Surprise as S&N chief quits to return to the US

The company, which has its wound care arm based in Hull, named pharmaceuticals executive Olivier Bohuon as his successor.

S&N, which has been tipped as a bid target by US rivals Johnson & Johnson and privately-owned Biomet, reported a nine per cent rise in trading profit to £173.1m for the fourth quarter of 2010 on flat revenues of £664.4m. The City had been expecting trading profits of around £156.9m.

The company reported strong sales of advanced wound management treatments, knee replacements and key hole surgery products.

Mr Illingworth, who will retire in April after four years in the role, said his departure was not linked to recent takeover speculation, nor was he taking another job elsewhere.

“I came to a very difficult personal decision that I needed to return to the US,” said Mr Illingworth, who is 57.

“This is probably the perfect time to turn the company over to new leadership. The company is very strong, it is doing well, it is well positioned.”

Mr Bohuon, aged 52, was until recently chief executive of French pharmaceutical and cosmetics firm Pierre Fabre, and before that held senior management positions at Abbott Laboratories and GlaxoSmithKline.

Evolution analysts said his appointment was likely to dampen the takeover speculation, but it was not likely to kill it off completely.

Orthopaedics companies are suffering pricing pressure from hospitals struggling with fewer admissions, and stagnant demand as younger patients delay procedures until the job market improves.

Analysts say the tough market dynamic makes consolidation more likely as companies seek economies of scale.

The takeover speculation, and subsequent rise in the share price, prompted a carefully worded denial from S&N.

Mr Illingworth declined to comment on the bid rumours, nor would he confirm whether the company had been approached by Johnson & Johnson.

Shares in the group, which hit a record 739p last month, closed up 2.18 per cent at 727.50p as analysts welcomed the strong numbers and confident outlook.

Investec’s Sebastien Jantet said the company had unsurprisingly not commented on the bid speculation, but “putting that to one side and focusing on the fundamentals, the statement is good news, with the company giving its most robust outlook statement for a few years.

“Whilst there may be elements of bid defence and the retiring chief executive wanting to go out with a bang, we believe this will be good news for the shares.”

Smith & Nephew’s larger US rivals Johnson & Johnson and Stryker Corp said last month they were facing pricing pressure, although Stryker and peer Zimmer were more optimistic about market growth prospects.

UK-based S&N said prices in orthopaedic reconstruction and trauma were continuing to fall at the one to two per cent annual rate seen in the third quarter, but this is being offset by its product mix.

The company said it would meet the challenges in its market over the next year by supplying innovative products and making further cost savings.

It forecast market-beating growth in its advanced wound management, knee franchise and sports medicine divisions.

Chairman John Buchanan said he was sorry to be losing Mr Illingworth.

“In his nine years with Smith & Nephew, Dave has made a major impact, with various distinctive achievements,” he said. “He has created strong platforms for growth despite the challenges of the external environment.”

He added Mr Bohuon’s experience meant he was highly qualified to take the company forward.

Mike Mitchell, an analyst at Seymour Pierce, said: “The consensus-beating results reflect a particularly strong finish to the year.

“The departure of Dave Illingworth is not a move we necessarily expected. Investors may speculate on whether this anticipates something more significant.”

Analyst Jeremy Batstone-Carr said: “Johnson & Johnson may be waiting in the wings but we remain sceptical regarding a bid from the latter, despite clear evidence of sufficient ‘fire-power’ and are unconvinced regarding the workability of a merger with privately owned Biomet.”

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