Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $1.4 billion, representing 7.7% underlying growth, with all business units and regions contributing positively [25][76]. - The full-year revenue growth guidance has been refined to the higher end of the 6% to 7% range, reflecting good momentum and improving execution [6][32]. - Trading margin guidance is now around 17.5%, reflecting additional headwinds, particularly from China [6][77]. Business Line Data and Key Metrics Changes - Orthopedics growth has accelerated, with underlying growth of 8.3% in the third quarter, following 3.9% in Q1 and 5.8% in Q2 [100]. - Advanced Wound Management grew 3.6% underlying, with a notable decline in bioactives by 4.8% due to production transition issues [71][72]. - Sports Medicine experienced growth of 11.1%, driven by internal and external innovations, although it faced headwinds from a slowing market in China [66][68]. Market Data and Key Metrics Changes - Growth was broad-based across regions, with 7.2% growth in the US, 7.8% in other established markets, and 9.2% in emerging markets [7]. - In China, sales were down 1.4%, impacted by a slowdown in Sports Medicine and destocking in anticipation of the VBP process [7][68]. - The ENT segment grew 40.2%, driven by the core tonsil and adenoid business, although demand growth is expected to moderate [70]. Company Strategy and Development Direction - The company is advancing a 12-point plan aimed at operational improvements and cost reductions, which is expected to drive key metrics toward their targets [24][78]. - There is a focus on enhancing product availability and commercial execution, particularly in orthopedics, to sustain growth [100][104]. - The company is also investing in innovation, with a pipeline that includes new applications for existing products and expansion into new markets [79][66]. Management's Comments on Operating Environment and Future Outlook - Management noted that the healthcare market is experiencing a slowdown, impacting overall performance, particularly in orthopedics and sports [10][46]. - Despite challenges, management remains optimistic about achieving midterm guidance, citing operational improvements and revenue leverage as key factors [55][56]. - The company expects to see a normalization in growth rates as it moves into 2024, with ongoing productivity gains and improved pricing strategies [54][55]. Other Important Information - The company announced the closure of two smaller factories, representing a 20% reduction in manufacturing footprint, which is expected to contribute to gross margin improvement [14][24]. - There are ongoing challenges related to product supply, particularly in the US knee business, which has impacted growth [19][44]. - The impact of the anticorruption campaign in China remains uncertain, but management does not expect it to persist indefinitely [46][130]. Q&A Session Summary Question: What are the underlying trends in the orthopedic side? - Management highlighted that growth in orthopedics was driven by the other reconstruction segment, with regional variations noted [82]. Question: Can you provide insights on pricing contributions to growth? - Management indicated that pricing has shown low single-digit positive growth, contributing to overall performance [83]. Question: What is the current status of CORI placements? - Management confirmed progress towards the placement target for CORI, with a focus on both placements and utilization [111]. Question: How is the company addressing the impact of VBP? - Management explained that the expanded scope of VBP is expected to impact 1.5% to 2% of group sales, with ongoing adjustments being made [126]. Question: What are the expectations for the 2025 margin target? - Management remains confident in achieving the 20% margin target, despite new headwinds, citing operational improvements and cost reduction initiatives [121][125].

| --- | --- | --- | --- | --- | --- | |-------------------|-------|-----------------------------------------|------------------------------------|-----------------------------------|--------------------------------------------| | Overall progress | | Fixing Orthopaedics \n1 point | Improving productivity \n2 points | | Accelerating Sports & AWM \n1 point | | | 50% | Rewire Orthopaedics commercial delivery | | Improve value and cash processes | Scale Negative Pressure Wound Therapy 50% | | c.45% | | | | | | ...

Smith & Nephew plc (NYSE:SNN) Q2 2023 Earnings Conference Call August 3, 2023 3:30 AM ET Company Participants Deepak Nath - Chief Executive Officer Anne-Francoise Nesmes - Chief Financial Officer Conference Call Participants Jack Reynolds-Clark - RBC Hassan Al-Wakeel - Barclays Graham Doyle - UBS Veronika Dubajova - Citi David Adlington - JPMorgan Robert Davies - Morgan Stanley Chris Gretler - Credit Suisse Deepak Nath Good morning. Welcome to the Smith & Nephew Second Quarter and First Half Results Call. I ...

