Smith & Nephew Annual Report 2023

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FY2023 Annual Report · Smith & Nephew

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Life Unlimited

Annual Report 2023

Contents

Our performance

Strategic Report

Our performance

Who we are

Chair’s statement

Chief Executive Officer’s review

Our marketplace

Our business model

Key Performance Indicators

Financial review

Creating value through
innovation

IFC

Taking our innovation to market 34

Building a culture of belonging

Shaping a healthy and
sustainable future

Risk report

Our stakeholders

Engaging with stakeholders

Governance

Governance at a glance

Board leadership and
Company purpose

Nomination & Governance
Committee Report

Compliance & Culture
Committee Report

Audit Committee Report

102

111

114

Directors’ Remuneration Report 121

Accounts

Statement of Directors’
responsibilities

Independent auditor’s
UK report

Group income statement

Group statement of
comprehensive income

Group balance sheet

Group cash flow statement

Group statement of changes
in equity

156

157

172

173

174

175

Notes to the Group accounts

176

Company financial statements 227

Notes to the Company accounts 229

Other information

Group information

Other information

Shareholder information

235

236

248

$5,549m
Group revenue
+7.2%
+6.4%
Underlying1
Reported

37.5¢
Unchanged
Dividend per share

$425m
-5.4%
Operating profit

$970m
+7.6%
Trading profit1

7.7%
-90bps
Operating profit margin

17.5%
+20bps
Trading profit margin1

30.2¢
+1.3%
Earnings per share (EPS)

82.8¢
+18.2%
Adjusted earnings per share1 (EPSA)

$829m
+42.7%
Cash generated from operations

$635m
+43.0%
Trading cash flow1

$339m
-1.8%
R&D investment

5.9%
-70bps
Return on invested capital1 (ROIC)

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

The images used throughout the report represent the ways that Smith+Nephew is
taking the limits off living and helping patients live Life Unlimited. Images used are not
photographs of our patients unless expressly indicated.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Physical health is never just about
our body. It’s our mind, feelings and
ambitions. When something holds
us back, it’s our whole life on hold.
We’re here to change that, to use
technology to take the limits off living,
and help other medical professionals
do the same.
So that patients can stare down
fear, see that anything is possible,
then go on stronger. Inspired by a
simple promise. Two words that
bring together all we do…

Life Unlimited

To learn more about our purpose visit
www.smith-nephew.com
-

Smith+Nephew Annual Report 2023

Who we are

We are a leading
portfolio medical
technology company.
We exist to restore
people’s bodies and
their self-belief.

Key facts 2023

168

year history

100+

countries
served

18,452

employees

14+ million

patients treated
with our products

$339
million

R&D investment

new product
launches

Creating value through innovation
Research & Development
Developing new technology through
our Research & Development (R&D)
programme, and acquiring exciting
technologies where we can add value.
» See pages 26–29

Medical education
The Smith+Nephew Academy network
supports the safe and effective use of
our products and provides opportunities
to learn innovative clinical techniques.
» See pages 30–31

Manufacturing
Building resilient manufacturing
and supply chains to ensure quality
and competitiveness and support
new product development.
» See pages 32–33

Building a culture of belonging
We strive to create a culture of belonging where
employees can bring their full selves and best ideas,
which fosters innovation, delivers business success
and strengthens engagement and personal
fulfilment. Our culture is based on our values
of Care, Courage and Collaboration.
» Care: A culture of empathy and understanding for each other,

our customers and their patients.

» Courage: A culture of continuous learning, innovation

and accountability.

» Collaboration: A culture of teamwork based on mutual trust

and respect.

» See pages 46–49 for more on
how we are building our culture

Shaping a healthy and
sustainable future
Our ESG strategy supports our Strategy for
Growth and strengthens the foundation to
help us serve customers over the long term.
Our ESG strategy focuses on three areas:
People, Planet and Products.
» People: Creating a lasting positive impact

on our communities.

» Planet: Aiming to reduce our impact

on the environment.

» Products: Innovating sustainably.

» See pages 52–66 for information on

our sustainability targets and progress

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Taking our innovation to market
We take our innovation to market through three global business units of Orthopaedics,
Sports Medicine & ENT, and Advanced Wound Management. These business units are responsible
for strategy and global marketing, and contain specialist sales and support teams dedicated to
serving the specific requirements of our healthcare professional customers.

Orthopaedics
Orthopaedics includes an innovative
range of hip and knee implants used
to replace diseased, damaged or
worn joints, robotics-assisted and
digital enabling technologies and
services that empower surgeons,
and Trauma & Extremities products
used to stabilise severe fractures and
correct hard tissue deformities, as well
as a shoulder replacement system.

Sports Medicine & ENT
Our Sports Medicine & Ear, Nose
and Throat (ENT) businesses offer
advanced products and instruments
used to repair or remove soft tissue.
They operate in growing markets
where unmet clinical needs provide
opportunities for procedural and
technological innovation.

Advanced Wound
Management
Our Advanced Wound Management
portfolio provides a comprehensive
set of products and services to meet
broad and complex clinical needs
across hard to heal wounds, delivering
on our mission to shape what is
possible in wound care.

40%

of Group revenue

31%

of Group revenue

29%

of Group revenue

» See pages
34–37

» See pages
38–41

» See page
42–45

Serving our customers through our sales force
We pride ourselves on giving customers a high standard of
service through our specialist sales and clinical support teams.

Representatives in our surgical businesses have a detailed
knowledge of the products and instruments that they sell
and the surgical techniques they may be used for, and provide
technical and logistical support to surgeons and hospitals.

In Advanced Wound Management, sales representatives
develop their knowledge of how clinicians seek to prevent
and treat wounds, as well as support customers through
their understanding of the economic benefits of using
our products within treatment protocols.

Smith+Nephew Annual Report 2023

Chair’s statement
Chair’s statement

Encouraged by the progress
made, excited by our
prospects for the future

“Deepak has set out a
confident outlook as
he leads the business
in the Strategy for
Growth and the second
year of delivery of the
12-Point Plan.”
Rupert Soames
Chair

Dear Fellow Shareholder,

It is a great honour to write to
you for the first time as Chair
of Smith+Nephew, and to share
my reflections on the year just
gone and the journey ahead.

But before I do, I want to pay tribute
to my predecessor Roberto Quarta who
chaired the Company with great care
and diligence for nine, sometimes difficult,
years. Most recently, he as Chair and Marc
Owen as Senior Independent Director, have
supported my induction and transition
to Chair with sensitivity and skill, for which
I am grateful.

Since joining the Board on 26 April
2023, I have been learning about the
business: its products and services; its
people, customers and competitors; its
strengths and weaknesses, as well as
the opportunities and threats it faces.
In all these things I have been supported
by Deepak Nath, our Chief Executive
Officer, who has deep knowledge of,
and experience in, the MedTech sector.
Many of our larger investors have also
been generous with their time, candid
in their analysis, and speak from many
years’ experience of both the sector
and Smith+Nephew.

In addition, I had the opportunity to meet
some of our smaller investors at the Annual
General Meeting in April, which was a
pleasure to attend and a reminder that
ultimately, in all we do, there are savers
and pensioners who rely on us to grow
the value of their investments.

Setting clear priorities
In a world in which stakeholders have
different, and sometimes conflicting,
views on how, and to what end, companies
should be run, Boards have to be resolute
in discharging their responsibilities in the
best interests of the Company as a whole.
This means they have to have priorities,
and to be clear on what their job is.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

I would like to thank Anne-Françoise for
her dedication and support to the business
over the last three years, during which
she has had to support a change of CEO
and the significant impact of Covid on
the business.

The other priority of the Board is to serve
our shareholders and wider stakeholders
by governing the business effectively
and in accordance with regulation and
good practice, but with an emphasis
on substance over form, simplicity
over complexity, and transparency
over opaqueness.

Governance at Smith+Nephew embraces
many different areas. In terms of risk
management, Smith+Nephew shares
a similar palette of risks to other
manufacturers, but the application of
medical devices, products and services in
the treatment of people, the global scale
of our operations, and the highly regulated
environment in which we operate make
monitoring of operating risk a key part of
the Board’s responsibilities.

In matters of corporate regulation and
corporate governance, being dual-
listed brings a degree of complexity.
Smith+Nephew hews to the rules and
regulations of both the London Stock
Exchange, which is our primary listing, and
the New York Stock Exchange. Our NYSE
listing as a foreign private issuer brings
us under the ambit of the Securities and
Exchange Commission, and means that
we have made the significant investment
required to comply with US regulations
including the applicable requirements of
the Sarbanes-Oxley Act.

Like many listed companies,
Smith+Nephew works hard to adapt to
a changing landscape of regulation and
reporting requirements, all of which seem
to have one result in common: significantly
more lengthy Annual Reports. But whilst
companies can adapt to evolving and
greater reporting requirements, be it on
audit or environmental or social issues,
what they cannot manage is operating
within a framework which does not
allow them to recruit and retain the
management they need to grow.

The first priority of the Board is to hire
and retain management who can lead
Smith+Nephew to be the best business
it can be; and then, watching closely,
encourage, support, guide and challenge
them in their work. As a Board, we are very
well aware that Smith+Nephew has not
performed to its full potential in recent
years. The reasons for this, and more
importantly, what management are doing
about it, are set out in the Strategy and
Operating Reviews, and I am pleased to say
that in 2023 there were encouraging signs
of progress.

In Deepak Nath, we have an exceptionally
talented CEO, and the Board is following
closely the implementation of the 12-Point
Plan he and his executive team developed
to enable Smith+Nephew to create
sustainable long-term value. Deepak has
a rare combination of strategic vision and
grasp of detail, and under his leadership
the business has begun to gather forward
momentum, including accelerating
revenue growth.

Joining Deepak from December 2023
is John Rogers, who will succeed Anne-
Françoise Nesmes as Chief Financial
Officer in the first quarter of 2024.
John brings long experience as a former
CFO of two FTSE 100 companies, and has
also managed impressive transformations
of companies’ operations.

37.5¢

Dividend unchanged

Visiting our Advanced Wound
Management R&D and manufacturing
facility in Hull, UK

Smith+Nephew Annual Report 2023

Chair’s statement continued

Smith+Nephew has a proud British heritage
– our Company was founded in Hull in 1856
and we have grown over the last 168 years
to become a truly global organisation with
over 18,000 employees operating in around
100 countries. As a result of that success
and global growth, the UK accounts for
around 3% of our revenues and 7% of
our employees, whilst over 50% of our
revenues arise in the US, and nearly all of
our senior operational managers, including
our CEO, are US citizens, and based in
the US.

Our 2024 Remuneration Policy proposes
a package of long-term incentive plan
adjustments for US-based executives to
be more closely aligned with norms in the
US in terms of structure and quantum,
and a comprehensive discussion of our
proposals is set out on pages 121–135
of our Remuneration Report. The Board
strongly believes that these proposals are
in the best interests of the Company and
that they will help the Board to execute on
its priority to ensure the Company is led by
a first-class management team.

Pay practices differ widely around
the world, and it is axiomatic and
uncontroversial that companies pay
their management teams in line with
the norms of the country where they
live and work. This approach is accepted
without qualm by stakeholders for the
millions of people which businesses such
as Smith+Nephew employ around the
world, with one exception: Executive
Directors who are expected to be paid by
reference to the norms of the country in
which their employer has its primary listing,
irrespective of where they actually live,
work, and pay tax. This is unique to a listed
company environment, and of course does
not apply to privately-owned businesses.

Currently our remuneration policies for
Executive Directors are aligned to the
norms of people living and working in
the UK; given the small proportion of our
revenues that arise in the UK, and the fact
that the centre of gravity of the MedTech
industry is in the US, this is not sustainable
if we are to attract and retain people who
live and work in the US.

It is for this reason that our Chair of
Remuneration, Angie Risley, and I have had
extensive consultations with our largest
investors in recent months and they have
confirmed their broad support for our
proposals to give Smith+Nephew the ability
to attract and retain senior executives in
the United States, if we need to do so.

In other issues pertaining to governance
and people, we are committed to
fostering diversity in its broadest sense
and we continue to ensure that our Board
membership draws from a wide range of
backgrounds and cultures. Our Board is
truly multi-cultural and includes members
who are from, live, or work in the US, UK,
China, India, Germany and Poland.

We continue to review the composition of
the Board on an ongoing basis; we actively
review diversity in addition to skillsets
and capabilities as part of our Board
succession planning process and ensure
that our candidate selection process for
new Board members comprises a balanced
slate of candidates for consideration.
We consider diversity of candidates on
every appointment and selection is based
on ensuring we have the best person for
the role.

When Anne-Françoise steps down from
the Board in 2024 our Board will continue
to have three experienced female Directors
(Angie Risley, Katarzyna Mazur-Hofsaess
and Jo Hallas), acknowledging that our
percentage of female Board members will,
in the short term, reduce from 33.3% to
27.3%. Our Board succession plan will seek
to address this as other NEDs step down
from the Board.

We have announced a number of other
changes to our Board this year. I would
like to thank Rick Medlock and Erik
Engstrom for their highly-effective service.
Erik stepped down after nine years on
31 December 2023 and Rick has confirmed
to the Board that he will not submit himself
for re-election at our AGM in May 2024.
In their place, Jez Maiden and Simon Lowth,
both of whom have extensive executive
and non-executive experience within large
and complex global companies, have joined
the Board. Until recently, Jez was CFO of
Croda International and has held a number
of non-executive roles including as Senior
Independent Director at Travis Perkins plc.
As announced, Jez will assume the role of
Chair of our Audit Committee with effect
from 1 March 2024.

Simon is CFO of BT Group and has
previously served as a non-executive
director of Standard Chartered. I am
delighted that our Board has been able to
attract such strong candidates to continue
to encourage diversity of perspective and
experience on its Board.

Taken in the round, I believe that your
Board has the skills, diversity, strength
and experience to operate effectively in
the interests of all stakeholders. You can
find more information on our Board and
Committees and their work in our
Governance Report starting on page 88 of
this Annual Report.

The Board also places strong emphasis on
being a good corporate citizen, supporting
our communities and reducing our
impact on the planet and its resources.
During the year we reviewed progress
across our ESG strategy, and welcomed
the establishment of a new governance
structure and strengthened leadership in
this area. More information on our progress
against our sustainability targets, including
our roadmap to net zero, can be found on
pages 52–66.

Smith+Nephew Annual Report 2023

2023 performance
2023 saw Smith+Nephew make progress
both in terms of operational performance
and financial results. Revenue grew at
6.4% on a reported basis which equates to
7.2% on an underlying basis.1 Trading profit
margin1 was slightly ahead of the prior year,
but the strong top-line growth meant that
trading profit1 grew 7.6% on a reported
basis. Operating profit was $425 million,
with an operating profit margin of 7.7%.
Cash generation from operations improved
over the prior year, but was below where it
should be going forward.

Having considered the performance in the
round, and the ongoing investments, the
Board is recommending a final dividend of
23.1¢ per share. Together with the interim
dividend of 14.4¢ per share, this will give
a total distribution of 37.5¢ per share,
unchanged from 2022.

Our colleagues
Before looking ahead in the Outlook, I want
to pay tribute on behalf of the Board to our
Smith+Nephew colleagues. Having worked
in several large and global businesses
during some 40 years of executive life, I
think I know what good looks like when
it comes to corporate culture, and I have
been deeply impressed by the resilience,
commitment and skill of my colleagues.
They have had many dragons to wrestle
with in recent years, not the least of
which has been a number of leadership
changes with their attendant uncertainties
and distractions. Throughout they have
remained focused on their purpose of
helping people to take the limits off living
and restore and promote health and
wellbeing. I know the Board respects and is
deeply grateful for their hard work, and is
proud to be part of the same team.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Outlook: building momentum
Deepak has set out a confident outlook as
he leads the business in the Strategy for
Growth and the second year of delivery
of the 12-Point Plan, and the Board is
encouraged by the accountability shown
and the progress the business has made
in 2023, and excited by the prospects
for the future. We look forward to
welcoming shareholders to our Annual
General Meeting in person in May and to
updating you further on the transformation
underway at Smith+Nephew.

Yours sincerely,

Rupert Soames, OBE
Chair

»
»

See page 88 for our
Governance Report
See page 121 for our
Remuneration Policy

1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 244–248.

Smith+Nephew Annual Report 2023

Chief Executive Officer’s review

Strong revenue growth
and improved trading
profit margin

“The progress we are making is
fundamental as we need to
have a strong platform from
which we will be able to build
further shareholder value.”
Deepak Nath, PhD
Chief Executive Officer

Dear Fellow Shareholder,

In 2023 we delivered strong
revenue growth and an improved
trading profit margin1 as the
results of our actions to
transform Smith+Nephew
started to come through. Our
12-Point Plan is on track, with
progress beginning to translate
into financial outcomes, and our
innovation strategy is delivering
a strong pipeline of new products
that we expect to drive
performance in the next few
years and beyond.

2023 performance
Group revenue in 2023 was $5,549 million,
an increase of 7.2% on an underlying
basis1 (6.4% reported). This growth was
ahead of our full-year guidance published
in February 2023 for underlying1 revenue
growth between 5.0% and 6.0%, and
reflects the strength of the portfolio,
with all three business units delivering
underlying1 growth above 5% for the
full year.

Operating profit was $425 million, with
an operating profit margin of 7.7%.
Trading profit1 for 2023 was up 7.6% on a
reported basis to $970 million. The trading
profit margin1 was 17.5%, a 20bps
improvement on the prior year and in line
with our full-year guidance.

1 These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial
measure prepared in accordance with IFRS on
pages 244–248.

Transforming Smith+Nephew
In July 2022, we announced our 12-Point
Plan to fundamentally change the way
Smith+Nephew operates, accelerating
delivery of our Strategy for Growth and
transforming to a consistently higher-growth
company. The 12-Point Plan is focused on:
1. Fixing Orthopaedics, to regain momentum
across hip and knee implants, robotics
and trauma, and win share with our
differentiated technology;
2. Improving productivity, to support trading
profit margin expansion; and
3. Further accelerating growth in our
already well-performing Advanced Wound
Management and Sports Medicine & ENT
business units.
Since inception we have measured our
progress across the 12-Point Plan through
a set of internal KPIs to drive accountability.

The 12-Point Plan is on track and starting
to deliver financial outcomes. Work will
continue in 2024, with further financial
progress expected to follow across
the year and in 2025.

Smith+Nephew Annual Report 2023

Strategy for Growth

Transform
Through innovation
and acquisition

Accelerate
Profitable growth
through prioritisation and
customer focus

Strengthen
The foundation to serve
customers sustainably and simply

Delivered through our 12-Point Plan

Fixing
Orthopaedics

Improving
productivity

Improving productivity,
to support trading profit
margin expansion

Fixing Orthopaedics,
to regain momentum
across hip and knee
implants, robotics and
trauma, and win share
with our differentiated
technology

Accelerating
Sports Med
and AWM

Further accelerating
growth in our well-
performing Advanced
Wound Management
and Sports Medicine
& ENT businesses,
representing
approximately 60%
of Group revenue

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Fixing Orthopaedics
We have made solid progress on fixing
much of Orthopaedics, and laid the
foundations for further improvement.
Overall, 2023 full year business unit growth
was 5.7% underlying1 (4.8% reported),
strongly ahead of last year’s growth, which
was 1.9% underlying1 (-2.0% reported).
Performance has improved in Hip and Knee
Implants outside of the US, and globally
in Other Reconstruction (which includes
robotics) and Trauma & Extremities.
Recovery has been slower to come through
in US Reconstruction, and especially in US
Knee Implants.

Product availability has been central
to these variances in performance.
By year end, across Orthopaedics, on the
percentage of customer order lines filled
(measured by line-item fill rates (LIFR)),
we had closed more than 95% of the gap
between the low point and our target
of being in line with industry standard.
Within this, in US Reconstruction there are
still some areas of inconsistent product
availability, which, together with slower
than anticipated set deployments and
some expected impact from sales force
change, limited our ability to win new
business. Through the 12-Point Plan we
are continuing to address the factors
that have undermined performance in
US Reconstruction.

We are making headway on inventory
through better sales and operations
planning, improving forecasting and
bringing the mix of what we manufacture
in line with demand. By the end of 2023,
inventory levels for all business units were
starting to come down as we expanded
recent product launches, consumed raw
materials and completed and deployed
new instrument sets. We turned a corner in
2023, and brought Days Sales of Inventory
down by 5% for the year, after several
years of increase, and expect to continue
this improvement in 2024 and beyond.

A significant driver of the overall
Orthopaedics improvements has been
the new demand and supply planning
process which has brought a deeper level
of specificity and collaboration between
our operations and commercial teams.
We are also benefiting from our actions to
improve logistics and redeploy implants
and instrument sets from lower to
higher-utilisation customers.

Smith+Nephew Annual Report 2023

Chief Executive Officer’s review continued

We have invested in improving our
commercial execution. In 2023 we
repositioned our offering and undertook
deeper sales training for the Orthopaedics
team, and enhanced our incentive plans
to better align reward with performance,
sales mix, robotic placement and implant
pull-through.

These steps are expected to help us
address the performance in Hip and
Knee Implants in the US, which remains
a priority. At the same time, they will also
ensure we sustain the progress we have
delivered elsewhere.

In Trauma & Extremities, where we
have successfully addressed availability
of product and instrument sets for our
EVOS◊ Plating system, we are focused on
maintaining the improved growth dynamic
delivered in the second half of 2023.

Improving productivity
We have made good progress on our actions
to improve productivity, contributing
around 160bps to our 2023 trading profit
margin1. Actions have included updating
and standardising pricing strategies
across our portfolio and reducing days
sales outstanding. We are also making
procurement savings to help mitigate cost
inflation and drive productivity. During 2023,
we deployed an enhanced supplier selection
process to identify and award business to
suppliers that better align to the global
business unit strategies and long-term
performance metrics, and better aligned
global category strategies to unlock the
Smith+Nephew buying power and leverage,
helping to drive volume to the most
preferred suppliers and reduce cost.

In line with our plan, work on
manufacturing optimisation is at an
earlier stage, with the benefits from
network simplification and cost and asset
efficiencies expected to support our
mid-term margin improvement targets.
The underlying work is progressing, with
KPIs tracking accordingly. For instance,
conversion cost, which is total direct and
indirect cost to convert raw materials into
finished goods as a percentage of sales,
started to come down in the second half.

Better aligned supply and demand process
has enabled us to critically assess our
manufacturing capacity. From a network
perspective we are reducing excess
capacity, having exited one small site in
France and announced the closures of two
more in China and Germany. Over the last
two years we have also reduced hiring and
our reliance on contingent workers.

Accelerating AWM
and Sports Medicine
The important third pillar of the 12-Point
Plan is focused on building on our consistent
above-market performance from our
Advanced Wound Management and
Sports Medicine & ENT business units.
Progress is also coming through across
this workstream.

Our negative pressure wound therapy
business is benefiting from focused
additional resource behind our sales force,
delivering strong growth in 2023 across
both our traditional RENASYS◊ Negative
Pressure Wound Therapy System and our
single-use PICO◊ Negative Pressure Wound
Therapy System.

We are pleased with our progress across
Ambulatory Surgical Centers (ASCs), as we
more than tripled the pace of cross-business
unit deals between our Orthopaedics
and Sports Medicine businesses in 2023.
Under the 12-Point Plan we have developed
a coordinated approach across these
business units overseen by a dedicated
strategic sales team. We are building on the
strong position established by our Sports
Medicine business, which is already the
preferred choice for a large proportion of the
ASC market, and successfully introducing
our Orthopaedics portfolio.

Creating value
through innovation
Innovation through our R&D programme
is central to our higher-growth ambitions.
In 2023, approaching half of our full year
underlying revenue growth came from
products launched in the last five years.
Encouragingly, some of our key growth
platforms like our robotics-enabled CORI◊
Surgical System, our EVOS◊ trauma plating
platform and our REGENETEN◊ Bioinductive
Implant for biological healing are not only
contributing to growth today, but also have
multi-year runways still ahead of them
as we expand applications and launch in
new markets.

In 2023 we delivered a good cadence
of new product launches, completing
20 with development finished on a
further two ahead of launch in 2024.

These included expanding CORI◊, adding
functionality and AI powered planning
tools. We introduced our AETOS◊ Shoulder
System, an important part of our growth
plans for Trauma & Extremities which
will enable Smith+Nephew to compete
effectively in the $1.7 billion shoulder
market, which, at around 9% CAGR, is
one of the fastest growing segments
in Orthopaedics. In Advanced Wound
Management, we are at the early stages
of rolling out the new RENASYS◊ EDGE
NPWT System. RENASYS◊ EDGE brings an
important new option to customers looking
for enhanced intuitiveness, simplicity and
durability, especially important for home-
care settings. We also continued to invest
behind our Sports Medicine portfolio,
for instance launching REGENETEN◊ in
China, India and Japan.

Acquisition of CartiHeal
In recent years we have successfully
augmented our R&D programmes with
acquisitions of exciting technologies.
During the year we announced another
such acquisition, CartiHeal, the developer
of the CARTIHEAL◊ AGILI-C◊ Cartilage
Repair Implant, a novel sports medicine
technology for cartilage regeneration in
the knee.

CARTIHEAL◊ AGILI-C◊ is an off-the-shelf
one-step treatment for osteochondral
(bone and cartilage) lesions with a broader
indication than existing treatments.
It is indicated to treat a wide patient
population, including those with lesions in
knees with mild to moderate osteoarthritis,
a previously unaddressed condition. Our
expertise in regenerative therapy and
leadership in knee repair gives me great
confidence that this will be a significant
value creator for Smith+Nephew over
the mid-term.

You can read more about our R&D
programme and CARTIHEAL◊ AGILI-C◊
on pages 26–29.

1 These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial
measure prepared in accordance with IFRS on
pages 244–248.

Smith+Nephew Annual Report 2023

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We also continued to deliver on our
environmental commitments and
are proud of our many achievements
including our ‘AA’ MSCI ESG Rating and
our recurring inclusion in leading indices,
such as FTSE4Good and the ESG Index
from Institutional Shareholder Services
(ISS). We are on track to achieve a
70% reduction in Scope 1 and Scope 2
greenhouse gas (GHG) emissions by 2025
compared to the 2019 baseline. This year,
we are reporting both our 2022 and 2023
Scope 3 GHG emissions from 13 categories
and are developing our Scope 3 GHG
emissions reduction roadmap. You can
read about these endeavours on pages
52–66 and in our Sustainability Report
on our website.

I would like to use this opportunity to
thank Anne-Françoise for her dedicated
service since she joined in 2020 and for
her commitment to ensuring a smooth
transition to our new Chief Financial Officer,
John Rogers. I have been immensely
impressed with how John has approached
his on-boarding and I look forward to
working together as we continue to turn
around performance and deliver the
12-Point Plan.

Some years in a company are all about
new strategies, transformational moves
or dealing with fundamental external
challenges; some years are more
foundational, but nevertheless important.
For Smith+Nephew, 2023 was about
improving how we operate, focusing on
the day-to-day processes and ultimately
bringing our innovation to customers
in a more reliable and simpler way. The
progress we are making is fundamental
as we need to have a strong platform
from which we will be able to build
further shareholder value and address
our longer-term ambitions.

Yours sincerely,

Deepak Nath, PhD
Chief Executive Officer

Executing our 12-Point Plan

c. 65%

Overall progress against milestones

The 12-Point Plan is on track and starting
to deliver financial outcomes.

Work will continue in 2024, with further
financial progress expected to follow across
the year and through 2025.

Multiple KPIs are used to measure delivery
against the two-year 12-Point Plan.

Fixing
Orthopaedics

Improving
productivity

Accelerating
Sports Med
and AWM

1 point

Rewire
Orthopaedics
commercial delivery

75%

3 point

Win market
share with
our technology

75%

2 point

Improve value
and cash
processes

1 point

Optimise
procurement

75%

1 point

Scale Negative
Pressure Wound
Therapy

1 point

75%

50%

Drive cross-selling
in ASCs

50%

1 point

2 point

Streamline our
recon portfolio

50%

Manufacturing
optimisation

50%

A strong sense of belonging
The 12-Point Plan has also been a
vehicle for cultural change. The discipline
we’ve driven through execution of the
plan is fostering new behaviours and
creating a sustainable culture marked by
customer-centricity, agility and speed,
execution rigour and consistently high-
performing teams.

As importantly, we’ve made progress in
creating a workplace where each of us
feels a sense of belonging. We put in place
a global steering group to guide our global
wellbeing strategy across physical, mental
and financial wellness and conducted
numerous internal inclusion events – many
championed by our Employee Inclusion
Groups. As teams and individuals, we
donated our time and talents to our
local communities, participating in many
charitable events and using more than
13,000 hours of our volunteer time off
in meaningful ways that advanced Life
Unlimited around the world.

Smith+Nephew Annual Report 2023

1212

Smith+Nephew Annual Report 2023
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Letting brothers
enjoy their
vacation together

Life Unlimited

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

Our marketplace

Leading positions in
attractive markets

Smith+Nephew competes in global markets
worth around $45 billion per annum.

POLAR3◊ Total
Hip Solution

Long-term growth drivers
Influencing the development
of innovative treatments
and the evolution of
healthcare delivery.

Emerging markets
Increasing healthcare
demand creates opportunities
and challenges for
healthcare providers.

Decentralised care
Promoting accessible
care outside traditional
hospital settings.

The medical technology industry is
underpinned by compelling long-term
growth drivers that make it an
attractive market.

Demographic trends, such as an
ageing population and greater levels of
physical activity later in life, continue to
fuel demand for healthcare services. As
the global population grows older, there
is a natural increase in the prevalence of
chronic diseases and age-related conditions,
necessitating ongoing medical care.
Other lifestyle-related health conditions,
such as increasing prevalence of diabetes
and obesity, create further demand.

Advancements in medical technology
are catalysts for long-term growth in
healthcare. Breakthroughs in fields like
artificial intelligence and biotechnology are
leading to more effective and personalised
healthcare solutions. This innovation
enhances patient outcomes and creates
new business opportunities supporting
further growth.

In emerging markets, the long-term growth
drivers have been compounded by economic
development including the emergence of an
increasingly prosperous middle class driving
demand for better healthcare services and
products. As living standards improve, people
seek access to higher-quality healthcare,
including advanced medical treatments
and medical devices.

Additionally, emerging markets may have
less mature healthcare infrastructure with
a pressing need for investment in healthcare
technology, which benefits companies
offering innovative medical solutions.
Emerging markets can be more receptive
to novel healthcare solutions which fosters
an environment where innovative and
cost-effective approaches can gain
rapid acceptance.

While the medical technology market has
matured in recent years, changing customer
and market dynamics have created new
high-growth opportunities.

In many countries care is becoming more
decentralised, with more procedures moving
to outpatient settings such as Ambulatory
Surgery Centers (ASCs) in the US. This has long
been a feature of the sports medicine market,
but a growing percentage of orthopaedic joint
replacement cases are now completed in
such settings, bringing cost and time savings
for healthcare providers.

The trend towards outpatient care was
accelerated by Covid as providers sought
to keep patients out of hospitals and also
tackle procedure backlogs.

Smith+Nephew Annual Report 2023

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Cost of healthcare
A pressing concern globally,
necessitating comprehensive
strategies for sustainable
healthcare delivery.

High regulation
Stringent regulations in the
medical devices industry play a
crucial role in ensuring product
safety, efficacy, and quality.

Seasonality
Seasonality necessitates
agile strategies to navigate
fluctuations in demand
throughout the year.

Governments are focused on reducing the
cost of healthcare and are sensitive to price.
Medical technology companies respond
through new innovation and also provide
evidence supporting both the clinical and
economic benefits of products.

Globally, countries are focused on increasing
domestic production across critical sectors,
including advanced technologies and life
sciences. These actions include localisation
policies and export restrictions that disrupt
global supply chains. Simultaneously, many
countries in key emerging markets are targeting
measures to lower healthcare costs and broaden
accessibility, implementing price-control policies
with respect to government procurement
of healthcare products. In China, we saw this
reflected in the introduction of volume-based
procurement in some of our segments.

» See pages 67–79 for more details

on risks in the Risk report

The medical device sector is one of the world’s
most heavily regulated industries providing
a high cost of entry for market participants.
National regulatory authorities govern the design,
development, approval, manufacture, labelling,
marketing and sale of healthcare products.
They also review data supporting the products
to ensure they are safe and perform as intended.
The majority of countries require products to
be authorised or registered prior to entering the
market, and such authorisation or registration
needs to be subsequently maintained.

Regulations and industry codes govern the
way the industry interacts with healthcare
professionals and government officials globally,
including the AdvaMed Code of Ethics and
the MedTech Europe Code of Ethical Business
Practice. Companies establish global compliance
programmes to help employees and third-party
partners comply with laws, regulations and
industry codes, and often have their own codes
of conduct to guide behaviour.

» See page 49 for more information
on our approach to compliance

There tends to be a higher volume of
orthopaedic and sports medicine procedures
during the winter months in our markets,
when accidents and sports-related injuries
are more frequent. Elective procedures tend
to slow down in the summer months due
to holidays. Advanced Wound Management
is less impacted by seasonality due to
the nature of procedures and products.
At Smith+Nephew, the majority of our
business is in the northern hemisphere,
including approximately 50% in the US
and 20% in Europe.

In the US, out-of-pocket costs for health
insurance plans are tied to medical expenses
in a calendar year. As a result, households
that have reached their annual deductible
amount and/or annual out-of-pocket cap
before the year’s end will find it to be
cost-effective to schedule necessary
procedures later in that year rather than
delaying into the next year.

Smith+Nephew Annual Report 2023

Our business model

How we create value
Through our business model we strive to transform outcomes
for the patients we serve, for the clinicians and the healthcare
systems we support, for the Company and our shareholders.
Our Strategy for Growth focuses our efforts, and our purpose
of Life Unlimited inspires us every single day.

What we need to create value

People
A purpose-driven
culture based
on authentic values
committed to doing
business in the
right way.

R&D
Innovation is at
the heart of our
business and we
prioritise investment
in new products,
technologies and
services.

Financial
strength
A robust balance
sheet and Capital
Allocation Framework
balancing investments
in the future and
returns today.

Sustainability
Addressing the
long-term needs of our
customers, employees,
communities and
stakeholders, reducing
our impact on the
environment.

Global
operations
Resilient
manufacturing
and supply chains
to ensure quality
and competitiveness.

Delivering value for stakeholders

Investors

$5,549m

+6.4% reported
+7.2% underlying¹
Group revenue

Customers

Community

$425m
-5.4%
-

$970m

+7.6%

97,405

Training sessions

$5.1m

Product donations

Operating profit

Trading profit¹

$327m

Dividend distribution
unchanged

7.7%
-90bps
Operating
profit margin

17.5%
+20bps
Trading profit
margin¹

New product
launches

Employees

4.20
+0.08
Gallup
engagement
score

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

Smith+Nephew Annual Report 2023

How we create value

Innovative
technology

We offer a broad portfolio
of differentiated products and
services that meet often-complex
clinical needs, including digital
and robotic technologies,
driving procedural innovation.

Go to market

Three global business units
set product strategy and
deliver global marketing to
drive demand in our markets,
supported by clinical evidence
to demonstrate efficacy.

Product
development
and acquisition

R&D model that provides for
customer and business unit
focused innovation and acquiring
technologies needing further
development and
commercialisation.

Customer centricity

Customer
feedback

Building close relationships with
customers to ensure a deep
understanding of unmet clinical
needs and changing financial
and sustainability priorities
within healthcare systems.

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Expertise
and support

Our sales force supports
customers and works with
healthcare systems to address
complex business and
reimbursement requirements.

Medical
education

Through the Smith+Nephew
Academy, a network of
centres and online resources,
we provide medical education
programmes to support the
safe and effective use of our
products, skills development
and procedural innovation.

Smith+Nephew Annual Report 2023

Key Performance Indicators

Measuring our progress
Smith+Nephew uses a number of financial and non-financial Key
Performance Indicators (KPIs) to track and evaluate performance and
delivery against its Strategy for Growth and other business objectives.
Those KPIs in the public domain are consolidated below. A number
of other KPIs are commercially sensitive and are not published but
are used internally to drive performance and growth.

Financial Key Performance Indicators

12-Point Plan

Revenue growth
Revenue growth allows management and
investors to measure our relative performance.
We are targeting underlying revenue growth
of 5%+ in the medium term.

Profit margin
Profit margin allows management and investors
to determine our relative performance. We are
targeting at least a 20% trading profit margin
in 2025.

Transforming Smith+Nephew
In July 2022 we announced our
12-Point Plan to fundamentally change
the way we operate and transform
business performance.

6.4%

Reported
revenue growth
Reported revenue
growth includes a foreign
exchange headwind
of -80bps.

7.2%

Underlying1
revenue growth
Underlying revenue growth
was ahead of our guidance
for 2023, with all three
global business units
delivering above 5%
underlying growth.

14.3

0.1

6.4

7.7%

Operating profit margin

11.4

8.6

7.7

Reported profit margin
reflects restructuring costs,
as well as acquisition and
disposal-related items,
amortisation and legal
and other items.

2021

2022

2023

10.3

4.7

7.2

17.5%

Trading profit margin1

2021

2022

2023

18.0 17.3 17.5

Trading profit margin was
in line with our guidance for
2023, representing a 20bps
improvement year-on-year.

2021

2022

2023

2021

2022

2023

Return on invested capital1
ROIC allows management and investors to
measure the return generated on capital invested,
providing a metric for long-term value creation.

Dividend per share
Dividend payments allow investors to
receive a cash return on their investment
in Smith+Nephew.

5.9%

ROIC
ROIC decreased from
6.6% in 2022 to 5.9%
in 2023 due to lower
operating profit.

8.1

6.6

5.9

37.5¢

Dividend per share
Total distribution
of 37.5¢ per share,
unchanged from 2022.

37.5 37.5 37.5

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

2021

2022

2023

2021

2022

2023

The 12-Point Plan is focused on:
– Fixing Orthopaedics, to regain

momentum across hip and knee implants,
robotics and trauma, and win share
with our differentiated technology;
– Improving productivity, to support

trading profit margin expansion; and

– Further accelerating growth in our
already well-performing Advanced
Wound Management and Sports
Medicine & ENT business units.

Overall progress
against milestones

Multiple KPIs are used to measure delivery
against the two-year 12-Point Plan. Taken as
a whole, the plan is showing good progress.
Further details regarding our progress across
the underpinning initiatives can be found
in the Chief Executive Officer’s review
on pages 8–11.

c. 65%

Overall progress
against milestones

» See pages 8–11
for more on our
12-Point Plan

Smith+Nephew Annual Report 2023

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Long-term sustainability targets
These KPIs allow management and
investors to measure progress against
our long-term sustainability targets
in the three areas of People, Planet
and Products.

Achieve net zero
Achieve net zero Scope 1 and Scope 2
greenhouse gases (GHGs) by 2040 and
Scope 3 GHGs by 2045, beginning by
achieving a 70% reduction in Scope 1
and Scope 2 GHGs by 2025.

Scope 1 and 2 (market-based)^

40%

Reduction since 2019.

Less waste to landfill

30%

Reduction from our strategic
manufacturing sites versus 2019.

Product donations

$5.1m

Each year we donate products to
support under-served communities.

^ Please refer to page 65 for our emissions reporting

methodology, materiality and scope.

Non-financial Key Performance Indicators

Investment in innovation
This KPI allows management and investors
to understand how much is being invested
in new innovative products designed to
drive future revenue growth and profit.

Employee engagement score
The Gallup Global Engagement Survey allows
management and investors to assess how
engaged our employees are, which is a key
driver of business performance.

$339m

R&D investment
In 2023, more than three
percentage points of our
full year underlying
revenue growth came
from products launched
in the last five years.

356 345 339

2021

2022

2023

See pages
26–29

New product launches
This KPI helps us track the number of
on-time new product launches to drive
future revenue growth. We completed
20 launches in 2023 with a further two
products ready for launch in 2024.

See page 29

Acquisition announced
This KPI tracks acquisitions that enhance our
portfolio and pipeline, including technology
that can change the standard of care and
assets in high-growth categories.

In November 2023 we entered into a definitive
agreement to acquire CartiHeal, the developer
of CARTIHEAL◊ AGILI-C◊, a novel sports
medicine technology for cartilage regeneration
in the knee.

In January 2024 we announced the completion
of this transaction. Smith+Nephew paid
$180 million on completion, with up to a
further $150 million contingent on future
financial performance.

4.20

Engagement
Our Grand Mean score of 4.20 positioned us
in the 83rd percentile in Gallup’s database
(2022: 73rd percentile). 89% of employees
participated.

See pages 48–49 for more about
our employee engagement score

Quality and safety
This KPI allows management and investors
to verify that we are operating a safe working
environment at high standards.

0.23 0.22 0.15

Headline safety rate

We adopt the industry-
standard OSHA system
to record incidents of
occupational injury and ill
health. Performance is
expressed as the number
of incidents per 200,000
hours worked.

2021

2022

2023

Medical education
This KPI helps investors understand how
we support the safe and effective use
of our products through the provision
of medical education.

97,405

Practitioner training sessions
»

See pages 30–31 for more about
medical education

See page 52–66 for details
of how we are meeting our
sustainability commitments

Smith+Nephew Annual Report 2023

Financial review

Strengthening
our foundations

“The 12-Point Plan is
beginning to translate
into improved financial
outcomes in 2023.”
Anne-Françoise Nesmes
Chief Financial Officer

Dear Fellow Shareholder,

The 12-Point Plan was
announced in July 2022 to
improve execution and drive our
Strategy for Growth. The plan
focuses on fixing Orthopaedics,
improving productivity and
accelerating growth in Advanced
Wound Management and Sports
Medicine through 12 initiatives,
which have underpinned our
improved performance in 2023.

2020

2023 performance
Group revenue in 2023 was $5,549 million,
an increase of 6.4% on a reported basis
and 7.2% on an underlying basis1 excluding
a 80bps headwind from foreign exchange,
slightly above the revenue guidance
range of 5.0% to 6.0% for 2023 we
announced previously.

The operating profit was $425 million
(2022: $450 million) with an operating
profit margin of 7.7% (2022: 8.6%) after
acquisition and disposal related items,
restructuring and rationalisation costs,
amortisation and impairment of acquisition
intangibles and legal and other items.
Trading profit1 for 2023 was $970 million
(2022: $901 million) with a trading profit
margin1 of 17.5% (2022: 17.3%) reflecting
improvement in revenue and productivity
savings across the Group.

The reported profit before tax was
$290 million (2022: $235 million) after
adjusting for an impairment related to
Engage Surgical. We acquired this business
in 2022 for a maximum consideration

of $135 million payable in cash.
The provisional fair value consideration
was $131 million and included $32 million
of contingent consideration. During 2023,
management evaluated the commercial
viability of Engage products and concluded
that they should be discontinued. A total
of $109 million of Engage’s assets and
liabilities were written off as a result of
this action.

Efficiency and 12-Point
Plan progress
We have made significant progress in our
12-Point Plan to fundamentally change the
way we operate and transform business
performance, especially our activities to
fix Orthopaedics and improve productivity.
This was reflected in our improved
financial performance for 2023. In 2023,
restructuring costs totalled $220 million,
including costs related to the efficiency
and productivity under the 12-Point Plan.
Overall, incremental benefits of around
$68 million was recognised during the year.

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

Group performance

Revenue
Operating profit
Trading profit1
Profit before tax
Attributable profit
EPS
EPSA1

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OTHER INFORMATION

2023
$ million
5,549
425
970
290
263
30.2¢
82.8¢

2022
$ million
5,215
450
901
235
223
25.5¢
81.8¢

Change
$ million
334
(25)
69
55
40
4.7¢
1.0¢

Non-IFRS measures
The underlying increase in revenue by market reconciles to reported growth, the most
directly comparable financial measure calculated in accordance with International
Financial Reporting Standards (IFRS), as follows:

US
Other Established Markets2

Total Established Markets
Emerging Markets

Total

2023
$ million
2,979
1,611

4,590
959

5,549

2022
$ million
2,764
1,504

4,268
947

5,215

Reconciling items

Reported
growth
%
7.8
7.1

Underlying
growth
%
7.8
7.3

Acquisitions/
Disposals
%
–
–

Currency
impact
%
–
(0.2)

7.5
1.3

6.4

7.6
5.1

7.2

–
–

–

(0.1)
(3.8)

(0.8)

Trading profit1 reconciles to operating profit, the most directly comparable financial
measure calculated in accordance with IFRS, as follows:

Operating profit
Acquisition and disposal related items
Restructuring and rationalisation costs
Amortisation and impairment
of acquisition intangibles
Legal and other

Trading profit1

2023
$ million
425
60
220

207
58

970

2023
%
7.7
1.1
4.0

3.7
1.0

17.5

2022
$ million
450
4
167

205
75

901

2022
%
8.6
0.1
3.2

4.0
1.4

17.3

We expect around $275 million of
restructuring costs related to the
12-Point Plan over three years.

During 2023, we have been able to
reduce our total production volumes,
while continuing to improve product
availability and instrument set delivery,
ultimately enabling reductions in inventory
and manufacturing capacity. We have
also made progress in our productivity
workstreams, with our Orthopaedics
network optimisation programme,
by closing two of our smaller facilities,
to consolidate production into our
larger sites, and reducing the size of our
contingent workforce. This translates
into a better underlying revenue growth
and better trading margin compared to
the prior year. These actions are covered
in more detail in the CEO’s review in
this report.

EPS
Basic earnings per share (‘EPS’) was up 18%
to 30.2¢ and adjusted earnings per share1
(‘EPSA’) was up 1.3% to 82.8¢1, reflecting
the improved trading performance.

Capital allocation framework
The appropriate use of capital on
behalf of shareholders is important to
Smith+Nephew. This approach is set out
in our 2021 Capital Allocation Framework,
which we used to prioritise the use of cash.

We always look for great investment
opportunities to add to our portfolio
while providing differentiation for our
customers such as the acquisition of
CartiHeal (2009) Ltd (CartiHeal), the
developer of CARTIHEAL◊ AGILI-C◊ that
is a novel sports medicine technology for
cartilage regeneration in the knee, which
was announced on 22 November 2023.
Upon completion on 9 January 2024,
the Group paid $180 million in cash with
up to a further $150 million contingent
on future financial performance.

We continue to make further investment in
innovative medical education through the
opening of a new Smith+Nephew Academy
in Munich, which will serve as a central
European hub for medical education and
for training surgeons from across the EMEA
region. See page 31 for more details.

Smith+Nephew Annual Report 2023
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2121

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

2 Other Established Markets are Europe, Canada, Japan, Australia and New Zealand.

Financial review continued

Dividends
The 2022 final dividend of 23.1¢ per ordinary
share, totalling $201 million, was paid on
17 May 2023. The 2023 interim dividend
of 14.4¢ per ordinary share, totalling
$126 million, was paid on 1 November 2023.

Taxation
The Group is subject to various taxes in
the many countries in which the Group
operates. The Group makes a significant
economic contribution to the countries
where it operates through taxation,
either borne or collected on behalf of
and paid to the relevant tax authorities,
and through employment of personnel.
We regard taxation as a critical element of
our commitment to grow in a sustainable,
responsible and socially inclusive way.

We aim to submit accurate tax returns to the
relevant tax authorities on a timely basis, and
seek to pay the right amount of tax on the
profits we make in accordance with the tax
laws in all the territories in which we operate.
In addition to corporate income taxes our
group pays and collects other taxes including
payroll (employee) taxes, sales (indirect)
taxes and customs duties.

During 2023, we made global tax payments
of $833 million (2022: $818 million). This
comprises $305 million of taxes borne by
Smith+Nephew (corporate income taxes,
employer social security contributions and
customs duties) and $528 million of taxes
collected from employees and customers on
behalf of governments (employee income
taxes and social security contributions
and net indirect tax payable).

Balance sheet data
Overall goodwill and intangible assets
decreased by $165 million mainly due
to the Engage write-off.

Goodwill decreased by $39 million as a
result of Engage impairment of $84 million,
which was partially offset by foreign
exchange movements of $45 million.

Intangible assets decreased by $126 million
because of amortisation and impairment
of $258 million being partially offset by
additions (net of disposals) of $103 million
and a transfer of $23 million from property
plant and equipment and foreign currency
movements of $6 million.

Other non-current assets increased
by $12 million due to a slight increase of
$15 million in property, plant and equipment
2222

and $97 million increase in deferred tax
assets, partially offset by $30 million
decrease in investment in associates due
to the Group’s share of Bioventus’ loss and
$72 million decrease in retirement benefit
assets mainly due to the UK buy-in.

Current assets increased by $174 million
mainly due to a $190 million increase
in inventories driven by strategic raw
material buys to support the Group’s
strategies, inflation raising the average
value of inventory and increased inventory
to support growth including new product
launches, safety stock, or in markets where
we expect growth acceleration. Whilst we
acknowledge there is more work to do, this
represents an improvement compared to
2022’s $361 million inventory increase,
thanks to improved demand forecasting,
supply planning and efficiencies as result
of the 12-Point Plan. Additionally, the
$36 million increase in trade and other
receivables in 2023 is also an improvement
compared to 2022’s $80 million increase.
This improvement is a direct result of Order
to Cash initiatives to improve collection as
part of the 12-Point Plan.

Non-current liabilities decreased by
$493 million primarily due to a $405 million
reclassification of borrowings to current
liabilities to reflect repayments due in 2024
and remeasurement of Engage’s contingent
consideration as a result of the voluntary
product discontinuation.

Current liabilities increased by $556 million
primarily related to the reclassification
from long-term debt to short-term debt

and drawdown of our Revolving Credit
Facility (“RCF”) in 2023.

Cash flow data
Cash generated from operations of
$829 million is after paying out $16 million
of acquisition and disposal related
items, $124 million of restructuring and
rationalisation expenses and $145 million
for legal and other items.

Trading cash flow increased by
$191 million driven by better working
capital movements compared to 2022.

Free cash flow increased to $129 million
from $56 million in the prior year because
of the increase in trading cash flow.

Liquidity and capital resources
At 31 December 2023, the Group had access
to $300 million (2022: $344 million) in cash
net of bank overdrafts. The Group’s debt
facilities comprise of a USD $1,000 million
corporate bond, EUR corporate bond
€500 million, a $1,000 million revolving credit
facility and $1,030 million private placement
debt. The Group had committed available
facilities of $3.6 billion at 31 December
2023 of which $2.9 billion was drawn.

The Group’s net debt, excluding lease
liabilities, increased from $2,339 million at
the beginning of 2023 to $2,577 million
at the end of 2023, representing an overall
increase of $238 million as a result of
dividend payments and metal-on-metal
settlements of $87 million.

Goodwill and intangible assets
Other non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total liabilities
Total liabilities and equity
Net debt2 including lease liabilities

Cash generated from operations
Trading cash flow1
Free cash flow1

2023
$ million
4,102
1,855
4,030
9,987
5,217
2,499
2,271
4,770
9,987
2,776

2023
$ million
829
635
129

2022
$ million
4,267
1,843
3,856
9,966
5,259
2,992
1,715
4,707
9,966
2,535

2022
$ million
581
444
56

Change
$ million
(165)
12
174
21
(42)
(493)
556
63
21
241

Change
$ million
248
191
73

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

2 Net debt is reconciled in Note 15 to the Group accounts.

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

acquisition of CartiHeal. We expect to
more than offset these headwinds through
positive operating leverage from revenue
growth and productivity improvements
and cost saving initiatives from the
12-Point Plan.

In line with prior years, we expect to see a
step up in margin in the second half of the
year versus the first half of the year driven
by typical seasonality.

The tax rate on trading results for 2024 is
forecast to be in the range of 19% to 20%,
subject to any material changes to tax law
or other one-off items.

Our midterm targets are unchanged. The
Group is focused on delivering underlying
revenue growth of consistently 5%+ and
expanding our trading profit margin.

