Smiths languishes in aerospace

A SHARP fall in aerospace profitability at Smiths Industries, coupled with a pounds 2.6m provision against a start-up investment in the US, offset strong growth in medical systems and a pounds 1.5m currency benefit to leave half-year pre-tax profits 9 per cent lower at pounds 40.3m, writes Terence Wilkinson.

The pounds 2.6m exceptional charge for the six months to 30 January related to Smiths' investment in a new method for taking blood pressure. But as the product, according to Roger Hurn, chairman and chief executive, did not appear to work in either a technical or marketing sense, full provision had been made against the investment.

Despite the fall in profits and a reduction in earnings from 10.1p to 9.2p, Smiths has increased its interim dividend by 5 per cent to 4.3p. Mr Hurn said that this reflected the company's ability to generate surplus cash from its operations and the prospect of steady progress for the rest of the year and beyond.

Cuts by Boeing, Smiths' largest civil aerospace customer, and delays in defence procurement programmes led to a 24 per cent fall in aerospace profits from pounds 18.2m to pounds 13.9m on sales pounds 10.8m lower at pounds 174.8m. About 400 jobs have been axed.

Production of Boeing 737s, for which Smiths supplies flight control and other systems, is down to 10 a month compared with 21 a month at the peak last summer.

Medical systems, which takes in single-use surgery products and operating tables, forged ahead with profits 39 per cent higher at pounds 16.1m on sales a third higher at pounds 84.8m.

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