Smiths Group beats H1 estimates, but warns of rising FX headwinds

19th Mar 2014 07:00

- Profit decline less than expected- Currency headwinds to increase in H2- Trading mixed between divisionsUK manufacturing firm Smiths Group reported a smaller-than-expected decline in adjusted profits in its first half, but warned that foreign exchange headwinds will increase towards the end of the year.Smiths Group said that judging by current exchange rates, currency movements will have a 4-5% impact on earnings for the full year, compared with only a marginal impact in the first half. Nevertheless, it said it expects an improvement in underlying trading in the second half.The company said it made "good progress" in its businesses that serve commercial customers during the six months to January 31st, but divisions with significant government and healthcare exposure "continued to face challenging conditions".Headline pre-tax profit for continuing operations, which excludes certain items, eased by 4% to £215m, slightly ahead of the consensus estimate of £211m. Group revenues fell by 2% on a reported basis to £1,442m.The company proposed a 2% increase in its interim dividend to 12.75p per share.Smiths Group reported small growth in revenues and margins at energy services division John Crane and fluid management engineering unit Flex-Tek.However, sales and margins were down at medical devices maker Smiths Medical, weapons sensor business Smiths Detection and electronics unit Smiths Interconnect."We anticipate improved underlying trading in the second half driven by a strong John Crane order book, some recovery in Smiths Interconnect and further growth in Flex-Tek," said Chief Executive Philip Bowman. "Smiths Detection will continue to be affected by government budget pressures. Smiths Medical is expected to continue to face tough trading," he said.BC