Smith & Nephew, the FTSE 100 medical-equipment group, today warned that “unacceptable” sales practices in a business it bought last year will cost it more than $100 million (£50 million) in lost sales this year.

The medical devices company paid $889 million for Plus Orthopedics, a Swiss orthopedics company, in 2007.

As well as the $100 million impact on sales, Smith & Nephew said profits would fall by around $25 million this year. It has launched an investigation into the sales practices which emerged while Plus was being integrated into the company, and will hire legal and forensic accounting experts to examine the practices.

Its share price tumbled 6 per cent to 615½p.

David Illingworth, chief executive at Smith & Nephew, said: “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.”

“As soon as these actions came to light we took prompt decisive action and began an independent review of the situation which has progressed a long way but is not yet 100 percent complete.”

Most of the activity - about $60 million - appears to have taken place in Greece, where Smith & Nephew has now virtually closed down its operations.

Mr Illingworth said that Smith & Nephew would “pursue whatever remedies we have [against the vendors of Plus] with particular gusto”. He claimed that there would be “significant benefits” from the Plus acquisition in the future.

The company also reported relatively healthy first quarter results, with revenue rising to $911 million, up 22 per cent from the same time last year, on strong demand for the company’s new Birmingham hip.

This will be threatened later this year by the launch of Corin Group’s rival Cormet implant in the United States.

Earnings per share rose to 13 cents from 11 cents a year ago.

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