Investor Presentation January - March 2021 - Smith+Nephew
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor Presentation January – March 2021
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 Fourth Quarter and Full Year 2020 Results announcement dated 18 February 2021. 2
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
Smith+Nephew for refining cod liver oil TJ Smith & Nephew army within 5 months To1200
established During WW1, staff grew
1986 from 50 to 1,200
Key acquisitions of Richards Medical Company
in Memphis, specialists in orthopaedic products 1937
and DYONICS, an arthroscopy specialists We were listed on the
based in Andover London stock exchange
1953 1928
We developed a special low-temperatureplaster We produced an
1995 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 surgical devices
1999 2001
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 Arthrocare Corp. JOURNEY II BCS sets a new standard inknee
◊ 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
to an activelifestyle
17,500+ Over
100
Today
2019 2020 and growing
Expanding in technologies of the We are proud of what we do We exist to restore people’s bodies and their self-belief
future, investing inOrthopaedics, and value our 17,500 employees by using technologies to take the limits off living.
Biologics and Digital Surgery. who make thispossible We call this purpose “LifeUnlimited”
◊Trademark of Smith & Nephew, ©2020 Smith & Nephew 3100 FTSE 100
A constituent of the UK’s
FTSE 100, 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
portfolio medical
Stock Exchange year since 1937
technology business
that has been trading
for over 160 years,
and operates in more
than 100 countries $4.6bn ~18,000
Annual sales in 2020 We have around 18,000
were $4.6 billion employees globally
4A portfolio medical technology business
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 Knees Knee System
ENT $4.6bn
Arthroscopic Revenues OR3O◊
Dual Mobility
COBLATION◊ Enabling (2020) Hips
Wand Technologies
EVOS◊ SMALL
REGENETEN◊ Sports Medicine Plating System
Bioinductive Implant
Joint Repair Other Recon Trauma
CORI◊
Surgical
System
5Leading positions in attractive markets
Hip & Knee Implants Sports Medicine Advanced Wound Management
$12.6bn market $4.6bn market $9.1bn market
+2% 2017-19 average growth +5% 2017-19 average growth +5% 2017-19 average growth
-15% 2020 growth -12% 2020 growth -3% 2020 growth
Others Others 3M
15% 17% 19%
Zimmer
Smith+ Biomet
Nephew 33% Others
Stryker Arthrex
11% 51%
11% 33% Smith+
Nephew
14%
DePuy
Mitek 1 Smith+ Molnlycke
DePuy 9%
13% Nephew
Synthes 1 Stryker Convatec
19% 22% 26%
7%
#4 position #2 position #2 position
Data used in 2020 estimates generated by Smith+Nephew is based on publicly available sources and internal analysis and represents an indication of market shares
1 A division of Johnson & Johnson. 6Our performance
Revenue Trading profit Trading cash conversion
$4,560m -12.1%* $683m 15.0% margin 101%
5138 1169 101%
4904 1123
4765 1020 1048 90% 85%
4669 83%
4560 75%
683
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Adjusted earnings per share (EPSA) Dividend per share Net debt
64.6¢ 37.5¢ $1,926m**
36.0 37.5 37.5
100.9 102.2 35.0
94.5 30.8 1926
82.6
1550 1600
64.6 1281
1104
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
* Underlying growth percentage after adjusting for the effect of currency translation, acquisitions and disposals.
