2010 Full Year Results strong finish to the year

Transcription

1 2010 Full Year Results strong finish to the year 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. 2

3 John Buchanan Chairman sustainable profitable growth

4 Four years of successful delivery Revenues $2,779m $3,962m 5 underlying CAGR Trading $571m $969m 14 CAGR EPSA CAGR Dividend CAGR Cash profit conversion much achieved and much more to come 4

5 Dave Illingworth Chief Executive Officer sustainable profitable growth

6 Financial highlights and Q4 4, , , , ,500 Trading Margin Revenues $3962m, 4 growth for the year $1067m, +5 ADS Margin 24.5 for the year, up 180 basis points (23.9 and 120 excluding Blue Sky) 26.0 for the quarter, up 220 basis points EPSA grew by 12 to 73.6 for the year (Q4 up 6.0 and 21.6 ) Final dividend 9.82, 15.82, for the year in total up 10 Debt reduced to $492m, $552m of free cash flow in the year Banking facilities re-organised Strong finish to the year for all businesses Revenue at constant currency 2010 avg rate , , Revenue Margin Excluding Blue Sky Note: ADS average days sales basis much achieved and much more to come 6

7 Business highlights and Q4 Orthopaedics Reconstruction Trauma Growth in every quarter +10 ADS in Q4 Clinical Therapies - $200m revenues FY VERILAST VISIONAIRE Endoscopy BIORAPTOR Knotless Suture Anchor Strong momentum in second half Knee growth above market rate globally for year ADS Q4 globally Arthroscopy +9 FY, Q4 +8 ADS Sports Medicine repair at double digit growth FY Advanced Wound Management Revenue growth consistently above market NPWT momentum sustainable profitable growth RENASYS GO EXOGEN 7

8 Advanced Wound Management a transformation FY 2006 FY Revenue Revenue growth Trading Profit Margin RENASYS EZ ALLEVYN AG ALLEVYN GENTLE BORDER OPSITE POST OP VISIBLE sustainable profitable growth 8

9 Advanced Wound Management review of 2010 and Q4 Revenues of $912m FY +7 and $251m Q4 +7 ADS US revenues grew FY +11 Q4 +17 Europe FY +5, ROW FY +8 ALLEVYN product line expansion NPWT revenue run rate $100m Margin FY bps, Q bps 2010 achievements Revenues grew at c. twice market rate NPWT gains momentum and market share Product launches including ALLEVYN gentle border range China factory increases margin ACTICOAT conversion moved to Hull from Alberta Growth above market and continued momentum in NPWT Advanced Wound Management sustainable profitable growth 9

10 Orthopaedics review of 2010 and Q4 Global revenues FY $2.2bn up 2, Q4 $584m +5 ADS Reconstruction revenues up 3 FY, Q4 +5 ADS Global knees FY + 5, Q4 +10 ADS Global hips FY flat, Q4 +1 ADS Trauma global revenues up 3 FY, Q4 +10 ADS Margin 24.4 up 60bps in the year, 25.2 Q4 up 130bps 2010 achievements VERILAST 30 year wear claim FDA approved VISIONAIRE exceeds 10,000 procedures - driving knee revenues Rediscover Your Go campaign delivers results Ceramicized metal data from Australia confirms OXINIUM outperforms all metals for wear in hips Trauma sales force tenure enhances revenues Clinical Therapies delivers growth EXOGEN and DURALANETM perform well Excellent finish to the year Orthopaedics sustainable profitable growth 10

11 Endoscopy review of 2010 and Q4 Revenues $855m FY + 7, Q4 $232m +6 ADS Arthroscopy grows FY +9, Q4 +8 ADS Repair FY +11, Q4 +5 Resection FY +6 Visualisation FY falls by 9 Margin FY 23.3, Q as investment continues 2010 achievements OUS revenues exceed $500m for the year Europe up 7 ROW up surgeons trained including in China US salesforce now two thirds direct First arthroscopy sales contract from US Healthcare Systems team Hip arthroscopy revenues grow rapidly and contribute to revenue growth Learning center network for India launched Fast track project development yields 6 new platforms including TWINFIX ULTRA PK Investing in sports medicine repair driving above market growth Endoscopy sustainable profitable growth 11

