Smiths Group Plc FY26 Results Statement

SMITHS GROUP PLC - FULL YEAR RESULTS FOR 12 MONTHS ENDED 31 JULY 2026

Pioneers of progress - engineering a better future

Year of significant strategic progress, strengthening focus on higher growth and margin

Roland Carter, Chief Executive Officer, commented:

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

"Over several years, we have purposefully aligned our business to attractive end-markets and demand trends that offer structural long-term growth. Supported by a strong balance sheet and a high proportion of aftermarket and recurring revenue, our focus is to accelerate organic growth, enhance innovation, execute with pace and discipline, and compound value through disciplined capital allocation.

"As we enter FY2027, underlying market conditions remain challenging, but our robust order book and business momentum underpins our expectation of organic revenue growth of ~4% and further increasing our operating margin into our medium-term target range. The positive addition of DRC and data centre exposure, the structural tailwinds in global energy resulting from the anticipated response to energy security and the positive portfolio development in Flex-Tek supports our strong conviction that we will more quickly deliver our 5-7% organic growth target in the medium term. We are delivering significant value today while creating a clear pathway to substantial long-term value creation and sizeable returns for shareholders."

KEY HIGHLIGHTS

· Organic revenue growth of +1.2%

o John Crane: +2.3%; strong OE and Americas sales, whilst absorbing a ~£20m Middle East conflict impact

o Flex-Tek: (0.4)%; strong Aerospace offset by lower revenue from Construction and Thermal Solutions

· Headline operating profit margin expanded to 20.6%, alongside investment in growth initiatives; ROCE⁴ of 23.5%

· Acquired DRC Heat Transfer for £165m, extending Flex-Tek into high-growth cooling and data centre markets

· Divested Smiths Interconnect and Smiths Detection for a combined EV of £3.3bn, ahead of market expectations; sales agreed for three Flex-Tek industrial businesses for £40m as part of portfolio high-grading

· Stronger balance sheet at £1,747m net cash, enhanced by pension fund transactions; strong operating cash conversion

· Announcing today the launch of a process to divest the John Crane US legacy asbestos liability

· Disciplined and efficient execution of share buyback programme; £1.5bn buyback completed, £1.5bn still to be returned

· FY2027 guidance ~4% organic revenue growth; headline operating profit margin of ~21%

· Strong conviction in achieving medium-term 5-7% organic revenue growth and 21-23% operating profit margin targets

Statutory reporting and definitions

Presentation

A webcast presentation and Q&A will begin at 08.00 (UK time) today at: https://smiths.com/investors/results-reports-and-presentations. A recording will be available from 13.00 (UK time).

About Smiths            

For 175 years, we have been pioneers of progress, engineering a better future. Our strategy is to be a focused, efficient and value creating industrial engineering company operating in the attractive and growing market segments of flow control, thermal solutions, construction and aerospace.

We focus on solving the toughest problems for our customers, helping address critical global needs such as decarbonisation and the ever-increasing demand for process and energy efficiency.

We are pioneers of progress. Engineering a better future, we drive efficiency for customers in mission-critical situations.

We are united by our purpose. It is what we do, how we think, and how we will continue to use our passion for innovative engineering. For more information visit www.smiths.com.

Legal Entity Identifier (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 intentions, beliefs and/or current expectations of Smiths Group plc and its subsidiaries and those of their respective officers, directors and employees concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies, and the businesses operated by the group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and, unless otherwise required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements. The Company and its directors accept no liability to third parties. This document contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law.

UPCOMING EVENTS

BUSINESS UPDATE

Smiths - a focused, premium industrial engineering company

FY2026 was a transformational year for Smiths as we celebrated the company's 175^th year anniversary.  We completed the divestments of Smiths Interconnect and Smiths Detection, crystallising significant shareholder value and repositioning Smiths as a focused, premium industrial engineering company. The transactions were completed at attractive valuations of 15.1x and 12.5x FY2025 EBITDA, respectively, generating £3.3bn of enterprise value, substantially strengthening our financial flexibility and delivering market-leading, enhanced returns to shareholders.

The actions we have taken create a focused Smiths, with a higher-quality portfolio, clear strategic priorities, a strong financial profile of sustainable attractive growth, and structurally higher margin and cashflow returns. Smiths is a high-quality business with leading market positions, where significant aftermarket and recurring revenues provide resilience through economic cycles, to deliver sustainable returns.

Financial performance

For FY2026, we delivered a resilient financial performance against the backdrop of significant end-market disruption in global energy and US residential construction markets.

·    Organic revenue grew +1.2%:

o John Crane grew +2.3% with a strong performance in the Americas, in original equipment sales and in dry gas seals. Growth was negatively impacted by ~£20m due to the conflict in the Middle East; growth excluding this impact was ~4%;

o Flex-Tek declined (0.4)% with strong aerospace growth more than offset by declines in the HVAC US residential construction market and lower revenue in Thermal Solutions;

·    Headline operating profit grew +1.9% organically to £399m, ahead of expectations, with headline operating profit margin expanding to 20.6% and a return on invested capital of 23.5%;

·    Strong cash generation with operating cash conversion of 96%;

·    Strong headline EPS growth of +12.0% on a reported basis, where growth in underlying earnings was further enhanced by the share buyback programme and acquisitions.

