Smiths Group Plc · LSE:SMIN
Smiths — Investor Day (June 2011)
29 slides from Smiths's investor day presentation, Jun 28, 2011
Slide 1: Smiths Group Investor Day, New York, June 28, 2011
Smiths Group New York, June 28, 2011 Smiths Group plc Investor Day, New York – June 2011 | 1 [email protected] www.smiths.com
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: Agenda
Agenda Smiths Group overview The last three years – Progress against strategic priorities The next three years – Strategic focus Smiths Group investment case Investor day agenda Smiths Group plc Investor Day, New York – June 2011 | 3
Slide 4: Smiths Group overview
Agenda Smiths Group overview Smiths Group plc Investor Day, New York – June 2011 | 4
Slide 5: Smiths Group: Five divisions in long-term growth markets
Smiths Group: Five divisions in long-term growth markets FY 2010 sales £2.77bn $4.35bn FY 2010 sales % 8 21 Headline op profit £492m $772m 12 Smiths Detection Operating margin 17.8% 17.8% John Crane Smiths Medical 31 28 EPS 84.6p $1.33 Smiths Interconnect Market cap* £4.8bn $7.9bn Flex-Tek * Market
Slide 6: A diversified portfolio with some common characteristics
A diversified portfolio with some common characteristics Exposure to long-term growth sectors High margins driven by leading-edge technology and high service levels • Long-term sales growth • Strong market positions • Competitive advantage • Repeat revenues through service and consumables Customer i
Slide 7: Smiths business model: Actions to drive long-term shareholder value
Smiths business model: Actions to drive long-term shareholder value Investing in driving top-line growth • Investing in growth opportunities – R&D, emerging markets • Improving sales and marketing effectiveness Enhancing margins • Operational improvement program to enhance margins • Leveraging our s
Slide 8: The last three years: Progress against strategic priorities
Agenda The last three years Progress against strategic priorities Smiths Group plc Investor Day, New York – June 2011 | 8
Slide 9: Organic sales growth: Strong portfolio with long-term growth prospects
Organic sales growth: Strong portfolio with long-term growth prospects Smiths John Crane Smiths Smiths Flex-Tek Detection Medical Interconnect 21% of sales 28% of sales 31% of sales 12% of sales 8% of sales Driven by Petrochemical Driven by Communications Lean changing investment demographics, inves
Slide 10: Sales growth: Targeting underlying sales growth
Sales growth: Targeting underlying sales growth Detection John Crane Medical * Excluding diabetes Interconnect Flex-Tek Key Target – high end Target – low end Sales growth targets: average annual organic growth over the medium term at constant currency Smiths Group plc Investor Day, New York – June
Slide 11: Organic sales growth: Increasing R&D to launch new products
Organic sales growth: Increasing R&D to launch new products £m Smiths Detection • Radseeker • New checked baggage screener • eqo – body image scanner Smiths Medical • CADD®-Solis and Medfusion™ • CT Marker, Gripper®Micro John Crane • Seals for carbon capture Smiths Interconnect • KuStream antenna Fl
Slide 12: Sales growth: Investing in growing markets
Sales growth: Investing in growing markets Expansion of global network through organic investment • John Crane service centres in Middle East, Asia and Latin America • Smiths Medical building sales presence in Asia: China and India M&A focused on emerging markets • Half of recent acquisitions have a
Slide 13: Enhancing margins: Through operational efficiencies
Enhancing margins: Through operational efficiencies Restructuring programme to deliver £70m of savings • Delivered £45m of savings to date – £25m to be delivered over next two years • Beginning to rationalise back office functions: HR, Finance and IT support Improvement of business systems • New ERP
Slide 14: Enhancing margins: Targeting improved operating margins
Enhancing margins: Targeting improved operating margins Detection John Crane Medical Interconnect Flex-Tek Key Target – high end Target – low end Smiths Group plc Investor Day, New York – June 2011 | 14
Slide 15: Enhancing margins: Progress in Group margins
