Smith & Nephew Plc · LSE:SN.

Smith & Nephew — Q1 2012 Earnings Presentation

31 slides from Smith & Nephew's earnings presentation, May 2012

  1. Slide 1: 2012 First Quarter Results

    Pe ad 7 2012 First Quarter Results

  2. 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"

  3. Slide 3: Olivier Bohuon, Chief Executive Officer

    Olivier Bohuon Chief Executive Officer

  4. Slide 4: Q1 2012 Highlights

    Q1 2012 Highlights • Reported Q1 revenues $1,079m, up 3% underlying • Trading profit $252m, up 5% underlying • Trading profit margin 23.3%, up 50 bps • EPSA 19.5¢, up 6% • Net debt reduced to $28m 4

  5. Slide 5: Q1 Revenue growth

    Q1 Revenue growth Geographic growth Revenue split Product franchise growth Knee +6% US +2% Hip -2% ASD Joint Repair +7% Enab Tech +3% +1% Est OUS Trauma -1% Other ASD AWM AWM +12% EM/IM +5% 12% 8% 4% 0% -2% 0% 2% 4% 6% 8% Underlying change (%) Underlying change (%) 5 Note: ‘Other ASD’ includes Clini

  6. Slide 6: Advanced Surgical Devices – Knee and Hip Implants

    Advanced Surgical Devices – Knee and Hip Implants • Revenue performance – Knees: global +6%, US +3%, OUS +9% ($235m) – Hips: global -2%, US -4%, OUS +1% ($179m) • Commentary – Knee Implants continue to outperform market – same trends in hips as in recent quarters POLARCUP◊ Dual Mobility Hip System –

  7. Slide 7: Advanced Surgical Devices – Sports Medicine and Trauma

    Advanced Surgical Devices – Sports Medicine and Trauma • Revenue performance – Sports Medicine Joint Repair +7% ($129m) – Arthroscopic Enabling Technologies +1% ($107m) – Trauma -1% ($114m) • Commentary – FAST-FIX◊ 360 Meniscal Repair System growth – building on strong position in ACL repair – Traum

  8. Slide 8: Advanced Wound Management

    Advanced Wound Management • Revenue performance – Exudate Management +0% ($64m) – Infection Management +6% ($30m) – other AWM (including NPWT) +6% ($146m) • Commentary ADERMA Dermal Pad – wholesaler stocking we highlighted in Q4 reversed – now around 20% NPWT share in Europe – 5 product launches 8

  9. Slide 9: Adrian Hennah, Chief Financial Officer

    Adrian Hennah Chief Financial Officer

  10. Slide 10: Income statement Q1 2012

    Income statement Q1 2012 First Quarter Quarterly growth 2012 2011 Underlying Reported $m $m Revenue 1,079 1,055 3% 2% Trading profit 252 241 5% 5% Restructuring and rationalisation costs (6) (1) Amortisation of acquisition intangibles (10) (9) Operating profit 236 231 Net interest cost (2) (2) Other

  11. Slide 11: Income statement Q1 2012

    Income statement Q1 2012 First Quarter 2012 2011 $m $m Profit before taxation 233 228 Taxation (72) (72) Tax rate* 30.1% Attributable profit 161 156 Add back: Amortisation of acquisition intangibles 10 9 Restructuring & rationalisation costs 6 1 Tax on excluded items (3) (2) Adjusted attributable pr

  12. Slide 12: Underlying revenue growth by geography & business segment Q1 2012

    Underlying revenue growth by geography & business segment Q1 2012 Emerging and Established Markets International Markets Group US Growth Other Growth Total Growth Total Growth Total Growth Quarter 1 $m % $m % $m % $m % $m % Advanced Surgical Devices 398 - 356 4 754 2 85 13 839 3 Advanced Wound Manag

  13. Slide 13: Profitability by business segment Q1 2012

    Profitability by business segment Q1 2012 First Quarter Revenue Trading Profit Margin 2012 $m $m % Advanced Surgical Devices 839 202 24.1 Advanced Wound Management 240 50 20.8 Group 1,079 252 23.3 2011 $m $m % Advanced Surgical Devices 823 194 23.6 Advanced Wound Management 232 47 20.1 Group 1,055 2

  14. Slide 14: Free cash flow Q1 2012

    Free cash flow Q1 2012 First Quarter 2012 2011 $m $m Trading profit 252 241 Share based payment 9 7 Depreciation and amortisation 70 64 Capital expenditure (58) (73) Movements in working capital and provisions (81) (33) Trading cash flow 192 206 Restructuring, rationalisation & acquisition costs (16

