REG - Smith & Nephew Plc - 3rd Quarter 2022 Trading Report
03/11/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221103:nRSC1436Fa&default-theme=true
RNS Number : 1436F Smith & Nephew Plc 03 November 2022
Smith+Nephew Third Quarter 2022 Trading Report
3 November 2022
Q3 Highlights(1,2)
· Q3 revenue of $1,250 million (2021: $1,266 million), representing
underlying revenue growth of 4.8% (600bps FX headwind resulted in reported
decline of -1.2%)
· Orthopaedics revenue up 2.1%. Excluding China, Orthopaedics grew 5.6%
· Sports Medicine & ENT up 7.1%, with recent product launches
performing well
· Advanced Wound Management up 6.0%, maintaining recent strong
performance
2022 Full Year Outlook(1,2)
· Full-year underlying revenue growth currently expected in middle of
previously guided range of 4.0% to 5.0%
· Unchanged trading profit margin guidance of around 17.5%
Strategic and Operational Update
· 12-point plan to improve execution and drive Strategy for Growth
underway, focused on fixing Orthopaedics, improving productivity, and
accelerating growth in Advanced Wound Management and Sports Medicine
o Teams and structures embedded and KPIs established
o In Orthopaedics, improved logistics contributed to a reduction in overdue
orders and improved instrument set utilisation during the quarter
· Continuing cadence of new product launches and publication of
clinical evidence
Deepak Nath, Chief Executive Officer, said:
"We delivered 4.8% underlying revenue growth in the third quarter, with all
franchises and geographies contributing, and are on track to deliver our full
year guidance.
"Last quarter we set out our 12-point plan to improve business performance. We
are executing at pace and have recorded a number of early successes, including
reducing backorders and improving instrument set deployment in Orthopaedics.
"We also continue to deliver innovative new products and build on the value of
our technology. During the quarter we became the first company to receive FDA
approval for robotics-assisted revision knee surgery, launched a
superabsorbent wound dressing, and published compelling new rotator-cuff
repair data for REGENETEN(◊).
"While we are still near the start of the journey, and there is much more work
to be done, I am pleased with our early progress, and confident that we are on
the right track to transform performance."
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
A conference call to discuss Smith+Nephew's third quarter results will be held
today at 8.30am GMT / 4.30am EDT, details of which can be found on the
Smith+Nephew website at https://www.smith-nephew.com/results/
(https://www.smith-nephew.com/investor-centre/reporting/current-quarterly-results/)
.
Forward calendar
The full year results will be released on 21 February 2023.
Notes
1. All numbers given are for the quarter or nine months ended 1 October
2022 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 2021 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 year 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 prior year closing rate.
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.
Third quarter 2022 trading update
Our third quarter revenue was $1,250 million (2021: $1,266 million),
representing underlying revenue growth of 4.8%. A 600bps foreign exchange
headwind, primarily due to the strength of the US Dollar, resulted in a
reported revenue decline of -1.2%. Q3 2022 comprised 63 trading days, in line
with the comparable Q3 period in 2021.
All franchises and geographies contributed to the underlying revenue growth in
the quarter.
Orthopaedics revenue was up 2.1% (-3.0% reported), Sports Medicine & ENT
up 7.1% (0.8% reported), and Advanced Wound Management up 6.0% (-1.0%
reported).
Revenue growth in our Established Markets was 3.9% (-1.8% reported). Within
this, in the US, our largest market, we delivered strong 6.0% revenue growth
(6.0% reported). Other Established Markets revenue was up 0.4% (-14.3%
reported). Emerging Markets revenue was up 8.6% (1.4% reported), as the
expected decline in China Orthopaedics discussed below continued to be offset
by strong growth elsewhere including in India and Latin America.
Macro factors including shortages of some input materials, such as
semiconductors and resin, and staff shortages in healthcare systems, remained
constraining factors on growth across a number of segments during the quarter.
Strategic update
In July 2022 we announced a comprehensive 12-point plan to drive better
execution at pace, in order to take the business forward and deliver on our
Strategy for Growth pillars to Strengthen and Accelerate. This plan is focused
on:
· Fixing Orthopaedics
· Improving productivity
· Accelerating growth in Advanced Wound Management and Sports Medicine
& ENT
During the quarter we embedded the teams and structures to drive this work and
established the internal KPIs to monitor progress and drive accountability.
While we expect the work to deliver the full plan to take two years, we are
making meaningful early progress, including:
· Improving logistics and updating our demand and supply planning
process to bring a deeper level of specificity and collaboration between our
operations and commercial teams;
· Reducing the value of overdue orders in US Orthopaedics by more than
15% since the peak in the first half of the year; and
· Moving Orthopaedics instrument sets to more active customer accounts,
with 80% of the first phase completed in the US by quarter end.
