TIDMSN.
RNS Number : 9867W
Smith & Nephew Plc
29 April 2021
Smith+Nephew First Quarter 2021 Trading Report
Delivering on our priorities with an encouraging start to 2021,
guidance reinstated
29 April 2021
Smith+Nephew (LSE:SN, NYSE:SNN) trading report for the first
quarter ended 3 April 2021.
Highlights (1,2)
-- Q1 revenue $1,264 million (2020: $1,134 million) up 11.5% on
a reported basis and 6.2% on an underlying basis
o Reported growth includes benefits of 3.4% from foreign
exchange and 1.9% from acquisitions
o Q1 included two more trading days than the equivalent 2020
period
-- All three global franchises returned to growth on a reported and underlying basis
o Orthopaedics revenue up 1.6% underlying, with strong growth in
Hip Implants and Trauma & Extremities offset by anticipated
weaker performance in Knee Implants
o Sports Medicine & ENT revenue up 10.4% underlying, driven
by the return of elective surgeries in an outpatient setting
o Advanced Wound Management revenue up 9.3% underlying,
benefitting from improved commercial execution
-- Established Markets revenue was up 3.4% underlying, with US
up 7.1% offset by a -1.8% decline from Other Established Markets,
mainly due to COVID impact in Europe
-- Emerging Markets revenue was up 21.8% underlying, with China
rebounding strongly from COVID impact in prior year
Outlook
-- Full year 2021 guidance reinstated
o Targeting underlying revenue growth in range of 10.0% to
13.0%; and
o Trading profit margin in range of 18.0% to 19.0%
o Guidance assumes improvement in conditions through the year,
with surgery volumes largely unconstrained by COVID in second
half
Roland Diggelmann, Chief Executive Officer, said:
"Our first priority for 2021 is to return to growth and
recapture our pre-COVID momentum, and we are encouraged by our
early progress through Q1. This was driven not only by surgery
volumes moving towards more normal levels in many markets, but also
the benefits from better commercial execution, acquired assets, and
recent product launches.
"Looking ahead, there is improving visibility as vaccine
programmes roll out and healthcare systems reopen. Our approach
through 2020 to maintain investment is already demonstrating value
and I look forward to seeing further evidence of this as the
recovery continues."
Enquiries
Investors
Andrew Swift +44 (0) 1923 477433
Smith+Nephew
Media
Charles Reynolds +44 (0) 1923 477314
Smith+Nephew
Susan Gilchrist / Ayesha Bharmal +44 (0) 20 7404 5959
Brunswick
Analyst conference call
An analyst conference call to discuss Smith+Nephew's first
quarter results will be held at 8.30am BST / 3.30am EDT on Thursday
29 April 2021, details of which can be found on the Smith+Nephew
website at http://www.smith-nephew.com/results .
Notes
1. All numbers given are for the quarter ended 3 April 2021 unless stated otherwise.
2. 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 2020 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.
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
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.
Forward calendar
Results for the first half of 2021 will be released on 29 July
2021.
First quarter trading update
Our three priorities for 2021 build on the work undertaken and
investments made in 2020 and are underpinned by our long-term
Strategic Imperatives.
1. Return to top-line growth and recapture momentum
2. Deliver further operational improvement across the Group
3. Continue to respond effectively to COVID
We are encouraged by our progress in the first quarter,
returning to revenue growth, continuing our work to improve
execution and efficiency, and protecting and supporting employees
in COVID impacted locations.
Our first quarter revenue was $1,264 million (2020: $1,134
million), up 6.2% on an underlying basis. Reported revenue growth
was 11.5% including a 3.4% benefit from foreign exchange (primarily
due to movements in the Euro, Renminbi and Australian Dollar) and
1.9% benefit from acquisitions.
The first quarter comprised 64 trading days, two more than the
equivalent period in 2020. Q1 2020 performance was impacted by
COVID, especially in China and, towards the quarter end, in Europe
and the US.
