Smiths Group: Shares jumps as demerger on track
British engineering firm Smiths Group posted a boost to revenue in the third quarter as it progressed on demerger plans.
The group’s revenue jumped 10.6 per cent on the back of “strong performance and momentum in the order book”.
Shares in the group rose over two per cent to 2,100p during early trading on Tuesday.
The firm said it expects revenue growth to come in the top end of its six to eight per cent target as it eyes a margin expansion of 40 to 60 basis points.
John Crane – the group’s energy-focused division – recorded “marginal” organic revenue in the latest quarter after its January cyber attack had longer-lasting impacts.
The breach involved unauthorised access to the company’s systems, prompting immediate isolation of affected systems and activation of business continuity plans.
The cyberattack disrupted operations at John Crane, leading to shipment delays and affecting profitability.
Elsewhere, in its Flex-Tek arm the firm posted “high single-digit” growth to revenue. This was driven by a strong performance in aerospace and developments in the construction business, which outpaced the US housing market.
The group said integration of its three acquisitions – Modular Metal Fabricators, Wattco and Du-Pac corporation – was progressing well.
Smiths follows activist investor calls
Demerger plans were “on track,” the group said, with an announcement of a sale of its Smiths Interconnect operation expected by the end of 2025. A separate sale of its Smiths Detection arm is anticipated to follow.
This follows significant pressure from US activist investor Engine Capital, which had called for the firm to divest from its interconnect arm and focus on industrial technologies.
After the firm announced plans to spin off its Smiths Detection business in January, shares rose to a record high of 2,066p. The firm rallied passed this mark in the month following but faced a slump in the wake of Trump’s ‘Liberation Day’ levies.
As the President slapped sweeping tariffs on all the US trading partners, shares in Smiths Group tumbled to a low of 1,695p.
The firm said it generated around 45 per cent of its sales in the US, with a significant majority produced there.
The group said it expects the impact of Trump’s tariffs to be “limited given its local-for-local model”.
“Full year guidance incorporates the direct impact of the current tariffs in place.
“The Group is closely monitoring the potential indirect macroeconomic impact of tariffs on demand, inflation and supply chains, and has not seen any material changes in customer behaviour to date,” the third-quarter report said.
Roland Carter, Smiths Group’s chief executive, said: “We are executing on the strategic actions we announced in January with pace and purpose to unlock our inherent value and become a premium rated company, focusing on our world-class, high-performance John Crane and Flex-Tek businesses.
“The sale process for Smiths Interconnect is firmly underway and preparatory work for the Smiths Detection separation process is also moving forwards.”