Smiths Group fares well in difficult market but remains a ‘hold' for investors

As industrials company Smiths Group reports positive full year results, Helal Miah, investment research manager at The Share Centre, explains what they mean for investors. 

"Smiths Group reported full year revenues up 7% to £3,038m with operating profit also up 7% to £554m. The figures were driven by strong performance from the John Crane oil and gas services business, which saw revenue up 9% and margins increasing to 21.6%, and emerging markets revenues growth of 14%. Emerging markets revenue now represents 15% of group revenue.

"Other areas of the business experienced more moderate growth. New product launches were offset by restrained demand from government backed customers, as a result of the difficult macro environment and spending constraints.

"Investors will be pleased to hear the company continues with its policy of a dividend cover rate of 2.5 times and has therefore announced a final dividend of 26.25p, a 5% increase for the full year.

"The company has a solid free cash flow enabling acquisitions, research and development investment. Investors will be encouraged to see the payoff from previous year's research and development programmes beginning to bear fruit.  However, the uncertain global environment and potential squeeze on government spending, particularly in the US and the Eurozone, is likely to offset these gains. We continue to recommend investors ‘hold' Smiths Group."

For more information, visit share.co.uk.