Engineering giant Smiths Group said that a tightening energy market had eaten into its sales in the first six months of the financial year, but it managed to outperform expectations.
The business reported that pre-tax profit was down 4% to £67 million in the six months to the end of January, with revenue dropping 7% to £1.2 billion.
Part of the hit was due to bad luck on the currency markets, however the business was also struck by the Covid-19 pandemic, which squeezed its oil producing customers.
However, revenue was slightly ahead of an average of analyst expectations, as was operating profit, which was measured at £166 million, compared to the £151 million analysts had forecast.
“This is a robust set of results relative to our end markets, with a resilient top line, good profit conversion and excellent cash generation,” said chief executive Andy Reynolds Smith.
“Whilst economic uncertainty remains, against the backdrop of our robust first half performance and the improving second half trends, the group is confident of meeting market expectations for the full year and delivering long-term sustainable value.”
The company said it had seen a 14% drop in revenue at subsidiary John Crane, which counts oil giants such as Shell and ExxonMobil among its customers.
It said that orders have started to improve after the market was hit last year by volatility in the energy price, and the disruptions caused by the pandemic.
Normally during troubled times some companies postpone maintenance for between six and nine months, Smiths said, and the last year has proved similar.
Another hit sector was Smiths’ aerospace business, which saw revenue drop by 38%. However, the segment only accounts for around £48 million of the company’s overall revenue.
However, Liberum analyst Christian Hinderaker said that the aviation-linked revenues at a separate division of Smiths “proved resilient, delivering 4% underlying growth despite the curtailment of global air travel, as the business worked through its strong order book”.
Smiths’ medical unit, which will be sold by the company before the end of this financial year, saw its revenue rise by 0.2% as its strong growth was held back by doctors deciding to put off elective procedures because of the pandemic.