TIDMSN.
RNS Number : 1148S
Smith & Nephew Plc
02 November 2023
Smith+Nephew Third Quarter 2023 Trading Report
Encouraging progress as 12-Point Plan actions drive revenue
growth
2 November 2023
Smith+Nephew (LSE:SN, NYSE:SNN) trading update for the third
quarter ended 30 September 2023.
Q3 Highlights(1,2)
-- Q3 revenue of $1,357 million (2022: $1,250 million),
representing underlying revenue growth of 7.7%. Reported growth of
8.5% included an 80bps FX tailwind
-- Orthopaedics revenue up 8.3%, in part as product launches and
12-Point Plan-led improvements drove higher growth from Trauma
& Extremities
-- Sports Medicine & ENT revenue up 11.1%, with continued
good growth across most markets offsetting weakness in China
-- Advanced Wound Management revenue up 3.6%, with double-digit
growth from our negative pressure portfolio but a slower quarter
from Advanced Wound Bioactives
2023 Full Year Outlook(1,2)
-- Underlying revenue growth currently expected to be towards
the higher end of guided range of 6.0% to 7.0%
-- Trading profit margin now expected to be around 17.5%, reflecting headwinds from China
Chief Financial Officer
-- John Rogers, former Chief Financial Officer of WPP plc,
announced as Chief Financial Officer-designate with effect from 1
December 2023
-- See separate announcement issued today for further information
Deepak Nath, Chief Executive Officer, said:
"We saw strong growth in the third quarter, continuing the
momentum from the first half of the year. Performance was
broad-based, and I am particularly pleased by the step-up in
Orthopaedics as we start to see the real impact from our improving
execution under the 12-Point Plan.
"Our investment in innovation continues to bear fruit. During
the quarter we saw the first surgery with our new AETOS Shoulder
System and launched our leading REGENETEN Bioinductive Implant in
India and Japan. We are gearing up for the imminent launch of our
RENASYS EDGE negative pressure wound therapy in the US.
"Overall, I am encouraged that our actions to transform
Smith+Nephew to a consistently higher growth company are starting
to deliver."
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
A conference call to discuss Smith+Nephew's third quarter
results will be held today at 8.30am GMT / 4.30am EDT, details of
which are available at
https://www.smith-nephew.com/en/about-us/investors#quarterly-reporting
.
Forward calendar
The full year results will be released on 27 February 2024.
Notes
1. All numbers given are for the quarter or nine months ended 30
September 2023 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 2022 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
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.
Third quarter 2023 trading update
Our third quarter revenue was $1,357 million (2022: $1,250
million), representing underlying revenue growth of 7.7%. Reported
revenue growth was 8.5% including an 80bps foreign exchange
tailwind. Q3 2023 comprised 63 trading days, in line with the
comparable Q3 period in 2022.
Orthopaedics revenue was up 8.3% (8.8% reported), Sports
Medicine & ENT up 11.1 % (11.3% reported), and Advanced Wound
Management up 3.6 % (5.4% reported) .
Revenue growth in our Established Markets was 7.4% (9.0%
reported). Within this, in the US, our largest market, we delivered
7.2% revenue growth (7.2% reported). Other Established Markets
revenue was up 7.8% (12.7% reported).
Emerging Markets revenue was up 9.2% (6.4% reported). Within
this, China was a headwind as a weaker quarter in Sports Medicine
offset a return to growth in Hip and Knee Implants as we fully
lapped the impact of Volume Based Procurement (VBP). Sports
Medicine was impacted as the Chinese healthcare system experienced
a slowdown in capital sales and procedure volumes, as well as by a
more specific headwind as our distributors reduced inventory in
anticipation of VBP in this segment.
12-Point Plan update
We continued to make good progress in the quarter delivering on
our 12-Point Plan to fundamentally change the way we operate and
transform business performance. Through the 12-Point Plan we are
working to fix performance in our Orthopaedics business and improve
our overall productivity, while continuing to invest behind our
well-performing Advanced Wound Management and Sports Medicine &
ENT business units.
In Orthopaedics, our actions to improve commercial execution and
product availability are starting to deliver clear returns. Trauma
accelerated over the first half, particularly in the US, building
on our investments over several years to complete the EVOS Plating
System, and the work under the 12-Point Plan to deploy more
instrument sets to drive implant pull-through. We continue to make
progress along a similar improvement path with our Hip and Knee
Implants business and expect improving results to follow in the
coming quarters.
We are also making progress in our productivity workstreams, for
instance with our Orthopaedics network optimisation programme. We
have announced the closure of two smaller facilities, consolidating
production into our larger sites, and also reduced the size of our
contingent workforce.
