TIDMSN.
RNS Number : 4494X
Smith & Nephew Plc
26 April 2023
Smith+Nephew First Quarter 2023 Trading Update
26 April 2023
Smith+Nephew (LSE:SN, NYSE:SNN) trading update for the first
quarter ended 1 April 2023.
Highlights (1,2)
-- Q1 revenue $1,356 million (2022: $1,306 million), up 6.9% on
an underlying basis and up 3.8% on a reported basis (including
-310bps foreign exchange impact)
-- Continued strong growth from Sports Medicine & ENT and
Advanced Wound Management and improved performance from
Orthopaedics
o Sports Medicine & ENT revenue up 10.0% underlying
o Advanced Wound Management revenue up 7.9% underlying
o Orthopaedics revenue up 3.9% underlying
-- Established Markets revenue up 10.0% underlying as procedure
volumes strengthened, offsetting Emerging Markets, where revenue
was down -7.3% due to the expected impact in China from
volume-based procurement (VBP) and Covid
-- Continued cadence of new product launches contributing to growth
-- Full year 2023 guidance unchanged, underpinned by ongoing delivery of 12-Point Plan
Deepak Nath, Chief Executive Officer, said:
"I'm pleased with our revenue performance in the first quarter
as we delivered growth across all three franchises, including
improvement in Orthopaedics.
"We saw strong elective procedure volumes in our Established
Markets early in the quarter, which our surgical businesses are now
better placed to benefit from. We are consistently seeing
accelerated adoption of robotics and the new CORI Digital Tensioner
adds further differentiation to our platform and will support
better outcomes for patients.
"We are still in the early phases of the two-year life-cycle of
our 12-Point Plan and are focused on driving transformation."
Enquiries
Investors
Andrew Swift +44 (0) 1923 477433
Smith+Nephew
Media
Charles Reynolds +44 (0) 1923 477314
Smith+Nephew
Susan Gilchrist / Ayesha Bharmal +44 (0) 20 7404 5959
Brunswick
Analyst conference call
An analyst conference call to discuss Smith+Nephew's first
quarter results will be held at 8.30am BST / 3.30am EDT on
Wednesday 26 April 2023, details of which can be found on the
Smith+Nephew website at
https://www.smith-nephew.com/en/about-us/investors/financial-resources#quarterly-reporting
.
Notes
1. All numbers given are for the quarter ended 1 April 2023 unless stated otherwise.
2. Unless otherwise specified as 'reported' all revenue growth
throughout this document is 'underlying' after adjusting for the
effects of currency translation and including the comparative
impact of acquisitions and excluding disposals. All percentages
compare to the equivalent 2022 period.
'Underlying revenue growth' reconciles to reported revenue
growth, the most directly comparable financial measure calculated
in accordance with IFRS, by making two adjustments, the 'constant
currency exchange effect' and the 'acquisitions and disposals
effect', described below.
The 'constant currency exchange effect' is a measure of the
increase/decrease in revenue resulting from currency movements on
non-US Dollar sales and is measured as the difference between: 1)
the increase/decrease in the current year revenue translated into
US Dollars at the current year average exchange rate and the prior
revenue translated at the prior year rate; and 2) the
increase/decrease being measured by translating current and prior
year revenues into US Dollars using the prior year closing
rate.
The 'acquisitions and disposals effect' is the measure of the
impact on revenue from newly acquired material business
combinations and recent material business disposals. This is
calculated by comparing the current year, constant currency actual
revenue (which includes acquisitions and excludes disposals from
the relevant date of completion) with prior year, constant currency
actual revenue, adjusted to include the results of acquisitions and
exclude disposals for the commensurate period in the prior year.
These sales are separately tracked in the Group's internal
reporting systems and are readily identifiable.
Forward calendar
Results for the first half of 2023 will be released on 3 August
2023.
First quarter trading update
Our first quarter revenue was $1,356 million (2022: $1,306
million), up 6.9% on an underlying basis. Reported revenue growth
was 3.8% including a -310bps headwind from foreign exchange.
The first quarter comprised 64 trading days, in line with the
equivalent period in 2022.