[Financial & Operational Highlights](index=4&type=section&id=Smith%2BNephew%20Second%20Quarter%20and%20First%20Half%202023%20Results) [Q2 & H1 2023 Performance Summary](index=4&type=section&id=Q2%20%26%20H1%202023%20Performance%20Summary) Smith+Nephew reported strong revenue growth for the second quarter and first half of 2023, with Q2 underlying revenue up 7.8% and H1 up 7.3%, driven by growth across all business units, particularly a 12.0% underlying increase in Sports Medicine & ENT in Q2, though H1 trading profit margin declined to 15.3% from 16.9% year-over-year due to inflation, foreign exchange headwinds, and increased sales and marketing expenses, while the interim dividend remained unchanged at 14.4 cents per share H1 2023 Key Financial Results (vs H1 2022) | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,734 million | $2,600 million | +5.2% (Reported) | | Underlying Revenue Growth | 7.3% | - | - | | Operating Profit | $275 million | $242 million | +13.6% | | Trading Profit | $417 million | $440 million | -5.2% | | Trading Profit Margin | 15.3% | 16.9% | -160 basis points | | EPS (cents) | 19.7¢ | 20.2¢ | -2.5% | | EPSA (cents) | 34.9¢ | 38.1¢ | -8.4% | Q2 2023 Underlying Revenue Growth by Business Unit | Business Unit | Q2 2023 Underlying Growth | | :--- | :--- | | **Total Revenue** | **+7.8%** | | Orthopaedics | +5.8% | | Sports Medicine & ENT | +12.0% | | Advanced Wound Management | +6.2% | - The H1 trading profit margin of **15.3%** was impacted by expected seasonality, higher input inflation, transactional FX, and increased sales and marketing investments to fuel growth[13](index=13&type=chunk) - The interim dividend was maintained at **14.4¢** per share, consistent with the prior year[13](index=13&type=chunk) [2023 Full Year Outlook](index=4&type=section&id=2023%20Full%20Year%20Outlook) The company has raised its full-year underlying revenue growth guidance to a range of 6.0% to 7.0%, up from the previous 5.0% to 6.0%, while the trading profit margin guidance remains unchanged, expected to be at least 17.5%, with a significant step-up anticipated in the second half, and the forecast tax rate on trading results has been lowered to around 17% Updated 2023 Full Year Guidance | Metric | Previous Guidance | Updated Guidance | | :--- | :--- | :--- | | Underlying Revenue Growth | 5.0% to 6.0% | 6.0% to 7.0% | | Trading Profit Margin | At least 17.5% | At least 17.5% (Unchanged) | | Tax Rate on Trading Results | Around 19% | Around 17% | - A significant improvement in trading profit margin is expected in the second half, driven by seasonality, operating leverage from revenue growth, and productivity benefits, which are anticipated to more than offset headwinds from inflation and a **-120 basis points** transactional foreign exchange impact[71](index=71&type=chunk) [Strategic Highlights](index=6&type=section&id=Strategic%20Highlights) The company is making significant progress on its 12-Point Plan, which is focused on fixing Orthopaedics, improving productivity, and accelerating growth in its other business units, with key achievements including improved product availability in Orthopaedics and an increased cadence of new product launches, while concurrently, CFO Anne-Françoise Nesmes will step down in Q2 2024, with an external search for her successor underway - The 12-Point Plan is showing progress, with significant improvements in product availability and commercial execution in Orthopaedics[17](index=17&type=chunk) - The company has increased its pace of innovation, with **13** new products launched in H1 2023, and is on track to meet its full-year target of **25** launches[17](index=17&type=chunk)[34](index=34&type=chunk) - Chief Financial Officer Anne-Françoise Nesmes will step down in the **second quarter of 2024**, and the Board has initiated an external search for a successor[17](index=17&type=chunk) [Business Performance Review](index=8&type=section&id=Business%20Performance%20Review) [Delivering our transformational Strategy for Growth](index=8&type=section&id=Delivering%20our%20transformational%20Strategy%20for%20Growth) The company's 12-Point Plan, initiated in July 2022, is on track to transform business performance, focusing on fixing Orthopaedics, improving productivity, and