Smith & Nephew plc · LSE:SN.
Smith & Nephew — Smith+Nephew — H1 2021 Earnings Presentation
34 slides from Smith & Nephew's earnings presentation, Jul 29, 2021
Slide 1: Second Quarter and First Half 2021 Results
Second Quarter and First Half 2021 Results
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: Key messages
Key messages Improved growth in Q2, as end markets continue to recover On track for 2021 revenue and margin guidance Delivering on our 2021 priorities: • returning to top-line growth and recapturing momentum • driving further operational improvement • continuing to respond effectively to COVID 3
Slide 4: H1 2021 highlights
H1 2021 highlights Revenue Trading profit $2,599m $459m 21.3% underlying growth* 17.6% margin 27.8% reported growth 2020: $172m EPSA DPS 38.8¢ 14.4¢ 2020: 13.4¢ 2020: 14.4¢ *Underlying growth is a non-IFRS measure. Please see page 30 of this presentation for a 4 reconciliation of underlying revenue
Slide 5: Q2 revenue by region
Q2 revenue by region $1,335m, 40.3% underlying, 48.2% reported Quarterly underlying sales development by region US Other established markets Emerging markets $677m $422m $236m 51.3% 40.1% 21.8% 16.2% 7.1% 0.9% -1.8% -4.7% -4.9% -6.3% -6.2% -6.2% -14.5% -14.9% -17.9% -20.2% -31.8% -30.8% 1Q20 2Q20 3Q
Slide 6: Q2 2021 underlying growth vs 2020
Q2 2021 underlying growth vs 2020 Reflect 2020 peak impact of COVID on our business Franchise split Franchise growth Advanced Wound Total 40.3% Management $387m Orthopaedics $557m Orthopaedics 43.4% Sports Med & ENT 50.9% AWM 27.2% Sports Med & ENT $391m 6
Slide 7: Q2 2021 underlying growth vs Q2 2019
Q2 2021 underlying growth vs Q2 2019 Two out of three Franchises back to 2019 levels Franchise growth Geographical growth Group -1.0% Group -1.0% Orthopaedics -6.2% US 2.3% Sports Med & Other Established 1.3% -3.5% ENT Markets AWM 5.1% Emerging Markets -5.3% 7
Slide 8: Orthopaedics
Orthopaedics $557m, 43.4% underlying* Revenue performance Underlying growth by quarter Knees $226m +58.8% (US +75.6%, OUS +42.4%) 43.4% Hips $161m +37.2% (US +61.3%, OUS +18.4%) Other Reconstruction** $21m +64.0% 1.6% -2.8% Trauma & Extremities $149m +28.2% -8.3% -10.2% Orthopaedics $557m +43.4% -34
Slide 9: Sports Medicine & ENT
Sports Medicine & ENT $391m, 50.9% underlying* Revenue performance Underlying growth by quarter Sports Medicine Joint 50.9% $211m +55.9% Repair Arthroscopic Enabling $147m +45.5% Technologies 10.4% ENT $33m +45.2% -4.5% -5.2% Sports Medicine & ENT $391m +50.9% -9.5% -33.3% 1Q20 2Q20 3Q20 4Q20 1Q21 2
Slide 10: Advanced Wound Management
Advanced Wound Management $387m, 27.2% underlying* Revenue performance Underlying growth by quarter Advanced Wound Care $186m +20.6% Advanced Wound 27.2% $132m +29.9% Bioactives 9.3% Advanced Wound Devices $69m +42.8% Advanced Wound -4.0% -6.1% -4.4% $387m +27.2% Management -17.6% 1Q20 2Q20 3Q20 4Q2
Slide 11: H1 2021 financials
H1 2021 financials 11
Slide 12: H1 revenue by franchise
H1 revenue by franchise All franchises recovering Reported growth 27.4% 32.9% 23.2% 27.8% Underlying growth 19.2% 28.0% 18.0% 21.3% 12
Slide 13: H1 revenue by region
H1 revenue by region All regions recovering Reported growth 29.1% 27.2% 25.1% 27.8% Underlying growth 26.0% 15.7% 19.2% 21.3% 13
Slide 14: H1 trading income statement
H1 trading income statement Profit recovering in line with expectations 2021 2020 Reported $m $m growth Revenue 2,599 2,035 27.8% Gross profit 1,836 1,395 32% Gross profit margin 70.6% 68.5% Selling, general and admin (1,229) (1,089) Research and development (148) (134) Trading profit 459 172 166% T
Slide 15: H1 cash flow
H1 cash flow Trading cash conversion 88% 2021 2020 $m $m Trading profit 459 172 Share based payment 23 15 Depreciation and amortisation 201 187 Lease liability repayments (28) (24) Capital expenditure (175) (188) Movements in working capital and other (76) (137) Trading cash flow 404 25 Trading cash
Slide 16: Strong balance sheet
Strong balance sheet Leverage 1.8x 1.6x ratio: 16 Net debt includes lease liabilities
Slide 17: Reconfirming 2021 outlook
Reconfirming 2021 outlook • Targeting underlying revenue growth of 10-13% − Hips to continue to outperform Knees − Sports Medicine & ENT to rebound strongly − AWM momentum to continue • Trading margin range of 18-19% − COVID impact on gross margin; partial offset from efficiency programmes − Dilutio
Slide 18: Priorities for 2021
Priorities for 2021 18
Slide 19: Return to top-line growth and recapture momentum
