Smith+Nephew First Quarter 2025
Trading Update
Good start to 2025, reinforcing
confidence in full year outlook
30 April 2025
Smith+Nephew (LSE:SN, NYSE:SNN)
trading update for the first quarter ended 29 March
2025.
Highlights1,2
·
Q1 revenue $1,407 million (2024: $1,386 million),
with underlying revenue growth of 3.1%, and reported revenue growth
of 1.6% including a -150bps foreign exchange headwind
o Growth driven by operational improvements and recent product
launches and inclusive of continued headwinds from China and one
less trading day year-on-year
·
Orthopaedics underlying revenue growth 3.2%
(reported growth 1.8%)
o Sustained improved performance in US Hip and Knee Implants and
good growth from Other Reconstruction and Trauma &
Extremities
·
Sports Medicine & ENT underlying revenue
growth 2.4% (reported growth 0.9%)
o Strong performance in Established Markets from Sports Medicine
Joint Repair and solid growth from Arthroscopic Enabling
Technologies, offset by China
·
Advanced Wound Management underlying revenue
growth 3.8% (reported growth 2.0%)
o Growth driven by foams and NPWT, offset by expected
SANTYL◊ volatility
·
Full year 2025 guidance unchanged
o Underlying revenue growth expected to be around 5.0% (reported
growth 5.4%), and
significant trading profit margin expansion to between 19.0% and
20.0%
o Continued higher cadence of product launches and clinical
evidence contributing to growth
o Unchanged outlook includes an expected net impact of $15 to
$20 million from tariffs in 2025, based on announced measures, and
mitigations
Deepak Nath, Chief Executive Officer, said:
"We have delivered a good start to
the year with the operational improvements delivered through the
12-Point Plan driving growth across our portfolio. Key platforms,
such as CORI◊, EVOS◊, REGENETEN◊
and our Negative Pressure Wound Therapy portfolio
all delivered strong double-digit growth in the quarter, and we are
maintaining our high pace of innovation with a further wave of
product launches this year. Headwinds from China remained an
offsetting factor, but we believe have now passed their peak
impact.
"Whilst uncertainties exist around
the imposition of tariffs, we remain confident in our outlook for
another year of strong revenue growth and a significant step-up in
trading profit margin."
Enquiries
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Investors
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Andrew Swift
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+44 (0) 1923 477433
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Smith+Nephew
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Media
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Charles Reynolds
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+44 (0) 1923 477314
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Smith+Nephew
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Susan Gilchrist / Ayesha
Bharmal
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+44 (0) 20 7404 5959
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Brunswick
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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 30
April 2025, details of which can be found on the Smith+Nephew
website at https://www.smith-nephew.com/en/who-we-are/investors.
Notes
1. All numbers given are
for the quarter ended 29 March 2025 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
2024 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 same
exchange rates.
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 2025
will be released on 5 August 2025.
First quarter trading update
Our first quarter revenue was $1,407
million (2024: $1,386 million), reflecting
underlying revenue growth of 3.1%. Reported revenue growth was
1.6%, including -150bps headwind from foreign exchange. The first
quarter 2025 comprised 62 trading days, one fewer than the same
period of 2024.
