Smiths Profit Holds Steady Amid ‘Constrained’ Markets

Smiths Group Plc (SMIN), the world’s biggest maker of airport-security scanners, said annual profit held steady, with cost-cutting programs helping offset “constrained” markets for medical equipment and detection devices.

Operating profit of 438 million pounds ($685 million), compared with 436 million pounds a year earlier, London-based Smiths said in a statement today. Revenue increased 3 percent to 2.84 billion pounds, in line with estimates. Adjusted operating profit was 517 million pounds, ahead of a JPMorgan estimate of 511 million pounds.

Smiths installed a new chief at its detection unit to improve profitability and counter the effects of shrinking government budgets. The company aims to generate 40 million pounds in annualized savings by the end of 2014 through an efficiency drive and transferring assembly to local markets, Chief Executive Officer Philip Bowman said on a call today.

“There is a lot of opportunity to improve the business,” Bowman said.

Smiths was little changed at 946 pence as of 8:38 a.m. in London, giving the company a market value of 3.7 billion pounds.

Bowman said it’s “too early” to determine whether there would be job reductions associated with the transfer of assembly capacity.

The outlook for medical equipment and scanners will remain “challenging” in the near term, the company said. Bowman turned down a $3.89 billion offer for the medical-equipment unit in January, saying it failed to value the business properly.

The company forecast growth at its John Crane unit as the order rate for mechanical seals used in the oil and gas industry remains at “strong levels.” That should translate into sales in the first half, Smiths said.

To contact the reporter on this story: Sabine Pirone in London at spirone@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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