Smith & Nephew creaks to full year targets thanks to US growth
Smith & Nephew reported full year sales and earnings in line with consensus forecasts as growth from the US and most emerging markets struggled to offset weakness in China and flat markets elsewhere.
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With China having returned to growth in the second half of the year and other emerging markets growing at double-digit rates, the medical technology group said it expected stronger revenue growth for 2017 and an improvement in profit margin.
Guidance for reported revenue to increase by 1.2-2.2% at prevailing exchange rates and 3-4% at the underlying level as headwinds dissipate in China and the Middle East.
Trading profit margin is expected to improve by 20-70 basis points, with dilution coming as it invests in the acquired Blue Belt orthopaedic robotics-assisted surgery business and from the disposal of the gynaecology unit.
Chief executive Olivier Bohuon, who has been looking to enhance earnings by discarding ex-growth parts of the group's complex portfolio, said he felt the "right structure and capability" was now in place, with management focused on improving execution across the group.
"Beyond this, with our innovative products and deep customer relationships, we are well set to deliver a stronger performance generating higher revenue growth and a better trading profit margin in the future."
For 2016, he admitted growth was "not at the level we had wanted", after a 3% fall in the fourth quarter led to calendar-year revenue declining 1% to $4.67bn, versus consensus of $4.69bn.
Trading profits were just short of flat at $1.02bn as the investment in Blue Belt and forex headwinds margin slumped to 21.88% from 23.7% the previous year, leading earnings to drop 3% to 82.6p, almost bang in line with the consensus estimate of 82.5p.
The full year dividend was held at 30.8 cents per share, which equates to a 20% rise in sterling terms to 24.8p per share at current exchange rates.