Aerospace to medical equipment engineering group Smiths yesterday scotched market rumours that it is on the brink of being broken up.
There was "no substance" to the speculation, chief executive Keith Butler-Wheelhouse said after announcing a rise of nearly fifth in the group's interim pretax profits.
Analysts had claimed that Smiths, which has major opera-tions at Wolverhampton and Cheltenham, could be split up if its aerospace and medical divisions failed to improve. Aerospace yesterday reported a ten per cent rise in half-year sales at #559 million but said operating profits for the period dipped by four per cent to #43 million because of higher development costs.
Medical, whose products include anaesthetic and monitoring devices, produced a 50 per cent rise in sales at #355 million following an acquisition in March last year, and an operating profit 61 per cent ahead at #61 million.
Commenting on the break-up speculation, Mr Butler-Wheelhouse said: "There is no substance to this at all. We consider our performance has been good over the years in terms of shareholder value, with growth at the top and the bottom line."
Smiths, which employs 7,200 people in the UK, is headquartered in London with centres at Cheltenham, Wolverhampton, Watford and Hythe in Kent.
The group, which supplies avionic systems to the world's major aircraft manufacturers, is heavily involved with projects such as the Airbus A380 and Boeing 787 Dreamliner airliners and the Boeing 767 Tanker. Unlike British aero engine manufacturer RollsRoyce, it emerged well from the recent US government defence review as funding for key programmes such as the F-18, F-22 and the F-35 JSF combat aircraft, the C-17 and C130J transporters and the Apache Longbow helicopter maintained.
Smiths Detection, a leading supplier of equipment which helps identify dangerous and illegal materials, also had a good first half. Sales and operating profits rose by 12 per cent to #171 million and #25 million respectively.
Speciality Engineering, the group's fourth division, yielded a 14 per cent rise in sales at #504 million and a 21 per cent increase in operating profit at #64 million.
Group headline pretax profits for the six months to January 31 rose by 18 per cent to #183 million on sales 19 per cent ahead at #1.59 billion.
Underlying operating profit rose by 22 per cent to #194 million, a performance broadly in line with City expectations.
Cash generation for the period was strong with operating cashflow of #174 million representing a 90 per cent conversion from same-basis profits.
Free cashflow after interest and tax but before acquisitions and dividends rose by 158 per cent to #93 million.
Smith raised its interim dividend 6.5 per cent to 9.85p a share.
"We have improved the operating margin, generated a robust cashflow and stepped up our investment to drive sales and profits," Mr Butler-Wheelhouse said. "Market conditions are positive, and we expect to sustain the pace of growth through the second half. The dividend increase reflects the board's confidence Smiths will continue to perform well."