REG - Smith & Nephew Plc - Half-year Report
05/08/2025 07:02
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RNS Number : 9280T Smith & Nephew Plc 05 August 2025
Smith+Nephew Second Quarter and First Half 2025 Results
Strong revenue growth, trading margin expansion and free cash flow; full year
guidance unchanged; $500 million share buyback announced
5 August 2025
Smith+Nephew (LSE:SN, NYSE:SNN), the global medical technology company,
reports results for the second quarter and first half ended 28 June 2025:
28 June 29 June Reported Underlying
2025 2024 growth growth
$m $m % %
Second Quarter Results(1,2)
Revenue 1,553 1,441 7.8 6.7
Half Year Results(1,2)
Revenue 2,961 2,827 4.7 5.0
Operating profit 429 328 30.6
Operating profit margin (%) 14.5 11.6
EPS (cents) 33.5 24.5 36.6
Cash generated from operations 568 368 54.3
Trading profit 523 471 11.2
Trading profit margin (%) 17.7 16.7
EPSA (cents) 42.9 37.6 14.1
Free cash flow 244 39 528.3
H1 Highlights(1,2)
· H1 underlying revenue growth was 5.0%. Reported revenue growth was
4.7% including -30bps FX headwind. There were two fewer trading days in the
period versus the prior year
· Trading profit up 11.2% with 100bps of trading profit margin
expansion to 17.7% (H1 2024: 16.7%), driven by revenue leverage and
accelerated operational savings. Operating profit increased by 30.6%
· Strong cash generation, with trading cashflow of $487 million (H1
2024: $284 million) and trading cash conversion up 33 percentage points to 93%
(H1 2024: 60%), driven by favourable working capital movements
· Free cash flow increased to $244 million (H1 2024: $39 million);
lower restructuring charge of $8 million (H1 2024: $62 million)
· EPSA up 14.1% to 42.9¢ (H1 2024: 37.6¢); EPS up 36.6% to 33.5¢ (H1
2024: 24.5¢)
Q2 Trading Highlights(1,2)
· Underlying revenue growth accelerated to 6.7%. Reported growth was
7.8% including 110bps FX tailwind. There was one fewer trading day in the
period versus the prior year
· All regions and all the three business units grew ahead of Q1
· Orthopaedics underlying revenue growth of 5.0% (reported growth 5.8%)
with both Global and US Reconstruction sequentially improving from Q1
· Sports Medicine & ENT underlying revenue growth up 5.7% (reported
growth 6.8%). Excluding China, underlying revenue growth was 10.2% (reported
growth 11.4%)
· Advanced Wound Management underlying revenue growth of 10.2%
(reported growth 11.4%), including rebound in Advanced Wound Bioactives
Interim Dividend and Share Buyback
· Interim dividend up 4.2% to 15.0¢ (H1 2024: 14.4¢)
· Announcing additional return of $500 million to shareholders via
share buyback in the second half of 2025, while retaining our leverage, and
without compromising our growth plans. This reflects strong cash generation
and balance sheet
Full Year 2025 Guidance Unchanged(1,2)
· Underlying revenue growth is expected to be around 5.0% (reported
growth 5.5%), and trading profit margin is expected to expand to between 19.0%
and 20.0%
· Continued higher cadence of product launches and clinical evidence to
underpin further growth
· Unchanged outlook includes an expected net impact of $15 to $20
million from tariffs in 2025, based on announced measures, and mitigations, as
previously announced
Deepak Nath, Chief Executive Officer, said:
"I'm pleased with our strong performance in the first half of 2025. We are
delivering sustained higher revenue growth, increased profitability and better
cash generation. As expected, revenue growth accelerated in the second
quarter, with all regions and business units contributing. We saw a
quarter-on-quarter improvement in our Orthopaedics business, and this was the
fourth consecutive quarter of sequential improvement from US Reconstruction
& Robotics on an average daily sales basis.
"Recent product launches are driving growth across all business units, with US
Hip Implants becoming another example of the innovation driven growth that is
central to our strategy. We maintained our high cadence of launches in H1 with
new products in Knee Implants, Robotics, Trauma, Sports Medicine and Advanced
Wound Care. New products launched in the last five years accounted for
three-quarters of our first half growth.
"The operational improvements we have made under the 12-Point Plan are
increasingly translating into better financial performance. We are on track
for our full year revenue growth target, a significant step-up in
profitability and strong free-cash generation, and are announcing a $500
million share buyback. There is more to be done, but the transformation of
Smith+Nephew is starting to deliver substantial value."
Analyst conference call
An analyst conference call to discuss Smith+Nephew's second quarter and first
half results will be held today at 8.30am BST / 3.30am EDT, details of which
are available on the Smith+Nephew website at
https://www.smith-nephew.com/en/who-we-are/investors
(https://www.smith-nephew.com/en/who-we-are/investors) .
Enquiries
Investors
Cora McCallum +44 (0) 1923 477433
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 30 to 35 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 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.
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 cash conversion ratio, EPSA and underlying growth are non-IFRS
financial measures. The non-IFRS financial measures reported in this
announcement are explained in Other Information on pages 30 to 35 and are
reconciled to the most directly comparable financial measures prepared in
accordance with IFRS. Reported results represent IFRS financial measures as
shown in the Condensed Consolidated Interim Financial Statements.
Smith+Nephew Second Quarter Trading and First Half 2025 Results
We are pleased to report a strong first half performance. Our transformation
programme is delivering revenue growth consistently above historical levels,
improved trading profit margin and a significant step-up in cash generation.
This progress is built upon the operational improvements made through the
12-Point Plan and our consistent ability to successfully launch new
innovation. While there remains further opportunity to drive productivity and
asset efficiency, the first half puts us on track to meet our 2025 targets on
revenue growth, profitability and cash-flow, enabling us to return $500
million to shareholders through a share buyback in the second half while
maintaining our leverage, and without compromising our growth plans.
Delivering higher revenue growth
First half revenue was $2,961 million (H1 2024: $2,827 million), reflecting
underlying revenue growth of 5.0%. Reported revenue growth was 4.7%, including
a -30bps headwind from foreign exchange. There were two fewer trading days in
the first half versus the prior year.
Second quarter revenue was $1,553 million (Q2 2024: $1,441 million),
reflecting underlying revenue growth of 6.7%. Reported revenue growth was
7.8%, including a 110bps tailwind from foreign exchange. The second quarter of
2025 comprised 63 trading days, one fewer than the same period of 2024.
The second quarter performance included a sequential acceleration across all
the three business units and all regions. In Orthopaedics, our Reconstruction
business improved both in the US and internationally. In Sports Medicine, we
maintained our recent good momentum across Sports Medicine Joint Repair and
Arthroscopic Enabling Technologies outside of China. In Advanced Wound
Management, we delivered double-digit growth led by Advanced Wound Devices and
a rebound in Advanced Wound Bioactives.
Improved profit margin, cash generation and capital returns
Trading profit for the first half was up 11.2% to $523 million (H1 2024: $471
million). The trading profit margin was 17.7% (H1 2024: 16.7%), a 100bps
improvement on the prior year. Operating profit increased 30.6% to $429
million (H1 2024: $328 million).
We made significant progress to improve our cash flow in 2024, and this
continued in the first half of 2025. Cash generated from operations was up
54.3% to $568 million (H1 2024: $368 million) and trading cash flow was up
71.5% to $487 million (H1 2024: $284 million). The trading profit to cash
conversion ratio improved 33 percentage points to 93% (H1 2024: 60%).
