Steris Plc (ireland) · NYSE:STE
Steris Plc (ireland) — STERIS — Investor Day (September 2003)
112 slides from Steris Plc (ireland)'s investor day presentation, Sep 4, 2003
Slide 1: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 and 4, 2003
Slide 2: Forward-Looking Statements
Forward-Looking Statements Except for historical information discussed, today’s presentations include forward-looking statements that involve risks and uncertainties. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially. Some of th
Slide 3: Today's Agenda
Today’s Agenda > STERIS Overview – Les Vinney > Business Segment Presentations by Group Presidents > Healthcare – Chuck Immel > Life Sciences – Morten Nielsen > STERIS Isomedix Services – Robert Moss > Financial Overview – Laurie Brlas > Wrap-up and Q&A – Les Vinney
Slide 4: Goals for Today
Goals for Today Our purpose in hosting this analyst day is to provide you with: > An increased knowledge and understanding of STERIS > The opportunity to meet and speak with our senior management team > An informed perspective on our industry and potential opportunities > An interactive session that
Slide 5: STERIS Overview
STERIS ze > STERIS Overview
Slide 6: STERIS's Path to Growth
STERIS’s Path to Growth [GRAPHIC]
Slide 7: STERIS Today
STERIS Today > Leader in infection prevention equipment and related products > Restructured in April 2003 to a market-focused business organization > Three new reporting segments: Healthcare, Life Sciences and STERIS Isomedix Services > Combination of acquisitions and internal manufacturing changes
Slide 8: The Mission of STERIS Corporation
The Mission of STERIS Corporation To provide a healthier today and a safer tomorrow through knowledgeable people and innovative infection prevention, decontamination and health science technologies, products and services.
Slide 9: Sales by Business Segment
Sales by Business Segment Fiscal Year Ended March 31, 2003 (Dollars in millions) [CHART] HEALTHCARE ($697) LIFE SCIENCES ($195) STERIS ISOMEDIX SERVICES ($79)
Slide 10: Key Markets Served
Key Markets Served HEALTHCARE > Surgical Support > Sterile Processing > Applied Infection Control LIFE SCIENCES > Pharmaceutical Production > Research > Defense and Industrial STERIS ISOMEDIX SERVICES (CONTRACT STERILIZATION)
Slide 11: Why STERIS: Investment Considerations
Why STERIS: Investment Considerations
Slide 12: Investment Considerations
Investment Considerations > A technology leader > Diversified and recurring revenue stream > Leading market positions > Improving market dynamics > Strong financial and operating platform > Experienced and credible management team
Slide 13: A Technology Leader
A Technology Leader Broad based technologies . . . [GRAPHIC] Delivered through capital equipment chemistries and services . . .
Slide 14: Diversified and Recurring Revenue Stream
Diversified and Recurring Revenue Stream Capital equipment drives Consumables and Services [GRAPHIC] 52% of fiscal 2003 revenues were higher margin, recurring consumables and services STERIS has the unique ability to offer a custom solution for a variety of customers, industries and geographies
Slide 15: Market Leader
Market Leader > Leading supplier of sterilization and surgical support products to U.S. healthcare facilities > Leading position in contract sterilization for medical technology manufacturers and other industries > Leading supplier of equipment and chemistries to biopharmaceutical companies for rese
Slide 16: Improving Market Dynamics
Improving Market Dynamics > Aging population is driving demand for healthcare services and pharmaceuticals > Increased spending by hospitals is leading to expansion and upgrading of facilities > Ongoing investment in drug production is driving manufacturing capacity and research facilities > Global
Slide 17: A Strong Financial and Operating Platform
A Strong Financial and Operating Platform > Consistent revenue and earnings growth > Low level of debt > Strong free cash flow > Efficient operations
