SmithsGroup s13 InterimResults 2013 s31 Presentation

7/30/2019 SmithsGroup s13 InterimResults 2013 s31 Presentation

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www.smiths.com

[email protected]

Interim Results

20 March 2013


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Smiths Group plc Interim Results 2013 | 2

This document contains certain statements that are forward-looking statements. Theyappear in a number of places throughout this document and include statementsregarding our intentions, beliefs or current expectations and those of our officers,directors and employees concerning, amongst other things, our results of operations,financial condition, liquidity, prospects, growth, strategies and the business weoperate. By their nature, these statements involve uncertainty since future events and

circumstances can cause results and developments to differ materially from thoseanticipated. The forward-looking statements reflect knowledge and informationavailable at the date of preparation of this document and, unless otherwise requiredby applicable law, the Company undertakes no obligation to update or revise theseforward-looking statements. Nothing in this document should be construed as a profitforecast. The Company and its directors accept no liability to third parties in respectof this document save as would arise under English law. This presentation contains

brands that are trademarks and are registered and/or otherwise protected inaccordance with applicable law.


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Philip BowmanChief Executive

Introduction


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Agenda

Introduction and overview Philip Bowman

Financial review Peter Turner

Operational review introduction Philip Bowman

John Crane Duncan Gillis

Smiths Medical Srini Seshadri

Operational review and priorities Philip Bowman


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Key messages

Resilient results in a challenging trading environment

Channelling greater sales and marketing resource to high growth marketsEmerging market sales up 9% - now representing 15% of Group revenues

Focus on operational improvement to improve margins/fund growthSmiths Detection restructuring programme and continuous improvement elsewhere

Further opportunities to generate value for shareholders

Delivering growth in profit and returns while investing more in growth drivers

Increased investment in new product developmentCompany-funded R&D investment up 8% in H1 up c. 60% over five years

Raising the bar for talent across the organisation


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Results highlights

Reported headline revenue up 4%; underlying up 6%

Headline operating profit up 4%, underlying up 5%

Headline EPS up 1% to 40.9p

Cash conversion strong at 88% - free cash flow of 71m

Return on capital employed up 70 basis points to 16.7%

Dividend up 6% to 12.5 pence, reflecting the strong cash conversion


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Recordable & lost time incident rates continue to improve

1.03

0.710.66

0.600.54**

0.51

0.30 0.29

0.21 0.22

2009 2010 2011 2012 H1 2013

Recordable incident rate*

Lost time incident rate

Incidentrate

Energy:21% reduction

Greenhouse gases:

25% reduction Water:

24% reduction

Non-recycled waste:21% reduction

*** Calculated over rolling 12-month period

to Jan 2013 compared to current goal

baseline of FY2010. Normalised to

revenue at H12013 exchange rates.

Solid progress onenvironmental targets***

Promoting responsibility: An increased focus is delivering improvements

* Measured per 100 employees per year using US OSHA definition

** 0.50 excluding recently acquired businesses


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Peter TurnerFinance Director

Financial review


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* In addition to statutory reporting, Smiths Group reports its continuing operations on a headline basis. Headline revenue and profit is before exceptional items,amortisation and impairment of acquired intangible assets, profit/loss on disposal of businesses, costs of acquisitions, net pensions finance credit and financinggains/losses from currency hedging. Free cash-flow and return on capital employed are defined in the Financial review in the press release.

** Organic growth at constant currency.

Headline* Statutory

reported underlying**

2013 2012 2013 2012

Revenue 1,475 1,415 4% 6% 1,475 1,407

Operating profit 253 244 4% 5% 215 132

Margin 17.1% 17.2% (10) bps - 14.6% 9.4%

Pre-tax profit 223 217 3% 6% 188 111

Basic EPS (p) 40.9 40.4 1% 35.8 21.4

Free cash flow 71 81

Dividend (pps) 12.50 11.25 6% 12.50 11.25

Return on capital employed 16.7% 16.0% 70 bps

m

Interim results 2013


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Revenue Operating profit

growth growth

John Crane +3% +7%

Smiths Medical +2% -10%

Smiths Detection +19% +56%

Smiths Interconnect +4% +13%

Flex-Tek +11% +20%

Group +6% +5%

Underlying headline sales and profit performance


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Headline profit progression 2012 to 2013

