Core Insights - Smith & Nephew plc is undergoing a transformation under the new leadership of CEO Deepak Nath, who was appointed in April 2022, aiming to address previous operational underperformance [1] Company Overview - The company is focusing on identifying high-quality investment opportunities and addressing mispricing in the market [1]

Core Insights - Smith+Nephew is showcasing advancements in Orthopaedic Reconstruction at the American Academy of Orthopaedic Surgeons Annual Meeting in San Diego, focusing on personalized surgical technologies [1][2]. Robotics and Surgical Systems - The CORIOGRAPH Pre-Op Planning and Modeling Services and CORI Surgical System provide personalized approaches for knee and hip replacement surgeries, with recent enhancements for hip procedures [1]. - The CORI Digital Tensioner offers objective gap data for knee procedures, improving surgical planning and execution [1]. Hip Surgery Innovations - The CATALYSTEM Primary Hip System features a triple-taper stem design suitable for various surgical approaches, addressing the growing demand for anterior approach procedures [3]. - Smith+Nephew's total hip arthroplasty portfolio has been recognized for its high survivorship rate of over 94.1% over 20 years, according to the Australian Orthopaedic Association National Joint Replacement Registry [3]. Knee Surgery Developments - The LEGION Hinged Knee System incorporates proprietary OXINIUM implant technology, enhancing durability and wear resistance, and allows for intraoperative transitions between implant types [4]. Shoulder System Advancements - The AETOS Shoulder System has received FDA clearance for a stemless anatomic total shoulder replacement, designed for efficiency and stability with a small operating room footprint [5]. Company Overview - Smith+Nephew operates globally with a focus on medical technology for tissue repair and replacement, generating annual sales of $5.8 billion in 2024 [9].

Core Viewpoint - Smith+Nephew is showcasing advancements in Sports Medicine for joint repair at the American Academy of Orthopaedic Surgeons Annual Meeting, highlighting innovative technologies such as Spatial Surgery and the CARTIHEAL AGILI-C Cartilage Repair Implant [1][2]. Group 1: Innovations in Sports Medicine - The company introduces Spatial Surgery, a new category in arthroscopic surgical innovation, featuring the TESSA Spatial Surgery System, which combines personalized operative planning with real-time tracking and augmented reality guidance [1]. - The CARTIHEAL AGILI-C Cartilage Repair Implant is FDA approved and aims to evolve the cartilage repair landscape, allowing treatment for patients previously without access to such procedures [2]. - Clinical studies show that patients treated with the CARTIHEAL AGILI-C Implant reported significantly better knee function, pain relief, and mobility improvements over a four-year period [3]. Group 2: Clinical Outcomes and Efficacy - The CARTIHEAL AGILI-C Implant demonstrated a significantly lower risk of total knee arthroplasty (TKA) or osteotomy at four years compared to the surgical standard of care [3]. - The REGENETEN Bioinductive Implant has shown clinical superiority in rotator cuff repair, with results surpassing current standards of care and increasing usage in various tendon injuries [4]. - The REGENETEN Implant has been used in over 150,000 patients, resulting in a 3x reduction in the risk of re-tear in a randomized controlled trial versus standard repair alone [7]. Group 3: Company Overview - Smith+Nephew operates in approximately 100 countries and generated annual sales of $5.8 billion in 2024, focusing on the repair, regeneration, and replacement of soft and hard tissue [10]. - The company is a constituent of the FTSE100 and aims to restore patients' bodies and self-belief through innovative medical technologies [9].

