Smith+Nephew Fourth Quarter and Full Year 2024 Results

Transformative 12-Point Plan delivering higher revenue growth, margin expansion, strong cash flow and better returns; further step-up in performance expected in 2025

Smith+Nephew (LSE:SN, NYSE:SNN), the global medical technology business, reports results for the fourth quarter and full year ended 31 December 2024:

Deepak Nath, Chief Executive Officer, said:

“Smith+Nephew’s transformation remains on track with the 12-Point Plan increasingly delivering better financial performance. Revenue growth is consistently above historical levels following operational and commercial improvements. Changes to our organisational structure are driving increased accountability at the Business Unit level. Operating leverage and productivity improvements are supporting margin expansion despite significant sector-wide headwinds. Working capital discipline and asset utilisation have driven strong cash flow generation and better returns.

“We finished the year strongly and US Reconstruction was again sequentially better. Our innovation continued to deliver, with more than 60% of revenue growth in 2024 coming from products launched in the last five years. We have launched nearly 50 new products over the last three years and have an exciting pipeline for 2025.

“There is much more to be done, but we have made solid progress fixing the foundations and expect a step-up in returns in 2025, including significant margin expansion. We are confident that this will be the year when transformation starts to unlock substantial value for our shareholders.”

Full Year Highlights^1,2

• 12-Point Plan actions driving strong revenue growth and second year of trading margin expansion, offsetting headwinds from inflation and China
• Around 410bps of incremental costs savings and a near 9% net reduction in total workforce delivered across 2023 and 2024
• 2024 revenue of $5,810 million (2023: $5,549 million), with underlying revenue growth of 5.3%. Reported growth of 4.7% was after -60bps FX headwind
• Recent product launches were a major contributor to higher growth, with many at early stages of roll-out, and exciting pipeline to come
• Trading profit grew 8.2% to $1,049 million (2023: $970 million) with 18.1% trading profit margin, up 60bps (2023: 17.5%). Reported operating profit improved to $657 million (2023: $425 million)
• Significant improvements in cash generated from operations at $1,245 million (2023: $829 million), trading cash flow at $999 million (2023: $635 million) and trading cash conversion, up to 95% (2023: 65%). Free cash flow increased to $551 million (2023: $129 million)
• Adjusted Return on Invested Capital (ROIC) improved to 7.4% (2023: 5.9%), with further progress expected in 2025
• Restructuring charges down significantly to $123 million (2023: $220 million)
• Increase in EPSA to 84.3¢ (2023: 82.8¢) and EPS to 47.2¢ (2023: 30.2¢)
• Full year dividend of 37.5¢ per share (2023: 37.5¢ per share)

Q4 Trading Highlights^1,2

• Q4 revenue of $1,571 million (2023: $1,458 million), with underlying revenue growth of 8.3%, which includes the benefit of two extra trading days. Reported growth of 7.8% was after -50bps FX headwind
• Strong finish to year in all regions except China
• US Reconstruction performance continued to improve. Underlying and reported revenue growth was 5.4% for Knee Implants and 7.6% for Hip Implants
• China headwind sustained across Sports Medicine Joint Repair and Reconstruction, as expected, reducing the Group underlying revenue growth rate by -280bps

Outlook^1,2

• For 2025 we are targeting another year of strong revenue growth and a significant step-up in trading profit margin
• 2025 underlying revenue growth expected to be around 5% (reported growth of around 4.8%); first quarter underlying revenue growth expected to be in the range of 1% to 2% primarily due to continued China headwinds and one less trading day, with acceleration thereafter
• Full year trading profit margin expected in the range of 19.0% to 20.0%; withmargin stronger in the second half than the first as impact of China headwinds reduce and operational savings are delivered
• Continued momentum and efficiency gains expected to drive further margin expansion beyond 2025

Analyst conference call

An analyst conference call to discuss Smith+Nephew’s fourth quarter and full year results will be held 8.30am GMT / 3.30am EST on 25 February 2025, details of which can be found on the Smith+Nephew website at https://www.smith-nephew.com/en/about-us/investors.

Enquiries

Notes

1. Unless otherwise specified as ‘reported’ all revenue growth throughout this document is ‘underlying’ after adjusting for the effects of currency translation and including the comparative impact of acquisitions and excluding disposals. All percentages compare to the equivalent 2023 period.

   ‘Underlying revenue growth’ reconciles to reported revenue growth, the most directly comparable financial measure calculated in accordance with IFRS, by making two adjustments, the ‘constant currency exchange effect’ and the ‘acquisitions and disposals effect’, described below. See Other Information on pages 37 to 43 for a reconciliation of underlying revenue growth to reported revenue growth.

