Smiths Group Plc · LSE:SMIN
Smiths — Investor Day (June 2011)
40 slides from Smiths's investor day presentation, Jun 28, 2011
Slide 1: Smiths Detection Investor Day, New York
Smiths Detection New York June 28, 2011 www.smiths-medical.com Smiths Detection Investor© Day, New 2011 by York Smiths – June Medical: 2011 Data Proprietary | 1
Slide 2: Forward-looking statements
This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other thin
Slide 3: Introduction to Smiths Detection
Introduction to Smiths Detection Philip Bowman Smiths Detection Investor Day, New York – June 2011 | 3
Slide 4: Observations on Smiths Detection
Observations on Smiths Detection Operates in growth markets – phasing heavily affected by external influences Changed market & competitive landscape requiring improved responsiveness Strong technology position – need to align investment with customer needs Need for focus on processes, management dat
Slide 5: Immediate key initiatives
Immediate key initiatives Reviewing organization and processes to match customer requirements Better management information systems to support specific functions Program to reduce fixed costs substantially Value engineering project will reduce product costs and strengthen margins Exciting growth opp
Slide 6: Business profile
Business profile The world leader in the provision of Government regulated systems to detect and identify CBRNE* materials and other dangerous or illegal objects, for homeland security and the military Market leadership based on: • 65,000 X-ray inspection systems deployed worldwide • 186,000 chemica
Slide 7: The market
The market • Serving an addressable market of more than £4bn, growing at 7% • Most markets event-driven, characterized by unpredictability • Growth & resilience driven by changing threats, legislation and new technologies • Purchasing decisions are made on reliability, technology, service and price
Slide 8: Financial performance
Financial performance 700 Sales progression (£m) 600 500 ROCE 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Profit progression (£m) 9.5% 13.3% 2009 2010 Annual fluctuations in an event driven business Smiths Detection Investor Day, New York – June 2011 | 8
Slide 9: Our response to the challenge
Our response to the challenge Targeting growth Maintaining Improving Driving drivers in the R & D investment customer efficiencies detection sector levels to compete intimacy & to reduce more effectively managing sales operating complexity costs Strategy Business Operations Management Group Sales Du
Slide 10: The market and growth drivers
The market and growth drivers Duncan Emery Smiths Detection Investor Day, New York – June 2011 | 10
Slide 11: Market development
Market development Detection market sector - 2011 Market growth forecast Air transport £670m Ports & Borders £670m CAGR = 7% Critical Infrastructure £480m Defense £2,400m £4.2bn £5.1bn 2011 2014 Source: internal analysis Smiths Detection Investor Day, New York – June 2011 | 11
Slide 12: Strong positions in key markets
Strong positions in key markets Air Transport (Market 2010: £639m) Ports & Borders (Market 2010: £520m) Smiths Others Smiths Detection 21% 26% Detection 17% NucTech 3% 13% AS&E Others 43% 6% Reveal 8% 20% 10% Rapiscan 7% SAIC 16% Morpho 4%6% Nuctech L3 Rapiscan L3 Air Passenger Traffic RPKs trillion
Slide 13: Market dynamics – the growth drivers
Market dynamics – the growth drivers Geo-political unrest Enhanced detection Government indebtedness requirements Tougher procurement processes High levels of incumbency Increased automation Intensifying competition & networking Replacement cycle opportunities Smiths Detection Investor Day, New York
Slide 14: Market dynamics – Replacement cycle opportunities
Market dynamics – Replacement cycle opportunities U.S. Aviation: • Advanced Technology program upgrades – checkpoint X-ray systems, 450 airports • Checked baggage, ~1,200 post 9/11 lobby systems, replacement by inline CT • Trace detectors life-cycle replacement. Potential 3,000+ units • Body scanner
Slide 15: Market dynamics – regulatory drivers
Market dynamics- regulatory drivers USA EU Air cargo screening 100% screening - cargo planes Policy introduction planned from August 2010. summer 2011 (Certified Cargo Screening Program) - Cargo on passenger flights by 31 December 2011 Passenger screening (body 1250 AIT systems by end 2012. Definiti
Slide 16: Investing in new products
Investing in new products Mal Maginnis Smiths Detection Investor Day, New York – June 2011 | 16
Slide 17: Leveraging scale across a broad range of technologies
Leveraging scale across a broad range of technologies Markets served by Smiths Detection Chemical Biological Rad/Nuc Explosives Technologies IMS/ FTIR late PCR Hi-energy X-ray incl. mm-wave IMS/ trace (Chem ident.) X-ray hi-energy backscatter trace Spectrometry Markets Transportation Ports & Borders
Slide 18: Investing for the future to enhance capability
Investing for the future to enhance capability Company-funded R&D investment 2010 - £36m • Company funded investment is 6.2% of sales • Customer funding of £8m makes total expenditure £44m (7.6% of sales) • Continued investment in performance improvement and product cost reduction • Programs mostly
Slide 19: Technology to Products – our core competency
Technology to Products – our core competency • Continuous development of core technologies • Working with customers, technology companies, national laboratories, university research groups • Our product engineering strengths: • Ruggedization & reliability • Lowering false alarm rates • Simplificatio
Slide 20: Bringing new products to market – X-ray screening systems
Bringing new products to market – X-ray screening systems aTiX – first system for automatic explosives detection in hand baggage • US deployment under TSA ‘Advanced Technology’ program • Approved to EU Standard 2 Type C (liquids detection) • Multi-view scanning for increased accuracy • Platform base