Further work is proceeding across the 12-point plan, and we will continue to
update on progress in future trading updates.
Delivering innovation
During the quarter we continued to introduce innovative new products and
clinical evidence to drive future growth.
In Orthopaedics, we became the first company to receive FDA 510(k) clearance
for a revision knee indication using a robotics-assisted platform and
completed the first cases on our CORI(◊) Surgical System. Revisions account
for around 10% of all knee procedures in the US. We also continued the
roll-out of our OR3O(◊) Dual Mobility System for use in primary and revision
hip arthroplasty, launching in Japan.
In Sports Medicine, we announced encouraging evidence supporting our REGENETEN
Bioinductive Implant, which delivered an 86% reduction in rotator cuff re-tear
rates at 12 months in interim results from a randomised controlled trial.
In Advanced Wound Management, we also introduced our DURAMAX(◊) S Silicon
Super Absorbent Dressing for high exuding wounds, launching in Europe where
superabsorbers are one of the fastest growing categories of dressings.
Consolidated revenue analysis for the third quarter
1 October 2 October Reported Underlying Acquisitions Currency
2022 2021 growth growth((i)) /disposals impact
Consolidated revenue by franchise $m $m % % % %
Orthopaedics 492 508 -3.0 2.1 - -5.1
Knee Implants 210 207 1.9 7.4 - -5.5
Hip Implants 136 145 -6.5 -1.0 - -5.5
Other Reconstruction((ii)) 18 20 -10.5 -6.0 - -4.5
Trauma & Extremities 128 136 -5.5 -1.2 - -4.3
Sports Medicine & ENT 382 379 0.8 7.1 - -6.3
Sports Medicine Joint Repair 209 207 0.9 7.5 - -6.6
Arthroscopic Enabling Technologies 131 139 -5.6 0.5 - -6.1
ENT (Ear, Nose and Throat) 42 33 27.8 32.1 - -4.3
Advanced Wound Management 376 379 -1.0 6.0 - -7.0
Advanced Wound Care 173 189 -8.3 1.6 - -9.9
Advanced Wound Bioactives 136 121 12.0 12.7 - -0.7
Advanced Wound Devices 67 69 -3.4 5.8 - -9.2
Total 1,250 1,266 -1.2 4.8 - -6.0
Consolidated revenue by geography
US 671 633 6.0 6.0 - -
Other Established Markets((iii)) 341 398 -14.3 0.4 - -14.7
Total Established Markets 1,012 1,031 -1.8 3.9 - -5.7
Emerging Markets 238 235 1.4 8.6 - -7.2
1,250 1,266 -1.2 4.8 - -6.0
Total
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our joint
reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan, Australia and New
Zealand
Orthopaedics
In Orthopaedics revenue was up 2.1% (-3.0% reported). Excluding China, where
performance continued to be impacted by the implementation of the previously
disclosed hip and knee volume-based-procurement (VBP) programme, Orthopaedics
grew by 5.6% underlying.
Knee Implants grew 7.4% (1.9% reported) and Hip Implants declined -1.0% (-6.5%
reported). Knee Implants grew by 11.1% and Hip Implants by 3.6% in the US. Our
JOURNEY II(◊) and LEGION(◊) REVISION knee systems both delivered
double-digit growth and we are starting to see the early benefit of our
cementless total knee LEGION CONCELOC(◊). We remain focused on improving
overall performance in Hip Implants, nevertheless our POLAR3(◊) Total Hip
Solution, with its class-leading survivorship data, and the OR3O Dual Mobility
Hip System both delivered good growth in the quarter.
Other Reconstruction revenue declined -6.0% (-10.5% reported), as raw material
supply constraints continued to impact this segment. Our installed base in
robotics has now passed 500 units globally.
Trauma & Extremities declined -1.2% (-5.5% reported) continuing to reflect
our decision not to participate in the broader roll-out of provincial trauma
tenders in China.
Sports Medicine & ENT
Our Sports Medicine & ENT franchise delivered revenue growth of 7.1% (0.8%
reported) in the quarter.
Within this, Sports Medicine Joint Repair delivered 7.5% (0.9% reported)
revenue growth and Arthroscopic Enabling Technologies revenue was up 0.5%
(-5.6% reported). We continue to benefit from our excellent shoulder repair
portfolio, including double-digit growth for REGENETEN. Recent product
launches also performed well, including the FAST-FIX(◊) FLEX Meniscal Repair
System and WEREWOLF FASTSEAL(◊) 6.0 Hemostasis Wand.
Revenue from ENT was up 32.1% (27.8% reported) as procedure volumes recover
from the impact of COVID.
Advanced Wound Management
Our Advanced Wound Management franchise delivered revenue growth of 6.0%
(-1.0% reported), maintaining recent strong performance with growth coming
across all regions and product categories.
