TIDMSN.
RNS Number : 6111J
Smith & Nephew Plc
28 April 2022
Smith+Nephew First Quarter 2022 Trading Update
Encouraging start to the year with all three franchises
contributing to growth
28 April 2022
Smith+Nephew (LSE:SN, NYSE:SNN) trading update for the first
quarter ended 2 April 2022.
Highlights (1,2)
-- Q1 revenue $1,306 million (2021: $1,264 million) up 3.3% on a
reported basis (including -2.6% currency effect) and up 5.9% on an
underlying basis
-- Continued strong growth from Sports Medicine & ENT and
Advanced Wound Management and improved performance from
Orthopaedics
o Sports Medicine & ENT revenue up 8.6% underlying
o Advanced Wound Management revenue up 8.0% underlying
o Orthopaedics revenue up 2.6% underlying
-- Established Markets revenue up 4.1% underlying as elective
surgery volumes recovered from Omicron impact at the start of the
quarter
-- Emerging Markets revenue up 14.3% underlying, with
double-digit growth across India, the Middle East and Africa, and
Latin America
-- Continued progress with new product development programme,
including US regulatory clearance for cementless knee software on
our robotics-assisted CORI Surgical System
-- Focused on our Strategy for Growth, including work on productivity and commercial execution
-- Full year 2022 guidance unchanged
Deepak Nath, Chief Executive Officer, said:
"We are pleased with this encouraging start to the year. Sports
Medicine & ENT and Advanced Wound Management continued to
deliver strong growth and Orthopaedics produced an improved
performance as elective procedure volumes rebounded across our
segments. The growing contribution from recent product launches
reflects the strength of our portfolio and innovation-led
approach.
"Our Q1 performance puts us on track to deliver our guidance for
this year. 2022 marks an important stepping-stone in our Strategy
for Growth and towards achieving our medium-term financial
performance commitments. I am excited by the prospect of driving
delivery of the Strategy and bringing out the best in Smith+Nephew
to realise the full potential of the business."
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 Thursday
28 April 2022, details of which can be found on the Smith+Nephew
website at http://www.smith-nephew.com/financialresults .
Notes
1. All numbers given are for the quarter ended 2 April 2022 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 2021 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 2022 will be released on 28 July
2022.
First quarter trading update
Our first quarter revenue was $1,306 million (2021: $1,264
million), up 5.9% on an underlying basis. Reported revenue growth
was 3.3% including a -2.6% headwind from foreign exchange.
The first quarter comprised 64 trading days, in line with the
equivalent period in 2021.
Consolidated revenue analysis for the first quarter
2 April 3 April Reported Underlying Acquisitions Currency
2022 2021 growth growth(i) /disposals impact
Consolidated revenue by franchise $m $m % % % %
------------------------------------- ------- ------- -------- ---------- ------------ --------
Orthopaedics 541 540 0.3 2.6 - -2.3
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Knee Implants 231 212 9.3 12.2 - -2.9
Hip Implants 149 154 -3.3 -0.7 - -2.6
Other Reconstruction(ii) 20 25 -20.6 -19.0 - -1.6
Trauma & Extremities 141 149 -5.4 -3.8 - -1.6
Sports Medicine & ENT 396 373 6.1 8.6 - -2.5
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 220 198 10.9 13.6 - -2.7
Arthroscopic Enabling Technologies 141 146 -3.3 -0.8 - -2.5
ENT (Ear, Nose and Throat) 35 29 20.7 21.6 - -0.9
Advanced Wound Management 369 351 5.1 8.0 - -2.9
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Advanced Wound Care 182 175 3.9 8.3 - -4.4
Advanced Wound Bioactives 118 116 2.0 2.3 - -0.3
Advanced Wound Devices 69 60 14.4 18.6 - -4.2
Total 1,306 1,264 3.3 5.9 - -2.6
-------------------------------------- ------- ------- -------- ---------- ------------ --------
Consolidated revenue by geography
------------------------------------- ------- ------- -------- ---------- ------------ --------
US 659 640 3.1 3.1 - -
Other Established Markets(iii) 404 407 -0.7 5.9 - -6.6
Total Established Markets 1,063 1,047 1.6 4.1 - -2.5
Emerging Markets 243 217 11.7 14.3 - -2.6
Total 1,306 1,264 3.3 5.9 - -2.6
-------------------------------------- ------- ------- -------- ---------- ------------ --------
(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 an encouraging first
quarter, with continued strong growth from Sports Medicine &
ENT and Advanced Wound Management and an improved performance from
Orthopaedics. Volumes returned across elective procedure categories
as the effects of the Omicron wave fell away in the US and Europe
early in the quarter and we benefitted from recent new product
launches. We continue to focus closely on managing the widely
reported global shortages of some raw materials and components.
