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Smiths GroupMeetings with investors in California

Smiths GroupMeetings with investors in California

Alan Thomson - Financial Director

Russell Plumley - Director, Investor Relations

August 2004

Alan Thomson - Financial Director

Russell Plumley - Director, Investor Relations

August 2004

INV US 08 | 2

Smiths Group:Good progress on reshaping the companySmiths Group:Good progress on reshaping the company

2001

Acquisitions

2002 2003 2004

Detection$60m

Detection$60m

Medical$60m

Medical$60m

Detection$375m

Detection$375m

Detection$90m

Detection$90m

Spec Eng$110m

Spec Eng$110m

Aero$100mAero

$100m

total spent on acquisitions $940 million

DEBT$2.5bn

DEBT~ $500m

Marine Seals$340m

Marine Seals$340m

Engineering$255m

Engineering$255m

Polymer Seals$770m

Polymer Seals$770m

Spec Eng $35m

Spec Eng $35m

Auto demerger$900m cash$470m prefs

Auto demerger$900m cash$470m prefs

DisposalsDisposals

Engineering$80m

Engineering$80m

(financial years)

Spec Eng$25m

Spec Eng$25m

Spec Eng$10m

Spec Eng$10m

Aero$30mAero$30m

Medical$80m

Medical$80m

MERGER

INV US 08 | 3

Smiths DetectionEquipment for protection against threats to security

Smiths DetectionEquipment for protection against threats to security

Focusing on activities with solid growth potentialFocusing on activities with solid growth potential

Specialty EngineeringApplication-specific electronic and engineered products

Specialty EngineeringApplication-specific electronic and engineered products

approx sales*approx sales* proportion of op. profitproportion of op. profit

Smiths AerospaceSystems and equipment for military and commercial aircraft

Smiths AerospaceSystems and equipment for military and commercial aircraft

$1.8 billion

Margin 10%

$1.8 billion

Margin 10%

$0.6 million

Margin 17%

$0.6 million

Margin 17%

$1.5 billion

Margin 13%

$1.5 billion

Margin 13%

(*£/$=1.75)(*£/$=1.75)

Estimated contribution to FY2004Estimated contribution to FY2004

Smiths MedicalDevices for critical care and medication delivery

Smiths MedicalDevices for critical care and medication delivery $0.8 billion

Margin 19%

$0.8 billion

Margin 19%

INV US 08 | 4

Adding valuable bolt-ons in each division:Six acquisitions since March 04 for $385mAdding valuable bolt-ons in each division:Six acquisitions since March 04 for $385m

DetectionCyrano

SensIR

DetectionCyrano

SensIR

MedicalSmiths MedicalJapanDHD

MedicalSmiths MedicalJapanDHD

Spec EngTRAK

Spec EngTRAK

Full ownership of Japanese distribution

US respiratory care devices

Full ownership of Japanese distribution

US respiratory care devices

Miniaturised detector

Hazmat kit

Miniaturised detector

Hazmat kit

Microwave components for military communications airborne antennae

Microwave components for military communications airborne antennae

$75m$75m

$111m$111m

$15m$15m

$55m$55m

$27m$27m

AerospaceDGT

AerospaceDGT

Engine Components Engine Components

$102m$102m

INV US 08 | 5

Commitment to R&D will help deliver organic growthCommitment to R&D will help deliver organic growth

10% of sales

$255m

$255m

$310m

$310m

$400m

$400m

$460m

$460m

company fundedcompany funded

customerfundedcustomerfunded

20012001 20022002 20032003 2004 (E)

2004 (E)

7% of sales

The latest products will drive sales ahead

Aerospace(systems for)

A380, B7E7, F-35

Medical

Needle-Pro, Cozmonitor, Cozmore

Detection

Bio-Seeq, Sentinel II, Hi-Scan

(Continuing activities)

INV US 08 | 6

Mexico Medical John Crane

Poland Aero components

Malaysia Flex-Tek

Costa Rica Interconnect

Czech Republic John Crane

China Aerospace John Crane Interconnect

Mexico Medical John Crane

Poland Aero components

Malaysia Flex-Tek

Costa Rica Interconnect

Czech Republic John Crane

China Aerospace John Crane Interconnect

Delivering improved operational performance:Operating globally to reduce the cost base and get closer to customers

Delivering improved operational performance:Operating globally to reduce the cost base and get closer to customers

China 130,000 sq ft Engine

components customer GE

China 130,000 sq ft Engine

components customer GE

INV US 08 | 7

exports$400m

2004 (estimated)

Sales: $2.4 billion

Net Assets: $1.6 billion

Employees: 12,000

2004 (estimated)

Sales: $2.4 billion

Net Assets: $1.6 billion

Employees: 12,000

Smiths Group: Significant presence in the USSmiths Group: Significant presence in the US