We continue to target at least 20% trading
profit margin in 2025. While headwinds
such as persistent inflation, foreign
exchange movements and China VBP in
Sports Medicine Joint Repair make that a
demanding target, we do expect to see an
increasing impact from the 12-Point Plan,
including the benefits of our manufacturing
optimisation programme, which are
expected to flow through strongly in 2025.

2024 is a year of change for many of us,
including me personally as I will leave
Smith+Nephew by the end of the first
quarter of 2024, after an extended
transition period with John Rogers, our
incoming CFO. I am very proud of what
we have achieved so far, and I am confident
that John and my Executive Committee
colleagues will lead Smith+Nephew on
to a successful 2024.

Anne-Françoise Nesmes
Chief Financial Officer

The Group refinanced its $1 billion RCF
in the fourth quarter of 2023. This extends
the facility maturity to 2028, with options
to extend the maturity to 2030.

Return on invested capital
Return On Invested Capital (ROIC)1,3 is a
measure of the return generated on capital
invested by the Group. It encourages
compounding reinvestment within the
business and discipline around acquisitions.
ROIC decreased from 6.6% in 2022 to
5.9% in 2023 due to lower operating profit
and higher average net operating assets
mainly due to an increase in short-term
borrowings as a result of our capital
outflow in inventory.

Going concern
The Directors have considered various
scenarios in assessing the future
financial performance and cash flows.
Throughout these scenarios, which
include a severe but plausible outcome,
the Group continues to have headroom
on its borrowing facilities and financial
covenants. The Directors have a reasonable
expectation that the Company and
the Group are well placed to manage
their business risks and to continue in
operational existence for the period to
29 March 2025. Accordingly, the Directors
continue to adopt the going concern
basis in preparing the consolidated
financial statements.

Outlook
For 2024, we are targeting another year of
strong revenue growth and a meaningful
improvement in trading profit margin.

For revenue, we expect to deliver
underlying revenue growth in the range
of 5.0% to 6.0%. Within this, we expect
continued strong growth from our Sports
Medicine & ENT and Advanced Wound
Management business units, and further
improvement in Orthopaedics as we
continue to execute on the 12-Point
Plan. On a reported basis the guidance
equates to a range of around 4.6% to 5.6%
based on exchange rates prevailing on
21 February 2024.

In terms of phasing, we expect the first
quarter revenue growth rate to reflect the
tough US comparator from the good start
to 2023, as well as a slower quarter from
Advanced Wound Bioactives following the
strong fourth quarter and one less trading
day year-on-year. We expect the business
to return to higher growth across the
remainder of the year.

We expect to deliver a trading profit
margin of at least 18.0%. Within this,
headwinds are expected to include
continuing inflation, a -70bps impact from
China Volume Based Procurement (‘VBP’)
within Sports Medicine Joint Repair, and
around -30bps from transactional foreign
exchange, plus a small impact from the

Available debt facilities by maturity date ($m)

405

140

1,060

652

1,095

155

1,000

300

700
700

552

RCF Drawn

EUR Bond

USD Bond

RCF Undrawn

Private placements

155

2030

2031

2032

140

100

2027

60
2028
Maturity by date

2029

300

405

2024

2025

2026

1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 244–248.

2 Net debt is reconciled in Note 15 to the Group accounts.
3 ROIC is defined as: Operating profit (before amortisation and impairment of acquisition intangibles)

less adjusted taxes/(Operating net operating assets + Closing net operating assets)/2.

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

2323

Getting
grandparents
back to playing
with their
grandchildren

Life Unlimited

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Smith+Nephew Annual Report 2023

Creating
value through
innovation

Research & Development
A long history of
transformative
innovation

Smith+Nephew’s innovation
pipeline is a material
contributor to our revenue
growth, with approaching 50%
of our 2023 underlying revenue
growth coming from recent
product launches. We expect
this trend to continue as
we drive innovation across
our business.

$339m

Invested in R&D in 2023

New products
launched in 2023

Smith+Nephew has a long and proud
history of transformative innovation,
dating back to our founding in 1856.

In the recent past we shaped clinical
practice and helped to deliver our purpose
of Life Unlimited to millions of patients.
In Orthopaedics, products such as our
kinematic knee, JOURNEY◊ II, have brought
more natural motion to joint replacement.
In Sports Medicine our products have been
instrumental in enabling arthroscopic
repair where previously open surgery
was the standard of care. And in wound
care, Smith+Nephew’s PICO◊ single-use
Negative Pressure Wound Management
System has revolutionised the availability
of this important treatment option.

“
Over decades, we have
repeatedly brought
technologies to market
that have disrupted
established approaches
and changed the standard
of care.”

Vasant Padmanabhan
President of Research &
Development and ENT

» For a full list of references
see pages 262–264

JOURNEY◊ II:
JOURNEY II TKA has been
demonstrated to restore anatomical
shape, position and motion.
This anatomical restoration can
provide superior clinical outcomes
and higher patient satisfaction.** 3–7

*1,2

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
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ACCOUNTS
OTHER INFORMATION

Designing a world-class
user experience
Users perform better when they believe they
are working with best-in-class equipment.
In the context of product design, devices
are typically considered best-in-class when
they are recognised as being developed
by an industry-leading brand and exhibit a
compelling and purposeful user experience.

Within R&D our Human Factors team
strives to bring a unique user experience
to product development, encompassing a
common high-quality look, feel and sound
across the entire portfolio of instruments
and digital systems. Their philosophy is
that each product should be considered
a Smith+Nephew brand ambassador,
expressing excellence and encouraging
ease-of-use and familiarity.

CORI◊ Digital Tensioner
The CORI◊ Digital Tensioner was designed
to address different demographics, making
this product ergonomically suitable for
female and male surgeons. This approach
to innovation is helping remove barriers and
limitations traditionally associated with
orthopaedic surgical equipment.

Addressing unmet
clinical needs
Today, there are still significant unmet clinical
needs. These needs can be for the patient,
in terms of satisfaction, clinical outcomes
and reduction in complications, or for the
healthcare system with costs of existing
treatments or of unaddressed problems.

For instance, in knee replacement, 80%
of recipients state that their new knee
feels ‘artificial’,8 while in Sports Medicine,
the re-tear rates associated with repair
of large full thickness rotator cuff tears
exceeds 50%.9 In ENT, almost one in 16
children undergoing total tonsillectomies
have post-procedure haemorrhages,10 and
in wound care the treatment for surgical
site infections costs the US healthcare
system more than $3 billion per year.11

These challenges, and many others like
them, inspire us to invest in developing the
next generation of products and services
that will continue to advance clinical
practice and improve outcomes for
patients and payers.

We are helping to shape an innovation
environment that is driven by four
key trends.

Smith+Nephew Annual Report 2023

– Robotics and digital systems enable a

degree of accuracy and personalisation
of procedures that has not been possible
in the past.

– Biologics technology is developing

rapidly and enables different types of
treatments – including fully restoring
tissue and function.

– Procedural innovation is focused on

less invasive and tissue sparing methods
that can improve recovery times.
– Healthcare costs require greater focus
on delivering compelling value and
health economic benefits.

Smith+Nephew’s R&D team is focused
on growth segments where we can deploy
our expertise in such fast developing areas
of innovation, and deliver novel solutions
that address unmet clinical needs.

Inspiration for new products comes from
observing our customers, working with
healthcare professionals on design and
development, acquiring technologies needing
further development and commercialisation,
and our co-development partners.

New products are developed using a
rigorous phase-gate process starting with
business case review and ending with
launch readiness. We also strive to embed
sustainability principles into our design
and packaging.

Creating value through innovation continued
Research & Development continued

New products in 2023

Innovation is central to our
higher-growth ambitions

In 2023 we launched 20 new products,
with development complete on a further
two ahead of their launch in 2024.

Investing in robotics and AI
Our CORI◊ Surgical System is the only
robotics-assisted system indicated for
partial, total and revision knees.

During 2023 we continued to add
features and functionality. The CORI◊
Digital Tensioner is a proprietary
device for soft tissue balancing in knee
replacement, and the only tensioner for
robotics-assisted surgery. This helps
make planning more objective and
eliminates inconsistencies in surgery
from current manual or mechanical tools.

Personalized Planning powered by AI
and the RI.INSIGHTS◊ Data Visualization
Platform on CORI◊ transform data into
contextual intelligence by enabling
surgeons to better understand how
pre-operative surgical plans and
intra-operative decision making link
to post-operative outcomes.

A new saw solution added versatility,
appealing to a broader range of surgeons.
CORI◊ is the only solution to offer
robotics-assisted burring and saw bone-
cutting options. This development was
accelerated as part of our 12-Point Plan.

CORI Surgical System

New shoulder system
In 2023 we launched our AETOS◊ Shoulder
System. We acquired this technology in
early 2021 and it is an important part of
our growth plans for Trauma & Extremities.
AETOS◊ is designed with both patient and
surgeon benefits in mind. For example, the
MetaStem aligns with the market trend
towards minimally invasive short stem
devices. Short stems are easier to implant,
have improved bone preservation, and are
a better fit to anatomy. AETOS◊ will enable
Smith+Nephew to compete effectively in
the $1.7 billion12 shoulder repair market,
which, at around 9% compound annual
growth rate, is one of the fastest growing
segments in Orthopaedics.

AETOS◊ Shoulder System

Smith+Nephew Annual Report 2023

Accessing external
innovation through M&A
Smith+Nephew has a strong track
record of using bolt-on acquisitions to
enhance our portfolio and R&D pipeline.
This includes technology that can change
the standard of care and assets in higher-
growth categories. We look to acquire
assets where we can use our commercial
expertise and channels to drive growth,
and also use our R&D expertise to develop
new iterations or indications to expand
the addressable market.

One example is the acquisition of
Rotation Medical in 2017, which included
REGENETEN◊, a novel tissue regeneration
technology for rotator cuff repair.
To support this acquisition we built a
specialist Sports Medicine sales force
which has delivered strong growth in the
US and Europe, and we have started to roll
out into new markets such as Japan, India
and China in 2023.

The acquisition of BlueBelt Technologies
brought a first-generation robotics system
and considerable R&D expertise which
we have leveraged to create a second-
generation system CORI◊ which we
continued to expand with new indications
and enhancements. Through the
acquisition of an Extremity Orthopaedics
business we added a next generation
shoulder replacement platform AETOS◊ to
our pipeline, completing the development
ahead of its launch in 2023.

In November 2023 we announced a
definitive agreement to acquire CartiHeal,
the developer of the CARTIHEAL◊ AGILI-C◊
Cartilage Repair Implant, a novel sports
medicine technology for cartilage
regeneration in the knee. CARTIHEAL◊
AGILI-C◊ is an off-the-shelf one-step
treatment for osteochondral (bone and
cartilage) lesions with a broader indication
than existing treatments. It is indicated to
treat a wide patient population, including
those with lesions in knees with mild
to moderate osteoarthritis, a previously
unaddressed condition, as well as the
approximately 700,000 patients1 that
receive cartilage repair annually in the
US. The acquisition was completed in
January 2024.

» For a full list of references
see pages 262–264

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Novel cartilage regeneration –
challenging standard of care
The CARTIHEAL◊ AGILI-C◊ Cartilage Repair
Implant is a porous, biocompatible and
resorbable scaffold which promotes natural
regeneration of the articular cartilage and
restoration of its underlying subchondral bone.

The US Food and Drug Administration (FDA)
granted CARTIHEAL◊ AGILI-C◊ Breakthrough
Device designation status in 2020 and
Premarket Approval (PMA) in March 2022.
PMA approval was granted based on the
results of a two-year randomised controlled
trial (N=251) that confirmed the superiority
of CARTIHEAL◊ AGILI-C◊ over the current
standard of care – microfracture and
debridement for the treatment of knee joint
surface lesions, chondral and osteochondral
defects. Study inclusion criteria included
patients with mild and moderate osteoarthritis.

At four-year follow-up the trial continues
to show significant improvement of patient
reported outcome scores, low surgical
reintervention, and that the difference in
improvement using CARTIHEAL◊ AGILI-C◊
compared to the standard of care is
statistically significant – offering potential for
a new standard of care in cartilage repair.

“
We have shown with REGENETEN◊
that we have the market development
and commercialisation expertise to take
novel technologies and successfully
establish a new standard of care.
AGILI-C◊ is the perfect addition to
our portfolio and we look forward to
leveraging our expertise to transform
cartilage repair outcomes for patients.”

Scott Schaffner
President Sports Medicine

RENASYS◊
EDGE

Creating a winning edge
The new RENASYS◊ EDGE Negative
Pressure Wound Therapy System is
designed to reduce inefficiency and
complexity and features an improved
user interface for enhanced intuitiveness
and simplicity and a durable pump built
to offer virtually maintenance-free use.

Smith+Nephew Annual Report 2023

Creating value through innovation continued

Medical education
Providing opportunities
to learn innovative clinical
and surgical techniques

4,241

Education courses run by
Smith+Nephew in 2023

97,405

Healthcare professional
training sessions in 2023

Smith+Nephew is committed to
educating and training healthcare
professionals on the safe and effective
use of our products. Every year we
provide tens of thousands of surgeons
and nurses with opportunities to
evaluate the latest clinical evidence
and learn innovative surgical techniques
and the effective use of our products
through our medical education
programmes.

Central to Smith+Nephew’s commitment
to being a global leader in medical
education and improving patient outcomes
is providing a comprehensive accessible
learning environment tailored to the
needs of the healthcare professional.

Through the Smith+Nephew Academy
we are actively transforming the way
we educate our customers around the
world by surrounding them with cutting-
edge technology, clinical content and
scientific data.

The multiple elements of the
Smith+Nephew Academy offer a blended
learning environment inclusive of state-
of-the-art digital interactive learning,
symposia, procedure-based education
through hands-on experiences inclusive
of Virtual Reality (VR) simulations,
customised curriculum and programming
specifically designed to meet the needs
of the accomplished physician, resident,
fellow and allied health professionals.

Smith+Nephew Academy augments
in-person training opportunities with a
comprehensive online presence through
Smith+Nephew Academy Online.

We have three in-person Academies
in the US in Memphis (Tennessee),
Andover (Massachusetts) and Pittsburgh
(Pennsylvania), as well as Academy
London, Academy Singapore and, new
in 2023, Academy Munich. In addition,
we have smaller training facilities in
the US in Phoenix (Arizona) and Austin
(Texas).

“
Our investment in S+N
Academy Munich is part of a
global commitment to drive
innovation and learning in
medical technology, creating
an environment where the
best healthcare providers can
learn, collaborate and innovate
in order to meet the needs of
their patients.”

Cynthia Walker
Senior Vice President
Medical Education

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Academy Munich
A new centre for surgical
innovation and training
In October 2023, we opened S+N Academy
Munich, a central European hub for
surgeons from across Europe, the Middle
East and Africa.

Surgeons and other healthcare specialists
will learn the latest surgical techniques
using the most advanced technology
available, and practise surgical techniques
using both hands-on and fully immersive
digital interactive experiences.

S+N Academy Munich is expected to
train more than 5,000 global healthcare
providers each year.

Additionally, S+N Academy Munich will
also serve as a hub to connect healthcare
professionals with our global marketing
and Research & Development teams to
test and validate new technologies.

RCSEng accreditation
Royal College of Surgeons of England
(RCSEng) Centre Accreditation has been
awarded to Smith+Nephew and is the
highest level of accreditation. It is seen as a
kite-mark of excellence and demonstrates
external validation of the Medical
Education training that we provide.

S+N Academy Online
S+N Academy Online is the global medical
education platform used by healthcare
professionals and caregivers to access the
latest peer-to-peer scientific, education-
based best practice; intended to deliver
thought leadership and content across
orthopaedic reconstruction, sports
medicine, ENT, trauma and extremities,
and wound management.

Our S+N Academy Online platform
supports personalised learning journeys
and educational pathways, with evolving
libraries, educational resources and
on-demand educational activities (such
as webinars, products and recorded
courses) as well as e-learning modules
(including faculty-led techniques, surgical
videos, expert lectures, panel discussions,
clinical data, evidence literature and
course information) and access to
online training such as live webinars and
virtual classrooms. S+N Academy Online
resources are available to all registered
healthcare professionals.

670

Modules available
on S+N Academy Online

10,504

Healthcare professionals used
S+N Academy Online in 2023

S+N Academy Online

Smith+Nephew Annual Report 2023

Creating value through innovation continued

Manufacturing
Manufacturing and
distributing innovative,
quality products globally

Global manufacturing sites

“
By delivering on the
manufacturing and
procurement initiatives
within the 12-Point Plan
we expect to support
commercial growth and
drive better efficiency on
both fixed and variable costs.”

Paul Connolly
President Global Operations

and redesigned SIOP process in 2023.
This has led to improved service, both
on new sets and on replenishment.

We have been working to optimise our
manufacturing network for a number of
years. Recent landmarks in this journey
have included opening a new high-
technology Orthopaedics manufacturing
facility in Malaysia in 2022, and we are
currently building a new Advanced
Wound Management facility in the UK.
We are also reviewing lean methodologies
across our operations to simplify processes,
drive greater standardisation, and
reduce scrap.

With renewed focus under the
12-Point Plan we have identified
further opportunities in our network for
simplification to bring cost and asset
efficiencies. Important steps in 2023
included announcing the closure of two
smaller facilities in China and Germany
to consolidate production into our larger
sites. We also reduced the size of our
contingent workforce.

Smith+Nephew takes great pride
in our manufacturing expertise and
commitment to distributing innovative,
quality products globally. Our Global
Operations team supports the delivery
of the Group’s strategy by ensuring that
we respond efficiently to demand, new
product development and changing
regulatory requirements.

Supporting the 12-Point Plan
Global Operations is integral to the delivery
of our 12-Point Plan, specifically our
activities to fix Orthopaedics and improve
productivity. These activities require close
collaboration with our commercial teams,
and have been supported by a refreshed
leadership team across Orthopaedics
and Global Operations with area-specific
experience and track record.

During 2023 we have been able to reduce
our total production, while continuing to
improve product availability. This in turn will
ultimately enable reductions in inventory
and manufacturing capacity.

A significant challenge has been a
misalignment between Commercial and
Operations. Our previous Sales, Inventory
and Operations Planning, or SIOP process,
was leading to over-ordering by our
commercial organisations and the creation of
excess capacity. We rolled out an improved

Smith+Nephew Annual Report 2023

The 12-Point Plan includes focus on
improving productivity to support trading
profit margin expansion. Areas of opportunity
include driving lean methodologies across
our manufacturing operations, further
network optimisation and direct and indirect
procurement savings.

Improving procurement
We are also targeting procurement
savings to help mitigate cost inflation and
drive productivity. We see opportunities
where spend is fragmented between
large numbers of suppliers, or where
providers in high-cost countries are
disproportionately used.

During 2023 we deployed an enhanced
supplier selection process to identify and
award business to suppliers that better
align to the global business unit strategies
and long-term performance metrics, and
better aligned global category strategies
to unlock the Smith+Nephew buying power
and leverage, helping to drive volume to the
most preferred suppliers and reduce cost.

We procure raw materials, components,
finished products and packaging materials
from suppliers globally. These include
metal forgings and castings, optical
and electronic sub-components, active
ingredients and semi-finished goods, as
well as packaging materials.

During 2023 we improved supplier
resilience, reducing back orders due to raw
materials or components shortages to the
lowest levels in more than two years.

All our suppliers are subject to our
Third-Party Guide to Working with
Smith+Nephew, meaning they agree to
conduct business on our behalf in an ethical
manner that is compliant with all applicable
laws, regulations and industry codes of
conduct, and to manage their suppliers
in accordance with the same standards.

We outsource certain parts of our
manufacturing processes where
necessary to obtain specialised expertise
or to lower cost without undue risk
to our intellectual property or quality.
We monitor suppliers through on-site
assessments and performance audits
to ensure the required levels of quality,
service and delivery as well as compliance
with our Third-Party Guide to Working
with Smith+Nephew.

Our manufacturing network
We operate manufacturing facilities
in countries across the globe, and have
central distribution facilities in the
US, Europe and Asia. Products for our
Orthopaedics business unit are primarily
manufactured at facilities in Memphis (US),
Penang (Malaysia), Aarau (Switzerland)
and Warwick (UK), as well as Tuttlingen
(Germany) and Beijing (China), two facilities
we are closing as described above.
Sports Medicine products are primarily
manufactured in the Alajuela (Costa Rica),
Mansfield (US) and Oklahoma City (US)
facilities. Our major manufacturing sites for
Advanced Wound Management products
are Hull (UK), Fort Worth (US), Columbia,
Maryland (US) and Suzhou (China).

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Quality & Regulatory Affairs
Our Quality & Regulatory Affairs
function supports full product life cycle
management of Smith+Nephew’s global
product portfolio from design and
development through manufacturing
and post-market surveillance.

These teams establish appropriate
processes and procedures to facilitate
compliance with complex global
regulations and laws that govern
the design, development, approval,
manufacture, labelling, marketing and
sale of healthcare products.

The Quality & Regulatory Affairs teams
directly support expansion of our global
portfolio through the registration of new
products and existing products in new
markets, as well as ensuring compliance
with regulatory reporting standards.

The European Union Medical Device
Regulation (EU MDR) is a significant
regulatory change whereby medical
devices carrying a CE mark, confirming
conformity with relevant requirements,
now face greater scrutiny than ever
before to ensure they are effective and
safe. We have made good progress with
our respective submissions, with all files
submitted to the Notified Bodies and 90%
percent of respective product lines have
received MDR certification. The Regulation
allows devices certified under previous
legislation (Medical Device Directive or
MDD) to continue to be placed on the
market in Europe until 31 December
2027 or 31 December 2028, dependent
on risk classification.

We closely monitor other Regulatory
landscape changes. This includes changes
in UK Medical Device Legislation and UKCA
marking. These changes allow CE marked
devices to be placed on the market in Great
Britain until June 2030. Additionally, we are
closely monitoring international regulatory
trends that include an increased focus on
cybersecurity in medical technology.

Taking our
innovation
to market

Orthopaedics
A leading portfolio of hip and
knee implants, robotics and
digital enabling technologies
driving procedural innovation
with Precision in Motion,
and a strengthened Trauma
& Extremities portfolio.

We serve our markets through
three global business units
of Orthopaedics, Sports
Medicine & ENT, and Advanced
Wound Management. These
business units are responsible
for strategy and global
marketing, and contain
specialist sales and support
teams dedicated to serving
the specific requirements
of healthcare systems.

Highlights

Orthopaedics revenue

$2,214m

2022: $2,113m

Reported
4.8%

Underlyinga
5.7%

Orthopaedics trading profit

$398m

2022: $383m

2023
Reported
growth
4.7%
2.5%

2023
Revenue
Knee Implants $940m
Hip Implants
$599m
Other
Reconstruction $111m 27.8%
Trauma &
Extremities

$564m

3.7%

2023
Underlying
growtha
5.5%
3.8%

28.0%

4.4%

a These non-IFRS financial measures are explained
and reconciled to the most directly comparable
financial measure prepared in accordance with
IFRS on pages 244–248.

“
We strengthened
performance across
most segments in
2023, and we are
clear on where we still
need to improve with
the necessary actions
underway.”

Brad Cannon
President Orthopaedics
& Americas

Smith+Nephew’s Orthopaedics vision is
to improve mobility and outcomes, with
unique and differentiated technologies
that allow patients to live a Life
Unlimited. Our innovative implants
seek to mimic natural movement, are
manufactured using materials with
a track record of longevity and
performance, and are accompanied
by our enabling robotic technologies.
We are well positioned as the supplier
of choice for surgeons across the globe.

Smith+Nephew’s Orthopaedics business
unit includes an innovative range of hip and
knee implants used to replace diseased,
damaged or worn joints, robotics-assisted
enabling technologies that improve
accuracy and facilitate precision during the
surgical procedure, and trauma products
used to stabilise fractures and correct
bone deformities.

In Orthopaedic Joint Reconstruction,
we have a broad, clinically proven and
differentiated portfolio that allows us to
compete effectively across a market worth
around $15.9 billion annually. This portfolio
includes our proprietary OXINIUM◊ material
which offers a clear advantage over
competitors. In addition, our CORI◊ Surgical
System is strongly positioned to take
advantage of the trends towards robotic-
assisted surgery and outpatient joint
replacement seen across the segment.

The Trauma & Extremities market is worth
over $13.6 billion annually, and we are well
positioned to compete effectively in this
segment. The simplicity and efficiency of
our complete EVOS◊ Plating System gives
us an advantage in the largest segment
in Trauma, and our TRIGEN◊ INTERTAN◊
Intertrochanteric Nail is backed by the
clinical and economic data to position it as
the standard of care for hip fracture,1,2 the
second-largest segment. In Extremities,
we launched our next generation shoulder
implant, the AETOS◊ Shoulder System.

2023 performance
Orthopaedics revenue increased 4.8%
on a reported basis in 2023, including a
90bps headwind from foreign exchange.
Underlying revenue growtha was 5.7%.

Within this, all segments positively
contributed to growth. In Knee Implants
and Hip Implants our performance outside
the US benefited from improved product
supply and execution. Further work is
required to address these challenges

Smith+Nephew Annual Report 2023

Global market share
In our Orthopaedics business unit we are
one of four leading players, competing
against US-based companies Stryker,
Zimmer Biomet and DePuy Synthes.

Global market size 2023b

Hip and Knee Implants

$15.9bn +8%

2022: $14.8bn +4.5%

A Smith+Nephew

10%

B Zimmer Biomet

C Stryker

D DePuy Synthesc

E Others

31%

24%

19%

16%

Trauma & Extremities

$13.6bn +7%

2022: $12.7bn +3%

A Smith+Nephew

B DePuy Synthesc

25%

C Stryker

23%

D Zimmer Biomet

E Others

11%

37%

b Data used in 2022 and 2023 estimates generated by
Smith+Nephew is based on publicly available sources
and internal analysis and represents an indication
of market shares and sizes.

c A division of Johnson & Johnson.

in the US. Other Reconstruction grew
strongly as we expanded our CORI◊
Surgical System, and Trauma & Extremities
performed well in the US where we
focused on improving availability of our
EVOS◊ Plating System.

Trading profita grew 3.9%, although the
trading profit margina of 18.0% remains
below that of our other business units.

Fixing Orthopaedics
A major area of focus for our 12-Point
Plan is to fix Orthopaedics, to regain
momentum across hip and knee implants,
robotics and trauma, and win share with
our differentiated technology. In 2023 we
made good progress improving product
availability, logistics and utilisation
of implants and instrument sets. We
also improved commercial execution,
repositioning our offering, streamlining the
organisation, simplifying our commercial
process and investing in deeper sales
training. We also enhanced our incentive
plan to better reward performance, sales
mix, robotic placement and implant pull-
through. Our actions and progress under
the 12-Point Plan are discussed further
on pages 8–11.

Strategy
Our Orthopaedics business unit has
an innovative portfolio that allows us to
compete in joint reconstruction, robotics-
enabled procedures, and Trauma &
Extremities markets. We are building on
our strong foundation in order to sustain
profitable growth. Our areas of focus
include advancing innovative surgical
solutions and optimising the use of
working capital.

Our initiatives are designed to drive growth
across the Orthopaedic business unit.
In joint reconstruction and robotics, we
aim to accelerate growth by focusing on
robotically enabled knee procedures and
navigated hip arthroplasty with the CORI◊
Surgical System. Additionally, we will
continue to leverage the unique material
properties in OXINIUM◊ across the knee
and hip platform. For Trauma & Extremities,
Smith+Nephew expects to globally
scale the EVOS◊ Plating System portfolio
to compete more broadly in trauma
centres. In addition, the 2023 launch
of our AETOS◊ Total Shoulder System is
expanding our footprint in the shoulder
replacement market.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Reconstruction & Robotics
Knee Implants
In Knee Implants, Smith+Nephew’s
specialised systems include leading
products for total primary replacement
and revision, as well as partial and
patellofemoral joint resurfacing procedures,
offering surgeons and patients the benefits
of many proprietary technologies.

These include a unique kinematic knee,
the JOURNEY◊ II Total Knee Arthroplasty
system, which features OXINIUM◊
Technology and has been shown to
replicate normal knee shape, position
and motion.*3,4 Our LEGION◊ CONCELOC◊
Cementless Total Knee System (TKS)
uses innovative 3D printed cementless
technology to achieve biological fixation,
bringing efficiency and versatility to
the OR.5

The JOURNEY II ROX◊ Total Knee Solution,
is a reverse-hybrid procedural solution
which aims to provide surgeons with the
normal kinematics*3,4,7–9 of JOURNEY II TKA,
the cementless technology of CONCELOC◊
Advanced Porous Titanium and the wear
resistance10,11 of OXINIUM◊ Technology.

Hip Implants
The Hip Implants portfolio is headlined by
the POLAR3◊ Total Hip Solution which has
among the lowest revision rates in total
hip arthroplasty.*12–16 Our OR3O◊ Dual
Mobility System is the first system to use
the latest OXINIUM◊ DH advanced bearing
technology. Dual mobility hip implants
are used in primary as well as revision
procedures. In addition, we offer a full
breadth of stems to address surgical needs,
including the ANTHOLOGY◊ Hip System.
For revisions, the REDAPT◊ Revision Hip
System features CONCELOC◊ Technology.

Bringing innovation to India
In 2023 we launched our OR3O Dual Mobility
System in India for use in primary and revision
hip arthroplasty.

» For a full list of references
see pages 262–264

Taking our innovation to market continued
Orthopaedics continued

Other Reconstruction
Our Other Reconstruction business
includes the CORI◊ Surgical System, one
of the most advanced and efficient***17
solutions. CORI◊ is a smaller,****18
portable solution capable of performing
robotic-assisted knee and computer-
guided hip surgery on a single platform.
In robotic-assisted knee procedures,
CORI◊ utilises handheld precision milling
which allows surgeons to execute TKA
and UKA procedures with reproducible
accuracy.*****19–23 Unlike other systems,
the proprietary smart mapping feature
creates a 3-D image of the patient’s
anatomy in surgery, eliminating time,
costs, and radiation exposure23
associated with preoperative CT scans.

In 2024, we will introduce the
CORIOGRAPH◊ pre-op planning and
modelling service that delivers a unique
surgical planning solution desired by
surgeons. The addition of pre-op planning
will make the CORI◊ System the most
versatile and flexible robotic-assisted
system on the market. The proprietary
software allows the CORI ◊ System to utilise
our proven image-free surface mapping
and image-based planning solutions for
the right indications.

RI.HIP◊ NAVIGATION further expands
indications on the CORI◊ System, bringing
a computer-guided total hip application to
a platform previously dedicated to robotic-
assisted knee procedures. When combined
with Smith+Nephew hip implants, like the

POLAR3◊ Total Hip Solution and OR3O◊
Dual Mobility System, and complementary
tools to assess spinopelvic mobility
(RI.HIP MODELER). RI.HIP◊ on CORI◊
delivers a comprehensive solution for
navigated total hip arthroplasty. RI.HIP◊
NAVIGATION and RI.HIP◊ MODELER are
designed to help maximise accuracy
and reproducibility by delivering patient-
specific component alignment.

With the addition of a first-in-market
indication in the US for robotic-assisted
revision knee using the LEGION◊ Revision
Knee System, the CORI◊ System is currently
the only solution indicated for robotic-
enabled knee procedures across the full
continuum of care – partial, total, and
revision knee arthroplasty. Furthermore,
indications for LEGION◊ CONCELOC◊
Cementless Total Knee System and RI.HIP◊
NAVIGATION are part of CORI◊.

Further strengthening our portfolio, we
introduced the first of its kind handheld
digital tensioning device for robotically-
enabled total knee arthroplasty in 2023.
The CORI◊ Digital Tensioner is a purpose-
built device that lets surgeons measure
the ligament tension in a knee prior to
cutting bone.24,25 By enabling a surgeon
to quantify joint laxity in the native knee
and achieve an optimal ligament tensioning
force, the CORI◊ Digital Tensioner helps
to reduce variability when balancing the
knee in surgery.24–27

In 2023, we expanded the CORI◊ Surgical
System’s capability in knee replacement with
Personalized Planning powered by AI, guided by
RI.INSIGHTS◊ data. This new addition enables
surgeons to set the initial implant placement
within the total knee arthroplasty procedure
based on AI-guided reference values and the
surgeon’s planning preferences for specific
implants and patient-specific deformities.

GENESIS◊ II Knee

Our award-winning,^ advanced implant
material for hip and knee arthroplasty
OXINIUM◊ Technology is a strong, resilient
and advanced implant material that is only
found in Smith+Nephew’s portfolio of joint
replacement systems.
OXINIUM◊ Technology has established itself
as the best performing bearing with the lowest
risk of revision in total hip arthroplasty (THA)
at 9–18 years,13–16,33 alongside strong clinical
performance in knees.33 It has been used
clinically for over 20 years as part of over
two million procedures.

Helping personalise robotics-enabled surgery with AI
In 2023 we introduced two key products
that close the feedback loop for our robotics
and digital surgery portfolio – Personalized
Planning powered by AI and RI.INSIGHTS◊
Data Visualization Platform. These solutions
transform data into contextual intelligence
by enabling surgeons to see how pre-operative
surgical plans and intra-operative decision-
making link to post-operative outcomes.

case performance and benchmark that
data against an anonymised global database.
The platform was designed to give surgeons
a simple and effective way to link patient
reported outcome measures (PROMs) to
pre-operative planning and intra-operative
decisions in robotically enabled
knee replacements.

Personalized Planning powered by AI, guided
by RI.INSIGHTS◊ data enables the surgeon to
set the initial implant placement within the
total knee arthroplasty procedure based on
AI-guided reference values and the surgeon’s
planning preferences for specific implants
and patient-specific deformities.
Through the RI.INSIGHTS◊ Data Visualization
Platform, surgeons can reference individual

Surgeon-specific dashboards provide the
ability to analyse procedure data, such as
case times, resections and alignment, and
ligament tensioning data from the CORI◊
Digital Tensioner. RI.INSIGHTS◊ delivers an
elegant solution to visualise data, connect
PROMs, address known challenges with
information access and utilisation, and
transform surgical insights into
actionable information.

RI.INSIGHTS◊ Data
Visualization Platform

Smith+Nephew Annual Report 2023

Precision in motion

This is our commitment. This is Precision in Motion

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Driving procedural innovation with Precision in Motion
Joint arthroplasty is dynamic, and future
progress will be defined by the constant
evolution of technology and its ability to
accommodate unique patient circumstances,
all while refining accuracy and reproducibility.

– Advance efficiency: Aiming to make the

complex as simple as possible by pioneering
solutions to help restore joint anatomy
and improve knee balance, especially
in challenging cases like revision knee
arthroplasty. The CORI System is the first
robotic-assisted technology indicated
for revision knee procedures. It has
demonstrated operating room efficiency,
such as a mean 56% reduction in trays28†
thereby reducing sterilisation and OR time
cost with an estimated savings of $1,500/
case in a single centre.29††

Covering a broad range of indications and
approaches – from primary and revision
implant solutions to cutting-edge digital
surgery and advanced bearing science –
Precision in Motion embodies the ability
of technology to:
– Personalise surgery: Leveraging handheld
robotic assistance, computer guided surgery
and digital tensioning to help position
implants based on individual patient
anatomy, CORI Digital Tensioner is the first
digital tensioning device with a robotic
system that quantifies joint laxity prior to
any bone resection and reduces variability
of tensioning by 64%.24–27

Trauma & Extremities
Smith+Nephew’s portfolio includes
differentiated technology across the
major categories of Plates and Screws,
Intramedullary Nails, Hip Fracture,
Limb Restoration, Extremities, and
Shoulder Replacement.

Leading products include the EVOS◊ Plating
System which includes a wide range of
clinical indications from mini and small
to large fragment and periprosthetic.
Designed to offer surgeons an all-inclusive,
expansive plating portfolio, EVOS◊ provides
the simplicity of logically organised
instrumentation with advanced implant
solutions that meets the demands and
expectations of trauma surgeons.

The portfolio also includes the TRIGEN◊
INTERTAN◊ Hip Fracture System, which is
backed by many years of strong clinical
evidence.2 For Extremities, SMART TSF◊
expands the capabilities of the TAYLOR
SPATIAL FRAME◊ External Fixator.

Smith+Nephew Annual Report 2023

– Optimise performance: Combining

innovations to facilitate surgeon preferences
and help solve the challenges they face;
such as CoCr-free modular dual mobility hip
and truly unique bearing material science.

In 2023, we launched the AETOS◊ Shoulder
System, indicated for both anatomic
and reverse total shoulder arthroplasty.
It is designed to restore patients’
range of motion34–37 and help minimise
arthritic shoulder pain. The AETOS◊
Shoulder System is the latest solution
in Smith+Nephew’s expanding Upper
Extremity portfolio and complements
our market-leading Sports Medicine
shoulder repair and biologics solutions.

The portfolio also includes the TRIGEN◊
INTERTAN◊ Hip Fracture System, which is
backed by many years of strong clinical
evidence.40,41 For Extremities, SMART TSF◊
expands the capabilities of the TAYLOR
SPATIAL FRAME◊ External Fixator.

EVOS◊ Plating System
Integrated solutions for fracture fixation
The EVOS◊ Plating System, an evolutionary
approach to simplify and unify into one plating
system, offers surgeons the simplicity of one,
comprehensive plating system that addresses
all of their small fragment surgical needs.

» For a full list of references
see pages 262–264

Taking our innovation to market continued

Sports Medicine & ENT
Elevating the Standard of Care

Highlights

Sports Medicine & ENT revenue

$1,729m

2022: $1,590m

Reported
8.8%

Underlyinga
10.0%

Sports Medicine & ENT trading profit

$503m

2022: $472m

2023
Revenue

2023
Reported
growth

2023
Underlying
growtha

$945m

8.7%

9.9%

$588m
$196m

3.7%
28.1%

4.7%
29.8%

Sports Medicine
Joint Repair
Arthroscopic
Enabling
Technologies
ENT

a These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial
measure prepared in accordance with IFRS on
pages 244–248.

“
We delivered strong
growth in 2023 as we
built upon our leading
portfolios in Joint
Repair and Arthroscopic
Enabling Technologies
and expanded our
exciting biological
healing business.”

Scott Schaffner
President Sports
Medicine

Smith+Nephew’s Sports Medicine & ENT
business unit leads with innovative
procedural solutions to elevate the
standard of care in Sports Medicine
& ENT. With a comprehensive offering
and differentiated technologies backed
by clinical evidence, we help healthcare
professionals get their patients back
to a Life Unlimited.

Sports Medicine & ENT operates in
growing markets where unmet clinical
needs provide opportunities for procedural
and technological innovation.

Smith+Nephew holds a leadership position
as a global player in the $5.8 billion annual
Sports Medicine Market. Sports Medicine
spans a broad patient population, including
athletes. People of all ages are more active
than ever before, and whenever they seek
treatment for an injury or a degenerative
condition, they expect a fast recovery and
rapid return to activity. The surgeons who
serve these patients want to treat them
as efficiently and as minimally invasively
as possible while ensuring the best
possible outcomes.

We have a rich history of product
development, and our technologies,
instruments and implants enable
surgeons to perform minimally invasive
surgery, treating soft tissue injuries and
degenerative conditions of the shoulder,
knee, hip and small joints.

ENT is also an attractive, growing market
segment offering the opportunity to
address unmet needs with differentiated
procedural solutions. The positive
momentum is driven by emerging
therapies, changes in the point of care,
mainly to the office setting, and increasing
global access for ENT procedures. We
offer a portfolio of technologies focused
on the unmet needs of some of the most
common procedures general and paediatric
ENT surgeons perform today. These include
tonsillectomies, epistaxis (severe nose
bleeds) and tympanostomies (insertion
of ear tubes).

Arthroscopy solutions for the OR
We are driven to design products that
enable better outcomes and improved
quality of care. We work with customers
to ensure their arthroscopy suite is
complete, robust and ready to perform –
providing and supporting comprehensive
technologies for visualisation, fluid
management, tissue resection
(COBLATION◊) and patient positioning.
Our INTELLIO◊ Connected Tower Solution
provides sports medicine surgeons with
a complete suite of enabling technologies
in the operating room (OR). It uses a
centralised app to wirelessly connect
and control the major components of an
arthroscopy surgical tower from outside
the sterile field, helping to streamline
procedure support.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023 performance
Sports Medicine & ENT delivered revenue
growth on a reported basis of 8.8%
including a 120bps headwind from foreign
exchange. Underlying growtha was 10.0%.
Performance was impacted as distributors
reduced inventory in anticipation of volume
based procurement in China.

Sports Medicine Joint Repair delivered a
strong performance, in line with previous
years, led by the REGENETEN◊ Bioinductive
Implant. Arthroscopic Enabling Technologies
improved year-on-year as we benefited
from improved supply. ENT grew strongly
led by our tonsil and adenoid business.

Business unit trading profita was up 6.6%
with a trading profit margina of 29.1%.

Strategy
We have a strong Sports Medicine &
ENT business and are well positioned for
long-term leadership and delivering our
vision of advancing standards of care.
Our business unit is driven by the three
strategic priorities – innovation, market
development and commercial execution.

Smith+Nephew’s Sports Medicine &
ENT business is founded on procedural
innovation, with differentiated technologies
that shape clinical outcomes across
the globe. Our portfolio continues to
demonstrate strong growth across key
segments, and we have an innovative
pipeline in development.

In line with our vision, our emphasis
on market development will help shift
standards of care to technologies and
procedures that deliver on the promise
of Life Unlimited. We are committed to
investments in key areas such as clinical
evidence, medical education and surgeon
training for continued market development
around key procedures. Our commercial
initiatives reflect balanced selling across
segments and regions, aligned priorities
and a customer-centric, winning mentality.

Global market share
In Sports Medicine, Smith+Nephew holds
a leading position behind Arthrex (US),
and also competes against Stryker and
DePuy Mitek.

Global market size 2023b

Sports Medicinec

$5.8bn +7%

2022: $5.5bn +4%

A Smith+Nephew

B Arthrex

C Stryker

D DePuy Mitekd

E Others

28%

33%

12%

10%

17%

b Data used in 2022 and 2023 estimates generated by
Smith+Nephew is based on publicly available sources
and internal analysis and represents an indication
of market shares and sizes.

c Representing repair products and arthroscopic
enabling technologies, and excluding ENT.

d A division of Johnson & Johnson.

» For a full list of references
see pages 262–264

UltraTRAC
Sports Medicine advanced
procedural innovation in 2023
by launching the QUADTRAC◊
Quadriceps Tendon Harvest
Guide System and expanded
family of ULTRABUTTON◊
Adjustable Fixation Devices
for anterior cruciate ligament
(ACL) reconstruction.

ULTRABUTTON◊ TIB
Adjustable fixation device

Smith+Nephew Annual Report 2023

QUADTRAC◊
Quadricepts tendon
harvest guide system

X-WING
Graft preparation system◊

ULTRABUTTON◊ QUAD
Adjustable fixation device

Taking our innovation to market continued
Sports Medicine & ENT continued

Key products by segment
Sports Medicine Joint Repair
Our Sports Medicine Joint Repair business
offers innovative procedural solutions
for repairing soft tissue injuries including
systems of specialised implants and
instruments to facilitate arthroscopic
procedures across Sports Medicine for
knees, shoulders, hips and small joints.

For shoulder repair, we develop products
for Rotator Cuff Repair (RCR) and
instability repair to help address pain
and restore function.

Advanced Healing Solutions for RCR include
the innovative REGENETEN◊ Implant.
With at least 12 published clinical studies
including more than 700 patients,1,2,13–22
the REGENETEN◊ Implant has been shown
to change the course of tear progression
in early studies,1,3,4,6,23,24 aid return to
normal activity13 and reduce re-tears
versus conventional surgery.7,16,17,25–28 The
HEALICOIL◊ Platform of Shoulder Anchors
features an open architecture design to
facilitate healing8 and is available in our
REGENESORB◊ material which is designed
to be absorbed and replaced by bone within
24 months.****10–12

In knee repair, arthroscopic repair
techniques have become more prevalent
and widely recognised for the treatment
of meniscal tears in recent years.29 Our All
Tears, All Repairs Meniscal Repair Portfolio
provides surgeons with unsurpassed
options and possibilities for meniscal repair.

In November 2023 we announced a
definitive agreement to acquire CartiHeal,
developer of the CARTIHEAL◊ AGILI-C◊
Cartilage Repair Implant, a novel sports
medicine technology for cartilage
regeneration in the knee. CARTIHEAL◊
AGILI-C◊ is a porous, biocompatible and
resorbable scaffold which promotes natural
regeneration of the articular cartilage and
restoration of its underlying subchondral
bone. See page 29 for further information.

We also offer a comprehensive ligament
portfolio of high-quality products and
thoughtful techniques to address the full
spectrum of ligament pathologies and
concomitant injuries. Building upon our
trusted legacy of data-driven solutions,
we continue to innovate in this space.

In 2023 we introduced the UltraTRAC◊
QUAD ACL Reconstruction Technique which
consists of the new QUADTRAC◊ Quadriceps
Tendon Harvest Guide System, X-WING◊
Graft Preparation System and a family

of ULTRABUTTON◊ Adjustable Fixation
Devices. These technologies work together
to provide an innovative procedural
solution, expanding Smith+Nephew’s ability
to address surgeon graft preference.

Our hip preservation portfolio
contains a comprehensive offering of
technologies and techniques, establishing
Smith+Nephew as a leader and innovator
in the hip repair segment. The CAP-FIX◊
Capsular Management Family addresses
all capsular management needs, from open
to close. We are committed to Redefining
Healing Potential in gluteus medius repairs,
with the use of the REGENETEN◊ Implant.**

In 2023 we launched new procedure
solutions in the foot and ankle soft tissue
repair segment, entering the market
with focused techniques and procedural
kits for ankle instability and Achilles
reconstruction. Our core platform
technology is designed specifically for
the foot and ankle surgeon and provides
a significant opportunity for growth.
In addition, with the REGENETEN◊ Implant,
we offer an innovative biologic solution
that can be used to augment insertional
or midsubstance Achilles repair.**

Advanced Healing Solutions
At Smith+Nephew, we are redefining healing
potential with our portfolio of innovative
products and materials.
The REGENETEN◊ Implant supports the body’s
natural healing response to promote the growth
of tendon-like tissue and change the course of
tear progression.**1–6 Derived from highly
purified bovine Achilles tendon, it creates an
environment that is conducive to healing.1,3

When used in Rotator Cuff Repair, the results
of a new randomised controlled trial showed
that the addition of our REGENETEN◊ Implant
delivered a significant reduction in rotator cuff
re-tear rates at 12 months.7

In addition, the unique open-architecture design
of HEALICOIL◊ anchors reduces the amount of
implanted material in the shoulder from that of
solid-core anchors and may provide a biologic
healing advantage.8,9 Our REGENESORB◊
material is designed to provide a jump start in
bone healing and formation by full absorption
and bone replacement in 24 months.****10–12

40
40

Smith+Nephew Annual Report 2023

Ear, Nose and Throat (ENT)
In Ear, Nose and Throat, our COBLATION◊
Plasma Technology, which has been used
to remove tonsils and adenoids for over
15 years,32,33 has an ability to remove
tissue at low temperatures with minimal
damage to surrounding tissue.32,34–38

Evidence shows that COBLATION◊
Intracapsular Tonsillectomy (CIT)
procedures offer less pain, quicker
recovery and a decreased risk of post-
operative bleeding with similar outcomes
to total tonsillectomies.39 Smith+Nephew
offers a full portfolio of COBLATION◊
Wands for CIT procedures.

Further expanding our portfolio,
we launched the ARIS◊ COBLATION◊
Turbinate Reduction Wand in 2023.

Our Tula◊ System provides an in-office
alternative to traditional tympanostomy
using a local anaesthesia system and
an automated, one-click tube delivery
device.41,42

As part of our comprehensive portfolio
of epistaxis (nosebleed) solutions, RAPID
RHINO◊ Epistaxis Products are inflatable
tamponades designed for ease of
insertion and removal43 with an ultra-low
profile and self-lubricating hydrocolloid
fabric. In addition, we market a range of
dissolvable and removable post-operative
nasal dressings.

Arthroscopic Enabling Technologies (AET)
In Arthroscopic Enabling Technologies,
our products facilitate arthroscopic surgical
procedures, providing a strong foundation
of platforms and associated consumables
required to perform arthroscopic surgery,
including visualisation, fluid management,
COBLATION◊ and mechanical resection.

The INTELLIO◊ Connected Tower Solution
unites high-definition imaging solutions,
energy-based and mechanical resection
platforms, fluid management and
access technologies.

The LENS◊ 4K Surgical imaging system
uses 4K UHD image quality and network
connectivity in a 3-in-1 console for multi-
speciality environments.

Our WEREWOLF◊ Controller enables
surgeons to remove soft tissue precisely***30
in a variety of arthroscopic procedures.
With COBLATION◊ treatment, patients
experienced significantly less bleeding
post-operatively.*****31

The WEREWOLF FASTSEAL◊ 6.0
Hemostasis Wand is used in orthopaedic
procedures for hemostasis of soft and hard
tissues bringing a technology widely used in
sports medicine to orthopaedic customers.

Ambulatory Surgery Centers (ASCs)
At Smith+Nephew, we go beyond product
to deliver a comprehensive offering
for ASCs.

There continues to be a shift of both sports
medicine and orthopaedic procedures from
hospital to ASC outpatient settings.

We are uniquely positioned to meet
the needs of the market with procedural
solutions spanning across sports medicine,
hip and knee reconstruction, robotics,
trauma, extremities, and post-surgical
wound care. As the ASC market evolves,
Smith+Nephew will continue to meet
the distinct needs of this segment
with procedure innovation and tailored
programmes for growth.

STRATEGIC REPORT
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OTHER INFORMATION

Launching the ARIS◊ COBLATION◊
Turbinate Reduction Wand
The ARIS◊ COBLATION◊ Turbinate Reduction
Wand utilises Smith+Nephew’s advanced
COBLATION Plasma Technology to provide a
minimally invasive way to reduce hypertrophic
turbinates. It provides targeted hemostasis
with built-in bipolar coagulation function.40
Designed for versatility, the ARIS◊
COBLATION◊ Turbinate Reduction Wand
allows surgeons to vary the degree of tissue
removal based on patient indication when
treating hypertrophic turbinates submucosally.
It offers customisation, flexibility and control
for turbinate reduction procedures,
accommodating various submucosal resection
surgical techniques. It is designed specifically
for the WEREWOLF◊ ENT Controller.

ARIS wand

» For a full list of references
see pages 262–264

Smith+Nephew Annual Report 2023

Taking our innovation to market continued

Advanced Wound
Management

Shaping What’s Possible
in Wound Care

Highlights

Advanced Wound Management
revenue

$1,606m

2022: $1,512m

Reported
6.2%

Underlyinga
6.4%

Advanced Wound Management
trading profit

$472m

2022: $436m

Smith+Nephew’s Advanced Wound
Management vision is to Shape What’s
Possible in Wound Care. Through our
extensive portfolio, designed to meet
broad and complex clinical needs,
we help healthcare professionals
solve the challenges of preventing
and healing wounds.

The global wound care market is worth
around $11.4 billion globally per annum.
Long-term growth has been driven
by the needs of an ageing population in
many markets and as we experience
lifestyle-related health conditions, such as
increasing prevalence of obesity, diabetes
and vascular disease. These conditions
are key drivers of wound prevalence
which contribute to the pressure on
healthcare spending.

In Advanced Wound Management, we
seek to help healthcare systems through
innovation in products and services, to
deliver accelerated healing or preventing
wounds, and to do more with less, such
as enabling patients to be treated faster
requiring fewer resources, or moved from
acute to homecare settings. We do this
across our three segments of Advanced
Wound Care (AWC), Advanced Wound
Bioactives (AWB) and Advanced Wound
Devices (AWD).

