Smiths Medical New York June 28,

Transcription

1 Smiths Medical New York June 28, Smiths Medical Investor Day, New York June 2011 Data by Smiths Medical: Proprietary

2 This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding 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 we operate. 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 document and unless otherwise required by applicable law the Company undertakes no obligation to update or revise these forward-looking statements. Nothing in this document should be construed as a profit forecast. The Company and its directors accept no liability to third parties in respect of this document save as would arise under English law. Smiths Medical Investor Day, New York June

3 Setting the Stage Srini Seshadri President, Smiths Medical Smiths Medical Investor Day, New York June

4 Smiths Medical: Bringing Technology to Life Our mission is to help healthcare professionals make every intervention successful. Deliver Medication Provide Vital Care Keep People Safe Reduce programming & delivery errors with intelligent pumps Relieve acute & chronic pain Treat cancer Manage acute and chronic airway conditions Maintain correct body temperature Monitor vital signs Assist reproduction Provide safe treatment access Prevent needle stick injuries Reduce cross infections Vision: Save lives by becoming the most valued global provider of innovative interventional medical devices in our chosen markets Smiths Medical Investor Day, New York June

5 Smiths Medical The investment case Sales Growth* 3-5% Net Margin 20-24% Long-term sustained global demand for healthcare driven by age demographics, key diseases, rise in middle class Smiths Medical well placed in lower risk, short residency, interventional devices Broad portfolio: hardware & consumables, hospital, alternate site & OEM, new software & services Quality brands supported by technology and IP gives competitive advantage International business with increasing presence in growth markets Robust operational platform well positioned to deliver strong margins and cash flow Strong, experienced, diverse & global leadership team with track record of execution and attracting terrific new talent *Average annual organic growth over the medium term at constant currency Strong fundamentals delivering consistent profit and cash growth Smiths Medical Investor Day, New York June

6 We have strong, high quality brands Deliver Medication Provide Vital Care Keep People Safe Leading ambulatory drug delivery systems that allow complete patient mobility Syringe pumps with superior accuracy No.1 for neonatal drug delivery Life saving products that keep you breathing Life saving fluids delivered at the correct temperature Intravenous Catheters Blood Sampling Devices to safely provide treatment access, e.g.: - PIVCs - Needles - Catheters - Ports - Arterial blood sampling Prevent cross infections and reduce ~2m needle-sticks per year Low cost, high quality pumps Grow in EM from #1 China position Modular systems for invasive blood pressure monitoring Needle Protection FY10 Sales: ~ 220m * FY10 Sales: ~ 350m FY10 Sales: ~ 270m * Excluding diabetes Smiths Medical Investor Day, New York June

7 Smiths Medical is a world leader in interventional devices with balanced segment mix and regional presence ~ 30% Safety Devices ~ 20% Hardware ~ 13% Asia ~ 6% ~ 22% Asia EMEA ~ 33% EMEA ~ 40% Vital Care ~ 80% Disposables ~ 37% North America ~ 30% Med Delivery ~ 54% Americas ~ 35% Mexico 2010 Sales 2010 Sales 2010 Sales Headcount Built for consistent profit delivery & presence around the world Smiths Medical Investor Day, New York June

8 We have transformed the business over the last ~3 years Leadership changes complete Oracle implementation finished Global brand strategy in place Streamlined 4 P&Ls into 1 Business & Portfolio Transformation Cost of unquality down by 10%+ p.a. 100% improvement in new product vitality Reduced ~ G&A >10% since FY09 Value engineering established, productivity up ~5% per year Operating margin from ~19% (FY07) to ~23% (H1, FY11e); ROCE from 13% to ~16% Smiths Medical Investor Day, New York June

9 Portfolio management approach contributing to headline operating profit and ROCE improvement Portfolio Management Impact, FY07 - FY10 Sales Core Non-Core FY07 FY08 FY09 FY10 Core portfolio enhancement Vitality index >10% SMZ acquisition* Profit pool maximization Non-core profitability management Diabetes exit Non-core investment controls and harvesting ~4,000 SKUs eliminated H1 HOP (%) * Sales in 2010 from products released in previous three years ROCE (%) Smiths Medical Investor Day, New York June

