Smiths Group, the technology business whose products range from bomb detectors to medical equipment, is tipped as a breakup candidate every now and then.
Its medical business in particular has been seen as a possible candidate for demerger. But following the release of the group's results, broker Investec reckons there is an obstacle to such a move. Analyst Michael Blogg said net debt had come in at £791m, some £80m less than expected, but added:
On the other hand, the net pension deficit climbed to £620m, from £199m a year earlier. This is the major impediment to any group breakup or significant disposals (Medical would otherwise be the obvious candidate). In the circumstances, growth to support the dividend stream is the most tangible prospect for shareholders.
As for the figures themselves, Smith reported a 7% rise in full year profits to £497m. Blogg said:.
Smiths has exceeded our and consensus estimates for 2012 and its outlook statement is reasonably upbeat, expecting payback from investment programmes and further operational improvements. There is some modest scope for upgrades, although caution is still required.
He has a hold rating on the shares, which have climbed 17p to £10.59.
