REG - Smith & Nephew Plc - Q1 2024 Trading Update
01/05/2024 07:00
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RNS Number : 7077M Smith & Nephew Plc 01 May 2024
Smith+Nephew First Quarter 2024 Trading Update
Solid start to 2024, reinforcing confidence in full year outlook
1 May 2024
Smith+Nephew (LSE:SN, NYSE:SNN) trading update for the first quarter ended 30
March 2024.
Highlights(1,2)
· Q1 revenue $1,386 million (2023: $1,356 million), up 2.9% on an
underlying basis, and 2.2% on a reported basis including a -70bps foreign
exchange headwind
o Growth in-line with expected 2024 phasing and included one less trading
day year-on-year, representing approximately a 1.5 percentage point headwind
in the quarter
· Orthopaedics revenue up 4.4% underlying
o Good growth across Hip and Knee Implants outside the US, Other
Reconstruction and Trauma & Extremities driven by 12-Point Plan
improvements
o Continued weakness in US Hip and Knee Implants against tough comparator
period. Product supply has improved; new leadership driving sharper commercial
execution
· Sports Medicine & ENT revenue up 5.5% underlying
o Robust performance from Sports Medicine Joint Repair supported by
prior-year product launches and expansion of REGENETEN(◊)
o Continued headwind from China
· Advanced Wound Management revenue down -2.0% underlying
o Sustained good growth from Advanced Wound Devices offset by Advanced Wound
Bioactives decline due to expected SANTYL(◊) volatility following the strong
Q4 2023
· Full year 2024 guidance unchanged
o Underlying revenue growth expected in the range of 5.0% to 6.0% (4.3% to
5.3% reported), and trading profit margin expected to be at least 18.0%
o Continued cadence of product launches and clinical evidence contributing
to growth
Deepak Nath, Chief Executive Officer, said:
"Revenue growth in the first quarter was driven by solid performance in our
Orthopaedics and Sports Medicine & ENT businesses, partially offset by
some anticipated softness in Advanced Wound Management.
"Our 12-Point Plan is on-track and the progress in Orthopaedics was again
evident from the strong growth across most segments, and we expect the
remainder to improve as the year progresses.
"We are confident in our outlook and look forward to all three of our business
units contributing as we deliver another year of strong revenue growth."
Enquiries
Investors
Katharine Rycroft +44 (0) 7811 270734
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 1 May 2024, details of
which can be found on the Smith+Nephew website at
https://www.smith-nephew.com/en/who-we-are/investors
(https://www.smith-nephew.com/en/who-we-are/investors) .
Notes
1. All numbers given are for the quarter ended 30 March 2024 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 2023 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 2024 will be released on 1 August 2024.
First quarter trading update
Our first quarter revenue was $1,386 million (2023: $1,356 million), up 2.9%
on an underlying basis, in-line with our expected growth phasing for 2024.
Reported revenue growth was 2.2% reflecting a -70bps headwind from foreign
exchange.
As previously guided, the first quarter revenue growth rate reflected the
tough US comparator from the strong start to 2023 across our surgical
businesses and one less trading day year-on-year, representing approximately a
1.5 percentage point headwind in the quarter. The first quarter 2024 comprised
63 trading days.
