Smith & Nephew launches $500m buyback after profit rise
Smith & Nephew will start the buyback in the second half of the year as it reported that revenues for the second quarter rose 7.8 per cent to $1.55 billion, helping lift its shares 165p or 14 per cent to £13.19 in afternoon trading.
Revenues for the half-year were up 4.7 per cent to $2.96 billion, with profit before tax rising 43 per cent to $362 million.
Cevian Capital emerged as an activist investor in Smith & Nephew last July and stated that the group owned 'fundamentally attractive businesses' but needed to 'realise this potential' of its business portfolio.
The activist investor, which is backed by the American billionaire Carl Icahn, has been increasing its holdings held through a Jersey-based vehicle and owns a stake of 8.5 per cent. The Swedish firm is known for running campaigns at a number of large listed groups in Europe, including Aviva, Pearson and Volvo.
Smith & Nephew traces its roots to a chemist shop that opened in Kingston upon Hull in 1856. The company, based in Watford, Hertfordshire, now operates wound care and sports medicine businesses, and is setting up a research and development facility in Hull. The business operates in about a hundred countries and employs about 17,000 people.
Deepak Nath, chief executive of Smith & Nephew, said the operational improvements put in place at the group were 'increasingly translating into better financial performance'. Nath has been implementing a three-year turnaround plan at the group after becoming chief executive in April 2022.
Smith & Nephew had been facing challenges with its orthopaedics business, which is the biggest driver of revenues, but had been been weighed down by slower demand for hip and knee implants from Chinese consumers. In the interim results statement, Smith & Nephew said it was seeing a 'weakening of the headwinds from China'.
The orthopaedics division saw revenues increase by 5.8 per cent to $615 million over the six months to June 28. Revenues in the sports medicine division increased by 6.8 per cent to $479 million, while revenues in the advanced wound management business were up 11.4 per cent to $459 million.
Nath said: 'We are delivering sustained higher revenues growth, increased profitability and better cash generation. As expected, revenue growth accelerated in the second quarter, with all regions and business units contributing.
'We are on track for our full-year revenue growth target, a significant step-up in profitability and strong free-cash generation, and are announcing a $500 million share buyback. There is more to be done, but the transformation of Smith & Nephew is starting to deliver substantial value.'
City analysts were expecting underlying revenue growth of about 4.5 per cent for the second quarter, and the group delivered underlying revenue growth, which reports revenues adjusted for currency exchange effects and the impacts of acquisitions and disposals effect, of 6.7 per cent.
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