Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Investor Presentation (March 2018)
32 slides from Smith & Nephew's investor presentation, March 2018
Slide 1: Investor Presentation January – March 2018
Investor Presentation Supporting healthcare January – March 2018 professionals for over 150 years
Slide 2: Forward looking statements
Forward looking statements This document may contain 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", "in
Slide 3: About Smith & Nephew
About Smith & Nephew 100 Smith & Nephew is a diversified FTSE100 A constituent of the UK’s Shares S&N has paid a dividend to advanced medical technology FTSE100, our shares are traded shareholders on its ordinary business that supports in London and New York shares every year since 1937 healthcare p
Slide 4: Today: a company of pioneers for over 150 years
Smith & Nephew is a company of pioneers, extending access to advanced medical technologies and enabling better outcomes for patients globally. We’ve been doing this for over 150 years 50 1896 1914 1856 days after the outbreak of WW1, FROM Thomas James Smith Horatio Nelson Smith entered we received a
Slide 5: Our business
Our business ALLEVYN™ LIFE PICO™ Advanced Foam Negative Pressure Wound Dressings Wound Therapy Advanced Advanced wound devices Collagenase wound care JOURNEY™ II BCS SANTYL™ Ointment Bi-Cruciate Enzymatic debrider Stabilised Knees Knee System Advanced wound bioactives $4.8bn NAVIO™ Other surgical Su
Slide 6: Our markets…
Our markets… We have a balanced global footprint… 6
Slide 7: Our leading position
Our leading position Hip & Sales Knee Implant Sports Medicine Advanced Wound Management Stryker Convatec Zimmer Biomet Stryker Molnlycke 11% 7% Arthrex 20% 10% 33% Other 32% 21% 17% 51% 16% Other Acelity 14% 11% 22% 15% 21% Other Smith & Nephew DePuy Synthes** Smith & Nephew DePuy Mitek** Smith & Ne
Slide 8: Our market growth drivers
Our market growth drivers Emerging markets Demographics Technology Prevalence Economics Lifestyle 8
Slide 9: Market realities and opportunities
Market realities and opportunities Procedure demand Still room for Ability to pay continues New business models Environment continues to increase innovation to decrease in slowly emerging, Complexities established markets but fragmented Demographic Fuelled by Demonstrate Austerity, Alternative, Valu
Slide 10: Our performance
Our performance Revenue Trading Profit Trading cash conversion $4,765m +3%* $1,048m 22.0% margin 90% 4765 1099 104% 89% 90% 4617 4634 4669 1055 1048 87% 85% 74% 75% 1020 4351 987 4270 961 965 4137 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 201
Slide 11: Our customers
Our customers Nurses, Nurse specialists Healthcare systems, Retail consumers, Procurement groups Patients Payers, Surgeons Administrators Physicians, GPs 11
Slide 12: Strategic priorities
Strategic priorities Winning Accelerating Innovating Simplifying Supplement in Established development in for value and improving organic Markets Emerging Markets our operating growth through model acquisitions 12
Slide 13: Capital allocation framework
Capital allocation framework 1 Reinvest for 2 Progressive 3 Acquisitions in 4 Return excess organic growth dividend policy line with strategy To shareholders Maintain strong balance sheet to ensure solid investment grade credit metrics 13
Slide 14: Q4 revenue of $1,278m; growth of 2% underlying
Q4 revenue of $1,278m; growth of 2% underlying Geographical growth Revenue split Product franchise growth Sports Medicine 6% Joint Repair Arthroscopic -3% Enabling Tech US 5% 1% Trauma & Extremities Other surgical 4% Knees 6% 1% Other Est Hips -1% -3% AWC 0% 14% Emerging AWB 14% AWD -5% 5% 15% -5% 5
Slide 15: FY revenue of $4,765m; growth of 3% underlying
FY revenue of $4,765m; growth of 3% underlying Geographical growth Revenue split Product franchise growth Sports 6% Medicine Joint Repair -3% 2% Arthroscopic Enabling Tech US 4% Trauma & Extremities Other surgical 7% 5% Knees 0% 0% Other Est Hips 0% AWC 0% 12% Emerging AWB 13% AWD 0% 5% 10% 15% -5%
Slide 16: 2018 guidance & medium term outlook
2018 guidance & medium term outlook Sales growth: Tax rate(2): Trading profit margin: 2018 Underlying: 3% to 4% 30-70bp improvement 20-21% Reported(1): around 7% to 8% (previously: around 25%) Underlying sales growth: Tax rate(2): Medium - Trading profit margin: 20-21% Consistent growth above Ongoin
Slide 17: Accelerating Performance and Execution (APEX)
