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David Illingworth, chief executive of the global medical technology firm, said that it had "one issue to deal with" in the former Plus business in Europe, which it took over last year.  

“As part of the integration of Plus, we uncovered certain sales practices in parts of Europe which are unacceptable to Smith & Nephew. We have taken prompt, decisive action to ensure that the sales practices we uncovered within Plus in continental Europe have been stopped and this has impacted our performance this quarter and will continue to do so for the rest of the year,” he added.

Illingworth said that Smith & Nephew had made significant progress in a thorough investigation of the practices, which is not yet fully completed.

The firm currently expects revenues, in a full twelve month period, to be reduced by about $100 million. 

Much of the reduction in sales relationships has been experienced in quarter one and Smith & Nephew expects some further reductions over the next two quarters.

The group expects about 70 per cent of the reduction in revenues to be in the reconstruction business, and about 30 per cent in trauma. 

A large part of this issue relates to Greece where pro-forma 2007 revenues were $60 million. 

“We do not expect to recover these lost revenues, but we see no ongoing impact on the continuing robust growth of the business, including the Plus revenues unaffected by the changed sales practices,” Illingworth added.

Smith & Nephew (LSE:SN.) expects the lost profit from the reduced sales to be at the group net margin once it has worked through the changes.

In the short-term it expects to see a somewhat higher impact on profit as it takes time to adjust the cost base, and due to additional costs associated with the investigation.

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• Smith & Nephew