Shares in Smiths Group sank as much as eight per cent this morning, as the industrials conglomerate reported a 26 per cent drop in pre-tax profit for the year following a “disrupted” few months during the pandemic.
Pre-tax profit for the 12 months to the end of July slumped 26 per cent to £278m, down from £376m in the same period last year.
Operating profit tumbled 23 per cent over the period to £327m, marking an £100m year-on-year drop driven. Smiths said this was driven by lower volumes in the second half, as well as additional costs incurred during the pandemic.
Group revenue climbed two per cent year-on-year to £2.54bn, which the engineering firm hailed as a “robust performance” amid tough market conditions.
Smiths announced it will pay a final dividend of 24p per share, alongside an interim dividend of 11p per share, which was delayed at the outbreak of the coronavirus crisis.
Investors baulked at the 25 per cent drop in total dividend payout for the year to 35p, with shares sinking 7.8 per cent to 1,321p at midday.
Why it’s interesting
The FTSE 100-listed firm withheld issuing guidance for the coming year due to Covid-related unpredictability.
Chief executive Andy Reynolds Smith said he “remains prudent as we continue to navigate the ongoing uncertainty” and the “depth and duration of the Covid-19 pandemic”.
However, the engineering company, which provides medical devices, airport security scanners and industrial engineering parts, said revenue for the four months to the end of August had started “stabilising”, with revenue down five per cent year-on-year.
Smiths said its focus for the coming year will be on safeguarding employees and optimising performance as it undergoes a wide-scale business restructure.
The group booked £55m in write-downs and restructuring costs, with its business overhaul expected to deliver £70m of savings by 2022.
The figure includes expected savings from plans to separate the company’s Smiths Medical division, which remain unchanged.
Reynolds Smith noted the firm’s commitment to issuing dividend payment reflected the strength of the group’s performance during the year and its confidence in the future.
What Smiths said
Andy Reynolds Smith, group chief executive of Smiths, commented:
“The strength and flexibility we have built into the business, and the benefits of the group’s strategic positioning, underpinned a robust performance in challenging market conditions.
We have continued to enhance the group’s strategic positioning, through execution of the restructuring programme, completion of three further bolt-on acquisitions and our unchanged commitment to separate Smiths Medical.
We are seeing a stabilisation of recent trends; but we are not complacent and are continuing to strengthen the business to deliver sustainable outperformance in the future.”