REG - Smith & Nephew Plc - Final Results
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RNS Number : 8073U Smith & Nephew Plc 02 March 2026
Smith+Nephew Fourth Quarter and Full Year 2025 Results
Strong finish to 12-Point Plan delivering step up in performance; poised for
acceleration in growth and returns
2 March 2026
Smith+Nephew (LSE:SN, NYSE:SNN), the global medical technology business,
reports results for the fourth quarter and full year ended 31 December 2025:
31 December 31 December Reported Underlying
2025 2024 growth growth
$m $m % %
Fourth Quarter Results(1,2)
Revenue 1,702 1,571 8.3 6.2
Full Year Results(1,2)
Revenue 6,164 5,810 6.1 5.3
Operating profit 794 657 20.7
Operating profit margin (%) 12.9 11.3
EPS (cents) 72.1 47.2 52.8
Cash generated from operations 1,549 1,245 24.4
Trading profit 1,211 1,049 15.5
Trading profit margin (%) 19.7 18.1
EPSA (cents) 102.0 84.3 21.0
Free cash flow 840 551 52.5
Deepak Nath, Chief Executive Officer, said:
"I am pleased that a strong fourth quarter helped us meet or exceed our 2025
targets for revenue growth, profitability and cash generation. During the
year, newer products drove strong broad-based performance, with underlying
revenue growth above 5% for all three business units, and we look forward to a
strong cadence of further new product introductions in 2026.
"This also marks the completion of our 12-Point Plan, through which we have
successfully transformed Smith+Nephew into a fundamentally stronger business.
Our new RISE strategy, launched in December, is the start of an ambitious and
achievable next phase of growth. It is our roadmap to Reach more patients,
unlock new categories of Innovation, Scale through strategic investment, and
Execute efficiently. Together, it will allow us to step-up performance towards
new 2028 financial targets.
"2026 is the first step in that journey and we are confident in delivering an
acceleration in growth and returns. With our strengthened foundations and new
strategy, we are well set to expand our leadership in healthcare innovation
and realise sustainable value for shareholders, while continuing to deliver
for customers, employees and communities into the future."
Strategic Highlights(1,2)
· 12-Point Plan transformation completed, strengthening operational
foundations, restoring performance in Orthopaedics, accelerating Sports
Medicine and Advanced Wound Management, improving productivity, and embedding
a culture of accountability, discipline and continuous improvement
· 12-Point Plan financial outcomes since 2022 include 5.7% reported
revenue Compound Annual Growth Rate (CAGR), plus 240bps of trading margin
expansion despite significant headwinds, fifteen-fold increase in free cash
flow, and 170bps increase in adjusted Return on Invested Capital (ROIC)
despite a -160bps headwind from the portfolio rationalisation announced in
December 2025
· RISE, Smith+Nephew's new strategy, launched, targeting new levels of
financial and operational performance to drive shareholder value
· 2028 financial targets announced, including significant acceleration
in revenue growth, trading profit, free cash flow, and adjusted ROIC
· Acquisition of Integrity Orthopaedics completed, supporting RISE and
our ambition to become the global leader in Sports Medicine
Full Year 2025 Highlights(1,2)
· 2025 revenue was $6,164 million (2024: $5,810 million), with
underlying revenue growth of 5.3%. Reported growth of 6.1% was after 80bps FX
tailwind
· Underlying revenue growth excluding China was 7.0% (reported growth
7.8%)
· Trading profit up 15.5% to $1,211 million (2024: $1,049 million) with
19.7% trading profit margin, up 160bps (2024: 18.1%). Reported operating
profit improved 20.7% to $794 million (2024: $657 million)
· Significant improvements in cash generated from operations at $1,549
million (2024: $1,245 million), trading cash flow at $1,236 million (2024:
$999 million) and trading cash conversion, at 102.0% (2024: 95.2%). Free cash
flow increased by 52.5% to $840 million, including one-off $26 million benefit
from a property transaction (2024: $551 million)
· Adjusted ROIC improved 90bps to 8.3% (2024: 7.4%) despite a -160bps
headwind from portfolio rationalisation
· EPSA up 21.0% to 102.0¢ (2024: 84.3¢) and EPS up 52.8% to 72.1¢
(2024: 47.2¢)
· Reflecting the strong cash generation and balance sheet, $500 million
share buyback completed in second half of 2025; adjusted net debt/EBITDA
leverage ratio for 2025 was 1.7x
· Full year dividend increased 4.3% to 39.1¢ per share (2024: 37.5¢
per share)
Q4 2025 Trading Highlights(1,2)
· Q4 revenue of $1,702 million (2024: $1,571 million), with underlying
revenue growth of 6.2%, which includes the benefit of one extra trading day
offset by
-100bps headwind from China. Reported growth 8.3% after 210bps FX tailwind,
primarily reflecting strength of the Euro
· Orthopaedics delivered underlying revenue growth of 7.9% (reported
growth 9.8%), its strongest quarter of revenue growth for more than two years
· Sports Medicine & ENT delivered underlying revenue growth of 7.3%
(reported growth 9.5%) despite continuing China headwinds
· Advanced Wound Management underlying revenue growth was 2.8%
(reported growth 5.3%) reflecting a strong comparative period and weakness in
skin substitutes ahead of reimbursement changes in 2026
2026 Outlook(1,2)
· Building on our momentum, for 2026 we are targeting further progress
in revenue growth, trading profit and ROIC, and sustained strong cash
generation
· In line with our provisional guidance issued in December 2025,
underlying revenue growth is expected to accelerate further to around 6% for
the full year
· Trading profit growth on an organic basis is expected to be around
8%, with revenue leverage and operational savings offsetting headwinds from
inventory revaluation, tariffs, skin substitute reimbursement changes, and ENT
VBP in China
· Since providing our provisional guidance, we have also completed the
acquisition of Integrity Orthopaedics. This acquisition is expected to be
marginally dilutive to trading profit in 2026, broadly neutral in 2027 and
accretive in 2028. Including this dilution, we expect trading profit to be
around $1.3 billion
· Free cash flow is expected to be around $800 million
· Adjusted ROIC is expected to be greater than 10% excluding the impact
of Integrity Orthopaedics
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 2 March 2026, details of
which can be found on the Smith+Nephew website at
https://www.smith-nephew.com/en/about-us/investors
(https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.smith-nephew.com%2Fen%2Fabout-us%2Finvestors&data=05%7C01%7CSarah.Carne%40smith-nephew.com%7C89f1c0752f66495266ee08dbcb57436e%7C273106dc287842ebb7c8069dcf334687%7C0%7C0%7C638327347876797741%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=cuP0zhcVP90ZXeubHQFyZCXoFHaGZyxlIvTTAgMH2N0%3D&reserved=0)
.
Enquiries
Investors
Emily Heaven +44 (0) 7811 919437
Craig Bijou +1 (475) 850-8282
Smith+Nephew
Media
Charles Reynolds +44 (0) 1923 477314
Smith+Nephew
Susan Gilchrist / Ayesha Bharmal +44 (0) 20 7404 5959
Brunswick
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 2024 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 35 to 41 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 same exchange 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 35 to 41 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 2025 Results
2025 represents the culmination of work that began three years ago under the
12-Point Plan: strengthening our operational foundations, restoring
performance in Orthopaedics, accelerating our Sports Medicine and Advanced
Wound Management businesses, improving productivity, and embedding a culture
of accountability, discipline and continuous improvement across the Group.
Our 2025 financial results demonstrate clear operational progress and a
sustained step up in performance across each of our three global business
units.
Building on this progress, our new RISE strategy, launched in December 2025,
is designed to drive stronger returns by elevating Smith+Nephew's financial
and operational performance to new levels.
2025 performance
Group revenue for 2025 was $6,164 million (2024: $5,810 million), reflecting
underlying revenue growth of 5.3%, ahead of our 2025 guided target of around
5%. Reported growth of 6.1% included an 80bps tailwind from foreign exchange,
primarily due to the strength of the Euro. Underlying revenue growth excluding
China was 7.0% (reported growth excluding China 7.8%). Each of our three
global business units delivered underlying revenue growth above 5%.
We achieved a good finish to the year, with fourth quarter revenue of $1,702
million (2024: $1,571 million) representing underlying revenue growth of 6.2%.
Fourth quarter reported revenue growth was 8.3% after a 210bps foreign
exchange tailwind, also primarily due to the strength of the Euro.
Orthopaedics delivered its best quarter of growth for more than two years,
Sports Medicine & ENT delivered a strong performance outside China, while
Advanced Wound Management's solid growth reflected a strong comparable period
and weakness in skin substitutes ahead of reimbursement changes in 2026.
Trading profit for 2025 was up 15.5% to $1,211 million (2024: $1,049 million).
The trading profit margin was 19.7% (2024: 18.1%), a 160bps improvement on the
prior year. Operating profit increased 20.7% to $794 million (2024: $657
million).
Cash generated from operations was up 24.4% to $1,549 million (2024: $1,245
million) and trading cash flow, at $1,236 million (2024: $999 million), was up
23.7%, with 102% trading cash conversion (2024: 95%). Free cash flow increased
by 52.5% to $840 million (2024: $551 million), including the benefit of a
one-off $26 million property transaction, well ahead of our initial 2025
guidance of more than $600 million.
We also improved adjusted ROIC, which was up 90bps to 8.3% despite a -160bps
headwind from the portfolio rationalisation programme announced in December
2025. The improvement in adjusted ROIC reflected our continued progress under
the 12‑Point Plan and the stronger operational discipline now embedded
across the organisation.
Given our strong cash generation, and in line with our capital allocation
policy, we completed a share buyback in the second half of 2025, returning
$500 million to shareholders while maintaining our leverage ratio, and without
compromising our growth plans.
Three years of stronger financial performance
Over the last three years we have significantly improved Smith+Nephew's
financial performance through the 12-Point Plan and related initiatives,
meeting our guidance each year.
Through our actions we have changed Smith+Nephew revenue growth profile from
an historically low single digit revenue growth company to one consistently
delivering mid-single digit growth, with a reported CAGR of 5.7% over the last
three years.
We have expanded trading margin by 240bps, from 17.3% in 2022 to 19.7% in
2025, whilst also overcoming around 1,000bps of macro challenges including
from Volume Based Procurement in China, foreign exchange and higher inflation.
Operating profit margin has expanded by 430bps from 8.6% in 2022 to 12.9% in
2025.
Our increased focus on cash and capital returns has yielded a fifteen-fold
increase in free cash flow, from $56 million in 2022 to $840 million in 2025.
Following our ongoing focus on improving this measure, adjusted ROIC has
increased 170bps to 8.3% (2022: 6.6%) despite the -160bps portfolio
rationalisation headwind.
12-Point Plan transformation
In 2022, Smith+Nephew initiated a 12-Point Plan to transform performance. This
plan had three pillars designed to fix our underperforming Orthopaedics
business, improve overall productivity, and accelerate our leading Sports
Medicine and Wound businesses. We have made demonstrable progress across each
of these pillars, delivering a step-change in financial and operational
performance.
Within Orthopaedics, we have addressed supply issues and right-sized
capacity, returned Trauma and Hip Implants growth to market levels or
higher, and accelerated the underlying revenue growth of our Orthopaedics
business unit from 1.9% in 2022 to 5.1% in 2025 (reported growth was -2.0% in
2022 and 5.7% in 2025). We continue to prioritise improving performance in US
Knee Implants, which represents less than 9% of Group revenue. We expect the
launch of our new LANDMARK(◊) Knee System in the second half of the year.
