Smiths Group investors to enjoy £118m windfall as takeover targets are scarce

Smiths Group revealed investors will receive a special dividend on top of its normal payout after failing to find suitable takeover targets – although it insisted it is still on the hunt for acquisitions. The industrial group reported broadly flat pre-tax profits of £498m in the year to the end of July, while revenues edged up two per cent to £3.1bn despite a “difficult trading environment”.

The conglomerate, which makes components for products ranging from car paint spray guns to emergency ventilators used by paramedics, said it remains cautious on defence and healthcare spending, where squeezed government funding continues to bite.

But Smiths sees more growth arising from heightened security concerns, energy demand, the need for fuel-efficient aircraft and stronger US housebuilding. Shares in the company climbed three per cent on the cash windfall to make it the biggest gainer on the FTSE 100 Index. Smiths, which has spent about £600m over the past six years on acquisitions, said it has not found targets which meet its criteria over the past 18 months.

Chief executive Philip Bowman said the group’s “strong and stable cash flows are more than adequate to meet the immediate needs of the business”. The 30p per share or £118m special dividend is on top of a total dividend for the year up four per cent to 39.5p per share.

The company said it spent £121m on research and development during the year, up from £117m. Innovations include a low-energy X-ray scanner which detects explosives, drugs, stowaways and contraband hidden in cars, while allowing drivers and passengers to remain in their vehicles. The group is increasingly shifting its focus from governments to commercial customers and emerging markets.

Yorkshireman Sir George Buckley is deputy chairman and will succeed Donald Brydon as chairman of the group when he retires in November.