The re-focus on cutting edge technologies may already be paying off at Smiths Group (SMIN). The engineering conglomerate delivered an upbeat assessment of full-year prospects, buoyed by a stronger operational performance in the Smiths Detection business and sterling's depreciation against the greenback.
We shouldn't get too carried away; operating profit is predicted to be above expectations but down on last year's levels. A strengthening dollar will result in positive translation effects for the John Crane unit, but that will be more than offset by reduced receipts due to the oil price slump. John Crane produces high-tech mechanical seals that are utilised across a range of industries, but it has significant exposure to the energy sector.
The group also reported improved profitability in its Medical and Interconnect businesses, though Smiths Detection is providing a genuine cause for optimism. The unit produces a range of sensors that detect and identify explosives, weapons and chemical agents, so the deterioration in the global security situation has certainly bolstered the commercial proposition. Management points out that nearly a third of revenues from the unit are now generated through aftermarket activities such as training and software provision.