   The ‘constant currency exchange effect’ is a measure of the increase/decrease in revenue resulting from currency movements on non-US Dollar sales and is measured as the difference between: 1) the increase/decrease in the current year revenue translated into US Dollars at the current year average exchange rate and the prior revenue translated at the prior year rate; and 2) the increase/decrease being measured by translating current and prior year revenues into US Dollars using the prior year closing rate.

   The ‘acquisitions and disposals effect’ is the measure of the impact on revenue from newly acquired material business combinations and recent material business disposals. This is calculated by comparing the current year, constant currency actual revenue (which includes acquisitions and excludes disposals from the relevant date of completion) with prior year, constant currency actual revenue, adjusted to include the results of acquisitions and exclude disposals for the commensurate period in the prior year. These sales are separately tracked in the Group’s internal reporting systems and are readily identifiable.

2. Certain items included in ‘trading results’, such as trading profit, trading profit margin, tax rate on trading results, trading cash flow, trading profit to trading cash conversion ratio, free cash flow, adjusted ROIC, EPSA, leverage ratio and underlying growth are non-IFRS financial measures. The non-IFRS financial measures reported in this announcement are explained in Other Information on pages 37 to 43 and are reconciled to the most directly comparable financial measure prepared in accordance with IFRS. Reported results represent IFRS financial measures as shown in the Condensed Consolidated Financial Statements.

Smith+Nephew Fourth Quarter Trading and Full Year 2024 Results

Smith+Nephew’s transformative 12-Point Plan is delivering revenue growth consistently above historical levels, improved trading profit margin in the face of significant headwinds, strong and substantially improved cash generation and increased ROIC. Much of the 12-Point Plan is complete, and we have addressed the structural weaknesses that were holding back the Group. There is much more to be done to drive productivity and asset efficiency to their full potential, with significant additional benefit expected to follow in 2025 and beyond.

Delivering higher revenue growth

Group revenue in 2024 was $5,810 million (2023: $5,549 million), reflecting underlying revenue growth of 5.3%. Reported growth of 4.7% reflected a -60bps headwind from foreign exchange primarily due to the strength of the US Dollar.

We delivered a strong finish to the year, with fourth quarter underlying revenue growth of 8.3% and revenue of $1,571 million (2023: $1,458 million). Fourth quarter reported revenue growth was 7.8% after a -50bps foreign exchange headwind.

The fourth quarter performance was ahead of our expectations driven by a strong finish to the year, particularly in US Sports Medicine, ENT and Advanced Wound Bioactives, and the benefit of two extra trading days. The Group is now operationally and commercially more able to benefit from better demand, as we saw at the end of the quarter. As a result, we realised more of a benefit to our surgical businesses from the two extra trading days than we expected to see during the holiday season. US Hip Implants and US Knee Implants both delivered a sequential improvement in performance in absolute terms and on an adjusted day sales basis. China remained a headwind in the quarter, as expected, reducing the fourth quarter Group underlying revenue growth rate by -280bps.

Improved trading profit margin, cash generation and ROIC

Trading profit for 2024 was up 8.2% to $1,049 million (2023: $970 million). The trading profit margin was 18.1% (2023: 17.5%), a 60bps improvement on the prior year. Operating profit increased to $657 million (2023: $425 million).

Over the last two years we have delivered an 80bps uplift in trading profit margin. This was achieved as productivity savings of around 410bps and operating leverage of around 390bps offset major headwinds of around -490bps from input cost inflation and merit, around -140bps from foreign exchange and around -90bps from China.

Improving cash flow has been an area of specific focus, with good progress made in 2024. Cash generated from operations was $1,245 million (2023: $829 million) and trading cash flow was $999 million (2023: $635 million), with significantly better trading cash conversion of 95% (2023: 65%). We have also reduced restructuring costs year-on-year to $123 million (2023: $220 million). Free cash flow increased to $551 million (2023: $129 million).

We have increased visibility and focus on improving our ROIC at the Business Unit level through allocation of central costs and our drive to improve working capital. ROIC increased year-on-year by 150bps to 7.4%, reflecting the progress made under the 12-Point Plan. Going forward, we will continue to focus on driving further improvement in our ROIC.

Delivering our Strategy for Growth and 12-Point Plan

Smith+Nephew’s Strategy for Growth is based on three pillars:

• First, Strengthen the foundations of Smith+Nephew. A solid base in commercial and manufacturing will enable us to serve customers sustainably and efficiently, and deliver the best from our core portfolio.
• Second, Accelerate our growth profitably, through more robust prioritisation of resources and investment, and with continuing customer focus.
• Third, continue to Transform ourselves for higher long-term growth, through continued investment in innovation and acquisitions.

