Engineering conglomerate Smiths Group (SMIN) falls 10% to £13.82 as it reports a weaker than expected first half performance.
The company has reiterated full year guidance, but the market knows from bitter experience that companies often fail to make up lost ground in the second half with a profit warning the end result.
AJ Bell investment director Russ Mould says: ‘Investors must be careful with firms which talk about profits being more second-half weighted than usual as it tends to mean management needs several things to drop right just to meet forecasts, let alone beat them.’
This risk seems particularly elevated at Smiths given the acknowledged headwind it faces from currency movements.
Pre-tax profit in the six months to 31 January is down 12% to £217m against expectations for £283m. A 4.3% fall in revenue to £1.55bn is also short of the £1.59bn expected.
Although profit was hit by a charge of £56m relating to US tax reforms it was also depressed by weakness in its core divisions.
Smiths is a diverse collection of businesses providing everything from sensors for explosives to hospital equipment and oil services. There have frequently been calls for the business to be broken up or certain assets to be sold which have largely been resisted by management.