Consolidated revenue analysis for the first quarter
30 March 1 April Reported Underlying Acquisitions Currency
2024 2023 growth growth((i)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 567 548 3.6 4.4 - -0.8
Knee Implants 239 237 1.0 1.7 - -0.7
Hip Implants 155 152 2.1 3.4 - -1.3
Other Reconstruction((ii)) 27 23 17.3 18.0 - -0.7
Trauma & Extremities 146 136 7.3 7.8 - -0.5
Sports Medicine & ENT 441 422 4.5 5.5 - -1.0
Sports Medicine Joint Repair 244 228 6.8 7.7 - -0.9
Arthroscopic Enabling Technologies 149 149 - 1.0 - -1.0
ENT (Ear, Nose and Throat) 48 45 7.9 9.0 - -1.1
Advanced Wound Management 378 386 -2.3 -2.0 - -0.3
Advanced Wound Care 174 175 -0.9 -0.5 - -0.4
Advanced Wound Bioactives 123 136 -9.7 -9.8 - 0.1
Advanced Wound Devices 81 75 8.1 8.7 - -0.6
Total 1,386 1,356 2.2 2.9 - -0.7
Consolidated revenue by geography
US 733 737 -0.6 -0.6 - -
Other Established Markets((iii)) 420 404 4.0 4.8 - -0.8
Total Established Markets 1,153 1,141 1.0 1.3 - -0.3
Emerging Markets 233 215 8.5 11.6 - -3.1
Total 1,386 1,356 2.2 2.9 - -0.7
(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
Mid-single digit growth from Orthopaedics and Sports Medicine & ENT was
partially offset by a decline in Advanced Wound Management in the first
quarter. In Orthopaedics, we continued to benefit from 12-Point Plan
improvements, including in product supply, and drove good growth across all
segments with the exception of Hip and Knee Implants in the US, where we
lapped against a tough comparator period. There remains a significant
opportunity to improve our performance in US Hips and Knees, with new
leadership driving sharper commercial execution. In Sports Medicine & ENT,
solid growth in Sports Medicine Joint Repair and ENT was offset by a slower
quarter in Arthroscopic Enabling Technologies. Advanced Wound Management's
small revenue decline reflected expected SANTYL volatility following the
strong finish to 2023.
Geographically, Established Markets grew 1.3% (1.0% reported), with the US
down -0.6%
(-0.6% reported) reflecting the strong comparator period. Revenue from Other
Established Markets was up 4.8% (4.0% reported). Emerging Markets delivered
strong growth of 11.6% (8.5% reported). By business unit, Emerging Markets
growth was led by strong double-digit growth in Orthopaedics.
We continued to successfully execute our 12-Point Plan, and have made
demonstrable progress in product and set availability and have markedly
increased our customer satisfaction scores. Our manufacturing optimisation
programme is on track. Recently launched products are contributing to growth
across the business, and we are increasing the pace of cross-business unit
deals into Ambulatory Surgical Centers (ASCs).
Orthopaedics
Our Orthopaedics business unit delivered revenue growth of 4.4% (3.6%
reported) in the quarter.
Knee Implants was up 1.7% (1.0% reported), led by our JOURNEY II(◊) Knee
System and partial knee portfolio. Hip Implants was up 3.4% (2.1% reported)
led by our POLAR3(◊) Total Hip Solution.
Outside the US we delivered a strong quarterly performance following improved
product supply and commercial execution driven by the 12-Point Plan, with
10.9% growth
(9.4% reported) in Knee Implants and 10.1% growth (7.0% reported) in Hip
Implants.
In the US, Knee Implants declined -5.0% (-5.0% reported) and Hip Implants
-1.9%
(-1.9% reported) against a strong comparator period. Product supply and set
availability have now also improved in the US and the new leadership team is
focused on delivering sharper commercial execution in this market. We remain
confident that we are on the right path to deliver better growth in this last
underperforming area of Orthopaedics.
Other Reconstruction revenue was up 18.0% (17.3% reported), including strong
growth from our CORI(◊) Surgical System. We are benefitting from CORI's
unique features and versatility, including being the only system with a
digital tensioner, an application for revision knee surgery and both
robotics-assisted burring and saw bone-cutting options.
Trauma & Extremities was up 7.8% (7.3% reported), with good growth driven
by the EVOS(◊) Plating System. During the quarter we announced full
commercial availability of the new AETOS(◊) Shoulder System in the US, along
with 510(k) clearance for its use with ATLASPLAN(◊) 3D Planning Software and
Patient Specific Instrumentation. AETOS addresses one of the fastest growing
segments in Orthopaedics and the early customer reaction has been very
positive.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered underlying revenue
growth of 5.5% (4.5% reported) in the quarter. Excluding China, where the
sector is adjusting to the upcoming VBP programme, Sports Medicine & ENT
grew 6.7% (6.2% reported). China will remain a headwind to growth for this
business unit across 2024 as VBP is implemented, which is due to start in May
2024.
