Smiths Group PLC · LSE:SMIN
Smiths — FY2004 Earnings Presentation
28 slides from Smiths's earnings presentation, Sep 22, 2004
Slide 1: Smiths Group Preliminary Results 2004
Smiths Group Preliminary Results 2004 London, Wednesday 22 September 2004 Presentation by: Keith Butler-Wheelhouse, Chief Executive Alan Thomson, Financial Director www.smiths-group.com/ir Preliminary Results 2004 Register here to receive regular information 1
Slide 2: Statutory reporting
Statutory reporting Chief Executive speaking Continuing and discontinued activities, after goodwill amortisation and exceptional items £m 2004 2003 Sales 2,733 3,056 Operating profit 292 380 Profit before tax 300 217 EPS 38.0p 20.0p Preliminary Results 2004 2
Slide 3: Highlights
Smiths Group: Preliminary Results 2004 Highlights • 45.9p EPS and £350m pre-tax* match 2003 results • At constant currency, sales improved by 7% and profits by 2% • Strong underlying sales and profit growth in the second half • Free cash-flow of 45.5p per share, equivalent to earnings • Higher R&D b
Slide 4: Key messages
Key messages • 2004 marked a significant transition point for Smiths Group • Performance gained momentum in the second half of the year • Second half sales growth of 8% (year-on-year, constant currency) with all divisions contributing • The outlook is better than it has been for some time: – organic
Slide 5: Operating performance
Operating performance Continuing activities, before goodwill amortisation and exceptionals £m 2004 2003 (@$1.75, €1.46) (@$1.59, €1.51) Sales 2,678 2,629 Operating profit 360 372 Margin 13% 14% Interest/pensions financing (10) (23) Profit before tax 350 349 EPS 45.9p 45.6p Preliminary Results 2004 5
Slide 6: Profit progression from 2003 to 2004
Profit progression from 2003 to 2004 Pre-tax 2003 £349m Pre-tax 2004 £350m exchange £(20)m operational improvement £43m One-off detection contracts £(30)m £16m interest/pensions R&D £(18)m £10m acquisitions (after funding costs) Operational improvement: • Productivity • Restructuring • Volume Prelim
Slide 7: 2004 year-on-year sales growth analysis
2004 year-on-year sales growth analysis (at constant currency) H1 H2 Aerospace +3% +9% +7% Medical +4% +7% +3% Specialty Engineering +2% +5% Detection +20% +21% extra months of Heimann Demand stepped up through the year Preliminary Results 2004 7
Slide 8: Adding valuable bolt-ons in each division: six acquisitions since March 04
Adding valuable bolt-ons in each division: Six acquisitions since March 04 for £215m Aerospace DGT • Engine components £56m Detection £8m Cyrano • Miniaturised detector SensIR • Hazmat kit £41m Medical £16m Smiths Med. Japan • Full ownership of Japanese distribution DHD • US respiratory care devices
Slide 9: Operating performance
Operating performance Financial Director Speaking £m 2004 exchange increase on 2003 (published) impact (at constant currency) Sales 2,678 (137) +7% Operating profit 360 (20) +2% Pre-tax profit 350 (20) +6% North America: by origin, as percentage of Smiths total Sales: 52% Profit: 61% US Canada Mexic
Slide 10: Operating profit into operating cash
Operating profit into operating cash £m 2004 Operating profit 362 (incl discontinued) Depreciation 72 Capital expenditure (54) (net of disposal proceeds) Retirement benefits (23) (contributions to reduce deficit) Working capital (28) (mainly trade receivables) Operating cash-flow 329 Op. profit into
Slide 11: Movement in net debt
Movement in net debt £m 2004 Operating cash (after cap-ex) 329 Interest and tax (51) (tax rate 26.5%) Restructuring (23) (cash spend) Free cash-flow 255 (compares with £257m post-tax profit) Dividends (146) (03 final and 04 interims) Acquisitions (215) Disposals 506 (mainly Polymer Seals) Financing
Slide 12: Post-retirement benefits update
Post-retirement benefits update £m 2004 2003 Funded schemes (UK&US) Liabilities (2,686) (2,776) Assets 2,558 2,468 Deficit (128) (308) Unfunded post-retirement healthcare Liabilities (119) (145) (247) (453) Deferred tax 85 145 Net liabilities (162) (308) The assets of the UK pension schemes now cove
Slide 13: Divisional performance - sales
Divisional performance - sales Chief Executive speaking growth at £m Sales 2004 constant currency Aerospace 1,006 +7% Detection 317 +21% Medical 487 +5% Specialty Engineering 868 +4% 2,678 +7% Specialty Eng 32% Aerospace 38% 2004 sales Medical 18% Detection 12% Preliminary Results 2004 13
Slide 14: Divisional performance - profit