Slide 18: Management Team
Management Team > 75% of management new within the last three years > All come from larger organizations > All have a proven ability to execute
Slide 19: Strategic Direction
STERIS: B > Strategic Direction
Slide 20: Sources of Growth
Sources of Growth Earnings Power External Internal Improving market dynamics and growing awareness of the need for infection control Strategic Actions to Drive Growth and Financials
Slide 21: Our Growth Strategy
Our Growth Strategy Enhance our revenue stream by continuing to diversify by product, service, market and geography > Capitalize on installed base > Leverage our channel > Introduce new technologies > Adapt our technologies > Expand internationally
Slide 22: Capitalize on Installed Base
Capitalize on Installed Base n Large revenue opportunity in our own installed base > Capture consumable opportunity > Aggressively grow service > New capital equipment products will have an associated proprietary consumable
Slide 23: Leverage Our Channel in Healthcare
Leverage Our Channel in Healthcare > Presence in every U.S. hospital > Sales force of 250 people > Service force of 1,000 > New products, alliances, acquisitions
Slide 24: Introduce New Technologies
Introduce New Technologies > R&D spending to approximate $32 million in fiscal 2004 > Focused new product development effort > Areas of focus include projects for new industries and new sterilization technologies > VHP technology advancement into new product uses > Prion Decontamination > Segmented
Slide 25: Adapt Our Technologies
Adapt Our Technologies CURRENT FUTURE POSSIBILITIES Exploring new applications related to Anthrax contamination Transportation Joint research on defense applications for biological and chemical warfare Hotel and building decontamination Joint research in space applications Food and beverage packagin
Slide 26: International Expansion Opportunities
International Expansion Opportunities First Quarter 2004, including Hamo Acquisition REVENUE MIX BY GEOGRAPHY [GRAPH] > Market size is equivalent to U.S. > Focused on key European markets > Acquisitions to play strategic role > Enter with leading-edge technologies > Organization established in Japan
Slide 27: Outlook/Financial Targets
> Outlook/Financial Targets
Slide 28: Financial Targets
Financial Targets Average Annual Growth Rates Current demand trends, new product initiatives, and geographical expansion opportunities to grow core businesses organically over next two years > Revenue growth of 10% > Earnings growth of 15%
Slide 29: Summary
Summary > A technology leader with strong market positions > Diversified and recurring revenue stream > Improving market dynamics > Financial flexibility > Management team that can execute > Bright future
Slide 30: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 and 4, 2003
Slide 31: Healthcare
STERIS Analyst Day SEPTEMBER 3 and 4, 2003 > Healthcare
Slide 32: Healthcare Group
Healthcare Group Agenda: > Business Overview > Market and Market Drivers > Strategy
Slide 33: Healthcare Group Business Definition
Healthcare Group Business Definition A leading provider of an integrated offering of equipment, consumables, and services to hospitals or alternative sites, enabling them to improve the safety, efficiency, and effectiveness of the Ambulatory and Acute Care environments.
Slide 34: Healthcare Group
Healthcare Group $ 697 Million* [GRAPH] *Fiscal Year ending March 31, 2003 Business Units: > Surgical Support—equipment and services designed to integrate new technologies and process improvements in the clinical and surgical environment > Sterile Processing—sterilization and contamination control p
Slide 35: Surgical Support
STERIS" Surgical Support
Slide 36: Sterile Processing
STERIS" Sterile Processing — ANALYST DAY 2003 ff 36
Slide 37: Markets
STERIS’ B > Markets
Slide 38: Healthcare by Product Type
