Interim Management Statement

RNS Number : 5147F

Smiths Group PLC

24 May 2013

 

 

News Release

London, 24 May 2013

For immediate release

SMITHS GROUP PLC INTERIM MANAGEMENT STATEMENT

In the nine months to 4 May 2013, Smiths Group grew underlying revenue across all divisions.  Underlying headline operating profit was also ahead of the same period last year.  Headline operating margin improved in all divisions except Smiths Medical which invested substantially more in sales and marketing in higher growth markets and incurred additional expense from the US medical device tax.  Overall, expectations for the year remain in line with the outlook given at the interim results in March, albeit with a slightly different mix by division.

John Crane delivered sustained underlying revenue growth in the first nine months, with flat revenues to first-fit OEM customers and continued growth in the aftermarket.  Headline operating margin rose as a result of productivity gains and favourable price/mix, while investing in growth drivers such as new product development.  The order book is ahead of last year with a positive book-to-bill ratio. As a result, the outlook has improved and we now expect second half sales to be ahead of the same period last year.  Headline operating margins should benefit from on-going productivity efforts, better mix and pricing, despite investing in growth opportunities.

Smiths Medical sustained underlying revenue growth from the first half into the third quarter, driven by both single-use consumables and hardware sales.  Around half of the growth came from emerging markets, reflecting increased investment in sales and marketing in these high growth regions.  As expected, headline operating profit in the first nine months lags the prior year as a result of the additional investment in emerging markets made over the past year.  In addition, the introduction of the US medical device tax in January also affected profitability.  Looking to the full year, revenue growth is expected to continue, driven by emerging markets and new products.  Operating margins will reduce compared with the prior year as a result of the device tax and increased investment.  We are partially offsetting this through operational improvements.

Smiths Detection grew both underlying revenue and headline operating profit in the first nine months.  We continue to make progress in restructuring the manufacturing footprint and generating operational improvements.  Headline operating margin, although ahead of last year, has been affected by changes in contract mix.  This was caused by a shift in the anticipated timing of certain contracts, reflecting pressures on government spend and delays to airport infrastructure programmes.  These contract delays are expected to result in second half sales below the strong level achieved last year.  Headline operating margins for the full year are expected to be at a similar level to last year.  This reflects the shorter term impacts of contract mix and initial under-recovery of overheads at the new manufacturing sites.

Smiths Interconnect delivered underlying growth in revenue and headline operating margin against a weak comparator period. Revenue rose across all business units: Connectors, Microwave and Power, although the power markets remain relatively weak.  The outlook for the final quarter remains challenging, given the strong comparator period and there continues to be uncertainty in several end markets, particularly with on-going weakness in Europe and the risk of US defence budget cuts.

Flex-Tek has made good progress growing underlying revenue through a strong performance in aerospace and US residential construction.  Helped by the division's high operational gearing, headline operating profit and margins improved as a result of the higher volumes.  The outlook for the full year remains positive driven by the aerospace order book and US housing, despite the demanding comparator period.

The headline effective tax rate for the full year is expected to be slightly below the rate reported at the half year.  At 4 May, net debt was £891m, up from £855m at 31 January, reflecting the interim dividend payment and adverse foreign exchange translation.

ENDS

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.

Investor Relations

Peter Durman: [phone]

Media Relations

Colin McSeveny: [phone];  Anthony Cardew - Cardew Group: [phone]

Smiths Group

Smiths is a global technology company listed on the London Stock Exchange (SMIN) and operates a sponsored level one ADR programme (SMGZY). A world leader in the practical application of advanced technologies, Smiths Group delivers products and services for the threat & contraband detection, medical devices, energy and communications markets worldwide. Our products and services make the world safer, healthier and more productive. Smiths Group employs around 23,000 people in over 50 countries. For more information visit www.smiths.com

 

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