Smith & Nephew Plc · LSE:SN.
Smith & Nephew — FY2009 Earnings Presentation
33 slides from Smith & Nephew's earnings presentation, February 2010
Slide 1: 2009 Full Year Results: Strong finish to the year
2009 Full Year Results Strong finish to the year
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 stat
Slide 3: Dave Illingworth, Chief Executive
Dave Illingworth Chief Executive sustainable profitable growth
Slide 4: Key business achievements in 2009
Key business achievements in 2009 • Revenues – $1066m, 4% growth for the quarter – $3772m, 2% growth for the year 4,000 23% • Margin 3,500 22% 3,000 – 23.8% for the quarter, up 60 basis tra d i n g m a rg i n reven u es $m points 2,500 21% 2,000 – 22.7% for the year, up 230 basis 1,500 20% points 1,
Slide 5: Our strategic pillars for success
Our strategic pillars for success Ortho Endo AWM Biologics Outperform our markets through • Innovation Customer-led • Medical education • Customer service Continued focus on operational margin enabling Efficient increased investment in the business Drive new revenues from new opportunities / Investi
Slide 6: Orthopaedics - Q4 2009
Orthopaedics - Q4 2009 2009 achievements • US reconstruction performance strengthens Global Q4 revenues $593m up 2% • European re- Recon organisation • US hips +7% } LEGION™, R3™ ACETABULAR cup • US knees +10% drive revenues and VISIONAIRE™ • Trauma sales force making progress • Margin 23.8% up Euro
Slide 7: Endoscopy - Q4 2009
Endoscopy - Q4 2009 2009 achievements • Progressive US revenue improvement in repair and resection Revenues $230m, growth of 6%, 14% outside US • Robust OUS US revenues Sports Medicine up 13% - repair grows 15% – Europe up 6% FASTFIX™ Meniscal Repair System drives growth – ROW up 12% Shoulder segmen
Slide 8: Advanced Wound Management - Q4 2009
Advanced Wound Management - Q4 2009 2009 achievements • Revenue growth in all geographies • NPWT revenues doubled Revenues of $243m and global growth of 8% - steady progress Outside US grows 9% Europe 9%, ROW 9% quarter by quarter • China factory opens on US revenues grew 5% time and budget ALLEVYN™
Slide 9: 2009 Summary
2009 Summary • Market conditions difficult during year, signs of stabilisation at the year end • Revenues up 2% for the year, 4% in Q4 • Great performance in many areas • Efficiency improvements becoming embedded in the business 9 sustainable profitable growth
Slide 10: 2009 achievements
2009 achievements Advanced Orthopaedics Endoscopy Wound Management • European re-organisation • New resection products - • RENASYS™ and RENASYS™ and management BONECUTTER™ and GO launched strengthened ELECTROBLADE™ and • Series of Intellectual • US and European DYONICS™ RF Control Property wins dist
Slide 11: Adrian Hennah, Chief Financial Officer
Adrian Hennah Chief Financial Officer
Slide 12: Income statement Q4 2009
Income statement Q4 2009 Fourth Quarter Full Year 2008 2009 Growth 2008 2009 $m $m Reported Underlying $m $m Revenue 960 1,066 11% 4% 3,801 3,772 Trading profit 222 254 14% 9% 776 857 Restructuring and acquisition costs (22) (24) (80) (68) Inventory revaluation - - (15) - Amortisation of acquisition
Slide 13: Income statement Q4 2009 (attributable profit and EPSA)
Income statement Q4 2009 Fourth Quarter Full Year 2008 2009 2008 2009 $m $m $m $m Profit before taxation 162 175 564 670 Taxation (45) (47) Tax Rate* 25.0% (187) (198) Attributable profit 117 128 377 472 Add back: Amortisation of acquisition intangibles / 21 41 51 66 impairments Restructuring & acqu
Slide 14: Revenue growth by business segment Q4 2009
Revenue growth by business segment Q4 2009 Actual Currency Underlying Quarter 4* % % % Orthopaedics 8 (6) 2 Endoscopy 12 (6) 6 Advanced Wound Management 19 (11) 8 Group 11 (7) 4 Full Year Orthopaedics (1) 2 1 Endoscopy (1) 2 1 Advanced Wound Management 0 6 6 Group (1) 3 2 * Q4 2009 comprises 64 trad
Slide 15: Underlying revenue growth by geography & business segment Q4 2009
Underlying revenue growth by geography & business segment Q4 2009 Quarter 4 US Growth Europe Growth ROW Growth Total Growth $m % $m % $m % $m % Orthopaedics 313 3 177 (1) 103 3 593 2 Endoscopy 99 (3) 78 10 53 19 230 6 Advanced Wound Management 46 5 126 9 71 9 243 8 Group 458 2 381 4 227 8 1,066 4 Fu
Slide 16: Profitability by business segment Q4 2009
