Smiths Group delays medical split and scraps dividend

(Sharecast News) - Smiths Group delayed the demerger of its medical business and scrapped its half-year dividend as the engineering group reported intensifying disruption from the coronavirus crisis.

The FTSE 100 company has been planning the separation of its medical division since November 2018 and was due to launch an initial public offering in the first half of 2020.

However, Smiths said it was not feasible to split off the business in current market conditions. The company also needs to concentrate on delivering ventilators and other medical equipment during the Covid-19 crisis, it said.

Smiths has agreed to increase production of its ventilators to provide 10,000 for the UK government to equip hospitals for rising numbers of Covid-19 patients. Smiths still intends to separate the medical business when conditions are right, it added.

Smiths said it was confident about its financial position but that conditions were too volatile to pay a dividend for the first half of 2020. The company said it would review its decision later in the year when trading was clearer. It has also withdrawn financial guidance for 2020.

After solid growth in the six months to the end of January Covid-19 has had an increasing impact on Smiths' business, the company said. Demand is weaker because customers have not been able to accept deliveries, energy customers have cut capital spending, and airports are closing or running at low capacity.

Sites responsible for more than 90% of Smiths' production were open on 30 March but are running at reduced capacity. The company said it was seeking government approval for factories to stay open for critical products and a central team was working with operating units and suppliers to resolve problems.

"Group trading to the end of March was affected to some extent by early Covid-19 disruption, which is now accelerating," Smiths said. In the first half, underlying revenue growth from continuing operations rose 3%. Reported revenue rose 8% including the acquisition of United Flexible.

In the eight weeks to 28 March revenue for continuing operations and Smiths Medical rose by mid-single digits, Smiths said. Smiths was due to report full first-half figures on Tuesday but the Financial Conduct Authority has told companies to delay results announcements until April.

Andy Reynolds Smith, the company's chief executive, said: "Smiths is a strong and naturally resilient business and we will come through this period well positioned for the future. Our business benefits from financial strength, flexibility and a strong balance sheet with significant liquidity. We are keeping our customers running, whilst staying safe and looking out for each other through the disruption. I'm very grateful to our global team for all their efforts."