Thursday, July 30, 2015

News: Second Quarter Trading and First Half 2015 Results

Strong performance - improved underlying revenue growth, trading profit margin and earnings. Full year guidance maintained

30 July 2015
Smith & Nephew plc (LSE:SN, NYSE:SNN) results for second quarter and first half ended 27 June 2015:

Trading

Reported

27 June
2015 
28 June
2014 
Underlying
growth 

27 June
2015 
28 June
2014 
Reported
growth 

$m
$m


$m
$m

Q2 Results1







Revenue
1,168
1,147
5%

1,168
1,147
2%
H1 Results1







Revenue
2,272
2,220
4%

2,272
2,220
2%
Trading profit
512
484
6%




Operating profit




439
363
21%
Trading/operating
profit margin (%)
22.5
21.8
70bps

19.3
16.4
290bps
EPSA/ EPS (cents)
39.1
38.1


33.0
26.8


Q2 Highlights1
  • Q2 revenue was $1,168 million, up 5% underlying and 2% on a reported basis, with -9% currency headwind partially offset by a 6% benefit from acquisitions
  • Advanced Wound Care improvement continues, with revenue up 12%
  • Emerging Markets consistently producing double-digit growth
  • Strong global Knee Implant performance delivers revenue growth of 7% 

H1 Highlights1
  • H1 revenue was $2,272 million, up 4% underlying and 2% on a reported basis, with -9% currency headwind partially offset by 7% benefit from acquisitions
  • H1 trading profit was $512 million, up 6% underlying
  • Trading profit margin up 70bps at 22.5%
  • H1 trading profit to cash conversion ratio improved to 75% (H1 2014: 53%)
  • EPSA 39.1¢, up 3%
  • Interim Dividend of 11.8¢ per share (2014: 11.0¢)
 Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said:
“These strong results demonstrate the positive effects of our actions coming through across the Group. Notably, in the second quarter we continued the improvement in Advanced Wound Care, achieved double-digit growth across the Emerging Markets, and delivered our best performance globally in Reconstruction for three years, led by strong US Knee Implants.
“In the first half of 2015, we delivered higher underlying revenue growth, trading profit margin and earnings year-on-year. We made a number of acquisitions, strengthening our technology and product portfolio and Emerging Markets business. Our efficiency programmes are progressing to plan, enhancing the bottom line.
“Where we have invested to improve existing businesses we are beginning to reap the benefits. I am confident we are firmly on-track with our strategy to invigorate the growth profile of Smith & Nephew.”
 Analyst conference call
An analyst meeting and conference call to discuss Smith & Nephew’s second quarter trading and half year results will be held at 8.30am BST/3.30am EST today, Thursday 30 July.  Click here for audio webcast/dial in details and for the presentation slides.
 Enquiries
Investors/ Analysts
Ingeborg Øie +44 (0) 20 7960 2285
Smith & Nephew plc

Media
Charles Reynolds +44 (0) 20 7401 7646
Smith & Nephew plc

Ben Atwell / Deborah Scott / Matthew Cole +44 (0) 20 3727 1000
FTI Communications

 Notes
  1. Certain items included in ‘Trading results’, such as trading profit, trading profit margin, trading cash flow, EPSA and underlying growth are non-IFRS financial measures.  The non-IFRS financial measures reported in this announcement are explained in Note 8 and are reconciled to the most directly comparable financial measure prepared in accordance with IFRS. Reported results represent IFRS financial measures as shown in the Condensed Consolidated Interim Financial Statements.
  2. All numbers given are for the quarter or first half ended 27 June 2015 unless stated otherwise.
  3.  Unless otherwise specified as ‘reported’ all revenue growths throughout this document are underlying increases/decreases after adjusting for the effects of currency translation and including the comparative impact of acquisitions and excluding disposals. All percentages compare to the equivalent 2014 period.
  4. Underlying revenue growth is used to compare the revenue in a given period to the comparative period on a like-for-like basis.  Underlying revenue growth reconciles to reported revenue growth, the most directly comparable financial measure calculated in accordance with IFRS, by making adjustments for the effect of acquisitions and disposals and the impact of movements in exchange rates (currency impact), as described below.
  5. The effect of acquisitions and disposals measures the impact on revenue from newly acquired material business combinations and recent material business disposals. This is calculated by comparing the current year, constant currency actual revenue (which include acquisitions and exclude disposals from the relevant date of completion) with prior year, constant currency actual revenue, adjusted to include the results of acquisitions and exclude disposals for the commensurate period in the prior year.
  6. Currency impact measures the increase/decrease in revenue resulting from currency movements on non-US Dollar sales and is measured as the difference between: 1) the increase/decrease in current year revenue translated into US Dollars at the current year average rate and the prior year revenue translated at the prior year average rate; and 2) the increase/decrease being measured by translating current and prior year revenue into US Dollars using a constant fixed rate.
  7. References to market growth rates are estimates generated by Smith & Nephew based on a variety of sources.
  8. Q2 2015 comprised 63 trading days (2014: 63 trading days). H1 2015 comprised 124 trading days (2014: 125 trading days).

Forward-looking Statements

This document may contain 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, payers 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 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; 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.
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