TIDMSN.
RNS Number : 1436F
Smith & Nephew Plc
03 November 2022
Smith+Nephew Third Quarter 2022 Trading Report
3 November 2022
Q3 Highlights(1,2)
-- Q3 revenue of $1,250 million (2021: $1,266 million),
representing underlying revenue growth of 4.8% (600bps FX headwind
resulted in reported decline of -1.2%)
-- Orthopaedics revenue up 2.1%. Excluding China, Orthopaedics grew 5.6%
-- Sports Medicine & ENT up 7.1%, with recent product launches performing well
-- Advanced Wound Management up 6.0%, maintaining recent strong performance
2022 Full Year Outlook(1,2)
-- Full-year underlying revenue growth currently expected in
middle of previously guided range of 4.0% to 5.0%
-- Unchanged trading profit margin guidance of around 17.5%
Strategic and Operational Update
-- 12-point plan to improve execution and drive Strategy for
Growth underway, focused on fixing Orthopaedics, improving
productivity, and accelerating growth in Advanced Wound Management
and Sports Medicine
o Teams and structures embedded and KPIs established
o In Orthopaedics, improved logistics contributed to a reduction
in overdue orders and improved instrument set utilisation during
the quarter
-- Continuing cadence of new product launches and publication of clinical evidence
Deepak Nath, Chief Executive Officer, said:
"We delivered 4.8% underlying revenue growth in the third
quarter, with all franchises and geographies contributing, and are
on track to deliver our full year guidance.
"Last quarter we set out our 12-point plan to improve business
performance. We are executing at pace and have recorded a number of
early successes, including reducing backorders and improving
instrument set deployment in Orthopaedics.
"We also continue to deliver innovative new products and build
on the value of our technology. During the quarter we became the
first company to receive FDA approval for robotics-assisted
revision knee surgery, launched a superabsorbent wound dressing,
and published compelling new rotator-cuff repair data for REGENETEN
.
"While we are still near the start of the journey, and there is
much more work to be done, I am pleased with our early progress,
and confident that we are on the right track to transform
performance."
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
A conference call to discuss Smith+Nephew's third quarter
results will be held today at 8.30am GMT / 4.30am EDT, details of
which can be found on the Smith+Nephew website at
https://www.smith-nephew.com/results/ .
Forward calendar
The full year results will be released on 21 February 2023.
Notes
1. All numbers given are for the quarter or nine months ended 1
October 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
year 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.
Third quarter 2022 trading update
Our third quarter revenue was $1,250 million (2021: $1,266
million), representing underlying revenue growth of 4.8%. A 600bps
foreign exchange headwind, primarily due to the strength of the US
Dollar, resulted in a reported revenue decline of -1.2%. Q3 2022
comprised 63 trading days, in line with the comparable Q3 period in
2021.
All franchises and geographies contributed to the underlying
revenue growth in the quarter.
Orthopaedics revenue was up 2.1% (-3.0% reported), Sports
Medicine & ENT up 7.1% (0.8% reported), and Advanced Wound
Management up 6.0% (-1.0% reported) .
Revenue growth in our Established Markets was 3.9% (-1.8%
reported). Within this, in the US, our largest market, we delivered
strong 6.0% revenue growth (6.0% reported). Other Established
Markets revenue was up 0.4% (-14.3% reported). Emerging Markets
revenue was up 8.6% (1.4% reported), as the expected decline in
China Orthopaedics discussed below continued to be offset by strong
growth elsewhere including in India and Latin America.
Macro factors including shortages of some input materials, such
as semiconductors and resin, and staff shortages in healthcare
systems, remained constraining factors on growth across a number of
segments during the quarter.
Strategic update
In July 2022 we announced a comprehensive 12-point plan to drive
better execution at pace, in order to take the business forward and
deliver on our Strategy for Growth pillars to Strengthen and
Accelerate. This plan is focused on:
-- Fixing Orthopaedics
-- Improving productivity
-- Accelerating growth in Advanced Wound Management and Sports Medicine & ENT
During the quarter we embedded the teams and structures to drive
this work and established the internal KPIs to monitor progress and
drive accountability.
While we expect the work to deliver the full plan to take two
years, we are making meaningful early progress, including:
-- Improving logistics and updating our demand and supply
planning process to bring a deeper level of specificity and
collaboration between our operations and commercial teams;
-- Reducing the value of overdue orders in US Orthopaedics by
more than 15% since the peak in the first half of the year; and
-- Moving Orthopaedics instrument sets to more active customer
accounts, with 80% of the first phase completed in the US by
quarter end.
