Smith & Nephew chief Deepak Nath in ‘last chance saloon’
The boss of Smith & Nephew has been warned he is in the ‘last chance saloon’ and must turn the company around.
Activist investors have given Deepak Nath, the medical device giant’s US-based CEO, two months to demonstrate improvements.
Shareholders are no longer patient with the pace of his strategy, The Mail on Sunday understands.
They will put pressure on Nath to resign in the new year unless he proves the FTSE 100 company has made operational improvements by the time the company’s annual results are announced in February.
Smith & Nephew, founded in Hull in 1856, develops technology for operations such as repairing soft tissue injuries and degenerative joint disease.
It is chaired by Rupert Soames, 65, the former boss of outsourcer Serco and the grandson of Sir Winston Churchill.
Borrowed time: Deepak Nath
Smith & Nephew consists of three divisions: sports medicine, wound care and orthopedics.
The sports medicine and wound care departments are both considered the second best in the world for these specialties. However, investors have been lobbying for a shake-up in the orthopedics division. Shareholders also want the company to cut central costs and overhaul its troubled China operations.
The company’s shares are down nearly 7 percent this year and are down 42 percent over the past five years.
Overall profit margins are around 17 percent – much lower than competitors, including Johnson & Johnson and Stryker.
The company’s largest shareholder is asset manager BlackRock with 5 percent, while activist hedge funds Cevian Capital and Harris Associates are also among the top ten.
Cevian has not made public its intentions for Smith & Nephew, but it has developed a fearsome reputation under founder Christer Gardell.
The hedge fund is best known for its role in the attempt to break up German steel giant ThyssenKrupp in 2018. Ulrich Lehner, then chairman of ThyssenKrupp, accused the activist investors involved of using “psycho-terror” tactics to force the resignation of several high-ranking leaders. executives.
Dan Coatsworth, investment analyst at investment platform AJ Bell, said: ‘Investors are notoriously impatient and time is running out for Smith & Nephew chief Deepak Nath to prove that the current turnaround program is the right one.
“The longer Smith & Nephew’s share price remains weak, the more likely Nath’s days are numbered.”
Smith & Nephew has seen rapid CEO turnover, adding four bosses in five years. Nath was hired in April 2022 to replace Roland Diggelmann, who left after less than three years by ‘mutual agreement’.
Nath, a former Siemens executive, launched a plan to increase shareholder value, but investors were unimpressed with the results. Some 43 percent opposed a plan to increase his salary to more than £9 million at the company’s annual meeting this year, saying they were disappointed with his performance.
But it is clear that the CEO’s high salary could be beneficial in attracting Nath’s successor if he is ousted.
A spokeswoman for Smith & Nephew said: ‘Over the past two years we have achieved revenue growth significantly above historical levels and profitability has increased. There is clear momentum across the business, with sharper operational and commercial execution, including the regrowth of US hip and knee implants. We are fully focused on delivering shareholder value.”
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