2013 Third Quarter Results

Transcription

1 2013 Third Quarter Results

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, our success in integrating acquired businesses, and disruption that may result from changes we make in our business plans or organisation to adapt to market developments; 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 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 Olivier Bohuon Chief Executive Officer

4 Q Highlights Revenue Third Quarter underlying growth $m $m % Advanced Surgical Devices Advanced Wound Management Group 1, Trading profit Advanced Surgical Devices Advanced Wound Management Group Trading Profit Margin 21.6% 21.7% EPSA Key Comments Q3 revenues up 8% reported up 5% underlying better Reconstruction performance strong AWM and Emerging Markets Trading profit up 10% underlying trading profit margin 21.6% EPSA 17.1, up 4% Full year outlook unchanged share buyback $151m to date 4

5 Q3 Revenue growth Geographic growth Revenue split Product franchise growth 5% Knee 2% US ASD Hip Joint Repair 3% 7% Enab Tech -1% 2% Est OUS Trauma Other ASD 2% AWM AWM 12% 20% EM/IM 0% 5% 10% 15% 20% -5% 0% 5% 10% 15% Underlying change (%) Underlying change (%) Note: Other ASD +11%, Est OUS is Australia, Canada, Europe, Japan and New Zealand 5

6 Advanced Surgical Devices Knee and Hip Implants Revenue performance Knees: global +2%, US +2%, OUS +3% ($196m) Hips: global +3%, US -3%, OUS +7% ($150m) Commentary performance improvement, Reconstruction global +2% investment benefits (e.g. VERILAST DTC marketing) JOURNEY II launch Hips (ex BHR ) global +4% JOURNEY II BCS Knee System 6

7 Advanced Surgical Devices Sports Medicine and Trauma Revenue performance Sports Medicine Joint Repair +7% ($118m) Arthroscopic Enabling Technologies (AET) -1% ($101m) Trauma +2% ($115m) Commentary start of strong Sports Medicine product pipeline Trauma strategy of increased channel specialisation and new products underlying dynamics positive optimistic about 2014 HEALICOIL REGENESORB Suture Anchor 7

8 Advanced Wound Management Revenue performance Advanced Wound Care +2% ($207m) Advanced Wound Devices +11% ($52m) Advanced Wound Bioactives +55% ($72m) Commentary AWC benefiting from better Europe AWD reflects strong comparable and price pressures, including competitive bidding expect AWB to be over 40% growth for full year DURAFIBER Ag Antimicrobial gelling fiber dressing (US launch) 8

9 Julie Brown Chief Financial Officer

10 Agenda items 1. Revenue and profitability analysis by business segment 2. Group income statement 3. Group cash flow outlook 10

11 Revenue growth by business segment Q Underlying Bioventus Healthpoint Currency Reported Quarter 3 % % % % % Advanced Surgical Devices 3 (1) - (2) - Advanced Wound Management (2) 30 Group 5-5 (2) 8 11

12 Underlying revenue growth by geography & business segment Q Established Markets Emerging and International Markets Group US OUS Total Total Total Quarter 3 Revenue $m $m $m $m $m Advanced Surgical Devices Advanced Wound Management Group ,027 Quarter 3 Growth % % % % % Advanced Surgical Devices - (1) Advanced Wound Management Group

13 Profitability by business segment Q Third Quarter ASD AWM Group Year to Date Margin 2013 Revenue ($m) ,027 Trading profit ($m) Margin (%) Revenue ($m) Trading profit ($m) Margin (%)

14 Income statement Q Third Quarter Quarterly growth Year to Date * Underlying Reported * $m $m $m $m Revenue 1, % 8% 3,176 3,060 Trading profit % 8% Restructuring and rationalisation costs (11) (10) (36) (30) Acquisition and integration costs (9) - (19) - Amortisation of acquisition intangibles (22) (10) (65) (30) Operating profit Net interest income/(costs) Other finance costs (3) (3) (7) (9) Profit before taxation, disposals and associates Trading margin (%) 21.6% 21.7% 21.9% 22.6% 14 * Restated for IAS19.

15 Income statement Q Third Quarter Year to Date * * $m $m $m $m Profit before taxation, disposals and associates Profit on disposal Associate - 5 (1) 4 Profit before taxation Taxation (56) (59) Tax rate** 29.8% (176) (298) Attributable profit Add back: Restructuring & rationalisation costs Acquisition and integration costs Amortisation of acquisition intangibles Profit on disposal (251) Taxation on excluded items (10) (5) (30) 89 Adjusted attributable profit Adjusted earnings per share ("EPSA") EPSA Growth 4% Earnings per share ("EPS") * Restated for IAS19. ** Excluding restructuring and rationalisation costs, acquisition and integration costs and amortisation of acquisition intangibles.

