Smiths Group Plc · LSE:SMIN
Smiths — DrKW Capital Goods Conference 2006
24 slides from Smiths's conference presentation, Mar 30, 2006
Slide 1: Smiths Group: DrKW Capital Goods Conference
Smiths Group DrKW Capital Goods Conference London, Thursday 30 March 2006 Presentation by: Alan Thomson, Financial Director www.smiths-group.com/ir Register here to receive regular information
Slide 2: Smiths Group: Interim Results
Smiths Group: Interim Results 2006 ( for six months ended 31 January) (£m) 2006 2005 Sales 1,590 1,338 +19% Headline operating profit 194 158 +22% Margin 12.2% 11.8% Headline pre-tax profit 183 155 +18% Headline EPS 24.4p 20.4p +18% Interim dividend 9.85p 9.25p +6.5% Smiths is now in its second year
Slide 3: Full Potential score card
Full Potential score card: How are we doing on the fundamental strengths? 1 Operating in sectors of high growth 2 Delivering constant improvement 3 Reaching deep into global markets 4 Developing technology to help customers succeed 5 Improving our business mix 6 Doing business the right way Smiths G
Slide 4: Driving towards Full Potential
Driving towards Full Potential growth on comparable period H1 2005 H2 2005 H1 2006 +18% +19% Sales +6% Headline +21% +22% operating profit +9% Headline +17% +18% +18% pre-tax profit Smiths Group DrKW 2006 4
Slide 5: Generating a strong cash-flow
Generating a strong cash-flow £m H1 2006 Headline operating profit Operating cash-flow 90% Free cash-flow Profit/cash conversion 194 174 93 After recurring restructuring After capex and After interest and tax costs and expensed R&D capitalised R&D Smiths Group DrKW 2006 5
Slide 6: Reaching into global markets
Reaching into global markets Aerospace: China, Poland Medical: Mexico, Malaysia John Crane: Czech Republic, India, Mexico, China Flex-Tek: Malaysia Interconnect: China, Costa Rica John Crane has the most significant presence in India of all Smiths’ businesses. • 185 employees by financial year-end •
Slide 7: Developing technology to help customers succeed
Developing technology to help customers succeed Research & Development £m (for six months ended 31 January) 2006 of sales 2005 of sales Company-funded Charged to P&L 62 58 Added to Balance Sheet 33 14 95 6% 72 5% Customer-funded No impact on P&L 70 4% 63 5% Total 165 10% 135 10% Total R&D increased
Slide 8: Improving our business mix: acquisitions in H1 2006
Improving our business mix: acquisitions in H1 2006 Spend Millitech £19m Microwave components Spec. Eng. Lorch Microwave £15m Microwave filters Spec. Eng. Livewave £9m Wide-area sensor networking Detection Farnam £4m Heating elements Spec. Eng. Smiths Group DrKW 2006 8
Slide 9: Aerospace
Smiths Aerospace Aerospace 22% £m H1 2006 Sales 559 +10% Headline operating profit 43 -4% Contribution to headline op. profit Margin 8% A380 • Sales growth in all sectors • Profit impacted by: - development costs (expensed) Eurofighter - currency transaction effects • Commercial aircraft production
Slide 10: Investing in the future of Smiths Aerospace
Investing in the future of Smiths Aerospace 10 Company Funded Research & Development: % of sales 8 Future spend depends on programme wins 6 B787 4 B767 Tanker 2 A380 FY 00 01 02 03 04 05 06 07 08 09 10 Today’s major development programmes will drive future growth Smiths Group DrKW 2006 10
Slide 11: Significant investment in new programmes
Significant investment in new programmes • Smiths supplies landing gear actuation and high-lift systems • New category of aircraft, incremental business for Smiths • Development completed this year • Firm orderbook: development has been capitalised A380 • Smiths supplies refuelling system and missio
Slide 12: Detection
Smiths Detection Detection 13% £m H1 2006 Sales 171 +12% Headline operating profit 25 +12% Contribution to headline op. profit Margin 14% Emergency Responders Transportation • Strong performance from all sectors of the business Ports & Borders • First Sentinels delivered to TSA Military • Military d