Enhancing margins: Progress in Group margins Headline operating profit margin 17.8% Smiths Group plc Investor Day, New York – June 2011 | 15
Slide 16: Focus on cash and balance sheet: Improved operating cash conversion
Focus on cash and balance sheet: Improved operating cash conversion Headline operating cash conversion Cash flow per share Smiths Group plc Investor Day, New York – June 2011 | 16
Slide 17: Strong balance sheet provides financing capacity for growth
Strong balance sheet provides financing capacity for growth Interest split Currency split Debt split Net debt £m Borrowings 1017 USD Liquid resources (137) Fixed Euro Bank Floating other Public Net debt 880 £m Weighted average life of debt is 5.4 years 300 Credit Rating: 250 BBB+ (stable)/ 200 Baa2
Slide 18: Improved returns on capital
High returns on capital and disciplined capital allocation: Improved returns 25.0 H1 2011 24.0% H1 2010 20.6% 19.8% 20.0 17.3% 17.4% 17.4% 15.9% 16.0% 14.9% 15.0 13.9% 13.0% % 11.3% 10.0 5.0 0.0 Smiths Group John Crane Flex-Tek Smiths Smiths Medical Smiths Detection Interconnect Return on capital em
Slide 19: Capital allocation: Targeted acquisition strategy over past four years
Capital allocation: Targeted acquisition strategy over past four years Aqn cost Complementary Extending Leveraging Date £m technologies geography infrastructure John Crane CDI Mar 07 £19m Sartorius Nov 07 £13m John Crane Japan* Dec 07 £4m Indufil Apr 08 £71m Fiberod May 08 £47m
Slide 20: Capital allocation: Bolt-on acquisitions follow strict financial criteria
Capital allocation: Bolt-on acquisitions follow strict financial criteria Support the divisional Sales growth growth targets EBIT margin Support the divisional and growth margin targets Generate strong cash flows Cash conversion in line with Group objectives Seek to generate a 12% post-tax Return on
Slide 21: Promoting responsibility: An increased focus is delivering improvements
Promoting responsibility: An increased focus is delivering improvements Recordable & lost time incident rates have been improving • Solid progress on environmental 4.63 targets** Lost time incident rate Recordable incident rate * • Greenhouse gas emissions - 8% reduction • Total non-recycled Inciden
Slide 22: The next three years – Strategic focus
Agenda The next three years – Strategic focus Smiths Group plc Investor Day, New York – June 2011 | 22
Slide 23: Actions to drive long-term shareholder value – a change in emphasis
Actions to drive long-term shareholder value – a change in emphasis Last 3 years Next 3 years Investment despite Accelerate with Driving top-line growth economic slowdown continued investment Continuous Enhancing margins Transformational improvement Focus on cash Transformational Continued focus and
Slide 24: Capital allocation: Increased emphasis on portfolio management
Capital allocation: Increased emphasis on portfolio management Option value on portfolio change • Diversified portfolio – synergies and strategic rationale are limited • Scope to realise value through active portfolio management • Attractive opportunities for reinvestment Portfolio management – view
Slide 25: Smiths Group investment case
Agenda Smiths Group investment case Smiths Group plc Investor Day, New York – June 2011 | 25
Slide 26: Investment case for Smiths Group
Investment case for Smiths Group Strong market positions in sectors well-placed for long-term profitable growth Leading-edge technologies and high service levels command high margins Further scope for operational improvement and margin enhancement Strong cash generation to reinvest in top-line growt
Slide 27: Investor day agenda
Agenda Investor day agenda Smiths Group plc Investor Day, New York – June 2011 | 27
Slide 28: Key objectives for today
Key objectives for today Provide an overview of each business: strategy and value drivers Improve understanding of the divisions and their market positions 3Highlight the opportunities for sales growth 4Outline the scope for further operational improvement to enhance margins 5Opportunity to see and
Slide 29: Investor Day, New York – June 2011
Smiths Group plc Investor Day, New York – June 2011 | 29