Smiths Group PLC · LSE:SMIN
Smiths — CSFB Aerospace & Defence Conference 2005
23 slides from Smiths's conference presentation, Sep 28, 2005
Slide 1: Smiths Group CSFB Aerospace & Defence Conference 2005
Smiths Group CSFB Aerospace & Defence Conference 2005 London, Wednesday 28 September 2005 Presentation by: Alan Thomson, Financial Director www.smiths-group.com/ir Register here to receive regular information
Slide 2: Smiths achieved strong growth in 2005
Smiths achieved strong growth in 2005 £m 2005 2004 reported growth Sales 3,017 2,678 +13% Operating profit 420 360 +17% Profit before tax 413 350 +18% Earnings per share 54.3p 45.9p +18% Dividend 29.0p 27.0p +7.4% The dividend was increased for the 35th consecutive year Smiths Group CSFB 2005 2
Slide 3: All four divisions contributed double-digit growth in 2005
All four divisions contributed double-digit growth in 2005 growth at Sales (£m) 2005 constant currency Aerospace 1,158 +18% Detection 367 +17% Medical 563 +19% Specialty Engineering 929 +10% Total 3,017 +16% Operating profit (£m) Aerospace 118 +22% Detection 67 +21% Medical 108 +23% Specialty Engine
Slide 4: Higher volumes and improved productivity generated better margins
Higher volumes and improved productivity generated better margins Net operating margins 2005 2004 Aerospace 10.2% 9.9% Detection 18.2% 17.5% Medical 19.2% 18.8% Specialty Engineering 13.7% 13.0% 13.9% 13.4% Smiths Group CSFB 2005 4
Slide 5: Cash-flow conversion was below target in 2005
Cash-flow conversion was below target in 2005 Operating profit/operating cash: 67% Higher capex: • Investment in capacity and low-cost manufacturing Higher working capital: • Concentration of sales in June/July • Timing of defence contract payments • Higher inventory to safeguard supply Conversion t
Slide 6: Smiths made good progress on acquisitions in 2005
Smiths made good progress on acquisitions in 2005 For example To establish a significant presence Medex in an adjacent market (safety devices) Integrated To extend the product range Aerospace (undercarriages) Sevit To widen the geographical reach (Italian medical distributor) Farran To acquire emerg
Slide 7: The synergies from the Medex acquisition will be achieved across Smiths Medical
The synergies from the Medex acquisition will be achieved across Smiths Medical 2005 (£m) 2006 (£m) 2007 (£m) 2008 (£m) Synergies: Sales/marketing Back office/distribution Manufacturing Profit impact 1 Circa 8 13 - 16 18 - 25 One-off costs 10 20 - 25 15 - 20 0-5 3 years @ 6% Overall profit 45 55 Syn
Slide 8: Technology leadership: increased commitment to R&D
Technology leadership: Increased commitment to R&D is generating incremental sales Aerospace: Detection: Medical: Specialty Engineering: open architecture Sentinel explosive Cozmonitor insulin phased array antenna for integrated avionics screening portal delivery pump/monitor aircraft Satcom systems
Slide 9: Strong organic growth momentum in all four divisions
Strong organic growth momentum in all four divisions Aerospace annual sales Commercial aero recovery, £1.2 billion sustained military growth annual sales Detection Market opportunities continue £0.4 billion to emerge, driven by new technology annual sales Medical Rising healthcare spend £0.7 billion
Slide 10: Smiths Aerospace
Smiths Aerospace reported at constant Aerospace 28% £m 2005 growth currency Sales 1,158 +15% +18% Headline operating profit 118 +18% +22% Contribution to operating profit Margin 10% Boeing 787 • Commercial sales up 25% - higher OE build rates US 101 - aftermarket driven by RPMs • Defence sales incre
Slide 11: Aerospace: Commitment to R&D and recent programme wins ensure long-term growth
Smiths Aerospace: Commitment to R&D and recent programme wins ensure long-term growth 2006 2007 2008 2009 2010 2011 2012 2013 Commercial aircraft Airbus A380 Boeing 787 Airbus A350 Next-gen narrowbodies Military aircraft Eurofighter Tranche 2 Tranche 3 US101 (Pres + USAF) KC-767 Tanker (USAF) B737 M
Slide 12: Smiths Detection
