Smith & Nephew plc · LSE:SN.
Smith & Nephew — Smith+Nephew — Q3 2020 Earnings Presentation
23 slides from Smith & Nephew's earnings presentation, December 2020
Slide 1: Investor Presentation October – December 2020
Investor Presentation October – December 2020
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 profit margins, market trends and our product pipeline are forward-looking statements. Phras
Slide 3: Our history
Our history 1914 1856 1896 Days after the outbreak of WW1, Thomas James Smith Horatio Nelson Smith we received an order to provide opened a chemist shop in Hull, entered into apartnership surgical and field dressing 1856 UK and develops a new method with his uncleforming supplies to French From 50 S
Slide 4: FTSE100 Shares $5.1bn
100 FTSE100 A constituent of the UK’s FTSE100, with ADRs Shares S&N has a progressive dividend policy, and has Smith+Nephew is a traded on the New York paid a dividend every global Medical Device Stock Exchange year since 1937 portfolio company, that has been trading for over 160 years, and operates
Slide 5: A portfolio medical device company
A portfolio medical device company ALLEVYN◊ LIFE PICO◊ Advanced Foam Advanced Advanced Negative Pressure Wound Dressings Wound Care Wound Devices Wound Therapy JOURNEY◊ II BCS Collagenase Advanced Bi-Cruciate SANTYL◊ Ointment Wound Stabilised Enzymatic debrider Bioactives Knees Knee System ENT $5.1b
Slide 6: Leading positions in stable growing markets
Leading positions in stable growing markets Hip & Knee Implants Sports Medicine Advanced Wound Management $14.8bn market $5.3bn market $9.4bn market (growth +3%) (growth +5%) (growth +4%) Others Others 3M 15% 17% 19% Zimmer Smith+ Biomet Nephew 32% Others DePuy Arthrex 12% 51% Synthes 33% Smith+ 13%
Slide 7: Our performance
Our performance Revenue Trading profit Trading cash conversion $5,138m +4.4%* $1,169m 22.8% margin 83% 5138 1169 90% 85% 85% 83% 4904 1123 75% 1099 4765 4669 1048 4634 1020 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Adjusted earnings per share (EPSA) Dividend per shar
Slide 8: Our enterprise strategic imperatives
Our enterprise strategic imperatives Achieve the full Transform the business Expand in high-growth Strengthen talent and Become the best owner potential of our through enabling segments capabilities portfolio technologies GROW TOGETHER EFFECTIVELY Year on year % underlying revenue growth 6% 4% 2% 0%
Slide 9: Meaningful new revenue growth drivers accumulating across the portfolio in 2020
Meaningful new revenue growth drivers accumulating across the portfolio in 2020 New launches from internal R&D Adding growth through M&A Tuck-ins in high growth areas Extremity Orthopaedics business Digital technology acquisitions CORI Surgical INTELLIO Connected COBLATION◊ System Tower HALO Wand Ad
Slide 10: Integra Orthopaedic Extremities acquisition - expanding in high growth segment
Integra Orthopaedic Extremities acquisition - expanding in high growth segment Comprehensive portfolio of Deal benefits extremities assets Shoulder Ankle • Purchase price $240m • $90m sales in 2019 • Accretive to S+N’s weighted average market growth rate Titan Modular Shoulder Cadence Total Ankle Sy
Slide 11: 2020 quarterly underlying sales development by region
2020 quarterly underlying sales development by region Other established US Emerging markets markets • Continued recovery in elective • Germany, France return to • Year-on-year growth in China, procedures growth procedures >80% of normal • Elective procedure restrictions • Australia, Japan procedures
Slide 12: Q3 recovery, visibility still limited
Q3 recovery, visibility still limited Quarterly Group underlying revenue growth • COVID-19 significant uncertainty continues - geographical variation and local restrictions - most healthcare systems better prepared - assuming impact continues into H1 2021 • Full year 2020 guidance remains withdrawn
Slide 13: Q3 revenue: $1,200m, -4.2% underlying, -3.7% reported
Q3 revenue: $1,200m, -4.2% underlying, -3.7% reported Revenue split Franchise performance Orthopaedics -2.8% Knees -9.5% Hips 7.1% Other Recon -3.1% Trauma -1.4% Sports Medicine, ENT -4.5% Sports Medicine Joint Repair -2.7% Geographical performance Arthroscopic Enabling Technologies -1.6% ENT -24.8%
Slide 14: Updated APEX targets
Updated APEX targets Become the best owner APEX – Jan 2018 APEX – 2020 update Initial targets: Updated targets: Benefits of $160m p.a. by 2022 Benefits of $190m p.a. Total one-off costs of $240m Total one-off costs of $290m ~75% of benefits, >75% of costs by 2020 Closing in full by end of 2020 14
Slide 15: Excellence through the value chain
Excellence through the value chain Become the best owner Operations transformation Commercial transformation Key initiatives: Key initiatives: • Optimised manufacturing network • Increasing share of direct distribution • Rollout of lean methodology • Sales training and excellence • Distribution netw
Slide 16: Appendices
Appendices 16
Slide 17: Franchise revenue analysis
Franchise revenue analysis 2019 2020 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q3 Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Orthopaedics 3.9 3.6 3.4 5.1 4.0 (8.3) (34.0) 512 (2.8) Knee Implants 4.1 4.3 4.6 4.7 4.4 (10.6) (46.9) 219 (9.5) Hip Implants 2.4 2.9 2.6 0.7 2.1
Slide 18: Regional revenue analysis
Regional revenue analysis 2019 2020 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q3 Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % US 4.0 2.3 2.7 4.2 3.3 (4.7) (31.8) 630 0.9 Other Established Markets(1) (0.1) (1.3) (0.3) 2.4 0.2 (6.3) (30.8) 372 (6.2) Established Markets 2.2 0
Slide 19: H1 trading income statement
H1 trading income statement 2020 2019 $m $m Revenue 2,035 2,485 Cost of goods sold (640) (646) Gross profit 1,395 1,839 Gross profit margin 68.5% 74.0% Selling, general and admin (1,089) (1,178) Research and development (134) (129) Trading profit 172 532 Trading profit margin 8.5% 21.4% 19
Slide 20: H1 EPSA and EPS
H1 EPSA and EPS 2020 2019 Growth $m $m % Trading profit 172 532 (68%) Net interest payable (21) (25) Other finance costs (7) (6) Share of results from associate (3) (3) Adjusted profit before tax 141 498 (72%) H1 2020 tax Taxation on trading result (24) (98) rate(1): 17.0% Adjusted attributable prof
Slide 21: Trading days per quarter
Trading days per quarter Q1 Q2 Q3 Q4 Full year 2019 63 63 63 62 251 2020 62 63 63 64 252 2021 64 64 63 60 251 21
Slide 22: Sustainability Targets
Sustainability Targets People Planet Products Creating a lasting positive impact A medical technology business with Innovating sustainably on our communities a positive impact By 2022, include sustainability review Between 2020 and 2030, contribute Achieve an 80% absolute reduction in in New Product
Slide 23: Smith+Nephew
SmithNephew