Steady-Eddie Nephew

Stripping out the £150m write-off of Smith & Nephew's last disastrous acquisitions the company seems to have regained its "steady-Eddie" image, with dull but reassuringly predictable growth.

Before exceptional items, sales and profits pushed ahead 7 per cent last year - which in a market growing at only 1 or 2 per cent represents a solid improvement in market share. Selling tampons, bandages and orthopaedic implants is a steadier business than drug research and development but it shares that industry's healthy margins.

Before putting aside £27m to rationalise the European distribution network, Smith improved the operating return on sales from 17.9 per cent to 18.2 per cent. That pushed underlying profits up from £161.3m to £172.9m from sales of £964.6m (£948.7m).

Including the exceptional loss on the sale of Loptex, the manufacturer of eye implants which Smith bought at the top of the market and has rued ever since, there was a loss per share of 5p compared with last year's 10.6p. Strong cash-flow, which wiped gearing out completely, allowed payment of an increased dividend of 5.28p.

Sales of the main health-care product areas - specialist dressings, modern plaster casts, keyhole surgery equipment and artificial hips and knees - grew by 10 per cent, benefiting from new products and geographic spread which sees Smith operating in top health-care markets.

Consumer products, including Elastoplast plasters and surgical gloves, slowed in the second half but still recorded 7 per cent growth overall.

The flip-side of Smith's impressive return is that growth is dependent on higher sales rather than widening margins. It also puts pressure on the company to acquire more wisely.

With the company prepared to drive gearing up to 100 per cent in the short term, deals worth up to £400m are possible. The focus is likely to be on expanding the portfolio of medical disposables.

In the meantime, sales growth of between 7 and 10 per cent, steady margins and strong cash flow mean that profits will continue to grow at 9 or 10 per cent a year, pretty much in line with the average of the rest of the FT-SE 100 constituents.

Worries include the ability of the same management that freely admits it messed up over Loptex to get it right this time round. The steady growth trend could also look vulnerable if one of Smith's competitors in the US or Europe took fright and discounted its selling prices too heavily. The shares are supported by an above-average yield of 4.7 per cent next year.

Suggested Topics
News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits