Investors were cheered by the huge hike in Smith & Nephew's interim dividend as management outlined a more aggressive payout policy, through which dividends should increase in step with underlying growth in earnings. The news was the only real highlight in the results, which reported flat sales and profits after a one-off benefit from disposals is stripped out. The dividend increase is welcome, but it looks increasingly obvious that Smith & Nephew faces indifferent growth in its major markets - and the current level of dividend yield is not enough of a consolation to stick around.
Operationally, the advanced surgical devices division kept up with the rest of the market, with sales growing by 2 per cent to $1.61bn, and a better sales mix kept price pressure at bay. The situation was more robust at the advanced wound management division, which, helped by market share gains, grew faster than the norm with a 4 per cent sales increase to $495m. Management left guidance unchanged and noted that the US market had started to show signs of stabilisation. Europe is the main source of uncertainty, though.
Broker forecasts are under review, but before these results Investec was forecasting pre-tax profits for 2012 of $958m, giving EPS of 74.2¢.
SMITH & NEPHEW (SN.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 675p | MARKET VALUE: | £6.06bn | |
| TOUCH: | 675.5-676.5p | 12-MONTH HIGH: | 678p | LOW: 501p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 396¢* | NET CASH: | $150m | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 2.13 | 450 | 34.7 | 6.60 |
| 2012 | 2.10 | 692 | 50.7 | 9.90 |
| % change | - | +54 | +46 | +50 |
Ex-div: 10 Oct Payment: 30 Oct *Includes intangible assets of $1.5bn, or 167¢ a share £1 = $1.56 | ||||
