The world's biggest maker of airport and port scanners cheered shareholders with a £118 million windfall after struggling to spend its warchest.

Smiths Group revealed investors will receive a special dividend on top of its normal payout after failing to find suitable takeover targets - although it insisted it is still on the hunt for acquisitions.

The British industrial group reported broadly flat pre-tax profits of £498 million in the year to the end of July, while revenues edged up 2% to £3.1 billion despite a "difficult trading environment".

The conglomerate, which makes components for products ranging from car paint spray guns to emergency ventilators used by paramedics, said it remains cautious on defence and healthcare spending, where squeezed government funding continues to bite.

But Smiths sees more growth arising from heightened security concerns, energy demand, the need for fuel-efficient aircraft and stronger US housebuilding.

Shares in the company climbed 3% on the cash windfall to make it the biggest gainer on the FTSE 100 Index.

Smiths, which has spent about £600 million over the past six years on acquisitions, said it has not found targets which meet its criteria over the past 18 months.

Chief executive Philip Bowman said the group's "strong and stable cash flows are more than adequate to meet the immediate needs of the business".

The 30p per share or £118 million special dividend is on top of a total dividend for the year up 4% to 39.5p per share.

The company said it spent £121 million on research and development during the year, up from £117 million.

Innovations include a low-energy X-ray scanner which detects explosives, drugs, stowaways and contraband hidden in cars, while allowing drivers and passengers to remain in their vehicles.

The group, which employs about 23,200 staff globally, is increasingly shifting its focus from governments to commercial customers and emerging markets. Sales to developing economies grew 14% during the year and now make up about 16% of its revenues.

Its detection division grew sales 8% to £559 million, with strong growth across transport, ports, borders and military sectors more than offsetting weakness from critical infrastructure and emergency services. But profits at the division were 16% lower to £58 million after it warned in July about three troublesome contracts for detection gear.

Its John Crane division, which serves customers such as oil giant Shell with products including seals and filtration systems, grew underlying sales 1% to £986 million as demand from emerging markets increases. Profits were 10% higher to £231 million.

But its medical arm, which makes products such as pipettes and needles, saw underlying revenues fall 1% to £850 million, with profits 7% lower to £189 million.

Smiths said the division will remain under pressure in developed markets such as the US, hurt by falling government spending and high unemployment.

Based in London, Smiths has around 2,000 staff in the UK, including major sites in Watford, Ashford, Slough and Manchester.

Investec analyst Michael Blogg said: "We believe that the group is fundamentally undervalued and today's statement might begin to wake up investors to the potential, even without major disposals."