2023
Revenue

2023
Reported
growth

2023
Underlying
growtha

$725m

1.8%

2.1%

$553m

6.3%

6.2%

$328m

17.0%

17.6%

GRAFIX◊ Placental Membranes
from our skin substitute
product range.

Advanced
Wound Care
Advanced
Wound
Bioactives
Advanced
Wound
Devices

2023 performance
Advanced Wound Management delivered
revenue growth on a reported basis of
6.2% including a 20bps headwind from
foreign exchange. Underlying growtha
was 6.4%.

Within this, Advanced Wound Care’s
performance included growth from our
major categories of foams, films and infection
management. Advanced Wound Bioactives'
performance was driven by strong growth
from SANTYL◊. Advanced Wound Devices
was driven by both our traditional RENASYS◊
Negative Pressure Wound Therapy System
and our single-use PICO◊ Negative Pressure
Wound Therapy System.

Business unit trading profita was up 8.3%
with a trading profit margina of 29.4%.

Strategy
Our vision of shaping what's possible in
wound care is delivered through innovation
in product with strong clinical evidence
and digital tools that enable protocol
compliance to ensure optimal patient
outcomes. Innovation includes new
product development, line extensions
and acquisitions as well as digital services
for both clinicians and patients. To drive
ever-improving commercial execution
we seek to inspire, engage and align on
our global strategy across all regions
and functions as efficiently as possible.
Through these strategic priorities we
are driving performance and supporting
delivery of Smith+Nephew’s global
Strategy for Growth to Strengthen,
Accelerate and Transform through the
12-Point Plan.

“
We are pleased with our
2023 performance, led by our
Negative Pressure Wound
Therapy portfolio where we
focused on accelerating
growth, delivering on the
12-Point Plan.”

Rohit Kashyap
President Advanced
Wound Management
& Global Commercial
Operations

a These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial
measure prepared in accordance with IFRS on
pages 244–248

Smith+Nephew Annual Report 2023

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GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Global market size 2023b

Advanced Wound Management

$11.4bn +5%

2022: $10.8bn +4%

A Smith+Nephew

B 3M

C Mölnlycke

D ConvaTec

14%

16%

10%

E Others

54%

b Data used in 2022 and 2023 estimates generated by
Smith+Nephew is based on publicly available sources
and internal analysis and represents an indication of
market shares and sizes.

Reducing the burden on nurses
through shared-care
The World Health Organisation predicts a
need for nine million more nurses by 2030
for health and wellbeing.9 Chronic wounds
significantly burden healthcare, consuming
large healthcare budgets. With wound
prevalence increasing, efficient wound care
treatments are crucial.10

In 2022, Wounds International suggested that
3.5 billion nursing hours could be saved globally
by 2030 with shared-care in chronic wound
care and long-wear advanced foam dressings.
Shared-care involves patient participation in care
delivery, supported by healthcare professionals.
It's effective in diabetes, stoma management
and incontinence.11–14
ALLEVYN◊ LIFE Foam Dressings, supporting
shared-care, are designed for extended use
(up to seven days), managing exudate and
providing comfort.15–22 *

Global market share
We operate in all three categories in
wound care, and have the second largest
business globally in terms of revenue.
In the Advanced Wound Care segment
we compete in dressings with Mölnlycke
(Sweden), Coloplast (Denmark) and
ConvaTec (UK). In Advanced Wound
Devices, we are the primary challenger
to Negative Pressure Wound Therapy
incumbent 3M. In Advanced Wound
Bioactives we have leadership positions
in a number of our respective categories.

DURAMAX◊ S Silicone
Superabsorbent Dressing
for highly exuding wounds
launched in 2022.

ALLEVYN LIFE◊
Foam Dressing

Committed to reducing
environmental impact
Smith+Nephew's Less Waste+More Care
initiative focuses on reducing environmental
impact by optimising ALLEVYN◊ Dressing
packaging. This includes reducing carton,
pouch and case sizes by over 20%, and
making ALLEVYN◊ Dressing cartons 33%
smaller and 13% lighter than competitors.23

Smith+Nephew Annual Report 2023

» For a full list of references
see pages 262–264

Taking our innovation to market continued
Advanced Wound Management continued

Key products by segment
Advanced Wound Care
Smith+Nephew started as a wound
care company and through our Advanced
Wound Care business we have grown to be
a leader in the segment. Today our portfolio
includes products that are designed to
manage exudate and infection, protect the
skin and help prevent pressure injuries.

Our key silver-based ACTICOAT◊
Antimicrobial Barrier Dressings, DURAFIBER◊
Ag Absorbent Gelling Silver Fibrous
Dressing, ALLEVYN◊ Ag Antimicrobial Foam
Dressing, as well as our range of IODOSORB◊
Cadexomer Iodine products provide clinicians
with a range of solutions to help patients
with complex wounds, managing exudate
as well as providing a barrier to bacterial
penetration.30–40

In exudate management, our products
provide appropriate wound fluid handling
and absorption to help promote an optimal
wound healing environment.24–26 Our
ALLEVYN◊ LIFE Foam Dressing is uniquely
differentiated, with its EXUMASK◊ change
indicator and hyper-absorbent lock-away
layer, with EXULOCK◊ technology for
odour control and fluid lock-in.26–28 The
effectiveness of the ALLEVYN Dressing
range has been demonstrated across
138 publications in 19 countries on over
12,000 patients and volunteers.29

In 2023, sales of the DURAMAX◊ S Silicone
Superabsorbent Dressing, launched last
year, continued to grow.

We were successful in receiving US
510(k) clearance for our improved range
of ALLEVYN◊ Ag Antimicrobial Foam
Dressings in 2023, giving access to
expanding market segments in the future.

Advanced Wound Bioactives
Our Advanced Wound Bioactives
portfolio provides a unique approach to
debridement, dermal repair and tissue
substitutes with considerable evidence
supporting their clinical application.

Collagenase SANTYL◊ Ointment (250 units/
gram) is the only FDA-approved enzymatic
debridement agent indicated for debriding
both chronic dermal ulcers and severely
burned areas available in the US market,
with a unique mechanism of action that
removes necrotic collagen and contributes
to the formation of healthy collagen in
chronic wounds and severely burned
areas. REGRANEX◊ (becaplermin) Gel
0.01% is the only FDA-approved Platelet-
Derived Growth Factor for the treatment
of diabetic neuropathic ulcers, formulated
to act as a first-line treatment following
effective ulcer care.

The future of pressure injury prevention
Hospital-acquired pressure injuries (HAPIs)
are on the rise.

Despite a decrease in other hospital-acquired
conditions, HAPIs are up 6%.1†† Each year,
complications from pressure injuries result
in an estimated 60,000 deaths in the US.
The average incremental cost of treating
a pressure injury is $21,767.
Smith+Nephew’s LEAF◊ Patient Monitoring
System promotes adherence to patient
turning procedures.2,3

In our skin substitute product range,
GRAFIX◊ Placental Membranes and
STRAVIX◊ Umbilical Tissues retain the
extracellular matrix, growth factors and
native placental components to support
wound closure.41–42 They are intended for
application directly to acute and chronic
wounds and as a surgical cover or barrier.
In addition, we offer OASIS®** Matrix and
OASIS MICRO products, which are naturally
derived scaffolds of extracellular matrix
(ECM), composed of porcine small intestinal
submucosa (SIS) and indicated for the
management of a wide range of acute
and chronic wounds, burns and surgical
interventions.43

Advanced Wound Devices
In Advanced Wound Devices, our portfolio
helps improve healing outcomes in chronic
wounds, reduces surgical site complications
and facilitates preventative care for pressure
injuries. Within the negative pressure
wound therapy (NPWT) category, we offer
single-use and traditional (cannister-based)
solutions offering customers a one-stop
shop with great flexibility.

Visual alerts in the patient room and at the
nurses’ station make it easy for the whole
team to see who needs to be turned and when.4
Plus, the LEAF◊ System’s Integrated
Positioning Technology is the first tool that
measures the quality and effectiveness
of patient turning, including patient turn
frequency and turn angle.
Smith+Nephew's ALLEVYN◊ LIFE Dressings
and SECURA◊ skincare products are designed
to help prevent pressure injuries, aiding in
evidence-based protocol adherence for
HAPI prevention.5–8 These products showcase
the Company's commitment to improved
healthcare practices.

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

Hospital-acquired pressure
injuries (HAPIs) are on the rise1

Despite a decrease in other hospital-
acquired conditions, HAPIs are

+6%1††

Each year, complications from
pressure injuries result in an estimated

60,000

deaths in the US54

The average incremental cost
of treating a pressure injury is

$21,76755

Our PICO◊ range of single-use NPWT
systems, with their proprietary AIRLOCK◊
Technology layer, has demonstrated
significant healing outcomes for chronic
wounds44*** and in the reduction of surgical
site complications in closed incisions,45† in a
highly portable form that allows patients to
return to their daily lives.46,47 Our traditional
RENASYS◊ NPWT Systems are easy to
use platforms with a range of accessories
to treat a wide variety of wounds and
patients – across all care settings.48,49 The
RENASYS◊ portfolio has been enhanced
with the recent addition of EDGE, our latest
innovation in NPWT designed to be clinically
easy to use,50 alleviating the daily patient
burden of living with a wound,51 whilst
delivering higher efficiency and utility for
healthcare systems.50,52,53

AWD also includes the LEAF◊ Patient
Monitoring System that supports a
hospital’s pressure injury prevention
strategy. In 2023, we gained 510(k)
clearance and introduced into the US
the VERSAJET◊ III Hydrosurgery System,
a surgical debridement device.

PICO
PICO◊ Single Use Negative Pressure Wound
Therapy System (sNPWT) is cost effective
and improved outcomes compared with
standard care to help prevent surgical site
complications in patients with surgically
closed incisions. A systematic literature
review and meta-analysis of 19 studies
involving 4,530 patients showed a 63%
reduction in the odds of developing surgical
site infections with the prophylactic use of
PICO◊ sNPWT compared with standard care.45

Smith+Nephew Annual Report 2023

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OTHER INFORMATION

Our technology takes the limits off living
Smith+Nephew’s Advanced Wound Management
Business Unit is also focused on utilising digitally
enabled technologies and pioneering data
services to provide new forms of value to our
customers. We aim to help optimise clinical
practice, prevent unnecessary wounds and
complications, support patient care and
self-management where appropriate and drive
the transition to value-based business models.

Building from the launch of the award-winning
WOUND COMPASS◊ Clinical Support App^
in 2022, we are investing in a digital health
portfolio that leverages the latest
advancements in connectivity, artificial
intelligence and data-driven health services.
These technologies aim to support our
customers in delivering more accessible,
efficient and effective wound care for patients.

» For a full list of references
see pages 262–264

Building a
culture of
belonging

At Smith+Nephew, we
strive to create a culture
of belonging where all
employees can bring their
full selves and best ideas.
We are committed to
creating a psychologically
safe environment that fosters
innovation, delivers business
success and strengthens
engagement and personal
fulfilment.

4646

Inclusion and allyship
Our comprehensive people strategy
is focused on making Smith+Nephew a
workplace that talented people want
to join and stay and building a high-
performing and inclusive culture where
everyone feels a sense of respect and
belonging. Our culture pillars of Care,
Courage and Collaboration guide
all we do.

Creating an environment where all
employees can flourish begins with
attracting and retaining diverse
talent, which we support through
an extensive Inclusion, Diversity
and Equity (IDE) programme.

In 2023 we took a number of new steps
to continue this journey. Our Talent
Acquisition team began using ‘bias
interrupters’ in their hiring practices
including ensuring diverse sourcing, hiring
pools and hiring panels for candidates.
Bias interrupters are tweaks to basic
business systems (including hiring,
performance evaluations, assignments,
promotions, compensation) that
prevent implicit bias in the workplace,
often without ever talking about
bias. Supported by this, we met our
gender diversity goal of 34% females
in management positions and met our
US ethnicity goal of 21% of those in
management positions being ethnically
diverse. We also established a baseline
for ethnicity for the UK. Our enterprise
gender ratio was 43%, exceeding
industry best practice of 40%.

“
By creating a workplace
where our employees feel
supported, included and
valued for their unique
strengths and perspectives,
we are able to build a
high-performing culture
and ultimately better
serve our customers
and their patients.”

Elga Lohler
Chief HR Officer

Gender ratios 2023
We continued to increase female
representation in senior roles, up to
34% in 2023 from 33% in 2022
and 31% in 2021.

Total employees1

18,452

Male

57%

Female

43%

Senior managers and above2

1,087

Male

66%

Female

34%

Board of Directors

Male

67%

Female

33%

1 Number of employees at 31 December 2023

including part-time employees and employees
on leave of absence.

2 Senior managers and above includes all employees

classed as Directors, Senior Directors, Vice Presidents,
Executive Officers and includes all statutory directors
and Directors of our subsidiary companies at
31 December 2023.

Smith+Nephew Annual Report 2023

Ethnic diversity
In 2023 we met our US ethnicity goal of
21% of those in management positions
being ethnically diverse. We also
established a baseline for ethnicity
across our UK-based management.

US management1

White

76.2%

Ethnically Diverse 21.4%

Unknown

2.4%

UK management1

White

88.8%

Ethnically Diverse 10.9%

Unknown

0.3%

1 Data correct as 31 December 2023.

In 2023 we introduced a new workspace
on our learning platform to educate our
employees on allyship in the workplace.
Allyship refers to actions, behaviours
and practices that support, amplify and
advocate with others, especially with
individuals who do not belong to the same
social identity group. With this, we are
teaching our employees how to advocate
for and elevate the experience of all their
colleagues, particularly those who may
be under-represented.

Allyship is a strong theme within our
Employee Inclusion Groups (EIGs) and
will be the guiding theme for our IDE
programme in 2024. Smith+Nephew’s
EIGs are voluntary, employee-led groups
that foster an inclusive, diverse workplace.
They are aligned with our purpose, culture
pillars, and business objectives and
empower our employees to share their
experiences, find advocacy, support and
strength. To amplify their impact, in 2023
we have brought our woman-focused
EIGs including the Society for Women
Engineers and Women’s Inspired Network,
under a combined group: The Women’s
Network. Sponsored by our Group
General Counsel & Company Secretary,
Helen Barraclough, this group includes
more than 800 members globally.

+800

Members globally who
are part of our EIG
Women’s Network

“
Smith+Nephew is committed
to amplifying the inclusion,
influence and achievements of
women employees by fostering
professional development,
advocacy and networking.
Our Women’s Network is at
the centre of our efforts.”

Helen Barraclough
Group General Counsel & Company
Secretary, Executive Sponsor
Women’s Network

Smith+Nephew Annual Report 2023

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Additionally, our EMPOWER EIG,
which is focused on employees affected
by or living with a visible or invisible
disability, chronic health condition and/
or mental health difficulty, launched the
Neurodiversity Network. Created and
managed by our passionate neurodiverse
members, the Neurodiversity Network
has a wealth of tools and resources aimed
at supporting neurodivergent individuals
in the workplace to recognise their
strengths and celebrate their unique skills
and perspectives. The Neurodiversity
Network also helps educate colleagues
on the different types of neurodiversity,
promoting the value of our neurodiverse
colleagues, and raising awareness of
their unique challenges.

+ WOMEN’S NETWORK Amplifying Women’s Inclusion
+ UNITY Race + Ethnicity
+ VETERANS+UNLIMITED Veterans of Military Service and Active Reservists

+ CARE Mental Health + Physical Wellbeing
+ GLOBAL SNYP Engage, Develop, Grow, Excel

+ PRIDE LGBTQ + Community + Allies

+ EMPOWER Support, Advocate, Educate

47
47

Building a culture of belonging continued

Promoting wellbeing
Wellness – physical, mental and financial –
plays a critical part in enabling employees
to engage and focus on delivering their
objectives. In 2023 we expanded and
improved our global wellness programme.

Our wellbeing strategy has
five components:
– Embed wellness into our culture.
– Raise awareness and usage of global

wellness resources.

– Strengthen employee engagement.
– Increase employee wellness and health.
– Increase employee productivity
through increased engagement
and overall health.

Promoting wellness
of body and mind
Individuals whose physical and mental
health needs are cared for are three
times more likely to be engaged at work,
according to Gallup. At Smith+Nephew,
our wellness offerings care for the whole
person, not just the employee. This year
we’ve focused our global wellness steering
group to guide our global wellbeing strategy
and established a global champion network
to help better understand what employees
want and what is already available.

During 2023, we expanded our mental
health first aiders network. We now have
150 trained first aiders across 11 countries.
These colleagues are trained to help
identify when help is needed, the level
of support required, and signpost people
towards doctors, helplines or organisations
that may offer counselling, professional
support and treatments. Privacy is always
respected, and conversations are never
shared with direct managers. Our
mental health champions are often
just ‘someone to talk to’.

Smith+Nephew supports a
culture of wellbeing that provides
benefits, resources and programmes
for employees across the globe to
provide an opportunity to improve
their overall wellbeing so that they can
bring their best self to work each day.

Underscoring the importance of wellness,
we replaced our previous Employee
Assistance Plan with a new provider,
Spring Health, available to all employees
and their household members. The new
service includes therapy sessions, coaching,
a wide range of diverse providers, as well
as legal assistance, financial services
and referrals for child and elder care. In the
US, for the first time, Smith+Nephew was
one of only 50 employers recognised with a
Best Employer Award for creating a healthy
work culture through a well-established,
progressive and measurable employee
wellbeing and engagement programme.

The Business Group on Health is made up
of large employers interested in ensuring
their wellness and benefit programmes
are benchmarked and appropriate for
their employees. The group supports
collaborating and sharing information on
vendors and best practices in wellness
and benefits, including diversity, inclusion
and health equity. In the US, we also won
the Cigna Healthy Workforce Designation:
Gold Level award for our focus on the
vitality and wellbeing of our workforce
and for helping employees to be healthier,
more productive and engaged.

At Smith+Nephew we promote flexibility in
where, how and when we work. This means
looking at the spaces in which we work,
the ways we work and our work patterns.
We believe our approach is an important
differentiator, and helps our employees
balance work and home life.

Social

Emotional

Physical

Financial

Our Global Flexibility Principles serve as the
guiding philosophy for identifying flexible
work solutions that foster productivity and
wellbeing while supporting our culture.
While the principles are consistent globally,
specific flexibility options will vary depending
upon the individual, role and site/
country/region.

Continuous improvement
Creating a culture of belonging, where
our employees are highly engaged,
is a continuous journey. We measure
our progress using the Gallup Q12
as the tool for our annual employee
engagement survey.

The Q12 survey tool focuses strongly on
the role of the people leader in engaging
their team. People leaders are provided
with their individual survey scores and
conduct team sessions where the results
are discussed and actions agreed – both
to improve on opportunity areas and
to maintain strengths. These action
plans continued throughout the year
and are assessed at our annual Gallup
Accountability Check-in Survey to
determine whether employees are
seeing improvements.

In our fifth year using the survey,
we again saw an improvement in our
‘grand mean’, putting Smith+Nephew
in the top half of participating companies
and well above the Gallup average.
Since the first administration of the survey,
our grand mean has increased every year
and we are trending on the improvement
trajectory of Gallup’s top quartile clients.
Our participation rate in this year’s
survey was 89%. Our most meaningful
improvements were in employees
feeling supported in their progress at
work and being recognised for their
contributions. Once again, our strongest
area was connection to our purpose of
Life Unlimited.

We also use Gallup to measure our
progress in fostering Equity and Inclusion.
We made solid progress across all eight
categories in 2023, and overall. In Equity
our greatest improvement came in
employee recognition that we encourage
their progress and development. In
Inclusion we improved most significantly
in the category recognising that
Smith+Nephew is committed to building
the strengths of each employee.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
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OTHER INFORMATION

+0.08

+0.04

+0.05

+0.07

+0.08

+0.04

In 2023, Smith+Nephew conducted
its fifth administration of our Global
Employee Survey using the Gallup Q12
engagement tool. We saw a significant
uptick in engagement from year one
(2019) to year two (2020) following
the launch of our purpose, culture pillars
and brand refresh. Smith+Nephew’s
engagement trajectory (in orange) has
remained well above the Gallup average
(grey) and is tracking towards the top
quartile of the Gallup database (blue).

Smith+Nephew’s culture trajectory
is well above average

Smith+Nephew
Gallup clients average
Top 25% Gallup clients

+0.32

+0.19

+0.12

+0.10

-0.04

+0.07

)
e
n

i
l
e
s
a
B
m
o
r
f
e
g
a
r
e
v
A
(

e
g
n
a
h
C
n
a
e
M
d
n
a
r
G

2019

Source: Gallup

2020

2021

2022

2023

Achieving results
with responsibility
Our global compliance programme helps
our business to comply with applicable
laws, regulations and industry code
requirements in the markets in which we
operate. Our comprehensive programme
includes policies, guidance, role-based
training, monitoring and validation
processes supported by data analytics
and reporting channels. Our compliance
teams work closely with business partners
to ensure that our programme evolves
in parallel with business changes and
emerging risks in the sector. Data privacy
is an integral part of our programme
and regulation in this area continues
to increase.

We are committed to helping our
employees and third-party partners
to do business in the right way through
simplification of compliance programme
requirements and by embedding key
compliance controls into business
processes. We regularly review our
global policies and use an interactive
tool and other resources to guide
employees to make decisions that
comply both with the law and our
Code of Conduct.

Our business models require that we
work closely with third-party partners,
and in many countries these partners
sell products on our behalf. We have a
well-established risk-based third party
compliance programme which includes
ongoing due diligence, training and
oversight of these partners.

Smith+Nephew Annual Report 2023

An ethical employer
Creating an environment where employees
feel safe and that fosters innovation
means building trust by operating ethically
and compliantly.

We have multiple levels of ethics and
compliance oversight, including a Board
Compliance & Culture Committee, to
ensure managers, employees and business
partners act with integrity. Data privacy
has now been fully integrated into the
compliance governance framework.
We ensure appropriate oversight of
significant interactions with healthcare
professionals or government officials,
and we comply with all national and state
transparency reporting laws which require
reporting of physician compensation.

All employees have a responsibility to report
violations of our Code. This may be done
via their manager, directly to Compliance,
HR or Legal functions, or through an
externally managed reporting channel
where anonymous reports may be made.

At Smith+Nephew, we recruit, employ
and promote employees on the sole basis
of the qualifications and abilities needed
for the work to be performed. We do not
tolerate discrimination on any grounds and
provide equal opportunity based on merit.

Smith+Nephew gives individuals
with disabilities fair consideration for all
vacancies against the requirements of
the role. Where possible, for any employee
who has a disability or who becomes
disabled while working for us, we make
reasonable adjustments and provide
appropriate training to ensure that they
are supported in their career.

We are committed to providing equal
opportunities in recruitment, promotion
and career development for all employees,
including those with disabilities.

We do not use any form of forced,
compulsory or child labour. Smith+Nephew
supports the Universal Declaration of
Human Rights of the United Nations,
respecting the human rights, dignity
and privacy of individuals and their right
to freedom of association, freedom
of expression and the right to be heard.

As a global medical technology business,
we recognise our responsibility to take
a robust approach to preventing slavery
and human trafficking. Smith+Nephew
is committed to preventing such activities
in all of its corporate operations and in
its supply chains.

We comply with applicable laws and
regulations globally in terms of our
interactions with labour unions.

» Our Code of Conduct and

Business Principles and Modern
Slavery Statements are available
at www.smith-nephew.com

Giving friends back
their freedom to
enjoy the slopes

Life Unlimited

Smith+Nephew Annual Report 2023

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Smith+Nephew Annual Report 2023

Shaping a
healthy and
sustainable
future

Our ESG strategy is built on
our purpose – Life Unlimited,
our Strategy for Growth and
our culture of Care, Courage
and Collaboration.

Protecting the future
Through our Strategy for Growth we are
working to strengthen the foundation
of our business to serve customers
sustainably and simply, to accelerate
profitable growth through prioritisation
and customer focus, and to transform
our business through innovation.

Our Strategy for Growth is underpinned by
our Capital Allocation Framework, which
has as one of its priorities investing in
innovation and our ESG agenda. You can
read more about our Strategy for Growth
on pages 8–11, and our Capital Allocation
Framework on page 21.

We strive to deliver our ESG strategy in
the communities where we live and work
through the application of our values:
– We demonstrate Care by respecting
our global resources and striving to
protect the safety and wellbeing of
our employees.

– We demonstrate Courage by setting

ambitious goals to increase our
volunteerism, reducing waste and
greenhouse gas emissions, and by
operating responsibly and sustainably.

– We demonstrate Collaboration by

working together with our partners
who share our commitment and
contributing to our communities through
individual and team volunteerism.

Our ESG strategy supports these
value drivers by helping us to address
the requirements of our stakeholders,
creating a lasting positive difference
to our communities, and protecting
our environment.

Our ESG strategy, inspired by the United
Nations’ Sustainable Development Goals
(SDGs), takes into account the social,
environmental and economic aspects
of our business and reflects the fact that
sustainability and financial performance
are closely linked. As a profit-seeking
business, we aim to meet our economic
objectives whilst at the same time
managing the social and environmental
impacts of our business activities.

Our ESG strategy focuses on
three areas: People, Planet
and Products. Our objectives and
progress against these are
summarised on pages 54–59.

People
Creating a lasting positive impact
on our communities

Planet
Aiming to reduce our impact
on the environment

Products
Innovating sustainably

“
Our ESG and sustainability
programme is intended to
drive business value for
our stakeholders, while
inspiring our employees
and empowering our
teams to make a
positive impact on
society and the planet.”

Katya Hantel
Vice President ESG

5252

Smith+Nephew Annual Report 2023

Our stakeholders’ priorities
Through our ESG strategy we are
addressing the needs and expectations
of our stakeholders.

Customers and suppliers
Building ESG principles into the delivery of
healthcare is of growing importance to our
customers. Increasingly, customers require
us to provide details of our ESG strategy
and objectives. Customers place increasing
importance on these responses when
making contract decisions. Our Third Party
Guide to Working with Smith+Nephew
requires our suppliers to conduct business
in a way which fits with the values and
ethics of Smith+Nephew and provides
our customers with further insight into
how we work with suppliers to drive our
ESG strategy.

Employees
Employees are looking for companies
with strong values and cultures, that
operate with integrity, transparency and
accountability, and offer satisfying career
opportunities for all. Living our values
and being a force for positive change is
part of our ESG strategy.

Investors
Investors are prioritising investments
based on corporate ESG programmes and
outputs. Our ESG programme provides
evidence of our progress in these areas.

Governments and regulators
ESG regulation is increasing at pace globally.
Our ESG strategy and governance focuses
on ensuring compliance with existing
and emerging regulation on sustainability
matters. Our Compliance & Culture
Committee reviews, tracks and monitors
our compliance and progress towards our
ESG objectives aligned with applicable
regulations and our Strategy for Growth.
Our senior management engage with
industry bodies and interest groups such
as AdvaMed, MedTech Europe and similar
organisations on ESG matters which have
the potential to impact our organisation.

Environment and communities
The communities where we are located
want to see support for local education,
health and volunteering programmes
from businesses which operate there.
Our ESG strategy prioritises giving back to
local communities, for example through
employee volunteering programmes.

Smith+Nephew Annual Report 2023

Stakeholders want to understand the
impact of our ESG strategy on People,
Planet and Products to understand
how we are driving and implementing
strategy to reduce our impact on the
planet and its resources and enabling
us to innovate sustainably.

ESG governance
In January 2023, we streamlined the
governance and operational structure
around the delivery of our ESG strategy.
We established the ESG Operating
Committee to implement and execute
our ESG strategy across all business
areas, reporting directly to the Executive
Committee. The Executive Committee
will continue to formulate and drive our
ESG strategy with oversight from the
Board and its Committees.

The Board reviews the ESG strategy, key
risks and opportunities and progress on a
regular basis and three Board Committees
review its implementation: Compliance
& Culture Committee, Audit Committee
and Remuneration Committee. For further
information on our governance see the
Governance Report from page 88 and
our Task Force on Climate-related
Financial Disclosures (TCFD) reporting
on pages 60–64.

Our ESG strategy focuses on three
areas: People, Planet and Products.
Within these three areas, we have
developed comprehensive objectives
to help us deliver on our sustainability
ambitions. Each year we measure and
report progress against these objectives.
During 2023, we adjusted several of
our objectives to better reflect the
challenges we face and to ensure they
remain meaningful.

We are proud of our many achievements
over the years, including our ‘AA’ MSCI
ESG Rating and our recurring inclusion in
leading indices, such as FTSE4Good, the
ESG Index from Institutional Shareholder
Services (ISS) and the Dow Jones
Sustainability Index.

This year, we are reporting both our 2022
and 2023 Scope 3 greenhouse gas (GHG)
emissions from 13 categories and are
developing our Scope 3 GHG emissions
reduction roadmap and strategy for
the short to medium term.

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Climate change
During 2023, we have continued to
consider the potential impact of climate
change on our business operations.

Our physical assets and supply chains are
vulnerable to weather and climate change,
for example through sea-level rise, more
frequent extreme weather events and
more severe extreme weather events.
Patients are vulnerable to a potential
rise in infectious disease propagation.
Governments and corporations alike are
under increasing pressure to mitigate
the expected effects of climate change,
potentially resulting in infrastructure
projects which would require large capital
outlays and further increase pressure on
healthcare payments.

In 2021, we made a commitment to
achieve net zero Scope 1 and Scope 2 GHG
emissions by 2040 and net zero Scope
3 GHG emissions by 2045, beginning by
achieving a 70% reduction in Scope 1
and Scope 2 GHG emissions by 2025.

We are on track to achieve a 70%
reduction in Scope 1 and Scope 2 GHG
emissions by 2025 compared to the
2019 baseline.

We aim to minimise the disruption to our
manufacturing and distribution network.
We understand how important it is to
balance environmental initiatives with
business activities, and strive to reduce
emissions through new technology
development, renewable energy use
and other measures.

Member of
Dow Jones
Sustainability Indices
Powered by the S&P Global CSA

More information on our ESG activities can
be found in our 2023 Sustainability Report,
available on our website.

www.smith-nephew.com

Shaping a healthy and sustainable future continued

Our facilities in Memphis (US) and Malaysia
sourced renewable electricity for the 2023
calendar year. In the final three months of
2023, we started procuring green energy
at all our UK sites. This is set to continue
through 2024.

Our reporting against the TCFD framework
and the Sustainability Accounting
Standards Board (SASB) framework for
our sector of Medical Equipment and
Supplies can be found on pages 60–64
and 258–259 respectively. The Compliance
& Culture Committee and the Audit
Committee received updates on TCFD
and SASB reporting during 2023.

As part of our Enterprise Risk Management
process, we have a sustainability risk
register and a business resilience process
review built into our review of our Principal
Risks (see pages 69–77). Our Principal
Risks capture our physical and transitional
climate-related risks in our Enterprise Risk
Management process. Climate change
is an element of our Global Supply Chain
Principal Risk, as increasingly frequent
climate events increase the likelihood and
impact of disruptions to our supply chain.
» Read our TCFD reporting

on pages 60–64

Delivering on our
sustainability ambitions
In 2023, we continued to focus on our three
priority areas: People, Planet and Products.
Within these areas we have refined our
objectives so that we can measure and
report clearly on our progress.

With an emphasis on increasing
participation in EIGs and Life Councils,
eight hours of paid volunteer time
continues to be available to and promoted
for uptake by all employees. In addition,
in 2023, we focused on site-wide and
community engagement activities,
enabling us to combine individual
efforts and maximise our impact
through organised events. We
reviewed and refined our packaging
objective in light of industry and
customer engagement, expanding its
scope to include broader themes.

In 2024 and beyond, we will continue
to review and adapt our strategy
and objectives to ensure they are
current and that we make
meaningful progress.

People

Creating a lasting positive
impact on our communities

Our objectives

Our progress in 2023

Volunteering

We are committed to living our culture in
our communities by providing 8 hours of
paid volunteer time to all employees and
enabling at least 50 community/charity
events across our sites each year from
2023 to 2030.

Giving

Between 2020 and 2030, donate
$125 million in products to underserved
communities.

95
Events in first year

$5.1m
($16.2m since 2020)

Inclusion

Empower and promote the inclusion of all.

4,200+
Supporters across our seven
Global Employee Inclusion
Groups and sub-groups

Smith+Nephew Annual Report 2023

People are at the heart of
our purpose – Life Unlimited
Putting people first will help us to achieve
our vision of a world where healthcare
professionals are able to help restore
health to patients, wherever they are.
We prioritise people in three ways:

First, we help improve patients’ wellbeing
and empower the healthcare professionals
who treat them.

Second, we engage with the communities
where we operate, encouraging our
people to volunteer in local communities,
offering paid volunteer time and matching
employee charitable donations.

And third, we support our own
employees’ wellbeing by ensuring their
work environment is healthy and safe.
We also continue to build employee
wellness programmes that enable
healthy life choices.

Our giving activities during the year totalled
donations of $5.2 million. These consisted
of $5.1 million in product donations and
$88,000 from matching employee gifts to
qualified charities. Since 2020, our product
donation strategies have been held back
by the impacts of Covid; however, we are
seeing the return of medical missions and
continue to support, as needed.

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Employee engagement is important to
us and is measured by the Gallup Global
Engagement Survey (see pages 48–49).
In 2023, we combined the four Employee
Inclusion Groups focused on women into
one group.
» See pages 48–49

volunteer events
in 2023.

$5.1m

of product donations
in 2023.

Celebrating our partnership with IHP –
helping thousands in need
For over 20 years Smith+Nephew has
partnered with International Health Partners
(IHP) to donate products to help treat people
in need in over 30 countries worldwide.
Most recently, we donated more than
40,000 products from our Advanced Wound
Management portfolio to Ukraine, where
medical supplies are desperately needed.
To celebrate their impact across the world,
in 2023 IHP held an event in London for all
their valued partners and supporters, which
Smith+Nephew attended. The infographic
shows some of the places that our support
has helped through our partnership with IHP.

2013

2014

Democratic Republic
of the Congo, Sierra Leone,
Zimbabwe

Gambia, Gaza, Honduras,
Philippines, Sri Lanka.
Turkey, West Bank

2015

Haiti, Iraq

2017
Iraq, Nicaragua

2021

Jamaica

2018
El Salvador, Iraq,
Sierra Leone

2022

Ukraine

2019
Benin, Myanmar,
Nicaragua

2023

Ukraine

2016

Afghanistan, Gambia, Haiti,
Honduras, Iraq, Jamaica,
Nicaragua, Ukraine

2020

Lebanon

Smith+Nephew Annual Report 2023

Shaping a healthy and sustainable future continued

Planet

Aiming to reduce our impact
on the environment

Our objectives Our progress in 2023

Net
zero

Achieve net zero
Scope 1 and
Scope 2 GHG
emissions by 2040
and Scope 3 GHG
emissions by
2045, beginning
by achieving
a 70% reduction
in Scope 1 and
Scope 2 GHG
emissions by 2025.

Waste

Achieve zero
waste to
landfill2 at our
manufacturing
facilities in
Memphis and
Malaysia by
2025 and at all
our strategic
manufacturing
facilities by 2030.

A carbon reduction roadmap for
Scopes 1 and 2 through 2025 has
been developed and a roadmap
for Scope 3 is being developed. We
have calculated our Scope 3 GHG
emissions data for 2022 and 2023.

Scopes 1 and 2 (total)

40,266 tonnes
CO2e emitted
(market-based)1
Our manufacturing sites in Malaysia
and Suzhou are generating on-site
renewable energy.

Scope 3

1.3 million tonnes
CO2e emitted in 2023

Our Malaysia facility has achieved
zero waste to landfill.
849 tonnes
sent to landfill from Memphis
manufacturing facilities,
representing 38% of total waste
from those facilities.

1,411 tonnes
sent to landfill from the Group.1

Progress since
2019 baseline

Scopes 1 and 2 (total)
40% reduction
CO2e emitted
(market-based)1

Emissions have been
reduced by undertaking
energy efficiency
projects, on-site
renewables and
procurement of
renewable energy and
purchase of RECs.

Scope 3

Now reporting
13 categories, up from
8 in 2021.

32% reduction

Less waste was sent
to landfill from Memphis
manufacturing facilities
during 2023 compared
to 2019.

30% reduction

Less waste was sent
to landfill from all our
strategic manufacturing
facilities during 2023
compared to 2019.

1 Data independently assured by ERM CVS, more details and the full assurance report are available in the 2023 Sustainability

Report on pages 59–60.

2 We define zero waste to landfill as a landfill diversion rate of 90% or greater.

We recognise the need to protect our
planet and help mitigate against the
impacts of climate change. In response,
we manage resources efficiently, reduce
our emissions where possible and are
mindful of the impact our decisions
have on the environment.

In 2023, as the impacts of the global
pandemic started to recede, many
colleagues chose to adopt remote or
hybrid working. Accordingly, some offices
continued to see lower occupancy levels
and we are adapting to those situations.

Our ESG strategy extends upstream to
our suppliers and downstream to our
customers. This means that we want
to work with partners who are making
efforts to reduce their own environmental
impacts. We are also working to deliver
products and services that have less
impact on the environment and are taking
steps to better understand the extended
footprints of our top-selling products.
This helps us focus our resources where
they will produce the most positive impact.
To help achieve improvements in this area,
we are collaborating with our key suppliers
where there are more opportunities.

We are mindful of the importance
of biodiversity, particularly in some
of the countries in which we operate
including Costa Rica and Malaysia.
The impact on local biodiversity is one
of our considerations when we approve
capital expenditure within our Global
Operations business.

Reducing our GHG emissions
Our approach to cutting emissions is
three-fold: tackling energy efficiency,
generating our own renewable energy
on-site and sourcing lower-carbon energy
through green tariffs and procuring
renewable energy certificates. To achieve
this, we are evaluating new ideas and
investing in technological solutions at
many of our sites. Our aim is to achieve
net zero status in line with our objectives.

During 2023, we calculated both our
2022 and 2023 Scope 3 GHG emissions
for 13 categories, and are beginning
to develop a roadmap for reduction.
See page 66 for more details.

Smith+Nephew Annual Report 2023

Our roadmap to net zero is outlined below.
These are our current actions, which will
be updated in the coming years as our
plans develop.

In accordance with the California Voluntary
Carbon Market Disclosures Act (AB1305),
detailed information is available on pages
36–39 of the 2023 Sustainability Report.

Net zero
In line with the Paris Agreement, which
aims to hold the increase in the global
average temperature to well below 2°C
above pre-industrial levels, and pursue
efforts to limit the temperature increase
to 1.5°C above pre-industrial levels, we are
committed to net zero. ‘Net zero’ means
that the activities within a company’s
value chain result in no net impact on the
climate from GHGs. It is in our roadmap
to achieve net zero Scope 1 and Scope 2
GHG emissions by 2040 and Scope 3 GHG
emissions by 2045, for more details see
the table below and page 36 of the 2023
Sustainability Report. We are on track to
achieve a 70% reduction in Scope 1 and
Scope 2 GHG emissions by 2025 compared
to a 2019 baseline.

We encourage all our employees and
supply chain partners to take responsibility
for minimising their energy use. We make
efforts to motivate staff to actively care
about the environment, providing them
with guidance and access to information
to enable them to make a real difference.

To identify and reduce our Scope 3
GHG emissions, we are working with our
suppliers to identify opportunities and then
build our roadmap for emissions reduction.
We continued to source renewable wind
energy for all our locations in Memphis
(US). We also sourced hydroelectric energy
for our manufacturing location in Malaysia.
These were both achieved through the
purchase of renewable energy certificates
(RECs). From October 2023, all our UK sites
began sourcing renewable energy through
the UK Green Tariff. We have installed
solar photovoltaic panels at our Suzhou
and Penang sites. Both systems began
operating in early 2023 and combined
the two solar-powered systems reduced
our Scope 2 GHG emissions by over
2,000 tonnes of CO2e in 2023.

Sourcing renewable energy reduces
our market-based GHG emissions,
i.e. the emissions from the electricity
we purchase.

Roadmap to net zero

What we have completed in 2023

– Conducted a detailed analysis of our energy usage data.
– Actioned our carbon reduction roadmap.
– Measured and reported our 2022 and 2023 Scope 3 GHG emissions from

13 categories, an increase from 8 categories reported for 2021.

– Sourced renewable electricity for our manufacturing facility in Memphis (US)
and started to generate renewable electricity from solar photovoltaic panels
in Malaysia and Suzhou (China).

What we are currently doing

– Preparing a carbon reduction roadmap to reduce Scope 3 GHG emissions.
– Sourcing renewable energy opportunities at all our strategic manufacturing sites.
– Converting our European and UK leased car fleet to electric vehicles (EVs).
– Expanding our supplier engagement through CDP.
– Promoting a salary sacrifice scheme in the UK to enable employees to drive EVs.

What we expect to do next

– Implement renewable electricity at all our strategic manufacturing sites by 2025.
– Convert our remaining global leased car fleet to electric vehicles.
– Actively engage with our suppliers and encourage them to set their own net

zero targets.

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Highlights

3.5 GWh

We are now generating renewable
energy in China and Malaysia in 2023.

2000 tCO2e

GHG emissions prevented from going
into the atmosphere by these projects.

Our net zero targets

2025

Begin by achieving a 70%
reduction in Scope 1 and
Scope 2 GHG emissions
by 2025.

2040

Achieve net zero Scope 1
and Scope 2 GHG emissions
by 2040.

2045

Achieve net zero Scope 3
GHG emissions by 2045.

Smith+Nephew Annual Report 2023

Shaping a healthy and sustainable future continued

Products

Innovating sustainably

Our objectives

Our progress in 2023

New products

Include sustainability review in New
Product Development (NPD) for all new
products and product acquisitions.

Sustainability is now embedded
into our NPD phase review process,
ensuring that we discuss, consider
and implement sustainability when
we design new products.

Packaging

We are committed to reducing our
packaging and designing with reusable,
recyclable and/or renewable resources
which are sustainably sourced.

Supply chain

By 2025, complete a focused risk based
due diligence of our Tier 1 suppliers,
including risk based analysis of sub tier
-
suppliers, to assure compliance with
our sustainability requirements.

We have refined and updated our
packaging objective. We have
continued to improve sustainable
sourcing, including our ‘regionalisation
strategy’ to purchase more packaging
materials from local suppliers.
We continue to use our electronic
Instructions For Use platform,
minimising paper instructions issued
where possible.

We have completed due diligence
and assessments of all Tier 1
suppliers according to our risk-based
procedure. We have continued our
supplier on-site audit programme for
suppliers identified through risk-based
analysis. On-site audits include worker
interviews and practical assessment of
the implementation of supplier policies
and procedures to assure compliance
with modern slavery, human trafficking,
HSE and sustainability requirements.

We aim to develop products with
sustainable attributes, increase access
to care, improve our environmental
impact and reduce costs.

Along with our customers and other
stakeholders, we are focused on the
environmental footprint of our products
and services. Manufacturing and supplying
safe and effective products is at the heart
of our business.

Our people, processes and technology are
structured to support progress towards
the objective of innovating sustainably.

We are applying sustainability attributes to
both our new products and their packaging
to support delivery of our ESG objectives
and those of our customers. We have
integrated sustainability as a specific topic
in our New Product Development phase
review process to drive consideration
of sustainability and efficiency in our
product design, specifically: 1) material
and energy usage during production; 2)
reduced product footprint for shipping/
transportation; and 3) recyclability of
waste products (e.g. packaging).

Our customers are increasingly requesting
information on the chemical components
and recyclability of our products and
packaging. Our focus on products will
assist our customers in reaching their
sustainability goals.

Packaging sustainability to minimise
environmental impact, both for new
products and our existing portfolio,
continues to be a key area of opportunity,
as does moving to digital Instructions
For Use (IFU). Our 2022 initiative to
reduce packaging dimensions for our
foam dressings has continued in 2023
and is resulting in reduced volumes of
packaging materials being used and
lower GHG emissions.

By 2025, we aim to have completed a
focused risk-based due diligence of our Tier
1 suppliers, including a risk-based analysis
of sub-tier suppliers. Supplier risk criteria
include country, commodity and spend,
and we have updated our global process for
managing Corporate Social Responsibility
(CSR) supplier risk. In 2023, we completed
internal screening due diligence with 100%
of our Tier 1 suppliers with additional due
diligence with identified potential high-risk
Tier 1 suppliers.

5858

Smith+Nephew Annual Report 2023

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RENASYS◊ TOUCH

The future starts now
The RENASYS◊ EDGE Negative Pressure
Wound Therapy System has been designed
with healthcare professionals and patients
in mind.
RENASYS◊ EDGE features years of innovation
built into a format that is more easily portable
and has a smaller footprint compared to
RENASYS◊ TOUCH and RENASYS◊ GO products.1
The size and weight of the device is designed
to allow patients to continue with their daily
lives and supports patient privacy.2
RENASYS◊ EDGE incorporates an intuitive,
user-friendly interface for easy to learn
operation and troubleshooting.3 Our step-
by-step user interface guidance is aimed at
supporting clinicians’ training and increasing
their confidence with therapy application.3
RENASYS◊ EDGE offers a short, user-friendly
and time-efficient on-board guide for cleaning
in between patient use.3,4 The modularised
design enables easy and low-cost repair.4
RENASYS◊ EDGE is sturdy, reliable and durable,
with the aim of minimising the need for
device returns.5

RENASYS◊ EDGE

3×

RENASYS◊ EDGE more
energy efficient than
RENASYS◊ TOUCH.6

34 kWh

energy saved compared to
RENASYS◊ TOUCH over its
lifetime, enough to charge a
mobile phone over 2,800 times.7

13 kg

C02 emissions saved
compared to RENASYS◊
TOUCH over its lifetime.8

Smith+Nephew Annual Report 2023

See page 264 for references.

Shaping a healthy and sustainable future continued

TCFD reporting
Pages 60–64 set out Smith+Nephew’s disclosures which are
consistent with the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD) framework. By this we mean the
four TCFD recommendations and the 11 recommended disclosures
set out in Figure 6 of Section B of the report entitled ‘Implementing
the Recommendations of the Task Force on Climate-related
Financial Disclosures’ published in October 2021 by the TCFD.

Board:
– Oversight of ESG strategy and
risk management programme.

Compliance & Culture
Committee:
– Oversight of ESG policy and
performance versus targets,
with reviews undertaken at
each committee meeting.

– Receives regular updates on ESG
and climate-related risks and
opportunities, people and culture
objectives including IDE and
ethics, compliance, quality and
regulatory matters.

Audit Committee:
– Oversight of the risk management

process and reviewing its
operating effectiveness.

– Receives regular updates on ESG
and climate-related financial risks
and opportunities.

– Assesses whether climate change

has a material impact on our
financial statements.

– Ensures the Company reports in
line with the recommendations
of the TCFD framework.

Remuneration Committee:
– Oversight and review of ESG

metrics within Remuneration Policy,
and compensation and incentive
plans generally.

– Approval of ESG percentage and
measures within short-term and
long-term incentive plans. In 2023,
the Committee approved 5% of the
Annual Bonus Plan for Executive
Directors would be dependent on the
achievement of ESG objectives and
in 2024, 5% of the Annual Bonus Plan
and 10% of the Performance Share
Plan for Executive Directors and
Executive Officers are dependent on
the achievement of ESG objectives.

Executive Committee:
– Driven by the Chief Executive Officer,
determination and management
of ESG strategy, with the President
Global Operations and Vice President
ESG accountable for leading
on implementation.

– Ensures that ESG risks and

opportunities are included in decision
making as part of each project,
initiative and the 12-Point Plan.

ESG Operating Committee:
– Established in January 2023.
– Supports the Executive Committee
in the execution and delivery of the
ESG strategy.

– Membership includes Global

Operations, ESG, Global
Manufacturing, Research &
Development, Global Procurement,
Public Policy & Government Affairs,
Finance and Human Resources.

Governance
The way in which we evaluate, manage and
embed sustainability within our business
and culture is directly linked to our Strategy
for Growth through a focus on People,
Planet and Products. Oversight of our ESG
strategy is one of the Matters Reserved
to the Board. The Board reviews the ESG
strategy, key risks and opportunities, and
progress on a regular basis and approves
the Sustainability Report annually, and
reviews and approves the ESG, TCFD and
SASB reporting in the Annual Report.

Three Board Committees are also closely
involved in reviewing the elements
of sustainability that impact the key
areas of our business. All Committees
receive regular updates on ESG strategy,
implementation, objectives and targets,
and climate-related financial risks and
opportunities. The Committee Chairs
report to the Board at each Board meeting:
– The Compliance & Culture Committee,
chaired by Marc Owen, assesses how
we implement our ESG strategy in
the core areas of People, Planet and
Products, encompassing the Group’s
impact on employees, the environment,
the local communities in which it
operates, customers, suppliers and other
key stakeholders. The Compliance &
Culture Committee also tracks progress
of the delivery on ESG objectives and
metrics, including a regular review of
our net zero emissions progress at each
Committee meeting.

– The Audit Committee, chaired by Rick
Medlock, is responsible for ensuring
oversight of the process by which risks
relating to the Group and its operations
are managed and reported. The Audit
Committee assesses the extent to which
climate change and other ESG risks are
likely to have a material impact upon our
financial statements by reviewing the
possible impact of different scenarios
related to climate change. The Audit
Committee also has oversight of the
TCFD reporting in the Annual Report.

– The Remuneration Committee,

chaired by Angie Risley, is responsible
for ensuring that the Remuneration
Policy and related incentive schemes
incorporate ESG targets and metrics
where appropriate to do so.

Smith+Nephew Annual Report 2023

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Smith+Nephew leaders consider ESG
risks and opportunities in their decision
making. For example, when evaluating
options for our new manufacturing
site in Melton, UK, an analysis of ESG
requirements and risks is being undertaken
as part of the project and decision making.
Where appropriate, papers submitted
to the Board by management for review
include an analysis of ESG issues and
opportunities to enable the Board to
consider these factors in decision making
and to ensure effective Board oversight
on ESG strategy, risks and opportunities.
Detailed information on our ESG risks can
be found in our Sustainability Report.

Strategy
Our ESG strategy is built on our purpose
– Life Unlimited, our Strategy for Growth
and our culture of Care, Courage and
Collaboration. Our ESG strategy, which was
developed by our Sustainability Council
in 2019 and approved by the Board, is
inspired by the United Nations’ Sustainable
Development Goals. Our strategy
reflects the importance of social,
environmental and economic aspects
of sustainable development.

Our Principal Risks capture our physical
and transitional climate-related risks
in our Enterprise Risk Management
(ERM) process.

Our Chief Executive Officer sets strategy
together with the Executive Committee,
and the President Global Operations and
the Vice President ESG are responsible
for the implementation and report
at least quarterly on our progress to
the Board, its Committees and our
Executive Committee. In January 2023,
we streamlined the governance and
operational structure around the delivery
of our ESG strategy. We established the
ESG Operating Committee to implement
and execute our ESG strategy across all
business areas, reporting directly into
the Executive Committee which will
continue to formulate and drive our ESG
strategy with oversight from the Board
and its Committees.

Transition risks

Climate-related risk

Potential impact

Timeframe

Actions taken by management

Commercial execution

Inability to satisfy customers’
sustainability requirements
and expectations.

Legal and compliance

Failure to identify existing or new
legal or regulatory requirements
including sanctions programmes
and ESG matters which result in
non-compliance with applicable
laws and regulations.

Failure to meet the needs of
stakeholders relating to increased
focus on and regulation of ESG
reporting requirements.

Carbon taxes.

Decline in customer demand.
Lower prices to remain
competitive.

Fines and sanctions.

Medium (3-7 years)
and long term (>7 years)

Continued new product launches
and monitoring of innovation pipeline.

Short (<3 years),
medium (3-7 years)
and long term (>7 years)

The ESG Operating Committee
assesses new and enhanced
regulations, reporting requirements
and works cross-functionally to
ensure compliance.

