Smiths Group PLC · LSE:SMIN
Smiths — JP Morgan Capital Goods Conference 2008
26 slides from Smiths's conference presentation, Jun 11, 2008
Slide 1: Smiths Group: JP Morgan Capital Goods Conference
Smiths Group JP Morgan Capital Goods Conference 11 June 2008
Slide 2: Forward-looking statements
This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from tho
Slide 3: Introduction and Agenda
Introduction John Langston, Finance Director Agenda • Business overview • Divisional review • Summary JP Morgan 2008 3
Slide 4: The shape of Smiths
The shape of Smiths Continuing activities Sales 2007: £2,161m Key metrics - 2007: Detection £438m Sales of £2,161m Operating profit of £348m Medical John £691m Crane Pre-tax profit of £344m >20,000 employees in over 50 countries Specialty Engineering £1,032m Smiths Detection Smiths Medical S
Slide 5: High margin businesses addressing the best growth opportunities
High margin businesses addressing the best growth opportunities 2007 EBIT margin* Medical: Premium products in strong niche markets 18% Technology leadership in Detection: responding to new threats 18% Specialty Meeting the most demanding Engineering: customer specifications 14% Smiths Sales growth
Slide 6: Recent key events in re-shaping of Smiths Group
Recent key events in re-shaping of Smiths Group • May 2007 Disposal of Aerospace • June 2007 £2.1 billion returned to shareholders • Dec 2007 Appointment of new CEO • June 2008 HQ restructuring announced Acquisitions • Nov 2007 Sartorius Bearing Technology for John Crane • Feb 2008 Fast Heat for Fle
Slide 7: CEO observations on Smiths Group
CEO observations on Smiths Group • Strong positions in growing and resilient markets • Reservoir of technology and IP • Employees with good knowledge base • Opportunities for margin enhancement • Scope for enhanced integration & efficiencies • Shared services • Best practice • Improved data flow • I
Slide 8: Restructuring the corporate and divisional headquarters
Restructuring the corporate and divisional headquarters Corporate • Streamlined HQ – 65 positions to be eliminated • Clear focus on role of HQ Divisional • Move divisional HQs from London to be closer to customer • Disband the Specialty Engineering division • Merge the two John Crane businesses Redu
Slide 9: Detection: Market drivers - threats, technology & legislation
Smiths Detection: Market drivers - threats, technology & legislation • Airline checkpoint automation and improved passenger experience • Cargo screening in response to US legislation • Latest military programmes Global market growth 11% CAGR over next 5 years Airports, Ports & Borders, Military, 201
Slide 10: Detection: A global leader
Smiths Detection: A global leader • Global presence in key markets • EBIT margin:18% • Technology & IP • R&D: 7.5% of sales • Strong growth in H1 • Success in: • Passenger checkpoint UK & US • Customs/border US & Russia Headline • Military sales JCAD for US DoD Sales/ H1 Sales operating profit 400 1
Slide 11: Detection: Opportunities
Smiths Detection: Opportunities • R&D increasing +11% in H1 • New technologies continue to be brought to market • Biological detection • Millimetre wave • Seeking acquisitions – complementary technologies • Opportunity for efficiencies • Implementation of single ERP starts H2 • Smarter sourcing init
Slide 12: Medical: Market drivers - demography, outcomes & economics
Smiths Medical: Market drivers - demography, outcomes & economics • Ageing population and increasing prosperity • Safety legislation and regulation • Healthcare productivity needs • Increasing use of IT Consistent Market Growth Vital Care Medication Safety 4% Delivery 6% 6% Source Smiths Medical int
Slide 13: Medical: Niche device manufacturer
Smiths Medical: Niche device manufacturer • Global sales & marketing network Smiths Medical brands • Established brands with practitioner loyalty • Increasing roll-out of new products • CADD Solis • H1 R&D spend increased 4% • Manufacturing and supply chain issue Headline Sales/ H1 Sales operating p
Slide 14: Medical: Manufacturing & supply chain issues
