Smiths Group PLC · LSE:SMIN
Smiths — H1 2024 Earnings Presentation
38 slides from Smiths's earnings presentation, Mar 26, 2024
Slide 1: Improving our world through smarter engineering
IMPROVING OUR WORLD THROUGH SMARTER ENGINEERING SMITHS GROUP PLC HALF YEAR RESULTS FY2024 26 MARCH 2024
Slide 2: Disclaimer
Disclaimer This presentation contains certain statements that are forward-looking statements. They appear in a number of places throughout this presentation and include statements regarding the intentions, beliefs and/or current expectations of Smiths Group plc (the “Company”) and its subsidiaries (
Slide 3: Agenda
Agenda Opening Remarks Paul Keel HY2024 Financial Results Clare Scherrer Operational Update Paul Keel Q&A | 3 |
Slide 4: HY2024 – Solid growth, building on a record year
HY2024 – Solid growth, building on a record year Delivered first half organic revenue growth1 of +3.9% against record HY23 comparator Eleventh consecutive quarter of organic revenue growth Growth Orders2 +16.5%, driven by John Crane (+10.9%), Smiths Detection (+38.2%) and Flex-Tek aerospace (+11.6%)
Slide 5: Smiths Value Engine
Smiths Value Engine OUR PURPOSE OUR STRENGTHS OUR PRIORITIES OUR COMMITMENTS World-Class Organic Revenue 4-6% Engineering Growth Growth (+M&A) 7-10% EPS Growth (+M&A) Leading Positions in Critical Markets PIONEERS OF Execution ROCE 15-17% PROGRESS Global Improving our world Capabilities Operating th
Slide 6: Sustained progress against our medium-term targets
Sustained progress against our medium-term targets 100%+ 18-20% 15-17% +M&A 7-10% 4–6% Organic Revenue Growth1 EPS Growth ROCE2 Operating Profit Margin Operating Cash Conversion2 HY2022 +3.4% +17.7% 14.0% 15.9% 93% HY2023 +13.5% +52.1% 15.2% 16.1% 63% HY2024 +3.9% +4.5% 15.7% 16.3% 89% Organic + M&A
Slide 7: HY2024 Financial Results
HY2024 Financial Results CLARE SCHERRER CHIEF FINANCIAL OFFICER
Slide 8: HY2024 – Growth across all key metrics
HY2024 – Growth across all key metrics HY20241 HY20231 Reported change Organic change Summary: 11th consecutive quarter of organic Smiths Group revenue growth Tracking to FY guidance Revenue £1,507m £1,497m +0.7% +3.9% 5.3% organic operating profit growth and moderate margin progression Operat
Slide 9: Building a track record of consistent growth
Building a track record of consistent growth 11 consecutive quarters of organic revenue growth 13.2% 13.6% 13.4% 6.7% 4.2% Medium 5.0% 5.8% 5.7% 3.5% -term target: Covid-19 1.0% 2.9% 4-6% (2.2%) (4.6%) (7.1%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY21 FY22 FY23 FY24 | 9 |
Slide 10: Moderate operating margin expansion
Moderate operating margin expansion Summary: Operating +100bps (80)bps margin (%) Margin expansion - Capturing price in excess (30)bps of input inflation +70bps - SES delivering further (120)bps benefits - FY2023 savings projects +60bps - Volume growth +20bps 16.3% Margin compression 16.1% (10)b
Slide 11: Delivering EPS growth
Delivering EPS growth Earnings per share (pence) EPS growth +4.5% Constant currency EPS growth +11.3% | 11 |
Slide 12: Improving cash conversion
Improving cash conversion 86% FY23 cash conversion, up from 80% in FY22 HY24 HY23 Summary: HY23 to HY24 - Operating cash conversion (OCC) Actuals Working capital initiatives resulted in a £17m inflow in H2 £m £m 89% cash Targeted plans and SES 25% projects (1)%reducing inventory Operating pr
Slide 13: Business Update
JOHN CRANE SMITHS DETECTION Business Update FLEX-TEK SMITHS INTERCONNECT
Slide 14: John Crane – strong organic revenue and operating profit growth
John Crane – strong organic revenue and operating profit growth Revenue Operating profit Business update £555m +12.7% 1 £128m +18.3% 1 Record order book with orders up +10.9% Increasing demand for energy efficiency and emissions reduction solutions Broad-based growth across both end markets Oper
Slide 15: Smiths Detection – significant growth in order book
Smiths Detection – significant growth in order book Revenue Operating profit Business update £404m +8.9% 1 £43m +10.3% 1 Multi-year orders up +38.2%, supporting growth for H2 and beyond OE aviation wins globally – now sold more Strong growth across both segments: Operating margin than >1,200 CTi
Slide 16: Flex-Tek – soft construction market impacting growth
Flex-Tek – soft construction market impacting growth Revenue Operating profit Business update £384m (4.1)% 1 £81m +2.6% 1 Slowdown in construction market; expecting H2 improvement Continued aerospace expansion supported Strong growth in aerospace offset by Operating margin by strong order book w
Slide 17: Smiths Interconnect – quarter-on-quarter momentum
Smiths Interconnect – quarter-on-quarter momentum, with orders returning to growth in Q2 Revenue Operating profit Business update £164m (13.7)% 1 £20m (33.3)% 1 Double-digit contraction in Q1, followed by flat Q2 Orders returned to growth in Q2, with a Improvement in market conditions after Oper
Slide 18: Capital allocation
Capital allocation Organic £83m invested in the business through capital expenditure and R&D 1 investment supporting new product development £90m across three bolt-on acquisitions in last four quarters Portfolio HCP integration progressing ahead of plan, and with accretive margins 2 changes
Slide 19: H2 outlook reaffirms our FY guidance