Decline in customer demand.

Medium (3-7 years)
and long term (>7 years)

Monitoring new regulatory
and enforcement trends.

Increased pricing of
GHG emissions.

Medium (3-7 years)
and long term (>7 years)

Net zero targets set for Scope 1, 2
and 3 GHG emissions.

New product innovation, design & development including intellectual property

Sustainability in new products.

Decline in customer demand.

Medium (3-7 years)
and long term (>7 years)

Sustainability criteria built into new
product development processes.

Pricing and reimbursement

Limited ability to pass on the cost
of sustainability improvements.

Higher input costs.

Medium (3-7 years)
and long term (>7 years)

Optimise portfolio mix and
promote differentiated products.

Quality and regulatory

Failure to meet stakeholder
expectations with regard to
increasing ESG regulations
and reporting requirements.

Decline in customer demand.

Medium (3-7 years)
and long term (>7 years)

Monitoring regulatory changes
and understand interpretation
of legislation.

Smith+Nephew Annual Report 2023

Shaping a healthy and sustainable future continued
TCFD reporting continued

Physical risks

Scenario modelling

Implication and mitigation

Global temperature rise

Based on the Intergovernmental Panel on
Climate Change's sixth assessment report,
we modelled the following scenarios out
to 2030 and 2050:
– Low: Limit warming to 2°C
(IPCC scenario SSP1-2.6)

– Medium: Limit warming to 3°C

(IPCC scenario SSP2-4.5)
– High: Limit warming to 4°C
(IPCC scenario SSP 3-7.0)

Sea-level rise

We modelled the following scenarios
out to 2030 and 2050:
– Sea-level rise up to 5 metres
– Distance from nearest coastline

Extreme weather

We modelled the following extreme
weather scenarios out to 2030 and 2050:
– Precipitation
– Wind
– Drought

Extreme heat increases the demand for cooling
and can overwhelm power grid infrastructures.
Existing defences and business continuity plans
are expected to mitigate any near-term impacts
and the longer-term impact is being closely
monitored by the ESG and operations teams.

Rising sea levels impact manufacturing sites
at coastal locations.
Existing flood defences and business continuity
plans are expected to mitigate any near-term
impacts and the longer-term impact on the
Group’s manufacturing footprint is an area of
focus being considered in our manufacturing
strategy. For example, the announced relocation
of our Advanced Wound Management facility
mitigates against the impact of sea-level rise
and accordingly reduces the potential impact.

Heavy precipitation events will make flooding
more probable, strong winds can damage roofs
and compromise the building envelope, and
more intense or prolonged droughts can lead
to diminishing water resources and potentially
more severe wildfires.
Existing weather defences and business
continuity plans are expected to mitigate any
near-term impacts and the longer-term impacts
are considered in our manufacturing strategy.

Potential severity
without mitigation

Potential severity
with mitigation

High

Medium

Low

Medium

Low

Smith+Nephew Annual Report 2023

In 2021, we aligned with the
recommendations of the
Intergovernmental Panel on Climate
Change and published our commitment
to achieve net zero Scope 1 and Scope
2 GHG emissions by 2040 and Scope 3
GHG emissions by 2045, beginning by
achieving a 70% reduction in Scope 1
and Scope 2 GHG emissions by 2025.
We understand how important it is to
balance environmental initiatives with
business activities and strive to reduce
emissions through new technology.
We have conducted a review of our
current state and captured related
business risks in our risk register.

Energy efficiency audits have been carried
out at sites in the UK and Germany in
2023 with the recommendations added
to improvement action plans.

The new UK site at Melton, on the
outskirts of Hull, will be designed to high
ESG standards with a focus on energy
and resource efficiency. The site aims to
generate on-site renewable energy.

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Scenario analysis
The scenario analysis undertaken in
2023 was supported by a third party
and included more than 30 locations.
The modelling focused on the material
impacts on our business and was based
on our current business activities and
assumed no mitigation. As outlined on
pages 61–62, our physical and transition
risks are captured in our ERM process.
Refer to our Risk report on page 67
for further details.

Based on the modelling undertaken,
the highest potential impact (without
mitigation) is in relation to global
temperature rise. The potential impact
of sea-level rise has decreased from the
prior year modelling with the announced
plans to build a new Advanced Wound
Management facility at Melton, on the
outskirts of Hull, which sits at a higher
elevation and is further inland than
the current facility. The Group closely
monitors climate-related physical risks
and is taking mitigating measures such
that the net impact to the business with
these measures in place is not expected
to be material.

We address climate-related risk primarily
through business strategies in our global
operations functions including facilities,
health and safety, business continuity
and global supply chain management.
Severe weather patterns as a result of
climate change may cause damage to
manufacturing or distribution facilities,
potentially impacting our ability to
meet customer demand over the long
term. Refer to the risk management
section on page 64 and the Risk report
on page 67 for more details on our risk
management process.

Climate-related opportunities
Climate-related opportunities are
identified and addressed through our ESG
strategy and programmes. Through this
process we have identified a number of
climate-related opportunities relating to
energy sourcing, energy efficiency, on-site
renewable energy generation, engagement
through the CDP Supply Chain programme
and packaging reduction initiatives.

In 2020, all our locations in Memphis (US)
began sourcing electricity from renewable
wind energy via the procurement of
renewable energy certificates (RECs)
and this has continued through 2023.
We completed construction of our
Malaysia facility in 2021 and photovoltaic
panels started generating renewable
energy on-site at the beginning of 2023.
Similarly, at our facility in Suzhou (China),
solar photovoltaic panels commenced
generating on-site renewable energy in
early 2023. All UK sites have sourced a
green tariff for the supply of electricity
from renewable sources from
October 2023.

Smith+Nephew Annual Report 2023

Our Scope 1, 2 and 3 GHG emissions data
are provided on page 66 of the Annual
Report with more detailed information
also available in our Sustainability Report.
In 2023, our combined Scope 1 and
market-based Scope 2 GHG emissions
reduced by 40% compared to our 2019
baseline year. We sent 30% less waste to
landfill from our strategic manufacturing
facilities compared to 2019.

In January 2023, we launched a salary
sacrifice scheme to make electric
vehicles available to all employees in
the UK. With electric vehicle chargers
in place at the majority of our UK
offices and manufacturing facilities,
all employees are being encouraged to
commute with more consideration for
the environment. This initiative will help
to lower our GHG emissions arising from
employee commuting.

Shaping a healthy and sustainable future continued
TCFD reporting continued

Risk management
Climate-related risks are managed through
our comprehensive risk governance
framework. At the top of our structure, the
Board sets our risk appetite and monitors
the application of our risk framework,
including strategy, execution and outputs
of risk reviews by the business and the
Group Risk team. The Board cascades our
risk appetite throughout our organisation
through the Executive Committee, the risk
owner community and our management
group. A formal ‘bottom-up’ exercise
ensures that risks are escalated back
through the process to our Board and
are reflected in our Principal Risks as
appropriate. Refer to pages 67–77 for
more detail.

Climate-related risks
We identify climate-related risks based
on short-, medium- and long-term horizons.
We consider short term to be within one to
three years (in line with our annual budget
and three-year plan cycles), medium term
to be within three to seven years (in line
with scenario modelling to 2030 and
typical product life cycles) and long term
to be greater than seven years. Short-term
risks are captured in our financial planning
process; medium- and long-term risks
are captured within our global footprint
planning process.

Our annual and three-year financial
planning, and our capital expenditure
planning processes require climate-
related risk information and specific
ESG considerations.

We maintain a separate sustainability risk
register where risk owners consider how
ESG and climate risks affect our Principal
Risks. These are managed through our
ERM process. Detailed information on
our ERM process can be found on pages
67–68 of the Annual Report and in our
Sustainability Report.

Metrics and targets
We have published an annual Sustainability
Report since 2001 detailing progress
against our global objectives. We have
objectives in each of our priority areas:
People, Planet and Products. Our key
climate-related metrics are greenhouse
gas emissions and waste to landfill. Our
key objectives in relation to these metrics
are net zero greenhouse gas emissions
by 2045 and zero waste to landfill at
our strategic manufacturing facilities
by 2030. Detailed information about our
objectives and progress made against
those objectives can be found on pages
54–59 of the Annual Report and in our
Sustainability Report.

In 2023, the Remuneration Committee
approved 5% of the Annual Bonus
Plan for Executive Directors would be
dependent on the achievement of ESG
objectives linked to our ESG strategy and
in 2024, 5% of the Annual Bonus Plan and
10% of the Performance Share Plan for
Executive Directors and Executive Officers
are dependent on the achievement of
ESG objectives.

We have mapped our Scope 1 and Scope
2 GHG emissions, and during 2022 we also
began to map our Scope 3 GHG emissions
in order to meet our objective of reducing
total life cycle GHG emissions to net zero
by 2045. In 2021, we also established
interim carbon reduction objectives for
2025. See our 2023 Sustainability Report
for details on our Scope 1 and Scope 2
net zero roadmap.

In 2022, we published our 2021 baseline
Scope 3 GHG emissions, including data
from eight of the 15 categories. In 2023,
we reported both our 2022 and 2023
Scope 3 GHG emissions from 13 of the
15 categories.

We have carbon reduction roadmaps
for our Scope 1 and Scope 2 GHG
emissions to show our pathway to
meet our objectives.

Smith+Nephew Annual Report 2023

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We have also targeted the use of online
‘real-time’ data to monitor energy usage
to make savings. We have a programme
to replace older inefficient equipment
with highly efficient equipment, such
as compressors, chillers, pumps, fans
and motors.

This year we also continued to convert
our company car fleet in Europe to electric
vehicles where appropriate.

In Memphis during 2023, we continued
to purchase RECs through Green Flex, a
voluntary renewable energy programme.
Certified by Green-e Energy, North
America’s leading certification programme
for renewable energy, Green Flex RECs
are based on wind power generated in
the Midwest US. Purchasing RECs gives
buyers the right to renewable energy
and also makes it possible to track
ownership of it. Our participation in this
scheme underscores our commitment to
supporting renewable energy and helps to
reduce our market-based carbon emissions
footprint. We also sourced hydroelectric
energy for our manufacturing location in
Malaysia through the purchase of RECs.
From October 2023, all our UK sites began
sourcing renewable power. Our sites in
Suzhou and Penang are now generating
electricity on-site using solar PVs.

CO2e reporting methodology,
materiality and scope

We report the carbon footprint of our Scope 1, Scope 2 and Scope 3
GHG emissions in tonnes of CO2 equivalent from our business
operations for the year ended 31 December 2023. We are including
UK-specific energy and emissions data to satisfy the Streamlined
Energy and Carbon Reporting (SECR) requirements.

Our focus is on the areas of largest
environmental impact, including
manufacturing sites, warehouses,
R&D sites and offices. Smaller locations
representing less than 2% of our overall
emissions are not included. Acquisitions
completed before 2023 are included in
the data, with more recent ones excluded.
This is in line with our established policy
for the integration of acquired assets.

Our GHG emissions reporting represents
our core business operations and
facilities that fall within the scope of
our consolidated financial statements.
Primary data from energy suppliers has
been used wherever possible. We report
our emissions in three scopes:
– Scope 1: Direct sources of emissions
which mainly comprise the fuels we
use on-site, such as gas and heating oil,
and fugitive emissions arising mainly
from the losses of refrigerant gases.
We have included UK vehicle emissions
from leased cars since 2020. In 2023,
we widened this to include 14 European
countries in our leased vehicle reporting.

– Scope 2: Indirect sources of emissions

such as purchased electricity and steam
we use at our sites.

– Scope 3: Indirect value chain emissions
that arise as a result of activities from
assets or processes not owned or
controlled by Smith+Nephew; these
can be further divided into upstream
and downstream emissions and fall into
15 defined categories. During 2023, we
have data available for 13 categories.

Location-based emissions are calculated
in compliance with the WRI/WBCSD
GHG Protocol Corporate Accounting
and Reporting Standard and have been
calculated using carbon conversion
factors published by the UK Government
Department for Energy Security & Net
Zero and the Department for Environment,
Food & Rural Affairs (Defra) for 2023.

We have applied the emission factors
most relevant to the source data, including
Defra 2023 (for UK locations), IEA 2021
(for overseas locations) and for the US
we have used the most recently available
US EPA ‘Emissions & Generation Resource
Integrated Database’ (eGRID) for the
regions in which we operate. All other
emission factors for gas, oil, steam
and fugitive emissions are taken from
Defra 2023.

In line with dual-reporting we also report
market-based emissions. These are
contractual or supplier-specific emission
factors that can be applied when procuring
low-carbon energy or siting facilities
in areas with lower emissions but also
recognising that this might be higher
than the grid average in some cases.
Where market-based factors were not
available, we have used ‘Residual Mix’ data
for the EU locations and IEA data for all
other countries, except for the remaining
US locations where the eGRID factors
were applied.

Smith+Nephew Annual Report 2023

Shaping a healthy and sustainable future continued
CO2e reporting methodology, materiality and scope continued

Reporting our Scope 3 emissions
During 2023, we have worked with our
global energy partner to measure our
2022 and 2023 Scope 3 GHG emissions
using a recognised protocol, CEDA
(Comprehensive Environmental Data
Archive). Our calculation of our 2023
Scope 3 GHG emissions was 1.3 million
tonnes of carbon dioxide equivalent from
the 13 categories that we measured.
Our data quality has improved, through
improved analysis and reporting within
each emissions category for Scope 3 and
by extending the number of categories
that we have reported. We also conducted
our first global commuting survey.

Our Scope 3 GHG emissions assessment
was made using the best available 2023
data. As expected, in line with our peer
group, purchased goods and services
contributes the most significant proportion
of our Scope 3 GHG emissions, over
83%. Further details are available in the
2023 Sustainability Report on page 38.
In 2024, we intend to prepare an emissions
transition plan which will cover all three
emission scopes.

Independent assurance
In 2023, selected Scope 1 and Scope 2
GHG emissions data were independently
assured by ERM CVS. Previously the 2022
and 2019 baseline data were assured.
More details and the full limited assurance
report can be found in the 2023
Sustainability Report on pages 59–60.
» www.smith-nephew.com/sustainability

CO2e emissions (tonnes) from:
Direct emissions (Scope 1)1
Indirect emissions (Scope 2)
(location-based)

Total (location-based)
Indirect emissions (Scope 2)
(market-based)

Total (market-based)
Energy consumption to calculate
Scope 1+2 emissions (GWh)1
Intensity ratio (location-based):
CO2e (t) per $m sales revenue
CO2e (t) per full-time employee

Intensity ratio (market-based):
CO2e (t) per $m sales revenue
CO2e (t) per full-time employee

Other indirect emissions
(Scope 3)4

2023

Global
(excluding UK)

Total

2022

Global
(excluding UK)

2019 (baseline year)

Global
(excluding UK)

Total

5,682

10,219

15,9012

5,563

6,605

12,1683

4,747

5,141

9,8883

3,997

9,679

3,800

9,482

55,015

65,234

20,565

30,784

59,0122

74,9132

3,856

9,419

24,3652

5,205

40,2662

10,768

57,961

64,566

31,474

38,079

61,8173

73,9853

36,6793

48,8473

4,911

9,658

5,072

9,819

62,413

67,3243

67,554

77,2123

52,080

57,1523

57,221

67,0403

195

243

188

237

168

213

13.6
3.9

7.3
2.1

14.2
3.9

9.4
2.6

15.1
4.3

13.1
3.7

1,276,079

1,385,356

1 UK-only vehicle data included in Energy and Scope 1 GHG emissions since 2020. A total of 14 European countries were included in 2023 vehicle data.
2 Data independently assured by ERM CVS, more details and the full assurance report are available in the 2023 Sustainability Report on pages 59–60.
3 Data independently assured by ERM CVS, more details and the full assurance report are available in the 2022 Sustainability Report on pages 60–61.
4 Measurement of 2022 and 2023 Scope 3 GHG emissions from the 13 categories measured. Refer to ‘Reporting our Scope 3 emissions’ above for more details.

2023 data includes recent acquisitions completed and new site openings during 2022.
Revenue: 2023: $5.5bn; 2022: $5.2bn; 2019: $5.1bn. Average full-time employee data: 2023: 19,081; 2022: 19,094; 2019: 18,030.

Smith+Nephew Annual Report 2023

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Emerging risks
Executive Committee risk owners continue
to scan the horizon for new and emerging
risks and these are discussed and considered
in the top-down risk discussion.

Emerging risks that were identified this
year include:
– Our customers, investors and other

internal and external stakeholders are
increasingly focused on our approach to
Environmental, Social and Governance
(ESG) matters and how we embed
ESG considerations into all areas of our
business. In 2023, we have responded
to this increased interest by enhancing
our ESG governance structure, ensuring
that ESG considerations are taken into
account in decision-making processes
and are reflected within each of our
Principal Risks as appropriate.

– Advances in Artificial Intelligence (AI),
machine learning, robotics, and other
technologies create opportunities
for the Group when used within
a clear governance framework.
These technologies can help us to
innovate to meet unmet patient
needs and earn and retain market
share through improved productivity
and customer service. The use of AI
technology should be implemented
with clear guidance on usage and
risk management in order to mitigate
the risk of employees or third parties
inadvertently disclosing proprietary
information or confidential or sensitive
data. As many AI tools are limited by
the information within the data sets that
they are trained on, human oversight
is required in order to manage risk and
avoid outputs that are inherently biased
or untrue. The Group has an internal
policy that defines the governance and
controls required to ensure the use
of AI is appropriate, transparent, and
properly implemented and monitored.

Risk report
Like all businesses, we face risks and uncertainties.
Smith+Nephew has developed an enterprise risk
management framework, together with supporting
policies and procedures, to support risk management
and value creation.

Our risk management process

1. Risk identification

2. Gross (inherent)
risk assessment

3. Current control
identification

4. Net (residual)
risk assessment

5. Risk response
planning

6. Risk reporting

7. Monitoring and review

Our risk management process
Successful identification and management of
existing and emerging risks is critical to the
achievement of strategic objectives and
to the long-term success of any business.
Risk management is therefore an integral
component of our corporate governance.

As in previous years, our Enterprise Risk
Management (ERM) process is based on
a holistic approach to risk management.
Our belief is that the strategic and
operational benefits of proactively
managing risk are achieved when ERM is
aligned with the strategic and operational
goals of the organisation. Our process
and governance structure achieve this.

2023 has seen a further maturing of
risk management. Our quarterly Risk
Champion workshops focused on topics
such as Business Continuity and Business
Change, Pricing and Reimbursement,
Cybersecurity, and external risk trends
and developments. This increased
awareness of external and internal
risks and management actions across
the Group. We enhanced our reporting
dashboards to share regular ERM insights
with Risk Champions and our executive
management. Executive Committee risk
owners report and discuss Principal Risk
trends from an operational perspective in
monthly Executive Committee meetings.
We further enhanced the annual top-down
Executive Committee risk assessment
process to ensure it considers a wide range
of external and internal themes, trends and
benchmarking information. The Group Risk
Team also enhanced their quality checks
to improve alignment between top-down
and bottom-up processes.

Smith+Nephew Annual Report 2023

Risk report continued

2024 Risk Management Plan
Our work will continue to evolve in 2024
with a particular focus on strengthening
cross-functional risk management in
alignment with the 12-Point Plan.

This will include deep-dive sessions
into specific risks with cross-functional
teams. We will work with the new head
of sustainability to further develop the risk
register in this area. The Group Risk team
will also continue to influence decision
making through effective challenge to
risk owners and Risk Champions in the
quarterly review process.

Our risk governance framework
At the very top of our structure is our
Board with responsibility for oversight
of risk management, setting our risk
appetite and monitoring the application
of our risk framework including strategy,
execution, and outputs of risk reviews
by the business and Group Risk team.
The Board cascades our risk appetite
throughout our organisation through
the Executive Committee, risk owner
community and our management Group.
A formal ‘bottom-up’ risk management
exercise ensures that risks are escalated
back through the process to our Board
and are reflected in our Principal Risks
as appropriate.

Providing guidance and rigour across
this process is our Executive Committee
and the Group Risk team.

At the third line of defence is our
Internal Audit function, providing an
annual opinion on the effectiveness of
our Risk Management process to the
Executive Committee, chaired by the
Chief Executive Officer, and then to
the Board and its Committees.

Risk management life cycle
Annual improvement and refinement
of our risk management process ensures
that it remains aligned with strategy
and operations.

Our Risk Management Policy, sponsored
by our Chief Executive Officer, is driven by
an Enterprise Risk Management Manual
and the Group Risk team providing
training to Business Area Risk Champions.

As in prior years, risks continue to
be managed through a ‘top-down’
and ‘bottom-up’ process, with
regular oversight from the Executive
Committee and quarterly reports
to the Board Committees.

An overview of our risk management
life cycle is illustrated below.

Audit
Internal

Board of
Directors and
Board Committees

Executive Committee

Business Area

Executive Committee

Group Risk Team

– Identifies and ensures

the management of risks
that would prevent the
Company from achieving
our strategic objectives.
– Appoints Business Area
Risk Champions who are
accountable for applying the
Enterprise Risk Management
Policy and Framework to
produce the risk deliverables.

– Reviews external/

internal environment
for emerging risks.
– Reviews risk register

updates from Business
Area Risk Champions.
– Identifies significant risks

and assesses effectiveness
of mitigating actions.

– Manages all aspects

of the Group’s approach to
Enterprise Risk Management
including design and
implementation of processes,
tools, and systems to identify,
assess, measure, manage,
monitor, and report risks.
– Facilitates implementation

and co-ordination
through Business Area
Risk Champions.

– Provides resources and

training to support process.
– Reports regularly on risk to
the Executive Committee.
– Prepares Board and Group
Risk Committee reports.

Internal Audit

– Provides independent

assurance to the Board
and Audit Committee on the
effectiveness of the Group’s
Risk Management process.
– Provides annual assessment
of effectiveness of Enterprise
Risk Management.

Smith+Nephew Annual Report 2023

Board of Directors
and Board Committees

– The Board is responsible
for oversight of risk
management, for our annual
strategic risk review and
for determining the risk
appetite the organisation is
willing to take in achieving
its strategic objectives.
– The Board monitors risks
through Board processes
(Strategy Review, Disclosures,
M&A, Investments, Disposals)
and Committees (Audit
and Compliance & Culture).

– The Audit Committee is
responsible for ensuring
oversight of the process
by which risks relating
to the Company and its
operations are managed and
for reviewing the operating
effectiveness of the Group’s
Risk Management process.

Business Area Risk Champions
– Carry out day-to-day risk
management activities.
– Identify and assess risk.
– Implement strategy and

mitigating actions to treat
risk within Business Area.

– Lead regular risk
register updates.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023 Principal Risks

We assess our Principal Risks in terms of their potential
impact on our ability to deliver our business strategy.
We have grouped our Principal Risks into five categories:
Compliance and Reputation, External, Financial, Operational
and People. The Principal Risks are presented in
alphabetical order according to their grouping below.

Risk grouping

Compliance
and Reputation

– Legal and Compliance.
– Quality and Regulatory.

External

Financial

Operational

People

– Political and Economic.

– Foreign Exchange.
– Pricing and

Reimbursement.

– Talent Management.

– Cybersecurity.
– Global Supply Chain.
– Mergers and
Acquisitions.
– New Product

Innovation, Design
& Development
including Intellectual
Property.
– Strategy and

Commercial Execution.

Our Strategy for Growth

1 Strengthen the

foundation to serve
customers sustainably
and simply

2 Accelerate profitable

growth through
prioritisation and
customer focus

3 Transform our

business through
innovation and
acquisition

» See pages 8–11 for further information on our Strategy for Growth

Risk key

Risk oversight

A Audit Committee N Nomination & Governance Committee R Remuneration Committee C Compliance & Culture Committee B Board

Risk change from 2022

Increased risk

Reduced risk

No change

Smith+Nephew Annual Report 2023

Risk report continued
2023 Principal Risks continued

Compliance and reputation risks

Legal and compliance

We are committed to doing business with integrity
and believe that ‘doing the right thing’ is part of our
mandate to operate. We operate in multiple countries
and regulatory authorities in each jurisdiction enforce
an increasingly complex pattern of laws and regulations
that govern the design, development, approval,
manufacture, labelling, marketing, sale and operation
of both traditional and digital healthcare products
and services.
Operating across this complex and dynamic legal
and compliance environment, which includes
regulations on bribery, corruption, privacy, sustainability
and trade compliance, increases the risk of fines,
penalties, and reputational damage. We mitigate this
through policies, procedures, training and practices
designed to prevent and detect violations of law,
regulations and industry codes. We conduct risk-based
oversight to monitor compliance with our Code of
Conduct and associated policies.

Oversight
C

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate
3. Transform

Quality and regulatory

Global regulatory bodies continue to increase their
expectations of manufacturers and distributors
of medical devices not only in respect of quality
and regulation of products but also in respect of
sustainability requirements. Our products are used
in the human body and therefore patient safety is
of paramount importance. The European Medical
Device Regulation (EU MDR), and multiple other global
regulations and changes in standards have increased
the focus on clinical and technical evidence, supplier
controls and product performance transparency.
Our customers and other stakeholders also require
us to explain our approach to and demonstrate
compliance with increasing sustainability regulations
and reporting requirements.

Oversight
C

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate

Examples of risks
– Failure to act in an ethical manner

consistent with our Code of Conduct
and Business Principles.

– Violation of anti-corruption or

healthcare laws, breach by employee
or third-party representative.

– Misuse or loss of personal information of
patients, employees, research subjects,
consumers or customers results in
violations of data privacy laws, including
General Data Protection Regulations.

– The development, manufacture and
sale of medical devices entail risk of
product liability claims or recalls.

– Failure to identify changes in or

new legal or regulatory requirements
including sanctions programmes
and ESG matters which result in
non-compliance with applicable
laws and regulations.

– Failure to meet needs of stakeholders
relating to increased focus on and
regulation of ESG reporting
requirements.

Actions taken by management
– Board Compliance & Culture

Committee oversees our ethical
and compliance practices.

– Global compliance programme,
policies and procedures in place
and regularly updated.

– Annually all employees required
to undertake training and certify
compliance with our Code of
Conduct and Business Principles.

– Group monitoring and auditing

programmes in place.

– Launched enhanced confidential
independent reporting channels
for employees and third parties
to report concerns.

– Trade compliance programme,

policies and procedures.

– Appointed a new head of ESG
– The ESG Operating Committee

assesses new and enhanced regulations
and reporting requirements and
works cross-functionally to
ensure compliance.

– Monitoring new regulatory
and enforcement trends.

Examples of risks
– Transition to EU MDR impacts ability

Actions taken by management
– The Quality departments within

to meet customer demand.

– Time required by Notified Bodies to
review product submissions and site
quality systems’ certification time for
new products impacts ability to meet
customer demand.

– Defects in design or manufacturing
of products supplied to, and sold by,
the Group could lead to product recalls
or product removal or result in loss of
life or major injury.

– Significant non-compliance with policy,
regulations or standards governing
products and operations regarding
registration, design, manufacturing,
distribution, sales or marketing.
– Failure to obtain proper approvals

for products or processes.

– Stringent local requirements for clinical
data across various markets globally.
– Failure to meet stakeholder expectations
with regard to increasing sustainability
regulations and reporting requirements.

each Business Unit regularly monitor
activities to comply with new
requirements, including EU MDR.

– Regular engagement with Notified Bodies,
MHRA and regulatory representatives
to monitor regulatory changes and
understand interpretation of legislation.

– Comprehensive and documented

product quality processes and controls
from design to customer distribution in
place, with the addition of cybersecurity
to new product development projects
for relevant products.

– Standardised monitoring and

compliance with quality management
practices through our Global Quality
and Regulatory Affairs organisation.
– Incident management teams in place

to provide a timely response in the event
of an incident relating to patient safety.

– Governance framework in place for

reporting, investigating and responding
to instances of product safety
and complaints.

– Local clinical evidence requirements
are included in global new product
development projects.

Smith+Nephew Annual Report 2023

External risks

Political and economic

We operate a global business and are exposed
to the effects of political and economic risks,
changes in the regulatory and competitive landscape,
trade policies and trade compliance requirements,
war, political upheaval, changes in government policy
regarding healthcare priorities and sustainability
expectations, increasing inflationary pressure and tax
rates, preference for local suppliers, import quotas,
economic sanctions and terrorist activities.

Oversight
B

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Examples of risks
– Global or regional recession and increasing
macroeconomic controls impact on
customer financial strength.
– Global political and economic

uncertainty and conflict, including in
Ukraine and the Middle East.
– Failure to meet the sustainability
targets and public policy changes.
– Failure to pivot on business strategy

in light of increased sanction
programmes globally.
– Market access rights.
– Increases in import and labour costs.
– Increases in tariffs and restrictions on

global trade.

– Inflationary pressures impacting raw
materials, freight, salaries and wages.

– Potential for significant tax rate
changes and/or base broadening
measures in key jurisdictions where we
operate including OECD proposals and
US tax reform.

– Failure to comply with current tax laws.
– Transfer pricing policy not correctly

implemented or monitored.

– Changing legislation in the US and other
key markets may require changes to our
operating model.

Actions taken by management
– Built sustainability strategy on our

purpose, business strategy, and culture
pillars, and tracked and benchmarked
targets within the industry.
– Our ESG Operating Committee

implements and operationalises ESG
strategy and provides data and metrics
to monitor implementation.
– Continued engagement with

governments, administrations, and
regulatory bodies to enhance education
and advocacy efforts with policymakers.

– Global trade compliance programme,

policies and procedures.

– Business continuity plans developed

with alternative source options
identified for critical suppliers and
increased safety inventory levels for
critical products affected by the conflict
in Ukraine and disruptions of travel
through the Red Sea and Suez Canal.

– Actively participate in trade

associations to enhance education and
advocacy efforts with policymakers.
– Ongoing engagement and monitoring/
lobbying on localisation initiatives.

– The Group Tax team continually monitors
developments in tax legislation and
obtain external advice where relevant.

– The Group Tax team, supported by

external advisers, works closely with
the business to implement agreed
processes and procedures.

– Seeking appropriate independent
third-party advice when required.

Smith+Nephew Annual Report 2023

Risk report continued
2023 Principal Risks continued

Financial risks

Foreign exchange

We operate a global business and are therefore exposed
to exchange rate volatility. Volatility in foreign currency
exchange rates can impact our results and it may not be
possible to fully mitigate against them.

Oversight
A

Link to Strategy
1. Strengthen

Change from 2022

Pricing and reimbursement

Our success depends on our ability to sell our
products profitably, despite increasing inflation and
costs associated with improving the sustainability
of our products, pricing pressures from customers
and the availability of and access to adequate
government funding and reimbursement to meet
increasing demands for our products arising from
patient demographic trends. The prices we charge
are therefore impacted by budgetary constraints
and our ability to persuade customers and
governments of the economic value of our products,
based on clinical data, cost, patient outcomes and
comparative effectiveness.
Market developments such as China volume-based
procurement, consolidation of customers into buying
groups, inflation, increasing professionalisation of
procurement departments and the commoditisation
of entire product groups, continue to challenge prices.
We mitigate this through price increases to counteract
the impact of inflation where possible, portfolio mix
and promotion of differentiated products, including
a compelling clinical and economic value proposition.

Oversight
B

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate

Examples of risks
– Risk of adverse trading margins

due to fluctuating foreign currency
exchange rates between our main
manufacturing operations (the US,
UK, Costa Rica, Malaysia and China)
and where our products are sold.

Actions taken by management
– A foreign exchange hedging programme
is operated and is overseen centrally
by the Group Treasury team.

– The Finance and Banking Committee
monitors ongoing treasury matters
including foreign exchange exposure.

Examples of risks
– Reduced reimbursement levels

and increasing pricing pressures.

– Systemic challenge on number

of elective procedures.
– Lack of compelling health

economics data to support
reimbursement requests.

– Unilateral price controls/reductions

imposed on medical devices.

– Price-driven tendering/

procurement processes.
– Volume-based procurement
in China and other markets.
– Limited access to non-clinical

decision makers.

– Limited ability to pass on increased
costs such as raw materials, freight,
sustainability improvements
and the cost of compliance with
regulations to our customers.

Actions taken by management
– Our 12-Point Plan includes an initiative
which focuses on pricing strategy and
execution in order to mitigate some
of the impact of inflation.

– Developed innovative economic

product and service solutions for both
Established and Emerging Markets.

– Incorporated health economic

components into the design and
development of new products.
– Sales training to improve capability
to communicate the clinical and
economic value proposition to
non-clinical decision makers.

– Implementing innovative contracting
models designed to lessen the risk of
adoption and coverage for healthcare
providers and payers.

– Increased engagement with payer
bodies to influence reimbursement
mechanisms to reward innovation.
– Optimise portfolio mix and promote

differentiated products.

– Consideration of price increases.

Smith+Nephew Annual Report 2023

Operational risks

Cybersecurity

We depend on a wide variety of information systems,
programmes and technology to run our business
effectively. We also develop and sell certain digitally
enabled products that connect to proprietary and
third-party networks and/or the internet.
Our systems and the systems of the entities we
acquire may be vulnerable to a cyber-attack, theft of
intellectual property, malicious intrusion, data privacy
breaches or other significant disruption. We have a
layered security approach in place to prevent, detect
and respond, to minimise the risk and disruption of any
intrusions and to monitor our systems on an ongoing
basis for current or potential threats.

Examples of risks
– Loss of confidential or sensitive

information, intellectual property
and/or data privacy breach.
– Inadequate consideration of

cybersecurity in the design of new
products, systems and/or processes.
– Disruption to business operations due
to a significant cybersecurity incident.

– Increased government focus on
cybersecurity and changes in
regulatory environment.

– Increasing demand for cybersecurity
expertise could impact our ability to
attract and retain cybersecurity talent.
– Disruption to the business due to critical
system infrastructure and applications
being unavailable.

Oversight
A

Change from 2022

Link to Strategy
1. Strengthen
3. Transform

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Actions taken by management
– Ensured every user has access to

and is using a secure Virtual Private
Network (VPN) when connecting
to Smith+Nephew networks to
safeguard remote working.
– Continued security awareness

activities including email
communications, intranet posts,
visuals, videos and more email
phishing training activities.

– Multi-factor authentication tools

reduce the likelihood of remote attacks.

– Security information and event
management (SIEM) in place to
provide real-time analysis of security
alerts generated by applications and
network hardware.

– Regular penetration testing and frequent
vulnerability scanning undertaken.

– Endpoint protection and intrusion

detection/prevention implemented.

– Security governance structure in

place including a Security & Privacy
Steering Committee.

– Monitor developments from

governments and raise changes and
developments with Global IT Security.

– Cybersecurity Maturity Programme
monitored by the Audit Committee.
– IT disaster recovery policy in place.

Smith+Nephew Annual Report 2023

Risk report continued
2023 Principal Risks continued

Operational risks continued

Global supply chain

Our ability to make, distribute and sell medical
products to customers in over 100 countries involves
complex manufacturing and supply chain processes.
Increased outsourcing, sophisticated materials, and the
speed of technological change in an already complex
manufacturing process leads to greater potential for
disruption in our supply chain. Lack of availability of
raw materials and components compound supply
and business disruption.
Capacity constraints and the regulatory environment,
including the increased focus on global regulation of
sustainability, increase our exposure to supply chain
disturbance. Increasingly frequent climate events
increase the likelihood and impact of disruptions
to our supply chain.
Increased inflationary pressure on production,
freight and warehousing and distribution costs
increases our risk of failing to achieve accelerated
profitable growth.
Our business depends on our ability to plan for and
be resilient in the face of events that threaten one
or more of our key locations. Damage caused by
environmental and climate change factors, including
natural disasters and severe weather, can and do
threaten our critical sites.

Oversight
B

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate

Examples of risks
– Disruption to manufacturing at a single
source facility (lack of manufacturing
redundancy), including from
natural disaster.

– Manufacturing and supply

chain capacity not adequate
to support growth.

– Constrained supplier sterilisation

capacity due to increased regulation
and enforcement.

– Risks associated with the transition

of warehouse and distribution activities
to external supplier impacting inbound
and outbound logistics.

– Supplier failure impacts ability to
meet customer demand (single
source supplier).

– Inadequate sales and operational
planning impacts ability to meet
customer demand for product.
– Excess inventory due to incorrect
demand forecasts, inaccurate
demand signals and unexpected
changes in demand.

– Failure of suppliers and distribution
partners to achieve and maintain
regulatory compliance.

– Increasing costs of raw materials

and freight.

– Increasing salary and wage costs

for manufacturing and distribution
employees and contractors.
– Severe weather patterns, global
temperature rise and sea-level
rise caused by climate change or
natural disaster causes damage
to manufacturing or distribution
facilities, impacting ability to meet
customer demand.

– Disruption to the business due to
critical system infrastructure and
applications being unavailable.
– Critical material shortages leading

to supply challenges.

– Increased freight cycle times due to

conflict in the Middle East, resulting in
disruptions of travel through the Red
Sea and Suez Canal.

– Labour attrition and delays

in backfilling.

– Failure to transform to achieve

our sustainability targets.

Actions taken by management
– Our 12-Point Plan includes initiatives
to improve product availability and
inventory, enhance procurement
and management of transportation
costs, focus on lean manufacturing
and quality and optimise our
manufacturing network.
– Delivering Global Operations

transformation programme to
optimise manufacturing and
distribution centres and reduce
single source limitations.
– Global Operations project

management governance and toolkits
to support successful execution of
transformation programmes.
– Risk-based review programmes
undertaken for critical suppliers.
– Business continuity plans developed

with alternative source options
identified for critical suppliers and
increased safety inventory levels for
critical products.

– Implemented an enhanced Sales

Inventory and Operations (SI&OP)
process to improve demand and
supply planning.

– Executive oversight of sales and

operational planning.

– Increased co-ordination between

commercial, supply chain and logistics
to improve forecast accuracy.
– Comprehensive product quality
processes in place from design
to customer supply.

– Supplier contract agreements achieve
and manage regulatory compliance.
– Initiatives to improve manufacturing

efficiency and reduce overhead costs.

– IT disaster recovery policy in place.
– Leadership taskforce established to
resolve cumulative impact of global
supply chain events.

– Global, regional, and local crisis

management governance in place.
– Emergency and incident management
and business recovery plans in place
at major facilities and for key products
and key suppliers.

– Appointed a new head of ESG.
– An ESG Operating Committee

implements and operationalises
ESG strategy and provides data and
metrics to monitor implementation.
– Investment in flood defences at our
operations in Hull and building of a
new R&D and manufacturing facility
for Advanced Wound Management
in Melton West.

Smith+Nephew Annual Report 2023

Examples of risks
– Failure to identify appropriate

acquisitions.

– Failure to conduct effective
acquisition due diligence.

– Failure to integrate newly acquired
businesses effectively, including
integration with Group standards,
policies and financial controls.

– Failure to deliver on plans to achieve

the acquisition business case.

Mergers and acquisitions

As the Group grows to meet the needs of our
customers and patients, we recognise that we are
not able to develop all the products and services
required using internal resources and therefore need
to undertake mergers and acquisitions in order to
expand our offering and to complement our existing
business. In other areas, we may divest businesses or
products which are no longer core to our activities.
It is crucial for our long-term success that we make
the right choices around acquisitions and divestments.
Failure to identify appropriate acquisition targets,
to conduct adequate due diligence or to integrate
them successfully or to deliver on the acquisition
business case would have an adverse impact on
our competitive position and profitability.

Oversight
B

Link to Strategy
3. Transform

Change from 2022

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Actions taken by management
– Acquisition activity aligned with

corporate strategy and prioritised
towards products, business units
and markets identified to have the
greatest long-term potential.

– Clearly defined investment

appraisal process based on range
of valuation metrics including return
on invested capital, in accordance
with Capital Allocation Framework
and comprehensive post-acquisition
review programme.

– Detailed and comprehensive
cross-functional due diligence
undertaken prior to acquisitions by
experienced internal and external
experts (including the integration
management office).

– Compliance and other risks included as

part of due diligence reviews, integration
plans and reporting for acquisitions.

– Integration committee review,

approval of integration plans and
monitoring of ongoing process.

– Board has annual post-deal

review session.

New product innovation, design & development including intellectual property

Our product innovation pipeline is becoming
broader in scope and increasingly complex, as we
focus our efforts on procedure innovation using
digital technologies such as connectivity, machine
learning, and artificial intelligence. Our focus on high
growth and profitable markets requires us to better
understand unmet customer needs, drivers of surgical
efficiency and patient outcomes, and new country/
regional regulations including requirements related
to cybersecurity and sustainability. Our innovation
pipeline needs to be sufficiently differentiated
from our competition in order for us to deliver
our commercial ambition.
If Smith+Nephew fails to protect and enforce its
intellectual property rights successfully, its competitive
position could suffer, which could impact profitable,
sustainable growth.

Oversight
B

Link to Strategy
3. Transform

Change from 2022

Examples of risks
– Failure to develop, partner or acquire a

competitively differentiated innovation.

Actions taken by management
– Our 12-Point Plan includes an initiative
to reposition our knee and hip portfolio.

– Insufficient long-term planning to

respond to competitor and disruptive
entries into the marketplace.
– Inadequate innovation due to low
Research & Development (R&D)
investment, R&D skills gap or ineffective
product development execution.
– Loss of market share due to critical
gaps in product portfolio not filled.
– Loss of proprietary data due to natural
disasters or failure of Product Lifecycle
Management (PLM) systems.
– Competitors may assert patents

or other intellectual property rights
against the Group or fail to respect
the Group’s intellectual property rights.

– Failure to ensure sustainability in

new products.

– Continued product and technology
acquisitions and product launches
and effective implementation of new
product launches.

– Global R&D organisation and

governance framework providing
strategic direction for allocation of
R&D investment across all businesses.
Clear stage-gate process to continually
evaluate R&D investment decisions
and development of new products.

– Cross-functional New Product Design and
R&D processes focused on identifying
new products and potentially disruptive
technologies and solutions.

– Replacing global Product Lifecycle

Management systems.

– Monitored external market trends and
collated customer insights to develop
product strategies.

– Ongoing monitoring of competitor

patent portfolios post product launch.
– Ongoing intellectual property training

for business counterparts.

– Sustainability criteria built into new
product development processes.

Smith+Nephew Annual Report 2023

Risk report continued
2023 Principal Risks continued

Operational risks continued

Strategy and commercial execution

The long-term success of our business depends on
setting the right strategic priorities such as the 12-Point
Plan and our three-year strategic plan and executing
on our plans to deliver priority initiatives in highly
competitive markets.
This requires effective communication and engagement
both internally on a cross-functional basis (for example,
in order to drive procedure-based selling models) and
with our customers, suppliers and other stakeholders.
We must also successfully embed the right governance
structures, accountability and capabilities across
the Group and ensure we adjust and refine strategic
priorities and business models when necessary.
The pace and scope of our business change initiatives
may increase execution risk for the change programmes
as well as for our business-as-usual activities. Failure to
set and execute on priorities and drive cross-functional
accountability within our business will impact our
ability to continue to grow our business profitably
and sustainably and to serve our customers.

Oversight
B

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate
3. Transform

Examples of risks
– Failure to execute our strategy adequately
from high-level ambition to specific
actions to make the ambition a reality.

– Multiple change initiatives, including
those within our 12-Point Plan could
distract management from delivering
business-as-usual objectives.

– Inability to keep pace with significant
product innovation and technical
advances to develop commercially
viable products.

– Failure to engage effectively with our

key stakeholders to meet their evolving
needs leading to loss of customers.
– Failure to manage distributors effectively
leading to stocking and compliance issues.
– Inability to satisfy customers’ sustainability

requirements and expectations.

– Limited healthcare professional access

to medical education.

Actions taken by management
– Dedicated Acceleration Office and
Executive Steering Committee led
by our CEO to monitor the successful
delivery of the 12-Point Plan.

– Changed our commercial operating
model from a franchise and regions
model to business unit model.
– Executive oversight of changes to
our commercial operating model.
– Strategic planning process clearly
linked to business and Group risk.
– Continued new product launches

and monitoring of innovation pipeline.

– Implemented an enhanced Sales

Inventory and Operations (SI&OP)
process to improve demand and
supply planning.

– Enhanced accessible digital sales
information and training modules
for sales staff.

– Failure to achieve potential from

– Enhanced Virtual Medical Education

acquisitions due to integration challenges.

– Failure to effectively implement core

elements of business change prevents
our projects and programmes achieving
the intended benefits and disrupts
existing business activities.

platforms and opening of the
Smith+Nephew Academies in
Singapore and Munich.

– Integration committee to review/

approve integration plans and monitor
ongoing processes.

– Our 12-Point Plan includes an initiative
to reposition our knee and hip portfolio.

– Continued product and technology
acquisitions and product launches
and effective implementation of new
product launches.

– Project management governance,

toolkits and project steering committee
oversight to support successful
execution of programme and projects.

Smith+Nephew Annual Report 2023

People

Talent management

In the current market, recruitment and retention
of top talent and minimising attrition is a critical
risk which requires a strong engagement process.
We recognise that people leadership, effective
succession planning and the ability to engage,
retain and attract talent is a key lever of success
for our business. Failure to do so places our ability
to execute the Group strategy and to be effective
in the chosen market/discipline at risk.

Oversight
B

Change from 2022

Link to Strategy
1. Strengthen
2. Accelerate

Examples of risks
– Loss of key talent, high attrition

and lack of appropriate succession
planning in context of required
skillsets for future business needs.

– In the event that the Company’s

remuneration strategies, quantum
and structure particularly in terms of
long term incentives for US executives
are not adequately addressed to
better align to local market norms,
the Company may not be able to
effectively compete for, attract and
retain talent, which may impact
management stability, internal talent
pipeline development and the ability
for management to drive value creation.

– Loss of competitive advantage due
to an inability to attract and retain
top talent.

– Loss of intellectual capital due
to poor retention of talent.
– Failure to attract talented and

capable candidates.

– Increased talent movement globally
due to shifting personal work-life
balance priorities.

– Increased salaries globally.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Actions taken by management
– Our 2024 Remuneration Policy proposes
a package of long-term incentive plan
adjustments for US executives to be
more closely aligned with norms in the
US in terms of structure and quantum.
Our draft Remuneration Policy and
a comprehensive discussion of our
proposals is set out on pages 126–135
of our Remuneration Report.

– Talent planning and people

development processes well
established across the Group.
– Talent and succession planning
discussed annually by the Board
and regularly by the Executive
Committee and Nomination &
Governance Committee.

– Identification of high-value roles
and ensuring that these roles are
filled with our high-performance
individuals with strong succession
plans in place.

– Developed strategic skills resourcing

plan by functional areas.

– Provided employees with access
to tools and resources to manage
their emotional, physical, and
mental wellness.

– Enhanced Inclusion, Diversity

and Equity (IDE) policy, including
establishment of Employee Inclusion
Groups (EIGs) and IDE Inclusion
Council in order to foster culture of
belonging within the organisation
and promote engagement, attraction
and retention of top talent.

– Ongoing segmentation of specific job
roles and applying focused rewards
to ensure we are competitive and
attractive to candidates.

Smith+Nephew Annual Report 2023

Risk report continued

Our Viability Statement

How we assess our prospects
During the year, the Board has carried
out a robust assessment of the Principal
Risks affecting the Company, particularly
those which could threaten the business
model. These risks, and the actions
being taken to manage or mitigate them,
are explained in detail on pages 67–77
of this Annual Report.

In reaching our Viability Statement
conclusion, we have undertaken the
following process:
– The Audit Committee reviewed the Risk
Management process at their meetings
in February, April, July and December,
receiving presentations from the Group
Risk team, explaining the processes
followed by management in identifying
and managing risk throughout
the business.

– In July and September 2023, the

Executive Committee met to review
the 2023 Principal Risks (the top-down
risk review process). The Executive
Committee was asked to consider the
significant risks which they believed
could seriously impact the profitability
and prospects of the Group and the
Principal Risks that would threaten its
business model, future performance,
solvency or liquidity.

– All Executive Committee members
nominated the Risk Champions and
have worked with them to prepare
risk registers. The Risk Champions
nominated by the Executive
Committee are senior employees
and in risk management.

– Using the outputs from the Business
Area ‘bottom-up’ risk identification
completed in September 2023 and
following ‘top-down’ discussions
with the Executive Committee,
the most significant risks affecting
our organisation were presented to the
Executive Committee for approval in
November as the draft 2023 Principal
Risks facing the Company and again
in January 2024 as final disclosures.

– The Executive Committee decided
to streamline the 12 Principal Risks
from 2022 into 11 Principal Risks with
amendments to the descriptions within
each Principal Risk to reflect the macro
and internal factors to be taken into
account in 2023.

– In assessing our TCFD risks we

concluded that climate-related risks
are not significant in our viability
horizon of three years. Nonetheless,
the impact of extreme weather events
have been considered in our operational
risk scenarios.

– All relevant executives have attested
alignment to the Group’s Enterprise
Risk Management Process as part of
the annual certification on governance,
risk, and compliance.

– The Board debated and agreed the risk
appetite for each of the Principal Risks
in February 2023.

– Final Principal Risks were presented

to the Audit Committee and the Board
in February 2023 for their consideration
and approval.

– Throughout the year, a number of
reviews into different risks were
conducted by the Board, the Audit
Committee and the Compliance
& Culture Committee looking into
the nature of the risks and how
they were mitigated.

Assessment period
The Board have determined that the
three-year period to December 2026
is an appropriate period over which
to provide its Viability Statement.

This period is aligned to the Group’s
Strategic Planning process and reflects
the Board’s best estimate of the future
viability of the business.

Scenario testing
To test the viability of the Company,
we have undertaken a robust scenario
assessment of the Principal Risks,
which could threaten the viability
or existence of the Group.

These have been modelled as follows:
– In carrying out scenario modelling

of the Principal Risks on the following
page we have also evaluated the impact
of a severe but plausible combination
of these risks occurring over the three-
year period. We have considered and
discussed a report setting out the terms
of our current financing arrangements
and potential capacity for additional
financing should this be required in
the event of one of the scenarios
modelled occurring.

– We are satisfied that we have robust
mitigating actions in place as detailed
on pages 67–77 of this Annual Report.
We recognise, however, that the long-
term viability of the Group could also
be impacted by other, as yet unforeseen,
risks or that the mitigating actions we
have put in place could turn out to be
less effective than intended.

Viability Statement
Having assessed the Principal Risks,
the Board has determined that we
have a reasonable expectation that
the Group will be able to continue
in operation and meet its liabilities
as they fall due over a period of
three years from 1 January 2024.
In our long-term planning we consider
horizons of between five and 10 years.
However, as most of our efforts are
focused on the coming three years,
we have chosen this period when
considering our viability.

Our conclusion is based on the
Strategic Plan reviewed and approved
by the Board in December 2023. We will
continue to evaluate any additional risks
which might impact the business model.

By order of the Board, on 26 February 2024.

Helen Barraclough
Company Secretary

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2023 Scenarios modelled

Scenario 1: Global economic downturn

Significant global economic recession, leading to sustained lower
healthcare spending across both public and private systems.
Reduced reimbursement levels and increasing pricing pressures.

Link to strategy
– Accelerate profitable growth through prioritisation

and customer focus.

Action taken: We have modelled 10% lower revenue throughout 2024
and 5% lower revenue throughout 2025.

Action taken: We have modelled annual price erosion of 1% impacting all
product lines, along with a full drop through impact on profit in each of the
periods 2024–2026.

Link to Principal Risks
– Global supply chain.
– Strategy and commercial execution.
– Political and economic.
– Pricing and reimbursement.

Scenario 2: Operational risk
Inability to keep pace with significant product, innovation, and technical
advances to develop commercially viable products, losing significant
market share to the competition.

Action taken: We have modelled 1% lower growth than planned for a key
product range in the US, along with a full drop through impact on profit in
each of the periods 2024–2026.