accelerating growth in Advanced Wound Management and Sports Medicine & ENT, with overdue orders in Orthopaedics reduced by approximately 50% from their peak, and productivity initiatives expected to yield over $200 million in annual savings by 2025, with inventory levels projected to decrease in the second half of 2023 - The 12-Point Plan focuses on: - Fixing Orthopaedics to regain momentum and win share - Improving productivity to expand trading profit margin - Further accelerating growth in Advanced Wound Management and Sports Medicine & ENT[29](index=29&type=chunk) - Progress in fixing Orthopaedics includes reducing overdue orders by around **50%** from the H1 2022 peak and improving customer order fill rates (LIFR)[27](index=27&type=chunk) - Productivity actions are projected to deliver over **$200 million** in annual savings by 2025, with associated restructuring costs of around **$275 million** over three years[32](index=32&type=chunk) - Inventory levels are expected to start falling in the second half of the year as new products are rolled out and raw materials are consumed[30](index=30&type=chunk) [Increasing our cadence of innovation](index=10&type=section&id=Increasing%20our%20cadence%20of%20innovation) Innovation is a key pillar of the company's growth strategy, with 13 new products launched in H1 2023 out of a targeted 25 for the full year, including enhancements to the CORI Surgical System, such as a Digital Tensioner and a new saw solution, and the introduction of the AETOS Shoulder System to compete in the fast-growing shoulder market and the RENASYS EDGE Negative Pressure Wound Therapy System - The CORI Surgical System was enhanced with the CORI Digital Tensioner for soft tissue balancing and received FDA 510(k) clearance for a saw solution, adding versatility to the robotics platform[35](index=35&type=chunk)[37](index=37&type=chunk) - The AETOS Shoulder System was introduced to compete in the **$1.3 billion** shoulder market, which is growing at approximately **9% CAGR**[38](index=38&type=chunk)[40](index=40&type=chunk) - In Advanced Wound Management, the new RENASYS EDGE Negative Pressure Wound Therapy System was launched, designed for improved efficiency and simplicity[42](index=42&type=chunk) - In Sports Medicine, the UltraTRAC QUAD ACL Reconstruction Technique was introduced, expanding the company's procedural solutions for knee repair[41](index=41&type=chunk) [Second Quarter 2023 Trading Update](index=12&type=section&id=Second%20Quarter%202023%20Trading%20Update) In Q2 2023, Smith+Nephew achieved underlying revenue growth of 7.8% to $1,379 million, driven by strong elective procedure volumes and solid performance across all business units, with Orthopaedics growing 5.8%, Sports Medicine & ENT surging by 12.0%, and Advanced Wound Management increasing by 6.2%, demonstrating robust growth in both Established Markets (+7.1%) and Emerging Markets (+11.0%) Q2 2023 Consolidated Revenue Analysis (in millions of US dollars) | Category | Q2 2023 | Q2 2022 | Reported Growth | Underlying Growth | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$1,379 million** | **$1,293 million** | **+6.6%** | **+7.8%** | | Orthopaedics | $554 million | $530 million | +4.6% | +5.8% | | Sports Medicine & ENT | $422 million | $381 million | +10.4% | +12.0% | | Advanced Wound Management | $403 million | $382 million | +5.5% | +6.2% | [Q2 Performance by Business Unit](index=14&type=section&id=Q2%20Performance%20by%20Business%20Unit) In Q2, Orthopaedics revenue grew 5.8% underlying, with Knee Implants up 7.8% and Hip Implants up 3.4%, while Sports Medicine & ENT was a standout performer with 12.0% growth, driven by a 12.5% increase in Joint Repair and a 38.9% surge in ENT, and Advanced Wound Management grew 6.2%, led by a 21.4% increase in Advanced Wound Devices, particularly the PICO and RENASYS systems - **Orthopaedics:** Grew **5.8%** underlying, with Knee Implants rising **7.8%** and Hip Implants **3.4%**, and Other Reconstruction, including robotics, growing **21.0%**[50](index=50&type=chunk)[51](index=51&type=chunk) - **Sports Medicine & ENT:** Grew **12.0%** underlying, with Sports Medicine Joint Repair up **12.5%**, and ENT surging **38.9%** due to the recovery in tonsil and adenoid