Medical technology company Smith & Nephew (SN.) reported a significant recovery in the third-quarter to 26 September with revenues down 4.2% to $1.2 billion, compared with the 29.3% drop seen in Q2. The shares fell 0.7% to £13.75.

US GROWTH

The US market was the stand-out performer, characterised by the continued relaxing of restrictions on elective procedures across all states. This helped to push growth up 0.9% in the period compared with a 31.8% fall in the prior quarter.

In other established markets, Australia and Japan were at 90% of normal activity in early October while growth also returned in France and Germany, but overall revenues fell 6.2% over the period. Emerging markets registered the biggest fall, down 14.5% held back by a lack of recovery in Latin America and South Africa.

In terms of franchises, Orthopaedics performed the best, falling 2.8% to $512 million with Hip replacement revenues up 7% driven by 9.8% growth in the US. Sports Medicine and Ear, Nose and Throat fell 4.5% to $350 million impacted by patient caution the latter where revenues fell 24.8%.

Advanced Wound Management revenues fell 6.1% to $338 million with recovery in Europe and the US and weakness in the Asia Pacific region.

INTEGRA ACQUISITION

Despite the disruption caused by Covid-19 the company continued its strategic priorities to expand in faster growing market segments with the purchase of Extremity Orthopaedics business Integra Life Sciences Holdings Corporation for $240 million on 29 September.

The business, which had revenues of $90 million in 2019, brings a dedicated sales force to Smith & Nephew, as well as a new product pipeline including a next-generation shoulder replacement system. Revenues are expected to grow in double-digits, but the business will be dilutive to trading profit in the next two years.

DEBUT BOND

On 14 October Smith & Nephew successfully issued $1 billion in its first ever bond issue which adds to existing $3.4 billion of committed bank facilities. The firm had net debt of $2.1 billion at 27 June.

The bond diversifies the company’s sources of funding while also extending the maturity profile and provides the fire power to continue to execute on the group’s strategic priorities.

The company refrained from providing any guidance on the outlook due to the lack of visibility at the current time and the ‘fluidity’ of the current situation with more countries invoking partial lockdowns.

On the analyst conference call chief executive Roland Diggelmann said that he expected disruption from dealing with Covid-19 to last at least until the middle of next year.

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Issue Date: 29 Oct 2020