Smith & Nephew shares climbed after the medical equipment maker surpassed expectations for 2024, thanks to a lift from its US hip and knee replacement business. The FTSE 100 group revealed underlying revenues increased by 5.3 per cent last year, higher than the 4.5 per cent predicted in October when Smith & Nephew was forced to downgrade forecasts.
Trading profit margins also exceeded previously reduced guidance after rising by 0.6 percentage points to 18.1 per cent, thanks to productivity savings and sales leverage. Shares in Smith & Nephew topped the FTSE 100 Index on Tuesday morning following the release of its results, climbing by 9 per cent before retreating modestly to be 6.3 per cent up at 1,109.5p.
The strong performance will provide relief to the firm's chief executive, Deepak Nath, who has faced investor pressure to prove his 12-point turnaround plan is delivering results. Activist investor Cevian Capital, known for its aggressive tactics for pursuing change, took a 5 per cent stake in Smith & Nephew last summer.
Bumper results: Medical equipment maker Smith & Nephew has reported better-than-expected annual underlying sales growth and profit margins. Since then, some Smith & Nephew shareholders have called for the group to consider spinning off its struggling orthopaedics division, whose products include knee and hip implants.
The segment provides around 40 per cent of the company's turnover, but its growth has slowed in recent years due partly to weaker trade in the US. Its revenue rose by 4.5 per cent to $2.3billion in 2024 on the back of higher demand for trauma and extremities products.
Smith & Nephew's total sales expanded by 4.7 per cent to $5.8billion, with adverse currency fluctuations providing a 60 basis points headwind. However, the firm's operating profits jumped by 54.6 per cent to $657million, while trading profits ended 8.2 per cent higher at $1.05billion.
Nath said: 'There is much more to be done, but we have made solid progress fixing the foundations and expect a step-up in returns in 2025, including significant margin expansion. 'We are confident that this will be the year when transformation starts to unlock substantial value for our shareholders.'.
For the upcoming year, Smith & Nephew estimates underlying revenues will expand by 5 per cent and a trading profit margin between 19.0 per cent and 20 per cent. It anticipates a better performance over the second half of 2025 as cost savings are realised and challenges in its Chinese market subside.
Russ Mould, investment director at AJ Bell, said: 'Time was running out for Smith & Nephew's management to demonstrate they could turn things around after years of underperformance. 'Sticking plaster solutions wouldn't cut it with the market, so there will be relief in the boardroom they were able to present a set of results revealing genuine progress on several fronts.'.