H2 outlook reaffirms our FY guidance Tailwinds Record order books in John Crane and Smiths Detection Gradual recovery in Flex-Tek and Smiths Interconnect markets New product launches driving growth FY24 organic revenue SES gaining momentum with further benefits in H2 growth within our Ener
Slide 20: Operational Update
Operational Update PAUL KEEL
Slide 21: Our priorities: Growth, Execution, People
Our priorities Growth Execution People | 21 |
Slide 22: Growth – market update
Growth – market update John Crane Smiths Detection 104 Worldwide liquid fuels volume (million barrels per day) 900 Global air passengers (billion revenue passenger km per month) 102 100 600 98 96 300 94 92 0 Jan-21 Jan-22 Jan-23 Jan-24 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 F
Slide 23: Growth – H1 progress against long-term megatrends
Growth – H1 progress against long-term megatrends Energy transition Insatiable data demand Ever-rising security needs Dry gas seals for large-scale Significant order growth for satellite US DOD and UK MoD awards for blue hydrogen project communications products next-generation chemical detection Wet
Slide 24: Growth – geographical build-out at Flex-Tek
Growth – organic investment and acquisitions support geographical build-out at Flex-Tek Headquartered in South Carolina - footprint focused on regions of fastest Core Flex-Tek HVAC housing growth, and heaviest use of central HVAC systems Added capacity in higher-demand US construction regions Or
Slide 25: Case study video: Medical connector scale-up at Smiths Interconnect
Execution – SES in action Case study video: Medical connector scale-up at Smiths Interconnect Opportunity Solution Results to date £10m contract win Value stream and Increased production with major medical production process capacity from 1,500 device customer mapping to assess cables per annu
Slide 26: Smiths Excellence System
Execution/People Smiths Excellence Awards: Advancing our high-performing and inclusive culture Awards categories directly linked to Smiths the Group’s key priorities Excellence New product development System Pricing Growth Sustainable growth SES Customer service improves results Best site improvem
Slide 27: People - Smiths Group Foundation awarding first grants
People - Smiths Group Foundation awarding first grants Launched Smiths Group Foundation in August 2023, with initial £10m commitment Supports activities in 3 key areas: – Expanding access to STEM education and skills – Improving safety and connectedness within communities – Improving the environ
Slide 28: Double-digit order growth and gradually improving market conditions
Double-digit order growth and gradually improving market conditions – reaffirming full-year guidance H1 delivery Good momentum for FY2024 Strong order growth in H1, alongside gradually Delivered eleventh consecutive quarter of organic improving market conditions revenue growth Reaffirming guid
Slide 29: Questions & Answers
Questions & Answers
Slide 30: Appendix
Appendix
Slide 31: Bridge – reported to organic
Bridge – reported to organic £m - Smiths Group HY2023 Headline1 Foreign exchange HY2023 Organic2 Organic movement2 Acquisitions HY2024 Headline1 John Crane 519 (26) 493 62 - 555 Smiths Detection 390 (19) 371 33 - 404 Flex-Tek 395 (22) 373 (15) 26 384 Smiths Interconnect 193 (9) 184 (25) 5 164 Headli
Slide 32: Income statement
Income statement1 £m HY2024 HY2023 Reported change Revenue 1,507 1,497 +1% Headline2 operating profit 246 241 +2% Amortisation of acquisition related intangible assets (25) (26) Legacy pension scheme arrangements (3) (12) Non-headline litigation provision movements (15) (10) Restructuring costs - (8
Slide 33: FX sensitivity
FX sensitivity HY2024 HY2023 Currency % change average rate average rate - For each $0.10 move, the annual USD 1.25 1.18 6.1% operating profit impact is c.£22m EUR 1.16 1.15 0.6% - For each €0.10 move, the annual Translation impact HY2024 operating profit impact is c.£6m Revenue £(76)m or (5.4)% Ope
Slide 34: Net debt movement
Net debt movement Net debt movement (£m) | 34 |
Slide 35: John Crane – Improving our world through innovative technologies
John Crane – Improving our world through innovative technologies, services and energy transition solutions HY Revenue COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE £555m (37% of Group) - Strong and differentiated proprietary - Near-term global demand for stable energy supply - Competito
Slide 36: Smiths Detection – Making our world safer through smarter engineering
Smiths Detection – Making our world safer through smarter engineering HY Revenue COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE £404m (27% of Group) - Global reach and market-leading brand - Persistent and evolving threats to national security, - Competitors range from HY Headline Operat
Slide 37: Flex-Tek – safer and more efficient fluid and gas management
Flex-Tek – Improving our world through safer and more efficient fluid and gas management HY Revenue COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE £384m (25% of Group) - Leading capability in design, - Through-cycle growth of the US housing - Competitors range from HY Headline Operating
Slide 38: Smiths Interconnect – smarter Interconnect solutions
Smiths Interconnect - Improving our world through smarter Interconnect solutions HY Revenue COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE £164m (11% of Group) - Broad portfolio of cutting-edge - Increased demand for faster data transmission, - Competitors range from HY Headline Operatin