Smith & Nephew(SNN) - 2022 Q4 - Annual Report

Financial Performance - Group revenue for the fiscal year ended December 31, 2022, was $5,215 million, reflecting a 0.1% increase[6] - Operating profit decreased by 4% to $901 million, with an operating profit margin of 17.3%, down 70 basis points[6] - Cash generated from operations was $581 million, representing a 45% decline compared to the previous year[6] - Earnings per share (EPS) decreased by 57% to 25.5 cents, while adjusted earnings per share (EPSA) increased by 1% to 81.8 cents[6] - Operating profit decreased by 24% to $450 million, with an operating profit margin of 8.6%, down 280 basis points[80] - Trading profit was $901 million, representing a decline of 4%, with a trading profit margin of 17.3%, down 70 basis points[80] - Reported profit before tax was $235 million, a decrease of $351 million from 2021, after adjusting for a $109 million impairment loss[119] - The trading profit margin was below the updated guidance of 17.5% provided on July 28, 2022[118] - Trading profit for 2022 was $901 million, representing a margin of 17.3%, down from 18.0% in 2021[123] - Basic earnings per share (EPS) decreased by 57% to 25.5¢ due to an impairment loss in the investment in Bioventus, while adjusted EPS (EPSA) increased by 1% to 81.8¢[128] Research and Development - Research and Development (R&D) investment was reported at $450 million, a 24% decrease year-over-year[6] - R&D investment in 2022 was $345 million, with 12 new product launches contributing to future revenue growth[104] - More than 60% of the revenue growth in 2022 came from products launched in the last five years, indicating a strong investment in innovation[43] - The company aims to enhance its product offerings through innovation and strategic acquisitions[20] Strategic Initiatives - The company plans to execute a 12-point plan aimed at driving higher growth and improving productivity, focusing on fixing Orthopaedics and accelerating growth in Advanced Wound Management and Sports Medicine & ENT[44][46] - A 12-point plan was announced to fundamentally change operations, aiming for higher growth and improved productivity[71] - The 12-point plan aims to achieve over $200 million in annual savings by 2025 through efficiency and productivity enhancements[127] Market Position and Growth - Smith+Nephew achieved 4.7% underlying revenue growth in 2022, with an operating profit margin of 8.6% and a trading profit margin of 17.3%[43] - The company targets underlying revenue growth of 5%+ in the medium term[89] - The company expects underlying revenue growth for 2023 in the range of 5.0% to 6.0%, with strong growth anticipated in Sports Medicine & ENT and Advanced Wound Management[154] Sustainability and Corporate Responsibility - The company emphasizes sustainability and aims to minimize its environmental impact while addressing stakeholder requirements[20] - The company is committed to achieving net zero carbon emissions by 2045, with a strengthened executive oversight of sustainability initiatives[34] - The company is committed to achieving net zero carbon emissions by 2045 and is developing a Scope 3 emissions reduction roadmap[70] Operational Challenges - The company faced challenges in 2022 due to macroeconomic factors, including higher inflation and supply chain issues, impacting growth and trading profit margin[43] - The company is addressing performance issues in its Orthopaedics franchise to improve productivity and support margin expansion[24][46] Acquisitions and Investments - The company acquired Engage Surgical in January 2022, enhancing its portfolio with a unique position in the US knee system market[105] - The acquisition of Engage Surgical was completed for a maximum consideration of $135 million, enhancing the company's innovation strategy[131] Employee Engagement - The employee engagement score was 4.12, placing the company in the 73rd percentile of Gallup's database[106] Product Development and Innovation - New product launches in orthopaedics include the expansion of the robotics-enabled CORI Surgical System, with FDA clearance for a revision knee indication[58] - REGENETEN showed an 86% reduction in rotator cuff re-tear rates at 12 months in interim results from a randomized controlled trial[59] - The company expects to launch the AETOS Total Shoulder System in 2023, expanding its presence in the Shoulder Replacement market[192] - Smith+Nephew's CORI Surgical System is the first robotic-assisted surgery system indicated for revision knee procedures in the US, positioning the company as a leader in robotic-assisted surgery[191] Facilities and Training - A new Smith & Nephew Academy is set to open in 2023, furthering its commitment to medical education[19] - The company plans to open a new Smith+Nephew Academy in Munich in 2023, following the establishment of a similar facility in Singapore[132] - The company opened the Smith+Nephew Academy Singapore in November 2022, enhancing its medical education and digital innovation capabilities in the Asia-Pacific region[184] Orthopaedics Segment Performance - Orthopaedics revenue for Smith+Nephew was $2,113 million in 2022, a decline of 2.0% on a reported basis, but an increase of 1.9% on an underlying basis[193] - The Knee Implants segment generated $899 million in revenue, reflecting a growth of 2.5%, while Hip Implants revenue was $584 million, down 4.4%[193] - Smith+Nephew's Orthopaedics trading profit increased to $383 million in 2022, up from $367 million in 2021[193] - The Orthopaedics franchise has a trading profit margin of 18.1%, which is below that of other franchises[197] - The company aims to accelerate growth in Joint Reconstruction and Robotics by focusing on robotically enabled procedures[199] - Smith+Nephew's Orthopaedics franchise competes against major players such as Stryker, Zimmer Biomet, and DePuy Synthes[200]