Smith & Nephew : Investor presentation October - December 2020
11/20/2020 | 01:05pm EST
Investor Presentation October - December 2020
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 profit margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith+Nephew, these factors include: risks related to the impact of COVID-19, such as the depth and longevity of its impact, government actions and other restrictive measures taken in response, material delays and cancellations of elective procedures, reduced procedure capacity at medical facilities, restricted access for sales representatives to medical facilities, or our ability to execute business continuity plans as a result of COVID-19; economic and financial conditions in the markets we serve, especially those affecting health care providers, payers and customers (including, without limitation, as a result of COVID-19); price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or other government actions; product defects or recalls or other problems with quality management systems or failure to comply with related regulations; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; disruption to our supply chain or operations or those of our suppliers (including, without limitation, as a result of COVID-19); competition for qualified personnel; strategic actions, including acquisitions and dispositions, our success in performing due diligence, valuing and integrating acquired businesses; disruption that may result from transactions or other changes we make in our business plans or organisation to adapt to market developments; relationships with healthcare professionals; reliance on information technology and cybersecurity; and numerous other matters that affect us or our markets, including those of a political, economic, business, competitive or reputational nature. Please refer to the documents that Smith+Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith+Nephew's most recent annual report on Form 20-F, for a discussion of certain of these factors. Any forward-looking statement is based on information available to Smith+Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith+Nephew are qualified by this caution. Smith+Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith+Nephew's expectations. The terms 'Group' and 'Smith+Nephew' are used for convenience to refer to Smith & Nephew plc and its consolidated subsidiaries, unless the context requires otherwise.
Certain items included in 'trading results', such as trading profit, trading profit margin, tax rate on trading results, trading cash flow, trading profit to cash conversion ratio, EPSA, leverage ratio, and underlying growth are non-IFRS financial measures. The non-IFRS financial measures in this announcement are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS in our Second Quarter and First Half 2020
Results announcement dated 29 July 2020.
2
Our history
1856
1896
1914
Days after the outbreak of WW1,
Thomas James Smith
Horatio Nelson Smith
we received an order to provide
1856
opened a chemist shop in Hull,
entered into apartnership
surgical and field dressing
From50
UK and develops a new method
with his uncleforming
supplies to French
Smith+Nephew
for refining cod liver oil
TJSmith & Nephew
army within 5months
To1200
established
1986
During WW1, staff grew
from 50 to 1,200
Key acquisitions of Richards Medical Company
1937
in Memphis, specialists in orthopaedic products
and DYONICS, an arthroscopy specialists
We were listed on the
based in Andover
1953
London stock exchange
1928
1995
We developed a special low-temperatureplaster
We produced an
for the Everest climbers on the 1953 expedition.
experimental bandage
Acquired
It enabled them to send back their camera films, sealed
ElastoplastTM
Acufex Microsurgical Inc,
and airtight!. This same research led to the development
making us a market leader in
of importantindustrial products
arthroscopic surgicaldevices
2001
1999
We were listed on the New York Stock
OXINIUM◊, a new material that
Exchange and in 2001 became a constituent
improves performance and increases
member of the UK FTSE-100 index
the service life of total joint
replacement systems, firstintroduced
2014
2013
2011
Acquired ArthrocareCorp.
JOURNEY◊ II BCS sets a new standardinknee
PICO◊, the first pocket-sized,single-use
to expand our sports
implant performance,designed
system, revolutionizes the negative
medicine portfolio
to empower patients to return
pressure wound therapymarket
17,500+
to an activelifestyle
2019
2020
We exist to restore people'sbodies and their self-belief
Expanding in technologies of the
We are proud of what we do
future, investing inOrthopaedics,
and value our 17,500 employees
by using technologies to take the limits off living.
