Divestments needed if the tech group wants to meet price expectations

 
Elizabeth Fournier
WITH operating margins up 17.4 per cent and a confident outlook for the year ahead, Smith Group’s long-term outlook now depends on its ability to navigate through its restructuring and implement portfolio changes that will bring value to shareholders.

It’s been an unpredictable few years for the technology company, which launched a restructuring plan in 2008 to deliver annual savings of £47m.

The firm’s pension deficit for example – which prompted a precipitous sell-off in March 2009 when its value jumped more than £450m in six months – is now looking more manageable, having fallen from £305m at end July 2010 to £119m by January this year.

But the market expects a disposal – and chief executive Philip Bowman remained reticent today on when that could happen.

Shares in Smiths spiked as long ago as April 2009 on rumours of the sale of its medical arm, but as recently as January the group said it had rejected a £2.4bn offer from Apax Partners for the business.

Though target prices look good, investors should be wary – a failure to demerge would lead to significant downside.