- First half earnings beat
- New $500 million share buyback
- Dividend up 4.2%
Medical products group Smith & Nephew (SN.) jumped as much as 15% to top the FTSE leaderboard after revealing first half profit ahead of expectations and announcing a new $500 million share buyback.
The shares were on track for their biggest one-day gain since November 2020, scaling a fresh 12-month high of £13.38, taking the year-to-date advance to around a third.
CEO Deepak Nath enthused: ‘We are delivering sustained higher revenue growth, increased profitability and better cash generation. As expected, revenue growth accelerated in the second quarter, with all regions and business units contributing.
‘We saw a quarter-on-quarter improvement in our Orthopaedics business, and this was the fourth consecutive quarter of sequential improvement from US Reconstruction & Robotics on an average daily sales basis.’
EARNINGS BEAT & NEW BUYBACK
The company said it is on track to achieve its underlying full year revenue growth target of around 5% with a ‘step-up’ in profitability and free-cash generation.
Consequently, the board announced a new $500 million share buyback in the second half, which will be made without compromising growth plans and while retaining leverage targets, the company said.
First half revenue to 30 June was up 4.7% to $2.96 billion including a 0.3% foreign exchange headwind and fewer trading days versus the prior year. Trading profit was up 11.2% to $523 million, ahead of consensus forecasts of $496 million.
Cash generated from operations was up 54% to $568 million with trading cash flow up 71.5% to $487 million, representing a conversion ratio of 93%, up from 60% in the first half of 2024.
Restructuring costs reduced by $54 million to just $8 million as the company nears the completion of its 12-point plan to improve operations.
RETAINED GUIDANCE
The company announced a 4.2% increase in the interim dividend to $0.15 per share. Despite the strong half the company left full year guidance unchanged although this includes a $15 million to $20 million expected impact from tariffs, as previously announced.
The firm expects underlying revenue growth of circa 5% and an expanded trading profit margin in the 19% to 20% range.