In July 2022 we announced our 12-Point Plan to fundamentally change the way Smith+Nephew operates, accelerating delivery of our Strategy for Growth and transforming to a consistently higher-growth company. The 12-Point Plan supports the first two pillars of the Strategy for Growth and is focused on:

• Fixing Orthopaedics, to regain momentum across hip and knee implants, robotics and trauma, and win share with our differentiated technology;
• Improving productivity, to support trading profit margin expansion; and
• Further accelerating growth in our already well-performing Advanced Wound Management and Sports Medicine & ENT business units.

There is clear evidence of the expected operational and financial outcomes coming through across the Group. Revenue growth is consistently above historical levels, built on improved product supply and better commercial execution. Productivity is improving with two years of margin expansion reflecting operating leverage and efficiency savings which have more than offset major headwinds. We have improved our capital intensity and cash conversion supported by the better profitability, improving inventory management and reduced restructuring costs. We have reengineered our ability to match production to demand and are reducing capacity in our manufacturing network. We have delivered a near 9% net reduction in our total workforce since the start of the 12-Point Plan. More than 1,000 of these role reductions were in 2024, with the majority taking place in the final quarter of the year.

The transformation programme remains on track and there is much more to focus on, with further financial benefits supporting trading margin expansion expected to follow this year and beyond.

12-Point Plan: Delivering higher revenue growth

Through delivery of the 12-Point Plan we have transformed the revenue growth profile of Smith+Nephew. This progress has been achieved against some major headwinds, including the underperformance in our US Orthopaedics business and the pressures of Volume Based Procurement (VBP) programmes in China across both our Reconstruction and Sports Medicine Joint Repair segments.

The progress was underpinned by 12-Point Plan initiatives that addressed a number of key issues that were holding back performance. We have significantly improved product and instrument set availability, which were far below industry standards, and have now exceeded target levels. Overdue orders have improved significantly, falling by 90% since 2022. The percentage of sets that are available reached target at the start of the year, and improved further during 2024. We also made significant progress simplifying our portfolio, with a third of global hip and knee brands now phased out.

We have also improved our commercial execution. We have turned around performance in Trauma, which is now a significant growth driver built upon our new EVOS^◊ Plating System, and improved Orthopaedics outside the US. US Orthopaedics is now also on a clear improvement path. Here we have introduced new management, customer service and satisfaction levels have improved, new growth-oriented incentive plans are in place and employee turnover has returned to low-levels. We strengthened our position in robotics with a series of new features, and the installed base now exceeds 1,000 systems.

Sports Medicine has been outperforming its market for many years built on sustainable and fundamental factors including commercial excellence, a steady stream of innovation across procedures, new segment development in tissue regeneration and successful integration of acquired assets. Whilst we continued to face significant VBP headwinds in China in 2024, the overall trajectory for Sports Medicine remains encouraging.

In Advanced Wound Management we have delivered improved performance in recent years based on better commercial execution focused on our differentiated strengths, such as our unique portfolio breadth and evidence-based selling. Performance in 2024 was driven by our leading position in the high-growth Negative Pressure Wound Therapy (NPWT) segment.

12-Point Plan: Improving organisational effectiveness

In 2023, we reorganised our global commercial operating model around our three business units of Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management in order to drive more agile decision making and greater accountability. In 2024, central costs attributable to business units were directly allocated to each business unit, with the objective of driving greater business unit accountability and efficiency, with each business unit having full profit and loss and capital accountability. These decisions are already driving more informed investment decisions in areas such as IT. A small proportion of the corporate costs continue to be held centrally, reflecting the centralised infrastructure required to support the Group and run a publicly listed company.

These changes will support our drive to improve our ROIC at the business unit level through allocation of central costs and improved working capital.

12-Point Plan: Creating value through innovation

Smith+Nephew’s innovation pipeline is a significant contributor to our transformation to being a higher growth business. In 2024, more than 60% of underlying revenue growth came from products launched in the last five years. In 2023, new products accounted for around half of our underlying revenue growth.

We maintained our recent high cadence of launches, with 16 new products in 2024, bringing our total of new products to nearly 50 over the last three years. Many of these new platforms are driving growth today and have multi-year runways still ahead of them as we expand indication and applications and launch in new markets.

