The healthcare group, which stretches from Elastoplast to artificial skin, also disappointed with preliminary figures at the bottom end of expectations. Pre-tax profits crept ahead 1 per cent to pounds 179m in the 12 months to December.
Despite its tinge of biotechnology, many of Smith's products, which include the humble plaster of Paris, sell into very difficult markets. The US, accounting for just over two fifths of sales, remains a running sore. The consolidation of customer groups like hospitals and healthcare management organisations is squeezing margins. Despite some cautious optimism at the half-way stage, average selling prices still slipped 3 per cent in 1996. Mr Robinson compares the medical products market with the two- year price-cutting trauma the pharmaceutical industry went through in the early 1990s and suggests on that basis his business could be enjoying inflation-led price rises by 1998.
That could prove optimistic as long as Europe is such a mixed bag. Smith & Nephew is outpacing the market in Germany, which remains a target for some of its pounds 500m acquisition firepower, but France has seen price cuts of up to 15 per cent. In the UKsales growth slowed from 12 to 3 per cent as no new products from Smith were approved for prescription use and the group faced competition from parallel imports and Far Eastern competition.
Given that background, Smith is doing a decent job. In the US, for instance, overall sales grew 9 per cent against a 3 per cent decline in the market. In wound dressings and the like, the group has soared from number six position to number three in three years on the back of products like its Allevyn dressings. Acufex, the maker of tools for minimal invasive surgery, is looking a good buy, helping to power the 13 per cent underlying growth in endoscopy sales last year.
But currency and the pounds 5m cost of launching the Dermagraft artificial skin product later this year is likely to keep profits flat in 1997, so the forward p/e remains an unexciting 16. The main hope remains Dermagraft, which is on track and could yet surprise. Hold.