Restructuring costs reduced by $54 million to $8 million (H1 2024: $62
million) as we near completion of the 12-Point Plan. We also brought down Day
Sales of Inventory (DSI) by 46 days year-on-year, a $69 million reduction in
inventory value on a constant currency basis (reported reduction: $24 million
including a foreign exchange impact of $45 million). Free cash flow increased
to $244 million (H1 2024: $39 million).
This strong cash generation will enable us to undertake a share buyback to
return $500 million to shareholders in the second half of 2025, while
maintaining our leverage, and without compromising our growth plans.
Driving growth through innovation
Innovation has been a major contributor in our transformation to a higher
growth business. Across 2023 and 2024 more than half of our underlying revenue
growth came from products launched in the previous five years. This success
continued in the first half, with three-quarters of growth coming from
products launched in the last five years. We also introduced new products
across all three global business units, which we are confident will help us
sustain our improved revenue growth profile.
In Orthopaedics, new products included LEGION(◊) medial stabilised inserts,
addressing a fast-growing category of inserts now used in more than 30% of US
knee replacement, and the TRIGEN(◊) MAX Tibia Nailing System for stable and
unstable fractures of the tibia, which builds on more than two decades of
proven performance and industry-leading design from our TRIGEN Nails
portfolio.
We also continued to invest behind the recent launches of the CATALYSTEM(◊)
Primary Hip System and the AETOS(◊) Shoulder System, both of which were
important growth drivers in the first half. On our CORI(◊) Surgical System,
we received FDA-clearance for CORIOGRAPH(◊) Pre-Operative Planning and
Modelling Services in total shoulder replacement during the second quarter,
expanding the offering to now cover all major joint replacement procedures -
Knee, Hip and Shoulder. 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.
In Sports Medicine, we continue to expand the indication range for our
REGENETEN(◊) Bioinductive Implant. For the first time, Smith+Nephew is able
to market REGENETEN for extra-articular ligament injuries in the US, creating
opportunities to reach more patients with soft tissue injuries around the
body. The initial focus is hip capsule repair with future expansion planned in
other extra-articular ligament repairs.
In July, we announced the release of the Q-FIX(◊) KNOTLESS All-Suture Anchor
for soft tissue-to-bone fixation indications across multiple joint spaces
including Shoulder, Hip, and Foot & Ankle. This new option builds on the
long-standing success and performance of the best-in-class anchor fixation
strength of the Q-FIX Family.
In Advanced Wound Management, we initiated the US launch of ALLEVYN(◊) Ag+
SURGICAL, a new antimicrobial silver dressing which adds to the established
ALLEVYN family of foam dressings. ALLEVYN Ag+ SURGICAL dressing features new
ComfortSTAY(◊) Technology for gentle silicone adhesion and HighFLEX(◊)
Technology to provide flexibility and comfort during patient movement.
These new products are expected to have multi-year growth runways ahead and we
have an exciting pipeline of further launches and line extensions planned in
the second half of 2025 and beyond.
Supporting adoption through clinical evidence
In addition to new products, we also announced a number of evidence milestones
during the first half of 2025, supporting the adoption of key product
families.
In Orthopaedics, the latest annual report from the Australian Orthopaedic
Association National Joint Replacement Registry highlighted that the
combination of our proprietary OXINIUM(◊) Technology on highly cross-linked
polyethylene has the highest survivorship rate (94.1%) among all bearing
combinations over a 20-year period for total hip arthroplasty, corroborating
similar findings in other national registries. A recently published randomised
controlled trial (RCT) of Smith+Nephew's handheld robotic system demonstrated
the value for patients and surgeons of robotic-assisted total knee replacement
with JOURNEY(◊) II BCS. Patients experienced significantly better outcomes,
including reduced pain, improved function, and higher satisfaction, compared
to conventional surgery at one year. Also, JOURNEY II UK with OXINIUM
Technology demonstrated excellent early survivorship when used with
Smith+Nephew's handheld robotics, recording 100% survivorship at one year in
the UK National Joint Registry.
In Sports Medicine, we expanded the evidence base for REGENETEN(◊)
Bioinductive Implant with an RCT showing that augmentation of medium and large
full-thickness rotator cuff repairs with REGENETEN resulted in significantly
lower re-tear rates at two years compared to repair alone. Five-year results
for CARTIHEAL AGILI-C(◊) Cartilage Repair Implant were presented at the
American Orthopaedic Society for Sports Medicine annual conference in July.
The study showed that CARTIHEAL AGILI-C maintained superior knee function
compared to the standard of care and reduced the long-term risk of total knee
arthroplasty or osteotomy.
In Advanced Wound Management, a comparative study involving over 10,000
Caesarean section patients showed that the PICO(◊) single-use Negative
Pressure Wound Therapy (sNPWT) system led to fewer surgical site infections
and complications, and cost savings compared to an alternative sNPWT system.
Second quarter 2025 trading update
Consolidated revenue analysis for the second quarter
28 June 29 June Reported Underlying Acquisitions Currency
2025 2024((i)) growth growth((ii)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 615 581 5.8 5.0 - 0.8
Knee Implants 257 247 3.7 2.9 - 0.8
Hip Implants 162 156 4.2 3.4 - 0.8
Other Reconstruction((iii)) 35 25 42.4 39.8 - 2.6
Trauma & Extremities 161 153 5.0 4.4 - 0.6
Sports Medicine & ENT 479 448 6.8 5.7 - 1.1
Sports Medicine Joint Repair 262 239 9.6 8.4 - 1.2
Arthroscopic Enabling Technologies 161 155 3.5 2.3 - 1.2
ENT (Ear, Nose and Throat) 56 54 4.1 3.6 - 0.5
Advanced Wound Management 459 412 11.4 10.2 - 1.2
Advanced Wound Care 192 183 4.6 2.6 - 2.0
Advanced Wound Bioactives 165 139 18.5 18.6 - (0.1)
Advanced Wound Devices 102 90 14.4 12.7 - 1.7
Total 1,553 1,441 7.8 6.7 - 1.1
Consolidated revenue by geography
US 827 760 8.7 8.7 - -
Other Established Markets((iv)) 470 421 11.6 7.4 - 4.2
Total Established Markets 1,297 1,181 9.7 8.2 - 1.5
Emerging Markets 256 260 (1.2) (0.2) - (1.0)
Total 1,553 1,441 7.8 6.7 - 1.1
(i) Restated for reclassification of robotics consumables revenue 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
cement
(iv) Other Established Markets are Europe, Japan, Australia,
Canada and New Zealand
Orthopaedics
Our Orthopaedics business unit delivered underlying revenue growth of 5.0%
(reported growth 5.8%) in the quarter.
Globally, Reconstruction delivered a sequential improvement on the first
quarter, with underlying revenue growth of 3.1% (reported growth 3.9%) versus
underlying revenue growth of 0.0% (reported decline -1.6%) in the first
quarter. Within this, Knee Implants underlying revenue growth was 2.9%
(reported growth 3.7%) and Hip Implants underlying revenue growth was 3.4%
(reported growth 4.2%) for the second quarter.
