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Smith & Nephew says Covid impact to remain in H1 as profits fall

Thu 18 February 2021 07:04 | A A A

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(Sharecast News) - Medical products business Smith & Nephew warned the Covid-19 pandemic impact was likely to continue into the first half of 2021 with uncertainty on the timing of recovery, as it reported a sharp fall in full-year profit.

Group trading profit fell 42% to $683m, reflecting as the pandemic forced the cancellation of elective procedures, lower gross margins resulting from factory underutilisation and an increase in provisions.

Revenue for the 12 months to December 31 declined 11.2% to $4.56bn. The board declared a final dividend of 23.1cents a share for a an unchanged total of 37.5cents.

"The impact of Covid-19 is likely to continue during the first half of 2021, and while there is still uncertainty on the timing of recovery, we have maintained our readiness and ability to respond," the company said.

"In terms of revenue, we expect to deliver substantial underlying growth in 2021 compared to 2020. Within this, we expect our hip implants business to continue to outperform knee implants, our sports medicine & ear nose and throat franchise to perform strongly as markets recover, and for advanced wound management's growth trajectory to improve as recent commercial changes continue to deliver benefits."

In terms of profit margin, we expect an improved performance in 2021 over the prior year. Relative to 2019 (the year before COVID-19), we anticipate a headwind from the continuing impact of reduced production volumes on gross margin as well as dilution of around 100bps from the increased investment in R&D and around 150bps from the acquisitions completed in 2020 and so far in 2021. Foreign exchange will be an additional headwind of around 100bps.

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