REG - Smith & Nephew Plc - Smith+Nephew First Quarter 2025 Trading Update
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RNS Number : 7132G Smith & Nephew Plc 30 April 2025
Smith+Nephew First Quarter 2025 Trading Update
Good start to 2025, reinforcing confidence in full year outlook
30 April 2025
Smith+Nephew (LSE:SN, NYSE:SNN) trading update for the first quarter ended 29
March 2025.
Highlights(1,2)
· Q1 revenue $1,407 million (2024: $1,386 million), with underlying
revenue growth of 3.1%, and reported revenue growth of 1.6% including a
-150bps foreign exchange headwind
o Growth driven by operational improvements and recent product launches and
inclusive of continued headwinds from China and one less trading day
year-on-year
· Orthopaedics underlying revenue growth 3.2% (reported growth 1.8%)
o Sustained improved performance in US Hip and Knee Implants and good growth
from Other Reconstruction and Trauma & Extremities
· Sports Medicine & ENT underlying revenue growth 2.4% (reported
growth 0.9%)
o Strong performance in Established Markets from Sports Medicine Joint
Repair and solid growth from Arthroscopic Enabling Technologies, offset by
China
· Advanced Wound Management underlying revenue growth 3.8% (reported
growth 2.0%)
o Growth driven by foams and NPWT, offset by expected SANTYL(◊) volatility
· Full year 2025 guidance unchanged
o Underlying revenue growth expected to be around 5.0% (reported growth
5.4%), and significant trading profit margin expansion to between 19.0% and
20.0%
o Continued higher cadence of product launches and clinical evidence
contributing to growth
o Unchanged outlook includes an expected net impact of $15 to $20 million
from tariffs in 2025, based on announced measures, and mitigations
Deepak Nath, Chief Executive Officer, said:
"We have delivered a good start to the year with the operational improvements
delivered through the 12-Point Plan driving growth across our portfolio. Key
platforms, such as CORI(◊), EVOS(◊), REGENETEN(◊) and our Negative
Pressure Wound Therapy portfolio all delivered strong double-digit growth in
the quarter, and we are maintaining our high pace of innovation with a further
wave of product launches this year. Headwinds from China remained an
offsetting factor, but we believe have now passed their peak impact.
"Whilst uncertainties exist around the imposition of tariffs, we remain
confident in our outlook for another year of strong revenue growth and a
significant step-up in trading profit margin."
Enquiries
Investors
Andrew Swift +44 (0) 1923 477433
Smith+Nephew
Media
Charles Reynolds +44 (0) 1923 477314
Smith+Nephew
Susan Gilchrist / Ayesha Bharmal +44 (0) 20 7404 5959
Brunswick
Analyst conference call
An analyst conference call to discuss Smith+Nephew's first quarter results
will be held at 8.30am BST / 3.30am EDT on Wednesday 30 April 2025, details of
which can be found on the Smith+Nephew website at
https://www.smith-nephew.com/en/who-we-are/investors
(https://www.smith-nephew.com/en/who-we-are/investors) .
Notes
1. All numbers given are for the quarter ended 29 March 2025 unless stated
otherwise.
2. Unless otherwise specified as 'reported' all revenue growth throughout
this document is 'underlying' after adjusting for the effects of currency
translation and including the comparative impact of acquisitions and excluding
disposals. All percentages compare to the equivalent 2024 period.
'Underlying revenue growth' reconciles to reported revenue growth, the most
directly comparable financial measure calculated in accordance with IFRS, by
making two adjustments, the 'constant currency exchange effect' and the
'acquisitions and disposals effect', described below.
The 'constant currency exchange effect' is a measure of the increase/decrease
in revenue resulting from currency movements on non-US Dollar sales and is
measured as the difference between: 1) the increase/decrease in the current
year revenue translated into US Dollars at the current year average exchange
rate and the prior revenue translated at the prior year rate; and 2) the
increase/decrease being measured by translating current and prior year
revenues into US Dollars using the same exchange rates.
The 'acquisitions and disposals effect' is the measure of the impact on
revenue from newly acquired material business combinations and recent material
business disposals. This is calculated by comparing the current year, constant
currency actual revenue (which includes acquisitions and excludes disposals
from the relevant date of completion) with prior year, constant currency
actual revenue, adjusted to include the results of acquisitions and exclude
disposals for the commensurate period in the prior year. These sales are
separately tracked in the Group's internal reporting systems and are readily
identifiable.
Forward calendar
Results for the first half of 2025 will be released on 5 August 2025.
First quarter trading update
Our first quarter revenue was $1,407 million (2024: $1,386 million),
reflecting underlying revenue growth of 3.1%. Reported revenue growth was
1.6%, including -150bps headwind from foreign exchange. The first quarter 2025
comprised 62 trading days, one fewer than the same period of 2024.