Consolidated revenue analysis for the first quarter
3 April 28 March Reported Underlying Acquisitions Currency
2021 2020 growth Growth(i) /disposals impact
Consolidated revenue by franchise $m $m % % % %
------------------------------------- ------- -------- -------- ---------- ------------ --------
Orthopaedics 540 497 8.7 1.6 4.3 2.8
-------------------------------------- ------- -------- -------- ---------- ------------ --------
Knee Implants 212 230 -7.9 -10.3 - 2.4
Hip Implants 154 137 12.6 9.1 - 3.5
Other Reconstruction(ii) 25 21 21.0 17.7 - 3.3
Trauma & Extremities 149 109 36.3 12.0 21.7 2.6
Sports Medicine & ENT 373 328 13.7 10.4 - 3.3
-------------------------------------- ------- -------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 198 172 15.2 12.0 - 3.2
Arthroscopic Enabling Technologies 146 126 15.5 11.7 - 3.8
ENT (Ear, Nose and Throat) 29 30 -2.2 -4.6 - 2.4
Advanced Wound Management 351 309 13.6 9.3 - 4.3
-------------------------------------- ------- -------- -------- ---------- ------------ --------
Advanced Wound Care 175 158 10.5 4.5 - 6.0
Advanced Wound Bioactives 116 91 27.2 26.7 - 0.5
Advanced Wound Devices 60 60 1.3 -3.2 - 4.5
Total 1,264 1,134 11.5 6.2 1.9 3.4
-------------------------------------- ------- -------- -------- ---------- ------------ --------
Consolidated revenue by geography
------------------------------------- ------- -------- -------- ---------- ------------ --------
US 640 581 10.1 7.1 3.0 -
Other Established Markets(iii) 407 379 7.4 -1.8 0.5 8.7
Total Established Markets 1,047 960 9.0 3.4 1.9 3.7
Emerging Markets 217 174 24.9 21.8 2.1 1.0
Total 1,264 1,134 11.5 6.2 1.9 3.4
-------------------------------------- ------- -------- -------- ---------- ------------ --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, the
joint reconstruction business acquired from Brainlab and cement
(iii) Other Established Markets are Australia, Canada, Europe,
Japan and New Zealand
Overview of the first quarter
All three global franchises returned to growth in the quarter as
we benefitted from our decision to maintain investment and prepare
for when healthcare systems returned towards more normal levels of
elective care.
Performance was strongest in Sports Medicine, driven by the
return of elective surgeries in an outpatient setting, and Advanced
Wound Management, where we are benefitting from improved commercial
execution. In Orthopaedics good growth across the franchise
continued to be offset by anticipated weaker performance in Knee
Implants.
Geographically, revenue growth was 3.4% (9.0% reported) in our
Established Markets and 21.8% (24.9% reported) in Emerging
Markets.
In the Established Markets, the US delivered 7.1% revenue growth
(10.1% reported) . Revenue from our Other Established Markets
declined by -1.8% (7.4% reported growth including 8.7% foreign
exchange benefit primarily from movements in the Euro and
Australian Dollar). We saw solid growth in Japan and Australia and
the UK improved in the quarter. Most other European markets slowed
in March as COVID infection rates rose again in the region.
The rebound in Emerging Markets included a strong performance
from China against a weak comparator. Elsewhere there was a mixed
picture with some markets improving while others, such as in LATAM,
continued to be impacted by COVID-related restrictions.
Orthopaedics
We delivered revenue growth of 1.6% (8.7% reported) in our
Orthopaedics franchise in the first quarter.
Knee Implants was down -10.3% (-7.9% reported) and Hip Implants
was up 9.1% (12.6% reported). Knee performance continued to be
impacted by the medical prioritisation of hip procedures, which are
often more debilitating and more urgent, as well as changes in
product mix. Hip Implants included a good performance from the
REDAPT Revision Hip System and the recently launched OR3O Dual
Mobility Hip System. We introduced new streamlined instrument sets
for both hip and knee implants during the quarter and are on track
to launch our cementless knee later this year.
Other Reconstruction revenue was up 17.7% (21.0% reported),
driven by strong US robotic sales as we continue the roll out of
our new handheld robotics platform, the CORI Surgical System.
In Trauma & Extremities revenue was up 12.0% (36.3% reported
including 21.7% benefit from acquisitions) with the EVOS Plating
System and TRIGEN INTERTAN Intertrochanteric Antegrade Nail
performing strongly. The commercial integration of the orthopaedic
extremity business acquired from Integra at the start of the
quarter is well underway, including training the Smith+Nephew
salesforce on the new portfolio.
Sports Medicine & ENT
We delivered revenue growth of 10.4% (13.7% reported) from our
Sports Medicine & ENT franchise.
Revenue in Sports Medicine Joint Repair was up 12.0% (15.2%
reported), driven by procedural recovery across all categories
except knee, where ligament and meniscal repair continued to be
impacted by lower sport participation. We delivered a strong
performance in shoulder repair with recent product launches adding
to our Advanced Healing portfolio for rotator cuff repair.
Arthroscopic Enabling Technologies revenue was up 11.7% (15.5%
reported), with good growth from our COBLATION technologies and
video portfolio. We continue to invest in our INTELLIO Connected
Tower Solution and announced the launch of the DOUBLEFLO
Inflow/Outflow Pump and 4KO (Optimized) Arthroscopes and
Laparoscopes in April.
ENT declined -4.6% (-2.2% reported). This is an improved
performance over recent quarters driven by the restart of
procedures in the APAC region, although this segment continued to
be impacted by caution over restarting elsewhere and lower rates of
ENT infections.
Advanced Wound Management
We delivered revenue growth of 9.3% (13.6% reported) from our
Advanced Wound Management franchise.
Advanced Wound Care revenue was up 4.5% (10.5% reported) driven
by good growth from our ALLEVYN Life range of foam dressings. The
benefits of improved commercial execution were offset by trading
conditions in Europe, which remained under pressure as a result of
COVID restrictions.