PBT:217m

PBT:223m15m

Volume

Associates

4m

5m

Average exchange rates

US$ 1.60 (H1 2012: 1.58)Euro 1.24 (H1 2012: 1.16)

Translation FX ready reckoner1 US cent = c. 2m HOP

1 Euro cent = c. 1m HOPCost

inflation

5mIncreased

R&D

5m5m

Price/mix

Sales &marketing

7m10m

Efficiencies

FX

3m

Volume: Volume growth across all divisions

Price: Positive in John Crane and Flex-Tek offsetting negative pricing in Medical and adverse mix

Increased R&D: Higher new product investment across all divisions Sales & marketing: Increased investment in sales & marketing particularly in emerging markets

Efficiencies: Detection restructuring and other operational efficiency initiatives across other divisions

Cost inflation: Largely wage-related inflationary increases

Associates: The impact from the sale of Crossmatch Technologies in July 2012

Foreign exchange: Translation losses of 4m offset by transactional gains of 1m


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m (for continuing activities) 2013 2012

Headline operating profit 253 244

Changes in working capital (43) (51)

Share based payment 6 5

Capital expenditure (Property, plant & equipment) (21) (21)

Depreciation 27 28

Development costs & other intangibles 1 (4)

Operating cash-flow 223 201

Conversion rate 88% 82%

(net of amortisation and deferred income)

Group cash conversion


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Return on capital employed is calculated over a rolling 12-month basis and is the percentage that headline operating profit comprises ofmonthly average capital employed. Capital employed comprises total equity adjusted for goodwill recognised directly in reserves, post-retirement benefit assets and liabilities and litigation provisions relating to exceptional items, both net of tax, and net debt.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Smiths Group Flex-Tek John Crane Smiths Medical SmithsInterconnect

Smiths Detection

12 months to 31 Jan 2013

12 months to 28 Jan 2012

% 16.0%16.7%

25.1%

29.8%

23.8% 24.3%

12.8% 12.3%

17.3% 16.9%

7.6%

12.2%

Improved return on capital from Flex-Tek, John Crane and Detection


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m

Headline operating profit 253

Restructuring programmes (5)

Litigation provision: John Crane, Inc. (10)

Litigation provision: Titeflex Corporation (2)

Gains on changes to pension plans 1

Profit on disposal of businesses 1

Exceptional operating items (15)

Amortisation and impairment of acquired intangible assets (23)

Statutoryoperating profit 215

Key exceptional items below operating profitPension finance credit 6

Reconciliation: Headline operating profit to statutory profit


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*Treated as exceptional costs except for 7m charged against headline operating profit in FY2012

m H1 2013 savings H1 2013 costs Total savings to date Total costs to date*

4 5 19 25

Revised

by FY2015Total planned savings Total planned costs*

36m 33m

Exceptional items: Restructuring programme in Detection delivering benefits

Original

by FY2014Total planned savings Total planned costs*

40m 40m

Achievements over 18 months

Site closures Morristown NJ, Rhode Island, Boston MA, Hopewell Junction NY, Milford CT,Laval, Canada

Aligning X-ray manufacturing footprint to customer needs focusing on 3 hubs:

- Americas - Expansion of Edgewood to include X-ray manufacture

- Asia - New site in Malaysia is now serving the Asian market

- Europe Agreed a restructuring plan with Wiesbaden to remove 170 roles

Beginning to establish a local supply chain to support new footprint

Senior management restructuring programme at key sites

Delivered these changes while growing the business and building the order book


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Cash contributionsDeficit movement since 31 July 2012

m 31 January 2013 31 July 2012 28 January 2012

Assets 3,517 3,348 3,232Liabilities (3,899) (3,968) (3,691)

Deficit (382) (620) (459)

UK bond yields 4.5% 4.1% 4.7%UK inflation 3.4% 2.8% 3.0%US bond yields 4.2% 3.8% 4.5%

2013

Funded schemecontributions 90m

- Smiths Industries PS 36m

- TI Group PS 16m

- US and other 38m

Escrow contributions 24m

m

Deficit at 31 July 2012 (620)