Consolidated revenue analysis for the first quarter
29 March 30 March Reported Underlying Acquisitions Currency
2025 2024((i)) growth growth((ii)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 578 567 1.8 3.2 - -1.4
Knee Implants 244 246 -0.8 0.7 - -1.5
Hip Implants 151 155 -2.9 -1.2 - -1.7
Other Reconstruction((iii)) 29 20 44.4 46.6 - -2.2
Trauma & Extremities 154 146 5.5 6.3 - -0.8
Sports Medicine & ENT 444 441 0.9 2.4 - -1.5
Sports Medicine Joint Repair 247 244 1.3 2.9 - -1.6
Arthroscopic Enabling Technologies 146 149 -1.7 -0.1 - -1.6
ENT (Ear, Nose and Throat) 51 48 6.7 7.8 - -1.1
Advanced Wound Management 385 378 2.0 3.8 - -1.8
Advanced Wound Care 173 174 -0.2 2.5 - -2.7
Advanced Wound Bioactives 120 123 -2.2 -2.0 - -0.2
Advanced Wound Devices 92 81 13.2 15.7 - -2.5
Total 1,407 1,386 1.6 3.1 - -1.5
Consolidated revenue by geography
US 759 733 3.6 3.6 - -
Other Established Markets((iv)) 427 420 1.8 5.0 - -3.2
Total Established Markets 1,186 1,153 2.9 4.1 - -1.2
Emerging Markets 221 233 -5.2 -1.7 - -3.5
Total 1,407 1,386 1.6 3.1 - -1.5
(i) Restated for reclassification of robotics consumables revenue from
Other Reconstruction to Knee and Hip implants
(ii) Underlying growth is defined in Note 2 on page 2
(iii) Other Reconstruction includes robotics capital sales and bone cement
(iv) Other Established Markets are Europe, Japan, Australia, Canada and New
Zealand
The good momentum across the portfolio was driven by operational improvements
delivered through the 12-Point Plan, such as bringing product supply up to
industry standards, as well as the successful commercial launches of recent
innovations. In Orthopaedics, this included new hip and shoulder implant
systems and new applications in surgical robotics. In Sports Medicine, growth
was driven by expansion of our biological healing business and new products in
foot and ankle repair. In Advanced Wound Management, we benefitted from the
early stages of our next-generation foam platform and recent launches in
Negative Pressure Wound Therapy. All of these new products are expected to
have multi-year growth runways ahead of them and we have an exciting pipeline
of further launches and line extensions underway or planned in 2025.
China continued to be a headwind in the quarter, as expected. We believe we
are now past the peak impact and expect to lap Sports Medicine Joint Repair
VBP during the second quarter. The additional headwind from the extension of
VBP into Arthroscopic Enabling Technologies is still expected in the second
half of 2025. First quarter Group underlying revenue growth excluding China
was 5.5% (reported growth 3.9%).
Geographically, Established Markets delivered underlying revenue growth of
4.1% (reported growth 2.9%). Underlying revenue growth was 3.6% in the US
(reported growth 3.6%) and 5.0% in Other Established Markets (reported growth
1.8%). The Emerging Markets underlying revenue decline of -1.7% (reported
decline -5.2%) reflected the headwinds from China. Emerging Markets underlying
revenue growth excluding China was 14.7% (reported growth 9.8%).
Orthopaedics
Our Orthopaedics business unit delivered underlying revenue growth of 3.2%
(reported growth 1.8%) in the quarter. Underlying revenue growth excluding
China was 5.1% (reported growth 3.6%).
As stated with our full year results in February, we have changed our
reporting practice around robotics to be more in line with industry peers. As
of this quarter, robotics consumables sales are now recorded under the
procedure where they are used, while capital and services revenue remain in
Other Reconstruction. Growth rates are all on a comparable basis.
Knee Implants underlying revenue growth was 0.7% (reported decline -0.8%) and
Hip Implants underlying revenue decline was -1.2% (reported decline -2.9%),
with both reflecting the headwind from China. The Q1 performance was driven by
the JOURNEY II(◊) Knee System and our cementless and revision systems and
the POLAR3(◊) Total Hip Solution.
In the US, underlying and reported revenue growth was 0.9% for Knee Implants
and 2.0% for Hip Implants. After adjusting for the two extra trading days in
the fourth quarter and one fewer trading day in the first quarter, our US
reconstruction business sustained the improved performance of the previous
quarter with adjusted underlying revenue growth of 2.5% in Knee Implants and
3.6% in Hip Implants.
The new CATALYSTEM(◊) Primary Hip System is being well-received, and we
continued to expand the US launch during the quarter. CATALYSTEM is designed
to address the evolving demands of primary hip surgery, including the
increased adoption of anterior approach procedures.
