What emerged from the largely straightforward half-year results for joint-maker and wound-care specialist Smith & Nephew (SN.) was the obvious determination to grow its presence in emerging markets, with post period acquisitions in Turkey and India. This follows a logical pattern of trade as emerging market revenues in the second quarter alone grew by 18 per cent, compared with either flat or minimal rises in developed economies. However, a consequence of this high profile push into new territories was the dilution of the group's profit margin, which combined with higher research & development costs of $110m (2012:$85m), cut operating profits by 11 per cent to $395m (£260m).
Advanced surgical devices hips and knees comprised $1.5bn of total revenue in the period after a 1 per cent fall in underlying sales, with demand for orthopaedic devices proving to be particularly weak. The acquisition last year of Healthpoint was behind the excellent result for the wound care division. Sales here increased by an underlying 11 per cent to $648m, ahead of the rest of the market which grew by an estimated 2 per cent during the half. Management noted that the basic outlook for the year is unchanged, with a better performance from the orthopaedic business expected in the second half.
Broker Numis forecasts pre-tax profits for 2013 of $949m, giving EPS of 73.8c (2012:$969m/EPS 75.6c)
SMITH & NEPHEW (SN.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 786p | MARKET VALUE: | £7.09bn | |
| TOUCH: | 785-787p | 12-MONTH HIGH: | 799p | LOW: 636p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 432¢* | NET DEBT: | 7% | |
| Half-year to 29 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 2.11 | 688 | 50.2 | 9.90 |
| 2013 | 2.15 | 392 | 30.1 | 10.4 |
| % change | +2 | -43 | -40 | +5 |
Ex-div: 9 Oct Payment: 29 Oct *Includes intangible assets of $2.19bn, or 243¢ a share £1=$1.52 | ||||
