Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Q3 2011 Earnings Presentation
30 slides from Smith & Nephew's earnings presentation, 2011
Slide 1: 2011 Third Quarter Results
2011 Third Quarter Results Strong revenue growth. Building on new strategic priorities.
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: Olivier Bohuon, Chief Executive Officer
Olivier Bohuon Chief Executive Officer
Slide 4: Q3 2011 highlights
Q3 2011 highlights • Reported Q3 revenues – $1,032m up 5% underlying – Orthopaedics up 3%: 5th quarter of Reconstruction market outperformance – Endoscopy up 7%: improved European performance – Advanced Wound Management up 5%: growth more than double market rate • Trading profit margin 19.8% – Stron
Slide 5: Q3 2011 – Orthopaedics
Q3 2011 – Orthopaedics • Market conditions consistent with H1 • Knees: market leading • Global revenues $548m in Q3, 3% growth performance continues - US +1%, Europe +3%, RoW +9% • Global Reconstruction growth +2% • Trauma growth stable - Global knees +6% (US +5%, OUS +6%) • Clinical Therapies growt
Slide 6: Q3 2011 - Endoscopy
Q3 2011 - Endoscopy • Improved Resection performance • Strong shoulder and hip repair • Global Revenues $226m in Q3, 7% growth • FAST-FIX™ 360 wider launch – US +3%, Europe +4%, RoW +16% • Visualisation stabilises • Arthroscopy growth +7% – DOR systems disposal – New HD autoclavable - Repair +8% cam
Slide 7: Q3 2011 - Advanced Wound Management
Q3 2011 - Advanced Wound Management • Challenging markets – European market growth c. -3% • 11 new product introductions – ALLEVYN™, ACTICOAT™ • Global Revenues $258m, 5% growth line extension – VERSAJET™ II – US +7%, Europe +2%, RoW +10% – RENASYS™ SOFTPORT • Exudate Management +2%, Infection Manag
Slide 8: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer
Slide 9: Income statement Q3 2011
Income statement Q3 2011 Third Quarter Quarterly Year to Date 2010 2011 Growth 2010 2011 $m $m Reported Underlying $m $m Revenue 941 1,032 10% 5% 2,895 3,164 Trading profit 215 205 (5%) (9%) 691 682 Restructuring and rationalisation costs (1) (5) (13) (7) Amortisation of acquisition intangibles (8)
Slide 10: Income statement Q3 2011
Income statement Q3 2011 Third Quarter Year to Date 2010 2011 2010 2011 $m $m $m $m Profit before taxation 201 188 637 638 Taxation (64) (55) Tax rate* 28.5% (204) (196) Attributable profit 137 133 433 442 Add back: Amortisation of acquisition intangibles 8 9 25 27 Restructuring & acquisition costs
Slide 11: Revenue growth by business segment Q3 2011
Revenue growth by business segment Q3 2011 Actual Currency Underlying Reported % % % Quarter 3* Orthopaedics 7 (4) 3 Endoscopy 12 (5) 7 Advanced Wound Management 12 (7) 5 Group 10 (5) 5 * Q3 2011 comprises 63 trading days (2010 – 63 trading days) 11
Slide 12: Underlying revenue growth by geography & business segment Q3 2011
Underlying revenue growth by geography & business segment Q3 2011 US Growth Europe Growth ROW Growth Total Growth Quarter 3 $m % $m % $m % $m % Orthopaedics 289 1 139 3 120 9 548 3 Endoscopy 85 3 64 4 77 16 226 7 Advanced Wound Management 47 7 124 2 87 10 258 5 Group 421 2 327 3 284 11 1,032 5 12
Slide 13: Profitability by business segment Q3 2011
Profitability by business segment Q3 2011 Blue Sky Adjusted Third Quarter Year to Date Year to Date Revenue Trading Profit Margin Margin Margin 2011 $m $m % % % Orthopaedics 548 85 15.6 20.7 Endoscopy 226 54 23.7 22.2 Advanced Wound Management 258 66 25.4 22.9 Total 1,032 205 19.8 21.5 2010 Orthopae
Slide 14: Free cash flow Q3 2011
Free cash flow Q3 2011 Third Quarter Year to Date 2010 2011 2010 2011 $m $m $m $m Trading profit 215 205 691 682 Share based payment 6 7 17 23 Depreciation and amortisation 63 73 177 201 Capital expenditure (75) (67) (208) (200) Movements in working capital and provisions (4) (9) (82) (49) Trading c
Slide 15: 2011 outlook
