Smith & Nephew dividend leaps as margins improve

The orthopaedic implant sector has been hard hit for a couple of years by patients delaying elective medical procedures because of the out-of-pocket cost of surgery and the time off work required.

News of the big dividend increase cheered investors and the shares rose in a broadly flat London market. They closed last night at 675p, a rise of 15.5p.

Chief executive Olivier Bohuon said the company’s performance had been “good”, with trading profit margins in the second quarter up 80 basis points on an underlying basis to 22.7 per cent, keeping it on track to hit its full-year targets.

He said the decision to boost the dividend reflected management confidence in the balance sheet, rather than pressure from shareholders, and the move would not deter his team from pursuing attractive acquisition opportunities.

“It doesn’t change at all – and I want to insist on this – our ability to make acquisitions and our focus on acquisitions,” Mr Bohuon said.

“It can go from a bolt-on acquisition at $10M to something much more significant, depending on what we find on the market.

“We have worked very hard this quarter to investigate different areas.” Future acquisitions might include businesses to improve Smith & Nephew’s position in minimally invasive surgery and emerging markets, he added.

Smith & Nephew’s Advanced Wound Management, which specialises in treatments for difficult and hard-to-heal wounds, is based in Hull.

The division outperformed the market with a FOUR per cent rise in revenue to $255m.

“Commentary suggests that this is a good performance versus a weaker market in both the US and Europe which grew at two per cent,” said analysts at Shore Capital.

Last year the division generated more than $1bn (£640m) of revenue for the first time and grew at seven per cent, more than twice the estimated market growth.

At Smith & Nephew’s landmark Hessle Road facility the division’s global management and UK sales and marketing teams employ 200 people, while there are a further 650 manufacturing workers.

About 60 per cent of the division’s products are produced in Hull.