Smith & Nephew PLC (LON:SN.) replaced its annual guidance for revenues and profit margins on Thursday, nudging the former higher but trimming the latter.
The replacement hip and knee specialist reported 4% growth in underlying revenue in the third quarter, with the Orthopaedics ‘franchise’ growing 3.4%, Sports Medicine up 6.9% and Wound Management rising 2.1%.
Following the 3.9% underlying growth in the first half of the year, the FTSE 100 group raised its revenue guidance by 50 basis points to a range of 3.5%-4.5%.
Smith & Nephew suggested that its new franchise-led operating model under the three abovementioned segments was driving growth “by bringing a greater focus to serving customers with our portfolio of leading technologies”.
But the target for trading profit margins was cut to 22.8%, narrowing down from its earlier indications of a range of 22.8%-23.2%, with the change reflecting dilution from acquisitions, currency headwinds and continued investment in the business.
Last week, the company revealed that it was swapping its chief executive for the second time in 18 months, with rumours that Namal Nawana, who joined in May last year, was leaving due to a dispute over his pay.
He will be replaced by former Roche Diagnostics boss Roland Diggelmann, who has been on the board as a non-executive since last year.
Broker Shore Capital was impressed by the top-line performance and said Diggelmann’s views on M&A “will be of interest”.
ShoreCap’s analysts said that as it believes growth will be the priority ahead of margin expansion, it was "not surprised to see trading profit margin guided to the lower end of the range alongside the revenue upgrade".