LANDMARK will bring the proven clinical benefits of our knee portfolio into a
single platform that combines advanced kinematics with personalisation,
robotic enablement, and ease of implantation, while unlocking capital
efficiency by leveraging on existing instrumentation. With it, we will be able
to address key surgeon preferences and participate in all key segments across
all sites of care. It will also feature best‑in‑class tray efficiency,
making it particularly suitable for Ambulatory Surgery Centers.
We continued to deliver strong results from our faster growth, higher margin
Sports Medicine and Advanced Wound Management businesses throughout the
period.
Smith+Nephew's innovation pipeline has been a significant contributor to our
transformation. In 2025, more than 60% of underlying revenue growth came from
products launched in the last five years, and we improved our portfolio with
15 new platforms and product enhancements across all global business units.
Significantly strengthened the business
The 12-Point Plan was designed not only to deliver on specific actions in the
short-term, but also to embed fundamental, lasting changes in our behaviours,
operations and performance, and raise the standard on how we deliver for our
patients, customers and shareholders.
In 2023, we moved our commercial operations from a complex matrix-based model
across franchises and regions to a simpler global business unit structure,
with vertical teams for each of Orthopaedics, Sports Medicine & ENT and
Advanced Wound Management. This is driving greater accountability, faster
decision making and execution, and has allowed us to increase customer focus
across the portfolio.
We have also focused on improving cash, capital returns and efficiency through
a number of initiatives. The move to allocate central costs attributable to
business units to each business unit is driving greater accountability and
efficiency, with each having full profit and loss and capital accountability.
We also introduced much greater rigour and discipline in capital allocation,
improving inventory set turn by deploying sets to more productive accounts.
Portfolio rationalisation was an area of opportunity identified through the
12-Point plan, in particular in Orthopaedics. An initial 19 product families,
mainly in knees and hips, were identified for phase out in a gradual process
to protect revenue which we are about halfway through. During the fourth
quarter of 2025, we commenced a second wave of rationalisation, identifying a
further 50 families to phase out, predominantly in Trauma. We expect to
complete this process over the next three to five years, by which time we will
have just 59 Orthopaedics product families, a reduction of 54% since the
beginning of the 12-Point Plan. We anticipate that this second wave will
reduce gross inventory by about $500 million. To achieve this significant and
on-going reduction in the capital requirements, the Group recognised a $159
million non-cash excess and obsolescence provision in 2025 included in legal
and other items. This will leave our portfolio simpler, easier for customers
to understand, and puts the company in a stronger position to drive growth,
improve margins and improve capital returns.
We are on track to deliver the $325 to $375 million of gross cost savings we
targeted by 2027, achieving $280 million in cumulative savings to the end of
2025, with the largest savings coming from manufacturing and procurement
across the programme. As outlined in December, we anticipate a further $150
million of savings to flow through in 2026, with around half from 12-Point
Plan and related activities and half from new opportunities above and beyond
these.
Our new RISE strategy and 2028 financial targets
In December we announced RISE, our new strategy to elevate Smith+Nephew. RISE
builds on the progress made through the 12-Point Plan and positions us for
success over the next three years.
RISE has four clear aims:
· To REACH more patients by driving adoption of our differentiated
portfolio and taking share across indications, settings and markets worldwide.
· To INNOVATE to enhance the standard of care through accelerating new
product launches and rapidly scaling existing innovation platforms.
· To SCALE through strategic investment, allocating capital to high
return and high growth opportunities aligned to our portfolio priorities.
· To EXECUTE efficiently, driving enterprise productivity and asset
efficiency to expand our margins and returns.
The delivery of the RISE strategy will be built upon our purpose of Life
Unlimited and strong corporate culture. This culture is built upon pillars of
Care, Collaboration and Courage and drives our Way to Win by being better,
every day, through a continuous improvement mindset and behaviours.
Alongside the RISE strategy we also announced 2028 financial targets,
including:
· 6-7% Organic revenue CAGR,
· 9-10% Trading profit CAGR,
· Free cash flow of more than $1 billion, and
· Adjusted ROIC of 12-13%.
These targets reflect both the strength of our core business and the
opportunity created through the transformation of the last three years.
Acquisition of Integrity Orthopaedics
Within RISE, we see the opportunity for acquisitions to support our strategy
to scale by building on our areas of strength and underpinned by our strong
balance sheet.
This approach was demonstrated in January 2026 with the acquisition of
Integrity Orthopaedics, an important building block in our ambition to become
the global leader in Sports Medicine.
Integrity Orthopaedics is a US‑based early‑stage commercial developer of
TENDON SEAM(◊), an innovative rotator cuff repair (RCR) system designed to
significantly reduce re‑tear rates and improve patient outcomes.
Tendon Seam strongly complements our REGENETEN Bioinductive Implant, giving us
a unique, differentiated and disruptive RCR portfolio, and enhances our
extensive shoulder offering, which spans technologies for both replacement and
repair.
The acquisition was completed for an initial cash payment of US$225 million
plus additional performance-based payments of up to US$225 million over the
next five years.
Fourth Quarter 2025 Trading Update
Our fourth quarter revenue was $1,702 million (2024: $1,571 million), with
underlying revenue growth of 6.2% which includes the benefit of one extra
trading day offset by-100bps headwind from China (reported growth of 8.3%
after 210bps foreign exchange tailwind primarily due to the strength of the
Euro). There were 63 trading days in the quarter.
Geographically, our Established Markets underlying revenue growth was 6.2%
(reported growth 8.0%). Within this, the US underlying revenue growth was 5.6%
(reported growth 5.6%) and Other Established Markets underlying revenue growth
was 7.2% (reported growth 12.8%). Emerging Markets revenue was up 6.4%
(reported growth 10.0%), as growth was tempered by the headwinds in China in
Sports Medicine & ENT.
Fourth Quarter Consolidated Revenue Analysis
31 December 31 December Reported Underlying Acquisitions Currency
2025 2024((i)) growth growth((ii)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 667 608 9.8 7.9 - 1.9
Knee Implants 275 255 8.1 6.1 - 2.0
Hip Implants 174 161 7.9 5.7 - 2.2
Other Reconstruction((iii)) 43 30 43.2 40.8 - 2.4
Trauma & Extremities 175 162 8.1 6.9 - 1.2
Sports Medicine & ENT 541 494 9.5 7.3 - 2.2
Sports Medicine Joint Repair 302 267 13.2 10.9 - 2.3
Arthroscopic Enabling Technologies 183 173 5.7 3.4 - 2.3
ENT (Ear, Nose and Throat) 56 54 3.6 2.3 - 1.3
Advanced Wound Management 494 469 5.3 2.8 - 2.5
Advanced Wound Care 203 187 8.6 4.4 - 4.2
Advanced Wound Bioactives 179 179 (0.2) (0.5) - 0.3
Advanced Wound Devices 112 103 8.7 5.4 - 3.3
Total 1,702 1,571 8.3 6.2 - 2.1
Consolidated revenue by geography
US 931 881 5.6 5.6 - -
Other Established Markets((iv)) 510 453 12.8 7.2 - 5.6
Total Established Markets 1,441 1,334 8.0 6.2 - 1.8
Emerging Markets 261 237 10.0 6.4 - 3.6
Total 1,702 1,571 8.3 6.2 - 2.1
(i) Robotics consumables revenue has been reclassified from Other
Reconstruction to Knee and Hip implants.
(ii) Underlying growth is defined in Note 1 on page 3
(iii) Other Reconstruction includes robotics capital sales and bone cement
(iv) Other Established Markets are Europe, Japan, Australia, Canada and New
Zealand
Fourth Quarter Business Unit Performance
Orthopaedics
Our Orthopaedics business unit delivered underlying revenue growth of 7.9%
(reported growth 9.8%) in the quarter.
Knee Implants global underlying revenue growth was 6.1% (reported growth
8.1%). In the US, Knee Implants underlying revenue growth was 3.6% (reported
growth 3.6%), an improvement over the third quarter and driven by our
LEGION(◊) Total Knee System including the recently launched medial
stabilized inserts, and the LEGION CONCELOC(◊) Cementless Total Knee System.
Outside the US, Knee Implants delivered strong underlying revenue growth of
9.4% (reported growth 14.2%) also driven by our LEGION platform.
Hip Implants global underlying revenue growth was 5.7% (reported growth 7.9%).
US Hip Implants underlying revenue growth was 7.5% (reported growth 7.5%) and
growth outside the US was 3.2% (reported growth 8.4%). Hip Implants growth was
led by our R3(◊) Acetabular System, OR3O(◊) Dual Mobility System and
recently launched CATALYSTEM(◊) Primary Hip System.
Other Reconstruction delivered another good quarter of growth, with underlying
revenue growth of 40.8% (reported growth 43.2%). This included strong growth
from our CORI Surgical System this year and from robotics service and
disposables. By the end of 2025 we had more than 1,100 CORIs installed
worldwide. We are pleased with the deployment in Ambulatory Surgery Centers,
increasing placement in Teaching Institutes and with the percentage of CORIs
deployed in competitive accounts. In the US, we finished the year with 36% of
knee implants completed on a CORI and 63% overall utilisation, our strongest
levels to date. This is important as US knee implants growth is significantly
higher in CORI accounts than in non-CORI accounts.
During the quarter we launched CORIOGRAPH(◊) Pre-Operative Planning and
Modelling Services in total shoulder replacement, expanding the offering to
now cover knee, hip and shoulder joint replacement procedures. Offering both
image-free and image-based registration, CORIOGRAPH is another element in our
approach of supporting a range of procedures and surgeon preferences on CORI.
Trauma & Extremities underlying revenue growth was 6.9% (reported growth
8.1%), reflecting continued good growth from the EVOS(◊) Plating System,
TRIGEN(◊) MAX Tibia and AETOS(◊) Shoulder System.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered underlying revenue
growth of 7.3% including a -250bps headwind from China (reported growth 9.5%).
The overall headwind from China is reducing as we lap the implementation of
Volume Based Procurement (VBP) in Sports Medicine Joint Repair. VBPs in
Arthroscopic Enabling Technologies and ENT are expected in 2026, but we expect
the headwinds to be much smaller given the relative size of these businesses.
We have taken actions to manage our inventory ahead of implementation.
Sports Medicine Joint Repair underlying revenue growth was 10.9% including a
-200bps headwind from China (reported growth 13.2%), with double-digit growth
from our shoulder repair portfolio led by strong growth from the REGENETEN
Bioinductive Implant. The launches of our new Q-FIX KNOTLESS(◊) All-Suture
Anchor for soft tissue-to-bone fixation and recently acquired CARTIHEAL(◊)
AGILI-C(◊) Cartilage Repair Implant are both going well.
During the quarter we announced new evidence and market updates that highlight
the clinical performance of the REGENETEN Bioinductive Implant and support its
further adoption including a Strong Recommendation from the American Academy
of Orthopaedic Surgeons. We also announced that the American Medical
Association had established a Category I Current Procedural Terminology (CPT)
code for procedures involving the CARTIHEAL AGILI-C Implant, effective January
1, 2027. The Category I CPT code will streamline reimbursement processes for
providers and payers, supporting its integration into standard clinical
practice.
Arthroscopic Enabling Technologies underlying revenue growth was 3.4%
including a -200bps headwind from China (reported growth 5.7%), with good
growth from our WEREWOLF(◊) FASTSEAL 6.0 Hemostasis Wand and our mechanical
resection range offset by performance in China where the sector is preparing
for a VBP process.