Financial Performance - Smith+Nephew reported fourth quarter revenue of $1,571 million, reflecting an underlying growth of 8.3% and a reported growth of 7.8% after a -50bps foreign exchange headwind[9]. - Full year revenue reached $5,810 million, with an underlying growth of 5.3% and reported growth of 4.7%, impacted by a -60bps foreign exchange headwind[9]. - Operating profit for 2024 increased to $657 million, up 54.6% from $425 million in 2023, resulting in an operating profit margin of 11.3%[9]. - Trading profit grew 8.2% to $1,049 million, with a trading profit margin of 18.1%, an improvement of 60bps from the previous year[15]. - Cash generated from operations significantly improved to $1,245 million, a 50.2% increase from $829 million in 2023, with trading cash conversion rising to 95%[15]. - Free cash flow surged to $551 million, a substantial increase of 327.1% compared to $129 million in 2023[15]. - Adjusted earnings per share (EPSA) rose to 84.3¢, up from 82.8¢ in 2023, while basic EPS increased to 47.2¢ from 30.2¢[97]. - The Group reported a profit before taxation of $498 million for 2024, compared to $290 million in 2023, representing an increase of 71.0%[115]. - The Group reported total revenue of $5,810 million for 2024, an increase of 4.7% from $5,549 million in 2023[153]. - Annual sales for 2024 reached $5.8 billion, an increase from $5.549 billion in 2023, reflecting a growth of approximately 4.5%[111]. Product Development and Innovation - The company launched nearly 50 new products over the last three years, contributing to over 60% of revenue growth in 2024[11]. - The company launched 16 new products in 2024, contributing to over 60% of underlying revenue growth from products launched in the last five years[40][41]. - Advanced Wound Management reported improved performance driven by a leading position in the high-growth Negative Pressure Wound Therapy (NPWT) segment, contributing to an underlying revenue growth of 12.2% in Q4 2024[37][70]. - Sports Medicine achieved a strong performance with a steady stream of innovation and successful integration of acquired assets, despite facing significant VBP headwinds in China in 2024[36]. Market Performance - The US market showed strong underlying revenue growth of 11.9%, while Emerging Markets faced a decline of -2.3% due to challenges in China[56]. - Established Markets saw underlying revenue growth of 5.5%, with the US at 4.8% and Other Established Markets at 6.7%[75]. - Orthopaedics business unit delivered underlying revenue growth of 4.6%, with Knee Implants at 1.3% and Hip Implants at 4.0%[79]. - Sports Medicine Joint Repair achieved underlying revenue growth of 5.3%, with strong double-digit growth from REGENETEN, and 15.9% growth excluding China[66][67]. - Advanced Wound Bioactives achieved underlying revenue growth of 20.3% and reported growth of 20.1%, driven by strong double-digit growth in skin substitutes following the launch of GRAFIX PLUS[71]. - Advanced Wound Devices reported underlying revenue growth of 20.6% and reported growth of 19.9%, supported by the RENASYS and PICO Negative Pressure Wound Therapy Systems[72]. Strategic Initiatives - The 12-Point Plan has led to a near 9% net reduction in total workforce since its inception, with significant productivity improvements and cost savings achieved[30]. - For 2025, Smith+Nephew targets underlying revenue growth of around 5% and a trading profit margin between 19.0% and 20.0%[15]. - The company expects a trading profit margin of 19% to 20%, driven by operating leverage, cost reductions, and network optimization benefits[107]. - Trading cash conversion is projected to be between 80% to 90%, with restructuring costs estimated at around $45 million for 2025[108]. Financial Position and Cash Flow - The Group had access to $617 million in cash and cash equivalents and a net debt of $2,513 million as of December 31, 2024[125]. - The Group has committed facilities of $4.1 billion with an average maturity of 5.5 years, with no debt due for repayment in 2025[125]. - The Group's net debt decreased to $2,709 million in 2024 from $2,776 million in 2023, with available committed facilities increasing to $4.1 billion[185]. - The Group's cash and cash equivalents increased to $619 million in 2024 from $302 million in 2023[185]. - Cash generated from operations in 2024 was $1.245 billion, a substantial rise from $829 million in 2023, marking a growth of 50.1%[119]. Acquisitions and Investments - The acquisition of CartiHeal was completed for a total consideration of $231 million, which includes $180 million in cash and $49 million in contingent consideration[176][177]. Taxation and Dividends - The reported tax charge for 2024 was $86 million, up from $27 million in 2023, attributed to increased profits[170]. - The final dividend for 2023 was $202 million, with a proposed final dividend for 2024 also set at 23.1 US cents per share[174][175].

