The Investment column: Smiths Industries is flying high
Thursday 10 April 1997
That reaction by the market looked a little perverse, given the good news that Smiths had to tell. Stripping out pounds 4m of property gains, the 15 per cent rise in underlying pre-tax profits to pounds 80.2m for the six months to 1 February was better than some expectations.
Certainly there have been hiccups in the latest period. Profits only crept ahead to pounds 31.9m in medical systems. It seems the results would have gone backwards but for acquisitions, giving credence to those who have long argued that the business's 20 per cent plus margins are unsustainable. Certainly Mr Butler-Wheelhouse was suggesting yesterday that margins may have plateaued for now.
But Smiths' UK-based medical equipment and disposable devices operations, currently struggling against a strong pound, will not have to battle currency factors for ever. There should be no repeat either of the second-quarter sales hiatus caused by the introduction of the US Deltec operation's new Prizm pump for the automatic delivery of medicines to patients.
Even so, the real story at Smiths is in aerospace. The jump in profits from pounds 17.2m to pounds 22.9m caught some observers off guard yesterday. Better still, the group was clearly signalling that the current boom in civil orders from Boeing, its main customer, is likely to be matched on the military side, which represents 60 per cent of the aerospace business. Meanwhile, every day seems to bring more good news on Boeing work, already showing a rise of up to 50 per cent. That could be worth a highly profitable pounds 50m addition to turnover by the end of the century.
Acquisitions are likely to continue to feature at Smiths, which reckons it has a war chest of up to pounds 400m before it needs to approach shareholders. Currency could shave profits by pounds 8m this year, but Hoare Govett has upgraded its full-year forecast to pounds 186m, putting the shares on a forward multiple of 19. Fair value.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...