ENT underlying revenue growth was 2.3% including a -530bps headwind from China
as this sector also prepares for VBP (reported growth 3.6%). Growth was led by
our nose business including strong double-digit growth from the ARIS(◊)
COBLATION turbinates wand, offsetting continued softness in the US tonsils and
adenoids market. China was a headwind in the quarter as the sector prepares
for VBP.
Advanced Wound Management
Our Advanced Wound Management business unit delivered underlying revenue
growth of 2.8% (reported growth 5.3%).
Advanced Wound Care underlying revenue growth was 4.4% (reported growth 8.6%)
with good growth outside the US across foam dressings, infection management
and films. In the US, we are at the early stages of launching the ALLEVYN
COMPLETE CARE Foam Dressing and announced new evidence demonstrating its
pressure injury prevention mechanism of action and ability to absorb and
dissipate friction and shear forces.
Advanced Wound Bioactives delivered underlying revenue decline of -0.5%
(reported decline -0.2%). The growth rate reflects a strong comparator period
from the launch on GRAFIX(◊) PLUS in Q4 2024 and softness in skin
substitutes ahead of the implementation of reimbursement changes in 2026, as
previously disclosed. We delivered mid-single digit growth from SANTYL(◊).
Advanced Wound Devices underlying revenue growth was 5.4% (reported growth
8.7%), also reflecting a strong comparator period. Growth was driven by our
single-use PICO(◊) Negative Pressure Wound Therapy System (sNPWT) and the
LEAF(◊) Patient Monitoring System as we deliver on our pressure injury
prevention strategy. In the US our traditional RENASYS NPWT System continues
to be impacted by softness in the acute care channel, while performance
outside the US remained strong.
During the quarter we announced new evidence showing that PICO sNPWT
significantly reduces the risk of wound dehiscence, hospital length of stay,
and overall healthcare costs compared to a competitor device.
Full Year Trading
Group revenue in 2025 was $6,164 million (2024: $5,810 million), with
underlying revenue growth of 5.3%. Reported growth of 6.1% included an 80bps
tailwind from foreign exchange primarily due to the strength of the Euro.
Geographically, our Established Markets underlying revenue growth was 5.9%
(reported growth 6.8%). Within this, US underlying revenue growth was 5.9%
(reported growth 5.9%) and Other Established Markets underlying revenue growth
was 5.9% (reported growth 8.6%). Emerging Markets underlying revenue growth of
2.5% (reported growth 2.4%) included the impacts of the China headwinds
described above.
Excluding China, 2025 Group underlying revenue growth was 7.0% (reported
growth 7.8%).
Full Year Consolidated Revenue Analysis
31 December 31 December Reported Underlying Acquisitions Currency
2025 2024((i)) growth growth((ii)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 2,437 2,305 5.7 5.1 - 0.6
Knee Implants 1,011 977 3.5 2.9 - 0.6
Hip Implants 641 619 3.5 2.9 - 0.6
Other Reconstruction((iii)) 136 101 35.4 33.8 - 1.6
Trauma & Extremities 649 608 6.7 6.3 - 0.4
Sports Medicine & ENT 1,934 1,824 6.0 5.2 - 0.8
Sports Medicine Joint Repair 1,067 982 8.6 7.8 - 0.8
Arthroscopic Enabling Technologies 647 632 2.4 1.6 - 0.8
ENT (Ear, Nose and Throat) 220 210 4.8 4.4 - 0.4
Advanced Wound Management 1,793 1,681 6.7 5.6 - 1.1
Advanced Wound Care 766 735 4.3 2.6 - 1.7
Advanced Wound Bioactives 621 581 6.9 6.8 - 0.1
Advanced Wound Devices 406 365 11.1 9.8 - 1.3
Total 6,164 5,810 6.1 5.3 - 0.8
Consolidated revenue by geography
US 3,306 3,123 5.9 5.9 - -
Other Established Markets((iv)) 1,855 1,707 8.6 5.9 - 2.7
Total Established Markets 5,161 4,830 6.8 5.9 - 0.9
Emerging Markets 1,003 980 2.4 2.5 - (0.1)
Total 6,164 5,810 6.1 5.3 - 0.8
(i) Robotics consumables revenue has been reclassified from Other
Reconstruction to Knee and Hip implants.
(ii) Underlying growth is defined in Note 1 on page 3
(iii) Other Reconstruction includes robotics capital sales and bone cement
(iv) Other Established Markets are Europe, Japan, Australia, Canada and New
Zealand
Full Year Business Unit Performance
Orthopaedics
Our Orthopaedics business unit delivered underlying revenue growth of 5.1%
(reported growth 5.7%) for the full year.
Knee Implants underlying revenue growth was 2.9% (reported growth 3.5%) and
Hip Implants underlying revenue growth was 2.9% (reported growth 3.5%). Knee
Implants growth was strongest outside the US led by our JOURNEY II Total Knee
System and ANTHEM Total Knee System. Hip Implant performance was driven by the
US launch of the CATALYSTEM(◊) Primary Hip System and strong growth from
OR30 Dual Mobility System.
Other Reconstruction underlying revenue growth was 33.8% (reported growth
35.4%) for the full year reflecting sales of our CORI Surgical System and
consumables.
Trauma & Extremities underlying revenue growth was 6.3% (reported growth
6.7%) for the full year as this business continued to be a significant growth
driver following its turnaround in 2023. Growth was driven by the EVOS Plating
System, our patient-positioning portfolio and the successful launch of the
AETOS Shoulder System.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered underlying revenue
growth of 5.2% including a -400bps headwind from China, where the
implementation of VBP was a headwind, as noted above (reported growth 6.0%).
Sports Medicine Joint Repair underlying revenue growth was 7.8% including a
-480bps headwind from China (reported growth 8.6%). Outside of China, Sports
Medicine Joint Repair had another strong year driven by our shoulder repair
portfolio and the REGENETEN Bioinductive Implant.
Arthroscopic Enabling Technologies underlying revenue growth was 1.6%
(reported growth 2.4%) including good growth from the WEREWOLF(◊) FASTSEAL
6.0 Hemostasis Wand and patient-positioning portfolio offset by video
technologies.
ENT underlying revenue growth was 4.4% (reported growth 4.8%). Growth was led
by our nose business offset by some softness in the US tonsils and adenoids
market.
Advanced Wound Management
Our Advanced Wound Management business unit delivered underlying revenue
growth of 5.6% (reported growth 6.7%) in 2025.
Advanced Wound Care underlying revenue growth was 2.6% (reported growth 4.3%)
including good growth in foam dressings and films offsetting a weaker
performance in infection management.
Advanced Wound Bioactives underlying revenue growth was 6.8% (reported growth
6.9%). Performance was led by good growth from SANTYL and a strong first half
for our skins substitutes portfolio ahead of the reimbursement changes
referred to above.
Advanced Wound Devices underlying revenue growth was 9.8% (reported growth
11.1%). This was driven by both our single-use PICO Negative Pressure Wound
Therapy System and traditional RENASYS(◊) Negative Pressure Wound Therapy
System, as well as our LEAF Patient Monitoring System.
Full Year 2025 Consolidated Analysis
Smith+Nephew results for the year ended 31 December 2025:
Reported
2025 2024 growth
$m $m %
Revenue 6,164 5,810 6.1
Operating profit 794 657 20.7
Acquisition and disposal related items 32 94
Restructuring and rationalisation costs 47 123
Amortisation and impairment of acquisition intangibles 176 187
Legal and other 162 (12)
Trading profit((i)) 1,211 1,049 15.5
¢ ¢
Earnings per share ('EPS') 72.1 47.2
Acquisition and disposal related items (3.6) 11.2
Restructuring and rationalisation costs 4.0 10.8
Amortisation and impairment of acquisition intangibles 15.6 16.6
Legal and other 13.9 (1.5)
Adjusted Earnings per share ('EPSA')((i)) 102.0 84.3 21.0
(i) See Other Information on pages 35 to 41
Full Year 2025 Analysis
Group revenue for 2025 was $6,164 million (2024: $5,810 million), reflecting
underlying revenue growth of 5.3%. Reported growth of 6.1% reflected an 80bps
tailwind from foreign exchange.
The gross profit was $4,192 million (2024: $4,046 million) with a gross profit
margin of 68.0% (2024: 69.6%), with the decrease reflecting non-trading items,
primarily a $159 million non-cash excess and obsolescence provision related to
the portfolio rationalisation programme (see Note 2 to the Financial
Statements). Trading gross profit, which excludes these items, was $4,368
million (2024: $4,085 million), and trading gross margin increased 60bps to
70.9% (2024: 70.3%).
Operating profit increased 20.7% on a reported basis to $794 million primarily
due to operating leverage and productivity savings across the Group (2024:
$657 million).
Trading profit was up 15.5% on a reported basis to $1,211 million (2024:
$1,049 million). A reconciliation of the $417 million (2024: $392 million) of
adjustments between operating profit and trading profit is included in Other
Information on pages 35 to 41.
We delivered a 160bps expansion in trading profit margin, which increased to
19.7% (2024: 18.1%). We continued to deliver year-on-year expansion in our
trading profit margin, reflecting operating leverage, continued benefits from
the 12-Point Plan and productivity savings across the Group, more than
offsetting headwinds including a $17 million impact from tariffs.
Orthopaedics trading profit was up 36.9% on a reported basis to $363 million
(2024: $265 million) and trading profit margin increased 340bps to 14.9%,
reflecting favourable price/mix and 12-Point Plan transformation initiatives
including manufacturing savings from network optimisation, ongoing
productivity initiatives and disciplined cost control. Sports Medicine &
ENT trading profit was up 5.6% on a reported basis to $461 million (2024: $437
million) and trading profit margin declined -20bps to 23.8% driven by the
China VBP headwind in ENT. Advanced Wound Management trading profit was up
12.0% on a reported basis to $447 million (2024: $399 million) and trading
profit margin increased 120bps to 24.9%, driven by favourable product mix and
productivity in operations (see Note 2 to the Financial Statements for global
business unit trading profit).
Reported profit before tax was $779 million (2024: $498 million), reflecting
the improvement in operating profit and a $109 million reversal of an
impairment charge relating to Bioventus (see Other Information on pages 35 to
41).
Reported tax for the year to 31 December 2025 was a charge of $154 million
(2024: $86 million). The increase in the reported tax charge can principally
be attributed to the increases in profit before tax since 2024 and the
jurisdictional profit mix. The tax rate on trading results was 19.4% (in line
with our guidance of 19-20%) (2024: 19.1%) (see Note 3 to the Financial
Statements and Other Information on pages 35 to 41 for further details on
taxation). The net interest charge was $112 million (2024: $121 million)
mostly reflecting higher cash balances.
Adjusted earnings per share ('EPSA') increased 21.0% to 102.0¢ (204.0¢ per
ADS) (2024: 84.3¢ per share), reflecting improved trading performance.
Basic earnings per share ('EPS') increased 52.8% to 72.1¢ (144.2¢ per ADS)
(2024: 47.2¢ per share), reflecting restructuring costs, acquisition and
disposal related items, amortisation and impairment of acquisition intangibles
and legal and other items incurred.
Cash generation improved significantly in 2025, driven by strong working
capital discipline and lower restructuring costs. As a result, cash generated
from operations improved by 24.4% to $1,549 million (2024: $1,245 million) and
trading cash flow was up 23.7% at $1,236 million (2024: $999 million) (see
Other Information on pages 35 to 41 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 102%
(2024: 95%). We delivered a significant improvement in free cash flow which
was up 52.5% to $840 million (2024: $551 million), including a $26 million
benefit from a property transaction.
