Smith & Nephew boss Deepak Nath at the ‘last chance show’

The boss of Smith & Nephew has been warned he is in the “last chance room” and must turn the company around.

Activist investors have given Deepak Nath, CEO of the US-based medical equipment giant, two months to demonstrate improvements.

Shareholders have run out of patience with the pace of his strategy, The Mail on Sunday understands.

Nath will be pressured to resign in the New Year unless he demonstrates the FTSE 100 company has made operational improvements when the company’s full-year results are announced in February.

Smith & Nephew, founded in Hull in 1856, develops technology for surgeries such as the repair of soft tissue injuries and degenerative joint conditions.

It is chaired by Rupert Soames, 65, former boss of subcontracting firm Serco and grandson of Sir Winston Churchill.

Smith & Nephew is comprised of three divisions: sports medicine, wound care and orthopedics.

Its branches of sports medicine and wound treatment are considered the second best in the world in those specialties. However, investors have pushed for a restructuring in the orthopedics division. Shareholders also want the company to cut core costs and reform its troubled China business.

The company’s shares have fallen nearly 7 percent this year and have fallen 42 percent over the past five years.

Overall profit margins are around 17 percent, much lower than those of its competitors, including Johnson & Johnson and Stryker.

The company’s largest shareholder is asset manager BlackRock with 5 percent, while activist hedge funds Cevian Capital and Harris Associates are also among the top ten shareholders.

Cevian hasn’t made its intentions for Smith & Nephew public, but under founder Christer Gardell, it has developed a fearsome reputation.

The hedge fund is best known for its role in attempting to break up German steel giant ThyssenKrupp in 2018. Ulrich Lehner, chairman of ThyssenKrupp at the time, accused the activist investors involved of “psychoterrorism” tactics to force the resignation of several senior officials. executives.

Dan Coatsworth, investment analyst at investment platform AJ Bell, said: “Investors are notoriously impatient and time is running out for Smith & Nephew director Deepak Nath to provide evidence that the current recovery program is the right one.”

“The longer Smith & Nephew’s share price remains weak, the greater the likelihood that Nath’s days are numbered.”

Smith & Nephew has experienced rapid CEO turnover, gaining four bosses in five years. Nath was hired in April 2022 to replace Roland Diggelmann, who left by “mutual agreement” after less than three years.

Nath, a former Siemens executive, launched a plan to try to increase shareholder value, but investors were not impressed with the results. Some 43 per cent opposed a plan to increase his salary to more than £9m at the company’s annual meeting this year amid disappointment over his performance.

But it is understood that the chief executive’s high salary could be beneficial in attracting Nath’s successor if he is ousted.

A Smith & Nephew spokeswoman said: ‘Over the past two years, we have achieved revenue growth significantly above historical levels and increased profitability. “There is clear momentum across the business, with sharper operational and commercial execution, including a return to growth in hip and knee implants in the US. We are fully focused on delivering value for shareholders.”