In the US, Reconstruction delivered underlying and reported revenue growth of
2.0%, an acceleration from 1.3% in the first quarter. Here, Knee Implants
declined
-1.5% and Hip Implants grew 7.4% in the second quarter. On an average daily
sales (ADS) basis, which removes the effect of the one fewer trading day
year-on-year, second quarter revenue growth was 0.1% in Knee Implants and 9.1%
in Hip Implants (see Other Information on pages 30 to 35). US knee performance
reflects, in part, some slowing in procedures towards the end of the quarter
among our surgeon base, as well as our on-going work to improve operational
efficiency and increase profitability by streamlining the portfolio and
focusing on higher-volume customers, supporting the 230bps trading profit
margin increase in the first half. The strong US hip performance includes
benefit from the new CATALYSTEM(◊) Primary Hip System as we continue to
build the US launch. On an ADS basis, this was the fourth consecutive quarter
of sequential improvement in revenue growth from our US Reconstruction &
Robotics business.
Outside the US, Knee Implants benefitted from the timing of a tender order in
the Middle East. China has been a headwind to Reconstruction growth in recent
quarters due to destocking at distributors. Inventory levels have continued to
come down, and were approaching more normal levels at the end of the quarter.
Other Reconstruction underlying revenue growth was 39.8% (reported growth
42.4%), including strong growth from our CORI Surgical System with its
recently expanded range of features and applications, as described above.
Growth was across both existing customers and competitive accounts, and we
continued to make good progress placing CORIs in both Ambulatory Surgery
Centers (ASC) and Teaching Institutes.
Trauma & Extremities underlying revenue growth was 4.4% (reported growth
5.0%). The EVOS(◊) Plating System continues to be a key growth driver and
revenue from the new AETOS Shoulder System is steadily increasing as we invest
behind the roll-out.
Sports Medicine & ENT
Our Sports Medicine & ENT business unit delivered underlying revenue
growth of 5.7% (reported growth 6.8%) in the quarter. Underlying revenue
growth was 10.2% (reported growth 11.4%) excluding China which is impacted by
Volume Based Procurement (VBP).
Sports Medicine Joint Repair underlying revenue growth was 8.4% (reported
growth 9.6%), including China VBP, which we expect to begin to annualise from
the third quarter as we lap the start of implementation. Underlying revenue
growth outside of China was 13.7% (reported growth excluding China: 14.9%),
led by our shoulder and hip repair portfolios. We delivered strong
double-digit growth from our REGENETEN Bioinductive Implant. Recent product
launches, including Q-FIX KNOTLESS All-Suture Anchor and in foot and ankle
repair, also contributed to the good quarterly performance.
Arthroscopic Enabling Technologies delivered underlying revenue growth of 2.3%
(reported growth 3.5%). Continuing the trend seen last quarter, performance
reflects headwinds in China where the sector is preparing for an expected
additional VBP process on mechanical resection blades and COBLATION(◊) wands
in the second half of 2025. Underlying revenue growth excluding China was 6.6%
(reported growth excluding China 7.8%), led by our COBLATION and patient
positioning business lines.
ENT underlying revenue growth was 3.6% (reported growth 4.1%), with good
growth in nose driven by our ARIS(◊) COBLATION turbinates business offset by
some softness in the US tonsils and adenoids market.
Advanced Wound Management
Advanced Wound Management underlying revenue growth was 10.2% (reported growth
11.4%), a step-up from the first quarter.
Advanced Wound Care underlying revenue growth was 2.6% (reported growth 4.6%),
with growth in foams, films and skin care offset by a decline in infection
management.
Advanced Wound Bioactives underlying revenue growth was 18.6% (reported growth
18.5%) reflecting strong double-digit growth in skin substitutes, a sequential
rebound in SANTYL(◊), along with a weak comparator prior year period.
Proposed updates to Medicare reimbursement of skin substitutes in the
outpatient and physician office were announced during the quarter, including
moving to a single payment. Since no products were excluded from
participating in the market, it is unclear how clinical practice will be
impacted. While the details of the proposal are yet to be finalised, we
anticipate that this will be a headwind to both Advanced Wound Management
sales and profitability in 2026, before any mitigating actions.
Advanced Wound Devices underlying revenue growth was 12.7% (reported growth
14.4%) with double-digit growth from our NPWT portfolio and LEAF(◊) Patient
Monitoring System. During the quarter we were awarded a contract to supply the
RENASYS(◊) TOUCH Negative Pressure Wound Therapy system to the United
States Department of Defense for up to 10-years, succeeding in a competitive
tender process having demonstrated clinical efficacy and operational fitness
including portability, an intuitive interface, and the ability to allow a
range of therapy modes. This contract is worth up to $75 million.
Performance by region
All regions delivered a sequential improvement in growth in the second
quarter. Established Markets delivered underlying revenue growth of 8.2%
(reported growth 9.7%). Underlying revenue growth was 8.7% in the US (reported
growth 8.7%) and 7.4% in Other Established Markets (reported growth 11.6%).
The Emerging Markets underlying revenue decline of -0.2% (reported decline
-1.2%) reflected the weakening of the headwinds from China, as expected.
Emerging Markets underlying revenue growth excluding China was 12.2% (reported
growth excluding China 10.4%).
First Half 2025 Consolidated Analysis
Smith+Nephew results for the first half ended 28 June 2025:
Half year Half year Reported
2025 2024 growth
$m $m %
Revenue 2,961 2,827 4.7
Operating profit 429 328 30.6
Acquisition and disposal related items 9 -
Restructuring and rationalisation costs 8 62
Amortisation and impairment of acquisition intangibles 83 87
Legal and other (6) (6)
Trading profit((i)) 523 471 11.2
¢ ¢
Earnings per share ('EPS') 33.5 24.5
Acquisition and disposal related items 1.8 0.2
Restructuring and rationalisation costs 0.6 5.8
Amortisation and impairment of acquisition intangibles 7.3 7.8
Legal and other (0.3) (0.7)
Adjusted Earnings per share ('EPSA')((i)) 42.9 37.6 14.1
(i) See Other Information on pages 30 to 35
First Half 2025 Analysis
Our first half revenue was $2,961 million (H1 2024: $2,827 million),
representing underlying revenue growth of 5.0% and reported revenue growth of
4.7% including a -30bps headwind from foreign exchange. The first half
comprised 125 trading days, two days less than the equivalent period in 2024.
The gross profit was $2,091 million (H1 2024: $1,974 million) with a gross
profit margin of 70.6% (H1 2024: 69.8%). We continued to maintain strong gross
profit margins whilst delivering revenue growth, resulting in operating
leverage. Operating profit increased 30.6% on a reported basis to $429 million
(H1 2024: $328 million).
Trading profit for the first half was up 11.2% on a reported basis to $523
million
(H1 2024: $471 million). The trading profit margin strengthened by 100bps to
17.7% (H1 2024: 16.7%). This increase was driven by the benefits of revenue
leverage and manufacturing, distribution and operating expense savings, some
of which were brought forward from the second half, partially offset by input
cost inflation and China VBP.
Orthopaedics first half trading profit margin increased 230bps to 12.7%,
reflecting
12-Point Plan transformation initiatives including inventory reduction,
improved capital efficiency, portfolio rationalisation and our focus on higher
volume accounts. Sports Medicine & ENT trading profit margin declined
130bp to 23.1%, reflecting the China VBP headwind. Advanced Wound Management
trading profit margin increased 160bps to 22.1%, driven by leverage from the
strong revenue growth. (see Note 2 to the Interim Financial Statements for
global business unit trading profit).