Consolidated revenue analysis for the first quarter
1 April 2 April Reported Underlying Acquisitions Currency
2023 2022 growth growth(i) /disposals impact
Consolidated revenue by franchise $m $m % % % %
------------------------------------- ------- ------- -------- ---------- ------------ --------
Orthopaedics 548 541 1.3 3.9 - -2.6
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Knee Implants 237 231 2.3 5.0 - -2.7
Hip Implants 152 149 1.8 4.6 - -2.8
Other Reconstruction(ii) 23 20 16.3 19.7 - -3.4
Trauma & Extremities 136 141 -3.2 -0.8 - -2.4
Sports Medicine & ENT 422 396 6.5 10.0 - -3.5
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 228 220 3.8 7.3 - -3.5
Arthroscopic Enabling Technologies 149 141 5.6 9.1 - -3.5
ENT (Ear, Nose and Throat) 45 35 26.9 30.8 - -3.9
Advanced Wound Management 386 369 4.7 7.9 - -3.2
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Advanced Wound Care 175 182 -3.4 1.0 - -4.4
Advanced Wound Bioactives 136 118 14.9 15.2 - -0.3
Advanced Wound Devices 75 69 8.4 12.9 - -4.5
Total 1,356 1,306 3.8 6.9 - -3.1
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Consolidated revenue by geography
------------------------------------- ------- ------- -------- ---------- ------------ --------
US 737 659 11.8 11.8 - -
Other Established Markets(iii) 404 404 - 7.0 - -7.0
Total Established Markets 1,141 1,063 7.3 10.0 - -2.7
Emerging Markets 215 243 -11.5 -7.3 - -4.2
Total 1,356 1,306 3.8 6.9 - -3.1
-------------------------------------- ------- ------- -------- ---------- ------------ --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our
joint navigation business and cement
(iii) Other Established Markets are Australia, Canada, Europe,
Japan and New Zealand
Overview of the first quarter
All three franchises contributed to the encouraging first
quarter as we maintained our growth momentum from the end of 2022.
Sports Medicine & ENT and Advanced Wound Management again
delivered strong growth and Orthopaedics also delivered an improved
performance. We continued to be held back by supply challenges in
some raw materials and components, and expect this to remain a
headwind during 2023.
Group trading was driven by a good quarter in the Established
Markets. The US, our largest market, grew 11.8% (11.8% reported),
and Other Established Markets grew 7.0% (flat on a reported basis
reflecting a -700bps impact from foreign exchange). Overall, we saw
a stronger environment for elective procedures in our Established
Markets as healthcare systems saw higher volumes than anticipated,
particularly in the early part of the quarter. This benefitted our
surgical businesses which are now better placed as a result of our
work to improve product supply and commercial execution.
In Emerging Markets, the -7.3% decline (-11.5% reported) was the
result of a slower quarter in China, as expected. Here growth
continued to be impacted by the implementation of the previously
disclosed hip and knee VBP programme, with an additional effect
from the renewed Covid waves that began in late 2022. These
resulted in reduced procedure volumes and slower shipments into the
channel for much of the quarter. The headwind from VBP will
continue until Q2 2023. Emerging Markets excluding China delivered
growth in the quarter, led by performance in India and Latin
America.
Orthopaedics
Our Orthopaedics franchise delivered revenue growth of 3.9%
(1.3% reported) in the quarter. Excluding China, Orthopaedics grew
by 9.0% underlying.
Knee Implants was up 5.0% (2.3% reported) and Hip Implants was
up 4.6%
(1.8% reported). We continued to benefit from our differentiated
portfolio of Knee Implants including double-digit growth from
JOURNEY II and strong momentum from the new cementless total knee
LEGION CONCELOC . Hip Implants performance was led by double-digit
growth from our OR3O Dual Mobility Hip System. During the quarter
we announced new data supporting improved outcomes from our
VISIONAIRE Patient-Specific Instrumentation for total knee
arthroplasty compared with conventional instrumentation.
Other Reconstruction revenue was up 19.7% (16.3% reported),
including strong growth from our CORI Surgical System. We are
benefiting from recent expansion of CORI, including offering the
only robotics-assisted revision knee indication. We continue to
invest behind the CORI platform and are at the early stages of
introducing our new CORI Digital Tensioner. This is a proprietary
device for soft tissue balancing in knee replacement, and is the
only tensioner for robotic assisted surgery that enables surgeons
to measure the ligament tension in a knee prior to cutting bone.
This allows surgeons to accurately measure gaps in the patient's
knee using quantifiable data and helps make planning more objective
and eliminates inconsistencies in surgery from current manual or
mechanical tools.
In Trauma & Extremities revenue was down -0.8% (-3.2%
reported). A strong quarter of growth in the US was offset by the
continued impact of the previously disclosed decision to exit this
segment in China. We expect Trauma & Extremities growth to
accelerate as the year progresses as we lap market exits made in
2022 and continue to drive the EVOS Plating System .
Sports Medicine & ENT
Our Sports Medicine & ENT franchise delivered revenue growth
of 10.0% (6.5% reported).
Revenue in Sports Medicine Joint Repair was up 7.3% (3.8%
reported). Performance was led by our shoulder repair portfolio,
including double-digit growth from our REGENETEN Bioinductive
Implant. During the quarter we introduced the UltraTRAC QUAD ACL
Reconstruction Technique, bringing together new tendon harvest and
preparation guides with our family of ULTRABUTTON Adjustable
Fixation Devices. These technologies work together to provide an
innovative procedural solution, expanding Smith+Nephew's ability to
address surgeon graft preference in knee repair.
Arthroscopic Enabling Technologies revenue was up 9.1% (5.6%
reported), with a good quarter in video, COBLATION and patient
positioning.
ENT delivered revenue growth of 30.8% (26.9% reported),
reflecting the post Covid recovery in tonsil and adenoid procedure
volumes . During the quarter we announced new evidence
demonstrating that COBLATION Technology can accelerate patient
recovery with fewer complications compared with total tonsillectomy
techniques.