In Advanced Wound Management, we have consistently driven strong
growth from our negative pressure wound therapy ('NPWT') business
and are at the early stages of rolling out the new RENASYS EDGE
NPWT System, preparing for the US launch. RENASYS EDGE brings an
important new option to customers looking for enhanced
intuitiveness, simplicity and durability, especially important for
home-care settings.
We also continued to invest behind our Sports Medicine
portfolio, for instance launching our REGENETEN Bioinductive
Implant in India and Japan. Through REGENETEN we have built a
leading position in regenerative medicine and, with more than
100,000 procedures completed globally, have had a transformative
impact on the way surgeons approach rotator cuff procedures.
Consolidated revenue analysis for the third quarter
30 September 1 October Reported Underlying Acquisitions Currency
2023 2022 growth growth(i) /disposals impact
Consolidated revenue by
business unit by product $m $m % % % %
-------------------------------- ------------ --------- -------- ---------- ------------ --------
Orthopaedics 536 492 8.8 8.3 - 0.5
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Knee Implants 223 210 6.3 5.7 - 0.6
Hip Implants 141 136 3.5 3.5 - -
Other Reconstruction(ii) 29 18 61.7 58.5 - 3.2
Trauma & Extremities 143 128 11.1 10.4 - 0.7
Sports Medicine & ENT 425 382 11.3 11.1 - 0.2
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 232 209 11.4 11.3 - 0.1
Arthroscopic Enabling
Technologies 134 131 2.1 1.7 - 0.4
ENT (Ear, Nose and Throat) 59 42 39.1 40.2 - -1.1
Advanced Wound Management 396 376 5.4 3.6 - 1.8
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Advanced Wound Care 183 173 5.9 3.2 - 2.7
Advanced Wound Bioactives 130 136 -4.4 -4.8 - 0.4
Advanced Wound Devices 83 67 23.8 21.3 - 2.5
Total 1,357 1,250 8.5 7.7 - 0.8
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Consolidated revenue by
geography
-------------------------------- ------------ --------- -------- ---------- ------------ --------
US 719 671 7.2 7.2 - -
Other Established Markets(iii) 385 341 12.7 7.8 - 4.9
Total Established Markets 1,104 1,012 9.0 7.4 - 1.6
Emerging Markets 253 238 6.4 9.2 - -2.8
Total 1,357 1,250 8.5 7.7 - 0.8
--------------------------------- ------------ --------- -------- ---------- ------------ --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our
joint reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan,
Australia and New Zealand
Orthopaedics
In our Orthopaedics business unit, revenue was up 8.3% (8.8%
reported). Knee Implants grew 5.7% (6.3% reported), with
performance driven by our JOURNEY II Total Knee System with its
proprietary OXINIUM bearing surface, even though we experienced
some supply constraints in the US where revenue declined by -1.3%.
Our work to improve product availability and to deploy greater
numbers of instrument sets is ongoing, with progress starting to
come through as we exited the quarter. Hip Implants grew 3.5% (3.5%
reported) with the POLAR3 Total Hip Solution, with its
class-leading survivorship data, delivering good growth in the
quarter. In the US, Hip Implants grew by 3.6%. Other Reconstruction
revenue grew 58.5% (61.7% reported) driven by our robotics-assisted
CORI Surgical System, with more than 25% of US knee procedures
utilising the system by quarter end. We have expanded CORI's
indications and added functionality in recent quarters and use in
revision surgeries, a unique capability, is approaching the overall
utilisation. The first procedures with the new saw solution were
performed in the quarter, with CORI being the only solution to
offer robotics-assisted burring and saw bone-cutting options.
Trauma & Extremities grew 10.4% (11.1% reported), with a strong
US performance led by the EVOS Plating System. The launch of the
new AETOS Shoulder System is underway, with first surgeries
completed in the US in the quarter.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered revenue
growth of 11.1% (11.3% reported) in the quarter despite the
softness in China noted earlier. Within this, Sports Medicine Joint
Repair delivered 11.3% (11.4% reported) revenue growth, with a good
quarter across shoulder, led by the REGENETEN Bioinductive Implant,
and knee repair. Arthroscopic Enabling Technologies revenue was up
1.7% (2.1% reported). Revenue from ENT was up 40.2% (39.1%
reported), reflecting the continued recovery in tonsil and adenoid
procedure volumes and the clearance of backorders following our
actions to improve product availability.
