Smith & Nephew plc · LSE:SN.
Smith & Nephew — FY2008 Earnings Presentation
32 slides from Smith & Nephew's earnings presentation, 2009
Slide 1: 2008 Preliminary Results
2008 Preliminary Results Sustainable profitable growth
Slide 2: Forward looking statements
Forward looking statements This presentation contains certain "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. In particular, statements regarding expected revenue growth and trading margins discussed under "Outlook" are forward- looking sta
Slide 3: John Buchanan, Chairman
John Buchanan Chairman sustainable profitable growth
Slide 4: Introduction
Introduction • 2008 – a challenging year with a good outcome • Management team worked well to overcome challenges • Financial strategy - conserve our resources • Good markets for tough times • Board’s strategy and market view unchanged • Final dividend 8.1¢ up 10% sustainable profitable growth 4
Slide 5: David Illingworth, Chief Executive
David Illingworth Chief Executive sustainable profitable growth
Slide 6: Key business achievements in 2008
Key business achievements in 2008 • Revenue $3,801m, 6% growth for the year – $960m, 7% growth for the quarter • EPSA grew by 7% to 55.6¢ • Orthopaedics – US sales force management re-structured – Settlement with Plus vendors in early 2009 – Trauma sales force management changes benefit revenues • E
Slide 7: Orthopaedics – Q4 2008
Orthopaedics – Q4 2008 2008 Achievements •Hip and knee growth balanced Global revenues $550m up 6% •Trauma sales force Recon and Trauma US revenues grow by 12% management re-aligned US hip revenue growth 8% •Plus litigation settled in US knee revenue growth 15% early 2009 Europe fell by 2%, 7% growt
Slide 8: Orthopaedics - 2009 business drivers
Orthopaedics - 2009 business drivers • Resilient underlying demand across Orthopaedics • Continued penetration recent product launches R3 Acetabular Cups, JOURNEY™ Bi-Cruciate Stabilized Knee System and JOURNEY™ DEUCE™ Bi- compartmental Knee System • Realisation of Plus potential in Europe • Trauma
Slide 9: Endoscopy - Q4 2008
Endoscopy - Q4 2008 2008 achievements •US reinvigoration improves performance •Outside US grew 13% Revenues $206m, growth of 9%, 14% outside US Repair grows 21% - Arthroscopy up 10% •Repair grew 16% Visualisation revenues grow 7% •Revenue growth Positive product and geographic mix lifts margins leve
Slide 10: Endoscopy - 2009 business drivers
Endoscopy - 2009 business drivers • Improved US growth from US sales force changes in 2008 – Improved alignment and motivation • Continuing success outside the US • New products underpin resection • Elective procedures and capital business most susceptible to weaker economy • Innovation enhances gro
Slide 11: Advanced Wound Management – Q4 2008
Advanced Wound Management – Q4 2008 2008 achievements •Largest revenue growth increase in 5 years •NPWT launched and Revenues of $204m and global growth of 7% billing substantial Outside US grows 10% numbers of accounts •US business to deliver US revenues down 3% - distributor de-stocking substantia
Slide 12: Advanced Wound Management - 2009 business drivers
Advanced Wound Management - 2009 business drivers • US execution key focus • Continued European success • Manufacturing in China on stream late 2009 – Margin improvement in 2010 • NPWT – Expanding revenue stream from ACTICOAT™ FLEX pump rentals Antimicrobial Barrier dressing sustainable profitable g
Slide 13: Advanced Wound Management China Factory
Advanced Wound Management China Factory January 2009 sustainable profitable growth 13
Slide 14: Business outlook
Business outlook • General economic outlook uncertain – Long term demand for our products intact – Innovation and customer focus are being rewarded – Our business is resilient • Orthopaedics – Maintain market growth in Reconstruction – Drive for sustainable above market growth in Trauma • Endoscopy
Slide 15: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer sustainable profitable growth
Slide 16: Income statement Q4 2008
Income statement Q4 2008 Fourth Quarter Full Year 2007 2008 % Growth 2007 2008 $m $m Reported Underlying $m $m Revenue 967 960 -1% 7% 3,369 3,801 Trading profit 222 222 0% 8% 706 776 Legal settlement - - (30) - Restructuring and acquisition costs (41) (22) (89) (80) Inventory revaluation* (20) - (64