** 2020 net debt includes lease liabilities. 7Priorities for 2021 Footer 8
Priorities for 2021 – Strategy and COVID
Return to top-line growth and
1
recapture momentum
Drive further operational
2
improvement
Continue to respond effectively
3
to COVID
9Return to top-line growth and recapture momentum
What we have achieved Driving sustainable revenue growth
Maximising portfolio potential
• Driving higher return from portfolio and growing recent launches
Clear strategy for growth
• Continuing to drive commercial excellence across franchises
• New commercial model
• New commercial leadership
• Portfolio enhanced through Delivering value of the acquired assets
M&A • Driving synergistic growth in Trauma & Extremities, Joint Repair, ENT and
Bioactives
• Adding further value-creating opportunities focused on high growth
Investment in innovation
segments
• Step up in R&D investment
Launching expanded pipeline of innovation
New Leadership Team
• High cadence of product launches across the franchises
• Further increase in R&D investment
10Delivering pipeline of innovation
Key late stage projects
Recently launched
Key 2021 projects*
growth drivers
OR3O Dual mobility Porous Knee system Porous offering for Knee portfolio
Hip & Knee
implants HARMONY Modular Trays New Hip & Knee instruments Streamlined instrument set for THA and TKA
ARIA Home PT Remote physical therapy module
Robotics & digital CORI TKA
Orthopaedics surgery Hip 7 Navigation on Kick
RI.HIP Navigation on CORI Navigation assisted Hip procedures
CORI Tensioner Tissue balancing for robotic-assisted TKA
EVOS Large Frag/Periprosthetic Broadening EVOS trauma plate portfolio
Trauma &
Extremities Digital Taylor Spatial Frame Increased efficiency in External fixation
Sports Medicine HEALICOIL Knotless PEEK FASTFIX FLEX Next generation meniscal repair
Joint Repair Hip Capsular Blades/Hip Pack REGENETEN Expansion Product and region expansion
Sports
Arthroscopic Enabling
Medicine & Technologies
INTELLIO Connected Tower DOUBLEFLO Arthroscopic tower fluid management
ENT HALO WEREWOLF ENT Wand
ENT
TULA
Advanced Wound
Clinical Decision Support
Care
Advanced GRAFIX, PL XC & PL CORE Lyopreserved biotissue
Advanced Wound
Wound Bioactives
STRAVIX, PL & MESHED Lyopreserved biotissue
Management PICO PROTECT Next generation single-use NPWT
Advanced Wound PICO Region and Indication
Devices Expansion LEAF 2.0 Next generation Patient monitoring system
Blue indicates products from recent acquisitions
*All innovation launches coming after completing relevant regulatory review, clearance and approval processes
11Demonstrated launch excellence
Growth inflections from new products in recent years
US Hips growth vs peers Sports Medicine Joint Repair
quarterly growth
14.0%
9.8%
3.9% 4.4%
REGENETEN
-5.4% acquired end 2017
8%
OR3O launch
-28.9% 6%
Q4 2019
OR3O Dual Mobility REGENETEN
Bioinductive Implant
Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019
AET quarterly growth PICO annual sales
FLOW 90
launch Q2 2019
5.1%
LENS 4K launch
Q3 2019 FLOW 90 Wand
0.8%
-1.1%
-2% -2.1%
-4%
LENS 4K
PICO 7 sNPWT
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Surgical Imaging System 2011 2013 2015 2017 2019
12Drive further operational improvement
Operations transformation and process efficiencies
• Continuing manufacturing network optimisation
Operations transformation • Outsourcing of warehousing and distribution
• Process transformation, with Lean deployment and greater automation
• Simplify end-to-end processes
Process efficiencies • Improve commercial execution and product launches
• Invest in IT and Digital solutions
• Five year operations efficiency plan, with work started in late 2019
• Targeting c.$200m of annualised cost savings
• Restructuring costs of c.$350m in total, by end of 2023
13Continue to respond effectively to COVID
Customers Employees Cost control
• Support customers in • Flexible and updated • Control discretionary
person and remotely working environments costs while COVID
outbreak continues
• Transform medical • COVID secure sites with
education, with new online deployment of social
platform in 2021 distancing technology
142021 outlook
• COVID-19 impact expected to continue into H1 2021, timing of
recovery unclear
• We expect substantial underlying revenue growth compared to
2020, with faster recovery in Established Markets
− Hips to continue to outperform Knees
− Sports Medicine & ENT to rebound strongly
− AWM growth trajectory to improve
• Trading margin elements compared to 2019:
− Ongoing COVID-19 impact on gross margin
− Dilution from investment in R&D (c.100bps), M&A (c.150bps)
− FX headwind (c.100bps)
• Tax rate on trading results in the range of 18-19%
15Sustainability targets
People Planet Products
Creating a lasting positive impact A medical technology business Innovating sustainably
on our communities with a positive impact
By 2022, include sustainability review
Between 2020 and 2030, contribute Achieve an 80% absolute reduction in in New Product Development phase
1 million volunteer hours to the total life cycle greenhouse gas reviews for all new products and
communities in which we live and emissions by 2050, beginning by product acquisitions.
work. implementing 100% renewable By 2025, incorporate at least 30%
electricity (e.g. solar or wind) plans post-consumer recycled content into
Empower and promote the inclusion
at our facilities in Memphis (US) and all packaging materials.
of all.
