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Smith & Nephew profits plummet as healthcare company impacted by Covid-19

Smith and Nephew Thursday’s biggest faller on the FTSE 100

Smith & Nephew, the medical equipment and manufacturing company, announced a 7.1% fall in its underlying revenue during Q4 of 2020. Down to $1.3bn from $1.4bn over the same period of 2019. 

Over the full year, underlying revenue was down to $4.6bn, with pre-tax profit falling to $246m from $743m in 2019. 

Heading into lunchtime Smith & Nephew’s share price is down 5% on yesterday’s close to 1,487.93p, and is the day’s top faller on the FTSE 100 so far. The company’s full-year dividend stayed the same at 37.5 cents. 

Russ Mould, investment director at AJ Bell, said there are often misconceptions about the impact of the coronavirus pandemic on the healthcare sector.  

“Because of the focus Covid-19 has placed on the healthcare sector it would be easy to assume the pandemic had acted as a positive driver for earnings across the board,” Mould said.

“However, as today’s results from Smith & Nephew reveal that is not necessarily the case. This is because the coronavirus response has swamped other areas of patient care, particularly the elective surgeries which require Smith & Nephew’s replacement prosthetic hips and knees.”

Roland Diggleman, chief executive of Smith & Nephew, reflected on the year gone, while outlining the company’s areas of focus for the remainder of 2021.

“In 2020 we continued to strengthen Smith & Nephew through increased investment in R&D, new product launches and strategic acquisitions in our higher-growth segments. We achieved this while also managing unprecedented disruption from COVID-19. The resilience of the business and strength of the balance sheet also meant we are able to maintain our progressive dividend policy,” said Diggelmann.

“We start 2021 with three clear priorities: to return to top-line growth and recapture momentum; to drive further operational improvement, and to continue to respond effectively to COVID-19. We will build on the progress we are starting to make in areas where we have recently invested and introduced innovation. We will again invest more in R&D and I am excited by the pipeline of new technologies approaching launch, and by the potential of our recent acquisitions.”

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