Healthcare by Product Type $Billions [GRAPH] * Other includes a broad range of OR and ICU equipment (Respiratory and Anesthesia devices, Patient Warming Systems, Fluid Waste Management) > Total market size greater than $11 billion with mid single digit growth rates > Geographies have differences in
Slide 39: Sterile Processing by Major Product
Sterile Processing by Major Product ($ in millions) [GRAPH]
Slide 40: Surgical Support by Major Product
Surgical Support by Major Product ($ in millions) [GRAPH]
Slide 41: Healthcare Group Core Strengths
Healthcare Group Core Strengths > Integrated offering of capital equipment, chemistries, and services > Service force of more than 1,000 professionals > Leading brand and strong channel in North America > Significant active installed base of equipment > Base of platform sterilization and disinfectio
Slide 42: Base Market Growth
Base Market Growth [GRAPH] “Boomers” continue to increase demand for acute care procedures driving sterilization cycle growth and hospital census Sources: F.W. Dodge, The Outlook for Healthcare Facilities (Q2 2002) SMG, Surgical Procedures, 1981-2007
Slide 43: Base Market Growth
Base Market Growth [GRAPH] > “Boomers” continue to increase demand for acute care procedures driving sterilization cycle growth and hospital census > U.S. Hospital capacity gaps drive robust construction spend, particularly in surgical and critical care Sources: F.W. Dodge, The Outlook for Healthcar
Slide 44: Strategy
STERIS’ B > Strategy
Slide 45: Healthcare Group Strategy
Healthcare Group Strategy > Build international presence through selected partnerships, acquisitions, and new technology introductions > Introduce new disruptive technologies in Sterile Processing > Drive growth of recurring revenues > Expand and integrate the Surgical and Critical Care offering to
Slide 46: Healthcare Group Strategy
Healthcare Group Strategy > Build international presence through selected partnerships, acquisitions, and new technology introductions > Introduce new disruptive technologies in Sterile Processing > Harness the value of the installed base and drive growth of recurring revenues > Expand and integrate
Slide 47: Recurring Revenue Growth
Recurring Revenue Growth Opportunity for Improved Recurring Revenue Growth Is Substantial on Current Installed Base of Equipment WASHING SYSTEMS HIGH TEMPERATURE STERILIZATION LOW TEMPERATURE STERILE PROCESSING Average Consumable Cost/Cycle*: $9.00 $10.00 $9.50 Annual Consumable Revenue Opportunity:
Slide 48: Technical Service Growth Opportunity
Technical Service Growth Opportunity ($ in millions; North America contract revenues) Total Market $850 [GRAPH]
Slide 49: Healthcare Group Strategy
Healthcare Group Strategy > Build international presence through selected partnerships, acquisitions, and new technology introductions > Introduce new disruptive technologies in Sterile Processing > Harness the value of the installed base and drive growth of recurring revenues > Expand and integrate
Slide 50: Healthcare Channel Strength Offers Opportunity in Selected Areas
Healthcare Channel Strength Offers Opportunity in Selected Areas [MAP] Capabilities : > Broad Hospital Reach > Capital & Consumables > Technical Sales Process > Complex Project Management > High Service Component
Slide 51: Expanded Offering in Surgical & Critical Care
Expanded Offering in Surgical & Critical Care [GRAPH] Source: MDB, CMD, ECRI, IHS
Slide 52: Healthcare Group Summary
Healthcare Group Summary > Underlying market demand driven by surgical procedure growth, new construction to address provider capacity gaps, and ongoing need to address nosocomial infections > STERIS has core strengths in channel and technology platforms > STERIS growth will be driven by expanding t
Slide 53: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 and 4, 2003
Slide 54: Life Sciences
STERIS Analyst Day SEPTEMBER 3 and 4, 2003 > Life Sciences
Slide 55: Life Sciences Group Definition
