Replacement knee and hip maker Smith & Nephew (SN.) reported first half profits up 3.9% to $2.4bn and raised its growth guidance by half a percent to 3% to 4%, giving the shares a 2% boost to £19.

Chief executive Namal Nawana said ‘The positive momentum across the business globally in the first half of 2019 has led us to upgrade our full year revenue growth guidance.

Organic revenue growth has been solid across all three franchises, with strong performance in Emerging Markets and global Sports Medicine. At the same time, we expanded our margin.’

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The company re-organised its business into three global franchises at the start of the year: Orthopaedics, Sports Medicine and Advanced Wound Management.

ORTHOPAEDICS

The biggest franchise, accounting for 43% of sales, delivered sales growth ahead of the market with knee implants growing 4.2% and hip implants up by 2.7%.

The company’s innovative hip products and recovery system showed superior results, cutting post-operative care costs by nearly 10%, and demonstrated lower readmission rates in the first 90 days.

In July the company released the latest version of its robotics-assisted surgical system designed to improve efficiency and lower costs. It also completed the purchase of Brainlab Orthopaedic Joint Reconstruction, which will focus on the development of digital surgery, augmented reality and robotics.

SPORTS MEDICINE

This franchise produces implants to treat injuries such as cruciate ligament ruptures and meniscal tears as well as mechanical devices and radiofrequency machines used to repair soft tissue around joints.

The joint repair business delivered 11.9% growth, accelerating the trend seen in the first quarter, with US shoulder repairs seeing mid-teens growth.

ADVANCED WOUND MANAGEMENT

Overall the franchise saw 1.2% revenue growth with advance wound devices the stand-out performer. Revenues in this segment were up 16% driven by the company’s PICO system, an advanced dressings system which the UK National Institute for Health & Care Excellence (NICE) said provides better outcomes than standard dressings for patients at risk of surgical site infections.

The trading profit margin saw a 60 basis point (0.6%) increase to 21.4%, reflecting cost savings which were partially offset by foreign exchange effects and higher research and development spending.

Cash generated from operations was particularly strong, up 30% to $543m, while net debt increased to $1.8bn due to the impact of acquisitions. The company is paying an interim dividend of 11.5p up 2.9%.

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Issue Date: 31 Jul 2019