Consolidated revenue analysis for the first
quarter
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29
March
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30
March
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Reported
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Underlying
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Acquisitions
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Currency
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2025
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2024(i)
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growth
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growth(ii)
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/disposals
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impact
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Consolidated revenue by business unit by
product
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$m
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$m
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%
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%
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%
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%
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Orthopaedics
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578
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567
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1.8
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3.2
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-
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-1.4
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Knee Implants
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244
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246
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-0.8
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0.7
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-
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-1.5
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Hip Implants
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151
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155
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-2.9
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-1.2
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-
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-1.7
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Other
Reconstruction(iii)
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29
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20
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44.4
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46.6
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-
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-2.2
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Trauma & Extremities
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154
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146
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5.5
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6.3
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-
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-0.8
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Sports Medicine & ENT
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444
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441
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0.9
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2.4
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-
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-1.5
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Sports Medicine Joint
Repair
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247
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244
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1.3
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2.9
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-
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-1.6
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Arthroscopic Enabling
Technologies
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146
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149
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-1.7
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-0.1
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-
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-1.6
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ENT (Ear, Nose and
Throat)
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51
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48
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6.7
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7.8
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-
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-1.1
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Advanced Wound Management
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385
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378
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2.0
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3.8
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-
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-1.8
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Advanced Wound Care
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173
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174
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-0.2
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2.5
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-
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-2.7
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Advanced Wound Bioactives
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120
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123
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-2.2
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-2.0
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-
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-0.2
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Advanced Wound Devices
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92
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81
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13.2
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15.7
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-
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-2.5
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Total
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1,407
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1,386
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1.6
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3.1
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-
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-1.5
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Consolidated revenue by geography
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US
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759
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733
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3.6
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3.6
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-
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-
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Other Established
Markets(iv)
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427
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420
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1.8
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5.0
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-
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-3.2
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Total Established Markets
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1,186
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1,153
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2.9
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4.1
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-
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-1.2
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Emerging Markets
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221
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233
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-5.2
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-1.7
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-
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-3.5
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Total
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1,407
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1,386
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1.6
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3.1
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-
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-1.5
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(i) Restated for
reclassification of robotics consumables revenue from Other
Reconstruction to Knee and Hip implants
(ii) Underlying growth is
defined in Note 2 on page 2
(iii) Other Reconstruction includes
robotics capital sales and bone cement
(iv) Other Established Markets are
Europe, Japan, Australia, Canada and New Zealand
The good momentum across the
portfolio was driven by operational improvements delivered through
the 12-Point Plan, such as bringing product supply up to industry
standards, as well as the successful commercial launches of recent
innovations. In Orthopaedics, this included new hip and shoulder
implant systems and new applications in surgical robotics. In
Sports Medicine, growth was driven by expansion of our biological
healing business and new products in foot and ankle repair. In
Advanced Wound Management, we benefitted from the early stages of
our next-generation foam platform and recent launches in Negative
Pressure Wound Therapy. All of these new products are expected to
have multi-year growth runways ahead of them and we have an
exciting pipeline of further launches and line extensions underway
or planned in 2025.
China continued to be a headwind in
the quarter, as expected. We believe we are now past the peak
impact and expect to lap Sports Medicine Joint Repair VBP during
the second quarter. The additional headwind from the extension of
VBP into Arthroscopic Enabling Technologies is still expected in
the second half of 2025. First quarter Group
underlying revenue growth excluding China was 5.5% (reported growth
3.9%).
Geographically, Established Markets
delivered underlying revenue growth of 4.1% (reported growth 2.9%). Underlying revenue
growth was 3.6% in the US (reported growth 3.6%) and 5.0% in Other Established Markets (reported
growth 1.8%). The Emerging Markets underlying
revenue decline of -1.7% (reported decline -5.2%) reflected the headwinds
from China. Emerging Markets underlying revenue growth excluding
China was 14.7% (reported growth 9.8%).
Orthopaedics
Our Orthopaedics business unit delivered
underlying revenue growth of 3.2% (reported
growth 1.8%) in the quarter. Underlying
revenue growth excluding China was 5.1% (reported growth
3.6%).
As stated with our full year results
in February, we have changed our reporting practice around robotics
to be more in line with industry peers. As of this quarter,
robotics consumables sales are now recorded under the procedure
where they are used, while capital and services revenue remain in
Other Reconstruction. Growth rates are all on a comparable
basis.
Knee
Implants underlying revenue growth
was 0.7% (reported decline -0.8%) and Hip Implants underlying revenue decline
was -1.2% (reported decline -2.9%), with both reflecting the
headwind from China. The Q1 performance was driven by the
JOURNEY II◊ Knee System and our
cementless and revision systems and the POLAR3◊ Total
Hip Solution.
