6-K 1 f6-k.htm 6-K Q4_Full_Year_Folio

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

February 7, 2019

 

Commission File Number 001-14978

 

SMITH & NEPHEW plc

(Registrant’s name)

 

15 Adam Street

London, England, WC2N 6LA

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F          Form 40-F __

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

 

Yes                          No 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

 

Yes                          No 

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2 (b) under the Securities Exchange Act of 1934.

 

Yes                          No 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2 (b)  : 82-  n/a.

 

 

 

 


 

 

Smith & Nephew plc

 

INDEX TO EXHIBITS

 

Item 1.  Press release entitled “Smith & Nephew Fourth Quarter and Full Year 2018 Results”, dated February 7, 2019.

 

 

 


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

Smith & Nephew plc

 

 

(Registrant)

 

 

 

 

 

 

Date: February 7,  2019

By:

/s/ Susan Swabey

 

 

Susan Swabey

 

 

Company Secretary

 

 

 

 


 

 

Smith & Nephew Fourth Quarter and Full Year 2018 Results

7 February 2019

 

Smith & Nephew plc (LSE:SN, NYSE:SNN) results for the Quarter and Year to 31 December 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

Trading2

 

 

31 Dec

 

31 Dec

 

Reported

 

31 Dec

 

31 Dec

 

Underlying

 

 

2018

 

2017

 

growth

 

2018

 

2017

 

growth

 

    

$m

    

$m

    

%

    

$m

    

$m

    

%

Fourth Quarter Results1

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

1,294

 

1,278

 

 1

 

1,294

 

1,278

 

 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year Results1

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

4,904

 

4,765

 

 3

 

4,904

 

4,765

 

 2

Operating/trading profit

 

863

 

934

 

 

 

1,123

 

1,048

 

 

Operating/trading profit margin (%)

 

17.6

 

19.6

 

 

 

22.9

 

22.0

 

 

Cash generated from operations/trading cash flow

 

1,108

 

1,273

 

 

 

951

 

940

 

 

EPS/ EPSA (cents)

 

76.0

 

87.8

 

 

 

100.9

 

94.5

 

 

 

 

Namal Nawana, Chief Executive Officer of Smith & Nephew, said:

 

We accelerated performance across 2018, with 3% underlying revenue growth in both the third and fourth quarters and a 7% uplift in full year trading profit. We start 2019 with a strengthened organisation and a new growth-oriented operating model.”

 

 

2018 Full Year Financial Highlights1,2

·

Underlying revenue up 2% and trading profit margin up 90bps to 22.9%, in line with guidance

o

Reported revenue growth of 3% is after +1% FX impact

o

Trading profit margin includes 50bps benefit from one-off legal settlement

o

Operating profit margin reflects restructuring costs of $120m, with c.$60m of benefits realised in 2018

·

Performance improved across the year, with revenue growth 1% in H1 and 3% in H2

·

Strong growth in Reconstruction and Emerging Markets (China growth double-digit), offset by continued softness in Arthroscopic Enabling Technologies and Advanced Wound Bioactives

·

Cash conversion ratio 85%; significant balance sheet capacity with 0.8x net debt to adjusted EBITDA ratio

·

Tax rate on trading results down 100bps to 16.1%, including provision release (15.1% reported tax rate)

·

EPSA up 7% to 100.9¢, reflecting improved trading and lower tax rate (EPS down 13% to 76.0¢ after restructuring and other non-trading costs)

·

Full year dividend up 3% to 36.0¢ per share

 

Strategic Highlights

·

New operating model complete from 1 January 2019, led by strengthened leadership team

·

Five new strategic imperatives to drive value creation over the medium term established

 

2019 Guidance1

·

Revenue expected to increase 2.5-3.5% underlying (around 1.8-2.8% reported3)

·

Trading profit margin expected in 22.8-23.2% range, a 40-80bps improvement excluding one-off 2018 legal gain

·

Tax rate on trading results expected to be 19-21% 

 


 

 

Analyst conference call

 

An analyst meeting and conference call to discuss Smith & Nephew’s results for the year ended 31 December 2018 will be held today, Thursday 7 February 2019 at 8.30am GMT / 3.30am EST. This will be webcast live and available for replay shortly after. The details can be found on the Smith & Nephew website at www.smith-nephew.com/results.