Foreign exchange 1

Return on assets 238

Contributions (net of service costs) 41

Change in liabilities (42)

Deficit at 31 Jan 2013 (382)

Inc luding escrow gi l ts of 74m (308)

Pensions: Deficit improved to 382m, driven by asset performance


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Interest split Currency split Debt split

Bank

Public

USD

Euro

other

Net debt m

Borrowings 1,109

Cash (254)

Net debt 855Fixed

Floating

Undrawn committed bank facilities of US$800m at 31 January 2013

Strong balance sheet supports investment in acquisitions and growth

Credit Rating:BBB+ (stable)/Baa2 (stable)

Successful $400m bondissue with 10 year maturityand fixed coupon of 3.625%

Weighted average life of debt is 5.9 years

Bonds$ Privates $ Bonds Bonds

m

0

50

100

150

200

250

300

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


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Philip BowmanChief Executive

Operational review and priorities


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Delivering shareholder value two key themes

Investing to accelerate revenue growth over the medium-term Increasing exposure to high growth markets, e.g. China, Brazil, India

New product development to sustain technology leadership

Rebalancing portfolio away from government-funded customers

Continue to look for value enhancing acquisitions

Operational improvements to fund growth and drive returns

Further opportunities for efficiencies scale varies by division

Improving performance and capabilities through cross-divisional working

Sustain strong cash generation to fund growth

Balance investment for long-term competitive advantage vs short-term returns


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Duncan GillisCEO & PresidentJohn Crane


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Sales growth across all sectors, particularly oil & gas and chemical

Aftermarket sales grew 4%

- Pipeline expansion projects in North America for shale oil

- Oil and gas aftermarket up 4%

- Chemical and pharmaceutical aftermarket up 6%

First-fit OEM sales up 1% - customer investments in new projectsslowed

Margins benefited despite increased investment in first-fit projects,sales & marketing and new product development

2013 H1 Revenue (469m)

1 First-fit OEM 36%

5 General Industry 9%

2 Oil, gas & petrochem 39%

3 Chemical and pharma 9%

4 Distributors 7%

1

2

3

45

Aftermarket 64%

Underlying revenue Headline operating marginUnderlying headline profit

John Crane: Delivering sales growth, improving margins and returns

+3% +7%+90bps21.8%


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Investments in growth markets are starting to pay off Emerging markets and fast-growth businesses represent over 21% of John Crane sales

First-half sales up in several regions

>10% in Middle East & Africa, >13% in China, >20% in Australia

New products expected to drive mid-term growth

16% increase in new product development and engineering

Plans to expand R&D infrastructure in select regions Focused on addressing customer demands in challenging operating situations

John Crane: Investments position John Crane for future growth


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Outlook

First fit customer slowdownexpected to continue

Order book slightly better due toaftermarket business

Overall, H2 revenues at a similarlevel versus last year

Margins will benefit fromproductivity efforts

John Crane: Outlook

Fitting a locking sleeve into the inboard stage of a gas seal


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Positive long-term customer relationships deliver sustainable and strong cash flow High net promoter scores speak to strength of customer relationships

Several, large, multi-year customer contracts signed

Strong operational leadership focused on meeting customer needs and local demand

Business strategy is under evaluation some adjustment in direction anticipated

May reorganise to enhance customer service

Continue to build core business Accelerate growth in select segments

Drive productivity

Explore acquisitions

John Crane: Accelerating growth to increase value to shareholders

Investor Day currently planned for December


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Srini SeshadriPresidentSmiths Medical


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+2% (10)%(240)bps21.1%

Sales growth despite challenging operating environment

Consumables up 2%; hardware up 1%

Safety devices - sales flat

- Growth in sharps offset by declines in PIVC and vascular access

Medication delivery - sales slightly up

- Capital budget constraints continue but pipeline is promising

Vital care - sales up 4%- Gains in most product areas offset by veterinary and kitting

Margins affected by additional 10m investment in emerging marketexpansion and new product development