procedures[53](index=53&type=chunk)[54](index=54&type=chunk) - **Advanced Wound Management:** Grew **6.2%** underlying, with Advanced Wound Devices leading with **21.4%** growth, driven by strong performance from both PICO and RENASYS negative pressure systems[55](index=55&type=chunk)[56](index=56&type=chunk) [Q2 Performance by Geography](index=12&type=section&id=Q2%20Performance%20by%20Geography) Geographically, Q2 2023 revenue growth was strong across the board, with Established Markets growing 7.1% underlying, including the US up 6.3% and Other Established Markets up 8.5%, while Emerging Markets delivered robust growth of 11.0% underlying, largely due to volume recovery in China following earlier COVID-related restrictions Q2 2023 Underlying Revenue Growth by Geography | Geography | Underlying Growth | | :--- | :--- | | Established Markets | +7.1% | | - US | +6.3% | | - Other Established Markets | +8.5% | | Emerging Markets | +11.0% | [First Half 2023 Consolidated Analysis](index=16&type=section&id=First%20Half%202023%20Consolidated%20Analysis) For the first half of 2023, revenue was $2,734 million, up 7.3% underlying, with trading profit at $417 million, resulting in a trading profit margin of 15.3%, down from 16.9% in H1 2022 due to inflation and strategic investments, while cash generated from operations was $215 million, with trading cash flow at $110 million, impacted by an increase in inventory, and net debt increased to $2,656 million, and the company declared an interim dividend of 14.4 cents per share - H1 trading profit was **$417 million** with a margin of **15.3%**, compared to **$440 million** and **16.9%** in H1 2022, with the decline attributed to inflation, FX headwinds, and increased sales and marketing expenses[61](index=61&type=chunk) - Trading cash flow was **$110 million** (H1 2022: **$154 million**), with a trading profit to cash conversion ratio of **26%** (H1 2022: **35%**), and the reduction was primarily due to increased inventory, which is expected to decrease in H2 2023[63](index=63&type=chunk)[64](index=64&type=chunk) - Net debt (excluding lease liabilities) increased to **$2,656 million** at the end of H1 2023, up from **$2,339 million** at the end of 2022[65](index=65&type=chunk) - Adjusted earnings per share (EPSA) was **34.9¢**, a decrease from **38.1¢** in H1 2022[68](index=68&type=chunk) [Condensed Consolidated Interim Financial Statements](index=24&type=section&id=2023%20HALF%20YEAR%20CONDENSED%20CONSOLIDATED%20INTERIM%20FINANCIAL%20STATEMENTS) [Group Income Statement](index=24&type=section&id=Unaudited%20Group%20Income%20Statement) For the half year ended July 1, 2023, the company reported revenue of $2,734 million, an increase from $2,600 million in the prior-year period, with operating profit growing to $275 million from $242 million, though attributable profit for the period slightly decreased to $172 million compared to $177 million in H1 2022, resulting in a basic EPS of 19.7 cents H1 2023 Income Statement Summary (in millions of US dollars) | Line Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | 2,734 million | 2,600 million | | Gross Profit | 1,898 million | 1,827 million | | Operating Profit | 275 million | 242 million | | Profit before taxation | 211 million | 204 million | | Attributable profit | 172 million | 177 million | | Basic EPS | 19.7¢ | 20.2¢ | [Group Balance Sheet](index=25&type=section&id=Unaudited%20Group%20Balance%20Sheet) As of July 1, 2023, total assets stood at $9,844 million, a slight decrease from $9,966 million at the end of 2022, with total equity at $5,233 million, and a notable change being the increase in inventories to $2,411 million from $2,205 million at year-end 2022, while total liabilities were $4,611 million Balance Sheet Summary (in millions of US dollars) | Category | 1 July 2023 | 31 Dec 2022 | | :--- | :--- | :--- | | **Total Assets** | **9,844 million** | **9,966 million** | | Inventories | 2,411 million | 2,205 million | | Goodwill | 3,049 million | 3,031 million | | **Total Liabilities** | **4,611 million** | **4,707 million** | | Long-term borrowings | 2,633 million | 2,712 million | | **Total Equity** | **5,233 million** | **5,259 million** | [Condensed Group Cash Flow Statement](index=27&type=section&id=Unaudited%20Condensed%20Group%20Cash%20Flow%20Statement) For