Smiths Group Plc · LSE:SMIN
Smiths — H1 2023 Earnings Presentation
38 slides from Smiths's earnings presentation, Mar 24, 2023
Slide 1: Pioneers of Progress – Interim Results FY2023
PIONEERS OF PROGRESS Smiths Group plc Interim Results FY2023 Improving our world 24 March 2023 through smarter engineering
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, Chief Executive Officer HY2023 Financial Results Clare Scherrer, Chief Financial Officer Strategic & Operational Update Paul Keel, Chief Executive Officer Q&A | 3 |
Slide 4: HY2023 – Material progress resulting in higher performance
HY2023 – Material progress resulting in higher performance Record organic revenue growth1 of +13.5%; reported growth of +25.6%; record EPS growth of +52.1% FY guidance raised again to at least 8% organic revenue growth with moderate margin Growth improvement +20bps operating margin improvement to 16
Slide 5: Smiths Value Engine
Smiths Value Engine OUR PURPOSE OUR STRENGTHS OUR PRIORITIES World-Class Engineering Growth Leading Positions in Critical Markets PIONEERS OF Execution Global PROGRESS Capabilities Improving our world through smarter Robust Financial People engineering Framework | 5 |
Slide 6: Significant progress against medium term financial commitments
Significant progress against 4 of our 5 medium term financial commitments 100%+ 18-20% +M&A 15-17% +M&A 7- 10% 4–6% Organic Revenue Growth1 EPS Growth ROCE Operating Profit Margin Operating Cash Conversion2 HY2021 (4.8)% (11.2)% 10.3% 14.4% 158% HY2022 +3.4% +17.7% 14.0% 15.9% 93% HY2023 +13.5% +52.
Slide 7: Clare Scherrer – Chief Financial Officer
Introduction Chief Financial Officer Clare Scherrer
Slide 8: HY2023 – a strong start
HY2023 – a strong start Reported Organic HY20231 HY20221 change change2 Summary: ▪ Record revenue growth, equally Smiths Group balanced between price and volume Revenue £1,497m £1,192m +25.6% +13.5% ▪ Strong operating profit growth Operating profit £241m £189m +27.4% +12.7% ▪ Record EPS growth Opera
Slide 9: Record organic revenue growth
Record organic revenue growth Organic1 revenue growth 7 straight quarters 13.5% of growth Pre-covid growth ~3% 4.1% 3.5% 3.1% 3.4% 2.6% 0.3% H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 H1'23 (4.5)% (4.8)% Resilience during downturn 1 Organic excludes the effects of foreign exchange and acquisiti
Slide 10: Moderate operating margin improvement
Moderate operating margin improvement Operating margin (%) Summary: ▪ Margin expansion +20bps (10)bps - Scale economies from increased +30bps (90)bps volume +40bps - Savings projects to fund growth (100)bps investment +50bps - High-value model capturing price +60bps in excess of input inflation 16.1
Slide 11: Record EPS growth in the first half
Record EPS growth in the first half Earnings per share Growth: +52.1% | 11 |
Slide 12: Cash generation
Cash generation Operating cash flow (£m) Summary: ▪ £151m of operating cash generated (63% operating profit conversion) ▪ Working capital increase driven by investment in inventory to support growth and secure supply ▪ Over 85% of working capital increase driven by two of our fastest growing busines
Slide 13: Business Update
Business Update John Crane Smiths Detection Flex-Tek Smiths Interconnect
Slide 14: John Crane – delivered accelerating growth and strong operating leverage
John Crane – delivered accelerating growth and strong operating leverage Revenue Operating profit Business update £519m +14.6% 1 £114m +24.6% 1 ▪ Continued strong demand with +14.2% order growth ▪ Increasing activity across hydrogen, carbon Operating margin capture and methane emissions reduction St
Slide 15: Smiths Detection – growth across all segments
Smiths Detection – growth across all segments Revenue Operating profit Business update £390m +14.0% 1 £41m +4.5% 1 ▪ Representative wins in aviation include New Zealand, Germany, UK and India ▪ Key wins also in air cargo with centralised Growth across all segments: Operating margin image processing
Slide 16: Flex-Tek – another period of strong growth
Flex-Tek – another period of strong growth Revenue Operating profit Business update £395m +17.0% 1 £77m +9.0% 1 ▪ As expected, seeing a slower rate of growth in the construction end market ▪ Continued aerospace expansion supported Double-digit growth across both Operating margin by strong orderbook
Slide 17: Smiths Interconnect – growth moderating, as expected
Smiths Interconnect – growth moderating, as expected Revenue Operating profit Business update £193m +3.3% 1 £32m (1.7)% 1 ▪ Expansive new product pipeline including next generation radio frequency components and transceivers As expected, growth moderating against Operating margin ▪ Bolt-on acquisiti
Slide 18: Capital allocation
Capital allocation ▪ Strong balance sheet - net debt to EBITDA of 0.8x as at 31 January 2023 ▪ £241m returned to shareholders during period ▪ €600m bond repayment due in April 2023 Organic ▪ £77m invested in the business through capital expenditure and R&D investment ▪ Small bolt-on acquisition of P
