Smiths Group upgrades guidance as installation sales soar

Smiths Group shares topped the FTSE 100 risers on Wednesday after the John Crane owner upgraded its annual revenue guidance.

The engineering business now anticipates its organic sales to grow by 5 to 7 per cent this financial year, compared to a prior forecast of 4 to 6 per cent.

It also expects operating profit margins to increase by 40 to 60 basis points, having previously just said there would be ‘continued margin expansion’.

Smiths Group shares rose 10.6 per cent to £16.84 by midday on Wednesday.

In the three months to 1 November, the London-based company recorded a 15.8 per cent rise in organic turnover thanks to growth across all four main business divisions.

Organic sales jumped by double-digit percentage levels at its Smiths Detection arm, which manufactures airport security scanners, and Smiths Interconnect, a supplier of microprocessors and graphics chips.

The firm said the former division’s performance reflected ‘high levels of installation activity’ and a large order book at the beginning of the year.

Meanwhile, the latter segment’s revenue jumped by over 30 per cent as its semi-test business was boosted by a strong rebound across semiconductor markets.

Roland Carter, chief executive of Smiths Group, also said the company benefited from a good result in the US, where it earns around 45 per cent of total turnover.

‘Our strategy to deliver profitable growth from secularly attractive markets continues to drive our performance,’ he added.

Carter was appointed CEO in March after three decades working for the company, including six years as president of Smiths Detection.

On the same day he took over, Smith Group announced a £100million share buyback programme as part of its half-year results.

Having completed an initial £50million tranche, Smiths Group is commencing the second half of the scheme but intends to spend an extra £50million repurchasing its stock by the end of the fiscal year.

Analysts at Stifel said Smiths Group’s trading update was ‘impressive’ and ‘should be clearly positive to a share price that has been languishing’.

They added: ‘We also note that Smiths looks well-placed for new geopolitical realities – low exposure to China, big dollar earner, big hydrocarbon end markets, and largely local-for-local in its markets.’

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