Diversified technology group Smiths Group (LON:SMIN) said today that it was on course to meet expectations for the full year as better margins and strong cash generation followed in the wake of a programme of operational improvement in the nine months to May 1, 2010. Smiths said trading for the three months to May had been in line with earlier guidance, with improvements in both underlying revenues and headline operating profit margins.

Smiths – whose main operating divisions include Smiths Detection, John Crane, Smiths Medical, Smiths Interconnect and Flex-Tek – develops products and services for the threat & contraband detection, medical devices, energy, communications and engineered components markets.

In the first nine months, Smiths Detection generated underlying growth in sales and profit across its main markets. The company said this reflected a continued strong sales performance in ports & borders and military, as well as a return to growth in transportation. Elsewhere, John Crane delivered operational and margin improvements through a global restructuring programme and other cost saving initiatives. Smith noted that a stronger order book supported an expected return to underlying sales growth in the second half of the year although it was unlikely to be enough to offset declines in the first half.

Meanwhile, improved operating performance at Smiths Medical delivered further like-for-like sales growth, while Smiths Interconnect made steady progress against some challenging end markets. Finally, Flex-Tek continued to see a recovery in recent monthly sales of components to the US residential construction and industrial markets while sales to the aerospace market remain weak.

Smiths noted that cash generation had been strong in the first nine months. Net debt was £991m as at May 1, reflecting the $185m acquisition of Interconnect Devices Inc. in April, the payment of the 10.5p interim dividend in April and foreign exchange translation. Earlier in May Smith closed a euro denominated offering totalling €300m in Senior Notes. The Notes have a seven year maturity and were priced at a fixed coupon of 4.125%. Shares in Smiths have risen steadily from a 12-month low last June of 649p and edged up 1% this morning to 1103p.

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