We continued to make progress addressing our high inventory, reducing Day
Sales of Inventory (DSI) by 21 days year-on-year, with DSI down across all
business units. As a result of the further Group-wide inventory portfolio
rationalisation programme announced in December 2025, DSI decreased by 51 days
year-on-year.
2025 adjusted ROIC increased by 90bps to 8.3% despite the -160bps portfolio
rationalisation headwind (2024: 7.4%).
Each business unit contributed to the expansion in adjusted ROIC, reflecting
continued progress under the 12‑Point Plan and the stronger operational
discipline now embedded across the Group. Orthopaedics adjusted ROIC increased
to 4.8% (2024: 3.1%), Advanced Wound Management increased to 14.1% (2024:
11.6%) and Sports Medicine & ENT was flat at 9.4% (2024: 9.4%). The
impact of the headwinds from the portfolio rationalisation programme was
most significant in Orthopaedics and Sports Medicine. The allocation of
directly attributable central costs to business units, introduced in 2024 to
reinforce ownership of performance, has enhanced accountability and focus on
returns. This action, alongside a higher trading profit margin, lower
non‑trading costs and improved capital efficiency contributed to the
increase in adjusted ROIC for the year. Group ROIC based on the closest
equivalent IFRS measures was 7.3% (2024: 4.9%).
The Group's net debt, including lease liabilities, was $2,759 million at 31
December 2025 (2024: $2,709 million), with access to committed facilities of
$4.1 billion (see Note 6 to the Financial Statements). Our adjusted net
debt/EBITDA leverage ratio for 2025 was 1.7x.
Dividend
The Board is recommending a Final Dividend of 24.1¢ per share (48.2¢ per
ADS) (2024: 23.1¢ per share). Together with the Interim Dividend of 15.0¢
per share (30.0¢ per ADS) (2024: 14.4¢), this will give a total distribution
of 39.1¢ per share (78.2¢ per ADS), a 4.3% increase from 2024. The 38%
payout ratio is in line with the 35-40% indicated in our capital allocation
framework.
2026 Outlook
Building on our momentum, for 2026 we are targeting further progress in
revenue growth, trading profit and adjusted ROIC, and sustained strong cash
generation, as outlined in our provisional guidance at our Capital Markets Day
in December 2025.
We continue to expect underlying revenue growth to further accelerate to
around 6% for the full year. This is expected to include continued good growth
in Orthopaedics, Sports Medicine (excluding Arthroscopic Enabling Technologies
and ENT in China) and Advanced Wound Management, particularly in Advanced
Wound Care and Advanced Wound Devices. In Orthopaedics, we expect to continue
to close the gap versus US Reconstruction market growth. We expect US Hip
Implants to track in line with or ahead of market growth and we expect US knee
performance to start with a softer first quarter, reflecting our continuing
and deliberate trade-offs to balance growth and profit and asset efficiency.
We will then build towards market growth in Q4, supported by the launch of the
cementless version of our new LANDMARK Knee System in the second half of the
year. In Advanced Wound Management, whilst we expect headwinds in our skin
substitutes business, we still expect Advanced Wound Bioactives to grow,
supported by the ongoing strength of SANTYL and growth in skin substitutes
outside of the physician office and mobile channel. The guidance equates to
reported revenue growth of around 7.8% based on exchange rates prevailing on
24 February 2026.
We expect trading profit growth on an organic basis of around 8% despite the
significant headwinds to profit in 2026, as outlined in December. These
include inventory revaluation, tariffs, the impact of changes to reimbursement
in our US Advanced Wound Management business, and ENT VBP in China. There are
no changes to any of our assumptions regarding these headwinds. We still
expect around $60 million impact from tariffs ($17 million in 2025) and $20 to
$40 million incremental impact from changes to wound reimbursement. We
continue to expect revenue leverage and operational savings to more than
offset these headwinds to drive trading profit growth ahead of revenue growth
before acquisitions.
We expect a stronger second half to the year compared to the first half for
both revenue and profit growth, in keeping with normal phasing. We have one
fewer trading day in Q1 2026 versus 2025 and one more in Q4. Trading days
typically have a more pronounced impact on our Orthopaedics business.
Since providing our provisional guidance we have completed the acquisition of
Integrity Orthopaedics. This acquisition is expected to be marginally dilutive
to trading profit in 2026, broadly neutral in 2027 and accretive in 2028.
Including this dilution, we expect 2026 trading profit to be around $1.3
billion based on current forecast exchange rates.
We expect around $800 million in free cash flow and greater than 10% adjusted
ROIC, excluding the impact of Integrity Orthopaedics.
The tax rate on trading results for 2026 is forecast to be in the range of
19.0% to 20.0%, subject to any material changes to tax law or other one-off
items.
Forward calendar
The Q1 2026 Trading Report will be released on 6 May 2026.
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 $6.2 billion in 2025. 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
(http://www.smith-nephew.com/) and follow us on X
(http://www.twitter.com/smithnephewplc) , LinkedIn
(http://www.linkedin.com/company/smith-%26-nephew) , Instagram
(https://www.instagram.com/smithnephewmeded/) or Facebook
(http://www.facebook.com/smithnephewplc) .
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.
2025 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Group Income Statement for the year ended 31 December 2025
2025 2024
Notes $m $m
Revenue 2 6,164 5,810
Cost of goods sold (1,972) (1,764)
Gross profit 4,192 4,046
Selling, general and administrative expenses (3,102) (3,100)
Research and development expenses (296) (289)
Operating profit 2 794 657
Interest income 28 24
Interest expense (140) (145)
Other finance costs (16) (28)
Share of results of associates 113 (10)
Profit before taxation 779 498
Taxation 3 (154) (86)
Attributable profit for the year(A) 625 412
Earnings per ordinary share(A)
Basic 72.1 47.2
Diluted 71.6 47.0
Group Statement of Comprehensive Income for the year ended 31 December 2025
2025 2024
$m $m
Attributable profit for the year(A) 625 412
Other comprehensive income
Items that will not be reclassified to income statement
Remeasurement of net retirement benefit obligations 5 16
Taxation on other comprehensive income (1) (1)
Total items that will not be reclassified to income statement 4 15
Items that may be reclassified subsequently to income statement
Cash flow hedges - forward foreign exchange contracts
Gains arising in the year 13 38
Gains recycled to income statement in the year (29) (1)
Exchange differences on translation of foreign operations 179 (124)
Taxation on other comprehensive income 5 (5)
Total items that may be reclassified subsequently to income statement 168 (92)
Other comprehensive income/(loss) for the year, net of taxation 172 (77)
Total comprehensive income for the year(A) 797 335
A Attributable to the equity holders of the Company and wholly derived
from continuing operations.
Group Balance Sheet as at 31 December 2025
2025 2024
Notes $m $m
ASSETS
Non-current assets
Property, plant and equipment 1,638 1,422
Goodwill 3,108 3,026
Intangible assets 882 1,032
Investments 30 9
Investments in associates 121 7
Other non-current assets 164 24
Retirement benefit assets 64 63
Deferred tax assets 347 350
6,354 5,933
Current assets
Inventories 2,117 2,387
Trade and other receivables 1,413 1,381
Current tax receivable 16 34
Cash and cash equivalents 6 557 619
4,103 4,421
TOTAL ASSETS 10,457 10,354
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 175 175
Share premium 615 615
Capital redemption reserve 20 20
Treasury shares (515) (66)
Other reserves (329) (497)
Retained earnings 5,323 5,018
Total equity 5,289 5,265
Non-current liabilities
Long-term borrowings and lease liabilities 6 3,177 3,258
Retirement benefit obligations 84 79
Other payables 190 95
Provisions 82 95
Deferred tax liabilities 40 31
3,573 3,558
Current liabilities
Bank overdrafts, borrowings, loans and lease liabilities 6 150 63
Trade and other payables 1,177 1,128
Provisions 74 108
Current tax payable 194 232
1,595 1,531
Total liabilities 5,168 5,089
TOTAL EQUITY AND LIABILITIES 10,457 10,354
Group Cash Flow Statement for the year ended 31 December 2025
2025 2024
$m $m
Cash flows from operating activities
Profit before taxation 779 498
Net interest expense 112 121
Depreciation, amortisation and impairment 573 645
Loss on disposal of property, plant and equipment and software 23 22
Share-based payments expense (equity-settled) 43 40
Share of results of associates (113) 10
Pension costs less cash paid 5 16
Decrease/(increase) in inventories 208 (42)
Increase in trade and other receivables (175) (81)
Decrease in trade and other payables and provisions 94 16
Cash generated from operations 1,549 1,245
Interest received 25 22
Interest paid (142) (140)
Income taxes paid (147) (140)
Net cash inflow from operating activities 1,285 987
Cash flows from investing activities
Acquisitions, net of cash acquired (9) (186)
Capital expenditure (433) (381)
Purchase of investments (2) (1)
Proceeds from disposal of property, plant and equipment 38 -
Investment in associates - (1)
Net cash used in investing activities (406) (569)
Cash flows from financing activities
Purchase of own shares (502) -
Proceeds from own shares 12 1
Payment of capital element of lease liabilities (50) (55)
Proceeds from borrowings due within one year 43 -
Settlement of borrowings due within one year (39) (705)
Proceeds from borrowings due after one year - 1,000
Settlement of borrowings due after one year (90) -
Settlement of currency swaps 1 -
Equity dividends paid (330) (327)
Net cash used in financing activities (955) (86)
Net (decrease)/increase in cash and cash equivalents (76) 332
Cash and cash equivalents at beginning of year 617 300
Exchange adjustments 12 (15)
Cash and cash equivalents at end of year(B) 553 617
B Cash and cash equivalents at the end of the year are net of bank
overdrafts of $4m (2024: $2m).
Group Statement of Changes in Equity for the year ended 31 December 2025
Capital
Share Share redemption Treasury Other Retained Total
capital premium reserve shares reserves(C) earnings(D) equity
$m $m $m $m $m $m $m
At 1 January 2025 175 615 20 (66) (497) 5,018 5,265
Attributable profit for the year(A) - - - - - 625 625
Other comprehensive income(A) - - - - 168 4 172
Total comprehensive income - - - - 168 629 797
Equity dividends declared and paid - - - - - (330) (330)
Share-based payments recognised - - - - - 43 43
Taxation on share-based payments - - - - - 4 4
Purchase of own shares(C) - - - (502) - - (502)
Cost of shares transferred to beneficiaries - - - 53 - (41) 12
At 31 December 2025 175 615 20 (515) (329) 5,323 5,289
Capital
Share Share redemption Treasury Other Retained Total
capital premium reserve shares reserves(C) earnings(D) equity
$m $m $m $m $m $m $m
At 1 January 2024 175 615 20 (94) (405) 4,906 5,217
Attributable profit for the year(A) - - - - - 412 412
Other comprehensive income(A) - - - - (92) 15 (77)
Equity dividends declared and paid - - - - - (327) (327)
Share-based payments recognised - - - - - 40 40
Taxation on share-based payments - - - - - (1) (1)
Cost of shares transferred to beneficiaries - - - 28 - (27) 1
At 31 December 2024 175 615 20 (66) (497) 5,018 5,265
A Attributable to equity holders of the Company and wholly derived from
continuing operations.
