7th Feb 2019 14:39
LONDON (Alliance News) - Smith & Nephew PLC on Thursday posted strong annual results, with all three of its franchises showing increased revenue, ahead of its Ceterix Orthopaedics Inc acquisition, which will increase the size of the biggest of those divisions.
The medical device maker's revenue for the year was USD4.90 billion, up from USD4.77 billion the year before. This matched the company-compiled consensus of USD4.91 billion.
Within the revenue figure Sports Medicine, Trauma & Other - Smith & Nephew's biggest franchise - recorded USD2.00 billion of revenue in 2018, rising 3.6% from USD1.93 billion in 2017. For just the fourth quarter, revenue from Sports Medicine, Trauma & Other was up at USD528 million from USD519 million year-on-year.
Smith & Nephew announced its intention to acquire Ceterix Orthopaedics in the final quarter of 2018 and it closed the deal, which has a maximum USD105 million consideration, last month.
Ceterix developed the NovoStitch Pro Meniscal Repair System, which treats complex meniscal tears. Smith & Nephew said NovoStitch is "highly complementary" to the Fast-Fix 360 Meniscal Repair System, which part of Smith & Nephew's Sports Medicine, Trauma & Other franchise.
Meanwhile, the Reconstruction franchise also experienced growth, up 3.2% from USD1.63 billion from USD1.58 billion. Fourth-quarter revenue was up at USD429 million from USD423 million.
Annual revenue improved much more modestly for Smith & Nephew's Advanced Wound Management franchise. This rose just 1.6% to USD1.28 billion from USD1.26 billion. In the fourth quarter, revenue was nearly flat at USD337 million, versus USD336 million the year before.
For the company as a whole, growth also was seen on a regional basis, with US revenue up at USD2.35 billion in all of 2018 from USD2.31 billion in 2017. Other established markets revenue rose to USD1.69 billion from USD1.66 billion. Emerging markets revenue grew to USD857 million from USD801 million.
Overall, group underlying revenue growth was 2% in 2018. Smith & Nephew's guidance was for underlying revenue growth in the lower half of the 2% to 3% range. Consensus was for underlying revenue growth of 1.9%.
Pretax profit for 2018 was USD781 million, 11% less than USD879 million in profit in 2017, driven by restructuring costs.
The company undertook its Accelerating Performance & Execution restructuring programme, beginning at the end of 2017, which incurred USD120 million of costs in 2018. This compares to around USD60 million of benefit from the effort realised in the course of the year.
The restructuring programme is expected to produce a USD160 million annualised benefit by 2022 for a one-off USD240 million cost.
Selling, general, and administrative expenses rose to USD2.50 billion in 2018 from USD2.36 billion in 2017, while research and development expenses increased to USD246 million from USD223 million.
Trading profit was USD1.12 billion, up from USD1.05 billion the year before. Consensus was for a USD1.10 billion in trading profit. Trading profit excludes a number of factors such as impairments and integration costs.
Adjusted earnings per share totalled 100.9 US cents, compared to a 95 cent analyst consensus forecast and 94.5 cents adjusted earnings per share result in 2017.
Smith & Nephew declared a final dividend of 22.0 cents per share, bringing the total for 2018 to 36.00 cents, up 2.9% from 35.00 cents per share for 2017.
For 2019, Smith & Nephew is guiding for underlying revenue growth in the 2.5% to 3.5% range. On a reported basis, this will be equivalent to 1.8% to 2.8% of revenue growth at February 1 exchange rates and including Smith & Nephew's acquisition of Ceterix Orthopaedics in January.
"We accelerated performance across 2018, with 3% underlying revenue growth in both the third and fourth quarters and a 7% uplift in full year trading profit. We start 2019 with a strengthened organisation and a new growth-oriented operating model," said Smith & Nephew Chief Executive Namal Nawana.
The stock was up 3.9% at 1,519.00 pence on Thursday afternoon.
Related Shares:
Smith & Nephew