Smith & Nephew plc · LSE:SN.
Smith & Nephew — Investor Presentation (March 2013)
35 slides from Smith & Nephew's investor presentation, March 2013
Slide 1: Investor Presentation March 2013
Investor Presentation March 2013
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: About Smith & Nephew
About Smith & Nephew • Global medical devices company ‐ Headquartered in UK, operates in 90 countries ‐ Sales of $4.1 billion in 2012 ‐ 10,500 employees worldwide ‐ $10 billion market capitalisation • History ‐ Founded in Hull, UK in 1856 by Thomas James Smith PICO◊, Negative ‐ Successful healthcare
Slide 4: Our business
Our business ALLEVYN◊ VERILAST◊ VISIONAIRE◊ RENASYS◊ GO Wound Dressings 30-year wear claim Patient Matched Instrumentation Negative Pressure Wound Therapy Advanced Wound Management ANTHOLOGY◊ Primary Hip System Knee Implants $4.1bn DYONICS◊ PLATINUM Shaver Blades Other revenues (2012) Arthroscopic H
Slide 5: A global business
A global business Emerging/International Markets (12%) US (40%) 2012 Revenue Established OUS (48%) 5 Source: 2012 Split of revenues, Smith & Nephew
Slide 6: Our position – leading share and a diversified business
Our position – leading share and a diversified business Other 16% Zimmer 23% Other Zimmer 9% Biomet 12% Hip & Knee 6% Biomet Implants 6% DePuy Synthes S&N DePuy S&N Trauma 50% 11% 20% 10% Stryker Other 18% 20% Arthrex KCI 26% Stryker Other 24% 18% 30% Arthrocare Advanced 5% Sports Wound Mkt Size: $1
Slide 7: What drives underlying market growth?
What drives underlying market growth? Economics Prevalence Technology Emerging markets Lifestyle 7
Slide 8: Market realities and opportunities
Market realities and opportunities • Procedure demand continues to increase – demographic and disease led – fuelled by expanded access in emerging markets • Still room for innovation – demonstrate clinical benefit or cost reduction • Ability to pay continues to decrease in established markets – aust
Slide 9: Our performance
Our performance Revenue Trading profit Free cash flow $4.1bn +2%* $965m +6%* 23.3% margin $637m +22% 4,270 969 961 965 637 4,137 857 552 776 521 3,962 401 3,801 3,772 277 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Adjusted earnings per share (EPSA) Dividend per share
Slide 10: Strategic Priorities
Strategic Priorities • Winning in Established Markets • Accelerating development in Emerging Markets • Innovating for value • Simplifying and improving our operating model • Supplement organic growth through acquisitions 10
Slide 11: Winning in Established Markets
Winning in Established Markets 2012 S&N revenues • 2012 highlights (geographic split) – ASD restructuring – AWM realignment – Bioventus Established Markets (88%) • 2013 developments – Trauma and Extremities investment EM/IM (12%) – continued NPWT expansion – integration of Healthpoint on track – fur
Slide 12: Accelerating development in Emerging Markets
Accelerating development in Emerging Markets 2012 S&N revenue growth • 2012 highlights (contribution) – China successful model – significant structural and talent investment – refined the new R&D model for EM/IM (41%) mid-tier Established Markets (59%) • 2013 developments – organic and inorganic inv
Slide 13: Innovating for value
Innovating for value R&D $m +2% • 2012 highlights 171 167 – 32 new AWM products 155 152 151 – ASD launch new platforms HEALICOIL◊ PK 2008 2009 2010 2011 2012 – registrations for EM/IM Suture Anchor – Centre for Innovation, Memphis R&D % • 2013 developments 4.0% 4.1% 3.8% 3.9% 4.1% – increased invest
Slide 14: Simplifying and improving the operating model
Simplifying and improving the operating model • 2012 highlights – 3% COGS reduction – manufacturing footprint – Linhe closed – Suzhou expanded • 2013 developments – process improvement projects – portfolio rationalization Manufacturing facility extension Suzhou, China 14
Slide 15: Supplementing organic growth through acquisitions
Supplementing organic growth through acquisitions • 2012 highlights Collagenase SANTYL Ointment Enzymatic debrider – strengthened team – Healthpoint Biotherapeutics – small bolt-ons • 2013 developments LifeMOD software – unchanged acquisition criteria – many opportunities – disciplined approach 15 A
Slide 16: 2012 Full Year Highlights
2012 Full Year Highlights Margin 25 Trading profit margin (%) 24 23.3 • Delivering against Strategic Priorities 23 22.5 • Financials 22 21 – revenue growth (+2% underlying to 20 $4,137 million) 2011 2012 – margin improvement (+80bps to 23.3%) EPSA – EPSA increase (+2% to 75.7¢) 80 75.7 74.5 – signif
Slide 17: 2012 Full Year Revenue growth
2012 Full Year Revenue growth Geographic growth Revenue split Product franchise growth Knee 3% 2% US Hip -3% ASD Joint Repair 8% Enab Tech -2% 1% Est OUS Trauma 3% Other ASD 4% AWM AWM 11% EM/IM 0% 4% 8% 12% -5% 0% 5% 10% Underlying change (%) Underlying change (%) 17 Note: ‘Other ASD’ +5%
Slide 18: 2012 Q4 Results
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Slide 19: Q4 2012 Highlights
