Speaking at the AGM held at 12:00 noon today at 10 Aldermanbury, London EC2, Keith Orrell-Jones, Chairman of Smiths Group said:
"We announced our preliminary results only two weeks after September 11 during a time of great economic uncertainty. Now, two months after those events, some of the effects have become more evident. But there remains a lack of clear visibility about the future.
"Our experience has been that, in addition to the well-publicised consequences for the aerospace sector, the last eight weeks have seen a noticeable reduction in orders for a wide range of other products and services. This has been felt by parts of our Industrial and Sealing businesses, some of which have seen a 15% fall in orders on a year-on-year basis for that period.
"We indicated at the preliminary results meeting that the slowdown in civil aerospace would be sharper and deeper as a consequence of September 11. The aircraft manufacturers have kept us closely informed of their planned build rates, but uncertainty will persist until airline revenues and profitability regain some stability. As stated in the results presentation, our civil aerospace sales, representing less than 20% of group sales, will progressively decline through the current financial period and could drop by up to 40% in a full year.
"The company took a 72m exceptional charge in July 2001 for merger-related reorganisations now underway in Aerospace and Sealing Solutions. These involve a net reduction of 1,600 jobs and the transfer of 500 jobs from the US and the UK to lower cost countries. These and other predicted savings are on target. Following the recent changes to the business outlook, we shall be further downsizing, mainly in Aerospace, and an exceptional charge in the range of 40 - 50m will be incurred in the current year.
"Based on current expectations, we expect that the factors referred to above will result in first half operating profits in our continuing businesses showing a year-on-year decline of approximately 15 per cent. It is early days to comment on the outlook for the full year. But we do not expect to recover fully in the second half from the first half shortfall.
"However, the company's medical, defence and detection/protection businesses will continue to perform strongly in the present environment, and the restructuring measures we are taking are already having a significant impact on the cost base, the benefit from which will increase as the year progresses."