In April we received US Food and Drug Administration (FDA) 510(k) clearance
for new LEGION(◊) Medial Stabilized inserts, addressing a fast-growing
category of inserts now used in more than 30% of US knee replacements.
Designed for use with our CONCELOC(◊) Technology and robotics-assisted CORI
Surgical System, LEGION(◊) Medial Stabilized inserts also address the major
market trends of cementless fixation and robotics.
During the quarter the latest annual report from the Australian Orthopaedic
Association National Joint Replacement Registry (AOANJRR) highlighted the
exceptional performance of our proprietary OXINIUM(◊) Technology on highly
cross-linked polyethylene. The data indicates that this combination has the
highest survivorship rate (94.1%) among all bearing combinations over a
20-year period for total hip arthroplasty (THA), corroborating similar
findings in other national registries.
Other Reconstruction underlying revenue growth was 46.6% (reported growth
44.4%), including strong growth from our CORI Surgical System. We are
benefitting from CORI's unique features and versatility, including supporting
revision knee procedures, a first-of-its-kind digital tensioner for
robotics-assisted knee surgery for soft tissue balancing and offering both
burr and saw cutting options. The new CORIOGRAPH(◊) Pre-Operative Planning
and Modelling Services for CORI, which make it the only orthopaedic
robotic-assisted system to offer intraoperative image-free and image-based
registration for knee implants, is being well received by customers.
Trauma & Extremities underlying revenue growth was 6.3% (reported growth
5.5%), driven by the EVOS Plating System. We saw strong demand for the new
AETOS(◊) Shoulder System following its launch in the US last year,
competitive account conversions through the new TOTAL ANKLE(◊)
Patient-Matched Guides, and the LEOS(◊) Plating System is also on a
promising trajectory.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered underlying revenue
growth of 2.4% (reported growth 0.9%) in the quarter. Underlying revenue
growth was 7.8% (reported growth 6.1%) excluding China VBP impact.
Sports Medicine Joint Repair underlying revenue growth was 2.9% (reported
growth 1.3%). Double-digit growth outside of China was led by our shoulder
repair portfolio, including double-digit growth from our REGENETEN
Bioinductive Implant. We also saw good momentum from new product launches
including the Q-FIX(◊) KNOTLESS All-Suture Anchor and our developing foot
and ankle repair business.
We have added further to the growing REGENETEN evidence base with the
publication in April of a randomised controlled trial (RCT) of medium and
large full-thickness rotator cuff repairs augmented with the REGENETEN
Bioinductive Implant that demonstrated significantly lower re-tear rates,
compared with repair alone, at 2-year follow-up.
Arthroscopic Enabling Technologies saw an underlying revenue decline of -0.1%
(reported decline -1.7%). Performance reflects headwinds in China where the
sector is preparing for an expected additional VBP process on mechanical
resection blades and COBLATION(◊) wands in the second half of 2025. Outside
of China growth remained solid with a good quarter in COBLATION and across
video, patient positioning and fluid management.
Smith+Nephew has submitted to the FDA a traditional 510(k) for a technology
called the TESSA(◊) Spatial Surgery System. If cleared by the FDA, TESSA
(Tracking Enabled Spatial Surgery Assistant) would combine a real-time,
tracking-enabled device. By using video processing and augmented reality
guidance, TESSA would assist a surgeon in making anterior cruciate ligament
reconstruction (ACLR) femoral tunnel decisions by navigating an operative
plan. TESSA was available for surgeons to view at the American Academy of
Orthopaedic Surgeons (AAOS) Annual Meeting in March.
ENT underlying revenue growth was 7.8% (reported growth 6.7%) led by our
tonsil and adenoid business utilising our HALO(◊) Wand for the COBLATION
Intracapsular Tonsillectomy (CIT) technique. We continue to invest behind the
recently launched ARIS(◊) COBLATION Turbinate Reduction Wand which provides
a minimally invasive way to reduce hypertrophic turbinates, a condition that
requires 350,000 procedures per annum in the US, with launches in Europe and
Emerging Markets.
Advanced Wound Management
Advanced Wound Management underlying revenue growth was 3.8% (reported growth
2.0%).
Advanced Wound Care underlying revenue growth was 2.5% (reported decline
-0.2%), with strong growth from our foam and films portfolios offset by
negative growth in infection management and skin care. We are in the early
stages of launching ALLEVYN(◊) Ag+ SURGICAL into the US, a new antimicrobial
silver dressing which adds to the established ALLEVYN family of foam
dressings. ALLEVYN Ag+ SURGICAL dressing features new ComfortSTAY(◊)
Technology for gentle silicone adhesion and HighFLEX(◊) Technology to
provide flexibility and comfort during patient movement.