Further work is proceeding across the 12-point plan, and we will
continue to update on progress in future trading updates.
Delivering innovation
During the quarter we continued to introduce innovative new
products and clinical evidence to drive future growth.
In Orthopaedics, we became the first company to receive FDA
510(k) clearance for a revision knee indication using a
robotics-assisted platform and completed the first cases on our
CORI Surgical System. Revisions account for around 10% of all knee
procedures in the US. We also continued the roll-out of our OR3O
Dual Mobility System for use in primary and revision hip
arthroplasty, launching in Japan.
In Sports Medicine, we announced encouraging evidence supporting
our REGENETEN Bioinductive Implant, which delivered an 86%
reduction in rotator cuff re-tear rates at 12 months in interim
results from a randomised controlled trial.
In Advanced Wound Management, we also introduced our DURAMAX S
Silicon Super Absorbent Dressing for high exuding wounds, launching
in Europe where superabsorbers are one of the fastest growing
categories of dressings.
Consolidated revenue analysis for the third quarter
1 2
October October Reported Underlying Acquisitions Currency
2022 2021 growth growth(i) /disposals impact
Consolidated revenue by
franchise $m $m % % % %
------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
Orthopaedics 492 508 -3.0 2.1 - -5.1
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
Knee Implants 210 207 1.9 7.4 - -5.5
Hip Implants 136 145 -6.5 -1.0 - -5.5
Other Reconstruction(ii) 18 20 -10.5 -6.0 - -4.5
Trauma & Extremities 128 136 -5.5 -1.2 - -4.3
Sports Medicine & ENT 382 379 0.8 7.1 - -6.3
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
Sports Medicine Joint
Repair 209 207 0.9 7.5 - -6.6
Arthroscopic Enabling
Technologies 131 139 -5.6 0.5 - -6.1
ENT (Ear, Nose and Throat) 42 33 27.8 32.1 - -4.3
Advanced Wound Management 376 379 -1.0 6.0 - -7.0
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
Advanced Wound Care 173 189 -8.3 1.6 - -9.9
Advanced Wound Bioactives 136 121 12.0 12.7 - -0.7
Advanced Wound Devices 67 69 -3.4 5.8 - -9.2
Total 1,250 1,266 -1.2 4.8 - -6.0
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
Consolidated revenue by
geography
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
US 671 633 6.0 6.0 - -
Other Established
Markets(iii) 341 398 -14.3 0.4 - -14.7
Total Established Markets 1,012 1,031 -1.8 3.9 - -5.7
Emerging Markets 238 235 1.4 8.6 - -7.2
Total 1,250 1,266 -1.2 4.8 - -6.0
----------------------------- ------- ---- ------- ---- -------- ---- ---------- ---- ------------ ---- --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our
joint reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan,
Australia and New Zealand
Orthopaedics
In Orthopaedics revenue was up 2.1% (-3.0% reported). Excluding
China, where performance continued to be impacted by the
implementation of the previously disclosed hip and knee
volume-based-procurement (VBP) programme, Orthopaedics grew by 5.6%
underlying.
Knee Implants grew 7.4% (1.9% reported) and Hip Implants
declined -1.0% (-6.5% reported). Knee Implants grew by 11.1% and
Hip Implants by 3.6% in the US. Our JOURNEY II and LEGION REVISION
knee systems both delivered double-digit growth and we are starting
to see the early benefit of our cementless total knee LEGION
CONCELOC . We remain focused on improving overall performance in
Hip Implants, nevertheless our POLAR3 Total Hip Solution, with its
class-leading survivorship data , and the OR3O Dual Mobility Hip
System both delivered good growth in the quarter.
Other Reconstruction revenue declined -6.0% (-10.5% reported),
as raw material supply constraints continued to impact this
segment. Our installed base in robotics has now passed 500 units
globally .
Trauma & Extremities declined -1.2% (-5.5% reported)
continuing to reflect our decision not to participate in the
broader roll-out of provincial trauma tenders in China.
Sports Medicine & ENT
Our Sports Medicine & ENT franchise delivered revenue growth
of 7.1% (0.8% reported) in the quarter.
