12/9/2025
Smith & Nephew Reveals Strategic Plan, but Analysts Urge Caution
The Times (London) (12/09/25) Ralph, Alex
New mid-term financial growth forecasts from Smith & Nephew (SNN), including plans to keep its largest division, failed to lift the share price of the FTSE 100 medical equipment company amid a spike in short sellers and pressure from a big investor. At a capital markets event in London on Monday, Smith & Nephew unveiled revenue and profit targets for 2028 and said each of its three business divisions would contribute, including orthopaedics, which would return to “market-level growth.” The strategy update follows the end of a three-year turnaround drive under Deepak Nath, the chief executive, and lingering questions over the group’s optimum structure. The performance of Smith & Nephew’s orthopaedics business, its largest, has come under greater scrutiny since Cevian Capital, one of Europe’s largest investors, emerged with a large stake in the company last year. Smith & Nephew, based in Watford, is one of the world’s biggest and oldest medical equipment makers. The group employs close to 17,000 people in about 100 countries. In Hull, where it traces its roots to a chemist shop in 1856, it is developing a new research and development and manufacturing facility. Nath, 53, former president of Siemens Healthineers diagnostics business, said, “Over the next three years, every business unit will contribute uniquely to our value creation. Sports medicine, advanced wound management and ear, nose and throat will drive above-market growth through innovation and disciplined execution, while orthopaedics, operating in a more mature segment, will return to delivering market-level growth, supporting margin expansion, and enhanced returns.” Smith & Nephew said it expected to deliver a “further step-change” in financial performance between 2025 and 2028, with 6% to 7% annual underlying revenue growth, “significantly above” its historical average. It is also targeting 9% to 10% annual trading profit over that period and more than $1 billion in free cash flow in 2028. Over the past three years Smith & Nephew has been simplifying its portfolio and said that it had identified further room to slim-down its product range. It estimates it can cut its gross inventory by about $500 million, and will book a non-cash provision in its 2025 accounts of about $200 million as part of the process. The strategy was presented to institutional investors and financial analysts in London, ahead of an additional capital markets day in New York on Thursday. The US is the group’s largest market and where senior executives are based. Shares in Smith & Nephew rose on the London Stock Exchange, before falling back in dealings later in the session, to trade down 4p, or 0.32%, at £12.61, valuing the group at about £10.7 billion. The stock remains up more than a quarter this year, but the combined short position in Smith & Nephew has jumped to 3.30% in recent months, with five hedge funds known to be betting against the company’s shares. Cevian Capital, one of Europe’s largest investors, has built a stake of about 8.8% in the company since it publicly emerged with a holding in July last year via a Jersey-based vehicle. Analysts at UBS said Smith & Nephew’s mid-term guidance implied about 4% upgrades to consensus forecasts for revenue and trading profit by 2028. They added, however, that the mid-term revenue guidance of 6% to 7% “looks ambitious to us, and we think some caution is warranted given the company has achieved more than 6% only six times in the past 20 years, and only two times in the past 15 years, one of which was 2021 Covid recovery.”
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