Smiths Group PLC · LSE:SMIN
Smiths — Citigroup UK Engineering Symposium 2009
30 slides from Smiths's conference presentation, Dec 2, 2009
Slide 1: Smiths Group Citigroup Engineering Symposium
Smiths Group Citigroup Engineering Symposium 2 December 2009 Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 1
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: Smiths Group at a glance
Smiths Group at a glance Smiths is a global technology company listed on the London Stock Exchange. A world leader in the Divisional sales % 8 19 practical application of advanced technologies, Smiths 12 Group delivers products and services for the threat Smiths Detection and contraband detection, e
Slide 4: Smiths Group: Current strategic focus
Smiths Group: Current strategic focus • Improve margins through restructuring and Delivering ‘self-help’ programmes operational efficiencies • Upgrade our business systems to drive faster data-based decisions and leverage scale • Continue to reduce working capital as percentage Cash of sales generat
Slide 5: Delivering operational efficiencies
Delivering operational efficiencies Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 5
Slide 6: Delivering the restructuring programme ahead of plans
Delivering the restructuring programme ahead of plans Programme ahead of plans £m Savings Full annualised to date benefits Costs to date: HQ 5 5 £28m IT 2 8 Total planned costs: £45m vs £48m John Crane 6 25 Medical - 3 Total planned savings: £50m vs £47m Flex-Tek 4 9 Total 17 50 £17m of savings anti
Slide 7: John Crane: Improving customer service and reducing costs
John Crane: Improving customer service and reducing costs • Restructuring programme - Delivered savings to date of £6m - Total annualised savings planned of £25m • Creation of a global John Crane: Integration of two regional organisations • Consistent global approach to central functions • Sales and
Slide 8: Investment in better information systems and leveraging scale
Investment in better information systems and leveraging scale Improvement of business systems • Good progress on ERP systems in all divisions • 36 implementations across the Group • All on track for completion in FY2010 Better information enables us to leverage the Group scale • 15k suppliers serve
Slide 9: Cash generation and financing
Cash generation and financing Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 9
Slide 10: Improved operating cash conversion
Improved operating cash conversion • Focus on improved working capital management • Particularly inventories and debtors • Cash conversion has remained strong in Q1 FY10 104% 76% 75% 72% 2006 2007 2008 2009 Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 10
Slide 11: Strong balance sheet underpins our plans
Strong balance sheet underpins our plans Interest split Currency split* Debt split Net debt £m Borrowings 933 USD Less net cash (48) Fixed Euro Bank Floating other Public Net debt 885 Weighted average life of debt has extended to 5.4 years 160 Credit Rating: 120 BBB+ / Baa2 80 Headline op profit /in
Slide 12: Investing in future growth
Investing in future growth Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 12
Slide 13: Smiths Group: Acquisition strategy – key focus
Smiths Group: Acquisition strategy – key focus Addition of complementary/adjacent technologies Extending geographic reach – particularly in developing markets Leveraging our existing infrastructure Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 13
Slide 14: Improving the portfolio: M&A activity over past two years
Improving the portfolio: Overview of M&A activity over past two years Date Sales Complementary Extending Leveraging value £m technologies geography infrastructure John Crane Sartorius Nov 07 £14m John Crane Japan* Dec 07 £16m Indufil Apr 08 £25m Fiberod May 08 £12m Orion May 09
Slide 15: Investing in increased R&D to launch new products
Investing in increased R&D to launch new products • Increase in both company-funded and customer-funded R&D 120 Company-funded Customer-funded 100 80 60 40 20 0 2006 2007 2008 2009 Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 15
Slide 16: Smiths Detection: Continuing to invest for the future through R&D
Smiths Detection: Continuing to invest for the future through R&D • Company-funded R&D increased to £35m or 6.9% of sales • Total spend increased to £45m; 8.9% of sales • New chemical and trace detection product launches: - High-Performance Radioisotope Identifier (HPRID) - Multi-mode threat detecto
Slide 17: Smiths Medical: Investing in growth opportunities
