The Investment Column: Smith & Nephew

Smith & Nephew

FOR A company that specialises in medical issues such as wound management, it is ironic that has been a sickly beast. The shares have been limping along at 200p or less for some time so it was with relief that Chris O'Donnell, the chief executive, announced plans in December to focus on three sectors. The key areas will be wound management, orthopaedics such as hip and knee joints and endoscopy, which covers micro-surgery.

Long-suffering investors were given the glimmer of a reward for their patience yesterday with an upbeat briefing to analysts ahead of the company's close season before its interim results. Underlying sales growth is up 6.5 per cent with margins also improving and cost-cutting measures on track. The challenge is to turn this short-term improvement into a longer term trend. Some pruning is still likely with non-core businesses such as consumer bandages (Elastoplast) likely to be sold.

The shares slipped 2p to 183p yesterday putting the stock on a forward- multiple of 17. This is a discount to the peer group and the market. They are worth holding on to for a re-rating.