Slide 19: FY2023 Outlook
FY2023 Outlook FY guidance raised again with continued positive trading Tailwinds ▪ Strong orderbook and trading trends support upgraded guidance ▪ New product strategy working well; pipeline strong and recent launches ramping well We now expect FY23 ▪ Impact of SES visible in results; will continue
Slide 20: CEO Review – Paul Keel
CEO Review Chief Executive Officer Paul Keel
Slide 21: Our priorities: Growth, Execution, People
Our priorities Growth Execution People | 21 |
Slide 22: Growth – driven by new product development
Growth – driven by new product development Increased focus on new product development aligned to long-term megatrends Energy transition & sustainability Ever-rising security needs Demand for data Smiths Detection: iCMORE Smiths Interconnect: John Crane: Flex-Tek: new target recognition software 28G
Slide 23: Growth – progress building out priority adjacencies
Growth – progress building out priority adjacencies John Crane Smiths Detection Flex-Tek Smiths Interconnect Energy transition High-security markets beyond airports Heating electrification Connector and testing adjacencies ▪ Currently engaged in 40+ active ▪ +23% organic growth in ▪ Partnership with
Slide 24: Execution – SES benefits visible and scaling quickly
Execution – SES benefits visible and scaling quickly Smiths Excellence System SES profit benefits (£m) ▪ SES continues to scale across Smiths £25m+ ▪ 50 projects now underway; adding additional Black Belts in key operational areas £20m ▪ £5m in benefits generated in H1 ▪ On track to generate £25m in
Slide 25: Case study video: Flex-Tek HeatKits
Execution – SES in action Case study video: Flex-Tek HeatKits Opportunity Solution Results ▪ Backorders on ▪ Mobilised team ▪ Increased HeatKits had quickly, collected production increased data and defined throughput by 23% significantly and the issue ▪ Improved lead lead times more ▪ Robust dashboa
Slide 26: People – inspiring and empowering our people
People – inspiring and empowering our people People priorities Safety Safety training, John Crane Mexico National Safety Week, India Leadership Development February Leadership Summit Accelerate Leadership Programme Diversity, Equity & Inclusion Black History Month panel International Women’s Day Eng
Slide 27: Progress advancing our sustainability strategy
Progress advancing our sustainability strategy Growth ▪ Our sustainability strategy centres on helping customers reach their ESG goals - First purchase order received for Midrex / H2 Green Steel partnership - 40+ active energy transition projects and 2X increase in opportunity pipeline - Multiple gr
Slide 28: Building a consistent record of continuous improvement
Building a consistent record of continuous improvement Record start in H1; on track for a strong FY23 Record H1 organic revenue growth of +13.5% Continued strong momentum will drive at and reported growth of +25.6% least +8% organic revenue growth for FY23 Growth Year-over-year improvement in 4 of 5
Slide 29: Questions & Answers
-> Questions & Answers smiths
Slide 30: Appendix
Appendix smiths
Slide 31: Bridge – reported to organic
Bridge – reported to organic £m HY2022 Foreign HY2022 HY2023 Organic movement 3 Smiths Group1 Headline2 exchange Organic3 Headline2 John Crane 416 36 452 67 519 Smiths Detection 313 29 342 48 390 Flex-Tek 297 41 338 57 395 Smiths Interconnect 166 21 187 6 193 Headline revenue 1,192 127 1,319 178 1,4
Slide 32: Income statement
Income statement1 £m HY2023 HY2022 Reported change Revenue 1,497 1,192 +25.6% Headline2 operating profit 241 189 +27.4% Amortisation of acquisition related intangible assets (26) (26) Legacy pension scheme arrangements (12) (8) Non-headline litigation provision movements (10) 3 Restructuring costs (
Slide 33: FX sensitivity
FX sensitivity HY2023 HY2022 Currency % change average rate average rate - For each $0.10 move, the annual USD 1.18 1.36 (13.2)% operating profit impact is c.£25m EUR 1.15 1.18 (2.3)% - For each €0.10 move, the annual Translation impact HY2023 operating profit impact is c.£5m Revenue +£127m or +10.7
Slide 34: Net debt movement
Net debt movement Net debt movement (£m) | 34 |
Slide 35: John Crane – smarter sealing and energy transition solutions
John Crane – Improving our world through smarter sealing and energy transition solutions HY Revenue COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE £519m (35% of Group) - Strong and differentiated proprietary - Near-term global demand for stable energy supply - Competitors range from HY H
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 £390m (26% of Group) - Global reach and market-leading brand - Persistent and evolving threats to national - Competitors range from HY Headline Operating profit
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 £395m (26% 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 £193m (13% of Group) - Broad portfolio of cutting-edge - Increased demand for faster data transmission, - Competitors range from HY Headline Operatin