UK's Smith+Nephew retains forecast for 5-6% revenue growth this year

By Prerna Bedi

(Reuters) -British medical equipment maker Smith+Nephew retained its annual revenue and margin forecasts on Wednesday after posting a near 3% rise in revenue in the first quarter.

The group forecast revenue to grow between 5% and 6% this year with a trading margin of 18%, against analysts' expectations for revenue growth of 5.4% and a trading margin of 18.2%.

Shares in the firm, which makes orthopaedic implants and prosthetics, wound dressings, and other surgical technologies, were up 3.7% at 10.15 pounds ($12.61) by 0818 GMT. They remain down almost 6% this year.

"(Smith+Nephew's management) has gained credibility on setting guidance, despite the recent pullback in the shares driven by the unexpected weakness in U.S. knees and slow start to 2024," Jefferies analysts said in a note.

The Watford, UK-headquartered group posted revenue of $1.39 billion for the three months ended March 30, up 2.9% on an underlying basis. Analysts had on average expected revenue of $1.40 billion, according to a company-compiled consensus.

"Revenue growth in the first quarter was driven by solid performance in our orthopaedics and sports medicine & ENT businesses, partially offset by some anticipated softness in advanced wound management," CEO Deepak Nath said in a statement.

The company also forecast a 70 basis point hit to its profit margin this year from China's volume-based procurement (VBP) programme, a bulk-buy drug procurement scheme aimed at cutting prices for medical products in the country.

It expects to offset the impact from VBP and the consequent pressure on prices through measures such as boosting productivity, Nath told Reuters in an interview.

The impact of the scheme, due to commence this month, is expected to ease off next year, Smith+Nephew said.

Nath added that the firm, which is present in more than 100 countries, had redirected shipments after facing delays in the Red Sea amid ongoing tensions in the Middle East, but that "it wasn't a big factor" for the company.

($1 = 0.8009 pounds)

(Reporting by Prerna Bedi in Bengaluru; Editing by Rashmi Aich, Subhranshu Sahu and Jan Harvey)