16 Free cash flow Q Third Quarter Year to Date $m $m $m $m Trading profit Share based payment Depreciation and amortisation Capital expenditure (74) (57) (215) (187) Movements in working capital and provisions (34) 33 (117) (4) Trading cash flow Restructuring, rationalisation & acquisition costs (11) (11) (55) (37) Exceptional legal expense (22) Operating cash flow Net interest paid (2) - (5) (3) Taxation paid (53) (58) (205) (216) Free cash flow Closing Net (Debt)/Cash (222)

17 2013 Outlook Full year outlook for Group as a whole unchanged Healthpoint now expected to grow at above 40% Trauma growth expected to be below the market Trading Margin guidance Pressures due to US Medical Device excise tax, Healthpoint and investments Partially offset by Structural Efficiency Programme 17

18 Olivier Bohuon Chief Executive Officer

19 Q3 Summary Strong third quarter improved revenue growth performance trading profit reflects balance of investment and savings Strategic Priorities directing investment additional investments improving Established Market growth R&D investment now evident in near-term pipeline acquisitions clearly supplementing organic growth strong Emerging and International Market strategy execution 19

20 Questions

21

22 Appendices

23 Product line revenues and underlying growth Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Growth Growth Growth Growth Growth Growth Growth Revenue Growth % % % % % % % $m % Advanced Surgical Devices Reconstruction Knee Implants 6 3 (1) 2 3 (6) (1) Hip Implants (2) (5) (4) (2) (3) (6) (1) Trauma (1) Sports Medicine Joint Repair Arthroscopic Enabling Technologies 1 (4) (3) - (2) (7) (1) Other ASD 7 11 (5) Advanced Wound Management Advanced Wound Care - - (2) Advanced Wound Devices Advanced Wound Bioactives n/a n/a n/a n/a n/a Group , All revenue growth rates are on an underlying basis

24 Analysis of restructuring costs P&L Charge Cash Spend Previous Previous Q3 Total to date Total to Date Total to Date Q3 Total to date Restructuring $m $m $m $m $m $m Cash costs Asset w/offs n/a n/a n/a Total Of the $11m total charged in Q3, $8m are reflected in selling, general and administrative expenses and $3m are reflected in cost of goods sold in the Group s Income Statement. Target $160m cash costs and $40m asset write-offs. 24

25 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)

26 Business days per quarter Q1 Q2 Q3 Q4 Full Year

27 Exchange rates Q3/12 FY/12 Q1/13 Q2/13 Q3/13 $: Period end Average $: Period end Average

28 Financial highlights YTD 2013 Revenue $m $m Key Comments Revenue Underlying growth of 3% ASD 2,197 2,311 AWM Group 3, Trading Profit Underlying growth of 4% Trading Profit ASD AWM Group Group Margin 21.9% 22.6% Group Margin Margin of 21.9% - 70 bps lower than prior year EPSA Flat growth on prior year at 53.6 per share Operating Profit Profit Before Tax EPSA

29 2013 key new products progression YTD Q4 H Knee and Hip Implants JOURNEY II BCS Knee System SMF Monolithic Hip Stem REDAPT Hip Revision Femoral System (Europe) Universal Instruments HA POLARSTEM for hips (US) R3 smaller ceramic liners for hips JOURNEY II range expansion Sports Medicine/ Arthroscopic Enabling Technologies FAST-FIX 360 (Japan) Clancy Depth Gauge Active Heel Traction Boot Retrofit Kits SPIDER2 SS Kits/ disposables GenXT camera (India) HEALICOIL REGENESORB Biocomposite Suture Anchor LED Light Source for visualisation SUTUREFIX ULTRA All Suture Anchor Suture passer and suture tape range Impingement surgical planning software tool Expanding hip anchor range Resection and shaver blade variants Trauma & Extremities Foot & Ankle Instruments TRIGEN SURESHOT (Japan) MODULAR RAIL SYSTEM ALL 28 Foot and Ankle portfolio expansion including ankle instability & Achilles tendon repair TRIGEN INTERTAN Nail range expansion SURESHOT upgrades Expand upper extremities portfolio Expand trauma plate and nail range Advanced Wound Management ALLEVYN Life variants ALLEVYN GB variants ALLEVYN Ag variants ACTICOAT Flex for PICO RENASYS enhancements Pressure ulcer prevention dressings Infection Management products Domestically manufactured Incise drapes (China) New wound contact layer IV improved format dressings ALLEVYN variants RENASYS enhancements PICO variants ALLEVYN variants NPWT variants Film, IV, Drape products (EM/IM) 29