Smiths Group PLC · LSE:SMIN
Smiths — FY2021 Earnings Presentation
37 slides from Smiths's earnings presentation, Sep 28, 2021
Slide 1: Pioneers of Progress: Annual Results FY2021
www.smiths.com PIONEERS OF PROGRESS IMPROVING OUR WORLD THROUGH SMARTER ENGINEERING SMITHS GROUP PLC Annual Results FY2021 28 September 2021
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: Annual Results FY2021 agenda
ANNUAL RESULTS FY2021 OPENING REMARKS Paul Keel, Chief Executive FY2021 RESULTS John Shipsey, Chief Financial Officer CEO REVIEW Paul Keel, Chief Executive 3 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 4: Opening Remarks – Paul Keel
OPENING REMARKS CHIEF EXECUTIVE PAUL KEEL 4 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 5: Introduction – John Shipsey
INTRODUCTION CHIEF FINANCIAL OFFICER JOHN SHIPSEY 5 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 6: Delivered a robust performance
DELIVERED A ROBUST PERFORMANCE Reported Underlying FY20211 FY20201 change change3 STRENGTHENING TOPLINE Smiths - Continuing Operations2 Revenue £2,406m £2,548m (6)% (2)% Operating profit £372m £327m +14% +7% STRONG PROFIT CONVERSION Operating profit margin 15.5% 12.8% +270bps +140bps Total Group Pro
Slide 7: Strengthening topline
STRENGTHENING TOPLINE Underlying1 revenue growth (%) STABLE GROWTH PRE-COVID-19 3% 3% 3% 0% RESILIENCE THROUGH COVID-19 H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 (4)% (5)% RETURNED TO GROWTH IN Q4’21 Pre-COVID-19 COVID-19 disruption EXITED FY2021 WITH GOOD MOMENTUM 1 Underlying modifies headline performan
Slide 8: Strong profit conversion
STRONG PROFIT CONVERSION Operating profit1 - £m Margin 15.5% 24 Margin 12.8% 9 32 +7% underlying (20) FY21 Restructuring Benefits: £40m 372 327 Costs: £(21)m FY2020 FOREIGN EXCHANGE LOWER RESTRUCTURING 2 ACQUISITIONS 3 UNDERLYING 4 FY2021 & WRITE-DOWNS 1 Headline excludes non operating items as defi
Slide 9: John Crane
JOHN CRANE REVENUE1 OP. PROFIT & MARGIN1 OE/AM Aftermarket 68% £865m (5)% £187m (1)% Original Equipment 32% H1: (10)% H2: Flat 21.6% +80bps END MARKETS Performed as anticipated through H2 operating profit +13% Energy c.59% the cycle with strong H2 +270bps improvement in H2 margin Industrials c
Slide 10: Smiths Detection
SMITHS DETECTION REVENUE1 OP. PROFIT & MARGIN1 OE/AM Original Equipment 54% £721m (7)% £99m (2)% Aftermarket 46% H1: (6)% H2: (8)% 13.7% +70bps END MARKETS Performed well during COVID Impressive margin performance, Aviation 76% disruption with later-cycle impact despite lower volumes Other Secur
Slide 11: Flex-Tek
FLEX-TEK REVENUE1 OP. PROFIT & MARGIN1 END MARKETS Aerospace 19% £508m +6% £97m +13% Industrials 81% H1: (1)% H2: +13% 19.1% +110bps Strong growth in Industrials +15% – Reflecting improved volumes and particularly US construction related strengthened margins products Royal Metal ahead of plan
Slide 12: Smiths Interconnect
SMITHS INTERCONNECT REVENUE1 OP. PROFIT & MARGIN1 £312m +7% £35m +54% H1: +11% H2: +3% 11.2% +450bps Continued good growth Good operating leverage High growth in semiconductor test Reflecting strong volumes and business restructuring benefits Delivering on significant orders for space-qual
Slide 13: Smiths Medical – discontinued operations
DISCONTINUED OPERATIONS DISCONTINUED OPERATIONS – BUSINESS HELD FOR SALE SMITHS MEDICAL FY2021 Revenue1 Profit after tax1 £849m (3)% £134m +5% - Agreed sale to ICU Medical - COVID headwinds and tailwinds broadly offset one another - Smiths Medical undertaking remediation activity to address FDA audi
Slide 14: Excellent operating and free cash-flow (Total Group)
