18th Mar 2015 07:37
LONDON (Alliance News) - Smiths Group PLC Wednesday reported a slight drop in pretax profit in the first half of its financial year, as the strength of the pound weighed on translated overseas revenue and its detection business continued to struglle, but the company expects to report an improved performance excluding foreign exchange movements in the second half of the year.
The engineering company, which has divisions for threat and contraband detection, medical devices, energy, communications and engineered components, reported a pretax profit of GBP131 million for the six months to January 31, down from GBP132 million a year earlier, as revenue slipped to GBP1.42 billion from GBP1.44 billion due to the strength of sterling.
Headline pretax profit, the company's preferred measure as it is on a continuing basis and strips out exceptional items, goodwill impairments, pensions charges and any gains or losses from currency hedging, fell to GBP208 million, from GBP215 million.
Smiths said its revenue for the half would have risen 1% if exchange rates had remained stable, with the increase driven by its medical, Flex-Tek and John Crane units. It also reported strong growth for the medical unit, which it said reflected recent investments in infusion pumps. Its struggling detection business, meanwhile, started stabilising although revenue in this unit was still down 5%.
However, its overall headline operating margin fell to 16.4% from 17.0% due to pressure in the detection and Interconnect businesses.
Smiths said it expects an improved headline performance excluding any exchange rate move hit in the second half of the financial year, although the outlook for its various divisions is mixed.
"Smiths Detection will benefit from a prior year comparator affected by one-off charges. John Crane is expected to see a slight easing in trading as upstream customers adjust their expenditure to the lower oil price and as some projects may be deferred. The growth rate at Smiths Medical will slow versus the strong first half performance. Seasonality will bias performance at Smiths Interconnect to the second half but trading in the second half will remain below last year's levels. Flex-Tek should continue to perform well," it said, adding that it'll continue driving through operational improvements.
Despite the profit drop, the company reported strong headline operating cash conversion of 88%. Fress cash flow rose to GBP58 million, from GBP30 million a year earlier. Return on capital employed, however, dropped to 15.4%, from 16.6%.
It raised its interim dividend to 13.00 pence, from 12.75p a year earlier, which it said reflected the strong cash conversion.
Smiths Group also said Rob White will be interim chief financial officer from April 25 if no permanent successor to Peter Turner is found in the meantime. It said its executive search for that successor is well underway. White has been vice president of global finance at Smiths Medical.
The company had said last October that Turner would step down on April 24.
By Steve McGrath; [email protected]; @stevemcgrath1
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Smiths Group