1 Medication delivery 27%

2 Vital care 42%

3 Safety devices 31%

1

2

3

Smiths Medical: Delivering sales growth from emerging markets and consumables

* Headline revenue

2013 H1 Revenue* (413m)Underlying revenue Headline operating marginUnderlying headline profit


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Building sales capabilities in high-growth emerging markets Added almost 300 heads over last 18 months

Investing to accelerate sales and generate returns over the medium term

Lead time in recruiting and training people and to build brand presence

Product registration process can be lengthy

Strategy is delivering faster growth rates but more work to be done Emerging markets up 12%: China up 17% and Brazil up 18%

Now represent 11% of sales (2012: 10%)

Smiths Medical: Investing in growth opportunities emerging markets


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Accelerating new product launches: investment up 16% to 4.4% of sales (2012: 3.8%)

Continued to streamline the organisation, upgrade talent and improve processes

Expanded Chinese engineering team by >20%

Strategy is delivering new product launches

Medfusion 4000 strong start; growth rate has slowed recently

CADD-Solis VIP recently received FDA clearance Good progress with Graseby 2000/2100 syringe pumps in China and other developing

markets

Recent safety devices launches: Jelco IntuitIV and ViaValve

Smiths Medical: Investing in growth opportunities new product launches


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Outlook

Developed markets are likely toremain challenging

Focus will remain on investment innew product development

Investing in sales and marketing;increasing emerging marketexposure

Lower margins: regulatory costs:US medical device tax (2.3%) andREACH/RoHS compliance

Focus on cost savings such asvalue engineering to offset highercosts

Smiths Medical: Outlook

Portex EpiFuse Catheter Connector reduces risk of catheterdisconnection


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+19% +56%+270bps

Revenue growth driven by transportation and ports and bordersoffset by declines in critical infrastructure

Margins benefit from better volumes and restructuring savings

Transportation underlying sales up 40%- Doha contract and smaller orders at various European airports

Critical infrastructure underlying sales down 22%- US budget pressure and caution around the fiscal cliff

Ports & borders underlying sales up 41%- Contracts in Brazil and other emerging markets; customs protection

Military underlying sales up 14%- US JCAD programme and other integrated systems programmes

1 Transportation 52%

5 Critical infrastructure 16%

2 Ports & borders 17%

3 Military 10%

4 Emergency responders 3%

6 Non security 3%

1

2

3

4

5

6

12.0%

Smiths Detection: Improving sales trend; margins benefit from restructuring

2013 H1 Revenue (255m)Underlying revenue Headline operating marginUnderlying headline profit


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Increased investment in new products strong pipeline of new launches Company funded spend maintained at 17m or 6.6% of sales (2012: 7.6%) Total spend of 20m or 8.0% of sales with 3m of customer funded projects

Recent product launches CIP-300: low energy X-ray scanner for rapid screening of cars and light vehicles HI-SCAN 10080 XCT: next generation explosives scanner under evaluation by USA

Continued focus on emerging market sales

Emerging market sales up 14% to represent around 19% of sales Malaysian factory supplying Asia; Focus on opportunities in Middle East and North Africa

Aftermarket revenues grew 5% Global organisation and increased focus is delivering benefits New training programme in place leading to reduced service interventions

Smiths Detection: Investing in future growth through new products and markets


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Outlook

Targeting a similar level of revenuein second half as very strongequivalent period last year

Remains subject to government

budgets and project timing

Order book remains strong

Margins will benefit from costsavings and operational efficiencies

Smiths Detection: Outlook

An emergency responder using GUARDION to identify potentiallydangerous chemicals


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+4% +13%+40bps13.5%

1 Connectors 34%

2 Microwave 44%

3 Power management 21%

1

2

3

Smiths Interconnect: Sales and margins improve against a weak comparator

Sales growth from Connectors and Microwave offset by Power

Margins benefited from better volumes and cost savings

Connectors sales up 7%- Recovery in medical; growth in commercial aerospace and space

- Robust demand from military customers,

Microwave sales up 13%- Good growth in military, aerospace and test markets

- Telecom declines against a strong comparator period

Power management underlying sales down 21%- Difficult market conditions facing PDI- Delays in US orders for power and EMP protection devices



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Continued investment in new product development Company-funded R&D increased 3% to 11m or 5.2% of sales (2012: 5.5%)

