U.K. medical device maker Smith & Nephew PLC (SN.LN) Thursday reported better-than-expected fourth-quarter earnings and said Chief Executive David Illingworth will retire in April.

Illingworth, who has been at the helm of the company since 2007 and oversaw a period of rising sales and improving margins, will be replaced by Olivier Bohuon, former chief executive of drug maker Pierre Fabre SA and a former executive at U.S. healthcare group Abbott Laboratories (ABT).

Illingworth told reporters his decision to retire was a personal one and was not related to renewed takeover speculation that has dogged the company in recent months.

Speculation that Smith & Nephew was being stalked by a U.S. rival reached fever pitch at the beginning of 2011, pushing its share price to record highs, with Johnson & Johnson (JNJ) and Biomet Inc. named as likely suitors. Smith & Nephew said Jan. 14 it wasn't in any offer talks and Illingworth referred reporters to that statement when queried about takeover approaches Thursday.

Smith & Nephew reported a net profit of $182 million for the final quarter of 2010, compared with $128 million a year earlier. Revenue was flat at $1.07 billion.

Earnings per share, excluding some items, rose to 21.6 cents from 20.3 cents, well ahead of analysts' average expectations of 18.9 cents, according to data compiled by the company.

Smith & Nephew increased its dividend by 10% to 9.82 cents a share.

The company said sales were flat because there were fewer trading days in the 2010 fourth quarter than a year earlier, an anomaly caused by Christmas holidays.

Earnings benefited from strong sales of high-margin products like a knee implant certified to last for 30 years and surgical instrument sets designed to match patients' anatomy. Sales of devices used to fix sports injuries and wound care products also rose, Smith & Nephew said.

Sales at its orthopedic division declined 1% on year, excluding the effect of exchange rates, although sales of replacement hips and knees outpaced the wider market. U.S. rivals Stryker Corp. (SYK) and Zimmer Holdings Inc. (ZMH) also reported an improvement in fourth-quarter hip and knee sales.

London-based Smith & Nephew's flagship products are designed for younger patients, a grouping who put off operations more frequently than retirees during the recession because of worries about taking long periods off work or out-of-pocket costs.

Illingworth told reporters procedure volumes are improving but that it's as yet unclear how much of that increase is due to those who had previously deferred undergoing surgery.

Market conditions remain challenging, Illingworth said. Governments and insurers in developed countries are pressing for lower prices and consumers are sometimes opting for cheaper implants. But ageing populations and increasing demand for devices in emerging markets will aid long-term sales, he said.

At 0855 GMT, shares in Smith & Nephew were up 12 pence or 1.8% at 725 pence, outperforming a 0.6% lower FTSE 100 index.

-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com
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