Smiths Group raises nearly three billion pounds through strategic disposals

Smiths Group, a constituent of the FTSE 100, has completed the sale of its airport security scanner business for £2 billion to CVC, marking another significant step in its restructuring efforts. This transaction follows the autumn sale of its Interconnect electronics division, which realised £1.3 billion. After adjustments for debt, the group expects to receive £1.85 billion in cash from the CVC deal, raising its total from recent disposals to approximately £2.95 billion.

The decision to divest two of its four main divisions has brought Smiths closer to its objective of refocusing on its core engineering operations. Smiths now intends to concentrate on John Crane, the oil and gas equipment producer, and Flex-Tek, which supplies solutions for heating and ventilation. The company previously parted ways with its medical devices business four years ago.

The board determined that the CVC offer, which values the airport security unit at roughly sixteen times its operating profits, represented a stronger proposition than a possible demerger. Since Smiths announced its intention to divest these assets at the start of the year, the share price has risen by around fifty per cent. Shares advanced an additional one per cent to £24.54, bringing the company’s valuation to £7.9 billion.

Smiths Group chief executive Roland Carter emphasised that these deals are intended to generate value for shareholders and redefine the firm as a specialised industrial engineering business. According to Carter, Smiths is being repositioned as a premium provider of flow management and thermal solutions, which will support sustainable growth and shareholder returns.

Of the proceeds from the disposals, Smiths plans to return a significant portion to shareholders, with a £1 billion share buyback programme already underway. Further distributions to investors are expected in the second half of next year, upon formal completion of the security scanner unit sale.

The group disclosed that its remaining operations, John Crane and Flex-Tek, are reporting revenue growth of 3.6 per cent, with John Crane and Flex-Tek achieving operating margins of nearly 24 per cent and 20 per cent, respectively. After accounting for central costs, the overall group margin is nearly 20 per cent. Looking ahead, Smiths anticipates annual revenue growth of between five and seven per cent and group operating margins rising to 21 to 23 per cent. Earnings per share are projected to increase by 10 per cent, reflecting the anticipated benefits of the company’s streamlined structure.