Smith & Nephew faces break-up call from top shareholders

Smith & Nephew is facing calls for a break-up from three large shareholders after it was targeted by an activist investor this summer.
The medical manufacturer has been urged to sell off its orthopaedics division by the three top 20 shareholders to address a decline in its share price in recent years.
The investors are urging the board to improve the company’s performance after it cut its annual revenue targets in October, according to the Financial Times.
Cevian Capital, a Swedish activist investor backed by the American billionaire Carl Icahn, declared a stake of 5 per cent in Smith & Nephew in July, stating that the company “owns fundamentally attractive businesses” but needed to “realise this potential”. The activist is known for running campaigns at a number of large listed groups in Europe, including Aviva, Pearson and Volvo.
Smith & Nephew, based in Watford, Hertfordshire, is one of the world’s largest medical technology companies, employing about 18,500 people and operating in more than a hundred countries. The FTSE 100 company operates a number of specialist business including orthopaedics, sports medicine, ear, nose and throat and wound management.
Deepak Nath, Smith & Nephew’s chief executive, has warned that trading in China has become a “significant headwind” for the group and has reduced guidance for revenue growth from between 5 per cent and 6 per cent to 4.5 per cent for the full year. The revenue slowdown led to the company’s shares declining by 13 per cent on the day of the announcement. The shares were down 0.17 per cent, or 1.6p, to 949.80p in morning trading and are down by more than 10 per cent in the year so far.
Smith & Nephew’s orthopaedics business is its biggest driver of revenue and accounts for almost 40 per cent of the group’s annual turnover of $5.5 billion. Yet the division has been troublesome in recent years owing to an interruption in operations during the pandemic and more recently it has been weighed down by slower demand for hip and knee implants from Chinese consumers.
Rupert Soames, chairman of Smith & Nephew, told the Financial Times that the company had “a well-formed strategy and a plan that we are diligently executing”. He said the strategy “encompasses all three of our business lines”.
A spokesman for Smith & Nephew added: “Over the last two years we have delivered revenue growth significantly above historical levels and increased profitability. There is clear momentum across the business, with operational fixes in place, sharper commercial execution, including in US orthopaedics where both our knee and hip implants have returned to growth, and continued delivery of innovation, with a higher cadence of new product launches.
“While the impact of China was a challenge for us in the quarter, we are confident we are on the right course to deliver shareholder value.”