Following on from an uninspiring set of full-year figures, Smiths Group's (SMIN) reported interim figures should at least see some benefits from currency translations following sterling's slide. Of course, that's beyond the group's sphere of influence. Instead, the impact of the group's strategic review on underlying margins and cash flows will be closely scrutinised. The review, implemented in the wake of a slump in profits and senior board changes, resulted in the sale of several non-core and marginal assets to free up cash to invest in growth areas of the business.
The attention of analysts will doubtless be drawn to the performance of its key John Crane subsidiary due to the apparent stabilisation of oil prices and the continued retracement within the metals complex. As Smith's largest subsidiary enterprise, John Crane provides a range of engineered products to the energy services sector, including mechanical seals, couplings and hydro-dynamic bearings. The slump in industry capex budgets, particularly in relation to first-fit equipment, constricted profits and cash flows. Conversely, demand for aftermarket products and services has remained relatively resilient, reflecting the fact that routine maintenance and repairs are unavoidable. However, in common with other diversified engineers, Smiths is intent on reducing exposure to the energy sector.
