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On the whole analysts at Credit Suisse have a favorable opinion of the final results posted today by Smiths Group. They thus describe the company's second half performance as "solid," while highlighting the 10% top line growth and 19.2% margin achieved. Nevertheless, they also take note of the company's references to the ongoing macro uncertainty and the pressure on government spending, which led to some caution on the outlook for fiscal year 2013 (in particular for the second half of that year) and as a result, trim their forecasts for the next two fiscal years (2013 and 2014) by 2% an 1%. Credit Suisse also calls attention to the fact that the "focus of the group is now shifting towards generating top line growth, primarily through 1) investment in new products and 2) expansion in growth markets." That now that the main restructuring program has been completed. As regards the company's valuation, they estimate that, on their new 2013 calendarised estimates, Smiths is trading on a price-to-earnings multiple of 10.5x and EV/EBITA of 9.2x, on average a circa 10% discount to the UK Industrial peer group. As well, they point out that their reverse-DCF analysis as well as the estimated 2013 EV/Sales multiple of 1.76x suggests the stock is currently discounting a through-cycle operating margin of circa 17-17.5% for Smiths, which they see as conservative in the light of their future margin forecasts of approximately 19%. Credit Suisse analysts have reiterated their outperform recommendation on shares of Smiths, as well as their 1,200p price target
On the whole analysts at Credit Suisse have a favourable opinion of the final results posted today by Smiths Group. They thus describe the company's second half performance as "solid," while highlighting the 10% top line growth and 19.2% margin achieved. Nevertheless, they also take note of the company's references to the ongoing macro uncertainty and the pressure on government spending, which led to some caution on the outlook for fiscal year 2013 (in particular for the second half of that year) and as a result, trim their forecasts for the next two fiscal years (2013 and 2014) by 2% an 1%. Credit Suisse also calls attention to the fact that the "focus of the group is now shifting towards generating top line growth, primarily through 1) investment in new products and 2) expansion in growth markets." That now that the main restructuring program has been completed. Credit Suisse analysts have reiterated their outperform recommendation on shares of Smiths, as well as their 1,200p price target.
Positive Points: Revenue from the John Crane unit, which makes mechanical seals for the oil and gas industry and accounts for 32% of total revenue, rose 9 % on higher demand. Emerging market revenue increased 14% and now represents around 15% of group revenues. The group invested £117 million in research and development, (£111 million in 2011) a measure of future commitment to organic growth. The company announced a final dividend of 26.25p per share, giving a total for the year of 38.0p, an increase of 5%. As an industrial conglomerate, speculation that the company could eventually be taken over/broken-up continues to linger.
Negative Points: Pressures on government spending are expected to continue; Conditions are likely to continue to constrain parts of business with government-funded customers. Smiths Group has strong market positions, however there remains a threat from the risk of new entrants to its markets. Via John Crane, the group is exposed to numerous lawsuits in the US where damages arising from products containing asbestos are pending. Foreign exchange movements provide potential risks. Rising commodity prices also provide the potential to impact on profit margins going forward. Further potential acquisitions could create risks in terms of overpaying or integration challenges.
Financial Highlights: Pre-tax profit for the year ended 31 July amounted to £365.9 million, versus £397.9 million a year earlier. Revenue increased by 7% to £3.04 billion versus £2.84 billion achieved a year ago. As at 31 July, net debt stood at £791million, up from £729 million at 31 July 2011. Management added that the increase in net debt reflects strong cash generation and was more than offset by outflows from the net impact of acquisitions and disposals.
Full year results: Smiths Group revenue grows across all divisions. Specialist engineer, Smiths Group announced top line growth across all of its divisions as it exceeded the expectations of the market. Revenues rose 7% to £3.04 billion while pre-tax profits declined to £365.9 million from £397.9 million a year earlier, a result of one-off costs. Divisionally, a strong order book was reported at John Crane where revenue growth of 9% was driven by greater demand in the oil and gas sector. Despite a tough operating environment with healthcare spend constraints and pricing pressures, Smith Medical achieved a strong second half, a result of new product launches and growth in emerging markets. Within Smiths Detection, significant contract wins and margins improvements supported a stronger second half with revenues up 3% on the full year. Smiths Interconnect's performance was boosted by the acquisition of Power Holdings Inc. Revenues also improved by 3%, although markets remained challenged, notably defence customers. The aerospace and US construction sectors are expected to support future sales growth at the Flex-Tek unit where revenues saw a rise of 5%. Looking ahead, Chief Executive Philip Bowman said, "The economic environment remains uncertain. Pressures on government spending are expected to continue, however, our investment initiatives are building a solid foundation to accelerate medium-term revenue growth
Company overview Smiths Group is a leading British engineering company involved in wide-ranging speciality engineering activities. It is based in London, listed on the London Stock Exchange, and a constituent of the FTSE 100 Index. Smiths Group has five divisions - Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect and Flex-Tek. They are focused on threat & contraband detection, medical devices, energy, communications and engineered components markets worldwide. The group’s customers range from governments and their agencies, to hospitals, petrochemical companies and equipment manufacturers and service providers in various sectors around the world.
