Smith & Nephew, a British portfolio medical technology company, operates in various segments including Orthopedics, Sports Medicine, and Advanced Wound Management. The company is known for its range of medical devices and services aimed at improving patient outcomes and quality of life.
Despite generating $5.55 billion in revenue in 2023, Smith & Nephew has been underperforming in terms of shareholder value. The company’s stock has depreciated by 44% since 2020 and 33% since 2021. The main reason for this decline is the low operating margins in the Orthopedics segment, which have dropped from 23% in 2019 to 11% currently.
One of the key challenges faced by Smith & Nephew is the instability in its management team. The company has witnessed significant management turnover in the last five years, which has hindered long-term strategic planning and operational improvements. Additionally, issues related to supply chain management and logistics have led to back orders and inefficiencies in the Orthopedics segment.
Cevian Capital, an international investment firm, holds a 5.11% stake in Smith & Nephew and is advocating for active ownership to enhance the company’s long-term value. Cevian is known for its “constructive activist” approach, where it collaborates with companies to drive operational improvements and boost shareholder returns.
With its expertise in operational performance focus, Cevian aims to help Smith & Nephew regain momentum and win back market share in the Orthopedics segment. By focusing on long-term strategic planning and addressing management stability issues, Cevian believes that the company can increase its operating margins and compete more effectively with industry peers.
Cevian’s average holding period is four to five years, with a focus on long-term value creation. The firm has a history of successfully helping companies improve their operations and strategic direction. By working closely with Smith & Nephew at a board level, Cevian aims to implement a comprehensive plan to boost the company’s performance and restore investor confidence.
Smith & Nephew stands to benefit from investor activism in the form of Cevian Capital’s strategic involvement. By addressing key operational and management challenges, the company has the potential to increase its profitability and generate shareholder value in the long run. With the right guidance and support, Smith & Nephew can transform its business and position itself as a leader in the medical technology industry.