Smith & Nephew plc Q2 FY2024 earnings call

• Deepak and John discuss progress on the 12-Point Plan, including operational improvements in Orthopedics to address product availability and execution challenges. - Successful integration of CARTIHEAL AGILI-C with early sales rep training and surgeon access. - New product launches like CORIOGRAPH for Robotics and GRAFIX PLUS in Wound Management. - Progress in inventory management, reducing slow-turning inventory and improving inventory health.

Orthopedics: Grew 5.8% underlying. Trauma & Extremities grew 11.8%, providing half of Orthopedics growth. Robotics (Other Recon) grew 17.8% with strong robotic placements. U.S. Recon showed progress with operational improvements. Sports Medicine and ENT: Grew 7.6%, Joint Repair had headwind from China VBP but excluding China was 11.8%. Advanced Wound Management: Returned to growth at +3.3%, with AWC and bioactives contributing.

• Full year revenue guidance 5%-6% underlying growth, with stronger second half. - Trading margin guidance at least 18%, targeting 20% by 2025. - Cost savings revised to $325M-$375M from zero-based budgeting, including manufacturing and procurement efficiencies. - Target leverage ratio around 2x net debt to adjusted EBITDA.

• China VBP headwinds affecting margins. - Competitive pressures in segments like Orthopedics. - Potential impact of regulatory changes (e.g., draft LCDs in wound biologics) on business and margins.

Q: On margin. How much conservatism is baked into the guidance for full year? And could there be a meaningful upside to that 18%?

A: John Rogers says no conservatism built in, VBP in second half is a factor, but no immediate upside seen.

Q: On CORI, how does revenue translate to placements and utilization? Any full year targets?

A: Deepak says CORI is above share position, placements growing, but no quarterly targets, will report year-end.

Q: On cost savings, expectations for restructuring charges?

A: John says restructuring costs guidance remains circa $270M-$275M, with circa $80M in 2024 and small rump in 2025.