Customer-funded portion declined 33% due to US defence budget cuts

Total R&D spend of 13m or 5.9% of sales (2012: 6.6%)

New product initiatives include:

- New lightweight battery-powered PIM tester for mobile communications networks

- Microwave filter for train communications to prevent interference from public mobile

phones

Expansion in emerging markets

Emerging market sales up 21% to represent c. 15% of sales

Smiths Interconnect: Investing in new products and emerging markets


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Smiths Interconnect: Outlook

Outlook

Cautious outlook

Defence market is likely to remainchallenging

Commercial markets (telecoms,semiconductor test, data centres)are expected to deliver long-termgrowth

However, timing on marketrecoveries is uncertain

Assembly of static transfer switches, a key component of PDIsproduct offer


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+11% +20%+120bps16.7%

1 Fluid Management 34%

2 Construction 30%

3 Heat Solutions 21%

1

2

4

4 Flexible Solutions 15%

3

Strong sales growth from aerospace and US residential construction- margins up 120 bps from higher volumes and price

Fluid Management - sales grew 11%- Volume growth on major airframe platforms and engines- US automotive sales for fuel/brake applications remained robust

Construction - sales up 26%- Improved demand; single family home starts up 18% to December

Heat Solutions - sales down 1%- Weak sales of HVAC components; growth in specialty heating elements

Flexible Solutions - sales up 4%- Sales of new sleep apnoea product offset US floorcare declines

Flex-Tek: Strong growth from Fluid Management and Construction; margins benefit



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Outlook

Order book for aerospacecustomers remains positive

Residential construction marketshould continue to improve

Solid foundation for H2 albeitagainst a strong comparator

Margins will benefit from highervolumes but face pressure fromincreased R&D investment,competitive pricing and potential

commodity inflation

Flex-Tek: Outlook

Fluorescent penetrant shows hidden imperfections in aerospace tubes


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Deliver new product launches to accelerate sales growth

Invest in sales and marketing capabilities in high growth markets

Drive operational efficiencies to improve margins and support investment

Sustain strong cash conversion to fund growth initiatives and enhance value

Effective capital allocation to drive improved returns and value for shareholders

Operational priorities for 2013


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Questions & Answers

Interim Results

20 March 2013

www.smiths.com

[email protected]


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1

A world-leading provider of products andservices for the major process industries,including oil and gas, power generation,chemical, pharmaceutical, pulp and paper,and mining sectors.

973m32%

36%Employees:

7,000

Percentage relates to headlineoperating profit before corporate costs

2012 Revenue by sector

1 First-fit OEM 37%

5 General Industry 9%

2 Oil, gas & petrochem 39%

3 Chemical and pharma 8%

4 Distributors 7%

Aftermarket

Revenue m

626

790 786

894973

2008

Contribution to2012 Group revenue:

Contribution to 2012headline operating profit:

John Crane

2009 2010 2011 2012

2

3

45


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Customers: John Crane serves oil and gas andpower generation companies, refineries, pumpand compressor manufacturers, chemical andother process industries. Its main customersinclude Chevron, BP, China Petroleum,Suncor/Petro Canada, Valero, Petrobras,ExxonMobil, Gazprom, TOTAL, Sabic, PDVSA,

Pemex, Saudi Aramco, Shell, Petrom, Sulzer,ITT Goulds, Flowserve, GE Nuovo Pignone, GEEnergy and Power, Andritz Hydro, Rolls Royce,Siemens, Mitsubishi, Solar Turbines, Elliot, York,BASF, Weir Group, Bayer, and Dow. Nocustomer is larger than 3% of sales.

Competitors: For rotatingequipment technologies, JohnCranes main competitors are

Flowserve and Eagle BurgmannIndustries (mechanical seals);Kingsbury and Waukesha(engineered bearings); Pall and

Hydac (filtration systems); Rexnordand Emerson (couplings). Forequipment in upstream energy, JohnCranes principal global competitors

include Weatherford and Norris.

Suppliers: John Craneoperates its supply chainglobally, using global, regionaland local partnerships to meetthe required service levels. Itsmain suppliers are MorganCrucible, CoorsTek, Penn

United Carbide, Schunk,Metalized Carbon, ESK, EarleM. Jorgensen, Femax, BEGroup, DuPont, GreeneTweed, and Ashland Chemical.

