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(Alliance News) - Smiths Group PLC on Tuesday launched a strategic restructuring programme that will cost around GBP65 million and said revenue was higher in the ten months to the end of May.
Shares in Smiths were up 6.2% at 1,378.50 pence in London in morning trading.
The restructuring is group-wide and will have an operating cash cost of approximately GBP65 million spread across financial 2020 - which ends July 31 - and financial 2021. Savings are to "substantially offset costs" in financial 2021 and deliver a full approximately GBP70 million annualised benefit starting in financial 2022.
The FTSE 100-listed engineering business, which has its headquarters in London, promised "further detail" of the restructure along with its annual results due September 24. But it confirmed that job cuts are on the horizon.
Turning to trading, Smiths said in the ten months ended May 31, underlying revenue from continuing operations was up 2% and year-to-date revenue increased 6%. For the four months of its second half ended May 31, underlying revenue was up 1%.
"The resilient overall performance of the last four months reflects the momentum of the first half and our strong orderbooks at the outset of the Covid-19 crisis. There has been some slowing, due to the impact on our operations and those of our customers; we also face increasingly tough comparators through the end of the fiscal year. We are currently operating in all our 75 manufacturing plants, but are not immune to higher consequential costs," said Smiths.
In terms of individual businesses, John Crane revenue has stayed in growth year-to-date, though it has experienced a recent slowdown due to customer service disruption.
Smiths Detection's performance has been strong. It is still winning new original equipment programmes, but tender activity and service revenue have slowed down.
Flex-Tek has been hurt by a "downturn in commercial aerospace" and US construction disruption but had a good first half.
Smiths Interconnect revenue suffered in the first half due to "global connector market weakness", but orders and revenue have improved more recently.
Smiths Medical managed to sustain growth, with underlying revenue up 1% year-to-date. Underlying revenue in the second half has been 2% higher so far, as the pandemic led to higher critical-care demand and restocking. Nonetheless, lower non-Covid-19 procedure volumes curtailed revenue later in the second half.
At present, Smiths has cash balances exceeding GBP300 million. Along with its undrawn revolving credit facility of GBP660 million, the company has access to around GBBP950 million of surplus liquidity.
Smiths did not provide any new financial guidance, having withdrawn 2020 guidance back in March over Covid-19 uncertainties.
Chief Executive Andy Reynolds Smith said: "Market-leading positions and a flexible business model have enabled the group to continue to perform through crisis disruption.
"Our immediate focus is the safety of our people and business continuity for our customers. We will continue to take the actions necessary to safeguard our long-term competitiveness. I very much regret that this will result in some job losses. My sincere personal thanks go to the amazing Smiths employees around the world for their dedication and commitment.
"The group has a resilient business model; market-leading positions, a culture of innovation at its heart, combined with relentless execution. We are confident that we will meet the challenges of the current crisis - and emerge stronger, better able to outperform long-term."
Separately, Smiths announced the acquisition of biotechnology company PathSensors Inc, which is based in Baltimore, Maryland. Financial details of the deal were not disclosed.
PathSensors provides pathogen detection and has developed a method to identify biological threats in only minutes. Its has a similar customer base to Smiths Detection's chemical-threat detection but allows for expansion into areas like agricultural and food safety.
"PathSensors offers multiple assays that are already available, at an independently verified speed and sensitivity data, which offer an opportunity to develop their future potential. The transaction will enable Smiths Detection to accelerate its position in biological-detection capabilities which are important both within our current markets and beyond," said Smiths.
By Anna Farley; annafarley@alliancenews.com
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