Good morning, everyone. My name is Adam Farley, and welcome to the Stifel Cross Sector Insight Conference. With us today, we have Crane Co. Quickly on today's rundown, we will have Crane have a presentation, followed by three bear and three bull cases. With us today, we have President and CEO, Max Mitchell, Senior VP and CFO, Rich Maue, and VP of Investor Relations, Jason Feldman. With that, I'll turn it over to Max.
Thanks, Adam. Appreciate it. Thank you for being in attendance today, and those listening by web. Outstanding conference. Great to be back in person. Incredible opportunity, the Cross Sector Insight Conference that Stifel puts on. Shout out to Nathan Jones. Comments and just note the regular disclaimers in the SEC filings today and presentation materials, which are available on our website. As a reminder, we will be citing non-GAAP measures that are reconciled to reported results in the appendix of today's material. Crane. Outstanding execution. Record performance coming off of COVID 2021. Record EPS $6.55, up 87% versus 2020. Record margins 15.8%. Free cash flow $415 million. 107% of net income. After years of continued outstanding execution, we've talked about with investors that we've reached an inflection point.
For years, we've been talking about this growth profile changing. We continue to have outstanding execution. However, in spite of that, we continue to see an undervaluation by the market and now realize that structural changes are gonna be required to continue to unlock further value. We've assembled three incredibly strong global technology-focused platforms through years of successful acquisitions, and today we have the scale to pursue the separation into two independent businesses that we announced earlier this year. After the separation, Crane will have two global strategic growth platforms, Aerospace & Electronics, and Process Flow Technologies businesses, as well as the smaller niche engineered materials business. Rich and I will continue to lead this company that has $2 billion in sales and solid pre-corporate 2022 EBITDA margins of approximately 19%.
Our payment and merchandising technologies business will be renamed Crane NXT, including both the Crane Payment Innovations and Crane Currency businesses. That business has about $1.4 billion in sales and a pre-corporate EBITDA margin of 28%. The CEO search with both internal and external candidates is underway. Two great businesses, each with a different set of exciting growth opportunities ahead. The rationale for the separation is compelling. We are creating two pure play companies, each better positioned to deliver long-term growth and value creation for all our stakeholders. The separation will provide better operating and financial flexibility to pursue growth opportunities, both organic and inorganic, and will remove the portfolio balance considerations that we have today. It will enable capital allocation strategies better aligned to each company's business strategy, market-specific dynamics, and outlook.
Critically, we believe the respective financial profiles and end market exposures of these great businesses appeal to fundamentally different shareholder bases. This transaction is also about how our current structure is viewed and valued by investors. As I mentioned earlier, we have delivered consistent differentiated execution, I mean, really stellar performance for years. However, we're simply not seeing the value in the public equity markets for the quality of our underlying businesses, the differentiation provided by the Crane Business System, and the best-in-class execution delivered by our strong and deep management team. We believe that a structural solution is necessary to unlock value and eliminate our significant multiple discount compared to peers, and that the planned spin-off permits us to separate with certainty and in a tax-efficient manner.
We continue to believe that as separate companies properly valued based on appropriate peer sets and based on current market conditions and valuations, the two companies should be worth more than 50% above today's market value. We are confident that a separation is the right next step. Even though we are creating two independent companies, we will ensure that all of the best parts of Crane's culture and management approach remain ingrained at each business. Specifically, this includes our distinctive high-performance culture, our approach and commitment to philanthropy, sustainability and equality, and the cadence and discipline of the Crane Business System. Crane to the power of two. Turning to the first post-separation business. Crane is a leading global provider of highly engineered products and solutions with differentiated technology, respected brands, and leadership positions in its markets.
It sells mission-critical products for applications with a high cost of failure, which drives significant recurring sales, and with about 40% of total revenue from the aftermarket. It's well-positioned for accelerating organic growth in its large and attractive end markets with favorable secular trends, new product development, and commercial excellence. Our Aerospace & Electronics business is an incredible platform with differentiated technology, substantial sole source content on virtually every major commercial and military aerospace platform. It is executing on a technology roadmap that aligns the business with accelerating trends, most notably electrification, among others, confident in a 7%-9% compound average growth rate. Process Flow Technologies has an extremely strong position in its core target markets of chemical, pharmaceuticals, water, wastewater, and general industrial. Those key markets now comprise more than 75% of the business.
