Smith & Nephew hikes divi after beating forecasts in Q4

Medical technology group Smith & Nephew has raised its dividend by a half after a strong finish to 2012, which saw the company beat forecasts for both revenue and profit in the fourth quarter.

Medical technology group Smith & Nephew has raised its dividend by a half after a strong finish to 2012, which saw the company beat forecasts for both revenue and profit in the fourth quarter.

The board recommended a 50% increase in the final dividend to 16.2 cents per share, "reflecting our confidence in continued strategic progress and our financial strength". This pushed the total dividend for 2012 to 26.1 cents per share, also up 50%.

Revenues totalled $1,077m in the final three months of last year, down from $1,106m on a reported basis the year before due to currency exchange rates and disposals, but ahead of the consensus estimate of $1,066m. On an underlying basis, revenues increased by 3.0% year-on-year.

Underlying trading profit during the quarter increased by 2.0% to $272m, down slightly on a reported basis but still above forecasts for $260m. The company was also able to raise its trading profit margin by 10 basis points (bp) year-on-year to 25.3%.

Commenting on the results, Chief Executive Officer Olivier Bohuon said: "Smith & Nephew finished the year strongly, with both underlying Q4 revenue and trading profit up on the prior year and the completion of the Healthpoint Biotherapeutics acquisition.

"Advanced Wound Management grew at well above the market rate and the Group delivered double digit growth in the emerging markets. It was also pleasing that our Trauma performance improved."

On an underlying basis for the full year, revenues increased 2.0% to $4,137m, while trading profit rose 6% to $965m. Margins were up 80bp at 23.3%, which the company said reflected the early benefits of its 'Strategic Priorities' plan, "in particular restructuring the group to give us the right commercial models and cost structure."

Net debt rose to $288m by the end of the period (end-2011: $138m), partly due to the $782m acquisition of Healthpoint.

OutlookThe firm said that there was little change in the business environment in the Established Markets during the period, with Europe in particular continuing to be challenging. However, Emerging and International Markets delivered 14% growth and China saw revenues increase by an impressive 30%.

These market conditions are expected to be similar in 2013, according to the group's outlook statement.

However, margins are expected to fall year-on-year due to the effect of the Healthpoint acquisition and the US Medical Device excise tax.

The company said: "Smith & Nephew exited 2012 with a much stronger platform than we entered the year. In 2013 we will continue to focus on our Strategic Priorities to deliver greater value for our Company and stakeholders."

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