John Crane

Delivering engineered solutions that keep process plants running, John Craneenhances customer productivity by providing advanced technology industrialproducts and performance-enhancing services backed by an exceptional globalnetwork.


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m 2013 2012 reported underlying

Revenue 469 469 +0% +3%

Headline operating profit 102 98 +4% +7%

Margin 21.8% 20.9% +90 bps

ROCE 24.3% 23.8% +50 bps

Volume: Driven by both aftermarket and OEM

Price/mix: Mainly aftermarket price increases

Investment: Increased R&D spend

Inflation: Increased labour/other costs partly

offset by and savings in material cost andoverheads

FX: Net impact of translation/transaction

Headline operating profit m

2011/12 98

Volume 1

Price/mix 10

Investment (1)Cost inflation (4)

Foreign exchange (2)

2012/13 102

John Crane: Margins ahead on volumes and price despite inflation and investment


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A leading supplier of specialist medical devicesand equipment for global markets.

Our products are focused on the medicationdelivery, vital care and safety devices marketsegments.

Headline revenue m

28%

35%Employees:

7,750


864m2012 Headline revenue by sector

1

2

3

1 Medication delivery 28%

2 Vital care 41%

3 Safety devices 31%



Smiths Medical

2008 2009 2010 2011 2012

703

834 858 838 864


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Customers: We estimatethat three-quarters of ourend customers arehospitals, with theremainder comprising thealternate care market suchas homecare, clinics and

other surgery centres. Wehave a direct salespresence in over 20countries, and distributionarrangements inapproximately 100 others.

Competitors: The competitive landscape for SmithsMedical is complex as we compete with differentcompanies across the broad product portfolio. Ourmajor competitors include Covidien, Teleflex, BBraun, Becton Dickinson, C R Bard, 3M (Arizant),Hospira and CareFusion. We often compete with asmall portion of a major competitors medical

business, as well as with any number of smaller,single product line companies trying to gain entranceinto a particular market. This makes comparisonbetween peers far from straightforward. In emergingmarkets, we compete with both large multinationalcompanies and smaller domestic players.

Suppliers: Our strategy is to activelyengage suppliers in productinnovation, value engineering and acommitment to quality. Our goal is toreduce product and supply chaincosts, improve delivery performanceand ensure supply continuity plans.

The majority of our direct spending ison resins, plastic injection mouldings,and electronics. Among indirectpurchases, freight, services, travel,temporary labour and capitalequipment represent the majority.

In medication delivery, our devices help treat cancer patients and provide reliefto those in pain. Our vital care products reduce hospital-acquired infections,manage patients airways before, during, and after surgery, maintain body

temperature and assist reproduction through IVF therapy. Our safety productsprotect health workers by helping prevent needlestick injuries and reducingcross-infections.

Smiths Medical


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Headline revenue 413 417 (1)% +2%

Headline operating profit 87 98 (11)% (10)%

Operating margin 21.1% 23.5% (240) bps

ROCE 16.9% 17.3% (40) bps

Volume: Growth in consumables andemerging markets

Price: Negative pricing in many markets

Efficiencies: Value engineering, manufacturing

savings and lower overheads Investment: Mainly sales and marketing and

new product development

FX: Impact of translation/transaction


2011/12 98

Volume 2

Price (4)

Operational efficiencies 2

Growth investment (10)


2012/13 87

Smiths Medical: Growth in tough markets; margins affected by growth investment


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A world-leading designer and manufacturerof sensors that detect and identifyexplosives, narcotics, weapons, chemicalagents, biohazards, nuclear & radioactivematerial and contraband.

519m1 Transportation 47%

2 Ports and borders 16%

3 Military 11%

4 Emergency responders 4%

5 Critical infrastructure 21%

6 Non-security 1%

Contribution to2012 Group revenue: 17%


12%Employees:

2,300



1

2

3

4

5

6

Revenue m

Smiths Detection

2008 2009 2010 2011 2012

509 501

574

510 519


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Customers:A significantmajority of sales areinfluenced by more than 100governments and theiragencies, including homelandsecurity authorities, customsauthorities, emergency

responders and the military.These include the USDepartment of Defense, USTransportation SecurityAdministration (TSA), and theUK Ministry of Defence.