2011 outlook • No change in 2011 revenue outlook - Above market growth in Orthopaedic Reconstruction, Endoscopy repair/resection and Advanced Wound Management; sustained improvement in Orthopaedic Trauma • Q4 Group trading margin above 24% • No change in medium-term margin intent - Around 24% margin
Slide 16: Olivier Bohuon, Chief Executive Officer
Olivier Bohuon Chief Executive Officer
Slide 17: New Strategic Priorities
New Strategic Priorities Emerging International Established Markets Markets Markets • Established markets • Emerging markets Advanced Advanced Wound Focused Other • Innovate for value Surgical Management Devices • Simplify and improve our operating model R&D • Supplement the organic Marketing/Regula
Slide 18: Progress to date
Progress to date • Unified Orthopaedics and Endoscopy under single management – Formed Advanced Surgical Devices (ASD) division • Established next layer of ASD management • ASD, Advanced Wound Management and Emerging Markets and International Markets organisations embracing strategic priorities • St
Slide 19: Liberating resources (1)
Liberating resources (1) Expense Actions Cost of goods Review manufacturing facility portfolio Further improvements in manufacturing processes Product portfolio rationalisation Continue field based capital improvement 19
Slide 20: Liberating resources (2)
Liberating resources (2) Expense Actions Sales force Continue with customer specific sales channels productivity Review and optimise our European sales structure General and Efficiencies from combination of Orthopaedics and Endoscopy Administrative – streamline US operations expenses – assessing str
Slide 21: Summary
Summary • Q3 Results – Strong revenue performance, in line with expectations – Two out of three businesses deliver strong margins – Actions taken to materially improve Orthopaedics margin – Q4 2011 Group trading margin above 24% • Making good progress on strategic priorities – Strategic priorities a
Slide 22: Questions
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Slide 23: We are smith&nephew
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Slide 24: Appendices
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Slide 25: Quarterly revenues
Quarterly revenues Smith & Nephew Key Product Line Revenues in $m at Average Rates and Underlying Growth 2010 2011 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Growth* Growth* Growth* Growth* Growth* Growth* Growth* Revenue Growth* % % % % % % % $m % Orthopaedics Reconstruction Knees 9% 3% 6% 4% 5% 5% 7% 202 6% H
Slide 26: Exchange rates
Exchange rates $:€ Q3/10 FY/10 Q3/11 Period end 1.37 1.34 1.34 Average 1.30 1.32 1.41 $:£ Period end 1.58 1.57 1.56 Average 1.55 1.54 1.61 Percentage of Revenue by Geographic Market: Q3 % United States 41 United Kingdom 7 Other Europe 25 Other 27 100 26
Slide 27: Analysis of restructuring and acquisition costs
Analysis of restructuring and acquisition costs P&L Charge Cash Spend Q3 Total to date Q3 Total to date $m $m $m $m EIP - cash costs * 1 118 4 114 - asset w/offs 4 30 n/a n/a Plus Integration - cash costs ** - 95 2 94 - asset w/offs - 28 n/a n/a * Target $125m ** Target $60-80m, plus $15m costs of i
Slide 28: 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 Third Quarter Year to Date 2010 2011 2010 2011 $m $m $m $m Free cash flow 144 138 394 413 Add back: capital expenditure 75 67 208 200 Net cash inflow from operating activities (IAS 7) 219 205 602 613 28
Slide 29: Business days per quarter
Business days per quarter Q1 Q2 Q3 Q4 Full Year 2010 64 64 63 60 251 2011 64 63 63 60 250 2012 64 63 63 61 251 29
Slide 30: New products 2011
New products 2011 Q1 Q2 Q3 Q4 SMF™ Short Modular Femoral Hip System STRUCSURE™ CP Bone Graft LEGION™ XLPE Inserts Substitute HD 1200 Autoclavable Camera VISIONAIRE™ Technology for ACTICOAT™ Ortho SURESHOT™ Humeral System TC Plus SCOLISCORETM AIS DYONICS™ High Visibility Sheath DUROLANE® -SJ LEGION N