Slide 21: Bringing new products to market - RadSeeker
Bringing new products to market - RadSeeker R&D investment leading to a major opportunity • Highly sensitive. Handheld Radiation Detector • Increases accuracy in finding and identifying rad-nuc threats • Development: 2006-2011 – DNDO awarded Smiths Detection $13.7m funding for next- generation radia
Slide 22: Serving the defense market
Serving the defense market • Intensive R & D projects leading to major program wins • LCD successfully developed and selected by several armed forces, including DoD • Selected for JCAD program, the US Army’s standard chemical agent detector • Orders to date - $350 million • Major program – CBPS (Che
Slide 23: Managing profitable sales
Managing profitable sales Cherif Rizkalla Smiths Detection Investor Day, New York – June 2011 | 23
Slide 24: Global sales presence
Global sales presence • Largest market – USA, primarily direct to Government sales • Direct sales in 48 countries; sales reps/agents in 167 countries Future expansion: • Emerging markets - taking control of agents as businesses achieves significant scale. Allows us to anticipate and influence large
Slide 25: Customer intimacy
Customer intimacy • Considerable focus on working with the customer, fully understanding the requirement to propose the most effective solution • Need to show we offer full value where price is not the determining factor - our technical superiority becomes the primary selection criterion. • In Ports
Slide 26: Managing the order book
Managing the order book • 60% of revenue is derived from large contracts with long timescales, subject to contractual variables • Mitigation through: • Product launches to core markets • Emphasis on smaller customer contracts, especially in Critical Infrastructure market • Expansion into emerging ma
Slide 27: Driving efficiencies and improving returns
Driving efficiencies and improving returns John Burton Smiths Detection Investor Day, New York – June 2011 | 27
Slide 28: Initiatives to enhance margins and working capital
Initiatives to enhance margins and working capital Manufacturing & Supply Chain Rationalization Lean Enterprise Global inventory Global ERP system: Data driven performance improvement Formalized continuous improvement framework Smiths Detection Investor Day, New York – June 2011 | 28
Slide 29: Global Manufacturing Operations
Global Approach to Operations Globally Aligned Functions Manufacturing Supply Procurement Quality Lean Chain Enterprise Global Manufacturing Operations Alcoa, TN High energy cargo inspection systems Danbury, CT Hand held chem, bio, rad products Edgewood, MD Chem/bio; Conventional X-ray; Integrated s
Slide 30: Operations - Initiatives to enhance margins
Operations - Initiatives to enhance margins Manufacturing & Supply Chain Rationalization Strategy • Fewer facilities - more world class facilities • Projected 40% reduction in manufacturing operations footprint • Five year plan from 2012 to achieve structural cost savings • Leverage world class supp
Slide 31: Operations - Initiatives to enhance margins
Operations - Initiatives to enhance margins Lean Enterprise through: • Positive effect of globalization • People Involvement • Continuous Improvement from lean thinking - More team work - Elimination of waste - Training, development & communications • Standardization • Quality - Bringing products to
Slide 32: Sustainable Structural Improvement
Sustainable Structural Improvement Key Focus Areas - Procurement Cost reduction program benefits • Group Leveraging • Low Cost Country Sourcing • Commodity management - Raw Materials • Shorter lead times for deliveries • Kanban £m - Value Engineering • Reviewing processes • Challenging established p
Slide 33: Summary
Summary Philip Bowman Smiths Detection Investor Day, New York – June 2011 | 33
Slide 34: Increasing our market share - actions
Increasing our market share - actions Disciplined market approach; increased government relations activity New product pipeline; speed and flexibility in product development Better understanding customer requirements & goals Improving operational effectiveness to deliver enhanced margins Smiths Dete
Slide 35: Summary – An attractive investment case
Summary – An attractive investment case Market leader in a growth sector with high barriers to entry Business underpinned by leading edge technology Positive outlook, driven by events, changing risks and new technologies Resilience through diversity of markets, customers and global spread Strong foc
Slide 36: Questions and answers
Questions and answers Smiths Detection Investor Day, New York – June 2011 | 36
Slide 37: Appendices
Appendices Smiths Detection Investor Day, New York – June 2011 | 37
Slide 38: Core technology streams
Core technology streams Chemical & Biological Sensors (chem/bio) Conventional X-ray Systems (CXS) Cargo Inspection Systems (CIS) Explosives Detection Systems (EDS) Trace, Radiation & Nuclear products (TRC) Integrated Systems (INT) Millimetre-Wave Systems (MMW) Concentrating on 7 key existing technol
Slide 39: Smiths Detection has true global presence
Smiths Detection has true global presence Major manufacturing sites Global HQ, Watford UK Boston, MA Watford, UK R&D / specialist centres Montreal, QC Sales/Service centres Newport, RI Central team: Toronto, ON) (#) = employees Danbury, CT (Technology/ Watford UK Strategy/ Business Wiesbaden, Develo
Slide 40: Glossary
Glossary APAC – Asia Pacific region FT-IR - Fourier-Transform Infrared spectroscopy. Analytical AIT – Advanced imaging technologies technique to identify unknown chemicals. ATR – Automated threat recognition IED – Improvised Explosives Device AT – Advanced Technology, the TSA’s program for advanced