10 We are well positioned with ~21% market share in our key segments ~ 100B Target market ~ 4B Vital Care Safety Devices Medication Delivery Market size Future Market growth SM sales FY10* SM approx share Medication Delivery ~ 1.2B 3-5% ~ 220M 18% Vital Care ~ 1.7B 2-4% ~ 350M 21% Safety Devices ~ 1.2B 3-5% ~ 270M 23% Total ~ 4.1B 3-5% ~ 840M 21% * Excludes Diabetes Business FY10 Sales ( m) Wide variety of approaches to market segmentation & consolidation Large, multi-business, consolidators Scale in key segments Small, focused on specific niches Publicly traded Privately held Covidien BD B Braun Carefusion Hospira CR Bard Teleflex Edwards Smiths ResMed Masimo F&P Vygon ICU Navilyst Angio Consort Intersurgical Ambu Baxa LMA Smiths Medical Investor Day, New York June

11 We compete with a wide array of competitors who are themselves also multi-portfolio companies FY2010 Company Bard BD Smiths Medical Covidien Teleflex Hospira Carefusion Ambu B.Braun Angiodynamics % of competitor sales in Smiths markets Safety Safety Vital Care Vital Care Infusion Infusion Vital Care All Vital Care Revenue ( B) R&D (%) EBIT (%) Smiths approach to value creation Balance scale and profit pool share Build out on customer knowledge in anesthesia, OR, Emergency, ICU Focus on competencies in design, manufacturing, sales & marketing Improve R&D effectiveness & spend as %of sales Maintain premium positioning of high quality brands Avoid transformational acquisitions with questionable value * Excluding Diabetes Smiths Medical Investor Day, New York June

12 Customer needs are complex and evolving Need Requirement Anticipated changes Compliance Safe products which meet regulatory requirements Increased regulations, linked globally Efficacy Effective devices that drive enhanced patient care and results Desire for more clinical data, studies Innovation New, differentiated products that solve medical or care delivery issues Increased availability of novel products Economics Proven delivery of economic value More transparent demonstration of cost for quality Brand Strong brand which represents reliability, quality and efficacy Low cost brands in EMs, migrating to developed markets Availability Reliable delivery and fulfillment No change Smiths Medical Investor Day, New York June

13 Some pressures, but positive trends will generate growth General market trends: Developing markets middle class ; ageing population Spend in developing markets... Under pressure in developed Healthcare reform in US + reimbursement pressure everywhere Chronic respiratory, cancer & obesity related issues Outpatient, hospital stays ; shift to new sites of care FDA & other regulators linking globally & increasing scrutiny GPOs & tenders exert price pressure nothing new Wide array of call points sales & marketing effectiveness key Medical Delivery growth drivers Credit squeeze, but innovation rewarded Medication error reduction Wireless integration with IT Display quality Products for non-acute sites Vital Care growth drivers Minimally invasive procedures Single use product demand Chronic respiratory issues Surface warming usage Safety growth drivers: Reduce Hospital Acquired Infections Safety emphasis (EU) Antimicrobial coating opportunities Cross-selling with other systems Smiths Medical Investor Day, New York June

14 Investing for growth Stuart Morris-Hipkins VP, Global Sales & Marketing Smiths Medical Investor Day, New York June

15 Solid game plan in place for next 3 years to drive profitable growth Increase global new product development impact Drive quality and cost leadership in new healthcare world Enhance presence in Emerging Markets Leverage our enhanced global structure Reduce G&A and reinvest in sales & marketing Optimize operational excellence New Products & Customer Value Emerging Markets Global & Local Smiths Medical Investor Day, New York June

16 Investing to expand the core ~ 9bn Safety Safety Target adjacencies PICCs Anti-microbials EU Safety ~ 4bn VC Vital Care Humidification Chronic Respiratory Vizualization Informatics MD Medication Delivery Lower cost infusion Volumetric Infusion Current Core Expanded Core Significant headroom in near adjacencies Reshaping portfolio to exploit them Smiths Medical Investor Day, New York June

17 Investing more in R&D focus and increased efficiency driving results We continue to invest for growth... R&D as % of Sales... While focusing our pipeline Pipeline (# projects) (35%) New Product Sales +15% e +65% e... And accelerating launches R&D Headcount in EMs Launches (# projects) +50% e Smiths Medical Investor Day, New York June

