Predictably, the strength of sterling, particularly against the dollar, stripped £43m off Smiths Group's (SMIN) operating profit during the year to 31 July - about 8 per cent of the total. More worryingly, however, the engineering group's underlying revenues were also flat, as US public-sector austerity continued to weigh on its detection and medical divisions.
Strip out currency effects and like-for-like revenues at Smiths Detection - which makes airport body scanners, among other products - fell 5 per cent. Terrorist threats have failed to translate into higher security spending at ports and borders. Worse, the margin more than halved, cutting underlying divisional profit by a full 57 per cent. Management has been replaced and is now restructuring the operation. Meanwhile, Smiths Medical, which supplies US hospitals with drips and the like, saw underlying sales fall 1 per cent, mainly due to pricing pressures.
Group-level figures were saved by a strong performance from John Crane, Smiths' biggest and most profitable division. The oil equipment supplier generated underlying top-line growth of 2 per cent, with profits up 8 per cent.
Chief executive Philip Bowman said Smiths would continue to reposition the group by investing in product innovation and expansion into emerging markets. He also noted "signs that the defence market is beginning to stabilise". Broker Investec expects pre-tax profits of £476m for the current financial year, giving EPS of 86.5p (up from 78.8p).
| SMITHS GROUP (SMIN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,285p | MARKET VALUE: | £ 5.1 bn | |
| TOUCH: | 1,283-1,287p | 12-MONTH HIGH: | 1,535p | LOW: 1,211p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 314p* | NET DEBT: | 65% | |
| Year to 31 July | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 2.77 | 373 | 75.3 | 34.0 |
| 2011 | 2.84 | 398 | 77.8 | 36.3 |
| 2012 | 3.03 | 366 | 65.4 | 38.0 |
| 2013 | 3.11 | 396 | 80.1 | 39.5 |
| 2014 | 2.95 | 302 | 59.0 | 40.3 |
| % change | -5 | -24 | -26 | +2 |
Ex-div: 23 Oct Payment: 21 Nov *Intangible assets of £1.54bn, or 391p per share | ||||