  15. Slide 15: 2012 outlook

    2012 outlook • No change from February Outlook • Revenue – Reconstruction close to market rate – Trauma slightly below market rate – Sports Medicine/Arthroscopy slightly above market rate – Advanced Wound Management above market rate • Modest improvement on 2011 margin 15

  16. Slide 16: Olivier Bohuon, Chief Executive Officer

    Olivier Bohuon Chief Executive Officer

  17. Slide 17: Strategic priorities – progress update

    Strategic priorities – progress update Acquisitions Innovate for Established operations Emerging Improve Markets Markets value Actions ASD Europe: organisational restructuring ongoing   ASD Europe/AWM global: commenced Process Optimisation project   Emerging Markets: Brazil GM appointed  Emergi

  18. Slide 18: Summary

    Summary • Good revenue performance, in line with expectations • Trading profit and margin improvement • High pace of introducing new innovation and products • Progressing actions to deliver Strategic Priorities for 2012 18

  19. Slide 19: Questions

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  20. Slide 20: We are smith&nephew

    +“ We are smith&nephew

  21. Slide 21: Appendices

    >¢ smith&nephew Appendices

  22. Slide 22: Product line revenues and underlying growth

    Product line revenues and underlying growth 2011 2012 Q1 Q2 Q3 Q4 Full Year Q1 Revenue Growth Revenue Growth Revenue Growth Revenue Growth Revenue Growth Revenue Growth $m % $m % $m % $m % $m % $m % Advanced Surgical Devices Reconstruction Knee Implants 224 5 220 7 202 6 223 2 869 5 235 6 Hip Implan

  23. Slide 23: Definitions of product lines

    Definitions of product lines Category Products Included Advanced Surgical Devices Reconstruction Knee Implants Knee implants Hips Implants Hip implants Knee Repair, Shoulder Repair, Hip Repair, Extremities Repair (including Hip and Sports Medicine Joint Repair Extremities Blades, RF and Instruments)

  24. Slide 24: Revenue growth by business segment Q1 2012

    Revenue growth by business segment Q1 2012 Reported Currency Underlying Quarter 1* % % % Advanced Surgical Devices 2 1 3 Advanced Wound Management 3 2 5 Group 2 1 3 * Q1 2012 comprises 64 trading days (2011 – 64 trading days) 24

  25. Slide 25: Exchange rates

    Exchange rates Q1/11 FY/11 Q1/12 $:€ Period end 1.41 1.29 1.33 Average 1.37 1.39 1.31 $:£ Period end 1.60 1.55 1.60 Average 1.60 1.60 1.57 Q1 Revenue by Geographic Market % United States 41 United Kingdom 6 Other Europe 27 Other 26 25 100

  26. Slide 26: Analysis of restructuring costs

    Analysis of restructuring costs P&L Charge Cash Spend Q1 Total to date Q1 Total to date Restructuring $m $m $m $m Cash costs* 6 32 16 25 Asset w/offs* - - n/a n/a * Target $160m cash costs and $40m asset write-offs 26

  27. Slide 27: 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 2012 2011 $m $m Free cash flow 96 139 Add back: capital expenditure 58 73 Net cash inflow from operating activities (IAS 7) 154 212 27

  28. Slide 28: Business days per quarter

    Business days per quarter Q1 Q2 Q3 Q4 Full Year 2011 64 63 63 60 250 2012 64 63 63 61 251 28

  29. Slide 29: Bioventus transaction – financial effects

    Bioventus transaction – financial effects • In Q1 2012, the Clinical Therapies and Biologics division generated sales of $58m and trading profit of $10m. • In 2011, the Clinical Therapies and Biologics division generated sales of $237 million and trading profit of $48 million, with net operating ass

  30. Slide 30: Bioventus – transaction overview

    Bioventus – transaction overview • Creation of a new entity, to be owned 51% by Essex Woodlands and 49% by Smith & Nephew • The new entity will comprise Smith & Nephew’s existing Clinical Therapies and Biologics business, along with $20 million cash contributed by Essex Woodlands and a $(160) millio

  31. Slide 31: 2012 key new products progression

    2012 key new products progression Q1 Q2 • POLARCUP◊ Dual Mobility Hip Knee and Hip Implants System (US launch) • HEALICOIL◊ PK Suture Anchor • ENDOBUTTON CL◊ Ultra 10mm • CLANCY◊ Flexible Drill System Sports Medicine Joint Repair • ACUFEX PINPOINT◊ Anatomic Fixation Device • TRUCLEAR◊ Ultra 4.0 ACL

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