Revenue in Sports Medicine Joint Repair was up 7.7% (6.8% reported).
Performance was led by our shoulder repair portfolio, including double-digit
growth from our REGENETEN(◊) Bioinductive Implant. We announced new evidence
showing REGENETEN reducing full-thickness rotator cuff re-tear rates by 68%.
We are at the early stages of introducing REGENETEN to augment Achilles repair
with good early customer feedback.
During the quarter we also showcased our newly acquired CARTIHEAL(◊)
AGILI-C(◊) Cartilage Repair Implant at the AAOS Annual Meeting. CARTIHEAL
AGILI-C and REGENETEN demonstrate our leadership in products that enable
biological healing for Sports Medicine and improve patient outcomes versus the
current standard of care.
Arthroscopic Enabling Technologies revenue was up 1.0% (0.0% reported), with a
good quarter in COBLATION(◊) and patient positioning offset by softness in
video capital sales caused by a third-party supply issue which is now
resolved.
Since the start of the year we have initiated two new sponsorships to promote
our Sports Medicine business, being named as the Preferred Sports Medicine
Technology Partner of UFC, the world's premier mixed martial arts
organisation, and undertaking a logo-sponsorship of players during high
profile matches at The Championships, Wimbledon.
ENT delivered revenue growth of 9.0% (7.9% reported), led by our tonsil and
adenoid business. We are in the early stages of launching the ARIS(◊)
COBLATION Turbinate Reduction Wand. This utilises Smith+Nephew's advanced
COBLATION Plasma Technology to provide a minimally invasive way to reduce
hypertrophic turbinates, a condition that requires 350,000 procedures per
annum in the US.
Advanced Wound Management
Advanced Wound Management revenue declined -2.0% (-2.3% reported).
Advanced Wound Care revenue was down -0.5% (-0.9% reported), with good growth
from our foam dressings and infection management portfolios offset by negative
growth in skin care and films. In April we announced new evidence supporting
ALLEVYN(◊) LIFE Foam Dressing's role in pressure injury prevention.
Advanced Wound Bioactives revenue was down -9.8% (-9.7% reported), driven by
the expected SANTYL volatility following the strong Q4 2023, as well as
reflecting a strong comparator period from Q1 2023.
Advanced Wound Devices revenue was up 8.7% (8.1% reported), led by good growth
from our single-use PICO(◊) Negative Pressure Wound Therapy Systems. During
the quarter, the UK National Institute for Health and Care Excellence (NICE)
reconfirmed its guidance supporting the use of PICO for closed surgical
incisions in patients who are at high risk of surgical site infections. In
April we announced the US launch of RENASYS(◊) EDGE Negative Pressure Wound
Therapy System. RENASYS EDGE brings an important new option to customers
looking for enhanced intuitiveness, simplicity and durability, especially
important for home-care settings.
Outlook
We remain confident in our full year guidance for 2024, which is unchanged. We
expect to deliver underlying revenue growth in the range of 5.0% to 6.0% (4.3%
to 5.3% based on exchange rates prevailing on 26 April 2024) and a trading
profit margin of at least 18.0%.
As in prior years, we expect the trading profit margin to be higher in the
second half than in the first half of the year, although with a less marked
step-up than in 2023. We expect the first half trading profit margin to be
around 75 to 125 bps ahead of the first half of 2023.
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 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 business units of Orthopaedics,
Sports Medicine & ENT and Advanced Wound Management.
Founded in Hull, UK, in 1856, we now operate in more than 100 countries, and
generated annual sales of $5.5 billion in 2023. 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
(http://www.smith-nephew.com/) and follow us on X
(http://www.twitter.com/smithnephewplc) , LinkedIn
(http://www.linkedin.com/company/smith-%26-nephew) , Instagram
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(http://www.facebook.com/smithnephewplc) .
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.
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