Smiths Group faces government spending headwinds

Medical devices and airport scanners maker Smiths Group says sales have been strong at its engineering unit John Clare, but revenues have been hit in the divisions exposed to government budget cuts.

For the half year to the end of January headline revenues increased by 3%, or £43m, to £1,415m, almost bang on the number forecast by analysts at Credit Suisse. Underlying sales grew 1%, or £13m.

Operating profit also came in ahead of Credit Suisse's expectations at £244m, compared to a Credit Suisse forecast of £239m.

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The increase in revenues was driven primarily by growth at John Crane (up £55m), and Flex-Tek (up £2m) but suffered from declines at Smiths Detection (down £28m), Smiths Interconnect (down £11m) and Smiths Medical (down £5m).

Smiths has boosted the interim dividend by 4% to 11.75p per share.

Commenting on the results, Chief Executive Philip Bowman described performance at Smiths Detection and Interconnect as "disappointing". He added: "Remediation in Smiths Detection is on track, although the benefits will be weighted to the second half. Elsewhere, John Crane continues to report strong growth driven by investment in oil and gas infrastructure. Performance at Flex-Tek was encouraging and Smiths Medical has been resilient against a tough trading backdrop."

The market seemed unimpressed with the results; Smiths' shares dropped 2% at the open.

BS