Smiths Group PLC is a global technology company headquartered in London and listed on the London Stock Exchange. The company is organized into five segments: Smiths Detection designs and manufactures sensors that detect and identify explosives, narcotics, weapons, chemical agents, biohazards and contraband; John Crane is a segment that provides mechanical seals, seal support systems, engineered bearings, power transmission couplings and specialist filtration systems; Smiths Medical, provides medication delivery systems, vital care products and safety devices that prevent needle-stick injuries and reduce cross-infection; Smiths Interconnect, builds specialized electronic and radio frequency components and sub-systems that connect, protect and control critical systems, and Flex-Tek, which engineers components that heat and move fluids and gases, flexible hosing and rigid tubing.
With the exception of Smiths Detection, the company's segments are correlated with overall global economic health. Due to the recovery from the recession between 2008 and 2010, the company has seen improvements in its revenue and net income. Smiths Detection has not seen any improvements due to continued delays to orders despite all-time high demands from the airport security business. Smiths Detection, which makes up around 20% of the company's revenues, is highly dependent on the demand from the security industry. The global presence of the company serves as a hedge against bad economic times in certain countries, but also increases risk due to changes in currency values.
The threat of terrorism jumped to the forefront of American foreign policy and defense spending after September 11, 2001. Since that time, defense spending has increased nearly $200 billion in order to pursue wars in Afghanistan and Iraq, but also to secure the US borders and ensure the safety of air travel and international shipping. SMIN's products are sold to governments and government contractors around the world to assist in the noninvasive X-ray screening of cargo, travelers, and vehicles. The company is highly exposed to the forces that govern government spending and any decreased allocations for port, air cargo, or other shipping security would pose a significant challenge to Smiths Group's continued success.
The U.S provides nearly 50% of all of the company's revenues. The remaining 50% is distributed among more than 30 countries in a diversified manner. With the exception of the U.S, no other country generates more than 5% of the company's total revenue. Business is conducted in a variety of global currencies, and changes in currency values are a risk to revenue. The devaluation of the US dollar versus other currencies makes doing business in other countries more expensive in US dollars, but also made revenue abroad worth more in US dollars. Because SMIN makes the majority of its revenues from the US, a increase in the value of the dollar raises revenues when measured against the company's home currency of the british pound.
Since Smiths is a diversified technology firm, different divisions in the company face different competitors. In addition, the competitors do not offer very similar products, improving the competitive background of Smiths' industries.