Smith & Nephew plc · LSE:SN.
Smith & Nephew — Smith+Nephew — H1 2022 Earnings Presentation
32 slides from Smith & Nephew's earnings presentation, Jul 28, 2022
Slide 1: Second Quarter and Half Year 2022
Second Quarter and Half Year 2022
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: Summary
Summary Smith+Nephew has many exciting opportunities • Strong innovation throughout the company • Clear right to win in all three franchises • Execution already good in Sports Medicine and AWM Action plan underway to strengthen Orthopaedics execution and supply chain • Detailed plan in place • Stron
Slide 4: Q2 2022 Revenue
Q2 2022 Revenue 4
Slide 5: Q2 2022: Growth reflects VBP and COVID
Franchise growth Group 1.2% Orthopaedics -1.1% Q2 2022: $530m Growth reflects Sports Med & ENT 1.9% $381m VBP and COVID AWM $382m 3.8% in China Geographical growth $1,293m, +1.2% underlying* Group 1.2% -3.1% reported US $690m 2.0% Other Established Markets 0.0% $374m Emerging Markets 0.8% $229m * Q2
Slide 6: Orthopaedics
Orthopaedics Revenue ($m) -1.1% $530m: -1.1% underlying*, $557m $530m -4.9% reported 149 -6.0% 135 21 23 +10.8% Knees: US +1.9%, OUS +3.8% 161 -3.7% 149 Hips: US -3.0%, OUS -4.4% 226 +2.7% 223 Q2'21 Q2'22 Knees Hips Other Recon** T&E Sales factors Strategic drivers ◊ • Knees and Hips growth reflects
Slide 7: Sports Medicine & ENT
Sports Medicine Revenue ($m) & ENT $381m: +1.9% underlying* +1.9% -2.4% reported $391m 33 $381m +11.2% 35 147 -0.5% 140 211 +2.1% 206 Q2'21 Q2'22 SMJR AET ENT Sales factors Strategic drivers ◊ • Sports Medicine growth affected by China COVID outbreaks • REGENETEN expansion into new regions and • ind
Slide 8: Advanced Wound Management
Advanced Wound Revenue ($m) Management $382m: +3.8% +3.8% underlying*, -1.3% reported $387m $382m 69 +7.9% 70 132 +2.4% 134 186 +3.3% 178 Q2'21 Q2'22 AWC AWB AWD Sales factors Strategic drivers • Strong quarter for AWC in Asia-Pacific and infection management • Ongoing focus on commercial execution
Slide 9: H1 2022 Financials
H1 2022 Financials 9
Slide 10: H1 revenue by franchise
H1 revenue by franchise (88) Reported growth (2.3%) 1.8% 1.7% (3.5%) 0.0% Underlying growth 0.7% 5.2% 5.8% 3.5% 10
Slide 11: H1 trading income statement
H1 trading income statement 2022 2021 Reported $m $m growth Revenue 2,600 2,599 0% Cost of goods sold (758) (763) Gross profit 1,842 1,836 0% Gross profit margin 70.9% 70.6% Selling, general and admin (1,253) (1,229) Research and development (149) (148) Trading profit 440 459 (4%) Trading profit mar
Slide 12: H1 operating profit and EPSA
H1 operating profit and EPSA 2022 2021 Reported $m $m growth IFRS operating profit 242 239 1% IFRS operating profit margin 9.3% 9.2% Adjusted earnings per share ("EPSA") 38.1¢ 38.8¢ (2%) Earnings per share ("EPS") 20.2¢ 23.4¢ (14%) Dividend per share 14.4¢ 14.4¢ - 12
Slide 13: H1 cash flow
H1 cash flow Trading cash conversion 35% 2022 2021 $m $m Trading profit 440 459 Share based payment 23 23 Depreciation and amortisation 195 201 Lease liability repayments (27) (28) Working capital outflow primarily due to Capital expenditure (173) (175) increased inventory - Movements in working cap
Slide 14: Strong balance sheet
Strong balance sheet Leverage 1.6x 1.9x ratio: 14 Net debt includes lease liabilities
Slide 15: 2022 outlook
2022 outlook • Targeting underlying revenue growth of 4.0%-5.0% • Trading margin of around 17.5% • Reflects prolonged impact of inflationary environment and external supply challenges • Tax rate on trading results around 18% 15
Slide 16: Looking ahead
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Slide 17: The right to win across all three franchises
The right to win across all three franchises Orthopaedics Sports Medicine & ENT Advanced Wound Mgmt. Full range across hips and knees, with Complete offering of Joint Repair, Broadest portfolio of solutions unique cementless uni knee Tower, customer service covering all key wound types Differentiate
Slide 18: Two of three franchises already executing well
