Booming orders for bag scanners and metal detectors to combat terrorist threats helped Smiths Group to paint a more confident outlook for a business hit by government cuts.
The industrial conglomerate makes mechanical seals for oil pumps, medical devices including insulin pumps and industrial piping but its best known business — scanners for airports — is the one that has dragged down earnings.
Smiths Detection has been hit by budget cuts by its military customers and sales fell 11 per cent to £220 million in the first half.
“It’s been a rough first half with military orders down 40 per cent ... However, the outlook is a lot more promising than it was 12 months ago,” Philip Bowman, chief executive, said.
Sales have been helped by demand from the construction industry and from hotels which are screening at check-in to combat terrorism.
Advertisement
Total revenue rose 3 per cent to £1.4 billion while pre-tax profit fell 41 per cent from £189 million to £111 million because of an increase in the company’s pension deficit to £450 million and exceptional items. Mr Bowman said: “The pension deficit increased because the Government keeps printing money. It’s a source of constant frustration.”
The company benefited from a 13 per cent spike in sales at John Crane, which supplies the oil and gas market, and cost-cutting at other units. The company has shed 150 staff in the first half, although the total number of job cuts is unclear as it has been hiring in Asia.
The five-division structure of Smiths has led to suggestions that the group is ripe for a break-up but Mr Bowman dismissed the talk. “The answer is no. The pension deficit is a significant impediment to such a move,” he said.
But Mr Bowman conceded that the structure was not ideal. “If you started from scratch then you wouldn’t end up with this group of businesses,” he said.
The group raised its interim dividend by 4 per cent to 11¾p.
Advertisement
The shares fell 12p to £10.89.