Strong market positions aligned to structural growth trends

The repositioned portfolio is exposed to several powerful global trends in structurally attractive markets across flow control, construction, thermal solutions and aerospace. These are supported by long-term fundamental demand drivers that underpin overall market growth expectations of 4-5% over the medium term.

·    Energy demand and security (~5% CAGR) - the heightened focus on energy security, resilience and supply diversification and greater investment in critical energy infrastructure strengthens the medium-term growth outlook, creating a positive backdrop for John Crane. While the Middle East conflict is creating near-term volatility, John Crane's strong regional presence and critical role in customer recovery efforts ideally position the business to support them. In energy transition, the development of hydrogen, carbon capture, geothermal and other technologies provide attractive growth areas where John Crane is well positioned.

·    Housing availability and affordability (~5% CAGR) - population growth and the shortage of US housing continues to support long-term demand in the US residential construction market. Affordability pressures and higher interest rates are weighing on near-term demand, so whilst the timing and pace of recovery remains uncertain, the longer-term opportunities remain positive. Flex-Tek's innovative products, wide geographic presence and strong distributor relationships position the business well for recovery and future growth.

·    Industrial electrification (~6% CAGR) - is a powerful long-term growth driver, underpinned by the  electrification of industrial processes, industrial decarbonisation, automation and energy efficiency. Manufacturers are accelerating the transition from fossil fuel-based systems towards electric thermal solutions. Rapid investment in data centres and digital infrastructure is driving significant demand for power generation and thermal management solutions. The recent acquisitions of Wattco and DRC Heat Transfer in Flex-Tek's Thermal Solutions pillar notably expanded our exposure to these highly attractive growth opportunities.

·    Aviation growth (~4% CAGR) - commercial and military aerospace demand remains strong, supported by growing passenger traffic, record multi-year aircraft backlogs and increasing defence expenditure. With high barriers to entry due to strict certifications and long platform cycles, qualified suppliers like Flex-Tek, with its advanced manufacturing and testing capabilities and long-term supply arrangements, are well placed to support this demand.

Underpinning these trends is the ongoing focus on productivity and sustainability. Demand for our products is driven by customers' desire to improve resource efficiency, drive production and reduce emissions. Whilst geopolitical uncertainty and volatility is increasingly the new normality, our business model provides resilience to challenging conditions and the flexibility to take advantage of new opportunities as they emerge.

Smiths Growth Algorithm

Our leading market positions set us up to drive outperformance and deliver our medium-term, through-cycle, organic revenue growth target of 5-7%. Our Growth Algorithm strategy is centred on four strategic growth priorities - accelerate our growth initiatives, innovate with impact, execute relentlessly and compound value through disciplined capital allocation. These initiatives, alongside the positive addition of DRC and data centre exposure, the structural tailwinds in global energy resulting from the anticipated response to energy security and the positive portfolio development in Flex-Tek, supports our strong conviction that we will more quickly deliver our 5-7% organic growth target in the medium term.

Accelerate

We are accelerating the pace of delivery of our strategic growth initiatives and increasing investment behind the highest return opportunities. By strengthening our product offering, strategic pricing, expanding into higher-growth adjacencies and investing in commercial excellence, we expect to drive above market growth.

During FY2026, this included targeted expansion into higher growth geographies and customer opportunities.

·    In John Crane, our strong market position in the US and Latin America ensured we captured the higher growth in these markets, with further plans to expand our presence here; leveraging our portfolio and leadership position in gas projects to benefit from record investment saw wins in LNG and NGL projects; and our focus on aftermarket growth enabled us to capture important contract wins in energy and chemicals supported by our Performance Plus framework (see John Crane business review for further detail);

·    In Flex-Tek, targeted customer initiatives in US residential construction drove a strong fourth quarter performance; Thermal Solutions advanced a number of notable electrification opportunities and new platform projects; and in Aerospace, long-term contract renewals delivered higher price and growth in overall shipset on key engine platforms (see Flex-Tek business review for further detail).

Innovate

Innovation is a key source of differentiation, and we continue to invest to increase the quantum and pace of impact to deliver growth and competitive advantage. Our approach combines sustained investment in product development with disciplined commercialisation, ensuring that new product concepts are translated into tangible growth.

We develop and apply five-year innovation roadmaps for each business, spanning technology, products, materials and manufacturing processes, that support both the evolution of existing product for new performance requirements and applications, and the development of new, differentiated offerings.

Examples during FY2026 include:

·    John Crane's Type 93AX separation seal with reduced nitrogen consumption for safer and more sustainable operations; and the ongoing installation of nine new test rigs to provide capability for the testing at higher pressure and speeds for more demanding applications such as hydrogen;

·    Flex-Tek drove operational improvement in the production of the HVAC Blue series by the introduction of a heat-tunnel system that enhances quality of the foam and reduces machine cycle times; Wattco is working with a US company on a customised energy storage solution; and in Aerospace, we continue to work with customers in the development of new high-pressure hoses, boosted by new equipment capability in our production facilities.

Execute

Operational excellence is foundational to growth and value creation. Following the portfolio simplification, Smiths operates through focused business units supported by a lean corporate centre focused on capital allocation, driving and incentivising performance, and promoting a culture of performance, excellence, safety and ethics. 

Smiths Excellence is increasingly embedded across the business, with a focus on lean tools, manufacturing processes, automation and supply chain resilience to underpin consistent execution and operational delivery.

