Smiths Group Plc · LSE:SMIN
Smiths — Investor Day (November 2022)
87 slides from Smiths's investor day presentation, Nov 10, 2022
Slide 1: Pioneers of Progress: Capital Markets Event
PIONEERS OF PROGRESS Smiths Group plc Capital Markets Event IMPROVING OUR WORLD 10 November 2022 THROUGH SMARTER ENGINEERING
Slide 2: Agenda
Agenda Progress towards our near, medium, and longer-term commitments Paul Keel, Chief Executive Officer Divisional Pat McCaffrey, President Flex-Tek deep dives Julian Fagge, President Smiths Interconnect Sustainability at Smiths John Ostergren, Chief Sustainability Officer Financial progress Clare
Slide 3: Progress towards our near, medium, and longer-term commitments
Progress towards our near, medium, and longer-term commitments Chief Executive Officer Paul Keel
Slide 4: Opening Thoughts
Opening Thoughts Our value creation thesis is unchanged: – Smiths is an intrinsically strong company capable of more – Higher performance creates greater value for all stakeholders – There is clear evidence of progress already, with further potential to come Our momentum and improving execution will
Slide 5: Smiths Value Engine
Smiths Value Engine OUR PURPOSE OUR STRENGTHS OUR PRIORITIES World-Class Engineering Growth Leading Positions in Critical Markets PIONEERS OF Execution Global PROGRESS Capabilities Improving our world through smarter Robust Financial People engineering Framework | 5 |
Slide 6: Progress since our last Capital Markets Event
Progress since our last Capital Markets Event GROWTH EXECUTION PEOPLE Q123 trading update 13.2% organic growth Strong H222 results 4.1% organic growth FY22 Capital Medical sale SES 2.0 6 Master Black Belts and Markets Event completed early launch 24 Black Belts appointed to accelerate SES FY23 Capit
Slide 7: Accelerating Growth
Accelerating Growth Organic1 revenue growth Reported revenue growth 9.4% 4.1% 3.7% 3.4% 0.3% (4.0)% (4.8)% (7.3)% H1'21 H2'21 H1'22 H2'22 H1'21 H2'21 H1'22 H2'22 1 Organic revenue growth is adjusted to exclude the effects of foreign exchange and acquisitions in the first twelve months following the
Slide 8: Agenda: Continued momentum in the near term
Agenda Continued momentum Delivery of medium- Reaching our long-term in the near term term commitments potential | 8 |
Slide 9: Strong Momentum
Strong Momentum End market growth Smiths organic sales growth vs. order growth Business Primary end End market 11% Smiths business FY22 Growth FY23 outlook markets FY23 outlook vs. FY22 Accelerating Energy 5-7% 3.7% growth Industrial ++ • Aviation Return to Order (9.4)% growth • Other ++ 4%-4.5%
Slide 10: Smiths Group high-value model supports accretive price capture
Smiths Group high-value model supports accretive price capture R&D as % sales Smiths price vs. input inflation Quartile R&D % Sales 10 bps contribution to margin in FY22 Smiths 4.2% Wage inflation Top quartile 4%-6.5% Freight Incremental inflation 2nd quartile 2.5%-3.5% price Median 2.5% Raw materia
Slide 11: Smiths Detection's return to growth has a positive impact for Smiths Group
Smiths Detection’s return to growth has a positive impact for Smiths Group Drivers of Smiths Detection growth Impact of Smiths Detection growth (%) on Smiths Group growth (bps) 300 Covid-related Return to 3 of 4 of Smiths Detection’s contraction in growth in FY23 segments delivered revenue FY21 and
Slide 12: SES, restructuring, and supply chain actions will deliver earnings leverage
SES, restructuring, and supply chain actions will deliver earnings leverage and de-risk uncertainty SES Additional operating excellence • SES is central to how we solve problems and deliver results • Expanding presence in priority markets; continue to manage price and supply chain • Full-time team i
Slide 13: Maintaining FY23 guidance
Maintaining FY23 guidance FY23 summary • Strong demand in most end markets, with order growth above accelerating sales levels Expect to deliver • Our high-value business model enabling 4.0-4.5% organic price capture in excess of input cost inflation revenue growth with moderate margin • Smiths Detec
Slide 14: Agenda: Delivery of medium-term commitments
Agenda Continued momentum Delivery of medium- Reaching our long-term in the near term term commitments potential | 14 |
Slide 15: Industrial technology group with multi-dimensional resilience and growth potential
