Alarms sounded at airport scanner-maker Smiths Group today, when half-year profits at its health division plummeted 18%, causing shares to drop almost 7%.
The FTSE 100 engineering firm, whose products range from surgical needles to electric car batteries, said that although work for commercial clients made “good progress”, government contracts and healthcare “continued to face challenging trading conditions.”
In other words, its medical devices business, which makes machines to administer anaesthetics and oxygen to patients undergoing surgery, hasn’t made Smiths as much money as in the past.
The engineer blamed “sluggish procedure volumes” — the economic downturn has made potential-patients defer procedures to avoid taking time off work or paying for them — as well as the impact from a medical device tax introduced in the US last year.
Smiths added that the 4% fall in revenues at the medical devices business was thanks to the “inevitable disruption” of a takeover approach, thought to be worth as much as £3 billion, from US healthcare rival CareFusion.
Overall, Smith’s pre-tax profit for the six months to February fell 4% to £215 million. “Lacklustre” was the verdict of Sandy Morris, analyst at Jefferies. “The first-half results confirm what we already knew — it’s not easy out there.” Shares fell 90p to 1261p.
