jefferies london healthcare conference · hip & knee implants arthrex 28% s&n 25% depuy...

Jefferies London Healthcare ConferenceJulie Brown, CFO

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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Agenda

1. Our business and strategic priorities

2. Progress to date

3. Insight into recent announcements

– ArthoCare

– Group optimisation

– Syncera

– Mid-Tier Strategy in Emerging Markets

4. Summary

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Our business

Advanced Wound Management

Knee Implants

Hip Implants

Trauma

ArthroscopicEnabling Technologies

Other

Sports Medicine (Joint Repair)

FAST FIX 360™ Meniscal Repair System 4

$4.35bnrevenues

(2013)

ALLEVYN™Wound Dressings

DYONICS™ PLATINUM Shaver Blades

PICO™ Negative Pressure Wound Therapy

ANTHOLOGY™Primary Hip System

VERILAST™

30-year wear claim

VISIONAIRE™ Patient Matched Instrumentation

PERI-LOC™Periarticular Locked Plating System

TRIGEN™ INTERTAN Intertrochanteric Antegrade Nail

Collagenase SANTYL OintmentEnzymatic debrider

HEALICOIL PK Suture Anchor

Our position – leading share and a diversified business

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Data: 2013 Estimates generated by Smith & Nephew based upon public sources and internal analysis*Acquisition of Systagenix by KCI completed Oct 2013*Sports Medicine consists of Repair, Access & Resection

Segment Size: $14.0bn

Growth: 3%

Segment Size: $4.3bn

Growth: 6%

Segment Size: $4.9bn

Growth: 7%

Segment Size: $6.7bn

Growth: 4%

Zimmer

23%

DePuy

20%

Stryker

19%

Biomet

12%

S&N

11%

Other

15%

Hip & Knee Implants

Arthrex

28%

S&N

25%

DePuy Mitek

15%

Stryker

10%

Conmed

5%

Other

17%

Sports Medicine

DePuy

Synthes

47%

Stryker

22%

S&N

10%

Biomet

6%

Zimmer

6%

Other, 9%

Trauma & Extremities

KCI

22%

S&N

20%

Molnlycke

12%

Convatec

8%

Other

38% Advanced Wound

Management

What drives underlying market growth?

Prevalence Lifestyle

Technology

Economics

Emerging markets

Demographics

6Diabetes

Strategic Priorities

• Winning in Established Markets

• Accelerating development in Emerging Markets

• Innovating for value

• Simplifying and improving our operating model

• Supplement organic growth through acquisitions

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Capital allocation framework

Reinvest for organic growth

Progressive dividend policy

Acquisitions in line with strategy

Return excess to shareholders

Maintain strong balance sheet to ensure solid investment grade credit metrics

1 2 3 4

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Agenda

1. Our business and strategic priorities

2. Progress to date

3. Insight into recent announcements

– ArthoCare

– Group optimisation

– Syncera

– Mid-Tier Strategy in Emerging Markets

4. Summary

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Progressing our Strategic Priorities

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Sh

are

ho

lde

r V

alu

e

Increased R&D. Launch momentum. Strong pipeline.

China. Distributor acquisitions. Mid-tier.Emerging Markets

Established Markets Focused investment & management. Greater efficiency.

Innovation

More agile and efficient. Group optimisation plan.Simplification

Acquisitions 13 deals, $2.8bn consideration (at H1)

Rebalancing Smith & Nephew

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Lower Growth

65%

Higher Growth

• Sports Medicine Joint Repair

• ArthroCare

• Trauma & Extremities

• Gynecology

• Advanced Wound Bioactives

• Advanced Wound Devices

• Emerging markets (all franchises)

Lower Growth

• Enabling Technologies (Established mkts)

• Reconstruction (Established mkts)

• Advanced Wound Care (Established mkts)

* Excluding Clinical Therapies ** H1 2014 including proforma ArthroCare for full period

Franchises / Geographies

Lower Growth

50%

Proportion of Revenue

2011* 2014 H1**

Higher Growth

50%

Lower Growth

65%

Higher Growth

35%

Agenda

1. Our business and strategic priorities

2. Progress to date

3. Insight into recent announcements

– ArthoCare

– Group Optimisation

– Syncera

– Mid-Tier Strategy in Emerging Markets

4. Summary

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Great fit for Smith & Nephew

ArthroCare - compelling strategic rationale

– Creates a comprehensive product portfolio

– Arthroscopic Enabling Technologies (COBLATION™)

– Joint Repair (Shoulder)

– Opportunities to drive greater revenue

– sales force enhancement

– geographic penetration outside US

– options in ENT

– Strong pipeline and R&D

– COBLATION & Joint Repair expertise

– new product development resources

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Simplify our management structure

Drive savings and capability investmentsDriving

Procurement Savings

Optimising Functions

Develop best in class global support functions

SimplifyingOperating Model

Group optimisation plan – four levers

• Increasing overall efficiency/ agility

• Liberating resources to re-invest in critical areas to drive growth

Rationalise property portfolioOptimising Locations

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The Syncera solution

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Hip/Knee implant solutions for progressive customers

Products from Smith & Nephew addressing the vast majority of primary joint procedures

Customer interfaces using innovative technology to reduce cost while improving efficiency

High levels of service and support

Transparent prices driving substantial benefit for providers Attractive economics

Value

Clinically proven

Automation

Full support

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2

3

4

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Mid-tier – new emerging markets business model…

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Independent Mid-tier sales organisation

Dedicated leadership

Different business model

Separate sales channels

Collaboration with premium-tier organisation

Different brand

Common shared

services

Mid-tier commercial model

Good quality products at lower prices

Manufacturing &design efficiency

Streamlinedsales & marketing

Different servicemodel

Agenda

1. Our business and strategic priorities

2. Progress to date

3. Insight into recent announcements

– ArthoCare

– Group optimisation

– Syncera

– Mid-Tier Strategy in Emerging Markets

4. Summary

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• Delivering on our Strategic Priorities

– re-balancing the growth profile

– enhancing the returns through cost and tax optimisation

– generating cash flow for value creating acquisitions or shareholder returns

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Summary

Questions

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