November 1, 2018 / 8:43 AM / a year ago

Demand for new hips to boost Smith & Nephew profit margin

LONDON (Reuters) - Britain’s Smith & Nephew (SN.L) expects its trading profit margin to be higher this year than last on a better performance for its hips franchise, boosting its shares.

Shares in the artificial hips and knees maker jumped 5.2 percent to 1,340 pence in early trading on Thursday after the positive update.

“Underlying growth was solid, and there was a welcome return to good growth in the hips business,” Bernstein analysts said.

The company forecast that for 2018 its underlying revenue would be in the lower half of the 2 percent to 3 percent range, but said that 2018’s trading profit margin would benefit from improved cost controls and a favourable legal settlement.

To help secure future growth, Smith & Nephew also said it would rearrange its commercial framework, appointing presidents of three franchises to help add new sales.

Smith & Nephew posted third-quarter revenue of $1.17 billion (£906 million), up 3 percent on the same period last year on an underlying basis, boosted by strong demand in the United States and emerging markets.

Hip reconstruction results buoyed the third quarter, said analysts at Investec.

“This is a particularly strong performance in hips, suggesting the company is taking share,” they said in a note.

Reporting by Sarah Young; editing by Kate Holton

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