Half Year 2025 Smiths Group PLC Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lushanthan Mahendrarajah - JPMorgan - Analyst : (inaudible - microphone inaccessible) Firstly on John Crane. I mean, is it possible to sort of quantify the impact of the cyber incident in in the first half and it looks like it impacted aftermarket more than. And we used to just sort of TRY and understand the rationale there and I guess how we think about that sort of catch up in the coming quarters. The second question is on just detection, just (inaudible - microphone inaccessible) Or sale and then thirdly on margin 60 headwind in the first half, how should we think about in the second half. (inaudible - microphone inaccessible) Thank you.

Question: Lushanthan Mahendrarajah - JPMorgan - Analyst : Okay. Thank you.

Question: Christian Hinderaker - Goldman Sachs International - Analyst : Good morning, Roland, good morning, Julian. Thanks for the opportunity. I want to start with the new growth assumptions, if I may. I think backing out your market growth numbers on slide 25, and getting to a 4% midpoint growth number when weighting those. And how do we think then about the building blocks for the 5% to 7% range? Is there a bit of a skew there at all to either segments and then also in terms of the 21% to 23% margin. How do we think about the progression given cranes obviously at the upper level there, is there scope for margin improvement across both businesses or is this a Flex-Tex story?

Question: Christian Hinderaker - Goldman Sachs International - Analyst : Thank you. That brings me on to question two on Flex-Tex, and I think you said 2% growth in industrial for the half ahead of the housing market. Just how do we think about your comments on the outlook here? Are they suggesting a flat negative market and an outperformance at the division level? I appreciate there's some uncertainty, but just want to sort of scale the thinking around the Flex-Tex guide into year end and beyond?

Question: Christian Hinderaker - Goldman Sachs International - Analyst : Thank you. And then a final one, just, are -- you able to clarify the SES contribution to profitability in the bridge for the half?

Question: Christian Hinderaker - Goldman Sachs International - Analyst : Understood. Thank you.

Question: Martin Wilkie - Citigroup - Analyst : Yeah, thank you. Good morning. It's Martin from Citi. Just a couple of questions on Interconnect and it's good news that they get an answer by the end of this year. In terms of how you're thinking about that exit, when we look about to multiples in defense, for example, they've obviously gone up a lot in the last. Few months, can you remind us how much of that divisions exposed to defense? I saw that you have reclassified some revenue inside Interconnect between the different sort of subdivisions with a larger chunk now in the pace and defense just to get an update of how much of Interconnect is within defense now. Thank you.

Question: Martin Wilkie - Citigroup - Analyst : Yeah, absolutely. And then just on semiconductors within that, it sounds like semiconductor was a big part of the revenue acceleration in the period just reported. How much visibility do you have on that? Is that something that we can expect to continue? I mean do you have an order backlog that suggests that we have good visibility over the next six months or so? Or how do you think about that semiconductor side of Interconnect?

Question: Martin Wilkie - Citigroup - Analyst : Great, thank you very much.

Question: Mark Davies Jones - Stifel Nicolaus and Company, Incorporated - Analyst : Morning Rowland, morning, Julian. Two for me, please. Firstly, on Detection, still very strong OE growth, obviously, as we go through that transfer to CT. Where do you -- how long before we hit the inflection with enough of the installed base that the aftermarket growth starts to grow at least in line with the OE and the margin can start to inflect? That would be the first question.

Question: Mark Davies Jones - Stifel Nicolaus and Company, Incorporated - Analyst : Okay, thank you. And then just back on Interconnect, if I may. Given that very strong semiconductor performance, I guess maybe one for Julian, if it was his baby. But do you think you can get full value for that business, selling it as a whole, given the slightly different peer group across the different segments of Interconnect? Do you miss losing out some of the full value of that semiconductor piece?

Question: Martin Wilkie - Citigroup - Analyst : Okay, thank you. Understood.

