Smiths Group's return to revenue growth fails to impress

Smiths Group returned to growth last year as underlying revenue increased but currency swings and reclassification of costs sent reported annual profit down 8%.

Underlying revenue rose 2% to £3.2bn in the year to the end of July though reported revenue fell 2%. Reported operating profit fell to £544m from £589m.

The FTSE 100 engineering company said operating profit excluding £74m of costs and currency swings rose 3%. The costs included £40m for making restructuring and pension administration expenses headline numbers.

But investors were unimpressed, sending Smiths shares down 8.5% to £14.55 at 08:43 BST. The company was the biggest faller in the FTSE 100.

Underlying revenue rose at the John Crane seals business, detection and Flex-Tek division, which makes tubes, hoses and thermal systems. This growth was partly offset by what the company said was a disappointing result at its medical unit and reduced revenue at the interconnect division. Revenue growth improved in the second half of the year, rising 5%.

Smiths has been struggling to grow for many years, leading to speculation that the group, whose products range from airport security scanners to medical syringe pumps, could be broken up.

The company called off talks to merge its medical devices business with ICU Medical of the US earlier in 2018. Smiths announced the sale of the medical division's sterile water bottling business for $40m to US group Amsino Healthcare alongside its results, suggesting it would trim the business rather than sell it.

Chief executive Andy Reynolds Smith said: "We said that this would be the year we returned to growth, and we've done that. Our next objective is to deliver continued, sustainable growth, on the way to outperforming our markets.

“With the exception of Smiths Medical, where the second half was disappointing, we delivered a good performance. As anticipated, our growth rate accelerated in the second half of the year.”

Smiths said it expected underlying revenue growth to rise at least as fast in 2019 as last year with performance weighted to the second half. John Crane will sustain its 5% underlying growth rate and the medical business, where underlying revenue fell 2%, will return to growth in the second half, the company said.