Home Business News Smiths detecting growth as threats emerge

Smiths detecting growth as threats emerge

18
0


It is a brand name familiar with generations of Britons who, in their schooldays, saw it emblazoned across their classroom clock as they waited anxiously for the bell to go home.

Smiths Group also, famously, made a watch worn by Sir Edmund Hillary when he and Tenzing Norgay became the first people to climb Mount Everest in 1953.

The company supplied altimeters, clocks and pressure gauges to the expedition and an endorsement from Sir Edmund subsequently appeared in its advertisements: “I carried your watch to the summit. It worked perfectly.”
Smiths stopped making clocks and watches in the 1970s.
However, as in the days of its classroom clocks, its brand name is still seen by millions of Britons every day even though it may not necessarily register with them.
For it is one of the world’s biggest makers of detection equipment and its scanners are used at all of the country’s major airports.
That is only one of the activities carried out by this 166-year old UK engineering group, which employs more than 22,000 people worldwide, many of which are in the UK.
Smiths also owns John Crane, a supplier of couplings, mechanical seals and bearings to the oil and gas industry; Smiths Medical, which supplies medical pumps, syringes and catheters to hospitals around the world; Smiths Interconnect, which supplies interconnectors and microwave systems to communications technology firms like Raytheon and Huawei; and Flex-Tek, which makes hosing and tubing found in everything from tumble dryers to jumbo jets.

Image: Smiths is developing new products to deal with chemical warfare threats
Now the FTSE 100 stalwart, which celebrated the 100th anniversary of its stock market flotation three years ago, has provided an update on trading.
Full year sales rose by 11%, to £3.3bn, with pre-tax profits rising by 17% to £528m.
That performance is not quite as impressive as it looks because more than half of the company’s sales are made in the US and, accordingly, the numbers have been flattered by the weakness of the pound against the dollar.
On a constant currency basis – assuming no movement in sterling against the likes of the dollar and the euro – full-year sales were actually down by 1% while underlying operating profits were up by just 3%.
In fact, sales in both John Crane and Smiths Medical came in lower than analysts had been expecting, which is why the shares have fallen sharply.
The performance has rather overshadowed a stronger performance from Smiths Detection, where underlying sales rose by 4%, boosted by strong demand from airports in Europe, the Middle East and Africa.

So where next for the company?
Well, Andy Reynolds Smith, the chief executive, says the company is seeking to be more focused and yet growing at the same time.
His ambition is to make Smiths one of the world’s leading technology companies.
A number of businesses and activities have been offloaded during the last year, while Smiths Detection has been beefed up with the £493m acquisition of Morpho, a business specialising in the detection of explosives.
The company also won new contracts in this area, including one to assist the Canadian police in finding illegal drugs, while growth opportunities are strong.
As Mr Reynolds Smith said: “New products are being developed and introduced that are going to detect a broader range of chemical warfare threats.
“As you can imagine, these threats continue to evolve very rapidly.”
He says Smiths Detection is now a “best in class” operation.
Undoubtedly, detection and airport security are very exciting businesses, offering huge growth potential.
The bigger question for the longer term is whether Mr Reynolds Smith, who became chief executive two years ago, sees any advantage in breaking up Smiths.
This £6.34bn company is a conglomerate – it owns businesses spanning a number of seemingly unrelated activities.
Conglomerates largely went out of fashion with British investors around 20 years ago, although the business model still exists with American industrial giants, such as General Electric and United Technologies.
Smiths would not be unhappy if people came to look on it as a smaller version of those highly successful businesses and, especially, if it were one that became closely identified with technology – an activity that, traditionally, has commanded a higher valuation among investors than traditional engineering businesses.

Source: SKY