British engineering firm Smiths Group will spin off its struggling medical business and list it separately on the London Stock Exchange, the company said today.
Smiths had unveiled plans for a demerger in November after a proposed sale of the healthcare unit to US firm ICU Medical fell through.
Read more: Smiths Group to spin off medical unit
But the company today said it expects to complete the process in the first half of 2020, subject to shareholder approval.
Chief executive Andy Reynolds Smith said: “Pursuing a demerger of Smiths Medical will lead to two stronger companies each focusing on accelerating the execution of their plans and maximising the opportunities in their respective markets.
“With sustained operational improvement and investment, both Smiths and Smiths Medical are well positioned to capitalise on their leadership positions and new products.”
Smiths, which manufactures a range of products from hospital equipment to airport security scanners, said it has begun the search for a chief executive of the new spin-off firm.
Russ Mould, investment director at AJ Bell, said the demerger was unsurprising, as the medical division did not fit well with the rest of the group.
“Separating business divisions can help the parent company be leaner and meaner, and for the orphaned operations to have a new life of their own with potentially more entrepreneurial decisions by management,” he said.
But he added: “As a standalone business, one cannot rule out Smiths Medical being subject to further takeover interest down the line.”
The move came as the company posted a two per cent rise in revenues to £1.6bn in the first half to the end of January.
But pre-tax profit dropped 13 per cent to £174m, dragged down by poor trading in the medical division, which the firm said had been hit by regulatory and contract challenges.
Smiths maintained its forecast of underlying revenue growth of at least two per cent for the full-year. Shares in Smiths Group ticked up just over one per cent in early trading.