SMITHS GROUP PLC (Reuters) - British engineering conglomerate Smiths Group Plc (>> Smiths Group plc) reported a steep fall in full-year profit and said it was not planning to sell its medical unit.
Shares in the company fell as much as 7 percent, making the stock the biggest loser on the FTSE-100 <.FTSE> index.
Smiths, a maker of industrial seals, medical devices and security detectors, has been restructuring to cut costs and streamline its diverse business as it struggles with weak demand and government spending cuts.
"We are not seeking to divest any of our businesses as part of our restructuring," Chief Executive Philip Bowman said on Wednesday.
The 163-year-old company has twice attempted to sell the medical unit, which makes syringes and catheters and is the company's second-biggest revenue contributor.
Margins at the unit have been falling due to pricing pressures and lower healthcare spending, prompting calls for the division to be sold.
The latest attempt to sell the unit fell through in last August after Smiths failed to agree on terms with the bidder, which a source said was U.S. healthcare company CareFusion (>> CareFusion Corporation).
Full-year revenue at medical unit fell 5 percent to 804 million pounds, while margins fell to 19.8 percent from 22.2 percent.
Smiths has been focusing on reducing its dependence on government spending and increasing its share of commercial business. The group has also been increasing its exposure to emerging markets, which now account for 16 percent of sales.
FULL-YEAR DISAPPOINTS
Headline operating profit for the year ending July 31 fell 10 percent to 504 million pounds due to a sharp decline in margins at its detection unit and pressure from a strong pound.
Full-year revenue fell 5 percent to 2.9 billion pounds.
Smiths, which generates about 95 percent of revenue from outside the UK, has been hurt by the strength of the pound, which has risen 11 percent against the U.S. dollar
Margins in the detection business, which makes sensors to detect explosives, chemical agents and biohazards, slumped to 4.8 percent from 10.4 percent a year earlier, partly due to lower volumes and additional costs.
The unit is heavily dependent on government customers such as the U.S. Transportation Security Administration and the U.S. and UK defence departments.
The company said it continued to remain cautious about healthcare and homeland security - sectors that are subject to government funding constraints.
"The most disappointing division continues to be detection, with EBITA of 25 million pounds, considerably lower than our 43 million pounds forecast.." UBS analysts said in a note.
Morgan Stanley analysts said they expected estimates to come down 2-3 percent on the back of detection business' estimates revision.
"The muted outlook statement suggests that this will be another year of hard work, with payback likely over a longer period," Investec analyst Michael Blogg said in a note.
Smiths shares were down 5.3 percent at 1277 pence at 1240 GMT (01:40 p.m. BST). The stock has risen 10 percent since hitting a year-low in mid-July.
(Editing by Gopakumar Warrier and Saumyadeb Chakrabarty)
By Aashika Jain and Roshni Menon