Priorities for 2021 Return to top-line growth and recapture momentum Driving sustainable revenue growth Delivering value of the Maximising portfolio acquired assets Launching expanded potential • Driving synergistic growth in pipeline of innovation • Driving higher return from Trauma & Extremities,
Slide 20: Increased M&A activity from 2019 onwards
Increased M&A activity from 2019 onwards Delivering value from our acquired assets Sports Medicine Advanced Wound Orthopaedics & ENT Management Extremities and digital surgery Tucking in growth assets Extending the portfolio offering Extremity Orthopaedics acquired from Integra LifeSciences 20
Slide 21: Progress with operational execution and growth
Progress with operational execution and growth Delivering value from our acquired assets Quarterly REGENETEN sales Trading profit by half year Sales Driving growth margin H1 H2 H1 H2 H1 2019 2019 2020 2020 2021 Q1 2018 Q3 2018 Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Delivering Commercial • S+N reps
Slide 22: Key pipeline progress in 2021
Key pipeline progress in 2021 Launching expanded pipeline of innovation FAST-FIX◊ FLEX DOUBLEFLO CORI Meniscal Repair System Inflow/Outflow Pump Surgical System • Launch announced July 2021, first patients • Launch announced April 2021 • Launched in India and Australia in Q2 treated 2021; regulatory
Slide 23: Drive further operational improvement
Drive further operational improvement Progress towards our five-year operations efficiency plan Manufacturing network optimisation ✓ Announced plans to sell or close five smaller factories ✓ Changes will simplify the network, enable greater efficiency ✓ Construction of large-scale, high- technology
Slide 24: Key messages
Key messages Improved growth in Q2, as end markets continue to recover On track for 2021 revenue and margin guidance Delivering on our 2021 priorities: • returning to top-line growth and recapturing momentum • driving further operational improvement • continuing to respond effectively to COVID 24
Slide 25: Appendices
Appendices 25
Slide 26: Technical guidance
Technical guidance July 2021 Foreign exchange and acquisitions Translational FX impact on revenue growth(1) c.2.5% Acquisition impact on revenue growth c.1.9% Non-trading items Restructuring costs $145-155m Acquisition and integration costs $35-45m European Medical Device Regulation (MDR) compliance
Slide 27: Franchise revenue analysis
Franchise revenue analysis 2020 2021 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Growth Revenue % % % % % % % $m Orthopaedics (8.3) (34.0) (2.8) (10.2) (14.0) 1.6 43.4 557 Knee Implants (10.6) (46.9) (9.5) (16.2) (21.0) (10.3) 58.8 226 Hip Implants (8.6) (26.9) 7.1 (0.5)
Slide 28: Regional revenue analysis
Regional revenue analysis 2020 2021 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Growth Revenue % % % % % % % $m US (4.7) (31.8) 0.9 (4.9) (10.1) 7.1 51.3 677 Other Established Markets(1) (6.3) (30.8) (6.2) (6.2) (12.3) (1.8) 40.1 422 Established Markets (5.4) (31.4) (1.8
Slide 29: Q2 consolidated revenue analysis
Q2 consolidated revenue analysis Q2 Q2 Reported Underlying Acquisitions/ Currency 2021 2020 growth growth disposals impact Consolidated revenue by franchise $m $m % % % % Orthopaedics 557 364 53.0 43.4 3.5 6.1 Knee Implants 226 137 65.5 58.8 - 6.7 Hip Implants 161 112 43.6 37.2 - 6.4 Other Reconstru
Slide 30: H1 consolidated revenue analysis
H1 consolidated revenue analysis Half year Half year Reported Underlying Acquisitions/ Currency 2021 2020 growth growth disposals impact Consolidated revenue by franchise $m $m % % % % Orthopaedics 1,097 861 27.4 19.2 4.2 4.0 Knee Implants 438 367 19.5 15.8 - 3.7 Hip Implants 315 249 26.6 21.9 - 4.7
Slide 31: 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 31
Slide 32: H1 EPSA
H1 EPSA 2021 2020 Reported $m $m growth Trading profit 459 172 167% Net interest payable (39) (21) Other finance costs (5) (7) Share of results from associates 1 (3) Adjusted profit before tax 416 141 195% Taxation on trading result (76) (24) Adjusted attributable profit 340 117 Weighted average num
Slide 33: Our sustainability strategy and 2020 highlights
Our sustainability strategy and 2020 highlights People Planet Products Creating a lasting positive impact on our A medical technology business with a Innovating sustainably communities positive impact 8,000 hours of employee volunteering in the All sites in Memphis (US) began sourcing Started to dev
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