Smiths Group has opened the door to further acquisitions as the UK conglomerate seeks to join the ranks of the world’s top engineering and technology companies.
The FTSE 100 group agreed this year to acquire a business that makes security systems for airports, border crossings and nuclear power plants from Morpho, the French aerospace group, for $710m.
More deals could be on the cards, according to Chris O’Shea, finance director.
“The acquisition of Morpho Detection is not the limit of our ambitions. I’d be happy to look at something several times that size,” Mr O’Shea told the Financial Times.
Smiths, which started out as a jewellery shop 165 years ago, was long viewed by the City as ripe for break-up due to its disparate collection of businesses. Its products range from X-ray scanners to heating elements and medical infusion pumps.
Instead, an overhauled management that has been in place for a year has promised to build on the wide-ranging portfolio it inherited.
On Wednesday, Andrew Reynolds Smith, chief executive, outlined a strategy for the company to achieve a top three leadership position in each of its market segments, with the possibility of disposals in areas where it is unable.
“We are in build and grow mode and we will be doing some pruning and grafting on the way,” said Mr Reynolds Smith.
“We see a potential road map to becoming one of the world’s leading technology companies, but we have to be more focused in how we invest and improve our competitiveness”.
As part of this, annual research and development expenditure will increase by more than a quarter to above £100m.
The comments came as Smiths revealed that tough conditions in global energy markets dragged on profitability in the year ending 31 July.
Fewer orders of new equipment at its business that supplies mechanical seals and bearings for the oil and gas sector saw group operating margin drop 30 basis points to 17.3 per cent. Smiths said it would look to expand the unit’s sales to customers in other industries such as chemicals, pharmaceuticals and pulp and paper.
Although sales increased at its other four divisions, underlying revenue dipped slightly to £2.95bn after stripping out positive currency effects from the weaker pound. Lower one-off costs, such as writedowns and litigation, led pre-tax profit to rise 6.5 per cent to £346m compared to the previous year.
Andrew Carter, analyst at RBC Capital Markets, sais that the results were better than expected.
Smiths was linked earlier this year with Pfizer’s sale of its infusion pumps unit, reportedly valued at between $1.5bn to $2bn, but executives at the group declined to comment.
Shares in the company rose 3.6 per cent on Wednesday to £14.37, giving it a market value of £5.7bn.