Geographically, revenue growth was 4.1% (1.6% reported) in our
Established Markets and 14.3% (11.7% reported) in Emerging
Markets.
The Established Markets recovered from the impact of the COVID
wave at the start of the year. In the US our business accelerated
through February and into March as procedure volumes returned, with
revenue growing 3.1% (3.1% reported) for the quarter. Revenue from
our Other Established Markets was up 5.9% (-0.7% reported due
primarily to FX movements in the Euro, Australian Dollar and
Japanese Yen) mainly driven by Europe, with the UK and Southern
Europe rebounding strongly.
In the Emerging Markets China saw a return of COVID outbreaks
and local lockdowns in some cities late in the quarter. Our China
business still added to Group growth with delays to the
implementation of the Hip and Knee volume-based-procurement (VBP)
programme more than offsetting the COVID headwind. The Emerging
Markets excluding China continued to recover strongly, with
double-digit growth across India, the Middle East and Africa, and
Latin America.
Orthopaedics
We delivered revenue growth of 2.6% (0.3% reported) in our
Orthopaedics franchise in the first quarter.
Knee Implants was up 12.2% (9.3% reported) and Hip Implants was
down -0.7%
(-3.3% reported). Knee Implants performance was driven by a
strong recovery in elective surgery volumes in the quarter. We saw
the first contributions from our recently launched LEGION CONCELOC
cementless knee and announced the first surgery using our new
JOURNEY II Medial Dished (MD) System. The small decline for Hip
Implants reflects a strong comparative period and a market that had
been more resilient than Knees in 2020 and 2021.
Other Reconstruction revenue was down -19.0% (-20.6% reported),
largely reflecting a strong Q1 2021. We continue to expand our CORI
Surgical System offering, launching in Japan in February and
conducting the first hip surgery and achieving US regulatory
clearance for our cementless knee software in April.
In Trauma & Extremities revenue was down -3.8% (-5.4%
reported) reflecting a varied performance by geography and product
category.
Sports Medicine & ENT
Our Sports Medicine & ENT franchise delivered revenue growth
of 8.6% (6.1% reported).
Revenue in Sports Medicine Joint Repair was up 13.6% (10.9%
reported), driven by procedural recovery in knee repair which had
been particularly impacted by lower sport participation due to
COVID. We also saw good momentum across recent product launches
including FASTFIX FLEX and HEALICOIL Knotless.
Arthroscopic Enabling Technologies revenue was down -0.8% (-3.3%
reported), reflecting a good quarter in fluid management and video
offset by a soft quarter in COBLATION and patient positioning.
ENT delivered revenue growth of 21.6% (20.7% reported) driven by
our tonsil and adenoid business as procedure volumes continue to
recover from the impact of COVID .
Advanced Wound Management
We delivered revenue growth of 8.0% (5.1% reported) from our
Advanced Wound Management franchise.
Advanced Wound Care revenue was up 8.3% (3.9% reported),
including double-digit growth in Europe. All major product
categories grew globally, with the highest growth coming from film
and foam dressings.
Advanced Wound Bioactives revenue was up 2.3% (2.0% reported)
with good growth from our enzymatic debrider SANTYL . In s kin
substitutes we announced a new study showing that, compared to
leading competitors, GRAFIX Membrane halved recurrence rates for
diabetic foot ulcers, one of the major categories of chronic
wounds.
Advanced Wound Devices revenue was up 18.6% (14.4% reported)
driven by both our PICO and RENASYS Negative Pressure Wound Therapy
Systems.
Outlook
Our first quarter trading results put us on track to meet our
full year guidance for 2022, which is unchanged.
As announced with our fourth quarter results, for 2022 we are
targeting underlying revenue growth of 4.0% to 5.0%. On a reported
basis the guidance equates to a range of around 1.3 % to 2.3%, with
a foreign exchange headwind of 270bps based on exchange rates
prevailing on 22 April 2022.
For trading profit margin we are targeting around 50bps of
expansion in 2022. This will be driven by efficiencies from
operating leverage and productivity and improvement in the margin
of acquired assets that will more than offset significant
anticipated headwinds from input cost inflation and China VBP
implementation.
In December 2021 we announced our Strategy for Growth and new
mid-term financial performance commitment, targeting consistent
4-6% organic revenue growth by 2024, structurally ahead of
historical levels, and rebuilding trading margin, targeting at
least 21% by 2024 with further improvements thereafter. 2022 is an
important stage in this journey and we are pleased with the
encouraging start to the year.
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 18,000 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 2021.
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 Twitter , 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 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 health care 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 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; 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, 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.
Trademark of Smith+Nephew. Certain marks registered US Patent
and Trademark Office.
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