smiths Detection was meanwhile continuing to execute against its order book, and was expected to deliver strong growth in the first half, having benefited from a “very strong” first quarter.

Flex-Tek's strong growth was also continuing, in both aerospace and construction, although in line with macroeconomic forecasts the board said it expected construction to slow in the second half.

Finally, Smiths Interconnect was continuing to deliver growth, albeit below the double-digit levels of last year.

Reflecting the current momentum, Smiths updated its guidance for the full 2023 financial year, saying it now expected organic revenue growth to be at least 7%, with “moderate” margin improvement.

“Our strategy of focusing on accelerating growth, improving execution and investing in our people continues to deliver increased value for all stakeholders,” said group chief executive officer Paul Keel.

“I credit our teams around the world for making this progress possible and I look forward to providing further details when we share our first half results on 24 March.”

Smiths also said that as at 17 January, it had returned £647m of its £742m share buyback programme, which it announced on 11 November 2021.

At the current run-rate and share price, the programme was now expected to complete by the end of the 2023 financial year.

The company said it would publish its results for the six months ending 31 January on 24 March.

At 1059 GMT, shares in Smiths Group were up 2.8% at 1,728.05p.

Reporting by Josh White for Sharecast.com.