Ill winds dent medtech Smith & Nephew

Global medtech Smith & Nephew has blamed volatile markets for disappointing full year results.

The group, whose UK orthopaedics operation is based at Warwick Technology Park, saw group revenue for the 2016 full year of $4,669m (£3,732m at live exchange rates), an increase of 1% on a reported basis and 2% on an underlying basis.

Reported growth includes a foreign exchange headwind of -1%, while acquisitions added 1% and disposals -1%.
Reported operating profit was $801m (£640m), which is before a one-off $326m gain from the disposal on the Gynaecology business in August.
Trading profit was $1,020m (£815m). The trading profit margin was 21.8% (FY2015: 23.7%), down 190bps year-on-year.

“This reduction primarily reflects the significant transactional currency headwind seen in 2016 resulting from the sustained strength of the US dollar.  Additionally, we lost some operational leverage from the lower than anticipated sales growth and our investment in Blue Belt Technologies was dilutive as previously guided. These factors were somewhat offset by the Group Optimisation programme,” it said.

Looking ahead, the group – which is responsible for developing the Birmingham Hip implant (pictured) – said it expected its markets to be broadly similar in 2017 to those seen in 2016. Against this backdrop, it said it expected to deliver higher revenue growth and an improved trading profit margin in 2017.

Olivier Bohuon, CEO, Smith & Nephew, said he was somewhat disappointed by the 2016 results.

“Whilst we still delivered growth in 2016 it was not at the level we had wanted,” he said.

“However, I was pleased with our 2016 performance in areas such as Sports Medicine and Knee Implants, where we maintained strong momentum. Market conditions in China and the Gulf States together shaved more than a percentage point of growth off the Group in 2016. China returned to growth in the second half, as did the Emerging Markets as a whole.
“I am confident we now have the right structure and capability in place and are focused on improving execution across the group, with a clear set of actions underway. Beyond this, with our innovative products and deep customer relationships, we are well set to deliver a stronger performance generating higher revenue growth and a better trading profit margin in the future.”