Smiths delivers mixed bag and promises special dividend

18th Sep 2013 07:03

A difficult trading environment produced a mixed bag of results from diversified engineer Smith Group, which included promise of an extra 30p per share special dividend. Headline group revenue grew 2% as underlying growth at the Detection, John Crane and Flex-Tek divisions more than offset declines in Medical and Interconnect segments. Chief Executive Philip Bowman emphasises that management continued to invest in the business to rebalance revenue and profit streams away from government to commercial customers, and also raise exposure to faster growing markets. Emerging market revenue rose 14% to represent 16% of group revenues.Headline profits were flat as margins were affected by the increased investment across the group, together with previously-flagged contract challenges in Smiths Detection, and the introduction of the US medical device tax in Smiths Medical.Industrial seals business John Crane, almost a third of group revenues, was driven by growth in both original equipment and aftermarket revenue, particularly in the oil and gas sector, wth margins strengthening to help lift profits 10%.However, the next largest division by sales, Smiths Medical, saw sales fall 1% on lower hardware volumes and flat consumables from constrained hospital budgets. With developed markets likely to be challenging, Bowman oversaw increased investment in medical sales capacities, new products and some restructuring which should benefit margins in future. He has no plans to change course on investment policy and said: "Our priority is to continue to raise our investment in sales, marketing and new product development to generate medium to long-term value for our shareholders through sustainable growth.""We are funding this investment by delivering operational improvements and efficiencies with initiatives underway across all divisions. We are also committed to managing group capital allocation to increase shareholder value."After strong cash generation of £548m led to net debt being reduced by £47m to £744m, the board has recommended a return of cash to shareholders of 30p per share, as well as a 4% increase in the annual dividend to 39.5p.OH