And despite the continued turbulence being experienced by the aircraft industry, Smiths saw profits grow in all three divisions in the first half of the current year. That fed through to a 26 per centrise to £58m in overall pre-tax figure for the six months to January, with thedividend up 10 per cent to 5.05p.
The figures continue to justify Smiths' acquisition strategy. Gearing remains minimal despite £250m spent on acquisitions in the past two years and the results are coming through. Group profits growth was split between existing businesses and last year's acquisitions.
In existing businesses, aerospace is still reaping the benefits of Smiths' timely action on costs, which saw a further 250 job cuts in the first half on top of the 45 per cent drop in the workforce over the previous four years. That helped propel operating profits £2.2m higher to £16.3m, despite a £1.8m dip in sales to £172m.
In the face of scepticism from some quarters, medical systems also continue to push margins ahead, raising profits from £18.7m to £26.1m, while profits in the Vent-Axia fans to engineering industrial division were hoisted by a chunky £4.4m to £16.1m.
Roger Hurn, chairman and chief executive,believes the upturn in the civil aviation marketremains two years off,but Smiths should continue to remain insulated from the chill winds blowing through the industry.
Helping to tide it over will be its recent success in winning a key contract to supply avionics equipment contract for three new series of Boeing 737s coming into service from 1997, worth two-thirds of the value of the current work supplying 737s that will continue. Add in equipment for the new Boeing 777, which will fly later this year, and Smiths should come out ahead.
Full-year profits approaching £140m would put the shares on a prospective multiple of nearly 16. Reasonable value, with the added spiceof more acquisitions.