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Shares in diversified engineering outfit Smiths (LON:SMIN) dropped by 5.60% to 1,501.95p (as of 10:40 BST) after the company announced that profits before tax for the year ended 31st July declined by 8% to £487 million. Revenues for the period fell by 2% to £3.21 billion.
The firm also agreed terms for the sale of its Medical division’s sterile water business to Amsino Healthcare for an enterprise value of $40 million. This deal is expected to complete in the first half of 2019.
Chief executive Andy Reynolds Smith said: “FY2018 marks an important milestone on our journey. We said that this would be the year we returned to growth, and we’ve done that. Our next objective is to deliver continued, sustainable growth, on the way to outperforming our markets.
With the exception of Smiths Medical, where the second half was disappointing, we delivered a good performance. As anticipated, our growth rate accelerated in the second half of the year driven by John Crane, Smiths Detection, Smiths Interconnect and Flex-Tek.
We continued to progress the high-grading of the portfolio through organic and inorganic investment with approximately 80% of the Group now well positioned in attractive markets. Our acquisitions of Morpho Detection, Seebach and the heating element division of Osram are being successfully integrated, with synergies being delivered ahead of schedule. The disposal of two non-core businesses in Smiths Medical and John Crane has supported our increasing focus on products and services with scalable, technology-differentiated leadership positions in our chosen markets.
We’re focused on world-class competitiveness. We delivered further stock turn improvements, now at 3.7x, and good cash conversion of 99%. This has helped to fund disciplined investment in commercially focused R&D and innovation.
In FY2019 we anticipate at least sustaining the rate of underlying revenue growth. As in previous years, Group performance in FY2019 is expected to be weighted towards the second half. Foreign exchange will provide a tailwind to reported revenue and operating profit, if current rates prevail.
Over the medium-term, we remain confident that we can grow faster than our markets. This is driven by our strategy to focus the portfolio for growth and deliver world-class competitiveness, underpinned by our strong financial framework. In parallel with continued active portfolio management, the Board remain confident that this will drive long-term sustainable growth and attractive returns“.
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