Bottom Line: Time is running out for turnaround plan
SMITHS Group is on borrowed time. The only industrial conglomerate left in the FTSE 100, its shares have been buoyed by ongoing hopes that the five-division firm, whose diverse interests range from medical devices to engineering, would be broken up and sold off.
The example of similarly diversified firm Invensys, which sold off its rail division and then last year was snapped up by Schneider Electric for £3.4bn, has helped fuel investors’ hope.
Then last year Smiths turned down what was rumoured to be a £2bn plus offer for its medical division from US-based CareFusion, a decision chief executive Philip Bowman insisted yesterday that he did not regret. “In order to sell something, you have to believe that an offer is deliverable and represents value. We didn’t believe it did,” he said.
Yet it was this division that, alongside a strong pound, dragged down the firm’s first half profits and revenues as the full impact of the medical device tax in the US took its toll.
Yet Bowman yesterday made it crystal clear that he had no plans to break up the firm as he detailed its strategy to grow organically via new products and expansion.
He insisted that this, alongside cutting costs, would deliver shareholder value.
The 3.7 per cent fall in its shares yesterday suggested they were not convinced.
If Smiths doesn’t demonstrate its strategy will kickstart growth and soon, then the shares are likely to fall even further.