Smiths shares fall on revenue miss

Shares in Smiths Group shed 5% this morning after the engineer disappointed sales expectations.

Revenues rose 11% over the year ended July 2017 to £3.28bn, though were behind analysts´ forecasts of £3.30bn.

Oil price weakness hurt demand for oil and gas related services at its John Crane division. There was also a negative impact from delayed product launches at its Smiths Medical unit.

John Crane

Underlying revenue from the John Crane business declined 4% over the year while sales from Smiths Medical were down 3%.

Challenging conditions in the energy sector saw oil and gas sales from its John Crane business decline by 7%.

However, Smiths claimed the unit continued to expand into non-oil and gas industries, which now make up around 45% of the division´s business. Overall, John Crane accounts for 27% of group revenue.

Medical

Smiths said the decline at its medical unit, which accounts for 29% of group revenue was due to weaker performances in Infusion Systems and Vascular Access, where it claims to be in the process of revamping its product offerings.

The segment reported a fall in sales of hospital hardware categories as well as lower-than-expected take up of certain products targeted for home use.

Detection

Headline sales from Smiths´ detection unit, which manufactures security sensors, increased by around 30% to £687m, largely reflecting the integration of Morpho Detection, an acquisition that was completed earlier this year.

On an underlying basis, revenue from the detection segment, which makes up around 21% of group revenue, rose 4%.

Morpho boost

The positive impact from the acquisition of Morpho Detection and foreign currency gains, with the latter spurred by Brexit-related sterling weakness, saw operating profit rise 16% on a reported basis to £589m.

Outstripping these favourable impacts, underlying operating profit was up by just 3%. Smiths proposed a final dividend of 29.70 pence per share, a 3% rise on the year.

As well as acquiring Morpho Detection, Smiths also made four disposals during the year of what it terms has “non-core” businesses.

“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,” said Andy Reynolds Smith, chief executive.