In the US, underlying and reported
revenue growth was 0.9% for Knee Implants and 2.0% for Hip
Implants. After adjusting for the two extra trading days in the
fourth quarter and one fewer trading day in the first quarter, our
US reconstruction business sustained the improved performance of
the previous quarter with adjusted underlying revenue growth of
2.5% in Knee Implants and 3.6% in Hip Implants.
The new CATALYSTEM◊
Primary Hip System is being well-received, and we continued to
expand the US launch during the quarter. CATALYSTEM is designed to
address the evolving demands of primary hip surgery, including the
increased adoption of anterior approach procedures.
In April we received
US Food and Drug Administration (FDA)
510(k) clearance for new LEGION◊ Medial Stabilized inserts, addressing a fast-growing category
of inserts now used in more than 30% of US knee replacements.
Designed for use with our CONCELOC◊ Technology and
robotics-assisted CORI Surgical System,
LEGION◊ Medial Stabilized inserts also address the major market trends
of cementless fixation and robotics.
During the quarter the latest annual
report from the Australian Orthopaedic Association National Joint
Replacement Registry (AOANJRR) highlighted the exceptional
performance of our proprietary OXINIUM◊ Technology on
highly cross-linked polyethylene. The data indicates that this
combination has the highest survivorship rate (94.1%) among all
bearing combinations over a 20-year period for total hip
arthroplasty (THA), corroborating similar findings in other
national registries.
Other Reconstruction underlying
revenue growth was 46.6% (reported growth 44.4%), including strong
growth from our CORI Surgical System. We are benefitting from
CORI's unique features and versatility, including supporting revision knee procedures, a
first-of-its-kind digital tensioner for robotics-assisted knee
surgery for soft tissue balancing and offering both burr and saw
cutting options. The new
CORIOGRAPH◊ Pre-Operative Planning and Modelling
Services for CORI, which make it the only orthopaedic
robotic-assisted system to offer intraoperative image-free and
image-based registration for knee implants, is being well received
by customers.
Trauma & Extremities underlying revenue growth was 6.3% (reported growth
5.5%), driven by the EVOS Plating System.
We saw strong demand for the new AETOS◊ Shoulder System
following its launch in the US last year, competitive account
conversions through the new TOTAL
ANKLE◊ Patient-Matched Guides, and the LEOS◊ Plating System is also on a promising trajectory.
Sports Medicine & ENT
Our Sports Medicine & ENT
business unit delivered underlying revenue growth
of 2.4% (reported growth
0.9%) in the quarter. Underlying revenue growth was 7.8% (reported growth 6.1%)
excluding China VBP impact.
Sports Medicine Joint Repair underlying revenue growth was 2.9% (reported growth 1.3%).
Double-digit growth outside of China was led by our
shoulder repair portfolio, including double-digit
growth from our REGENETEN Bioinductive Implant. We also saw good momentum from new product launches including
the Q-FIX◊ KNOTLESS All-Suture Anchor and our developing foot and ankle
repair business.
We have added further to the growing
REGENETEN evidence base with the publication in April of a
randomised controlled trial (RCT) of medium and large
full-thickness rotator cuff repairs augmented with the REGENETEN
Bioinductive Implant that demonstrated significantly lower re-tear
rates, compared with repair alone, at 2-year follow-up.
Arthroscopic Enabling Technologies saw an underlying revenue decline of -0.1% (reported decline
-1.7%). Performance reflects headwinds in China where the sector is
preparing for an expected additional VBP process on mechanical
resection blades and COBLATION◊ wands in the second half
of 2025. Outside of China growth remained solid with a good quarter
in COBLATION and across video, patient positioning and fluid
management.
