30th Oct 2014 12:29
LONDON (Alliance News) - Smith & Nephew PLC Thursday said its outlook for the year remains unchanged, after it reported higher trading profit and revenue in the third quarter, buoyed by growth in sports medicine joint repair, wound bioactives and its emerging market business.
The medical devices maker reported a trading profit of USD246 million for the three months to September 27, up from USD222 million a year earlier, as revenue rose to USD1.15 billion, from USD1.03 billion, but its trading profit margin fell slightly to 21.4%, from 21.6%.
"We are delivering on our strategy to rebalance Smith & Nephew by strengthening our higher growth platforms, which currently represent more than half the business, up from just 35% three years ago. Sports Medicine Joint Repair and Advanced Wound Bioactives both produced double-digit growth in the quarter, and the emerging markets business increased revenue by 20%," Chief Executive Olivier Bohuon said in a statement.
The company's adjusted earnings per share rose to 19.5 cents, from 17.1 cents a year earlier.
However, its pretax profit fell to USD153 million in the third quarter, from USD178 million a year earlier, as administrative costs and research and development expenses all rose. Basic earnings per share declined to 11.4 cents, from 13.6 cents.
The rise in costs reflects integration costs and increased amortisation of acquisition intangibles from the acquisition of ArthroCare, as well as restructuring and legal costs, it said.
The company bought Texas-based ArthroCare for USD1.7 billion in February in order to bolster its sports medicine business. It reiterated Thursday that the integration is progressing well, highlighting 3% growth in revenue from arthroscopic enabling technologies which now includes the radio frequency Coblation portfolio acquired with ArthroCare.
The maker of products including hip and knee replacements said revenue rose to USD816 million, from USD696 million, in its surgical devices business, but was broadly flat at USD332 million in its wound management business.
The wound management performance was hit by its RENASYS negative pressure wound therapy system, as predicted. The company was required to halt distribution of RENASYS and needs to secure new regulatory clearances from the US Food and Drug Administration for some design enhancements, a process it expects to take the rest of the year.
It said revenue in advanced wound devices fell 17% in the third quarter as a result of the distribution halt.
Smith & Nephew's revenue was flat overall in its established markets, growing 2% in the US but declining by the same amount elsewhere. However, revenue grew 20% in its emerging markets, including an improving contribution from its distributor acquisitions in Brazil.
"The quarter positively reflects our strategy to rebalance towards higher growth markets, and we have many actions underway to further build upon these achievements," it said.
For the first nine months of the year, Smith & Nephew's trading profit rose to USD730 million, from USD695 million, as revenue increased to USD3.37 billion, from USD2.18 billion. Adjusted earnings per share rose to 57.6 cents, from 53.6 cents.
On a reported basis, pretax profit fell to USD502 million in the nine month period, from USD570 million, and basic earnings per share fell to 38.2 cents, from 43.6 cents, again reflecting the cost increase.
Smith & Nephew said it received a USD188 million loan repayment in cash from Bioventus after the end of the third quarter.
The company spun its biologics and clinical therapies business into Bioventus in May 2012, although it still holds a 49% investor equity in the venture.
Smith & Nephew shares were up 1.4% at 1,032.50 pence in the wake of the results.
By Steve McGrath; [email protected]; @stevemcgrath1
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