18 We have leading technologies both in our products and our plants CADD Solis is the leading ambulatory infusion pump Diverse applications require delivery flow rates between 0.1 and 500 ml/hr A 5000:1 ratio This ratio is equivalent to the difference between a standard kitchen faucet.. And the Alaskan Pipeline Imperfect IV catheters are painful literally, for patients That is why we conduct 1200 measurement inspections on every catheter In one second via automated systems At one plant alone, these systems perform ~1.6x10 11 measurements annually Equivalent to ~23 for every person on earth Smiths Medical Investor Day, New York June

19 Compelling technology initiatives driving growth Medication Delivery Vital Care Safety Hospital Infusion Syringe Pump Enhancements Hospital and homecare applications Multi-therapy smart infusion Enhanced med error reduction Improved user interface Airway Access Large neck tracheotomy Capture growth associated with obesity trend Quicker, less invasive procedure Medical Excellence Design Award recipient in 2010 Needle Safety Passive PIVC safety Low cost passive safety technologies to further minimize needle stick injuries Complement active device portfolio Ambulatory Infusion Next Gen Solis Range Hospital and homecare applications Multi-therapy smart infusion Enhanced med error reduction Improved user interface Mobile Ventilation Ruggedized platform Oxygen and ventilation delivery Ruggedized platform Outside and intra hospital patient transport Vascular Access CT Power Ports CT identifier to confirm power injection compatibility Allows more rapid diagnostics for critically ill patients Smiths Medical Investor Day, New York June

20 Local in all key regions... Investing in emerging markets Americas Enhanced NPI impact Investment in sales effectiveness Increased focus outside Hospital Invest in Brazil EMEA Enhanced NPI impact Conversion to Safety Investment in sales effectiveness Accelerate Middle East growth FY10 Smiths Medical sales (c. 840M) Americas 54% EMEA 33% Asia Pacific 13% Asia Pacific Right products for the markets, accelerate registrations Focus on China, India add headcount, go direct Acquisitions Direct presence to support local distributors Smiths Medical Investor Day, New York June

21 Increasing China presence rapidly SMZ SMZ critical for enhancing our China presence China headcount FY08 FY09 FY11e Performing above expectations Strong domestic sales Integration project on plan Low cost product launches Why SMZ? Leading infusion position in China Value tier technology Capable sales, marketing, and manufacturing base R&D strengths China sales growth FY08 FY11e FY15 e Smiths Medical Investor Day, New York June

22 We are investing in India India medical device market growing rapidly India Medical Device Mkt ( B)* Growth driven by: Rising middle class Growth of healthcare insurance, expenditure Expansion of healthcare infrastructure Shift in disease patterns from communicable ~15% We have a history in India: Smiths Medical has been in India for 20+ years Primarily a distributor model Focused on Portex brand ~20% of which is disposables 75% via imported products * Ernst & Young e e But we have a new game plan: Incorporate direct sales model Increase penetration beyond Portex Pursue developing tender market Establish key account management Expecting double digit growth Smiths Medical Investor Day, New York June

23 Increasing our emphasis on clinical outcomes and cost excellence Healthcare dynamics Implications Actions US: Patient Protection & Affordable Care Act EU: Transparency Directive UK: Health and Social Care Bill Reimbursement reductions, pricing Quality based reimbursement - Comparative effectiveness Value- based purchasing - Accountable care, pay for performance Engage in the debate Further demonstrate clinical efficacy Continue aggressive pursuit of variable cost efficiencies Enhance low cost product portfolio Smiths Medical Investor Day, New York June

24 Global Functions Our new structure becoming very effective global in processes, local with customers New global structure in place Customer Regions US & Latin America Canada Northern & Eastern Europe Southern Europe & MEA China Japan ANZ & other Asia Finance Operations Supply Chain Sourcing Regulatory & Quality Legal IT Infusion Safety Airway Temp & Pain Mgt Driving desired behaviours and results Smashed internal barriers transparency in all we do Enhanced communication within and across global functions Improved visibility of challenges and opportunities Improved customer focus and service Enhanced sales force effectiveness Established clear, consistent global processes Reduced G&A Smiths Medical Investor Day, New York June