Advanced Wound Management
We delivered revenue growth of 7.9% (4.7% reported) from our
Advanced Wound Management franchise.
Advanced Wound Care revenue was up 1.0% (-3.4% reported),
including a solid performance across most major regions against a
strong prior year comparator .
Advanced Wound Bioactives revenue was up 15.2% (14.9% reported)
driven by sustained double-digit growth from our skin substitutes
portfolio.
Advanced Wound Devices revenue was up 12.9% (8.4% reported) as
we continued to deliver good growth across both our PICO and
RENASYS Negative Pressure Wound Therapy Systems.
12-Point Plan update
In July 2022 we announced our 12-Point Plan to fundamentally
change the way we operate and deliver results. The 12-Point Plan is
focused on:
-- Fixing Orthopaedics , to regain momentum across hip and knee
implants, robotics and trauma, and win share with our
differentiated technology;
-- Improving productivity , to support trading profit margin expansion; and
-- Further accelerating growth in our already well-performing
Advanced Wound Management and Sports Medicine & ENT
franchises.
On productivity, we have finalised the associated costs for our
manufacturing network and go-to-market optimisation workstream. In
aggregate, the benefits from these actions are expected to result
in more than $200 million of annual savings by 2025, as disclosed
last quarter, for around $275 million of restructuring costs over
three years.
Outlook
Full year guidance for 2023 is unchanged, with targets of 5.0%
to 6.0% underlying revenue growth (around 5.0% to 6.0% reported
based on exchange rates on 20 April 2023) and a trading profit
margin of at least 17.5%.
About Smith+Nephew
Smith+Nephew is a portfolio medical technology business that
exists to restore people's bodies and their self-belief by using
technology to take the limits off living. We call this purpose
'Life Unlimited'. Our 19,000 employees deliver this mission every
day, making a difference to patients' lives through the excellence
of our product portfolio, and the invention and application of new
technologies across our three global franchises of Orthopaedics,
Advanced Wound Management and Sports Medicine & ENT.
Founded in Hull, UK, in 1856, we now operate in more than 100
countries, and generated annual sales of $5.2 billion in 2022.
Smith+Nephew is a constituent of the FTSE100 (LSE:SN, NYSE:SNN).
The terms 'Group' and 'Smith+Nephew' are used to refer to Smith
& Nephew plc and its consolidated subsidiaries, unless the
context requires otherwise.
For more information about Smith+Nephew, please visit
www.smith-nephew.com and follow us on LinkedIn , Instagram or
Facebook .
Forward-looking Statements
This document may contain forward-looking statements that may or
may not prove accurate. For example, statements regarding expected
revenue growth and trading profit margins, market trends and our
product pipeline are forward-looking statements. Phrases such as
"aim", "plan", "intend", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions
are generally intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual
results to differ materially from what is expressed or implied by
the statements. For Smith+Nephew, these factors include: risks
related to the impact of Covid, such as the depth and longevity of
its impact, government actions and other restrictive measures taken
in response, material delays and cancellations of elective
procedures, reduced procedure capacity at medical facilities,
restricted access for sales representatives to medical facilities,
or our ability to execute business continuity plans as a result of
Covid; economic and financial conditions in the markets we serve,
especially those affecting healthcare providers, payers and
customers (including, without limitation, as a result of Covid);
price levels for established and innovative medical devices;
developments in medical technology; regulatory approvals,
reimbursement decisions or other government actions; product
defects or recalls or other problems with quality management
systems or failure to comply with related regulations; litigation
relating to patent or other claims; legal and financial compliance
risks and related investigative, remedial or enforcement actions;
disruption to our supply chain or operations or those of our
suppliers (including, without limitation, as a result of Covid);
competition for qualified personnel; strategic actions, including
acquisitions and dispositions, our success in performing due
diligence, valuing and integrating acquired businesses; disruption
that may result from transactions or other changes we make in our
business plans or organisation to adapt to market developments;
relationships with healthcare professionals; reliance on
information technology and cybersecurity; disruptions due to
natural disasters, weather and climate change related events;
changes in customer and other stakeholder sustainability
expectations; changes in taxation regulations; effects of foreign
exchange volatility; and numerous other matters that affect us or
our markets, including those of a political, economic, business,
competitive or reputational nature. Please refer to the documents
that Smith+Nephew has filed with the U.S. Securities and Exchange
Commission under the U.S. Securities Exchange Act of 1934, as
amended, including Smith+Nephew's most recent annual report on Form
20-F, which is available on the SEC's website at www. sec.gov, for
a discussion of certain of these factors. Any forward-looking
statement is based on information available to Smith+Nephew as of
the date of the statement. All written or oral forward-looking
statements attributable to Smith+Nephew are qualified by this
caution. Smith+Nephew does not undertake any obligation to update
or revise any forward-looking statement to reflect any change in
circumstances or in Smith+Nephew's expectations.
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