Companies roundup: Smiths Group, IG Design & DFS

Activist investor Engine Capital called for Smiths Group (SMIN) to be broken up.

New York-based Engine, which owns around 2 per cent of the group’s shares, argued in a letter to Smiths Group’s board that the FTSE 100 industrial conglomerate needed to solve an undervaluation problem caused by “structural issues”.

It urged management to “announce a strategic alternatives process” as its current structure means it is “challenging for Smiths to ever be properly valued in the public market”.

Smiths has four businesses – John Crane, Smiths Detection, Flex-Tek and Smiths Interconnect – and trades on 15 times forward consensus earnings. The letter argued that “the fact that Smiths trades at a meaningful discount to its pure play peers in each of its divisions is a powerful attestation that the entire company trades at a sizable discount to its sum of the parts valuation”.

Engine wants the board to consider options including the sale of the company in whole or in parts, potentially through the spin-off of John Crane and the disposal of its other assets. The activist also warned management against getting “distracted” with acquisitions.

In a short response, Smiths said that it “welcomes feedback from all shareholders and continues to have a clear focus on creating shareholder value”. Its shares rose 4 per cent in early trading. CA

Read more: John Baron: Trust investors must stand up to US activists

IG Design craters after geegaw market dries up 

The share price of IG Design (IGR) collapsed after the stationery and assorted novelties manufacturer revealed that trading across both its divisions slumped over the Christmas season, with “DG Americas particularly affected”. Several of its retail customers in the US market are struggling, and have entered protective arrangements or bankruptcy procedures, with the most recent — the fourth-largest customer of the DG Americas division — just re-entering Chapter 11 protection. Companies have been reducing or delaying their forward orders, with the result that the division will book a $15mn (£12.3mn) provision. 

Group revenue for the year ending 31 March 2025 is now expected to be c.10 per cent below last year, while profit is now expected to be around break-even for the period, well adrift of market expectations. And given the severity of the problems, management feels unable to provide guidance beyond its current financial year. 

IG’s share price fell by 59 per cent. MR

DFS boosts profits but warns on future

DFS (DFS) expects profit for the six months to December of £16mn-£17mn – a £7mn-£8mn improvement on the prior year.

The sofa seller reported a 10 per cent increase in orders, ahead of consensus forecasts of 7 per cent and a “weak” market, in which overall volumes were down.

A more downbeat note on the second half, in which it will incur higher employment costs post-Budget, initially sent the shares 3 per cent lower, but they later made a recovery and traded 1 per cent higher. MF

Falling debt allows McBride to bring back dividends

McBride (MCB) is planning to re-establish dividends after making “continued progress” in revenue and profits in the six months to December.

The maker of private label cleaning products said adjusted operating profit was up 8 per cent on the prior year, and net debt had been cut to 1.3 times cash profit, from 1.5 times a year earlier. It also highlighted two new “multi-year” deals to manufacture products under contract for major brands.

Dividends are expected to be re-instated alongside final results, which are due in September.

McBride’s shares jumped by 17 per cent. MF