12 2010 Summary Market conditions continued to be tough as expected Revenue growth Advanced Wound Management - outgrows market - NPWT momentum Reconstruction - knees great result, hips making good progress Innovation - driving mix, offsetting price changes Trauma - strengthens as salesforce investment pays off Endoscopy strong Sports Medicine growth Margin improvement enabled on-going investment Cash generation and working capital improvement sustainable profitable growth 12

13 2010 achievements Orthopaedics FDA approval for 30 year wear claim for VERILAST VISIONAIRE exceeds 10,000 procedures TRIGEN SURESHOT demand strong R3 Acetabular System full launch KLEOS surgeon membership exceeds 7000 VERILAST with OXINIUM delivers above market growth Positive response to Rediscover Your Go DTC campaign for knees Trauma sales force tenure increases and strengthens performance China revenues expanded Traditional hips grow ahead of market ScoliScore distribution agreement signed for CT EXOGEN specifically recommended by NICE in the UK Beijing factory opened and achieved ISO 9001 accreditation Chief Operating Officer appointed Inventory control improves Endoscopy York Surgical Skills Centre completed and fully utilised RF resection penetrating competitor accounts New product development program delivers new products including TWINFIX Ultra for rotator cuff and BIOSURE SYNC for tibia/anterior cruciate ligament 2/3 of US salesforce direct BIORAPTOR Knotless Suture Anchor supports shoulder growth Hip arthroscopy revenues grow rapidly and contribute to revenue growth from a small base On-line sales training launched for new reps OUS and drives sales growth much achieved and much more to come Advanced Wound Management New product introductions including expanded ALLEVYN range Blue Sky purchase agreement closed out Suzhou, China producing over 40 of global ALLEVYN demand Major IP win for NPWT in Germany and 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 Largo facility sold Global Ops appoints China leader for all factories 13

14 Adrian Hennah Chief Financial Officer sustainable profitable growth

15 Income statement Q Fourth Quarter ,066 Trading profit Full Year Growth Reported Underlying 1, ,772 3, Restructuring and acquisition costs (24) (2) (68) (15) Amortisation of acquisition intangibles (41) (9) (66) (34) Operating profit Net interest cost (10) (5) (40) (15) (5) (4) (15) (10) Revenue Other finance costs Share of results of associates Profit before taxation Trading margin 220bps 15

16 Income statement Q Fourth Quarter Full Year Profit before taxation Taxation (47) (76) (198) (280) Attributable profit Restructuring & acquisition costs Tax on excluded items (13) (1) (26) (10) Add back: Amortisation of acquisition intangibles / impairments Adjusted attributable profit Adjusted earnings per share ("EPSA") Tax rate*28.6 EPSA Growth 6 * Excluding restructuring and rationalisation costs, acquisition related costs, amortisation of acquisition intangibles / impairments. 16

17 Revenue growth by business segment Q Reported Currency Underlying ADS Quarter 4* Orthopaedics Endoscopy Advanced Wound Management Group (2) (1) 1 - (1) 4 - Full Year Orthopaedics Endoscopy Advanced Wound Management Group (1) (1) (1) (1) * Q comprises 60 trading days ( trading days)

18 Underlying revenue growth by geography & business segment Q US Growth Europe Growth ROW Growth Total Growth Quarter 4 Orthopaedics 311 (1) 160 (4) (1) Endoscopy 94 (4) 73 (3) Advanced Wound Management (1) (3) ,067-1, ,195 2 Endoscopy Advanced Wound Management , , ,962 4 Group Full Year Orthopaedics Group 18

19 Profitability by business segment Q Revenue Fourth Quarter Trading Profit Margin Full Year Margin Orthopaedics Endoscopy Advanced Wound Management , Orthopaedics Endoscopy Advanced Wound Management , Total 2009 Total 19

20 Free cash flow Q Fourth Quarter Full Year (117) (107) (318) (307) 74 (30) (32) (112) (18) (4) (54) (16) Macrotextured claim (1) (2) (5) (5) Operating cash flow Net interest paid (10) (5) (41) (17) Taxation paid (66) (61) (270) (235) Free cash flow (492) (492) Trading profit Share based payment Depreciation and amortisation Capital expenditure Movements in working capital and provisions Trading cash flow Restructuring, rationalisation & acquisition costs Closing Net Debt (943) 20

