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A restructuring that claimed the jobs of nearly 800 staff and cut $150m in costs has offset a fall in demand for artificial hips at Smith & Nephew.
The FTSE 100 medical technology company on Thursday reported a 2 per cent increase in first quarter pre-tax profits to $233m, in spite of revenues staying relatively flat year-on-year at $1.1bn.
S&N, which also focuses on wound care and sports medicine, said that revenues from hip replacements fell by 2 per cent year-on-year in the three months to March 31, following problems with metal-on-metal implants.
However, knee replacement sales rose by 6 per cent in the quarter as more patients chose to have the surgery.
“Smith & Nephew has had a good first quarter. We saw the first results of our actions to make Smith & Nephew more fit and effective,” said Olivier Bohuon, S&N chief executive.
“Our plans to progress the structural changes, additional investments and, of course, greater efficiencies, are now under way.”
S&N’s orthopaedics division has struggled during the economic downturn as cash-strapped consumers postponed elective surgery, such as knee, hip and shoulder reconstructions.
In response, S&N has focused its attentions on increasing its sales in emerging markets and now manufactures more of its artificial hips and knees in low-cost countries such as China.
The group also moved to relieve pressure on margins by axing 770 jobs – 7 per cent of its workforce – as part of a restructuring to save $150m in costs.
Sales from S&N’s wound care business rose 5 per cent year-on-year to $240m in the quarter, while revenue from its surgical devices unit increased 3 per cent to $839m.
Diluted earnings per share rose from 17.4 cents to 17.9 cents and no dividend was paid.
Net debt fell from $138m at the year end to $28m, and the group said it was on track to turn cash positive in the first half.
David Adlington at JPMorgan Cazenove said S&N’s results were “a decent set of numbers with more for bulls [knees, margins] than bears. We expect a relief rally that could send the shares towards the top of its recent trading range.”
S&N shares rose 3.3 per cent, or 20p, to 625.5p.