Two of three franchises already executing well Sports Medicine revenue growth* AWM revenue growth Moved to above Consistently above market market in 2021 11.8% 14.1% 7.0% 5.8% 2.2% 4.2% -11.1% -8.1% 2019 2020 2021 H1 2022 2019 2020 2021 H1 2022 Market growth rate Market growth rate * Representing re
Slide 19: Orthopaedics held back by execution and supply chain
Orthopaedics held back by execution and supply chain Execution challenges Examples: Supporting multiplicity of hip stems and Hip & Knee revenue growth Complexity knees – peers moving to just one Above market Below market Operating model Connectivity between commercial and suboptimal operations not w
Slide 20: New structured programme covering biggest opportunities
New structured programme covering biggest opportunities Comprehensive 12-point plan across three areas Fixing Accelerating Improving 1 orthopaedics 2 productivity 3 Sports & AWM Underpinned by structures for accountability 20
Slide 21: Programme of execution underway - Orthopaedics
Programme of execution underway - Orthopaedics Actions to address performance include: Improve Orthopaedics commercial Rewire Orthopaedics delivery, and win market share with our commercial delivery current portfolio Reduce numbers of implant systems in Streamline recon each category, sales focus on
Slide 22: Clear accountability to ensure sustained impact
Clear accountability to ensure sustained impact Rejuvenated High cadence of leadership team implementation with track record in orthopaedics Fortnightly meetings with CEO oversight Named owner for Specific plans and each area meaningful KPIs Ensuring clear Tracking progress and accountability for de
Slide 23: Summary
Summary Smith+Nephew has more opportunities than challenges Multiple positive factors coming together in Orthopaedics • Next wave of innovative implants coming to market • Unique expansions for CORI coming, starting in 2022 • Revitalised management team in place • Rewiring of commercial delivery und
Slide 24: Appendices
Appendices 24
Slide 25: Technical guidance
Technical guidance July 2022 Foreign exchange and acquisitions Translational FX impact on revenue growth(1) c. (4.2)% Acquisition impact on revenue growth - Non-trading items Restructuring costs $110-120m Acquisition and integration costs $20-30m European Medical Device Regulation (MDR) compliance c
Slide 26: Franchise revenue analysis
Franchise revenue analysis 2021 2022 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Growth Revenue % % % % % % % $m Orthopaedics 1.6 43.4 (5.9) (2.6) 6.4 2.6 (1.1) 530 Knee Implants (10.3) 58.8 (6.5) (1.1) 5.1 12.2 2.7 223 Hip Implants 9.1 37.2 (7.9) (6.1) 5.8 (0.7) (3.7) 1
Slide 27: Regional revenue analysis
Regional revenue analysis 2021 2022 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Growth Revenue % % % % % % % $m US 7.1 51.3 (2.5) (0.4) 10.5 3.1 2.0 690 Other Established Markets(1) (1.8) 40.1 4.5 (2.4) 7.7 5.9 0.0 374 Established Markets 3.4 46.8 0.1 (1.2) 9.4 4.1 1.2 1
Slide 28: Q2 consolidated revenue analysis
Q2 consolidated revenue analysis Q2 Q2 Reported Underlying Acquisitions/ Currency 2022 2021 growth growth disposals impact Consolidated revenue by franchise $m $m % % % % Orthopaedics 530 557 (4.9%) (1.1%) - (3.8%) Knee Implants 223 226 (1.3%) 2.7% - (4.0%) Hip Implants 149 161 (7.7%) (3.7%) - (4.0%
Slide 29: H1 consolidated revenue analysis
H1 consolidated revenue analysis Half year Half year Reported Underlying Acquisitions/ Currency 2022 2021 growth growth disposals impact Consolidated revenue by franchise $m $m % % % % Orthopaedics 1,071 1,097 (2.3%) 0.7% - (3.0%) Knee Implants 454 438 3.8% 7.3% - (3.5%) Hip Implants 298 315 (5.5%)
Slide 30: H1 revenue by region
H1 revenue by region (88) Reported growth 2.5% (6.4%) 4.5% (3.5%) 0.0% Underlying growth 2.5% 2.6% 7.8% 3.5% 30
Slide 31: H1 EPSA
H1 EPSA 2022 2021 Reported $m $m growth Trading profit 440 459 (4%) Net interest payable (32) (39) Other finance costs (2) (5) Share of results from associates (2) 1 Adjusted profit before tax 404 416 (3%) Taxation on trading result (71) (76) Adjusted attributable profit 333 340 Weighted average num
Slide 32: 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 2022 64 63 63 60 250 2023 64 63 63 60 250 32