During the year, execution of the Acceleration Plan delivered benefits through site consolidation and footprint optimisation, process standardisation, ERP harmonisation and automation. We incurred costs of £27m, taking the total spend to £43m, and to date have delivered £20m of annual plan benefits, remaining on track to achieve the FY2027 annualised target of £30-35m.

Through this period of transformation, we are strengthening the culture to build a more agile, empowered and accountable organisation focused on delivering for our customers. Our refreshed Smiths Values reinforce our commitment to safety and wellbeing, and investment in talent development, career pathways and succession planning is focused on building the leadership and engineering capabilities to support long-term growth.

Compound

M&A is the final component of our Growth Algorithm, compounding organic growth. This approach has been demonstrated in Flex-Tek which over the past eight years has delivered double-digit compound annual revenue growth. Acquisition returns have notably exceeded cost of capital and are delivering significant value creation under Smiths ownership. This has broadened the geographic coverage in Construction and shifted the mix of Flex-Tek revenue, with a larger contribution in particular from Thermal Solutions, now around a third of annualised revenue.

We have clear criteria for the strategic and financial characteristics of the targets and have a pipeline of opportunities across multiple vectors. The acquisition of DRC Heat Transfer in April 2026 demonstrates this approach in action. The business expands Flex-Tek's thermal management capabilities, adds exposure to the fast-growth data centre market, and creates opportunities for commercial and operational synergies across Smiths. With pro-forma growth in FY2026 of more than 20% and the market expected to grow 20-25% through 2030, we are actively investing in people, capabilities, capacity and processes to scale for customer demand and support this new high-growth opportunity.

Disciplined capital allocation

Our capital allocation strategy prioritises growth investment, both organically and inorganically, to deliver enhanced returns to shareholders.

·    Organic growth - RD&E (research, development and engineering, 3-4% of revenue) and capital expenditure (2-3%) supports continued investment into organic growth opportunities. We continue to identify opportunities to expand investment, whilst delivering operating margin in the medium-term target 21-23% range.

·    Value-accretive acquisitions - our strategy is to recycle generated free cashflow into acquisitions in high-growth adjacencies to compound organic growth. We will invest inorganically in businesses that align with, or are adjacent to, our existing portfolio, in attractive long-term market sub-segments supported by structural trends.

·    Portfolio management - we continue to evaluate the shape of the portfolio and exit non-core activities. This year, we elected to divest four Flex-Tek industrial businesses, with sales agreed for three of them for a combined value of £40m, with two of the sales completed in FY2026.

·    Progressive dividends - in alignment with our progressive dividend policy, the Board is recommending a dividend increase of +5.4%, the 75th year of successive dividend payments.

·    Enhanced shareholder returns - the portfolio reshaping has enabled enhanced returns to shareholders, with £2.6bn returned in the past five years. Following the completion of the FY2025 £500m share buyback programme in December, a further £1bn related to the proceeds from the sale of Smiths Interconnect has now been returned. A further £1.5bn is still to be executed in relation to the Smiths Detection proceeds and is expected to be substantially completed by end of calendar year 2027. The General Meeting held in July to increase our authority to repurchase shares demonstrates our desire to action this at pace.

·    Balance sheet strength - we look at means to strengthen our balance sheet and improve the quality of our free cashflow. During the year, we completed the buy-in of the Smiths Industries Pension Scheme and buy-out of the TI Group Pension Scheme. We are also announcing today that our US John Crane business will begin a marketing process for the divestiture of its legacy asbestos liabilities. If successful, this transaction would remove the asbestos liability from the balance sheet, increase free cashflow and available capital and reduce earnings volatility.

These actions reflect our disciplined approach to capital allocation. We aim to operate an efficient balance sheet whilst retaining a solid investment grade credit rating. The issuance of a €650m bond during the year, to refinance the equivalent size bond maturing in February 2027, has provided liquidity to meet our future needs. 

FY2027 outlook and medium-term guidance

We expect FY2027 organic revenue growth of around 4%, supported by a robust order book.

·    John Crane is expected to see growth weighted to the second half of the year, and our outlook assumes continued disruption in the first half in the Middle East with growth in other regions, supported by our order book.

·    Flex-Tek is expected to see growth weighted to the first half of the year. Our outlook assumes the US construction market will remain subdued, although we will continue to implement customer initiatives and price increases to drive performance. Thermal Solutions is expected to benefit from underlying business growth and the year-on-year comparator, supplemented by the DRC acquisition. In Aerospace, the strength of our order book and coverage supports a similarly positive outlook for the year.

The FY2027 headline operating margin is expected to be around 21%. We expect to enter our medium-term target range of 21-23% through operating leverage, achieving the remaining benefits of the Acceleration Plan and continued Smiths Excellence efficiency savings, alongside additional investment into strategic growth initiatives.

We expect headline operating cash conversion of low 90%s.

Medium-term targets

We remain committed to achieving our medium-term, through cycle, targets. Together with continued underlying performance, the positive addition of DRC and data centre exposure, the structural tailwinds in global energy resulting from the anticipated response to energy security driving growth in John Crane and the positive portfolio development in Flex-Tek supports our strong conviction that we will more quickly deliver our 5-7% organic revenue growth target in the medium term.

FINANCIAL REVIEW

Revenue

Smiths revenue increased +1.2% on an organic basis and +2.1% on a reported basis to £1,937m (FY2025: £1,898m). This included £(32)m of negative foreign exchange translation and a +£49m contribution from the acquisitions of Modular Metal Fabricators, Inc ('Modular Metal'), Wattco, Inc ('Wattco'), Duc-Pac Corporation ('Duc-Pac') in FY2025 and DRC Heat Transfer ('DRC'), which completed in April 2026. 

