31st Jan 2025 08:46
(Alliance News) - Smiths Group PLC on Friday announced a break-up of the wide-ranging engineering group, alongside plans to increase its share buyback as it looks to "maximise shareholder value".
London-based Smiths said the plans would "unlock significant value and enhance returns to shareholders".
In response, shares in Smiths jumped 12% to 2,082.00 pence for a market value of GBP7.16 billion. They set a new 12-month high of 2,188.00p earlier Friday morning.
Smiths said it plans to sell its electronic connectors business by the end of 2025 and separate is threat detection arm, either by UK demerger or sale.
"Both businesses have delivered significant recent performance improvement, with Smiths Interconnect's markets returning to growth and Smiths Detection benefiting from the continued airport investment upgrade cycle. Recognising this improvement, the board has decided that the separation of these two divisions now best serves the prospects of these businesses, the group as a whole and our shareholders," the firm said in a statement.
This will leave the group focused on the John Crane and Flex-Tek businesses giving a focus on "high performance industrial technologies for efficient flow and heat management".
Smiths said these businesses serve "attractive energy and industrial end markets and are set to deliver continued growth and margin expansion".
Analysts at Stifel were pleased. "This is a big, bold plan, finally breaking up the group's conglomerate structure. We think it should unlock material value."
Chief Executive Roland Carter explained the board has spent "considerable time evaluating the options to maximise shareholder value and address the persistent discount to the significant value embedded within the group."
Earlier this month, US activist investor Engine Capital said Smiths should explore a split, according to a Financial Times report.
Carter said: "We start from a position of strength and as we execute this strategy, we will become a more focused business with significant potential for future growth and value creation. Focusing on our world-class John Crane and Flex-Tek businesses and carefully managing the separation of Smiths Interconnect and Smiths Detection, we will deliver significant value for all stakeholders."
Smiths said further details of its updated strategy and new medium-term financial targets will be presented at the interim results in March.
The company also said it has upped its share buyback programme to GBP500 million from GBP150 million. It expects the additional GBP350 million buyback to be completed by the end of calendar 2025.
In addition, Smiths said a "large portion" of all disposal proceeds are to be returned to shareholders.
"Our updated strategy enables us to deliver enhanced returns to shareholders alongside disciplined investment for growth whilst maintaining a strong balance sheet with an intended investment grade rating," the firm added.
Smiths said it continues to manage its response to the recent cyber incident.
While it left full-year guidance unchanged, the firm said "given the proximity of the incident to our half year close, we anticipate a portion of the revenue from the last week of January will shift into the second half of the financial year."
The firm's financial year ends on July 31.
By Jeremy Cutler, Alliance News reporter
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