Disruption to a Global Distribution Centre (GDC) preventing our ability to supply
our customers with all products from the applicable GDC for one quarter.

Action taken: We have modelled an inability to supply products from one
of our GDCs for one quarter of 2025.

Key supplier disruption – resulting in our inability to manufacture and
supply a few key products for a full year.

Action taken: We have modelled an interruption to receiving goods from
a key supplier for a period of one year in 2025.

Increases in raw materials, freight and labour costs.

Product liability claim.

Action taken: We have modelled an increase in our input costs by an additional
5% in each of the periods 2024–2026, due to continued inflationary pressures.

Action taken: We have modelled a group of product liability claims resulting
in a settlement agreement requiring cash payment in each of the periods
2024–2026, without any insurance coverage.

Link to strategy
– Strengthen the foundation to serve customers sustainably and simply.
– Transform our business through innovation and acquisition.

Link to Principal Risks
– Strategy and commercial execution.
– New product innovation, design & development including

intellectual property.
– Global supply chain.
– Legal and compliance.
– Political and economic.
– Talent management.

Scenario 3: Foreign exchange, legal, regulatory and compliance risks
Data privacy failure – giving rise to a significant fine or loss.

Action taken: We have modelled a one-off significant fine from regulator
of 2% of revenue or loss resulting from a data privacy issue in 2025.

Failure to obtain proper regulatory approvals for products or processes
impacting our ability to sell products.

Action taken: We have modelled the complete loss of revenue from a key
product effective in mid-2024 for two years, and returning to lower volumes
in mid-2026.

Risk of adverse trading margins due to fluctuating foreign currency
exchange rates across our markets.

Action taken: We have modelled a reduction in profitability in 2025 and
2026 due to a weakening in other currencies relative to the US Dollar by 5%.

Link to strategy
– Strengthen the foundation to serve customers sustainably and simply.

Link to Principal Risks
– Legal and compliance.
– Quality and regulatory.
– Foreign exchange.

Scenario 4: Cybersecurity
Disruption to business operations due to a significant cybersecurity
incident.

Action taken: We have modelled one of our key regions being unable
to invoice also affecting shipping and tracking of deliveries for one month
due to a disruption to our IT infrastructure in 2024.

Link to strategy
– Strengthen the foundation to serve customers sustainably and simply.

Link to Principal Risks
– Cybersecurity.

Scenario 5: Mergers and acquisitions

Failure to integrate newly acquired business effectively to achieve
expected growth.

Action taken: We have modelled a scenario of zero growth in a recently
acquired business in 2024.

Link to strategy
– Transform our business through innovation and acquisition.

Link to Principal Risks
– Mergers and acquisitions.

Smith+Nephew Annual Report 2023

Smith+Nephew Annual Report 2023
Smith+Nephew Annual Report 2023

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Enabling those
moments that
bring balance
together

Life Unlimited

Smith+Nephew Annual Report 2023

Our stakeholders

Section 172 statement

We are a leading portfolio medical
technology company and Our Purpose
is Life Unlimited – we exist to restore
people’s bodies and their self-belief.
» See pages 13–17 for

more on Life Unlimited

We live our Purpose through our culture
pillars of Care, Courage and Collaboration
to use technology to take the limits off
living, and help other medical professionals
do the same.
» See pages 46–49 for
more on our culture

Our ambition is to transform into a
structurally higher growth company
through our Strategy for Growth:

Strengthen the foundations
in commercial and manufacturing to
enable us to serve customers sustainably
and simply, and deliver the best from our
core portfolio.

Accelerate our growth profitably
through robust prioritisation of resources
and investment, and with continuing
customer focus.

Transform ourselves for higher long-term
growth, through investment in innovation
and acquisitions.
» Read more in the Chief Executive

Officer’s Review pages 8–11, and the
Governance report on the Board
activities on pages 100–101.

In accordance with section 172 of
the Companies Act 2006 and the UK
Corporate Governance Code 2018, the
Board considers the potential impact
on the Company’s key stakeholders
and takes their views and interests into
account when making decisions. The pages
referenced in each of the sections below
form part of this statement and provide
examples of our approach to stakeholder
engagement and how the Board considers
their views and the impact of decisions
on key stakeholder groups. The Board is
committed to taking a long-term view in
order to deliver sustainable value creation
for shareholders and other stakeholders.

The Board understands the importance of
ensuring that the views and interests of all
stakeholders are considered in the delivery
and oversight of the Company’s strategy
and culture.

Although members of the Board engage
directly with stakeholders as part of site
visits or employee engagement meetings,
engagement with stakeholders mostly
takes place at an operational level and
the Board forms its views through reports
and information presented to it by
management. Management are asked to
outline and present the potential impacts
on stakeholders to the Board where
appropriate during the review, discussion
and decision making process.

Employees
Our Employees are crucial
to the success of our
business. Creating a culture
of belonging and an
environment that fosters
innovation, delivers
business success and
strengthens engagement
and development is core to
everything we do.
» See page 84

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Customers and suppliers
Healthcare Professionals
and patients are at the
centre of everything we do.
Working in partnership with our
suppliers ensures we have the right
resources to support our growth
and that those who partner with us
are committed to doing business
in a way which is consistent with
our values.
»

See page 87

Investors
Our Investors are the
owners of our business.
The Board seeks to engage and
understand their perspectives
on performance, value, risk
and governance. Our Investor
presentations are available
to download on our website:
www.smith-nephew.com.
» See page 85

Our Stakeholders

Environment and
communities
People, Planet and Products
are at the heart of our
ESG strategy aiming to
create a positive impact
on our communities,
reducing the impact on our
environment and enabling us
to innovate sustainably.
»

See page 86

Smith+Nephew Annual Report 2023

Governments
and regulators
We focus on product safety,
compliance and doing business
the right way in order to achieve
the full potential of our portfolio.
We engage through industry
bodies and similar organisations
with focus on key issues impacting
our organisation and the MedTech
industry more broadly.
»

See page 86

Engaging with our stakeholders

Engaging with our
stakeholders

Employees

Areas of interest
– Purpose, Strategy and Culture.
– Leadership and succession planning.
– Talent, retention and development.
– Employee wellbeing and cost of living.
– Inclusion, Diversity and Equity (IDE).

The Board has oversight of the initiatives
being undertaken to strengthen, accelerate
and transform the Company in line with our
Strategy for Growth, driving the creation
of value whilst ensuring we are doing
business in the right way. Engagement with
our stakeholders, including employees,
investors, customers and suppliers,
governments and regulators and our
local communities provides valuable
feedback and insight for the Board into
what matters to stakeholders most, and

helps to foster greater understanding of
the impact of decisions on each of our key
stakeholder groups.

In matters brought to the Board for
discussion and approval, the Board
considers the likely consequences and
impact on stakeholders in the longer term,
and carefully considers their interests as
part of the decision-making process in the
interests of the Company as a whole.

How we engage
– Direct engagement through Board/employee listening sessions. A number of Non-Executive

Directors lead these sessions in order to understand more about the Company culture,
employee engagement and IDE.

– Meeting with employees informally during visits to our sites and during our Board meetings.
– Board Inductions enable the Board to hear directly from employees on Purpose, Strategy

and Culture.

– The Remuneration Committee and the Compliance & Culture Committee (CCC) receive updates
at each meeting on the activities of our Employee Inclusion Groups (EIGs), and initiatives relating
to IDE, wellbeing and community together with the initiatives relating to ongoing review of
programmes to support the wider workforce.

– The Board and its Committees are provided with updates on leadership and talent development

and succession planning for senior executives.

2023 Outcome/impact
– The Board received valuable feedback from the 2023 listening sessions with employees
wanting to hear more from management on innovation, the link from our strategy to our
Commitments and culture, talent development and ESG and IDE initiatives.

– The site visit to Costa Rica provided an opportunity for direct engagement with EIGs and

leadership teams in Operations and GBS functions which enable the Board to measure and
monitor the Culture of the organisation.

– Feedback from the Chair and new Non-Executive Directors has been positive on the breadth
and depth of the induction programme. Please see page 107 for our Q&A with Jez Maiden.

– The review programmes relating to compensation adjustment for markets materially

impacted by high inflation have continued and have been reported to the Remuneration
Committee and CCC.

– Board listening sessions, site visits and succession planning reviews have provided confidence
for the Board that the Company is focusing its efforts on developing a strong internal talent
pipeline and visibility on succession planning for high value roles within the Company.

Focus for 2024
– Management have taken actions to

continue to focus on communicating
on innovation, linking strategy and
commitments, talent development and
ESG/IDE strategic initiatives in global
webcasts, leadership team meetings and
through internal communications and the
Company intranet S+N Life.

– Board members will follow up on the

outcomes and impact of the actions taken
to address the 2023 employee feedback
from Board listening sessions.

– The Chair and Non-Executive Directors will
be provided with additional opportunities
to visit certain key Company sites as part
of their induction.

– The 2024 Board Listening Sessions have
been amplified to include additional Non-
Executive Directors to enable the Board to
hear from a broader group of employees.
The 2024 sessions will focus on several key
topics including the new Global Business
Unit model, new leaders, remuneration,
12-Point Plan initiatives within Operations
and the ways in which corporate functions
enable success.

– Induction and refresher sessions will

continue to be developed and delivered
programmatically to Non-Executive
Directors depending on their areas
of interest.

– Continue to report on and review
workforce equity initiatives and
programmes to support the
wider workforce.

– Two full board sessions planned for

2024 focusing on talent, retention and
succession planning for senior leaders.

» See pages 46–49 for People
» See pages 111–113 for Compliance

& Culture Committee

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Investors

Areas of interest
– Strategy and Performance.
– Capital Allocation and Dividend.
– Leadership and Succession planning.
– Remuneration.
– Sustainability and ESG.

How we engage
– Chair engagement with investors, groups and teams covering strategy and operational

excellence, remuneration, succession planning and ESG matters.

– Senior Independent Director engages with investors and governance teams on topics of

investor interest including Board composition, diversity and ESG matters.

– Our Chief Executive Officer and our Chief Financial Officer engage regularly with investors

as part of an ongoing dialogue throughout the year.
– US Executive Director Remuneration Consultation.
– Meet the Management Day enabled direct engagement with investors for members of

the Board.

– The Board receives analyst reports, reviews the share register and receives reports on investor

meetings and investor perceptions of the Company through external advisor sessions.

2023 Outcome/impact
– The Chair and management received consistent feedback from investors to reiterate investor

perspectives and expectations on performance improvement, value creation and cost
management. The Board and senior management have addressed the feedback provided to
the extent possible through investor communications and other engagement.

– The Meet the Management event was attended by Non-Executive Directors either virtually
or in person, which provided further context and insight into investor areas of focus such as
operational excellence, cost management, improvement in inventory and cash and talent
retention, which in turn shape Board agendas and discussions.

– Engagement on US Executive Director Remuneration proposals shaped the proposed 2024

Remuneration Policy (see pages 126–135).

Focus for 2024
– Continued focus and support from the
Board on strategy, performance and
operational excellence to support delivery
of value creation for investors.

– Continued engagement by the Chair and
Board on remuneration matters in order
to ensure that the Company remains
competitive in key markets to attract and
retain talent.

– Continue to seek opportunities for direct
Board engagement with Investors on key
topics of investor focus.

– Continued engagement by the Chair

and Board with Investors on key matters
throughout the year which feed through to
the Board agenda.

» See pages 248–256 for
Shareholder information

“I have had the opportunity to meet some

of our larger investors who have been
generous with their time and speak
from many years’ experience of both
the sector and Smith + Nephew. I also
had the opportunity to meet some of
our smaller investors at the AGM in April
2023 which was a pleasure to attend
and a reminder that ultimately, in all
we do, there are savers and pensioners
who rely on us to grow the value of their
investments.”

Rupert Soames
Chair

Smith+Nephew Annual Report 2023

Engaging with our stakeholders continued

Governments and regulators

Areas of interest
– Product safety.
– Compliance with applicable legal and regulatory requirements.
– Promotion of fair competition.
– Social and economic concerns.

How we engage
– Updates are provided on our Global Compliance programme with applicable metrics and

monitoring at each CCC meeting.

– The Board and CCC receive updates on product quality and regulatory matters and

compliance with applicable laws and regulations.

– The Chief Executive Officer and other senior leaders engage through industry bodies such

as AdvaMed, Medtech Europe and similar organisations in order to advocate for and provide
perspectives on core issues which are of critical importance to the MedTech industry.

– The Chief Executive Officer and senior management meet with governments and regulators,

as applicable.

2023 Outcome/impact
– The Chief Executive Officer and other senior leaders participated in a number of industry
meetings and interest groups in order to drive issues of critical importance to both the
organisation and the MedTech industry.

– The CCC received reports on product and regulatory audits which provide comfort and

confidence that product safety is being managed and maintained effectively.

– The CCC and Board also receive updates from the Group General Counsel under legal
privilege relating to any material legal matters of which the Board should be aware.

Environment and communities

Areas of interest
– Investment and innovation in local communities.
– Understanding how the Company’s business impacts local communities and global business.

How we engage
– The Board approves the ESG Strategy annually and receives updates on core ESG initiatives at

each meeting as appropriate.

– Updates on performance and progress on key environment and social metrics are provided

at each CCC meeting.

– Updates on reporting and disclosures are included at each Audit Committee meeting.
– Remuneration Committee determines ESG metrics for remuneration purposes liaising closely

with the CCC to ensure that metrics are quantifiable and measurable.

– The Chair, Chief Executive Officer and Company Secretary attend industry roundtable and

panel discussions on ESG matters which impact the Company.

2023 Outcome/impact
– At the Costa Rica site visit, the Board received detailed presentations on the environmental

and community initiatives being undertaken by our employees locally and had direct
engagement with members of our EIGs.

– Proposed Remuneration Policy for 2024 includes ESG metrics for both short-term and long-

term incentive plans.

Focus for 2024
– The Board and the CCC will continue
to receive reports on product safety,
compliance with applicable laws and
regulations and will receive updates on
Company interactions with governments
and regulators as appropriate.

– The Chief Executive Officer and senior
leadership will continue to engage and
participate in discussions with industry
bodies in order to advocate for and amplify
issues which are of importance to the
organisation and the MedTech industry
more broadly.

See page 33 for
Quality & Regulatory

Focus for 2024
– Board site visits and induction programmes
will continue to include further information
and on key areas of focus within ESG for
the Company.

– The Board will continue to engage with

EIGs as appropriate on site visits and report
on Board listening sessions.

– The CCC will continue to track progress

against key objectives and metrics in terms
of transition plan and other objectives.
– The Audit Committee will continue to
review key disclosures and reporting
obligations around sustainability risks.

– The Remuneration Committee will

continue to review key elements of ESG
metrics for remuneration purposes.
– Board members and the Company

Secretary will continue to attend industry
discussions on ESG matters of importance
to the Company.

» See pages 111–113 for Compliance

& Culture Committee

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Focus for 2024
– Continued focus at Board level on

innovation pipeline and product portfolio
to meet customer requirements.

– Continued focus from the Board and its
Committees on risk management and
ensuring product quality, compliance with
applicable laws and regulations and doing
business the right way.

– The Board will monitor ongoing network

transformation initiatives and supply chain
focus on excellence and productivity.

– The Board and CCC will continue to

focus on customer requirements in the
area of People, Planet and Products.
– See also Sustainability Report for further

details on how we plan to continue
to consider areas of importance to
our customers.

» See pages 111–113 for Compliance
& Culture Committee Report

Customers and suppliers

Areas of interest
– Innovation and improved outcomes.
– Ensuring product quality, compliant with regulations and doing business the right way.
– Partnering with suppliers to ensure business is done the right way.
– ESG.

How we engage
– The Board reviews the portfolio strategy throughout the year, together with acquisition
pipeline for key assets to accelerate innovation and respond to customer and patient
unmet needs.

– The Board and CCC are provided with updates on product quality, regulatory matters and

complaints and legal, compliance and ethical matters.

– We continue to work with our suppliers and explain our expectations in our Third-Party

Guide to our Code of Conduct.

– Our customers continue to focus on ensuring that ESG and sustainability are taken into

account in our decision making aligned with their own policies and procedures.

2023 Outcome/impact
– Please see pages 26–29 on innovation highlighting initiatives designed to support unmet

customer needs.

– The Board and CCC received regular reports on quality audits as part of ongoing monitoring.
– The CCC continues to monitor company response to new regulations impacting our products,
quality and regulatory matters and FDA and other regulatory engagement and reports to the
Board at each Board meeting.

– Monitoring of supply chain and procurement matters is reviewed regularly by the Board with

a focus on outcomes of the 12-Point Plan initiatives and metrics.

– Please also see pages 9 and 45–47 of our Sustainability Report which highlight our customer

and supplier focus.

– Board review of our Sustainability Strategy ensures a clear link to stakeholders and issues of

importance to customers.

– The Board and CCC receive reports at each meeting on sustainability matters which take

into account the views and requirements of our customers and in turn how we engage with
our suppliers to reflect customer approach.

Further information about our relationship
with other stakeholders, including the local
communities in which we operate and the
impact of climate change on our business,
can be found in the Sustainability Report
on pages 9 and 33.

The Strategic Report comprising
pages IFC–81 was approved by
the Board on 26 February 2024.

Deepak Nath, PhD
Chief Executive Officer

Smith+Nephew Annual Report 2023

Governance at a glance

This section provides an overview of our
corporate governance structure, our
policies and practices, as well as the key
activities undertaken by the Board and its
Committees to ensure effective leadership
and the implementation of strong
corporate governance at Smith+Nephew.

Statement of Compliance
The Board is committed to the highest standards
of corporate governance. We comply with the
provisions and principles of the UK Corporate
Governance Code 2018 (2018 Code). The Company’s
American Depositary Shares and bonds are listed on
the New York Stock Exchange (NYSE) and we
are therefore subject to the rules of the NYSE as
well as to US securities laws and the rules of the
Securities and Exchange Commission (SEC) applicable
to foreign private issuers. We comply with the
requirements of the NYSE and SEC and have no
significant differences to report between
the US and UK corporate governance standards.

We explain in this ‘Governance’ section how we
comply with and have applied the 2018 Code during
the year. The 2018 Code can be found at
www.frc.org.uk/getattachment/88bd8c45-50ea-
4841-95b0-d2f4f48069a2/2018-UK-Corporate-
Governance-Code-FINAL.pdf. We also explain
how we have complied with the Financial Conduct
Authority’s (FCA) Listing Rules and Disclosure &
Transparency Rules (DTRs) throughout the year.

1. Board leadership
and Company purpose
The Board’s primary focus is the long-term success of the
Company. It ensures the right resources and culture are
in place to deliver on its objectives, and is responsible for
effective engagement with stakeholders.
» See pages 84–87 and 90–95

“In a world in which stakeholders have

different, and sometimes conflicting,
views on how, and to what end,
companies should be run, Boards
have to be resolute in discharging their
responsibilities in the best interests
of the Company as a whole.”

Rupert Soames, OBE
Chair

2. Division of responsibilities
The Board ensures a diverse balance of Executive and Non-
Executive Directors with clear definition of their respective
roles and responsibilities.
» See pages 96–99

Board meeting attendance

Board

Audit

Nomination
& Governance

Compliance
& Culture

Remuneration

94%

100%

88%

95%

96%

Key Activities
– Purpose and culture
– Strategy and innovation
– Operations and commercial excellence
– Stakeholders
– Risk and internal controls

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3. Composition, succession
and evaluation
The Board maintains an appropriate balance of skills,
experience and knowledge to ensure that it can discharge
its responsibilities. The evaluation of Board performance
and succession plans are crucial to ensure that the Board
operates effectively.
» See pages 102–110

Board ethnicity

Board tenure

White British or other White
(including minority-white groups)

Asian/Asian British

Not specified/prefer not to say

0-2 yrs

3-5 yrs

6+ yrs

4. Audit, risk and internal control
and Compliance and Culture
The Audit Committee’s assurance that the financial
reporting is fair, balanced and understandable is important
for stakeholders to determine the Company’s performance.

The Compliance & Culture Committee assists the Board in
monitoring ethics and compliance, quality and regulatory,
culture and sustainability matters across the Group.
» See pages 111–120

5. Remuneration
The Remuneration Committee designs policies and practices
to support strategy and stability thereby promoting the
long-term sustainable success of the Company. In doing so, it
ensures these align with the remuneration and related policies
across the Group’s workforce.
» See pages 121–154

Single figure remuneration

Deepak Nath

Anne-Françoise
Nesmes

Salary

Pension & Benefits

Bonus

LTI

Deepak Nath

$1,512,726

$65,000

$1,997,124

Nil

Anne-Françoise
Nesmes

$785,673

$109,735

$1,010,184

$154,354

Forfeited Incentives

$1,083,402

Nil

Total remuneration

Deepak Nath

$4,658,252

Anne-Françoise Nesmes

$2,059,946

67%

58%

42%

92%

58%

67%

58%

67%

58%

Board gender diversity

33.33% female 66.67% male

Board experience

Employee engagement

CEO

Financial

International

Healthcare/Medical Devices

Emerging Markets

Cybersecurity

ESG

UK Governance

Remuneration

Smith+Nephew Annual Report 2023

Committee key

Committee Chair

Member of the
Audit Committee

Member of the Nomination
& Governance Committee

Member of the
Remuneration Committee

Member of the Compliance
& Culture Committee

Deepak Nath
Chief Executive Officer
Appointed Chief Executive Officer
in April 2022

Key skills and competencies:
Deepak brings global leadership and
risk-management expertise and has
a track record of driving growth at
major healthcare companies through
delivering a significant improvement in
execution and building a strong results-
focused culture.

Current external appointments:
None.

Marc Owen
Senior Independent Director
Appointed Independent Non-
Executive Director in October 2017
and Senior Independent Director
in September 2022

A C N

Previous experience:
He began his career as a scientist in
computational physics at Lawrence
Livermore National Laboratory and
holds a BSc and MSc in Mechanical
Engineering and a PhD in Theoretical
Mechanics from the University of
California, Berkeley. Prior to joining
Siemens Healthineers, he held roles
at both Amgen and McKinsey and
spent 10 years at Abbott Laboratories,
Inc. culminating in his appointment
as President of Abbott Vascular.
At Siemens Healthineers (2018–2022)
he was President of the Diagnostics
business responsible for $6 billion of
revenue and 15,000 employees.

Nationality:

American

Previous experience:
Rupert stepped down in December
2022 after nine years as Group Chief
Executive from Serco Group plc,
the specialist services business in
Health, Defence, Transport and
Immigration. Previously, he was Chief
Executive Officer of Aggreko plc
for 11 years and prior to that Chief
Executive of Misys plc’s Banking and
Securities Division. Rupert was Senior
Independent Director and a member
of the Audit, Remuneration and
Nomination Committees for both DS
Smith and Electrocomponents plc (now
RS Group).

Nationality:

British

Board leadership and Company purpose

Board of Directors

Rupert Soames
Chair
Appointed as an Independent
Non-Executive Director in April 2023
and as Chair in September 2023

N R

Key skills and competencies:
Rupert has extensive global leadership
experience, a proven track record
of delivering shareholder value
and a deep understanding of UK
corporate governance.

Current external appointments:
– Chair of the Confederation of

British Industry.

Anne-Françoise Nesmes
Chief Financial Officer
Appointed Chief Financial Officer
in July 2020 and stepping down from
the Board in Q1 2024

Key skills and competencies:
Anne-Françoise has worked as a senior
finance executive in global FTSE listed
companies for many years, which
alongside a strong business acumen
and deep sector knowledge provides
her with the experience required to be
part of the Smith+Nephew leadership
team. She demonstrates a high
competency for delivering operational
excellence across different geographic
markets and leading large teams who
are responsible for significant budgets.
She has an impressive and diverse
background and her ability to translate
financial insights into results helps
guide Smith+Nephew.

Current external appointments:
– Senior Independent Director and
Chair of the Audit Committee
at Compass Group plc.

Previous experience:
Anne-Françoise joined GlaxoSmithKline
plc in 1997 where she worked for 16
years, holding multiple senior finance
roles including Senior Vice President,
Global Vaccines. Anne-Françoise
served as Chief Financial Officer for
Dechra Pharmaceuticals plc in 2013
where she successfully implemented
financial strategies to support the
growth of the business. She was
Chief Financial Officer of Merlin
Entertainments Limited (formerly
Merlin Entertainments plc) from 2016
to 2020, leaving after successfully
completing the transaction to take the
company private.

Nationality:

British/French

Key skills and competencies:
Marc is a proven leader with an astute
strategic vision, capable of building
significant international healthcare
businesses. He has strong commercial
healthcare expertise. Marc is
responsible for ESG through his role as
Chair of the CCC.

Current external appointments:
None.

Previous experience:
Marc commenced his healthcare
and technology career at McKinsey
& Company where he progressed
to senior partner and eventually
a founding partner of McKinsey’s
Business Technology Office. In 2001,
Marc joined McKesson Corporation and
served as Executive Vice President and

member of their Executive Committee.
He delivered strategic objectives
and led over 40 acquisitions and
divestments over a 10-year period.
In late 2011, he headed McKesson
Speciality Health, which operates
over 130 cancer centres across the
US and provides market intelligence,
supply chain services, patient access
to therapy, provider and patient
engagement and clinical trial support.
In 2014, he was appointed Chair of
the European Management Board at
Celesio AG. He retired in March 2017
once he had improved operations,
set the strategy and recruited
his successor.

Nationality:

British/American

Smith+Nephew Annual Report 2023

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GOVERNANCE
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OTHER INFORMATION

home offer. She then moved to Spectris
plc, where she had responsibility
for a portfolio of global industrial
technology businesses, as well as for
the Group’s digital strategy. From April
2019 to April 2023, Jo served as
Chief Executive Officer for Tyman
plc where she made sustainability
a core foundation of the group’s
strategy. Jo was also previously Chair
of the Remuneration Committee for
Norcros plc.

Nationality:

British

Erik Engstrom
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in January 2015. Stepped down
from the Board on 31 December 2023

Jo Hallas
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in February 2022

A N

Key skills and competencies:
Erik has successfully reshaped RELX
Group’s business in terms of portfolio
and geographies. He brings a deep
understanding of how technology
can be used to transform a business
and insight into the development of
new commercial models that deliver
attractive economics. His experience
as a Chief Executive Officer of a global
company gives him valuable insights as
a member of our Audit and Nomination
& Governance Committees.

Current external appointments:
– Chief Executive Officer of

RELX Group.

Previous experience:
Erik commenced his career at
McKinsey & Company and then worked
in publishing, latterly as President and
Chief Operating Officer of Random
House Inc. and as President and Chief
Executive Officer of Bantam Doubleday
Dell, North America. In 2001, he moved
on to be a partner at General Atlantic
Partners, a private equity investment
firm. Between 2004 and 2009, he was
Chief Executive Officer of Elsevier,
the division specialising in scientific
and medical information and then
from 2009 Chief Executive Officer
of RELX Group, the division specialising
in scientific and medical information
and then from 2009 Chief Executive
Officer of RELX Group.

Nationality:

Swedish

Key skills and competencies:
Jo has extensive international
experience focused on business
transformation through both organic
and acquisitive growth in global
industrial and consumer sectors.
She brings valuable expertise which
will help Smith+Nephew build upon and
achieve our strategic ambitions.

Current external appointments:
None.

Previous experience:
Jo commenced her career at Procter
& Gamble based in Germany, the
US, Thailand and the Netherlands.
She then joined Bosch where she
held a business unit leadership role
in their Power Tools division followed
by Invensys in 2009 where she ran
their global heating controls business
unit including launching its first smart

John Ma
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in February 2021

Katarzyna Mazur-Hofsaess
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in November 2020

He initially joined Fosun Pharma to
lead their medical device business and
in 2014 became President of Fosun
Healthcare Holdings. He served as
a key member of their healthcare
investment committee which went
on to establish a global presence
across the US, Europe, Israel and
China. In 2017, John joined Intuitive
Surgical as their Senior Vice President
of Strategic Growth Initiatives. He has
previously served as a NED for both
Haier Electronics Group and Clinical
Innovations LLC.

Nationality:

American

Key skills and competencies:
John has an impressive track record
in medical device businesses and
his contribution provides value as
Smith+Nephew continues to develop
innovative ways to grow and serve
our markets with a focus towards Asia
Pacific regions. He is an established
healthcare leader and has strong
experience of driving market entry and
growth within emerging markets.

Current external appointments:
– Founder, Chair and Chief Executive

of Ronovo Surgical.

Previous experience:
In 2000, John joined GE Healthcare and
became Vice President and General
Manager of their Global Product
Company in China. John has also held a
number of senior positions as President
of Asia Pacific regions at Pentair Inc.,
Vice President of Express Scripts Inc.,
and Global Partner of Fosun Group.

Smith+Nephew Annual Report 2023

Key skills and competencies:
Katarzyna demonstrates a true
passion for customer focus and
maintains an impressive track record in
senior leadership within the MedTech
industry. She is a qualified medical
doctor (PhD) and has a wealth of
experience in medical devices and
orthopaedic sectors. Her Chief
Executive Officer experience of a
global company and valuable industry
knowledge will help drive innovation
and ensure the continued development
of Smith+Nephew.

Current external appointments:
– Chief Executive Officer, Care

Enablement (MedTech segment),
at Fresenius Medical Care AG and a
member of the Management Board.

Previous experience:
Katarzyna commenced her corporate
career at Roche in Poland, was later
recruited by Abbott Laboratories to
manage their diabetes care division
in Poland and became Country
General Manager.

Her career progressed to General
Manager of Molecular Diagnostics
Division for EMEA and eventually
to Divisional Vice President Abbott
Diagnostics for Europe. In 2010,
she became President EMEA region
at Zimmer, following the Biomet
acquisition and led the integration in
the region and served as President
EMEA for Zimmer Biomet, leading
orthopaedic company. In 2018, she
joined Fresenius Medical Care, the renal
company, as CEO EMEA and Member of
the Management Board.
Effective January 2022, Katarzyna
took over responsibility for the globally
operating Care Enablement segment
in which Fresenius Medical Care
AG has consolidated its €5.5 billion
healthcare products business
into one MedTech organization.
Her responsibility includes research
and development, quality and
regulatory, manufacturing, supply
chain and commercial operations.

Nationality:

German/Polish

Board leadership and Company purpose continued
Board of Directors continued

Jez Maiden
Independent
Non-Executive Director
Appointed Independent Non-Executive Director
in September 2023 and as a member of the Audit
and Remuneration Committee. Will become
Chair of the Audit Committee from 1 March 2024

A R

Rick Medlock
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in April 2020. Stepping down as
Chair of the Audit Committee on 1 March 2024
and will not submit for re-election at the AGM

Key skills and competencies:
Jez has extensive financial experience
across a diverse range of industries
and sectors. Jez brings more than 15
years of global experience both as a
FTSE Chief Financial Officer and as
a Non-Executive Director on boards
of companies addressing strategic
and operational challenges across
a number of different industries,
including life-sciences and healthcare.
He has had oversight of large
operations in the US, Europe and Asia in
highly regulated industries.

Current external appointments:
– Senior Independent Director, Travis

Perkins plc.

– Non-Executive Director and

member of the Audit Committee at
Intertek Group plc.

Previous experience:
Jez retired in 2023 as Group Finance
Director at Croda International plc, the
FTSE 100 global speciality chemicals
company, and previously held similar
roles at National Express Group plc and
Northern Foods Limited. He has served
as the Senior Independent Director at
Synthomer PLC and at both PZ Cussons
plc and Synthomer PLC he chaired
the Audit Committee and served on
the Remuneration Committee. He is
a fellow of the Chartered Institute of
Management Accountants.

Nationality:

British

Angie Risley
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in September 2017

Rick has had a highly successful
career as a strong commercial Chief
Financial Officer in the technology
industry, working for a range of
international FTSE 100 and NASDAQ
listed businesses during periods of high
growth. He has held a number of Chief
Financial Officer positions throughout
his career, including at NDS Group plc,
Inmarsat plc and Worldpay Group plc.
Rick brings a wealth of experience as
a former NED and Audit Committee
Chair of several technology driven
businesses, such as Sophos Group
plc, Edwards Vacuum, and Thus plc.
Rick was also previously Chair of BluJay
Solutions Ltd, Chair of Momondo Group
and Chair of the Audit Committee for
LoveFilm UK Limited.

Nationality:

British

Key skills and competencies:
Rick has extensive experience and a
deep understanding of technology
focused R&D businesses. He has driven
value and transformation throughout
his executive career which will further
reinforce the ability of Smith+Nephew
to grow and develop into new and
existing markets. Rick brings significant
financial and risk management
expertise as a well-regarded former
FTSE 100 Chief Financial Officer, NED
and Audit Committee Chair.

Current external appointments:
– NED and member of the Audit, Risk
and Compliance Committee at
Datatec Ltd.

– NED and Chair of the Audit
Committee at Deliveroo.

– NED and Chair of the Board at British

Engineering Services Limited.

– NED and Chair of the Board

at Alaska TopCo Limited, the
parent company of Nomentia Oy
(the software cash and treasury
solutions provider).

Previous experience:

Bob White
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in May 2020

C R N

C R

Key skills and competencies:
Angie has gained experience in a
wide range of sectors, including a
regulated environment. This diversity
of experience is welcomed by
the Board and the Remuneration
Committee. Angie is also an additional
resource and sounding board for
Smith+Nephew’s own internal Human
Resources function.

Current external appointments:
– Non-Executive Director and Chair

of the Remuneration Committee at
InterContinental Hotels Group plc.

Previous experience:
From 2007 to 2013 Angie was the
Group HR Director for Lloyds Banking
Group and was Group HR Director of
Sainsbury plc and a member of their
Operating Board from January 2013
to May 2023. Over the years, Angie
has been a member of the Low Pay
Commission and has held a number
of Non-Executive Directorships with
Biffa plc, Arriva and Serco Group plc.
At Serco Group plc she was the Chair
of the Remuneration Committee.
Previously she has attended
Remuneration Committees of
Whitbread plc and Lloyds Bank.

Nationality:

British

Key skills and competencies:
Bob is an experienced leader with
more than 25 years’ worth of industry
relevant experience. He is an influential
and well-known figure in the medical
technology sector and has an
impressive track record in delivering
growth and fostering innovation.
He brings valuable global medical
technology insight to the Board, which
will prove fundamental in helping
to shape and develop the future
strategic direction of Smith+Nephew
healthcare expertise.

Current external appointments:
None

Previous experience:
Bob has held a number of senior Vice
President positions throughout his
career, most recently as Executive Vice
President and President at Medtronic
plc. He was also senior Vice President
at Chemdex Corporation, Accelrys Inc.,
SourceOne Healthcare Technologies,
Inc., GE Healthcare and Covidien
as President for Emerging Markets
and President for Respiratory and
Monitoring Solutions. He then became
Senior Vice President and President
of Medtronic Asia Pacific, having led
the integration of Covidien Asia Pacific
when it was acquired by Medtronic plc
in 2015.

Nationality:

American

Smith+Nephew Annual Report 2023

Directors who have joined the Board
since 31 December 2023

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OTHER INFORMATION

Helen Barraclough
Group General Counsel
and Company Secretary
Appointed Company Secretary
in April 2022

Simon Lowth
Independent
Non-Executive Director
Appointed as Independent
Non-Executive Director
on 1 January 2024

A N

Key skills and competencies:
Simon has extensive experience in
finance, accounting, risk, corporate
strategy as well as mergers and
acquisitions and brings a wealth of
expertise across a wide range of
sectors, including within regulated
industries. Having served as the CFO
in four FTSE 100 companies, he has
deep experience of capital markets,
implementing strategic change, cost
transformation and performance
improvement programmes as well as
understanding how technology can
be used to transform a business.

Current external appointments:
– Group Chief Financial Officer of

BT Group.

John Rogers
Chief Financial Officer
Designate
Joining the Board as Chief Financial
Officer in Q1 2024

Key skills and competencies:
John has extensive financial and
commercial leadership experience
across a range of sectors and on a
global basis, as well as a track record
of delivering complex international
transformation programmes.

Current external appointments:
– Non-Executive Director of Grab

Holdings Limited.

Previous experience:
Simon was previously Group Chief
Financial Officer at AstraZeneca and
Scottish Power. Before joining Scottish
Power, he led the Industrial Practice
of McKinsey in the UK. He previously
served as a Non-Executive Director
on the Board of Standard Chartered.

Nationality:

British

Key skills and competencies:
Helen is a qualified Solicitor admitted
in England & Wales and a Chartered
Governance Professional. She also
serves as the Chief Risk Officer for
Smith+Nephew.

Previous experience:
Helen started her career with Allen
& Overy LLP and prior to joining
Smith+Nephew held senior legal
roles at WPP plc and Nomura
International plc.

Nationality:

British

Board member whose
tenure ceased during the year
Roberto Quarta, Chair, stepped down from the Board
on 15 September 2023.

Previous experience:
He has served as the Chief Financial
Officer at WPP plc, where he
successfully led the implementation
of their global transformation
programme, and as Chief Financial
Officer at J Sainsbury plc where
he also served as Chief Executive
Officer of Argos, Habitat and
Sainsbury’s clothing and general
merchandise businesses.

Nationality:

British

Smith+Nephew Annual Report 2023

Board leadership and Company purpose continued

Executive Committee

The CEO, with support from the CFO, leads the
Executive Committee of Smith+Nephew which
is responsible for the day-to-day operational
management of the Group and executing
its strategy.

» See page 90 for CEO
and CFO biographies

Brad Cannon
President Orthopaedics &
Americas

Nationality:
Location: Andover, US

American

Brad brings more than 25 years of
experience across medical devices and
medtech. Prior to Smith+Nephew, Brad
worked in Medtronic plc’s Spine and
Biologics division and previously
served as Chief Marketing Officer and
President of Europe and Canada at
Smith+Nephew.

Paul Connolly
President Global Operations

Nationality:
Location: Andover, US

American/Irish

Paul brings more than 30 years of
global manufacturing and supply
chain experience at multinational
companies with a strong track record
in delivering operational excellence
and transformation programmes.
Prior to joining Smith+Nephew, Paul
held senior roles at Goodyear, DePuy,
Inc., and other Johnson & Johnson
family companies.

Rohit Kashyap
President Advanced Wound
Management and Global
Commercial Operations

American
Nationality:
Location: Fort Worth, US

Rohit brings more than 20 years’
experience across wound care, surgical
management, business development
and global commercial leadership.
Prior to joining Smith+Nephew, Rohit
worked at Acelity, a global advanced
wound care company, most recently
as President, Global Commercial and
at MIMEDX as President of the Wound
and Surgical business and as Chief
Commercial Officer.

Phil Cowdy
Chief Corporate Development
& Corporate Affairs Officer

British
Nationality:
Location: Watford, UK

Prior to joining Smith+Nephew, Phil
served as a senior Director at Deutsche
Bank AG for 13 years specialising
in corporate finance and equity
capital markets. Phil serves as the
representative of Smith+Nephew on
the Board of Bioventus Inc.

Mizanu Kebede
Chief Quality &
Regulatory Affairs Officer

Nationality:
Location: Georgia, US

American

Mizanu brings more than 20 years
of leadership experience in Quality
and Regulatory Affairs. Prior to
Smith+Nephew, Mizanu held senior
roles at Avanos Medical, Life
Technologies Corporation, Johnson &
Johnson and STERIS Corporation.

Smith+Nephew Annual Report 2023

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GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Elga Lohler
Chief HR Officer

Nationality:
Location: Fort Worth, US

American/South African

Prior to joining Smith+Nephew, Elga
held Human Resources roles at
Transnet SOC Ltd, Sensormatic (now
Tyco International plc) and Advanced
Tissue Sciences, Inc. (acquired by
Smith+Nephew in 2002).

Vasant Padmanabhan
President Research &
Development and ENT

Nationality:
Location: Andover, US

American

Vasant has over 25 years of global
med-tech leadership experience.
Prior to Smith+Nephew, Vasant held
senior roles at Thoratec Corporation
and Medtronic plc as Vice President of
Connected Care R&D and Operations
and Vice President of Product
Development for the Implantable
Defibrillator Business.

Scott Schaffner
President Sports Medicine

Nationality:
Location: Austin, US

American

Scott has more than 30 years
experience across the medical device
industry, including cardiac rhythm
management, neuromodulation, spine,
and sports medicine. Prior to moving
into his current role, Scott served
as Executive Vice President, Global
Marketing and US Commercial, Sports
Medicine, Senior Vice President, Global
Marketing, Sports Medicine and Vice
President, Sports Medicine.

Alison Parkes
Chief Compliance Officer

Nationality:
Location: Hull, UK

British

Prior to moving into her current role,
Alison served as the Compliance
Officer for the Global Advanced Wound
Management business, APAC and
Emerging Markets and established and
led the Global Compliance Programme
Effectiveness & Improvement team.

Helen Barraclough
Group General Counsel
and Company Secretary

British
Nationality:
Location: Watford, UK

Prior to joining Smith+Nephew, Helen
started her career at Allen & Overy
LLP and held senior roles at WPP plc
and Nomura International plc. She is a
qualified Solicitor admitted
in England & Wales and a Chartered
Governance Professional. She also
serves as the Chief Risk Officer for
Smith+Nephew.

Executive Officers whose tenures
ceased and recent appointments
Simon Fraser, President Advanced Wound Management
and Global Commercial Operations, served until
2 June 2023.
Myra Eskes, President APAC Region, served until
1 November 2023.
Brad Cannon, President Orthopaedics & Americas, served
until 4 March 2024.
Craig Gaffin was appointed President Orthopaedics
effective as of 4 March 2024.

Smith+Nephew Annual Report 2023

Division of responsibilities

Roles and composition of the Board

Chair
Rupert Soames
– Responsible for the effective leadership and operation

of the Board and for facilitating the review of its
composition, effectiveness and development.

– Promotes effective board relationships, encouraging
constructive challenge and facilitating effective
communication between Board members and
supporting a culture of openness, challenge and debate.

Senior Independent Director
Marc Owen
– Acts as a sounding board for the
Chair and as an intermediary
for other Directors and stakeholders
as necessary.

– As a member of the Nomination

& Governance Committee,
leads the Board evaluation process

and searches for Chair and
Independent Non-Executive Directors
to ensure effective succession.
– Acts as an alternative contact

for stakeholders to raise
concerns (in addition to Chair and
senior management).

– Ensures that the Board understands the views
and needs of the Company’s stakeholders and
facilitates effective communication and dialogue,
whilst maintaining an appropriate balance
between stakeholders.

– Leads relations with shareholders in order to
understand their views on governance and
performance against strategy.

– Responsible for promoting high standards of

governance by the Board and its Committees.

The Chair achieves this through effective chairing of Board
meetings; setting a board agenda which focuses on
strategy, performance, value creation, risk management,
culture, stakeholders and accountability; enabling an
annual review of Board effectiveness; holding discussions
with Board members both inside and outside the
boardroom and ensuring appropriate Board induction and
development programmes are in place.

Independent Non-Executive Directors
Jo Hallas, John Ma, Katarzyna Mazur-Hofsaess, Erik Engstrom,
Jez Maiden, Rick Medlock, Angie Risley and Bob White
– Comprise more than half of
Board membership in order
to meet the independence criteria
set out in the 2018 Code.
– Ensure that no individual/

– Provide constructive challenge,
give strategic guidance, offer
specialist advice and hold executive
management to account.

small group can dominate the
Board’s decision making.

Chief Executive Officer
Deepak Nath
– Responsible for delivering and

implementing Group strategy and
management of the organisation as
a whole. Provides information and
participates in Board discussions
regarding Group management
and operational matters.

– Leads the Executive Committee and
ensures its effectiveness in managing
the overall operations and resources
of the Group.

– Sets tone at the top with regard to culture,
compliance and sustainability matters.
– Ensures the Chair and Board are updated

regularly regarding key matters and
maintains relationships with shareholders,
advising the Board accordingly.

Chief Financial Officer
Anne-Françoise Nesmes
– Supports the Chief Executive Officer
in developing and implementing
Group strategy.

– Responsible for ensuring effective

financial reporting, investor relations,
tax, treasury and financial controls
are in place within the Group.

– Provides information and participates

in Board discussions regarding
financial matters.

– Leads global finance function,

developing key finance talent and
succession planning.

Company Secretary
Helen Barraclough
– Supports the Chair and ensures

Board members have access to the
information required to perform
their duties.

– Advises the Board on legal and

corporate governance matters and
supports the Board in applying the
2018 Code and complying with UK
listing obligations, and other statutory
and regulatory requirements.
– Provides a channel for Board and

Committee communications and a link
between the Board and management.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Re-appointment of Directors
In accordance with the 2018 Code, all
Directors offer themselves to shareholders
for re-election annually, except those who
are retiring immediately after the Annual
General Meeting. Each Director may be
removed at any time by the Board or
the shareholders.

Board support
Together with the Chief Executive Officer
and the Group General Counsel and
Company Secretary, the Chair ensures
that the Board is kept properly informed.
Each Director has access to the Group
General Counsel and Company Secretary,
who helps to ensure that Board procedures
and good corporate governance practices
are followed. Directors are permitted to
take independent professional advice at
the Company’s expense if required in order
to enable them to fulfil their duties.

Each Director is covered by appropriate
directors’ and officers’ liability insurance
and there are also Deeds of Indemnity in
place between the Company and each
Director. These Deeds of Indemnity mean
that the Company indemnifies Directors
in respect of any proceedings brought by
third parties against them personally in
their capacity as Directors of the Company.
The Company would also fund ongoing
costs in defending a legal action as they
are incurred rather than after judgment has
been given. In the event of an unsuccessful
defence in an action against them,
individual Directors would be liable to repay
the Company for any damages and to
repay defence costs to the extent funded
by the Company.

If any Director becomes aware of any
situation which might give rise to a conflict
of interest, they must, and do, inform
the rest of the Board immediately and
the Board is then permitted under the
Company’s Articles of Association to
authorise such conflict. This information is
then recorded in the Company’s Register of
Conflicts, together with the date on which
authorisation was given. In addition, each
Director certifies on an annual basis that
the information contained in the Register of
Conflicts is correct.

When the Board decides whether or not
to authorise a conflict, only the Directors
who have no interest in the matter are
permitted to participate in the discussion
and a conflict is only authorised if the Board
believes that it would not have an impact
on the Board’s ability to promote the
success of the Company in the long term.
Additionally, the Board may determine
that certain limits or conditions must
be imposed when giving authorisation.
No actual conflicts have been identified,
which have required approval by the
Board. However, the situations that could
potentially give rise to a conflict of interest
have been identified and duly authorised by
the Board and are reviewed at least on an
annual basis.

Outside directorships
We encourage our Executive Directors
to serve as Non-Executive Directors of
external companies. We believe that the
work they do as Non-Executive Directors
of other companies has benefits for their
executive roles with the Company, giving
them a fresh insight into the role of a Non-
Executive Director.

Anne-Françoise Nesmes is the Senior
Independent Director and Chair of the
Audit Committee at Compass Group
plc which is listed on the London
Stock Exchange.

At the opening and close of each Board
meeting, the Full Board meets for a short
closed session discussion. At the end of
each Board meeting, the Chair meets with
Non-Executive Directors in the absence
of the Executive Directors. The Chair also
holds one to one discussions with each
Board member throughout the year.

Independence of Directors
We require our Non-Executive Directors to
remain independent from management so
that they are able to exercise independent
oversight and effectively challenge
management. We therefore continually
assess the independence of each of our
Non-Executive Directors. The Executive
Directors have determined that all our
Non-Executive Directors are independent
in accordance with both UK and US
requirements. None of our Non-Executive
Directors or their immediate families has
ever had a material relationship with the
Group. None of them receive additional
remuneration apart from Directors’ fees,
nor do they participate in the Group’s share
plans or pension schemes. None of them
serve as directors of any companies or
affiliates in which any other Director is a
director. The Board considers all external
directorships prior to appointment,
reviewing any potential conflict of interests
and time commitment for both Executive
Directors and Non-Executive Directors.

Management of conflicts
of interest
None of our Directors or their connected
persons, has any family relationship with
any other Director or Officer, nor has a
material interest in any contract to which
the Company or any of its subsidiaries are,
or were, a party during the year or up to
16 February 2024.

Each Director has a duty under the
Companies Act 2006 to avoid a situation
in which they have or may have a direct
or indirect interest that conflicts or might
conflict with the interests of the Company.
This duty is in addition to the existing
duty owed to the Company to disclose
to the Board any interest in a transaction
or arrangement under consideration by
the Company.

Smith+Nephew Annual Report 2023

Division of responsibilities continued

Corporate governance framework

The Board is accountable to shareholders for the performance and long-term sustainable success of the Company. It approves the strategy of
the Group, evaluates and monitors the management of risk, and oversees the implementation of the strategy in order to achieve sustainable growth.
The Board delegates certain matters to the Audit, Remuneration, Nomination & Governance and Compliance & Culture committees which support
the Board in carrying out its responsibilities. Full details of the Matters Reserved to the Board can be found on the Company’s website.

Our Board

www.smith-nephew.com

Audit Committee
»pages 114–120

Ensures the integrity of the Company’s
financial reporting, systems and controls.

Oversight of risk management process.
Reviews and monitors climate change
disclosures and related ESG financial
reporting obligations. Monitors the Group’s
cyber resilience.

Ensures effectiveness of internal
and external audit functions.

Compliance & Culture Committee
»pages 111–113

Reviews and monitors and has
oversight of ethics and compliance, quality
and regulatory, culture, sustainability matters
and metrics, stakeholder relationships and
related legal matters
across the Group.

Remuneration Committee
»pages 121–154

Determines Remuneration Policy
and packages for Executive Directors
and senior management, having regard
to pay across our workforce.

Ensures reward strategy aligns with our
purpose, values and long-term strategy.

Nomination &
Governance Committee
»pages 102–110

Reviews size, skills, experience, knowledge
and composition of the Board, succession
planning, diversity and governance matters.

Finance & Banking Committee

Disclosures Committee

A Committee comprising senior executives
which approves banking and treasury
matters, guarantees and Group structure
changes relating to mergers,
acquisitions and disposals.

A Committee comprising senior executives
which oversees and approves public
announcements and communications to
investors and Stock Exchanges.
Reviews communications and reporting
requirements in respect of market
sensitive information.

Executive Committee
»pages 94–95

The Board delegates the day-to-day operational management and implementation of Group strategy to the Chief Executive Officer and Executive
Committee). The Executive Committee recommends, and following Board approval, implements strategy, budget and three-year strategic plan
within the Group. It ensures cross-functional alignment in order to deliver on strategy and reviews major investments, divestments
and capital expenditure proposals. The Executive Committee also focuses on people and organisational culture, reviewing recruitment, attrition
and development initiatives within the Company and developing and monitoring succession planning and talent pipeline below Board level.

The Executive Committee meets at least 10 times per year to review commercial and operating results against budget, key initiatives,
KPIs and performance metrics aligned to deliver Group strategy.

The Executive Committee forms sub-committees including those listed below:

Group Ethics
& Compliance
Committee

ESG Operating
Committee

Mergers &
Acquisitions
Investment
Committee

Global Benefits
Committee

12-Point Plan
Steering
Committee

Global Crisis
Management
Team

New Product
Development Review
Committee

Inclusion,
Diversity and
Equity Council

Security and
Privacy Steering
Committee

Smith+Nephew Annual Report 2023

Board and Committee attendance

Attendees
Roberto Quarta1
Rupert Soames2
Deepak Nath
Erik Engstrom3
Jez Maiden4
John Ma5
Katarzyna Mazur-Hofsaess6
Rick Medlock7
Anne-Françoise Nesmes
Marc Owen
Angie Risley8
Bob White
Jo Hallas

Appointed
December 2013
April 2023
April 2022
January 2015
September 2023
February 2021
November 2020
April 2020
July 2020
October 2017
September 2017
May 2020
February 2022

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Board WIP
8
4/5
6/6
8/8
8/8
3/3
7/8
7/8
7/8
8/8
8/8
7/8
8/8
8/8

Total meetings

Audit
7
–
–
–
7/7
3/3
–
–
7/7
–
7/7
–
–
7/7

Remuneration
9
4/5
6/6
–
–
4/4
–
–
–
–
–
9/9
9/9
–

Nomination
& Governance
6
3/4
4/5
–
5/6
–
–
–
–
–
6/6
6/6
–
–

Compliance
& Culture
4
–
–
–
–
–
4/4
3/4
–
–
4/4
4/4
4/4
–

1 Roberto Quarta stepped down from the Board on 15 September 2023 and of the five meetings held during his tenure in 2023, he was unable to attend the Board meeting in April as he was

recuperating from a surgical procedure. Roberto was unable to attend the Nomination & Governance Committee meeting in August and the Remuneration Committee Meeting in February due to
travel disruption.

