Smiths Group demerger delayed and dividend scrapped

Uncertainty caused by the coronavirus means the industrial conglomerate has delayed the separation of its medical unit

Article updated: 31 March 2020 10:00am Author: Ian Forrest

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  • The group reported underlying revenue was up 3% in the period but Smiths also reported accelerating disruption due to the virus towards the end of its first half
  • A range of measures are being put in place to try to reduce costs, including hiring freezes, but the company said it was withdrawing its forward guidance because it was too early to assess the impact of the coronavirus
  • The market reacted positively to the update with the shares rising 7% in early trading
  • Recommendation: Smiths has a relatively strong balance sheet and may well qualify for significant funding from the Bank of England’s new corporate finance facility, so we continue with our Buy recommendation

Industrial conglomerate Smiths Group reported good first half growth today, but also announced it has decided to delay the separation of its medical unit and will not pay an interim dividend due to the uncertainty caused by the coronavirus outbreak. Underlying revenue was up 3% in the period but Smiths also reported accelerating disruption due to the virus towards the end of its first half. A range of measures are being put in place to try to reduce costs, including hiring freezes, but the company said it was withdrawing its forward guidance because it was too early to assess the impact of the coronavirus.

The market reacted positively to the update with the shares rising 7% in early trading, although they have still underperformed the FTSE 100 so far this year. The cancellation of the dividend is disappointing for investors but hardly unexpected and seems a prudent move given the high degree of uncertainty around future trading. The delay in separation of the medical unit, which is producing ventilators for the government, is also a sensible move given the level of market volatility at present. Smiths has a relatively strong balance sheet and may well qualify for significant funding from the Bank of England’s new corporate finance facility, so we continue with our buy recommendation for investors seeking a balanced returned and willing to accept a medium level of risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.

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