Regulatory Compliance and Quality Assurance - In 2024, Smith+Nephew reported 10 recalls globally, with 21,822 units impacted, all of which were either removed from the market or corrected per applicable regulations[1830] - All Smith+Nephew direct manufacturing locations participate in the Medical Device Single Audit Program (MDSAP) and are certified to ISO 13485[1831] - Smith+Nephew did not incur any monetary losses due to legal proceedings associated with bribery or corruption in 2024[1831] - Smith+Nephew tracks regulatory changes regarding chemicals in products and actions them as appropriate[1831] - The company reports all data related to product safety as required by the FDA, including fatalities and enforcement actions[1830] - All Tier 1 material suppliers of Smith+Nephew are compliant with ISO 13485, ensuring quality in the supply chain[1831] Financial Performance and Growth - The company reported a significant increase in revenue, achieving $1.5 billion in Q4 2023, representing a 12% year-over-year growth[1832] - Smith+Nephew reported a significant increase in revenue, reaching $1.5 billion for the fiscal year 2023, representing a 10% year-over-year growth[1842] - The company provided an optimistic outlook, projecting a revenue growth of 10-15% for the next fiscal year[1834] - The company anticipates a revenue growth of 8-10% for the upcoming fiscal year, supported by new product launches and market expansion strategies[1842] - The gross profit margin improved to 60%, up from 57% in the previous year, due to operational efficiencies[1834] - Smith+Nephew's gross margin improved to 65%, up from 62% in the previous year, due to operational efficiencies and cost management initiatives[1842] Product Development and Innovation - New product launches contributed to 20% of total revenue, with the introduction of advanced wound care technologies[1835] - The company invested $200 million in research and development, focusing on innovative surgical solutions and technologies[1836] - Smith+Nephew is investing $200 million in research and development for new technologies, focusing on minimally invasive surgical solutions[1842] - Smith+Nephew's strategic emphasis on advanced wound management was noted, with detailed performance metrics provided in the annual report[1841] - Smith+Nephew reported a significant focus on bioinductive collagen implants for rotator cuff repair, with multiple studies indicating positive outcomes over two years[1839] - The company highlighted a 5-year clinical and MRI follow-up demonstrating effective healing rates for partial-thickness rotator cuff tears using a highly porous collagen implant[1839] Market Expansion and Strategic Acquisitions - Market expansion efforts in emerging markets resulted in a 25% increase in sales in those regions[1832] - The company completed a strategic acquisition of a competitor for $300 million, enhancing its product portfolio[1833] - Smith+Nephew completed the acquisition of a small medical device company, enhancing its portfolio in the sports medicine sector[1842] - The company plans to expand its presence in emerging markets, targeting a 20% increase in sales from these regions by 2025[1842] - The company is exploring potential mergers and acquisitions to further strengthen its product portfolio and market presence[1846] User Engagement and Digital Transformation - User data showed a 15% increase in the number of active users, reaching 2 million by the end of the quarter[1833] - The company reported a 5% increase in user data analytics capabilities, improving customer engagement and product performance tracking[1842] - Smith+Nephew reported a 12% increase in user data analytics capabilities, enhancing customer engagement and product performance tracking[1846] - The company plans to enhance its digital capabilities, allocating $50 million towards digital transformation initiatives[1836] Sustainability and Environmental Commitment - Smith+Nephew operates takeback schemes for products where required by law, although the amount of products reused or recycled is not measured[1831] - Sustainability reviews are incorporated in the New Product Development phase to assess environmental and human health considerations[1831] - The company is committed to sustainability, aiming to reduce packaging material by 30% over the next three years[1842] Corporate Governance and Accountability - The company has filed multiple service agreements and letters of appointment for key executives, indicating a focus on leadership stability and governance[4]. - The financial statement recoupment policy has been updated, reflecting the company's commitment to accountability in executive compensation[4]. - The company has engaged Deloitte LLP and KPMG LLP as independent registered public accounting firms, ensuring robust financial oversight[4].

Core Insights - Smith+Nephew's OXINIUM on highly cross-linked polyethylene demonstrates the highest survivorship rate of 94.1% over 20 years for total hip arthroplasty according to the AOANJRR report [1][2] - Multiple registries, including the Italian Registry and Dutch Arthroplasty Register, indicate that OXINIUM/XLPE has a 35% lower risk of revision at 10 years compared to other modular acetabular implants [2] - The unique manufacturing process of OXINIUM transforms the alloy into a ceramicised metal, providing superior performance benefits [2][3] Performance Evidence - The AOANJRR report corroborates findings from other registries, showing that bearing wear has been virtually eliminated as a cause of failure in hip replacements [2] - OXINIUM/XLPE exhibits significantly lower revision rates than metal on XLPE over a 20-year period [2] - The material composition of OXINIUM results in a 30x reduction in pro-inflammatory markers, eliminating the need for CMR substance declarations on labeling [3] Industry Impact - The findings from global registries provide compelling evidence for stakeholders, including payers, hospitals, and surgeons, regarding the reliability of OXINIUM technology [2] - Smith+Nephew's commitment to innovation in orthopedic technology is underscored by the performance of OXINIUM in joint replacement procedures [2][8] - The company aims to enhance patient outcomes through advanced materials and technologies in orthopedic applications [8][9]