Life Sciences Group Definition The STERIS Life Sciences Group is a leading global provider of integrated and validated equipment, chemistries and service solutions aiding developers and manufacturers of pharmaceutical and bio-pharmaceutical products to maximize uptime, enhance productivity and prote
Slide 56: Key Group Characteristics
Key Group Characteristics Sales Revenue > High double digit annual growth even past two fiscal years > Low-to-mid double digit annual growth expected for the next several years > Majority of Equipment and Chemistry sales driven from Manufacturing Process Segment [GRAPH] Global Reach > Present in mor
Slide 57: Key Strengths
Key Strengths Technologies and equipment that are critical to the operation of aseptic pharmaceutical manufacturing Strong field based technical expertise Strong brand recognition with our customers > US: Calgon Vestal, AMSCO > Europe: Finn-Aqua, HAMO Unmatched global presence High quality equipment
Slide 58: Evolution of a (Bio)pharmaceutical Drug
Evolution of a (Bio)pharmaceutical Drug [GRAPHIC]
Slide 59: Research Business—Integrated Products and Systems
Research Business—Integrated Products and Systems [GRAPHIC]
Slide 60: Process Business—Integrated Products and Systems
Process Business—Integrated Products and Systems
Slide 61: Key Growth Drivers
Key Growth Drivers STERIS Advances in Investment in Population Growth Molecular [+4 Research & | & Changing Biology Development ©) Dernographics — Research Capacity Expansion . RS Pharmaceutical Volume 2 Production Capacity Expansion Changes in Production Methodology Plant Extensions | Generics Sarc
Slide 62: Research Business Overview
STERIS’ B > Research Business Overview
Slide 63: Research Business Overview
Research Business Overview [GRAPH] Source: SDI, STE analysis
Slide 64: Research Business Overview
Research Business Overview ($ in millions) Total $485 million [GRAPH]
Slide 65: Process Business Overview
STERIS’ B > Process Business Overview
Slide 66: Process Business Growth Drivers
Process Business Growth Drivers [GRAPH] Source: EFPIA, Pharma, LEK, US Census,
Slide 67: Process Business Overview
Process Business Overview [GRAPH] CAGR% (2001-06F) Total Sterile Small Molecule Biologics Oral/Topical Small Molecule Sources : Analyst Reports, Medical Healthcare Marketplace, BCC Inc., L.E.K. Interviews and Analysis, STERIS analysis
Slide 68: Process Business Overview
Process Business Overview Pharma Equipment Market $12.1 billion Sterile Dosage $3.2 billion (inc. bulk production & purification) [GRAPH] > Aggregate market growth rate is approximately 10% > Oral/topical 7% CAGR > Sterile Dosage ~15% CAGR Source: LEK, STERIS analysis
Slide 69: Process Business Overview
Process Business Overview ($ in millions) Total $749m [GRAPH] Source : Analyst Reports, Medical Healthcare Marketplace, BCC Inc., L.E.K. Interviews and Analysis, STERIS analysis
Slide 70: Process Business Overview
Process Business Overview ($ in millions) Total $450m [GRAPHIC] 03-09 CAGR:
Slide 71: Life Sciences Group Underlying Growth Rates
Life Sciences Group Underlying Growth Rates > Portion of the Industry that STERIS’ Research Business serves is expected to grow <10% per annum over the next 3 to 5 years > Portion of the industry that STERIS process equipment and chemistries serves is expected to grow at 10-15% per annum over the ne
Slide 72: Key Growth Strategies
Key Growth Strategies Strengthen Penetration in Key Growth Segments > Fill and Finish > Clean Utilities > Bio-pharmaceuticals > Cleaning Chemistry Geographic Expansion Leverage expansion of manufacturing operations > Reduction in Lead-Times > Modularization of Custom-Build Equipment Adapt Technologi
Slide 73: Life Sciences Group Summary
Life Sciences Group Summary > Unique offering of broad range of capital equipment > Unique in offering capital equipment and chemistries > Growing core markets > Opportunities to increase penetration of chemistries > System solution offering will add value to pharmaceutical and biotech customer base
Slide 74: Defense and Industrial Overview
