Smith & Nephew shares tumble on market slowdown fears

Smith & Nephew, the FTSE 100 manufacturer of artificial hips and knees, saw £500m wiped from its market value yesterday after revealing a slowdown in its markets and a disappointing product launch.

The company's interim results were below even the most conservative forecasts, the first "miss" since Sir Christopher O'Donnell became chief executive and reshaped the historic medical supplier in 1998.

S&N'sshares plunged 52.5p to 481p, valuing the company at £4.5bn. Sir Christopher blamed a skittish market that "will jump at shadows" and said he was "confident" of matching the City's forecasts for the full year.

He said the main factor in the missed forecasts was poor sales of a new cream for ulcers, bed sores and burns. The supplier of S&N's previous product failed regulatory inspections and had to be replaced. "The new product has some slight clinical differences, and take-up has been slow," Sir Christopher said.

Sales in the US woundcare division were down a worse-than-expected 15 per cent. However, investors were also spooked by a slowdown in S&N's largest and fastest-growing division, orthopaedics. The demand for replacement joints has surged because of the ageing population and improvements in product design, but there have been more cautious comments recently from S&N's rivals, Zimmer and Stryker. They have suggested that competition is getting tougher.

S&N shares had fallen 4 per cent earlier this week on fears that the growth of the orthopaedics market had peaked. The company said its US sales of artificial joints grew 18 per cent in the last three months, compared with 23 per cent in the first quarter, but it was still outperforming the market as a whole. It characterised the latest quarter as a "blip" and Sir Christopher said: "We can argue over whether the US market is up 12 per cent or 13 per cent, but the fundamentals haven't changed. Artificial joints is a growing market."

Overall, S&N's sales in the first half of 2004 were up 6 per cent to £609.2m, held back by the weak dollar. Pre-tax profits were 22 per cent higher at £119.4m.

Analysts are forecasting about £260m for the year as a whole and some suggested the company could now struggle to recover lost ground. "They have left themselves with a hell of a lot to do," Seb Jantet, of Investec Securities, said.

Others who met the company, though, were confident new product launches will push up the full-year numbers. Peter Cartwright, of Williams de Broe, said: "Our questioning was sceptical, maybe even hostile...but they gave sensible answers and their confidence for the second half looks plausible."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future