Smiths Medical: Manufacturing & supply chain issues Issues Action plan Initial results • Relocation of • Focusing on Unfulfilled orders Short Term manufacturing key issues: and reduction • Unfulfilled orders of plants • Least effective sites • Inventory re 65% du • Medex ct ion integration Medium •
Slide 15: Medical: Opportunities
Smiths Medical: Opportunities • Scope to reduce costs and improve margins • Focusing increased R&D investment on higher growth segments and markets • Leverage global product development process • Increase percentage of sales from products under 3 years old JP Morgan 2008 15
Slide 16: Specialty Engineering - strong business opportunities
Smiths Specialty Engineering - strong business opportunities John Crane Oil & Gas Chem/Pharma General Industry Specialty - Other Smiths Interconnect Military Wireless Rail Flex-Tek US Housing Aerospace Appliances Medical JP Morgan 2008 16
Slide 17: John Crane: Petrochemical market drivers
John Crane: Petrochemical market drivers Global energy consumption • Largest segment is petrochemical industry: 600 2.0% CAGR Quadrillion Btu • Upstream 1.7% CAGR • Midstream & pipelines 300 • Downstream • Two-thirds of revenue 0 1990 2020 from aftermarket service Source: U.S. Department of Energy,
Slide 18: John Crane: Global leader
John Crane: Global leader • Market leader in its field, blue-chip customer base Top 10 customers H1 achievements • Sales and margin increasing; Sartorius acquisition • Increasing OE sales and manufacturing capacity • Further develop of service bases – Saudi Arabia/China Headline Sales/ H1 Sales oper
Slide 19: John Crane: Opportunities
John Crane: Opportunities • Expanding technology footprint - Sartorius & Indufil • New upstream services business leverages global network - CDI & Fiberod • Extend global customer service network • Margin expansion - sales and cost reduction • Implementation of ERP system continues H2 • Possibility
Slide 20: Interconnect: Military & communications markets
Smiths Interconnect: Military & communications markets US DoD Procurement Budget ($bn) Global Wireless Subscribers (millions) 3000 Source: CIBC/Wall Street Sources: StrategyAnalytics, Worldwide Cellular User Forecasts and TIA 2007 Industry Playbook 100 2000 1000 60 0 2007 2008 2009 2010 2011 2003 20
Slide 21: Interconnect: Operating in growth markets
Smiths Interconnect: Operating in growth markets • Strong B2B brands; growing markets Top 10 customers • Strong tech differentiation and blue chip customers Benefiting from… • Sales to US 4G wireless providers • Contracts in defence • Increased low-cost headcount Headline Sales/ H1 Sales operating p
Slide 22: Interconnect: Opportunities
Smiths Interconnect: Opportunities • Expand globally from US base • Potential to rationalise manufacturing and accelerate move to lower costs • Sector fragmented with many potential bolt-on acquisitions • Report separately from FY09 JP Morgan 2008 22
Slide 23: Flex-Tek: Difficult market conditions
Flex-Tek: Difficult market conditions • US construction market in recession • Good performance in other markets – civil & military aircraft demand rising • US household appliance demand driven by macro-economic cycle Opportunities & priorities • Expand non-construction markets e.g. aerospace & medic
Slide 24: Group: Opportunity to create value
Smiths Group: Opportunity to create value Smiths Detection • Strong technology positions Driven by changing threats, • Good access to growing market technology & legislation • Investment in R&D increasing Smiths Medical • Manufacturing & supply chain issues Driven by demography, • New product develo
Slide 25: Group: A growth opportunity
Smiths Group: A growth opportunity INVESTMENT CASE FOR SMITHS • Strong positions in growing and resilient markets • Good reservoir of technology and IP • New CEO introduced an increased focus on performance • Opportunities for margin enhancement • Good track record of cash conversion Clear opportuni
Slide 26: Questions & Answers
smiths bringing technology to life Questions & Answers Making the world safer, healthier and more productive
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