EXCELLENT OPERATING AND FREE CASH-FLOW (TOTAL GROUP) £m FY2021 FY2020 EBITDA1 635 610 Continuing operations £458m, Smiths Medical £177m Capex (117) (109) Change in working capital 90 53 Other 22 21 Operating cash-flow1 630 575 125% cash conversion; 122% excluding restructuring Interest (37) (50) Tax
Slide 15: Further significant progress on pensions
FURTHER SIGNIFICANT PROGRESS ON PENSIONS Strong funding position of two main plans TI scheme: contributions paused, as previously announced SIPS scheme: valuation completed, contributions now paused AHEAD OF SCHEDULE ON MAKING BOTH UK PLANS SELF SUFFICIENT Pension contributions down to c.£15m in FY2
Slide 16: FY2022 Outlook
FY2022 OUTLOOK Good order book momentum Economic uncertainty and supply chain challenges continue Group revenue growth expected to return to around pre-COVID levels Further operational efficiency Good cash generation WELL POSITIONED AS MARKETS RECOVER 16 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 17: CEO Review – Paul Keel
CEO REVIEW CHIEF EXECUTIVE PAUL KEEL 17 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 18: High quality business with strong fundamentals
HIGH QUALITY BUSINESS WITH STRONG FUNDAMENTALS Well positioned in attractive markets Multiple levers for growth SIGNIFICANT VALUE CREATION OPPORTUNITY Strong financial framework World class organisation 18 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 19: Enhancing our performance
ENHANCING OUR PERFORMANCE BALANCED PORTFOLIO (Revenue) ACCELERATING GROWTH DIVISIONS John Crane 36% Smiths Detection 30% Flex-Tek 21% Smiths Interconnect 13% OPERATIONAL EXCELLENCE END MARKETS General Industrial 38% Energy 21% Space & Commercial Aerospace 6% Security & Defence 35% PEOPLE & CULTURE G
Slide 20: First priority – delivering the separation of Smiths Medical
FIRST PRIORITY - DELIVERING THE SEPARATION OF SMITHS MEDICAL Sale to ICU Medical announced September 8 SIMPLIFIES AND Enterprise value of $2.7bn; equity value of $2.4bn POSITIONS SMITHS FOR FOCUSED GROWTH IN ITS CORE BUSINESS Smiths participates in further value creation by receiving 2.5m ICU shares
Slide 21: Improving our world through smarter engineering
IMPROVING OUR WORLD THROUGH SMARTER ENGINEERING PROGRESS TO DATE ENVIRONMENT GOALS OPERATIONS PRODUCT STEWARDSHIP ENVIRONMENT BY 2040 Since 2007 we have: NET ZERO Scope 1 and 2 emissions REDUCED WATER USE BY 53% Scope 1 – direct emissions Scope 2 – indirect emissions from fuel purchased and used in
Slide 22: Summary
SUMMARY Attractive core industrial technology business Well positioned as we enter FY2022 Focused on execution and delivery Significant potential to be realised 22 SMITHS GROUP PLC | ANNUAL RESULTS 2021
Slide 23: Questions & Answers
QUESTIONS & ANSWERS
Slide 24: Appendix
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Slide 25: Supporting our customers' ESG agendas and making strong progress ourselves
SUPPORTING OUR CUSTOMERS’ ESG AGENDAS AND MAKING STRONG PROGRESS OURSELVES Environmental Social Governance External recognitions Score FY2021 vs. FY2007 data: Our People are our most important Average tenure on the Board c.4.3 Governance 3 • Greenhouse Gas (GHG) source of sustainable competitive yea
Slide 26: Income statement
INCOME STATEMENT1 £m FY2021 FY2020 Reported change Revenue 2,406 2,548 (6)% Headline2 operating profit 372 327 +14% Amortisation of acquisition related intangible assets (53) (57) Legacy pension scheme arrangements (6) 7 Post acquisition integration costs and fair value adjustment unwind (2) (4) Acq
Slide 27: Reported to underlying bridge – continuing operations
REPORTED TO UNDERLYING BRIDGE – CONTINUING OPERATIONS1 £m FY 2020 Foreign Restructuring FY 2020 FY 2021 Restructuring Acquisitions and FY 2021 Reported exchange costs & write- Underlying2 Underlying2 Underlying2 costs3 Disposals Reported Smiths - Continuing Operations1 downs John Crane 955 (45) 910
