Investec reviews stance on Smiths after revenue weakens

23rd May 2014 12:43

Investec is revisiting its stance on Smiths Group after the industrial conglomerate said issues in its x-ray scanner business would hit underlying nine-month revenue this year.The broker is placing its estimates, target price and recommendation under review as Smiths predicted profits in Smiths Detection would be £25m lower due to working capital adjustments, reduced volumes and extra costs.Investec said the third quarter trading update was written as if the £25m hit in the detection business was a one-off.The broker added: "It smells of poor execution and, possibly, insufficiently conservative accounting."Investec said it was reducing its estimates for all years for the detection business and making smaller adjustments in medical and interconnect for market conditions and/or currency.It said the company was exposed to risks from public budget cuts, particularly in the US."Despite better news from John Crane and Flex-Tek, we are reminded of the capacity to disappoint. We will review our estimates, target price and recommendation," it said.Shares in Smiths fell 9p or 0.7% to 1306p by 12:59 in London.PW