Organic revenue grew +2.3% in John Crane with a further +2.6% contribution from acquisitions. This was partly offset by a (0.4)% organic revenue decline in Flex-Tek and a (1.7)% impact from foreign exchange translation.

·    John Crane growth reflected a resilient performance in energy against the backdrop of the Middle East conflict which had a ~£20m impact on revenue in the second half. Excluding this region, revenue growth was ~4%, reflecting mid-single digit growth in the Americas and good overall OE sales growth.

·    Flex-Tek benefited from a strong performance in Aerospace reflecting volume growth from new build programmes and new contract renegotiations. This was offset by the impact of the weak US residential construction market on HVAC and Thermal Solutions and the completion of a large ultra-high heat contract. Momentum improved in the second half, with Flex-Tek delivering MSD growth in the fourth quarter.

Operating profit

Headline operating profit was £399m (FY2025: £388m); +1.9% (+£7m) on an organic basis, and +2.7% (+£11m) on a reported basis. Acquisitions contributed £12m to operating profit and were accretive to margin.

Headline operating profit margin was 20.6%, up +20bps on an organic basis and +10bps on a reported basis, demonstrating steady progress towards the medium-term target range of 21-23%. Margin improvement in John Crane and a reduction in central costs was partly offset by a margin decline in Flex-Tek.

·    John Crane operating margin expanded +30bps organically, driven by increased pricing and positive mix, Smiths Excellence and Acceleration Plan benefits, alongside an increase in strategic growth investments;

·    Flex-Tek's margin declined (80)bps organically, reflecting lower volume and mix impacts following the completion of a higher-margin heating project and the net impact from US tariffs.

ROCE decreased to 23.5% (FY2025: 24.5%), with the higher profitability more than offset by an increase in the capital base due to acquisitions and an FX impact.

Earnings per share

Total Group headline EPS grew +12.0% to 135.7p (FY2025: 121.2p). This included a £9m increase in headline finance costs to £36m due to the timing of the share buyback programmes during the year and a headline tax charge of £89m (FY2025: £82m), with a 24.4% effective tax rate.

Smiths Detection, Smiths Interconnect and certain general industrial businesses within Flex-Tek are classified as discontinued operations. The headline profit after tax contribution to earnings from the discontinued operations was £153m (FY2025: £133m). This reflected an eight-month contribution from Smiths Interconnect and 11 months from Smiths Detection.

Smiths continuing operations headline EPS for the year was 86.8p. (FY2025: 81.9p).

Cashflow

Headline operating cash conversion was 96% (FY2025: 97%), supported by the year-on-year improvement in profit and lower capex, with machining and test rig investment projects in John Crane now largely complete. Headline operating cashflow was £384m (FY2025: £377m) with the increase in operating profit and lower capex offset by working capital movements, reflecting an increase in inventory levels to underpin delivery of the order book and service customers as well as an increase in receivables, partly related to the impact from the conflict in the Middle East. Free cashflow generation decreased to £256m (FY2025: £336m) or 45% of reported underlying Group headline operating profit (FY2025: 58%), as a result of the divestments, and also reflecting costs of the Acceleration Plan and additional US pension contributions.

Capital allocation

Organic investment

Investment in RD&E of £64m (FY2025: £63m) represented 3.3% (FY2025: 3.3%) of revenue. This included £41m (FY2025: £40m) on customer-specific engineering-related projects in John Crane.

Capex decreased to £39m (FY2025: £51m) and included investment in capacity and automation and initiatives under the Acceleration Plan.

Value-creative M&A

In April, we acquired DRC for £165m. DRC is being integrated into Flex-Tek's newly formed Thermal Solutions business and is consistent with the strategy of building into high growth adjacencies. DRC generated £35.5m in revenue in the four months of ownership.

Enhanced shareholder returns - share buyback and dividend

In December 2025, the £500m share buyback programme completed. A new £1bn programme was commenced to return a large portion of the proceeds from the sale of Smiths Interconnect, which has now completed. A further £1.5bn share buyback programme from the proceeds of the sale of Smiths Detection has now commenced. The Board is recommending a final dividend of 33.5p, a year-on-year increase of +5.4% bringing the total dividend for the year to 48.5p (FY2025: 46.0p). The proposed final dividend will be paid on 23 November 2026 to shareholders on the register at close of business on 16 October 2026.

Net debt and leverage

Smiths net cash at 31 July 2026 increased to £1,747m (FY2025: net debt of £462m), with the year-on-year movement reflecting the net proceeds from the divestments of Smiths Interconnect and Smiths Detection, partly offset by the share buyback programme and DRC acquisition.

As at 31 July 2026, borrowings were £1,204m (FY2025: £667m) comprising a €650m bond which matures in February 2027, a €650m bond which matures in 2033 and £104m of lease liabilities. There are no financial covenants associated with these borrowings. Cash and cash equivalents as at 31 July 2026 were £2,956m (FY2025: £195m).

Together with an $800m (£594m at the year-end exchange rate) revolving credit facility, which matures in May 2030, total liquidity was £3.6bn at the year end.

