Smiths Group PLC · LSE:SMIN
Smiths — FY2007 Earnings Presentation
22 slides from Smiths's earnings presentation, Sep 26, 2007
Slide 1: Smiths Group Preliminary Results 2007
Smiths Group Preliminary Results 2007 London, Wednesday 26 September 2007 Presentation by: Keith Butler-Wheelhouse, Chief Executive John Langston, Finance Director Register here to receive regular information Preliminary Results 2007 ½ www.smiths.com/ir 1
Slide 2: Summary
Smiths Group: Preliminary Results 2007 Chief Executive speaking Summary Headline profit before tax up by 9% Underlying 7% increase in headline operating profit Margins of 16.1% improved by 30bps Cash conversion from profit at 75% Net debt reduced from £923m to £588m Annual dividend increased by 8.5%
Slide 3: Preliminary Results 2007
Preliminary Results 2007 2007 2006 £m Headline* Statutory Headline* Statutory Continuing activities Sales 2,161 2,180 Operating profit 348 257 345 (8) Pre-tax profit 344 256 316 (37) Basic EPS (p) 47.0p 36.9p 41.5p (18.2p) Annual dividend (pps) 34.0p 31.35p * In addition to statutory reporting, Smit
Slide 4: Headline performance - Continuing activities
Headline performance - Continuing activities £m 2007 2006 reported underlying* Sales 2,161 2,180 -1% +5% Operating profit 348 345 +1% +7% Margins 16.1% 15.8% Pre-tax profit 344 316 +9% - *Underlying performance excludes the year-on-year impact of currency translation and acquisitions/disposals Preli
Slide 5: Profit progression from 2006 to 2007
Profit progression from 2006 to 2007 Currency Interest/ £25m Pensions £19m financing Headline pre-tax £27m Volume/ 2007: Underlying operating mix performance is £344m Headline pre-tax higher by £22m 2006: £316m Labour costs £17m Selling prices £23m £8m Input costs £15m Efficiencies/ £6m synergies Ov
Slide 6: Financial update
Financial update Finance Director speaking Exchange rates $1.95 v $1.79 last year Sales effect £120m €1.48 v €1.46 last year Operating profit £21m £1.2m per US cent £0.7m per Euro cent Pro-forma EPS PBT £334m (adjusted) Shares 385m EPS 65.0p Exceptionals Litigation - Commutation 43 - Asbestos (101)
Slide 7: Operating cash conversion
Operating cash conversion £m (for continuing activities) 2007 Headline operating profit 348 Share based payment 10 Capital expenditure (PP&E) (50) Depreciation 44 Development costs & other intangibles (28) (net of amortisation and deferred income) Changes in working capital (65) Operating cash-flow
Slide 8: Movement in net debt in 2007
Movement in net debt in 2007 £m Net debt at start of period (923) Operating cash (after capex etc) 259 Interest and tax (111) Exceptionals, special pension payments and insurance commutation (47) 101 Cash outflow from discontinued operations (62) Dividends (182) Disposals 2,516 Acquisitions (35) Ret
Slide 9: Smiths Group: well positioned for growth in resilient markets
Smiths Group: well positioned for growth in resilient markets Chief Executive speaking Smiths Detection By business segment Smiths Medical A market and technology A strong niche player in leader in detection the medical device sector Detection Medical UK/Eur By US destination John RoW Crane Specialt
Slide 10: Smiths Detection: 10% underlying growth, investment for future growth
Smiths Detection: 10% underlying Stephen Phipson growth, investment for future growth Group Managing Director £m 2007 2006 reported underlying Sales 438 412 +6% +10% Operating profit 79 74 +6% +10% Margin 18.0% 18.0% • Airport equipment grew 11% Other Transportation First (constant exchange) respond
Slide 11: Smiths Detection: a high-growth, high-technology business
Smiths Detection: a high-growth, high-technology business Mutual decision not to proceed with JV Not able to reach a shared strategic vision for the combined business Technology evolving rapidly, Smiths well-placed Smiths Detection best served by remaining independent Co-operation agreement remains
Slide 12: Airports: Rapid developments in airport security present new opportunities
Airports: Rapid developments Transportation in airport security present new opportunities Today Next generation Advanced Checkpoint X-ray Technology (AT) X-ray aTiX US: CT Checked Regulation baggage RoW: AT evolving (supplemented by CT) EDtS Trace Conventional trace New IED units detection 500DT Pre
Slide 13: Other growth drivers ahead
Other growth drivers ahead Period of strong growth Ports & • Concerns on border security drive demand Borders • Sales doubled in 2007 • Russian factory operational Major military • US Chemical Biological Protection System programmes (CBPS) now in prototype stage • JCAD US manpack - production underw
Slide 14: Smiths Medical: Sales held back by supply chain disruption, margins improved
Smiths Medical: Sales held back by Srini Seshadri supply chain disruption, margins improved Group Managing Director £m 2007 2006 reported underlying Sales 691 737 -6% -1% Operating profit 127 133 -5% +1% Margin 18.4% 18.1% • Temporary disruption to internal supply chain Medication Vital Delivery Car
Slide 15: Smiths Medical: manufacturing issues addressed
Smiths Medical: manufacturing issues addressed Location of manufacturing “direct” employees: Changed manufacturing footprint • Mexico now 60% of total direct EU manufacturing employees EU Mexico • EU operations consolidated US Mexico on to fewer sites US • US operations highly automated 2005 2007 Pr
Slide 16: Smiths Medical: Attractive market dynamics, significant opportunities for growth
Smiths Medical: Attractive market dynamics, significant opportunities for growth • Consistent 5% growth in world market for healthcare devices • Smiths: good market positions, respected brands, constant product renewal Medication Delivery • Effective global distribution network: sales 50/50 US/RoW •
Slide 17: Specialty Engineering: John Crane
Specialty Engineering: John Crane Paul Cox Group Managing Director John Crane (£m) 2007 2006 reported underlying Sales 532 518 +3% +9% Operating profit 75 66 +13% +22% Margin 14.1% 12.8% John Crane Pulp & paper • Continued high demand in oil & gas sector Oil, gas General • Other sectors more variabl
Slide 18: John Crane has excellent prospects
John Crane has excellent prospects • Market outlook remains strong • High capex in oil & gas sector expected to continue • Additional John Crane manufacturing & test capacity installed • Recent investments in China & India generating incremental sales Oil refinery • Raw material cost increases are b
Slide 19: Specialty - Other: Interconnect grew strongly
Specialty - Other: Interconnect grew strongly Specialty - Other (£m) 2007 2006 reported underlying Sales 500 513 -3% +3% Operating profit 66 71 -6% -1% Margin 13.3% 13.8% Specialty - Other Interconnect Flex-Tek • Flex-Tek sales reduced by downturn in US house-building • Interconnect: Interconnect -
Slide 20: Smiths Group: driving for Full Potential
Smiths Group: driving for Full Potential Smiths will: A year of action: Operate in sectors of high growth Recent major business wins Reach deep into global markets New plants in Russia, India, Mexico and US Develop technology to “Advanced Technology” X-ray machines help customers succeed Restructuri
Slide 21: Smiths Group: Looking ahead
Smiths Group: Looking ahead “Smiths continues to build leadership positions in growth markets and the outlook in its sectors remains robust. All three divisions have made a good start to the new financial year and the Board is confident that Smiths will achieve an enhanced performance in the current
Slide 22: Questions and answers
Questions and answers A world leader in the practical application of advanced technologies Smiths Detection Smiths Medical Specialty Engineering Equipment for homeland defence, business Specialist devices and equipment Application-specific components in energy, security and protection of the militar