Smiths Group share price: Company targets £50 million of annual savings

Written by: Jane Tindall
October 21, 2019, Tuesday, December 17: London-based Smiths Group Plc (LON:SMIN) has announced that it is targeting about £50 million of annual savings in four years, with the next phase of the firm’s restructuring programme set to cost £100 million.

The medical devices to engineering services company said it will give full details of the restructuring programme when it reports its interim results next March. However, in a statement today ahead of a Capital Markets Day in Dubai, hosted by its John Crane business, Smiths Group revealed today that the energy services unit is expected to generate £14 million of the total £50 million savings at a cost of £28 million. The FTSE 100-listed company added that it plans to reinvest these savings in growth initiatives.

Smiths Group is targeting four to six percent revenue growth at John Crane over the medium-term and a headline operating margin in the range of 22 to 25 percent.
“The growth rate is expected to improve over time as the initiatives gain traction, assuming no discontinuities in the market growth drivers,” Smiths Group said in the statement.
John Crane made revenues of £986 million in fiscal 2013, up from £973 million in 2012 and £894 million in 2011. Its headline operating profit margin was 23.4 percent in 2013, up from 21.6 percent in 2012.

Smiths Group further remarked: “As the market leader in mechanical seals and with around 65 percent of revenues from the energy sector, John Crane is well placed to grow and support top quartile margins while increasing investment in growth opportunities.”
***No trading update in sight***
The engineering company noted that there would be no update on current trading beyond its latest Interim Management Statement, when Smiths said overall trading in the three months to November 2 was in line with management expectations, and annual targets remained unchanged.

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According to this latest update, the Smiths’ revenue and headline operating profit have both grown on an underlying and reported basis. Headline operating profit improvements in Smith’s Detection, John Crane and Flex-Tek divisions more than offset some weakness in Medical and Interconnect. The engineering firm warned however that foreign exchange translation is expected to be a headwind at current rates and sales to government-funded customers remain a risk.

***Smiths Group share price edges lower***
Smiths’ shares have fallen 0.57 percent so far today. Since the beginning of the year, however, the stock has gained almost 17 percent.
According to AnalystRatingsNetwork data, five research analysts have a ‘sell’ rating on Smiths Group, 10 have it as a ‘hold’ and nine call it a ‘buy’. The stock’s average rating is ‘hold’ with a consensus price target of 1,348.33p.
**As of 13:27 UTC, buy Smiths Group shares at 1,389.00p.**
**As of 13:27 UTC, sell Smiths Group shares at 1,388.00p.**
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