Slide 1: Pioneers of Progress: Full Year Results FY2022
PIONEERS OF PROGRESS Smiths Group plc Full Year Results FY2022 IMPROVING OUR WORLD 23 September 2022 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: Opening Remarks
OPENING REMARKS CHIEF EXECUTIVE OFFICER PAUL KEEL
Slide 4: FY2022 Results agenda
FY2022 RESULTS Opening Remarks Paul Keel, Chief Executive Officer FY2022 Results Clare Scherrer, Chief Financial Officer CEO Review Paul Keel, Chief Executive Officer | 4 |
Slide 5: Executing Against Our Strategy
EXECUTING AGAINST OUR STRATEGY +3.8% organic1 revenue growth; +6.7% reported growth; +17.8% headline EPS growth High demand across most end markets with strong order growth of +11%2 Growth Resilient margin of 16.3% and +30bps of ROCE3 expansion Smiths Excellence System (SES) fully embedded with 25 h
Slide 6: 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 | 6 |
Slide 7: Progress Towards Medium-Term Financial Targets
PROGRESS TOWARDS MEDIUM-TERM FINANCIAL TARGETS 100%+ +M&A 18-20% 15-17% +M&A 7- 10% 4–6% ORGANIC REVENUE GROWTH1 EPS GROWTH ROCE2 OPERATING PROFIT MARGIN OPERATING CASH CONVERSION2 FY2020 (1.0)% (27.4)% 12.8% 12.8% 112% FY2021 (2.2)% +19.3% 13.9% 15.5% 129% FY2022 +3.8% (H2:+4.1%) +17.8% 14.2% 16.3%
Slide 8: Clare Scherrer: Introduction
INTRODUCTION CHIEF FINANCIAL OFFICER CLARE SCHERRER
Slide 9: First Impressions
FIRST IMPRESSIONS A unique opportunity Market leading businesses with significant potential and strong growth levers Growth At an exciting time Focused structure and clear priorities already helping to unlock that potential Execution As part of an energised leadership team Bringing my experien
Slide 10: FY2022 – Good Progress in Executing Our Strategy
FY2022 – GOOD PROGRESS IN EXECUTING OUR STRATEGY Reported Organic Delivering organic growth, FY20221 FY20211 change change3 ahead of expectations, further enhanced by Smiths Group2 targeted M&A Resilient margin Revenue £2,566m £2,406m +6.7% +3.8% Strong EPS growth Operating profit £417m £372m
Slide 11: Building Good Revenue Momentum
BUILDING GOOD REVENUE MOMENTUM Reported revenue Reported revenue growth +9.4% Sequentially accelerating Organic Growth growth FX/M&A M&A contribution from Royal +3.7% Metal adding +1.8% of growth FX provided strong tailwind in H2’22 H1'22 H2'22 Revenue growth H1’22 H2’22 FY2022 Organic1 +3.4%
Slide 12: Accelerating Organic Revenue Growth
ACCELERATING ORGANIC REVENUE GROWTH Organic1 revenue growth 5 straight quarters Pre-Covid growth ~3% of growth 4.1% 3.5% 3.4% 3.1% 2.6% 0.3% H1'19 H2'19 H1'20 H2'20 H1'21 H2'21 H1'22 H2'22 (4.5)% (4.8)% Resilience during downturn 1 Organic is revenue growth adjusted to exclude the effects of foreign
Slide 13: Resilient Margins
RESILIENT MARGINS Reported movement Operating margin (%) +20bps contribution from Royal Metals Reported: +80bps +90bps from restructuring charges in FY2021 +60bps +10bps (30)bps (70)bps Organic1 movement +90bps 16.4% +20bps 16.3% 16.1% 15.5% Restructuring benefit from FY2021 programmes Prici
Slide 14: Delivering Strong EPS Growth
DELIVERING STRONG EPS GROWTH Earnings per share Growth: +17.8% 1 1 Organic is headline performance adjusted to exclude the effects of foreign exchange, acquisitions and prior year restructuring costs. | 14 |
Slide 15: Cash Generation
CASH GENERATION Operating cash flow Operating cash1 (£m) Generated £332m of operating cash (80% of operating profit) £71m investment in capex and £109m investment in working capital to support order book growth and to navigate supply chain impacts Free cash flow £130m of free cashflow generate
Slide 16: Divisional Update
JOHN CRANE SMITHS DETECTION DIVISIONAL UPDATE SMITHS FLEX-TEK INTERCONNECT A STRONGER, MORE FOCUSED GROUP
Slide 17: John Crane – Strong Demand Across All Segments
JOHN CRANE – STRONG DEMAND ACROSS ALL SEGMENTS REVENUE OPERATING PROFIT BUSINESS UPDATE £901m +3.7% 1 £188m (2.8)% 1 +10.5% order growth; record orderbooks going into FY2023 New contract wins in hydrogen (e.g. Growth across all segments: OPERATING MARGIN NEOM) and biopolymer filtration (e.g. Nat
Slide 18: Smiths Detection – Order Book Signals FY2023 Return to Growth
