1st May 2014 08:07
LONDON (Alliance News) - Smith & Nephew PLC Thursday reiterated confidence in its outlook for 2014 and detailed its new restructuring programme, as its pretax profit benefited from a one-off gain in the quarter to March 29, although revenue remained broadly flat.
The medical technology company posted an pretax profit of USD229 million, up from USD207 million in the previous year, benefiting from a USD35 million one off gain from the closure of its US pension plan. Revenue was unchanged at USD1.07 billion.
Removing exceptional costs, Smith & Nephew posted a decline in profit to GBP229 million from GBP241 million.
In its established markets, the company's revenue dropped 1%, including a 2% decline in the US due to surgical procedures being brought forward into 2013 ahead of changes to the US health insurance system.
However, revenue in emerging and international markets rose 9% during the quarter, with China growing over 30%. In Brazil, revenues were disrupted as it transitioned to a direct sales model, it said.
The company undertook a six-month review to optimise its structure, and on Thursday said that it had identified a plan to simplify its operations and produce USD120 million of yearly efficiency savings.
Smith & Nephew intends to re-invest savings from the restructuring programme to drive further growth. The restructuring will take place over the next four years, and will lead to an exceptional cost of USD150 million.
The four areas it will tackle in the new programme are improving its corporate functions, driving savings, simplifying its operating model, and optimising its facilities.
Smith & Nephew's currently on-going USD150 million programme to simplify back office support in its Advanced Surgical Devices division and refine its Advanced Wound Management manufacturing footprint, which is separate to the new programme, has delivered yearly savings of USD135 million so far, it said.
"We remain confident in our 2014 outlook as we roll-out our strong pipeline of new products, benefit from recent investments in marketing and the salesforce and see an increasing contribution from acquisitions," said Chief Executive Officer Olivier Bohuon in a statement.
Berenberg maintained its Hold rating for Smith & Nephew, noting that the company had indicated at its full-year results in February that the quarter was likely to be lacklustre, and the results were more or less in line with lowered expectations.
Berenberg said that the new restructuring programme would be "helpful and supportive of future growth, but not a real game-changer."
However, it noted that "in the company?s defence, having been in some kind or other of optimisation programme since 2006, it must be running out of things to optimise."
Shares in Smith & Nephew were trading down 0.3% at 917.00 pence Thursday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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