Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Investor Presentation (November 2013)
38 slides from Smith & Nephew's investor presentation, November 2013
Slide 1: Investor Presentation November/December 2013
Investor Presentation November/December 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 ‐ 11,000 employees worldwide ‐ $11 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%) Established markets Emerging and International markets 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 S&N Zimmer 9% 11% Hip & Knee 6% Biomet Implants 6% DePuy Synthes Biomet DePuy S&N Trauma 50% 12% 20% 10% Stryker Other 18% 17% Arthrex KCI 26% Stryker Other 24% 18% 30% Arthrocare 5% Advanced Conmed Linvatec Sports Wo
Slide 7: What drives underlying market growth?
What drives underlying market growth? Demographics Emerging markets Technology Prevalence Lifestyle 7 Economics
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 Collagenase SANTYL Ointment • Innovating for value Enzymatic debrider • 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 (contribution) • 2012 highlights – China successful model Establis EM/IM – significant structural and talent hed Markets (41%) investment (59%) – refined the new R&D model for mid-tier Revenue Development • 2013 developments 14% Re
Slide 13: Closer to the customer; developing critical mass
Closer to the customer; developing critical mass BRIC China India Brazil Russia ‘Next level’ Turkey Mexico Saudi Arabia South Africa 13
Slide 14: Product strategy and development
Product strategy and development Market S&N Strategy Execution Upper “Lead” the Premium • Registering more existing tier segments products Mid • Acquisitions Tier “Champion”: address and Mid-tier • New product development create Mid-tier • Launching AWM range Lower Tier Lower tier “Opportunistic” 14
Slide 15: Innovating for value
Innovating for value R&D $m +2% • 2012 highlights 171 169 167 – 32 new AWM products 152 155 151 – ASD launch new platforms 2008 2009 2010 2011 2012 Q3 HEALICOIL◊ PK YTD – registrations for EM/IM Suture Anchor – Centre for Innovation, Memphis R&D % • 2013 developments 5.3% 4.0% 4.1% 3.8% 3.9% 4.1% –
Slide 16: Simplifying and improving our operating model
Simplifying and improving our operating model 2012 2013 Programme initiated Q4 2011 Manufacturing asset review 2014 Expect total programme annual underway benefits of $150m AWM manufacturing footprint complete Incurred costs of $127m to Ortho and Endo businesses Sept 2013 ($112m cash and combined $1
Slide 17: Supplement organic growth through acquisition
Supplement organic growth through acquisition Scale Acquisitions Large bolt-ons Supplementing organic growth strategies Complementary technology 17
Slide 18: Capital allocation framework
Capital allocation framework Reinvest for Progressive Acquisitions Return organic dividend in line with excess to growth policy strategy shareholders 1 2 3 4 Maintain strong balance sheet to ensure solid investment grade credit metrics 18
Slide 19: Q3 2013 Results
>¢ smith&nephew Q3 2013 Results
Slide 20: Q3 2013 Highlights
Q3 2013 Highlights Third Quarter Key Comments underlying 2013 2012 growth • Q3 revenues up 8% reported $m $m % – up 5% underlying Revenue – better Reconstruction performance Advanced Surgical Devices 696 698 3 – strong AWM and Emerging Markets Advanced Wound Management 331 254 12 Group 1,027 952 5 •
Slide 21: Q3 Revenue growth
Q3 Revenue growth Geographic growth Revenue split Product franchise growth Knee 2% 5% US Hip 3% ASD Joint Repair 7% Enab Tech -1% 2% Trauma 2% Est OUS Other ASD AWM AWM 12% 20% EM/IM 0% 5% 10% 15% 20% -5% 0% 5% 10% 15% Underlying change (%) Underlying change (%) 21 Note: ‘Other ASD’ +11%, ‘Est OUS’
Slide 22: 2013 Outlook
2013 Outlook • Full year outlook for Group as a whole unchanged – Healthpoint now expected to grow at above 40% – Trauma growth expected to be below the market • Trading Margin guidance – Pressures due to US Medical Device excise tax, Healthpoint and investments – Partially offset by Structural Effi
Slide 23: Q3 Summary