70 manufacturing locations in 29 states70 manufacturing locations in 29 states

Smiths Smiths

INV US 08 | 8

Smiths Aerospace: Smiths is a leader in aircraft electronics, actuation systems and engine componentsSmiths Aerospace: Smiths is a leader in aircraft electronics, actuation systems and engine components

approx contrib. to 2004 profit

approx contrib. to 2004 profit

First tier supplierFirst tier supplier

Systems integratorSystems integrator

Significant investment in R&DSignificant investment in R&D

Restructuring benefits will be retainedRestructuring benefits will be retained

Recovery delivers rapid improvement in marginsRecovery delivers rapid improvement in margins

DefenseDefense

CommercialCommercial

AftermarketAftermarket

OEOE

Commercial OE recovery starts FY06 And aftermarket in FY05 Smiths: substantial presence on next-generation aircraft

Commercial OE recovery starts FY06 And aftermarket in FY05 Smiths: substantial presence on next-generation aircraft

Defense Current programmes performing effectively New programmes will sustain growth Procurement budget continues to increase, but will slow

Defense Current programmes performing effectively New programmes will sustain growth Procurement budget continues to increase, but will slow

salessales

INV US 08 | 9

Smiths Aerospace: Steady through the recent downturn, sales will regain momentum as the commercial market recovers

Smiths Aerospace: Steady through the recent downturn, sales will regain momentum as the commercial market recovers

commercialcommercial

defensedefense

Company-funded R&D has increased from 4% to 8% of salesCompany-funded R&D has increased from 4% to 8% of sales

Sales held steady through commercial market downturnSales held steady through

commercial market downturn

$1,450m

$1,450m

$1,590m

$1,590m

$1,570m

$1,570m

2000 2001 2002 2003

$1,590m

$1,590m

$1,760m

$1,760m

2004 (E)

Outlook for 2005: Sales growth (in $) circa 7%, margin circa 10%Outlook for 2005: Sales growth (in $) circa 7%, margin circa 10%

CAGR 2000-2004: 5%

CAGR 2000-2004: 5%

largely organiclargely organic

Sale

sS

ale

s

INV US 08 | 10

Common core systemremote data concentrators

Common core systemremote data concentrators

Common data networkCommon data network

Enhanced airborne flight

recorder

Enhanced airborne flight

recorder

A strong presence on next generation commercial aircraft: Smiths systems on the 7E7A strong presence on next generation commercial aircraft: Smiths systems on the 7E7

Common computing

resource

Common computing

resource

Common core systemremote data concentrators

Common core systemremote data concentrators

Common data networkCommon data network

The main Smiths systems Common Core Computing Landing Gear Actuation High Lift Actuation

The main Smiths systems Common Core Computing Landing Gear Actuation High Lift Actuation

Main gear actuation and brake control monitoring system

Main gear actuation and brake control monitoring system

Landing gear systemsflight deck interface

Landing gear systemsflight deck interface

Nose gear steering, actuation and brake

control monitoring system

Leading edge power drive unitLeading edge power drive unit

High lift system – leading edge High lift system – leading edge

High lift system -

trailing edge

High lift system -

trailing edge

Trailing edge power drive unit

Trailing edge power drive unit

INV US 08 | 11

Smiths Detection: A rapidly evolving business, finding new applications for core technologiesSmiths Detection: A rapidly evolving business, finding new applications for core technologies

approx contrib. to 2004 profit

approx contrib. to 2004 profit

AirportsAirports

Critical infrastructuresCritical infrastructures

First respondersFirst responders

Ports and bordersPorts and borders

MilitaryMilitary

Sound organic growth Technology acquisitions Commitment to R&D World-wide presenceSound organic growth Technology acquisitions Commitment to R&D World-wide presence

AirportsAirportsMilitaryMilitary

Ports and borders

Ports and borders

FirstrespondersFirstresponders

Critical infrastructuresCritical infrastructures

OtherOther

Sales 2004Sales 2004

INV US 08 | 12

Smiths Detection: sales have grown rapidly, firstly from 9/11, then from wider application of detection systemsSmiths Detection: sales have grown rapidly, firstly from 9/11, then from wider application of detection systems

Outlook for 2005: Sales growth (in $) circa 20%, margin circa 17%Outlook for 2005: Sales growth (in $) circa 20%, margin circa 17%

$95m$95m $90m$90m

$175m$175m

2000 2001 2002 2003

$435m$435m

$560m$560m

2004 (E)

CAGR 2000-2004: 56%

CAGR 2000-2004: 56%

from organic and acquired growth

from organic and acquired growth

Includes post-9/11 orders from TSAIncludes post-9/11 orders from TSA

Barringeracquired

Heimannacquired

Sale

sS

ale

s

INV US 08 | 13

Smiths has: Broadest range of

technologies Widest market access

X-Ray(Checkpoint)

