Smith & Nephew plc · LSE:SN.
Smith & Nephew — Investor Presentation (November 2016)
40 slides from Smith & Nephew's investor presentation, November 2016
Slide 1: Investor Presentation November – December 2016
Investor Presentation November – December 2016
Slide 2: Forward looking statements
Forward looking statements This document may contain 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”, “i
Slide 3: About Smith & Nephew
About Smith & Nephew 100 Smith & Nephew is a diversified advanced medical technology FTSE100 A constituent of the UK’s Shares S&N has paid a dividend to FTSE100, our shares are traded shareholders on its Ordinary business that supports in London and New York. Shares every year since 1937. healthcare
Slide 4: Today – company of pioneers, over 150 years
Smith & Nephew is a company of pioneers, extending access to advanced medical technologies and enabling better outcomes for patients globally. We’ve been doing this for over 150 years. 50 1896 1914 1856 days after the outbreak of WW1, FROM Thomas James Smith Horatio Nelson Smith entered we received
Slide 5: Our business
Our business PICO™ Negative Pressure Wound Therapy ALLEVYN™ Life Advanced Foam Wound Dressings Advanced Wound Collagenase Advanced Wound Devices JOURNEY™ II BCS SANTYL™ Ointment Care Bi-Cruciate Enzymatic debrider Stabilised Knees Knee System Advanced Wound Bioactives NAVIO™ Surgical System Other Su
Slide 6: Our markets…
Our markets… 2015 Split of Revenues Emerging/ Established International OUS (37%) Markets (15%) We have a balanced global footprint 15,000 US (48%) Employees
Slide 7: Our leading position
Our leading position Zimmer Arthrex Zimmer Biomet Other Convatec Other Biomet 30% 3% 37% 8% 15% 35% DePuy Mitek** Acelity 15% 21% Stryker Advanced 19% Hip & Knee Sports Wound Implants Medicine* Linvatec 5% Management Other Molnlycke 13% 12% DePuy Stryker Coloplast Synthes** 11% 4% 21% 10% 23% 18% Da
Slide 8: Our market growth drivers
Our market growth drivers Emerging Markets Demographics Technology Prevalence Economics Lifestyle 8
Slide 9: Market realities and opportunities
Market realities and opportunities Procedure demand Still room for Ability to pay continues New business models Environment continues to increase innovation to decrease in slowly emerging, Complexities established markets but fragmented Demographic Fuelled by Demonstrate Austerity, Alternative, Sync
Slide 10: Our performance
Our performance Revenue Trading profit Trading cash conversion $4,634m +4%* $1,099m +5%* 23.7% margin 85% 4,617 4,634 1,099 104% 87% 89% 85% 1,055 74% 4,351 4,270 987 4,137 961 965 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Adjusted earnings per share (EPSA) Dividend
Slide 11: Our customers
Our customers Nurses, Nurse specialists Healthcare systems, Retail consumers, Procurement groups Patients Payers, Administrators Surgeons Physicians, GPs 11
Slide 12: Strategic priorities
Strategic priorities Winning Accelerating Innovating Simplifying Supplement in Established development in for value and improving organic Markets Emerging Markets our operating growth through model acquisitions 12
Slide 13: Capital allocation framework
Capital allocation framework 1 Reinvest for 2 Progressive 3 Acquisitions in 4 Return excess organic growth dividend policy line with strategy To shareholders Maintain strong balance sheet to ensure solid investment grade credit metrics 13
Slide 14: Future – a rebalanced Smith & Nephew
Future – a rebalanced Smith & Nephew 2011* Future Lower Higher Growth Growth 65% 67% Improving Strengthening Creating Higher Lower Growth Growth 35% 33% Proportion of Revenue * Excluding Clinical Therapies Higher Growth: Sports Medicine Joint Repair, Trauma & Extremities, Advanced Wound Bioactives a
Slide 15: Group optimisation plan – four levers
Group optimisation plan – four levers Optimising Develop best in class global support functions Functions • Increasing overall Driving Drive savings and capability investments efficiency Procurement Savings • Liberating resources to Simplifying re-invest in Simplify our management structure critical
Slide 16: Q3 and 9 Month 2016 Performance & Full Year Guidance
Q3 and 9 Month 2016 Performance & Full Year Guidance 16
Slide 17: Q3 revenue growth of 2% underlying
Q3 revenue growth of 2% underlying Geographical growth Revenue split Product franchise growth Sports Medicine 8% Joint Repair Arthroscopic Enabling Tech 2% US 2% Trauma & Extremities 1% Other Surgical 12% Knees 4% 0% Est OUS Hips 0% AWC -2% -3% Emerging AWB 6% 5% AWD 0% 5% 10% -5% 5% 15% Underlying
Slide 18: 9 month 2016 (YTD) revenue growth of 3% underlying
9 month 2016 (YTD) revenue growth of 3% underlying Geographical growth Revenue split Product franchise growth Sports Medicine 10% Joint Repair Arthroscopic Enabling Tech 5% US 3% Trauma & Extremities -4% Other Surgical 15% Knees 6% 1% Est OUS Hips 1% -3% AWC -1% Emerging AWB -1% 5% AWD -5% 0% 5% 10%
Slide 19: Full year guidance
Full year guidance • Revenue ‐ improvements in China, as guided; Gulf States remain challenging ‐ AWB full year revenue around 2015 level ‐ four fewer sales days in Q4 ‐ foreign exchange impact for full year of -1% • Trading profit margin ‐ guidance relating to transactional fx & BlueBelt (-180bps)
Slide 20: Strategic Updates: M&A, Syncera, Innovation, Recon, Emerging Markets
Strategic Updates: Recent M&A Update, Syncera, Innovation, Recon, and Emerging Markets 20
Slide 21: ArthroCare – two year update
ArthroCare – two year update strengthened Sports Medicine business integration completed ahead of time $65m cost synergies delivered accelerated growth in Established Markets successful product launches ‐ such as our Rotator Cuff Repair Solutions strong and exciting combined pipeline ‐ i
Slide 22: Blue Belt – six month update
Blue Belt – six month update successful integration strong operational performance expansion of indications: approval of Total Knee first Total Knee case on NAVIO full commercial launch of Total Knee on-track for 2017 Expecting >50% sales growth for full year 22
Slide 23: Complementary products and pipeline
Complementary products and pipeline Blue Belt Technologies What Smith & Nephew brings Most successful partner Current Navio System JOURNEY Uni, ZUK offering STRIDE™ Uni Knee Global reach Total knee arthroplasty Established compatible products R&D Revision knee Clinical and marketing strength program
Slide 24: The Syncera solution
The Syncera solution Value 1 Hip/Knee implant solutions for progressive customers Products from Smith & Nephew addressing the vast Clinically proven 2 majority of primary joint procedures Automation Customer interfaces using innovative technology to 3 reduce cost while improving efficiency Full supp
Slide 25: Syncera
Syncera • Interest in Syncera continues to exceed expectations ‐ CJR is stimulating additional interest ‐ but conservative market segment • Good engagement with providers on future models of healthcare • Broadening remit of Syncera team ‐ pure Syncera solutions ‐ unique supporting technologies, risk
Slide 26: Pioneering innovative technologies and models
Pioneering innovative technologies and models Sports Medicine Hip & Knee Wound • Leading knee , hip • VERILAST™ • ALLEVYN™ Life TODAY: and shoulder technology • PICO™ Drive growth with portfolios • JOURNEY™ II family • SANTYL™ differentiated products • COBLATION™ & • ZUK uni knee DYONICS™ • Rotator
Slide 27: Advanced Wound Management: Disease lens driving innovation
Advanced Wound Management: Disease lens is driving our view of innovation Care Diagnosis Data Driven Prevention Treatment Coordination & Detection Healthcare & Monitoring • Deep tissue • Point of care • Healing • Clinical • Best-in-class injury detection diagnostics technologies algorithms medical e
