UPDATE 1-UK's Smiths posts weaker-than-expected H1, reaffirms 2018 guidance

By Justin George Varghese

March 23 (Reuters) - British engineering company SmithsGroup reported a lower than expected first-half profiton Friday, hit by weakness in its core businesses, sending itsshares down as much as 11 percent.

Smiths, a provider of hospital equipment, industrialservices and sensors to detect explosives, said pretax profitfell 12 percent to 217 million pounds ($306 million) for the sixmonths ending on Jan. 31, missing analysts expectation of 283million pounds, according to Thomson Reuters data.

Revenue fell 4.3 percent to 1.55 billion pounds, alsofalling short of expectations of 1.59 billion pounds.

Shares of the company fell as much as 11.1 percent at 0834GMT, their lowest since November 2016. However, the company keptits expectations for the year unchanged.

Delays in new product launches have hit the FTSE 100 firm'slargest unit, Smiths Medical, with revenue at the divisionfalling 5 percent to 451 million pounds.

Underlying revenue at the John Crane division, its secondbiggest, which serves oil majors BP and Chevronamong others, fell 2 percent to 428 million pounds.

Analysts at Jefferies said in a note Smiths "is long overduesome assistance from its major end markets in returning to andsustaining organic sales growth."

"Current trading, the strong order books in John Crane andSmiths Detection, as well as the substantial ongoing programmeof new product launches in Smiths Medical, support ourconfidence that the group's growth rate will accelerate over thebalance of the year," Smiths said in a statement.

The company has been in the process of reorganising JohnCrane by divesting struggling businesses with an exposure to oilprices, in an effort to boost margins.

Five businesses, including bearings, were sold at thedivision, raising about 200 million pounds.

Smiths reaffirmed its 2018 full-year outlook, but added thatforeign exchange, at current rates, will remain a headwind forthe year.

"Delivering the now expected 8 percent organic growth and 70basis points year-on-year margin improvement in the second-halfis key to the investment case going forward, in our view,"analysts at Credit Suisse said, keeping its 2018-2020 forecastson Smiths unchanged.($1 = 0.7088 pounds)(Reporting By Justin George Varghese in Bengaluru; Editing bySunil Nair and David Evans)