Wed. Dec 1st, 2021

The new CEO of Smiths Group has launched a robust defense of the UK company’s conglomerate structure, rejecting the idea that the manufacturer should slim down everything from airport baggage scanners to satellite parts.

Paul Keel, a U.S. executive who held the top job at Smiths in May, said the group’s retention would not saddle up its valuation at a discount, even though GE and Toshiba, two of the world’s most famous conglomerates , this month announced plans to break up.

“There is nothing wrong with this company,” Keel told the Financial Times. “If we can perform better, get a little more growth, we will be one of the most valued in our peer group.”

The claim that Smiths should improve its performance rather than change its structure comes weeks after the group agreed to sell its wrong medical division for $ 2.7 billion.

Keel, a veteran of the industrial sector whose career at GE and 3M has included, said the diversity of his businesses helps protect the company from downturns in any sector.

Paul Keel, Smiths CEO: ‘There is nothing wrong with this company’

He pointed to the success of industrial conglomerates such as Honeywell and Danaher and the countless examples of companies focusing on a single sector that failed.

“The common denominator is not structure. It is not multi-segment or pure-play, ”he said. “The common denominator is achievement.”

However, the new CEO, who replaced Andrew Reynolds Smith, is under pressure to end a period of weak revenue growth. According to analysts at Goldman Sachs, the group has achieved an average annual revenue growth of just 0.3 percent over the past decade.

Keel last week set medium-term earnings targets aimed at annual revenue growth of 4 percent to 6 percent.

Smiths aims to generate between £ 400 million and £ 500 million in extra revenue over the next three to five years through new products such as fiber optic satellite components and lightning-resistant gas pipes. To help achieve this, the group also plans to sell its scanners to port and border authorities and apply its seals to hydrogen and methane projects.

The sale of the medical business was welcomed by investors, but Mark Fielding, an analyst at RBC, said the company would need to show evidence that its performance was improving.

“The market will be skeptical about the price of a growth rate change without evidence, since while there seems to be a positive cultural shift, many of these aspirations are not new to Smiths,” Fielding said.

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