Smith & Nephew(US:SNN)2021-02-18 13:29Financial Data and Key Metrics Changes - Full year revenue was $4.6 billion, reflecting a 12.1% underlying decline and an 11.2% reported decline, primarily due to COVID-19 impacts [7][27] - Trading profits decreased by 42% to $683 million, resulting in a trading margin of 15% [28] - Adjusted earnings per share were $0.646, a decline of 37% compared to the previous year [29][36] Business Line Data and Key Metrics Changes - Orthopaedics, the largest franchise, saw a revenue decline of 14% to $1.9 billion [31] - Sports Medicine and ENT revenue declined by 13% to $1.3 billion [31] - Advanced Wound Management remained resilient with a decline of only 0.1% [31] Market Data and Key Metrics Changes - In the US, revenue was impacted by the second wave of COVID-19, with around 20 states implementing restrictions on elective surgeries [12][13] - Other established markets declined by 6.2%, with variations by country; UK and Japan improved while France and Italy saw slowdowns [14] - Emerging markets also faced declines, although China showed strong end-user demand [15] Company Strategy and Development Direction - The company plans to maintain investment in R&D and M&A to drive mid-term growth, with an intense period of new product launches planned for 2021 and beyond [6][48] - Focus on maximizing the potential of current product portfolio and delivering value from recent acquisitions [51][52] - A strong emphasis on operational improvements to free up resources for reinvestment [63] Management Comments on Operating Environment and Future Outlook - Management expects continued impact from COVID-19 into the first half of 2021, with uncertainty regarding the timing and extent of recovery [42] - Anticipated substantial underlying growth in 2021 compared to 2020, with established markets expected to recover faster than emerging markets [43] - Management remains optimistic about the pipeline of new technologies and the potential of recent acquisitions [71] Other Important Information - The company proposed to keep the full year dividend unchanged at $0.375 per share, reflecting resilience and a strong balance sheet [9][30] - Net debt increased to $1.9 billion, with a leverage ratio of 1.8 times adjusted EBITDA [40][41] Q&A Session Summary Question: R&D Spend and Clinical Data Needs - Management acknowledged the increasing need for clinical data and confirmed that R&D investment will be higher moving forward, currently at about 6% of sales [76][77] Question: Robotics Adoption - Adoption of the CORI system is expected to grow, with a focus on capturing market share despite entering the market later than competitors [78] Question: RENASYS Market Share - RENASYS previously reached about $100 million in market share, with expectations for further growth due to product quality [79] Question: 2021 Guidance - Management opted for general guidance due to COVID-19 uncertainties, emphasizing confidence in recovery once restrictions are lifted [87][88] Question: Inventory Obsolescence - An increase in inventory obsolescence provision was noted, driven by demand estimates, with no change in accounting policy [92][93] Question: Share Price Performance - Management suggested that external factors, including Brexit, may have contributed to underperformance relative to peers [95][96] Question: Cash and Capital Deployment - The company maintains a strong liquidity position and plans to reinvest in growth and pursue M&A opportunities [109] Question: CapEx Increase - CapEx increased in 2020 primarily due to investments in the Malaysia factory, with expectations for continued higher rates in 2021 [113][114]