Smith & Nephew plc · LSE:SN.
Smith & Nephew — Q3 2012 Earnings Presentation
31 slides from Smith & Nephew's earnings presentation, 2012
Slide 1: 2012 Third Quarter Results
A, oe 7. oe |e, 2012 Third Quarter Results
Slide 2: Forward looking statements
Forward looking statements This document contains certain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan"
Slide 3: Olivier Bohuon, Chief Executive Officer
Olivier Bohuon Chief Executive Officer
Slide 4: Q3 2012 Highlights
Q3 2012 Highlights • Reported Q3 revenues $952m, up 1% underlying • Trading profit $207m, up 10% underlying • Trading profit margin 21.7%, up 190 bps • EPSA 16.6¢, up 2% • Moved to net cash of $379m 4
Slide 5: Q3 Revenue growth
Q3 Revenue growth Geographic growth Revenue split Product franchise growth -1% Knee 2% US -4% Hip ASD Joint Repair 8% Enab Tech -3% -1% Est OUS Trauma 2% Other ASD AWM AWM 4% 6% EM/IM -4% 0% 4% 8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Underlying change (%) Underlying change (%) 5 Note: ‘Other ASD’ declined
Slide 6: Advanced Surgical Devices – Knee and Hip Implants
Advanced Surgical Devices – Knee and Hip Implants • Revenue performance – Knees: global -1%, US 0%, OUS -2% ($193m) – Hips: global -4%, US -5%, OUS -3% ($149m) • Commentary – knee growth reflects weaker European market and current product portfolio cycle – full US launch of REDAPT◊ Revision Hip Syst
Slide 7: Advanced Surgical Devices – Sports Medicine and Trauma
Advanced Surgical Devices – Sports Medicine and Trauma • Revenue performance – Sports Medicine Joint Repair +8% ($126m) – Arthroscopic Enabling Technologies -3% ($94m) – Trauma +2% ($112m) • Commentary OSTEORAPTOR◊ Suture Anchor – strong US Joint Repair for hip arthroscopy – launches of new anchors
Slide 8: Advanced Wound Management
Advanced Wound Management • Revenue performance – Exudate Management -1% ($64m) – Infection Management -6% ($31m) [Image Japan – Other AWM (including NPWT) +8% ($159m) packing?] • Commentary – double market growth rate RENASYS◊ GO Negative Pressure Wound Therapy – very strong NPWT performance launch
Slide 9: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer
Slide 10: Income statement Q3 2012
Income statement Q3 2012 Third Quarter Quarterly growth Year to Date 2012 2011 Underlying Reported 2012 2011 $m $m $m $m Revenue 952 1,032 1% (8%) 3,060 3,164 Trading profit 207 205 10% 1% 693 682 Restructuring and rationalisation costs (10) (5) (30) (7) Amortisation of acquisition intangibles (10)
Slide 11: Income statement Q3 2012
Income statement Q3 2012 Third Quarter Year to Date 2012 2011 2012 2011 $m $m $m $m Profit before taxation and associates 188 188 630 638 Profit on disposal - - 251 - Associate 5 - 4 - Profit before tax 193 188 885 638 Taxation (59) (55) Tax rate* 30.2% (298) (196) Attributable profit 134 133 587 44
Slide 12: Revenue growth by business segment Q3 2012
Revenue growth by business segment Q3 2012 Reported Currency Disposal Underlying Quarter 3* % % % % Advanced Surgical Devices (10) 3 7 - Advanced Wound Management (2) 6 - 4 Group (8) 4 5 1 * Q3 2012 comprises 63 trading days (2011 – 63 trading days) 12
Slide 13: Underlying revenue growth by geography & business segment Q3 2012
Underlying revenue growth by geography & business segment Q3 2012 Emerging and Established Markets International Markets Group US Growth Other Growth Total Growth Total Growth Total Growth Quarter 3 $m % $m % $m % $m % $m % Advanced Surgical Devices 326 - 290 (1) 616 (1) 82 3 698 - Advanced Wound Ma
Slide 14: Profitability by business segment Q3 2012
Profitability by business segment Q3 2012 Third Quarter Year to Date Revenue Trading Profit Margin Margin 2012 $m $m % % Advanced Surgical Devices 698 149 21.3 22.8 Advanced Wound Management 254 58 22.9 22.0 Group 952 207 21.7 22.6 2011 $m $m % % Advanced Surgical Devices 774 139 18.0 21.1 Advanced
Slide 15: Free cash flow Q3 2012
Free cash flow Q3 2012 Third Quarter Year to Date 2012 2011 2012 2011 $m $m $m $m Trading profit 207 205 693 682 Share based payment 9 7 29 23 Depreciation and amortisation 72 73 210 201 Capital expenditure (57) (67) (187) (200) Movements in working capital and provisions 33 (9) (4) (49) Trading cas