21 Outlook for 2011 Revenue growth: Ortho: continued above market growth from recent launches and from focus on operational performance Endo: ahead of market in arthroscopy Wound: ahead of market, driven by NPWT Margin: continued significant efficiency improvement used to fund additional investment and deal with modest price pressures 21

22 Dave Illingworth Chief Executive Officer sustainable profitable growth

23 Our consistent strategy has delivered results Ortho Endo AWM Outperform our markets through: Customer-led Product innovation Medical education Customer service Efficient Investing for growth Aligned much achieved and much more to come Continued focus on operational margin and cash generation enabling increased investment in the business Drive new revenues from new opportunities / Emerging Markets / Adjacent technologies Company-wide objectives, aligned with compensation plan that rewards results and integrity 23

24 Growth drivers 2011 and beyond Orthopaedics SUPARTZ link to Rediscover Your Go campaign for knees Co-located multi-discipline Tiger teams for new products development, supported by R&D spend increase VISIONAIRE and VERILAST Roll out of LEAN 100 Endoscopy In house incubator collaboration for product development with customers INVENTURES New product development for China and other Emerging Markets Healthcare Systems customer development program NPWT product development, differentiation and scale up investments supporting unique market opportunities Emerging Markets management and infrastructure strengthening in 2011, continued strong focus on China and India Advanced Woundcare sales and marketing investments in Europe Diabetes Activity Levels Clinical Evidence Innovation Demographics Advanced Wound Management Obesity much achieved and much more to come Emerging Markets Osteoarthritis Re-imbursement & Funding Economic Values 24

25 Market and business outlook much achieved and much more to come Healthcare systems globally face continued challenges Demographics drive underlying growth Emerging markets offer continued potential Customer proximity is the key to innovation Great people executing our plans Investing for the longer term 25

26 Questions?

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28 Appendices

29 Quarterly revenues Smith & Nephew Key Product Line Revenues in at Average Rates and Underlying Growth Q1 Growth* Q2 Growth* 2009 Q3 Growth* (1) 2 (4) 2 2 (5) (5) 5 3 (2) (4) 3 (12) 4 (26) 8 (21) Q4 Full Year Growth* Growth* 2010 Q3 Q4 Growth* Revenue Growth* Q1 Growth* Q2 Growth* Full Year Growth* (3) (6) (5) (5) 4 (12) (5) 13 (21) 7 (20) (2) 8 (19) (12) 9 (9) (2) (5) , Orthopaedics Reconstruction Knees Hips Traum a Clinical therapies Endoscopy Arthroscopy Visualisation Advanced Wound Managem ent Exudate Manag em ent Infection Manag em ent Sm ith & Nephew * All revenue growths are on an underlying basis as previously reported, excluding the effects of acquisitions and currency translation 29

30 Exchange rates $: Q4/09 FY/09 Q1/10 Q2/10 Q3/10 Q4/10 FY/10 Period end Average Period end Average $: Percentage of Revenue by Geographic Market: United States United Kingdom Other Europe Other Q FY

31 Analysis of restructuring and acquisition costs P&L Charge Q4 Total to date Cash Spend Q4 Total to date EIP - cash costs * - asset w/offs n/a 108 n/a Plus Integration - cash costs ** - asset w/offs n/a 92 n/a * Target $125m ** Target $60-80m, plus $15m costs of investigating and resolving issues with the vendors 31

32 Reconciliation of free cash flow to IAS 7 net cash flow from operating activities Fourth Quarter Full Year Free cash flow Add back: capital expenditure Net cash inflow from operating activities (IAS 7) 32

33 Business days per quarter Q1 Q2 Q3 Q4 Full Year

34 New Borrowing Facility Commenced December 2010 Comprises 5 year revolving credit facility of $1bn Existing term loan of $1bn maturing in May 2012 reduced to $500m Cancellation of revolving credit facility of $1.5bn maturing in May