Bottom Line: Ready for take-off

NOT NOTED for despondency, Roger Hurn, chairman and chief executive of Smiths Industries, is in a notably optimistic frame of mind.

Of Smiths' three activities, medical systems is enjoying organic volume growth, aerospace may finally hit bottom this year, and industrial operations, particularly in the US, are starting the pull out of recession.

A published 14 per cent rise in half- year pre-tax profits to pounds 46m is reduced to 6 per cent, excluding last year's pounds 3m write-off of the investment in Sentinel, and is even less if the contributions from Vent Axia and Intertech, acquired in 1993, are left out. But this is no pedestrian performance, as a 7 per cent dividend increase to 4.6p and a 15p rise in the shares to 485p underlines. Smiths is a cost-conscious company whose profits weathered the recession well, and one with a good eye for worthwhile, non-dilutive acquisitions.

By dint of early cost-cutting in aerospace - employment has been slashed by 40 per cent in three years - half-year profits have nudged ahead despite further volume falls in Boeing 737 production. Smiths is set to benefit strongly when deliveries of the new 777 begin, probably in a year's time, with the prospect of up to dollars 600m of business over the first 15 years.

Medical systems, 90 per cent of whose products are single-use and benefiting from fears of cross-infection and/or legal threats, is pushing up volumes worldwide and has lifted margins to 20 per cent. Industrial group profits remain robust, with an upturn in US domestic appliance demand an added bonus.

Pending the aerospace upturn, a p/e of 18 is a justifiable premium rating.