Accelerating Performance and Execution (APEX) Simplify and streamline, while meeting future volume demand and maintaining focus Manufacturing, on quality: Warehousing & • rationalisation of manufacturing footprint Distribution • multiple initiatives to simplify and optimise Supply Chain General & Le
Slide 18: Summary of APEX financial guidance
Summary of APEX financial guidance • Benefits of $160m p.a. by 2022 Illustrative phasing of annualised benefits • Total one-off costs (mainly cash) up to and one-off charges $240m (c.150% of annualised run-rate benefits) • Period: 2018 – 2022, with around 75% of benefits and >75% of costs by 2020 •
Slide 19: Innovation: Launching differentiated products
Innovation: Launching differentiated products Important 2017 launches Starting 2018 with PICO™ 7 NAVIO™ TKA WEREWOLF™ / LENS™ Mobile App FLOW 50 PICO™ 7 Single Use Negative Pressure Wound Therapy REDAPT™ JOURNEY™ II XR Monolithic • available in Europe* and Australia Sleeved Stem • enhanced vacuum an
Slide 20: Continuously improving
Continuously improving 2016 and before 2017 2018 and beyond Building Delivering Continuously strong platforms on commitments improving 20
Slide 21: Appendices
x smith&nephew Appendices
Slide 22: 2018 technical guidance
2018 technical guidance Guidance February 2018 Foreign exchange and other revenue impact Impact of translational FX* on revenue +3.5% Acquisition impact on revenue +0.3% Exceptional items Restructuring costs c. $100m Acquisition and integration costs c. $5m European Medical Device Regulation (MDR) c
Slide 23: Franchise revenue analysis
Franchise revenue analysis 2016 2017 Full Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % % % $m % Sports Medicine, Trauma & 5 4 4 1 3 4 3 2 2 1,926 3 OSB Sports Medicine Joint Repair 11 10 8 5 8 7 5 8 6 627 6 Arthros
Slide 24: Regional revenue analysis
Regional revenue analysis 2016 2017 Full Full Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % % % $m % Geographic regions US 8 4 2 0 3 1 2 2 1 2,306 2 Other Established 4 1 0 (3) 0 1 (1) 0 (1) 1,678 0 Markets Established M
Slide 25: Full year trading income statement
Full year trading income statement Full Year 2017 2016 $m $m Revenue 4,765 4,669 3% underlying growth Cost of goods sold (1,248) (1,272) Gross profit 3,517 3,397 Gross profit margin 73.8% 72.8% Selling, general and admin (2,246) (2,147) Research and development (223) (230) Trading profit 1,048 1,020
Slide 26: Full year EPSA and EPS
Full year EPSA and EPS Full Year 2017 2016 Growth $m $m Trading profit 1,048 1,020 3% Net interest payable (51) (46) Other finance costs (7) (11) Share of results from associate 6 2 Adjusted profit before tax 996 965 3% Tax rate*: 17% including one-off Taxation on trading result (170) (230) credit A
Slide 27: Full Year IFRS reconciliation
Full Year IFRS reconciliation Full Year 2017 2016 Growth $m $m Trading profit 1,048 1,020 3% Trading margin 22.0% 21.8% +20bps Acquisition related costs 10 (9) Restructuring and rationalisation - (62) Amortisation of acquisition (140) (178) intangibles Legal and other items 16 30 IFRS Operating prof
Slide 28: Full year free cash flow
Full year free cash flow Full Year 2017 2016 $m $m Trading profit 1,048 1,020 Share based payment 31 27 Depreciation and amortisation 320 300 Capital expenditure (376) (392) Movements in working capital and other (83) (190) Trading cash flow 940 765 Trading cash conversion 90% 75% Restructuring, acq
Slide 29: Trading days per quarter
Trading days per quarter Q1 Q2 Q3 Q4 Full Year 2016 64 64 63 60 251 2017 64 63 63 60 250 2018 63 64 63 61 251 • Year-on-year differences in the number of trading days typically impacts our surgical businesses in the Established Markets more than our wholesaler and distributor-supported businesses. 2
Slide 30: Management
Management Olivier Bohuon Chief Executive Officer Olivier joined the Board and was appointed Chief Executive Officer in April 2011. He resigned as a Member of the Nomination & Governance Committee on 3 February 2016. Olivier holds a doctorate from the University of Paris and an MBA from HEC, Paris.
Slide 31: Investor Relations Contacts
Investor Relations Contacts Ingeborg Øie Ghazaleh Mahdizadeh VP, Investor Relations Investor Relations Manager E: [email protected] E: [email protected] T: +44 (0) 207 960 2285 T: +44 (0) 207 960 2339 Nick Fridberg Smith & Nephew plc Senior Director Strategic Planning
Slide 32: Smith & Nephew
+“ smith&nephew Supporting healthcare professionals for over 150 years