This week I am taking a closer look at the global technology company, Smiths Group, 18 months on from the change of its top management team. The group operates across five separate divisions that provide a range of products and services including mechanical seals to the energy services sector, speciality medical devices for hospitals, electrical components for power applications and devices for detecting explosives and other threats.
With several parts of the business operating in difficult sectors and a meaningful exposure to the oil and gas industry, Smiths Group has certainly had a difficult few years with declining sales and very little organic growth.
Following a profit warning in 2014, Smiths Group welcomed their new CEO, Mr Reynolds Smith (previously of GKN) to the helm in September 2015. Along with a new CFO, Mr O’Shea, the new team brought with them hopes of reenergising the business without the need to split up the various divisions. Management took this opportunity to conduct a thorough strategic review which has resulted in a new focus on improving cash generation, margin improvements and using the combined strength of the Group in order to drive ongoing growth.
So has the new strategy paid off? Eighteen months on and already there have been encouraging signs of simplifying the business with sales of several of the non-core and loss-making assets to free up cash to invest in key growth areas. The company has performed reasonably well since the change of management and has reported revenue growth across four out of five divisions throughout 2016, although there was a decline for the group as a whole. Despite these initial improvements, the business continues to face considerable challenges due to ongoing concerns about government spending and the outlook for the oil and gas industry.