From a company with M&A action on the table, to technology giant Smiths Group (SMIN) – where break up deals or takeovers have long been rumoured, but have so far never come to fruition. Such speculation has certainly supported the share price, with the most recent newsflow highlight at the beginning of August when we, Galvan Research countered Investec’s May assertion that Smiths Group is ‘boring.’ Our view is that the company is ‘resilient’, warranting a buy rating. All should be revealed one way or the other in the forthcoming Finals.
Well, look at it this way, the best form of flattery is immitation!
After all, not every dame is a one night (hump 'n bump) stand.
Perhaps this seductress is being modest in her willingness to be wooed by any Tom, Dick or Harry - and resistance is all part of the game of seduction.
Smiths Chief Executive Philip Bowman said: "As I indicated at our interim results in March, we are looking to simplify our portfolio. This disposal helps us to focus on our core businesses in driving revenue growth, operational improvements, enhanced margins and strong cash conversion." Smiths Group's investment in Cross Match, reflected in its accounts as an associate of Smiths Group with a book value of $36 million, stems from the 2002 purchase of Heimann Systems which included a biometrics business. Heimann Biometrics was sold to Cross Match three years later in exchange for equity in Cross Match.
SMITHS SELLS SHARE OF US BIOMETRIC COMPANY FOR $77M Smiths Group plc today announces the disposal of its minority stake in Cross Match Technologies Inc for up to $77 million as part of its strategy to manage its portfolio more actively and divest non-core activities. The proceeds from the sale of its entire holding in the Florida-based biometric identification company to Francisco Partners, a private equity firm, comprise $69 million in cash on completion. In addition, up to $8 million will go to an escrow account to cover working capital adjustments and to meet any possible legal claims for up to 15 months.
http://www.investegate.co.uk/Article.aspx?id=201207160705007078H
The rather odd assortment of engineering firms that make up Smiths Group somehow works as a business concludes Tempus in the Times. The big idea was that some of the divisions may have been sold, with flexible tubes outfit Flex-Tek the main candidate, but the US housing market has put paid to that and with the shares at 12 times earnings Tempus thinks Smiths is a leave.
Investec has cut its target price for medical devices maker Smiths Group following the firm's third-quarter trading update this morning, saying that while there was no major surprises, there also wasn't any reason to get excited. With little change in the operating performance from the interim results, Investec has left its full-year forecasts unchanged following the statement. However, it has cut its target price from 1,130p to 1,050p to reflect the recent sector de-rating. With the stock trading at 10.3 times earnings, the broker has maintained its hold recommendation on the stock
"The Group has made good progress despite the challenging economic environment, particularly for businesses serving government-funded customers such as Smiths Detection and Smiths Interconnect, where performance has been disappointing. Remediation in Smiths Detection is on track, although the benefits will be weighted to the second half. Elsewhere, John Crane continues to report strong growth driven by investment in oil and gas infrastructure. Performance at Flex-Tek was encouraging and Smiths Medical has been resilient against a tough trading backdrop. Our results continue to benefit from restructuring initiatives and operational improvements. These savings are being reinvested to build a solid foundation to accelerate medium-term revenue growth. "We have increased our focus on top-line growth through new product development, sales effectiveness, expansion of our emerging market exposure and targeted acquisitions. The trading environment remains uncertain and sustained pressures on government spending are likely to affect some of our divisions. However, we continue to see further potential to grow sales, drive operational improvements and deliver strong cash conversion. We remain confident of meeting expectations for the full year." Philip Bowman Chief Executive
Highlights · Resilient performance in a difficult trading environment · Headline revenue up 3%; headline operating profit up 2% · Continued investment in new products and new markets driving growth · Emerging market sales up from 12.5% to 15% of Group sales · Good headline margin progression in John Crane, Smiths Medical and Flex-Tek · Performance improvement initiatives on track in Smiths Detection; improving order book · Improved headline operating cash conversion at 82% - with free cash-flow of £81m · Dividend up 4%
http://www.investegate.co.uk/Article.aspx?id=201203140700162915Z
medical devices and airport scanners group Smiths (SMIN) delivered a big update last Sept when the initial buzz of excitement over a possible offer for part of the company was offset by a rather mixed bag performance from the diverse business units. Of note this time is whether the interims will show an improvement from the laggard Smiths Detection business.
Exane BNP Paribas upgrades Smiths Group from neutral to outperform, target price raised from 1000p to 1150p.
Live price 971p good start
25p final dividend date on Thursday. Keep the faith, soon back to £10
Nomura has downgraded Smiths Group, the medical devices and airport scanner maker, from neutral to reduce, saying that the firm is “likely to grow slower than other companies in our coverage universe”. “Smiths Group is a conglomerate of five businesses and its end market exposure is one of the most diversified, which normally gives the group stability. This looks now uncertain as sales are 40% to the public sector and only 15% to emerging markets.” As a result, the target price is cut from 1,150p to 1,050p.
Nomura downgrades Smiths Group from neutral to reduce, target price cut from 1150p to 1050p.