Slide 17: Income statement Q4 2008
Income statement Q4 2008 Fourth Quarter Full Year 2007 2008 2007 2008 $m $m $m $m Profit before taxation* 137 162 469 564 Taxation* (43) (45) (153) (187) Attributable profit 94 117 316 377 Add back: Amortisation of acquisition intangibles* 11 21 30 51 Restructuring & acquisition costs 41 22 89 80 Le
Slide 18: Revenue growth by business segment Q4 2008
Revenue growth by business segment Q4 2008 Actual Currency Acquisitions Underlying Quarter 4 * % % % % Orthopaedics - 6 - 6 Endoscopy 2 7 - 9 Advanced Wound Management (6) 13 - 7 Group (1) 8 - 7 Full Year Orthopaedics 16 (2) (9) 5 Endoscopy 9 (1) - 8 Advanced Wound Management 8 (1) - 7 Group 13 (2)
Slide 19: Underlying revenue growth by geography & business segment Q4 2008
Underlying revenue growth by geography & business segment Q4 2008 Quarter 4 US Growth Europe Growth ROW Growth Total Growth $m % $m % $m % $m % Orthopaedics 304 10 162 (2) 84 11 550 6 Endoscopy 101 5 66 12 39 16 206 9 AWM 44 (3) 103 9 57 11 204 7 Group 449 8 331 4 180 12 960 7 Full Year Orthopaedics
Slide 20: Profitability by business segment Q4 2008
Profitability by business segment Q4 2008 - - - - - - - - - - - - - Q4 - - - - - - - - - - - - Full Year Revenue Trading Profit Margin 2008 Margin $m $m % % Orthopaedics 550 127 23.2 22.3 Endoscopy 206 53 25.6 20.7 Advanced Wound Management 204 42 20.6 15.3 Total 960 222 23.2 20.4 2007 Orthopaedics
Slide 21: Free cash flow Q4 2008
Free cash flow Q4 2008 Fourth Quarter Full Year 2007 2008 2007 2008 $m $m $m $m Trading profit 222 222 706 776 Share based payment 4 7 23 24 Depreciation and amortisation 63 72 207 236 Capital expenditure (55) (91) (194) (289) Movements in working capital and provisions (34) (51) (140) (135) Trading
Slide 22: 2009 outlook
2009 outlook • Revenue growth – Market growth rates subject to macro-economic uncertainty – Ortho – around market growth, year-on-year impact of Plus issues small – Endoscopy – continue to grow slightly below the market – Advanced Wound Management – excluding NPWT, at or slightly above served market
Slide 23: David Illingworth, Chief Executive Officer
David Illingworth Chief Executive Officer sustainable profitable growth
Slide 24: Summary
Summary • 2008 - a good year • 2009 - a year of opportunity – Markets trends unchanged – Product ranges excellent – Management and business structures in place – Great people to execute our plans – EIP provides right mindset for tough times sustainable profitable growth 24
Slide 25: Questions?
4 smith&nephew Questions?
Slide 26: We are smith&nephew
> We are smith&nephew
Slide 27: Appendices
4 smith&nephew Appendices
Slide 28: Quarterly revenues
Quarterly revenues Smith & Nephew Key Product Line Revenues in $m at Average Rates and Underlying Growth* 2007 2008 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Growth* Growth* Growth* Growth* Growth* Growth* Growth* Growth* Revenue Growth* % % % % % % % % $m % Orthopaedics Reconstruction Knees 12% 7% 5% 10% 9
Slide 29: Exchange rates
Exchange rates €:$ Q4/07 FY/07 Q1/08 Q2/08 Q3/08 Q4/08 FY/08 Period end 1.46 1.46 1.58 1.58 1.46 1.39 1.39 Average 1.45 1.37 1.50 1.56 1.51 1.32 1.46 £:$ Period end 1.99 1.99 1.99 1.99 1.84 1.44 1.44 Average 2.05 2.00 1.98 1.97 1.89 1.58 1.84 Percentage of Revenue by Geographic Market: Q4 FY % % Uni
Slide 30: Analysis of restructuring and acquisition costs
Analysis of restructuring and acquisition costs P&L Charge Cash spend Q4 Total to date Q4 Total to date $m $m $m $m EIP – cash costs* 4 68 2 60 – asset w/offs 4 11 n/a n/a Plus Integration – cash costs** 13 84 13 70 – asset w/offs - 13 n/a n/a * Target $125m over three years ** Target $60-80m, plus
Slide 31: Reconciliation of free cash flow to IAS 7 net cash flow from operating activities
Reconciliation of free cash flow to IAS 7 net cash flow from operating activities Fourth Quarter Full Year 2007 2008 2007 2008 $m $m $m $m Free cash flow 94 82 244 277 Add back: capital expenditure 55 91 194 289 Net cash inflow from operating activities 149 173 438 566 (IAS 7) 31
Slide 32: Business days per quarter
Business days per quarter Q1 Q2 Q3 Q4 Full Year 2007 64 63 63 61 251 2008 62 64 63 63 252 2009 61 63 63 65 252 32