19th Nov 2013 11:09
LONDON (Alliance News) - Smiths Group PLC Tuesday warned that its outlook has deteriorated somewhat as exchange rates have gone against it and its medical unit continues to struggle, although revenues and profits have grown in the fiscal first quarter as improvements at its detection, John Crane and Flex-Tek units more than offset weakness in its medical and Interconnect units.
In a trading update, the company said "expectations for the year remain broadly in line with the outlook given at the full year results, although foreign exchange translation is expected to be a headwind at current rates and sales to government-funded customers remain a risk."
It said energy services business John Crane has delivered modest operating profit growth in the first quarter of the current financial year, even though revenues were flat on last year. However, it's order book is up, so the full-year outlook for the unit remains unchanged.
The medical unit saw underlying revenue decline due to lower demand for single-use products in the first quarter, while profits at the unit were hit by a US medical device tax and continued tough trading in developed markets. It said the full-year performance is expected to be below last year for the same reasons. In September, the company has said it had hoped tom offset margin pressure from the US tax hit by cutting costs and selling more of its most profitable products.
The detection unit delivered strong underlying revenue and operating profit growth in the quarter, although Smiths is still cautious about the revenue outlook because the order book is still slightly below this time last year.
Electronic components unit Interconnect has experienced a fall in revenues and operating profit in the first quarter thanks to slowing demand from defence customers and continued weakness in Europe. However, it expects the business to pickup in the second half as improved trading in some markets offsets the reduced defence demand and leads to modest overall growth.
Fluid and gas engineering unit Flex-Tek was buoyed by a recovery in US residential construction in the first quarter, and the full-year outlook remains positive thanks to demand from aerospace and Us housing markets.
"In the three months to 2 November 2013, overall trading at Smiths Group has been in line with expectations. Revenue and headline operating profit have both grown on an underlying and reported basis," it said in a statement.
Still, Smiths Group shares were down 2.5% at 1,397 pence Tuesday morning, the fourth-biggest faller on the FTSE100.
By Steve McGrath; [email protected]; @stevemcgrath1
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