EDS/EDtS Cargo Explosives trace

Chem Bio

SAIC XXAS&E X X

Smiths Detection: market leadership across the full range of capabilities

X : No. 1 or 2 player

Smiths Detection X X X X XX

GE (IonTrak) X

L3 X X

OSI/Rapiscan X X

InVision X

General Dynamics X X

X

INV US 08 | 14

approx contrib. to 2004 profit

approx contrib. to 2004 profit

Strong market niches in two specialized areas

Increased healthcare spending assures steady market growth

Technology leadership sustains margins above 18%

World-scale business driven by dynamic US market

40% of production in low-cost areas

Strong market niches in two specialized areas

Increased healthcare spending assures steady market growth

Technology leadership sustains margins above 18%

World-scale business driven by dynamic US market

40% of production in low-cost areas

Medication Delivery & Patient

Monitoring

Medication Delivery & Patient

Monitoring

Anaesthesia & Safety Devices

Anaesthesia & Safety Devices

RoWRoW USUS

JapanJapan

EuropeEurope

salessales

Smiths Medical: innovative products are driving profitable growthSmiths Medical: innovative products are driving profitable growth

INV US 08 | 15

Outlook for 2005: Sales growth (in $) circa 9%, margin circa 19%Outlook for 2005: Sales growth (in $) circa 9%, margin circa 19%

$635m$635m $660m$660m $700m$700m

2000 2001 2002 2003

$770m$770m$855m$855m

2004 (E)

CAGR 2000-2004: 8%

CAGR 2000-2004: 8%

New product innovation is driving organic growthNew product innovation is driving organic growth

Smiths Medical: healthcare spending continues to rise steadily, benefiting the market for medical devices

Smiths Medical: healthcare spending continues to rise steadily, benefiting the market for medical devices

largely organiclargely organic

Sale

sS

ale

s

INV US 08 | 16

Cozmo - insulin delivery pump

10,000 sold since launch (Nov 02)

50% of sales to people under 20

Gaining firm market share in US

Int’l sales underway, inc France/Canada

Combined pump/glucose monitor will be launched this year

Cozmo - insulin delivery pump

10,000 sold since launch (Nov 02)

50% of sales to people under 20

Gaining firm market share in US

Int’l sales underway, inc France/Canada

Combined pump/glucose monitor will be launched this year

1.3m1.3m

0.8m0.8m

0.3m0.3m

9898 0000 0202 04E04E

Use of insulin pumps in the USUse of insulin pumps in the US

Type 1 diabetics

PUMPS

The next step…Cozmonitor

Monitor combined with pump

Blood/glucose level displayed

Easily stored/retrieved data

The next step…Cozmonitor

Monitor combined with pump

Blood/glucose level displayed

Easily stored/retrieved data

Smiths Medical: leading the way in treating serious (Type 1) diabetesSmiths Medical: leading the way in treating serious (Type 1) diabetes

INV US 08 | 17

approx contrib. to 2004 profit

approx contrib. to 2004 profit

John Crane Strengthening market presence in

Russia, China and South America Oil & gas sector showing growth,

except in Middle East Productivity improvement continues

John Crane Strengthening market presence in

Russia, China and South America Oil & gas sector showing growth,

except in Middle East Productivity improvement continues

Interconnect Defense business forging ahead Substantial recovery in cellphone infrastructure

Interconnect Defense business forging ahead Substantial recovery in cellphone infrastructure

Flex-Tek Achieving growth in difficult markets

Flex-Tek Achieving growth in difficult markets

Marine Margins improving from a low level Shipping market buoyant

Marine Margins improving from a low level Shipping market buoyant

John CraneJohn Crane

DuctingDucting

MarineMarine Interconnect

Interconnect

salessales

Specialty Engineering:Business units are performing wellSpecialty Engineering:Business units are performing well

INV US 08 | 18

Specialty Engineering: robust market positions, high cash-flowSpecialty Engineering: robust market positions, high cash-flow

Outlook for 2005: Sales growth (in $) circa 10%, margin circa 13%Outlook for 2005: Sales growth (in $) circa 10%, margin circa 13%

$1,270m

$1,270m

$1,410m

$1,410m $1,320

m$1,320

m

2000 2001 2002 2003

$1,390m

$1,390m

$1,520m

$1,520m

2004 (E)

Telecom slowdown affected InterconnectTelecom slowdown affected Interconnect

CAGR 2000-2004: 5%

CAGR 2000-2004: 5%Organic and acquiredOrganic and acquired

Sale

sS

ale

s

INV US 08 | 19

Free cash-flowFree cash-flow

Operating profitOperating profit

Operating cash-flow (after capex)Operating cash-flow (after capex)

7% yield on equity

80%80%

Current yield 3.7%

Dividend programmeDividend programme

Self-funded acq. prog.Self-funded acq. prog.Generates additional growth

Over the past 3yrs Smiths has generated $1.2bn of free cash-flowOver the past 3yrs Smiths has generated $1.2bn of free cash-flow

Smiths Group: Good track record: turning profits into cashSmiths Group: Good track record: turning profits into cash

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