Industrial technology group with multi-dimensional resilience and growth potential Balanced portfolio and end market exposure • Leading positions in long-term, attractive growth markets • Geographic diversity across both developed and developing markets • Attractive mix of OE and recurring after-mar
Slide 16: Our markets are attractive – both resilient and expanding
Our markets are attractive – both resilient and expanding Global aviation passenger volume1 (annual change) Customer % Smiths Medium term market outlook end market FY22 sales Cumulative growth (right axis) 40% 35% 180% General Industrial 42% • Strong demand continues in most end markets 30% 150% 25%
Slide 17: Portfolio balanced geographically
Portfolio balanced geographically FY22 Smiths revenue by geography Worldwide capabilities to serve global customer Rest of World Localised supply chains APAC • Sourcing, manufacture and delivery typically in same region 10% Europe 16% • Shorter cycle times, reduces raw transportation, currency and t
Slide 18: Aftermarket revenues – growing, recurring, and margin expanding
Aftermarket revenues – growing, recurring, and margin expanding Aftermarket revenue as % total Aftermarket revenue as % total 80% 70% Aftermarket margins Aftermarket margins ~ 2.5x 80% ~ 1.75x 60% OE margins OE margins 70% 50% 60% 40% 50% 40% 30% 30% 20% Consistently high 20% after-market revenue Co
Slide 19: Clear progress towards medium-term financial targets
Clear progress towards medium-term financial targets 100%+ +M&A 18-20% 15-17% +M&A 7- 10% 4–6% ORGANIC REVENUE GROWTH1 EPS GROWTH ROCE2 OPERATING PROFIT MARGIN OPERATING CASH CONVERSION2 FY2020 (1.0)% (27.4)% 12.8% 12.8% 112% FY2021 (2.2)% +19.3% 13.9% 15.5% 129% FY2022 +3.8% +17.8% 14.2% 16.3% 80%
Slide 20: Agenda: Reaching our long-term potential
Agenda Continued momentum Delivery of medium- Reaching our long-term in the near term term commitments potential | 20 |
Slide 21: Our fundamental strengths underpin achievement of our long-term potential
Our fundamental strengths underpin achievement of our long-term potential OUR STRENGTHS • 171-year track record of innovating across multiple markets World-Class • R&D investment consistently above competition; strongest NPD pipeline in years Engineering • Unmatched global service network of 2000+ s
Slide 22: Powerful megatrends propel long-term growth
Powerful megatrends propel long-term growth, which Smiths is uniquely positioned to access Energy transition Insatiable demand for data • Fundamentally an • Global data consumption engineering opportunity doubling every 4 years3 • Particular opportunity for • Transmission data rates John Crane and F
Slide 23: Agenda: Reaching our long-term potential
Agenda Continued momentum Delivery of medium- Reaching our long-term in the near term term commitments potential | 23 |
Slide 24: Executing our strategy and delivering our commitments
Executing our strategy and delivering our commitments • Taking full advantage of the steady growth enabled by our diverse market exposure • Developing high-impact new products, including compelling green technologies • Building out priority market adjacencies Growth • Supplementing organic growth wi
Slide 25: Smiths Value Engine
Smiths Value Engine OUR PURPOSE OUR STRENGTHS OUR PRIORITIES Organic Revenue World-Class Growth 4-6% (+M&A) Engineering Growth EPS Leading Growth 7-10% (+M&A) Positions in Critical Markets Execution PIONEERS OF ROCE 15-17% PROGRESS Global Capabilities Operating Improving our world Profit Margin 18-2
Slide 26: Flex-Tek Deep Dive
Deep Dive Flex-Tek
Slide 27: Pat McCaffrey, President, Flex-Tek
Pat McCaffrey, President, Flex-Tek • Flex-Tek Operations Manager, 1996 - 1999 • Flex-Tek (Industrial Hose) General manager, 1999 -2002 • Flex-Tek (Heat Solutions) President, 2002 - 2008 • Flex-Tek COO, 2008 - 2019 • Flex-Tek President, 2019 - present | 2 |
Slide 28: Executive Summary
Executive Summary • Leading provider of solutions for safe and efficient fluid management • Strong positions in attractive markets: construction, aerospace, and general industrial (including medical hoses and industrial heating) • Competitive advantage from deep customer relationships, superior prod
Slide 29: Flex-Tek: solutions for the safe, efficient movement and heating of fluids
Flex-Tek: solutions for the safe, efficient movement and heating of fluids Revenue breakdown Revenue breakdown Key data by geographical region, % of by end markets, % of Flex-Tek total Flex-Tek total FY2022 revenue £647m (25% of Smiths) Europe APAC RoW General Aerospace Construction - Industrial res