Smith+Nephew is a global Medical Device portfolio company, that has been trading for over 160 years, and operates in more
FTSE100
A constituent of the UK's FTSE100, with ADRs traded on the New York Stock Exchange
Shares
S&N has a progressive dividend policy, and has paid a dividend every year since 1937
than 100 countries
$5.1bn
~17,500
Annual sales in 2019
We have around 17,500
were $5.1 billion
employees globally
4
A portfolio medical device company
ALLEVYN◊ LIFE
Advanced
Advanced Foam
Wound Dressings
Wound Care
Collagenase
Advanced
SANTYL◊ Ointment
Wound
Enzymatic debrider
Bioactives
ENT
$5.1bn
Arthroscopic
Revenues
COBLATION◊
Enabling
(2019)
Wand
Technologies
REGENETEN◊
Sports Medicine
Bioinductive Implant
Joint Repair
Other Recon
Advanced
PICO◊
Negative Pressure
Wound Devices
Wound Therapy
JOURNEY◊ II BCS
Bi-Cruciate
Stabilised
Knees
Knee System
POLAR3◊
Hips
Total Hip
Solution
EVOS◊ SMALL
Trauma
Plating System
NAVIO◊
Surgical
System
5
Leading positions in stable growing markets
Hip & Knee Implants
$14.8bn market
(growth +3%)
Others
15%
Zimmer
Smith+
Biomet
Nephew
32%
12%
DePuy
Stryker
Synthes
22%
19%
#4 position
Sports Medicine
$5.3bn market
(growth +5%)
Others
17%
DePuy
Arthrex
Synthes
33%
13%
Stryker
Smith+
11%
Nephew
26%
#2 position
Advanced Wound Management
$9.4bn market
(growth +4%)
3M
19%
Others
51%Smith+
Nephew
14%
Molnlycke
Convatec 9%
7%
#2 position
1)
Data used in 2019 estimates generated by Smith & Nephew is based on publicly available sources and internal analysis and represents an indication of market shares
6
2)
DePuy Synthes is a division of Johnson & Johnson.
Our performance
Revenue
$5,138m +4.4%*
5138
4904
4634 46694765
2015 2016 2017 2018 2019
Adjusted earnings per share (EPSA)
102.2¢
+5% CAGR
85.1
82.6
94.5
100.9
102.2
2015 2016 2017 2018 2019
Trading profit
$1,169m
22.8% margin
1169
1099
1123
1020
1048
2015 2016 2017 2018 2019
Dividend per share
37.5¢
+5% CAGR
35.0
36.0
37.5
30.8
30.8
2015 2016 2017 2018 2019
Trading cash conversion
83%
85%
90%
85%
83%
75%
2015 2016 2017 2018 2019
Net debt
$1,600m
1361
1550
1600
1281
1104
2015 2016 2017 2018 2019
* Underlying growth percentage after adjusting for the effect of currency translation, acquisitions and disposals.
7
Our enterprise strategic imperatives
Achieve the full
Transform the business
Expand in high-growth
Strengthen talent and
Become the best owner
potential of our
through enabling
segments
capabilities
portfolio
technologies
GROW
TOGETHER
EFFECTIVELY
6%
4%
2%
0%
Year on year % underlying revenue growth
H1 2018
H2 2018
H1 2019
H2 2019
Performance improved over the course of the 2019, with 3.9% underlying revenue growth in the first half and 4.9% in the second half. All three global franchises delivered an improved revenue growth performance over the prior year
8
Meaningful new revenue growth drivers accumulating across the portfolio in 2020
New launches from internal R&D
CORI Surgical
INTELLIO Connected
COBLATION◊
System
Tower
HALO Wand
US launch
US launch
US launch
announced
announced
Q1 2020
July 2020
July 2020
+ pipeline
Adding growth through M&A
Tuck-ins in high growth areas
Extremity Orthopaedics business
Digital technology acquisitions
Adding value to recent acquisitions
CE Mark for
CE Mark for
Bioactives salesforce selling
REGENETEN◊
NOVOSTITCH◊ PRO
Grafix/Stravix
9
Integra Orthopaedic Extremities acquisition - expanding in high growth segment
Comprehensive portfolio of
extremities assets
ShoulderAnkle
Titan Modular Shoulder
Cadence Total Ankle
System 2.5
System
Upper extremities
Lower extremities
Freedom Wrist
Panta 2 TTC Arthrodesis