Within this, Sports Medicine Joint Repair delivered 7.5% (0.9%
reported) revenue growth and A rthroscopic Enabling Technologies
revenue was up 0.5% (-5.6% reported). We continue to benefit from
our excellent shoulder repair portfolio, including double-digit
growth for REGENETEN. Recent product launches also performed well,
including the FAST-FIX FLEX Meniscal Repair System and WEREWOLF
FASTSEAL 6.0 Hemostasis Wand.
Revenue from ENT was up 32.1% (27.8% reported) as procedure
volumes recover from the impact of COVID.
Advanced Wound Management
Our Advanced Wound Management franchise delivered revenue growth
of 6.0% (-1.0% reported), maintaining recent strong performance
with growth coming across all regions and product categories.
Advanced Wound Care revenue was up 1.6% (-8.3% reported),
including good growth from our infection management and films
portfolios and in Asia-Pacific.
Advanced Wound Bioactives revenue was up 12.7% (12.0% reported),
driven by both our enzymatic debrider SANTYL and our skin
substitute portfolio.
Advanced Wound Devices revenue was up 5.8% (-3.4% reported),
with double-digit growth from our PICO Single Use Negative Pressure
Wound Therapy System being offset by a slower quarter from the
traditional negative pressure system RENASYS due to
on-going input material shortages.
2022 Full Year Outlook
With one quarter remaining of 2022, we currently expect our
underlying revenue growth for the full year to be around the middle
of our guided range of 4.0% to 5.0% (around -0.8% to +0.2% o n a
reported basis, including a foreign exchange headwind of 480bps
based on exchange rates prevailing on 28 October 2022).
We also continue to expect trading profit margin to be around
17.5%.
We expect the tax rate on trading results for 2022 to be around
18%, subject to any material changes to tax law, or other one-off
items.
Consolidated revenue analysis for nine months to 1 October
2022
1 October 2 October Reported Underlying Acquisitions Currency
2022 2021 growth Growth(i) /disposals impact
Consolidated revenue by franchise $m $m % % % %
----------------------------------- --------- --------- -------- ---------- ------------ --------
Orthopaedics 1,564 1,605 -2.5 1.2 - -3.7
------------------------------------ --------- --------- -------- ---------- ------------ --------
Knee Implants 665 644 3.2 7.3 - -4.1
Hip Implants 434 461 -5.8 -1.9 - -3.9
Other Reconstruction(ii) 61 67 -9.0 -5.5 - -3.5
Trauma & Extremities 404 433 -6.6 -3.7 - -2.9
Sports Medicine & ENT 1,159 1,143 1.5 5.8 - -4.3
------------------------------------ --------- --------- -------- ---------- ------------ --------
Sports Medicine Joint Repair 634 616 3.0 7.6 - -4.6
Arthroscopic Enabling Technologies 412 432 -4.6 -0.3 - -4.3
ENT (Ear, Nose and Throat) 113 95 18.9 21.7 - -2.8
Advanced Wound Management 1,127 1,117 0.8 5.9 - -5.1
------------------------------------ --------- --------- -------- ---------- ------------ --------
Advanced Wound Care 533 550 -3.1 4.3 - -7.4
Advanced Wound Bioactives 388 368 5.2 5.8 - -0.6
Advanced Wound Devices 206 199 3.5 10.4 - -6.9
Total 3,850 3,865 -0.4 3.9 - -4.3
------------------------------------ --------- --------- -------- ---------- ------------ --------
Consolidated revenue by geography
----------------------------------- --------- --------- -------- ---------- ------------ --------
US 2,022 1,950 3.7 3.7 - -
Other Established Markets(iii) 1,119 1,229 -8.9 1.9 - -10.8
Total Established Markets 3,141 3,179 -1.2 3.0 - -4.2
Emerging Markets 709 686 3.5 8.1 - -4.6
Total 3,850 3,865 -0.4 3.9 - -4.3
------------------------------------ --------- --------- -------- ---------- ------------ --------
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our
joint reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan,
Australia and New Zealand
About Smith+Nephew
Smith+Nephew is a portfolio medical technology company 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,
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 $5.2 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTEAFFAEFFAFAA
(END) Dow Jones Newswires
November 03, 2022 03:00 ET (07:00 GMT)
Smith & Nephew (LSE:SN.)
Historical Stock Chart
From Mar 2023 to Mar 2023
Smith & Nephew (LSE:SN.)
Historical Stock Chart
From Mar 2022 to Mar 2023
