Smith & Nephew FY profits slip despite improved revenues
By Iain Gilbert
Date: Thursday 20 Feb 2020
(Sharecast News) - Medical devices manufacturer Smith & Nephew saw pre-tax profits slip in 2019 despite recording some improved underlying revenues.
Smith & Nephew posted a 4.4% increase in full-year underlying revenues to $5.14bn on Thursday. When including currency movements and the contribution of acquisitions, revenues were up 4.8% year-on-year.
However, despite the top-line growth, pre-tax profits fell to $743m from the $781m recorded a year earlier. Earnings per share dropped to 68.4 cents from 75.7 cents.
Smith & Nephew recommended a final dividend of 23.1 cents, taking its full-year payout to 37.5 cents.
The company said current full-year underlying revenue growth to be somewhere in the region of 3.5-4.5%, assuming the China coronavirus outbreak normalises during the second quarter.
Smith & Nephew added that all of its franchises were expected to make further progress in 2020 and that it anticipates delivering a trading profit margin at or slightly above 2019's levels.
Chief executive Roland Diggelmann said: "For 2020, our focus is on sustaining the positive momentum and our strategic imperatives remain the right path to value creation.
"Within these, we will focus on delivering a consistent and excellent customer experience, maximising the impact from our increased investment in innovation, and continuing to improve our operational agility and efficiency."
Analysts at Shore Capital Markets stood by their 'sell' rating on the firm on Thursday but said they continued to like "the new commercial model" at S&N and added they were "not surprised" to see it delivering success at the top line.
However, Shore Cap retained its view that growth would take priority over margin expansion.
"We still believe S&N may have to undertake large scale M&A to achieve consistent, above-market growth rates and highlight the associated difficulties of elevated valuations and a competitive acquisition space," said the analysts.
As of 0820 GMT, Smith & Nephew shares were up 4.61% at 1,930p.
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