Advanced Wound Bioactives saw an underlying revenue decline of -2.0% (reported
decline -2.2%). Performance reflected the typical quarterly volatility in the
category with strong double-digit growth in skin substitutes following the
launch last year of GRAFIX(◊) PLUS offset by the expected slower quarter
from SANTYL(◊) reflecting stocking patterns following the strong finish to
2024.
Advanced Wound Devices underlying revenue growth was 15.7% (reported growth
13.2%) with double-digit growth from both our traditional and single-use NPWT
portfolios and good growth from the LEAF(◊) Patient Monitoring System.
Outlook
Our full year guidance for 2025 is unchanged as we target another year of
strong revenue growth and a significant step-up in trading profit margin,
notwithstanding the uncertainties around the imposition of tariffs.
We expect underlying revenue growth to be around 5% (around 5.4% based on
exchange rates prevailing on 25 April 2025).
Full year trading profit margin is expected to be in the range of 19.0% to
20.0%, with margin stronger in the second half than the first as impact of
China headwinds reduce and operational savings are delivered.
The tariff situation remains dynamic. Just over half our revenues are in the
US and two thirds of the products we sell within the US are manufactured
in-market. Our other manufacturing sites are in Costa Rica, UK, Malaysia,
China and Switzerland. We are working to mitigate tariff impacts from products
and raw materials imported into the US, including leveraging our global
manufacturing network in terms of mix and supply routes. The unchanged outlook
includes an expected net impact of around $15 to $20 million from tariffs in
2025, based on announced measures, and mitigations.
We continue to expect to drive further margin expansion beyond 2025 through
continued momentum and efficiency gains.
About Smith+Nephew
Smith+Nephew is a portfolio medical technology business focused on the repair,
regeneration and replacement of soft and hard tissue. We exist to restore
people's bodies and their self-belief by using technology to take the limits
off living. We call this purpose 'Life Unlimited'. Our 17,000 employees
deliver this mission every day, making a difference to patients' lives through
the excellence of our product portfolio, and the invention and application of
new technologies across our three global business units of Orthopaedics,
Sports Medicine & ENT and Advanced Wound Management.
Founded in Hull, UK, in 1856, we now operate in around 100 countries, and
generated annual sales of $5.8 billion in 2024. Smith+Nephew is a constituent
of the FTSE100 (LSE:SN, NYSE:SNN). The terms 'Group' and 'Smith+Nephew' are
used to refer to Smith & Nephew plc and its consolidated subsidiaries,
unless the context requires otherwise.
For more information about Smith+Nephew, please visit www.smith-nephew.com
(http://www.smith-nephew.com/) and follow us on X
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Forward-looking Statements
This document may contain forward-looking statements that may or may not prove
accurate. For example, statements regarding expected revenue growth and
trading profit margins, market trends and our product pipeline are
forward-looking statements. Phrases such as "aim", "plan", "intend",
"anticipate", "well-placed", "believe", "estimate", "expect", "target",
"consider" and similar expressions are generally intended to identify
forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause
actual results to differ materially from what is expressed or implied by the
statements. For Smith+Nephew, these factors include: conflicts in Europe and
the Middle East, economic and financial conditions in the markets we serve,
especially those affecting healthcare providers, payers and customers; price
levels for established and innovative medical devices; developments in medical
technology; regulatory approvals, reimbursement decisions or other government
actions; product defects or recalls or other problems with quality management
systems or failure to comply with related regulations; litigation relating to
patent or other claims; legal and financial compliance risks and related
investigative, remedial or enforcement actions; disruption to our supply chain
or operations or those of our suppliers; competition for qualified personnel;
strategic actions, including acquisitions and disposals, our success in
performing due diligence, valuing and integrating acquired businesses;
disruption that may result from transactions or other changes we make in our
business plans or organisation to adapt to market developments; relationships
with healthcare professionals; reliance on information technology and
cybersecurity; disruptions due to natural disasters, weather and climate
change related events; changes in customer and other stakeholder
sustainability expectations; changes in taxation regulations; effects of
foreign exchange volatility; and numerous other matters that affect us or our
markets, including those of a political, economic, business, competitive or
reputational nature. Please refer to the documents that Smith+Nephew has filed
with the U.S. Securities and Exchange Commission under the U.S. Securities
Exchange Act of 1934, as amended, including Smith+Nephew's most recent annual
report on Form 20-F, which is available on the SEC's website at www. sec.gov,
for a discussion of certain of these factors. Any forward-looking statement is
based on information available to Smith+Nephew as of the date of the
statement. All written or oral forward-looking statements attributable to
Smith+Nephew are qualified by this caution. Smith+Nephew does not undertake
any obligation to update or revise any forward-looking statement to reflect
any change in circumstances or in Smith+Nephew's expectations.
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