Slide 30: Flex-Tek: a strong business with great positions in attractive markets
Flex-Tek: a strong business with great positions in attractive markets Market growth drivers Key customers Competitive strengths Competitive landscape • Continued strong demand for new • Construction and General • Leading capability in design, • Fragmented competition in most housing construction, d
Slide 31: The Flex-Tek growth story
The Flex-Tek growth story Revenue growth (£m) 13.9% Five-year track record 700 CAGR COVID-19 impact 600 500 • Double digit growth CAGR for revenue and 400 profit 300 200 Acquired Acquired FlashShield+ Acquired Python Sureheat United Flexible launch Royal Metals launch 100 • 6% organic revenue CAGR -
Slide 32: How Flex-Tek delivers growth
How Flex-Tek delivers growth Focus Examples • Industrial heating (Sureheat – 2017) Disciplined • Accelerating access to product • Aerospace (United Flexible – 2019) M&A adjacencies and geographical growth • HVAC portfolio (Royal Metal – 2021) • New platforms to support energy • Partnering with Midre
Slide 33: Construction
Construction Construction products include: Key customers Route to market Smiths relative position Flex Metal Corrugated Residential • 85% HVAC • Innovation leader in duct duct stainless steel tubing heat kits wholesale our segments distributors • Top three player in all • 15% HVAC OEMs segments • 9
Slide 34: New business initiatives within Construction
New business initiatives within Construction Python refrigerant line sets New duct plant in Houston • New product launch for • Synergy initiative from Royal £300m market segment: Metal acquisition replaces copper lines in HVAC • High demand from regional systems customers • All six sizes are fully •
Slide 35: Confident of further growth in Construction
Confident of further growth in Construction • The residential HVAC metal ducting Flex-Tek revenues demonstrate resilience and forward momentum segment in the US is worth approximately ~£0.8bn annually with the South accounting for c. 60% of the market • Flex-Tek sales concentrated in the South Flex-
Slide 36: General Industrial: heating and industrial hoses
General Industrial: heating and industrial hoses Industrial products include: Key customers Route to market Smiths relative position Medical Industrial Polymide Air • 35% wholesale • Top three in high end hose hose heater heater distributors medical hose • 65% OEM • A leader in high • 80% US sales t
Slide 37: New business initiative within Industrial
New business initiative within Industrial Current direct reduction of iron CO2 Midrex/ green steel project • Conversion of direct reduced iron (DRI) using H2 via electric heating systems rather than burning natural gas reduces carbon emissions in iron ore production by 95% • Annual carbon reduction
Slide 38: Aerospace
Aerospace Aerospace products include: Key customers Route to market Smiths relative position Rigid Flexible Hybrid • Supply globally • Top three in high- tubing tubing assemblies integrity flexible tubing • Commercial 55%, Military 45% • Middle position in • Direct to airframe high-integrity metal a
Slide 39: New business initiatives within Aerospace
New business initiatives within Aerospace LM900 natural gas “One Aero" operating model fuel lines • Consistent, single customer-facing team for global customer care • Enhanced, integrated business development team • Centre of excellence for tooling design and build • Production automation enhancemen
Slide 40: Role of M&A
Role of M&A • Expanded technology capability (e.g. SureHeat high voltage heating) Flex-Tek is pursuing a • Brought profitable growth and delivered synergies disciplined approach to M&A. • Delivered Royal Metals sales growth of 48% and profit growth of 70% since acquisition Recent acquisitions have:
Slide 41: Closing Remarks
Closing Remarks • We are confident about delivering further growth – resilient in most market conditions • Proven track record of consistent growth, margin expansion and successful M&A • Well-positioned with strong customer relationships in attractive markets and able to move into higher-growth adja
Slide 42: Smiths Interconnect Deep Dive
Deep Dive Smiths Interconnect
Slide 43: Julian Fagge, President, Smiths Interconnect
Julian Fagge, President, Smiths Interconnect • PwC, 1996 - 1999 • Procter & Gamble, 1999 - 2011 • Royal Caribbean, 2011 - 2013 • Smiths Group, 2013 – present – Group Controller – Group Director, Strategy and M&A – President, Smiths Interconnect | 2 |
