Bowman's cautious tone fails to impress Smiths Group investors

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The Independent Online

Philip Bowman failed to impress in his maiden trading statement as the head of Smiths Group as investors sent the engineering conglomerate's shares plummeting on news of continued weakness in its medical division.

Investors had been hoping that Mr Bowman, who took over in December, would use the update to give some indication of his plans for the group. Instead the company gave a cautious outlook for its medical business, where it has been hit with supply chain issues, while its airport scanners business grew slower than expected. Its shares dropped by nearly 6 per cent in midday trading before recovering to close down 1.5 per cent at 933.50p.

"The cautious tone on some of the issues they're having did not go down well," said Richard Johnston, an analyst at Numis Securities. "We had been looking for some sense of strategy going forward, but we did not receive it."

The company said sales and profit growth over the past six months were in line with management expectations, though medical was "flat". The transfer of manufacturing operations to Mexico was completed, but the company warned there were still challenges that needed ironing out. In a statement, the company said: "Whilst the transfers of key production from Hythe and Kirchseeon [in Germany] to plants in lower-cost regions have been completed, the business has been affected by supply chain issues and the implementation of the [enterprise resource planning] system. Management believe it will take a significant period of time to fully implement a world-class supply chain and ERP system."

Break-up speculation that has surrounded the company for years has remained since Mr Bowman was named as the successor to Keith Butler-Wheelhouse. Before taking up the post at Smiths, he sold ScottishPower to the Spanish utility Iberdrola and before that hawked Allied Domecq to Pernod Ricard.

Mr Johnston said that "portions of Smiths would sit well within any number of conglomerates". Talk has often centred on GE, though this decreased after a proposed joint detection business fell apart late last year. The deal to combine the scanning business of the two companies was originally announced when Smiths sold its Aerospace unit to the American conglomerate for £2.5bn last January.

Smiths won a 10-year deal last September to supply all of the airports operated by BAA with X-ray scanners. It will unveil its interim results on 19 March.