* Co sees spending cuts and medical device tax in U.S.
* First-half underlying headline revenue up 6 pct
* First-half headline pretax profit up 3 pct
* Shares fall as much as 7 pct
By Richa Naidu
March 20 British engineering company Smiths
Group Plc said it expects its second half to be hurt by
slower demand in its core John Crane business, and medical
device tax and increased government spending cuts in the United
Sequestration may muddy the situation, with the July
financial year-end potentially working against the company,
Jefferies & Co analyst Sandy Morris said in a note.
"Despite the fact that over the past five years we've
reduced the percentage of revenue from government contracts from
around 50 percent to 35 percent, we will be impacted by
sequestration in the U.S.," Chief Executive Philip Bowman said
in a post-earnings call.
First-half turnover from the John Crane unit, a maker of
seals, couplings and bearings for customers such as BP Plc
, Total SA and Rolls-Royce Holdings Plc,
grew 4 percent.
But the order book at John Crane - which generates a third
of Smiths' revenue - points to a slower growth rate, with a
similar level of sales in the second half.
Smiths Group, whose products range from explosive detectors
to surgical needles, reported a 3 percent rise in first-half
headline pretax profit to 223 million pounds ($337 million).
Underlying headline revenue rose 6 percent to 1.48 billion
Smiths Medical reported a 2 percent rise in revenue in the
first half, but said profitability was expected to be lower
partly hurt by a tax on medical devices that went into effect in
January in the United States, its biggest market.
The company had said in November that the tax would
constrain sales and margins at its second-largest Smiths Medical
Smiths shares were down about 3 percent at 1285 pence at
0847 GMT on the London Stock Exchange. They fell as much as 7
percent earlier in the day.