Smiths delivers underlying growth in revenue but warns of divisional challenges

FTSE 100 technology company Smiths Group has reported the its underlying revenue has grown across all divisions in the three months ended November 3rd, with full year expectations remaining in line with previous guidance.

FTSE 100 technology company Smiths Group has reported the its underlying revenue has grown across all divisions in the three months ended November 3rd, with full year expectations remaining in line with previous guidance.

The group said underlying headline operating profit was also ahead of the same period last year with progress in all divisions except Smiths Medical which, as previously announced, has significantly increased its investment in sales and marketing in higher growth markets.

Growth in the Smiths Medical business underlying revenue was driven by the demand for its single-use consumables, which offset a slight weakness in hardware sales compared with the same period last year. As expected, headline operating profit was lower, as a result of the annualised effect of its increased investment in sales and marketing in emerging markets, which was weighted towards the second half of last year.

The company warned that it expects to feel the effects of the introduction of the medical device tax in the US in January on growth and margins.

Remaining upbeat, the group said: "We will seek to offset these impacts through operational improvements and a continuing focus on higher margin products."

Elsewhere, the John Crane division said that it sustained underlying revenue growth in the first quarter, continuing the same trend as the second half of last year.

"This reflected on-going demand for its first-fit original equipment and aftermarket services," the group said.

"Operating profit also rose, despite increased investment in growth drivers such as sales and marketing and a weaker performance from the John Crane Production Solutions business. We have expanded the order book in the quarter with a positive book-to-bill ratio and we expect to sustain modest revenue growth into the front end of the second half. Beyond that, we remain cautious as some of our customers have signalled concerns about the potential impact on their capital expenditure from any further economic slowdown."

The Smiths Detection division also saw an underlying improvement, with cost savings successfully made during the period. Although the order book continued to grow significantly compared to previous years, the firm said it still believes the overall performance may be affected by the level and timing of government spending.

Revenue in the Smiths Interconnect business was driven by improvements in connectors and microwave, while power management experienced continuing underlying declines. It warned that the outlook for the year "remains challenging".

Finally, the Flex-Tek business reported a good start to the year, with the best performance seen in aerospace and US residential construction.

"Given the division's high operational gearing, headline operating profit and margins improved significantly as a result of the higher volumes. The outlook for the full year remains positive driven by the aerospace order book and the improving trend for US housing," it said.

Net debt at November 3rd was slightly higher at £802m.

The share price rose 0.19% to 1,041p by 15:00.

NR

Recommended

Share tips of the week - 12 August
Share tips

Share tips of the week - 12 August

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
12 Aug 2022
Britain’s ten most-hated shares – w/e 9 August
Stocks and shares

Britain’s ten most-hated shares – w/e 9 August

Rupert Hargreaves looks at Britain's ten most-hated shares, and what short-sellers are looking at now.
10 Aug 2022
Aviva: One for income investors to tuck away
Share tips

Aviva: One for income investors to tuck away

Insurance giant Aviva is one of the highest yielding stocks in the FTSE 100 – and it’s cheap, too, making it a tempting target for income investors. R…
10 Aug 2022
Director dealings w/e 5 August: what company insiders are buying and selling
Stocks and shares

Director dealings w/e 5 August: what company insiders are buying and selling

Directors’ share dealings can often give investors an insight into the sentiment of company insiders. Here are some of the biggest deals by company di…
9 Aug 2022

Most Popular

Don’t listen to the doom-mongers – the future is bright
Economy

Don’t listen to the doom-mongers – the future is bright

With volatile markets, raging inflation and industrial unrest, it may feel like things are bad and likely to get worse. But the end of the world is no…
15 Aug 2022
Are UK house prices set to fall? It’s not so simple
House prices

Are UK house prices set to fall? It’s not so simple

Figures suggest UK house prices are starting to slide, but we shouldn’t take these numbers at face value, explains Rupert Hargreaves.
11 Aug 2022
How solar panels could lower your energy bill
Energy

How solar panels could lower your energy bill

Solar-panel installation firms are reporting a four-fold increase in orders this year compared with 2021. Ruth Jackson-Kirby explains how solar can he…
14 Aug 2022