Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Q1 2009 Earnings Presentation
26 slides from Smith & Nephew's earnings presentation, 2009
Slide 1: 2009 First Quarter Results
2009 First Quarter Results Enabling people to live healthier, more active lives
Slide 2: Forward looking statements
Forward looking statements This presentation contains certain "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. In particular, statements regarding expected revenue growth and trading margins discussed under "Outlook" are forward- looking sta
Slide 3: David Illingworth, Chief Executive
David Illingworth Chief Executive sustainable profitable growth
Slide 4: Key business achievements in Q1 – good performance in slower markets
Key business achievements in Q1 – good performance in slower markets • Revenue $865m, 4% growth for the quarter • Trading profit - $183m up 12% – Trading margin 21.2% of revenues up 120 basis points • EPSA increased to 13.1¢ • Orthopaedics – revenues grew 4% in slower markets • Endoscopy - arthrosco
Slide 5: Orthopaedics – Q1 2009
Orthopaedics – Q1 2009 Q1 Achievements •Plus litigation settled •Deferred Prosecution Global revenues $508m up 4% Agreement ended Reconstruction revenues up 3% •R3™ Acetabular System - Global hip revenue growth 2% launch at AAOS •OXINIUM™ Oxidised - Global knee revenue growth 5% Zirconium in Japan T
Slide 6: Endoscopy - Q1 2009
Endoscopy - Q1 2009 Q1 outcomes •Repair maintains 11% growth •Facility to close Revenues $179m •Capital revenues hold Arthroscopy up 3%, despite capital sales impact back growth Visualisation revenues fall 12% w/w, 17% in US Margin 21.3% Solid Q1 for sports medicine in difficult Endoscopy conditions
Slide 7: Advanced Wound Management – Q1 2009
Advanced Wound Management – Q1 2009 Q1 achievements •Production testing ahead of China factory start-up Revenues of $178m and global growth of 9% •NPWT business US revenue growth 8% building – launched RENASYS™ and Outside US grows 9% RENASYS Go NPWT revenues grow globally •US and European Margin 14
Slide 8: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer sustainable profitable growth
Slide 9: Income statement Q1 2009
Income statement Q1 2009 First Quarter 2008 2009 % Growth $m $m Reported Underlying Revenue 911 865 (5)% 4% Trading profit 182 183 1% 12% Restructuring and acquisition costs (15) (16) Inventory revaluation (15) - Amortisation of acquisition intangibles (10) (8) Operating profit 142 159 Net interest
Slide 10: Income statement Q1 2009
Income statement Q1 2009 First Quarter 2008 2009 $m $m Profit before taxation 126 146 Taxation (43) (48) Tax Rate** 31.8% Attributable profit 83 98 Add back: Amortisation of acquisition intangibles 10 8 Restructuring & acquisition costs 15 16 Inventory revaluation 15 - Tax on excluded items (9) (6)
Slide 11: Revenue growth by business segment Q1 2009
Revenue growth by business segment Q1 2009 Actual Currency Underlying Quarter 1* % % % Orthopaedics (4) 8 4 Endoscopy (8) 8 - Advanced Wound Management (6) 15 9 Group (5) 9 4 * Q1 2009 comprises 61 trading days (2008 – 62 trading days) 11
Slide 12: Underlying revenue growth by geography & business segment Q1 2009
Underlying revenue growth by geography & business segment Q1 2009 US Growth Europe Growth ROW Growth Total Growth Quarter 1 $m % $m % $m % $m % Orthopaedics 273 3 147 (2) 88 16 508 4 Endoscopy 83 (4) 58 2 38 8 179 - Advanced Wound Management 35 8 95 6 48 15 178 9 Group 391 2 300 1 174 14 865 4 12
Slide 13: Profitability by business segment Q1 2009
Profitability by business segment Q1 2009 Revenue Trading Profit Margin 2009 $m $m % Orthopaedics 508 119 23.4 Endoscopy 179 38 21.3 Advanced Wound Management 178 26 14.6 Total 865 183 21.2 2008 Orthopaedics 528 125 23.7 Endoscopy 194 40 20.6 Advanced Wound Management 189 17 9.0 Total 911 182 20.0 1
Slide 14: Free cash flow Q1 2009
Free cash flow Q1 2009 First Quarter 2008 2009 $m $m Trading profit 182 183 Share based payment 5 4 Depreciation and amortisation 62 56 Inventory step-up utilisation 15 - Capital expenditure (61) (42) Movements in working capital and provisions (84) (73) Trading cash flow 119 128 Restructuring, rati
Slide 15: 2009 outlook
2009 outlook • Revenue growth – Market growth rates subject to macro-economic uncertainty – Relative to market: * Ortho – approaching market growth * Endo - continue to grow slightly below the market * AWM - excluding NPWT, at or slightly above served market • Focused on end 2010 margin of 24.5%. Ri
Slide 16: David Illingworth, Chief Executive
David Illingworth Chief Executive sustainable profitable growth
Slide 17: Summary
Summary • Resilient revenue growth – Orthopaedics – solid performance – Endoscopy – good performance in tough conditions – Advanced Wound Management – good growth in all markets JOURNEY™ Active Knee Solutions • Margin improvement continues • Well positioned for ongoing growth PERI-LOC™ Peri-articula
Slide 18: Questions?
Questions? sustainable profitable growth
Slide 19: We are smith&nephew
> We are smith&nephew
Slide 20: Appendices
4 smith&nephew Appendices
Slide 21: Quarterly revenues
Quarterly revenues Smith & Nephew Key Product Line Revenues in $m at Average Rates and Underlying Growth* 2008 2009 Q1 Q2 Q3 Q4 Full Year Q1 Growth* Growth* Growth* Growth* Revenue Growth* Revenue Growth* % % % % $m % $m % Orthopaedics Reconstruction Knees 1% 9% 10% 9% 759 7% 184 5% Hips 4% 7% 3% 5%
Slide 22: Exchange rates
Exchange rates €:$ Q1/08 FY/08 Q1/09 Period end 1.58 1.39 1.33 Average 1.50 1.46 1.30 £:$ Period end 1.99 1.44 1.43 Average 1.98 1.84 1.43 Percentage of Revenue by Geographic Market: Q1 % United States 45 United Kingdom 7 Other Europe 28 Other 20 22
Slide 23: Analysis of restructuring and acquisition costs
Analysis of restructuring and acquisition costs P&L Charge Cash spend Q1 Total to date Q1 Total to date $m $m $m $m EIP – cash costs* 7 75 4 64 – asset w/offs 4 15 n/a n/a Plus Integration – cash costs** 4 88 7 77 – asset w/offs - 13 n/a n/a * Target $125m over three years ** Target $60-80m, plus $1
Slide 24: 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 First Quarter 2008 2009 $m $m Free cash flow 42 53 Add back: capital expenditure 61 42 Net cash inflow from operating activities (IAS 7) 103 95 24
Slide 25: Business days per quarter
Business days per quarter Q1 Q2 Q3 Q4 Full Year 2008 62 64 63 63 252 2009 61 63 63 64 251 25
Slide 26: New products 2009
New products 2009 Q1 Q2 Q3 Q4 PROMOS™ Total Shoulder R3™ Metal (US) LEGION™ Primary Porous System Cap BHR™ Mid Head Resection PERI-LOC™ Screws & Trays R3™ Ceramic (US) (OUS) TRIGEN™ Semi-extended Tibia INTERTAN™ CHS VLP Foot Locked Plating System Nail Insertion Instruments XL Hip Scopes BICEPTOR™ Te