Smith & Nephew added to the generally austere mood within the healthcare sector by announcing a cost-cutting programme which should save an estimated $150m (£95m) annually. So far, 220 posts have been made redundant, out of a targeted 770, which is expected to cost about $160m in cash along with non-cash charges of $40m.
The cuts were prompted by a squeeze on profitability and the group trading margin fell two percentage point in the year to 22.5 per cent - although the fourth quarter did see an improvement to around 25.2 per cent after the first phase of the savings were implemented. Operationally, performance at the group's business segments varied. For instance, wound care saw underlying sales grow 7 per cent to $1bn. While orthopaedics - the biggest division by sales - increased revenue just 2 per cent to $2.31bn, reflecting largely flat sales towards the end of 2011 in mature markets such as the US. However, underlying sales growth of 10 per cent in emerging markets, to $1.1bn, was a notably significant shift. Overall, management remained cautious on the outlook for 2012 as pressure on government budgets and patient spending looks unlikely to abate.
Investec Securities expects pre-tax profit for 2012 of $958m, giving EPS of 74.2¢.
SMITH & NEPHEW (SN.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 640p | MARKET VALUE: | £5.72bn | |
| TOUCH: | 639-640p | 12-MONTH HIGH: | 749p | LOW: 501p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 356¢* | NET DEBT: | 4% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 3.37 | 469 | 34.2 | 11.9 |
| 2008 | 3.80 | 564 | 42.6 | 13.1 |
| 2009 | 3.77 | 670 | 53.4 | 14.4 |
| 2010 | 3.96 | 895 | 69.3 | 15.8 |
| 2011 | 4.27 | 848 | 65.3 | 17.4 |
| % change | +8 | -5 | -6 | +10 |
Ex-div: 18 Apr Payment: 9 May *Includes intangible assets of $1.52bn, or 170¢ a share £1=$1.58 | ||||
