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Flex-Tek profits hit by US downturn

Ducting, hosing and HVAC specialist Flex-Tek is looking to develop opportunities in non-construction markets after being hit by the US housing market slump according to parent company Smiths Group.


The engineering giant reported its interim results for the six months up to February showed overall sales and operating profits up by seven per cent on last year.


The Specialist Engineering division – including Flex-Tek - saw operating profits up 10 per cent to £66 million, but, in his report on the results Philip Bowman, Smiths Group Chief Executive, said Flex-Tek faced particular challenges.


But, Mr Bowman said: “Flex-Tek will be held back by the ongoing uncertainty in the
US residential construction market.


“It has been adversely affected by the
US housing recession, but has the opportunity to expand its non-construction business, reduce costs and rationalise its production sites.”


Flex-Tek, which has manufacturing bases in the
UK and across Europe alongside its US operation, could also look to exploit the growth potential in Asia. Yesterday, the company announced it had won contracts worth $18 million to provide technology on the new Boeing 787 Dreamliner.


This will go some way to counteracting the negative impact of the housing downturn on the last six months of business. Mr Bowman said: “Flex-Tek’s sales remained flat while profit declined. Sales of fluid distribution components and services for commercial and military aircraft helped to offset the impact of the decline in the
US residential construction market.


“During the period, Flex-Tek completed the reorganisation of its tubular systems business with a relocation and consolidation of manufacturing in
Tennessee. This project will cut costs and
improve customer service.


“The challenge is to reduce costs and position this business to deliver future value when its main markets improve.”


Since the beginning of the year Smiths Group has made several acquisitions including the heating element division of HVAC specialist Fast Heat for $18m plus industrial manufacturers
Indufil BV and Fiber Composite Company Inc - subject to approvals


Mr Bowman said: “Since joining three months ago, I have begun a thorough review of operations
and I find a business that has many strong positions in growing markets.


“There are significant opportunities to improve performance progressively over a two-year period.


“Smiths will focus on margin improvement, top line growth – especially in developing markets – and financial returns. There is also scope to grow the business through bolt-on acquisitions, such as Indufil and Fiberod.


“Going forward, I believe there are clear opportunities to grow Smiths and improve returns for shareholders.”