Following the pattern of the wider engineering sector, Smiths reported its highest operating margin in a decade - even as underlying sales remained flat. What's more, chief executive Philip Bowman's restructuring mission - embarked upon shortly after his arrival at this unwieldy conglomerate three years ago - has resulted in £41m of annual savings so far. He hopes to increase that to £50m by next year.
That suggests margins could rise further. But Mr Bowman remains cautious, noting that any further profit boost from cost-cutting will be “more muted”. He adds that delivering sales growth in the “short-to-medium term is likely to remain challenging” - reflecting Smiths' high exposure both to the US and public-sector buyers.
Smiths Detection, which makes body scanners and X-ray devices for airports and ports, was the only division to post a strong sales recovery, as governments and airports started spending on security again. But underlying revenues at the oil and gas division, John Crane, fell 5 per cent overall after a torrid first half, but orders are now improving.
Merrill Lynch expects pre-tax profits of £470m for 2011, giving EPS or 90p (2010: £371m/72.4p).
SMITHS GROUP (SMIN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,201p | MARKET VALUE: | £4.69bn | |
| TOUCH: | 1,197-1,199p | 12-MONTH HIGH: | 1,253p | LOW: 825p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 16 | |
| NET ASSET VALUE*: | 280p | NET DEBT: | 76% | |
| Year to 31 Jul | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 2.18 | -37.0 | -18.2 | 29.0 |
| 2007 | 2.16 | 256 | 36.9 | 31.3 |
| 2008 | 2.32 | 319 | 63.0 | 34.0 |
| 2009 | 2.66 | 371 | 70.8 | 34.0 |
| 2010 | 2.77 | 373 | 75.3 | 34.0 |
| % change | +4 | +1 | +6 | - |
Ex-div:20 Oct Payment:19 Nov *Includes intangible assets of £1.64bn, or 419p per share | ||||
