Smiths Group share price: Final results out

on Sep 17, 2014
Listen, Wednesday, September 17: Smiths Group Plc (LON:SMIN) today released its full-year results for the twelve months ended July 31. Key information from the report provided below, with more to follow:

· Commercial market gains but challenging healthcare and homeland security markets
· John Crane, Smiths Interconnect and Flex-Tek increased underlying revenue and margins
· Smiths Medical returned to growth in H2 with improvement in infusion pumps
· Smiths Detection margins under pressure with tough trading and additional charges

· Fuel for Growth restructuring programme delivered £10m of savings
· FX impact of £43m on operating profit: translation of £27m and transaction of £16m
· Company-funded investment in new products up 5% underlying to £109m
· Headline operating cash conversion at 97%; dividend up 2%

“Underlying revenue and margins rose in John Crane, Smiths Interconnect and Flex-Tek but were offset by declines in Smiths Medical and Smiths Detection. Smiths Medical saw revenue grow in the second half driven by good growth in its infusion franchise. Smiths Detection’s performance was disappointing with a difficult trading environment and one-off charges of £30m in the year. Our overall results were significantly reduced by foreign exchange headwinds.

“Our strategy remains to accelerate medium-term growth and reposition the business through consistent investment in product innovation, sales effectiveness, and expansion in higher growth markets. This investment is funded by our Fuel for Growth programme, scheduled to generate £60m of annual savings by 2017 with initiatives underway across all divisions.

“Looking ahead, we remain well-placed to benefit from growth in energy demand, the need for new fuel-efficient aircraft, increased US residential construction and investment in wireless networks. However, we remain cautious about sectors such as healthcare, homeland security and defence, which are subject to government funding constraints, although there are signs that the defence market is beginning to stabilise.”

Divisional highlights
John Crane
· Revenue up 2% driven by both original equipment and aftermarket sales, particularly in oil and gas
· Excluding upstream energy services, revenue grew 4% on an underlying basis
· Margins improved 150 basis points to 24.9%, a new high; while new product investment rose 13%
· Well-positioned for future growth supported by a record order book
Smiths Medical
· Revenue down 1% driven by price pressure – particularly affecting consumables; return to revenue growth in H2
· Developed markets continued to be hit by constrained hospital budgets, slow procedure rates and adverse pricing
· Margins fell 240 basis points driven by adverse FX transaction, price pressure and US medical device tax
· Developed markets remain challenging; cost savings will largely be reinvested for growth initiatives
Smiths Detection
· Revenue down 5% against a strong comparator – weakness in transportation, ports & borders and military
· Margins reduced by working capital adjustments, adverse price/mix, additional programme costs and other charges
· New leadership is restructuring business and improving programme delivery capabilities
· Order book in line with last year; margins should improve against a weak comparator
Smiths Interconnect
· Revenue up 1% with a return to growth in H2 on strong demand from microwave customers
· Margins up 110 basis points reflecting productivity gains and better volumes
· Underlying investment in new products increased 5% while emerging market sales grew 15%
· Commercial markets are expected to see continued growth with defence stabilising
· Revenue up 3% driven primarily by US residential construction and heat solutions
· Improved volumes, mix and pricing helped push profit up 14% and margins up 180 basis points
· Aerospace and US construction sectors expected to support continued sales growth
· Margins geared to volume improvements across Flex-Tek’s end markets


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