C Other reserves comprises gains and losses on cash flow hedges, foreign
exchange differences on translation of foreign operations and net changes on
fair value of trade investments. The cumulative translation loss within other
reserves at 31 December 2025 was $341m (2024: $520m, 2023: $396m).
D Within retained earnings is a non-distributable capital reserve of
$2,266m (2024: $2,266m, 2023: $2,266m) which arose as a result of the Group's
reorganisation in 2008.
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation and accounting policies
Smith & Nephew plc (the 'Company') is a public limited company
incorporated in England and Wales. In these condensed consolidated financial
statements ('Financial Statements'), 'Group' means the Company and all its
subsidiaries. The financial information herein has been prepared on the basis
of the accounting policies as set out in the Annual Report of the Group for
the year ended 31 December 2025. The Group has prepared its accounts in
accordance with UK-adopted International Accounting Standards. The Group has
also prepared its accounts in accordance with International Financial
Reporting Standards (IFRS Accounting Standards) as issued by the International
Accounting Standards Board (IASB) effective as at 31 December 2025. IFRS as
adopted in the UK differs in certain respects from IFRS Accounting Standards
as issued by the IASB. However, the differences have no impact for the periods
presented.
The preparation of accounts in conformity with IFRS requires management to use
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the accounts and the reported amounts of revenues and expenses during the
year. The accounting policies requiring management to use significant
estimates and assumptions are discussed below. Although these estimates are
based on management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
The uncertainties as to the future impact on the financial performance and
cash flows of the Group as a result of the current economic environment have
been considered as part of the Group's adoption of the going concern basis in
these financial statements, in which context the Directors reviewed cash flow
forecasts prepared for a period of at least 12 months from the date of
approval of these financial statements. Having carefully reviewed those
forecasts, the Directors concluded that it was appropriate to adopt the going
concern basis of accounting in preparing these financial statements for the
reasons set out below.
The Group had access to $553m of cash and cash equivalents at 31 December
2025. The Group's net debt at 31 December 2025 was $2,759m with access to
committed facilities of $4.1bn with an average maturity of 4.7 years. The
funding position of the Group has remained materially unchanged following the
upfront payment of $225m for the acquisition of Integrity Orthopaedics, the
repayment of $75m of maturing private placement debt, and an increase of the
Revolving Credit Facility by $125m to $1.125bn.
$625m of private placement debt is subject to financial covenants. The
principal covenant on the private placement debt is a leverage ratio of
<3.5 which is measured on a rolling 12-month basis at half year and year
end. There are no financial covenants in any of the Group's other facilities.
The Directors have considered various scenarios in assessing the impact of the
economic environment on future financial performance and cash flows, including
the impact of a significant global economic downturn, leading to lower
healthcare spending across both public and private systems. Throughout these
scenarios, which include a severe but plausible outcome, the Group
continues to have headroom on its borrowing facilities and financial
covenants.
The Directors have a reasonable expectation that the Company and the Group are
well placed to manage their business risks, have sufficient funds to continue
to meet their liabilities as they fall due and to continue in operational
existence for a period of at least 12 months from the date of the approval of
the financial statements. The financial statements have therefore been
prepared on a going concern basis.
Accordingly, the Directors continue to adopt the going concern basis (in
accordance with the guidance 'Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting' issued by the FRC) in preparing
these financial statements.
The principal risks that the Group is exposed to will be disclosed in the
Group's 2025 Annual Report. These are: strategy and commercial execution;
cybersecurity; global supply chain; legal and compliance; mergers and
acquisitions; new product innovation, design and development including
intellectual property; political and economic; pricing and reimbursement;
quality and regulatory; talent management; and financial markets.
The financial information contained in this document does not constitute
statutory financial statements as defined in sections 434 and 435 of the
Companies Act 2006 for the years ended 31 December 2025 or 2024 but is derived
from those accounts. Statutory accounts for 2024 have been delivered to the
registrar of companies and those for 2025 will be delivered in due course. The
auditor has reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
New accounting standards effective 2025
A number of new amendments to standards are effective from 1 January 2025 but
they do not have a material effect on the Group's financial statements.
Accounting standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual
periods beginning after 1 January 2026 and earlier application is permitted;
however, the Group has not adopted them early in preparing these financial
statements.
IFRS 18 Presentation and Disclosure in Financial Statements was issued by the
IASB in April 2024. The standard is effective for annual reporting periods
beginning on or after 1 January 2027 and also applies to comparative
information. IFRS 18 will replace IAS 1 Presentation of Financial Statements
and will have a pervasive impact on several aspects of financial statements
presentation and disclosure, particularly in the Group income statement and
disclosure requirements for management-defined performance measures (MPMs)
within the financial statements.
The Group has commenced an assessment of the standard's full impact. Based on
the preliminary analysis, the Group anticipates that the standard will have
the following potential impacts:
· The classification of items of income and expense into
categories defined in IFRS 18 will impact the presentation of the Group income
statement. Whilst the standard does not impact recognition or measurement,
changes in classification will impact the reported amounts for line items in
the income statement. A new subtotal 'Profit before financing and income tax'
will be included to separately present the impact of investing and financing
activities. Share of results of associates will be classified in the investing
category, interest income and expense in the financing category and other
finance costs will be classified in the operating, investing or financing
category depending on the nature of the income or expense.
· The Group is reassessing its aggregation and disaggregation
principles to ensure they comply with the enhanced guidance in IFRS 18, which
aims to provide more detailed and useful information to users of the financial
statements.
· Mandatory new disclosures in relation to MPMs will be required
within the financial statements.
· Consequential presentational changes to statement of cash flows
will be required and operating profit will be the new starting point for
reconciling cash flows from operating activities.
The Group will apply IFRS 18 from its mandatory effective date of 1 January
2027. Comparative information for the financial years ending 31 December 2026
and 31 December 2025 will be restated in accordance with IFRS 18.
Critical judgements and estimates
The Group prepares its consolidated financial statements in accordance with
IFRS Accounting Standards as issued by the IASB and IFRS adopted in the UK,
the application of which often requires judgements and estimates to be made
by management when formulating the Group's financial position and results.
Under IFRS, the Directors are required to adopt those accounting policies most
appropriate to the Group's circumstances for the purpose of presenting fairly
the Group's financial position, financial performance and cash flows.
Management regularly reviews, and revises as necessary, the accounting
judgements that significantly impact the amounts recognised in the financial
statements and the estimates that are considered to be critical estimates due
to their potential to give rise to material adjustments in the Group's
financial statements in the next financial year. The Group has determined that
there are no critical accounting judgements and no key sources of estimation
uncertainty that have a significant risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year.
Climate change considerations
The impact of climate change has been considered as part of the assessment of
estimates and judgements in preparing the Group accounts. The climate change
scenario analyses undertaken this year in line with TCFD recommendations did
not identify any material financial impact. The following considerations were
made in respect of the financial statements:
a. The impact of climate change on the going concern assessment and the
viability of the Group over the next three years.
b. The impact of climate change on the cash flow forecasts used in the
impairment assessments of non-current assets including goodwill.
c. The impact of climate change on the carrying value and useful economic
lives of property, plant and equipment.
While there is currently no material medium term impact expected, the Group
closely monitors climate-related risks given the changing nature of these
risks and management consider the impact of climate change as part of the
decision making process and continue to assess the impact on judgements and
estimates, and on preparation of the consolidated financial statements.
2. Business segment information
The Group's operating structure is organised around four global business units
(Orthopaedics, Sports Medicine, ENT and Advanced Wound Management) and the
chief operating decision maker monitors performance, makes operating decisions
and allocates resources on a global business unit basis. Business unit
presidents have responsibility for upstream marketing, driving product
portfolio and technology acquisition decisions, full commercial responsibility
and for the implementation of their business unit strategy globally.
Accordingly, the Group consists of four operating segments.
The Group has concluded that Sports Medicine and ENT meet the aggregation
criteria and therefore, these operating segments have been aggregated into a
single operating segment. In applying the aggregation criteria prescribed by
IFRS 8 Operating Segments, management made certain judgements pertaining to
the economic indicators relating to these operating segments including those
relating to the similarities in the expected long-term market growth rates,
the geographic and operational risks and the competitive landscape that these
segments operate in. Therefore, in accordance with IFRS 8, the Group has three
operating segments which are also reportable segments.
The Executive Committee ('ExCo') comprises the Chief Financial Officer
('CFO'), the business unit presidents and certain heads of function, and is
chaired by the Chief Executive Officer ('CEO'). ExCo is the body through which
the CEO uses the authority delegated to him by the Board of Directors to
manage the operations and performance of the Group. All significant operating
decisions regarding the allocation and prioritisation of the Group's resources
and assessment of the Group's performance are made by ExCo, and while the
members have individual responsibility for the implementation of decisions
within their respective areas, it is at the ExCo level that these decisions
are made. Accordingly, ExCo is considered to be the Group's chief operating
decision maker as defined by IFRS 8 Operating Segments.
In making decisions about the prioritisation and allocation of the Group's
resources, ExCo reviews financial information for the business units and
determines the best allocation of resources to the business units. This
information is prepared substantially on the same basis as the Group's IFRS
financial statements aside from the adjustments described in Note 2b. In 2024,
the Group changed the segment trading profit measure presented to the ExCo by
allocating directly attributable corporate costs to business units. Financial
information for corporate costs relating to centralised infrastructure costs
such as compliance and group functions is presented on a Group-wide basis. The
ExCo is not provided with total assets and liabilities by segment, and
therefore these measures are not included in the disclosures below. The
results of the segments are shown below.
2a. Revenue by business segment and geography
Revenue is recognised as the performance obligations to deliver products or
services are satisfied and is recorded based on the amount of consideration
expected to be received in exchange for satisfying the performance
obligations. Revenue is recognised primarily when control is transferred to
the customer, which is generally when the goods are shipped or delivered in
accordance with the contract terms, with some transfer of services taking
place over time. Substantially all performance obligations are fulfilled
within one year. There is no significant revenue associated with the provision
of services.
Payment terms to our customers are based on commercially reasonable terms for
the respective markets while also considering a customer's credit rating.
Appropriate provisions for returns, trade discounts and rebates are deducted
from revenue. Rebates primarily comprise chargebacks and other discounts
granted to certain customers. Chargebacks are discounts that occur when a
third-party purchases product from a wholesaler at its agreed price plus a
mark-up. The wholesaler in turn charges the Group for the difference between
the price initially paid by the wholesaler and the agreed price. The provision
for chargebacks is based on expected sell-through levels by the Group's
wholesalers to such customers, as well as estimated wholesaler inventory
levels.
Orthopaedics and Sports Medicine & ENT (Ear, Nose & Throat)
Orthopaedics and Sports Medicine & ENT consists of the following
businesses: Knee Implants, Hip Implants, Other Reconstruction, Trauma &
Extremities, Sports Medicine Joint Repair, Arthroscopic Enabling Technologies
and ENT. Sales of inventory located at customer premises and available for
customers' immediate use are recognised when notification is received that the
product has been implanted or used. Substantially all other revenue is
recognised when control is transferred to the customer, which is generally
when the goods are shipped or delivered in accordance with the contract terms.
Revenue is recognised for the amount of consideration expected to be received
in exchange for transferring the products or services.
In general, our business in Established Markets is direct to hospitals and
ambulatory surgery centers whereas in the Emerging Markets we generally sell
through distributors.
