We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Smith & Nephew plc (SN.) Ordinary USD0.20

Sell:993.60p Buy:994.00p 0 Change: No change
FTSE 100:0.26%
Market closed Prices as at close on 28 March 2024 Prices delayed by at least 15 minutes | Switch to live prices |
Ex-dividend
Sell:993.60p
Buy:994.00p
Change: No change
Market closed Prices as at close on 28 March 2024 Prices delayed by at least 15 minutes | Switch to live prices |
Ex-dividend
Sell:993.60p
Buy:994.00p
Change: No change
Market closed Prices as at close on 28 March 2024 Prices delayed by at least 15 minutes | Switch to live prices |
Ex-dividend
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

HL comment (27 February 2024)

Smith & Nephew has reported 2023 revenue of $5.5bn, up 6.4% on an underlying basis. There was broad based growth across all business units and territories. Sports Medicine & Ear, Nose & Throat (ENT) was the stand-out division with sales up 10% despite headwinds from a slow Chinese market.

Underlying operating profit grew by 7.6% to $970mn, with the margin expanding from 17.3% to 17.5% as productivity improvements more than offset cost inflation.

Free cash flow improved from $114mn to $181mn. Excluding lease liabilities, the Group’s net debt totalled $2.6bn.

For 2024, underlying revenue growth is expected to land between 5% and 6% and underlying operating margins to reach at least 18%.

The Board has recommended a final dividend of 23.1 cents per share, unchanged from last year.

The shares were up 4.4% following the announcement.

Our view

Smith & Nephew posted a solid set of 2023 numbers and looks set to make further progress in 2024.

The medical device maker operates through three segments; Orthopaedics - offering hip and knee replacements, Sports Medicine - a soft tissue repair business, and Wound Management - providing materials to manage injuries and prevent infection.

Demographic trends and widespread backlogs continue to underpin the market for elective surgeries. But there are some signs that the pent-up demand built up during the COVID-19 pandemic is starting to normalise. Smith & Nephew is not just sitting and waiting for the market to drive its sales growth. It's continuing to develop, acquire and launch new products, cross-sell its wide product range across its territories, and introduce existing products into new areas of treatment.

We see innovation as its biggest weapon for targeting higher market share. In Orthopaedics, new product lines and capabilities are being added to the CORI robotic surgery platform, where the group is seeing accelerated adoption by clinicians. Another area where the group is a thought leader is negative pressure wound therapy. Here, the Group’s products continue to evolve as management target a multi-year growth opportunity.

But while there are some structural growth opportunities, the group does face some challenges.

A change to the way China buys its hip and knee replacement devices has caused some tough reading for investors over the last year. Comparative periods should get easier from here, but the underlying market remains weak and management expects this to remain a headwind to margins in the current year and beyond.

It's proving harder than expected to rebuild margins. A good second-half performance helped the Group reach its 2023 target of 17.5% for underlying operating margins, but they are still well below pre-pandemic levels.

A target of 18% for 2024 is materially behind the original recovery plan, and there’s still a lot of work to do if Smith & Nephew is to reach the previously lowered target of at least 20% for 2025. This is reflected in the valuation which sits below the long-term average. Investors could be rewarded if Smith & Nephew makes good on its promise. But the market will need to see further evidence of improved productivity. Otherwise sentiment is unlikely to continue its upward momentum.

Market forecasts suggest a prospective yield of 2.9%, but as ever there can be no guarantees. And given the relatively high debt levels and drive for product innovation, there may be limited scope to increase payouts to shareholders.

Smith & Nephew key facts

  • Forward price/earnings ratio (next 12 months): 13.6

  • Ten year average forward price/earnings ratio: 18.4

  • Prospective dividend yield (next 12 months): 2.9%

  • Ten year average prospective dividend yield): 2.1%

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.


Previous Smith & Nephew plc updates

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used.

The London Stock Exchange does not disclose whether a trade is a buy or a sell so this data is estimated based on the trade price received and the LSE-quoted mid-price at the point the trade is placed. It should only be considered an indication and not a recommendation.

Trades priced above the mid-price at the time the trade is placed are labelled as a buy; those priced below the mid-price are sells; and those priced close to the mid-price or declared late are labelled 'N/A'.