24 Sep 04. Smiths Group Plc (London:SMIN.L – News) met forecasts with a two percent profit rise on Wednesday but concerns over a lukewarm outlook and a civil aerospace downturn hit its shares.
Underlying operating profit for continued business, which excludes disposals, was £372m($615.6m) for the year to the end of July, towards the upper end of the range of forecasts of £364 to £375m.
Smiths has been selling non-core assets since it began a major restructuring after it acquired the TI Group three years ago to focus on its aerospace, detection devices and medical equipment divisions, which now represent 70 percent of profits.
“In the current year, the company is confident it can achieve a steady performance from the continuing activities, with reduced profits from commercial aerospace balanced by gains elsewhere,” the company said in a statement. It saw no significant recovery in commercial aerospace until 2006.
The company also said it did not yet have a specific exposure to the lawsuits filed against companies, ranging from airlines, security-equipment makers to landlords, regarding the September 11, 2001 suicide plane attacks on U.S. cities.
“We’ve had nothing specific to the company at this point in time,” Chief Executive Keith Butler-Wheelhouse told reporters. Bank of America Securities (News – Websites) analyst Rob Stallard said the results and trading performance were in line with market expectations and separating the detection business out of aerospace provided a clearer picture of its performance.
“It had a cracking margin last year but it’s worth saying that it’s likely to come down this year,” said Stallard, referring to the 3,000 Ionscan explosive detectors supplied to the U.S. Transportation Security Agency in the first-half.
Total sales dipped to £3.1bn, but for continued business, sales edged a touch higher to £2.63bn. Smiths also proposed a final dividend of 17.25 pence per share, taking the total dividend to 26 pence, up two percent and the 33rd consecutive year it has increased its annual dividend. Smiths said its debt would fall below £250m after completing the Polymer Seals disposal, leaving room to target acquisitions in detection, medical and aerospace.
“We are working on projects in each of them”, said Butler-Wheelhouse, adding that it would have up to £1.5bn to spend but it would not be used on “one big hit”.