Profitability by business segment Q4 2009 Fourth Quarter Full Year Revenue Trading Profit Margin Margin 2009 $m $m % % Orthopaedics 593 142 23.9 23.8 Endoscopy 230 65 28.2 23.9 Advanced Wound Management 243 47 19.2 18.9 Total 1,066 254 23.8 22.7 2008 Orthopaedics 550 127 23.2 22.3 Endoscopy 206 53 2
Slide 17: Free cash flow Q4 2009
Free cash flow Q4 2009 Fourth Quarter Full Year 2008 2009 2008 2009 $m $m $m $m Trading profit 222 254 776 857 Share based payment 7 3 24 18 Depreciation and amortisation 72 70 236 246 Capital expenditure (91) (117) (289) (318) Movements in working capital and provisions (51) 74 (135) (32) Trading c
Slide 18: 2010 outlook
2010 outlook • Revenue growth: – Recon: in line with market – Trauma: return to market growth over time – Endo: in line with market in arthroscopy; capital equipment market subject to significant macro-economic uncertainty – Wound: in line with market excluding NPWT; significant growth in NPWT • Mar
Slide 19: Dave Illingworth, Chief Executive Officer
Dave Illingworth Chief Executive Officer sustainable profitable growth
Slide 20: Our strategic pillars for success
Our strategic pillars for success Ortho Endo AWM Biologics Outperform our markets through • Innovation Customer-led • Medical education • Customer service Continued focus on operational margin enabling Efficient increased investment in the business Drive new revenues from new opportunities / Investi
Slide 21: Customer-led - some examples for 2010
Customer-led - some examples for 2010 • Medical education – Beijing (Ortho) Customer-led – York (Ortho/Endo) – Memphis (Ortho) – Lucerne (Ortho) – NPWT expert panel in Hamburg – Globalisation of KLEOS™ • Innovation Efficient – Clinical benefits – Market needs - VISIONAIRE™ – Total cost focus • US cu
Slide 22: Efficient - some examples for 2010
Efficient - some examples for 2010 • Operational – Factories coming on line Customer-led • Suzhou additional lines • Beijing – Complete first phase of Lean – Global procurement expanding • Process and systems Efficient – Rationalising global platforms – Operating models • Margin – Embedding improvem
Slide 23: Investing for growth - some examples for 2010
Investing for growth - some examples for 2010 • Biologics Customer-led – Chief Scientific Officer • Fast-track ‘develop to launch’ process • Product range expansion Efficient • Instrument design development • Adjacencies and bolt-on acquisitions • Emerging markets – China Investing for growth • Sale
Slide 24: Business outlook
Business outlook • Healthcare systems globally face continued challenges • Demographics drive underlying growth • Emerging market potential • Customer proximity is the key • Management and business disciplines in place • Great people to execute our plans • Investing for the longer term 24 sustainabl
Slide 25: Questions?
>¢ smith&nephew Questions?
Slide 26: We are smith&nephew
>KWe are smith&nephew
Slide 27: Appendices
>¢ smith&nephew Appendices 27
Slide 28: 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 Q2 Q3 Q4 Growth* Growth* Growth* Growth* Growth* Growth* Growth* Growth* Revenue Growth* % % % % % % % % $m % Orthopaedics Reconstruction Knees 1% 9% 10% 9% 7%
Slide 29: Exchange rates
Exchange rates $:€ Q4/08 FY/08 Q1/09 Q2/09 Q3/09 Q4/09 FY/09 Period end 1.39 1.39 1.33 1.41 1.47 1.43 1.43 Average 1.32 1.46 1.30 1.36 1.43 1.48 1.39 $:£ Period end 1.44 1.44 1.43 1.65 1.59 1.61 1.61 Average 1.58 1.84 1.43 1.54 1.64 1.63 1.56 Percentage of Revenue by Geographic Market: Q4 FY % % Uni
Slide 30: US 2009 Revenue by Product Class
US 2009 Revenue by Product Class Total 2009 USA Sales $1.7bn Class 3 26% Class 2 57% Class 1 13% Other 4% Total 100% 30
Slide 31: Analysis of restructuring and acquisition costs
Analysis of restructuring and acquisition costs P&L Charge Cash Spend Q4 Total to date Q4 Total to date $m $m $m $m EIP – cash costs* 10 100 12 92 – asset w/offs 3 26 n/a n/a Plus Integration – cash costs** 3 95 6 92 – asset w/offs 8 28 n/a n/a * Target $125m ** Target $60-80m, plus $15m costs of in
Slide 32: 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 Fourth Quarter Full Year 2008 2009 2008 2009 $m $m $m $m Free cash flow 82 189 277 401 Add back: capital expenditure 91 117 289 318 Net cash inflow from operating activities (IAS 7) 173 306 566 719 32
Slide 33: 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 2010 64 64 63 60 251 33