Investment: Aerospace helps to keep Smiths flying
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.SIR ROGER HURN left Smiths Industries yesterday with a flourish. After 22 years at the helm of the aerospace and medical engineer Sir Roger, who is leaving to take over as chairman of GEC, presented a 15 per cent jump in operating profits for his final year in charge. The market duly applauded, lifting the shares 12 per cent to 781.5p.
Despite the gloom in the engineering sector, Smiths was upbeat. Aerospace profits jumped 30 per cent, helped by booming demand from Boeing and Airbus, and a pick-up in activity in the defence sector. The medical division overcame the strong pound to lift underlying profits by 5 per cent. Meanwhile, earnings in the industrial division were up a fifth.
Can Keith Butler-Wheelhouse, who came on board as chief executive two years ago, keep up the good work? He does not need to do anything radical. The aerospace order book is strong, while the pound's recent slide against the yen should help medical exports. The industrial side remains most exposed to an economic downturn, though it is stronger than most of its competitors.
Mr Butler-Wheelhouse will find it hard to improve margins much - they widened again in the aerospace and industrial divisions. But there is scope for acquisitions - Smiths' legendary cash flow means it could spend up to pounds 600m without any trouble.
Market upheaval has made targets much cheaper while European defence restructuring could open the way for a closer relationship with Sextant, Smiths' French rival.
Most of this is reflected in Smiths' share price, which has not suffered as much as the rest of the sector and - after yesterday's jump - trades in line with the rest of the market on a forward p/e ratio of 15.
Still, with broker Morgan Stanley forecasting profit growth of about 6 per cent this year and next the shares remain a solid hold.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments