Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Smith+Nephew — Q4 2024 Earnings Presentation
41 slides from Smith & Nephew's earnings presentation, Feb 25, 2025
Slide 1: Fourth Quarter and Full Year 2024
Fourth Quarter and Full Year 2024
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: Transformation on track
Transformation on track 12-Point Plan delivery driving financial improvement • Operations and commercial actions leading to higher growth; margin expansion from leverage and productivity improvements; better working capitalcand asset utilisation drive cash flow and returns • Good availability of con
Slide 4: A comprehensive programme to drive value
A comprehensive programme to drive value Fixing Improving Accelerating Orthopaedics productivity Sports & AWM Initiatives 1-5 Initiatives 6-10 Initiatives 11-12 Rewire Orthopaedics commercial delivery Improve value and cash processes Scale Negative Pressure Wound Therapy • Rebuild demand planning pr
Slide 5: 12-Point Plan achievements
12-Point Plan achievements Comprehensive programme of Shift to consistently higher revenue actions taken growth Plan initiatives delivered across all aspects Four consecutive years of growth above of the business historical average Move to global business unit model, driving Growth underpinned by su
Slide 6: 12-Point Plan: Consistently higher revenue growth
12-Point Plan: Consistently higher revenue growth Underlying revenue growth 2016-25e Sustained acceleration Historic growth COVID disruption Consistently higher growth • Revenue growth above historical levels for fourth consecutive year 10.3% 7.2% Fixed operational foundations 5.3% c.5.0% 4.4% 4.7%
Slide 7: 12-Point Plan: Waves of innovation delivery
12-Point Plan: Waves of innovation delivery Continuing to drive existing platforms: CORI and REGENETEN◊ 10 new CORI features launched Growing strong double-digit on since 2022 rotator cuff, new tendon applications >60% Robotics installed base of >1,000 510k clearance for use in extra- of 2024 growth
Slide 8: Actions taken on business structure and cost base
Actions taken on business structure and cost base Global business units to drive customer Total gross run-rate savings of centricity, efficiency, performance c.$325-375m in 2027 From To QARA Sales & Marketing Customer centricity Specialised and focused Manufacturing & diluted by franchise global exe
Slide 9: 12-Point Plan: Cost efficiency and margin expansion
12-Point Plan: Cost efficiency and margin expansion 2022-4 productivity gains offset significant external pressures FY 2022-24 trading margin bridge • 410bps of incremental cost savings in two years, offsetting unexpected external headwinds and above normal inflation • 80bps of trading margin expans
Slide 10: 12-Point Plan: Step up across ROIC and cash metrics
12-Point Plan: Step up across ROIC and cash metrics Free cash flow ($m) Restructuring costs ($m) 220 >600 551 123 129 c.45 2023 2024 2025e 2023 2024 2025e >$400m increase in 2024; further P&L charge to reduce by >75% improvement expected in 2025 in two years Days sales of inventory (DSI)* ROIC >8.5%
Slide 11: Q4 2024 Revenue
Q4 2024 Revenue
Slide 12: Q4 2024 summary revenue performance
Q4 2024 summary revenue performance Growth by Business Unit* Group 8.3% Orthopaedics 6.0% $608m Sports Med & ENT 7.8% $494m Total revenue of $1,571m AWM 12.2% • Underlying revenue growth +8.3%, $469m +7.8% reported • Two extra trading days vs Q4 2023 Growth by Region* • Strong finish from US Sports,
Slide 13: Orthopaedics
Orthopaedics US recon growth continues to improve sequentially; T&E momentum returns Revenue of $608m: Q4 sales factors +6.0% underlying* • Global Knees and Hips +2.4% and +4.7%: +5.5% reported • US Knees and Hips +5.4% and +7.6%, showing continued growth improvement, both as reported, and after adj
Slide 14: US Recon steadily improving both on underlying growth and adjusted for trading days
US Recon steadily improving both on underlying growth and adjusted for trading days US Knees +5.4% -1.3% -1.7% +2.0% +0.7% -3.8% -3.5% Improvements in product availability, -5.0% -3.3% commercial execution and key launches Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 driving improvement in US Rec
Slide 15: Sports Medicine & ENT
Sports Medicine & ENT Established markets led by REGENETEN, China VBP remains headwind into 2025 Revenue of $494m: Q4 sales factors +7.8% underlying* Revenue of $441m: • Sports Medicine Joint Repair +5.3%: +7.1% reported • +15.9% ex-China; continued strong growth from REGENETEN in rotator cuff +5.5%
Slide 16: Advanced Wound Management
Advanced Wound Management Skin substitutes and NPWT drive double-digit business unit growth Revenue of $469m: Q4 sales factors +12.2% underlying* • Advanced Wound Care +1.9%: ◊ +11.7% reported • Led by ALLEVYN family of foam dressings • Advanced Wound Bioactives +20.3%: Revenue • Growth rate reflect
Slide 17: FY 2024 Financials
FY 2024 Financials 17
Slide 18: FY revenue growth by Business Unit
FY revenue growth by Business Unit $m 83 5,810 108 -34 104 5,549 FY 2023 Orthopaedics Sports Medicine AWM Translational FY 2024 & ENT FX impact Revenue ($m) 2,305 1,824 1,681 5,810 Reported growth 4.1% 5.5% 4.7% (0.6%) 4.7% Underlying growth 4.6% 6.2% 5.1% 5.3% 18
Slide 19: FY trading income statement
FY trading income statement FY 2024 FY 2023 Reported $m $m growth Revenue 5,810 5,549 4.7% Cost of goods sold (1,725) (1,626) Gross profit 4,085 3,923 4.1% Gross profit margin 70.3% 70.7% Selling, general and admin (2,748) (2,653) 3.6% Research and development (288) (300) (3.9)% Trading profit 1,049
Slide 20: FY operating profit and EPSA
FY operating profit and EPSA FY 2024 FY 2023 Reported $m $m growth IFRS operating profit 657 425 54.6% IFRS operating profit margin 11.3% 7.7% Adjusted earnings per share ("EPSA") 84.3¢ 82.8¢ 1.7% Earnings per share ("EPS") 47.2¢ 30.2¢ 56.3% Dividend per share 37.5¢ 37.5¢ - 20
Slide 21: FY 2024 trading margin bridge
FY 2024 trading margin bridge 60 basis points expansion over 2023 FY 2024: +60bps yoy 1.6% 18.1% 17.5% 1.3% (1.3%) (0.1%) (0.9%) FY 2023 Input cost FX China VBP Revenue Manufacturing, FY 2024 trading margin inflation pricing leverage distribution trading margin & merit and operating expense savings
Slide 22: 2023-24 Efficiency savings across Group
2023-24 Efficiency savings across Group Gross run-rate savings of 2024 year-end headcount c.9% ~$210m* at the end of 2024 lower than in 2022 -9% 19,012 Manufacturing & Procurement R&D & QARA 18,452 Sales & Marketing 17,349 Business Support Warehouse & Distribution 2022 2023 2024 22 *Gross savings be
Slide 23: 2024 progress sets up for mid-term margin delivery
2024 progress sets up for mid-term margin delivery 2026+ Cost savings continued driving expansion: expansion 19-20% Leverage more than 18.1% offsetting inflation • Productivity and 12PP savings • Revenue leverage • Lower manufacturing c.(110)bps c. (10)bps costs • Ongoing but moderating input cost i
Slide 24: Trading margin by business unit
Trading margin by business unit +120bps +50bps Opex savings and leverage across all business units in 2024 22.8% 24.0% 23.2% 23.7% +20bps 2025 trading margin expansion to 11.3% 11.5% be led by Orthopaedics Business unit margins reflect full allocation of attributable costs FY 2023 FY 2024 FY 2025 FY
Slide 25: Inventory by business unit
Inventory by business unit DSI below prior year in all BUs; continued improvement remains a focus for 2025 Group and Business Unit DSI* 600 -23 days 900 530 823 507 801 Group DSI down 23 days during 500 800 2024, due to progress on launches and set deployments 400 700 Similar reductions achieved acr
Slide 26: ROIC by Business Unit
ROIC by Business Unit Group 7.3% 10.9% WACC 8.0% >8.5% 7.9% 7.4% 6.6% 5.9% ROIC improved by 150bps in 2024, from increased trading margin, lower non-trading costs; improved capital intensity in Orthopaedics 2019 2020 2021 2022 2023 2024 2025e Focus on driving improved returns – group ROIC expected t
Slide 27: FY cash flow and cash conversion
FY cash flow and cash conversion Improved trading and free cash flow on lower capex, working capital, restructuring FY 2024 FY 2023 $m $m Trading profit 1049 970 1200 140% 95% 120% 1000 Share based payment 40 39 101% 88% 100% Depreciation and amortisation 412 375 800 83% 65% 80% Lease liability repa
Slide 28: Strong balance sheet
Strong balance sheet Leverage 2.1x 1.9x ratio: $m 2,776 186 2,709 (29) 327 381 (932) Net debt at Free cash flow Capex Dividends Acquisitions Other Net debt at 31 December 2023 pre capex 31 December 2024 28 Net debt includes lease liabilities
Slide 29: Outlook
Outlook Underlying revenue growth of around 5% • Ongoing improvement in US recon through 12-Point Plan; continued strong performance of Sports (ex-China), ENT and AWM c • Guidance includes c.150bps growth headwind from China; one fewer trading day than 2024 2025 trading margin of 19.0-20.0% • Expans
Slide 30: Transformation on track
Transformation on track 12-Point Plan delivery driving financial improvement • Operations and commercial actions leading to higher growth; margin expansion from leverage and productivity improvements; better working capitalcand asset utilisation drive cash flow and returns • Good availability of con
Slide 31: Appendices
Appendices 31
Slide 32: Technical guidance
Technical guidance February 2025 Foreign exchange and acquisitions Translational FX impact on revenue growth(1) c.(0.2)% Acquisition impact on revenue growth - Non-trading items Restructuring costs c. $45m Acquisition and integration $1-5m European Medical Device Regulation (MDR) - compliance costs
Slide 33: Q4 consolidated revenue analysis by Business Unit
Q4 consolidated revenue analysis by Business Unit Q4 Q4 Reported Underlying Acquisitions/ Currency 2024 2023 Growth growth disposals impact $m $m % % % % Orthopaedics 608 576 5.5 6.0 - (0.5) Knee Implants 246 242 1.7 2.4 - (0.7) Hip Implants 161 155 4.0 4.7 - (0.7) Other Reconstruction 39 31 23.7 23
Slide 34: FY consolidated revenue analysis by Business Unit
FY consolidated revenue analysis by Business Unit FY FY Reported Underlying Acquisitions/ Currency 2024 2023 Growth growth disposals impact $m $m % % % % Orthopaedics 2,305 2,214 4.1 4.6 - (0.5) Knee Implants 947 940 0.7 1.3 - (0.6) Hip Implants 619 599 3.2 4.0 - (0.8) Other Reconstruction 131 111 1
Slide 35: Quarterly revenue analysis by Business Unit
Quarterly revenue analysis by Business Unit 2023 2024 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth % % % % % % % % % % Orthopaedics 3.9 5.8 8.3 4.9 5.7 4.4 5.8 2.3 6.0 4.6 Knee Implants 5.0 7.8 5.7 3.6 5.5 1.7 2.1 (0.9) 2.4 1.3 Hip
Slide 36: Quarterly revenue analysis by region
Quarterly revenue analysis by region 2023 2024 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Growth Growth Growth Growth Growth Growth Growth Growth Growth Growth % % % % % % % % % % US 11.8 6.3 7.2 6.2 7.8 (0.6) 3.6 4.0 11.9 4.8 Other Established Markets(1) 7.0 8.5 7.8 6.1 7.3 4.8 6.9 6.8 8.2 6.7 Established Marke
Slide 37: FY trading income statement
FY trading income statement FY 2024 FY 2023 Reported $m $m growth Revenue 5,810 5,549 4.7% Cost of goods sold (1,725) (1,626) Gross profit 4,085 3,923 4.1% Gross profit margin 70.3% 70.7% Selling, general and admin (2,748) (2,653) 3.6% Research and development (288) (300) (3.9)% Trading profit 1,049
Slide 38: Full year EPSA
Full year EPSA FY 2024 FY 2023 Reported $m $m growth Trading profit 1049 970 8.1% Net interest payable (121) (98) Other finance costs(1) (22) (1) Share of results from associates 2 (9) Adjusted profit before tax 908 862 5.3% Taxation on trading result (173) (140) Adjusted attributable profit 735 722
Slide 39: Trading profit by Business Unit
Trading profit by Business Unit 2023 2024 Trading Trading profit Trading Trading profit profit margin profit margin $m % $m % Orthopaedics 251 11.3 265 11.5 Sports Medicine & ENT 394 22.8 437 24.0 Advanced Wound Management 372 23.2 399 23.7 Segment trading profit 1,017 1,101 Corporate costs (47) (52
Slide 40: Capital allocation framework
Capital allocation framework 1. Invest 2. Acquire • Innovation to drive • New technologies and expand in high growth organic growth segments with strong strategic fit that meet our • Sustainability targets Invest Acquire financial criteria and further embed our ESG agenda Invest Maintain 4. Return 3
Slide 41: Trading days per quarter
Trading days per quarter Q1 Q2 Q3 Q4 Full year 2023 64 63 63 60 250 2024 63 64 63 62 252 2025 62 63 63 63 251 2026 61 63 63 64 251 41