Defense and Industrial Overview Customer / Development Partner Market Drivers Competition Key Competitive Differentiators Government Agencies (non-defense) • Threat of a naturally occurring biological contamination Technologies: • VHP (bio) and modified VHP (bio-chem) technology, experience, experti
Slide 75: D&I Key Current Activities
D&I Key Current Activities > U.S. Army Edgewood Chemical Biological Center—Contract R&D to further VHP as a biological and chemical decontamination system > Single Use Manufactured Medical Devices—Multiple opportunities for VHP MD > Department of State—Providing remediation services to decontaminate
Slide 76: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 and 4, 2003
Slide 77: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 and 4, 2003
Slide 78: STERIS Isomedix Services Definition
STERIS Isomedix Services Definition STERIS Isomedix Services is a leading provider of sterilization , microbial reduction , and materials modification services to medical supply , consumer , and industrial customers. STERIS Isomedix Services provides its customers safe, effective products in a timel
Slide 79: Our Business—Geographic View
Our Business—Geographic View [MAP]
Slide 80: Our Business—Geographic View
Our Business—Geographic View [GRAPHIC] Advantages > Proven reliability > Broad application Industries > Medical > Food packaging Products > Medical supplies > Dairy packaging > Labware > Spices
Slide 81: Our Business—Ethylene Oxide Sterilization
Our Business—Ethylene Oxide Sterilization [GRAPHIC] Advantages > Gentle process > High volume Industries > Medical > Spices Products > Surgery kits > Surgical supplies
Slide 82: Our Business—E-Beam Processing
Our Business—E-Beam Processing [GRAPHIC] Advantages > Materials enhancement Industries > Materials modification Products > Wire and cable > Plastic resin
Slide 83: Sales Process
Sales Process > 11 Direct sales representatives > Process validation > Service agreements > Process Agreement > Commitments > Slot of Time
Slide 84: Key Strengths
Key Strengths > Responsive to customer needs > Capacity—Monitor customer needs > Proximity—Serve the US with sixteen facilities > Flexibility—Three key technologies, Gamma, EtO and E-Beam > Experience—31 years
Slide 85: Business Model—Typical Product Life Cycle
Business Model—Typical Product Life Cycle [GRAPHIC]
Slide 86: Business Model—Isomedix Service Facility Life Cycle
Business Model—Isomedix Service Facility Life Cycle [GRAPHIC]
Slide 87: Business Model—Isomedix Services Advantage
Business Model—Isomedix Services Advantage [GRAPHIC]
Slide 88: Industry Drivers
Industry Drivers > Demographics increasing medical supply consumption worldwide > Medical commodity manufacturing moving to lower cost labor > In-house processing going contract/outsourcing > No rapid technology change foreseen > New applications developing
Slide 89: Industry Size
Industry Size > $ 390 + Million > Includes in-house operations and industrial applications [GRAPHIC] $680+M Worldwide
Slide 90: Industry Competition
Industry Competition > IBA/Sterigenics—Gamma, EtO, E-Beam and X-ray in 39 locations > Cosmed—EtO and Ozone in 8 U.S. locations > Titan Scan—E-Beam in 3 U.S. locations > Isotron—Gamma, EtO, and E-Beam in 15 non-U.S. locations > Other—Multiple with 3 or less sites > In-House Captive—Trend towards outs
Slide 91: Growth Strategy—Key Strategic Imperatives
Growth Strategy—Key Strategic Imperatives >Business Growth > Grow revenue 8-10% AAGR > Improve “same store” operating income year over year >Customer Focus > Improve customer satisfaction >Operational Excellence > Enhance performance > Improve business process > Control costs >Leadership Excellence
Slide 92: Summary
Summary STERIS Isomedix Services is well positioned to: > Take advantage of ongoing favorable market trends > Capitalize on new applications for irradiation > Expand into new geographies
Slide 93: STERIS Analyst Day
S T E R I S Analyst Day SEPTEMBER 3 and 4, 2003
