Smiths aims for savings of £25m a year from cost cuts

Smiths, the aerospace, medical equipment and detection systems group, is embarking on a fresh cost-cutting exercise designed to save £25m a year.

Smiths, the aerospace, medical equipment and detection systems group, is embarking on a fresh cost-cutting exercise designed to save £25m a year.

The restructuring, which will involve an unspecified number of job losses from Smiths' 26,500-strong workforce, will cost £50m, spread over the next two years. It will mainly involve the group's aerospace businesses and will be focused on the US and Japan.

News of the latest productivity drive came as the group announced a 9 per cent fall in first-half profits to £141m and made a further acquisition to bolster its detection business. Smiths is paying $15m (£8m) for Cyrano Sciences, a Californian maker of battlefield sensors used to detect chemical traces.

The main reason for the fall in earnings for the six months to the end of January was a 57 per cent plunge in operating profits in Smiths' detection business from £42m to £18m, following a one-off boost to profits in the previous year as Smiths raced to fulfill a contract to install explosives detectors in US airports. However, Keith Butler-Wheelhouse, Smiths' chief executive, said the group had already begun to see a pick-up in orders for detection equipment in the second half.

Medical equipment, another growth area for the group, also reported a slight increase in operating profits, to £39m. Smiths is preparing to launch a new product on the UK market for administering insulin to diabetics using a pump technology. The programmable pump, called Cozmo, looks like a mobile phone and clips on to the waistband.

The pumps, which cost about £2,000 each, are already being prescribed in the US, where there are more than 7,000 users. They have also been approved for the UK market by Nice, the body which decides whether medicines can be prescribed on the NHS, but only for between 2,000 and 4,000 sufferers of the most acute form of diabetes, Type 1, which can cause blindness, kidney failure and severe circulatory problems.

Aerospace, Smiths biggest single division, accounting for 36 per cent of sales, also increased profits thanks to strong military sales. Smiths has recently won $1bn worth of work on Boeing's new 250-seat aircraft, the 7E7, and could double this if it secures further orders in the next few months. But Mr Butler-Wheelhouse said he still did not see an upturn in commercial aviation until 2006.