Major launches in 2024 included the CATALYSTEM^◊ Primary Hip System designed to address the evolving demands of primary hip surgery, including the increased adoption of anterior approach procedures. We moved to full commercial launch of the AETOS^◊ Shoulder System in the US, enabling us to compete effectively in the fast-growing $1.7 billion shoulder market, and continued to build out the platform adding planning software and a stemless anatomic total shoulder option. We announced new CORIOGRAPH^◊ Pre-Operative Planning and Modelling Services for the CORI^◊ Surgical System, making it the only orthopaedic robotic-assisted system to offer either intraoperative image-free or image-based registration for knee implants. This is one of a number of unique features for CORI, including supporting revision knee procedures, a first-of-its-kind digital tensioner for robotics-assisted knee surgery for soft tissue balancing and offering both burr and saw cutting options.

In Sports Medicine, we completed the acquisition of CartiHeal, the developer of the CARTIHEAL AGILI-C^◊ Cartilage Repair Implant, a novel sports medicine technology for cartilage regeneration in the knee. We have made good progress on market development activities in the first year of ownership, including clinical strategy and reimbursement milestones. We have shown with REGENETEN^◊ that we have the market development and commercialisation expertise to acquire regenerative technologies and successfully establish a new standard of care. In ENT, we launched the ARIS^◊ COBLATION^◊ Turbinate Reduction Wand. This utilises our advanced COBLATION Plasma Technology to provide a minimally invasive way to reduce hypertrophic turbinates, a condition that requires 350,000 procedures per annum in the US.

In Advanced Wound Management, we launched the RENASYS^◊ EDGE NPWT System. This is designed to reduce inefficiency and complexity and features an improved user interface for enhanced intuitiveness and simplicity and a durable pump built to offer virtually maintenance free use. We also continued our high cadence of incremental innovation in skin substitutes, with the launch of GRAFIX^◊ PLUS in the second quarter, an easier-to-handle new version in our lead product family, targeting the growing post-acute market.

An exciting pipeline of further innovation

In 2025 we expect to launch a number of exciting new products. These include next-generation digital video-based navigation in the arthroscopic tower, a new intramedullary nail and further extensions to the CORI Surgical System and AETOS Shoulder System.

Investing in clinical evidence

Clinical, scientific, and real-world evidence continue to play a critical role in our go-to-market strategy, with compelling and differentiating data supporting key brands in 2024. This included the first randomised controlled trial with the REGENETEN^◊ Bioinductive Implant, market-leading 20-year survivorship data for OXINIUM^◊ with highly cross-linked polyethylene among all total hip replacement bearing combinations, and impressive early results for the OR3O^◊ Dual Mobility Hip, LEGION CONCELOC^◊ Cementless Knee, and revision total knee arthroplasty using CORI. A systematic review and meta-analysis showed that meniscal repair in selected patients aged ≥40 years had good success rates and patient-reported outcomes, similar to those in patients aged <40 years, supporting our leading meniscal repair business. We also published new data supporting the use of PICO^◊ Single Use Negative Pressure Wound Therapy (NPWT) to reduce surgical site infections and using the ALLEVYN^◊ LIFE Dressing in a pressure injury prevention protocol.

12-Point Plan: Cost efficiency and margin expansion

We have made significant productivity improvements through the 12-Point Plan, delivering around 410bps of incremental costs savings across 2023 and 2024. Our trading profit margin has expanded by 80 bps since 2022, driven by revenue leverage from the higher revenue growth and operational efficiencies, successfully making progress despite major headwinds from inflation, foreign exchange and China.

Since 2022 we have improved our Sales, Inventory & Operations Planning (SIOP) process. This is a dynamic process that has brought better alignment of production plans and commercial delivery. Further productivity improvements are expected to come through in 2025 as we benefit from costs savings from our decision to shut four smaller Orthopaedics manufacturing facilities and our reductions in workforce.

Looking beyond 2025, we expect our work to better align production and commercial delivery along with capacity reduction, and the timing of lower costs passing through inventory, to support further margin expansion.

12-Point Plan: Improved cash generation and ROIC

In 2024 we made good progress improving both our trading and free cash flow by reducing our capital expenditure, working capital and restructuring costs, and we expect to make further progress in 2025. Through the 12-Point Plan we have improved our order to cash and asset utilisation, and started to address our high inventory. By the end of 2024, we had reduced our Day Sales of Inventory (DSI) by 20 days year-on-year, with DSI down across all business units. Further inventory improvements will be an area of continued focus in 2025 to further enhance working capital and ROIC.

Group ROIC increased year-on-year by 150bps to 7.4% in 2024, reflecting progress made under the 12-Point Plan. We anticipate further improvement in 2025. We will continue to prioritise investment in areas where we expect to see the highest incremental returns on invested capital.