2 Rupert Soames was appointed as an Independent Non-Executive Director and Chair Designate on 26 April 2023. Rupert was unable to join the Nomination & Governance Committee in July due

to a pre-existing commitment prior to appointment as Chair Designate.

3 Erik Engstrom retired from the Board on 31 December 2023. Erik was unable to join the Nomination & Governance Committee in October due to executive management commitments.
4 John Ma was unable to attend the July Board meeting due to travel disruption.
5 Jez Maiden was appointed to the Board as an Independent Non-Executive Director and a member of the Audit and Remuneration Committees on 14 September 2023.
6 Katarzyna Mazur-Hofsaess was not in attendance at the December Board meetings due to a prior statutory commitment. She provided comments to the Chair in advance of the meeting.
7 Rick Medlock was not in attendance at the January Board Meeting due to a prior professional commitment. He provided his comments to the Chair in advance of the meeting.
8 Angie Risley was not in attendance at the January Board Meeting due to a prior professional commitment. She provided her comments to the Chair in advance of the meeting.

Smith+Nephew Annual Report 2023

Division of responsibilities continued

Board activities

Group Purpose
and Culture

Strategy and
Innovation

The following pages provide an overview
of the key topics reviewed, monitored,
considered and debated by the Board in
the year to 31 December 2023.

– Agendas for each Board meeting
focus on matters within the core
areas of strategy and risk, innovation
and portfolio, capital allocation and
operational excellence and are agreed in
advance by the Chair, CEO and CFO with
the support of the Company Secretary.

– The Board receives the 12-Point Plan
updates on performance against key
metrics, operating and financial reports
from the CEO and CFO on strategic
and business developments, as well as
financial performance and forecasts at
each meeting.

– Presentations led by Exco members and
their direct reports and senior leaders
are also included on key topics of interest
to the Board, such as Sustainability, Risk
Management, Cybersecurity and AI.
– The Chairs of each Committees update
the Board on the proceedings of those
meetings, including key topics and areas
of concern.

– At the end of each meeting the Chair
holds a closed session with Board
members providing further opportunity
for the Non-Executive Directors to
assess the performance of management
in an atmosphere conducive to
transparent and collaborative debate.

– Reviewing and monitoring Group

– Reviewing and monitoring progress

strategy in alignment to the Purpose of
Life Unlimited and culture pillars of Care,
Collaboration and Courage.

– Monitoring and ensuring the scope and

focus of strategic projects and initiatives
support the Group’s purpose and
culture pillars.

– Review of initiatives on people,

leadership and development of internal
talent pipeline.

– Review of Sustainability strategy,

climate-related disclosures and key
performance metrics with input from
Audit, Remuneration and Compliance &
Culture Committee Chairs.

– Review of initiatives to strengthen and
embed Inclusion, Diversity and Equity
throughout the Group, including receiving
reports on employee engagement,
employee interest groups and Board
listening sessions.

– Approving Group policies relating to

Code of Conduct and Business Principles,
Code of Share Dealing and other
reserved matters.

» Employees (pages 46–49)
» Compliance & Culture

Committee report (pages 111–113)

against the 12-Point Plan and
related metrics, global business unit
reorganisation and infrastructure and
network optimisation projects in support
of the Group strategy.

– Reviewing and approving three-year

strategic plan, with a focus on innovation,
transformation and portfolio.

– Setting priorities for capital investment

across the Group with a view to ensuring
systemic transformation.

– Determining the dividend policy and

dividend recommendations.

– Reviewing the implementation of

cost management programmes and
monitoring outcomes against objectives.

– Approving annual budget and financial

plan and half-year, full-year and
trading updates.

– Approving major borrowings and finance
and banking arrangements, such as the
refinancing of the Group’s $1bn USD
revolving credit facility in October 2023.

– Approving changes to the composition
of the Board, its Committees and the
Executive Committee.

» Chair’s Statement (pages 4–7)
» Financial Review (pages 20–23)

Link to stakeholder groups

1 Employees

Investors

3 Customers/Suppliers

4 Governments/Regulators

5 Environment/Communities

Link to our strategic priorities

100

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Operations and
Commercial Excellence

Stakeholders

Risk Oversight,
Management and Controls

– Strategic deep dives on global business

unit plans in Orthopaedics, Sports
Medicine & ENT and Advanced Wound
Management aligned to 12-Point
Plan initiatives and broader long-term
strategic initiatives.

– Monitoring Group operations updates on
inventory management, asset utilisation,
network optimisation, and response
to external and internal challenges in
line with 12-Point Plan key metrics
and deliverables.

– Review of global innovation pipeline

and product portfolio with a focus on
differentiation and delivery for our
customers, patients and stakeholders.
– Overseeing succession planning at Board
and senior management level to ensure
development of internal talent pipeline
and stability for the Group.

– Review of performance and return
on investment of acquisitions and
integration planning.

– Continuing review and monitoring
of impact of external factors such
as inflation, supply constraints,
cybersecurity and business continuity on
ability to deliver on strategic objectives.

» Compliance & Culture

Committee report (pages 111–113)

» Audit Committee report
(pages 114–120)

– Overseeing and maintaining relationships
with stakeholders including employees,
customers, suppliers, investors,
regulators, governments and local
communities. Further details of Board
interactions with stakeholders can be
found on pages 84–87.

– Evaluation of risks and opportunities

with regard to strategic initiatives such
as the 12-Point Plan, global business unit
reorganisation, operations and network
optimisation, innovation and portfolio
opportunities, AI strategic initiatives
and Sustainability.

– Review of external and investor

– Oversight of the Group’s risk

perceptions of the Company including
feedback on investor engagement and
Meet the Management sessions.
– Reviewing Executive Director and

Executive Officer talent pipeline and
succession planning.

– Reviewing employee engagement

scores and performance/trends within
the Company.

– Review of diversity metrics and gender

pay gap data and reporting.

– Engaging with shareholders on strategy,
operational performance, governance,
remuneration, succession planning, ESG
and Governance matters.

» Our stakeholders (pages 82–83)
» Engaging with Stakeholders

(pages 84– 87)

management strategy, programme and
related processes. See pages 67–77 for
further details.

– Review and approval of the Principal

Risks of the Group and Board appetite
for risk.

– Board consideration of key risks and
opportunities to manage risk and
create value in including cybersecurity
and business continuity, succession
and talent pipeline, IT investment and
infrastructure and ESG considerations.

– Discussion at Board and Committee

meetings on key macro topics including
impact of inflation, regulatory changes
and portfolio competitiveness,
geopolitical outlook and global conflicts,
operational challenges and global
talent outlook.

– Approving the appointment and
removal of the External Auditor
on the recommendation of the
Audit Committee.

– Approving significant changes to
accounting policies or practices.
– Approving the use of the Company’s

shares for the Company’s Share Plans.

» Chair’s Statement (pages 4–7)
» Financial Review (pages 20–23)

Smith+Nephew Annual Report 2023

Our Investor presentations are available
to download on our website

www.smith-nephew.com

101

Composition, succession and evaluation

Nomination & Governance
Committee Report

Rupert Soames
Chair of the Nomination
& Governance Committee

Membership

Dear Fellow Shareholder,

Member
from

Meetings
attended

Rupert Soames
(Chair)1

April 2023

Erik Engstrom2 April 2023

Roberto
Quarta3

April 2014

Marc Owen

March 2020

Angie Risley

Sept 2022

4/5

5/6

3/4

6/6

1 Rupert Soames joined the Committee with

effect from 26 April 2023 and was
appointed as Chair on 15 September 2023.

2 Erik Engstrom was unable to join the

Nomination & Governance Committee
in October due to executive
management commitments.

3 Roberto Quarta stepped down from the

Board on 15 September 2023.

www.smith-nephew.com/
en/who-we-are/corporate-
governance#terms-of-
reference

The Terms of Reference for the Nomination &
Governance Committee describe the role and
responsibilities of the Nomination &
Governance Committee more fully and
can be found on our website.

102

In my first Annual Report as your Chair of
the Nomination & Governance Committee,
I am pleased to present this report within the
governance section of our Annual Report.

The Committee has been busy over the past
12 months managing the appointment of
four new Directors to the Board: Chair of the
Board, two Non-Executive Directors, and a Chief
Financial Officer. This will result in a Board which,
over the last 18 months, is substantially refreshed,
and I would like to recognise in particular the
contribution of our Senior Independent Director,
Marc Owen, who has diligently and effectively
led the Chair and NED searches. In addition, the
Committee carried out its other responsibilities
supporting Board induction, development
programmes and strong corporate governance.

Board and Executive appointments
in 2023
Jez Maiden was appointed as a Non-Executive
Director to the Board on 14 September 2023
and as a member of the Audit Committee and
Remuneration Committee. Jez brings more than
15 years of experience both as a FTSE Chief
Financial Officer and as a Non-Executive Director
in businesses involved in manufacturing, science
and technology and has already demonstrated
that he is a valuable addition to the Board and
its Committees.

We welcomed Simon Lowth on 1 January 2024
as a Non-Executive Director and member of the
Audit Committee and Nomination & Governance
Committee following Erik Engstrom’s
completion of his 9 year tenure. Simon brings
a wealth of expertise across a wide range of
sectors, including within regulated industries.
His experience of capital markets, implementing
strategic change, cost transformation and
performance improvement programmes as well
as understanding how technology can be used
to transform a business, will be very helpful to
the Board.

Following Anne-Françoise notifying the Board
in August 2023 of her intention to step down
from her role as Chief Financial Officer, John
Rogers joined the Company as Chief Financial
Officer designate on 1 December 2023 and will
join the Board during the first quarter of 2024.
John is a highly regarded Chief Financial Officer
with a proven track record operating around the
world and across a number of industry sectors.
His extensive experience in transformation
and capital markets is especially important
given Smith+Nephew’s focus on driving greater
shareholder value and we look forward to
welcoming him to the Board.

New Director appointments
and process
For our new Board appointments in 2023, the
Committee followed the process outlined in the
table on page 103 and considered the shortlist
of candidates for each position taking into
account: (i) the purpose, values and culture of the
business and the Company’s strategic priorities;
(ii) the key skills and experience which may
be required on the Board and its Committees;
and (iii) the importance of diversity including
gender, personal strengths, and social and
ethnic backgrounds.

With all of our new appointments, we had
a diverse slate of candidates taking into
account diversity in its broadest sense. In our
appointments, we will always ensure we select
the most qualified candidate for the role in the
best interests of the organisation as a whole.

Smith+Nephew Annual Report 2023

Board and Executive
Succession Planning
Succession planning is a key focus for
the Board from both a leadership and
governance perspective. The Committee
engaged in a review throughout the year
of Board and Committee composition
and skillsets to ensure alignment with
the Company’s strategic objectives
and culture pillars to enable effective
succession planning for Non-Executive and
Executive Directors.

The full Board also reviewed the Board
Skills Composition Matrix (please see
table on page 106) which sets out the
tenure, skills, competencies and diversity
of the Board. The Board composition and
skills matrix feeds into a formal rolling
succession plan for Directors.

The Committee starts board recruitment
well ahead of retirements, understanding
the competitiveness of the market.
Priorities for recruiting and succession
planning include the ability to respond
to evolving strategic imperatives for the
Company, adding and enhancing Board
skills including in the areas of healthcare
sector perspectives, finance, operational
and digital/cyber experience and ESG and
enhancing diversity in the boardroom.

The Board discusses succession plans with
management for senior executives and this
will receive enhanced focus in 2024, with
a biannual Board review of talent pipeline
and development programmes (see page
110 Board Effectiveness) in addition to the
focus already provided by the Compliance
& Culture Committee on employee
engagement and the Remuneration
Committee on executive compensation.
These plans include consideration and
monitoring of diversity in the executive
pipeline. Pages 94–95 give details of the
members of the Executive Committee,
33.3% of whom are female, one of whom
is of African heritage and one of Asian
ethnicity. Following the leadership changes
at executive level this year, the Committee
is aware that management are focused
on ensuring that there are development
plans in progress to enable a broader range
of candidates to be considered within
the internal succession pipeline for senior
management roles.

Board appointment process

1 Before any appointment is made,

the Committee evaluates the
balance of skills, knowledge,
experience, independence and
diversity on the Board.

2 In light of this evaluation,

the Committee prepares a
description of the role and
capabilities required for a
particular appointment and
works with external advisors, as
appropriate, to compile a shortlist
of candidates based on the
role description.

3 The Committee (together

with external advisors*) then
compiles a shortlist including a
broad slate of candidates from
a wide range of backgrounds to
ensure diversity.

4 The Committee evaluates the

shortlist of candidates on merit
and against objective criteria,
taking care to ensure that
appointees have sufficient time
to devote to the position in light
of their other commitments.
The Committee also assesses any
actual or potential conflicts of
interest as part of the process.

5 Members of the Committee

interview key candidates from
the shortlist. Other Board
members are also involved in the
interview process as appropriate.
For example, where a candidate
is required to have a requisite
level of financial expertise, the
Audit Committee Chair and
Chief Financial Officer would be
involved in the interview process.

6 The Committee reviews and

considers the feedback provided
based on the interview process,
reference checks and due
diligence in arriving at a decision
on a candidate to recommend to
the Board.

* Russell Reynolds was appointed as the search firm
in respect of the appointments of Rupert Soames,
Jez Maiden and Simon Lowth. Spencer Stuart was
engaged for the Chief Financial Officer appointment.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Diversity
The Committee believes that a Board and
management team which has a range of
diverse skills, background and experience
is best equipped to take the decisions
which will deliver sustainable value to
shareholders and other stakeholders.
We are therefore committed to fostering
diversity in its broadest sense and
we continue to ensure that our Board
membership draws from a wide range of
backgrounds and cultures.

When Anne-Françoise steps down from
the Board in 2024, our Board will continue
to have three experienced female Directors
and our succession planning process
will continue to ensure that we have a
diverse slate of candidates and will seek
to increase diversity within the Board as
and when the opportunity arises. We will
also have a diverse range of ethnicities,
experience and backgrounds on the Board.
The Committee will continue to appoint
Board members on merit, valuing the
unique contribution that they will bring to
the Board, regardless of gender, ethnicity
or with other specific diversity measure.
Our diversity statement is located on our
website: www.smith-nephew.com/en/
about-us/corporate-governance/diversity-
statements.

During 2023, the Board has benefited from
the diversity of experience, background
and global and regional expertise of
its members. The Committee believes
the Board’s composition gives us the
necessary balance of diversity, skills,
experience, independence and knowledge
to ensure continued effectiveness in
running the business and delivery of
sustainable growth.

Yours sincerely,

Rupert Soames, OBE
Nomination & Governance
Committee Chair

103

Composition, succession and evaluation continued
Nomination & Governance Committee report continued

Responsibilities of the Nomination & Governance Committee
Board composition
– Reviewing the structure, size and

Corporate governance
– Overseeing governance aspects of the

Board gender diversity
Board gender diversity

composition of the Board.
– Overseeing Board succession

plans including engaging external
search consultancies and making
recommendations on appointments to
the Board.

– Recommending the appointment of
Directors and Company Secretary.

– Monitoring the range of skills,

knowledge, experience, independence
and diversity of the Board.

– Monitoring Board diversity in its

broadest sense.

Highlights in 2023:
– Appointment of Rupert Soames
as a Non-Executive Director and
Chair designate on 26 April 2023.
Rupert became Chair of both the
Board and the Committee effective
15 September 2023 following a
transition from Roberto Quarta.
– Appointment of Jez Maiden on

14 September 2023 as Independent
Non-Executive Director and
a member of the Audit and
Remuneration Committees.

– Appointment of John Rogers as Chief
Financial Officer designate announced
on 2 November 2023. John joined the
Company on 1 December 2023 and will
be appointed as an Executive Director
during the first quarter of 2024.

Focus and Actions for 2024
– Continued oversight of succession

planning at and below Board level, with
biannual discussion at Board level as
well as at Compliance & Culture and
Remuneration Committees on senior
management talent pipeline planning,
attraction, retention and development.

– Ongoing review of Board structure,
size and composition with a view to
ensuring that the Board continues to
demonstrate the right balance of skills,
knowledge and diversity in its broadest

104

Board and its Committees.
– Overseeing the review into the
effectiveness of the Board.

– Considering and updating the Schedule

of Matters Reserved to the Board
and the Terms of Reference of the
Board Committees.

– Overseeing the Induction process
for new Directors and the Board
Development Programme to support
the ongoing development of all
Board members.

– Considering the continued

independence of the Non-Executive
Directors and any conflict of interest.
– Overseeing the annual Board Evaluation
process led either externally or internally
by the Senior Independent Director.
– Approving external directorships to be

held by the Board.

– Appointment of Simon Lowth effective

1 January 2024 as Independent
Non-Executive Director and a
member of the Audit and Nomination
& Governance Committees following
the departure of Erik Engstrom.

– Devising and implementing

comprehensive induction and
development programmes for our
new Board members.

– Annual review of conflict process and
Directors’ external appointments.

– Approval of re-appointment of
Directors and assessment of
continued independence of Non-
Executive Directors.

sense and to evaluate potential
opportunities to increase diversity
within the Board and the timeline for
doing so.

– Implementing comprehensive induction

programmes for our new Board
members to enable them to gain
strong insight into our business and
high levels of engagement with our
Purpose, Culture Pillars and strategic
objectives over the short, medium and
longer term.

66.67% male
33.33% female

FTSE 350 companies to have
at least one woman in the
Chair or Senior Independent
Director role on the Board,
and/or one woman in the
Chief Executive or Finance
Director role in the company
by the end of 2025.

Year achieved

2020

Anne-Françoise Nesmes
was appointed
Chief Financial Officer
in 2020.

Board ethnicity*

White British or
other White (including
minority-white groups)

Asian/Asian British

Not specified/
prefer not to say

Board nationality*

British

American

British/American

Swedish

British/French

Polish/German

Board tenure*

0–2 yrs

3–5 yrs

6+ yrs

* This information is at 31 December 2023.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Board and executive management diversity

Prepared in accordance with UK Listing Rule 9.8.6R(10) as at 31 December 2023.

Number of
Board members

Percentage
of the Board %

Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)

Number in
executive
management1

Percentage of
executive
management1 %

Gender Representation: Board & Executive Management (as at 31 December 2023)

Men

Women

Other categories

Not specified/prefer not to say

Ethnic Background: Board & Executive Management (as at 31 December 2023)

White British or other White
(including minority-white groups)

Mixed/Multiple Ethnic Groups

Asian/Asian British

Black/African/Caribbean/Black British

Other ethnic group, including Arab

Not specified/prefer not to say

66.67

33.33

16.67

8.33

1 Executive management is the Executive Committee (most senior executive body below the Board).

66.67

33.33

66.67

8.33

16.67

Source of Data
Data concerning gender and ethnicity representation on the Board and
Executive Committee is set out below. This data was collected directly
from all the individual Board and Executive Committee members.
Each individual disclosed their gender and ethnicity using the options
included on a form, which align with the detail in the left-hand column
of the table below and therefore includes the option to not specify
an answer.

Explanation against LR 9.8.6(9)
The table above provides our Board and executive management diversity
data as at 31 December 2023, our chosen reference date, which has
been prepared in accordance with UK Listing Rule 9.8.6. One of the four
senior positions on the Board (Chair, CFO, CEO or SID) was held by a
woman, our Board composition included two Directors from ethnic
minority backgrounds and 33.33% of the Board of Directors are women.
The Board is pleased that two of the targets have been met but
recognises that it has not met the target of 40% individuals on the Board
being women. The Board membership draws from a wide range of
backgrounds and cultures with a commitment to fostering diversity in its
broadest sense. The Board succession planning process includes a
diverse range of candidates and the Board will seek to increase diversity
as part of succession planning relating to future board changes.
All appointments to the Board are determined on merit and valuing the
unique contribution that a member brings to the Board, regardless of
gender, ethnicity or other specific diversity measure. The overriding
priority across all Board appointments remains identification of the
strongest candidate for the role, based on clear search criteria.
Further detail of the focus by the Nomination & Governance Committee
on the continued development of a diverse talent pipeline, and the work
to oversee external benchmarking to ensure Smith+Nephew has the
diversity and capabilities needed for future growth, is set out on
page 103.

Smith+Nephew Annual Report 2023

105

Composition, succession and evaluation continued
Nomination & Governance Committee report continued

Skills and experience matrix

Executive Directors

Tenure

engagement CEO

Financial

International

Employee

Healthcare/
Medical
Devices

Emerging
Markets

Cyber
security

ESG

Governance Remuneration

Deepak Nath

Anne-Françoise
Nesmes

John Rogers1

Non-Executive
Directors

1y 08m

3y 05m

Employee

Tenure

engagement CEO

Financial

International

Healthcare/
Medical
Devices

Emerging
Markets

Cyber
security

ESG

Governance Remuneration

Rupert Soames2

0y 08m

Roberto Quarta3

10y 00m

Marc Owen

Erik Engstrom4

Jo Hallas

Simon Lowth5

John Ma

Jez Maiden6

Katarzyna
Mazur-Hofsaess

Rick Medlock7

Angie Risley

Bob White

6y 02m

8y 11m

1y 10m

2y 10m

0y 03m

3y 01m

3y 08m

6y 03m

3y 07m

Notes
1 John Rogers is to replace Anne-Françoise Nesmes as Chief Financial Officer during Q1 2024.
2 Rupert Soames joined the board on 26 April 2023 and became Chair on 15 September 2023.
3 Roberto Quarta stepped down as Chair on 15 September 2023.
4 Erik Engstrom stepped down from the Board on 31 December 2023.
5 Simon Lowth joined the Board as a Non-Executive Director and as member of the Audit and Nomination and Governance Committees on 1 January 2024.
6 Jez Maiden joined the Board on 14 September 2023 and will become Chair of the Audit Committee on 1 March 2024.
7 Rick Medlock has notified the Board of his decision not to submit himself for re-election as a Non-Executive Director. He will step down as Chair of the Audit Committee on 1 March 2024 and

as a Non-Executive Director on 30 April 2024.

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Smith+Nephew Annual Report 2023

Q&A with Jez Maiden,
Independent Non-Executive Director

What most interested
you in joining S+N?
Most of my executive career has been
spent in manufacturing businesses and I
now help connect government innovation
funding to growing process manufacturing
businesses. I believe that innovative
manufacturing must and will continue
to play a key role in driving the global
economy. Smith+Nephew is creating
value through innovation, combining
successful R&D with high-quality, efficient
manufacturing. I am excited by the
opportunity to support the team from
a lifetime of manufacturing experience,
hopefully leveraging insights in lean
manufacture, inventory management
and improving productivity.

With many years experience helping
companies develop in Life Sciences and
Health Care, I am also excited by the
opportunity to help drive success in a new
but adjacent space, the MedTech market.
Smith+Nephew has a broad, clinically
proven and differentiated portfolio
of MedTech products and services.
Its Purpose is clear, Life Unlimited. I hope to
bring my experience in R&D-driven, highly
regulated, attractive growth markets to
good use in helping Smith+Nephew deliver
its strategy and 12-Point Plan.

But perhaps the most exciting element
for me in joining Smith+Nephew is the
opportunity to help grow our global
leading businesses, in Sports Medicine &
ENT and Advanced Wound Management,
combined with the significant benefits
of fixing Orthopaedics, to create value
for all stakeholders. I am convinced that
companies such as Smith+Nephew with
a clear purpose, embedded values and a
focused ESG strategy will ultimately be
the winners.

Smith+Nephew Annual Report 2023

How effective has
your induction been?
Induction is an ongoing process – as
Directors, we are always learning about
the business through our interactions
and visits. For my first five months
with Smith+Nephew, I started with an
immersion in the MedTech market, gaining
external perspectives on competitors and
our strengths and weaknesses. This was
followed by a two-day deep dive into our
strategy and one-to-one meetings with
all of the Executives, benefiting from
their knowledge and expertise in the
MedTech sector.

Reflecting my forthcoming move to
chair the Audit Committee, I spent a
day at Croxley with the Finance Team,
which will be really useful in helping the
Committee execute its responsibilities to
ensure accountability and effectiveness
in reporting and control. I have also spent
time with our external advisors – corporate
brokers, remuneration advisor and auditors,
particularly valuable as Deloitte will
become our new external auditor in 2024
as I take over the Audit Committee Chair.

Building on my previous IT experience,
I have also had valuable sessions with
Smith+Nephew’s application development
and information security management
teams, a key area of both systems
opportunity and cyber risk.

As a manufacturing guy, I was excited
by my visit in February to the Advanced
Wound Management production site in
Hull, UK. As a resident of Yorkshire for
over 30 years, I was already familiar with
the heritage and reputation attached to
Smith+Nephew’s foundation in the region,
and the chance to see the site, and learn
more on the development of the new
state-of-the-art facility, was immensely
rewarding. I am looking forward to meeting
the Ortho and Sports Medicine teams as
part of the forthcoming Board visit to the
US in 2024.

Crucial to Board members is the chance
to hear about life at the ‘coal face’.
I am looking forward to meeting more
Smith+Nephew employees as part of our
Employee Listening sessions in 2024.

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What have your first impressions
of S+N been?
My first few months have been really
fulfilling. Joining as Rupert took over as
Chair and benefiting from Deepak’s deep
knowledge of the MedTech sector, it is
clear that we have a great opportunity to
take the business forward in delivering its
strategy and 12-Point Plan. I have been
particularly struck by the Board’s balance,
blending a strong combination of MedTech
and general industry expertise. There is
an openness to discuss challenging and
difficult questions, living up to our culture
pillars of Care, Courage and Collaboration.
Most of all, the people I have met are
committed to Smith+Nephew and to doing
the right thing with quality, innovation
and trust.

"
There is an openness to discuss
challenging and difficult questions,
living up to our culture pillars of Care,
Courage and Collaboration. Most of all,
the people I have met are committed to
Smith+Nephew and to doing the right
thing, with quality, innovation and trust.”

Jez Maiden
Independent Non-Executive Director

107

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Board development

Board Induction and
Development Programme
Our Board induction and development
programmes are customised to address
the specific needs and interests of each
of our Directors. We focus the induction
and development sessions on facilitating
a greater awareness and understanding
of our business, our stakeholders and
the regulatory frameworks within which
we operate.

During 2023, we implemented induction
programmes for our new Chair Rupert
Soames as well as for Jez Maiden,
Simon Lowth and John Rogers whose
appointments to the Board were
announced during the year.

Induction programmes are tailored to
each Board member’s individual skills and
experiences and their roles on the Board
and its Committees and include:
– One-to-one meetings with

senior executives to understand
the organisation, the roles and
responsibilities of our senior employees
and specifically how we do things at
Smith+Nephew;

– Meetings with our external advisers
including brokers, external counsel,
remuneration consultants and auditors,
to explain the legal and regulatory
background to their role on our Board
and how these matters are approached
at Smith+Nephew;

– Strategic presentations and site visits

tailored to Executive and Non-Executive
needs respectively in order to provide
a strong foundation to learn about the
organisation, its history, current and
future opportunities and challenges and
to give Board members an opportunity
to ask questions and interact with our
wider workforce.

On an ongoing basis, we provide our
Directors with both virtual and in-person
opportunities to understand more about
our business and the healthcare industry
and support engagement with our
teams and internal/external resources as
appropriate, for example:
– A number of Board Members have
enjoyed holding employee listening
sessions throughout the year both
physically and virtually, where they
have talked with employees and heard
their views on what it means to work
for Smith+Nephew. These sessions are
discussed in more detail on page 113.

Chair Induction 2023
– Our 2023 Chair Induction programme
was tailored with a strategic overview
and introduction to Medtech and
Medical Devices coupled with
an immersive introduction to our
Purpose, Culture Pillars and People
through various meetings, visits and
presentations from our Executive
Committee and its direct reports.
– External session on Global Healthcare

Context and Trends.

– External session on Medical Devices.
– One-to-one sessions with each

member of the Executive Committee,
Investor Relations and Finance Global
Leadership Team.

– Visits to Hull, Croxley, Poland, Memphis,
Pittsburgh and Andover sites in addition
to the full Board Costa Rica site visit.

– Informal office touchpoints with

employees at the UK Group Head Office
– Introduction at Global Senior Leadership

Virtual Meeting.

– Subject matter expert sessions
on Medical Device Regulation,
Healthcare Compliance, Enterprise
Risk Management and Inventory/
Asset Utilisation.

– Introductory sessions with

external advisors, auditors, brokers
and consultants.

– Additional internal and external sessions

upon request based on interest.

– In November 2023, Board Members were
invited to our Meet the Management
session in London and were able to
attend sessions virtually and in person
which provided further insight into
global product innovation strategy
across each of our business units and
our differentiated product pipeline,
together with the opportunity to meet
our investors.

– All Board members have access

to a library of Board induction and
development internal materials within
our Board resource portal as well as
external thought leadership articles,
materials, webinars and other resources.

– We have arranged sessions on external

perspectives on the Healthcare industry
and macro trends/insights on topics of
interest/relevance to the Board.

The Chair regularly reviews the
development needs of individual Directors
and the Board as a whole.

Rupert Soames
Chair of the Nomination
& Governance Committee

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"
The site visit agenda was thoughtful
and represented a good mix of listening
sessions, presentations, product experience
and customer voice. It was an insightful
and uplifting experience that provided
Board members with a great opportunity to
understand more about the culture of the
organisation and stakeholder perspectives.”
Jo Hallas
Independent Non-Executive Director

The Board also heard from teams on
Sustainability and innovation at the site,
highlighting success in sustainability and
recycling programmes, quality frameworks,
network footprint performance, engineering and
quality innovation and business continuity and
resilience in our Sports Medicine business and
supply chain. The business focus of the
afternoon was on accelerating growth in our
Sports Medicine business. The sessions were
framed to provide the Board with an overview of
the impact of these projects on key stakeholders
including employees, suppliers, customers,
regulators, government, investors, local
communities and the environment.

The Board visited the Smith+Nephew Service
Center Site on the second day of the site visit
which is home to the GBS Costa Rica teams.
The morning highlighted the S+N Service Center
transformation journey, reviewing the GBS
business model and transformation. Over lunch,
Board members hosted two of our EIG groups
(SWE and Pride) with rich discussions on remote
working challenges, achieving gender balance
and equality and diversity more broadly.
Aligned with the ESG strategy, the Board heard
more about the volunteering and other efforts
that are supporting embedding culture and
engagement priorities within the Costa
Rica sites.

Costa Rica – Site Visit

In addition to the Chair Induction
programme, the June 2023 Board site
visit to Costa Rica focused on strategic
and operational initiatives aligned with
key priorities for the Board, including core
business strategy, value creation
opportunities, culture and workforce,
operational transformation and ESG
and stakeholder considerations.

The visit began at our Coyol Facility with a tour
of the Coyol Free Zone Business Park to orient
Board members within the Medtech hub.
The Board were provided with an overview of
Costa Rica, its political, economic and social
history and the business and Medtech context
together with a history of the site.

The Operations Site Tour and Product
Demonstrations allowed Board members to
see our clean rooms, microbiology lab and
quality and operations facilities. The Board also
enjoyed Product demonstrations for PICO◊ 14,
WEREWOLF◊ and a number of other core product
lines manufactured or assembled on site.

Following the tour, Board members engaged
in listening sessions with our teams with
presentations on Operational Excellence in
Costa Rica focusing on the One Smith+Nephew
approach to site governance, culture and
behaviours aligned with our purpose of Life
Unlimited and culture pillars of Care, Courage
and Collaboration.

"
The Costa Rica site is a world class
facility and I was impressed by the pride,
accountability and energy of the teams
to drive continuous improvement.”
John Ma
Independent Non-Executive Director

"
It was great to see the passion,
authenticity, commitment and
professionalism of the local teams in
Costa Rica living our values. The
organisation is working hard to capture
and cascade best practice evidenced
in this facility to other sites/teams.”

Rupert Soames
Chair

Smith+Nephew Annual Report 2023

109

Composition, succession and evaluation continued
Nomination & Governance Committee report continued

Board effectiveness

Evaluation Process
The 2023 Review was conducted
internally by the Senior Independent
Director Marc Owen supported by the
Company Secretary and sought to review
all aspects of Board effectiveness.

Questionnaire responses were provided
by Board members (including both scores
and narrative responses) in advance
of one-to-one discussions between
our Senior Independent Director and:
(i) each Board Member; and (ii) the
Company Secretary.

Findings were summarised and presented
to the Board for discussion in December
2023 with progress benchmarked
against reviews from 2021 and 2022,
noting the significant changes to the
Board and management teams during
the last 24 months.

2023 Progress and Conclusions
Overall, the Smith+Nephew Board
believes it is operating effectively as
assessed both holistically and against
the areas of focus for 2022:
– During the year, the Board has spent
more time on strategic discussions
around the shape of portfolio, capital
allocation and opportunities to drive
longer-term strategic value creation.
– The Board has regularly evaluated risks,
opportunities and progress against key
metrics within the 12-Point Plan, the
Company’s restructuring programmes
and systems and network optimisation,
noting that considerable progress has
been made over the last 18 months
supported by stronger insights provided
by management on the extent of the
challenges and an ambitious plan on
how to address them.

Areas of strength and focus for 2024
Several areas of strength around
the operation of the Board and each
Committee, induction process for new
Board members, ESG strategy and risk
management were noted. The areas of
focus for 2024 are set out below:
– Longer-term strategic drivers to deliver

value creation: Continued focus on
core areas of innovation, operational
excellence/cost productivity, capital
deployment and returns on capital
and portfolio strategy. Formal opening
session and informal closing session
with Executive Directors at each Board
meeting to provide more focused
discussion and detail.

– Board and Committees have discussed
management succession planning,
including monitoring of employee
engagement scores and internal talent
pipeline and development framework
in particular for high-value roles within
the Company.

– Members of Exco and their direct

reports have spent time over the year
with Board members during inductions,
site visits and strategic presentations
fostering constructive discussion and
continuing to build trust and credibility
to strengthen governance.

– Composition of the Board has been

reviewed by the full Board and
Nomination & Governance Committee
and is considered appropriate with
good progress made during the year
on recruitment of two NEDs and
CFO designate. Board members feel
that views are properly heard and
discussions allow individual members
to have an impact.

– The Board has had further discussions
on the macro challenges, regulations
and trends globally within healthcare
and the Board and its Committees
have been provided with additional
sessions/materials from external
experts to enhance understanding
of the industry and the frameworks
within which the Company operates.

– Succession Planning: Enhanced focus
on management succession planning
to attract, retain and develop senior
leaders. Actions will include a biannual
review of talent pipeline and gap
analysis at Board level in addition
to reports to Compliance & Culture
and Remuneration Committees to
review long-term people strategy
with an emphasis on developing
strong pipelines of senior leaders.
Board listening sessions will also
include talent attraction, retention and
development topics as appropriate.

– Commercial and operational

transformation: Progress already
made should continue, monitored by
the Board through sessions with Exco
and management.

– Reporting: Further refinement of
Board papers to focus on insights
and Q&A and financial reporting to
provide further analysis and insight on
performance, risks and opportunities.

– The 2024 review will be facilitated

externally, with reviews in 2025 and
2026 to be facilitated internally and
led by the Senior Independent Director,
supported by the Company Secretary.

110

Smith+Nephew Annual Report 2023

Compliance & Culture

Compliance & Culture
Committee Report

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The Board is committed to a strong focus on
ethics and compliance, regulatory, quality and
culture to support our Strategy for Growth
and 12-Point Plan.”

Marc Owen
Chair of the Compliance
& Culture Committee

Membership

Member
from

Meetings
attended

Marc Owen
(Chair)

John Ma

Katarzyna
Mazur-
Hofsaess1

March
2018

December
2021

April 2021

Angie Risley

April 2020

Bob White

July 2020

4/4

3/4

4/4

In 2023, the Committee held
four meetings. The Chief
Executive Officer, Chief
Financial Officer, Group General
Counsel and Company
Secretary, the Chief
Compliance Officer, the Chief
Quality & Regulatory Affairs
Officer, Chief HR Officer,
President of Global Operations
and VP ESG also attended
all or part of the meetings
by invitation.

www.smith-nephew.com/
en/who-we-are/corporate-
governance#terms-of-
reference

The Terms of Reference for the Compliance &
Culture Committee describe the role and
responsibilities of this Committee more fully
and can be found on our website.
1 Katarzyna Mazur-Hofsaess was not
present at the meeting held on
4 December 2023 due to a prior
statutory commitment.

Smith+Nephew Annual Report 2023

Our focus for 2024 will include:
– Continued evaluation of ethics and

compliance, regulatory, quality and cultural
activities and trends and impact on the
Strategy for Growth and 12-Point Plan.
– Continued monitoring of the Company’s

progress against our ESG strategy and plan,
measuring actions against objectives and
metrics and evaluating implementation.
– Continued focus on stakeholder impact on
Committee and Board decision making.
– Monitoring the progress of the Company’s

commitment to its net zero roadmap by 2045.
– Monitoring the actions taken by management

following the Board/employee listening
sessions in 2023.

– Amplification of the Board/employee listening
sessions to include additional Non-Executive
Board members to enable the full Board to
hear from employees across the organisation
and to monitor the corporate culture globally.

– Evaluation of employee feedback gathered

through the annual survey and other
mechanisms to ensure the Board is aware
of employee views and any resulting actions
required by management. Recent survey
results are discussed on pages 48–49.

– Deeper understanding and focus on

stakeholder needs and requests relating to
ESG matters which are of interest to specific
stakeholder groups.

Responsibilities of the Compliance & Culture Committee
Sustainability
Ethics and Compliance
– Overseeing the implementation of our ESG
– Overseeing ethics and compliance
programmes, strategies and plans.

– Monitoring ethics and compliance process

improvements and enhancements.

– Assessing compliance performance based on
monitoring, auditing and internal and external
investigations data.

– Discussion of allegations of significant

potential compliance issues.

– Receiving reports from the Chief Compliance
Officer on ethics and compliance matters.
– Reviewing implementation of the global data
privacy compliance framework and other
regulatory developments which impact
our business.

strategy and reviewing performance against
targets and metrics, including the Scope 3
roadmap and ESG dashboard and metrics.
– Receiving and discussing reports from the ESG
Operating Committee focused on alignment
of our ESG strategy with stakeholder
requirements and our Strategy for Growth.

Culture
– Oversight of our relationship with stakeholders,
including the employee voice and sustainability.
– Receiving and assessing performance against
Purpose and Culture, Talent, Engagement and
Inclusion, Diversity and Equity (IDE).

Quality and Regulatory Affairs (QRA)
– Monitoring trends, activities and plans

relating to regulatory and quality risks and
events within the organisation aligned to our
Strategy for Growth.

– Receiving and assessing regular functional
reports and presentations from the Chief
Quality & Regulatory Affairs Officer on QRA
strategy and operations.

111

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Ethics and Compliance
As stated in the Code of Conduct, the
sustainability of our business depends on
doing business the right way and ensuring
that we work with third parties who adhere
to business principles consistent with
our own.

The Chief Compliance Officer provided
regular reports to enable the Committee
to evaluate the effectiveness of the Global
Compliance programme and understand
the audit, monitoring and continuous
improvement activities undertaken
to ensure our ethics and compliance
programme continues to evolve aligned
to our Strategy for Growth and the
12-Point Plan.

The Committee is provided with updates
on allegations of potentially significant
issues which are raised through the
Company’s hotline or to our Compliance
team and the Company’s response to
such matters. It also receives an annual
review of investigations, actions taken
to address substantiated matters and
developing trends.

The Committee received updates on
potentially significant findings from
compliance audits and oversight actions,
including detail of mitigating actions to
address findings. On an annual basis the
Committee receives a trend analysis of
audit findings and root cause analysis with
details of any program changes required to
address evolving trends. The Committee
continues to receive a report on the
annual self-assessment of the Compliance
programme against the US Department
of Justice Evaluation of Corporate
Compliance programs guidance.

The reports to the Committee
demonstrate that the organisation has
established mature processes and controls
over compliance and ethics reporting
and investigations.

During 2023, the Committee also received
updates with a regional focus on our
Compliance programmes in China and the
US which demonstrate how the global
programme is adapted to mitigate market
specific risks.

Sustainability/ESG
In 2023, sustainability and ESG matters
more broadly received a refined focus and
scrutiny from the Committee.

The Committee reviewed the Company’s
ESG strategy early in the year to
ensure alignment with our Strategy
for Growth, the 12-Point Plan and key
stakeholder expectations.

The Committee received updates
throughout the year from the
President Global Operations and newly
appointed Vice President ESG on our
performance against People, Planet and
Product initiatives.

Utilising enhanced dashboards and
reporting following the establishment
of the ESG Operating Committee, the
Committee monitors management actions
taken and tracks progress against the
organisation’s ESG objectives through KPIs,
metrics and leading indicators.

Driven by increasing requirements by
our Vice President ESG and the ESG
Operating Committee for the organisation
to align with and demonstrate shared
sustainability objectives with a number of
our stakeholders, the Committee reviewed
our sustainability objectives holistically to
align with strategy and approved updates
to volunteering and sustainable packaging.

During the site visit to Costa Rica in June
2023, the Committee was able to learn
more about our sustainability initiatives
in both our manufacturing operations and
corporate facilities.

In August 2023, the Committee discussed
annual performance metrics as a member
of the Dow Jones Sustainability Index to
understand how the Company benchmarks
against others in the industry.

In December 2023, the Committee
analysed and discussed the proposed
remuneration ESG metrics for our
Performance Share Programme and
engaged in further discussions on
stakeholder priorities to inform the
organisation’s global ESG strategy in 2024.

The Committee Chair continues to engage
with investors, governance teams and
other stakeholders on sustainability topics.
Since the year end, the Committee has also
approved the 2023 Sustainability Report.

Quality and Regulatory Affairs
Product safety and effectiveness is
at the foundation of our business.
Regulatory authorities across the world
implement and enforce a complex series
of laws and regulations that govern
the design, development, approval,
manufacture, labelling, marketing and sale
of healthcare products.

The Committee received and reviewed
summary reports at each meeting of
the Company’s performance against
internal and external KPIs and metrics in
order to ensure oversight of the quality
and regulatory activities of our business
aligned to our Strategy for Growth and the
12-Point Plan.

At each meeting, the Committee received
a briefing on key quality and regulatory
matters from the Chief Quality &
Regulatory Affairs Officer. The Committee
reviewed results of external regulatory
inspections and audits conducted by
the FDA and other regulatory agencies
including the progress being made on
continuous improvement programs
and activities.

The Committee also discussed results
of internal quality audits and key
performance metrics associated with
critical quality and regulatory compliance
processes. The Committee received
reports regarding preparation for emerging
regulations applicable to our business and
also received an update on the closure
of our EU Medical Device Regulation
program and implementation of the
compliance framework.

During the year, the Committee reviewed
progress in areas of focus including quality
assurance program improvements at key
manufacturing sites across the business
and our continued efforts on Quality
System simplification and optimisation
leading to continued efficiency across
our network.

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Smith+Nephew Annual Report 2023

The Committee was made aware of the
positive impact of and events held by our
Employee Inclusion Groups (EIGs) including
the consolidation of women employee
EIGs into the S+N Women’s Network, the
expansion of the ethnicity EIG Unite to
include a Latin Heritage EIG, as well as
continued progress for the EIGs focused on
generations, veterans, mental health and
physical wellbeing, the differently abled
and LGBTQ+.

The 2023 Gallup global employee survey
results were shared with the Committee.
These results, which allow Smith+Nephew
to benchmark against similar companies
in our industry, showed a strong employee
response rate of 88%. The Committee was
pleased to see that the survey highlighted
overall strengths in employee connection
to the purpose of Life Unlimited and
an overall upward trend of our results
compared with last year.

For specific issues where employees
may not feel comfortable articulating
their views, we have a whistle-blowing
policy and confidential line, as outlined
in the Ethics and Compliance section of
this report.

Culture
The Company’s core purpose of Life
Unlimited and the supporting culture
pillars of Care, Courage and Collaboration
continue to drive performance and
accountability throughout the organisation
globally. Our strategic objectives and
culture pillars provide alignment across our
business and stronger understanding by
employees of their role in supporting our
collective success.

At each meeting, the Committee received
briefings and updates on culture from the
Chief HR Officer demonstrating progress in
key areas.

The specific focus for 2023 centred
around the Employee Experience, People
Leader Capabilities and Organisational
Effectiveness and Embedding Change.

The Committee was pleased to receive
updates on the Employee Experience
focused on workplace flexibility initiatives,
wellbeing plans, IDE strategy and
implementation and tracking of internal
and external KPIs and metrics and
employee engagement through the annual
survey. Discussions at the Committee
on People Leader Capabilities focused
on refreshed leadership programmes
aligned to our Commitments and the
People Leader hub was launched to
provide enhanced resources for manager
development and self-led learning.
The Committee also evaluated the impact
of culture on 12-Point Plan engagement
and change management and the
way in which our Commitments were
embedded to focus on driving strategy
and performance.

How we monitor culture

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Employees
The Board proactively supports and further
reinforces the Purpose of Life Unlimited
and culture pillars of Care, Courage and
Collaboration through informal board
listening sessions. These sessions give the
Board the opportunity to hear directly
from employees and understand thoughts
and perspectives on a number of topics in
connection with our purpose and culture.

Five Board listening sessions were
held in 2023 with key enterprise-wide
themes being raised and discussed such
as portfolio strategy, innovation and
simplification; embedding our leadership
commitments and accountability;
simplification, agility and speed of decision-
making; celebrating purpose, talent,
culture and organisational achievements;
talent development and ESG engagement
across the enterprise. One of the sessions
was hosted by John Ma with the Greater
China team in order to hear their views on
strategy, operations, culture and people.
The Committee will continue to track and
monitor the implementation of actions
arising from these listening sessions as part
of its responsibilities in 2024.

The Board listening session programme
has been amplified for 2024 to include
additional Non-Executive Directors in
addition to Committee members and
will focus on several key topics including
the new Global Business Unit model,
new leaders, remuneration, 12-Point
Plan initiatives within operations and
the ways in which corporate functions
enable success.

The Employee
Experience

People Leader
Capabilities

2023 Interactions and Engagement

Looking ahead to 2024

The Committee received updates on workplace flexibility, wellbeing
plans and initiatives, IDE Strategy and IDE Council and annual
engagement survey results and plans. Listening sessions aligned to
hear employee voices in key areas of focus.

The Committee will continue to engage and
focus on understanding Smith+Nephew’s
well-being plan and initiatives and Allyship as
part of the IDE strategy and plan.

The Committee received updates on leadership and management
programmes which were refreshed to align to our Commitments and
the launch and implementation of the People Leader Hub provided
further resources for manager self learning. Listening sessions for
business unit and regional leadership teams facilitated discussions
on leadership and our commitments.

The Committee to receive updates on the
programmes Smith+Nephew will deliver to
improve leadership capabilities and how
Smith+Nephew will continue to reinforce our
Leadership Commitments and behaviours.

Organisational
Effectiveness and
Embedding Change

Updates provided to the Committee on culture and change
management relating to 12-Point Plan engagement and delivery
embedding our Commitments; focus on talent development
pipelines. Listening sessions on simplification and speed of decision
making supported discussions on organisational effectiveness and
pace of change.

Discussions with the Committee to include
details on operationalising the discipline of the
12-Point Plan, embedding the new
organisational structure, tracking key internal
and external metrics for ESG and review of
performance enablement strategy.

Smith+Nephew Annual Report 2023

113

Audit, Risk and Internal Control

Audit Committee Report

As announced, I stepped down as Chair of this
Committee on 1 March. I therefore take this
opportunity to thank all of the Committee members
for their support and focus during my tenure and
to Erik Engstrom for his 9-year service to the
Committee. We welcomed Simon Lowth to the
Committee in January and I wish Jez Maiden every
success in his new role as Chair of the Committee.”

Rick Medlock
Audit Committee Chair

Membership*

Member
from

Meetings
attended

Rick Medlock
(Chair)1

April 2020

Erik Engstrom2

Jan 2015

Jez Maiden3

Sept 2023

Marc Owen

Oct 2017

Jo Hallas

Sept 2022

7/7

3/3

7/7

The Committee met seven
times during the year, with
meetings timed to coincide
with the financial and reporting
cycles of the Company.
In addition, the Committee
met with both the Company’s
external auditor and Group
Head of Internal Audit without
management present.

www.smith-nephew.com

The Terms of Reference of the Audit
Committee describe the role and
responsibilities more fully and can be found
on our website.

1 Designated financial expert under the SEC

Regulations or recent and relevant
financial experience under the
UK Corporate Governance Code.
2 Erik Engstrom stepped down from the

Board and as a member of the Committee
on 31 December 2023.

3 Jez Maiden was appointed to the Board
and as a member of the Committee on
14 September 2023 and will become Chair
of the Committee on 1 March 2024.
4 Simon Lowth became a member of the

Committee on 1 January 2024.

* All members of the Committee are

deemed to be independent Directors.

114

Focus for 2024:
– Continued oversight of the governance and

maturity of our IT framework and controls, and
of the planned upgrading of Enterprise Resource
Planning (ERP) systems within the Group
– Monitoring of the continuing investment in

cyber resilience

– Continued focus on the Group’s Enterprise Risk
Management framework and the evolution of
the principal and emerging risks we face
– Supporting and monitoring the transition of

the external audit to the Deloitte team

– Developing the existing framework of
controls across the Group in order to

meet new requirements under the UK
Corporate Governance Code, particularly the
monitoring and review of the effectiveness of
material controls from 2026

– Ensuring that the Committee is compliant

with the UK FRC’s Minimum Standard: Audit
Committees and the External Audit

– Oversee adoption of a new internal reporting

structure and financial operating model
within the Group, ensuring that reporting and
controls remain effective

– Supporting new people in key roles within the
Finance function, including a new CFO and
new Head of Group Internal Audit.

Responsibilities of the Audit Committee
The Committee’s key roles are to:
– Ensure the integrity of the Company’s

financial reporting to shareholders and any
announcements relating to the Group’s
financial performance.

– Ensure financial statements comply with UK

and US statutory requirements.

– Review the content of the Annual Report

and advise the Board on whether, taken as a
whole, it is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
– Monitor the effectiveness of internal controls
and compliance with the 2018 UK Corporate
Governance Code and the SOX Act.

– Ensure the effectiveness of the internal audit

function, agree audit plans and consider
outcomes of internal audits.

– Review the operation of the Group’s risk

management framework.

– On behalf of the Board, carry out a robust

assessment of the principal and emerging risks
facing the Group.

– Ensure the effectiveness of the external

audit function, agree the scope of the audits
(including materiality thresholds and areas of
risk for focus) and the auditor’s fees and terms
of engagement.

– Consider any reported frauds and any

concerns raised by the Company’s whistle-
blowing process.

– Oversee other matters, including cybersecurity,
IT governance, ESG reporting, tax and treasury.

Dear Fellow Shareholder,

– Monitored the transition of the Group’s

During 2023, outside of the routine matters
undertaken by the Committee (as set out in its
Terms of Reference), the Committee has focused
on the following:
– Monitored progress on and enhancement of our

ESG reporting plan including TCFD.

