Industrial group Smiths today warned of problems with the firm's medical devices division. The arm, which makes products such as drips and ventilation devices, has been hit by supply chain issues.
The problems with Medical follow a decision to shift manufacturing sites from Hythe in Kent and Germany to lower-cost regions. Shares came off sharply in early trade this morning, at one point 50p, or 5% lower at 899.5 pence.
Medical's sales and margins were at a similar level to the same period last year, the company said. A weak performance in the arm's Critical Care business, due to two supplier issues, offset satisfactory growth in other parts of the division.
The company said: 'Management believes it will take a significant period of time to fully implement a world class supply chain.' Smiths said the problems at Medical were offset by a stronger performances from its Detection and Speciality Engineering divisions.
Smiths said Detection enjoyed strong trading in the six months to 2 February , after contract wins including a deal to supply airports operator BAA with equipment to scan luggage for explosives and liquids across its seven UK sites.
Speciality Engineering, which makes seals and other equipment for the oil and gas sector as well as communications components for aircraft, also reported higher sales and margins. The division accounts for almost half of the group's revenues.
Former chief executive Keith Butler-Wheelhouse, who oversaw the sale of Smiths' aerospace division to General Electric a year ago, stepped down in December. His replacement Philip Bowman, whose previous appointments at Allied Domecq and Scottish Power ended in takeovers by overseas companies, had fueled speculation of a possible break up.
Numis Securities analyst Clive Forestier-Walker said: 'The lack of information regarding the future strategy may also come as a disappointment to some now that the new chief executive has been in position for a few months. However we feel that the share price will continue to be supported by the break-up speculation up to the interims.'