Accelerating new product development is further expanding exposure to those target markets, and there is a substantial opportunity to further expand margins. Another secular growth story benefiting from years of investment. Crane will also continue to leverage its CBS capabilities across both Aerospace & Electronics and Process Flow Technologies to continue to drive margin expansion and free cash flow growth as we have done for decades. We will continue to pursue many exciting opportunities for M&A, both bolt-ons and adjacencies, in our fragmented end markets. A business with substantial financial flexibility and a strong balance sheet to support a flexible capital allocation policy. Crane will generate solid mid-single-digit core sales growth, and that, combined with strong operating leverage, should drive double-digit core EPS growth with upside from substantial capital deployment potential.
We also believe that the Aerospace & Electronics and Process Flow Technologies end markets are both well understood by general industrial investors, the same group that is typically has the least experience with our payment business. For this group of investors, the story is straightforward. Premier platforms in both Aerospace & Electronics and Process Flow Technologies markets with a clear and directly comparable peer set currently trading in the mid-teens forward EBITDA range today. Two great platforms for growth, both organically and through acquisitions, and each comprised of well-known and highly sought-after assets.
The other post-separation company is Crane NXT, a premier industrial technology business with global scale, a best-in-class margin profile, and consistently excellent free cash flow. The broadest global portfolio of payment and currency-related products and services with market-leading brands. Differentiated technology to take advantage of long-term secular drivers such as automation. During periods of high inflation, as well as economic and geopolitical instability.
Once independent, this business will also be better positioned to aggressively leverage its technology in several high-growth adjacent markets, such as product authentication, which we expect to grow into a $100 million business by the end of this decade. Growth in services, payment for electric vehicle charging, and new and innovative turnkey payment automation solutions. There are also a number of huge potential opportunities to pursue in the next few years. We've already spoken about the US government's new series or the redesign of the 10, 20, and 50 bills. There is a potential opportunity we are pursuing for micro-optics for Indian banknotes, which could be more than $1.5 billion over the next 10 years. Crane NXT will be well-capitalized to support investment, organic growth, and acquisitions.
We have a robust acquisition pipeline for this business, and acquisitions will remain a key component of Crane NXT's growth strategy moving forward, along with a healthy level of capital return to shareholders. Consistently delivers best-in-class margins and free cash flow conversion, along with above GDP organic growth by leveraging its differentiated technology and leading market positions in its large, growing global markets with a substantial recurring revenue base of 40% of sales and a long-term track record of compounding growth through successful and accretive acquisitions. The facts and financial profile support Crane NXT being viewed as a high-performing midcap industrial technology or technology-enabled payment company. We are confident that this business over time will trade in line with reference peers well above where Crane is trading today.
The next step is the separation itself, which we still expect to complete in early April 2023. That is really just the beginning for each of these incredibly well-positioned companies. It's a very exciting story, and I look forward to sharing more during the rest of our talk this morning. I'll turn it back over to Adam.
Thank you, Max. Now we're gonna do three bear cases followed by 3 bull cases that will hopefully help us better understand the story. All right. Bear case number one. The businesses don't grow. Average organic growth over the last 10 years has been less than 1%. The mid-single-digit growth targets aren't credible.
Ouch. Adam. Wow. Went right for the jugular right away. No, I appreciate that question. The businesses didn't grow. Average organic growth over the last 10 years has been 0.6%. Mid-single-digit growth targets aren't credible. Not only are they credible, but they're extremely credible. Let me explain why. I think it's for those investors who have followed the story on the Crane NXT side. We've proven mid-single-digit growth consistently over the last 5 years, easily. So it's MEI, Crane Currency. Their currency has even outperformed MEI over that timeframe. I mean, so we all hear cash is dead, and yet we continue to grow this business for all the reasons that we described. So I think that has been proven. Let me parse the other segments of the business.
