Smiths Group plc Falls On Declining Profits

Shares in Smiths Group (LSE: SMIN) fell 6% to 1,284p after announcing a pre-tax profit fall for the first half of its fiscal year.

Smiths Group reported a profit of £132m compared with £166m in the corresponding six months last year.

The technology firm added that it is being adversely affected by squeezed government budgets, while price competition and the strength of the sterling — which rose to nine-month highs against the dollar — also impacted margins.

The FTSE 100 company added that revenue dipped to £1.4bn from £1.8bn a year earlier.

However, reflecting the group’s strong cash generation, the dividend was lifted 2%.

The chief executive, Philip Bowman, commented:

“We made good progress in our businesses that serve commercial customers, while those with significant government and healthcare exposure continued to face challenging trading conditions.”

“We continue to focus on operational improvements to support investment in both high growth markets and new products to accelerate medium-term revenue growth. We will maintain our focus on investing to drive sales growth in what are attractive long-term markets, and delivering further operational improvements, while providing strong cash conversion and returns.”

In Smiths Group’s upcoming annual results, City experts are projecting earnings per share of 90p, while a dividend of 42p has been penciled in by said analysts.

This would mean that the shares currently trade on a price/earnings ratio of 14 and offer a prospective income of 3.3%.

Of course, the decision to ‘buy’ — based on those ratings, today’s results, and the company’s wider prospects — is solely your own decision.

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Mark does not own shares in Smiths Group.