Smith+Nephew has submitted to the FDA
a traditional 510(k) for a technology called the TESSA◊
Spatial Surgery System. If cleared by the FDA, TESSA (Tracking
Enabled Spatial Surgery Assistant) would combine a real-time,
tracking-enabled device. By using video processing and augmented
reality guidance, TESSA would assist a surgeon in making anterior
cruciate ligament reconstruction (ACLR) femoral tunnel decisions by
navigating an operative plan. TESSA was
available for surgeons to view at the American Academy of
Orthopaedic Surgeons (AAOS) Annual Meeting in March.
ENT underlying revenue growth
was 7.8% (reported growth 6.7%) led by our tonsil and adenoid
business utilising our HALO◊ Wand for the COBLATION
Intracapsular Tonsillectomy (CIT) technique. We continue to invest
behind the recently launched ARIS◊ COBLATION Turbinate
Reduction Wand which provides a minimally invasive way to reduce
hypertrophic turbinates, a condition that requires 350,000
procedures per annum in the US, with launches in Europe and
Emerging Markets.
Advanced Wound Management
Advanced Wound Management underlying revenue growth was 3.8%
(reported growth 2.0%).
Advanced Wound Care underlying revenue growth was 2.5%
(reported decline -0.2%), with strong growth from our foam and films portfolios offset
by negative growth in infection management and skin care. We are in
the early stages of launching ALLEVYN◊ Ag+ SURGICAL into
the US, a new antimicrobial silver dressing which adds to the
established ALLEVYN family of foam dressings. ALLEVYN Ag+ SURGICAL
dressing features new ComfortSTAY◊ Technology for gentle
silicone adhesion and HighFLEX◊ Technology to provide
flexibility and comfort during patient movement.
Advanced Wound Bioactives saw
an underlying revenue decline of -2.0% (reported decline -2.2%).
Performance reflected the typical quarterly volatility in the
category with strong double-digit growth in skin substitutes
following the launch last year of GRAFIX◊ PLUS offset by
the expected slower quarter from SANTYL◊ reflecting
stocking patterns following the strong finish to 2024.
Advanced Wound Devices underlying revenue growth was 15.7%
(reported growth 13.2%) with double-digit
growth from both our traditional and single-use NPWT portfolios and
good growth from the LEAF◊ Patient Monitoring
System.
Outlook
Our full year guidance for 2025 is
unchanged as we target another year of strong revenue growth and a
significant step-up in trading profit margin, notwithstanding the
uncertainties around the imposition of tariffs.
We expect underlying revenue growth
to be around 5% (around 5.4% based on exchange
rates prevailing on 25 April 2025).
Full year trading profit margin is
expected to be in the range of 19.0% to 20.0%, with margin stronger
in the second half than the first as impact of China headwinds
reduce and operational savings are delivered.
The tariff situation remains
dynamic. Just over half our revenues are in
the US and two thirds of the products we sell within the US are
manufactured in-market. Our other manufacturing sites are in
Costa Rica, UK, Malaysia, China and Switzerland.
We are working to mitigate tariff impacts from products and raw
materials imported into the US, including leveraging our
global manufacturing network in terms of mix and
supply routes. The unchanged
outlook includes an expected net impact of around
$15 to $20 million from tariffs in 2025, based on announced
measures, and mitigations.
We continue to expect to drive
further margin expansion beyond 2025 through continued momentum and
efficiency gains.
About Smith+Nephew
Smith+Nephew is a portfolio medical
technology business focused on the repair, regeneration and
replacement of soft and hard tissue. We exist 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 17,000
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 business units of Orthopaedics, Sports Medicine &
ENT and Advanced Wound Management.
Founded in Hull, UK, in 1856, we now
operate in around 100 countries, and generated annual sales of $5.8
billion in 2024. 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 X,
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:
conflicts in Europe and the Middle East, economic and financial
conditions in the markets we serve, especially those affecting
healthcare providers, payers and customers; 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; competition for qualified
personnel; strategic actions, including acquisitions and disposals,
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.
◊ Trademark of Smith+Nephew.
Certain marks registered in US Patent and Trademark
Office.