Smiths Group shares fall on missed forecast

Smiths Medical parent company Smiths Group (LON:SMIN) saw shares fall more than 5% today after reporting a fall in underlying full-year revenue due to weaknesses in its medical device unit and energy equipment and service businesses.

The fall made the company the worst performer on the London Stock Exchange’s FTSE 100 Index today.

Smiths Medical was faced with delays in its new product releases, seeing revenues decline 3% for the year at $1.28 billion (GBP £951 million), while analysts on Wall Street expected to see revenues of $1.3 billion (GBP £962 million).

Overall, the company’s revenue grew 11% to $4.44 billion (GBP £3.28 billion) over the prior year, which was aided by a weaker pound as it sells internationally.

“Smiths has made good progress this year as we continue to execute our strategy for sustainable growth. We are well underway in repositioning the business through organic and inorganic investment with approximately 75% of the Group now well positioned in attractive markets. The disposal of four non-core businesses and the acquisition of Morpho Detection has supported the significant upgrading of the portfolio as we increasingly focus on scalable, technology-differentiated leadership positions in our chosen markets. Underlying revenue was broadly in line with the prior year, with growth across the portfolio offset by John Crane’s oil & gas business and in Smiths Medical due to market challenges in John Crane and a delay in some new product launches in Smiths Medical. The underlying quality of our businesses and the increasing impact of the Smiths Excellence System supported a strong operating profit performance. We delivered margin expansion in all divisions while making increased, smarter investment in R&D and innovation. This has delivered a strong pipeline of new products due to be launched in FY2018 and beyond. Our relentless focus on operational efficiency and cash generation is delivering results with significant reductions in working capital and strong cash conversion supporting continued investment for growth. The progress delivered in executing our strategy ensures that we’re well positioned for the Group to return to growth in FY2018. As in previous years, we expect Group performance to be weighted towards the second half. Growth in John Crane’s non-oil & gas business, as well as an increase in aftermarket is expected to more than offset the challenging market conditions in oil & gas. We expect the introduction of new products during the year to support a gradual improvement in Smiths Medical. In Smiths Detection we anticipate a strong second half driven by air transportation, which should generate good growth for the year as a whole. In Smiths Interconnect, our focus on fewer, higher-growth end markets is anticipated to support further good progress in this division. Flex-Tek is expected to deliver continued steady growth. We’re confident that our focus on attractive growth markets, increasing investment in technology and new products, our established operating model for excellence and strong financial framework will deliver long-term sustainable growth and attractive returns,” CEO Andy Smith said in a prepared statement.

Material from Reuters was used in this report.

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