www.smiths.com SMITHS GROUP PLC Annual Results 20 September 2019
2 SMITHS GROUP PLC Annual Results 2019 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 (together, the “Group”) and those of their respective officers, directors and employees concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and the businesses operated by the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this presentation and, unless otherwise required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements. Nothing in this presentation should be construed as a profit forecast. The Company and its directors accept no liability to third parties. This presentation contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law.
3 SMITHS GROUP PLC Annual Results 2019 INTRODUCTION ANDY REYNOLDS SMITH CHIEF EXECUTIVE
4 SMITHS GROUP PLC Annual Results 2019 AGENDA Introduction Andy Reynolds Smith John Shipsey FY19 Results & FY20 Outlook Smiths Medical JehanZeb Noor Andy Reynolds Smith Smiths Group
5 SMITHS GROUP PLC Annual Results 2019 BUILDING ON OUR STRATEGIC PROGRESS 2018 2017 2016 2019 H1 AMBITION CY2020 OUTPERFORMING RETURN TO SEPARATION A NEW SIGNIFICANT SUSTAINABLE OUR CHOSEN DIRECTION PROGRESS GROWTH GROWTH OF MEDICAL MARKETS ✓ ✓ ✓ ✓
6 SMITHS GROUP PLC Annual Results 2019 FY2019 RESULTS JOHN SHIPSEY CHIEF FINANCIAL OFFICER
7 SMITHS GROUP PLC Annual Results 2019 HEADLINE FINANCIAL RESULTS 1 FY2019 FY2018 2 Reported change Continuing Operations 3 Revenue 2,328 +7% 2,498 +3% underlying Operating profit 427 388 +10% +4% underlying Operating margin 17.1% 16.7% +40bps Profit before tax 333 +13% 376 Profit after tax 273 246 +11% Discontinued Operations 4 - Profit after tax 112 115 (3)% Total Group Profit for the year 385 361 +7% Total basic EPS 90.7p +7% 96.8p +3% underlying Free cash-flow 234 302 (23)% 83% operating cash conversion ROCE 14.4% 14.6% (20)bps Dividend 44.55p +3% 45.90p 1 Headline excludes non operating items as defined in note 3 of the accounts. Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses 2 FY2018 has been restated for IFRS 15 and Smiths Medical reclassification as discontinued operations Continuing operations exclude Smiths Medical which is accounted for as ‘discontinued operations – businesses held for distributi on to owners’, given the intended separation of Smiths Medical by the end of H1 CY2020 3 4 Discontinued operations as defined in note 27 to the financial statements
8 SMITHS GROUP PLC Annual Results 2019 BUILDING ON OUR RETURN TO GROWTH 1,2 Revenue - £m 2,498 67 8 ( 17 ) 12 2,428 43 57 2,328 (2)% +3% +8% +3% +3% underlying FY2018 FX ACQUISITIONS & FY2018 PROFORMA JOHN CRANE SMITHS FLEX-TEK SMITHS FY2019 3 DISPOSALS DETECTION INTERCONNECT 1 Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses. 2 Continuing operations exclude Smiths Medical which is accounted for as ‘discontinued operations – businesses held for distributi on to owners’, given the intended separation of Smiths Medical by the end of H1 CY2020 3 Includes disposals and HY2019 performance from acquisitions that do not have comparators for the prior year
9 SMITHS GROUP PLC Annual Results 2019 FY REVENUE BY DIVISION 1 JOHN CRANE SMITHS DETECTION FLEX-TEK SMITHS INTERCONNECT +3% +3% (2)% +8% £436m £319m £798m £945m H2 performance moderated Continued good growth Strong OE growth Good growth driven by programme phasing across both segments by aerospace and defence Energy +c.10% Aviation (6)% Aerospace +3% Industrials +c.4% Other Security Systems +6% Industrials +3% OE +13% Aftermarket +5% 1 Headline excludes non operating items as defined in note 3 of the accounts. Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses
10 SMITHS GROUP PLC Annual Results 2019 FURTHER MARGIN PROGRESSION 1,2 Operating profit - £m 6 427 ( 10 ) 13 3 3 13 412 11 388 +4% underlying Operating Operating margin margin 16.7% 17.1% FY2018 FX ACQUISITIONS & FY2018 PROFORMA JOHN CRANE SMITHS FLEX-TEK SMITHS CENTRAL COSTS FY2019 3 DISPOSALS DETECTION INTERCONNECT 1 Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses. 2 Continuing operations exclude Smiths Medical which is accounted for as ‘discontinued operations – businesses held for distributi on to owners’, given the intended separation of Smiths Medical by the end of H1 CY2020 3 Includes disposals and HY2019 performance from acquisitions that do not have comparators for the prior year
11 SMITHS GROUP PLC Annual Results 2019 FY OPERATING PROFIT BY DIVISION 1 JOHN CRANE SMITHS DETECTION FLEX-TEK SMITHS INTERCONNECT £220m +6% £84m +4% £127m (7)% £47m +6% OP OP OP OP Margin 23.3% Margin 19.2% Margin 14.7% Margin 16.0% - Improving volumes - Segment mix - Continued strong - Higher volumes performance - Investing for future growth - Pricing - Restructuring benefits 1 Headline excludes non operating items as defined in note 3 of the accounts. Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses
12 SMITHS GROUP PLC Annual Results 2019 SMITHS MEDICAL 1,2 £874m - Improving trajectory REVENUE - Infusion systems - - H2 revenue +2% - Vascular access (3)% - Vital Care +3% - Impacted by operational £147m (6)% inefficiencies OP OPERATING - H2 profit +2% PROFIT & MARGIN Margin 16.8% - H2 margin improved to 17.0% 1 Headline excludes non operating items as defined in note 3 of the accounts. Underlying modifies headline performance to: adjust prior year to reflect an equivalent period of ownership for divested businesses; and exclude the effects of foreign exchange, acquisitions and supplemental sales for divested businesses. 2 Restated for IFRS 15
13 SMITHS GROUP PLC Annual Results 2019 TOTAL GROUP CASH-FLOW FY2018 2 £m FY2019 Operating profit 1,2 544 574 Capex, depreciation and amortisation (12) (26) John Crane investment in capacity Change in working capital (104) (16) See next slide Other 30 22 OPERATING CASH-FLOW 1 538 474 Total Group: 83% cash conversion Interest 1 (64) (58) Headline 1 ETR 26%; FY2020 expected at c.25-27% Taxation 1 (65) (99) Pension (45) (36) Other investment and non-headline (47) (62) FREE CASH-FLOW 234 302 1 Headline excludes non operating items as defined in note 3 of the accounts 2 Restated for IFRS15
14 SMITHS GROUP PLC Annual Results 2019 TOTAL GROUP WORKING CAPITAL % SALES MAINTAINED Working capital as a % sales maintained at 26% Good underlying performance: - DSO/DPO 1 gap reduced by 3 days Temporarily impacted by: Increase in current receivables - • Strong sales in June/July now being collected - Higher inventory • Short term deferral in Smiths Detection deliveries • John Crane strong order book 1 DSO = debtor days, DPO = creditor days
15 SMITHS GROUP PLC Annual Results 2019 TOTAL GROUP - STRONG BALANCE SHEET £m 1,197 (64) - Weighted average debt maturity: 5.2 years 1 (178) - Weighted average interest rate: 3.2% 1 - Stable credit rating (BBB+/Baa2) (277) (41) 234 893 Net Debt/ Net Debt/ EBITDA EBITDA 22 1.4x 1.8x Net debt FX Free Cash Flow Divestitures Acquisitions Dividend Other Net debt 31.07.2018 31.07.2019 1 Refers to gross debt
16 SMITHS GROUP PLC Annual Results 2019 DISCIPLINED CAPITAL ALLOCATION 4.5% cash R&D % sales 1 INVESTMENT IN ORGANIC GROWTH Vitality at 13% 2 CASH VALUE CREATIVE M&A United Flexible for $345m GENERATION PROGRESSIVE DIVIDEND Full year dividend growth 3% 1 Continuing Operations 2 Total Group
17 SMITHS GROUP PLC Annual Results 2019 FY2020 OUTLOOK A year of further progress Growth H1 weighted FX tailwind at current rates Improved operational excellence and cash generation
18 SMITHS GROUP PLC Annual Results 2019 UPDATE ON SEPARATION OF SMITHS MEDICAL ANDY REYNOLDS SMITH CHIEF EXECUTIVE
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