UK engineering firm Smiths Group’s aerospace operating profit fell 4% on increased research and development costs in the first six months of its 2005-06 financial year, as sales rose one-tenth.
Smiths today recorded a 22% increase in group headline operating profits to £194 million ($337 million) for the six months ending 31 January 2006, on the basis of a 22% increase in group sales to £1.59 billion.
Within its aerospace operations, sales rose 10% to £559 million. But headline operating profit was 4% down at £43 million.
“Profitability was held back by an increase in development costs charged to profit. Additionally, UK exports in this period had been secured at less favourable exchange rates than in the prior period,” the company says.
The company has raised its research and development investment levels, notably relating to the Airbus A380, Boeing 787 and Boeing 767 tanker programmes. It adds demand from airline customers for spares and repairs “remains healthy”.
“The outlook for Smiths Aerospace is for sustained growth and increased returns, driven by positive market dynamics and by the increase in business resulting from research and development investment to secure new contracts in both commercial and defence sectors,” it says.
The company reported a bright performance in its detection business, as revenues and profit rose 12% to £171 million and £25 million respectively. “Sales to transportation and airport authorities, accounting for one third of the division’s total, increased steadily and new business secured in this period will sustain growth ahead,” it says.
Commenting on the group’s first half performance, Smiths chief executive Keith Butler-Wheelhouse says: “We have improved the operating margin, generated a robust cash-flow and stepped up our investment to drive future sales and profits. Market conditions are positive and we expect to sustain the pace of growth through the second half.”
GRAHAM DUNN / LONDON
Source: Flight International