Advanced Wound Care revenue was up 1.6% (-8.3% reported), including good
growth from our infection management and films portfolios and in Asia-Pacific.
Advanced Wound Bioactives revenue was up 12.7% (12.0% reported), driven by
both our enzymatic debrider SANTYL(◊) and our skin substitute portfolio.
Advanced Wound Devices revenue was up 5.8% (-3.4% reported), with double-digit
growth from our PICO(◊) Single Use Negative Pressure Wound Therapy System
being offset by a slower quarter from the traditional negative pressure system
RENASYS(◊) due to
on-going input material shortages.
2022 Full Year Outlook
With one quarter remaining of 2022, we currently expect our underlying revenue
growth for the full year to be around the middle of our guided range of 4.0%
to 5.0% (around -0.8% to +0.2% on a reported basis, including a foreign
exchange headwind of 480bps based on exchange rates prevailing on 28 October
2022).
We also continue to expect trading profit margin to be around 17.5%.
We expect the tax rate on trading results for 2022 to be around 18%, subject
to any material changes to tax law, or other one-off items.
Consolidated revenue analysis for nine months to 1 October 2022
1 October 2 October Reported Underlying Acquisitions Currency
2022 2021 growth Growth((i)) /disposals impact
Consolidated revenue by franchise $m $m % % % %
Orthopaedics 1,564 1,605 -2.5 1.2 - -3.7
Knee Implants 665 644 3.2 7.3 - -4.1
Hip Implants 434 461 -5.8 -1.9 - -3.9
Other Reconstruction((ii)) 61 67 -9.0 -5.5 - -3.5
Trauma & Extremities 404 433 -6.6 -3.7 - -2.9
Sports Medicine & ENT 1,159 1,143 1.5 5.8 - -4.3
Sports Medicine Joint Repair 634 616 3.0 7.6 - -4.6
Arthroscopic Enabling Technologies 412 432 -4.6 -0.3 - -4.3
ENT (Ear, Nose and Throat) 113 95 18.9 21.7 - -2.8
Advanced Wound Management 1,127 1,117 0.8 5.9 - -5.1
Advanced Wound Care 533 550 -3.1 4.3 - -7.4
Advanced Wound Bioactives 388 368 5.2 5.8 - -0.6
Advanced Wound Devices 206 199 3.5 10.4 - -6.9
Total 3,850 3,865 -0.4 3.9 - -4.3
Consolidated revenue by geography
US 2,022 1,950 3.7 3.7 - -
Other Established Markets((iii)) 1,119 1,229 -8.9 1.9 - -10.8
Total Established Markets 3,141 3,179 -1.2 3.0 - -4.2
Emerging Markets 709 686 3.5 8.1 - -4.6
Total 3,850 3,865 -0.4 3.9 - -4.3
(i) Underlying growth is defined in Note 2 on page 2
(ii) Other Reconstruction includes robotics capital sales, our joint
reconstruction business and cement
(iii) Other Established Markets are Europe, Canada, Japan, Australia and New
Zealand
About Smith+Nephew
Smith+Nephew is a portfolio medical technology company that exists 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 18,000 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 franchises of
Orthopaedics, Sports Medicine & ENT and Advanced Wound Management.
Founded in Hull, UK, in 1856, we now operate in more than 100 countries, and
generated annual sales of $5.2 billion in 2021. 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 Twitter
(http://www.twitter.com/smithnephewplc) , LinkedIn
(http://www.linkedin.com/company/smith-%26-nephew) , Instagram
(https://www.instagram.com/smithnephewmeded/) or Facebook
(http://www.facebook.com/smithnephewplc) .
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 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: risks related to the impact of COVID,
such as the depth and longevity of its impact, government actions and other
restrictive measures taken in response, material delays and cancellations of
elective procedures, reduced procedure capacity at medical facilities,
restricted access for sales representatives to medical facilities, or our
ability to execute business continuity plans as a result of COVID; economic
and financial conditions in the markets we serve, especially those affecting
health care providers, payers and customers (including, without limitation, as
a result of COVID); 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
compliance risks and related investigative, remedial or enforcement actions;
disruption to our supply chain or operations or those of our suppliers
(including, without limitation, as a result of COVID); competition for
qualified personnel; strategic actions, including acquisitions and
dispositions, 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; 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, 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
(.) (◊) Trademark of Smith+Nephew. Certain marks registered US Patent and
Trademark Office.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END TSTEAFFAEFFAFAARecent news on Smith & Nephew
See all newsREG - Smith & Nephew Plc - Dividend Declaration
AnnouncementREG - Smith & Nephew Plc - Directorate Change
AnnouncementREG - Smith & Nephew Plc - Result of AGM
AnnouncementREG - Smith & Nephew Plc - Total Voting Rights
AnnouncementREG - Smith & Nephew Plc - Q1 2024 Trading Update
Announcement