– Continued oversight of the governance and

maturity plan for our IT framework and controls.

– Reviewed the Group’s cyber resilience.

External Auditors.

– Received progress reports on the change in the

finance operating model.

– Assessed the proposals within the Non-

Financial Reporting Review, the changes to
the UK Corporate Governance Code and the
minimum standards for Audit Committees.

Smith+Nephew Annual Report 2023

Significant matters related to the financial statements
We considered the following key areas of judgement in relation to the 2023 financial statements and at each half year and quarterly
trading report, which we discussed in all cases with management and the External Auditor:

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Valuation of inventories
A feature of the Orthopaedics business unit (which accounts for
approximately 66% of the Group’s total inventory and approximately 82% of
the total provision for excess and obsolete inventory) is the high level of
product inventory required, some of which is located at customer premises
and is available for customers’ immediate use. Complete sets of products,
including large and small sizes, have to be made available in this way.
These sizes are used less frequently than standard sizes and towards the end
of the product life cycle are inevitably in excess of requirements.
Adjustments to carrying value are therefore required to be made to
orthopaedic inventory to anticipate this situation. These adjustments are
calculated in accordance with a formula based on levels of inventory
compared with historical usage. This formula is applied on an individual
product line basis and typically is first applied when a product group has
been on the market for two years. This method of calculation is considered
appropriate based on experience, but it does involve management
estimation of customer demand, effectiveness of inventory deployment,
length of product lives and phase-out of old products.

Liability provisioning
The recognition of provisions for legal disputes is subject to a significant
degree of estimation. Provision is made for loss contingencies when it is
considered probable that an adverse outcome will occur and the amount
of the loss can be reasonably estimated. In making its estimates,
management takes into account the advice of internal and external
legal counsel and uses third-party actuarial modelling where appropriate.
Provisions are reviewed regularly and amounts updated where necessary
to reflect developments in the disputes. The ultimate liability may
differ from the amount provided depending on the outcome of court
proceedings and settlement negotiations or if investigations bring
to light new facts.

Impairment
In carrying out impairment reviews of goodwill and acquisition intangible
assets, a number of significant assumptions have to be made when
preparing cash flow projections. These include the future rate of market
growth, discount rates, the market demand for the products acquired,
the future profitability of acquired businesses or products, levels of
reimbursement and success in obtaining regulatory approvals. If actual
results should differ or changes in expectations arise, impairment
charges may be required, which would adversely impact
operating results.

Our action
At each quarter end, we received reports from, and discussed with,
management the level of provisioning and material areas at risk.
The provisioning level was 21% at 31 December 2023 (2022: 21%).
We challenged the basis of the provisions and concluded that
the proposed levels were appropriate and have been
consistently estimated.

Challenge by KPMG
During 2023 KPMG challenged management’s approach to
inventory provisioning considering recovery of demand in 2023.

Our action
As members of the Board, we receive regular updates from the Group
General Counsel & Company Secretary. These updates form the basis
for the level of provisioning. The Group carries a provision relating
to potential liabilities arising on its portfolio of metal-on-metal hip
products of $149 million as of 31 December 2023. We received detailed
reports from management on this position, including the actuarial model
used to estimate the provision, and challenged the key assumptions
including the number of claimants and projected value of each claim.
The provisions for legal matters have decreased by $105 million during the
year, primarily due to utilisation of the metal-on-metal provision. We have
determined that the proposed levels of provisioning at year end of
$159 million included within ‘provisions’ in Note 17.1 in 2023 (2022:
$264 million) were appropriate in the circumstances.

Challenge by KPMG
KPMG challenged management’s assumptions in determining the
provisions for metal-on-metal hip claims including the work of
management appointed actuaries.

Our action
We reviewed management’s reports on the key assumptions with
respect to goodwill and acquisition intangible assets – particularly
the forecast future cash flows and discount rates used to make
these calculations. We reviewed in detail management’s conclusion
that the goodwill and acquisition intangible assets related to Engage
Surgical and agreed that they should be fully impaired. We had a
particular focus on goodwill impairment testing for the Orthopaedics
CGU. Although the level of headroom has increased, it is sensitive to a
reasonably possible change in assumptions. We challenged the
downside sensitivity analyses undertaken and concluded that the
carrying value of these assets, excluded for Engage, is reasonable and
appropriately supported by the cash flow projections. We have
also considered the disclosure surrounding these reviews, and
concluded that the review and disclosure were appropriate.

Challenge by KPMG
KPMG challenged management on the impairment conclusions
and the basis of the assessment.

Smith+Nephew Annual Report 2023

115

Audit, Risk and Internal Control continued
Audit Committee report continued

Other matters related to
the financial statements
As well as the identified significant matters,
other matters that the Audit Committee
considered during 2023 were:

Going concern
The impact of a global economic recession
has been considered as part of the
adoption of the going concern basis in
these financial statements. We reviewed
three-year projections as part of the
Group’s Strategic Plan, and also more
detailed cash flow scenarios to 29 March
2025 for going concern purposes and
concurred with management that the
continued adoption of the going concern
basis is appropriate.

Taxation
The Group operates in numerous tax
jurisdictions around the world and
is subject to factors that may affect
future tax charges. We annually review
policies and approve the principles for
management of tax risks. We review
quarterly reports from management
evaluating the existing tax profile, tax risks
and tax provisions. Based on a thorough
report from management of tax liabilities
and our challenge of the basis of any tax
provisions recorded, we concluded that
the levels of provisions and disclosures
were appropriate.

Post-retirement benefits
The Group has post-retirement defined
benefit pension schemes, which require
estimation in setting the assumptions.
We received a report from management
setting out their proposed assumptions
for the UK and US schemes and concurred
with management that these assumptions
were appropriate. We also reviewed the
assumptions, accounting and disclosures
for the UK scheme buy-in and US scheme
buy-out and deemed them appropriate.

Climate change
The impact of climate change has been
considered as part of our review of the
impairment testing of goodwill and
acquired intangible assets, and the going
concern assessment. We have also
considered the disclosures on climate
change and considered them appropriate.

Since the year end
We have reviewed the results for the full
year 2023 and the Annual Report 2023,
and have concluded that they are fair,
balanced and understandable. In coming
to this conclusion, we have considered the
description of the Group’s strategy and
key risks, the key elements of the business
model, which is set out on pages 16–17,
risks and the key performance indicators
and their link to the strategy.

External auditor
Independence of external auditor
Following a competitive tender in 2014,
KPMG was appointed external auditor of
the Company in 2015. We are satisfied
that KPMG is fully independent from
the Company’s management and free
from conflicts of interest. Our Auditor
Independence Policy, which ensures
that this independence is maintained, is
available on the Company’s website.

We believe that the implementation of this
policy helps ensure that auditor objectivity
and independence is safeguarded.
The policy also governs our approach when
we require our external auditor to carry out
non-audit services, and all such services
are strictly governed by this policy.

The Auditor Independence Policy also
governs the policy regarding audit partner
rotation with the expectation that the
audit partner will rotate at least every
five years. Paul Nichols was appointed
as our senior lead audit partner on
1 January 2022.

The Audit Committee confirms it has
complied with the provision of the
Competition and Markets Authority (CMA)
Order 2014.

Effectiveness of external auditor
We conducted a review into the
effectiveness of the external audit as part
of the 2023 year-end process, in line with
previous years. We sought the views of
the Committee and key members of the
finance management team, considered the
feedback from this process and shared it
with management.

During the year, we also considered
the inspection reports from the Audit
Oversight Board in the UK and determined
that we were satisfied with the audit
quality provided by KPMG.

The Audit Committee receives feedback
from KPMG at each meeting where
management present their summary of
critical accounting estimates as at each
quarter end and during the Committee’s
private sessions with the auditors which
are held throughout the year.

Overall, therefore, we concluded that
KPMG had carried out their audit for
2023 effectively.

Change in Auditor
Deloitte LLP has made good progress
on the transition process further to the
accelerated audit tender process reported
last year. They are to be appointed auditors
of the Company from 1 January 2024,
subject to shareholders’ approval at the
Annual General Meeting in May 2024.

KPMG has been our auditor since 2015
and 2023 is their last year as our auditor.
We would like to thank them for their
service during their time as our auditor.

Appointment of external auditor
at Annual General Meeting
Resolutions will be put to the Annual
General Meeting to be held on 1 May 2024
for the appointment of Deloitte LLP as
the Company’s auditor and authorising
the Board to determine its remuneration,
on the recommendation of the Audit
Committee in accordance with the CMA
Order 2014.

116

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

During the year, the team completed 35
audits and reviews across the Group.
These covered significant aspects of all
11 Principal Risks and included: financial
controls effectiveness reviews across
the EMEA, APAC, US and LATAM regions;
IT and various programme assurance
reviews ranging from IT disaster recovery
planning and cyber maturity; and an ERP
pre-implementation review in Japan.
Group-level reviews included enterprise
risk management effectiveness, business
continuity management arrangements,
ESG governance, field inventory controls,
trade compliance activities, 12-Point Plan
governance and fraud risk management
effectiveness. Management have taken
swift action to implement Internal Audit’s
recommendations. The team was able to
travel to a number of locations, following
the relaxing of Covid-related restrictions
and there was continued use of data
extraction and analysis techniques during
all work.

The function carries out its work in
accordance with the standards and
guidelines of the Institute of Internal
Auditors. Its performance is annually
assessed using a structured questionnaire,
allowing non-executive, executive and
senior management, plus the external
auditor, to comment on key aspects of
the function’s performance. In addition, in
early 2022, Grant Thornton carried out an
evaluation of the function and concluded
that it was operating effectively. The Audit
Committee, which re-approved the
function’s charter in December 2023, has
satisfied itself that adequate, objective
internal audit standards and procedures
exist within the Group and that the Internal
Audit function is effective.

Audit-related fees in 2023 primarily
consisted of routine services and were
deemed by the Committee not to infringe
auditor objectivity or independence.
The ratio of non-audit fees to audit fees
for the year ended 31 December 2023 is
0.03. The ratio of non-audit fees to audit
fees for the year ended 31 December
2022 was 0.04.

Full details are shown in Note 3.2 to the
Notes to the Group accounts.

Audit fees paid to the auditor
Fees for professional services provided by
KPMG, the Group’s independent auditor in
each of the last two fiscal years, in each of
the following categories were:

Audit fees
Audit-related fees

Total

2023
$ million
10.0
0.3

10.3

2022
$ million
9.4
0.4

9.8

Internal audit
The internal audit team, which reports
functionally to the Audit Committee,
carries out risk-based reviews across
the Group. These reviews examine the
management of risks and controls over
financial, operational, commercial, IT and
transformation programme activities.

The audit team, led by the Group Head of
Internal Audit, consists of appropriately
qualified and experienced employees.
Third parties may be engaged to support
audit work as appropriate.

The Group Head of Internal Audit has direct
access to, and has regular meetings with,
the Audit Committee Chair and prepares
formal reports for Audit Committee
meetings on the activities and key findings
of the function, together with the status
of management’s implementation of
recommendations. The Audit Committee
has unrestricted access to all internal audit
reports, should it wish to review them.

Disclosure of information
to the auditor
In accordance with Section 418 of the
Companies Act 2006, the Directors
serving at the time of approving the
Directors’ Report confirm that, to the
best of their knowledge and belief, there
is no relevant audit information of which
the auditor, KPMG, is unaware and the
Directors also confirm that they have
taken reasonable steps to be aware of any
relevant audit information and, accordingly,
to establish that the auditor is aware of
such information.

Non-audit fees paid to the auditor
Non-audit fees are subject to approval in
line with the Auditor Independence Policy
which is reviewed annually and forms
part of the Terms of Reference of the
Audit Committee.

The Audit Committee recognises the
importance of the independence of the
external auditor and ensures that the
auditor’s independence should not be
breached. The Audit Committee ensures
that the auditor does not receive a fee
from the Company or its subsidiaries
that would be deemed large enough to
impact its independence or be deemed a
contingent fee. The total fees for permitted
non-audit services shall be no more than
70% of the average of the fees paid in the
last three consecutive financial years for
the statutory audits of the Company and
its subsidiaries.

Any pre-approved aggregate or individual
amounts up to $25,000 may be authorised
by the Group Treasurer and SVP Group
Finance respectively and amounts up to
$50,000 by the Chief Financial Officer.
Any individual amount over $50,000 must
be pre-approved by the Chair of the Audit
Committee. If unforeseen additional
permitted services are required, or any
which exceed the amounts approved, again
pre-approval by the Chair of the Audit
Committee is required.

The following reflects the non-audit
fees incurred with KPMG in 2023, which
were approved by the Chair of the
Audit Committee.

Audit-related services

2023
$ million
0.3

2022
$ million
0.4

Smith+Nephew Annual Report 2023

117

Audit, Risk and Internal Control continued
Audit Committee report continued

Viability Statement
We also reviewed management’s work in
conducting a robust assessment of those
risks which would threaten our business
model and the future performance or
liquidity of the Company, including its
resilience to the threats of viability posed
by those risks in severe but plausible
scenarios. Management have considered
various scenarios in assessing the impact
of a global economic recession, with the
key judgement applied being the speed
and sustainability of the return to a normal
volume of elective procedures in key
markets. This assessment included stress
and sensitivity analyses of these risks
to enable us to evaluate the impact of a
severe but plausible combination of risks.
We then considered whether additional
financing would be required in such
eventualities. Based on this analysis, we
recommended to the Board that it could
approve and make the Viability Statement
on page 78.

Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the financial review on pages
20–23 and the Principal Risks on pages
69–77.

The financial position of the Group, its cash
flows, liquidity position and borrowing
facilities are described on pages 20–23.
In addition, the Notes to the Group
accounts include: the Group’s objectives,
policies and processes for managing its
capital; its financial risk management
objectives; details of its financial
instruments and hedging activities; and its
exposure to credit risk and liquidity risk.

The Group has considerable financial
resources and its customers and
suppliers are diversified across different
geographic areas. As a consequence,
the Directors believe that the Group is
well placed to manage its business risk
successfully despite the ongoing uncertain
economic outlook.

Risk management programme
Whilst the Board is responsible for
ensuring oversight of strategic risks
relating to the Company, determining
an appropriate level of risk appetite,
and monitoring risks through a range of
Board and Board Committee processes,
the Audit Committee is responsible for
ensuring oversight of the processes by
which operational risks, relating to the
Company and its operations are managed
and for reviewing financial risks and the
operating effectiveness of the Group’s Risk
Management process.

During the year, we reviewed our Risk
Management processes and progress was
discussed at our meetings in February,
April, July, and December. We approved
the Risk Management programme for 2023
and monitored performance against that
programme, specifically reviewing the work
undertaken by the risk champions across
the Group, identifying the risks which could
impact their areas of our business.

The Risk Management programme
followed the risk management policy and
manual communicated company-wide
in 2023. This programme combines a
‘bottom-up’ approach (whereby risks are
identified within business areas by local risk
champions working with their leadership
teams), with a ‘top-down’ approach (when
the Executive Committee meets as the
Risk Committee to consider the risks facing
the Group at an enterprise level).

Throughout the year, the Audit Committee
maintained oversight of this programme.
We reviewed the Principal Risks
identified and the heat maps prepared by
management showing how these risks
were being managed. We considered
where the risk profile was changing.

Since the year end, we have reviewed a
report from the Group Head of Internal
Audit into the effectiveness of the Risk
Management programme throughout the
year. We considered the Principal Risks, the
actions taken by management to review
those risks and the Board risk appetite in
respect of each risk. We concluded that the
Risk Management process during 2023 and
up to the date of approval of this Annual
Report was effective. Work will continue in
2024 and beyond to continue to enhance
the process.
» Risk Report (pages 67–77)

118

The Group has considered several
scenarios (refer to Viability Statement on
page 78 and 79) including the continued
uncertainty as to the future impact on the
financial performance and cash flows of
the Group as a result of a global economic
recession as part of the adoption of the
going concern basis in these financial
statements. The Directors have a
reasonable expectation that the Group
has adequate resources to continue in
operational existence for the foreseeable
future. Thus they continue to adopt the
going concern basis for accounting in
preparing the annual financial statements.
Management also believes that the Group
has sufficient working capital for its
present requirements.

Evaluation of internal controls
Management are responsible for
establishing and maintaining adequate
internal control over financial reporting as
defined in Rule 13a–15(f) and 15d–15(f)
under the US Securities Exchange Act
of 1934.

There is an established system of internal
control throughout the Group and our
country business units. The main elements
of the internal control framework include:
– The management of each country and
Group function is responsible for the
establishment, maintenance and review
of effective financial controls within their
business unit or function.

– The Group’s IT organisation is responsible

for the establishment of effective
IT controls within the core financial
systems and underlying IT infrastructure.

– The Financial Controls & Compliance

Group has responsibility for the review of
the effectiveness of controls operating
in the countries, functions and IT
organisation, by either: performing
testing directly, reviewing testing
performed in-country, or utilising a
qualified third party to perform this
management testing on its behalf.
– The Group Finance Manual sets out

financial and accounting policies, and is
updated regularly. The Group’s Minimum
Acceptable Practices (MAPs) internal
control framework is updated annually
to adjust to changing business processes
or to leverage leading practices.
The business is required to self-assess
their level of compliance with the MAPs
on a monthly basis and remediate
any gaps.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

This process complies with the FRC’s
‘Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting’ under the UK Corporate
Governance Code and additionally
contributes to our compliance with the
obligations under the SOX Act and other
internal assurance activities. There has
been no change during the period covered
by this Annual Report that has materially
affected, or is reasonably likely to
materially affect, the Group’s internal
control over financial reporting.

The Board is responsible overall for
reviewing and approving the adequacy
and effectiveness of the risk management
framework and the system of internal
controls over financial, operational
(including quality management and
ethical compliance) processes operated
by the Group. The Board has delegated
responsibility for this review to the Audit
Committee. The Audit Committee, through
the Internal Audit function, reviews the
adequacy and effectiveness of internal
control procedures and identifies any
significant weaknesses and ensures these
are remediated within agreed timelines.
The latest review covered the financial
year to 31 December 2023 and included
the period up to the approval of this Annual
Report. The main elements of this review
are as follows:
– The Chief Executive Officer and the
Chief Financial Officer evaluated the
effectiveness of the design and operation
of the Group’s disclosure controls and
procedures as at 31 December 2023.
Based upon the evaluation, the Chief
Executive Officer and Chief Financial
Officer concluded on 26 February
2024 that the disclosure controls
and procedures were effective as at
31 December 2023.

– MAPs compliance is validated through

– A treasury operating framework and

spot-checks conducted by the Financial
Controls & Compliance Group and
Internal Audit, as well as during wider
Internal Audit reviews performed
throughout the year. We continue
to leverage a technology solution to
facilitate the real time monitoring
of the operation and testing of
controls and have established KPIs for
control performance.

– There are clearly defined lines of
accountability and delegations
of authority.

– The Internal Audit function executes
a risk-based annual work plan, as
approved by the Audit Committee.
The Audit Committee reviews reports
from Internal Audit on their findings
on internal financial controls, including
compliance with MAPs and from the
SVP Group Finance and the heads of
the Financial Controls & Compliance,
Taxation and Treasury functions.

– The Audit Committee reviews regular
reports from the Financial Controls
& Compliance Group with regard to
compliance with the SOX (Sarbanes
Oxley) Act.

Additional complementary elements of our
control environment include the following:
– Business continuity planning, including

preventative and contingency measures,
back-up capabilities and the purchase
of insurance.

– Risk management policies and

procedures including segregation
of duties, transaction authorisation,
monitoring, financial and managerial
review and comprehensive reporting
and analysis against approved standards
and budgets.

Group treasury team, accountable for
treasury activities, which establishes
policies and manages liquidity and
financial risks, including foreign
exchange, interest rate and counterparty
exposures. Treasury policies, risk limits
and monitoring procedures are reviewed
regularly by the Audit Committee or the
Finance & Banking Committee, on behalf
of the Board.

– Our published Group tax strategy

which details our approach to tax risk
management and governance, tax
compliance, tax planning, the level of
tax risk we are prepared to accept and
how we deal with tax authorities, which
is reviewed by the Audit Committee on
behalf of the Board.

– The Audit Committee reviews the Group
whistle-blower procedures to ensure
they are effective.

This system of internal control has been
designed to manage rather than eliminate
material risks to the achievement of our
strategic and business objectives and can
provide only reasonable, and not absolute,
assurance against material misstatement
or loss. Because of inherent limitation,
our internal controls over financial
reporting may not prevent or detect all
misstatements. In addition, our projections
of any evaluation of effectiveness in
future periods are subject to the risk that
controls may become inadequate because
of changes in conditions, or that the
degree of compliance with the policies or
procedures may deteriorate. Entities where
the Company does not hold a controlling
interest have their own processes of
internal controls.

We have reviewed the effectiveness of the
Company’s internal controls over financial
reporting. The Company’s assessment
included documenting, evaluating
and testing the design and operating
effectiveness of its internal controls
over financial reporting. Based on this
evaluation, we have satisfied ourselves that
we are meeting the required standards
and that our internal control over financial
reporting is effective both for the year
ended 31 December 2023 and up to the
date of approval of this Annual Report.
No concerns were raised with us in 2023
regarding possible improprieties in matters
of financial reporting.

Smith+Nephew Annual Report 2023

119

Audit, Risk and Internal Control continued
Audit Committee report continued

– Management are responsible for

establishing and maintaining adequate
internal control over financial
reporting. Management assessed the
effectiveness of the Group’s internal
control over financial reporting as at
31 December 2023 in accordance
with the requirements in the US under
section 404 of the SOX Act. In making
that assessment, they used the
criteria set forth by the Committee
of Sponsoring Organizations of the
Treadway Commission in Internal
Control-Integrated Framework
(2013). Based on their assessment,
management concluded and reported
that, as at 31 December 2023, the
Group’s internal control over financial
reporting was effective based on those
criteria. Having received the report from
management, the Audit Committee
reports to the Board on the effectiveness
of controls. KPMG, an independent
registered public accounting firm,
audited the financial statements
included in the 2023 Annual Report,
containing the disclosure required by this
item, issued an attestation report on the
Group’s internal control over financial
reporting as at 31 December 2023.

Code of Ethics for
Senior Financial Officers
We have adopted a Code of Ethics for
Senior Financial Officers, which applies
to the Chief Executive Officer, the Chief
Financial Officer, the SVP Group Finance
and the Group’s senior financial officers.
There have been no waivers to any of the
Code’s provisions nor have there been
any substantive amendments to the
Code during 2023 or up until 26 February
2024. A copy of the Code of Ethics for
Senior Financial Officers can be found on
our website.

In addition, every individual in the finance
function certifies to the Chief Financial
Officer that they have complied with the
Finance Code of Conduct.

Rick Medlock
Chair of the Audit Committee

The Committee has satisfied
itself that the Smith & Nephew
plc 2023 Annual Report is fair,
balanced and understandable.
The Committee therefore
supports the Board in making its
formal statement on page 156.

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Remuneration

Directors’ Remuneration Report

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Membership

Angie Risley
(Chair)

Roberto
Quarta1

Rupert
Soames2

Member
from

Meetings
attended

Sept 2017

9/9

April 2014

4/5

April 2023

Jez Maiden3

Sept 2023

Bob White

July 2020

6/6

4/4

9/9

1 Roberto Quarta stepped down from the

Board and as a member of the Committee
on 15 September 2023.

2 Rupert Soames joined the Board and the

Committee on 26 April 2023.

3 Jez Maiden joined the Board and as a

member of the Committee on
14 September 2023.

Smith+Nephew Annual Report 2023

Angie Risley
Chair of the Remuneration Committee

The Committee’s role
The Committee’s role is to ensure that our
Remuneration Policy and practices are
aligned to the business strategy and promote
long-term sustainable success. We make
sure that the Remuneration of our Executive
Directors and leadership team is aligned to the
Company’s purpose and values and is clearly

Focus for 2024
– Propose to shareholders a package of
changes to our Remuneration Policy in
respect of US Executive Directors’ long-
term incentive plans, with the objective
of enabling the Company to effectively
compete for, attract and retain the
best people.

– Continue to monitor the remuneration and
initiatives to support the wider workforce,
making interventions where required.

Dear Fellow Shareholder,

The core focus of the Remuneration Committee
this year has been on attraction, retention and
development of talent across the organisation
and understanding the needs of the wider
workforce more broadly, particularly in the
context of the cost of living globally.

With our focus on ensuring longer-term stability
to drive value creation for the organisation, the
Committee has identified a pressing need to
take proactive steps to ensure the organisation
is able to compete for, attract and retain key
talent in priority markets, most notably the US,
in support of the delivery of our strategy and the
12-Point Plan.

The Board is cognisant of the fact that stability
and continuity of our people is critical to deliver
on our commitments. This will enable senior
management to successfully develop the internal
talent pipeline and succession plans in the
longer-term.

linked to the successful delivery of business
performance and drives value creation.
We engage with shareholders as appropriate
to ensure that the Committee hears and
understands their views which in turn assists
the Committee to shape its proposals.

– Focus on development of internal talent

pipeline to ensure longer-term succession,
promote stability and drive value creation.

– Approving the ESG metrics for the 2024

Performance Share Programme.

– Monitor the performance versus targets for
the short and long-term awards under the
Performance Share Programme and Annual
Bonus Plan, rewarding pay for performance.

The Company has seen several changes at
Executive Director level during my six years as
Chair of the Committee; Deepak Nath is the
Company’s fourth CEO during a five-year period
and with every CEO change there has been
an increase in downstream senior leadership
attrition across the business. These CEO and
senior management changes have led to loss of
talent in our internal pipeline which has had a
longer-term negative impact on the Company.

The Board believes that the Company needs to
be able to offer employees who are normally
resident in the US, including Executive Directors,
remuneration packages which can compete with
the Company’s US Medtech peers of a similar
size and provides them with an opportunity
to be compensated in accordance with US
market norms.

The global MedTech market is very heavily
weighted to the US. Although our primary listing
is in London, less than 4% of our revenues arise in
the UK, and over 50% arise in the US. Currently,
our CEO and key senior operational leaders, are

121

Remuneration continued
Directors’ Remuneration Report continued

based in the US. In terms of our global
employees, 8% are based in the UK and
around 40% in the US. Such a balance is
common in the MedTech world but makes
the Company an outlier within the FTSE
and is the basis on which we believe the
Company must be able to differentiate itself
in terms of the remuneration packages it
needs to offer.

As a result of detailed work undertaken
by the Remuneration Committee during
2023 with support from our remuneration
advisers and the Board, it became
apparent that both in terms of quantum
and structure, whilst our policies are
appropriate in most countries in which the
Company operates, they were not aligned
with long-term incentive plans for MedTech
executives normally resident in the US.

Under the current Remuneration Policy,
the target value of Smith+Nephew’s
total direct compensation package for
the role of CEO falls materially below
the lower quartile of Smith+Nephew’s
Global MedTech peer group, which is
based on comparably sized competitors
in the industry with most based in the US.
Further, the competitiveness gap with
Global MedTech peers is not solely a matter
of quantum. These peers predominantly
apply a portfolio approach to LTI (long-term
incentives) design, operating a combination
of performance shares, restricted shares,
and share options (the majority of which
do not have performance conditions or
an underpin). Based on our review, 18 of
21 Global MedTech peers use restricted
shares, or options, or both, and these
plans usually vest on a phased annual
basis over three years, rather than vesting
on a cliff edge basis at the end of three
years, followed by a 2-year post-vesting
holding period, as with Smith+Nephew’s
Performance Share Programme (PSP).

Annual Bonus deferral of any kind is
also very rare among Global MedTech
peers, and they do not typically operate
post-vesting holding periods on LTI.
In combination with the phased vesting
schedule for LTI, senior executives at
Global MedTech peers can typically
expect to receive vested equity and cash
far earlier than is the case at FTSE-listed
companies like Smith+Nephew, all of which
raises the perceived value of the package
independently of quantum.

The changes proposed in our Policy on LTIs
for US Executive Directors are intended
to move some way towards addressing
these gaps in competitiveness with
Global MedTech peers, both in terms of
quantum and design. We would emphasise
that the proposals do not seek to match
the prevalent Global MedTech practice
and in terms of quantum would only
raise the target value of CEO total direct
compensation to a level around the lower
quartile of this market.

Shareholder consultation on
the 2024 Remuneration Policy
Upon becoming Chair, Rupert met with a
significant number of our larger investors
and highlighted his concerns on the ability
of the Company to compete for talent
in the US. The great majority of those
investors supported engagement in a
formal consultation.

With full support from the Board and
Committee members on our approach,
Rupert and I engaged or corresponded
with 52 of our largest shareholders,
comprising over 67% of the share capital
of the Company, and key proxy advisors.
We heard their views and comments on
the proposed package of measures which
helped us to shape the proposals that we
are putting to the shareholder vote.

During the consultation we were pleased
to receive support and positive feedback
from the majority of those we engaged
with directly. Investors were aligned with
the Board desiring to achieve greater
stability within senior management.
Whilst there was an acknowledgment
that our proposals do not fit squarely
within the four corners of the current
UK Corporate Governance framework,
investor governance teams acknowledged
the compelling rationale for the Company
to differentiate itself from other companies
within the FTSE given the size and scale
of its business and operational leadership
in the US, its prior history of management
attrition due to reported issues on pay and
the driving need to be able to compete for,
attract and retain talent in the US to ensure
longer-term stability for the organisation.

At the 2024 Annual General Meeting, we
are therefore seeking shareholder approval
for a new Remuneration Policy which
reflects investor feedback.

We understand that some investors would
ideally wish to see financial performance
meeting investor expectations in advance
of increasing LTI, but in the Board’s view
the changes must be implemented
in the short-term to incentivise long-
term stability.

The new package of proposed measures
for US Executive Directors will move
our practices and structures nearer to,
but not equivalent to, US market norms.
The management team also has the
ambition to cascade a similar market-
competitive model to other relevant
organisational levels below the Executive
Director level.

Overview of proposed changes
for US Executive Directors
We have determined that there is a clear
business need to make changes to our
remuneration policy in respect of US
Executive Directors for the reasons set
out above. The proposed changes are set
out below:

LTIP quantum and structure: In addition
to a proposed increase to the maximum
opportunity under the performance share
programme (PSP), we plan to introduce a
new restricted stock programme (RSP) for
US Executive Directors to ensure our LTI
structure more closely mirrors LTIP design
found in the US market and MedTech peers.
The proposed quantum and structure of
the two plans are as follows:
– Performance Share Programme (PSP):

We are proposing a change to the
quantum of the PSP for US Executive
Directors to align with continued
Board and investor focus on driving
performance globally across the
organisation. Performance will continue
to be assessed over a three-year period
with an additional post-vesting two year
holding period. Maximum opportunity
will increase from 275% to 300%.

– Restricted Share Programme (RSP): We
propose the introduction of a new RSP
of 125% of base salary for US Executive
Directors. Awards will vest in three
equal tranches over a three-year period,
contingent on a reasonable judgement
underpin being met as determined by
the Committee. Please see page 130
for further details on the reasonable
judgement underpin.

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Executive Directors who are not normally
resident in the US will not participate in
the RSP and will only participate in the
PSP; they will not receive any additional
quantum under the LTIP than that
already offered under the current Policy
in accordance with market norms in
the countries where they live and work.
It should be noted that the Company has,
in the past, used RSPs for executives and
senior leaders on a case-by-case basis,
to support retention. We are proposing
to add a reasonable judgement underpin
which is not normal practice in the US,
to allay concerns on fully guaranteed
additional pay.

The introduction of restricted stock is
critical to enable effective competition
with MedTech peers, as RSPs are a
standard component in US leadership
remuneration packages.

In order to achieve a balance of measures
which drive longer-term stability and value
creation and support a longer-term holding
period, we propose to increase the share
ownership guidelines for US Executive
Directors from 300% to 500% and
retain bonus deferral at 30% after share
ownership guidelines are met.

The Board considered the following
alternatives in arriving at the proposal to
introduce the RSP:

– Increase in base salary for US Executive
Directors: Unlikely to be acceptable
to investors and wider stakeholders.
Based on the analysis completed, base
compensation is not the primary issue for
the Company; longer-term incentives are
out of line with US packages.

– Reduce PSP on introduction of RSP:
The Board feels strongly that there
should be continued focus on driving
performance and reduction of the PSP
is not ideologically aligned with this goal.
The PSP is global for all senior executives
and therefore a reduction would not
support organisational performance
objectives. In addition, the reduction of
PSP would not achieve the objective of
increasing the overall quantum in order to
become more competitive with US norms.
– Increase in PSP only: This would not align
to US norms and packages offered by our
major competitors. We are proposing to
add a reasonable judgement underpin
to the RSP to allay concerns on full
guaranteed additional pay.

– Introduce an RSP at a lower quantum of

50% of salary: The Board seeks to ensure
that our US talent are remunerated
in line with the structures used in the
local market. An RSP of 125% still
only takes the CEO into the lower
quartile when benchmarked against
US peers. We understand that under
UK market norms, this would not fall

within commonly accepted practice, but
failure to make these increases will not
achieve the dual objective of becoming
more competitive in the US market or
attracting and retaining US talent to
ensure longer term stability.

– Introduce the 2024 Policy changes for
all Executive Directors: The strategic
rationale for the 2024 Policy changes
for US Executive Directors is to ensure
that the Board has a compensation
framework to remunerate US Executive
Directors in the jurisdiction in which they
live and work.

New Policy in the context
of the wider workforce
Although this report deals primarily
with the remuneration of our Executive
Directors, as outlined in my introduction,
the focus of the Committee has and will
continue to be on reviewing compensation
and initiatives across the wider workforce.

ShareSave Plans are operated in the UK
and 31 other countries internationally.
As Company financial performance
improves, we anticipate seeing an increase
in participation in our ShareSave Plans.

In January, I chaired a Board listening
session with some of our employees from
our UK teams to explain our Executive
Director’s Remuneration Policy and how

Element

Base salary

Annual Bonus

Current Policy
for US Executive Directors

Change/No Change to Policy for
US Executive Directors

Updated Remuneration Proposal January
2024 for US Executive Directors

CEO: $1,526,625

Maximum: 215% of base salary
Target: 50% of maximum
Threshold: 15% of maximum

No change

CEO: $1,572,424

Maximum: 215% of base salary

Target: 50% of maximum
Threshold: 15% of maximum

Long-term incentives Maximum PSP: 275% of base salary

3 years performance period
+ 2 year holding

Increase maximum opportunity under
PSP to 300% of base salary. Introduce an
opportunity under a new RSP of 125%
of base salary with a 3-year phased
vesting with Committee underpin based
on reasonable judgement. Holding period
doesn’t apply to RSP.

Maximum PSP: 300% of base salary
3 years performance period
+ 2 year holding
Maximum RSP: 125% of base salary.
Annual vest in three equal tranches over a
3-year period, contingent on Committee
reasonable judgement underpin.

Share Ownership
Guidelines (SOG)

Post-cessation SOG

300% of base salary

Increase to 500%

500% of base salary

100% of SOG or actual holding (if lower)
for 2 years

No change

100% of SOG or actual holding (if lower) for
2 years

Bonus deferral

50% paid in cash, 50% deferred for
3 years

Reduction for all Executive Directors, of
bonus deferral from 50% to 30% when SOG
is met.

50% paid in cash, 50% deferred for 3 years
70% paid in cash, 30% deferred for 3 years
when SOG is met.

Malus and clawback

Malus and clawback provisions apply

No change

Malus and clawback provisions apply

Pension

Capped at 7.5% of salary

No change

Capped at 7.5% of salary

Smith+Nephew Annual Report 2023

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Remuneration continued
Directors’ Remuneration Report continued

it aligns to the Company’s purpose, values
and delivery of the Company’s long-term
strategy. We also discussed the impact
of the cost of living crisis and fall in
disposable incomes.

In response to the continued challenges
relating to the cost of living in a number of
markets globally, the Company continued
to monitor the situation and again, as
in 2022, undertook an off-cycle salary
adjustment for employees in markets
where inflation had a material impact.
This was determined by thorough review
of external inflation rates across markets
and was applied to employees below senior
management level where the gap between
their 2022 annual pay increase and the
rate of inflation was above a certain level.
We also offered our employees in Costa
Rica an opportunity to convert their
salaries back into Costa Rican Colóns
from US Dollars to minimise the impact of
devaluing currency.

Pay equity is key in our commitment to
our people. We have a globally consistent
approach to managing pay equity, with
clear accountability and regular reporting
to ensure we are delivering on our
commitment. We review annually the
gender pay ratio in the UK and we continue
to make positive progress to address the
adjusted pay gap and drive pay equity
on our global agenda. The Committee
monitors the pay philosophy for the wider
workforce throughout the year to ensure
our people are paid fairly and equitably for
the work they do.

Smith+Nephew is committed to developing
our talent globally and offers a variety
of multi-level programmes and network
events in support of continued growth
and retention. Some of the key initiatives
offered in 2023 include:
– A broad range of self-paced learning
options for our employees globally
via our online learning library, the
Accelerated Leadership Collection.
Following completion of a particular
learning module, employees present
thoughts and insights on the module
to their teams in order to share best
practice and learning;

– Continuing to deliver and expand our
Diverse Talent Sponsorship Program.
Previous cohorts provided positive
feedback and we have noted a positive
impact on career progression and talent
retention for participants in the program.

124

Following the first S+N sponsorship
initiative in 2020/21, we have seen 71%
of the 24 participant cohort achieve an
internal promotion and there has been
an 88% retention rate within the cohort.
The second cohort in 2022/23 has seen
64% of the 11 participant cohort achieve
lateral moves or promotions in line with
their talent development plans and there
has been a 92% retention rate within the
second cohort to date;

– Coaching for wellbeing, mental health,

leadership and professional development
through our Healthcare provider across
key jurisdictions;

– Facilitation of opportunities for

employees and leaders to learn from
each other via structured reflection
sessions built into most of our programs;

– Launching the leader transition toolkit
to accelerate the impact of successors
moving into broader roles aligned to their
development plans; and

– Career Conversation guides and

micro-learnings modules are available
to all employees and managers
globally to build self-awareness
and capability in engaging in career
development conversations.
» See more on pages 46–49
Introducing ESG measures in PSP
alongside ABP
As reported in 2022, the Committee
recognises that ESG performance forms
an important part of Smith+Nephew’s
short-term and long-term strategic
priorities. The current approach for
our Annual Bonus Plan is to allocate
5% of the total opportunity under
the plan to ESG performance.
For 2024, we propose to allocate 5% out
of the 15% weighting on the business
objectives element to ESG, focusing on
environmental measures aligned with
carbon reduction targets and diversity
measures within our People. For awards
granted under the Performance Share
Programme in 2024 we are introducing a
10% ESG allocation with primary focus on
carbon reductions and diversity measures.

Balancing performance scorecards
to support our business strategy
Together with developing the policy
proposals above, and introducing ESG
measures in PSP, the Committee has
reviewed the mix of performance

measures within the scorecards for
the ABP and the PSP to ensure they
continue to drive the implementation
of business strategy. To maintain the
balance in each incentive programme in
the context of the adjustments to ESG
performance measurement:

– Cash flow performance will be removed
from the PSP scorecard and introduced
in the ABP scorecard in the form of a
trading cash flow conversion metric to
ensure stronger focus.

– In both plans, the mix of measures will

be slightly reweighted to accommodate
these changes and the inclusion of ESG.

Review of 2023 performance
In 2023 the Group delivered strong revenue
growth in line with its guidance issued in
February 2023 and an improved trading
profit margin⁴. Revenue was $5,549 million,
up 6.4% on a reported basis and 7.2% on
an underlying basis.⁴ Operating profit was
$425 million, and the trading profit⁴ was
$970 million with a trading profit margin⁴
of 17.5%.

The strong revenue growth and improved
trading profit margin in 2023 were built
upon the early benefits from our actions
to transform Smith+Nephew. The 12-Point
Plan is on track, with progress beginning to
translate into financial outcomes, and our
innovation strategy is delivering a strong
pipeline of new products that we expect
will drive future performance.

Remuneration outcomes
for 2023
Annual Bonus Plan
Performance against the financial targets
under the Annual Bonus Plan was above
maximum for revenue and between
threshold and target for trading margin,
resulting in an aggregated payout of
124.51% of target in respect of the
financial objectives.

The Remuneration Committee reviewed
the performance of the Executive Directors
against their individual business objectives
and determined the rating as follows:

Deepak achieved his objectives in terms
of what he delivered and exceeded in how
he performed and therefore received an
above target payout in relation to this
element of his bonus.

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I would like to thank our shareholders,
employees and other stakeholders for their
engagement and support over the past
year. Our shareholders have helped us to
shape the proposed Remuneration Policy
for 2024 through their engagement and
constructive feedback and we are very
grateful for their continued support and
investment in the Company.

Angie Risley
Chair of the Remuneration Committee

Anne-Françoise achieved her objectives
both in terms of what she delivered and
how she performed and therefore received
an on-target payout in relation to this
element of her bonus.

These ratings combined with performance
against the financial objectives resulted in
an overall bonus amounting to 130.8% of
base salary for Deepak and 127.5% of base
salary for Anne-Françoise.

We appreciate that during 2023, the
share price decreased by 4%, but having
considered the progress against the
12-Point Plan, and that there have been
no material risk or reputational events, we
determined that the bonus outcomes are
a fair representation of the performance of
the Company and the Executive Directors
in 2023. There is no need to apply any
discretion to these formulaic outcomes.

Performance Share Programme
Similarly, the Remuneration Committee
reviewed performance over the past three
years against the targets determined
in 2021 for the Performance Share
Programme and determined that these
awards should vest at 21% (see pages
144–145 for further details). This reflects
performance against the targets over
the three-year performance period since
1 January 2021. Note: As Deepak joined in
2022 he did not receive a PSP 2021 award.

4 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS on pages 244–248.

Compliance statement
We have prepared this Directors’ Remuneration report (the Report) in accordance with The Enterprise and Regulatory Reform Act 2012–2013 (clauses 81–84), sections 420 to 422 of the
Companies Act 2006 and The Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the Regulations), The Companies (Directors’
Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 and The Companies (Miscellaneous Reporting) Regulations 2018. The Report also meets the relevant requirements
of the Financial Conduct Authority (FCA) Listing Rules.
Pages 138–154 is the annual report on remuneration (the Implementation Report). The Implementation Report will be put to shareholders for approval as an advisory vote at the Annual General
Meeting on 1 May 2024. The Implementation Report explains how the Remuneration Policy was implemented during 2023. The following sections have been audited by KPMG:
The Single Figure Tables on Remuneration including related notes (pages 139–140); details of awards made under the Performance Share Programme (pages 145–146); Summary of Scheme
Interests during the year (page 145–146); Payments to former Directors (page 148); Directors interests in ordinary shares (page 149) and Senior Management Remuneration (page 154).
The Policy Report describes our Remuneration Policy as it relates to the Directors of the Company. All payments we make in relation to Directors of the Company will be in accordance with this
Remuneration Policy. The Policy will be put to shareholders’ vote at the Annual General Meeting on 1 May 2024.

Smith+Nephew Annual Report 2023

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Remuneration continued

Directors’ Remuneration Policy

Compliance with the UK
Corporate Governance Code
The new Remuneration Policy has
been developed taking into account the
following principles set out in Provision 40
of the Code:
– Simple and clear: Our remuneration
structure is straightforward and
transparent with Executive Directors’
variable pay consisting of an annual
bonus and a single long-term
incentive plan.

– Aligned to culture, purpose and

strategy: The remuneration structure
has been designed to support our culture
and business purpose with particular
attention being paid to remuneration
throughout the organisation to ensure
that arrangements are appropriate
in the context of our approach to
reward for the wider workforce.
Performance measures used in the
incentive plans are aligned with key
strategic objectives and the principle
of long-term sustainable value creation.

– Predictability: Incentive awards are

capped so that the maximum potential
award under each plan is transparent.

The charts on page 132 provide an
illustration of the potential total reward
opportunity for the Executive Directors.

– Proportionality and mitigating risk:

Our variable remuneration arrangements
are designed to provide a fair and
proportionate link between Group
performance and reward whilst
mitigating risk where appropriate.
The Committee has overriding discretion
that allows it to adjust formulaic
annual bonus or PSP outcomes so as
to prevent disproportionate results
and Policy provisions allow for the
application of malus and/or clawback
in specific circumstances. Additionally,
there is a clear link between executive
remuneration and the longer-term
performance of the Group through a
combination of bonus deferral into shares,
five-year release periods for PSP awards
and stretching shareholding requirements
that apply during and post employment.

Changes to policy
The new Policy contains no changes
to the 2023 Remuneration Policy for
Executive Directors who reside outside

the US. The changes proposed in the
new Policy are summarised below.

In designing the Directors’ remuneration
policy set out on pages 126–135, the
Committee followed a robust process
which included detailed Committee
discussions on approach and content of
the Policy, engagement by the Committee
Chair and Chair of the Board with 52
shareholders comprising over 67% of
the share capital of the Company and
proxy advisors, and further discussions
following shareholder and proxy feedback
culminating in the Proposal being put to the
shareholder vote.

In order to avoid any conflicts of interest,
the Committee is composed entirely
of independent Non-Executive Directors.
The Committee considered input from
management, while ensuring that conflicts
of interest were suitably mitigated,
and our independent advisors, and
sought the views of Smith & Nephew plc
(the Company) major shareholders and
other stakeholders, including employees.
If approved by shareholders, the Policy will
take effect from the date of that approval.

Proposed implementation of new Policy in 2024
Base salary
– 2023 salaries: CEO $1,526,625;

Annual Bonus
– 2024 opportunity for Executive

CFO £637,519

– 2024 salaries: CEO $1,572,424;

Incoming CFO: £725,000. For context,
the average 2023 increase for the US
workforce was 3% and 3.65% for the
UK workforce.

Pension
– CEO: 7.5% of base salary.

The contribution is capped in
accordance with plan rules and
regulations (aligned with the US-based
workforce), see page 141.
– CFO: 12% of salary (aligned

with UK employees).

Directors: 215% of salary (unchanged
from 2023).

– Executive Directors receive 50% paid in
cash, 50% deferred in shares for three
years. 70% paid in cash, 30% deferred in
shares once the shareholding guidelines
have been met.

– Performance measures:* 35% revenue
growth, 35% trading profit margin,
15% trading cash flow conversion, 15%
business objectives (including 5% on
ESG metrics).

Performance Share Programme
– 2024 award for US Executive Directors

increased to 300%. UK Executive
Directors remains at 275% of salary.

– Three-year performance period
plus two-year holding period.

– Performance measures: 30% relative
TSR, 30% ROIC, 30% revenue growth
and 10% ESG metrics.

Restricted Share Plan
– 2024 award for US Executive Directors

at 125% of salary.

– Awards will vest in 3 equal tranches
over a 3-year period contingent on
reasonable judgement underpins
being met.

Shareholding guideline
– Whilst in employment, build up and

maintain shareholding worth at least
500%/200% of salary for US Executive
Director/Non-US Executive Director.

– After ceasing employment, remain

compliant with their ‘in employment’
guideline for two years after stepping
down as Director.

* These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS on pages 244–248.

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OTHER INFORMATION

Future policy table – Executive Directors

Base salary and benefits

Base salary

Core element of remuneration, paid for doing the expected day-to-day job to recruit and retain Executive Directors of the calibre required to deliver
the Company’s strategy.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

Performance in the prior year is one of
the factors taken into account and poor
performance is likely to lead to a zero
salary increase.

Salaries are normally reviewed annually with
any increase usually applying from 1 April.
Salary levels and increases take into account:
– scope and responsibility of position;
– skill/experience and performance of the

individual Executive Director;

– general economic conditions in the relevant

geographical market;

– average increases awarded across the

Company, with particular regard to increases
in the market in which the Executive Director
is based; and

– market movements seen among relevant

peer companies.

While there is no maximum salary level, any
increases will normally not exceed the typical
increase for the wider employee population
within the relevant geographic area.
Higher increases may be made under certain
circumstances at the Committee’s discretion.
For example, this may include:
– increase in the scope and/or responsibility

of the individual’s role; and

– development of the individual within the role.
A full explanation will be provided in the
Implementation Report should higher increases
be approved in exceptional cases.
In addition, where an Executive Director has
been appointed to the Board at a lower than
typical salary, larger increases may be awarded
to move them closer to market practice as
their experience develops.

Pension and payment in lieu of pension

Provide Executive Directors with an allowance for retirement planning to recruit and retain Executive Directors of the calibre required to deliver the
Company’s strategy.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

Executive Directors receive a cash allowance
in lieu of membership of a Company-run
pension scheme.
In jurisdictions where the local law requires
employees to participate in a Company-
run pension scheme, Executive Directors
participate in the local pension scheme.
Base salary is the only component of
remuneration which is pensionable.

None.

The maximum pension allowance for an
Executive Director will be no more than the
percentage of salary contribution paid in
respect of the majority of our UK workforce
(currently 12% of salary) unless the percentage
of salary contribution paid in respect of the
majority of the workforce in the Executive
Director’s home country or the country in
which the Executive Director is based is lower,
in which case that lower percentage of salary
contribution would usually be offered.

Smith+Nephew Annual Report 2023

127

Remuneration continued
Directors’ Remuneration Policy continued

Benefits

Provide Executive Directors with a market competitive benefits package to recruit and retain Executive Directors of the calibre required to deliver
the Company’s strategy.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

None.

While no maximum level of benefits is
prescribed, they are set at an appropriate
market competitive level, taking into account
a number of factors, which may include:
– the jurisdiction in which the individual

is based.

– the level of benefits provided for other

employees within the Company.

– market practice for comparable roles
within appropriate pay comparators.
The actual amount payable will depend
on the cost of providing such benefits to
an employee in the location at which the
Executive Director is based.
The Committee regularly reviews the benefit
policy and benefit levels.

A wide range of benefits may be provided
depending on the benefits provided for
comparable roles in the location in which the
Executive Director is based.
These benefits will include, as a minimum:
healthcare cover, life assurance, long-term
disability, annual medical examinations,
company car or car allowance.
The Committee retains the discretion to
provide additional benefits, where necessary
or relevant in the context of the Executive
Director’s location, or, in connection with an
Executive Director’s recruitment, the country
from which the Executive Director is recruited.
Where applicable, relocation costs may be
provided in-line with the Company’s relocation
policy for senior executives, which may include,
amongst other items: removal costs, assistance
with accommodation, living expenses for
self and family and financial, tax and/or legal
consultancy advice. In some cases, such
payments may be grossed up.

All-employee arrangements

All-employee share plans

To enable Executive Directors to participate in all-employee share plans on a similar basis as other employees.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

ShareSave Plans are operated in the UK and
31 other countries internationally. In the US,
an Employee Stock Purchase Plan is operated.
These plans enable employees to save on
a regular basis and then buy shares in the
Company. Executive Directors are able to
participate in such plans on a similar basis
to other employees, depending on where
they are based.

Executive Directors may currently invest up
to £500 per month in the UK ShareSave Plan,
in-line with UK participants.
The Committee may exercise its discretion
to increase this amount up to the maximum
permitted by HM Revenue & Customs.
Similar limits will apply in different locations.

None.

128

Smith+Nephew Annual Report 2023

Annual incentives

Annual Bonus Plan

Incentivises delivery of the business plan on an annual basis. Rewards performance against key performance indicators which are critical to the
delivery of our business strategy.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

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The maximum opportunity is 215%
of base salary.
50% of maximum is payable for on-target
performance. Up to 15% of maximum is
payable for threshold performance.

