Smith & Nephew beats US gloom: Increased market share wins top-four place

SMITH & NEPHEW, which specialises in healthcare products such as high-tech wound dressings, is weathering tougher conditions in the US, its largest market, better than originally expected.

The company has increased its market share in North America despite competitive pressures which have seen purchasers increasingly congregating in large buying groups to give them the muscle to negotiate bigger discounts.

Underlying growth in 1993, after adjusting for favourable currency fluctuations, was 7 per cent in North America, giving sales of pounds 428m and making it one of the top four medical supplies groups.

Particularly strong was non-elective surgery, where growth was 14 per cent. Non-elective surgery has been less affected by structural change than elective surgery - items such as hip replacements.

Underlying growth of 7 per cent was also achieved in Continental Europe to give sales of pounds 192m, though in the UK sales of pounds 155m were flat.

The fastest expanding areas are the new markets of Asia and Australia, where growth of 13 per cent took sales to pounds 157m. Growth in the very new markets of Japan and China was particularly impressive.

As a result health care achieved trading profits of pounds 141.7m, up from pounds 119.2m in 1992, on sales that rose from pounds 662m to pounds 782m.

The consumer division did less well, with turnover up only fractionally at pounds 150m and trading profits down from pounds 22.5m to pounds 19.9m.

Total sales of pounds 949m were 11 per cent higher, giving pre-tax profits up 16 per cent at pounds 170.6m. The underlying growth after stripping out currency factors was 7 per cent in sales and 8 per cent in profits.

Ignoring exceptional profits of pounds 10.1m from the sale of the Australian plastics business and the UK ophthalmic solutions business, less an anticipated pounds 2.8m loss on the recent disposal of the US dental needles business, pre-tax profits were up 16 per cent at pounds 163.8m.

Cost savings, plus the sale of low- margin businesses, helped to push margins up from 16.5 to 17.2 per cent. Earnings per share grew by only 10 per cent to 10.6p because of a higher tax charge at 33 per cent. The final dividend is 3.02p, giving a total up 6 per cent at 4.91p.

The figures were in line with expectations and the shares ended 1p higher at 144.5p.

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