(Alliance News) - Smiths Group PLC on Tuesday said trading in the first half of its financial year improved but it won't pay an interim dividend, saying the Covid-19 health crisis has resulted in weaker demand.
The stock was trading 5.8% higher at 1,180.00 pence each on Tuesday morning in London.
The FTSE-100 engineering firm also said the separation of Smiths Medical from the rest of the group has been delayed.
Smiths Medical makes products such as catheters, thin medical tubes which can be used in surgical procedures. It was originally set to be demerged by June. However, due to the company making ventilators for the UK government, coupled with uncertainty created by Covid-19, Smiths has decided to delay the separation.
For the six-month period to the end of January, Smiths said continuing operations delivered underlying revenue growth of 3%. Reported revenue increased 8%, including the acquisition of fluid management business United Flexible.
However, for the eight weeks to the end of March, the company recorded disruptions to trading amid the new coronavirus outbreak. Demand, as well as the company's supply chain and production have been hurt. All its manufacturing sites in China have now reopened and are operating at close to normal levels, Smiths noted.
Smiths said it is now implementing cash-conservation methods and has therefore decided not to propose an interim dividend. It however said it will review the decision later in the financial year as trading conditions become clearer. It has also implemented hiring freezes, cancelled discretionary expenditure, and postponed non-essential capital expenditure.
Looking beyond the Covid-19 outbreak, the company said it is well placed to deliver consistent outperformance and is well-positioned in long term, attractive growth markets. It added that it has a strong balance sheet with significant liquidity to see it through the period of uncertainty.
As at the end of January, Smiths had total liquidity headroom of over GBP850 million comprising around GBP250 million of cash and an undrawn revolving credit facility of USD800 million maturing in November 2023. It added that it believes it is eligible to get up to GBP600 million in fundng through the Bank of England's Covid Corporate Finance Facility
"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," said Chief Executive Andy Reynolds Smith.
By Ife Taiwo; ifetaiwo@alliancenews.com
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Smiths Group (SMIN)