At reported exchange rates, trading for the first nine months is in line with management’s expectations, following a strong performance from Detection and Specialty Engineering which offset a flat performance in Medical. Currency translation has had a small positive impact on overall Group profit, benefiting Detection and Specialty Engineering, with an adverse impact on Medical.
Smiths Detection has continued to deliver sales and profit growth driven by contract wins across its broad customer base, most notably in its transportation, ports & borders and military businesses. As indicated at the interim results, profit margin in the period has been held back as a result of our investment in additional manufacturing capacity to support customer demand for new products, and by the adverse effect of currency transaction where the full year impact on profit is anticipated to be approximately £7m. In line with guidance at the half year, the size of contracts in Detection has increased which is changing the operating profile of the business and has raised its working capital requirements.
At reported exchange rates, Smiths Medical’s sales and profit are in line with last year. This performance reflects the impact of the previously announced supply chain issues and the three product recalls. There has also been an adverse currency impact on profit translation. The 24-month performance improvement programme will address the supply chain issues and complete the implementation of an ERP system. The programme has begun to deliver improvements and the level of unfulfilled orders has continued to reduce since the half year.
Specialty Engineering has performed well with good growth in sales and profit.
- John Crane has benefited from the high levels of investment by the petrochemical industry. The integration of Indufil and Fiberod into John Crane’s global sales and service network is underway and both are trading ahead of their performance in the same period last year.
- Interconnect has delivered strong growth driven by sales to support satellite communications for the military as well as sales of lightning and surge-protection equipment to wireless broadband providers. Interconnect will also benefit from the acquisition of Allrizon Tongguang announced in May. This Chinese firm designs and manufactures radio frequency filters and related products for the wireless telecommunications infrastructure market.
- Flex-Tek’s sales of components to the military and commercial aircraft industry have shown continued growth which has helped to offset the impact of the slowdown in US housing and the household appliance market.
Since the half year, net debt has increased by £155m to £830m at 3 May 2008, reflecting the acquisitions and payment of the interim dividend. We anticipate that net debt will be around £750m at the year end, in line with previous guidance.
Looking to the full year, we anticipate that the trends set out above will continue and we remain confident of meeting expectations.
This press release contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of the press release and the Company undertakes no obligation to update these forward-looking statements. Nothing in this press release should be construed as a profit forecast.