Slide 44: Executive Summary
Executive Summary • At the forefront of cutting-edge connectivity with leading products, technologies and capabilities • Over the past few years, we have successfully transformed the business and have built strong positions in fast growing market segments with structurally attractive characteristics
Slide 45: Smiths Interconnect: advancing the world through cutting-edge connectivity
Smiths Interconnect: advancing the world through cutting-edge connectivity Revenue breakdown Revenue breakdown Key data by geographical region, % of by business segment, % of FY2022 revenue Smiths Interconnect total Smiths Interconnect total £363m (+13.9% ) 1 (14% of Smiths) APAC RoW Fibre Optics an
Slide 46: Smiths Interconnect: strong positions with competitive advantage in core segments
Smiths Interconnect: strong positions with competitive advantage in our core segments Demand drivers Key customers Competitive strengths Competitive landscape • The insatiable demand for • Global leaders in our core • Broad portfolio of products, • Large multinationals to data markets including: and
Slide 47: The Smiths Interconnect growth story
The Smiths Interconnect growth story FIVE-YEAR TRACK RECORD Revenue growth (£m) Five-year track record 4.6% CAGR COVID-19 impact 400 • Revenue growth: 4.6% CAGR 300 200 • Operating profit: 10.7% CAGR FY18 FY19 FY20 FY21 FY22 Organic M&A • Operating margin growth to 18.0% Operating profit growth (£m)
Slide 48: How Smiths Interconnect delivers growth
How Smiths Interconnect delivers growth Focus Examples • Add new technologies • Optical products (Reflex Photonics - 2020) Disciplined M&A • Access market adjacencies • Add incremental revenue streams • Optical transceivers / sub-assemblies Adjacencies • Move up the value-chain • Medical cable assem
Slide 49: Investing for growth
Investing for growth R&D investment (£m) and # of new Staying at the forefront of innovation Examples product platforms launched • The world of connectivity is advancing at SpaceAble optical transceivers (SatCom) R&D # of platforms launched a fast rate – Launched in September 2018 25 • We have diffe
Slide 50: Connectors
Connectors We design connectors that: Key customers Route to market Smiths relative position • Deliver high-performance for space and defence • Defence, aerospace • Direct with dedicated • High integrity, high • Enable the safe operation of high-speed trains and space primes key account performing •
Slide 51: Semiconductor Test
Semiconductor Test We design test products that: Key customers Route to market Smiths relative position • Test sophisticated semiconductor chips and electronic circuits used in applications such as gaming, data centres, industrial and computing devices • Integrated device • Direct for key • Top 3 se
Slide 52: SII: Military expenditure
SII We design integrated microwave solutions, antennae and Key customers Route to market Smiths relative position communication devices that: • Deliver RF systems for advanced applications • Leading defence, • Collaborative • RF subsystem design • Provide situational awareness and protection from in
Slide 53: Fibre Optics and Radio Frequency components
Fibre Optics and Radio Frequency components We design RF and optical components that: Key customers Route to market Smiths relative position • Deliver performance and signal integrity in satellite communications, deep space exploration, and defense • Leading space • Mix of direct • A leader in Optic
Slide 54: Closing remarks
Closing remarks • Smiths Interconnect has delivered a strong performance over the past few years and has enormous potential building on the momentum we have established • We play in attractive market segments with leading products, technologies, capabilities and a rich innovation pipeline • We have
Slide 55: Sustainability at Smiths
Sustainability at Smiths Chief Sustainability Officer John Ostergren
Slide 56: John Ostergren, Chief Sustainability Officer
John Ostergren, Chief Sustainability Officer Stanford University - JD (2002), PhD (1999), Environmental Geochemistry Dorsey & Whitney LLP – Environmental Law & IP litigation (2002-07) 3M Company (2007-19) - Global EHS Director - Associate General Counsel, Supply Chain Zymergen Inc., Senior Legal Dir
Slide 57: Sustainability is at the heart of our Purpose
