3rd May 2018 07:44
LONDON (Alliance News) - Smith & Nephew PLC on Thursday lowered its full-year underlying revenue guidance after its businesses delivered a "mixed performance" in the first quarter of the year.
The firm said first quarter revenue rose 5% to USD1.20 billion, from USD1.14 billion, though this was flat on an underlying basis. There was one fewer trading day than the comparable period last year, Smith & Nephew noted.
The medical devices maker said its full-year guidance has been hit by the "weaker" first quarter, with underlying revenue growth now expected to be in the range 2% to 3% with a trading profit margin "at or above" that achieved in 2017.
The FTSE 100-listed company at its full-year results in February had guided to underlying revenue growth of between 3% to 4% for 2018, with a 30 to 70 basis point improvement in its trading profit margin on last year. The trading profit margin for 2017 came in at 22%.
"Our businesses delivered a mixed performance in the first quarter, with the effects of some softer markets and a slowdown in our Bioactives business offset by another quarter of strong growth in the Emerging Markets," said Chief Executive Olivier Bohuon.
"We expect trading conditions to return to more normal levels, which, combined with the continued rollout of new products and our sustained Emerging Markets performance, gives us confidence in delivering an improving performance trend during the remainder of the year," Bohuon said.
Established Markets revenue in the period was up 3% at reported rates and down 2% on an underlying basis, "held back by some softer market conditions and weaker performance in Advanced Wound Bioactives".
Advanced Wound Bioactives saw reported revenue fall 11% in the period to USD59 million, down 12% on an underlying basis.
Within the unit, sales of SANTYL were weak, which the company attributed to "a deepening seasonality in sales patterns, an effect compounded by distributor stocking activities".
"In addition, performance from OASIS remained significantly below last year. We now expect a mid-single digit percentage decline in revenue from this franchise in 2018," the company added.
Emerging Markets continued to deliver strong growth, Smith & Nephew said, with revenue up 15% on a reported and 9% on an underlying basis.
"Our outlook for 2018 was based on the expectation that overall dynamics in our markets would be similar to those seen in 2017. However, the first quarter results and updated expectations for weaker performance from Advanced Wound Bioactives in 2018 have made us more cautious in our outlook," Smith & Nephew said.
The lowered expectation for underlying revenue growth in 2018 assumes that procedure volumes return to "more normal levels" for the rest the year, the company said.
"We expect sales growth to be stronger in the second half than the first half of the year. The phasing of the trading profit margin is expected to track this, albeit with margin lower in the first half of 2018 than that achieved in the same period last year," Smith & Nephew added.
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