H1 2023, net cash inflow from operating activities was $113 million, a decrease from $207 million in H1 2022, primarily due to a larger negative movement in working capital, with net cash used in investing activities at $182 million, and net cash used in financing activities at $86 million, resulting in a net decrease in cash and cash equivalents of $155 million for the period H1 2023 Cash Flow Summary (in millions of US dollars) | Category | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Cash generated from operations | 215 million | 227 million | | **Net cash inflow from operating activities** | **113 million** | **207 million** | | Net cash used in investing activities | (182 million) | (268 million) | | Net cash used in financing activities | (86 million) | (704 million) | | **Net decrease in cash and cash equivalents** | **(155 million)** | **(765 million)** | | Cash and cash equivalents at end of period | 183 million | 512 million | [Group Statement of Changes in Equity](index=28&type=section&id=Unaudited%20Group%20Statement%20of%20Changes%20in%20Equity) Total equity decreased from $5,259 million at the beginning of 2023 to $5,233 million as of July 1, 2023, primarily driven by the payment of equity dividends totaling $201 million, which was partially offset by the attributable profit of $172 million for the period - Total equity started at **$5,259 million** on Jan 1, 2023 and ended at **$5,233 million** on July 1, 2023[87](index=87&type=chunk) - Key movements in equity included attributable profit of **+$172 million**, other comprehensive loss of **-$18 million**, and equity dividends paid of **-$201 million**[87](index=87&type=chunk) [Notes to the Financial Statements](index=29&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Statements) [Note 1: Basis of Preparation and Accounting Policies](index=29&type=section&id=1.%20Basis%20of%20preparation%20and%20accounting%20policies) The interim financial statements were prepared in accordance with IAS 34 and on a going concern basis, with directors concluding the Group has sufficient resources to continue operations for at least 12 months despite the challenging economic environment, and the principal risks remain consistent with the 2022 Annual Report, including supply chain, commercial execution, and cybersecurity, while critical estimates relate to inventory valuation, legal provisions, and impairment - The financial statements have been prepared on a going concern basis, with directors concluding the Group has sufficient resources and headroom on its borrowing facilities and financial covenants[91](index=91&type=chunk)[93](index=93&type=chunk) - The provision for excess and obsolete inventory increased from **$504 million** at year-end 2022 to **$576 million** at 1 July 2023, primarily due to higher inventory levels[105](index=105&type=chunk) - The principal risks and uncertainties are consistent with the 2022 Annual Report and include business continuity, commercial execution, cybersecurity, global supply chain, and legal/compliance risks[94](index=94&type=chunk) [Note 2: Business Segment Information](index=33&type=section&id=2.%20Business%20segment%20information) The Group operates and reports across three global business units: Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management, with H1 2023 Orthopaedics generating $1,102 million in revenue and $174 million in trading profit, Sports Medicine & ENT having revenue of $843 million and trading profit of $224 million, and Advanced Wound Management reporting revenue of $789 million and trading profit of $223 million, while total Group trading profit of $417 million was reconciled from a Group operating profit of $275 million H1 2023 Revenue and Trading Profit by Segment (in millions of US dollars) | Segment | Revenue | Trading Profit | | :--- | :--- | :--- | | Orthopaedics | 1,102 million | 174 million | | Sports Medicine & ENT | 843 million | 224 million | | Advanced Wound Management | 789 million | 223 million | | **Segment Total** | **2,734 million** | **621 million** | | Corporate Costs | - | (204 million) | | **Group Trading Profit** | **-** | **417 million** | - Group operating profit of **$275 million** was adjusted for items including restructuring costs (**$46 million**) and amortisation of acquisition intangibles (**$102 million**) to arrive at the Group trading profit of **$417 million**[128](index=128&type=chunk) [Note 3: Taxation](index=41&type=section&id=3.