Advanced Wound Bioactives revenue was up 26.7% (27.2% reported)
driven by strong sales of SANTYL (,) helped by the timing of
shipment orders at the end of 2020, and good growth from the
acquired skin substitute products GRAFIX and STRAVIX .
Advanced Wound Devices revenue declined -3.2% (1.3% reported
growth) as the impact of COVID in Europe offset growth from our
negative pressure wound therapy portfolio in the US.
Outlook
Looking ahead, there is improving visibility as vaccine
programmes roll out and healthcare systems adapt to managing COVID
whilst increasing elective care capacity. As a result we are
reinstating guidance for the full year.
We are targeting underlying revenue growth for 2021 in the range
of 10.0% to 13.0%. On a reported basis this equates to a range of
around 14.8% to 17.8%, with a foreign exchange benefit of 290bps
based on exchange rates prevailing on 23 April 2021 and completed
acquisitions adding around 190bps.
We expect our Hip Implants business to continue to outperform
Knee Implants, our Sports Medicine & ENT franchise to perform
strongly as markets recover, and for Advanced Wound Management's
growth trajectory to improve as commercial changes continue to
deliver benefits.
Our 2021 trading profit margin guidance range is 18.0% to 19.0%.
Consistent with our previous outlook, relative to 2019 (the year
before COVID) we continue to anticipate a temporary headwind from
the impact of reduced production volumes on gross margin as a
result of COVID, as well as dilution of around 100bps from the
increased investment in R&D and around 150bps from completed
acquisitions. Foreign exchange will be an additional headwind of
around 100bps.
The revenue and trading profit margin targets assume an
improvement in conditions through the year, with surgery volumes
largely unconstrained by COVID in the second half.
The tax rate on trading results for 2021 is expected to be in
the range 18.0% to 19.0%, subject to any material changes to tax
law or other one-off items.
About Smith+Nephew
Smith+Nephew is a portfolio medical technology business that
exists to restore people's bodies and their self-belief by using
technology to take the limits off living. We call this purpose
'Life Unlimited'. Our 18,000 employees deliver this mission every
day, making a difference to patients' lives through the excellence
of our product portfolio, and the invention and application of new
technologies across our three global franchises of Orthopaedics,
Advanced Wound Management and Sports Medicine & ENT.
Founded in Hull, UK, in 1856, we now operate in more than 100
countries, and generated annual sales of $4.6 billion in 2020.
Smith+Nephew is a constituent of the FTSE100 (LSE:SN, NYSE:SNN).
The terms 'Group' and 'Smith+Nephew' are used to refer to Smith
& Nephew plc and its consolidated subsidiaries, unless the
context requires otherwise.
For more information about Smith+Nephew, please visit
www.smith-nephew.com and follow us on Twitter , LinkedIn ,
Instagram or Facebook .
Forward-looking Statements
This document may contain forward-looking statements that may or
may not prove accurate. For example, statements regarding expected
revenue growth and trading margins, market trends and our product
pipeline are forward-looking statements. Phrases such as "aim",
"plan", "intend", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions
are generally intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual
results to differ materially from what is expressed or implied by
the statements. For Smith+Nephew, these factors include: risks
related to the impact of COVID, such as the depth and longevity of
its impact, government actions and other restrictive measures taken
in response, material delays and cancellations of elective
procedures, reduced procedure capacity at medical facilities,
restricted access for sales representatives to medical facilities,
or our ability to execute business continuity plans as a result of
COVID; economic and financial conditions in the markets we serve,
especially those affecting health care providers, payers and
customers (including, without limitation, as a result of COVID);
price levels for established and innovative medical devices;
developments in medical technology; regulatory approvals,
reimbursement decisions or other government actions; product
defects or recalls or other problems with quality management
systems or failure to comply with related regulations; litigation
relating to patent or other claims; legal compliance risks and
related investigative, remedial or enforcement actions; disruption
to our supply chain or operations or those of our suppliers
(including, without limitation, as a result of COVID); competition
for qualified personnel; strategic actions, including acquisitions
and dispositions, our success in performing due diligence, valuing
and integrating acquired businesses; disruption that may result
from transactions or other changes we make in our business plans or
organisation to adapt to market developments; and numerous other
matters that affect us or our markets, including those of a
political, economic, business, competitive or reputational nature.
Please refer to the documents that Smith+Nephew has filed with the
U.S. Securities and Exchange Commission under the U.S. Securities
Exchange Act of 1934, as amended, including Smith+Nephew's most
recent annual report on Form 20-F, for a discussion of certain of
these factors. Any forward-looking statement is based on
information available to Smith+Nephew as of the date of the
statement. All written or oral forward-looking statements
attributable to Smith+Nephew are qualified by this caution.
Smith+Nephew does not undertake any obligation to update or revise
any forward-looking statement to reflect any change in
circumstances or in Smith+Nephew's expectations.
Trademark of Smith+Nephew. Certain marks registered US Patent
and Trademark Office.
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