Malaysia by 2022, and at all of our
strategic manufacturing facilities by By 2025, complete supply chain
2025. assessment of all suppliers and
To check our progress, please view subsequent tier levels to assure
the Annual Sustainability Report on Achieve zero waste to landfill at compliance with our sustainability
Smith+Nephew’s website. our facilities in Memphis (US) and requirements.
Malaysia by 2025 and at all of our
www.smith-nephew.com/sustainability strategic manufacturing facilities by
2030.
16Financials
17Q4 revenue:
$1,326m, -7.1% underlying, -5.8% reported
Revenue split Product franchise growth
Emerging Markets
$212m
Orthopaedics -10.2%
Knees -16.2%
US
$689m Hips -0.5%
Other Other Recon -45.6%
Established Markets Trauma -1.3%
$425m
Sports Medicine, ENT -5.2%
Geographical growth Sports Medicine Joint Repair -0.3%
Arthroscopic Enabling Technologies -5.0%
-7.1% Global
ENT -33.1%
Advanced Wound Management -4.4%
-4.9% US AWC -2.1%
AWB -9.9%
-6.2% Other Established Markets
AWD +0.2%
-14.9% Emerging Markets
18FY revenue:
$4,560m, -12.1% underlying, -11.2% reported
Revenue split Product franchise growth
Emerging Markets
$771m
Orthopaedics -14.0%
Knees -21.0%
US
$2,339m Hips -7.4%
Other Other Recon -26.1%
Established Markets Trauma -5.1%
$1,450m
Sports Medicine, ENT -13.0%
Geographical growth Sports Medicine Joint Repair -10.2%
Arthroscopic Enabling Technologies -12.4%
-12.1% Global
ENT -29.7%
Advanced Wound Management -8.1%
-10.1% US AWC -7.5%
AWB -10.5%
-12.3% Other Established Markets
AWD -4.8%
-16.8% Emerging Markets
192020 quarterly underlying sales development by region
Other established
US Emerging markets
markets
• Limited restrictions on elective • Overall performance stable from • Continued strong end-user
surgery reintroduced in some Q3, with mixed trends by market demand in China
states
• UK and Japan strengthened; • Latin America and India remain
• Patient cancellations due to positive France and Italy slowed under significant restrictions,
COVID tests and staff shortages some improvement in South
also affected surgery volumes • New restrictions in some markets Africa
into 2021
20Full year revenue by franchise
2020 2019 Reported Underlying
$m $m growth growth
Group 4,560 5,138 (11.2%) (12.1%)
Orthopaedics 1,917 2,222 (13.7%) (14.0%)
Sports Medicine & ENT 1,333 1,536 (13.2%) (13.0%)
Advanced Wound Management 1,310 1,380 (5.1%) (8.1%)
21Full year trading income statement
2020 2019 Reported Underlying
$m $m growth growth
Revenue 4,560 5,138 (11.2%) (12.1%)
Cost of goods sold (1,375) (1,326)
Gross profit 3,185 3,812 (16.4%)
Gross profit margin 69.9% 74.2%
Selling, general and admin (2,223) (2,375)
Research and development (279) (268)
Trading profit 683 1,169 (41.6%)
Trading profit margin 15.0% 22.8%
IFRS operating profit 295 815 (63.8%)
IFRS operating profit margin 6.5% 15.9%
Adjusted earnings per share ("EPSA") 64.6¢ 102.2¢ (36.8%)
Earnings per share ("EPS") 51.3¢ 68.6¢ (25.2%)
Dividend per share 37.5¢ 37.5¢ -
22Trading profit margin
23Full year free cash flow
2020 2019
$m $m
Trading profit 683 1,169
Share based payment 26 32
