(Reuters) - Britain’s Smiths Group Plc (SMIN.L) said headline operating profit for the year would to be up to 15 million pounds ($22.68 million) below current expectations, hurt by problems at its Smiths Detection business, sending its shares down 5 percent.
Analysts on average had expected the company to report an operating profit of 562 million pounds for the year ended July 31, according to Thomson Reuters I/B/E/S.
The engineering company said its Smiths Detection unit had identified three contracts whose outcomes were expected to be “materially adverse” to its previous expectations.
Smiths Detection, which accounts for about 17 percent of the company’s revenue, makes sensors that detect explosives, weapons, nuclear and radioactive material, and narcotics.
Smiths Group said the contracts were entered into before 2010.
The company, whose products range from explosive detectors to surgical needles, said it also decided to make additional provisions for costs related to certain legal disputes in the Smiths Detection business.
Investec Securities analyst Michael Blogg said that the 15-million-pound hit for the unit looked like a one-off incident.
“Although this update is negative, it does not fundamentally change our view that this is a group containing high-quality operations, most of which are performing well against mixed market conditions,” Blogg said in a note.
The company is scheduled to report full-year results on September 18.
Smith Group’s shares were down 3.37 percent at 1344 pence at 0805 GMT on the London Stock Exchange.
($1 = 0.6613 British pounds)
Reporting by Karen Rebelo in Bangalore; Editing by Supriya Kurane