SMITHS DETECTION – ORDER BOOK SIGNALS FY2023 RETURN TO GROWTH REVENUE OPERATING PROFIT BUSINESS UPDATE £655m (9.4)% 1 £73m (30.7)% 1 +13.9% order growth, covering multi-year programmes, supports return to revenue growth in FY2023 Growth in 3 of 4 areas: OPERATING MARGIN Providing digital solutio
Slide 19: Flex-Tek – Record Growth and Profitability
FLEX-TEK – RECORD GROWTH AND PROFITABILITY REVENUE OPERATING PROFIT BUSINESS UPDATE £647m +16.1% 1 £133m +21.7% 1 5 year CAGR: +13.9% revenue and +15.3% operating profit Major new product launch in Q4’22 (Python Double-digit growth across both OPERATING MARGIN refrigerant line sets) Aerospace
Slide 20: Smiths Interconnect – Record Sales Growth
SMITHS INTERCONNECT – RECORD SALES GROWTH REVENUE OPERATING PROFIT BUSINESS UPDATE £363m +13.9%1 £65m +39.7% 1 Record sales growth and significant margin expansion Order intake strong throughout FY2022 Growth delivered across all segments: OPERATING MARGIN High impact new products 18.0% +330bp
Slide 21: Strong Balance Sheet
STRONG BALANCE SHEET $2.7bn enterprise value; $100m potential earnout MEDICAL DISPOSAL £0.4bn stake in ICU Medical £1bn profit on disposal recognised in January 2022 Over 75% of £742m share buyback programme already completed At current run rate, share buyback expected to complete in early
Slide 22: FY2023 Outlook
FY2023 OUTLOOK TAILWINDS Clear strategy and priorities Strong order books Pricing power across most of the portfolio Expect to deliver High impact new product launches SES projects beginning to yield results 4.0-4.5% organic Energised organisation executing at a faster pace revenue growt
Slide 23: CEO Review
CEO REVIEW CHIEF EXECUTIVE OFFICER PAUL KEEL
Slide 24: Our Priorities
OUR PRIORITIES Growth Execution People | 24 |
Slide 25: Our Priorities – Accelerating Growth
OUR PRIORITIES – ACCELERATING GROWTH Growth Execution People | 25 |
Slide 26: Four Levers of Accelerating Growth
FOUR LEVELS OF ACCELERATING GROWTH Disciplined M&A Building out priority adjacencies New product development and commercialisation Strong execution to maximise market recovery opportunity | 26 |
Slide 27: Strong Execution to Access Market Demand
STRONG EXECUTION TO ACCESS MARKET DEMAND General Safety & % of Smiths Energy Aerospace Industrial Security FY22 Revenue Smiths FY22 Smiths FY22 Smiths FY22 Smiths FY22 Growth +11.4% Growth (6.4)% Growth +3.5% Growth +15.4% Energy Aerospace Strong demand for Softness in the Strong, broad-based
Slide 28: Success in New Product Development and Commercialisation
SUCCESS IN NEW PRODUCT DEVELOPMENT AND COMMERCIALISATION High impact products launched in FY2022 Upcoming new product launches Flex-Tek: Multi-layer refrigerant line sets Smiths Interconnect: 28G Optical transceivers for Smiths Detection: space John Crane: next-gen chemical Zero emission seal detect
Slide 29: Progress Building Out Attractive Adjacencies
PROGRESS BUILDING OUT ATTRACTIVE ADJACENCIES JOHN CRANE SMITHS DETECTION FLEX-TEK SMITHS INTERCONNECT ENVIRONMENTAL PROTECTION DIGITAL EXPANSION ENVIRONMENTAL QUALITY AND HIGH SPEED SATELLITE COMMS EFFICIENCY High win rate in hydrogen Automated AI-driven target Core position in ruggedized and
Slide 30: Our Priorities – Executing Better
OUR PRIORITIES – EXECUTING BETTER Growth Execution People | 30 |
Slide 31: Smiths Excellence System – Progressing at Pace
SMITHS EXCELLENCE SYSTEM– PROGRESSING AT PACE FY2022 – Progress Made FY2023 and beyond New phase of SES launched Scale and accelerate results Fully resourced team in place – Group First wave of SES projects will support growth, SES leader, 6 Master Black Belts margins and cash conversion in FY
Slide 32: High Impact Black Belt Projects
HIGH IMPACT BLACK BELT PROJECTS GROWTH EXECUTION PEOPLE Multiple projects to increase capacity to John Crane project targeted on orderbook Flex-Tek project to advance training and satisfy high levels of demand conversion to accelerate throughput on-boarding employees Multiple projects to imp
Slide 33: Our Priorities – Inspiring and Empowering Our People
OUR PRIORITIES – INSPIRING AND EMPOWERING OUR PEOPLE Growth Execution People | 33 |
Slide 34: Inspiring, Empowering and Investing in Our People
INSPIRING, EMPOWERING AND INVESTING IN OUR PEOPLE PRIORITIES PROGRESS Recordable incident rate of 0.5 in FY2022 (FY2021: 0.5), top quartile Safety and wellbeing always for manufacturing companies at the forefront Incident rate at Royal Metal improved 48% since acquisition Refreshed leadership
