Smith & Nephew plc · LSE:SN.
Smith & Nephew — H1 2018 Earnings Presentation
24 slides from Smith & Nephew's earnings presentation, July 2018
Slide 1: Second Quarter and First Half 2018 Results
Second Quarter and First Half 2018 Results Supporting healthcare professionals for over 150 years 1
Slide 2: Forward looking statements and non-IFRS measures
Forward looking statements and non-IFRS measures This document may contain 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
Slide 3: Namal Nawana, Chief Executive Officer
Namal Nawana Chief Executive Officer 3
Slide 4: Initial thoughts: A portfolio medical device company
Initial thoughts: A portfolio medical device company AWD AWB Sports Medicine Joint Repair 4% 6% 14% AWC 15% H1 2018 revenue split 13% Arthroscopic Enabling Technologies 13% 10% Hips Trauma and Extremities 4% 21% Other Surgical Businesses Knees Second Quarter and First Half 2018 Results 4
Slide 5: Initial thoughts: Our leading medical technologies
Initial thoughts: Our leading medical technologies Emerging REGENETEN™ NAVIO™ REDAPT™ WEREWOLF™ JOURNEY™ II BCS ALLEVYN™ LIFE INTERTAN™ POLARSTEM™ PICO™ 7 5
Slide 6: Initial thoughts: Improving how we do business
Initial thoughts: Improving how we do business • Focus more on lead products Commercial model • Provide leadership in each category • A more customer centric approach • Faster, more streamlined decision making Operating model • First steps taken to new leadership structure • Take complexity and cost
Slide 7: Q2 revenue of $1,245m; 4% reported growth, 2% underlying
Q2 revenue of $1,245m; 4% reported growth, 2% underlying Geographical growth Revenue split Product franchise growth Sports Medicine Joint Repair 8% Arthroscopic -1% Enabling Tech 1% US Trauma & -5% Extremities Other surgical 8% 3% Knees Other Est Hips 1% 1% 2% AWC -6% 6% Emerging AWB 9% AWD 0% 5% 10
Slide 8: Sports Medicine, Trauma & OSB
Sports Medicine, Trauma & OSB Q2 revenue performance • Sports Medicine Joint Repair +8% ($173m) • Arthroscopic Enabling Technologies (AET) -1% ($153m) • Trauma & Extremities -5% ($122m) • Other Surgical Businesses* +8% ($54m) Commentary • REGENETEN™ (Rotation Medical) performing strongly EVOS™ SMALL
Slide 9: Reconstruction
Reconstruction Q2 revenue performance • Knees: global +3%, US +1%, OUS +6% ($258m) • Hips: global +1%, US +4%, OUS -1% ($156m) Commentary • Knees growth driven by JOURNEY II™, LEGION™ and ANTHEM™ systems • Renewed focus on POLAR3™ total hip solution and leading survivorship data POLAR3™ Total Hip So
Slide 10: Advanced Wound Management
Advanced Wound Management Q2 revenue performance • Advanced Wound Care +2% ($187m) • Advanced Wound Bioactives -6% ($87m) • Advanced Wound Devices +9% ($55m) Commentary • AWC growing overall, but still soft in Europe • SANTYL™ improved sequentially • NICE issued Medtech Innovation Briefing on prophy
Slide 11: Ian Melling, SVP Group Finance
Ian Melling SVP Group Finance 11
Slide 12: H1 trading income statement
H1 trading income statement Half Year 2018 2017 $m $m Revenue 2,440 2,336 1% underlying growth Cost of goods sold (651) (603) Gross profit 1,789 1,733 Gross profit margin 73.3% 74.2% Selling, general and admin (1,168) (1,133) Research and development (114) (107) Trading profit 507 493 Trading profit
Slide 13: H1 EPSA and EPS
H1 EPSA and EPS Half Year 2018 2017 Growth $m $m Trading profit 507 493 3% Net interest payable (25) (25) Other finance costs (7) (4) Share of results from associate 2 - Adjusted profit before tax 477 464 3% Taxation on trading result (96) (88) Tax rate(1): 20.1% (H1 2017: 19.0%) Adjusted attributab
Slide 14: H1 free cash flow
H1 free cash flow Half Year 2018 2017 $m $m Trading profit 507 493 Share based payment 18 15 Depreciation and amortisation 171 154 Capital expenditure (178) (178) Movements in working capital and other (131) (157) Trading cash flow 387 327 Trading cash conversion 76% 66% Restructuring, acquisition,
Slide 15: 2018 Guidance
2018 Guidance Sales growth Underlying: 2% to 3% Reported(1): around 3% to 4% Trading profit margin At or above 2017 levels Tax rate(2): 20-21% (1) Based on exchange rates prevailing on 20th July 2018 15 (2) Tax rate on trading result
Slide 16: Summary
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Slide 17: Appendices
ot smith&nephew Appendices
Slide 18: 2018 technical guidance
2018 technical guidance July 2018 Foreign exchange and other revenue impact Impact of translational FX* on revenue +1.1% Acquisition impact on revenue +0.3% Exceptional items Restructuring costs c. $100m Acquisition and integration costs c. $5m European Medical Device Regulation (MDR) compliance cos
Slide 19: H1 IFRS reconciliation
H1 IFRS reconciliation Half year 2018 2017 Growth $m $m Trading profit 507 493 3% Trading profit margin 20.8% 21.1% (30bps) Acquisition related costs (2) (2) Restructuring and rationalisation (58) - Amortisation of acquisition intangibles (57) (65) Legal and other items (18) (12) IFRS Operating prof
Slide 20: Franchise revenue analysis
Franchise revenue analysis 2017 2018 Full Q1 Q2 Q3 Q4 Q1 Q2 Year Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % $m % Sports Medicine, Trauma & OSB 4 3 2 2 3 1 502 2 Sports Medicine Joint Repair 7 5 8 6 6 6 173 8 Arthroscopic Enabling (1) (4) (3) (3) (3) (5) 153 (1) Technologies
Slide 21: Regional revenue analysis
Regional revenue analysis 2017 2018 Full Q1 Q2 Q3 Q4 Q1 Q2 Year Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % $m % Geographic regions US 1 2 2 1 2 (2) 590 1 Other Established Markets 1 (1) 0 (1) 0 (2) 429 1 Established Markets 1 1 1 0 1 (2) 1,019 1 Emerging Markets 12 13 9 14
Slide 22: H1 revenue of $2,440m; 4% reported growth, 1% underlying
H1 revenue of $2,440m; 4% reported growth, 1% underlying Geographical growth Revenue split Product franchise growth Sports Medicine 7% Joint Repair Arthroscopic -3% Enabling Tech -1% US -3% Trauma & Extremities Other surgical 9% 3% Knees Other Est 0% 0% Hips 1% AWC -8% 8% Emerging AWB 6% AWD -5% 0%
Slide 23: Trading days per quarter
Trading days per quarter Q1 Q2 Q3 Q4 Full Year 2016 64 64 63 60 251 2017 64 63 63 60 250 2018 63 64 63 61 251 • Year-on-year differences in the number of trading days typically impacts our surgical businesses in the Established Markets more than our wholesaler and distributor-supported businesses. 2
Slide 24: Smith & Nephew: Supporting healthcare professionals for over 150 years
ot smith&nephew > smith&nephew Supporting healthcare professionals for over 150 years