Statutory results

Income statement and cashflow

The £110m difference (FY2025: £41m) between continuing operations headline operating profit of £399m and statutory profit of £289m are non-headline items. The largest of these relate to a legacy pension scheme settlement loss of £57m, the amortisation of acquired intangible assets of £33m, Acceleration Plan corporate restructuring costs of £27m, a £30m net credit for asbestos litigation provision in John Crane Inc, and £8m separation related expenses.

Discontinued operations include Smiths Interconnect, Smiths Detection and four Flex-Tek general industrial businesses. Statutory operating profit from discontinued operations was £1,660m higher than headline operating profit due to non-headline items. The largest of these relate to the £1,690m gain realised on the disposal of discontinued operations, partially offset by £11m of impairment losses recognised on the Flex-Tek general industrial businesses and £8m of Smiths Detection restructuring and separation related costs.

Total finance costs for continuing operations have increased by £14m to £44m (FY2025: £30m). This increase has been driven by an increase in debt during the year from the share buyback programme, offset in the second half of the financial year by the net proceeds from the divestments.

The statutory effective tax rate ('ETR') for the Group (including discontinued operations) was 6.7% (FY2025: 28.8%) and includes a non-headline tax credit of £4m (FY2025: £19m credit). The FY2026 statutory ETR was significantly influenced by material non-headline items including the non-taxable gains arising on the disposal of Smiths Detection and Smiths Interconnect, which both qualify for the Substantial Shareholding Exemption; non-deductible costs associated with these disposals and other M&A activity; and the settlement of the buy-in of the SIPS pension scheme.

Statutory profit after tax for the Group was £1,972m (FY2025: £292m) and statutory basic EPS was 628.8p (FY2025: 85.7p).

Statutory net cash inflow from operating activities for the Group was £241m (FY2025: £456m).

Pensions

During the year, £15m of pension contributions (FY2025: £11m) were made, which relate to funded, unfunded and overseas schemes and healthcare arrangements. Of this, £10m related to the US defined benefit pension plan.

In May 2026, the TIGPS trustee converted the existing buy-in policies to buy-out policies. The liabilities and corresponding assets of TIGPS have therefore been de-recognised from 11 May 2026, as the legal obligation for payment of benefits transferred to the relevant insurers from that date. In July 2026, the SIPS trustee completed a deal to secure its remaining uninsured pension liabilities by way of a bulk annuity buy-in with M&G. As a result, as at 31 July 2026, 100% of the remaining funded UK liabilities had been de-risked through the purchase of annuities from third-party insurers.

Litigation

Litigation provisions remain a significant area of judgement for the company. During the year, provisions relating to John Crane asbestos litigation and Titeflex product liability claims were revised to £153m (FY2025: £191m) and £29m (FY2025: £26m), respectively. Further details of the provisions, related judgements and estimates are provided in note 23 to the financial statements.

Foreign exchange

The results of overseas operations are translated into sterling at average exchange rates. Net assets are translated at period-end rates. The principal exchange rates, expressed in terms of the value of Sterling, are as follows:

Investment in our people and sustainability enables the success of our strategy

We take a disciplined, commercially grounded approach to sustainability, focused on the issues that matter most to our business, stakeholders and wider value chain.

In FY2026, we continued to strengthen our sustainability framework and climate-related disclosures in line with evolving reporting requirements and regulatory expectations. We completed a review of our climate risks, opportunities and targets following the divestments and are undertaking a refresh of our Science Based Targets to align with the remaining businesses. We have made good progress in reducing the environmental impact of our operations, achieving a 6% reduction in Scope 1 and 2 emissions and a 5% reduction in energy use compared with FY2025, while maintaining 75% renewable electricity across the business. We are also on track for our environmental targets through FY2027 covering energy, emissions, supplier engagement and resource efficiency.

Our sustainability data and reporting processes continue to be supported by Watershed and independent assurance, helping to improve transparency, consistency and decision-making. We have continued to expand supplier engagement through EcoVadis, with 35% (FY2025: 28%) of supplier spend evaluated by the end of the year and remain on track towards our FY2027 targets for supplier assessment within our supply chain. In FY2027, we will focus on readiness for compliance with regulations such as CSRD and IFRS S1 & S2 disclosures.

1 The energy reduction target is expressed as the MWh energy consumed (excluding renewable electricity produced and consumed onsite), compared to a revenue-adjusted MWh baseline (excluding price growth within the measurement year), on a continuing basis

2 Scope 1, 2 and 3 GHG emissions calculated in accordance with the WRI/WBCSD Greenhouse Gas Protocol

3 Continuing operations including acquisitions against the FY2024 base year

4 Across seven identified water stressed areas

Safety, alongside health and wellbeing, is an essential foundation of our success and we are focused on achieving excellence through strong leadership, grassroots ownership and a culture of care. Our FY2026 recordable incident rate was 0.52 (FY2025: 0.35). Although this is not the improvement we targeted, the long-term trend is positive, and we consistently average lower than the Industrial Manufacturing & Services benchmark. To re-emphasise our commitment, we have now included 'Safety' as one of the Smiths Values and are implementing a new health and safety software tool for improved capture, understanding and action on safety. In relation to wellbeing, we have enhanced leadership capability through bespoke training and practical tools and introduced further widespread training to establish a consistent baseline of safety and wellbeing knowledge at the grassroots.

