Smiths Group is a ‘buy’ for The Share Centre despite mixed results

23rd September 2015


As Smiths Group reports full year results this morning, Helal Miah, investment research analyst at The Share Centre, explains what it means for investors…

General industrials company Smiths Group reported revenues down by 2% to £2,897m in full year results this morning. Contrastingly, operating profits rose by 1% and were in-line with market expectations.

There were resilient numbers from the John Crane division of the business, where revenues fell by 2% despite the harsh conditions in the oil and gas industry. The Smiths Medical division grew sales by 4% helped by innovative products and disruptions with competitors.

The group’s Flex-Tek business, an engineering components provider, continued to benefit from the strong US housing and construction market.

However, it is worth noting that the Smiths Detection and Interconnect businesses continued to face tough trading conditions. Current investors will be pleased with Smiths’ Fuel for Growth restructuring programme, as it has delivered £33m of cost savings and an operating margin improvement, while the group’s pension deficit fell to £108m.

While individual divisions have their problems, we believe the diversified nature of Smiths Group should help the business ride through the expected tough conditions over the next year as global growth looks shakier.

For investors we continue with our medium risk ‘buy’ recommendation, particularly for those looking for a balanced return.

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