Q3 Summary • Strong third quarter – improved revenue growth performance – trading profit reflects balance of investment and savings • Strategic Priorities directing investment – additional investments improving Established Market growth – R&D investment now evident in near-term pipeline – acquisitio
Slide 24: Appendices
>¢ smith&nephew Appendices
Slide 25: Advanced Surgical Devices – Knee and Hip Implants
Advanced Surgical Devices – Knee and Hip Implants • Revenue performance – Knees: global +2%, US +2%, OUS +3% ($196m) – Hips: global +3%, US -3%, OUS +7% ($150m) • Commentary – performance improvement, Reconstruction global +2% – investment benefits (e.g. VERILAST◊ DTC marketing) – JOURNEY◊ II launch
Slide 26: Advanced Surgical Devices – Sports Medicine and Trauma
Advanced Surgical Devices – Sports Medicine and Trauma • Revenue performance – Sports Medicine Joint Repair +7% ($118m) – Arthroscopic Enabling Technologies (AET) -1% ($101m) – Trauma +2% ($115m) • Commentary HEALICOIL◊ – start of strong Sports Medicine product pipeline REGENESORB – Trauma Suture An
Slide 27: Advanced Wound Management
Advanced Wound Management • Revenue performance – Advanced Wound Care +2% ($207m) – Advanced Wound Devices +11% ($52m) – Advanced Wound Bioactives +55% ($72m) • Commentary – AWC benefiting from better Europe DURAFIBER◊ Ag Antimicrobial gelling fiber – AWD reflects strong comparable and price dressin
Slide 28: Underlying revenue growth by geography & business segment Q3 2013
Underlying revenue growth by geography & business segment Q3 2013 Emerging and International Established Markets Markets Group US OUS Total Total Total Quarter 3 Revenue $m $m $m $m $m Advanced Surgical Devices 326 270 596 100 696 Advanced Wound Management 118 179 297 34 331 Group 444 449 893 134 1,
Slide 29: Product line revenues and underlying growth
Product line revenues and underlying growth 2012 2013 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Advanced Surgical Devices Reconstruction Knee Implants 6 3 (1) 2 3 (6) (1) 196 2 Hip Implants (2) (5) (4) (2) (3) (6) (1) 150 3 Trau
Slide 30: Profitability by business segment Q3 2013
Profitability by business segment Q3 2013 Third Quarter Year to Date ASD AWM Group Margin 2013 Revenue ($m) 696 331 1,027 Trading profit ($m) 157 65 222 Margin (%) 22.5 19.9 21.6 21.9 2012 Revenue ($m) 698 254 952 Trading profit ($m) 149 58 207 Margin (%) 21.3 22.9 21.7 22.6 30
Slide 31: Income statement Q3 2013
Income statement Q3 2013 Third Quarter Quarterly growth Year to Date 2013 2012* Underlying Reported 2013 2012* $m $m $m $m Revenue 1,027 952 5% 8% 3,176 3,060 Trading profit 222 207 10% 8% 695 693 Restructuring and rationalisation costs (11) (10) (36) (30) Acquisition and integration costs (9) - (19
Slide 32: Income statement Q3 2013
Income statement Q3 2013 Third Quarter Year to Date 2013 2012* 2013 2012* $m $m $m $m Profit before taxation, disposals and associates 178 186 571 624 Profit on disposal - - - 251 Associate - 5 (1) 4 Profit before taxation 178 191 570 879 Taxation (56) (59) Tax rate** 29.8% (176) (298) Attributable
Slide 33: Free cash flow Q3 2013
Free cash flow Q3 2013 Third Quarter Year to Date 2013 2012 2013 2012 $m $m $m $m Trading profit 222 207 695 693 Share based payment 6 9 23 29 Depreciation and amortisation 71 72 210 210 Capital expenditure (74) (57) (215) (187) Movements in working capital and provisions (34) 33 (117) (4) Trading c
Slide 34: Analysis of restructuring costs
Analysis of restructuring costs P&L Charge Cash Spend Previous Previous Q3 Total to date Q3 Total to date Total to Date Total to Date Restructuring $m $m $m $m $m $m Cash costs 102 10 112 95 8 103 Asset w/offs 14 1 15 n/a n/a n/a Total 116 11 127 95 8 103 Of the $11m total charged in Q3, $8m are ref
Slide 35: 2013 key new products progression
2013 key new products progression YTD Q4 H1 2014 • JOURNEY◊ II BCS Knee System • SMF Monolithic Hip Stem • HA POLARSTEM◊ for hips (US) Knee and Hip Implants • REDAPT◊ Hip Revision Femoral System • R3◊ smaller ceramic liners for hips • JOURNEY◊ II range expansion (Europe) • Universal Instruments • SU
Slide 36: 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 37: 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 38: We are smith&nephew
+“ We are smith&nephew
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