On Aerospace and Electronics, I've been talking about an inflection point for years. We had a May 2021 investor day for Aerospace and Electronics. I would remind investors to reread or revisit that website, which is still streamed on our investor section of Crane Co., where we lay out our 7%-9% growth profile and how the confidence, the high confidence, which we reiterated in our March investor day as well, and all the reasons of that growth. Starting 10 years ago, we shifted strategically from investing in program applications to technology readiness. It was a fundamental shift in our investment R&D strategy. We understood the trends long term, and we invested in growth in every one of our solutions within A&E.
That has absolutely paid benefits and is bearing fruit today and will continue to as we move forward. I mean, it's incredibly exciting. Again, I would encourage investors to listen to Jay Higgs' presentation in our March Investor Day. 3%-5% of that growth of 7%-9% is gonna come just from market growth, and that's easily seen just in the recovery. We're still $150 million below pre-COVID levels of revenue. Not only the revenue, but the drop-through on that is significant as we recover. The 3%-5% we feel very strong about. The other 2% we have absolute clear line of sight to, we've already won, and we're developing, and when we will deliver. That's just another given.
The other 2% is the future growth on the R&D that is already being put on demonstrators today. It's gonna come in 4- or 5-year timeframe and a 10-year timeframe, but we're already proving the technology because of our investment in the R&D, readiness, technology readiness strategy that we have continued to consistently deliver on. We feel very, very solid about the 7%-9% on A&E. When I look at Process Flow Technologies, I think it's important for investors to understand there's been a reset in our portfolio. There's over $200 million of revenue that has, over the last 10 years, that has evaporated in our traditional energy and conventional power markets. That's been a reset. I believe that's at the trough.
At the same time, we grew at mid-single digits in our core markets of chem-pharma, chemical, pharmaceutical, wastewater, water, and industrial markets. That has offset. What looks like 0% growth has been energy markets declining at a trough, mid-single digits on our core. Now with the divestment of Crane Supply, 75% of our portfolio is now oriented towards our higher growth end markets with clear line of sight to that mid-single digits. We feel very confident, very credible about our growth profile as we move forward.
Thanks, Max. Bear case number two, many of the businesses are lumpy and difficult to forecast from quarter to quarter and from year to year. This increases earnings risk and makes it difficult to get a multiple that a sum of the parts model would imply.
We hear this regularly and in some cases, we've even openly said, "Look, we understand some of our businesses are lumpy." We manage it really well, and we embrace those types of businesses. We're not somebody who just shies away. Having said that, I think the separation answers a lot of investors' concerns on this because it's a different profile in terms of lumpiness and ability to forecast. Crane NXT, while lumpy, is actually not very cyclical over the long period. So it tends not to be very cyclical. As a matter of fact, even in the last downturn, it has benefited with strength.
That attracts a different type of investor base, warrants a different type of capital allocation policy and return policy. I think our separation helps with that understanding. Our core A&E and Process Flow Technologies business, while, is actually not so lumpy. It's really not. It's long cycle, and that's understood, and I think that attracts a different investor profile as well and warrants a different capital allocation policy. We believe that the separation actually helps with the clarity and will help with the sum of the parts valuation that will make it easier for investors to see the underlying value, and that will be unlocked.
I can tell you that we are making all the right moves here in from a position of strength, not from a position of weakness, but from a position of absolute strength and execution and performance. Now, approaching some structural change to unlock value that will clearly unlock value. These businesses are incredibly attractive. We are doing this for the long term in terms of running our business, but if I were to put an investor hat on to say, "Well, what if the market doesn't unlock the value?" If I were on the outside looking in, I would say, "Well, those are incredibly attractive businesses, then they're gonna attract attention." Either way, there's value unlocked, but we're not doing this to divest or dispose of the assets. We're doing this to position ourselves for further strength, unlock value, and grow.
