23 September 2008

Smiths reports strong growth in sales and profit

Preliminary results for the year ended 31 July 2008

£m

Headline*

 

 

Statutory

Continuing activities

2008

2007

growth

**under-
lying

2008

2007

Sales

2,321

2,161

7%

6%

2,321

2,161

Operating profit

381

348

10%

6%

326

257

Operating margin

16.4%

16.1%

-

-

14.0%

11.9%

Pre-tax profit

380

344

10%

8%

319

256

Basic EPS (p)

74.5

47.0

 

 

63.0

36.9

Dividend

34.0p

34.0p

 

 

34.0p

34.0p

* In addition to statutory reporting, Smiths Group reports its continuing operations on a headline basis. Headline profit is before exceptional items (incl. impairment of assets and income and expenditure relating to John Crane litigation), amortisation of acquired intangible assets, profit/loss on disposal of businesses and financing gains/losses from currency hedging. ** Organic growth at constant currency.

Philip Bowman, Smiths Group Chief Executive, said:
"We have delivered strong sales and profit growth driven by good performances from John Crane, Smiths Detection and Smiths Interconnect.  A performance improvement programme is underway to address the operational issues that have held back Smiths Medical over the past two years.

"The portfolio has been strengthened through one divestment and seven acquisitions which bring new technologies and extend Smiths geographic footprint - particularly in developing markets.

"Our focus is on top-line growth and margin enhancement while there are significant opportunities to improve performance and generate value across the Group. We have begun a substantial restructuring programme that will deliver operating efficiencies and improve customer service. The scale of the opportunities is demonstrated by the new divisional targets set out here for the first time.

"The sustained upheaval in the world economy is creating uncertainty in many markets and may disrupt government spending patterns - particularly in the US and India where there are forthcoming elections. However, Smiths Group is well placed among global businesses to meet these challenges."

  • KEY ACHIEVEMENTS*
    Group sales up 6% to £2,321; headline operating profit up 6% to £381m
  • Reorganised into five divisions with disbanding of Specialty Engineering
  • Divisional restructuring programmes underway to reduce costs and improve customer service
  • Rationalisation of corporate HQ to reduce cost and increase divisional focus on delivering returns
  • Target ranges for sales growth and margins established for each of the divisions
  • New incentive plans introduced to reinforce performance improvement and delivery
  • Strengthened portfolio mix through seven acquisitions in John Crane, Interconnect and Flex-Tek
  • Increased R&D investment up 8% to £86m

BUSINESS HIGHLIGHTS*

  • Smiths Detection: Sales up 12% and headline operating profit up 2%
    • Strong sales of checkpoint explosive detection systems to UK and US customers
    • Customs and border cargo screening continues to grow
    • Roll-out of joint chemical agent detector (JCAD) to the US military
    • Margins adversely affected by currency transaction (£9m)
  • John Crane:  Sales up 8% and headline operating profit up 12%
    • Growth driven by high demand from the petrochemical sector
    • Beginning to benefit from recent acquisitions: Sartorius, Indufil, Fiberod and Japan JV
    • Major restructuring underway with the formation of a global John Crane business
  • Smiths Medical: Sales flat and headline operating profit up 2%
    • Operational improvements have reduced customer backorders by 90%
    • 24-month performance improvement programme underway
    • R&D up 6%: several new product launches
  • Smiths Interconnect: Good growth in sales and profit
    • Strong sales of lightning and surge protection equipment for 4G wireless broadband
    • Good progress on several programmes with the US military
    • Connectors group win several new contracts in military, medical, aerospace and rail sectors
  • Flex-Tek: Showing resilience in the face of challenging markets
    • Growth in sales of components to the aircraft industry has helped offset the slowdown in US housing and the household appliance market
    • Established new manufacturing facilities in China, India and the Philippines

 

Figures are at constant currency and exclude the impact of acquisitions and disposals. 

ENDS

You can click here to view the full press release.

The presentation slides and a live webcast of the presentation to analysts is available at www.smiths.com/results at 09.00 (UK time) on Wednesday 24 September. A recording of the webcast is available later that day.  A live audio broadcast of the presentation is also available by dialling:

UK:    0800 358 7034
International:    +44 (0)20 8609 1270
US/Canada:    1 703 621 9128