Smiths Group PLC · LSE:SMIN
Smiths — JP Morgan Capital Goods Conference 2007
20 slides from Smiths's conference presentation, Jun 14, 2007
Slide 1: Smiths Group
Smiths Group Presentation by: John Langston, Finance Director At the JP Morgan Capital Goods Conference Pennyhill Park, Surrey, UK Thursday, 14 June 2007 www.smiths.com/ir Register here to receive regular information JPM June 07 1
Slide 2: The shape of new Smiths
The shape of new Smiths Continuing activities, Sales 2006: £2,180m Following the disposal of Aerospace: Detection Medical £412m £737m In markets with strong growth, less cyclical Higher margin businesses Less capital intensive, better cash conversion John More efficient balance sheet Crane
Slide 3: In markets with strong underlying growth
In markets with strong underlying growth Market growth Healthcare spending continues to increase Medical: worldwide, driven by demographics 5% Specialty High capital spending on energy Engineering: production and on electronic networks 7% Homeland security now a top priority Detection: in all wester
Slide 4: High margin businesses addressing the best growth opportunities
High margin businesses addressing the best growth opportunities 2006 EBIT margin* Medical: Premium products in strong niche markets 18% Specialty Meeting the most demanding Engineering: customer specifications 13% Technology leadership in Detection: responding to new threats 18% Smiths Sales growth
Slide 5: Now less capital intensive and able to achieve an improved cash generation
Now less capital intensive and able to achieve an improved cash generation Target for Smiths from 2008 Headline Headline operating 90% operating conversion profit cash-flow (after capex and capitalised R&D) Continuing activities £m 2007E Capex (PPE + intangibles) circa (80) Capitalised R&D circa (20
Slide 6: A more efficient Balance Sheet
A more efficient Balance Sheet New targets Debt/Equity 20% Debt/EBITDA <2x Interest cover >7x BBB+ Credit rating Baa2 The tightened B/S still provides adequate resource for a targeted acquisition programme The better cash generation allows a more generous dividend pay-out ratio: now targeting an
Slide 7: Smiths Group: A strong management team driving Full Potential
Smiths Group: A strong management team driving Full Potential Board Donald Brydon 4 non-executives Chairman - Finance - Industry - Government Executive Team Keith Butler-Wheelhouse John Langston David Lillycrop Chief Executive Finance Director General Counsel Paul Cox Stephen Phipson Srini Seshadri
Slide 8: Smiths Medical: focusing on improved outcomes for patients
Smiths Medical: focusing on improved outcomes for patients Srini Seshadri Medical Holding leading positions in key market segments Medication Vital Care Benefiting from patient Delivery demographics Driving growth through product innovation Extending global reach: design, production, distrib
Slide 9: Smiths Medical: innovative products targeted at specialist users
Smiths Medical: innovative products targeted at specialist users - Well-positioned in dynamic market sectors Market dynamics Smiths sales Smiths products Size growth (06-approx) Medication Delivery • Pain relief • Cancer treatment • Insulin delivery £1.5bn 6% £250m Vital Care • Airway management • R
Slide 10: Cost reduction and improved operating efficiency
Cost reduction and improved operating efficiency Manufacturing strategy Fewer, world class, facilities High volume lines automated High labour content in LCCs Operating strategy Business-wide ERP system Improved service levels Rationalised supply chain Number of facilities Inventory Turn
Slide 11: Specialty Engineering: changing the business mix to focus on growth markets
Specialty Engineering: changing the business mix to focus on growth markets Paul Cox Specialty Engineering 2006 sales: £1,032m Growth record, sales £m 1000 800 Margins 14.3% Interconnect John Crane 13.7% 600 13.0% 12.4% 11.3% 400 Flex Tek 200 Organic Sales Growth: c5% per annum, Organic Profit Growt
Slide 12: John Crane: a world leader in rotating mechanical seals
John Crane: a world leader in rotating mechanical seals Products & services used throughout the energy sector Two thirds of sales are into the petrochemical sector Strong relationships with end-users Capex Global capital spend in this sector will continue to increase growth: 6.7% CAGR OE Installed b
Slide 13: Interconnect: highly specialised components for electronic networks
Interconnect: highly specialised components for electronic networks Military/aerospace Defence procurement focusing on force modernisation - UAVs - next-generation land vehicles - communications systems - battlespace surveillance - self-protection systems Wireless infrastructure Mobile telecoms
Slide 14: Specialty Engineering: well-positioned for sustainable growth
Specialty Engineering: well-positioned for sustainable growth Two thirds of divisional sales are in strong growth markets Production being established in Industrial Energy developing economies, incl. China Volume increase and efficiency Above GDP improvements will drive further growth margin e
Slide 15: Smiths Detection: offering the widest range of detection technologies
Smiths Detection: offering the widest range of detection technologies Stephen Phipson Detection Smiths capabilities Military Transportation Chemical agent detection Bio-agent detection Emergency X-ray screening responders Infra-red chemical analysis Ports & Non-security Millimetre wave Bor
Slide 16: Ports & Borders: a rapidly expanding sector
Ports & Borders: a rapidly expanding sector Driven by two dynamics - Security screening - Prevention of tax evasion Current levels of screening are inadequate for perceived threat Smiths is the market leader, with mobile and fixed units Capable of detecting explosives, weapons, radioactive m
Slide 17: Military: providing the armed forces with total capability
Military: providing the armed forces with total capability Equipment for battlefield detection of chemical, biological, radiological, nuclear and explosive threats Units are being miniaturised for individual protection Sizeable contracts with UK MoD, US DoD and other countries Technology spi
Slide 18: Airport security: focusing on checkpoint, hold baggage, air cargo
Airport security: focusing on checkpoint, hold baggage, air cargo Preventing explosives/weapons being taken on to aircraft Airport security demand will grow at c10% pa, due to: - traffic growth - new threats - improved efficiency - replacement of post 9/11 kit - systems integration Technology wi
Slide 19: Bringing Smiths Detection and GE Homeland Protection together
Bringing Smiths Detection and GE Homeland Protection together To offer a total solution for airport screening of hold baggage Including GE’s Computed Tomography (CT) technology for Level3 screening Access to GE’s research programmes 64% Smiths Detection Smiths GE L3 GE Smiths OSI Detection Hig
Slide 20: Smiths Group: achieving Full Potential through six fundamental strengths
Smiths Group: achieving Full Potential through the implementation of six fundamental strengths Operating in sectors of high growth Reaching deep into global markets Developing technology to help customers succeed Delivering constant improvement Improving the business mix Doing business the right way
Smiths Group — JP Morgan Capital Goods Conference 2007 on 6ix