Arthroplasty System
Nail System
US market estimated to grow 6-7% per annum
Deal benefits
Purchase price $240m
$90m sales in 2019
Accretive to S+N's weighted average market growth rate
Adds team of Extremities specialists with established distribution
Expect double digit revenue growth
Dilutive to trading profit 2021, 2022
ROIC to reach or exceed WACC in year 5
10
2020 quarterly underlying sales development by region
US
Other established
Emerging markets
markets
Continued recovery in elective procedures
Elective procedure restrictions being relaxed in Texas; restrictions now lifted in all other states
•
Germany, France return to
•
Year-on-year growth in China,
growth
procedures >80% of normal
•
Australia, Japan procedures at
•
India, Latin America, South
~90% of normal in early Oct
Africa yet to show significant
recovery
11
Q3 recovery, visibility still limited
Quarterly Group underlying
revenue growth
•
COVID-19 significant uncertainty continues
- geographical variation and local restrictions
- most healthcare systems better prepared
- assuming impact continues into H1 2021
• Full year 2020 guidance remains withdrawn
• Focused on delivering growth, investments sustained
- R&D programme
- recent M&A (short-term dilution)
• Negative operating leverage while volumes reduced
- reviewing operational efficiency plans
•
Transactional FX headwind
12
Q3 revenue:
$1,200m, -4.2% underlying, -3.7% reported
Revenue split
Franchise performance
Geographical performance
Orthopaedics
-2.8%
Knees
-9.5%
Hips
7.1%
Other Recon
-3.1%
Trauma
-1.4%
Sports Medicine, ENT
-4.5%
Sports Medicine Joint Repair
-2.7%
Arthroscopic Enabling Technologies
-1.6%
ENT
-24.8%
Advanced Wound Management
-6.1%
AWC
-6.9%
AWB
-4.5%
AWD
-6.9%
13
Updated APEX targets
Become the best owner
APEX - Jan 2018
APEX - 2020 update
Initial targets:
Updated targets:
Benefits of $160m p.a. by 2022
Benefits of $190m p.a.
Total one-off costs of $240m
Total one-off costs of $290m
~75% of benefits, >75% of costs by 2020
Closing in full by end of 2020
14
Excellence through the value chain
Become the best owner
Operations transformation
Commercial transformation
Key initiatives:
Key initiatives:
•
Optimised manufacturing network
• Increasing share of direct distribution
• Rollout of lean methodology
•
Sales training and excellence
•
Distribution network and supply
•
Enhancing professional education
chain opportunities
15
Appendices
16
Franchise revenue analysis
2019
2020
Q1
Q2
Q3
Q4
Full Year
Q1
Q2
Q3
Q3
Growth
Growth
Growth
Growth
Growth
Growth
Growth
Revenue
Growth
%
%
%
%
%
%
%
$m
%
Orthopaedics
3.9
3.6
3.4
5.1
4.0
(8.3)
(34.0)
512
(2.8)
Knee Implants
4.1
4.3
4.6
4.7
4.4
(10.6)
(46.9)
219
(9.5)
Hip Implants
2.4
2.9
2.6
0.7
2.1
(8.6)
(26.9)
156
7.1
Other Reconstruction
6.9
3.5
1.5
31.6
12.6
19.4
(51.5)
19
(3.1)
Trauma
4.8
2.8
2.2
7.0
4.3
(7.1)
(11.1)
118
(1.4)
Sports Medicine & ENT
5.3
5.6
6.9
10.1
7.0
(9.5)
(33.3)
350
(4.5)
Sports Medicine Joint Repair
11.0
11.9
12.2
14.0
12.3
(7.1)
(32.0)
186
(2.7)
Arthroscopic Enabling Technologies
(1.1)
(2.1)
0.8
5.1
0.8
(11.2)
(32.1)
136
(1.6)
ENT
4.2
6.3
5.3
10.7
6.7
(15.2)
(44.0)
28
(24.8)
Advanced Wound Management
4.1
1.2
2.1
1.9
2.2
(4.0)
(17.6)
338
(6.1)
Advanced Wound Care
2.4
(1.3)
(2.3)
0.4
(0.2)
(6.7)
(14.6)
163
(6.9)
Advanced Wound Bioactives
(0.7)
(1.9)
2.8
(1.9)
(0.4)
(8.6)
(18.7)
117
(4.5)
Advanced Wound Devices
16.6
16.3
15.4
15.4
15.9
13.0
(23.7)
58
(6.9)
Total
4.4
3.5
4.0
5.6
4.4
(7.6)
(29.3)
1,200
(4.2)
All revenue growth rates are on an underlying basis and without adjustment for number of selling days.