Restructuring costs decreased year-on-year to $8 million (H1 2024: $62
million), and included costs related to 12-Point Plan efficiency and
productivity work (see Note 2 to the Financial Statements).
The net interest charge within reported results was $54 million (H1 2024: $61
million).
Our reported tax for the period ended 28 June 2025 was a charge of $69 million
(H1 2024: $39 million). The first half tax rate on trading results of 19.8%
(H1 2024: 17.8%) was calculated using full year projections, applied to
trading profits for the first half and includes non-recurring tax credits
arising in this period. The applicable rate of corporate income tax has been
applied to the actual non-trading items in the period on an item-by-item
basis. See Note 3 to the Interim Financial Statements and Other Information on
pages 30 to 35 for further details on taxation.
Adjusted earnings per share ('EPSA') increased by 14.1% to 42.9¢ (85.8¢ per
ADS) (H1 2024: 37.6¢ per share). Basic earnings per share ('EPS') was 33.5¢
(67.0¢ per ADS) (H1 2024: 24.5¢ per share), reflecting acquisition and
disposal related items, restructuring costs, amortisation and impairment of
acquisition intangibles and legal and other items incurred.
Cash generated from operations was up to $568 million (H1 2024: $368 million)
and trading cash flow was up to $487 million (H1 2024: $284 million) with the
year on year increase primarily driven by favourable working capital movement
(see Other Information on pages 30 to 35 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 93%
(H1 2024: 60%). Free cash flow improved to $244 million (H1 2024: $39
million).
We continued to make progress addressing our high-inventory, reducing DSI by
46 days year-on-year, with DSI down across all business units. The reduction
in DSI delivered a $69 million reduction in inventory value on a constant
currency basis (reported reduction: $24 million including a foreign exchange
impact of $45 million). This remains an area of focus, with the new Sales,
Inventory & Operations Planning (SIOP) process, introduced under the
12-Point Plan, bringing better alignment of production plans and commercial
delivery.
Group net debt as of 28 June 2025 was $2.7 billion (31 December 2024: $2.7
billion), with committed facilities of $4.2 billion (see Note 6 to the
Financial Statements). The net debt to adjusted EBITDA ratio was 1.8x.
Interim Dividend and Share Buyback
Smith+Nephew's capital allocation framework prioritises the use of cash and
informs our investment decisions.
Our first priority is investing in the business to drive organic growth and
meet our sustainability targets.
The second priority is to invest in acquisitions, targeting new technologies
in high growth segments with a strong strategic fit that meet our financial
criteria.
The third priority is to maintain an optimal balance sheet and appropriate
dividend. Here we will continue to target investment grade credit ratings with
a target leverage ratio of around 2x net debt to adjusted EBITDA. We have a
progressive dividend policy and from 2025 onwards we expect a payout of around
35% to 40% of EPSA. The interim payment will be 40% of the prior full year.
The interim dividend for 2025 is therefore 15.0¢ per share (30.0¢ per ADS),
a 4.2% increase year-on-year (2024: 14.4¢).
Our final priority is to return any surplus capital to shareholders, subject
to the above balance sheet metrics. Following the 12-Point Plan
transformation, Smith+Nephew has become strongly cash generative. As a result,
we are announcing a share buyback in the second half of 2025 to return $500
million to shareholders while maintaining our leverage, and without
compromising our growth plans.
Outlook
Our full year guidance for 2025 is unchanged as we target another year of
strong revenue growth and a significant step-up in trading profit margin,
notwithstanding the uncertainties around the imposition of tariffs.
We expect underlying revenue growth to be around 5% (around 5.5% based on
exchange rates prevailing on 31 July 2025).
Full year trading profit margin is expected to be in the range of 19.0% to
20.0%. While some cost savings initiatives were delivered earlier than
expected, benefiting the first half trading profit margin, we continue to
expect the margin to be stronger in the second half as the impact of headwinds
in China reduce and other operational savings are delivered.
Our unchanged outlook includes an expected net impact of around $15 to $20
million from tariffs in 2025, based on announced measures, and mitigations, as
previously announced.
We continue to expect to drive further margin expansion beyond 2025 through
continued momentum and efficiency gains.
Forward calendar
The Q3 Trading Report will be released on 6 November 2025.
Capital Markets Day planned for early December, date to be confirmed.
About Smith+Nephew
Smith+Nephew is a portfolio medical technology business focused on the repair,
regeneration and replacement of soft and hard tissue. We exist to restore
people's bodies and their self-belief by using technology to take the limits
off living. We call this purpose 'Life Unlimited'. Our 17,000 employees
deliver this mission every day, making a difference to patients' lives through
the excellence of our product portfolio, and the invention and application of
new technologies across our three global business units of Orthopaedics,
Sports Medicine & ENT and Advanced Wound Management.
Founded in Hull, UK, in 1856, we now operate in around 100 countries, and
generated annual sales of $5.8 billion in 2024. Smith+Nephew is a constituent
of the FTSE100 (LSE:SN, NYSE:SNN). The terms 'Group' and 'Smith+Nephew' are
used to refer to Smith & Nephew plc and its consolidated subsidiaries,
unless the context requires otherwise.
For more information about Smith+Nephew, please visit www.smith-nephew.com
(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.
Consolidated revenue analysis for the first half
28 June 29 June Reported Underlying Acquisitions Currency
2025 2024((i)) growth growth((ii)) /disposals impact
Consolidated revenue by business unit by product $m $m % % % %
Orthopaedics 1,193 1,149 3.9 4.1 - (0.2)
Knee Implants 501 494 1.5 1.8 - (0.3)
Hip Implants 313 311 0.6 1.1 - (0.5)
Other Reconstruction((iii)) 64 45 43.3 42.8 - 0.5
Trauma & Extremities 315 299 5.2 5.3 - (0.1)
Sports Medicine & ENT 923 888 3.9 4.1 - (0.2)
Sports Medicine Joint Repair 509 483 5.4 5.6 - (0.2)
Arthroscopic Enabling Technologies 307 304 1.0 1.1 - (0.1)
ENT (Ear, Nose and Throat) 107 101 5.3 5.6 - (0.3)
Advanced Wound Management 845 790 6.9 7.1 - (0.2)
Advanced Wound Care 366 357 2.2 2.5 - (0.3)
Advanced Wound Bioactives 285 262 8.8 8.9 - (0.1)
Advanced Wound Devices 194 171 13.9 14.1 - (0.2)
Total 2,961 2,827 4.7 5.0 - (0.3)
Consolidated revenue by geography
US 1,586 1,493 6.2 6.2 - -
Other Established Markets((iv)) 897 841 6.7 6.2 - 0.5
Total Established Markets 2,483 2,334 6.4 6.2 - 0.2
Emerging Markets 478 493 (3.1) (0.9) - (2.2)
Total 2,961 2,827 4.7 5.0 - (0.3)
(i) Restated for reclassification of robotics consumables revenue 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
cement
(iv) Other Established Markets are Europe, Japan, Australia,
Canada and New Zealand
2025 HALF YEAR CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Unaudited Group Income Statement for the Half Year ended 28 June 2025
Half year Half year
2025 2024
Notes $m $m
Revenue 2 2,961 2,827
Cost of goods sold (870) (853)
Gross profit 2,091 1,974
Selling, general and administrative expenses (1,519) (1,509)
Research and development expenses (143) (137)
Operating profit 2 429 328
Interest income 15 9
Interest expense (69) (70)
Other finance costs (12) (12)
Share of results of associates (1) (2)
Profit before taxation 362 253
Taxation 3 (69) (39)
Attributable profit for the period(A) 293 214
Earnings per ordinary share(A)
Basic 33.5 24.5
Diluted 33.3 24.5
Unaudited Group Statement of Comprehensive Income for the Half Year ended 28
June 2025
Half year Half year
2025 2024
$m $m
Attributable profit for the period(A) 293 214
Other comprehensive income
Items that will not be reclassified to income statement
Remeasurement of net retirement benefit obligations 4 9
Taxation on other comprehensive income (2) (2)
Total items that will not be reclassified to income statement 2 7
Items that may be reclassified subsequently to income statement
Cash flow hedges - forward foreign exchange contracts
(Losses)/gains arising in the period (47) 33
Gains recycled to income statement in the period (5) (18)
Exchange differences on translation of foreign operations 193 (65)
Taxation on other comprehensive income 9 (2)
Total items that may be reclassified subsequently to income statement 150 (52)
Other comprehensive loss for the period, net of taxation 152 (45)
Total comprehensive income for the period(A) 445 169
A Attributable to the equity holders of the parent and wholly derived
from continuing operations.
