First-half results to 30 June
- Total group revenue up 5% to $2.73 billion
- Trading profit down 5% to $414 million
- Interim dividend unchanged at 14.4 US cents per share
- Now expects full-year underlying revenue growth of between 6% to 7%, up from 5% to 6%
Chief executive Deepak Nath said:
"I am pleased to report strong first half revenue growth across our business. The continued outperformance in Sports Medicine and Advanced Wound Management - representing 60% of our business - has continued. In Orthopaedics, our actions to improve product supply and execution have increased our ability to benefit from strong elective procedure volumes. Overall, these results have given us the confidence to increase our full year revenue growth guidance.”
Smith & Nephew (LSE:SN.) is a designer and manufacturer of advanced medical products. It operates via three businesses.
Generating around 30% of sales, the Sports Medicine and Ear, Nose & Throat (ENT) business sells products and instruments used to repair or remove soft tissue including keyhole surgery items.
A further 30% of sales come from Advanced Wound Management products.
A final 40% of sales is generated by its Orthopaedics business, selling a range of hip and knee implants used to replace diseased, damaged, or worn joints. Other items sold include robotics-assisted products that help surgeons operate and trauma items used to stabilise severe fractures and correct bone deformities.
For a round-up of these latest results, please click here.
Founded in Hull in the UK in 1856, the FTSE 100 company today operates in more than 100 countries. The US is its biggest single market at just over a half, followed by China at 6% and the UK almost 4%. The balance of sales is split relatively evenly between developed and emerging markets.
Under its relatively new chief executive Deepak Nath, formerly of Siemens, the Watford headquartered company is pursuing a growth improvement plan. Initiatives include increasing overall group productivity and pushing growth for its Orthopaedics division.
For investors, previous attempts to kick start growth have proved mixed, costs for businesses generally remain elevated, while the dividend payment has remained unchanged for the last four years.
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On the upside, management’s transformation push continues, and there's good diversity in both product and geographic region. An innovation focus has seen more than ten new products launched so far in 2023, while a price/earnings ratio of around 16 times is below both the three- and ten-year averages, suggesting the shares are not obviously expensive.
On balance, and while some caution looks sensible, an analyst consensus estimate of fair value at over £14 per share suggests scope for longer-term reward at this play on an ageing demographic.
- Both product and geographic diversification
- Exposure to favourable demographics
- Elevated costs
- Subject to currency headwinds
The average rating of stock market analysts:
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