The problem with the conglomerate model is that if you operate a number of businesses, often they will be travelling in different directions at different times. Smiths Group has five profit centres. Three are doing well, one noticeably so. One is recovering fast — and one is still acting as a drag. Guess which one the market focused on?
Add to this the damage from sterling, given that almost all the earnings come from overseas, and you have two reasons to turn negative. The adverse effects of the high pound took £43 million off operating profits, or almost 8 per cent of the total as reported, in the year to the end of July. This left the shares 81p lower at £12.68.
The weak point