2010 Third Quarter Results Continuing robust performance

Transcription

1 2010 Third Quarter Results Continuing robust performance 1

2 Forward looking statements This document contains certain 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", "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: economic and financial conditions in the markets we serve, especially those affecting health care providers, payors and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or other government actions; product defects or recalls; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters that affect us or our markets, including those of a political, economic, business or competitive 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 20F, 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. sustainable profitable growth 2

3 David Illingworth Chief Executive Officer

4 Q highlights continuing robust performance Reported Q3 revenues $941m up 4% underlying Orthopaedics up 2% Reconstruction grows above market rate Trauma grows at market rate Endoscopy up 4% strong repair revenues offset by capital Advanced Wound Management outperforms - revenues up 7% Emerging markets grow strongly, China grows over 20% Trading margin improved to 22.9% EPSA % of trading profit converted to cash Net debt reduced to $600m good progress investment continues 4

5 Q Orthopaedics Global revenues $510 in Q3 up 2% - Global recon revenue growth 3% - Hips flat, knees up 6% US recon revenues up 3% - Hips 1%, - Knees 5% European recon revenues grow by 1% Trauma revenues grow 5% globally, 3% in the US Clinical Therapies revenues $55m Margin 22.2%, investment in direct to consumer advertising Orthopaedics investing for sustainable profitable growth Traditional hips and knees grow ahead of market VERILAST driving increased revenues Positive response to Rediscover Your Go DTC campaign Trauma sales force tenure strengthens performance Clinical Therapies expands approvals in Europe China revenues grow substantially Revenue growth Reconstruction above market rate and Trauma at market rate 5

6 Q Endoscopy Revenues $201m in Q3, 4% growth Arthroscopy grows by 8% - Shoulder grows well globally - RF probes continue to boost revenues Visualisation revenues fall by 19% Margin 22.8% in the quarter, 40bps increase from product mix BIORAPTOR Knotless Suture Anchor supports shoulder growth 2/3 of US salesforce direct Hip arthroscopy continues to grow strongly from small base On-line sales training launched for new reps OUS Solid quarter - sports medicine growing well Endoscopy investing for sustainable profitable growth 6

7 Q Advanced Wound Management Revenues grow by 7% to $230m US grows 8%, Europe 5% Infection Management grows 5% Exudate Management grows by 3% NPWT drives revenue growth and continues momentum Margin grows by 280bps to 24.6% 8 new product introductions including expanded ALLEVYN range NPWT revenues benefit from broader product range Major IP win for NPWT in the US in October ACTICOAT conversion moved to Hull from Alberta PRO-FORE packaging moved to China NO-STING SKIN-PREP and ALLEVYN GB LITE announced sustainable profitable growth Advanced Wound Management Strong quarter for Advanced Wound Management - NPWT market position strengthened 7

8 Adrian Hennah Chief Financial Officer

9 Income statement Q Third Quarter Year to date Growth $m $m Reported Underlying $m $m Revenue % 4% 2,706 2,895 Trading profit % 4% Restructuring and acquisition costs (13) (1) (44) (13) Amortisation of acquisition intangibles (9) (8) (25) (25) Operating profit Net interest cost (9) (3) (30) (10) Other finance costs (4) (2) (10) (6) Share of results of associates Profit before taxation Trading margin % 22.8% 22.9% 10 bps 22.3% 23.9% 9

10 Income statement Q Third Quarter Year to Date $m $m $m $m Profit before taxation Taxation (45) (64) Tax rate* 31.4% (151) (204) Attributable profit Add back: Amortisation of acquisition intangibles / impairments Restructuring & acquisition costs Tax on excluded items (2) (3) (13) (9) Adjusted attributable profit Adjusted earnings per share ("EPSA") EPSA Growth (4)% * Excluding restructuring and rationalisation costs, acquisition related costs, amortisation of acquisition intangibles / impairments. 10

11 Revenue growth by business segment Q Quarter 3* Reported Currency Underlying % % % Orthopaedics Endoscopy Advanced Wound Management Group * Q comprises 63 trading days ( trading days) 11

12 Underlying revenue growth by geography & business segment Q US Growth Europe Growth ROW Growth Total Growth Quarter 3 $m % $m % $m % $m % Orthopaedics (1) Endoscopy 83 (1) Advanced Wound Management Group