I think it's incredibly compelling for where Crane is on its history, its journey, and these structural changes are the next step to unlock significant value.
All right, bear case number 3, cash is dead. The entire payment and currency businesses will eventually go to zero.
This is another one that I think the separation actually helps. You can argue this all day long, and some investors absolutely agree with us. They do their homework, and they understand the reality of cash. You just look at the data. Now, there's an emotional side to this, which none of you use cash on a day-to-day basis. 1 billion people around the world are unbanked and still use cash. They have no other option but cash. It's proven that the cash in circulation continues to grow just year after year, 4%-5%. Now, while individual use declines as a store of value, it is absolutely, and even through COVID and through turmoil and through war, you see runs on the banks, you see ATM pullouts, you see increased cash.
In high inflationary periods, we've got to print more cash. All this uncertainty drives an added demand for cash. I don't think it's a matter of cash going to zero, who wins or who doesn't win. There's going to continue to be a place for both digital and forms of digital. Meanwhile, it's early days on digital. I mean, look at what's happening in the crypto market today. If anybody feels rock solid on the future of crypto, eliminating even other forms of digital currency, I think we're decades away from this game getting figured out. Meanwhile, we have two incredibly well-positioned businesses, great secular drivers that are gonna continue for a long time. There's tremendous value to continue to be had in this business as we grow in the cash and payment businesses.
All right, over to the bull cases. Bull case number one, management's track record on capital deployment into acquisitions has been very good with two large, highly accretive deals completed in MEI and Crane Currency, along with several smaller strategic deals. Post the split, both companies are likely to have minimal net debt to pursue independent acquisition strategies.
I like the bull case.
Me too.
No, we would agree. I mean, this is exactly what we're pursuing in our separation. We have incredibly well-run companies. We believe that unlocking the value actually enhances our ability to do M&A. We've talked publicly, there's been some deals on NXT that we've intentionally withheld from because I was concerned over the balance of the portfolio, over-weighting on cash further, the perceptions of investors. This is gonna unlock NXT to do the deals that they need to do and invest. Meanwhile, by unlocking the value, there's an added currency in terms of being able to do deals even on the A&E and PFT side of the business. We would absolutely agree with this.
All right, bull case number 2. Crane has a strong record over the last few years of not only improving the margin profile of acquired businesses, but also continuing to drive margins higher in legacy businesses driven by the Crane Business System. Financial targets for both businesses imply significant upside from current levels.
I think this is a real strength for us. We've talked about this for years. Our discipline, our cadence, our execution, our ability to drive margin enhancement on acquisitions has been incredibly impressive. From MEI to Currency to Cummins Allison, we reached double-digit ROIC. Even going into the COVID period, it's just been incredible. It's a strength for us. It will continue to be. We will continue to drive margin enhancement without a doubt. We see upside both in NXT as well as for PFT & A&E. I think what I would highlight also is the Crane Business System is not just about cost, it's not just about productivity, it's not just about execution, it's about driving growth.
We have a healthy balance of process-oriented innovation, strategy deployment, execution, and that balance of driving top-line growth as well as the margin enhancement.
Finally, bull case number three. Portfolio simplification initiatives, including the spin asset sales and potential to remove the asbestos liability, will highlight the strength and cash generation profiles, core businesses, while simplifying the story for investors.
You really just hit all the key points, even what I opened with. This is after years and years of consistent outstanding execution, driving record performance in 2021, addressing structural changes that's gonna unlock value, cleaning up the portfolio further with our announced from engineering materials to the success of Crane Supply. You highlight asbestos here. As we've discussed publicly, we're suing or looking at options for that liability that also is going to help we believe, potentially clean up a liability that is an overhang for some investors. That will be another reason why we significantly unlock value as we move forward. All very, very exciting. We've got a lot going on, a lot we're executing on. On track.
As you would expect within Crane, we're executing incredibly well and should be exciting for investors.
All right. With that will conclude our presentation. Crane, thank you again. Have a good rest of the day.
Adam, thank you very much. Thank you all very, very much. Have a great day.
Thank you.