Smiths Medical: Investing in growth opportunities Sales from products launched in last three years up 12% year-on-year • More focused approach to R&D spend • Good progress in new launches CADD-Solis is gaining traction • Next generation ambulatory pump Selection of new product launches from last yea
Slide 18: Smiths Detection: A global leader in security
Smiths Detection: A global leader in security Smiths Detection is a world leading designer and manufacturer of sensors that detect and identify explosives, weapons, chemical agents, biohazards, narcotics and contraband. Contribution to 2009 sales % 8% 2009 Group sales: 19% 13% Transportation 36% 200
Slide 19: Smiths Detection: Long-term growth drivers and recent trading
Smiths Detection: Long-term growth drivers and recent trading • Driven by events and perceived threats • Government legislation and regulations to improve security • Requirements from insurance companies for improved security • Technology development launching products to counter new threats Recent
Slide 20: John Crane: A world leader in mechanical seals
John Crane: A world leader in mechanical seals John Crane is a world-leading provider of products and services for the major process industries. These include the oil and gas, power generation, chemical, pharmaceutical, pulp and paper, and mining sectors. Contribution to 2009 sales % 10% 2009 Group
Slide 21: John Crane: Long-term growth drivers and recent trading
John Crane: Long-term growth drivers and recent trading • Main growth driver is continued global demand for energy • Drives capital investment in oil, gas and petrochemical infrastructure • Expansion into adjacent markets – engineered bearings, filtration • Continue to look for bolt-on acquisition o
Slide 22: Smiths Medical: Strong positions in niche markets
Smiths Medical: Strong positions in niche markets Smiths Medical is a leading supplier of specialist medical devices and equipment for global markets. Contribution to 2009 sales % 2009 Group sales: 31% 31% 29% Medication Delivery 2009 Margin: Vital Care Safety Devices 20% Employees: 40% 7,400 Smiths
Slide 23: Smiths Medical: Long-term growth drivers and recent trading
Smiths Medical: Long-term growth drivers and recent trading • Main growth driver is demographics and increasing prosperity • Improving productivity of hospitals through better technology, use of IT • Safety legislation and regulation • Optimise R&D spend across the portfolio and launch new products
Slide 24: Smiths Interconnect
Smiths Interconnect Smiths Interconnect is a recognised leader in technically differentiated electronic components and subsystems providing signal, power and microwave solutions. Contribution to 2009 sales % 21% 49% 2009 Group sales: 12% Military/Aerospace 2009 Margin: Wireless Medical, rail and aut
Slide 25: Smiths Interconnect: Long-term growth drivers and recent trading
Smiths Interconnect: Long-term growth drivers and recent trading • Growth is driven by defence spending on military communications – Intelligence, Surveillance and Reconnaissance programmes • Mobile phone subscribers and the roll-out of new telecomms infrastructure • Increasing demand for wireless d
Slide 26: Flex-Tek
Flex-Tek Flex-Tek is a global provider of engineered components that heat and move fluids and gases for the aerospace, medical, industrial, construction and domestic appliance markets. Contribution to 2009 sales % 2009 Group sales: 8% 51% 27% Aerospace 2009 Margin: Flexible Solutions Heat Solutions
Slide 27: Flex-Tek: Long-term growth drivers and recent trading
Flex-Tek: Long-term growth drivers and recent trading • Primarily driven by US residential construction – US housing starts • Other markets driven by aerospace and general industrial by GDP Recent Q1 IMS trading • US housing and appliances remain challenging – signs of flattening • Aerospace has sof
Slide 28: Smiths Group: A business transformed over past five years
Smiths Group: A business transformed over past five years 2005 2009 Sales £3.0bn* £2.7bn Operating margins 14% 16% Cash conversion 62% 104% Free cash flow per share 26p 66p Net debt £931m £885m Return on shareholders’ funds 11.2% 16.5% *Including £1.2bn of Aerospace sales Smiths Group plc Citigroup
Slide 29: Why invest in Smiths Group?
Why invest in Smiths Group? Our core strengths include… • Markets with long-term underlying defensive dynamics • Good relationships with blue chip customer base and governments • Strong margins with scope for further improvement through self-help • Excellent product engineering: practical applicatio
Slide 30: Q&As
Q&As Smiths Group plc Citigroup UK Engineering Symposium December 2009 | 30
Smiths Group — Citigroup UK Engineering Symposium 2009 on 6ix