Smith & Nephew Strong Financial Performance, But 7% Work Force Reduction To Follow.

Smith & Nephew released its full year results last week and it was indeed an interesting picture. The company describes its position as “good progress, building a business fit and effective for the future.”

Overall company sales rose 4% over prior year with an underlying 3% growth in Q4. All divisions showed some growth although the picture was not consistent across divisions or geographies. Advanced Wound Management in Q4 was flat in USA, grew 9% in Europe and 12% in rest of world (ROW). This contrasted with Orthopaedics which was flat in USA, declined 7% in Europe and grew 10% in ROW. Endoscopy sales grew in all regions.

Commenting on the fourth quarter, Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said: “I am pleased to report that we grew revenue and exceeded our Q4 trading profit margin expectation. Our Endoscopy and Advanced Wound Management businesses delivered strong revenue growth and excellent trading profit margins, with Advanced Wound Management growing at more than twice the market rate. In Orthopaedics, our rigorous management actions led to a significant improvement in Q4

“We also made good progress delivering against our strategic priorities, reaching important milestones in finalising management teams and streamlining our operations. We are building momentum every day and I am confident that the result will be a business that is stronger, growing faster, better balanced and fit and effective for the future.”

Coinciding with the financial reports, the company has announced it will reduce its global workforce by 7 percent over the next three years. We’ve covered the ongoing hints of job losses associated with restructuring and efficiency measures on our pages quite extensively including this one on December reporting the loss of 80 jobs in its Memphis facility, so this is not a huge surprise.

This time around the company has indicated that the majority of the structural changes will impact its general and administration expenses and includes about 220 positions lost to date. It seems that Orthopaedics remains in the spotlight as it struggles to attain decent margins, a situation likely to be behind cost reduction measures. Though the company reported strong revenue growth for the Q3 period last year, CEO Olivier Bohuon released a statement at the time saying he was “disappointed with our margin performance, with Orthopaedics overshadowing excellent performances in Endoscopy and Advanced Wound Management. We are taking the steps necessary to reduce a cost base in Orthopaedics that is too high for ongoing market conditions.”

Source: Smith & Nephew