Smith & Nephew Plc · LSE:SN.
Smith & Nephew — Smith+Nephew — H1 2020 Earnings Presentation
26 slides from Smith & Nephew's earnings presentation, July 2020
Slide 1: Investor Presentation July – September 2020
Investor Presentation July – September 2020
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 margins, market trends and our product pipeline are forward-looking statements. Phrases such
Slide 3: Our history
Our history 1914 1856 1896 Days after the outbreak of WW1, Thomas James Smith Horatio Nelson Smith we received an order to provide opened a chemist shop in Hull, entered into apartnership surgical and field dressing 1856 UK and develops a new method with his uncleforming supplies to French From 50 S
Slide 4: FTSE100 Shares $5.1bn
100 FTSE100 A constituent of the UK’s FTSE100, with ADRs Shares S&N has a progressive dividend policy, and has Smith+Nephew is a traded on the New York paid a dividend every global Medical Device Stock Exchange year since 1937 portfolio company, that has been trading for over 160 years, and operates
Slide 5: A portfolio medical device company
A portfolio medical device company ALLEVYN◊ LIFE PICO◊ Advanced Foam Advanced Advanced Negative Pressure Wound Dressings Wound Care Wound Devices Wound Therapy JOURNEY◊ II BCS Collagenase Advanced Bi-Cruciate SANTYL◊ Ointment Wound Stabilised Enzymatic debrider Bioactives Knee System Knees ENT $5.1b
Slide 6: Leading positions in stable growing markets
Leading positions in stable growing markets Hip & Knee Implants Sports Medicine Advanced Wound Management $14.8bn market $5.3bn market $9.4bn market (growth +3%) (growth +5%) (growth +4%) Others Others 3M 15% 17% 19% Zimmer Smith+ Biomet Nephew 32% Others DePuy Arthrex 12% 51% Synthes 33% Smith+ 13%
Slide 7: Our performance
Our performance Revenue Trading profit Trading cash conversion $5,138m +4.4%* $1,169m 22.8% margin 83% 5138 1169 90% 85% 85% 83% 4904 1123 75% 1099 4765 4669 1048 4634 1020 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Adjusted earnings per share (EPSA) Dividend per shar
Slide 8: Q2 Revenue: $901m, -29.3% underlying, -29.8% reported
Q2 Revenue: $901m, -29.3% underlying, -29.8% reported Revenue split Franchise performance Orthopaedics -34.0% Knees -46.9% Hips -26.9% Other Recon -51.5% Trauma -11.1% Sports Medicine, ENT -33.3% Sports Medicine Joint Repair -32.0% Geographical performance Arthroscopic Enabling Technologies -32.1% E
Slide 9: Monthly underlying sales development by franchise
Monthly underlying sales development by franchise 9
Slide 10: Elective procedure trends by market
Elective procedure trends by market Timing of restart Key development All 50 states resumed surgery during Q2, recovery to >80% of expected levels in June; US From late April some renewed restrictions in Texas and Mississippi in July. Recovery to around 85% capacity utilisation; Victoria under new 6
Slide 11: Balancing cost control with readiness
Balancing cost control with readiness Cost base includes fixed components Progress on 2020 cost savings • Up to $200m of savings indicated for 2020, with SG&A the primary source ~55% materials; remainder largely fixed COGS costs including labour, overheads and D&A • c.$150m savings delivered in H1 ~
Slide 12: Launching products in a changed environment
Launching products in a changed environment Key launches and Digital professional Digital marketing regulatory clearances education FDA clearance for INTELLIO◊ TKA on CORI Connected Tower CE Mark for REGENETEN◊ OR3O Dual Mobility 12
Slide 13: Accelerating ASC opportunity through COVID
Accelerating ASC opportunity through COVID Increasing Medicare Services and technology to coverage in ASCs support expansion Inpatient Outpatient ASC UKA TKA Supporting ASCs (2020) THA (2020) CORI Surgical System UKA = Unicompartmental Knee Arthroplasty TKA = Total Knee Arthroplasty
Slide 14: Strengthening capabilities and supporting communities
Strengthening capabilities and supporting communities Professional development Supporting communities • >200% increase in sales training hours in H1 • c.90% of training delivered digitally • >150% increase in digital training across all employees since late March 14
Slide 15: Delivering on strategic imperatives
Delivering on strategic imperatives Achieve the full Transform the Expand in high- Strengthen talent Become the best potential of our business through growth segments and capabilities owner portfolio enabling technologies GROW TOGETHER EFFECTIVELY 15
Slide 16: Appendices
Appendices 16
Slide 17: H1 trading income statement
H1 trading income statement 2020 2019 $m $m Revenue 2,035 2,485 Cost of goods sold (640) (646) Gross profit 1,395 1,839 Gross profit margin 68.5% 74.0% Selling, general and admin (1,089) (1,178) Research and development (134) (129) Trading profit 172 532 Trading profit margin 8.5% 21.4% 17
Slide 18: H1 EPSA and EPS
H1 EPSA and EPS 2020 2019 Growth $m $m % Trading profit 172 532 (68%) Net interest payable (21) (25) Other finance costs (7) (6) Share of results from associate (3) (3) Adjusted profit before tax 141 498 (72%) H1 2020 tax Taxation on trading result (24) (98) rate(1): 17.0% Adjusted attributable prof
Slide 19: H1 free cash flow
H1 free cash flow 2020 2019 $m $m Trading profit 172 532 Share based payment 15 17 Depreciation and amortisation 187 188 Lease liability repayments (24) (23) Capital expenditure (188) (153) Movements in working capital and other (137) (156) Trading cash flow 25 405 Trading cash conversion 14% 76% Re
Slide 20: Net debt and capital allocation
Net debt and capital allocation 20
Slide 21: Franchise revenue analysis
Franchise revenue analysis 2019 2020 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % $m % Orthopaedics 3.9 3.6 3.4 5.1 4.0 (8.3) 364 (34.0) Knee Implants 4.1 4.3 4.6 4.7 4.4 (10.6) 137 (46.9) Hip Implants 2.4 2.9 2.6 0.7 2.1 (8.6) 112 (26.9) Other
Slide 22: Regional revenue analysis
Regional revenue analysis 2019 2020 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q2 Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % $m % US 4.0 2.3 2.7 4.2 3.3 (4.7) 440 (31.8) Other Established Markets(1) (0.1) (1.3) (0.3) 2.4 0.2 (6.3) 274 (30.8) Established Markets 2.2 0.9 1.5 3.5 2.1 (5.4) 7
Slide 23: Trading days per quarter
Trading days per quarter Q1 Q2 Q3 Q4 Full year 2019 63 63 63 62 251 2020 62 63 63 64 252 2021 64 64 63 60 251 23
Slide 24: First half consolidated revenue analysis
First half consolidated revenue analysis 27 June 29 June Reported Underlying Acquisitions Currency 2020 2019 growth Growth /disposals impact Consolidated revenue by franchise $m $m % % % % Orthopaedics 861 1,098 (21.6) (21.4) 1.0 (1.2) Knee Implants 367 523 (29.9) (28.8) - (1.1) Hip Implants 249 308
Slide 25: Sustainability Targets
Sustainability Targets People Planet Products Creating a lasting positive impact A medical technology business with Innovating sustainably on our communities a positive impact By 2022, include sustainability review Between 2020 and 2030, contribute Achieve an 80% absolute reduction in in New Product
Slide 26: Smith+Nephew
SmithNephew