Depreciation and amortisation 397 368
Lease liability repayments (55) (46)
Capital expenditure (443) (408)
Movements in working capital and other 82 (145)
Trading cash flow 690 970
Trading cash conversion 101% 83%
Restructuring, acquisition, legal and other (216) (54)
Net interest paid (59) (52)
Taxation refunded/(paid) 22 (150)
Free cash flow 437 714
24Net debt and capital allocation
*Net debt includes lease liabilities
25Appendices
26Technical guidance
February 2021
Foreign exchange and acquisitions
Translational FX impact on revenue growth(1) 2.8%
Acquisition impact on revenue growth 1.7%
Non-trading items
Restructuring costs $140-150m
Acquisition and integration costs $35-45m
European Medical Device Regulation (MDR) compliance costs c. $60m
Other
Amortisation of acquisition intangibles $170-180m
Income from associates c. $5m
Net interest(2) $75-80m
Other finance costs c. $15m
Tax rate on trading result 18-19%
(1) Based on the foreign exchange rates prevailing on 5th February 2021
(2) Includes interest associated with IFRS 16 Leases
27Franchise revenue analysis
2019 2020
Full Full
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Full Year
Year Year
Growth Growth Growth Growth Growth Growth Growth Growth Revenue
Growth Growth
% % % % % % % % $m
% %
Orthopaedics 3.9 3.6 3.4 5.1 4.0 (8.3) (34.0) (2.8) (10.2) 1,917 (14.0)
Knee Implants 4.1 4.3 4.6 4.7 4.4 (10.6) (46.9) (9.5) (16.2) 822 (21.0)
Hip Implants 2.4 2.9 2.6 0.7 2.1 (8.6) (26.9) 7.1 (0.5) 567 (7.4)
Other Reconstruction 6.9 3.5 1.5 31.6 12.6 19.4 (51.5) (3.1) (45.6) 68 (26.1)
Trauma 4.8 2.8 2.2 7.0 4.3 (7.1) (11.1) (1.4) (1.3) 460 (5.1)
Sports Medicine & ENT 5.3 5.6 6.9 10.1 7.0 (9.5) (33.3) (4.5) (5.2) 1,333 (13.0)
Sports Medicine Joint Repair 11.0 11.9 12.2 14.0 12.3 (7.1) (32.0) (2.7) (0.3) 710 (10.2)
Arthroscopic Enabling
(1.1) (2.1) 0.8 5.1 0.8 (11.2) (32.1) (1.6) (5.0) 517 (12.4)
Technologies
ENT 4.2 6.3 5.3 10.7 6.7 (15.2) (44.0) (24.8) (33.1) 106 (29.7)
Advanced Wound Management 4.1 1.2 2.1 1.9 2.2 (4.0) (17.6) (6.1) (4.4) 1,310 (8.1)
Advanced Wound Care 2.4 (1.3) (2.3) 0.4 (0.2) (6.7) (14.6) (6.9) (2.1) 647 (7.5)
Advanced Wound Bioactives (0.7) (1.9) 2.8 (1.9) (0.4) (8.6) (18.7) (4.5) (9.9) 431 (10.5)
Advanced Wound Devices 16.6 16.3 15.4 15.4 15.9 13.0 (23.7) (6.9) 0.2 232 (4.8)
Total 4.4 3.5 4.0 5.6 4.4 (7.6) (29.3) (4.2) (7.1) 4,560 (12.1)
All revenue growth rates are on an underlying basis and without adjustment for number of selling days.
28
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 Q4 Full Year Full Year
Growth Growth 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) 0.9 (4.9) 2,339 (10.1)
Other Established Markets(1) (0.1) (1.3) (0.3) 2.4 0.2 (6.3) (30.8) (6.2) (6.2) 1,450 (12.3)
Established Markets 2.2 0.9 1.5 3.5 2.1 (5.4) (31.4) (1.8) (5.4) 3,789 (11.0)
Emerging Markets 15.3 16.2 16.0 16.6 16.1 (17.9) (20.2) (14.5) (14.9) 771 (16.8)
Total 4.4 3.5 4.0 5.6 4.4 (7.6) (29.3) (4.2) (7.1) 4,560 (12.1)
(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
29Trading 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
2022 63 64 63 60 250
30You can also read
