A couple of months ago I noted on the multinational diversified engineering company Smiths Group (SMIN) that you could see why the share price was ‘kicking around the £17 level a number of times from mid 2017’. And hence my perception back in March was that it was worth waiting for a ‘couple of bad days back below a £15 share price’ which would justify a buy. Whilst the share moved up during April, it then has moved down in May. A latest announcement observed that ‘Smiths Group plc announces that, after an extensive search process by the Nomination Committee of the Board, Paul Keel has been appointed as the Group's Chief Executive Officer and to the Board’. Well good luck to him especially as he has taken on the role with immediate effect, highlighting his role at 3M Company ‘between 2004 and 2020 within the US and UK’.
Unsurprisingly, Smiths also announced that ‘Andy Reynolds Smith will step down from his position as Chief Executive Officer and from the Board with immediate effect’. Such a change has been ‘mutually agreed as the right time to provide new leadership as Smiths enters into its next growth phase’. Management changes happen all the time, although the evolution happening immediately usually means the new candidate can immediately move and sufficient cash payment will ensure the exiting CEO will move on. No surprise that the board’s chairman - who no doubt helped drive much of this decision - continued that the new CEO ‘has a strong track record of delivering results in other innovation-led and diversified global industrial technology businesses’. Nor that the latter himself observed that the ‘deep engineering capabilities and proven business model position it well for continued success...I look forward to moving back to the UK’.
As for the company’s performance, since the views above a couple of months ago ‘there is no change to the comments on current trading...and our expectations for the full year remain unchanged’. For a business with such a range of exposures including its Detection business in airport security screening, John Crane with oil & gas plus wider industrial applications, Flex-Tek with heat and move fluids and Interconnect with exposure to the semiconductor and defence businesses, if would be no surprise if there was an attempt to break the business up. After all there is the Medical business which it is spinning off within the next six months. It certainly will be interesting to see what the new CEO thinks.
On this basis I expect a further trading update in late June and a full year results presentation on the 28th September. Further progress in this business in the next set of numbers will be able to bring the forward EV:ebit down from over x16s times and a dividend yield of over 3%. The announcement of the CEO shift here helps raises the scope that there would be more ongoing shifts. Let’s see what he thinks, especially in the full year update in September. I do think there would be more surprises here and at/around a fifteen quid share price I would Buy.
Filed under: Smiths Group, Vast Resources, [email protected] Capital, Revolution Bars, housing market, Playtech
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