Q4 2012 Highlights • Reported Q4 revenues $1,077m, up 3% underlying • Trading profit $272m, up 2% underlying • Trading profit margin 25.3% (2011 25.2%) • EPSA 21.6¢ (2011 21.9¢) • Acquisition of Healthpoint Biotherapeutics • Moved to net debt of $288m • Final dividend up 50% at 16.2¢ per share (81.0
Slide 20: Q4 2012 Revenue growth
Q4 2012 Revenue growth Geographic growth Revenue split Product franchise growth 2% Knee 1% US Hip -2% ASD Joint Repair 7% Enab Tech 0% 2% Est OUS Trauma 7% Other ASD AWM AWM 4% 14% EM/IM 0% 4% 8% 12% 16% -4% -2% 0% 2% 4% 6% 8% Underlying change (%) Underlying change (%) 20 Note: ‘Other ASD’ +2%
Slide 21: 2013 Guidance and outlook
2013 Guidance and outlook • Market dynamics unchanged • Revenue growth – Advanced Wound Management above market rate – Trauma slightly above market rate – Sports medicine/arthroscopy around market rate – Knees/hips slightly below market rate • Margin – efficiency improvements funding investment – US
Slide 22: Summary – making choices for the long term
Summary – making choices for the long term • Strategic priorities progress – good finish to 2012 – efficiency benefits evident – strong operational and financial platform • Towards stronger portfolio, flexibility and predictability – highly efficient business model – invested in attractive high grow
Slide 23: Appendices
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Slide 24: Q4 2012 Advanced Surgical Devices – Knee and Hip Implants
Q4 2012 Advanced Surgical Devices – Knee and Hip Implants • Revenue performance – Knees: global +2%, US 0%, OUS +5% ($227m) – Hips: global -2%, US -6%, OUS +1% ($173m) • Commentary – continued strong VISIONAIRE◊ adoption – US launch of REDAPT◊ Revision Hip System – Hips (ex BHR) global +3% VISIONAIR
Slide 25: Q4 2012 Advanced Surgical Devices – Sports Medicine and Trauma
Q4 2012 Advanced Surgical Devices – Sports Medicine and Trauma • Revenue performance • Commentary – Sports Medicine Joint Repair +7% – another solid quarter in Sports Medicine ($139m) – improved Trauma performance to above – Enabling Technologies 0% ($110m) market growth – Trauma +7% ($120m) – incre
Slide 26: Q4 2012 Advanced Wound Management
Q4 2012 Advanced Wound Management • Revenue performance – Exudate Management +1% ($72m) – Infection Management -6% ($34m) – Other AWM (including NPWT) +7% ($174m) • Commentary – continued growth well above market rate Collagenase SANTYL◊ Ointment – NPWT performance Enzymatic debrider – Japan RENASYS
Slide 27: Income statement Q4 2012
Income statement Q4 2012 Fourth Quarter Quarterly growth Full Year 2012 2011 Underlying Reported 2012 2011 $m $m $m $m Revenue 1,077 1,106 3% (3%) 4,137 4,270 Trading profit 272 279 2% (2%) 965 961 Restructuring and rationalisation costs (35) (33) (65) (40) Acquisition related costs (11) - (11) - Le
Slide 28: Income statement Q4 2012
Income statement Q4 2012 Fourth Quarter Full Year 2012 2011 2012 2011 $m $m $m $m Profit before taxation, disposals and associates 215 210 845 848 Profit on disposal - - 251 - Associate - - 4 - Profit before tax 215 210 1,100 848 Taxation (73) (70) Tax rate* 29.2% (371) (266) Attributable profit 142
Slide 29: Underlying revenue growth by geography & business segment Q4 2012
Underlying revenue growth by geography & business segment Q4 2012 Emerging and Established Markets International Markets Group US Growth Other Growth Total Growth Total Growth Total Growth Quarter 4 $m % $m % $m % $m % $m % Advanced Surgical Devices 362 1 335 - 697 1 100 16 797 3 Advanced Wound Mana
Slide 30: Product line revenues and underlying growth
Product line revenues and underlying growth 2011 2012 Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Full Year Year Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % % % $m % Advanced Surgical Devices Reconstruction Knee Implants 5 7 6 2 5 6 3 (1) 2 874 3 Hip Implants (2) - (
Slide 31: Free cash flow Q4 2012
Free cash flow Q4 2012 Fourth Quarter Full Year 2012 2011 2012 2011 $m $m $m $m Trading profit 272 279 965 961 Share based payment 5 7 34 30 Depreciation and amortisation 71 69 281 270 Capital expenditure (78) (121) (265) (321) Movements in working capital and provisions (12) (53) (16) (102) Trading
Slide 32: 2012 key new products progression
2012 key new products progression H1 H2 • POLARCUP◊ Dual Mobility Hip System (US • REDAPT◊ Hip Revision Femoral System US launch) Launch Knee and Hip Implants • LEGION◊ Narrow Femoral Components • LEGION◊ Hinge Knee System • ENDOBUTTON CL◊ Ultra 10mm Fixation Device • HEALICOIL◊ PK Suture Anchor Spo
Slide 33: Management
Management Olivier Bohuon Chief Executive Officer Olivier joined the Board and was appointed Chief Executive Officer in April 2011. Olivier has had extensive international experience within a number of pharmaceutical and healthcare companies. Prior to joining Smith & Nephew, he was President of Abbo
Slide 34: Investor Relations Contacts
Investor Relations Contacts Phil Cowdy Charles Reynolds Head of Corporate Affairs Director of Corporate Communications E: phil.cowdy@smith-nephew.com E: charles.reynolds@smith-nephew.com T: +44 (0) 207 960 2296 T: +44 (0) 207 960 2212 Kim Gunthorp Investor Relations Manager Smith & Nephew plc E: kim
Slide 35: We are smith&nephew
+“ We are smith&nephew