Advanced Wound Management
Advanced Wound Management consists of the following businesses: Advanced Wound
Care, Advanced Wound Bioactives and Advanced Wound Devices. Substantially all
revenue is recognised when control is transferred to the customer, which is
generally when the goods are shipped or delivered in accordance with the
contract terms. Revenue is recognised for the amount of consideration expected
to be received in exchange for transferring the products or services.
Appropriate provisions for returns, trade discounts and rebates are deducted
from revenue, as explained above.
The majority of our Advanced Wound Management business, and in particular
products used in community and homecare facilities, is through wholesalers and
distributors. When control is transferred to a wholesaler or distributor,
revenue is recognised accordingly. The proportion of sales direct to hospitals
is higher in our Advanced Wound Devices business in Established Markets.
Segment revenue reconciles to statutory revenue from continuing operations as
follows:
2025 2024
$m $m
Reportable segment revenue
Orthopaedics 2,437 2,305
Sports Medicine & ENT 1,934 1,824
Advanced Wound Management 1,793 1,681
Revenue from external customers 6,164 5,810
Disaggregation of revenue
The following table shows the disaggregation of Group revenue by product by
business unit:
2025 2024((i))
$m $m
Knee Implants 1,011 977
Hip Implants 641 619
Other Reconstruction 136 101
Trauma & Extremities 649 608
Orthopaedics 2,437 2,305
Sports Medicine Joint Repair 1,067 982
Arthroscopic Enabling Technologies 647 632
ENT (Ear, Nose and Throat) 220 210
Sports Medicine & ENT 1,934 1,824
Advanced Wound Care 766 735
Advanced Wound Bioactives 621 581
Advanced Wound Devices 406 365
Advanced Wound Management 1,793 1,681
Total 6,164 5,810
(i) Robotics consumables revenue has been reclassified from Other
Reconstruction to Knee and Hip implants.
The following table shows the disaggregation of Group revenue by geographic
market and product category. The disaggregation of revenue into the two
product categories below reflects that in general the products in the Advanced
Wound Management business unit are sold to wholesalers and intermediaries,
while products in the other business units are sold directly to hospitals,
ambulatory surgery centers and distributors. The further disaggregation of
revenue by Established Markets and Emerging Markets reflects that in general
our products are sold through distributors and intermediaries in the Emerging
Markets while in the Established Markets, with the exception of the Advanced
Wound Care and Bioactives products, which are in general sold direct to
hospitals and ambulatory surgery centers. The disaggregation by Established
Markets and Emerging Markets also reflects their differing economic factors
including volatility in growth and outlook.
2025 2024
Established Markets(E) Emerging Markets Total Established Markets(E) Emerging Markets Total
$m $m $m $m $m $m
Orthopaedics, Sports Medicine & ENT 3,606 764 4,370 3,366 763 4,129
Advanced Wound Management 1,555 239 1,794 1,464 217 1,681
Total 5,161 1,003 6,164 4,830 980 5,810
E Established Markets comprises the US, Australia, Canada, Europe, Japan
and New Zealand.
Sales are attributed to the country of destination. US revenue for 2025 was
$3,306m (2024: $3,123m, 2023: $2,979m), UK revenue for 2025 was $246m (2024:
$226m, 2023: $201m) and China revenue for 2025 was $128m (2024: $210m, 2023:
$275m).
No single customer generates revenue greater than 10% of the consolidated
revenue.
2b. Trading profit by business segment
The segment profit measure presented to the ExCo is the segment trading
profit. The Group has identified the following items, where material, as those
to be excluded from operating profit when arriving at segment trading profit:
corporate costs; acquisition and disposal-related items; significant
restructuring programmes; amortisation and impairment of acquisition
intangibles; gains and losses arising from legal disputes; and other
significant items.
In 2024, the Group changed the segment trading profit measure presented to the
ExCo by allocating directly attributable corporate costs to business units
except for corporate costs relating to centralised infrastructure costs such
as compliance and group functions.
Segment trading profit is reconciled to the statutory measure below:
2025 2024
$m $m
Segment profit
Orthopaedics 363 265
Sports Medicine & ENT 461 437
Advanced Wound Management 447 399
Segment trading profit 1,271 1,101
Corporate costs(1) (60) (52)
Acquisition and disposal related items(2) (32) (94)
Restructuring and rationalisation expenses(2) (47) (123)
Amortisation and impairment of acquisition intangibles (176) (187)
Legal and other(2) (162) 12
Operating profit 794 657
Interest income 28 24
Interest expense (140) (145)
Other finance costs (16) (28)
Share of results of associates 113 (10)
Profit before taxation 779 498
1 Corporate costs include centralised infrastructure costs such as
compliance and group functions.
2 During 2025, the Group undertook a strategic review of its inventory
portfolio and determined that certain product ranges would be phased out and
simplified. As a result, the Group recognised an excess and obsolescence
charge of $159m within legal and other items. During 2024, the Group announced
its intention to close the Warwick manufacturing site that manufactures
Birmingham Hip Resurfacing (BHR) products. As a result, a total of $68m of BHR
assets and liabilities were written off, which mainly includes goodwill of
$63m (included in acquisition and disposal-related items).
Depreciation and amortisation included in segment profit is
presented below:
2025 2024
$m $m
Depreciation and amortisation
Orthopaedics 227 213
Sports Medicine & ENT 105 98
Advanced Wound Management 69 62
Acquisition and disposal-related items
For the year ended 31 December 2025, costs primarily relate to charge relating
to integration costs for prior year acquisitions and disposal of certain
products.
For the year ended 31 December 2024, costs primarily relate to impairment of
BHR goodwill, disposal of certain products and integration costs relating to
CartiHeal.
Restructuring and rationalisation costs
For the year ended 31 December 2025 and 2024 these costs include efficiency
and productivity elements of the 12-Point Plan and the Operations and
Commercial Excellence programme. These costs primarily consist of severance,
business advisory services, asset write-offs, contractual terminations and
integration and dual running costs.
Amortisation and impairment of acquisition intangibles
For the years ended 31 December 2025 and 2024 these costs relate to the
amortisation and impairment of intangible assets acquired in material business
combinations.
Legal and other
For the year ended 31 December 2025, the charge mainly relates to a $159m
increase in the excess and obsolescence provision arising from the Group's
portfolio simplification initiatives introduced under the 12‑Point Plan and
further developed in 2025 through the Ortho 360 operating model and new RISE
strategy. These actions include the planned discontinuation and simplification
of certain product ranges which will reduce the need for inventory and capital
employed in the business, provide a simpler and more efficient offer to our
customers, and will also allow us to focus on migrating them to our latest
technology products. Legal and other also includes $9m reduction in the
provision for ongoing metal-on-metal hip claims as a result of a decrease in
the present value of the estimated costs to resolve all known and anticipated
metal-on-metal hip claims, offset by legal expenses of $10m for ongoing
metal-on-metal hip claims.
For the year ended 31 December 2024, the credit mainly relates to a $28m
reduction in the provision for ongoing metal-on-metal hip claims as a result
of a decrease in the present value of the estimated costs to resolve all known
and anticipated metal-on-metal hip claims, partially offset by legal expenses
for ongoing metal-on-metal hip claims.
The years ended 31 December 2024 also include costs for implementing the
requirements of the EU Medical Device Regulation which came into effect in May
2021 with a transition period to May 2024.
3. Taxation
Reported tax for the year ended 31 December 2025 was a charge of $154m (2024:
$86m charge). The reported tax charge is higher than 2024 due to an increase
in reported profits.
Pillar Two
The OECD Pillar Two GloBE Rules (Pillar Two) introduce a global minimum
corporation tax rate of 15% applicable to multinational enterprise groups with
global revenue over €750m. The Pillar Two rules first applied to the Group
for its accounting period commencing 1 January 2024.
The Pillar Two current tax charge for the period ended 31 December 2025 is
approximately $8m (2024: $8m).
The Group is adopting the IAS12 mandatory temporary exception from the
recognition and disclosure of deferred taxes arising from the Pillar Two
rules.
The Group does not meet the threshold for application of the Pillar One
transfer pricing rules.
4. Dividends
The 2024 final dividend of 23.1 US cents per ordinary share totalling $202m
was paid on 28 May 2025. The 2025 interim dividend of 14.4 US cents per
ordinary share totalling $128m was paid on 7 November 2025.
A final dividend for 2025 of 24.1 US cents per ordinary share has been
proposed by the Board and will be paid, subject to shareholder approval, on 27
May 2026 to shareholders whose names appear on the Register of Members on 27
March 2026. The sterling equivalent per ordinary share will be set following
the record date. The ex-dividend date is 26 March 2026 and the final day for
currency and dividend reinvestment plan ('DRIP') elections is 5 May 2026.
5. Acquisitions
Year ended 31 December 2025
No acquisitions were completed in 2025.
Year ended 31 December 2024
On 9 January 2024, the Group completed the acquisition of 100% of the share
capital of CartiHeal (2009) Ltd (CartiHeal), the developer of CARTIHEAL◊
AGILI-C◊, a novel Sports Medicine technology for cartilage regeneration in
the knee. The acquisition of this disruptive technology supports our strategy
to invest behind our successful Sports Medicine & ENT business unit.
The fair value of the consideration amounted to $231m. This is comprised of
contingent consideration of $49m, which represents the discounted value of
$150m of consideration contingent upon the achievement of a single future
financial performance milestone in the next 10 years, and initial cash
consideration of $180m adjusted for cash acquired and other liabilities
assumed, of which $18m was transferred in to escrow to be released in equal
instalments to the seller in 12 and 18 months from completion.
The fair value of assets acquired and liabilities assumed is set out below:
CartiHeal (2009) Ltd
$m
Intangible assets - product-related and trade name 84
Inventory 1
Cash 6
Other liabilities (2)
Trade and other payables (1)
Net deferred tax liability (3)
Net assets 85
Goodwill 146
Consideration 231
The product-related intangible assets and the trade name were valued using a
relief-from-royalty methodology with the key inputs being revenue, profit and
discount rate.
The cash outflow from acquisitions in 2024 of $186m comprises payments of
consideration of $177m net of cash acquired relating to acquisitions in the
current year and payments of deferred and contingent consideration of $9m
relating to acquisitions completed in prior years.
The goodwill represents the control premium, acquired workforce and the
synergies expected from integrating CartiHeal into the Group's existing
business. The carrying value of goodwill increased from $2,992m at 31 December
2023 to $3,026m at 31 December 2024. The acquisition in the year ended 31
December 2024 increased goodwill by $146m, this was partially offset by
goodwill impairment of $65m and foreign exchange movements of $47m.
For the year ended 31 December 2024, the contribution from CartiHeal to the
Group's revenue and profit was immaterial. If the business combination had
occurred at the beginning of the year the contribution to revenue and profit
would not have been materially different.
6. Net debt
Net debt comprises borrowings and credit balances on currency swaps less cash
and cash equivalents.
2025 2024
$m $m
Bank overdrafts, borrowings and loans - current 83 2
Corporate bond 2,478 2,498
Private placement notes 550 625
Borrowings 3,111 3,125
Cash and cash equivalents(1) (557) (619)
Credit balance on derivatives - currency swaps - 1
(Asset)/liability balance on derivatives - interest rate swaps (11) 6
Net debt excluding lease liabilities 2,543 2,513
Non-current lease liabilities 149 135
Current lease liabilities 67 61
Net debt 2,759 2,709
1 In 2025, cash and cash equivalents include cash at bank of $457m (2024:
$419m) and cash equivalents of $100m (2024: $200m).
