Shares in medical firm Smith & Nephew leapt on Tuesday as ongoing restructuring delivered strong full-year sales and profits.
At £11.37 per share, Smith & Nephew’s share price was 9% higher on the day.
On a statutory basis, revenues at the FTSE 100 company rose 4.7% in 2024 to $5.8 billion. Underlying sales improved 5.3% year on year.
Statutory and underlying revenue growth improved to 7.8% and 8.3% respectively in the fourth quarter, to $1.6 billion.
Trading profit last year increased 8.2%, to $1 billion. This was helped by a 60-basis-point rise in the trading profit margin, to 18.1%.
Pre-tax profit leapt 71.2% year on year, to $498 million.
Cash generated from operations leapt 50.2% year on year, to $1.2 billion. The dividend was kept locked at 37 US cents per share, surprising analysts who had predicted an increase.
Cost Savings Jump
Smith & Nephew said its 12-Point Plan – introduced in 2022 to boost revenues and improve efficiency – has delivered 410 basis points worth of incremental costs savings across the last two years.
The medical firm said that it had trimmed its workforce by a net 9% over the period.
Elsewhere, Smith & Nephew said that “recent product launches were a major contributor to higher growth,” with products lauched during the last five years accounting for 60% of last year’s sales rise.
Smith & Nephew launched 50 new products in the last three years, it said, including 16 last year. It added that it has an “exciting pipeline” for 2025.
More Progress Tipped In 2025
Chief executive Deepak Nath commented that “Smith & Nephew’s transformation remains on track with the 12-Point Plan increasingly delivering better financial performance.”
He noted that “revenue growth is consistently above historical levels following operational and commercial improvements,” adding that “changes to our organisational structure are driving increased accountability at the business unit level.”
Nath added that “there is much more to be done, but we have made solid progress fixing the foundations and expect a step-up in returns in 2025, including significant margin expansion.”
Underlying revenues are expected to rise 5% this year, or 4.8% on a statutory basis. Underlying sales growth is tipped at 1% to 2% in the first quarter due to ongoing pressures in China.
Full-year trading profit margin is predicted at 19% to 20%, with Smith & Nephew adding that “continued momentum and efficiency gains expected to drive further margin expansion beyond 2025.”
Strong Fourth Quarter
Analyst Adam Vettese of eToro said that “there were three cheers due for Smith and Nephew’s hip and knee replacement business over in the US, which was the main driver of growth.”
He added that both sales and profits at the division beat forecasts in the fourth quarter.
In China, Vettese noted that high inventories “are beginning to come down but are still way above what would be considered normal,” adding that this is likely to persist into the first quarter of 2025.
Smith & Nephew experienced weakening demand in China during the second half, it said, which impacted orders from its distribution partners as they sought to manage stock levels.
Read the full article here