Smith & Nephew plc (LON:SN, NYSE:SNN), the global medical technology company, has reported results for the second quarter and first half ended 29 June 2024:
| 29 June | 1 July | Reported | Underlying | |||||
| 2024 | 2023 | growth | growth | |||||
| $m | $m | % | % | |||||
| Second Quarter Results1,2 | ||||||||
| Revenue | 1,441 | 1,379 | 4.6 | 5.6 | ||||
| Half Year Results1,2 | ||||||||
| Revenue | 2,827 | 2,734 | 3.4 | 4.3 | ||||
| Operating profit | 328 | 275 | 19.5 | |||||
| Operating profit margin (%) | 11.6 | 10.0 | ||||||
| EPS (cents) | 24.5 | 19.7 | 24.6 | |||||
| Trading profit | 471 | 417 | 12.8 | |||||
| Trading profit margin (%) | 16.7 | 15.3 | ||||||
| EPSA (cents) | 37.6 | 34.9 | 7.7 |
Q2 Trading Highlights1,2
· Q2 revenue of $1,441 million (Q2 2023: $1,379 million), up 5.6% (4.6% on a reported basis including -100bps FX headwind)
· Orthopaedics revenue up 5.8% (4.9% reported), with good growth across Hip and Knee Implants outside the US, Other Reconstruction and Trauma & Extremities; further progress in addressing performance in US Hip and Knee Implants
· Sports Medicine & ENT up 7.6% (6.3% reported), with strong growth across all segments; continued headwind from China sports medicine VBP
· Advanced Wound Management up 3.3% (2.3% reported), returning to growth with all segments contributing
H1 Highlights1,2
· H1 revenue of $2,827 million (H1 2023: $2,734 million), up 4.3% (3.4% on a reported basis including -90bps FX headwind)
· Operating profit of $328 million (H1 2023: $275 million), up 19.5% reported
· Trading profit up 12.8% to $471 million (H1 2023: $417 million)
· Trading profit margin expansion to 16.7% (H1 2023: 15.3%), around the top of our guided range, reflecting positive operating leverage and 12-Point Plan benefits
· Cash generated from operations $368 million (H1 2023: $215 million)
· Significant improvement in trading cash flow conversion at 60% (H1 2023: 26%), trading cash flow increased to $284 million (H1 2023: $110 million)
· Adjusted earnings per share (‘EPSA’) up 7.7% to 37.6¢ (H1 2023: 34.9¢). Basic earnings per share (‘EPS’) was 24.5¢ (H1 2023: 19.7¢)
· Interim dividend of 14.4¢, in line with prior year
Outlook1,2
· 2024 guidance unchanged: underlying revenue growth expected in the range of 5.0% to 6.0% (4.4% to 5.4% reported), and trading profit margin expected to be at least 18.0%
· Midterm targets unchanged
Strategic Highlights1,2
· 12-Point Plan benefits driving improved financial performance:
o Orthopaedics turnaround delivering strong results across Trauma & Extremities, Other Reconstruction and Hip and Knee Implants outside of the US. Performance from Hip and Knee Implants in the US expected to improve through the second half of 2024
o Productivity improvements supporting trading margin expansion; further savings identified
o Advanced Wound Management and Sports Medicine & ENT on track for another year of strong growth
· Sustained high cadence of new product launches to drive future higher growth
Deepak Nath, Smith & Nephew Chief Executive Officer, said:
“Today’s results are further evidence of the good progress we are making transforming Smith+Nephew into a higher growth and more profitable business.
“Across the majority of Orthopaedics, which was our underperforming business unit, we are now consistently achieving growth rates well above historical levels. The methods we employed in achieving these successes give me confidence that we will also turn around US Hip and Knee Implants and we expect to see a step up through the second half of the year.
“Our investment in innovation continues to deliver. In the first half of 2024, we delivered several major launches and product enhancements. For example, we continued to expand our CORI◊ Surgical System, which is now a recognised leader in robotics-assisted surgery. We also achieved full commercial launch of our AETOS◊ Shoulder System, addressing one of the fastest growing segments in Orthopaedics, and US regulatory approval for our new CATALYSTEM◊ Hip System.
“Our progress is also showing through in our double-digit trading profit growth and margin expansion, driven by positive operating leverage and efficiency initiatives. I am pleased to see this profit growth translate into cash flow, with our first-half trading cash flow up more than 150% year-on-year.
“Our guidance for the full year remains unchanged. There is still more work to be done and we expect to see further progress in the second half of the year.”
Analyst conference call
An analyst conference call to discuss Smith+Nephew’s second quarter and first half results will be held today at 8.30am BST / 3.30am EDT, details of which are available on the Smith & Nephew website at https://www.smith-nephew.com/en/who-we-are/investors.
Notes
1. Unless otherwise specified as ‘reported’ all revenue growth throughout this document is ‘underlying’ after adjusting for the effects of currency translation and including the comparative impact of acquisitions and excluding disposals. All percentages compare to the equivalent 2023 period.
‘Underlying revenue growth’ reconciles to reported revenue growth, the most directly comparable financial measure calculated in accordance with IFRS, by making two adjustments, the ‘constant currency exchange effect’ and the ‘acquisitions and disposals effect’, described below. See Other Information on pages 33 to 37 for a reconciliation of underlying revenue growth to reported revenue growth.
The ‘constant currency exchange effect’ is a measure of the increase/decrease in revenue resulting from currency movements on non-US Dollar sales and is measured as the difference between: 1) the increase/decrease in the current year revenue translated into US Dollars at the current year average exchange rate and the prior year revenue translated at the prior year rate; and 2) the increase/decrease being measured by translating current and prior year revenues into US Dollars using the prior year closing rate.
The ‘acquisitions and disposals effect’ is the measure of the impact on revenue from newly acquired material business combinations and recent material business disposals. This is calculated by comparing the current year, constant currency actual revenue (which includes acquisitions and excludes disposals from the relevant date of completion) with prior year, constant currency actual revenue, adjusted to include the results of acquisitions and exclude disposals for the commensurate period in the prior year. These sales are separately tracked in the Group’s internal reporting systems and are readily identifiable.
2. Certain items included in ‘trading results’, such as trading profit, trading profit margin, tax rate on trading results, trading cash flow, trading profit to cash conversion ratio, EPSA and underlying growth are non-IFRS financial measures. The non-IFRS financial measures reported in this announcement are explained in Other Information on pages 33 to 37 and are reconciled to the most directly comparable financial measures prepared in accordance with IFRS. Reported results represent IFRS financial measures as shown in the Condensed Consolidated Interim Financial Statements.
