Smith & Nephew(US:SNN)2023-03-06 14:00Financial Performance - Group revenue for 2022 was $5,215 million, with reported growth of +0.1% and underlying growth of +4.7%[6]. - Operating profit decreased by 24% to $450 million, with an operating profit margin of 8.6%, down 280 basis points[6][41]. - Trading profit was $901 million, a decline of 4%, with a trading profit margin of 17.3%, down 70 basis points[6][41]. - Earnings per share (EPS) was 25.5¢, a decrease of 57%, while adjusted earnings per share (EPSA) was 81.8¢, an increase of 1%[6]. - Cash generated from operations fell by 45% to $581 million, and R&D investment decreased by 46% to $345 million[6]. - Free cash flow decreased to $56 million from $410 million in the prior year, with a trading profit to cash conversion ratio of 49% compared to 88% in 2021[151]. - The Group's net debt increased from $2,049 million at the beginning of 2022 to $2,535 million at the end of 2022, an increase of $486 million due to dividend payments, acquisitions, and share repurchases[153]. Revenue and Growth Initiatives - The company reported that over 60% of revenue growth in 2022 came from products launched in the last five years[41]. - A 12-point plan was announced to drive higher growth and improve productivity, focusing on strengthening foundations, accelerating growth, and transforming for long-term growth[42]. - The company targets an underlying revenue growth of over 5% in the medium term[89]. - For 2023, the Group expects underlying revenue growth in the range of 5.0% to 6.0%, driven by strong growth in Sports Medicine & ENT and Advanced Wound Management franchises[157]. - The company expects to deliver both faster revenue growth and margin expansion in the coming year as part of its 12-point plan[66]. Dividends and Shareholder Returns - The total dividend per share for 2022 remained unchanged at 37.5¢, with a final dividend of 23.1¢ and an interim dividend of 14.4¢[26]. - The total distribution of dividends per share remained unchanged at 37.5¢, consistent with the previous year[94]. - The Group purchased a total of 10.1 million ordinary shares at a cost of $158 million in 2022[151]. Sustainability and ESG Efforts - The company is committed to achieving net zero carbon emissions by 2045, with a new ESG Operating Committee established in January 2023 to oversee sustainability efforts[31]. - The company aims to achieve a 70% reduction in Scope 1 and Scope 2 greenhouse gas emissions by 2025, with a current reduction of 27% since 2019[119]. Product Development and Market Position - The Advanced Wound Management franchise has consistently outperformed the market since 2021, with significant growth opportunities identified, particularly in Negative Pressure Wound Therapy[47]. - Smith+Nephew launched 12 new products in 2022, which is a key performance indicator for driving future revenue growth[108]. - The company made a significant R&D investment of $345 million in 2022, focusing on new product launches from its organic pipeline and acquisitions[107]. - The company introduced the OR3O◊ Dual Mobility with OXINIUM DH Technology as part of its new product development[198]. - A new high technology orthopaedics manufacturing facility was opened in Malaysia, and plans for an Advanced Wound Management facility in the UK were announced[46]. Market Performance and Challenges - Orthopaedics revenue for 2022 was $2,113 million, a decline of 2.0% from $2,156 million in 2021, with a 390bps headwind from foreign exchange[200]. - The overall performance in 2022 was impacted by the implementation of the hip and knee volume-based procurement program in China[200]. - The company continues to focus on strategic initiatives to enhance market expansion and product offerings[200]. - The Orthopaedics market is valued at approximately $14.7 billion annually, with the Group's proprietary OXINIUM material providing a competitive advantage[194]. - The Trauma & Extremities market is worth over $12.7 billion annually, with the Group positioned to compete effectively in this segment[196].