Slide 13: Detection: The story so far
Smiths Detection: The story so far: Organic growth and acquisitions £m Sales growth since Smiths Group 500 acquired Graseby in 1997 Livewave acquisition Expansion has been driven both by Farran and ETI acquisitions organic sales growth and by acquisitions 400 Cyrano and SensIR acquisitions Heimann 3
Slide 14: Detection: Developing the capability
Smiths Detection: Developing the capability Using a variety of investment vehicles Examples Internal Sentinel trace portal £21m invested in 6046si X-Ray, 6040aTiX R&D 2004/5. Increasing GasID, EPBD, JCAD Next generation EDS Customer- £8m won in 2004/5. systems, Rail screening; funded R & D Increasin
Slide 15: Detection: Driving growth in key markets
Smiths Detection: Driving growth in key markets Transportation Smiths Detection Sales by sector 2005 Emergency Military Responders Transportation Ports & Borders Critical infrastructure Critical infra- structure Ports and borders Service Military Emergency Non-security responders Smiths Group DrKW 2
Slide 16: Ports and Borders: Major opportunity for Smiths Detection
Ports and Borders: Major opportunity for Smiths Detection Market drivers Ports and Borders – Increased security screening – Manifest verification – Contraband detection Market growth – >10% growth in container shipping since 2002 – US Container Security Initiative – Multiple international programmes
Slide 17: Medical
Smiths Medical Medical 32% £m H1 2006 Sales 355 +50% Headline operating profit 61 +60% Contribution to headline op. profit Margin 17% Protect IV catheters • Underlying 6% sales growth • Medex contributed £21m profit Srini Seshadri • Margins improved by 1% • Sales ahead in critical care, safety and m
Slide 18: The integration of Medex is on track
The integration of Medex is on track Sales & marketing integrated Back office functions transferred to a single shared-services centre for US Financing and tax synergies achieved Closure of two US and one large UK plant announced Pace of integration steps up in second half Synergy benefits across Sm
Slide 19: Specialty Engineering
Specialty Engineering Spec. Eng. 33% £m H1 2006 Sales 504 +14% Headline operating profit 65 +21% Contribution to headline op. profit Margin 13% John • Strong growth in: Interconnect Crane - John Crane - Interconnect - Flex-Tek • Valuable acquisitions: Millitech, Lorch Microwave • Marine steady in th
Slide 20: Vision for Specialty Engineering
Vision for Specialty Engineering Deliver Full Potential for each of our four businesses Interconnect • Technology based groups/scaleable organisation • Medical expansion • Acquisitions John Crane • Capitalise on increased growth profile • Acquire adjacent businesses and leverage global distribution
Slide 21: Evolution of Specialty Engineering
Evolution of Specialty Engineering sales 2006 2006 Acquired Lorch Microwave 2005 Acquired Millitech Inc 2005 Acquired US Seals 2005 2004 Acquired John Crane Timing 2004 Acquired TRAK TECOM Industries 15% 2004 2004 Divested Icore International e tur n on Sales 11% R 2003 Divested Polymer 2003 2003 Sp
Slide 22: Specialty Engineering: John Crane is performing well
Specialty Engineering: John Crane is performing well £m H1 2006 Sales 245 +12% Headline operating profit 29 +22% Margin 12% • Benefiting from strong service revenues • Orderbooks reflect heavy investment by oil majors • Investing to extend global reach: - India - Russia - China Smiths Group DrKW 200
Slide 23: Group: Generating an attractive return on investment
Smiths Group: Generating an attractive return on investment 1 Company’s overall ROI (including goodwill) Smiths’ 2 Acquisitions investment criteria: Expected rate of return 12% 12% after-tax return YEAR 1 YEAR 2 date of acquisition YEAR 3 8% WACC on total investment 3 Research & Development 4 Capita
Slide 24: Questions and answers
Smiths Group DrKW Capital Goods Conference Questions and answers www.smiths-group.com/ir Register here to receive regular information