Headline EPS up 5% and continued strong headline operating cash conversion at 95%
Smiths Medical delivered highest revenue growth in almost a decade
John Crane aftermarket strength underpinned a resilient performance
Smiths Detection achieved margin improvement and strengthened order book
Difficult trading conditions at Smiths Interconnect; continued positive results from Flex-Tek
Increased investment in growth initiatives through Engineered for Growth programme
Net accounting pension deficit reduced to £108m - its lowest reported level since 2008
"While Group revenues fell 2% with tougher trading in Smiths Interconnect, Smiths Detection and John Crane, headline operating margin rose on a recovery in profitability at Detection as management action strengthened its business performance. Smiths Medical achieved its highest revenue growth in almost 10 years helped by innovation in infusion pumps and some competitor disruption. John Crane delivered a resilient performance supported by its robust business model, focused on aftermarket services. Smiths Interconnect reported lower revenues with continued tough trading conditions; the impact on operating profit was exacerbated by the division's high operational gearing. Flex-Tek benefited from continued growth in US residential construction, specialty heating elements and aerospace demand..
"Over the last eight years, we have increased our investment in revenue growth opportunities through investment in innovation, expansion in emerging markets and better sales & marketing effectiveness. Our Fuel for Growth restructuring programme is on track and has generated £33m of annual savings which were largely reinvested in growth initiatives as part of our Engineered for Growth plans.
"Looking ahead, our investment initiatives are building a solid foundation to accelerate medium-term revenue growth. We see positive momentum in Smiths Medical, Smiths Detection and Flex-Tek, albeit against the backdrop of continuing global economic uncertainty. John Crane is likely to experience further pressures from lower capital expenditure by energy services customers, although the aftermarket services business is expected to prove more resilient. Smiths Interconnect is expected to see modest improvement in some of its commercial markets. Overall, the phasing of group results is expected to be slightly more weighted towards the second half than usual."
Dividend
The Board has a progressive dividend policy for future payouts while maintaining a dividend cover of around 2.5 times. This policy will enable us to retain sufficient cash-flow to meet our legacy liabilities and finance our investment in the drivers of growth. While the medium-term objective is to maintain this dividend cover, we will operate some flexibility in applying the 2.5 times cover to take account of short-term impacts such as foreign exchange.
The Board has recommended a final dividend of 28p per share giving a total for the year of 41p, an increase of 2% reflecting the strong cash conversion in the year. The final dividend will be paid on 20 November to shareholders registered at the close of business on 23 October. The ex-dividend date is 22 October.
