Sales put Smith’s wound care arm in good health

The medical devices giant yesterday reported a better-than-expected five per cent rise in trading profits during the first three months of the year, also thanks to a strong performance in knee implants and its restructuring programme.

Revenues at the group increased three per cent to $1.08bn (£667m) and trading profits rose from $241m to $252m.

Turnover in its wound arm increased five per cent to $240m (£148m), which S&N said beat the market rate of three per cent. The division delivered trading profits of $50m, up from $47m a year earlier.

Profit margins in its wound division were up to 20.8 per cent from 20.1 per cent.

S&N said the division performed well in the United States, with a 14 per cent sales increase driven mainly by its negative pressure wound therapy (NPWT).

Emerging markets grew 12 per cent but non-US established markets grew just one per cent, which S&N said reflects some wholesaler restocking reversing.

The division launched five new products during the period.

Chief executive Olivier Bohuon said: “Smith & Nephew has had a good first quarter. We grew revenue, increased profit and improved our trading profit margin.

“We saw the first results of our actions to make Smith & Nephew more fit and effective.

“2012 is a critical year for implementing our new strategic priorities.

“Our plans to progress the structural changes, additional investments and, of course, greater efficiencies, are now underway.

“Throughout Smith & Nephew, at every level, there is a clear sense of direction, as we work to reshape the group for future growth.”

The market for reconstructive surgery has been in the doldrums for a couple of years as patients postpone surgery because of the costs and time off work required.

Mr Bohuon said it was too soon to talk about a recovery in the United States.

“I think that it’s still a very challenging environment, still unstable, however it’s better than one could have expected,” he said.

Mr Bohuon, who took over as chief executive a year ago, has responded to the tough market conditions by trimming costs and shedding seven per cent of its workforce.

The group’s hips business continued to lag however, with sales down two per cent, largely because its Birmingham Hip Resurfacing technology suffered from an association with other problematic metal-on-metal implants.

Seymour Pierce analyst Mike Mitchell said that while the results were unlikely to alter market perception of a relatively weak period for the industry, the group’s overall trading performance suggested few negative surprises.

“With today’s results appearing to validate the restructuring and strategy currently being validated we remain buyers,” he said.

Charles Stanley analyst James Dawson added: “S&N remains well positioned to benefit from global mega trends, specifically an ageing global population and prolonged active lifestyles, and in conjunction with the efficiency programmes that management is implementing, we remain comfortable with our accumulate recommendation.”