Our technology helps customers in the global transportation, ports andborders, critical infrastructure, military and emergency responder markets.We have the most comprehensive range of detection technologies in theworld, including X-ray, trace detection, infra-red and gamma rayspectroscopy, and millimetre-wave.

Competitors: Smiths Detections broad portfolio in

the homeland security and defence sectors bringsit into competition with a wide range of companiesin individual segments. Principal competitorsinclude: Morpho (air transportation), Rapiscan (airtransportation, ports and borders, criticalinfrastructure), L3 Security & Detection Systems

(air transportation), Nuctech (ports and borders),AS&E (ports and borders), FLIR (air transportation,defence), SAIC (ports and borders), Chemring(military), Bruker (military, emergencyresponders), Thermo Fisher (military, emergencyresponders).

Suppliers: We are actively developingsynergies across sites and restructuringour purchasing group to ensure that wefully leverage the size of our business.These developments will be ongoingtaking into account the demand for localcontent with some of our major

customers as well as our stringentquality and delivery requirements. Ourprocurement team has now beencentralised and our engagement withsuppliers is being standardised acrossall business operations.

Smiths Detection


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Volume: Transportation and ports and bordersoffset by critical infrastructure

Efficiencies: 4m of savings and 3m of costsnot repeated from prior period

One-off costs: Legal costs and additionalrestructuring

Cost inflation: Labour related

FX: Net impact of translation/transaction


2011/12 20

Volume 12


One-off costs (5)Cost inflation (2)

Net foreign exchange (1)

2012/13 31

Smiths Detection: Delivering improvements in revenue, margins and returns


Revenue 255 220 +16% +19%


Margin 12.0% 9.3% +270 bps

ROCE 12.2% 7.6% +460 bps


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A leader in electronic components andsub-systems that connect, protect and controlcritical systems for wireless telecommunications,aerospace, defence, space, test, medical, railand industrial markets.

449m15%

11%Employees:

4,100



1 Connectors 35%

2 Microwave 45%

3 Power management 20%

1

2

3



Smiths Interconnect

Revenue m

2008 2009 2010 2011 2012

261

318340

379

449


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Customers: Smiths Interconnect supplies tomultiple levels of the supply chain and itsblue chip customers include primes andservice providers, OEMs, system suppliersand sub-system manufacturers. Amongstour largest customers are Raytheon,Finmeccanica, BAE Systems, Boeing,

EADS, AAI/Textron, Northrop Grumman,General Dynamics, Lockheed Martin,Row44, Ericsson, Motorola, AT&T, Verizon,Sprint, ZTE, Huawei, Facebook, APC,Foxconn, GE Healthcare, Varian,Qualcomm, NVIDIA and Alstom.

We design and manufacture products that connect, protect and control criticalsystems for the global data centre, wireless telecommunications, aerospace,defence, space, medical, rail, test and industrial markets.

Our products are application-specific and incorporate innovative technologiesto provide our customers with a competitive advantage.

Competitors: Smiths Interconnect operates in afragmented market with many small and medium-sized competitors in various product andtechnology areas. Connector competitors includeAmphenol, Deutsch (part of TE Connectivity),Everett Charles (part of Dover), Glenair, ODU andHarting. Microwave competes with, amongst

others, Anaren, PowerWave, KMW, Dover,CommScope, Cobham, EMS (part of Honeywell)and Teledyne. Emerson Network Power, Cyberex(part of ABB), Eaton, Starline (part of UniversalElectric), Huber & Suhner, Dehn + Shne andPhoenix Contact offer competitive power products

Suppliers: SmithsInterconnect maintains astrong supply base withmachined parts andelectronic componentstogether representingapproximately half of the

total spend. No individualsupplier accounts formore than 4% of totalpurchased value.