Question: Stephan Klepp - HSBC - Analyst : Yeah, hi, good morning, Roland. Good morning, Julian. Thanks for taking my question. Can we talk about John Crane a little bit more again? So you mentioned, first of all, that growth was 1 to 2 percentage points lower. Is that regarding Smiths as a Group or John Crane itself? Then you have been saying as well that order intake was impacted. Can we clarify a little bit? And can we clarify what that means in terms of catch-up potential? I heard you saying H2 is going to be stronger growth again. But did you lose out here? And then at the same time, you're saying that your view on John Crane for the full year has come down a little bit, obviously, due to the cyber incident. Can we clarify that as well again?

Question: Stephan Klepp - HSBC - Analyst : Yeah, okay, thank you. And then on Detection, I always understood the business that you need the slots to deliver your equipment into the airport. Shouldn't that give you very high visibility on the second half as well on the next year to come because you need those installation slots. So wouldn't it be possible to be a little bit more positive and more constructive on the growth rate that we should see in the next half year and probably beyond that?

Question: Stephan Klepp - HSBC - Analyst : Okay. Last one. You mentioned the new CapEx cycle with regard to the baggage scanners. When would that commence? My best guess, from today because you said that you are going through the certification process at the moment?

Question: Stephan Klepp - HSBC - Analyst : Yeah. Thank you so much.

Question: Andrew Simms - Berenberg - Analyst : Good morning, gentlemen. Thanks for taking the questions. Just firstly on the Interconnect margin, I just wonder if you could comment a little bit on the sustainability of that given the jump in the first half? And maybe given the tailwinds in the mix, can this go any materially higher? That's the first question. Thanks.

Question: Andrew Simms - Berenberg - Analyst : Great. And then just on the guidance, you mentioned that the guidance includes potential impact of US tariffs that are currently in place. I'm just wondering if you could comment on where you're seeing that or what measures you're taking around those? Thanks.

Question: Andrew Simms - Berenberg - Analyst : Great. And maybe just one final one. You're obviously talking about starting the separation of the Interconnect and Detection businesses. I think we heard the past year that behind the scenes that there's quite a lot of commonality in terms of platforms and things like that. In terms of that separation, is there going to be a lot of sort of post-transaction service levels required or any investment to prepare the businesses to standalone or (inaudible) I suppose?

Question: Andrew Simms - Berenberg - Analyst : Great. (inaudible)

Question: Dylan Jones - Kepler Cheuvreux - Analyst : Morning Roland. Morning, Julie, thanks for taking my question. Just a few quick follow-ups. Most of them have been answered, I might ask one by one. So on Interconnect, perhaps just asking in a slightly different way in terms of the semi end market. Do you have a sense of where the sort of semi volumes are compared to historic levels?

Question: Dylan Jones - Kepler Cheuvreux - Analyst : Got it. And you obviously announced at this result, the acquisition of Duc-Pac. Just wondering if there's sort of any update commentary you can sort of give on the M&A pipeline. And also just kind of interested in sort of commentary around, I suppose, the capacity for more M&A. And by that, I obviously don't mean balance sheet. I'm sort of talking about there's a whole number of sort of initiatives going on at the group, sort of the three acquisitions announced recently, the acceleration program and obviously, the demergers as well. So just interested in your thoughts around that as well.

Question: Dylan Jones - Kepler Cheuvreux - Analyst : Got it. And just one more -- if I can squeeze one more in. Just following up on the divestments. I mean, you obviously provided a bit of an update sort of saying that the process has commenced. It's on track. I think at the time of announcing this strategic shift, you sort of alluded to you expected strong interest. I'm just wondering if there's any sort of updated commentary now that the process has commenced around the sort of level of interest that you're seeing in particularly the Interconnect business, but also the Detection business at this point?

Question: Dylan Jones - Kepler Cheuvreux - Analyst : Got it. Thanks a lot, gentlemen.