25 Sales & Marketing Executing on G&A reduction to reinvest in sales & marketing e Consistently reducing G&A... Business unit / P&L reductions Global restructuring Streamlining of support functions Back office / shared services consolidation Sales & Marketing G&A e... And reinvesting in Sales & Marketing Created and strengthened Global Product Management team Increased sales headcount in North America and International Enhanced key account management capabilities Improved sales force effectiveness by investing in better talent training and tools Expanded marketing communications Opportunities exist to drive further rebalancing Smiths Medical Investor Day, New York June

26 Driving Efficiencies Rob White VP, Global Finance Smiths Medical Investor Day, New York June

27 We have designed and executed an operations excellence game plan... Pursuing additional opportunities Our vision is to achieve operations excellence by breaking problems down through focused projects Best in Class Sourcing Manufacturing Distribution Today Optimize Streamlined supplier base Closed 5 plants Closed 10 DCs Stabilize Rigorous supplier quality programs Enhanced purchasing execution Rationalized ~4000 SKUs Drove variable cost reductions ~5% per year Globalized & streamlined logistics Improved availability and fill rates July, 2007 Operations Challenges Implemented Oracle Improved inventory turns to 3.4x Reduced cost of quality 10%+ per year Further opportunities exist: e.g. footprint, VAVE, SKUs Smiths Medical Investor Day, New York June

28 For example, driving efficiencies via inventory and site management Inventory turns up ~40% 15 sites closed in last 5 years More opportunity ahead Waukesha, WI Wampsville, NY Rossendale & Cherwell, UK Watford & Hythe, UK ERP providing global visibility Gary, IN Otay Mesa, CA Duluth, GA Portugal Wampsville, NY Paris, France Dusseldorf, Munich Kirchseeon, Germany Milan, Italy Continuous improvement targeting finished goods and raw materials Driving raw materials down through vendor-managed purchasing Plant Sites e DC Sites e Key Distribution Center Manufacturing Smiths Medical Investor Day, New York June

29 And VAVE projects continue to add significant value We have established an effective variable cost reduction program Value Analysis/Value Engineering Examples of recent projects: Epidural Connector redesign (50% unit cost reduction) Ambulatory Infusion pumps component sourcing and redesign (35% unit cost reduction) Safety Catheters process and quality improvement (7% unit cost reduction) VAVE program increasingly effective... VAVE impact 60% Project impact is strong and increasing Average project impact 300% Smiths Medical Investor Day, New York June

30 Pressures Internal External Opportunities Internal External Continue to drive margin improvements Target margin range: ~20% to ~24% New products Leveraging the portfolio Sales effectiveness Emerging Markets penetration VAVE/sourcing initiatives Oracle capabilities G&A productivity Demographics Emerging Markets spend growth Healthcare reform Safety and HAI prevention Current margin: ~23% Reinvesting in sales & marketing Accelerating research & development Developing advanced clinical capabilities Government healthcare economics Input costs: material and labor inflation Regulatory: new product technology Smiths Medical Investor Day, New York June

31 Conclusion Srini Seshadri President, Smiths Medical Smiths Medical Investor Day, New York June

32 Recap: driving value via profitable growth Leverage our enhanced global structure Reduce G&A and reinvest in sales & marketing Increase global new product development impact Enhance presence in Emerging Markets Drive quality and cost leadership in new healthcare world Optimize operational excellence Invest for growth Drive efficiencies Improve margins and ROCE Smiths Medical Investor Day, New York June

33 Smiths Medical The investment case Sales Growth* 3-5% Net Margin 20-24% Long-term sustained global demand for healthcare driven by age demographics, key diseases, rise in middle class Smiths Medical well placed in lower risk, short residency, interventional devices Broad portfolio: hardware & consumables, hospital, alternate site & OEM, new software & services Quality brands supported by technology and IP gives competitive advantage International business with increasing presence in growth markets Robust operational platform well positioned to deliver strong margins and cash flow Strong, experienced, diverse & global leadership team with track record of execution and attracting terrific new talent *Average annual organic growth over the medium term at constant currency Strong fundamentals delivering consistent profit and cash growth Smiths Medical Investor Day, New York June

34 Questions and answers Smiths Medical Investor Day, New York June