The Group had access to $553m of cash and cash equivalents at 31 December
2025. The Group's net debt, excluding lease liabilities, at 31 December 2025
was $2,543m with access to committed facilities of $4.1bn with an average
maturity of 4.7 years. The funding position of the group remains materially
unchanged following the acquisition of Integrity Orthopaedics for $225m, the
repayment of $75m of maturating private placement debt, and an increase of the
Revolving Credit Facility by $125m to $1.125bn.
$625m of private placement debt is subject to financial covenants. The
principal covenant on the private placement debt is a leverage ratio of
<3.5 which is measured on a rolling 12-month basis at half year and year
end. There are no financial covenants in any of the Group's other facilities.
7a. Financial instruments
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy.
Carrying amount Fair value
2025 2024 2025 2024 Fair value
$m $m $m $m level
Financial assets measured at fair value
Forward foreign exchange contracts 33 46 33 46 Level 2
Investments 30 9 30 9 Level 3
Investments relating to deferred compensation arrangements 106 - 106 - Level 1
Interest rate swaps 11 10 11 10 Level 2
Currency swaps 2 1 2 1 Level 2
182 66 182 66
Financial assets not measured at fair value
Trade and other receivables 1,278 1,190
Cash and cash equivalents 557 619
1,835 1,809
Total financial assets 2,017 1,875
Financial liabilities measured at fair value
Acquisition consideration - contingent (107) (84) (107) (84) Level 3
Forward foreign exchange contracts (15) (16) (15) (16) Level 2
Interest rate swaps - (16) - (16) Level 2
Currency swaps (2) (2) (2) (2) Level 2
(124) (118) (124) (118)
Financial liabilities not measured at fair value
Acquisition consideration - deferred - (21)
Bank overdrafts and loans (8) (2)
Corporate bond not in a hedge relationship (1,394) (1,492)
Corporate bond in a hedge relationship (1,084) (1,006)
Private placement debt not in a hedge relationship (625) (625)
Trade and other payables (1,243) (1,084)
(4,354) (4,230)
Total financial liabilities (4,478) (4,348)
The following table shows the book value and market value of corporate bonds
and private placement debt.
2025 2024
Book Market Book Market
value value value value
$ million $ million $ million $ million
2030 USD corporate bond 897 810 995 836
2034 USD corporate bond 641 672 628 642
2027 USD corporate bond 349 354 348 352
2029 EUR corporate bond 591 617 527 547
Private placement debt 625 594 625 573
There were no transfers between Levels 1, 2 and 3 during 2025 and 2024. For
cash and
cash equivalents, short-term loans and receivables, overdrafts and other
short-term liabilities which have a maturity of less than three months, the
book values approximate the fair values because of their short-term nature.
Long-term borrowings are measured in the balance sheet at amortised cost. The
corporate bonds issued in October 2020, October 2022 and March 2024 are
publicly listed and a market price is available. The Group's other long-term
borrowings are not quoted publicly, their fair values are estimated by
discounting future contractual cash flows to net present values at the current
market interest rates available to the Group for similar financial instruments
as at the year end. The fair value of the private placement notes is
determined using a discounted cash flow model based on prevailing market
rates.
The fair value of forward foreign exchange contracts is calculated by
reference to quoted market forward exchange rates for contracts with similar
maturity profiles. The fair value of interest rate swaps is determined by
reference to quoted market interest rates. The fair value of currency swaps is
determined by reference to quoted market spot rates. As a result, foreign
forward exchange contracts, interest rate swaps and currency swaps are
classified as Level 2 within the fair value hierarchy.
The Group holds investments in relation to deferred compensation and employee
benefit arrangements. These assets mainly comprise investments in mutual funds
and similar investment vehicles with quoted prices in active markets that the
Group can access at the reporting date. Fair value is therefore determined
using unadjusted quoted market prices, and accordingly these investments are
classified as Level 1 within the fair value hierarchy. The assets are measured
at fair value through profit or loss.
The fair value of contingent consideration is estimated using a discounted
cash flow model. The valuation model considers the present value of expected
payment, discounted using a risk-adjusted discount rate. The expected payment
is determined by considering the possible scenarios, which relate to the
achievement of established milestones and targets, the amount to be paid under
each scenario and the probability of each scenario. As a result, contingent
acquisition consideration is classified as Level 3 within the fair value
hierarchy.
The fair value of investments is based upon third party pricing models for
share issues. As a result, investments are considered Level 3 in the fair
value hierarchy. The movements in the year ended 31 December 2025 and the year
ended 31 December 2024 for financial instruments measured using Level 3
valuation methods are presented below:
2025 2024
$m $m
Investments
At 1 January 9 8
Additions 2 1
Transferred from receivables 18 -
Fair value remeasurement 1 -
At 31 December 30 9
Contingent consideration receivable
At 1 January - 18
Transferred to receivables - (18)
- -
Contingent acquisition consideration liability
At 1 January (84) (32)
Arising on acquisitions - (49)
Payments 6 6
Remeasurements (29) (9)
At 31 December (107) (84)
7b. Retirement benefit obligations
The discount rate applied to the future pension liabilities of the UK plan is
based on the yield on bonds that have a credit rating of AA denominated in the
currency in which the benefits are expected to be paid with a maturity profile
approximately the same as the obligations. The UK discount rate has remains
unchanged since 31 December 2024. The remeasurement gain of $5m recognised in
Other Comprehensive Income (OCI) was principally made up of a $3m gains on
remeasurement of plan obligations in the UK, Germany and Switzerland.
8. Exchange rates
The exchange rates used for the translation of currencies into US Dollars that
have the most significant impact on the Group results were:
2025 2024
Average rates
Sterling 1.32 1.28
Euro 1.13 1.08
Swiss Franc 1.20 1.14
Japanese Yen 0.0067 0.0066
Year end rates
Sterling 1.35 1.25
Euro 1.17 1.04
Swiss Franc 1.26 1.10
Japanese Yen 0.0064 0.0064
9. Post balance sheet events
On 21 January 2026, the Group completed the acquisition of 100% of the share
capital of Integrity Orthopaedics, Inc., a US-based early-stage commercial
developer of Tendon Seam™, an innovative rotator cuff repair (RCR) system
designed to significantly reduce re tear rates and improve patient outcomes.
The acquisition represents a meaningful step in delivering Smith+Nephew's RISE
strategy to accelerate growth through strategic investment and portfolio
leadership, and will be an important building block in our ambition to become
the global leader in Sports Medicine. The acquisition consideration comprised
of $225m paid on completion, with up to a further $225m contingent on future
performance.
The acquisition will be treated as a business combination under IFRS 3. The
fair value assessment of the acquisition consideration, identifiable assets
acquired and liabilities assumed is ongoing. Given the proximity of the
acquisition to the financial statements being authorised for issue, it is not
practicable at this stage to reasonably estimate the financial effect of the
acquisition on the Group's consolidated financial statements. The Group
expects to complete the purchase price allocation exercise under IFRS 3 in the
first half of 2026, accordingly, provisional disclosures will be included in
the Group's 2026 interim results.
On 9 February 2026, the Group amended its $1bn revolving credit facility,
increasing total commitments to $1.125bn. The facility remains undrawn and its
maturity is unchanged.
Other information
These financial statements include financial measures that are not prepared in
accordance with International Financial Reporting Standards (IFRS). This
additional information presented is not uniformly defined by all companies
including those in the Group's industry. Accordingly, it may not be comparable
with similarly titled measures and disclosures by other companies.
Additionally, certain information presented is derived from amounts calculated
in accordance with IFRS but is not itself a measure defined under IFRS. Such
measures should not be viewed in isolation or as an alternative to the
equivalent GAAP measure. The non-IFRS measures
discussed in this document are set out below.
Performance measures
Non-IFRS measure Purpose Definition Closest equivalent IFRS measure Reconciled on
Underlying revenue growth Underlying revenue growth is used to compare revenue in a given year to the Underlying revenue growth reconciles to reported revenue growth, the most Revenue growth 38
previous year on a like-for-like basis. This measure is used by both directly comparable financial measure calculated in accordance with IFRS, by
management and the investor community. making two adjustments, the 'constant currency exchange effect' and the
'acquisitions and disposals effect'.
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 year 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 same exchange 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.
Trading profit Trading profit is used in conjunction with operating profit to assess the Trading profit is operating profit excluding the impact of acquisition and Operating profit 38
performance and profitability of the Group. It is a key internal and external disposal related items arising in connection with business combinations,
metric used by the investor community to assess our performance. It is our including amortisation of acquisition intangible assets, impairments and
segment performance measure in accordance with IFRS 8 Operating Segments. integration costs; restructuring events; and gains and losses resulting from
legal disputes and uninsured losses. In addition to these items, gains and
losses that materially impact the Group's profitability on a short-term or
one-off basis are excluded.
Trading profit margin This measure is used to assess the performance and profitability of the Group. Trading profit margin is trading profit divided by revenue. Operating profit margin 38
It is a key external metric used by the investor community to assess our
performance.
Performance measures (continued)
Non-IFRS measure Purpose Definition Closest equivalent IFRS measure Reconciled on
Trading profit before tax Trading profit before tax is used in conjunction with profit before tax to Trading profit before tax is profit before tax excluding impact of acquisition Profit before tax 38
assess performance and profitability of the Group. This measure is intended to and disposal related items arising in connection with business combinations,
enable the users to assess the performance of the Group by including amortisation of acquisition intangible assets, impairments and
integration costs; restructuring events; and gains and losses resulting from
excluding items that impact the legal disputes and uninsured losses. In addition to these items, gains and
losses that materially impact the Group's profitability on a short-term or
short-term profitability of the Group. one-off basis are excluded.
Trading taxation Trading taxation is used in conjunction with taxation to assess taxation that Trading taxation is taxation excluding the impact of acquisition and disposal Taxation 38
corresponds to trading profit before tax. This metric is used by both related items arising in connection with business combinations, including
management and the investor community. amortisation of acquisition intangible assets, impairments and integration
costs; restructuring events; and gains and losses resulting from legal
disputes and uninsured losses. In addition to these items, gains and losses
that materially impact the Group's profitability on a short-term or one-off
basis are excluded.
Trading attributable profit This metric is used in the calculation of adjusted basic earnings per share. Trading attributable profit is attributable profit excluding the impact of Attributable profit 38
acquisition and disposal related items arising in connection with business
combinations, including amortisation of acquisition intangible assets,
impairments and integration costs; restructuring events; and gains and losses
resulting from legal disputes and uninsured losses. In addition to these
items, gains and losses that materially impact the Group's profitability on a
short-term or one-off basis are excluded.
Adjusted earnings per share ('EPSA') EPSA is a trend measure. The Group presents this measure to assist investors Adjusted earnings per share is trading attributable profit divided by the Basic earnings per share 38
in their understanding of trends. weighted average number of shares outstanding. This is the same denominator
used when calculating basic earnings per share.
Trading cash flow Trading cash flow is used in conjunction with cash generated from operations Trading cash flow is cash generated from operations excluding the impact of Cash generated from operations 38
to assess the conversion of trading profit into cash. It is key external acquisition and disposal related items arising in connection with business
metric used by the investor community and is a key performance measure for combinations, including integration costs; restructuring events; and gains and
management. losses resulting from legal disputes and uninsured losses. In addition to
these items, gains and losses that materially impact the Group's cash flows
on a short-term or one-off basis are excluded. Trading cash flow includes
payment of capital element of lease liabilities, proceeds from disposal of
property, plant and equipment and capital expenditure as presented in the
Group cash flow statement.