Slide 35: A Refreshed Leadership Team
A REFRESHED LEADERSHIP TEAM Paul Keel Bernard Cicut Pat McCaffrey Roland Carter Julian Fagge Ted Wan CEO John Crane Flex-Tek Smiths Detection Smiths Smiths China Interconnect Clare Scherrer John Ostergren Tony Tielen Vera Kirikova Mel Rowlands Sir Kevin Tebbit Diana Houghton CFO Sustainability SES P
Slide 36: Continuing to Translate Our Commitment to ESG Leadership into Action
CONTINUING TO TRANSLATE OUR COMMITMENT TO ESG LEADERSHIP INTO ACTION Deliver Sustainable Growth FY2022 Progress • Targeted R&D investment in green technologies: - Environmental protection in John Crane Help our customers achieve - Energy efficiency of critical safety & security infrastructure in Smi
Slide 37: Executing Against Our Strategy in an Uncertain Macro Environment
EXECUTING AGAINST OUR STRATEGY IN AN UNCERTAIN MACRO ENVIRONMENT FY2022 FY2023 +3.8% organic1 growth, +6.7% reported Further acceleration to 4-4.5% organic growth, +17.8% headline EPS growth revenue growth Growth Resilient margin of 16.3%, +30bps of ROCE SES overcoming macro challenges to expansion,
Slide 38: Smiths Value Engine
SMITHS VALUE ENGINE OUR PURPOSE OUR STRENGTHS OUR PRIORITIES OUR COMMITMENTS Organic Revenue World-Class Growth 4-6% (+M&A) Growth Engineering EPS Leading Growth 7-10% (+M&A) Positions in Critical Markets Execution PIONEERS OF ROCE 15-17% PROGRESS Global Capabilities Operating Improving our world Pr
Slide 39: Questions & Answers
j », —> QUESTIONS & ANSWERS smiths
Slide 40: Appendix
—> APPENDIX smiths
Slide 41: Bridge – Reported to Organic
BRIDGE – REPORTED TO ORGANIC £m FY2021 Foreign FY2021 FY2022 FY2022 Restructuring costs Organic movement 3 Acquisitions Smiths Group1 Headline2 exchange Organic3 Organic3 Headline2 John Crane 865 4 869 32 901 901 Smiths Detection 721 2 723 (68) 655 655 Flex-Tek 508 14 522 83 605 42 647 Smiths Interc
Slide 42: Income Statement
INCOME STATEMENT1 £m FY2022 FY2021 Reported change Revenue 2,566 2,406 +6.7% Headline2 operating profit 417 372 +12.0% Legacy pension scheme arrangements (214) (6) Amortisation of acquisition related intangible assets (51) (53) Russia impairment charges and related closure costs (19) - Post acquisit
Slide 43: FX Sensitivity
FX SENSITIVITY FY2022 FY2021 Currency % change Average rate average rate - For each $0.10 move, the USD 1.32 1.36 (2.9)% annual operating profit impact is c.£21m EUR 1.18 1.13 +4.4% - For each €0.10 move, the annual operating profit impact is c.£6m Translation impact FY2022 Revenue +£26m or +1.1% Op
Slide 44: Net Debt Movement
NET DEBT MOVEMENT Net debt movement (£m) | 44 |
Slide 45: John Crane – Solutions for Increased Efficiency, Emission Reductions and Energy Transition
JOHN CRANE – SOLUTIONS FOR INCREASED EFFICIENCY, EMISSION REDUCTIONS AND ENERGY TRANSITION FY REVENUE £901m (35% of Group) COMPETITIVE STRENGTHS - Strong and differentiated GROWTH DRIVERS - Near-term global demand for stable energy supply COMPETITIVE LANDSCAPE - Competitors range from proprietary te
Slide 46: Smiths Detection – Supporting Safety and Security
SMITHS DETECTION – SUPPORTING SAFETY AND SECURITY FY REVENUE £655m (26% of Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - Global reach and market-leading brand - Persistent and evolving threats to national security, - Competitors range from public safety and critical infrastruct
Slide 47: Flex-Tek – Solutions for Safe, Efficient Movement of Fluids and Gases
FLEX-TEK – SOLUTIONS FOR THE SAFE, EFFICIENT MOVEMENT AND HEATING OF FLUIDS AND GASES FY REVENUE £647m (25% of Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - Leading capability in design, - Through-cycle growth of the US housing - Competitors range from FY HEADLINE OP manufactur
Slide 48: Smiths Interconnect – Solutions for High-Speed, Secure Connectivity
SMITHS INTERCONNECT - SOLUTIONS FOR HIGH-SPEED, SECURE CONNECTIVITY IN DEMANDING APPLICATIONS FY REVENUE £363m (14% of Group) COMPETITIVE STRENGTHS GROWTH DRIVERS COMPETITIVE LANDSCAPE - Broad portfolio of cutting-edge - Increased demand for connectivity in space, - Competitors range from FY HEADLIN