Smith & Nephew ($SNN) is working toward having two-thirds of its revenue coming from higher growth areas. Acquisitions are core to that goal--in fact, during the fourth quarter any organic growth was wiped out by the impact from currency exchange and the only revenue growth came from its surgical devices acquisitions, which grew by 12%.
The company completed its largest acquisition to date with its $1.7 billion buy last year of sports medicine player ArthroCare. The company expects to squeeze out $85 million in further synergies from the deal by 2017, which it plans to drop to the bottom line as profit.
Smith & Nephew CEO Olivier Bohuon is confident in the company's acquisition strategy, including both past and future deals
"We've established a strong track record in making, integrating and achieving the returns from acquisitions, although we have completed 15 acquisitions since 2011 for a total value of $2.8 billion; appetite for more; provided they meet our disciplined criteria is undiminished," he said on the 2014 earnings call.
The company had $638 million in free cash flow in 2014. The top priority for the company's cash is supporting organic growth, with the second priority being the company's dividend. In 2014, it returned $0.296 per share and twice that per ADS. The next priority is M&A and finally, a surplus distribution rounds out the list of Smith & Nephew plans for its cash, noted Smith & Nephew CFO Julie Brown.
On Feb. 4, Smith & Nephew also launched its SutureFix Ultra soft suture anchor, which can be used in both hip and shoulder labral repair. It has a smaller size and soft construct intended to allow surgeons to fine tune their repairs.
Smith & Nephew had $1.25 billion in fourth quarter revenue, a gain of 2% from the same quarter a year prior. That's the same growth rate it had for its 2014 revenue of $4.35 billion.
The company's shares gained 4% on its Feb. 5 earning news; it's up about 21% in the last year.
- here is the earnings release (PDF)