Q3 Commentary
- Strong reported revenue up 10% to $1,032 million, underlying growth of 5%
- Trading profit was $205 million, a trading margin of 19.8%
- Two of the three businesses delivered strong trading margins: Endoscopy 23.7% up 90bps and Advanced Wound Management 25.4% up 80bps
- Orthopaedics? trading margin 15.6%, due to continuing adverse sales mix, high periodic costs, and the need to reduce costs to better reflect market conditions
- Actions taken to materially improve Orthopaedics? trading margin from Q4 onwards
- Q4 Group trading margin expected to be above 24%
- Adjusted earnings per share increased by 0.6% to 16.2¢
- Trading profit-to-cash conversion ratio of 102% (2010: 95%), net debt decreased to $196 million (2010: $600 million)
- Action plans in line with new strategic priorities to maximise growth and margins well advanced, targeting annual savings of at least $150 million
Commenting on the third quarter, Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said:
“We again delivered strong top-line revenue growth, up a reported 10% at $1,032 million, an underlying increase of 5%. I am, however, disappointed with our margin performance, with Orthopaedics overshadowing excellent performances in Endoscopy and Advanced Wound Management. We are taking the steps necessary to reduce a cost base in Orthopaedics that is too high for on-going market conditions. I expect to see material improvements from Q4 onwards and am confident that the Group will deliver a Q4 trading profit margin above 24%.
“In August we announced our new strategic priorities to maximise growth and margins. The new operational management teams have embraced these and together we are developing the action plans that will liberate the resources needed for re-investment and to protect our underlying margins. With high levels of energy and determination, we are reshaping Smith & Nephew to thrive in the future.”
Analyst presentation and conference call
An analyst conference call to discuss Smith & Nephew?s third quarter results will be held at 8:30am GMT/4:30am EST today, Friday 4 November. This will be broadcast live on the company?s website and will be available on demand shortly following the close of the call at http://www.smith-nephew.com/Q311. A podcast will also be available at the same address. If interested parties are unable to connect to the web, a listen-only service is available by calling +44 (0) 20 7136 2054 in the UK or +1 (718) 354 1359 in the US, confirmation code: 7334478. Analysts should contact Jennifer Heagney on +44 (0) 20 7960 2255 or by email at jennifer.heagney@smith-nephew.com for conference details.
Notes
1 Unless otherwise specified as „reported?, all revenue increases/decreases throughout this document are underlying increases/decreases after adjusting for the effects of currency translation. See note 3 to the financial statements for a reconciliation of these non-GAAP financial measures to results reported under IFRS.
2 A reconciliation from operating profit to trading profit, a non-GAAP financial measure, is given in note 4 to the financial statements. The underlying increase/decrease in trading profit is the increase/decrease in trading profit after adjusting for the effects of currency translation.
3 Adjusted earnings per share (“EPSA”) growth is as reported, not underlying, and is stated before restructuring and rationalisation costs, amortisation of acquisition intangibles and taxation thereon. See note 2 to the financial statements for information on this non-GAAP financial measure.
4 All numbers given are for the quarter ended 1 October 2011 unless stated otherwise.
5 References to market growth rates are estimates generated by Smith & Nephew based on a variety of sources.
Enquiries Investors/Analysts
Phil Cowdy
+44 (0) 20 7401 7646
Smith & Nephew
Media
Jon Coles / Justine McIlroy
+44 (0) 20 7404 5959
Brunswick – London