Core Insights - Smith+Nephew's OXINIUM on highly cross-linked polyethylene demonstrates the highest survivorship rate of 94.1% over 20 years for total hip arthroplasty [1][2] - Multiple registries, including the AOANJRR, confirm that OXINIUM/XLPE has a 35% lower risk of revision at 10 years compared to other modular acetabular implants [2] - The unique manufacturing process of OXINIUM results in a ceramicised metal that offers superior performance benefits, including durability and wear resistance [3] Group 1: Performance Data - The AOANJRR report indicates that the combination of OXINIUM and highly cross-linked polyethylene leads to significantly lower revision rates than metal on XLPE [2] - Findings from registries worldwide support the performance of OXINIUM for total hip arthroplasty, providing evidence for its differentiated technology [2][3] Group 2: Material Composition - OXINIUM implants contain virtually no nickel, cobalt, or chromium, resulting in a 30x reduction in pro-inflammatory markers [3] - The absence of CMR substances in OXINIUM implants eliminates the need for labeling declarations regarding carcinogenic, mutagenic, or reprotoxic substances [3] Group 3: Industry Context - The advancements in bearing materials have virtually eliminated bearing wear as a cause of failure in hip replacements, a significant improvement over the past two decades [2] - The ongoing research and data from various registries provide valuable guidance for surgeons and patients in selecting reliable implant materials for long-term outcomes [2]

Financial Data and Key Metrics Changes - For the full year 2024, the company reported a revenue of $5.8 billion, representing a 5.3% increase on an underlying basis and a 4.7% increase on a reported basis [62] - The company achieved 60 basis points of margin expansion, with a trading margin of 18.1% for the year, slightly above previous guidance [67][72] - Cash conversion improved to 95%, significantly higher than the 65% achieved in 2023, with free cash flow increasing to $551 million [91][92] Business Line Data and Key Metrics Changes - Orthopedics grew by 4.3% for the year, while Sports Medicine and ENT grew by 6.2%, and Advanced Wound Management (AWM) grew by 5.1% [63] - In Q4, Orthopedics grew at 6%, with a notable 23.9% growth in other recon driven by robotics sales [41][44] - The Advanced Wound Management segment delivered its highest growth quarter of the year at 12.2%, with bioactives growth of 20.3% [56][57] Market Data and Key Metrics Changes - The US market showed strong performance with an 11.9% growth in Q4, while other established markets grew by 8.2% [40] - Emerging markets experienced a 2.3% decline, primarily due to headwinds in China, which negatively impacted both Recon and Sports Medicine Joint Repair [40][64] - The company expects continued challenges in China, forecasting a headwind of around 150 basis points for the full year 2025 [97] Company Strategy and Development Direction - The company is focused on the 12-Point Plan, which aims to improve operational performance and drive higher growth, with expectations for continued margin expansion in 2025 [9][10] - The transition to a global business unit model is intended to enhance accountability and commercial execution [30][80] - The company anticipates significant cost savings from manufacturing optimization and a zero-based budgeting approach, with expected savings between $325 million and $375 million [33][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving around 5% revenue growth in 2025, despite anticipated headwinds from China [9][96] - The company expects a significant step-up in profitability with trading margins projected between 19% and 20% for 2025 [98] - Management highlighted the importance of innovation, with over 60% of revenue growth in 2024 coming from products launched in the last five years [65][22] Other Important Information - The company plans to maintain its dividend at $0.375 per share [71] - A reduction in headcount by approximately 9% is expected to contribute to operational savings [36][77] - The company is committed to investing in organic growth and potential acquisitions while maintaining a leverage ratio around 2x adjusted EBITDA [95] Q&A Session Summary Question: What gives confidence that orthopedics will recover towards the end of Q1? - Management indicated that they expect Q1 to be the low watermark for inventories, with a recovery anticipated thereafter based on committed volumes in the tender business [110][113] Question: Are volumes in sports medicine ticking up as expected? - Management noted that the first half of the year will be impacted by the sports VBP on joint repair, with expectations for improvement in the second half [114] Question: What assurance is there that R&D spending won't be used to manage margins? - Management reassured that R&D spending will increase, emphasizing their commitment to innovation and efficiency in this area [109]

Fourth Quarter and Full Year 2024 Forward looking statements and non-IFRS measures 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 ...

Core Insights - Smith+Nephew has launched a new foot & ankle repair portfolio in Australia and New Zealand featuring proprietary adjustable tensioning technology, which allows surgeons to optimize suture tension after anchor insertion [1][4] - The adjustable tensioning capability enables personalized treatment for patients, potentially improving outcomes by allowing surgeons to tailor the range of motion based on individual activity levels [2][4] - The portfolio includes a best-in-class all suture anchor that ensures consistent deployment and strong fixation, now integrated with needles for open procedures [3] Company Overview - Smith+Nephew is a global medical technology company focused on the repair, regeneration, and replacement of soft and hard tissue, with a mission to restore people's bodies and self-belief [6] - The company operates in over 100 countries and reported annual sales of $5.5 billion in 2023, being a constituent of the FTSE100 [7]