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Smith & Nephew hits sales record, but cautions over coronavirus uncertainty

The group said its 2020 sales growth targets are dependent on the outbreak easing early in the second quarter.

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(University Hospital Southampton/PA)

(University Hospital Southampton/PA)

(University Hospital Southampton/PA)

Hip and knee replacement specialist Smith & Nephew has seen annual sales surpass 5 billion US dollars (£3.8 billion) for the first time, but cautioned the coronavirus outbreak clouds its revenues outlook.

Shares jumped 8% as the group reported a 4.4% rise in underlying revenues to 5.1 billion US dollars (£4 billion) for 2019 and predicted growth of 3.5% to 4.5% for 2020.

But it warned coronavirus has produced “additional uncertainty” and said the sales outlook assumes the outbreak, which has impacted mostly across China and Asia, “normalises” early in the second quarter.

The group added it is “monitoring the Covid-19 outbreak closely”, with China accounting for 7% of group revenues.

Its annual results showed emerging markets, including China, helped boost revenues last year, with sales in the region up 16.6% on an underlying basis in the final quarter.

Higher sales from its sports medicine and ear, nose and throat arm also bolstered the result, thanks to a 7% hike in revenues.

Pre-tax profits dropped 4.9% to 743 million US dollars (£576 million) for 2019, though its underlying operating profit lifted 4% to 1.2 billion US dollars (£930 million).

Recently appointed chief executive Roland Diggelmann – the former boss of Roche Diagnostics – said: “The improved underlying revenue growth of 4.4% in 2019, the best for several years, has propelled group sales above 5 billion US dollars for the first time in Smith & Nephew’s history.”

He added the group will focus on “sustaining the positive momentum” over the year ahead.

Analysts at Jefferies said the results showed an improving underlying performance through the final quarter of 2019.

Fourth quarter results revealed a 4.7% rise in underlying revenues for knee implants and a 0.7% increase in sales for hip implants.

Its wound care management division put in the weakest performance of its three businesses, with underlying sales up 1.9%.

PA Media