Unaudited Group Balance Sheet as at 28 June 2025
28 June 31 December 29 June
2025 2024 2024
Notes $m $m $m
ASSETS
Non-current assets
Property, plant and equipment 1,436 1,422 1,441
Goodwill 3,111 3,026 3,104
Intangible assets 962 1,032 1,112
Investments 29 9 9
Investments in associates 7 7 15
Other non-current assets 49 24 17
Retirement benefit assets 70 63 67
Deferred tax assets 401 350 319
6,065 5,933 6,084
Current assets
Inventories 2,467 2,387 2,491
Trade and other receivables 1,435 1,381 1,355
Current tax receivable 49 34 44
Cash and cash equivalents 6 676 619 568
4,627 4,421 4,458
TOTAL ASSETS 10,692 10,354 10,542
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 175 175 175
Share premium 615 615 615
Capital redemption reserve 20 20 20
Treasury shares (48) (66) (82)
Other reserves (347) (497) (457)
Retained earnings 5,121 5,018 4,934
Total equity 5,536 5,265 5,205
Non-current liabilities
Long-term borrowings and lease liabilities 6 3,297 3,258 3,275
Retirement benefit obligations 86 79 82
Other payables 96 95 96
Provisions 94 95 71
Deferred tax liabilities 42 31 36
3,615 3,558 3,560
Current liabilities
Bank overdrafts, borrowings, loans and lease liabilities 6 157 63 380
Trade and other payables 1,097 1,128 1,024
Provisions 58 108 152
Current tax payable 229 232 221
1,541 1,531 1,777
Total liabilities 5,156 5,089 5,337
TOTAL EQUITY AND LIABILITIES 10,692 10,354 10,542
Unaudited Group Cash Flow Statement for the Half Year ended 28 June 2025
Half year Half year
2025 2024
$m $m
Cash flows from operating activities
Profit before taxation 362 253
Net interest expense 54 61
Depreciation, amortisation and impairment 273 273
Loss on disposal of property, plant and equipment and software 11 6
Share-based payments expense (equity-settled) 21 20
Share of results of associates 1 2
Pension costs less cash paid 2 7
Increase in inventories - (119)
Increase in trade and other receivables (49) (44)
Decrease in trade and other payables and provisions (107) (91)
Cash generated from operations 568 368
Interest received 14 6
Interest paid (75) (65)
Income taxes paid (111) (71)
Net cash inflow from operating activities 396 238
Cash flows from investing activities
Acquisitions, net of cash acquired (8) (186)
Capital expenditure (139) (172)
Purchase of investments - (1)
Investment in associates - (1)
Proceeds from disposal of property, plant and equipment 12 -
Net cash used in investing activities (135) (360)
Cash flows from financing activities
Payment of capital element of lease liabilities (25) (27)
Proceeds from borrowings due within one year 27 -
Settlement of borrowings due within one year (13) (400)
Proceeds from borrowings due after one year - 1,000
Proceeds from own shares 1 1
Settlement of currency swaps (5) -
Equity dividends paid (202) (202)
Net cash used in financing activities (217) 372
Net increase in cash and cash equivalents 44 250
Cash and cash equivalents at beginning of year 617 300
Exchange adjustments 12 (5)
Cash and cash equivalents at end of period(B) 673 545
B Cash and cash equivalents at the end of the period is net of
overdrafts of $3m (29 June 2024: $23m).
Unaudited Group Statement of Changes in Equity for the Half Year ended 28 June
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 period(A) - - - - - 293 293
Other comprehensive income(A) - - - - 150 2 152
Equity dividends declared and paid - - - - - (202) (202)
Share-based payments recognised - - - - - 21 21
Taxation on share-based payments - - - - - 6 6
Cost of shares transferred to beneficiaries - - - 18 - (17) 1
At 28 June 2025 175 615 20 (48) (347) 5,121 5,536
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 period(A) - - - - - 214 214
Other comprehensive income(A) - - - - (52) 7 (45)
Equity dividends declared and paid - - - - - (202) (202)
Share-based payments recognised - - - - - 20 20
Cost of shares transferred to beneficiaries - - - 12 - (11) 1
At 29 June 2024 175 615 20 (82) (457) 4,934 5,205
A Attributable to the equity holders of the parent 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 28 June 2025 was $327m (1 January 2025: $520m, 29 June 2024:
$461m).
D Within retained earnings is a non-distributable capital reserve of
$2,266m (1 January 2025: $2,266m, 29 June 2024: $2,266m) which arose as a
result of the Group's reorganisation in 2008.
Notes to the Condensed Consolidated Interim 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 interim
financial statements ('Interim Financial Statements'), 'Group' means the
Company and all its subsidiaries.
These Interim Financial Statements have been prepared in accordance with IAS
34 Interim Financial Reporting as adopted for use in the UK. As required by
the Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, these Interim Financial Statements have been prepared applying the
accounting policies and presentation that were applied in the preparation of
the Company's annual accounts for the year ended 31 December 2024 which were
prepared in accordance with UK-adopted International Accounting Standards. The
Group has also prepared its accounts in accordance with IFRS as issued by the
International Accounting Standards Board (IASB) effective as at 31 December
2024. IFRS as adopted in the UK differs in certain respects from IFRS as
issued by the IASB. However, the differences have no impact for the periods
presented.
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 for
its Interim Financial Statements for the period ended 28 June 2025, 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 Interim 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 Interim Financial Statements for the reasons set out below.
The Group's net debt at 28 June 2025 was $2,747m (see Note 6) with committed
facilities of $4.2bn. No debt is due for repayment in the second half of 2025
and $75m of private placement debt is due for repayment in the first half of
2026. $625m of private placement debt is subject to financial covenants. The
principal covenant on the private placement debt is a leverage ratio of
<3.5x 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, with the
key judgement applied being the speed and sustainability of the return to a
normal volume of elective procedures in key markets, including the impact of a
significant global recession, 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 believe that the Group is
well placed to manage its financing and other business risks satisfactorily
and have a reasonable expectation that the Group has sufficient resources to
continue in operational existence for a period of at least 12 months from the
date of approval of these Interim Financial Statements period. Thus they
continue to adopt the going concern basis for accounting in preparing these
Interim Financial Statements.
