The group, which also makes wound therapy products, reported trading profit of $252 million, $10 million better than analysts expected, on revenue 3 percent higher at $1.08 billion.

S&N said on Thursday that its knee franchise grew 6 percent, outperforming a market that grew at 3 percent.

The group's hips business continued to lag however, with sales down 2 percent, largely because its Birmingham Hip Resurfacing technology suffered from an association with other problematic metal-on-metal implants.

S&N was the best performing stock on the FSTE 100 on Thursday morning, with its shares up 3.5 percent to a one-month high of 627 pence by 0829 GMT.

Seymour Pierce analyst Mike Mitchell said that while the results were unlikely to alter market perception of a relatively weak period for the industry, the group's overall trading performance suggested few negative surprises.

"With today's results appearing to validate the restructuring and strategy currently being validated we remain buyers," he said.

The market for reconstructive surgery has been in the doldrums for a couple of years as patients postpone surgery because of the costs and time off work required.

Competitor Stryker reported last month that the market had stabilized, but more substantial hopes of a market recovery were dashed by Zimmer Holdings when it reported first-quarter results.

S&N's chief executive Olivier Bohuon said it was too soon to talk about a recovery in the United States.

"I think that it's still a very challenging environment, still unstable, however it's better than one could have expected," he said.

Bohuon, who took over as chief executive a year ago, has responded to the tough market conditions by trimming costs and shedding 7 percent of its workforce.

He is also looking at markets beyond the United States and Europe, such as the BRIC countries (Brazil, Russia, India and China) where sales rose more than 20 percent.

The group is looking at making bolt-on acquisitions in fast growing markets, he said. "I definitely believe during the year we will be able to announce some deals in emerging countries," he said.

S&N said it was sticking to its guidance for a "modest increase" in its trading margin for the year.

(Editing by Mike Nesbit)

• A Permanent Economic Emergency