Earnings In Brief
This article was originally published in The Gray Sheet
Executive Summary
Smith & Nephew finds substandard sales practices at Plus Orthopedics: Unethical sales practices uncovered at Plus Orthopedics, which was recently acquired by orthopedic device maker Smith & Nephew, will reduce revenues by roughly $100 million in 2008, Smith & Nephew announces in conjunction with first-quarter financial results May 1. While integrating Plus, purchased for $889 million last June, S&N discovered sales practices in Europe that ran counter to its "ethics and policies," primarily in Greece, CEO David Illingworth disclosed during the firm's earnings call. "We're sensitive about discussing these in any detail, as we're still investigating some of the issues," Illingworth noted. The resulting revenue loss for S&N, totaling $16 million-$20 million in the first quarter, primarily relates to reconstruction and trauma products. Despite the "challenging" quarter, S&N still expects "significant benefits to come" from its purchase of Swiss-based Plus (1"The Gray Sheet" March 19, 2007, p. 17). Overall, S&N reported revenue of $911 million for the quarter, representing reported growth of 22% from a year ago and underlying growth of 2% after accounting for the effect of acquisitions and currency exchange rates. Excluding Plus, underlying S&N growth was 5%, S&N notes. The London-based company reported profits of $83 million for the quarter, down 8.8% from a year ago