February 12, 2009 / 7:33 AM / 11 years ago

UPDATE 3-Smith & Nephew year meets forecasts, shares up

* Sales $3.8 billion, in line with consensus

* Adjusted EPS 55.6 cents, vs consensus of 55 cents * Says long-term fundamentals of sector still favourable

* Earnings improvement programme still on track

* CEO has not seen reductions in patient numbers so far

* Shares rise as much as 7 percent

(Adds chief executive comment, share price)

LONDON, Feb 12 (Reuters) - Europe’s biggest medical device maker Smith & Nephew’s (SN.L) full-year sales and earnings met forecasts, allaying fears of cash-strapped patients delaying orthopaedic procedures and boosting its shares on Thursday.

Chief executive David Illingworth told reporters the company has seen the effect of the global economic downturn in falls in the sales of capital equipment to hospitals but patient numbers remain strong.

“There have been ... reports that we’ve read about some of our competition commenting that possibly they are seeing a bit of a weakening on the fourth quarter in patient volumes, but we have not seen that in our numbers,” he said.

Smith & Nephew’s 2008 sales rose 13 percent to $3.8 billion, while adjusted earnings per share rose 6.9 percent to 55.6 cents, just above the consensus forecast for 55 cents.

Illingworth predicted the endoscopy section would see a weakening of demand in 2009 as the unit has the greatest exposure to elective procedures in the group.

Panmure Gordon analyst Savvas Neophytou said sales met his brokerage’s forecasts while margins and EPS beat them. He reiterated his “hold” rating on Smith & Nephew stock even though it trades at a 15 percent premium to its peer group.

At 0900 GMT, Smith & Nephew shares were up 4.6 percent at 536.5 pence, after a high at 550 pence.

The company said the long-term demand fundamentals of its sector continued to be favourable, regardless of the slowing global economy.

It said its Earnings Improvement Programme, under which it hopes to improve trading profit margins by 1 percent every year until 2010, was progressing well.

Its 2008 trading margin was 20.4 percent, slightly below the 21.0 percent achieved in 2007, due in part to consolidating lower-margin revenues from Plus and some $30 million of additional compliance costs.

Smith & Nephew has seen its shares fall by 23 percent in value in the past year, outpacing the FTSE 100 index .FTSE which tumbled by 28 percent.

The company trades at just under 12 times forecast 2009 earnings, broadly in line with U.S. peer Stryker (SYK.N) which trades at just over 13 times, and above Zimmer ZMH.N which trades at 10 times 2009 forecasts. (Reporting by Ben Deighton, editing by Dan Lalor)

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