Smiths Interconnect


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Revenue 219 200 +9% +4%


Margin 13.5% 13.1% +40 bps

ROCE 12.3% 12.8% (50) bps

Volume: Positive volume offset by adverseoperational gearing in certain facilities

Price/mix: Mainly mix driven by Microwave andConnectors

Operational efficiencies: Site rationalisationbenefits and procurement savings more thanoffset cost inflation


2011/12 26

Volume 3

Price/mix (2)


2012/13 30

Smiths Interconnect: Revenue and margins up despite tough trading environment


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233m8%

6%Employees:

2,000



1 Fluid Management 35%

2 Flexible Solutions 15%

3 Heat Solutions 24%

4 Construction 26%

1

2

4

3



A global provider of engineered componentsthat heat and move fluids and gases for theaerospace, medical, industrial, constructionand domestic appliance markets.

Flex-Tek

Revenue m

2008 2009 2010 2011 2012

206222

212221

233


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Customers: We serve mainlyaerospace engine and airframemanufacturers, domesticappliance manufacturers and theUS construction industry. Largecustomers include Boeing, Airbus,Pratt & Whitney, GE Aerospace,

Whirlpool, Electrolux, Trane, andCarrier. Our notable distributors inthe US construction marketinclude Ferguson and Watsco.

Our flexible hosing and rigid tubing provide fluid management for fuel and hydraulicapplications on commercial and military aircraft, deliver fuel gas and conditioned air inresidential and commercial buildings, and provide respiratory care for medicalapplications. Flex-Tek heating elements and thermal systems improve the performanceof a range of devices; from medical and diagnostic equipment to domestic appliancessuch as clothes tumble dryers and HVAC equipment.

Competitors: Competitors for our FluidManagement business include specialty segmentsof Parker-Hannifin, Eaton, and Kongsberg; as wellas vertically integrated capacity from keycustomers. Heat Solutions competitors in the USinclude: Zoppas, Nibe, Watlow and Chromalox; andin China, Kawai and Dongfang manufacture a wide

variety of electric heaters. Flex-Teks Constructionproducts compete with US manufacturers: Hitachi,Atco, Omega-Flex, Hart & Cooley and Goodman.Flexible Solutions competes globally with a numberof smaller privately owned businesses whichmanufacture specialty hoses.

Suppliers: Flex-Tek sourceskey raw materials from world-class companies includingelectrical resistance wire fromSandvik, fibreglass insulationfrom Owens Corning, specialtyplastic resins from DuPont and

PolyOne, and stainless steelfrom Allegheny Ludlum. Eachof these supply chain partnersis chosen based on its abilityto provide exceptional quality,service and value.

Flex-Tek


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Revenue 120 109 +9% +11%


Margin 16.7% 15.5% +120 bps

ROCE 29.8% 25.1% +470 bps

Volume: Gains in aerospace and constructionsectors

Price: Improved price helped offset inflation

Input cost inflation: PTFE, tubes, etc.


2011/12 17

Volume 3

Price/mix 2

Input cost inflation (2)2012/13 20

Flex-Tek: Volumes and pricing offset inflation pressures to grow margins


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m 2013

Net debt at start of period (791)

Operating cash (after capex etc.) 223

Interest and tax (83)

Exceptionals/Pensions (69)

Free cash flow 71

Dividends (103)

Financing including net investment hedges (6)


Movement in fair value of swapped debt and interest accrual (12)

Change in net debt (64)

Net debt at end of period (855)

Net debt increased by 64m driven by dividends


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0

40000

80000

120000160000

200000

240000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Claims dismissed Claims outstanding

Cumulative claim trends

0

20

40

6080

100

120

2004 2005 2006 2007 2008 2009 2010 2011 2012

Awards ($m) Adverse judgments

Cumulative claim history

Cumulative charts as at 31 July 2012

Key figuresKey facts

Asbestos litigation

Production ceased in 1985

Exposure within John Crane, Inc.

Resists claims based on safe product defense

Provision determined using independentvaluation experts based on 10-year timehorizon

Number of outstanding claims continues to fall

Gross provision 226m

Discounted pre-tax provision 209m

Claims dismissed 229,000

Claims outstanding 80,000

Adverse judgments 117

Adverse judgment awards paid $113mProvisions and claims as at 31 January 2013

Documents

SmithsGroup s13 InterimResults 2013 s31 Presentation