Slide 94: Financial Overview
S T E R I S Analyst Day SEPTEMBER 3 and 4, 2003 Financial Overview
Slide 95: Recent Performance
STERIS ze > Recent Performance
Slide 96: Fiscal 2003 Recap
Fiscal 2003 Recap Fiscal 2003 Year Ended March 31, (In millions) Change Total Net Revenues $ 972.1 $ 866.7 % Gross Profit 408.8 355.2 % Gross Margin 42.1 % 41.0 % Operating Profit $ 125.8 $ 80.6 % Operating Margin 12.9 % 9.3 % Net Income $ 79.4 $ 46.2 % Diluted EPS $ 1.12 $ 0.65 %
Slide 97: Fiscal 2003 Segment Data
Fiscal 2003 Segment Data Fiscal 2003 Year Ended March 31, 2003 (In millions) Healthcare Revenues $ 697.4 Operating Profit 114.2 Life Sciences Revenues $ 195.3 Operating Profit 0.8 Isomedix Revenues $ 79.3 Operating Profit 10.7 Revenues by Segment [CHART] Operating Profit by Segment [CHART]
Slide 98: Fiscal 2004 First Quarter Recap
Fiscal 2004 First Quarter Recap Fiscal 2004 Quarter Ended June 30, (In millions) Change Total Net Revenues $ 259.3 $ 221.3 % Gross Profit 106.6 91.8 % Gross Margin 41.1 % 41.5 % Operating Profit $ 26.2 $ 20.6 % Operating Margin 10.1 % 9.3 % Net Income $ 16.5 $ 12.8 % Diluted EPS $ 0.23 $ 0.18 %
Slide 99: First Quarter Segment Data
First Quarter Segment Data Fiscal 2004 Quarter Ended June 30, (In millions) Change Healthcare Revenues $ 179.6 $ 161.9 % Operating Profit 23.6 20.2 % Life Sciences Revenues $ 58.4 $ 39.7 % Operating Profit (0.6 ) (3.2 ) N/A Isomedix Revenues $ 21.3 $ 19.7 % Operating Profit 3.2 3.5 -10 %
Slide 100: Current Financial Position
STERIS’ B > Current Financial Position
Slide 101: Strong Financial Picture
Strong Financial Picture > Consistent revenue and earnings growth > Improving key financial ratios > Low level of debt > Strong free cash flow > Capacity to fund growth
Slide 102: Net Quarterly Revenues
Net Quarterly Revenues dollars in millions [GRAPH]
Slide 103: Quarterly Diluted Earnings Per Share
Quarterly Diluted Earnings Per Share [GRAPH] * A charge in the fourth quarter of fiscal 2001 resulted in a loss of $0.24 per share
Slide 104: Improving Key Financial Ratios
Improving Key Financial Ratios FY 2001 FY 2002 FY 2003 Return on Assets 1 3.4 % 5.6 % 9.3 % Return on Average Equity 2 6.9 % 10.1 % 15.0 % Return on Invested Capital 3 4.6 % 7.8 % 13.2 % Long-term Debt to Capital 4 32.7 % 19.1 % 9.5 % 1. Average 12 months net income divided by average 12 months tota
Slide 105: Quarterly Long-Term Debt-to-Capital
Quarterly Long-Term Debt-to-Capital percentage [GRAPH]
Slide 106: Strong Cash Flow
Strong Cash Flow Cash From Operations and Capital Spending (In millions) [GRAPH] Cash Priorities: Fund growth through acquisitions Modest share buy backs to offset dilutive impact of options Cash Uses in Q1 FY’04: $39.7 million in acquisitions $14.1 million in share buy back
Slide 107: Acquisition Criteria
Acquisition Criteria > Strong financial discipline and detailed integration > Strategic fit > Expand internationally > Leverage healthcare channel > Drive recurring revenues > Improve technology offering > Targeted accretion in year one
Slide 108: Outlook/Financial Targets
STERIS’ B > Outlook/Financial Targets
Slide 109: Our Current Financial Outlook
Our Current Financial Outlook FISCAL 2004 Including acquisitions: > Revenue growth to approximate 17% > Earnings per share of $1.29 to $1.33 (15-18% growth) > Free cash flow of $60-65 million (before acquisitions) > Capital spending approximately $70-$75 million > Depreciation and amortization $50-5
Slide 110: Capital Spending in Fiscal 2004
Capital Spending in Fiscal 2004 Total Fiscal 2004 Capital Spending $70-75 million [CHART]
Slide 111: Financial Targets
Financial Targets Average Annual Growth Rate Current demand trends, new product initiatives, and geographical expansion opportunities are expected to grow core businesses over the next two years > Revenue growth of 10% > Earnings growth of 15% Acquisitions will further enhance growth
Slide 112: STERIS Analyst Day
STERIS Analyst Day SEPTEMBER 3 AND 4, 2003