Smiths Group is in the business of spotting risks as it sells cargo and luggage scanners to dozens of transport clients, but the FTSE 100 giant has failed to foresee a downturn in demand.
Shares in the maker of security, medical and energy equipment today slumped as much as 4% after it warned profits will be £25 million lower than expected. Smiths, led by chief executive Philip Bowman since 2007, blamed “challenging trading conditions” and a fall in underlying sales in Smiths’ detection division.
The group is taking a £12 million “charge” following an internal review of practices and inventories, and there have been other setbacks.
Smiths added it has recently appointed a new top executive to head the detection division to sort out its “shortcomings” and boost sales and margins. However, it could take 18 months to address the problems. The company maintained profit across the rest of the business was in line with expectations.
Analysts at Espirito Santo said the problems in the detection business showed “Smiths is a difficult business to manage”.
However, Jefferies was more upbeat, and suggested that part of the volatility in the shares has been caused by merger speculation following the Pfizer-AstraZeneca talks.
The shares today eased 14.8p, or 1.1%, to 1300p.