Slide 16: 2012 outlook
2012 outlook • No change in Outlook for Group as a whole • Q3 trends at product franchise level to continue • AWM showing excellent growth relative to market • Stronger BHR headwinds in hips; and slightly lower sales growth in knees 16
Slide 17: Olivier Bohuon, Chief Executive Officer
Olivier Bohuon Chief Executive Officer
Slide 18: Summary
Summary • Another strong quarter – 10% trading profit growth and trading profit margin improvement – revenue growth impacted by weaker markets – strong cash generation • Strategic priorities progress – efficiency benefits evident – making choices for the long term 18
Slide 19: Questions
>¢ smith&nephew Questions
Slide 20: We are smith&nephew
+“ We are smith&nephew
Slide 21: Appendices
>¢ smith&nephew Appendices
Slide 22: IAS 19 revised, employee benefits
IAS 19 revised, employee benefits Impact of finance costs restatement on Group 2011 comparatives 2011 Reported 2011 Restated variance $m $m $m Group Income statement Service costs (24) (24) - Operating profit 920 920 - Other Finance cost (6) (13) (7) Attributable profit for the year 582 575 (7) Grou
Slide 23: Bioventus Transaction – Trading Impact
Bioventus Transaction – Trading Impact The trading results included in the group results of the businesses included in the Bioventus transaction are as follows: Q1 Q2 Q3 US OUS US OUS US OUS 2012 $m $m $m $m $m $m Revenue 48 10 21 11 - 8 Trading Profit 10 - 6 (1) - - Note: The US element (the greate
Slide 24: Bioventus Transaction – Q3 Impact
Bioventus Transaction – Q3 Impact Impact on balance sheet and income statement captions: Reconciliation of impact on Q3 EPSA: Pre- Bioventus transaction impact Reported Impact $m $m $m $m Net interest receivable - 2 2 Trading profit impact (13) Share of associate - 5 5 2 Interest income Other financ
Slide 25: Product line revenues and underlying growth
Product line revenues and underlying growth 2011 2012 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Advanced Surgical Devices Reconstruction Knee Implants 5 7 6 2 5 6 3 193 (1) Hip Implants (2) - (2) (2) (1) (2) (5) 149 (4) Trauma 6
Slide 26: Definitions of product lines
Definitions of product lines Category Products Included Advanced Surgical Devices Reconstruction Knee Implants Knee implants Hips Implants Hip implants Knee Repair, Shoulder Repair, Hip Repair, Extremities Repair (including Hip and Sports Medicine Joint Repair Extremities Blades, RF and Instruments)
Slide 27: Exchange rates
Exchange rates Q3/11 FY/11 Q1/12 Q2/12 Q3/12 $:€ Period end 1.34 1.29 1.33 1.27 1.29 Average 1.41 1.39 1.31 1.28 1.25 $:£ Period end 1.56 1.55 1.60 1.57 1.61 Average 1.61 1.60 1.57 1.58 1.58 Q3 Revenue by Geographic Market % United States 40 United Kingdom 7 Other Europe 23 Other 30 27 100
Slide 28: Analysis of restructuring costs
Analysis of restructuring costs P&L Charge Cash Spend Q3 Total to date Q3 Total to date Restructuring $m $m $m $m Cash costs 10 56 11 46 Asset w/offs - - n/a n/a Of the $30m total charged to date, $29m are reflected in ‘selling, general and administrative expenses’ and $1m are reflected in ‘cost of
Slide 29: Reconciliation of free cash flow to IAS 7 net cash flow from operating activities
Reconciliation of free cash flow to IAS 7 net cash flow from operating activities Third Quarter Year to Date 2012 2011 2012 2011 $m $m $m $m Free cash flow 195 138 463 413 Add back: capital expenditure 57 67 187 200 Net cash inflow from operating 252 205 650 613 activities (IAS 7) 29
Slide 30: Business days per quarter
Business days per quarter Q1 Q2 Q3 Q4 Full Year 2011 64 63 63 60 250 2012 64 63 63 61 251 2013 62 64 63 62 251 30
Slide 31: 2012 key new products progression
2012 key new products progression H1 Q3 Q4 • REDAPT◊ Hip Revision Femoral • POLARCUP◊ Dual Mobility Hip System System (US launch) Knee and Hip Implants • LEGION◊ Narrow Femoral Components • LEGION◊ Hinge Knee System • ENDOBUTTON CL◊ Ultra 10mm Fixation Device • HEALICOIL◊ PK Suture Anchor Sports Med