Slide 28: Reconstruction – focused on areas of growth
Reconstruction – focused on areas of growth • Pioneering products – VERILAST◊ is a unique bearing surface – JOURNEY◊ II is designed to provide higher levels of patient satisfaction • Differentiated marketing – speaking to surgeons and their patients – US marketing campaigns with measurable returns •
Slide 29: Accelerating development in Emerging Markets
Accelerating development in Emerging Markets Quarterly revenue development 30% SUPPORTIVE MARKET CONTEXT: Revenue as proportion of group (%) • economic growth 25% FY 2015 • higher healthcare spending OUR ACTIONS: 15% 20% • expansion of premium product range Q1 • mid-tier strategy • medical education
Slide 30: China – improvements expected in H2
China – improvements expected in H2 Smith & Nephew sales trajectory in China 2014 2015 2016 FY Q1 Q2 Q3 Q4 Q1 Q2 H2e Reconstruction Sports Medicine Trauma Advanced Wound Management 30
Slide 31: Mid-tier – new emerging markets business model
Mid-tier – new emerging markets business model Mid-tier commercial model Independent Mid-tier sales organisation Good quality products Dedicated at lower prices leadership Common shared Different business services model Manufacturing & design efficiency Different service model Separate sales Differe
Slide 32: Appendices
Appendices >t smith&nephew 32
Slide 33: Franchise revenue analysis
Franchise revenue analysis 2015 2016 Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Sports Medicine, Trauma & OSB 5 4 2 5 4 5 4 457 4 Sports Medicine Joint Repair 9 7 4 9 7 11 10 140 8 Arthroscopic Enabling Technologies (2) 1 (2) 3 -
Slide 34: Regional revenue analysis
Regional revenue analysis 2015 2016 Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Geographic regions US 1 4 4 9 5 8 4 540 2 Other Established Markets (2) 3 1 2 1 4 1 401 - Established Markets - 3 3 6 3 6 3 941 1 Emerging Markets 22
Slide 35: H1 Trading income statement
H1 Trading income statement 2016 2015 $m $m Revenue 2,328 2,272 Cost of goods sold (632) (566) Gross profit 1,696 1,706 Gross profit margin* 72.8% 75.1% Selling, general and admin (1,100) (1,084) Research and development (113) (110) Trading profit 483 512 Trading profit margin 20.8% 22.5% * includes
Slide 36: H1 EPSA and EPS
H1 EPSA and EPS Growth 2016 2015 Reported CER Underlying $m $m Trading profit 483 512 -6% -4% -3% Net interest payable (24) (21) Other finance costs (6) (7) Share of results from associate - (3) Adjusted profit before tax 453 481 Taxation (119) (131) Tax rate 26.3% Adjusted attributable profit 334 3
Slide 37: H1 Free cash flow
H1 Free cash flow 2016 2015 $m $m Trading profit 483 512 Share based payment 14 13 Depreciation and amortisation 147 148 Capital expenditure (174) (161) Movements in working capital and provisions (215) (130) Trading cash flow 255 382 Trading cash conversion 53% 75% Restructuring, rationalisation, a
Slide 38: Management
Management Olivier Bohuon Chief Executive Officer Olivier joined the Board and was appointed Chief Executive Officer in April 2011. Olivier has had extensive international experience within a number of pharmaceutical and healthcare companies. Prior to joining Smith & Nephew, he was President of Abbo
Slide 39: Investor Relations Contacts
Investor Relations Contacts Ingeborg Øie Kate Gibbon VP, Investor Relations Investor Relations Manager E: ingeborg.oie@smith-nephew.com E: kate.gibbon@smith-nephew.com T: +44 (0) 207 960 2285 T: +44 (0) 207 960 2339 Smith & Nephew plc 15 Adam Street London WC2N 6LA T: +44 (0) 207 401 7646 39
Slide 40: Smith & Nephew – supporting healthcare professionals
a! ° 74 smith&nephew Supporting healthcare professionals for over 150 years
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