Smith axes extra 1,450 jobs

SMITHS Group is to shed a further 1,450 jobs, on top of the 1,600 it axed in the autumn, after a slump in the earnings of its civil aviation division. Some 1,200 of the new losses will be in Britain. The move follows a dive in airliner orders from operators whose passenger numbers have declined since the 11 September terrorist attacks on the US.

However, Smiths' defence division was boosted today by a potential $1bn (£715m) order from Boeing for its hose-and-drogue refuelling system.

Chief executive Keith Butler-Wheelhouse said that the six months to January had been 'exceptionally tough' but civil aviation division orders were now picking up and he is 'more confident' about the second half. He said airline load factors had started to improve, the first positive indicator for the industry since September, and the defence and medical divisions have held up well in the US.

Defence equipment now accounts for half of Smiths' sales, and these rose by 20% in the period. Group interim operating profits were down 11% at £201m. Pre-tax profits before exceptionals and goodwill were £173.5m against £199.6m last time and the dividend is unchanged at 8.75p.

The shares rose 19p to 743p. Smiths director Robert White O'Leary was sufficiently impressed by the group's actions to pay out £9,890 today for 1,327 shares to increase his holding to 4,642.

Butler-Wheelhouse said the group was now concentrating on more disposals and on restructuring, and that has led to a reduced cost base. Restructuring of the civil aerospace business incurred exceptional costs of £8m, and further exceptionals of between £35m and £40m are expected in the second half. Margins were 13% on sales slightly down at £1.49bn.

Analysts at Schroder Salomon Smith Barney said the earnings appeared 'a little bit light'.

The Boeing order could be worth $1bn over the next 30 years as the planemaker hopes to build and sell 500 Global Tanker Transport Aircraft. Boeing is negotiating the lease of 100 of the aircraft to the US Air Force and is part of a consortium bidding to supply the flying tankers to Britain's Ministry of Defence. The tankers are also scheduled for delivery to Italy and Japan from 2005.

Boeing today sold its Able division to Smiths for $17.5m plus up to $10m more over the next five years. Able makes the refuelling hose unit used by Smiths for the drogue on the tankers.