Smith & Nephew eyes stronger margins as orthopaedics demand drives profits to £764m

Smith & Nephew expects profit margins to continue improving this year after beating market expectations for 2023 earnings.

The British medical equipment maker posted a trading profit of $970m (£764m) for the year ended December 31, slightly above forecasts of $966m, thanks to strong sales in its orthopedics and wound treatment divisions.

The FTSE 100-listed company reported that trading profit margins for the year were expected to be “at least 18 per cent”, up from the 17.5 per cent it achieved last year.

The company expects revenue to grow 5 to 6 percent on an underlying basis in 2024, compared to 7.2 percent growth achieved a year earlier.

Deepak Nath, CEO of Smith & Nephew, said: “We delivered ahead-of-expected revenue growth for the full year and made significant improvements to our trading profit margin in a challenging macroeconomic environment.

‘Our 12 Point Plan is on the right track. While there is more to do to improve our performance in US reconstruction, our orthopedics business is moving along a clear path of improvement.”

Smith & Nephew Stock They rose 2.80 per cent to 1,157.00 pence in Tuesday morning trading.

Mark Crouch, analyst at investment platform eToro, said: ‘Shareholders have witnessed a 25 percent rally since November, and despite persistent inflation impeding the company’s progress, this set of results may reassure investors that Smith & Nephew is on the path to recovery.

S&N is a medical equipment company that develops, manufactures and markets medical devices for use in orthopedic reconstruction, clinical and trauma therapies, sports medicine and advanced wound treatment.

Before the Covis-19 outbreak, S&N consistently achieved operating margins of over 20 percent. Recent years have been less impressive, with margins contracting to 11 percent in 2020 and only recovering to 16.8 percent in 2022, as a result of global supply chain challenges and inflation.

This deterioration in performance led to the hiring of a new CEO, Dr. Deepak Nath, of Siemens Healthineers AG in April 2022.

After just 18 months in charge, much has changed under his leadership, and the group is targeting a recovery in margins to above 20 per cent by 2025.