Smiths Group PLC · LSE:SMIN
Smiths — JP Morgan Capital Goods & Aerospace Conference 2006
18 slides from Smiths's conference presentation, Jun 7, 2006
Slide 1: Smiths Group: JP Morgan Capital Goods & Aerospace Conference
Smiths Group JP Morgan Capital Goods & Aerospace Conference Pennyhill Park Hotel Wed 7 June 2006 Presentation by: Alan Thomson, Financial Director www.smiths-group.com/ir Register here to receive regular information
Slide 2: Smiths Group: operating in four sectors, each with a strong growth profile
Smiths Group: operating in four sectors, each with a strong growth profile Smiths Detection Smiths Aerospace circa £3.5 billion Equipment for homeland defence, business Integrated avionics and mechanical security and protection of the military systems for military and commercial aircraft Smiths Medi
Slide 3: Smiths Group: achieving a pattern of sustained growth
Smiths Group: achieving a pattern of sustained growth Headline performance analysts’ consensus* £m 2004 2005 2006 Sales 2,678 3,005 +12% circa 3,500 +16% Operating profit 360 412 +14% circa 505 +21% Pre-tax profit 350 404 +15% circa 490 +21% Earnings per share 45.9p 53.2p +16% circa 64p +20% Headlin
Slide 4: Generating a strong cash-flow from operations
Smiths Group Generating a strong cash-flow from operations to drive the business ahead and provide good returns for shareholders Operating operating Net debt at 31Jan 06: £970m Interest cover > 10x EBITDA profit cash Debt/market cap: 19% 70-75% Interest Average rate: 5% On an IFRS basis, and after c
Slide 5: Improving the quality of the assets by making acquisitions and disposals
Smiths Group: improving the quality of the assets by making acquisitions and disposals ACQUISITIONS £490m £218m Medex Aerospace £240m Detection £65m Heimann Medical Aerospace (Detection) Interconnect £45m Medical £60m £40m Interconnect/ (financial years Interconnect Aerospace Spec Eng. Detection end
Slide 6: Achieving greater operational efficiency, transferring production to low-cost countries
Smiths Group: achieving greater operational efficiency, transferring production to low-cost countries, reaching into global markets Mexico: Medical, John Crane Costa Rica: Interconnect Poland: Aerospace Czech Rep: John Crane Mexico Costa Rica Poland Czech John Crane - Bangalore China China: Aerospac
Slide 7: Investing in advanced technology to gain competitive advantage and win new business
Smiths Group: investing in advanced technology to gain competitive advantage and win new business Research & Development as a % of sales Aerospace company-funded 9% Half is capitalised customer-funded 9% Detection company-funded 6% Mostly expensed customer-funded 4% Medical company-funded 3% Mostly
Slide 8: Applying rigorous financial metrics to the decision-making process
Smiths Group: applying rigorous financial metrics to the decision-making process 1 Company’s overall ROI (including goodwill) Smiths’ 2 Acquisitions investment criteria: Expected rate of return 12% 12% after-tax return YEAR 1 YEAR 2 date of acquisition YEAR 3 8% WACC on total investment 3 Research &
Slide 9: Smiths Aerospace: a first-tier supplier of integrated systems
Smiths Aerospace: a first-tier supplier of integrated systems Products Customers Markets Engine Components Commercial Defence Original Aftermarket Actuation Electronic equipment systems Systems Principal applications: Commercial - B737, B777, B787, A320, A330/400, A380 Military - F-22, F-18 E/F, F-3
Slide 10: Smiths Aerospace: current dynamics of the business
Smiths Aerospace: current dynamics of the business • Strong sales growth in commercial sector • Steady growth in military sector • Aftermarket performing well • Recent programme wins improve Smiths’ competitive position • But have pushed R&D to a peak in 2006 • With some impact on margin progression
Slide 11: Smiths Detection: a leading supplier of detection systems
Smiths Detection A leading supplier of detection systems Emergency Transportation for Homeland Security and Defence. A global business with development Responders and manufacturing in six countries Ports & and a worldwide market presence. Borders sales: organic growth & acquisitions £m Livewave 500
Slide 12: Smiths Detection: current dynamics of the business
Smiths Detection: current dynamics of the business • All market sectors are experiencing strong growth • US Dept of Homeland Security budget is $43 billion in 2007 (up 6% on 2006) • Smiths is committed to technology leadership • Airports are being re-equipped with more efficient equipment • Large Sm
Slide 13: Medical: devices and equipment for critical healthcare
Smiths Medical: devices and equipment for critical healthcare Annualised Rising healthcare sales split expenditure worldwide drives market growth at: 5-6% pa Operating globally Medication Safety Critical Delivery Devices Care US Japan International Smiths Group JP Morgan 2006 13
Slide 14: Smiths Medical: current dynamics of the business
Smiths Medical: current dynamics of the business • Underlying sales growth now at 6% • Integration of Medex on track to achieve full synergies by 2008 • Srini Seshadri recently appointed to lead the division • Transfer to low-cost manufacturing continues • Significant position in safety devices now
Slide 15: Specialty Engineering: application-specific products
Specialty Engineering: application-specific products for oil&gas, defence electronics and telecom sectors Interconnect John Crane FlexTek Marine annualised sales split Benefiting from strong market growth in Benefiting from significant capital investment network-centric military communications progr
Slide 16: Specialty Engineering: current dynamics of the business
Specialty Engineering: current dynamics of the business • Top line growth and improving margins at John Crane will continue • Smiths has invested in John Crane to gain efficiency and extend its global presence • Interconnect also growing strongly in favourable market conditions • Good pipeline of bo
Slide 17: Full Potential scorecard: analysing the fundamental strengths
Full Potential scorecard: analysing the fundamental strengths 1 Operating in sectors of high growth 2 Delivering constant improvement 3 Reaching deep into global markets 4 Developing technology to help customers succeed 5 Improving our business mix 6 Doing business the right way Smiths Group JP Morg
Slide 18: Smiths Group
Smiths Group JP Morgan Capital Goods & Aerospace Conference Pennyhill Park Hotel Wed 7 June 2006 www.smiths-group.com/ir Register here to receive regular information
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