# Smith & Nephew Plc delivers Q3 revenue of $1,412 million, 4% growth

- Link: https://www.directorstalkinterviews.com/smith-nephew-plc-delivers-q3-revenue-of-1412-million-4-growth/4121176017
- Published: 2024-10-31T07:43:36+00:00
- Author: Amilia Stone

**Smith & Nephew plc **(LON:SN, NYSE:SNN) trading update for the third quarter ended
28 September 2024.

**Q3 Highlights^(1,2)**

·      Q3 revenue of $1,412 million (Q3 2023: $1,357 million), representing 4.0%
revenue growth (underlying and reported)

o    Excluding China, Group growth was 5.9% (underlying and reported). China impacted
by worse than expected headwinds across our surgical businesses

o    Operational and commercial improvements from 12-Point Plan on track across 
the rest of the business, with financial improvements coming through

·      Orthopaedics revenue up 2.3% (2.4% reported), with US Hip and Knee Implants
both delivering revenue growth

·      Sports Medicine & ENT revenue up 3.9% (3.7% reported), with strong growth
from Sports Medicine across Established Markets partially offset by VBP-related 
headwind in China

·      Advanced Wound Management revenue up 6.5% (underlying and reported), an acceleration
over the first half

**Outlook^(1,2)**

·      For the full year 2024, underlying revenue growth is now expected to be around
4.5% (previously 5.0% to 6.0%), primarily due to the impact of China headwind. For
trading profit margin in 2024, we are now expecting growth of up to 50bps compared
to last year’s 17.5% (previously at least 18.0%), reflecting the reduced operating
leverage from slower revenue growth

·      For 2025, given the updated 2024 outlook and, in particular, uncertainty 
around ongoing China headwinds, we now expect to expand our trading profit margin
significantly to between 19.0% and 20.0%, driven by the continued delivery of the

12-Point Plan improvements

> **Deepak Nath, Chief Executive Officer, said:**
> “We delivered encouraging growth in most segments and markets in the third quarter
> as the 12-Point Plan drove further financial improvements. We are making progress
> in both Hip and Knee Implants in the US, although there is more to do. China VBP
> was a significant headwind that masked Sports Medicine’s strong performance across
> the rest of the world. Advanced Wound Management delivered its best quarter this
> year, with all segments performing well.
> “We continue to deliver on longer term growth drivers, including robotics adoption
> and product innovation, as well as improving productivity. While the revised outlook
> reflects the headwinds across our surgical businesses in China, we remain convinced
> that our transformation to a higher growth company, with the ability to drive 
> operating leverage through to the bottom line, is on the right course.”

**Analyst conference call**

A conference call to discuss Smith & Nephew’s third quarter results will be held
today at 8.30am GMT / 4.30am EDT, details of which are available on the Smith+Nephew
website at https://www.smith-nephew.com/en/who-we-are/investors.

**Forward calendar**

The full year results will be released on 25 February 2025.

**Notes**

_1.   All numbers given are for the quarter or nine months ended 28 September 2024
unless stated otherwise._

_2.   Unless otherwise specified as ‘reported’ all revenue growth throughout this
document is ‘underlying’ after adjusting for the effects of currency translation
and including the comparative impact of acquisitions and excluding disposals. All
percentages compare to the equivalent 2023 period._

_‘Underlying revenue growth’ reconciles to reported revenue growth, the most directly
comparable financial measure calculated in accordance with IFRS, by making two adjustments,
the ‘constant currency exchange effect’ and the ‘acquisitions and disposals effect’,
described below._

_The ‘constant currency exchange effect’ is a measure of the increase/decrease in
revenue resulting from currency movements on non-US Dollar sales and is measured
as the difference between: 1) the increase/decrease in the current year revenue 
translated into US Dollars at the current year average exchange rate and the prior
year revenue translated at the prior year rate; and 2) the increase/decrease being
measured by translating current and prior year revenues into US Dollars using the
prior year closing rate._

_The ‘acquisitions and disposals effect’ is the measure of the impact on revenue
from newly acquired material business combinations and recent material business 
disposals. This is calculated by comparing the current year, constant currency actual
revenue (which includes acquisitions and excludes disposals from the relevant date
of completion) with prior year, constant currency actual revenue, adjusted to include
the results of acquisitions and exclude disposals for the commensurate period in
the prior year. These sales are separately tracked in the Group’s internal reporting
systems and are readily identifiable._

**Third quarter 2024 trading update**

Smith & Nephew third quarter revenue was $1,412 million (Q3 2023: $1,357 million),
representing underlying revenue growth of 4.0%. Reported revenue growth was also
4.0% with no foreign exchange impact. Q3 2024 comprised 63 trading days, in line
with the comparable Q3 period in 2023.

Orthopaedics revenue was up 2.3% (2.4% reported), Sports Medicine & ENT up 3.9% (
3.7% reported), and Advanced Wound Management up 6.5% (6.5% reported).

Revenue growth in our Established Markets was 5.0% (5.2% reported). Within this,
in the US we delivered 4.0% revenue growth on both an underlying and reported basis,
and Other Established Markets revenue was up 6.8% (7.5% reported). Emerging Markets
revenue was down -0.1% (-1.2% reported).

We continued to make progress delivering against the 12-Point Plan. Hip Implants
and Knee Implants both delivered revenue growth in the US reflecting the operational
progress in product supply and sharper commercial execution. However, there is still
more to do in what was an area of significant weakness identified during the diagnostic
phase of the 12-Point Plan. Reconstruction maintained its good momentum in Other
Established Markets, with growth accelerating over the first half.

Sports Medicine continued to deliver strong growth across the Established Markets,
and Advanced Wound Management delivered its best quarter this year, with all segments
contributing.

Emerging Markets performance reflected a weaker than expected quarter in China across
our surgical businesses. In Sports Medicine, we saw the expected price impact of
the Volume Based Procurement (VBP) programme, but with the related volume benefits
yet to come through. In Orthopaedics, slower in-market demand and consequent impact
on our channel were also a headwind. We expect both these China headwinds will continue
into 2025. Excluding China, Group growth for the quarter was 5.9% on both an underlying
and reported basis.

**New product launches**

We maintained our high cadence of innovation in the quarter, expanding our portfolio
with launches that address unmet clinical needs and support our higher growth ambitions.

We announced 510(k) clearance and completed the first cases for the CATALYSTEM^(
◊) Primary Hip System. The system is designed to address the evolving demands of
primary hip surgery including the increased adoption of anterior approach procedures
and the expanding role of Ambulatory Surgery Centers (ASCs).

We also continued to build our portfolio of tools to support surgeons. We introduced
TOTAL ANKLE^(◊) Patient-Matched Guides to help surgeons plan and perform total ankle
replacement procedures. Total ankle replacements are historically uncommon, but 
this is a high-growth market bolstered by the rising prevalence of osteoarthritis
in adults and influenced by growing patient preference for joint preservation and
restoration. After quarter end we announced a co-marketing agreement with JointVue
for its patented OrthoSonic™ 3D Surgery Planning Technology, offering surgeons using
our CORI^(◊) Surgical System for robotic-assisted knee arthroplasty opportunities
to improve patient satisfaction and operating room efficiency.

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