Trading cash conversion This measure is used to assess the conversion of trading profit into cash. It Trading cash conversion is trading cash flow divided by trading profit. Cash generated from operations 38
is a key external metric used by the investor community and is a key
performance measure for management.
Other measures
Non-IFRS measure Purpose Definition Closest equivalent IFRS measure Reconciled on
Free cash flow Free cash flow is a measure of the cash generated for the Group to use after Free cash flow is cash generated from operations less capital expenditure, Cash generated from operations 40
capital expenditure according to its Capital Allocation Framework. This metric proceeds from disposal of property, plant and equipment, payment of lease
is used by both management and investor community. liabilities and cash flows from interest and income taxes.
Adjusted EBITDA Adjusted EBITDA is used in the calculation of adjusted leverage ratio. Adjusted EBITDA is attributable profit excluding taxation, share of results of Attributable profit 40
associates, other finance costs, interest expense, interest income,
acquisition and disposal related items, restructuring and rationalisation
costs, amortisation and impairment of acquisition intangibles, legal and other
costs, depreciation and impairment of property, plant and equipment and
amortisation and impairment of other intangible assets.
Adjusted leverage ratio Adjusted leverage ratio is used in the calculation relating to debt covenants. We calculate adjusted leverage ratio by dividing net debt by adjusted EBITDA. Leverage ratio 40
Net debt is defined as total borrowings less cash and cash equivalents in the
(using IFRS measures)
statement of financial position. Total borrowings include bank overdrafts,
borrowings, loans and lease liabilities and long-term borrowings and lease
liabilities.
Adjusted return on invested capital ('Adjusted ROIC') Adjusted ROIC is a metric used by investor community and is a measure of the Adjusted ROIC is defined as operating profit (before amortisation and Return on invested capital ('ROIC') (using IFRS measures) 41
return generated on capital invested by the Group. It provides a metric for impairment of acquisition intangibles) less adjusted taxes/((opening net
long-term value creation and encourages compounding reinvestment within the operating assets + closing net operating assets)/2).
business and discipline around acquisitions with low returns and long payback.
Adjusted ROIC is a key performance measure under the Performance Share
Program.
Underlying revenue
Reported revenue growth, the most directly comparable financial measure
calculated in accordance with IFRS, reconciles to underlying revenue growth as
follows:
Reconciling Items
Reported Underlying Acquisitions Currency
2025 2024 growth growth & disposals impact
$m $m % % % %
Segment revenue
Orthopaedics 2,437 2,305 5.7 5.1 - 0.6
Sports Medicine & ENT 1,934 1,824 6.0 5.2 - 0.8
Advanced Wound Management 1,793 1,681 6.7 5.6 - 1.1
Revenue from external customers 6,164 5,810 6.1 5.3 - 0.8
Cash
Profit generated
Operating before Attributable from Earnings
profit(1 ) tax(2 ) Taxation(3 ) profit(4 ) operations(5 ) per share(6 )
$m $m $m $m $m ¢
2025 Reported 794 779 (154) 625 1,549 72.1
Acquisition and disposal related items 32 (47) 15 (32) 30 (3.6)
Restructuring and rationalisation costs 47 47 (13) 34 83 4.0
Amortisation and impairment of acquisition intangibles 176 176 (40) 136 - 15.6
Legal and other(7) 162 142 (21) 121 19 13.9
Lease liability payments - - - - (50) -
Capital expenditure - - - - (433) -
Proceeds from disposal of property, plant and equipment - - - - 38 -
2025 Non-IFRS 1,211 1,097 (213) 884 1,236 102.0
Cash
Profit generated
Operating before Attributable from Earnings
profit(1 ) tax(2 ) Taxation(3 ) profit(4 ) operations(5 ) per share(6 )
$m $m $m $m $m ¢
2024 Reported 657 498 (86) 412 1,245 47.2
Acquisition and disposal related items(8) 94 106 (9) 97 3 11.2
Restructuring and rationalisation costs(8) 123 123 (29) 94 151 10.8
Amortisation and impairment of acquisition intangibles 187 187 (42) 145 - 16.6
Legal and other(7) (12) (6) (7) (13) 36 (1.5)
Lease liability payments - - - - (55) -
Capital expenditure - - - - (381) -
2024 Non-IFRS 1,049 908 (173) 735 999 84.3
(1 ) Represents a reconciliation of operating profit to
trading profit.
(2 ) Represents a reconciliation of reported profit before
tax to trading profit before tax.
(3 ) Represents a reconciliation of reported tax to trading
tax.
(4 ) Represents a reconciliation of reported attributable
profit to trading attributable profit.
(5 ) Represents a reconciliation of cash generated from
operations to trading cash flow.
(6 ) Represents a reconciliation of basic earnings per
ordinary share to adjusted earnings per ordinary share (EPSA).
(7 ) The ongoing funding of defined benefit pension schemes
that are closed to future accrual is not included in management's definition
of trading cash flow as there is no defined benefit service cost for these
schemes.
(8 ) During 2024, the Group announced its intention to close
the Warwick manufacturing site that manufactures Birmingham Hip Resurfacing
(BHR) products. As a result, a total of $68m of BHR assets and liabilities
were written off, which mainly includes goodwill of $63m (included in
acquisition and disposal-related items).
Acquisition and disposal related items
For the year ended 31 December 2025, costs primarily relate to disposal of
certain products
and integration costs relating to acquisitions. Trading profit before tax
additionally excludes gains of $108m related to the Group's shareholding in
Bioventus and the remeasurement and discount unwind for contingent
consideration. This primarily includes an impairment reversal of $109m and the
Group's share of gain recognised by Bioventus in its financial statements.
For the year ended 31 December 2024, costs primary related to impairment of
BHR goodwill,
disposal of certain products and integration costs relating to integration of
CartiHeal. Trading profit before tax additionally excludes losses related to
the Group's shareholding in Bioventus. This primarily includes the Group's
share of loss recognised by Bioventus in its financial statements.
Restructuring and rationalisation costs
For the year ended 31 December 2025, these costs include efficiency and
productivity elements of the 12-Point Plan to the Operations and Commercial
Excellence programme. These costs primarily consist of severance, asset
write-offs and integration and dual running costs.
For the year ended 31 December 2024, these costs include efficiency and
productivity elements of the 12-Point Plan to the Operations and Commercial
Excellence programme. These costs primarily consist of severance, asset
write-offs and integration and dual running costs.
Amortisation and impairment of acquisition intangibles
For the years ended 31 December 2025 and 2024, these costs relate to the
amortisation and impairment of intangible assets acquired in material business
combinations.
Legal and other
For the year ended 31 December 2025, the charge mainly relates to a $159m
increase in the excess and obsolescence provision arising from the Group's
portfolio simplification initiatives introduced under the 12-Point Plan and
further developed in 2025 through the Ortho 360 operating model and new RISE
strategy. These actions include the planned discontinuation and simplification
of certain product ranges which will reduce the need for inventory and capital
employed in the business, provide a simpler and more efficient offer to our
customers, and will also allow us to focus on migrating them to our latest
technology products.
Trading profit before tax additionally excludes $10m gain on repurchase of
corporate bonds, investment income relating to deferred compensation
arrangements of $14m, partially offset by $4m of finance costs for the unwind
of discount relating to the provision for metal-on-metal hip claims.
For the year ended 31 December 2024, the credit mainly relates to a $28m
reduction in the provision for ongoing metal-on-metal hip claims as a result
of decrease in the present value of the estimated costs to resolve all known
and anticipated metal-on-metal hip claims, partially offset by legal expenses
for ongoing metal-on-metal hip claims and costs of implementing the
requirements of the EU Medical Device Regulation that was effective from May
2021 with a transition period to May 2024.
In 2024, Trading profit before tax additionally excludes $6m of finance costs
for the unwind of discount relating to the provision for metal-on-metal hip
claims.
Free cash flow
A reconciliation from cash generated from operations, the most comparable IFRS
measure, to free cash flow is set out below:
2025 2024
$m $m
Cash generated from operations 1,549 1,245
Capital expenditure (433) (381)
Interest received 25 22
Interest paid (142) (140)
Payment of lease liabilities (50) (55)
Income taxes paid (147) (140)
Proceeds from disposal of property, plant and equipment 38 -
Free cash flow 840 551
Adjusted leverage ratio
The calculation of the adjusted leverage ratio is set out below. Adjusted
leverage ratio is calculated using metrics similar to those used in the debt
covenant calculation.
2025 2024
$m $m
Net debt including lease liabilities 2,759 2,709
Attributable 625 412
Taxation 154 86
Share of results of associates (113) 10
Other finance costs 16 28
Interest expense 140 145
Interest income (28) (24)
Acquisition and disposal-related items 32 94
Restructuring and rationalisation costs 47 123
Amortisation and impairment of acquisition intangibles 176 187
Legal and other 162 (12)
Depreciation of property, plant and equipment 335 325
Impairment and amortisation of other intangible assets and impairment of 61 67
property, plant and equipment
Adjusted EBITDA 1,607 1,441
Adjusted leverage ratio 1.7 1.9
Leverage ratio (using closest equivalent IFRS measures)
The leverage ratio using closest equivalent IFRS measures is not based on
measures used in the calculation of debt covenants and is not used by
management internally. This measure is not used for the Company's covenant in
its private placement debt.
2025 2024
$m $m
Bank overdrafts, borrowings, loans and lease liabilities 150 63
Long-term borrowings and lease liabilities 3,177 3,258
Total borrowings 3,327 3,321
Attributable profit 625 412
Leverage ratio 5.3 8.1
Adjusted return on invested capital
The calculation of adjusted return on invested capital and is set out below:
2025 2024
$m $m
Attributable profit 625 412
Share of results of associates (113) 10
Other finance costs 16 28
Interest expense 140 145
Interest income (28) (24)
Amortisation and impairment of acquisition intangibles 176 187
Taxation adjustment(1) (44) (73)
Operating profit before amortisation and impairment of acquisition intangibles 772 685
less adjusted taxes
Total equity 5,289 5,265
Accumulated amortisation and impairment of acquisition intangibles net of 1,679 1,470
associated tax
Retirement benefit assets (64) (63)
Investments (30) (9)
Investments in associates (121) (7)
Right-of-use assets (192) (173)
Cash and cash equivalents (557) (619)
Long-term borrowings and lease liabilities 3,177 3,258
Retirement benefit obligations 84 79
Bank overdrafts, borrowings, loans and lease liabilities 150 63
Net operating assets 9,415 9,264
Average net operating assets(2) 9,340 9,219
Adjusted return on invested capital 8.3% 7.4%
(1 ) Being the taxation on amortisation and impairment of
acquisition intangibles, interest income, interest expense, other finance
costs and share of results of associates.
(2 ) (Opening net operating assets + closing net operating
assets)/2.
Return on invested capital (using closest equivalent IFRS measures)
The calculation of return on invested capital using closest equivalent IFRS
measures is set out below:
2025 2024
$m $m
Attributable profit 625 412
Long term borrowings and lease liabilities 3,177 3,258
Bank overdrafts, borrowings, loans and lease liabilities 150 63
Investments (30) (9)
Investments in associates (121) (7)
Retirement benefit assets (64) (63)
Retirement benefit obligations 84 79
Total equity 5,289 5,265
Invested capital at end of the period 8,485 8,586
Average invested capital for the period 8,536 8,441
Return on invested capital using IFRS measures 7.3% 4.9%
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