Advanced Wound Management
Our Advanced Wound Management business unit delivered revenue
growth of 3.6% (5.4% reported). Advanced Wound Care revenue was up
3.2% (5.9% reported), including good growth in Europe. Advanced
Wound Bioactives revenue was down -4.8% (-4.4% reported),
reflecting a strong comparator. Additionally, there were temporary
delays to SANTYL shipments as we completed the transfer of
production to our Fort Worth facility in the US, and delivery was
back to normal levels by quarter-end. Advanced Wound Devices
revenue was up 21.3% (23.8% reported), with double-digit growth
from both our traditional RENASYS NPWT System and PICO Single-Use
NPWT System.
2023 full year outlook
With one quarter remaining of 2023, we currently expect our
underlying revenue growth for the full year to be towards the
higher end of our guided range of 6.0% to 7.0% (around
5.0% to 6.0% on a reported basis based on exchange rates
prevailing on 27 October 2023). Relative to third quarter
performance, in the fourth quarter we expect higher growth in
Advanced Wound Management mainly due to improvement in Advanced
Wound Bioactives, a continuation of our positive momentum in
Orthopaedics, and slower growth in Sports Medicine reflecting the
headwinds in China.
We now expect trading profit margin to be around 17.5% for the
full year. As previously guided, trading profit margin in the
second half is expected to be considerably stronger than the first
half. Within that we expect to benefit from the usual seasonal
margin uplift, with the fourth quarter our strongest revenue
quarter, as well as the unwinding of one-time commercial costs from
the first half and our planned cost reductions. We also expect an
increased profit headwind from China from the market slowdown and
as the channel prepares for sports medicine VBP.
Consolidated revenue analysis for nine months to 30 September
2023
30 September 1 October Reported Underlying Acquisitions Currency
2023 2022 growth Growth(i) /disposals impact
Consolidated revenue by
business unit by product $m $m % % % %
-------------------------------- ------------ --------- -------- ---------- ------------ --------
Orthopaedics 1,638 1,564 4.8 5.9 - -1.1
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Knee Implants 698 665 5.0 6.1 - -1.1
Hip Implants 444 434 2.4 3.9 - -1.5
Other Reconstruction(ii) 80 61 31.3 32.0 - -0.7
Trauma & Extremities 416 404 2.9 3.9 - -1.0
Sports Medicine & ENT 1,268 1,159 9.3 11.1 - -1.8
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 689 634 8.6 10.3 - -1.7
Arthroscopic Enabling
Technologies 428 412 3.7 5.1 - -1.4
ENT (Ear, Nose and Throat) 151 113 34.4 36.9 - -2.5
Advanced Wound Management 1,185 1,127 5.2 5.9 - -0.7
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Advanced Wound Care 539 533 1.3 2.3 - -1.0
Advanced Wound Bioactives 404 388 4.1 4.0 - 0.1
Advanced Wound Devices 242 206 17.3 18.6 - -1.3
Total 4,091 3,850 6.3 7.5 - -1.2
--------------------------------- ------------ --------- -------- ---------- ------------ --------
Consolidated revenue by
geography
-------------------------------- ------------ --------- -------- ---------- ------------ --------
US 2,191 2,022 8.4 8.4 - -
Other Established Markets(iii) 1,191 1,119 6.5 7.8 - -1.3
Total Established Markets 3,382 3,141 7.7 8.2 - -0.5
Emerging Markets 709 709 - 4.3 - -4.3
Total 4,091 3,850 6.3 7.5 - -1.2
--------------------------------- ------------ --------- -------- ---------- ------------ --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our
joint reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan,
Australia and New Zealand
About Smith+Nephew
Smith+Nephew is a portfolio medical technology company 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 19,000 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 business units of
Orthopaedics, Sports Medicine & ENT and Advanced Wound
Management.
Founded in Hull, UK, in 1856, we now operate in more than 100
countries, and generated annual sales of $5.2 billion in 2022.
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 X , 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 profit 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 healthcare 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 and financial 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 disposals, 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;
relationships with healthcare professionals; reliance on
information technology and cybersecurity; disruptions due to
natural disasters, weather and climate change related events;
changes in customer and other stakeholder sustainability
expectations; changes in taxation regulations; effects of foreign
exchange volatility; 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, which is available on the SEC's website at www. sec.gov, 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 in US Patent
and Trademark Office.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTEAEFFEFADFAA
(END) Dow Jones Newswires
November 02, 2023 03:00 ET (07:00 GMT)
Smith & Nephew (LSE:SN.)
Historical Stock Chart
From Mar 2024 to Apr 2024
Smith & Nephew (LSE:SN.)
Historical Stock Chart
From Apr 2023 to Apr 2024