Sustainability is at the heart of our Purpose OUR PURPOSE OUR STRENGTHS OUR PRIORITIES World-Class Engineering Growth Leading Positions in Critical Markets PIONEERS OF Execution Global Capabilities PROGRESS Improving our world through smarter Robust Financial People engineering Framework Delivering
Slide 58: Our ESG Framework: from purpose to action
Our ESG Framework: from purpose to action FLEX-TEK Sustainability at Smiths Improving our world through smarter engineering | 4 |
Slide 59: Our Priorities – delivering for all our stakeholders
Our Priorities – delivering for all our stakeholders Deliver for our customers • Commercialise high-value green technologies • Prioritise new product development that delivers sustainability performance benefits that our customers need and want Growth Deliver for our communities • Net Zero GHG emiss
Slide 60: Deliver for our customers: Enabling energy transition
Deliver for our customers The energy transition agenda will drive investment This creates significant group-wide opportunities of over $100tn in the next 30 years 3.5 Illustrative development of 120 Estimated Investment c.$110tn 110 annual investment ($tn) in Power/End Uses needed to meet 1.5 °C Sce
Slide 61: Deliver for our customers: Sustainability our customers need and want
Deliver for our customers Smiths Detection John Crane Energy efficiency – addressing Smiths Supporting customers today to create and Group’s Scope 3 emissions (products-in- preserve our path to tomorrow - safety, use for lifetime) compliance, conservation and efficiency Energy efficiency – latest ge
Slide 62: Deliver for our communities
Deliver for our communities Priority actions Results Target FY2022-2024 FY2022 Progress Net Zero 2040 – Scope 1&2 GHG (operations) - Setting Science-Based Targets (SBTs) in 2023 Renewable 5% increase 2% increase electricity to 66% to 63% - Group-wide energy team managing efficiency and renewables
Slide 63: Delivering for our colleagues
Delivering for our colleagues Priority Actions Results Workplace safety - Top-quartile1 RIR (0.5), 86 colleagues injured in FY2022 - Support and continue to grow strong safety culture - > 15,500 Safety Leading Indicators in FY2022 - See and act to engage teams and reduce risk - Engineered soluti
Slide 64: Delivering for investors
Delivering for investors FLEX-TEK • Delivering for investors: purpose-driven value creation for all stakeholders • ESG Framework translates purpose to action • Prioritising delivery of high-value sustainable returns - Delivering for our customers – sustainability performance that our customers need
Slide 65: Financial Progress
Financial Progress Chief Financial Officer Clare Scherrer
Slide 66: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 67: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 68: A great opportunity in a great company
A great opportunity in a great company Market leading businesses with Growth A unique opportunity significant potential and strong growth levers Focused structure and clear Execution At an exciting time priorities already helping to unlock that potential Bringing my experience of a fast People As pa
Slide 69: Significant value creation potential
Significant value creation potential EV / Next 12 months EBIT Key financial metrics ~18x Top Smiths medium- quartile term targets Top ~15x quartile US mid-cap engineering peers ~14.5x Sales growth1 ~5.5% 4-6% EBIT margin2 >20% 18-20% ~12x ~12x Cash conversion3 >100% 100%+ Median UK engineering peers
Slide 70: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 71: Q1'23 – a very strong start to the year
Q1’23 – a very strong start to the year Organic revenue growth (%) • Q1’23: +13.2% organic revenue growth, our 6 consecutive quarters of growth sixth consecutive quarter of growth • John Crane posted steady growth and 13.2% demand remains strong • Smiths Detection benefitted from a strong Q1 orderbo
Slide 72: Strong balance sheet provides security and flexibility
Strong balance sheet provides security and flexibility Net debt : EBITDA1 £107m share buyback in Q1 • Share buyback now 83% complete with £617m returned Proforma leverage • FY22 proforma net debt:EBITDA of 0.8x adjusts for the completion of the 1.9x full £742m share buyback expected to 1.8x 1.6x com
Slide 73: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 74: Capitalising on opportunities and navigating headwinds