Continued investment in our people underpins the delivery of our strategic priorities. During FY2026, we strengthened future capability through the establishment of a Technology Steering Group and the development of more than 20 integrated product, technology, process, materials and skills roadmaps, providing a clear five-year view of strategic priorities, capability requirements and investment needs across the business. The skills roadmaps also informed workforce planning and future capability development.

We continued to evolve our Excellence programme towards a culture of continuous improvement and daily value creation, with around 400 Yellow Belt projects registered during the year. 84% of employees have completed Excellence Fundamentals training and we have more than 800 Yellow Belts across the organisation. In parallel, our partnership with the UK Manufacturing Technology Centre advanced technology and manufacturing capability through four completed projects and a growing pipeline of future opportunities.

Our people are enthusiastic about supporting our communities and making a positive social impact. Since 2023, the Smiths Foundation has awarded grants totalling c.£3m to 32 colleague-nominated charities across 16 countries. In FY2026, to mark our 175th anniversary and founding in 1851, the Board approved the retention of £18.51m from divestment proceeds, increasing the Foundation's fund to c.£25m. This has enabled the Foundation to expand its activities across three strategic funding streams: scholarships and education, colleague-nominated charitable partnerships as previously, and biodiversity and environment. Together, these programmes provide a strong platform for delivering long-term, purpose-led impact aligned with our strategy with annual funding of £2-3m.

Board changes

During the year, there were several changes to the Board. Following the November 2025 AGM, Mark Seligman, Noel Tata and Karin Hoeing retired from the Board and Dame Ann Dowling was appointed as Senior Independent Director. Three new Non-executive Directors have been subsequently appointed - Laurence Mulliez, effective 1 September 2026, Val Rahmani, effective 1 October 2026, and Emma FitzGerald, effective 1 November 2026. They are all highly experienced leaders and bring complementary skills, perspectives and insight that will further strengthen the Board. Their appointments reflect our commitment to maintaining a Board with a broad range of relevant expertise, international experience and diverse viewpoints.

BUSINESS REVIEW

JOHN CRANE

1 Includes cash R&D expenditure (1.5% of sales) and spend on customer-specific engineering-related projects (3.6%)

Market backdrop

The conflict in the Middle East and its wider ramifications is having a material impact on the global energy market, and volatility remains high. The timing for the resolution of the conflict is uncertain but implications on energy security and reliability are expected to have a positive medium-term effect on demand, and likely require additional investment in oil and gas production, energy mix, transport and storage both in and outside the Middle East. Total energy demand is expected to grow ~5% CAGR over the medium term.

Within industrial markets, we see notable opportunities in chemicals, mining and pulp and paper. In chemicals, excess capacity in China is limiting growth though we see targeted opportunities in the US and Asia-Pacific. In mining, there is high demand for energy transition materials and in pulp and paper, packaging and tissue growth support demand. Industrial demand is expected to grow ~3-4% CAGR over the medium term. 

Performance

Revenue

Despite a challenging market back-drop, John Crane delivered organic revenue growth of +2.3% for the year, a resilient performance and supported by an improvement in operational execution, with faster lead times and improved on-time delivery. Reported revenue was +1.4% higher year-on-year at £1,130m, with the organic growth partly offset by a negative (0.9)% foreign exchange impact.

Energy

·    Organic revenue grew +2.5% with growth in both original equipment ('OE') and aftermarket ('AM'). The conflict in the Middle East impacted sales by ~£20m as OE programmes were delayed and maintenance programmes were impacted by the disruption and closure of facilities in the region. Sales were strong in the US and in Latin America, reflecting robust customer demand as rates of production accelerated.

·    In OE, growth of +4.1% reflected strong demand for dry gas seals, partly offset by lower systems sales which reflected project phasing delays and a strong year-on-year comparator.

·    Aftermarket organic revenue increased +1.9% reflecting continuing expansion in the installed base and growth in customer aftermarket service contracts but was particularly impacted by slowdowns in the Middle East.

Industrial

·    In industrial markets, organic revenue increased +2.0% reflecting good growth in OE, with aftermarket revenue up marginally year-on-year. Growth in general industrial, particularly in the mining and water sectors, was offset by lower revenue in chemicals in China and Japan.

Operating profit

Headline operating profit of £270m grew +3.5% on an organic basis, resulting in a margin of 23.9%, a +30bps improvement on an organic basis, and +10bps higher on a reported basis.

This organic improvement was driven by increased pricing and positive mix effects, Acceleration Plan and Smiths Excellence benefits, partly offset by cost inflation and an £8m increase in investment in strategic OE projects.

On a reported basis, headline operating profit was up +1.9%, with the organic improvement partly offset by a (1.6)% negative foreign exchange impact. Statutory operating profit includes the net credit in relation to the provision for John Crane, Inc. asbestos litigation, partially offset by the costs incurred in relation to the Acceleration Plan.

ROCE was 24.5%, with the profit growth partly offset by a higher capital base, resulting from the investments in machining and test rig projects, and the FX impact.

FY2027 outlook

Growth for John Crane in FY2027 is expected to be weighted to the second half. The Middle East conflict continues to add uncertainty to the near-term outlook for John Crane, and whilst the business has proved to be resilient, it continues to see disruption in the short term. In the medium term, we expect OE orders to increase as projects restart and the recovery phase begins. John Crane is well-placed to support the region as the aftermarket also recovers given our strong local presence and notable importance to our customer base for recovery and execution. Outside the Middle East, we continue to see growth opportunities particularly in the US and Latin America as higher energy prices drive demand, particularly for AM services as demand accelerates.

