By Aashika Jain
(Reuters) - British engineering company Smiths Group Plc (LSE:SMIN) declared a special dividend and announced a restructuring programme to save 50 million pounds ($80 million) a year, sending its shares up as much as 4.7 percent.
The company, which makes mechanical seals, power transmission couplings, medical devices and equipment to detect explosives, said it continues to be cautious about sectors such as defence and healthcare that are subject to government funding.
"Government funding remains constrained.. We are reducing our dependence on government projects to closer to 30 percent from above 50 percent earlier," said Chief Executive Philip Bowman.
Smiths Group said it expects margins to benefit from the planned restructuring.
Operating margins have been under pressure, particularly at its medical and detection units. The operating margin at its detection unit, which makes sensors to detect explosives, weapons, nuclear and radioactive material and narcotics, fell to 10.4 percent for the full year from 13.3 percent a year earlier.
Operating margin at its medical unit, which supplies equipment to hospitals and emergency services, fell to 22.2 percent from 23.5 percent due to budget cuts and an increase in tax on medical devices in the United States.
The United States imposed a 2.3 percent tax on manufacturers of medical devices as part of the Affordable Care Act, popularly known as Obamacare, from the beginning of this year.
Smiths Groups' operating profit rose marginally to 560 million pounds ($890.54 million) in the year ended July 31 from 554 million pounds a year earlier. Revenue rose 2 percent to 3.1 billion pounds.
"We believe Smiths has acquitted itself creditably, but we recognise that if the global economic recovery gathers momentum Smiths may remain fettered to a degree by Sequester and so could start to lag behind its peers," Jefferies analysts wrote in a note to clients.
Smiths' shares were up 3.4 percent at 1421.36 pence, making them one of the top percentage gainer on the FTSE 100 index. ($1 = 0.6288 British pounds)
(Reporting by Aashika Jain; Editing by Supriya Kurane)