Smiths Group plc (Smiths), a UK-based medical devices company, reported sales of GBP1.29 billion for the first half of fiscal 2009, up 19%, compared with the sales of GBP1.08 billion in the year-ago quarter. It reported profit attributable to shareholders of GBP108.6 million, or 27.7 pence per diluted share, for the first half of fiscal 2009, compared with the profit attributable to shareholders of GBP141.4 million, or 36 pence per diluted share, in the year-ago period.


Key developments

Divisional restructuring programmes underway to reduce costs and improve customer service

Rationalisation of the corporate HQ completed and greater divisional focus on delivering returns – total restructuring savings to date of GBP8 million

Upgrade of business systems including ERP for Detection, John Crane and Medical on track

Underlying increase in Group R&D investment of 11% to GBP49 million (reported increase of 29%)

Extended our product portfolio and presence through two acquisitions, subject to regulatory approvals

US$175m of additional long-term debt capital raised in February to extend our maturity profile

Strong free cash flow generation

Business highlights

Smiths Detection: Reported sales up 5%; underlying sales down 11%

As previously guided, revenue was distorted by variable order flow – particularly in ports and borders

Strong sales of airport equipment to US and good military growth with orders for JCAD

Margins adversely affected by currency transaction (GBP5 million) and adverse cost absorption due to reduced volumes

John Crane: Reported sales up 39%; underlying sales up 6%

Growth driven by ongoing demand from the oil and gas sector and robust aftermarket

Restructuring initiatives delivered GBP3m savings

Upstream energy services business created with CDI and Fiberod

Smiths Medical: Reported sales up 16%; underlying sales down 3%

Single-use consumables proving more robust than hardware

Operational improvements have reduced customer backorders to a five year low

Decision to exit diabetes business informed by SKU and customer profitability review

Smiths Interconnect: Reported sales up 25%; underlying sales down 2%

Several long-term military programmes have delivered revenue growth

Offset by lower sales to wireless operators following a large contract last year

First half margins constrained by restructuring costs

Flex-Tek: Reported sales up 12%; underlying sales down 11%

Performance affected by deepening recession in US housing and household appliances although market share increased

Continued growth in sales of components to the aircraft industry

Rationalisation programme and other cost initiatives helping preserve margins

Underlying figures are at constant currency and exclude the impact of acquisitions and disposals.