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. An unqualified opinion was issued that did not contain a
statement under section 498 of the Companies Act 2006 on the Group's statutory
financial statements for the year ended 31 December 2024. The Group's
statutory financial statements for the year ended 31 December 2024 have been
delivered to the Registrar of Companies.
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.
The Group is adopting the mandatory temporary exception from the recognition
and disclosure of deferred taxes arising from the jurisdictional
implementation of the Pillar Two model rules which took effect for the Group
from 1 January 2024.
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 2025 and earlier application is permitted;
however, the Group has not early adopted them in preparing these Interim
Financial Statements.
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.
The critical accounting estimates are consistent with those reflected in the
Group's consolidated financial statements for the year ended 31 December 2024.
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 interim financial statements:
a. The impact of climate change on the going concern assessment;
b. The impact of climate change on the cash flow forecasts used in the
impairment assessments of non-current assets including goodwill; and
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. Accordingly, as described in Note 2 to the most recent
annual report, the Group has concluded that there are three reportable
segments.
Segment revenue reconciles to statutory revenue from continuing operations as
follows:
Half year Half year
2025 2024
$m $m
Reportable segment revenue
Orthopaedics 1,193 1,149
Sports Medicine & ENT 923 888
Advanced Wound Management 845 790
Revenue from external customers 2,961 2,827
2a. Disaggregation of revenue
The following table shows the disaggregation of Group revenue by product by
business unit:
Half year Half year
2025 2024((i))
$m $m
Knee Implants 501 494
Hip Implants 313 311
Other Reconstruction 64 45
Trauma & Extremities 315 299
Orthopaedics 1,193 1,149
Sports Medicine Joint Repair 509 483
Arthroscopic Enabling Technologies 307 304
ENT (Ear, Nose and Throat) 107 101
Sports Medicine & ENT 923 888
Advanced Wound Care 366 357
Advanced Wound Bioactives 285 262
Advanced Wound Devices 194 171
Advanced Wound Management 845 790
Total 2,961 2,827
(i) Restated for reclassification of robotics consumables revenue 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 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.
Half year 2025 Half year 2024
Established Markets(E) Emerging Markets Total Established Markets(E) Emerging Markets Total
$m $m $m $m $m $m
Orthopaedics, Sports Medicine & ENT 1,752 364 2,116 1,647 390 2,037
Advanced Wound Management 731 114 845 687 103 790
Total 2,483 478 2,961 2,334 493 2,827
E Established Markets comprises US, Australia, Canada, Europe, Japan and
New Zealand.
Sales are attributed to the country of destination. US revenue for the half
year was $1,586m (H1 2024: $1,493m), China revenue for the half year was $58m
(H1 2024: $112m) and UK revenue for the half year was $114m (H1 2024: $103m).
No individual customer comprises more than 10% of the Group's external sales.
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. Accordingly, operating segment results for
the half year ended 29 June 2024 have been restated for comparative purposes.
Segment trading profit is reconciled to the statutory measure below:
Half year Half year
2025 2024
$m $m
Segment profit
Orthopaedics 151 119
Sports Medicine & ENT 213 217
Advanced Wound Management 187 162
Segment trading profit 551 498
Corporate costs(1) (28) (27)
Acquisition and disposal related items (9) -
Restructuring and rationalisation expenses (8) (62)
Amortisation and impairment of acquisition intangibles (83) (87)
Legal and other 6 6
Operating profit 429 328
Interest income 15 9
Interest expense (69) (70)
Other finance costs (12) (12)
Share of results of associates (1) (2)
Profit before taxation 362 253
1 Corporate costs include centralised infrastructure costs such as
compliance and group functions.
Depreciation and amortisation included in segment profit is presented below:
Half year Half year
2025 2024
$m $m
Depreciation and amortisation
Orthopaedics 112 105
Sports Medicine & ENT 51 47
Advanced Wound Management 34 30
Acquisition and disposal related items
For the half year ended 28 June 2025, the charge included costs of integration
for prior year acquisitions.
For the half year ended 29 June 2024, credits related to the remeasurement of
deferred and contingent consideration for prior year acquisitions were offset
by integration costs during that period.
Restructuring and rationalisation costs
For the half year ended 28 June 2025, these costs primarily relate to the
efficiency and productivity elements of the 12-Point Plan and the Operations
and Commercial Excellence programme. These costs primarily consist of
severance, integration and dual running costs, partially offset by gains on
disposal of property, plant and equipment.
For the half year ended 29 June 2024, these costs primarily relate to the
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 both the half years ended 28 June 2025 and 29 June 2024, charges relate to
the amortisation and impairment of intangible assets acquired in material
business combinations.
Legal and other
For the half years ended 28 June 2025 and 29 June 2024, charges relate to
legal expenses for ongoing metal-on-metal hip claims.
For the half year ended 28 June 2025 these expenses were offset by a release
of $11m (half year ended 29 June 2024: release of $12m) in the provision that
reflects the decrease in the present value of the estimated costs to resolve
all other known and anticipated metal-on-metal hip claims.
The half year ended 29 June 2024 also includes costs for implementing the
requirements of the EU Medical Device Regulation that was effective from May
2021 with a transition period to May 2024.
3. Taxation
Tax rate
Our reported tax for the period ended 28 June 2025 was a charge of $69m, with
an effective tax rate of 19.1% (H1 2024: $39m, effective tax rate of 15.4%).
OECD BEPS 2.0 - Pillar Two
The OECD Pillar Two GloBE Rules (Pillar Two) introduce a global minimum
corporate tax rate of 15% applicable to multinational enterprise groups with
global revenue over €750m and first applied to the Group for its accounting
period commencing 1 January 2024.
The Group forecasts a Pillar Two current tax charge for the year ending 31
December 2025 of approximately $27m.
The Group is adopting the IAS12 mandatory temporary exception from the
recognition and disclosure of deferred taxes arising from the jurisdictional
implementation of the Pillar Two model rules.
4. Dividends
The 2024 final dividend totaling $202m was paid on 28 May 2025. The 2025
interim dividend of 15.0 US cents per ordinary share was approved by the Board
on 30 July 2025. This dividend is payable on 7 November 2025 to shareholders
whose names appear on the register at the close of business on 3 October 2025.
The sterling equivalent per ordinary share will be set following the record
date. Shareholders may elect to receive their dividend in either Sterling or
US Dollars and the last day for election will be 17 October 2025. Shareholders
may participate in the dividend re-investment plan and elections must be made
by 17 October 2025.
5. Acquisitions
Half year ended 28 June 2025
No acquisitions were completed in the half year ended 28 June 2025.
The cash outflow from acquisitions in H1 2025 comprises payments of deferred
and contingent consideration of $8m for acquisitions completed in prior
periods.
The carrying value of goodwill increased from $3,026m at 31 December 2024 to
$3,111m at 28 June 2025 due to foreign exchange movements.
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 are 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 goodwill represents the control premium, acquired workforce and the
synergies expected from integrating CartiHeal into the Group's existing
business.
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.
For the half year ended 29 June 2024, the contribution from CartiHeal to the
Group's revenue and profit was immaterial.
The cash outflow from acquisitions in H1 2024 of $186m comprises payments of
consideration of $177m net of cash acquired relating to acquisitions during
that period and payments of deferred and contingent consideration of $9m
relating to acquisitions completed in prior periods.
