21 February 2023
If you are covering Smith & Nephew’s latest financial results, please find below a comment from Sheena Berry, equity research analyst at Quilter Cheviot:
“Smith & Nephew had a solid end to 2022 with underlying sales growth of 6.8% in Q4. The results themselves are largely in line with expectations and it is good to see no divergence from the market on the 2023 outlook.
“Smith & Nephew, however, has struggled to deliver consistent growth and margin expansion over an extended period of time now. It is hoped that the two year 12-point plan announced in 2022 will improve business performance, but there remain some key challenges if this is to be achieved. Specifically, Smith & Nephew has not been immune to shortages of some input materials and staff shortages within healthcare systems. These aren’t exactly issues that will be fixed overnight.
“As such, the medium-term margin target has been cut, which was well anticipated. Its margin is now expected to be at least 20% by 2025, compared to previous guidance of 21% by 2024. Smith & Nephew’s peers have flagged similar margin pressures previously, so it is no surprise, but gives a reminder of the difficult environment even defensive healthcare stocks are operating in.”
