Smiths cuts guidance as Middle East disruption hits home

(Sharecast News) - Smiths Group cut full-year guidance on Thursday, as the conflict in the Middle East weighed on trading.

The 175-year-old firm had previously forecast organic revenue growth of between 3% and 4% for the current year, excluding any impact from the war.

However, Smiths said that on the assumption disruption in the Middle East continues, annual revenue growth would now be curtailed at around 2%, although the headline operating margin was reaffirmed at slightly above 20%.

The revised guidance came as Smiths updated on third-quarter trading. The group - which is undergoing a major reorganisation - said organic revenues were flat in the three months to 2 May, and up just 0.2% in the first nine months of the year. "This performance was achieved in the context of the disruption in global energy markets, a subdued US construction market and a strong comparator in Flex-Tek," Smiths noted.

Crane, its seals and component business, posted a 2.8% uplift in organic revenue, including a £10m hit following two months of war, while heating components manufacturer Flex-Tek saw revenues fall 3.9%.

However, chief executive Roland Carter said that while growth was moderating in the near term, "it is set against a backdrop of increasing global demand for energy security and resilience, and we are well positioned to support our customers.

"This underpins our confidence in the strength of our medium-term outlook.

"We are continuing to make good progress reshaping the portfolio, deploying capital with discipline and investing to drive sustainable growth and long-term shareholder value."

The Middle East contributed around 7% of group revenues in the second half, primarily through John Crane.

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Smiths Group