Smith & Nephew plc · LSE:SN.
Smith & Nephew — Smith+Nephew — FY2020 Earnings Presentation
31 slides from Smith & Nephew's earnings presentation, March 2021
Slide 1: Investor Presentation January – March 2021
Investor Presentation January – March 2021
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: Our history
Our history 1914 1856 1896 Days after the outbreak of WW1, Thomas James Smith Horatio Nelson Smith we received an order to provide opened a chemist shop in Hull, entered into apartnership surgical and field dressing 1856 UK and develops a new method with his uncleforming supplies to French From 50 S
Slide 4: FTSE 100 Shares $4.6bn
100 FTSE 100 A constituent of the UK’s FTSE 100, with ADRs Shares S+N has a progressive dividend policy, and has Smith+Nephew is a traded on the New York paid a dividend every portfolio medical Stock Exchange year since 1937 technology business that has been trading for over 160 years, and operates
Slide 5: A portfolio medical technology business
A portfolio medical technology business ALLEVYN◊ LIFE PICO◊ Advanced Foam Advanced Advanced Negative Pressure Wound Dressings Wound Care Wound Devices Wound Therapy JOURNEY◊ II BCS Collagenase Advanced Bi-Cruciate SANTYL◊ Ointment Wound Stabilised Enzymatic debrider Bioactives Knees Knee System ENT
Slide 6: Leading positions in attractive markets
Leading positions in attractive markets Hip & Knee Implants Sports Medicine Advanced Wound Management $12.6bn market $4.6bn market $9.1bn market +2% 2017-19 average growth +5% 2017-19 average growth +5% 2017-19 average growth -15% 2020 growth -12% 2020 growth -3% 2020 growth Others Others 3M 15% 17%
Slide 7: Our performance
Our performance Revenue Trading profit Trading cash conversion $4,560m -12.1%* $683m 15.0% margin 101% 5138 1169 101% 4904 1123 4765 1020 1048 90% 85% 4669 83% 4560 75% 683 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Adjusted earnings per share (EPSA) Dividend per shar
Slide 8: Priorities for 2021
Priorities for 2021 Footer 8
Slide 9: Priorities for 2021 – Strategy and COVID
Priorities for 2021 – Strategy and COVID Return to top-line growth and 1 recapture momentum Drive further operational 2 improvement Continue to respond effectively 3 to COVID 9
Slide 10: Return to top-line growth and recapture momentum
Return to top-line growth and recapture momentum What we have achieved Driving sustainable revenue growth Maximising portfolio potential • Driving higher return from portfolio and growing recent launches Clear strategy for growth • Continuing to drive commercial excellence across franchises • New co
Slide 11: Delivering pipeline of innovation
Delivering pipeline of innovation Key late stage projects Recently launched Key 2021 projects* growth drivers OR3O Dual mobility Porous Knee system Porous offering for Knee portfolio Hip & Knee implants HARMONY Modular Trays New Hip & Knee instruments Streamlined instrument set for THA and TKA ARIA
Slide 12: Demonstrated launch excellence
Demonstrated launch excellence Growth inflections from new products in recent years US Hips growth vs peers Sports Medicine Joint Repair quarterly growth 14.0% 9.8% 3.9% 4.4% REGENETEN -5.4% acquired end 2017 8% OR3O launch -28.9% 6% Q4 2019 OR3O Dual Mobility REGENETEN Bioinductive Implant Q4 2019
Slide 13: Drive further operational improvement
Drive further operational improvement Operations transformation and process efficiencies • Continuing manufacturing network optimisation Operations transformation • Outsourcing of warehousing and distribution • Process transformation, with Lean deployment and greater automation • Simplify end-to-end
Slide 14: Continue to respond effectively to COVID
Continue to respond effectively to COVID Customers Employees Cost control • Support customers in • Flexible and updated • Control discretionary person and remotely working environments costs while COVID outbreak continues • Transform medical • COVID secure sites with education, with new online deplo
Slide 15: 2021 outlook
2021 outlook • COVID-19 impact expected to continue into H1 2021, timing of recovery unclear • We expect substantial underlying revenue growth compared to 2020, with faster recovery in Established Markets − Hips to continue to outperform Knees − Sports Medicine & ENT to rebound strongly − AWM growth
Slide 16: Sustainability targets
Sustainability targets People Planet Products Creating a lasting positive impact A medical technology business Innovating sustainably on our communities with a positive impact By 2022, include sustainability review Between 2020 and 2030, contribute Achieve an 80% absolute reduction in in New Product
Slide 17: Financials
Financials 17
Slide 18: Q4 revenue: $1,326m, -7.1% underlying, -5.8% reported
Q4 revenue: $1,326m, -7.1% underlying, -5.8% reported Revenue split Product franchise growth Emerging Markets $212m Orthopaedics -10.2% Knees -16.2% US $689m Hips -0.5% Other Other Recon -45.6% Established Markets Trauma -1.3% $425m Sports Medicine, ENT -5.2% Geographical growth Sports Medicine Join
Slide 19: FY revenue: $4,560m, -12.1% underlying, -11.2% reported
FY revenue: $4,560m, -12.1% underlying, -11.2% reported Revenue split Product franchise growth Emerging Markets $771m Orthopaedics -14.0% Knees -21.0% US $2,339m Hips -7.4% Other Other Recon -26.1% Established Markets Trauma -5.1% $1,450m Sports Medicine, ENT -13.0% Geographical growth Sports Medici
Slide 20: 2020 quarterly underlying sales development by region
2020 quarterly underlying sales development by region Other established US Emerging markets markets • Limited restrictions on elective • Overall performance stable from • Continued strong end-user surgery reintroduced in some Q3, with mixed trends by market demand in China states • UK and Japan stre
Slide 21: Full year revenue by franchise
Full year revenue by franchise 2020 2019 Reported Underlying $m $m growth growth Group 4,560 5,138 (11.2%) (12.1%) Orthopaedics 1,917 2,222 (13.7%) (14.0%) Sports Medicine & ENT 1,333 1,536 (13.2%) (13.0%) Advanced Wound Management 1,310 1,380 (5.1%) (8.1%) 21
Slide 22: Full year trading income statement
Full year trading income statement 2020 2019 Reported Underlying $m $m growth growth Revenue 4,560 5,138 (11.2%) (12.1%) Cost of goods sold (1,375) (1,326) Gross profit 3,185 3,812 (16.4%) Gross profit margin 69.9% 74.2% Selling, general and admin (2,223) (2,375) Research and development (279) (268)
Slide 23: Trading profit margin
Trading profit margin 22.8% (4.1%) 0.9% 16.7% 2.0% (0.9%) (4.8%) 2019 trading COVID-19 SG&A negative Discretionary Restructuring 2020 trading R&D margin impact on operating cost savings benefits margin before investment COGS leverage R&D, M&A, FX SN — 9 9) Ls 15.0% (0.3%) (0.6%) M&A Transactional 20
Slide 24: Full year free cash flow
Full year free cash flow 2020 2019 $m $m Trading profit 683 1,169 Share based payment 26 32 Depreciation and amortisation 397 368 Lease liability repayments (55) (46) Capital expenditure (443) (408) Movements in working capital and other 82 (145) Trading cash flow 690 970 Trading cash conversion 101
Slide 25: Net debt and capital allocation
Net debt and capital allocation *Net debt includes lease liabilities 25
Slide 26: Appendices
Appendices 26
Slide 27: Technical guidance
Technical guidance February 2021 Foreign exchange and acquisitions Translational FX impact on revenue growth(1) 2.8% Acquisition impact on revenue growth 1.7% Non-trading items Restructuring costs $140-150m Acquisition and integration costs $35-45m European Medical Device Regulation (MDR) compliance
Slide 28: Franchise revenue analysis
Franchise revenue analysis 2019 2020 Full Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Full Year Year Year Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth Growth % % % % % % % % $m % % Orthopaedics 3.9 3.6 3.4 5.1 4.0 (8.3) (34.0) (2.8) (10.2) 1,917 (14.0) Knee Implants 4.1 4.3 4.6 4.7 4.4 (1
Slide 29: Regional revenue analysis
Regional revenue analysis 2019 2020 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Full Year Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % % % $m % US 4.0 2.3 2.7 4.2 3.3 (4.7) (31.8) 0.9 (4.9) 2,339 (10.1) Other Established Markets(1) (0.1) (1.3) (0.3) 2.4
Slide 30: 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 63 64 63 60 250 30
Slide 31: Smith+Nephew
SmithNephew