Our businesses are either market leaders or are well placed in attractive niches. This allows us to benefit from the long-term growth drivers in their industries. Across our portfolio, these growth drivers include:
We stay at the forefront of technology by understanding the needs of our customers and investing in research and development to meet those needs. Our technological strengths give us a competitive advantage and create customer loyalty, enabling us to earn attractive margins.
Our businesses often provide significant levels of aftermarket service and essential consumables. This helps us retain customers and provide recurring income as well as insight into customer needs.
Operational efficiencies will drive our margins higher. Our restructuring programme has already delivered significant value, with more to come in the next two years.
We have invested to improve our systems, with enterprise resource planning projects installed in John Crane, Smiths Medical and Smiths Detection. Better information enables us to leverage the Group’s scale and deliver further savings. Portfolio profitability reviews are also improving operational efficiency.
We also assess active portfolio management opportunities where we see the potential to create a more focused portfolio through a targeted programme of acquisitions and disposals.
We invest in business acquisitions to increase our exposure to attractive and adjacent growing sectors as well as to expand our current businesses.
Our divisions generate attractive margins and tend to specialise in small-batch, low-cost manufacturing. As a result, they have low capital intensity and deliver returns above our weighted average cost of capital.
We have opportunities to invest for growth in our businesses to generate attractive incremental returns for our shareholders. We maintain a strong discipline to ensure we make informed investment choices.
Closely managing our working capital enables us to convert most of our operating profit into cash-flow. Improved business data will continue to drive cash generation.
Our focus on cash ensures we have the resources needed to reinvest in our businesses through targeted acquisitions, and in organic growth drivers such as product development, and sales and marketing in growth markets. At the same time, it allows us to increase dividend payments to shareholders, while maintaining an efficient balance sheet and meeting the obligations of our legacy liabilities, such as pensions and product liability litigation.