Smith & Nephew plc · LSE:SN.
Smith & Nephew — Merger or Acquisition (March 2007)
21 slides from Smith & Nephew's merger presentation, Mar 12, 2007
Slide 1: Acquisition of Plus Orthopedics
Acquisition of Plus Orthopedics 12th March 2007
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: Sir Christopher O'Donnell, Chief Executive
Sir Christopher O’Donnell Chief Executive
Slide 4: Our strategy for acquisitions
Our strategy for acquisitions • Seek value-enhancing acquisitions – Unique/additive technologies – Improved channels to market • Particular focus on emerging markets for biological repair of cartilage and bone • Maintain balance sheet flexibility to deliver on opportunities 4
Slide 5: David Illingworth, Chief Operating Officer
David Illingworth Chief Operating Officer
Slide 6: Introduction to Plus Orthopedics
Introduction to Plus Orthopedics • Founded in 1991 • Based in Switzerland • Original business in cementless hips • Among the top players in hips in Germany, the world’s 3rd largest orthopaedics market • Strong player in knees in Germany • Manufacturing in Switzerland and China 6
Slide 7: Acquisition highlights
Acquisition highlights • Purchase price of $889m, including debt • Revenues of $300m in 2006 growth of 16% over 2005 • Profit before interest and tax of $36m in 2006 growth of 33% over 2005 All CHF / US$ conversions at $1 = CHF 1.221 7
Slide 8: Benefits
Benefits • Strengthens European and Asian distribution • Excellent European product portfolio – European designed cementless hip stems – Hinged, fixed and mobile knees • Complementary product range • Highly synergistic business • Earnings accretive from 2008 8
Slide 9: Opportunities
Opportunities • Increased leverage of combined sales force – In Europe and Asia • Production – increased manufacturing leverage – capacity utilisation • Marketing and sales infrastructure efficiencies • Focused integration resources to deliver benefits 9
Slide 10: Complementary products
Complementary products • Hinged knee • Mobile bearing knee • Threaded acetabular cup • Shoulder implants Ring locking BICON-Plus • Toe implants Bi-polar head RT-Plus hinged knee threaded acetabular cup Cementless, rectangular, dual-taper BOFOR Cup PROMOS modular shoulder Metal (CoCr) heads straight
Slide 11: Global market – new #4 in reconstruction
Global market – new #4 in reconstruction Other 6% Biomet 11% Smith & Nephew/PO 12% Stryker 20% DePuy (J&J) 22% Zimmer 29% Source: Company reports/internal research 11
Slide 12: Plus sales force locations
Plus sales force locations 12
Slide 13: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer
Slide 14: Financial highlights - 1
Financial highlights - 1 • Purchase price including debt CHF 1,086m* (US$ 889m) • Financed entirely from bank borrowings – facility in place $ million 2006 2005 Growth Revenue 300 258 16% EBIT 36 27 33% EBITDA 62 48 29% Price / EBIT 25x Price / EBITDA 14x PriceAll/ Revenue 3x * CHF numbers have been
Slide 15: Financial highlights - 2
Financial highlights -2 • EPSA – Broadly neutral in 2007 – Accretive in 2008 and beyond • Return on invested capital – Exceeds WACC in third full year • Year three synergies – Costs: Equivalent to at least 15% of acquired cost base – Revenue: Approximately 15% of current acquired revenue • Cost of s
Slide 16: Summary
Summary • Exciting addition to global Orthopaedic Reconstruction business – takes Smith & Nephew to global #4 • Step change in Europe – doubles our business • Complementary European focussed product range • Strengthened channels to market • Earnings accretive from 2008 16
Slide 17: We are smith&nephew
>KWe are smith&nephew
Slide 18: Appendix
rg smith&nephew Appendix
Slide 19: Proforma revenue by geography 2006
Proforma revenue by geography 2006 USDm % USDm % Smith & Nephew Total US 1,365 49 Reconstruction US 514 56 Europe 867 31 Europe 232 25 ROW 547 20 ROW 173 19 Total 2,779 100 Total 919 100 Plus US 20 7 Europe 258 86 ROW 22 7 Total 300 100 Combined (proforma) US 1,385 45 Europe 1,125 37 ROW 569 18 Tota
Slide 20: Plus Orthopedics – summary income statement
Plus Orthopedics – summary income statement CHF million 2006 2005 Revenue 367 315 Cost of sales (122) (105) Gross profit 245 210 Operating expenses (202) (178) Share of profit of associates 1 1 EBIT 44 33 Financial expenses (net) (19) (6) Profit before tax 25 27 Tax (8) (9) Profit for the year 17 18
Slide 21: Plus Orthopedics – summary balance sheet
Plus Orthopedics – summary balance sheet CHF million 2006 2005 Fixed assets: tangible 108 92 intangible 34 20 investments 9 8 total 151 120 Other non-current assets 28 7 Trade working capital 145 144 Other working capital (32) (28) Deferred taxation (net) 20 17 Employee benefit obligation (19) (23)