%20Taxation) The reported tax charge for H1 2023 was $39 million, resulting in an effective tax rate of 18.5%, compared to a 13.2% rate in H1 2022, and the Group will be subject to the OECD Pillar Two model rules starting in 2024, which is expected to increase the Group's tax rate - The reported tax charge for H1 2023 was **$39 million**, with an effective tax rate of **18.5%**[136](index=136&type=chunk) - The Group will be subject to the OECD Pillar Two global minimum tax rate of **15%** from **2024**, which is expected to increase the Group's tax rate[137](index=137&type=chunk) [Note 4: Dividends](index=42&type=section&id=4.%20Dividends) The Board approved an interim dividend for 2023 of 14.4 US cents per ordinary share, payable on November 1, 2023, to shareholders on record as of October 6, 2023, following the 2022 final dividend of $201 million paid on May 17, 2023 - The 2023 interim dividend was approved at **14.4 US cents** per share, payable on November 1, 2023[139](index=139&type=chunk) [Note 6: Net Debt](index=43&type=section&id=6.%20Net%20debt) As of July 1, 2023, net debt including lease liabilities was $2,849 million, an increase from $2,535 million at the end of 2022, with net debt excluding lease liabilities standing at $2,656 million, and the Group has private placement debt of $105 million due for repayment in the second half of 2023 and another $100 million due in the first half of 2024 Net Debt Position (in millions of US dollars) | Category | 1 July 2023 | 31 Dec 2022 | | :--- | :--- | :--- | | Net debt (excl. leases) | 2,656 million | 2,339 million | | Net debt (incl. leases) | 2,849 million | 2,535 million | - The Group has upcoming debt repayments of **$105 million** in H2 2023 and **$100 million** in H1 2024 from private placement debt[145](index=145&type=chunk) [Other Disclosures](index=49&type=section&id=Other%20Disclosures) [Directors' Responsibilities and Independent Review Report](index=49&type=section&id=Directors'%20Responsibilities%20and%20Independent%20Review%20Report) The Directors confirmed that the interim financial statements were prepared in accordance with IAS 34 and provide a fair review of the company's performance and position, and the independent auditor, KPMG LLP, concluded their review by stating that nothing has come to their attention to suggest the financial statements are not prepared in all material respects in accordance with IAS 34 and UK regulations - The Directors confirmed the interim financial statements were prepared in accordance with IAS 34[160](index=160&type=chunk) - KPMG LLP, the independent auditor, provided a review conclusion stating no material misstatements were found, but noted a review is substantially less in scope than an audit[162](index=162&type=chunk)[164](index=164&type=chunk) [Reconciliation of Non-IFRS Measures](index=51&type=section&id=Other%20information) This section defines and reconciles non-IFRS financial measures used by management, such as underlying revenue growth, trading profit, and Adjusted EPS (EPSA), where underlying revenue growth adjusts for currency effects and acquisitions/disposals, and trading profit excludes items like acquisition-related costs, restructuring charges, and significant legal expenses to show underlying performance, with H1 2023 reported EPS of 19.7 cents adjusted to an EPSA of 34.9 cents - Underlying revenue growth is a non-IFRS measure that adjusts reported revenue for constant currency exchange effects and the impact of acquisitions and disposals[176](index=176&type=chunk) - Trading profit is a non-IFRS measure that excludes items such as acquisition/disposal costs, restructuring expenses, amortisation of acquisition intangibles, and significant legal costs from operating profit[179](index=179&type=chunk) H1 2023 Reconciliation of Reported EPS to EPSA (in cents) | Description | Per Share Amount (¢) | | :--- | :--- | | **Reported Basic EPS** | **19.7¢** | | Acquisition and disposal related items | 0.1¢ | | Restructuring and rationalisation costs | 4.6¢ | | Amortisation of acquisition intangibles | 9.1¢ | | Legal and other | 1.4¢ | | **Adjusted EPS (EPSA)** | **34.9¢** |