Accelerate

During the year, John Crane made good progress against its strategy to deliver above-market growth through driving the core portfolio and its leadership gas position, growing aftermarket services, alongside executing initiatives in energy transition and attractive industrial markets. The investments in machining and test rigs will also assist here through improved customer service and reduced delivery times.

In its core gas business, John Crane secured major contracts supporting both LNG and NGL projects, further strengthening its position in global gas infrastructure, a market underpinned by ongoing energy security investment. With installations in approximately 90% of the world's largest LNG facilities, John Crane is well positioned to benefit from the significant long-term aftermarket opportunities these assets generate.

Several important contract wins and customer partnerships for reliability management contracts in energy and chemicals reinforced the business's expanding aftermarket position, and within higher growth energy transition markets, opportunities in geothermal power and carbon capture and storage were an area of focus.

In industrial markets, John Crane secured agreements and expanded its presence in structurally attractive industrial segments, including projects in pulp and paper and for critical minerals infrastructure, supporting long-term industrial and energy transition demand.

All these contracts illustrate our business model and strategy in action - develop strong, intimate customer relationships to deliver superior products and services that provide attractive recurring aftermarket revenue visibility that reinforce embedded long-term customer relationships.

Innovate

RD&E investment was 5.1% of sales and advanced our product capabilities and underpinned our drive to capture a greater share of aftermarket. Customer response to the Type 93AX Coaxial Separation Seal has been very positive. We launched the Type 8628VL, a next generation mechanical seal engineered to address the challenge of maintaining seal integrity in multi-phase ethane and ethylene pipelines. To extend our product capability, John Crane developed an industry-first validated methodology that significantly improves the accuracy of drivetrain analysis in critical rotating equipment improving predictive accuracy which can have a direct impact on customers' operational performance, project delivery and costs.

We re-launched Performance Plus™ modular service framework to support the drive to expand our aftermarket position. The tailored service solutions adapt to each customer's operational experience, bringing together smart technology, data insights and expertise to keep operations running smoothly, reliably, safely and sustainably.

Supporting our drive into attractive industrial markets, John Crane's Type SB2 USP technology won the Most Innovative Water Solution category at the Manufacturing Supplier Innovation Awards UK 2026. The technology helps customers significantly reduce water consumption in demanding industrial applications while maintaining sealing performance and equipment reliability.

FLEX-TEK

1 The comparatives for FY2025 have been re-presented to reflect the reclassification of certain Flex-Tek general industrial businesses as discontinued operations. These businesses had a FY2026 contribution of £46m to revenue and a £(3)m operating loss (FY2025: £54m revenue and £5m loss)

Market backdrop

The US residential construction market remained challenging with housing starts and building permits down (0.8%) and (2.1)%, respectively, in FY2026. Thermal markets grew strongly behind the growth in US data centre investment as well as ongoing strong demand for industrial process electrification. The aerospace and defence market remained strong, with demand supported by new commercial aircraft build programmes and increased defence spending.

Over the medium term, the US residential market is expected to grow ~5% CAGR, driven by US housing demand and a shortage of housing. US data centre capacity demand is expected to grow 20-25% annually through 2030, primarily driven by AI and cloud demand. Looking ahead, the industrial electrification market is expected to grow ~6% CAGR, underpinned by industrial process electrification, process efficiency and data centre cooling. The aerospace fluid conveyance systems market is expected to grow ~4% CAGR over the medium term.

Performance

Revenue

Organic revenue declined marginally by (0.4)% in FY2026, impacted by market-driven weakness in construction and revenue decline in thermal projects, mostly offset by strong growth in aerospace. Reported revenue increased +3.1%, with a positive contribution from acquisitions of +6.4% (+£49m), partly offset by a negative foreign exchange translation effect.

Construction (45% of revenue)

·    Organic revenue declined (3.6)% in the year, reflecting slow demand for HVAC products. There was a sequential improvement in performance through the year and growth returned in Q4, at +2.9%, as a result of targeted customer wins, particularly in flexible ducting and multi-family projects. The performance was against a strong prior year comparator which benefited from post-acquisition revenue synergies from flexible ducting products, as well as market consolidation amongst major customers. The integration of Modular Metal and Duc-Pac are now complete, strengthening our geographical coverage, positioning us well for when the market turns positive.

Thermal Solutions (27% of revenue)

·    Organic revenue declined (6.2)%, following the impact from customer destocking of heat kits in the first half and the completion of the ultra-high heating project in October 2025. Revenue was enhanced by the Wattco acquisition which is fully integrated and now benefits from capacity expansion to satisfy the demand of products and solutions to capitalise on the ongoing industrial electrification trend. In addition, the acquisition of DRC Heat Transfer completed in April 2026, expanding our offering to cooling solutions and positions Flex-Tek to serve customers in fast-growing power generation and data centre markets, and is growing strongly on a pro-forma basis.

Aerospace (28% of revenue)

·    Organic revenue grew +10.6%, reflecting continued successful execution against its strong order book across both commercial (~70% of revenue) and defence (~30% of revenue) aircraft programmes, and the price and volume benefits from long-term contract renewals across key customers. We delivered strong double-digit growth in both India and in our MRO business (~10% of revenue), two strategic growth priorities for the business. This performance also reflected recent investments in machining automation which have enabled capacity flexibility, as well as efficiency gains.