Capitalising on opportunities and navigating headwinds Tailwinds Headwinds - Strong demand reflected in record orderbook - Supply chain disruption currently expected to continue - Targeted actions to simplify end to end value chain throughout FY23 - Methane remediation and energy transition underpin
Slide 75: Maintaining FY23 guidance
Maintaining FY23 guidance Tailwinds • Clear strategy with better focused execution priorities • Strong order books • Pricing power across most of the portfolio (and improve in weaker markets through technology diversification) Expect to deliver • High impact new product launches 4.0-4.5% organic • S
Slide 76: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 77: Strong operating cash conversion
Strong operating cash conversion Average operating cash conversion: 100% Current working Return to 100%+ operating capital status cash conversion over time Receivable as we: Payables 129% Inventory • Manage inventory levels as supply chains stabilise 112% through FY23/FY24 104% 100%+ • Continue to m
Slide 78: Managing growth and supply chain whilst maintaining inventory discipline
Managing growth and supply chain whilst maintaining inventory discipline FY22 inventory composition FY23 action plan Raw materials WIP Finished goods Examples of SES projects • Improved demand and capacity planning John Crane John Crane • Continued reduction of single source supply Smiths Smiths • I
Slide 79: Continued active management of free cashflow
Continued active management of free cashflow 5 yr average operating 5 yr average free cash conversion1:100% cashflow conversion1:46% LTIP Target: 45-55% of operating profit Repaid $400m Reduction in bond in Feb effective tax 22; upcoming rate to 27.6% €600m bond No material in FY22 (FY21: FY23 forec
Slide 80: Top investor questions
Top investor questions • What attracted you to Smiths and what are your early impressions? • How is FY23 going so far? • Do you remain confident in the FY23 guidance? • What is management’s view on cash conversion, and in particular working capital? • What are the Group’s capital allocation prioriti
Slide 81: Capital allocation priorities: driving growth and shareholder returns
Capital allocation priorities: driving growth and shareholder returns 1000 Cash spend (£m) Organic investment: £661m Priority Share R&D, sales & Capital 1 marketing and capex returned to buyback 800 shareholders Dividends 600 M&A Priority 2 M&A: acquisitions Capex 400 Sales and Marketing Capital ret
Slide 82: Priority 1: Organic investment (R&D)
Priority 1: Organic investment R&D investment (% sales) Representative R&D projects Average: 4.2%: Top quartile 4.5% 4.7% Enhanced CarbonLF Gas seal recovery 4.1% 4.2% seals for LNG system for methane 3.9% Customer funded Capitalised Expensed High volume air cargo Next-gen chemical screening detecti
Slide 83: Priority 1: Organic investment (capex)
Priority 1: Organic investment Capital expenditure (% sales) Representative capex projects Average: 2.6% Asset light Investment in CNC capabilities and in quality management 2.8% systems 2.5% 2.7% 2.6% 2.6% R&D Investment in chem- bio technologies facilities FY18 FY19 FY20 FY21 FY22 New duct plant i
Slide 84: Priority 2: Targeted M&A
Priority 2: Targeted M&A Accelerate organic strategy Cultivate an attractive M&A pipeline • Focus on our core and adjacencies Cross–divisional/transformational through bolt-ons and selective Adjacencies larger strategic opportunities Targets • Strengthen market/ geographical Core positions ADT Royal
Slide 85: Priority 2: Targeted M&A – disciplined vetting
Priority 2: Targeted M&A Average # of opportunities Disciplined approach Structured process reviewed per year1 • All division generate opportunities aligned to the ~100 strategy Ideas considered Disciplined vetting • Group expertise supports prioritisation, review and progression of opportunities In
Slide 86: Priority 3: Capital returns to shareholders
Priority 3: Capital returns to shareholders Progressive dividend • Target to increase dividends in line with long-term growth in earnings • While maintaining dividend cover of at least two times • FY22 dividend yield of 2.6%, attractive relative to peers • 70 years of uninterrupted dividend Surplus
Slide 87: Well positioned for the near and longer term
Well positioned for the near and longer term FY2023 Medium-term Organic Maintain guidance of 4-4.5% organic Strong positions in attractive markets revenue supports medium-term target of 4-6% growth, with a very strong start in Q1 growth Operating Moderate margin improvement in FY23 as SES delivering