The British medical device company said profits for the 3 months ended March 30 were $143 million, or 79¢ per share, on sales of $1.08 billion, for a bottom-line slide of 10.1% and a sales decline of 0.4% compared with Q1 2012.
Adjusted to exclude reorganization and acquisition costs, trading profits were $241 million, or 92.5¢ per share, down 4.4%.
"Smith & Nephew has consistently delivered revenue and earnings growth together with strong cash generation in the challenging markets of the last few years. In light of this, and our confidence in the continued execution of our strategic priorities, we have undertaken a major review of our capital allocation framework," CEO Olivier Bohuon said in prepared remarks."We will continue to invest in our growth products, franchises and geographies and maintain adequate headroom for further significant acquisitions. We have increased the level of dividend and moved to a progressive policy. Further to these commitments, today we are announcing the start of a share buy-back programme to return $300 million of surplus capital to our shareholders."
The company said it agreed to acquire Adler Mediequip, "a leading manufacturer and distributor of mid-tier, orthopaedic trauma products for the Indian market," and its Sushrut Surgicals brand, according to a press release. Along with the buyout of longtime Brazilian distribution partner Pró Cirurgia Especializada earlier this month, the acquisition spend is about $70 million, Smith & Nephew said.
The outlook for the rest of the year is unchanged, new CFO Julie Brown told analysts during a conference call.
"We do expect, however, to see some variation in performance at the product franchise level. In particular, Healthpoint is performing most strongly than we previously guided, and conversely, we’re seeing slightly lower hip and knee growth relative to the market than we had expected. In terms of margin, as you know, we expect to be below the 2012 level," Brown said. "We expect the revenue trends of Q1 to continue into Q2. We expect the 2nd half of the year to be stronger, as we benefit from new product introductions. The 2 sales days we lost in Q1 we will make up for in Q2 and in Q4 this year. And we expect Healthpoint growth to be over 20% for the full year. In terms of margin, the cost of this accelerated investment will start to come through in Q2, ahead of the benefits."
SNN shares were trading at $58.23 each as of about 1 p.m. today, up 2.0%.