6. Net debt
Net debt as at 28 June 2025 is outlined below. The repayment of lease
liabilities is included in cash flows from financing activities in the cash
flow statement.
28 June 31 December 29 June
2025 2024 2024
$m $m $m
Bank overdrafts, borrowings and loans - current 18 2 23
Corporate bond 2,603 2,498 2,518
Private placement notes 625 625 930
Borrowings 3,246 3,125 3,471
Cash at bank (476) (419) (293)
Cash equivalents (200) (200) (275)
Credit balance on derivatives - currency swaps - 1 (1)
(Debit)/credit balance on derivatives - interest rate swaps (31) 6 -
Net debt excluding lease liabilities 2,539 2,513 2,902
Non-current lease liabilities 144 135 132
Current lease liabilities 64 61 52
Net debt 2,747 2,709 3,086
No debt is due for repayment in the second half of 2025 and $75m of private
placement debt is due for repayment in the first half of 2026.
In March 2024 the Group issued two corporate bonds: $650m (before expenses and
underwriting discounts) of notes bearing an interest rate of 5.4% repayable in
2034; and $350m (before expenses and underwriting discounts) of notes bearing
an interest rate of 5.15% repayable in 2027.
The Company is subject to financial covenants under its private placement
agreements. 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 using net debt excluding lease liabilities as set out below. The
financial covenants are tested at the end of each half year for the 12 months
ending on the last day of the testing period. As of 28 June 2025, the Company
was in compliance with these covenants. The facilities are also subject to
customary events of default, none of which are currently anticipated to occur.
As the measure included in the financial covenants represents net debt
excluding lease liabilities, the Group also presents the net debt position to
provide a complete and comprehensive view of its financial position.
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
28 June 31 December 29 June 28 June 31 December 29 June
2025 2024 2024 2025 2024 2024 Fair value
$m $m $m $m $m $m level
Financial assets measured at fair value
Forward foreign exchange contacts 2 46 34 2 46 34 Level 2
Investments 29 9 9 29 9 9 Level 3
Contingent consideration receivable - - 18 - - 18 Level 3
Interest rate swaps 31 10 7 31 10 7 Level 2
Currency swaps - 1 1 - 1 1 Level 2
62 66 69 62 66 69
Financial assets not measured at fair value
Trade and other receivables 1,296 1,190 1,214
Cash and cash equivalents 676 619 568
1,972 1,809 1,782
Total financial assets 2,034 1,875 1,851
Financial liabilities measured at fair value
Acquisition consideration - contingent (89) (84) (78) (89) (84) (78) Level 3
Forward foreign exchange contracts (36) (16) (16) (36) (16) (16) Level 2
Interest rate swaps - (16) (7) - (16) (7) Level 2
Currency swaps - (2) - - (2) - Level 2
(125) (118) (101) (125) (118) (101)
Financial liabilities not measured at fair value
Acquisition consideration - deferred (9) (21) (20)
Bank overdrafts (3) (2) (23)
Bank loans (14) - -
Corporate bond not in a hedge relationship (1,493) (1,492) (1,491)
Corporate bond in a hedge relationship (1,110) (1,006) (1,027)
Private placement debt not in a hedge relationship (625) (625) (930)
Trade and other payables (1,060) (1,084) (999)
(4,314) (4,230) (4,490)
Total financial liabilities (4,439) (4,348) (4,591)
At 28 June 2025, the book value and market value of the $1bn 2020 USD
corporate bond were $996m and $875m respectively (31 December 2024: $995m and
$836m,
29 June 2024: $995m and $826m), the book value and market value of the $650m
2024 USD corporate bond maturing in 2034 were $648m and $659m respectively
(31 December 2024: $628m and $642m, 29 June 2024: $637m and $639m),
the book value and market value of the $350m 2024 USD corporate bond maturing
in 2027 were $348m and $354m respectively (31 December 2024: $348m and $352m,
29 June 2024: $347m and $348m), the book value and market value of the €500m
Corporate bond were $611m and $623m respectively (31 December 2024: $527m and
$547m, 29 June 2024: $539m and $555m).
At 28 June 2025, the book value and fair value of the private placement debt
were $625m and $589m respectively (31 December 2024: $625m and $573m, 29 June
2024: $930m and $857m).
There were no transfers between Levels 1, 2 and 3 during the half year ended
28 June 2025 and the year ended 31 December 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 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 fair value of contingent acquisition 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 half year ended 28 June 2025 and the
year ended 31 December 2024 for financial instruments measured using Level 3
valuation methods are presented below:
28 June 31 December
2025 2024
$m $m
Investments
At 1 January 9 8
Additions - 1
Transferred from receivables 18 -
Fair value remeasurement 2 -
29 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 5 6
Remeasurements (10) (9)
(89) (84)
7b. Retirement benefit obligations
The discount rates applied to the defined benefit pension liabilities of the
UK, Germany and Switzerland pension plans are determined 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.
Since 31 December 2024, the discount rate for UK has increased by 10 basis
points to 5.6%, the discount rate for Germany has increased by 30 basis points
to 3.8% and the discount rate for Switzerland has increased by 30 basis points
to 1.2%.
A remeasurement gain of $4m was recognised in Other Comprehensive Income (OCI)
during the first half of 2025, reflecting actuarial movements in the present
value of the pension 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:
Half year Full year Half year
2025 2024 2024
Average rates
Sterling 1.30 1.28 1.26
Euro 1.09 1.08 1.08
Swiss Franc 1.16 1.14 1.12
Japanese Yen 0.0067 0.0066 0.0066
Period end rates
Sterling 1.37 1.25 1.27
Euro 1.17 1.04 1.07
Swiss Franc 1.26 1.10 1.11
Japanese Yen 0.0069 0.0064 0.0062
9. Contingencies
The Company and its subsidiaries are party to various legal proceedings, some
of which include claims for substantial damages. The outcome of these
proceedings cannot readily be foreseen, but except as described herein
management believes none of them is likely to result in a material adverse
effect on the financial position of the Group. The Group provides for outcomes
that are deemed to be probable and can be reliably estimated. There is no
assurance that losses will not exceed provisions or will not have a
significant impact on the Group's results of operations in the period in which
they are realised.
10. Subsequent events
In August 2025, the Group announced its intention to repurchase shares
amounting to $500m during the second half of 2025. Other than that, there have
been no events between the balance sheet date, and the date on which the
financial statements were approved by the Board, which would require
adjustment to the financial statements or any additional disclosures.
11. Principal risks and uncertainties
The principal risks and uncertainties that the Group is exposed to are
consistent with those as at 31 December 2024. The principal risks and
uncertainties continue to be: legal and compliance; quality and regulatory;
political and economic; financial markets; pricing and reimbursement;
cybersecurity; global supply chain; mergers and acquisitions; new product
innovation, design and development including intellectual property; strategy
and commercial execution; and talent management. Further detail on these risks
can be found in the 2024 Annual Report of the Group on pages 83-93.
Directors' Responsibilities Statement
The Directors confirm that to the best of their knowledge:
· this set of condensed consolidated Interim Financial Statements
has been prepared in accordance with IAS 34 Interim Financial Statements as
adopted for use in the UK and IAS 34 Interim Financial Statements as issued by
the International Accounting Standards Board; and
· that the interim management report herein includes a fair review
of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the enterprise during that period, and any changes
in the related party transactions described in the last annual report that
could do so.