Financial Performance - Group revenue for 2022 was $5,215 million, with reported growth of +0.1% and underlying growth of +4.7%[6]. - Operating profit decreased by 24% to $450 million, with an operating profit margin of 8.6%, down 280 basis points[6][41]. - Trading profit was $901 million, a decline of 4%, with a trading profit margin of 17.3%, down 70 basis points[6][41]. - Earnings per share (EPS) was 25.5¢, a decrease of 57%, while adjusted earnings per share (EPSA) was 81.8¢, an increase of 1%[6]. - Cash generated from operations fell by 45% to $581 million, and R&D investment decreased by 46% to $345 million[6]. - Free cash flow decreased to $56 million from $410 million in the prior year, with a trading profit to cash conversion ratio of 49% compared to 88% in 2021[151]. - The Group's net debt increased from $2,049 million at the beginning of 2022 to $2,535 million at the end of 2022, an increase of $486 million due to dividend payments, acquisitions, and share repurchases[153]. Revenue and Growth Initiatives - The company reported that over 60% of revenue growth in 2022 came from products launched in the last five years[41]. - A 12-point plan was announced to drive higher growth and improve productivity, focusing on strengthening foundations, accelerating growth, and transforming for long-term growth[42]. - The company targets an underlying revenue growth of over 5% in the medium term[89]. - For 2023, the Group expects underlying revenue growth in the range of 5.0% to 6.0%, driven by strong growth in Sports Medicine & ENT and Advanced Wound Management franchises[157]. - The company expects to deliver both faster revenue growth and margin expansion in the coming year as part of its 12-point plan[66]. Dividends and Shareholder Returns - The total dividend per share for 2022 remained unchanged at 37.5¢, with a final dividend of 23.1¢ and an interim dividend of 14.4¢[26]. - The total distribution of dividends per share remained unchanged at 37.5¢, consistent with the previous year[94]. - The Group purchased a total of 10.1 million ordinary shares at a cost of $158 million in 2022[151]. Sustainability and ESG Efforts - The company is committed to achieving net zero carbon emissions by 2045, with a new ESG Operating Committee established in January 2023 to oversee sustainability efforts[31]. - The company aims to achieve a 70% reduction in Scope 1 and Scope 2 greenhouse gas emissions by 2025, with a current reduction of 27% since 2019[119]. Product Development and Market Position - The Advanced Wound Management franchise has consistently outperformed the market since 2021, with significant growth opportunities identified, particularly in Negative Pressure Wound Therapy[47]. - Smith+Nephew launched 12 new products in 2022, which is a key performance indicator for driving future revenue growth[108]. - The company made a significant R&D investment of $345 million in 2022, focusing on new product launches from its organic pipeline and acquisitions[107]. - The company introduced the OR3O◊ Dual Mobility with OXINIUM DH Technology as part of its new product development[198]. - A new high technology orthopaedics manufacturing facility was opened in Malaysia, and plans for an Advanced Wound Management facility in the UK were announced[46]. Market Performance and Challenges - Orthopaedics revenue for 2022 was $2,113 million, a decline of 2.0% from $2,156 million in 2021, with a 390bps headwind from foreign exchange[200]. - The overall performance in 2022 was impacted by the implementation of the hip and knee volume-based procurement program in China[200]. - The company continues to focus on strategic initiatives to enhance market expansion and product offerings[200]. - The Orthopaedics market is valued at approximately $14.7 billion annually, with the Group's proprietary OXINIUM material providing a competitive advantage[194]. - The Trauma & Extremities market is worth over $12.7 billion annually, with the Group positioned to compete effectively in this segment[196].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F INFORMATION FOR SHAREHOLDERS (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ...

