Smiths Group's first-half performance beats expectations

Firm's medical division makes up for a poor performance from its John Crane business

British engineering company Smiths Group posted a better-than-expected first-half performance, as growth in its medical division made up for a poor performance from its John Crane energy unit.

The company, which makes industrial seals, medical devices and security detectors, posted a 9% fall in pre-tax profit to £189 million for the six months ended 31 January.

Meanwhile, group revenue fell 3% to £1.37 billion.

Revenue at John Crane, which makes mechanical seals, fell 13% to £393 million, hurt by lower demand from oil and gas clients. However, revenue at Smiths Medical, which supplies medical devices to healthcare providers around the world, was up 1% at £411 million.

Andy Reynolds Smith, chief executive, said: “From a trading perspective, this is a solid set of results. Group performance in the first six months of the year demonstrated the benefits of our range of end market exposures. As expected, John Crane was down in the first half, in persistently tough oil and gas end markets, but we benefited from growth in profits at Smiths Medical and Smiths Detection. Good progress has been made to improve Smiths Detection's competitive positioning through initiatives on value engineering, programme management and aftermarket servicing, which are clearly having a positive impact on the bottom line. Against a tough prior year comparator, Smiths Medical delivered another strong performance as it benefited from consumables sales for its expanded installed base of infusion pumps. Performance at Smiths Interconnect and Flex-Tek was in line with expectations.

"As previously stated, Group performance is anticipated to be slightly more weighted to the second half than usual.  We expect global energy markets to remain challenging in the second half of the year, and are taking action to ensure that John Crane remains well positioned in an uncertain environment. I expect Smiths Medical to deliver a similar revenue performance in the second half, driven by growth in Infusion Systems and Vital Care. Smiths Medical's margins should benefit further from the effect of operational efficiencies and restructuring actions. Smiths Detection's strong order book underpins anticipated higher levels of sales growth in the second half, although the margins seen in the first half will moderate somewhat given contract mix and investment in new business capabilities. Our expectations for the full year remain unchanged," Reynolds Smith added.