Better working capital movements resulted in significant improvement in trading cash flow to $999 million (2023: $635 million), and the trading profit to cash conversion ratio improved to 95% (2023: 65%). We reduced our restructuring costs to $123 million, down from $220 million in 2023, and expect a further reduction in 2025 as 12-Point Plan charges come to an end. This was a driver behind the significant increase in free cash flow to $551 million in 2024 (2023: $129 million).

Fourth Quarter 2024 Trading Update

Our fourth quarter revenue was $1,571 million (2023: $1,458 million), with underlying revenue growth of 8.3% (reported growth of 7.8% after -50bps foreign exchange headwind). There were 62 trading days in the quarter, two more than Q4 2023. As stated above, the fourth quarter performance was ahead of our expectations driven by a strong finish to the year.

Geographically, our Established Markets underlying revenue growth was 10.6% (reported growth 10.5%). Within this, the US underlying revenue growth was 11.9% (reported growth 11.9%) and Other Established Markets underlying revenue growth was 8.2% (reported growth 7.9%). The Emerging Markets underlying revenue decline of -2.3% (reported decline -5.1%) reflected the headwinds in China in Reconstruction and Sports Medicine Joint Repair.

Fourth Quarter Consolidated Revenue Analysis

(i)   Underlying growth is defined in Note 1 on page 3

(ii)  Other Reconstruction includes robotics capital sales and bone cement

(iii)  Other Established Markets are Europe, Canada, Japan, Australia and New Zealand

Fourth Quarter Business Unit Performance

Orthopaedics

Our Orthopaedics business unit delivered underlying revenue growth of 6.0% (reported growth 5.5%) in the quarter.

Knee Implants underlying revenue growth was 2.4% (reported growth 1.7%) and Hip Implants underlying revenue growth was 4.7% (reported growth 4.0%). Knee Implants growth was driven by our JOURNEY II^◊ Total Knee System and by our cementless and revision systems. Hip Implants growth was led by our POLAR3^◊ Total Hip Solution and R3^◊ Acetabular System.

Our US Reconstruction business continued to build momentum as we increasingly benefit from the 12-Point Plan actions to improve product and set availability and commercial execution. US Knee Implants underlying revenue growth was 5.4% (reported growth 5.4%) and US Hip Implants underlying revenue growth was 7.6% (reported growth 7.6%) in the quarter, both sequentially improving over the third quarter.

Outside the US, Knee Implants underlying revenue decline was -1.3% (reported decline -2.8%) and Hip Implants underlying revenue growth was 1.2% (reported decline -0.6%). As expected, China remained a significant headwind to overall growth. Here, our distribution partners have continued to reduce their holdings of implants, following slow end-customer demand earlier in the year. Inventory in the channel has come down significantly, but is not yet at normalised levels, and as indicated previously, the largely-paused ordering is likely to continue through the first quarter of 2025. Other Established Markets continued its recent good momentum, delivering its best quarterly performance of the year.

Other Reconstruction delivered another good quarter of growth, with underlying revenue growth of 23.9% (reported growth 23.7%). This included strong growth across robotics including another record quarter of placements of our CORI Surgical System.

Trauma & Extremities underlying revenue growth was 9.5% (reported growth 9.4%), returning to its recent stronger growth profile following a slower third quarter, as expected. Performance continued to be driven by the EVOS Plating System with a growing contribution to growth coming from the roll-out of the new AETOS Shoulder System.

Sports Medicine & ENT

Our Sports Medicine & ENT business unit delivered underlying revenue growth of 7.8% (reported growth 7.1%). Excluding China, Sports Medicine & ENT underlying revenue growth was 14.0% (reported growth 13.1%). The segment continued to face a headwind from the Sports Medicine Joint Repair VBP programme in China, which commenced in May 2024. We expect this VBP headwind to persist throughout the first half of 2025, as previously flagged. We also expect an additional VBP process on mechanical resection blades and COBLATION wands within Arthroscopic Enabling Technologies in the second half of 2025, which we expect to be around a $25 million revenue headwind in 2025 from price impact and channel adjustments.

Sports Medicine Joint Repair underlying revenue growth was 5.3% (reported growth 4.4%) led by strong double-digit growth from REGENETEN. Excluding China, Sports Medicine Joint Repair underlying revenue growth was 15.9% (reported growth 15.0%).

Arthroscopic Enabling Technologies underlying revenue growth was 8.5% (reported growth 7.9%), with good growth from our COBLATION resection range and patient positioning portfolio.

