25 Mar 09. The strength of the US dollar helped Smiths Group defy the gloom in the manufacturing sector as it reported interim operating profits up 17 per cent on Wednesday. But Philip Bowman, chief executive of the engineering conglomerate, admitted the group had not been immune to the deteriorating economic conditions. He said he was considering further cost-cutting measures, in addition to the restructuring plan, announced last September, to deliver £47m of annual cost savings within three years. “We are looking at other areas where we can take out costs,” he said, highlighting procurement as one likely area. Mr Bowman’s comments came as Smiths unveiled headline operating profits for the six months to the end of January, before exceptional items and gains from currency translation, up £27m to £185m. Headline sales were up 19 per cent to £1.29bn. On an underlying basis, which excluded the effects of currency translation and acquisitions and disposals, sales fell by £35m or 3 per cent. Statutory pre-tax profits were down from £165.4m to £135.2m. Free cash flow for the period was up from £26m to £104m.
The best performer was the mechanical seals division John Crane which services the petrochemicals industry. The division saw underlying sales growth, which excluded benefits from currency translation and acquisitions, of 6 per cent or £19m for the period. Other divisions fared less well. At Detection, which specialises in X-ray screening, sales declined 11 per cent or £28m on an underlying basis, reflecting the increasingly variable nature of the order flow from what are mainly government customers. Smiths Medical, which has been grappling with supply chain problems, saw sales decline 3 per cent or £1m as the economic downturn impacted hospital equipment budgets. A product portfolio is under review to improve the division’s profitability and the group recently decided to discontinue the diabetes business. Sales at Flex-Tek were adversely affected by the deepening recession in the US housing market. Mr Bowman said despite the tough trading environment the group was continuing to focus on delivering the restructuring plan announced last September. As part of the plan Mr Bowman had set divisional sales and margin targets for the first time. On Wednesday he said although he remained confident of meeting these in the longer-term, given the current economic environment, “we won’t do it in the short-term”. His biggest concern at the moment, he said, was the “lack of visibility over what will happen to the economies around the world”. (Source: FT.com)
23 Mar 09. The US invasion and occupation of Iraq may not have been popular in the Arab world, but it was the making of Agility, previously a small logistics company based in Kuwait. The year before the 2003 invasion, Agility had revenues of $79m. By 2006, after winning lucrative contracts to supply the US Army with food and logistics services, sales jumped to $3.4bn. “Their business before Iraq was mostly some warehousing and logistics, but then they got some major contracts from the US Army, which transformed the company,” says Kareem Murad, an analyst at Shuaa Capital. Tarek Sultan, Agility’s chairman and managing director, is reluctant to say the Iraqi war has benefited the company: “The invasion in 2003 was followed by a long and difficult conflict, one with heavy costs for everyone involved, including the companies that won contracts to provide services.” However, realising that US contracts will eventually end – its five-year $14bn prime vendor food contract runs out at the end of 2009 – Agility has spent recent years expanding across the world, both organically and through acquisitions. It is now Kuwait’s seventh-largest listed company, with annual revenues of $6bn and present in 120 mostly emerging market countries through its three main business lines: logistics, government and defence services, and warehousing and
investments. Its cyclical logistics and