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Smith & Nephew Plc

Smith & Nephew plc Accelerated performance across 2018

Smith & Nephew plc (LON:SN, NYSE:SNN) today announced results for the Quarter and Year to 31 December 2018:

Reported

Trading2

31 Dec

31 Dec

Reported

31 Dec

31 Dec

Underlying

2018

2017

growth

2018

2017

growth

    

$m

    

$m

    

%

    

$m

    

$m

    

%

Fourth Quarter Results1

Revenue

 1,294

 1,278

 1

 1,294

 1,278

 3

Full Year Results1

Revenue

 4,904

 4,765

 3

 4,904

 4,765

 2

Operating/trading profit

 863

 934

 1,123

 1,048

Operating/trading profit margin (%)

 17.6

 19.6

 22.9

 22.0

Cash generated from operations/trading cash flow

 1,108

 1,273

 951

 940

EPS/ EPSA (cents)

 76.0

 87.8

 100.9

 94.5

 

Namal Nawana, Chief Executive Officer of Smith & Nephew, said:

“We accelerated performance across 2018, with 3% underlying revenue growth in both the third and fourth quarters and a 7% uplift in full year trading profit. We start 2019 with a strengthened organisation and a new growth-oriented operating model.”

2018 Full Year Financial Highlights1,2

· Underlying revenue up 2% and trading profit margin up 90bps to 22.9%, in line with guidance

o Reported revenue growth of 3% is after +1% FX impact

o Trading profit margin includes 50bps benefit from one-off legal settlement

o Operating profit margin reflects restructuring costs of $120m, with c.$60m of benefits realised in 2018

· Performance improved across the year, with revenue growth 1% in H1 and 3% in H2

· Strong growth in Reconstruction and Emerging Markets (China growth double-digit), offset by continued softness in Arthroscopic Enabling Technologies and Advanced Wound Bioactives

· Cash conversion ratio 85%; significant balance sheet capacity with 0.8x net debt to adjusted EBITDA ratio

· Tax rate on trading results down 100bps to 16.1%, including provision release (15.1% reported tax rate)

· EPSA up 7% to 100.9¢, reflecting improved trading and lower tax rate (EPS down 13% to 76.0¢ after restructuring and other non-trading costs)

· Full year dividend up 3% to 36.0¢ per share

Strategic Highlights

· New operating model complete from 1 January 2019, led by strengthened leadership team

· Five new strategic imperatives to drive value creation over the medium term established

2019 Guidance1

· Revenue expected to increase 2.5-3.5% underlying (around 1.8-2.8% reported3)

· Trading profit margin expected in 22.8-23.2% range, a 40-80bps improvement excluding one-off 2018 legal gain

· Tax rate on trading results expected to be 19-21%

Analyst conference call

An analyst meeting and conference call to discuss Smith & Nephew’s results for the year ended 31 December 2018 will be held today, Thursday 7 February 2019 at 8.30am GMT / 3.30am EST. This will be webcast live and available for replay shortly after. The details can be found on the Smith & Nephew website at www.smith-nephew.com/results