ENT underlying revenue growth was 19.4% (reported growth 19.6%), a significant increase from the previous quarter. This acceleration reflects some catch-up after slow procedure volumes in the third quarter and a more normal comparator. Growth was led by our tonsil and adenoid business.

Advanced Wound Management

Our Advanced Wound Management business unit delivered underlying revenue growth of 12.2% (reported growth 11.7%), its strongest quarter of growth in 2024.

Advanced Wound Care underlying revenue growth was 1.9% (reported growth 1.2%) with good growth across our foam dressing and infection management portfolios offset by skin care.

Advanced Wound Bioactives delivered underlying revenue growth of 20.3% (reported growth 20.1%). The growth rate reflects typical quarterly volatility in the category with strong double-digit growth in skin substitutes following the launch of GRAFIX PLUS. We delivered mid-single digit growth from SANTYL^◊.

Advanced Wound Devices underlying revenue growth was 20.6% (reported growth 19.9%) driven by both our traditional RENASYS Negative Pressure Wound Therapy System and our single-use PICO Negative Pressure Wound Therapy System.

Full Year Trading

Group revenue in 2024 was $5,810 million (2023: $5,549 million), with underlying revenue growth of 5.3%. Reported growth of 4.7% reflected a -60bps headwind from foreign exchange primarily due to the strength of the US Dollar.

Geographically, our Established Markets underlying revenue growth was 5.5% (reported growth 5.2%). Within this, US underlying revenue growth was 4.8% (reported growth 4.8%) and Other Established Markets underlying revenue growth was 6.7% (reported growth 6.0%). Emerging Markets underlying revenue growth of 4.3% (reported growth 2.2%) included the impacts of the China headwinds described above.

Full Year Consolidated Revenue Analysis

1. Underlying growth is defined in Note 1 on page 3
2. Other Reconstruction includes robotics capital sales and bone cement
3. Other Established Markets are Europe, Canada, Japan, Australia and New Zealand

Full Year Business Unit Performance

Orthopaedics

Our Orthopaedics business unit delivered underlying revenue growth of 4.6% (reported growth 4.1%) for the full year.

Knee Implants underlying revenue growth was 1.3% (reported growth 0.7%) and Hip Implants underlying revenue growth was 4.0% (reported growth 3.2%).

Knee Implants and Hip Implant growth was driven by performance in Other Established Markets and a significant improvement in the US over the course of the year. These changes reflected the operational progress in product supply and sharper commercial execution following the 12-Point Plan. Performance was held back by China, where we saw reduced end-customer demand in the second half of the year, resulting in orders from our distribution partners significantly slowing as they reduced stock-levels in response. 2024 Knee Implants growth was driven by our JOURNEY II Total Knee System and by our cementless and revision systems. Hip growth was led by our POLAR3 Total Hip Solution and R3 Acetabular System.

Other Reconstruction underlying revenue growth was 18.5% (reported growth 18.2%) for the full year. Performance principally reflects sales of our robotics-assisted CORI Surgical System and consumables.

Trauma & Extremities underlying revenue growth was 8.1% (reported growth 7.9%) for the full year. Following 12-Point Plan actions to improve product supply and turnaround performance in Trauma & Extremities, this business was a significant growth driver in 2024. Progress was driven by our investment to build out the EVOS Plating System. We also continued to successfully roll-out the launch of the AETOS Shoulder System, entering a high growth category in Orthopaedics.

Sports Medicine & ENT

Our Sports Medicine & ENT business unit delivered underlying revenue growth of 6.2% (reported growth 5.5%) for the full year. Sports Medicine & ENT underlying revenue growth was 10.0% (reported growth 9.3%) excluding China, where the implementation of VBP was a headwind, as noted above.

Sports Medicine Joint Repair underlying revenue growth was 4.8% (reported growth 4.0%) for the full year. Outside of China, Sports Medicine Joint Repair had another strong year driven by our knee repair portfolio and the REGENETEN Bioinductive Implant. Excluding China, Sports Medicine Joint Repair underlying revenue growth was 11.3% (reported growth 10.6%).

Arthroscopic Enabling Technologies underlying revenue growth was 8.2% (reported growth 7.4%). This was significantly ahead of the prior year, driven by our arthroscopic tower and COBLATION technologies.

ENT underlying revenue growth was 7.3% (reported growth 6.9%). Growth was led by our tonsil and adenoid business.

Advanced Wound Management

Our Advanced Wound Management business unit delivered underlying revenue growth of 5.1% (reported growth 4.7%) in 2024.

