Smith & Nephew confident despite slip in profits

Medical technology company Smith & Nephew reported full-year revenue of $5.22bn (£4.35bn) on Tuesday, which was up 4.7% on an underlying basis year-on-year.

The FTSE 100 firm put the growth down to strong performances across all franchises and geographies.

Its reported growth, however, was only 0.1% due to the negative impact of foreign exchange headwinds of 460 basis points.

The company's trading profit for the year was $901m, with a trading profit margin of 17.3%, compared to $936m and 18.0% respectively in 2021.

Smith & Nephew attributed the margin decline to higher inflation.

Meanwhile, the company generated $581min cash from operations, down from $1.05bn in the prior year, with trading cash flow falling to $444m from $828m in 2021.

The firm completed $150m of its share buyback programme in 2022, adding that it would maintain its full-year dividend of 37.5 US cents per share.

On the strategic front, Smith & Nephew reported progress on its 12-point plan aimed at improving execution and driving growth in advanced wound management, sports medicine, and orthopaedics.

Looking ahead, Smith & Nephew said it was targeting underlying revenue growth in the range of 5% to 6% for 2023, with a trading profit margin of at least 17.5%.

The firm also updated its mid-term targets, aiming for at least 5% underlying revenue growth and a trading profit margin expansion to at least 20% by 2025, driven by productivity improvements and innovation investments.

“We made good progress during 2022 and ended the year in a much stronger position than we started,” said chief executive officer Deepak Nath.

“We continued to outperform in sports medicine and ENT, and advanced wound management and, even though we are early in our work to fix orthopaedics, performance improved here too.

“With our 12-point plan, we are fundamentally changing the way Smith & Nephew operates to drive higher growth and improve productivity.”

Nath said the plan was starting to deliver, and, as the company progressed through the two-year life of the plan, it expected further operational and financial benefits, including a reduction in inventory levels and cash conversion to return to historic levels.

“We are benefiting from our increased investment in innovation, with more than 60% of growth in 2022 coming from products launched in the last five years.

“We will continue to face macroeconomic headwinds in 2023; however, I believe the drivers of further growth are in place, including leading technologies across all three franchises and a clear path to improved execution in orthopaedics.

“We expect to deliver both faster revenue growth and margin expansion in the coming year, and are setting a solid foundation for our midterm ambitions as we transform to a consistently higher growth company.”

At 0847 GMT, shares in Smith & Nephew were up 3.29% at 1,199.66p.

Reporting by Josh White for Sharecast.com.