(Reuters) – Smiths Group Plc expects a 2 percent drop in full-year revenue at its medical unit, hurt by some products losing certifications under a new regulation and the loss of two contracts in the United States, it said on Wednesday.

Shares of the company fell more than 7 percent in early trade, making it the worst performing stock on London’s bluechip index.

The engineering company’s overall underlying revenue rose 3 percent in the eleven months through June, as its second-half growth accelerated, it said.

Smiths, a provider of hospital equipment, industrial services and security sensors, said excluding the medical unit, which is its largest, full-year performance would be in line with expectations.

The company said its second biggest division, John Crane, which serves oil majors BP and Chevron, and other units delivered a good performance.

The company had been in the process of reorganizing John Crane by divesting struggling businesses with an exposure to oil prices, in an effort to boost margins.

Smiths Group reported a lower-than-expected first-half profit in March, hit by weakness in its core businesses, with delays in new product launches hitting Smiths Medical.

Smiths, which is in talks about a potential combination of its medical division with U.S.-based ICU Medical Inc, said there was no certainty that a transaction would be concluded.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri)