- Full 2007 Annual Report
- Annual Report
Review from our Chairman and Chief Executive
Full Year Results and Dividend
The Company grew Group revenues in the year to $3,369 million (a 21% increase in reported revenues) with particularly strong growth in Reconstruction. Reconstruction revenues were $1,240 million for the year, benefiting from hip resurfacing in the US and a recovery in US knee revenues in the fourth quarter.
Reported trading profit for the year was up 24% to $706 million with a 21.0% trading margin, 50 basis points higher than 2006 as the benefits of the EIP become clear. The EIP has good momentum going into 2008.
Net interest and finance charges were $24 million as the gearing of the balance sheet takes effect. The tax charge of $202 million reflects the effective rate for the year of 29.6% on profit before restructuring costs, acquisition related costs, the legal settlement and amortisation of acquisition intangibles. Adjusted attributable profit of $480 million is before the costs of restructuring, acquisition related costs, the legal settlement and amortisation of acquisition intangibles and taxation thereon. Attributable profit was $316 million.
Adjusted earnings per ordinary share (“EPSA”)1 rose by 15% to 52.0¢ (260.0¢ per American Depositary Share, (“ADS”)). Reported basic earnings per share were 34.2¢ (171.0¢ per ADS).
Trading cash flow2 was $602 million compared with $342 million a year ago. This is a trading profit to cash conversion ratio of 85% compared with 60% a year ago reflecting stronger working capital management and a reduction in the working capital and capital expenditure requirements of the US launches of JOURNEY° Bi Cruciate Stabilised Knee System, LEGION° Revision Knee System and BHR.
Share buy-back programme
Under the two year share buy-back programme of up to $1.5 billion announced last year the Company had bought back a total of 52 million shares at a cost of $640 million by the end of the year. The board has reviewed this programme in the light of current market conditions and opportunities. In order to preserve flexibility the Board currently expects to complete the programme over three years.
Dividend
The second interim dividend has been declared in the amount of 7.38¢ per share, a 10% increase in line with current dividend policy, and will be paid on 9 May 2008 to shareholders on the Register of Members at the close of business on 18 April 2008. The Sterling equivalent per ordinary share will be set on 18 April 2008. Shareholders may elect to receive their dividend in either Sterling or US Dollars and the last day for election will be 16 April 2008. Together with the first interim dividend of 4.51¢ per share (22.55¢ per ADS) this makes a total declared dividend of 11.89¢ per share (59.45¢ per ADS) for the year 2007, up 10%. Shareholders may participate in the Company’s dividend reinvestment plan.
- Adjusted earnings per ordinary share (“EPSA”) growth is as reported, not underlying, and is stated before restructuring and rationalisation costs, acquisition costs, the legal settlement with the US Department of Justice, (“the legal settlement”), amortisation of acquisition intangibles and taxation thereon, and in 2006 the gain on the disposal of the joint venture and the related fair value adjustment. A calculation of EPSA is provided in Note 2 to the Summary Financial Statement.
- Trading cash flow is cash generated from operations less capital expenditure but before the Macrotextured settlements, acquisition related costs, the legal settlement and restructuring costs.