 

Enquiries

 

 

 

Investors

 

Andrew Swift

+44 (0) 20 7960 2285

Smith & Nephew

 

 

 

Media

 

Charles Reynolds

+44 (0) 1923 477314

Smith & Nephew

 

 

 

Ben Atwell / Andrew Ward

+44 (0) 20 3727 1000

FTI Consulting

 

 

Notes

 

1.

Unless otherwise specified as ‘reported’ all revenue growth throughout this document is ‘underlying’ after adjusting for the effects of currency translation and including the comparative impact of acquisitions and excluding disposals. All percentages compare to the equivalent 2017 period.

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.

The effect of acquisitions and disposals measures the impact on revenue from newly acquired business combinations and recent 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.

The ‘constant currency exchange effect’ is a measure of 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 the current year revenue translated into US Dollars at the current year average exchange rate and the prior revenue translated at the prior year rate; and 2) the increase/decrease being measured by translating current and prior year revenues into US Dollars using the prior year closing rate.

2.

Certain items included in ‘trading results’, such as trading profit, trading profit margin, tax rate on trading results, trading cash flow, trading profit to cash conversion ratio, EPSA, net debt to adjusted EBITDA ratio 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 Financial Statements.

3.

Reported growth rate guidance assumes exchange rates prevailing at 1 February 2019.

 

 

 

2

 


 

 

Smith & Nephew Fourth Quarter Trading and Full Year 2018 Results

 

Fourth Quarter Consolidated Revenue Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

31 December 

    

31 December 

    

Reported

    

Underlying

    

Acquisitions

    

Currency

 

 

 

2018

 

2017

 

growth

 

Growth(i)

 

/disposals

 

impact

 

Consolidated revenue by franchise

 

$m

 

$m

 

%

 

%

 

%

 

%

 

Sports Medicine, Trauma & Other

 

528

 

519

 

 2

 

 3

 

 1

 

-2 

 

Sports Medicine Joint Repair

 

188

 

173

 

 9

 

 9

 

 2

 

-2 

 

Arthroscopic Enabling Technologies

 

157

 

167

 

-6 

 

-4 

 

 -

 

-2 

 

Trauma & Extremities

 

127

 

128

 

-1 

 

 1

 

 -

 

-2 

 

Other Surgical Businesses

 

56

 

51

 

 9

 

11

 

 -

 

-2 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconstruction

 

429

 

423

 

 1

 

 3

 

 -

 

-2 

 

Knee Implants

 

269

 

266

 

 1

 

 3

 

 -

 

-2 

 

Hip Implants

 

160

 

157

 

 2

 

 4

 

 -

 

-2 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advanced Wound Management

 

337

 

336

 

 -

 

 2

 

 -

 

-2 

 

Advanced Wound Care

 

185

 

187

 

-1 

 

 2

 

 -

 

-3 

 

Advanced Wound Bioactives

 

94

 

97

 

-3 

 

-3 

 

 -

 

 -

 

Advanced Wound Devices

 

58

 

52

 

11

 

14

 

 -

 

-3 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,294

 

1,278

 

 1

 

 3

 

 -

 

-2 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated revenue by geography

 

 

 

 

 

 

 

 

 

 

 

 

 

US

 

649

 

624

 

 4

 

 3

 

 1

 

 -

 

Other Established Markets(ii)(iii)

 

427

 

439

 

-3 

 

 -

 

 -

 

-3 

 

Total Established Markets

 

1,076

 

1,063

 

 1

 

 2

 

 -

 

-1 

 

Emerging Markets(iii)

 

218

 

215

 

 2

 

 8

 

 -

 

-6 

 

Total

 

1,294

 

1,278

 

 1

 

 3

 

 -

 

-2 

 

 

(i)

Underlying growth is defined in Note 1 on page 2

(ii)

Other Established Markets are Europe, Canada, Japan, Australia and New Zealand

(iii)

Included within the Q4 2017 analysis is a reclassification of $6 million of revenue formerly included in Other Established Markets which has now been included in Emerging Markets in order to present consistent analysis to the Q4 2018 results

 

Fourth Quarter 2018 Trading Update

 

Our Q4 revenue was $1,294 million (2017: $1,278 million), up 3% on an underlying basis.  Reported revenue growth was 1%, including a -2% foreign exchange headwind.

 

The fourth quarter 2018 comprised 61 trading days, one more than the same period last year.

 

Fourth Quarter 2018 Franchise Highlights

 

Sports Medicine Joint Repair delivered 9% revenue growth in the quarter, driven by good performance across our shoulder repair portfolio. The recently acquired REGENETEN Bioinductive Implant for rotator cuff repair continued to perform ahead of expectations.

 

During the quarter we announced the acquisition of Ceterix Orthopaedics, Inc., the developer of the NovoStitch Pro Meniscal Repair System. This unique device addresses complex meniscal tear

3

 


 

 

patterns not adequately served by other repair systems and is highly complementary to Smith & Nephew’s leading FAST-FIX 360 Meniscal Repair System. The acquisition completed on 22 January 2019.

 

Revenue from Arthroscopic Enabling Technologies was down -4% as the softness in resection seen in previous quarters continued. We expect the launch of the FLOW 90 COBLATION wand for shoulder repair in the first half of 2019 to support improved performance.  

 

In Trauma & Extremities revenue was up 1%, with good growth across the nail portfolio and an increased contribution from the new EVOS SMALL plating system for lower extremity fractures. The global roll-out of this product is progressing well. During the quarter we announced two new studies showing positive clinical results and cost savings from using the INTERTAN Intertrochanteric Antegrade Nail.

 

Our Other Surgical Businesses franchise delivered revenue growth of 11% in the quarter, led by strong capital sales for our robotic NAVIO Surgical System.

 

We delivered 3% revenue growth across our Reconstruction business in the quarter.

 

Within this, revenue from Knee Implants grew 3%. Growth across our JOURNEY II, LEGION  REVISION and ANTHEM knee systems remained strong. In November we announced new clinical evidence showing excellent mid-term survivorship results for JOURNEY II BCS.

 

Revenue from Hip Implants was up 4%, continuing the much improved dynamic seen last quarter. This was again led by increased demand for the POLAR3 total hip solution, with its class-leading survivorship data, and the continued roll-out of the REDAPT Revision System.

 

Advanced Wound Care revenue was up 2%. Good growth in the US, led by ALLEVYN◊  LIFE and our pressure ulcer prevention strategy, continues to be offset by softness in some European countries. 

 

Advanced Wound Bioactives revenue was down -3%, with SANTYL volumes remaining under pressure. Following review of two large safety studies, the FDA approved the removal of the boxed warning from REGRANEX, and we are relaunching this product.

 

Revenue from Advanced Wound Devices was up 14%, completing a year of strong growth from this franchise. During the quarter we announced the European launch of the new PICO 7Y Single Use Negative Pressure Wound Therapy System (sNPWT) with AIRLOCK Technology. This is the first sNPWT system to include an innovative integrated Y extension enabling the utilisation of two dressings concurrently from one pump. We also completed the US launch of the new PICO 7 sNPWT System.

 

In December 2018, Smith & Nephew and our partner -  digital health provider Inhealthcare  - announced plans to pilot a multi-platform digital application designed to reduce variation in practice by community nurses by enabling consistent wound assessment and treatment recommendations in real-time. This formed part of the Wound Care Sector Deal launched by the UK Government within its Life Sciences Industrial Strategy.

 

Fourth Quarter Regional Performance

 

In the fourth quarter, revenue growth was 3% in the US and flat across our Other Established Markets. Revenue growth was 8% across the Emerging Markets. China growth remained double-digit.

4

 


 

 

.

Full Year 2018 Results

 

Smith & Nephew results for the Full Year ended 31 December 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

 

 

2018

 

2017

 

growth

 

 

    

$m

    

$m

    

%

 

Revenue

 

4,904

 

4,765

 

 3

 

Operating profit

 

863

 

934

 

-8 

 

Acquisition and disposal related items

 

(7)

 

(10)

 

 

 

Restructuring and rationalisation costs

 

120

 

 -

 

 

 

Amortisation and impairment of acquisition intangibles

 

113

 

140

 

 

 

Legal and other

 

34

 

(16)

 

 

 

Trading profit (non-IFRS)

 

1,123

 

1,048

 

 7

 

 

 

¢

 

¢

 

 

 

Earnings per share “EPS”

 

76.0

 

87.8

 

-13 

 

Acquisition and disposal related items

 

(0.7)

 

(0.9)

 

 

 

Restructuring and rationalisation costs

 

11.0

 

 -

 

 

 

Amortisation and impairment of acquisition intangibles

 

10.3

 

11.4

 

 

 

Legal and other

 

4.3

 

(0.1)

 

 

 

US tax reform

 

 -

 

(3.7)

 

 

 

Adjusted Earnings per share “EPSA”

 

100.9

 

94.5

 

 7

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2018 Analysis

 

Our full year revenue was $4,904 million (2017: $4,765 million), up 3% on a reported basis, including a foreign exchange tailwind of 1%. Revenue was up 2% on an underlying basis.

 

Trading profit for the year was $1,123 million (2017: $1,048 million), and the trading profit margin was 22.9% (2017: 22.0%), up 90bps. This reflects both improved trading performance and cost control and includes the 50bps benefit of a one-off legal settlement.

 

The Accelerating Performance and Execution (APEX) programme, initiated at the end of 2017, incurred restructuring costs of $120 million, with benefits recognised in 2018 P&L of around $60 million. We are making good progress across all three workstreams of (i) Manufacturing, Warehousing and Distribution,  (ii) General and Administrative (G&A) Expenses, and (iii) Commercial Effectiveness. APEX is expected to drive an annualised benefit of $160 million by 2022, for a one-off cost of $240 million.

 

Reported operating profit of $863 million (2017: $934 million) was after the APEX restructuring and rationalisation costs, as well as acquisition and disposal related items, amortisation of acquisition intangibles and legal and other items incurred in the year (see Note 8 to the Condensed Consolidated Financial Statements).

 

Cash generated from operations was $1,108 million (2017: $1,273 million), reflecting higher working capital outflows including increased inventory supporting sales growth, new product launches and an increase in safety stock levels in part in preparation for the UK’s exit from the European Union (EU). Trading cash flow was $951 million (2017: $940 million) (see Note 8 for a reconciliation between cash generated from operations and trading cash flow). The trading profit to cash conversion ratio was again good at 85% (2017: 90%).

 

The net interest charge within reported results was $51 million (2017: $51 million). Net debt was $1,104 million at year-end, a decrease of $177 million from $1,281 million at 31 December 2017 

5

 


 

 

(see Note 6 for a reconciliation of net debt). Net debt to adjusted EBITDA ratio was 0.8x at year-end (see Note 8 to the Condensed Consolidated Financial Statements).

 

The tax rate on trading results for the year to 31 December 2018 was 16.1% (2017: 17.1%). This was lower than the guided rate of between 20-21% mainly due to a one-off benefit from a tax provision release following expiry of statute of limitations and a beneficial geographical mix of profits. The reported tax rate was 15.1% (2017: 12.7%). Details of the reconciliation between trading results and reported results are set out in Note 8  to the Condensed Consolidated Financial Statements.

 

Adjusted earnings per share (‘EPSA’) was up 7% at 100.9¢ (201.8¢ per ADS) (2017: 94.5¢) as a result of the improved trading performance and lower tax rate on trading results. Basic earnings per share (‘EPS’) was down 13% to 76.0¢ (152.0¢ per ADS), primarily due to the impact of the restructuring charges related to the APEX programme as well as other non-trading costs  (2017: 87.8¢).

 

 

Dividend

 

The Board is pleased to recommend a Final Dividend of 22.0¢ per share (44.0¢ per ADS). This, together with an Interim Dividend of 14.0¢ per share (28.0¢ per ADS), will give a total distribution of 36.0¢ per share (72.0¢ per ADS) in 2018 representing year-on-year growth of 3% in the declared full year dividend. The Final Dividend will be paid on 8 May 2019 to shareholders on the register at the close of business on 5 April 2019.

 

 

Business update

 

Smith & Nephew has launched five new strategic imperatives which form our value creation plan for the medium term.

 

1.

Achieve the full potential of our portfolio – improving commercial execution to accelerate organic revenue growth performance with a focus on
(i) platform-specific plans;
(ii) Ambulatory Surgery Centers; and
(iii) Emerging Markets, especially China and Latin America.

2.

Transform the business through enabling technologies – by acquiring and developing leading enabling technologies to transform procedures, including robotics, imaging and augmented reality.

3.

Expand in high-growth segments – by accelerating portfolio growth, strengthening or establishing leadership positions, and driving meaningful synergies organically and through M&A and partnering.

4.

Strengthen talent and capabilities – by developing a winning culture to improve retention and attract talent.

5.

Become the best owner  – through operations transformation and organisation simplification, hence driving meaningful margin expansion.

The strategic imperatives build on the previously announced new global commercial model.  From 1 January 2019 a president is responsible for each of our three specialised global marketing franchises – Orthopaedics, Sports Medicine/ENT and Wound. The franchise presidents also have commercial responsibility for the US. Aligned with, and supporting the franchises, are presidents

6

 


 

 

and regional commercial organisations for Europe, Middle East, and Africa (EMEA), and Asia Pacific (APAC).  

 

The Group has also introduced a new brand purpose – Life Unlimited – and three supporting culture pillars - Care, Collaboration and Courage. Life Unlimited captures the essence of Smith & Nephew and our purpose to address meaningfully the health issues that hinder people from living their lives to the fullest. The culture pillars are grounded in the service of patients and practitioners. They guide employees to work together and couple the idea of continuous learning and improvement with the aspiration to lead in all our endeavours.

 

 

UK’s withdrawal from the EU

Smith & Nephew’s management does not believe that the UK’s decision to leave the EU will have a significant impact on our long-term ability to conduct business into and out of the EU or UK. The UK accounts for approximately 5% of global revenue and the majority of our manufacturing takes place outside the UK and EU. We are making good progress with our preparations for the various scenarios.

 

 

2019 Outlook

 

Our 2019 guidance for further improvement in underlying performance at the top and bottom line is an important step in realising our medium-term ambition to outgrow our markets.

 

In terms of revenue, we expect our underlying growth to be in the range of 2.5% to 3.5% in 2019. On a reported basis this equates to a range of around 1.8% to 2.8% at exchange rates prevailing on 1  February 2019 and including the effect of the Ceterix acquisition.

 

We expect 2019 trading profit margin to be in the range of 22.8% to 23.2%, a further 40-80bps improvement over 2018, excluding the one-off 50bps legal settlement benefit.  

 

The tax rate on trading results for 2019 is expected to be in the range 19% to 21%, subject to any material changes to tax law, or other one-off items.

 

 

 

 

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Forward calendar

 

The Q1 Trading Report will be released on 2 May 2019.

 

About Smith & Nephew

 

Smith & Nephew is a portfolio medical technology business with leadership positions in Orthopaedics, Advanced Wound Management and Sports Medicine. Smith & Nephew has more than 16,000 employees and a presence in more than 100 countries. Annual sales in 2018 were $4.9 billion. Smith & Nephew is a member of the FTSE100 (LSE:SN, NYSE:SNN). For more information about Smith & Nephew, please visit our corporate website www.smith-nephew.com and follow us on Twitter,  LinkedIn or Facebook.

 

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 or other problems with quality management systems or failure to comply with related regulations; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; disruption to our supply chain or operations or those of our suppliers; competition for qualified personnel; 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.

 

 Trademark of Smith & Nephew. Certain marks registered US Patent and Trademark Office.

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Full Year Consolidated Revenue Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

31 December 

    

31 December 

    

Reported

    

Underlying

    

Acquisitions

    

Currency

 

 

 

 

2018

 

2017

 

growth

 

Growth(i)

 

/disposals

 

impact

 

 

Consolidated revenue by franchise

 

$m

 

$m

 

%

 

%

 

%

 

%

 

 

Sports Medicine, Trauma & Other

 

1,999

 

1,926

 

 4

 

 2

 

 1

 

 1

 

 

Sports Medicine Joint Repair

 

697

 

627

 

11

 

 8

 

 2

 

 1

 

 

Arthroscopic Enabling Technologies

 

600

 

615

 

-2 

 

-3 

 

 -

 

 1

 

 

Trauma & Extremities

 

493

 

495

 

 -

 

-1 

 

 -

 

 1

 

 

Other Surgical Businesses

 

209

 

189

 

10

 

10

 

 -

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconstruction

 

1,630

 

1,583

 

 3

 

 3

 

 -

 

 -

 

 

Knee Implants

 

1,017

 

984

 

 3

 

 3

 

 -

 

 -

 

 

Hip Implants

 

613

 

599

 

 2

 

 2

 

 -

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advanced Wound Management

 

1,275

 

1,256

 

 2

 

 -

 

 -

 

 2

 

 

Advanced Wound Care

 

740

 

720

 

 3

 

 1

 

 -

 

 2

 

 

Advanced Wound Bioactives

 

320

 

342

 

-6 

 

-6 

 

 -

 

 -

 

 

Advanced Wound Devices

 

215

 

194

 

10

 

 9

 

 -

 

 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

4,904

 

4,765

 

 3

 

 2

 

 -

 

 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated revenue by geography

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US

 

2,354

 

2,306

 

 2

 

 1

 

 1

 

 -

 

 

Other Established Markets(ii)(iii)

 

1,693

 

1,658

 

 2

 

 -

 

 -

 

 2

 

 

Total Established Markets

 

4,047

 

3,964

 

 2

 

 1

 

 -

 

 1

 

 

Emerging Markets(iii)

 

857

 

801

 

 7

 

 8

 

 -

 

-1 

 

 

Total

 

4,904

 

4,765

 

 3

 

 2

 

 -

 

 1

 

 

 

(i)

Underlying growth is defined in Note 1 on page 2

(ii)

Other Established Markets are Europe, Canada, Japan, Australia and New Zealand

(iii)

Included within the full year 2017 analysis is a reclassification of $20 million of revenue formerly included in Other Established Markets which has now been included in Emerging Markets in order to present consistent analysis to the full year 2018 results

9

 


 

 

2018 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Group Income Statement for the year to 31 December 2018

 

 

 

 

 

 

 

 

 

    

 

    

2018

    

2017

 

 

Notes

 

$m

 

$m

Revenue

 

2

 

4,904

 

4,765

Cost of goods sold

 

 

 

(1,298)

 

(1,248)

Gross profit

 

 

 

3,606

 

3,517

Selling, general and administrative expenses

 

 

 

(2,497)

 

(2,360)

Research and development expenses

 

 

 

(246)

 

(223)

Operating profit

 

8

 

863

 

934

Interest income

 

 

 

 8

 

 6

Interest expense

 

 

 

(59)

 

(57)

Other finance costs

 

 

 

(20)

 

(10)

Share of results of associates

 

 

 

(11)

 

 6

Profit before taxation

 

 

 

781

 

879

Taxation

 

3

 

(118)

 

(112)

Attributable profitA

 

 

 

663

 

767

Earnings per shareA

 

 

 

 

 

 

Basic

 

8

 

76.0¢

 

87.8¢

Diluted

 

 

 

75.7¢

 

87.7¢

 

 

Unaudited Group Statement of Comprehensive Income for the year to 31 December 2018

 

 

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

 

 

$m

 

$m

Attributable profitA

 

663

 

767

Other comprehensive income

 

 

 

 

Items that will not be reclassified to income statement

 

 

 

 

Remeasurement of net retirement benefit obligations

 

11

 

64

Taxation on other comprehensive income

 

(1)

 

(9)

Total items that will not be reclassified to income statement

 

10

 

55

 

 

 

 

 

Items that may be reclassified subsequently to income statement

 

 

 

 

Exchange differences on translation of foreign operations

 

(132)

 

181

Fair value remeasurement of available for sale asset

 

 -

 

(10)

Net gains/(losses) on cash flow hedges

 

23

 

(24)

Taxation on other comprehensive income

 

(3)

 

 -

Total items that may be reclassified subsequently to income statement

 

(112)

 

147

Other comprehensive (loss)/income for the year, net of taxation

 

(102)

 

202

Total comprehensive income for the yearA

 

561

 

969

 

A

Attributable to the equity holders of the parent and wholly derived from continuing operations.

10

 


 

 

Unaudited Group Balance Sheet as at 31 December 2018

 

 

 

 

 

 

 

 

 

    

 

    

2018

    

2017

 

 

Notes

 

$m

 

$m

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

1,062

 

1,049

Goodwill

 

 

 

2,337

 

2,371

Intangible assets

 

 

 

1,210

 

1,371

Investments

 

 

 

34

 

21

Investment in associates

 

 

 

105

 

118

Other non-current assets

 

 

 

16

 

16

Retirement benefit assets

 

 

 

92

 

62

Deferred tax assets

 

 

 

126

 

127

 

 

 

 

4,982

 

5,135

Current assets

 

 

 

 

 

 

Inventories

 

 

 

1,395

 

1,304

Trade and other receivables

 

 

 

1,317

 

1,258

Cash at bank

 

6

 

365

 

169

 

 

 

 

3,077

 

2,731

TOTAL ASSETS

 

 

 

8,059

 

7,866

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

Equity attributable to owners of the Company

 

 

 

 

 

 

Share capital

 

 

 

177

 

178

Share premium

 

 

 

608

 

605

Capital redemption reserve

 

 

 

18

 

17

Treasury shares

 

 

 

(214)

 

(257)

Other reserves

 

 

 

(340)

 

(228)

Retained earnings

 

 

 

4,625

 

4,329

Total equity

 

 

 

4,874

 

4,644

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Long-term borrowings

 

6

 

1,301

 

1,423

Retirement benefit obligations

 

 

 

114

 

131

Other payables

 

 

 

53

 

128

Provisions

 

 

 

153

 

97

Deferred tax liabilities

 

 

 

99

 

97

 

 

 

 

1,720

 

1,876

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Bank overdrafts, borrowings and loans

 

6

 

164

 

27

Trade and other payables

 

 

 

957

 

957

Provisions

 

 

 

121

 

129

Current tax payable

 

 

 

223

 

233

 

 

 

 

1,465

 

1,346

Total liabilities

 

 

 

3,185

 

3,222

TOTAL EQUITY AND LIABILITIES

 

 

 

8,059

 

7,866

 

 

11

 


 

 

Unaudited Condensed Group Cash Flow Statement for the year to 31 December 2018

 

 

 

 

 

 

 

 

2018

 

2017

 

 

$m

 

$m

Cash flows from operating activities

 

  

 

  

Profit before taxation

 

781

 

879

Net interest payable

 

51

 

51

Depreciation, amortisation and impairment

 

454

 

460

Share of results of associates

 

11

 

(6)

Share-based payments expense (equity settled)

 

35

 

31

Net movement in post-retirement obligations

 

(35)

 

(40)

Movement in working capital and provisions

 

(189)

 

(102)

Cash generated from operations

 

1,108

 

1,273

Net interest and finance costs paid

 

(52)

 

(48)

Income taxes paid

 

(125)

 

(135)

Net cash inflow from operating activities

 

931

 

1,090

 

 

 

 

 

Cash flows from investing activities

 

  

 

  

Acquisitions, net of cash acquired

 

(29)

 

(159)

Capital expenditure

 

(347)

 

(376)

Purchase of investments

 

(4)

 

(8)

Distribution from associate

 

 2

 

 -

Net cash used in investing activities

 

(378)

 

(543)

Net cash inflow before financing activities

 

553

 

547

 

 

 

 

 

Cash flows from financing activities

 

  

 

  

Proceeds from issue of ordinary share capital

 

 3

 

 5

Proceeds from own shares

 

10

 

 5

Purchase of own shares

 

(48)

 

(52)

Equity dividends paid

 

(321)

 

(269)

Cash movements in borrowings

 

(7)

 

(147)

Settlement of currency swaps

 

(8)

 

24

Net cash used in financing activities

 

(371)

 

(434)

 

 

 

 

 

Net increase in cash and cash equivalents

 

182

 

113

Cash and cash equivalents at beginning of period

 

155

 

38

Exchange adjustments

 

(4)

 

 4

Cash and cash equivalents at end of periodB

 

333

 

155

 

B

Cash and cash equivalents at the end of the period are net of overdrafts of $32 million (31 December 2017: $14 million).

12

 


 

 

Unaudited Group Statement of Changes in Equity for the year to 31 December 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Capital 

    

 

    

 

    

 

    

 

 

 

 

Share 

 

Share 

 

redemption 

 

Treasury 

 

Other 

 

Retained 

 

Total 

 

 

 

capital 

 

premium 

 

reserve 

 

shares 

 

reserves 

 

earnings 

  

equity 

 

Notes

 

$m 

 

$m 

 

$m 

 

$m 

 

$m 

 

$m 

  

$m 

At 31 December 2017

 

 

178

 

605

 

17

 

(257)

 

(228)

 

4,329

  

4,644

Adjustment on initial application of IFRS 9 (net of tax)

1

 

 -

 

 -

 

 -

 

 -

 

 -

 

(11)

 

(11)

Adjusted balance as at 1 January 2018

 

 

178

 

605

 

17

 

(257)

 

(228)

 

4,318

 

4,633

Attributable profitA

 

 

-

 

-

 

-

 

-

 

-

 

663

  

663

Other comprehensive incomeA

 

 

-

 

-

 

-

 

-

 

(112)

 

10

  

(102)

Equity dividends paid

 

 

-

 

-

 

-

 

-

 

-

 

(321)

  

(321)

Share-based payments recognised

 

 

-

 

-

 

-

 

-

 

-