27th Feb 2024 12:02
(Alliance News) - Smith & Nephew PLC's annual results were largely well-received on Tuesday, though Hargreaves Lansdown observed the firm is likely to face some bumps in the road towards is 2025 margin target.
Shares in the Watford, England-based medical devices maker were up 1.3% to 1,140.00 pence each in London on Tuesday morning. Over the last 12 months, the FTSE 100-listed firm's shares are down 5.3%.
In 2023, revenue climbed 6.4% to USD5.55 billion from USD5.22 billion a year before. The topline figure beat company-compiled analyst consensus of USD5.53 billion.
Trading profit increased 7.7% to USD970 million from USD901 million, beating consensus of USD966 million.
Pretax profit rose 23% to USD290 million from USD235 million.
"Smith & Nephew hasn't delivered any curveballs in full-year results today," observed Derren Nathan, head of equity research at Hargreaves Lansdown.
"There was broad based growth across all business units and geographies and it was pleasing to see a strong performance from the cutting edge CORI robotic surgery platform," he added.
For 2024, the firm is guiding for underlying revenue growth of 5.0% to 6.0% or reported revenue growth of 4.6% to 5.6%, with trading profit margin of at least 18.0%, which would be a step up from 2023's 17.5%.
"Inflation is expected to be a continued brake on profit growth in 2024, and the volume based procurement program by the Chinese authorities remains a significant challenge to meeting a 2025 margin target of 20%. Smith & Nephew expects to make some progress towards this in 2024 but there's still some way to go if it's going to make good on that promise," HL's Nathan said.
However, Nathan notes the firm is "fighting hard" to maintain a competitive edge, through developing novel technologies in-house, as well as acquiring firms with complementary capabilities.
The most recent example of this was the USD330 million buy of Israeli sports medicine technology firm CartiHeal, which develops Agili-C, a treatment that promotes natural regeneration of cartilage and restoration of underlying bone used for knee repair.
"In this space there's no room to stand still and with net debt still relatively high, there may be limited scope for dividend growth in the near-term," HL's Nathan added.
S&N proposed a final dividend of 23.1 cents per share, bringing the annual total to 37.5 cents, unchanged from the prior year.
By Elizabeth Winter, Alliance News deputy news editor
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