13 Profitability by business segment Q Third Quarter Year to Date Revenue Trading Profit Margin Margin 2010 $m $m % % Orthopaedics Endoscopy Advanced Wound Management Total Orthopaedics Endoscopy Advanced Wound Management Total

14 Free cash flow Q Third Quarter Year to Date $m $m $m $m Trading profit Share based payment Depreciation and amortisation Capital expenditure (66) (75) (197) (208) Movements in working capital and provisions 23 (4) (106) (82) Trading cash flow Restructuring, rationalisation & acquisition costs (8) (2) (36) (12) Macrotextured claim (2) (1) (4) (3) Operating cash flow Net interest paid (9) (3) (31) (12) Taxation paid (57) (55) (204) (174) Free cash flow Closing Net Debt (1,076) (600) 14

15 2010 outlook No change in outlook for 2010 Revenue growth: Ortho: improvement driven by recent launches, strong clinical data and focus on operational performance Endo: ahead of market in arthroscopy Wound: ahead of market Margin: material improvement over 2009 level 15

16 David Illingworth Chief Executive Officer

17 Q Summary Challenging market conditions as expected Innovation and products with clear economic benefits create differentiation and drive revenues Good quality investment opportunities increasing Efficiency enables investment for growth Management teams well established and performing well robust performance continues 17

18 Questions

19

20 Appendices 20

21 Quarterly revenues Smith & Nephew Key Product Line Revenues in $m at Average Rates and Underlying Growth Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Growth* Growth* Growth* Growth* Growth* Growth* Growth* Revenue Growth* % % % % % % % $m % Orthopaedics Reconstruction Knees 5% 1% 2% 5% 3% 9% 3% 183 6% Hips 2% (1)% 2% 3% 1% 6% 0% 157 0% Trauma 6% 2% (5)% (2)% 0% 3% 2% 106 5% Clinical therapies 2% (4)% (5)% (4)% (3)% 5% (6)% 55 (5)% Endoscopy Arthroscopy 3% 4% 8% 13% 7% 17% 11% 173 8% Visualisation (12)% (26)% (21)% (21)% (20)% 0% (2)% 25 (19)% Advanced Wound Management Exudate Management 9% 3% 0% 10% 5% 7% 0% 64 3% Infection Management 31% 13% 9% 14% 16% 7% 7% 32 5% Smith & Nephew 4% 0% 1% 4% 2% 9% 4% 941 4% * All revenue growths are on an underlying basis as previously reported, excluding the effects of acquisitions and currency translation 21

22 Exchange rates $: Q3/09 FY/09 Q3/10 Period end Average $: Period end Average Percentage of Revenue by Geographic Market: Q3 % United States 44 United Kingdom 7 Other Europe 24 Other

23 Analysis of restructuring and acquisition costs P&L Charge Cash Spend Q3 Total to date Q3 Total to date $m $m $m $m EIP - cash costs * asset w/offs 26 n/a n/a Plus Integration - cash costs ** asset w/offs 28 n/a n/a * Target $125m ** Target $60-80m, plus $15m costs of investigating and resolving issues with the vendors 23

24 Reconciliation of free cash flow to IAS 7 net cash flow from operating activities Third Quarter Year to Date $m $m $m $m Free cash flow Add back: capital expenditure Net cash inflow from operating activities (IAS 7)

25 Business days per quarter Q1 Q2 Q3 Q4 Full Year

26 New products 2010 Q1 Q2 Q3 Q4 LEGION HA Porous Tibials GENESIS II ECO instruments VLP FOOT variable-angle locking plate system TWINFIX Ultra family of suture anchors for rotator cuff repair JOURNEY UNI / JOURNEY DEUCE Baseplate Re-launch FOOTPRINT Ultra Suture Anchor RT PLUS Offset Stems BIORAPTOR Knotless Suture Anchor Circular Fixation Upgrades TRIGEN SURESHOT Distal Targeting System BIOSURE SYNC Tibial Fixation Device PERI-LOC Titanium HIPSTRUMENTS Hip Repair instruments RENASYS NPWT Port foam kit Surgical Post-Op Dressings Orthopaedic Reconstruction New Exudate Management dressings Exudate Management and Infection management dressings for Japan Orthopaedic Trauma Endoscopy Shaver blade portfolio expansion Additional variants of ALLEYN GENTLE BORDER dressings Advanced Wound Management Silver version of New Exudate Management dressings RENASYS Abdominal NPWT kit 26