September 22, 2017 / 6:19 AM / a year ago

Smiths Group's core revenue slips, shares drop

(Reuters) - British conglomerate Smiths Group (SMIN.L) reported a fall in underlying full-year revenue due to weakness in its energy equipment and service business as well as its medical device unit.

The company's stock fell more than 5 percent, making it the worst performer on London Stock Exchange's FTSE 100 .FTSE index on Friday.

However, sales at its security devices unit rose, cushioning the impact of declines in the bigger businesses.

Smiths said the headline revenue fell 1 percent on an underlying basis for the year ended July 31.

Underlying revenue at the conglomerate’s John Crane business, which serves oil majors BP (BP.L) and Chevron (CVX.N) among others, fell 4 percent to 885 million pounds as tough market conditions persisted.

Delays in new product launches hit the group’s largest unit, Smiths Medical, with underlying revenue declining 3 percent to 951 million pounds.

Analysts were expecting the company’s medical unit to report 962 million pounds in sales, while revenue from the John Crane unit was estimated to come in at 880 million pounds.

“We expect the introduction of new products during the year to support a gradual improvement in Smiths Medical,” Chief Executive Andy Reynolds Smith said in a statement on Friday.

Smiths Group’s reported revenue, however, rose 11 percent to 3.28 billion pounds, helped by a weaker pound as it sells in markets outside Britain.

“Returning revenue to sustained organic growth is arguably the key thing for Smiths to achieve, in our view. Smiths guides for a return to growth in FY18,” Jefferies analyst Sandy Morris, wrote in a note.

Underlying sales in the group’s detection unit climbed 4 percent to 687 million pounds.

To bulk up the division, the company agreed last year to purchase Safran’s (SAF.PA) U.S. Morpho Detection business for $710 million.

The deal closed in April 2017 and the integration was on track, the company said.

Editing by Amrutha Gayathri

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