The Directors of Smith & Nephew plc are listed in the Smith & Nephew
plc Annual Report for 31 December 2024. A list of current Directors is
maintained on the Smith & Nephew plc website: www.smith-nephew.com
(https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.smith-nephew.com%2F&data=05%7C02%7CAndrey.Kartyshev%40smith-nephew.com%7Cac4b3666acbe492b83d208ddc865be5e%7C273106dc287842ebb7c8069dcf334687%7C0%7C0%7C638887061504987463%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=WDyXUrfnwkGbplvScM%2FVUySkaroO7vwZo3xBlCX7z7E%3D&reserved=0)
.
The Directors are responsible for the maintenance and integrity of the Group's
website. Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation in other
jurisdictions.
By order of the Board:
Chief Executive Officer 4 August 2025
Deepak Nath
John Rogers Chief Financial Officer 4 August 2025
INDEPENDENT REVIEW REPORT TO SMITH & NEPHEW PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the interim financial report for the period ended 28 June 2025
which comprises the Group Income Statement, the Group Statement of
Comprehensive Income, the Group Balance Sheet, the Group Cash Flow Statement,
the Group Statement of Changes in Equity and related notes 1 to 11.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the period ended 28 June 2025 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules
("the DTR") of the United Kingdom's Financial Conduct Authority ("the UK
FCA").
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this interim
financial report has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim financial report in
accordance with the DTR of the UK FCA.
In preparing the interim financial report, the directors are responsible for
assessing the group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the interim financial report, we are responsible for expressing
to the company a conclusion on the condensed set of financial statements in
the interim financial report. Our Conclusion, including our Conclusion
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
4 August 2025
Other information
These Interim 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 period to the Underlying revenue growth reconciles to reported revenue growth, the most Revenue growth 33
previous period 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.
Average daily sales Average daily sales is used to assess underlying revenue growth by removing Average daily sales is calculated by dividing revenue at a constant exchange Revenue n/a
the effect of different trading days between periods. This is a key metric rate by the number of trading days in a given period. Trading days refer to
used by management to assess the performance of the Group. the days on which the Group generates its revenue.
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 33
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 33
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 33
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 excluding items including amortisation of acquisition intangible assets, impairments and
that impact the short-term profitability of the Group. 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 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 33
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 33
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 33
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 33
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 33
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 35
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 35
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 35
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) n/a
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
Half year Half year Reported Underlying Acquisitions Currency
2025 2024 growth growth & disposals impact
$m $m % % % %
Segment revenue
Orthopaedics 1,193 1,149 3.9 4.1 - (0.2)
Sports Medicine & ENT 923 888 3.9 4.1 - (0.2)
Advanced Wound Management 845 790 6.9 7.1 - (0.2)
Revenue from external customers 2,961 2,827 4.7 5.0 - (0.3)
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 ¢
Half year 2025 Reported 429 362 (69) 293 568 33.5
Acquisition and disposal related items(8) 9 20 (4) 16 7 1.8
Restructuring and rationalisation costs 8 8 (2) 6 52 0.6
Amortisation and impairment of acquisition intangibles(8) 83 83 (19) 64 - 7.3
Legal and other(7,8) (6) (4) 1 (3) 12 (0.3)
Lease liability payments - - - - (25) -
Capital expenditure - - - - (139) -
Proceeds from disposal of property, plant and equipment - - - - 12 -
Half year 2025 Non-IFRS 523 469 (93) 376 487 42.9
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 ¢
Half year 2024 Reported 328 253 (39) 214 368 24.5
Acquisition and disposal related items(8) - 1 - 1 1 0.2
Restructuring and rationalisation costs 62 63 (13) 50 88 5.8
Amortisation and impairment of acquisition intangibles(8) 87 87 (19) 68 - 7.8
Legal and other(7,8) (6) (5) - (5) 26 (0.7)
Lease liability payments - - - - (27) -
Capital expenditure - - - - (172) -
Half year 2024 Non-IFRS 471 399 (71) 328 284 37.6
(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.
Acquisition and disposal related items
For the half year ended 28 June 2025, the charge included costs of integration
for prior year acquisitions.
For the half year ended 29 June 2024, credits related to the remeasurement of
deferred and contingent consideration for prior year acquisitions were offset
by integration costs during that period.
Adjusted profit before tax for the half years ended 28 June 2025 and 29 June
2024 additionally excludes disposal items related to the Group's shareholding
in Bioventus.
Adjusted profit before tax for the half year ended 28 June 2025 also excludes
the remeasurement and discount unwind for contingent consideration.
Restructuring and rationalisation costs
For the half year ended 28 June 2025, these costs primarily relate to the
efficiency and productivity elements of the 12-Point Plan and the Operations
and Commercial Excellence programme. These costs primarily consist of
severance, integration and dual running costs, partially offset by gains on
disposal of property, plant and equipment.
For the half year ended 29 June 2024, these costs primarily relate to the
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.
Adjusted profit before tax for the half year ended 29 June 2024 additionally
excludes restructuring costs related to the Group's shareholding in Bioventus.
Amortisation and impairment of acquisition intangibles
For both the half years ended 28 June 2025 and 29 June 2024, charges relate to
the amortisation and impairment of intangible assets acquired in material
business combinations.
Legal and other
For the half years ended 28 June 2025 and 29 June 2024, charges relate to
legal expenses for ongoing metal-on-metal hip claims.
For the half year ended 28 June 2025 these expenses were offset by a release
of $11m (half year ended 29 June 2024: release of $12m) in the provision that
reflects the decrease in the present value of the estimated costs to resolve
all other known and anticipated metal-on-metal hip claims.
The half year ended 29 June 2024 also includes costs for implementing the
requirements of the EU Medical Device Regulation that was effective from May
2021 with a transition period to May 2024.
Free cash flow
A reconciliation from cash generated from operations, the most comparable IFRS
measure, to free cash flow is set out below:
Half year Half year
2025 2024
$m $m
Cash generated from operations 568 368
Capital expenditure (139) (172)
Proceeds from disposal of property, plant and equipment 12 -
Interest received 14 6
Interest paid (75) (65)
Payment of lease liabilities (25) (27)
Income taxes paid (111) (71)
Free cash flow 244 39
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.
Half year Full year
2025 2024
$m $m
Net debt including lease liabilities 2,747 2,709
Attributable profit for the period 491 412
Taxation 116 86
Share of results of associates 9 10
Other finance costs 28 28
Interest expense 144 145
Interest income (48) (24)
Acquisition and disposal-related items 103 94
Restructuring and rationalisation costs 69 123
Amortisation and impairment of acquisition intangibles 183 187
Legal and other (12) (12)
Depreciation of property, plant and equipment 331 325
Impairment and amortisation of other intangible assets and impairment of 81 67
property, plant and equipment
Adjusted EBITDA(1) 1,495 1,441
Adjusted leverage ratio(1) 1.8 1.9
(1 ) Adjusted leverage ratio for the half year 2025 has been
calculated based on adjusted EBITDA for the
rolling 12 months ended 28 June 2025.
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.
Half year 2025 Full year 2024
$m $m
Bank overdrafts, borrowings, loans and lease liabilities 157 63
Long-term borrowings and lease liabilities 3,297 3,258
Total borrowings 3,454 3,321
Attributable profit for the period(1) 491 412
Leverage ratio(1) 7.0 8.1
(1 ) Leverage ratio for the half year 2025 has been
calculated based on attributable profit for the
rolling 12 months ended 28 June 2025.
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