Smiths Group has today launched a fund raising to pre-refinance 2010 debt maturities, to extend the maturity profile of debt further and to reduce its exposure to bank financing. To support this process, the Board has accelerated the publication of the following Interim Management Statement.
Group trading for the nine months to 2 May has continued ahead of last year at reported exchange rates, benefiting from acquisitions and currency translation. Restructuring initiatives begun last year are delivering cost savings and operational improvements in line with our plans. As a result, the Group’s corporate costs are below those of last year. The programme to improve the Group’s information systems is also on track.
Overall, Smiths Group remains well placed to address the prevailing uncertainties facing the world economy. On a reported basis, including the benefit of currency translation and acquisitions, the Board expects the Company to meet expectations for the current year. On an underlying basis, John Crane delivered strong organic sales and profit growth with particular strength in the petrochemical industry. The major restructuring initiatives are on schedule and delivering savings in line with our plans. However, the order book has softened since January and is now slightly below the prior period.
As previously indicated in Smiths Detection, there are continued delays and uncertainty in the timing of contracts and tender activities, particularly in the ports and borders area and in airport equipment outside the USA. As a result, underlying performance after nine months is below that of the prior period which benefited from some large contract wins. New business enquiries and tender activity remain high although the timing of these contracts may affect the full year performance.
Smiths Medical maintains good progress in driving operational improvements and cost savings. However, the pressure on hardware sales from reduced hospital budgets continues to affect underlying sales. The SKU rationalisation programme announced in March is proceeding well. As previously guided, the exit from the diabetes pump market will have an anticipated impact on sales of around £7m in the second half.
Smiths Interconnect continues to benefit from involvement in several large, long-term military communications programmes which have shown good growth. However, sales of components to wireless and other industrial customers are behind the same period last year. As a result, underlying trading is behind last year. Interconnect continues to benefit from its recent acquisitions and currency translation which will support growth at reported exchange rates.
The housing, appliance and industrial markets served by Flex-Tek remain challenging, although sales of components and servicing to the aircraft industry have held up well. While Flex-Tek is benefiting from targeted price increases and cost savings, lower volumes are putting some pressure on margins.
At current exchange rates, we anticipate that net debt at the year end will be around £1bn, in line with previous guidance, assuming the completion of the acquisition of Orion Corporation. The acquisition of Shenzen Dowin Lightning Technologies by Smiths Interconnect was completed on 24 April.
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.
The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) absent registration or an exemption from the registration requirements of the Securities Act. There will be no public offer of the securities in the United States.