Smiths Detection reported at constant Detection 16% £m 2005 growth currency Sales 367 +16% +17% Headline operating profit 67 +20% +21% Contribution to operating profit Margin 18% Sentinel II • Smiths technologies used for the widest range of applications • Transportation sector benefiting from re-eq
Slide 13: Detection: Growth is coming from the wide range of market sectors
Smiths Detection: Growth is coming from the wide range of market sectors Emergency Responders Transportation New gas analysers Sentinel II Dual-use Ionscan Ports & Borders New mobile X-ray unit Critical infrastructure Military US Post Office LCAD to UK ACADA to US Service Growing aftermarket Non-sec
Slide 14: Detection: System integration and networking will be the next step
Smiths Detection: System integration and networking will be the next step PAX LAN WAN Local Networking at Airports Networking between - Airports FIS - Regional Headquarters - National Headquarters Sub-system information fusion Checkpoint Wide Area Network Checked Baggage Local - Regional – National
Slide 15: Smiths Medical
Smiths Medical reported at constant Medical 26% £m 2005 growth currency Sales 563 +16% +19% Headline operating profit 108 +18% +23% Contribution to operating profit Margin 19% Protect IV catheters • Excluding Medex and currency, sales grew 4%, profits 3% • Base business held back by supply issues Co
Slide 16: Medical: In specialised markets, with strong niche positions
Smiths Medical: In specialised markets, with strong niche positions Medication Delivery Critical Care Performing strongly, Benefiting from new products, helped by Cozmo and integration of Medex. Supply issues have been resolved Safety Devices Conversion from conventional devices sustains growth of c
Slide 17: Specialty Engineering
Specialty Engineering reported at constant Spec. Eng. 30% £m 2005 growth currency Sales 929 +7% +10% Headline operating profit 127 +12% +16% Contribution to operating profit Margin 14% • All four businesses contributed to growth Interconnect John Crane • John Crane benefiting from increased investme
Slide 18: John Crane: oil and gas market
John Crane: oil and gas market Market Drivers Oil and gas Demand extraction 30% growth Refining 0.5% 5% Chemicals 5% 1% 8% 2% Major In excess 5.5% 4.2% 25% 41% of $500bn investment identified in 4.1% 9% 11% 10 years Kuwait: 9% 3% Iraq: 11% Migration to Iran: 8% Technology developing Investme
Slide 19: Interconnect: high margins and strong growth
Interconnect: high margins and strong growth Defence and Aerospace EMC protection Sat-com antennae Microwave assemblies Other markets Telecoms lightning strike protection latest acquisition Millitech • Millimetre wave assemblies • Antennae for network-centric warfare • Adds £15m to Interconnec
Slide 20: Financial factors in 2006 performance
Financial factors in 2006 performance growth related to Capital expenditure worldwide investment one-off issues now Working capital being resolved free cash-flow provides Debt levels resources for further organic/acquisitive growth UK funded plans now in surplus Pensions P&L benefit will increase Sm
Slide 21: Capital programmes adds value through disciplined investment criteria
Smiths adds value through disciplined investment criteria Company’s overall ROI 1 (including goodwill) Smith’s Acquisitions investment 2 criteria: Expected rate of return 12% 12% YEAR 1 YEAR 2 date of acquisition YEAR 3 7.5% WACC after tax return on total investment Research and 3 development 4 Capi
Slide 22: Reaching for full potential: Six fundamental strengths
Reaching for full potential: Six fundamental strengths which drive Smiths’ strategy 1 Choosing markets with long term growth where Smiths can outperform 2 Improving productivity, including establishing low-cost manufacturing 3 Building the scale and infrastructure to operate globally 4 Investing hea
Slide 23: Smiths Group
Smiths Group www.smiths-group.com/ir Register here to receive regular information 23
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