Slide 28: Reported to underlying bridge – discontinued operations
REPORTED TO UNDERLYING BRIDGE – DISCONTINUED OPERATIONS1 Smiths Medical – Discontinued Operations1 Depreciation Depreciation FY 2020 FY 2020 Foreign Restructuring FY 2020 FY 2021 Restructuring FY 2021 FY 2021 £m and Underlying2 and Reported Pro-forma1 exchange costs Underlying3 Underlying3 costs4 Pr
Slide 29: Restructuring programme
RESTRUCTURING PROGRAMME FY2021 Total FY2021 Total £m Restructuring Restructuring Cash outflow Cash outflow P&L costs P&L costs John Crane (4) (18) (8) (12) Smiths Detection (6) (20) (10) (12) Flex-Tek - (0) - (0) Smiths Interconnect (10) (12) (5) (6) Centre (1) (2) (1) (2) Continuing operations1 (21
Slide 30: Total Group – balance sheet
TOTAL GROUP - BALANCE SHEET £m Derivatives, FX and other non- cash 1,141 383 movements 22 1,018 (185) (97) Net Net Debt/ Debt/ EBITDA EBITDA Net debt:EBITDA calculation1 1.7x 1.5x - Net debt = £1,018m (as per above) - EBITDA excluding restructuring for both continuing and discontinued operations = £
Slide 31: FX sensitivity
FX SENSITIVITY FY 2021 FY 2020 Currency % change average rate average rate - For each $0.10 move, USD 1.36 1.26 8% the annual operating profit impact is c.£17m EUR 1.13 1.14 (1)% - For each €0.10 move, the annual operating profit impact is c.£6m Translation impact FY 2021 Revenue £(123)m or (5)% Ope
Slide 32: Incentive performance measures and linkage to business strategy
INCENTIVE PERFORMANCE MEASURES AND LINKAGE TO BUSINESS STRATEGY ANNUAL BONUS (FY2021) Operating profit (40%) 1 2 3 Revenue (25%) 1 3 Operating cash conversion (25%) 2 3 Personal objectives (10%) 1 2 3 LONG TERM INCENTIVES (FY2021 AWARDS) EPS growth after tax (25%) 1 2 3 Organic revenue growth (25%)
Slide 33: John Crane – solutions for efficiency, emission reductions and energy transformation
JOHN CRANE – SOLUTIONS FOR INCREASED EFFICIENCY, EMISSION REDUCTIONS AND ENERGY TRANSFORMATION FY REVENUE £865m (36% of Cont. Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - Strong and differentiated proprietary - Long-term growth in energy, especially in emerging markets - Compe
Slide 34: Smiths Detection – supporting safety, security and freedom of movement
SMITHS DETECTION – SUPPORTING SAFETY, SECURITY AND FREEDOM OF MOVEMENT FY REVENUE £721m (30% of Cont. Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - A global market leader with - Persistent and evolving terror and other threats to - Competitors range from FY HEADLINE OP differen
Slide 35: Flex-Tek – safe, efficient movement and heating of fluids and gases
FLEX-TEK – SOLUTIONS FOR THE SAFE, EFFICIENT MOVEMENT AND HEATING OF FLUIDS AND GASES FY REVENUE £508m (23% of Cont. Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - High-performance differentiated - Through-cycle growth of the US housing construction - Competitors range from FY H
Slide 36: Smiths Interconnect – high-speed, secure connectivity
SMITHS INTERCONNECT - SOLUTIONS FOR HIGH-SPEED, SECURE CONNECTIVITY IN DEMANDING APPLICATIONS FY REVENUE £312m (13% of Cont. Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - Broad portfolio of technically - Increased demand for connectivity in space, defence - Competitors range fr
Slide 37: Smiths Medical – quality medical devices and consumables
DISCONTINUED OPERATIONS SMITHS MEDICAL – QUALITY MEDICAL DEVICES AND CONSUMABLES THAT ARE VITAL TO PATIENT CARE GLOBALLY FY REVENUE £849m COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - A category leader in served segments - Ageing populations with increasing personalised - Competitors