British technology company Smiths Group said tighter government spending would affect its sales growth and it would therefore focus on squeezing more costs out of the business to improve margins.
Smiths' customers include the US Department of Defense, the UK Ministry of Defence and airports operator BAA.
"The economic environment remains uncertain and delivering sales growth in the short to medium term is likely to remain challenging," it said in a statement as it reported results for the year to 31 July.
The company, whose products range from airport scanners and bomb detectors to medical devices and fuel hoses, reported a better than expected 17 per cent increase in headline pre-tax profit to £435m on sales of £2.77bn.
Smiths said it had cut costs by £21m and was planning a further £20m, while it was planning to increase its "footprint" in emerging markets.