Advanced Wound Care underlying revenue growth was 2.0% (reported growth 1.4%). Growth was driven by good performances in foam dressings and infection management categories.

Advanced Wound Bioactives underlying revenue growth was 5.1% (reported growth 5.1%). SANTYL^◊ delivered growth for the full year, although we continued to see quarter-to-quarter variability, a long-term feature of this product. We delivered double-digit growth from our skin substitutes business following the launch of GRAFIX PLUS.

Advanced Wound Devices underlying revenue growth was 12.2% (reported growth 11.5%). This was driven by both our traditional RENASYS Negative Pressure Wound Therapy System and our single-use PICO Negative Pressure Wound Therapy System, and from our LEAF^◊ Patient Monitoring System as we continued to expand the market in pressure injury prevention.

Full Year 2024 Consolidated Analysis

Smith+Nephew results for the year ended 31 December 2024:

1. See Other Information on pages 37 to 43

Full Year 2024 Analysis

Group revenue for 2024 was $5,810 million (2023: $5,549 million), reflecting underlying revenue growth of 5.3%. Reported growth of 4.7% reflected a -60bps headwind from foreign exchange primarily due to the strength of the US Dollar.

The gross profit was $3,996 million (2023: $3,819 million) with a gross profit margin of 69.6% (2023: 68.8%). Operating profit increased to $657 million (2023: $425 million) after acquisition and disposal related items, restructuring and rationalisation costs, amortisation and impairment of acquisition intangibles and legal and other items (see Other Information on pages 37 to 43).

Trading profit was up 8.2% to $1,049 million (2023: $970 million), with a trading profit margin of 18.1% (2023: 17.5%). The 60bps margin expansion reflects the benefits of revenue leverage and manufacturing, distribution and operating expense savings offset by input cost inflation and China VBP (see Note 2 to the Financial Statements for global business unit trading profit).

Acquisition and disposal-related items primarily relate to impairment of BHR goodwill, discontinuation of certain products and integration costs relating to the CartiHeal acquisition (see Note 2 to the Financial Statements).

Restructuring costs significantly decreased year-on-year to $123 million (2023: $220 million), and included costs related to the efficiency and productivity work underway across the Group under the 12-Point Plan.

The net interest charge within reported results was $121 million (2023: $98 million) which reflects the recent maturities of low coupon debt and the increased interest rate environment.

Reported tax for the year to 31 December 2024 was a charge of $86 million (2023: $27 million). The tax rate on trading results was 19.1% (2023: 16.2%) (see Note 3 to the Financial Statements and Other Information on pages 37 to 43 for further details on taxation).

Adjusted earnings per share (‘EPSA’) increased to 84.3¢ (168.6¢ per ADS) (2023: 82.8¢ per share). Basic earnings per share (‘EPS’) was 47.2¢ (94.4¢ per ADS) (2023: 30.2¢ per share), reflecting restructuring costs, acquisition and disposal related items, amortisation and impairment of acquisition intangibles and legal and other items incurred.

Cash generated from operations was up significantly to $1,245 million (2023: $829 million) and trading cash flow was up to $999 million (2023: $635 million). The increase was primarily driven by lower working capital costs, including in inventory, and higher payables. Capital expenditure was also lower versus an elevated level of investment in 2023 (see Other Information on pages 37 to 43 for a reconciliation between cash generated from operations and trading cash flow). As a result of the working capital movement, the trading profit to cash conversion ratio improved to 95% (2023: 65%).

The Group’s net debt, excluding lease liabilities, was $2,513 million at 31 December 2024, with access to committed facilities of $4.1 billion (see Note 6 to the Financial Statements). Our adjusted leverage ratio for 2024 was 1.9x.

Dividend and Capital Allocation Framework

The Board is recommending a Final Dividend of 23.1¢ per share (46.2¢ per ADS) (2023: 23.1¢ per share). Together with the Interim Dividend of 14.4¢ per share (28.8¢ per ADS), this will give a total distribution of 37.5¢ per share (75.0¢ per ADS), unchanged from 2023. Subject to confirmation at our Annual General Meeting, the Final Dividend will be paid on 28 May 2025 to shareholders on the register at the close of business on 28 March 2025.

The appropriate use of capital on behalf of shareholders is important to Smith+Nephew. In July 2024, we announced an updated capital allocation framework to prioritise the use of cash and inform our investment decisions.