Financial Data and Key Metrics Changes - Revenue for the full year was $5.2 billion, reflecting a 4.7% growth on an underlying basis compared to 2021, while reported revenue growth was flat at 0.1% due to foreign exchange headwinds [12][81] - Trading profit was $901 million, resulting in a trading margin of 17.3% [81] - Adjusted earnings per share grew by 1.1% to $0.818 [81] Business Line Data and Key Metrics Changes - Orthopaedics grew by 4.1% underlying, with significant contributions from new product launches [4][5] - Sports Medicine and ENT franchise grew by 9.2%, with Joint Repair growing 11.5% [11] - Advanced Wound Management showed strong growth, with Advanced Wound Devices growing 14.9% [45] Market Data and Key Metrics Changes - The U.S. market grew by 4.8%, established markets grew by 7.3%, and emerging markets grew by 12.1%, largely driven by a return to growth in China [2][3] - The company expects continued above-market growth in Sports Medicine and Advanced Wound Management, with further improvement in Orthopaedics [20] Company Strategy and Development Direction - The company is implementing a 12-point plan aimed at transforming operations and driving higher growth, targeting consistent underlying growth of 5% or higher [24][30] - Focus on innovation and product launches, with 25 expected in 2023, to enhance market position and drive growth [67] - The strategy includes optimizing pricing and cost savings to achieve a trading margin in excess of 20% by 2025 [53][68] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges from inflation and supply chain disruptions but remains optimistic about growth and margin expansion in 2023 [8][52] - The company expects to see benefits from cost actions and operational improvements throughout 2023, with a stronger second half anticipated [95] - Management emphasizes the importance of innovation, with over 60% of revenue growth in 2022 coming from products launched in the last five years [85] Other Important Information - The company faced headwinds from semiconductor and resin shortages, but improvements in supply chain performance are expected [1][16] - The company plans to reduce inventory levels as part of its 12-point plan, with a focus on managing raw material availability [14][49] Q&A Session Summary Question: Can you provide more information on the timing of margin components? - Management expects to see benefits from G&A and sales and marketing cost actions starting in 2023, with manufacturing network optimization having a more back-end loaded impact [94][95] Question: What is the rationale for the 5% plus organic growth ambition? - Management cites strong performance in 2022 and a robust pipeline of products as key drivers for confidence in achieving this growth target [97][99] Question: How do you see the sustainability of the turnaround in Orthopaedics? - Management indicates that a mix of pricing improvements and addressing historical product gaps will be crucial for sustainable growth in Orthopaedics [108][109]

Smith & Nephew plc (NYSE:SNN) Q3 2022 Results Conference Call November 3, 2022 4:30 AM ET Company Participants Deepak Nath - Chief Executive Officer Anne-Francoise Nesmes - Chief Financial Officer Conference Call Participants Hassan Al-Wakeel - Barclays Jack Reynolds - RBC David Adlington - JPMorgan Julien Dormois - BNP Paribas Robert Davies - Morgan Stanley Chris Gretler - Credit Suisse Deepak Nath Good morning. Welcome to the Smith & Nephew Third Quarter Call. I'm Deepak Nath, and with me is our Chief Fin ...

Smith & Nephew plc (NYSE:SNN) Q2 2022 Results Conference Call July 28, 2022 3:30 AM ET Company Participants Deepak Nath - Chief Executive Officer Anne-Francoise Nesmes - Chief Financial Officer Conference Call Participants Patrick Wood - Bank of America Jack Reynolds-Clark - RBC Hassan Al-Wakeel - Barclays Julien Dormois - BNP Paribas Chris Gretler - Credit Suisse David Adlington - JP Morgan Deepak Nath I'll just draw your attention to the safe harbor statement on the slide that's about to pop up in front o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F INFORMATION FOR SHAREHOLDERS (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ◻ Other information XXX or Commission file number 1-14978 Board leaders ...