Operating profit

Headline operating profit declined (4.2)% on an organic basis. Organic operating margin declined (80)bps to 21.0% largely as a result of lower volumes in construction, investment in growth initiatives and a limited impact from tariffs, partly offset by pricing and operational efficiency savings. On a reported basis, operating profit was flat, benefiting from the DRC profit contribution, whilst operating margin declined (60)bps.

Statutory operating profit includes the amortisation of acquired intangible assets, an increase to the Titeflex Corporation subrogation claims provision driven by an increase in the number of expected claims, and costs incurred in relation to the Acceleration Plan.

ROCE declined (220)bps to 26.3%, reflecting the headline operating profit decline and the impact of acquisitions on the capital base.

FY2027 outlook

Flex-Tek is expected to return to growth in FY2027, weighted to the first half.

·    Construction remains focused on driving performance, with the timing of the US construction market recovery remaining uncertain. The business expects to benefit from continued customer wins and new pricing initiatives.

·    Thermal Solutions performance is expected to benefit from underlying business growth supplemented by the DRC acquisition, as well as the phasing out of destocking effect in heat kits, and the ultra-high heating contract from the second quarter.

·    Aerospace finished the year with a strong order book, with coverage of ~65% for FY2027 offering good visibility and is expected to benefit from continued positive performance in targeted growth areas as well as recent contract renewals.

Accelerate

·    In Construction, growth initiatives focused on the core portfolio include leveraging strong distributor relationships to continue expanding market share and in FY2026, this included investing into the higher-growth Canadian market which presents an opportunity to increase market penetration and broaden customer reach.

·    In Thermal Solutions, we are increasingly moving from a product approach towards customised solutions that create greater value for customers and strengthen our competitive position. The first priority is accelerating our position in data centre cooling, with DRC presenting a large immediate growth opportunity, and plans underway to ramp up capacity to meet the strong demand being driven by data centre back-up power needs. Our second priority is building a leadership position in high-value electrification. The pipeline of projects remains positive, including the provision of electric heaters for ultra-low emission electro-fuel and data centre safety-power projects.

·    In Aerospace, the second half included contract renewals with major aircraft engine manufacturers. These contracts deepen the long-standing relationships and support some of the most important engine manufacturing programmes in global aviation. They include a five-year contract with GE Aerospace across its key commercial and defence-related engine fleets. The business continues to drive expansion of its shipset content, its MRO capabilities, which include supporting the repair of Pratt & Whitney's geared turbofan engine, and investing in higher-growth geographies such as India.

Innovate

Innovation within HVAC solutions continues to progress across multiple product categories. The Blue Series polyurethane-insulated sheet metal HVAC components are gaining traction with new customers, particularly in the southern US, with further growth expected in FY2027. Enhancements to the Python line set portfolio are also underway, improving compatibility with mini-split systems to simplify installation, enhance the installer experience, and reduce overall installed costs.

Thermal Solutions remains focused on combining heating technologies with controls, panels and integrated systems, making it easier for customers to solve increasingly complex challenges.

Aerospace continues to work with customers in the development of new high-pressure hoses. New equipment capability in our facilities have enabled meeting high pressure hose demands, as well as making improvements in our internal laboratory to speed up development times.

Portfolio management

During the year, we agreed the sale of three general industrial businesses for a combined value of £40m (with one still to complete, expected in the first quarter). The process for the remaining one is ongoing. Further information can be found in note 28.

DISCONTINUED OPERATIONS

SMITHS DETECTION (Disposal completed on 30 June 2026)

1 FY2026 absolutes represent the contribution for the time they were owned. Reported growth reflects the change in absolutes, whilst organic growth reflects growth over 11 months of ownership in each year.

Smiths Detection delivered strong organic revenue growth at +9.0%, successfully converting its strong order book into revenue, driven by growth in Aviation and Other Detection Systems, in both OE and aftermarket. Reported revenue declined (4.4)% reflecting the 11-month contribution with the sale completing on 30 June 2026, and a negative foreign exchange effect.

Headline operating profit increased +22.9% on an organic basis, reflecting the strong volume growth and favourable mix from higher aftermarket growth in Aviation, as well as efficiency and Acceleration Plan benefits, and despite the impact of US tariffs. Headline operating profit margin increased to +13.7%, +150bps on an organic basis. On a reported basis, headline operating profit increased +3.3%.

ROCE increased +170bps to 13.1%, reflecting the growth in headline operating profit. 

SMITHS INTERCONNECT (Disposal completed on 31 March 2026)

1 FY2026 absolutes represent the contribution for the time they were owned. Reported growth reflects the change in absolutes, whilst organic growth reflects growth over 8 months of ownership in each year. These figures include Smiths Interconnect's US sub-systems business unit, which was sold in Q1 FY2026.

Smiths Interconnect's organic revenue increased +7.8%, led by continued momentum in the semi-test business with demand from key customers across multiple AI and data centre programmes. Reported revenue declined (39.9)%, largely reflecting only an eight-month contribution following the sale of the business on 31 March 2026, together with negative foreign exchange.

Headline operating profit increased +4.4% on an organic basis. Headline operating profit margin increased to 19.7%, (70)bps lower on an organic basis and +190bps higher on a reported basis. The benefit from the sale of its US sub-systems business unit as well as efficiency improvements and Smiths Excellence benefits, were partly offset by negative mix effects and higher materials costs.

ROCE improved +110bps to 17.8%, driven by the increase in headline operating profit.