Our first priority remains investing in the business to drive organic growth and meet our sustainability targets. The second priority is also unchanged, and is to invest in acquisitions, targeting new technologies in high growth segments with a strong strategic fit that meet our financial criteria. The third priority is to maintain an optimal balance sheet and appropriate dividend. Here we will continue to target investment grade credit ratings with a target leverage ratio of around 2x net debt to adjusted EBITDA. We have a progressive dividend policy and from 2025 onwards we expect a payout of around 35% to 40% of EPSA. The interim payment will be 40% of the prior full year. Our final priority remains to return any surplus capital to shareholders, via a share buyback subject to the above balance sheet metrics.

2025 Outlook

For 2025 we are targeting another year of revenue growth above historical levels and a significant step-up in trading profit margin.

For revenue, we expect to deliver underlying revenue growth of around 5%. Within this, we expect ongoing improvement from US Reconstruction and continued strong growth from Sports Medicine outside of China, ENT and Advanced Wound Management offset by the impact of the anticipated China VBP extension into Arthroscopic Enabling Technologies (estimated $25 million revenue headwind in 2025). There will be one fewer trading day in 2025 than in 2024. The guidance equates to reported growth of around 4.8% based on exchange rates prevailing on 19 February 2025.

In terms of phasing, we expect the headwinds from China to continue in Reconstruction for the first quarter, and in Sports Medicine Joint Repair into the second quarter as we lap VBP implementation. We expect that some of the strong finish to 2024, particularly in US Sports Medicine and Advanced Wound Bioactives, will normalise in the first quarter. In addition, we have one fewer trading day in each of the first and second quarters versus 2024, then one extra day in the fourth quarter. As a result of these factors, we expect first quarter underlying revenue growth to be in the range of 1% to 2% and then be higher across the remainder of the year.

We expect to deliver a trading profit margin of between 19% to 20%. This significant step-up will be driven by operating leverage, cost reductions and the benefits of our network optimisation programme. These benefits are expected to more than offset headwinds from China and cost inflation.

We expect trading profit margin to be stronger in the second half than the first as the impact of China headwinds reduce and operational savings are delivered.

We expect trading cash conversion of 80% to 90% and restructuring costs of around $45 million in 2025.

The tax rate on trading results for 2025 is forecast to be in the range of 19% to 20%, subject to any material changes to tax law or other one-off items.

Forward calendar

The Q1 2025 Trading Report will be released on 30 April 2025.

About Smith+Nephew

Smith+Nephew is a portfolio medical technology business focused on the repair, regeneration and replacement of soft and hard tissue. We exist to restore people’s bodies and their self-belief by using technology to take the limits off living. We call this purpose ‘Life Unlimited’. Our 17,000 employees deliver this mission every day, making a difference to patients’ lives through the excellence of our product portfolio, and the invention and application of new technologies across our three global business units of Orthopaedics, Sports Medicine & ENT and Advanced Wound Management.

Founded in Hull, UK, in 1856, we now operate in around 100 countries, and generated annual sales of $5.8 billion in 2024. Smith+Nephew is a constituent of the FTSE100 (LSE:SN, NYSE:SNN). The terms ‘Group’ and ‘Smith+Nephew’ are used to refer to Smith & Nephew plc and its consolidated subsidiaries, unless the context requires otherwise.

For more information about Smith+Nephew, please visit www.smith-nephew.com and follow us on X, LinkedIn, Instagram or Facebook.

Forward-looking Statements

This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading profit margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith+Nephew, these factors include: conflicts in Europe and the Middle East, economic and financial conditions in the markets we serve, especially those affecting healthcare providers, payers and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or other government actions; product defects or recalls or other problems with quality management systems or failure to comply with related regulations; litigation relating to patent or other claims; legal and financial compliance risks and related investigative, remedial or enforcement actions; disruption to our supply chain or operations or those of our suppliers; competition for qualified personnel; strategic actions, including acquisitions and disposals, our success in performing due diligence, valuing and integrating acquired businesses; disruption that may result from transactions or other changes we make in our business plans or organisation to adapt to market developments; relationships with healthcare professionals; reliance on information technology and cybersecurity; disruptions due to natural disasters, weather and climate change related events; changes in customer and other stakeholder sustainability expectations; changes in taxation regulations; effects of foreign exchange volatility; and numerous other matters that affect us or our markets, including those of a political, economic, business, competitive or reputational nature. Please refer to the documents that Smith+Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith+Nephew's most recent annual report on Form 20-F, which is available on the SEC’s website at www. sec.gov, for a discussion of certain of these factors. Any forward-looking statement is based on information available to Smith+Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith+Nephew are qualified by this caution. Smith+Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith+Nephew's expectations.

^◊ Trademark of Smith+Nephew. Certain marks registered in US Patent and Trademark Office.