Smiths Industries is on the lookout for a big acquisition

SMITHS INDUSTRIES is on the lookout for a large acquisition that would mark a step change in the engineering group's attempts to build a world-leading business.

Keith Butler-Wheelhouse, Smiths' chief executive, revealed yesterday that the company had put in a bid for Sherwood Medical, a former division of American Home Products, but had been outbid by Tyco, the US conglomerate, which offered $1.8bn for the business.

He added that Smiths would consider buying parts of the aerospace division of LucasVarity, the engineering group, if it was put up for sale by its new owner TRW.

The comments suggest that Smiths is targeting larger acquisitions under Mr Butler-Wheelhouse than it did under his predecessor, Sir Roger Hurn. In the past, Smiths has tended to make buy a number of small bolt-on companies for its aerospace, medical and industrial divisions.

Alan Thomson, Smiths' finance director, said yesterday the company could afford to spend up to pounds 1bn on an acquisition while keeping its interest cover at about five times. The largest acquisition in Smiths' history to date was in 1987, when it bought a business for pounds 275m.

Smiths yesterday reported an 11 per cent rise in pre-tax profits to pounds 99m for the six months to 31 January, on turnover up 10 per cent at pounds 607m. Smiths said its continuing businesses had accounted for about half the revenue growth, with the rest coming from acquisitions. But almost all the profit growth was organic.

Smiths' growth was entirely down to its aerospace division, where profits grew by 42 per cent with the help of buoyant demand for its avionics products and improved operating margins. In the medical and industrial businesses, however, difficult economic conditions meant that profits were broadly flat.

Smiths' dependence on its aerospace business rattled the stock market, which marked the shares down 103p to 953p, even though the figures were broadly in line with expectations.

But analysts pointed out that Smiths' shares had risen sharply ahead of the figures.

Mr Butler-Wheelhouse stressed that the group had no plans to abandon its traditional dependence on its three divisions, and would continue to look for potential acquisitions in all three areas.

Market observers pointed out that Smiths has an exemplary growth record over the past 20 years. Sandy Morris, engineering analyst at ABN Amro, said the company was likely to carry on growing despite the economic conditions. "For Smiths, a recession probably means that they get 5 to 10 per cent earnings growth, not 10 to 15 per cent," he said.

However, he added that the company was suffering from the fact that growth prospects in its industrial and medical divisions are currently pedestrian, while the market is fully aware of the growth Smiths will achieve in its aerospace division.

Analysts yesterday pulled back their full-year profit forecasts to between pounds 230m and pounds 235m, mainly on worries about the growth picture in the United States, which is now Smiths' largest market. On a forward multiple of 18 - and in the absence of any corporate activity - the shares are seen as no more than a solid hold.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Wes Brown is sent-off
Italy celebrate scoring their second try
six nations
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower