Smiths Group Share Price Up On Special Dividend

London-based Smiths Group plc (LON:SMIN) yesterday saw its share price climb following announcement of a special dividend. The group reported an increase in full-year profit and plans to reduce costs.

Smiths Group, which started life in 1851 as a watchmaker but now makes industrial seals, medical devices and detectors of explosives and weapons, yesterday released its financial results for the fiscal year ended July 31.

The FTSE 100-listed company posted profit before tax of £441.8 million, 20 percent higher than the £365.9 million recorded in the previous year. Adjusting for last year’s hefty exceptional charges, such as £44 million relating to asbestos litigation at its John Crane seals division, pre-tax profit was relatively flat at £498 million.

Annual revenues grew two percent to £3.11 billion from £3.03 billion in the preceding year, mainly driven by strong growth in Smiths’ John Crane business, which makes mechanical seals, power transmission couplings and filtration systems.

The unit’s performance offset underlying revenue falls in the company’s medical unit, with underlying profit at Smiths Medical – a provider of devices for hospitals and the emergency services – down seven percent year on year to £189 million, which the group blamed in part on the introduction of a US tax on medical devices.

Group CEO Philip Bowman said in a statement yesterday: "Headline margins were affected by the increased investment in future growth drivers across the group, contract challenges in Smiths Detection, and the introduction of the US medical device tax in Smiths Medical."

Shareholders in Smiths Group are in line for a £118 million dividend distribution, with the tech company announcing that it would pay a special dividend of 30 pence per share. This will bring the full-year dividend to 39.5 pence, up four percent from the prior fiscal year.

The group also announced that it will undertake restructuring initiatives across all divisions to fund growth and enhance margins.

Savings of £50 million a year will be achieved through measures calling for an initial three-year investment of £100 million, including the streamlining of manufacturing and reducing the number of management layers. The group will also continue to be receptive to approaches for its business units,

Bowman said during a conference call yesterday. The CEO declined to confirm whether the cost-cutting programme would include axing jobs, but said that further details would be released next year.