Divisional performance - profit growth at £m Profit 2004 constant currency Aerospace 100 +2% Detection 55 -20% Medical 92 +12% Specialty Engineering 113 +11% 360 +2% 2004 profit Specialty Eng 31% Aerospace 28% Medical 26% Detection 15% Preliminary Results 2004 14
Slide 15: Smiths Aerospace
Smiths Aerospace at constant Aerospace 28% £m 2004 currency Sales 1,006 +7% Operating profit 100 +2% Contribution to operating profit Margin 10% Boeing 7E7 • Significant contract wins: commercial - Boeing 7E7, military - Boeing 737MMA and Northrop J-UCAS • Restructuring benefits being achieved DGT •
Slide 16: Aerospace: commitment to R&D investment
Smiths Aerospace: commitment to R&D investment 2001 2002 2003 2004 Published Aerospace margin 16% 13% 11% 10% Company funded R&D (£m) 55 67 75 81 (% of sales) 5% 6% 7% 8% Aerospace margin excl. R&D 21% 19% 18% 18% Not included: customer-funded R&D, which has grown from 9% of sales in 2001 to 12% (£1
Slide 17: Aerospace sales trends
Smiths Aerospace sales trends (constant currency) 2002 2003 2004 OE Commercial 75% Military Aftermarket Commercial 25% Military Preliminary Results 2004 17
Slide 18: Smiths Detection
Smiths Detection at constant Detection 15% £m 2004 currency Sales 317 +21% Operating profit 55 -20% Contribution to operating profit Margin 18% Cargo X-ray screening • X-ray and Trace business now integrated on a global scale • Market has extended well beyond airports Sentinel II • Major new product
Slide 19: Detection - performance trends
Smiths Detection - performance trends Sales 2003 - £273m Sales 2004 - £317m Trace One-off Trace 1 0% contract US airports + X-ray Continuing activities Trace X-ray 2 0% 8 months only X-ray 12 months + pro-forma Preliminary Results 2004 19
Slide 20: Detection: market leadership across the full range of capabilities
Smiths Detection: market leadership across the full range of capabilities X-Ray EDS/EDtS Cargo Explosives Chem Bio (Checkpoint) Trace Smiths Detection L3 GE (IonTrak) InVision OSI/Rapiscan General Dynamics SAIC AS&E no.1 or 2 player others Smiths has: • Broadest range of technologies • Widest market
Slide 21: Smiths Medical
Smiths Medical at constant Medical 26% £m 2004 currency Sales 487 +5% Operating profit 92 +12% Contribution to operating profit Margin 19% NeedlePro • Strong sales growth in US market • Margin improved by one percentage point Cozmonitor • Continued gains from moving to low-cost manufacturing regions
Slide 22: Medical: Product innovation ensures high margins and volume growth
Smiths Medical: Product innovation ensures high margins and volume growth Greater focus on innovative new products silicone Gripper Plus tracheos tomy needles ambulatory pump convective blanket catheter range patient blower extensions monitors low d ead-s g pa convectiv e wa rm in sy ringe ce ge bub
Slide 23: The latest development of the Cozmo diabetes pump
The latest development of the Cozmo diabetes pump • Total pumps now in use: 11,500 • Following US, Cozmo has now been launched in: – Canada – France – Germany – Australia • Cozmonitor now launched • Next generation: combines insulin delivery with blood/glucose monitor • Only all-in-one product avail
Slide 24: Specialty Engineering
Specialty Engineering at constant Spec. Eng. 31% £m 2004 currency Sales 868 +4% Operating profit 113 +11% Contribution to operating profit Margin 13% TRAK John Crane • Strong growth in Interconnect from defence, telecoms • Acquisition adds to microwave technologies, raises Interconnect sales to circ
Slide 25: Interconnect: driving the growth of Specialty Engineering
Interconnect: driving the growth of Specialty Engineering (sales growth at constant currency) 2002 2003 2004 Interconnect John Crane Flex / Marine Preliminary Results 2004 25
Slide 26: Smiths Group: the Outlook for 2005
Smiths Group: the Outlook for 2005 Management action to drive growth: • Investing in new products • Investing in cost base reductions • Enhancing the portfolio Other drivers of profit growth: • Volume increases • Pensions financing Likely negatives: • Input cost increase • Currency translation Preli
Slide 27: Smiths Group: sales growth prospects for 2005
Smiths Group: sales growth prospects for 2005 Commercial market growth, plus new products build-up rate demand growing, Flex/Marine orders up Military Interconnect continuing recovery Medication delivery John Crane procurement already Trace committed Anaesthesia X-ray depends on Mid-East stability A
Slide 28: Smiths Group
Smiths Group www.smiths-group.com/ir Preliminary Results 2004 Register here to receive regular information 28