Smith & Nephew PLC (LSE:SN) maintained full-year guidance after reporting robust revenue growth and rising profitability on Tuesday.
The FTSE 100-listed medical technology group also announced a $500 million share buyback to be launched in the second half of the year, underlining its cash generation and a healthy balance sheet.
Quarterly and half-year numbers
Revenue for the second quarter to 28 June rose to $1.55 billion, up 7.8% on a reported basis and 6.7% at constant currency.
All three of the company’s business units and all regions delivered growth ahead of the first quarter, with chief executive Deepak Nath citing a particularly strong rebound in Advanced Wound Management.
For the first half, revenue increased 4.7% to $2.96 billion, or 5% on an underlying basis.
Operating profit surged by 30.6% to $429 million, with the operating profit margin widening to 14.5%, up from 11.6% a year earlier.
Trading profit, which excludes certain costs and restructuring charges, rose 11.2% to $523 million, delivering a margin of 17.7% (H1 2024: 16.7%).
The company saw a sharp improvement in cash generation, with cash generated from operations up 54.3% to $568 million in the half year.
Free cash flow increased to $244 million from $39 million a year earlier, helped by lower restructuring charges and favourable working capital movements.
Trading cash conversion, which measures the proportion of trading profit that is turned into cash, rose to 93%, compared with 60% in the first half of last year.
Earnings per share climbed 36.6% to 33.5 cents, while adjusted earnings per share rose 14.1% to 42.9 cents. The interim dividend has been raised by 4.2% to 15 cents per share.
Business highlights
Underlying revenue growth for the second quarter was 6.7%, with reported growth of 7.8% including a positive impact from currency movements.
The Orthopaedics business saw underlying revenue growth of 5.0% (reported 5.8%), with improvements both globally and in the US Reconstruction division.
Sports Medicine & Ear, Nose and Throat grew 5.7% on an underlying basis, and 6.8% reported.
Excluding China, underlying growth was even stronger at 10.2%. Advanced Wound Management delivered underlying growth of 10.2% (reported 11.4%) as the Advanced Wound Bioactives segment rebounded.
Recent product launches, including new implants and robotics, are credited with driving three-quarters of the group’s first-half growth.
CEO Deepak Nath said: “Recent product launches are driving growth across all business units, with US Hip Implants becoming another example of the innovation-driven growth that is central to our strategy.
"We maintained our high cadence of launches in H1 with new products in Knee Implants, Robotics, Trauma, Sports Medicine and Advanced Wound Care. New products launched in the last five years accounted for three-quarters of our first-half growth.”
Outlook and buyback
Full-year guidance remained unchanged, with underlying revenue growth expected to be around 5% and reported growth of 5.5%.
Trading profit margin is expected to increase to between 19% and 20%. The outlook includes the net impact of tariffs, forecast at $15 to $20 million for the year, as previously flagged.
Smith+Nephew said the share buyback will not compromise growth plans or leverage position.
Nath added: “The operational improvements we have made under the 12-Point Plan are increasingly translating into better financial performance."