20-Nov-20
17
The 2019 growth rates for the Advanced Wound Care, Advanced Wound Bioactives and Advanced Wound Devices franchises have been re-presented in order to present consistent analysis to the 2020 results.
There has been no change in growth for the Advanced Wound Management franchise or the total Group in any period for 2019.
Regional revenue analysis
2019
2020
Q1
Q2
Q3
Q4
Full Year
Q1
Q2
Q3
Q3
Growth
Growth
Growth
Growth
Growth
Growth
Growth
Revenue
Growth
%
%
%
%
%
%
%
$m
%
US
4.0
2.3
2.7
4.2
3.3
(4.7)
(31.8)
630
0.9
Other Established Markets(1)
(0.1)
(1.3)
(0.3)
2.4
0.2
(6.3)
(30.8)
372
(6.2)
Established Markets
2.2
0.9
1.5
3.5
2.1
(5.4)
(31.4)
1,002
(1.8)
Emerging Markets
15.3
16.2
16.0
16.6
16.1
(17.9)
(20.2)
198
(14.5)
Total
4.4
3.5
4.0
5.6
4.4
(7.6)
(29.3)
1,200
(4.2)
(1) Other Established Markets' are Australia, Canada, Europe, Japan and New Zealand.
All revenue growth rates are on an underlying basis and without adjustment for number of selling days
18
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%
19
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%)
Taxation on trading result
(24)
(98)
Adjusted attributable profit
117
400
Weighted average number of shares (m)
874
874
Adjusted earnings per share ("EPSA")
13.4¢
45.8¢
(71%)
Earnings per share ("EPS")
11.5¢
35.3¢
(67%)
Dividend per share
14.4¢
14.4¢
0%
H1 2020 tax
rate(1): 17.0%
20
Tax rate on trading result
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
21
Sustainability Targets
PeoplePlanet
Products
Creating a lasting positive impact on our communities
Between 2020 and 2030, contribute 1 million volunteer hours to the communities in which we live and work.
Empower and promote the inclusion of all.
A medical technology business with a positive impact
Achieve an 80% absolute reduction in total life cycle greenhouse gas emissions by 2050, beginning by implementing 100% renewable electricity (e.g. solar or wind) plans at our facilities in Memphis (US) and Malaysia by 2022, and at all of our strategic manufacturing facilities by 2025.
Achieve zero waste to landfill at our facilities in Memphis (US) and Malaysia by 2025 and at all of our strategic manufacturing facilities by 2030.
Innovating sustainably
By 2022, include sustainability review in New Product Development phase reviews for all new products and product acquisitions.
By 2025, incorporate at least 30% post-consumer recycled content into all packaging materials.
By 2025, complete supply chain assessment of all suppliers and subsequent tier levels to assure compliance with our sustainability requirements.
Smith & Nephew plc published this content on 20 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 November 2020 18:04:01 UTC
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