Knee and hip replacement medical device company Smith & Nephew (SN.) pleased investors after reporting better than expected 4.4% underlying growth in revenue to $5.1bn, pushing the shares up 8% to £19.90.
Chief executive Roland Diggelmann commented, ‘the improved underlying revenue growth of 4.4% in 2019, the best for several years, has propelled Group sales above $5 billion for the first time in Smith & Nephew's history.’
NEW OPERATING MODEL DELIVERING
The company is now organised around three global franchises after ditching its country led model in an attempt to introduce more dynamism and commercial edge into the business.
The full-year results to 31 December 2019 demonstrated the benefits with all franchises contributed to top line growth including Sports Medicine, (+7%) and emerging markets (+16.1%).
A key aspect of the strategy is to acquire businesses in higher-growth segments of the market and the company made five purchases last year, the largest being the $660m acquisition of Osiris Therapeutics in April.
Last month it acquired Tusker Medical, giving it complementary ear, nose and throat (ENT) technology.
Dilution from acquisitions and restructuring costs resulted in an operating margin of 15.9% and excluding these items the trading profit margin came in at 22.8%, slightly lower than the 23.1% that analysts’ had pencilled in.
The group increased its research and development costs by 19% to $292m which helped to deliver new products across the franchises.
OUTLOOK CONFIRMED
The company reaffirmed its outlook for revenue growth of between 3.5% and 4.5% and a trading margin similar or slightly above the 2019 outcome. The priority is to improve efficiency and agility while continuing to invest in the business.
The firm is monitoring the COVID-19 virus outbreak closely and the outlook assumes that the situation normalises in the second quarter. China represented 7% of revenues in 2019.
The dividend was hiked 4% to 37.5c.