The Committee will determine the appropriate
performance measures for each financial
year, in order to ensure that the Annual Bonus
Plan focuses on key business priorities for
the Company.
Typically, at least 80% of the annual bonus
will be based on financial performance
measures. The remainder will usually be based
on business objectives linked to key areas of
strategic focus.
The Committee retains the discretion to
adjust the relative weightings of the financial
and strategic components and to adopt any
performance measure that is relevant to
the Company.
Under whatever measures are chosen, the
Committee will set appropriately challenging
maximum performance targets and
additionally, where appropriate, targets for
threshold and/or on-target performance.
In doing so, they will take into account a
number of internal and external reference
points, including the Company’s key strategic
objectives. The Committee may amend the
performance conditions applicable to an
award in accordance with the terms of the
performance conditions or if events happen
which cause the Committee to consider that
it fails to fulfil its original purpose and would
result in participants being unfairly advantaged
or disadvantaged.

The Annual Bonus Plan is designed to reward
performance over the year against financial
and business objectives.
The Committee determines pay out levels
based on the extent to which performance
against these objectives has been achieved.
The Committee retains discretion, in
exceptional circumstances, to pay bonuses in
respect of the half year and/or full year.
The Committee has full discretion to adjust
outcomes under the Annual Bonus Plan
where: (i) the occurrence of certain events
would unfairly advantage or disadvantage
participants, in the reasonable opinion of
the Committee and/or (ii) the amount that
a participant would/could receive under an
award would result in the participant receiving
an amount which the Committee considers
cannot be justified or which the Committee
considers to unfairly disadvantage or advantage
a participant.
In exercising this discretion, the Committee
may consider all circumstances, including
(but not limited to): the financial performance
of the Company; any changes in the Company’s
share price; and the performance, conduct
and contribution of the participant.
Malus and clawback provisions apply,
as detailed in the notes to this table.
Normally, where the in-employment
shareholding guideline of an Executive Director
has not been met, half of the award is paid in
cash after the end of the performance year and
half is deferred into an award of shares under
the Deferred Share Bonus Plan (DBP), which
normally vests after three years. The bonus
deferral reduces from 50% to 30% of base salary
once shareholding guidelines have been met.
The Committee has full discretion to authorise
the payment of dividend equivalent payments on
DBP awards to the extent they vest.

Smith+Nephew Annual Report 2023

129

Remuneration continued
Directors’ Remuneration Policy continued

Long-term incentives

Performance Share Programme (PSP) and Restricted Share Programme (RSP)

To motivate and reward performance linked to the long-term strategy and share price of the Company.
The performance measures which determine the level of vesting of the PSP awards are linked to our corporate strategy.

How the component operates

Maximum levels of payment

Framework in which performance is assessed

Awards are granted pursuant to the terms
of the PSP and RSP.
Awards are normally made in the form of
conditional share awards, but may be awarded
in other forms if appropriate, including nil cost
options or a combination of awards.
PSP awards usually vest after three years,
subject to the achievement of stretching
performance targets linked to the Company’s
strategy. The performance period for the PSP
is usually three years.
RSP awards usually vest in equal annual
tranches over the three-year vesting period.
The Committee has full discretion to adjust
outcomes under the PSP and RSP where: (i) the
occurrence of certain events would unfairly
advantage or disadvantage participants in the
reasonable opinion of the Committee; and/
or (ii) the amount that a participant would/
could receive under an Award would result
in the participant receiving an amount which
the Committee considers cannot be justified
or which the Committee considers to unfairly
disadvantage or advantage a participant.
In exercising this discretion, the Committee
may consider all circumstances, including
(but not limited to): the financial performance
of the Company; any changes in the Company’s
share price; and the performance, conduct and
contribution of the participant.
Participants may receive an additional number
of shares (or, exceptionally, cash) equivalent to
the amount of dividends payable on ordinary
shares subject to the award that vest during
the period up to vesting. On vesting, a number
of shares are sold to cover the tax liability.
The remaining shares are usually required to
be held by the Executive Director for a further
two year holding period.
Malus and clawback provisions apply as detailed
in the notes to this table.

130

PSP
Awards for Executive Directors not resident in
the US will consist of performance shares only
with a maximum annual opportunity of 275% of
base salary.
US Executive Directors will receive a mix of
performance shares and restricted shares
with a maximum performance shares annual
opportunity of 300% of base salary.
For on-target levels of performance, 50%
of the award vests. For threshold levels of
performance, 25% of the award vests.

RSP
US Executive Directors awards will consist of
a mix of performance shares and restricted
shares, with the annual grant of Restricted
Shares comprising no more than 125% of salary.

PSP
The Committee aims to align the PSP
performance measures with the Company’s
key long-term strategic objectives. In this
manner, strong performance against the
measures should lead to long-term sustainable
value creation for our shareholders.
Measures used will typically include:
– Financial measures – to reflect the financial
performance of our business and a direct
and focused measure of Company success.
– Shareholder return measures – a measure of
the ultimate delivery of shareholder returns,
providing direct alignment.

– Strategic measures – aligned with the

Company’s long-term strategy

The make-up and weighting of each measure
will be determined by the Committee
each year to reflect the particular
strategic objectives over the relevant
performance period.
Maximum pay-outs will only be made for
significant outperformance.
Under whatever performance measures are
chosen, the Committee will set appropriately
challenging maximum performance targets
and additionally, where appropriate, targets
for threshold and/or on-target performance.
In doing so, they will take into account a
number of internal and external reference
points, including the Company’s key
strategic objectives.
The Committee may amend the performance
conditions applicable to an award in
accordance with the terms of the performance
conditions or if events happen which cause
the Committee to consider it appropriate to
do so provided that this would not result in,
in the Committee’s reasonable opinion, an
unfair benefit to the Executive Director.
RSP
Awards under the RSP are not subject to
financial performance conditions and will vest
to the extent the Committee determines in
its discretion that the reasonable judgement
underpin has been met. In determining the
extent to which an award will vest, the
Committee’s will consider multiple factors
relating to the vesting period including market
movements, shareholder experience, the
impact of the regulatory environment and
reputational factors. The Committee retains
full discretion following the grant of an
award to make adjustments to the vesting
outcome if full vesting is not considered to be
appropriate. Any awards granted to Executive
Directors must be in line with the Directors’
Remuneration Policy.

Smith+Nephew Annual Report 2023

On 25 September 2023, the Board adopted
the Financial Statement Compensation
Recoupment Policy (the “Clawback Policy”)
providing for the recovery of certain
incentive-based compensation from
current and former executive officers of
the Company in the event the Company is
required to restate its financial statements
filed with the SEC in order to correct
an error that is material to its financial
statements. The Clawback Policy is in
addition to the rights granted to the SEC
under applicable legislation and the malus
and clawback provisions set forth in the
Global Share Plan 2020 which permit the
Remuneration Committee to reduce or
clawback awards in specific circumstances.

Legacy matters
The Committee can make remuneration
payments and payments for loss of office
outside of the Policy set out above where
the terms of the payment were agreed (i)
before the Policy came into effect, provided
the terms of the payment were consistent
with any applicable policy in force at
the time they were agreed or the terms
were agreed before the date on which
the Company first obtained shareholder
approval for a Directors’ remuneration
policy; or (ii) at a time when the relevant
individual was not an Executive Director
of the Company (or other person to whom
the Policy set out above applies) and
that, in the opinion of the Committee, the
payment was not in consideration for the
individual becoming an Executive Director
of the Company (or such other person).
This includes the exercise of any discretion
available to the Committee in connection
with such payments.

For these purposes, payments include the
Committee satisfying awards of variable
remuneration and, in relation to an award
over shares, the terms of the payment are
agreed at the time the award is granted.
The Policy set out above applies equally
to any individual who would be required to
be treated as an Executive Director under
the applicable regulations. The Committee
can make remuneration payments and
payments for loss of office outside of the
Policy set out above if such payments are
required by law in a relevant country.

Notes to future policy table –
Executive Directors
Share awards
The Committee may, in the event of any
variation of the Company’s share capital,
demerger, delisting, or other event which
may affect the value of awards, adjust
or amend the terms of DBP, PSP, or RSP
awards in accordance with the plan rules.

Malus and clawback
At any time prior to the vesting of a PSP,
RSP, or DBP award or payment of a cash
bonus, the Committee may determine that
an unvested award or part of an award
may not vest, including to zero on the
occurrence of a Trigger Event (as defined
below), regardless of whether or not the
performance conditions have been met).
At any time up to three years after the
vesting of a PSP, RSP, or DBP award or
payment of a cash bonus, the Committee
may determine that any cash bonus,
vested shares, or their equivalent value in
cash be returned to the Company on the
occurrence of a Trigger Event.

A Trigger Event will occur if any of the
following matters is discovered where:
– There has been a misstatement of the
Company’s financial results which has
resulted in a material overpayment to
participants, which is in the form of
awards under the applicable programme
or otherwise, irrespective of whether the
relevant participants are at fault;

– There has been an error in determining
the size of the award or to the extent to
which the performance conditions have
been satisfied, or erroneous or misleading
data, which has resulted in the vesting
of an award which would not otherwise
have vested or which would otherwise
have vested to a materially lesser extent;

– There has been a significant adverse

change in the financial performance or
reputation of the Company, including
corporate failure and/or any significant
loss at a general level or in respect of a
global business unit or function in which
a participant worked; and/or

– The Committee determines that the

conduct, capability or performance of
a participant or any team, business area
or profit centre warrants a review.

These provisions will apply under the
Global Share Plan 2020, the Annual Bonus
Plan and the Deferred Bonus Shares
Plan 2020.

Smith+Nephew Annual Report 2023

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OTHER INFORMATION

Consideration of employment
conditions elsewhere in the
Group and differences between
arrangements for Executive
Directors and workforce as a whole
When setting the Policy for Director’s
Remuneration, the Committee
discusses, and takes into account of pay
arrangements and employment conditions
of employees across the Group when
determining the pay of Executive Directors
in the following ways:

Base salary
Increases to Executive Director base
salaries will generally not exceed base
salary budgets in the geography in which
the Executive Director is based, although
the Committee will also have oversight of
base salary budgets across the Company
more generally when making the decision.

Pension contributions and
payments in lieu of a pension
A range of different pension arrangements
operate across the Group depending
on location and/or length of service.
Executive Directors either participate in
pension arrangements relevant to wider
workforce in their local market or receive a
cash allowance payable in lieu of a pension
at a percentage of base salary in line with
the wider workforce in the geography in
which they are based.

Benefits
Benefit packages vary across the world
depending on local market practice.
Executive Directors receive a range of
benefits in line with the standard executive
benefits package available to the wider
executive workforce in the geography
in which they are based.

Annual Bonus Plan
Nearly all employees are eligible to
receive performance-based pay,
primarily in form of the Annual Bonus.
Employees at different levels throughout
the Group participate in Annual Bonus
Plans with different payment outcomes.
The annual performance objectives are
cascaded down to all employees from
the objectives set at the beginning of
the year for the Executive Directors and
Executive Officers, to ensure that the
performance of all employees is linked to
the Company’s strategy and the objectives
of the Executive Directors and senior
management as applicable. In 2023,
Executive Officers and senior executives

131

Remuneration continued
Directors’ Remuneration Policy continued

participated in the Annual Bonus Plan on
the same basis as the Executive Directors,
subject to lower limits.

Illustrations of the application of the Remuneration Policy 2024
The following charts show the potential split between the different elements of the
Executive Directors’ remuneration under four different performance scenarios:

All Employee Share Plans
We operate two all-employee share
plan arrangements depending on the
most appropriate arrangement for
different geographies. In 2023, US
employees participated in the Employee
Stock Purchase Plan. In 2023, UK and
international employees from 31 other
countries, participated in the ShareSave
Plan. Executive Directors, executive
officers and senior executives participated
in these plans aligned to the geography in
which they are based.

Long term incentives
Executive Officers and senior executives
participate in the PSP and RSP on the
same basis as the Executive Directors
subject to lower limits.

Shareholding requirements
Executive Officers and senior executives
who participate in the Annual Bonus Plan,
the PSP, and RSP are also required to build
a significant shareholding in the Company.

Corporate events
If there is a takeover of the Company,
awards under the PSP and DBP will
normally vest early at the time of the
transaction. DBP awards will normally vest
in full. The extent to which awards under
the PSP and RSP vest will be determined
by the Committee, taking into account,
where considered to be appropriate in
all the circumstances, the actual or likely
achievement of the relevant performance
conditions and, unless the Committee
determines otherwise, the awards will
be time pro-rated by reference to the
proportion of the relevant performance
period that has elapsed. Any post-vesting
holding requirements will normally cease
to apply.

In these circumstances, the Committee
reserves the discretion to treat the
payment of annual bonuses for the
financial year in which the takeover takes
place in such manner as it considers
appropriate (subject to the limit set out
in the Policy table above).

If there is a demerger or other transaction
that is likely to materially affect the
Company’s share price, the Committee
may allow awards to vest and bonus to
be paid early on the same basis as set
out above for a takeover.
132

Chief Executive Officer

Current

Minimum %

100 $1,731k

Target %

Maximum %

Maximum+ %*

56 $7,745k

57 $11,794k

22 $15,136k

Chief Financial Officer

Current

Minimum % 100 £824k

Target %

32 30 38 £2,600k

Maximum %

19 36

46 £4,377k

Maximum+ %* 15

37 19 £5,374k

* + 50% share price growth

Fixed pay

Annual bonus

LTIP

LTIP – share price appreciation

Assumed performance

Assumptions used for proposed Policy

Fixed
pay

All performance
scenarios

– Consists of total fixed pay, including base salary and
pension allowance (as at 1 April 2024) and benefits
(as received during 2023).
– Pro-rated for Deepak Nath.

Variable
pay

Minimum
Performance

– No pay out under the Annual Bonus Plan.
– No vesting under the PSP.

Target
Performance

Maximum
Performance

– 50% of maximum pay out under the Annual Bonus Plan

(i.e. 107.5% of salary).

– 50% vesting under the PSP (i.e. 137.5% of salary).

– 100% of the maximum pay out under the Annual Bonus Plan

(i.e. 215% of salary).

– 100% vesting under the PSP (i.e. 300% of salary for the CEO

and 275% for the CFO).

Maximum performance +
50% share price growth

– As maximum performance but this column assumes that the
face value of the PSP award increases by 50% as a result
of share price growth.

PSP awards have been shown at face value with no discount rate assumptions. The charts
provide illustrative values of the remuneration package in 2023. Actual outcomes may
differ from those shown.

Smith+Nephew Annual Report 2023

Policy on recruitment arrangements
Our policy on the recruitment of Executive
Directors is to pay a fair remuneration
package for the role being undertaken and
the experience of the Executive Director
appointed. In terms of base salary, we will
seek to pay a salary comparable, in the
opinion of the Committee, to that which
would be paid for an equivalent position
elsewhere. The Committee will determine
a base salary in line with the Policy and
having regard to the parameters set out in
the Future Policy Table. Incoming Executive
Directors will be entitled to pension (or
cash payment in lieu of pension), benefits
and incentive arrangements aligned
with those set out in the Policy table
above. On that basis, the aggregate
annual opportunity under their incentive
arrangements would not exceed 490%
of base salary if based outside the US or
640% of base salary if based in the US.

We recognise that in the event that we
require a new Executive Director to relocate
to take up a position with the Company, we
may also pay relocation and related costs,
in line with the relocation arrangements
we operate across the Group. In addition,
where a new Executive Director requires
legal or other professional advice related
to the appointment with the Company, we
may agree to pay directly or reimburse the
Executive Director for fees and expenses
reasonably and properly incurred including
the provision of advice to enable the
Executive Director to understand the
obligations, duties and legal and regulatory
requirements of the new role.

The Committee also has the discretion
to determine whether a new Executive
Director should be subject to a different
set of criteria for annual and/or long-term
incentive performance measures during the
first 12 months following appointment.

For external appointments, the Committee
may award compensation for the forfeiture
of remuneration awards or compensation
arrangements from a previous employer.
In doing so, the Committee would aim to
structure the replacement awards in a like-
for-like manner to the extent possible, taking
into account relevant factors, including:
– the form of the forfeited awards

(e.g. cash or shares);

– any performance conditions attached
to them and the likelihood of these
conditions being satisfied; and

– the proportion of the vesting and/or

performance period remaining.

Smith+Nephew Annual Report 2023

The Committee will have regard to the best
interests of both Smith+Nephew and its
shareholders and is conscious of the need to
pay no more than is necessary, particularly
when determining buy-out arrangements.

In making buy-out awards to new
appointments, the Committee may grant
awards under the relevant provision in
the Financial Conduct Authority Listing
Rules, which allows for the granting of
awards specifically to facilitate, in unusual
circumstances, the recruitment of an
Executive Director, without seeking prior
shareholder approval.

The overall approach outlined above would
also apply to internal appointments, with the
proviso that any commitments entered into
before promotion which are inconsistent with
the Policy will continue to be honoured.

Service contracts
We employ Executive Directors on rolling
service contracts with notice periods of up
to 12 months from the Company and up
to 12 months from the Executive Director.
On termination of the contract, we may
require the Executive Director not to work
their notice period and pay them (in phased
instalments or as a lump sum) an amount
equivalent to the base salary, contributions
to a pension or equivalent savings plan
(or payment in lieu thereof) and benefits
they would have received if they had
been required to work their notice period.
The Executive Directors may become
entitled to additional/alternative sums if
termination occurs within 12 months of a
change in control (as further described in
the following section ‘Policy for payment
for loss of office’).

Directors’ service contracts are available
for inspection at the Company’s registered
office: Building 5, Croxley Park, Hatters
Lane, Watford, Hertfordshire WD18 8YE,
United Kingdom.

Policy for payment for loss of office
Our usual policy regarding termination
payments to departing Executive
Directors is to limit severance payments
to pre-established contractual terms.
Where necessary to comply with the
mandatory laws of the jurisdiction in which
the Executive Director is resident, the
Committee may authorise remuneration
payments or payments for loss of office in
excess of the pre-established contractual
terms. In the event that the employment
and/or office of an Executive Director
ends, any compensation payable will be

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GOVERNANCE
ACCOUNTS
OTHER INFORMATION

determined in accordance with the terms
of the service contract between the
Company and the Executive Director, as
well as the rules of any incentive plans and
the Policy. In addition, the Committee will
have the discretion to make payments in
discharge of an existing legal obligation
(or by way of damages for breach of such
obligation) or by way of settlement of
any claim arising in connection with the
cessation of office or employment.

Under normal circumstances (excluding
termination for gross misconduct and
certain other terminations for ‘cause’) all
leavers are entitled to receive a termination
payment (in phased instalments or as a
lump sum) in lieu of notice equal to base
salary, pension contributions (or payment
in lieu of pension) and benefits. The leaver
may also be paid a payment in lieu of
accrued but untaken holiday leave.

Payments may also include (but are
not limited to) costs associated with
relocation/repatriation, the costs of legal
advice, financial (including tax) advice and
outplacement services in connection with
cessation of office or employment.

In the event of termination in connection
with a change in control of the Company, in
circumstances where there is a diminution
of status, a reduction in salary or benefits, a
mandatory relocation or where termination
results from the change in control, the
payment in lieu of notice will be payable as
a lump sum, the Committee will consider
to what extent an annual bonus award
should be made, and the leaver will receive
reasonable outplacement costs.

In the event that an Executive Director
dies or ceases to be an employee because
of ill-health, injury, disability, redundancy,
retirement with the agreement with the
Company, the sale of their employing
company or business out of the Group,
or for any other reason for which the
Committee determines that good leaver
treatment is appropriate:
– They may be eligible to receive an annual
bonus on a time pro-rated basis for the
period of the year that they have worked.
– The annual bonus will typically be subject
to business and individual performance
in the same manner as for the continuing
Executive Directors, and paid at the usual
time. The annual bonus may be paid in
such proportion of cash and shares and
subject to such deferral arrangements
as the Committee may determine.

133

Remuneration continued
Directors’ Remuneration Policy continued

The Committee will have the discretion
to take into account performance over
the full financial year or up to the date
of cessation of employment based on
appropriate performance measures
determined by the Committee in line
with the Policy.

– Outstanding PSP and RSP awards

will typically, unless the Committee
determines otherwise, be pro-rated
for the proportion of the relevant
performance period (in the case of
the PSP) or the vesting period (in the
case of the RSP) that has elapsed at
the time Executive Director leaves,
and be tested for performance at the
end of the performance period (in the
case of the PSP), unless the Committee
determines to test performance
otherwise. The two-year post-vesting
holding period for the PSP will, unless
the Committee determines otherwise,
continue to be enforced. If an Executive
Director dies, awards will normally vest
early and only be time pro-rated if the
Committee considers it appropriate.
Any outstanding awards under the PSP
and RSP will remain subject to the same
terms and conditions (including, malus
and clawback) as applied at time of grant.
For participants who leave for any other
reason, outstanding PSP or RSP awards
will lapse in full.

– If an Executive Director leaves for any

reason other than dismissal or any other
reason that the Committee determines,
any outstanding DBP awards will
remain subject to the same terms
and conditions (including malus and
clawback) as applied at time of grant
and vest as if the Executive Director had
not left. In the event of termination in
connection with a change in control of
the Company or, if an Executive Director
dies, any outstanding DBP awards will
vest. In any other circumstances any
unvested DBP awards will lapse.

One-off awards granted on appointment
will normally lapse on leaving except in
cases of death, retirement, redundancy or
ill-health. The Committee has discretion
to permit such awards to vest in other
circumstances or to agree to make a cash
payment in respect of such an award and
will be subject to satisfactorily meeting
applicable performance conditions.

134

We will supply details via an
announcement to the London Stock
Exchange of a departing Executive
Director’s termination arrangements as
soon as is practicable.

Policy on shareholding requirements
The Committee believes that one of the
best ways our Executive Directors’ interests
can be aligned with that of shareholders
is for them to hold a significant number of
shares in the Company. If based outside the
US, the Chief Executive Officer is expected
to build a holding of Smith+Nephew shares
worth three times base salary and the
Chief Financial Officer is expected to
build a holding of two times base salary.
If based in the US, the Chief Executive
Officer is expected to build a holding of
Smith+Nephew shares worth five times
base salary and the Chief Financial
Officer is expected to build a holding of
two times base salary. Executive Directors
are required to retain at least 50% of the
shares (after tax) vesting under Company
incentive plans decreasing to 30% once
share ownership guidelines are met,
recognising that differing international tax
regimes affect the pace at which Executive
Directors may fulfil the shareholding
requirement, unless the Committee
determines otherwise.

When calculating whether or not this
requirement has been met, Ordinary Shares
or ADRs held by the Executive Directors
and their immediate family are included,
as are unvested awards under the DBP (on
a net-of-tax basis), but not PSP awards.
Ordinarily we would expect Executive
Directors to achieve their shareholding
requirement within a period of five years
from the date of appointment.

Executive Directors are also usually required
to hold any shares vesting under the PSP
for a period of two years after vesting.

The Executive Officers and senior executives
who participate in the Annual Bonus
Plan and PSP are also required to build a
significant shareholding in the Company,
extending the principle of alignment
with our shareholders across the senior
management team.

Policy on post cessation shareholding
Executive Directors are usually required to
retain any shareholding up to the applicable
shareholding requirement (or their actual
holding on departure if lower) for a period of
two years after cessation of employment.

This post employment holding requirement
does not apply to shares purchased by an
Executive Director in the market which have
not been awarded as part of remuneration.

In order to reinforce this expectation, and to
the extent that the shareholding requirement
has not been reached, all relevant vested
DBP, PSP, and RSP shares will be held in a
vested share plan account, which will not
usually be accessible until two years post
cessation of employment. In addition, former
Executive Directors will be required to seek
permission to deal during this period.

The Committee retains the discretion to
adjust or waive all or part of the post-
employment shareholding requirement in
appropriate circumstances. In exercising
this discretion, the Committee may
consider circumstances including (but not
limited to) the performance, conduct and
contribution of the participant.

Limited discretion to make
minor amendments to Policy
The Committee retains the discretion to
make minor amendments to the Policy as
may be required or reasonably necessary
for administrative reasons or to the extent
required or reasonably necessary to comply
with applicable laws and regulations.

Consultation with employees relating
to Executive Director remuneration
While the Committee does not directly
consult with our employees as part of
the process of determining executive
pay, the Chair provided an overview of
the compensation of Executive Officers
at one of our Board Listening Sessions.
No comments were raised by the
employees attending that session.

Statement of consideration
of shareholder views
Angie Risley, the Committee Chair, engaged
with shareholders during development of the
Policy. The feedback received was presented
to and discussed by the Committee and
informed the final shape of the proposed
Policy which is being put to the 2024
Annual General Meeting.

The Committee Chair and shareholders
appreciated the engagement and the
Committee took all comments received on
board during its subsequent discussions and
ensured further clarity was included in the
narrative detailing the proposed changes
to the new Policy (see page 126).

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Future policy table – Chair and Non-Executive Directors
The following table and accompanying notes explain the different elements of remuneration we pay to our Chair and Non-Executive
Directors. No element of their remuneration is subject to performance. All payments made to the Chair are determined by the
Committee, whilst payments made to the Non-Executive Directors are determined by those Directors who are not themselves
Non-Executive Directors, currently the Chair, Chief Executive Officer and Chief Financial Officer.

Annual fees

Basic annual fee

To attract and retain Directors by setting fees at rates comparable to what would be paid in an equivalent position elsewhere.
A proportion of the fees is usually paid in shares in the third quarter of each year in order to further align Non-Executive Directors’ fees with the interests of shareholders.
Where appropriate, the Chair or Non-Executive Director may be provided with an alternative option of receiving their fee wholly in cash in return for them entering into a
commitment to separately purchase the required number of shares to comply with the above requirement.

How the component operates

Maximum levels of payment

Fees will be reviewed on an annual basis. Any increase will usually be paid in shares
until 25% of the total fees is paid in shares.
Fees are set in-line with market practice for companies of a similar size and complexity.
Annual fees are set and paid in UK Sterling or US Dollars depending on the
location of the Non-Executive Director. If appropriate, fees may be set and paid
in alternative currencies and exchange rate fluctuation will be taken into account
when determining fees to be paid in alternative currencies.

Whilst it is not usually expected to increase the fees paid to the Non-Executive
Directors and the Chair by more than the increases paid to employees generally,
in certain circumstances (including periodic and substantial increases in activity
or time commitment), higher fees might become payable.
The total maximum aggregate fees payable to the Non-Executive Directors
will not exceed the limit set out in the Company’s Articles of Association.

Additional Fees

To compensate Non-Executive Directors for additional responsibilities such as Committee Chair or Senior Independent Director reflecting additional time involved
in such roles.

How the component operates

A fixed fee is paid, which is reviewed annually.

Intercontinental travel

Maximum levels of payment

The aggregate amount of fees payable to the Non-Executive Directors may
not exceed the limit set out in the Company’s Articles of Association.

To compensate Non-Executive Directors for the time spent travelling to attend meetings in another continent.

How the component operates

A fixed fee is paid, which is reviewed annually.

Notes to future policy table –
Non-Executive Directors
Additional duties undertaken
by Non-Executive Directors
In the event that the Chair or a Non-
Executive Director is required to undertake
significant executive duties in order to
support the Executive Directors during a
period of absence due to illness or a gap
prior to the appointment of a permanent
Executive Director, the Committee is
authorised to determine an appropriate level
of fees which will be payable. These fees
will not exceed the amounts which would
normally be paid to a permanent Executive
Director undertaking such duties and will not
include participation in short or long-term
incentive arrangements or benefit plans.

Additional benefits
The Committee will have the discretion
to approve such additional benefits
for Non-Executive Directors as may
be required or reasonably necessary

Smith+Nephew Annual Report 2023

Maximum levels of payment

The aggregate amount of fees payable to the Non-Executive Directors may
not exceed the limit set out in the Company’s Articles of Association.

in connection with the performance of
their duties, including without limitation
expenses and associated taxes.

Policy on recruitment arrangements
Any new Non-Executive Director will be paid
in accordance with the current fee levels on
appointment, in-line with the Policy set out
above. With respect to the appointment
of a new Chair, fee levels will take account
of market rates, the individual’s profile and
experience, the time required to undertake
the role and general business conditions.
In addition, the Committee retains the right
to: (i) authorise the payment of relocation
assistance or an accommodation allowance
in the event of the appointment of a Chair not
currently based in the UK; and (ii) authorise
the payment of a contribution towards
ongoing administrative support services as
may be required or reasonably necessary
to enable the Chair to fulfil the required
duties and obligations of the role.

Terms of appointment
The Chair and Non-Executive Directors
have letters of appointment which set
out the terms under which they provide
their services to the Company. These are
available for inspection at the Company’s
registered office: Building 5, Croxley Park,
Hatters Lane, Watford, Hertfordshire
WD18 8YE, United Kingdom.

The appointment of the Non-Executive
Directors is not subject to a notice period,
nor is there any compensation payable
on loss of office, for example, should they
not be re-elected at an Annual General
Meeting. The Committee has the discretion
to waive all or a portion of the notice period
of six months applicable for the Chair.

The Chair and Non-Executive Directors are
encouraged to acquire a shareholding in the
Company equivalent in value to their basic
fee within two years of their appointment
to the Board.

135

Remuneration continued

Remuneration at a glance

Our at a glance summary sets out
the total remuneration paid to
our Executive Directors in 2023

We aim to align the total remuneration for our
Executive Directors to our key performance
measures through a combination of fixed pay, bonus
and long-term incentives.

Remuneration principles

2023 in numbers

Remuneration principles –
supporting long-term success
and sustainable value

– We will materially differentiate

reward according to performance.

– Performance targets will be

relevant, stretching and aligned to
our business strategy.

– Rewards will be compatible with the
Group’s risk policies and systems,
with malus and clawback applied to
all forms of variable pay.

– We will provide a balance between
attracting, retaining and motivating
talented people as well as
supporting equal opportunity and
diversity of talent.

– Remuneration outcomes will be
clear and explainable, avoiding
paying more than the Committee
considers necessary.

Base salary

See more on page 141

Pension and benefits

»See more on page 141

Annual bonus (AIP)

»See more on page 141

Long-term incentive plan (PSP)

»See more on pages 144–145

136

Performance

Remuneration
across the Group

Chief Executive
Officer remuneration

$970m
7.6%
Trading profit1
(2022: $901m)

$425m

Operating profit
(2022: $450m)

-25.7%

Relative TSR
(2022: -33.7%)

30.2c

EPS
(2022: 25.5c)

$1.7bn

Total pay bill
(2022: $1.6bn)

$4.6m

Single figure
(2022: $5.9m)

3.0%

US Base Salary
Increase
(2022: 6.5%)

21.0%

2021 PSP
(2022: 2020 PSP 0%)

61.37%

Annual bonus
percentage of max
(2022: 31.27%)

3.0%

Base Salary Increase
(2022: 3.5%)

1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure

prepared in accordance with IFRS on pages 244–248.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Total Pay

Pension and Benefits

Deepak Nath
Chief Executive Officer
$4,658,252
Anne-Françoise Nesmes
Chief Financial Officer
$2,059,946

»See more on page 139

Deepak Nath received a Company pension contribution of
$24,750 in line with the tax authority limits and wider US
workforce arrangements.
Anne-Françoise Nesmes receives a salary supplement of
12% of basic salary to apply towards her retirement savings,
in lieu of membership of one of the Company’s pension
schemes. This is in line with the pension arrangement for
the wider UK workforce.
Other benefits include life insurance, health cover, car and
fuel allowance and financial consultancy advice.

»See more on page 141

Annual Bonus Plan (ABP)

Long Term incentive Plan (2021 PSP)

Total bonus payout (% of maximum):
Deepak Nath
61.37%
»See more on pages 141–144

Anne-Françoise Nesmes
59.80%

Forfeited Incentives: Performance share award:

Total vesting
Deepak Nath
99.98%

»See more on page 140

Single figure of remuneration

Deepak Nath

Anne-Françoise Nesmes

Total vesting (% of maximum):
Anne-Françoise Nesmes
21%

Weighting (%)

TSR performance

Global revenue

Cumulative free cash flow

25%

Return on invested capital (ROIC)

25%

Total

»See more on pages 144–145

Vesting (%)

21%

$4,658,252

$2,059,946

$0k
Pension & Benefits

$500k

Bonus

LTI

$1,000k
Forfeited Incentives

$1,500k

Salary

$2,000k

$2,500k

$3,000k

$3,500k

$4,000k

$4,500k

$5,000k

Salary
Pension & Benefits
Bonus
LTI

Forfeited Incentives
»See more on page 139

Smith+Nephew Annual Report 2023

Deepak Nath
$1,512,726
$65,000
$1,997,124
Nil

$1,083,402

Anne-Françoise Nesmes
$785,673
$109,735
$1,010,184
$154,354

Nil

137

Remuneration continued

Remuneration Implementation Report

The Remuneration Committee presents the Annual Report on
Remuneration (the Implementation Report) which will be put to
shareholders for an advisory vote at the Annual General Meeting
to be held on 1 May 2024. The Terms of Reference of the
Remuneration Committee describe our role and responsibilities more
fully and can be found on our website: www.smith-nephew.com

Work of the Remuneration
Committee in 2023
In 2023, we held nine meetings. The Chief
Executive Officer and the Chief Human
Resources Officer, key members of the
HR and Finance functions, the Company
Secretary and Deputy Company Secretary
also attended all or part of some of
the meetings, except when their own
remuneration was being discussed.
Attendance by the members of the
Committee at each meeting is set out on
page 121 of this Annual Report. We also
met with the independent remuneration
consultants, Deloitte LLP (Deloitte) and
Willis Towers Watson plc (WTW), who both
contributed as remuneration advisors to
the Committee during the year. The work
carried out by the Committee during the
year is set out on pages 121–125.

Since the year end, we have reviewed
the financial results for 2023 against
the targets under the short-term and
long-term incentive arrangements
jointly with the Audit Committee.

We have also determined base salary
increases for Executive Directors and
Executive Officers with effect from April
2024 and have determined the payouts
under the 2023 Annual Bonus Plan and
the vesting under the Performance
Share Programme 2021.

138

Independent Remuneration
Committee advisors
During the year, the Committee received
information and advice from Deloitte
and WTW. Both are global firms and
provide many services to the Company,
including tax, data and consultancy
services. WTW replaced Deloitte as
advisors to the Remuneration Committee
at the conclusion of the Annual General
Meeting in April 2023 further to Deloitte
being appointed external auditors of
the Company.

During the year, WTW provided advice on
market trends and remuneration in general,
attended Committee meetings, assisted in
the review of the Directors’ Remuneration
Policy and Implementation report,
undertook calculations relating to the
TSR performance conditions and advised
on annual bonus plan measures.

The fees paid to WTW for advice to the
Committee during 2023, charged on a
time and expense basis, were £188,500
(US$234,287). WTW complies with the
Code of Conduct in relation to Executive
Remuneration Consulting in the UK and the
Committee is satisfied that their advice is
objective and independent.

Role of the Remuneration Committee
Main Responsibilities
– Determination of Remuneration
Policy for the Chair, Executive
Directors, Executive Officers and
senior executives.

– Approval of individual remuneration

packages for Executive Directors and
Executive Officers, at least annually,
and any major changes to individual
packages throughout the year.

– Consideration of remuneration policies

and practices across the Group in
particular relating to CEO Pay Ratio and
Gender Pay.

– Approval of appropriate performance
measures for short-term and long-
term incentive plans for Executive
Directors, Executive Officers and
senior executives.

– Determination of payouts under short-
term and long-term incentive plans for
Executive Directors, Executive Officers
and senior executives.

– Engage with major shareholders and
ensure their views are sought and
considered when determining the
Remuneration Policy.

Matters of a routine nature considered by the Committee
– Received updates on the external

– Monitored adherence to

market context and data.

– Noted grants of awards under the

Company’s Share Plans.

– Monitored dilution limits and the

number of shares available for use
in respect of discretionary and all-
employee share plans.

shareholding guidelines for Executive
Directors. Executive Officers and
senior executives.

– Received regulatory/best practice
updates from WTW and other
consulting groups.

– Reviewed and approved the

Committee’s Terms of Reference.

Smith+Nephew Annual Report 2023

Key activities of the Committee during the year
– Considered the terms of remuneration
for the outgoing and incoming CFO.
– Reviewed the Remuneration Strategy
for the Executive Directors, Executive
Officers and senior executives and
developed Remuneration Policy
proposals incorporating feedback
received during the consultation
with shareholders.

– Reviewed and updated the incentive
performance scorecard to apply
across the Annual Bonus Plan and
Performance Share Programme for
2023 to ensure ongoing alignment with
strategic priorities.

– Considered principles for setting
the targets for the Annual Bonus
Plan 2023 and 2023 Performance
Share Programme.

– Reviewed out-turns for determining

payouts to Executive Directors
and Executive Officers under the
2022 Annual Bonus Plan and 2020
Performance Share Programme, and
– Approved quantum of cash payments
and awards to Executive Directors
and Executive Officers under the
2022 Annual Bonus Plan and 2020
Performance Share Programme.

– Approved the 2022 Directors’

Remuneration Report.

– Approved financial targets for the

2023 Annual Bonus Plan for Executive
Directors, Executive Officers and
senior executives.

– Approved financial measures and

targets for 2023 Performance Share
Programme for Executive Directors and
Executive Officers.

– Reviewed the CEO’s pension provision and
aligned this more fully with arrangements
available to wider US workforce, with
effect from 2024.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

– Reviewed and consulted with

shareholders on changes proposed
for the new Remuneration Policy for
approval by shareholders at the Annual
General Meeting in 2024.

– Approved the TSR Peer Groups for

Performance Share Awards to be made
in 2024.

– Considered the Gender Pay Report and

CEO Pay Ratio figures.

– Approved the 2023 Remuneration

Committee Business Plan.

– Tracked the performance against the
targets set for the 2023 Annual Bonus
Plan and the 2021, 2022 and 2023
Performance Share Programme.

– Appointed a new Remuneration Advisor.

Single total figure on remuneration (audited)
The amounts for 2023 have been converted into US$ for ease of comparability using the exchange rate of £ to US$1.2429 (2022: £ to
US$1.2311).

Deepak Nath
Appointed 1 April 2022

Anne-Françoise Nesmes
Appointed 27 July 2020

Fixed pay

Base salary

Pension payments

Taxable benefits

Total Fixed Pay

Annual variable pay

Annual Incentive Plan/
Annual Bonus Plan – cash element

Annual Incentive Plan/
Annual Bonus Plan – equity element

Long-term variable pay

Performance Share Programme1

Total Variable Pay

Forfeited Incentives²

Cash Bonus

Non-Performance Based Awards

Performance Based Award

Total Forfeited Incentives

Total Pay

2023

2022

2023

2022

$1,512,726

$1,083,558

$785,673

$747,224

$24,750

$40,250

$22,875

$18,874

$94,281

$15,454

$89,667

$15,248

$1,577,726

$1,125,243

$895,408

$852,139

$998,562

$371,888

$505,092

$251,194

$998,562

$371,887

$505,092

$251,193

–

$154,354

–

$1,997,124

$743,775

$1,164,538

$502,387

–

$371,414

$2,132,844

$1,083,402

$1,581,970

$1,083,402

$4,086,228

–

$4,658,252

$5,955,246

$2,059,946

$1,354,526

1 The 2021 PSP award granted in May 2021 will trigger at 21%. These shares are valued at 1077.0p. Further details date be found on pages 144–145.
2 Cash bonus and performance based award are part of annual variable pay and the non-performance based award is part of fixed pay. Total variable pay was $3,080,526 (2022: $2,697,159). Total fixed

pay was $1,577,726 (2022: $3,258,087).

Smith+Nephew Annual Report 2023

139

Remuneration continued
Remuneration Implementation Report continued

Base salary

Pension payments

Taxable benefits

Annual Incentive Plan –
cash element/Annual Bonus Plan

Annual Incentive Plan –
equity element/Annual Bonus Plan

Performance Share Programme

The actual salary receivable for the year.

The value of the salary supplement in lieu of pension or contribution to any pension scheme
made by the Company.

The gross value of all taxable benefits (or benefits that would be taxable in the UK) received
in the year.

The value of the cash incentive payable for performance in respect of the relevant financial year.

The value of the equity element awarded in respect of performance in the relevant financial year
as described on pages 141–144 of this report.

The value of shares vesting that were subject to performance over the three-year period ending
on 31 December in the relevant financial year.(includes dividend shares accrued during the
performance period). For awards vesting in early 2024 this is based on the closing mid-market
share price on 29 December 2023 which was 1077.0p.

Total

The sum of the above elements.

All data is presented in our reporting currency of US Dollars (USD). Amounts for Anne-Françoise Nesmes have been converted from
Sterling (GBP) using 12 month average exchange rates. Given currency movements in 2023, this may give the impression of changes that
are misleading. Data is presented in local currency in the subsequent sections in the interests of full transparency.

Forfeited Incentives
These relate to buy-out awards which vested during the year. These were granted to Deepak Nath in respect of outstanding incentives
he forfeited on leaving his former company. Full details of the buy-out awards can be found on page 129 of the 2021 Annual Report and
in the stock exchange announcement released to the market on 3 May 2022.

During the year ended 31 December 2023, the following such awards vested:
– Partial vesting of Restricted Stock Unit (“RSU”) award granted over a total of 12,061 shares: 3,015 shares vested on 8 November 2023.
– Partial vesting of a further RSU award granted over a total of 8,716 shares: 4,358 shares vested on 8 November 2023
– Partial vesting of RSU award over a total of 14,364 shares: 4,788 shares vested on 13 November 2023.

Note: The total value of the RSUs granted to Deepak Nath was previously disclosed in the 2022 Single Figure Table ($2,132,844).
– Partial vesting of a Performance Share Award granted over a total of 84,868. Following confirmation of performance against the

targets attached to the original award, 84,855 shares vested on 21 December 2023 with the remaining balance of 13 shares lapsing
on the same date. The shares are valued at 1027.25p being the S+N mid-market share price as at the 2023 year-end date of his former
company (30 September 2023).

140

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Fixed pay

Base salary

As normal, the base salaries of the Executive Directors were reviewed in February 2024 and it was determined that the CEO salary be
increased by 3%. The general increase to base pay in 2024 was in line with the wider workforce in the US (3%) and below the FTSE 100.

Deepak Nath’s base salary increased by 3% from $1,526,625 to $1,572,424 effective from 1 April 2024.

Anne-Françoise Nesmes’ base salary of £637,519 was not increased given her impending departure from the Company during Q1 2024.

Pension payments

Deepak Nath received a Company pension contribution of $24,750 in line with the limits set forth by the US tax authority and the
pension arrangement for the wider US workforce. Due to an initial oversight, the CEO’s pension contributions were set below our
remuneration policy guideline. This has been corrected to ensure his pension is commensurate with the standard 7.5% of base salary,
aligning with the contribution rates for the majority of our US-based workforce. The impact of this correction will initially be visible in the
CEO’s single figure for FY2024 in next year’s Directors’ Remuneration Report.

Anne-Françoise Nesmes receives a salary supplement of 12% of basic salary to apply towards her retirement savings, in lieu of
membership of one of the Company’s pension schemes. This is in line with the pension arrangement for the wider UK workforce.

Benefits

In 2023, Deepak Nath received life insurance cover of $1 million plus accidental death and dismemberment insurance of $1 million.
Anne-Françoise Nesmes received life insurance cover of seven times basic salary for the period 1 January 2023 to 31 March 2023
which was changed, effect 1 April 2023, to four times basic salary in line with the changes made to the wider UK workforce.

Each Executive Director received benefits as detailed in the below table. The same arrangements will apply in 2024. The following table
summarises the value of benefits in respect of 2023 and 2022.

Health cover
Car and fuel allowance
Financial consultancy advice

Annual incentives

Annual Bonus Plan 2023

2023

$12,276
$12,700
£12,289

Deepak Nath

Anne-Françoise Nesmes

2022

$8,871
$8,467
£1,248

2023

£1,034
£11,400
–

2022

£986
£11,400
–

Following the approval of the Remuneration Policy at the 2023 Annual General Meeting, the maximum opportunity under the Annual
Bonus Plan for Executive Directors is 215% of base salary, subject to satisfactory performance against the performance measures
detailed below. If the shareholding ownership guideline has not been met, 50% of the award is paid in cash and 50% is deferred into
shares which will vest after three years. If the shareholding ownership guideline has been met, 100% of the award is paid in cash.

The performance measures and weightings which applied to the Annual Bonus Plan 2023 were as follows:

Revenue growth
Trading profit margin
Business Objectives
ESG Objectives
Total

Weighting
40.00%
40.00%
15.00%
5.00%
100.00%

Threshold as a
percentage of
salary
12.80%
12.80%
4.80%
1.60%
32.00%

Target as a
percentage of
salary
43.00%
43.00%
16.13%
5.37%
107.50%

Maximum as a
percentage of
salary
86.00%
86.00%
32.25%
10.75%
215.00%

The 2023 targets and out-turn for revenue and trading margin are shown below:

Revenue
Trading Margin

Threshold
$5,357m
17.4%

Target
$5,495m
18.1%

Maximum
$5,539m
18.5%

Actual1
$5,574m
17.5%

1 Actual revenue and trading margin is compared with the target range at constant exchange rates to ensure a like-for-like comparison. See page 244.

Smith+Nephew Annual Report 2023

141

Remuneration continued
Remuneration Implementation Report continued

Financial objectives
The revenue target for 2023 is set at 5.7% by reference to our expectations for growth for the year. Threshold was set at 3.0 % growth
over 2022 out-turn and maximum was set at 6.5% over 2022 out-turn.

The trading margin target was set at 18.1% for the year. Threshold was set at 17.4% and maximum at 18.5% of trading profit margin,
divided by threshold and maximum revenue respectively.

Performance resulted in an overall payout of 133.8% of target against the financial objectives.

Business and ESG objectives
In determining performance against the business and ESG objectives, the Executive Directors have been assessed on the same basis
as applies to all employees across the Group using a four-point rating scale reflecting both what has been achieved and how it has
been achieved. At the beginning of the year, specific objectives were determined relating to achievement of the corporate strategy.
For 2023, these objectives were Growth, People and Business processes as in 2022. Performance against these business objectives
was considered alongside how the Executive Directors performed in respect of our culture pillars of Care, Collaboration and Courage.
This includes consideration of performance against sustainability, compliance, quality and specific ESG metrics of building a more
diverse and inclusive workforce as well as delivering planet and project plan objectives. Their overall performance has been assessed
according to the extent to which the Executive Directors have met the expectations of the Board. 20% of the Annual Bonus Plan which
is attributable to business and ESG objectives will be paid out as follows:

Performance

Below expectations

Partially met expectations

In line with expectations (100% of target)

Above expectations

% of base salary

Nil

6.4%

21.5%

43%

When setting objectives for the upcoming year, the Board looks not only at the expected financial performance for the year, but also at
the actions it expects the Executive Directors to carry out in the year to build a solid foundation for financial performance over the longer
term. In reviewing performance against these objectives at the end of the year, the Board is mindful that there is not always a necessary
correlation between financial performance and the achievement of business and ESG objectives. The table below sets out how the
Chair and the Board have assessed how Deepak Nath and Anne-Françoise Nesmes have performed against the objectives of Growth,
People and Business Processes.

Accordingly, the following amounts have been earned by Deepak Nath and Anne-Françoise for 2023 under the Annual Bonus Plan.

Deepak Nath
Anne-Françoise Nesmes

$1,997,124
£812,763

As well as considering the monetary outcome of the formulaic calculation of these awards, the Committee considered that this
performance fairly represented the overall financial performance during the year.

142

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ACCOUNTS
OTHER INFORMATION

Annual incentives continued

Annual Bonus Plan 2023

Deepak Nath

People and Process

Anne-Françoise Nesmes

– Achieved above target to strengthen Executive Committee

– Achieved against target to increase employee engagement and

competency, effectiveness and accountability to drive consistent
execution, successfully recruiting two high-quality external
executives and promoting and expanding two internal executive
roles as a result of an enhanced executive talent assessment,
succession and development process.

– Achieved above target to execute 12-Point Plan and cost-reduction
programme, specifically fixing Orthopaedics, including supply and
inventory, Improve Productivity and Accelerate Advanced Wound
Management and Sports Medicine. Actively engaged shareholders
with exceptional cadence of updates on the delivery of 12-Point Plan
delivery and ability to meet guidance.

embed Finance Competency Model through creation and execution of
strategic communication programme, development of Finance career
path and integration of Finance Competency Model in performance
management process. This has resulted in an increase in engagement
as measured by annual survey as well as increases in internal hires for
high-value roles, retention and gender diversity in management roles.
– Achieved against target to support the 12-Point Plan through delivery
of Order-to-Cash and Pricing initiatives, tracking of plan delivery and
value creation, alignment of enterprise IT strategy to the plan, and
clear communication to progress to shareholders.

– Progressed target to drive business accountability through better
reporting and insights through franchise P&L balance sheets,
earlier communication of budget targets for improved planning, and
improvement of control environment with emphasis on cyber risks.

ESG

– Achieved against target to progress building a more inclusive and
diverse workforce, exceeding targets for female leaders in people
management and female to male leaders in people management.
Increased ethnic minorities in people management in both the US
and UK markets.

– Exceeded against target to increase employee engagement as

measured by our Gallup annual survey.

– Achieved above target to deliver 2023 milestones to reduce scope
1 & 2 greenhouse gases by 70% by 2025, and reduction of waste
to landfill including attainment of zero waste to landfill at newest
manufacturing facility in Malaysia. Outlined clear scope 3 plan
and milestones.

Customer

– Achieved against target to continue merger and acquisition

activities that strengthen growth and complement core businesses
through seamless integration of acquisition and delivery of
integration milestones.

– Achieved above target to build and strengthen S+N’s innovation
pipeline, including attainment of target for successful delivery of
launches and on-time delivery of NPD programme milestones.

– Achieved against target to ensure ongoing compliance with disclosure

requirements and started to create a profile of the investments
required to meet stakeholder commitments.

– Achieved against target to simplify the Finance Operating Model to
deliver better customer support through completion of end-to-end
restructuring of global business services and Group Finance Controller
Teams, as well as alignment of wider Finance team to new vertical
Business Unit commercial operating model.

Smith+Nephew Annual Report 2023

143

Remuneration continued
Remuneration implementation Report continued

Therefore the total amount earned by Executive Directors in 2023 under the Annual Bonus Plan 2023 is:

Deepak Nath
Anne-Françoise Nesmes

Amount earned
in respect of
financial objectives
$1,620,822
£676,855

Amount earned
in respect of
business objectives
$376,301
£135,908

Total amount
earned
$1,997,124
£812,763

Total as
percentage of
target
122.73%
119.61%

Total as
percentage of
salary
132.02%
128.58%

The Board has reviewed the formulaic calculation of these figures. We acknowledged that during 2023, the share price decreased by
4%, that the Company had partially delivered against its 2023 financial targets and that there had been no material risk or reputational
events. We therefore determined that these outcomes were a fair representation of performance and there was no need to apply
discretion to these formulaic outcomes. 50% of the total amount earned will be paid in cash and the remaining 50% will be deferred into
shares which will vest after three years.

2024 Annual Bonus
The maximum opportunity under the Annual Bonus Plan for Executive Directors will be 215% of base salary, subject to satisfactory
performance against the performance measures detailed below. 50% of the award will be paid in cash and 50% will be deferred into
shares which will vest after three years in accordance with the share ownership guidelines.

Following the Remuneration Committee’s review of the incentive scorecard during 2023, the performance measures and weightings
which apply to the Annual Bonus Plan 2024 are as follows:

Revenue
Trading margin
Business objectives (including ESG)
Trading cash flow conversion
Total

Weighting
35%
35%
15%
15%
100%

Threshold as a
percentage of
salary
11.287%
11.287%
4.837%
4.837%
32.248%

Target as a
percentage of
salary
37.625%
37.625%
16.125%
16.125%
107.500%

Maximum as a
percentage of
salary
75.250%
75.250%
32.250%
32.250%
215.000%

For reasons of commercial sensitivity no 2024 ABP targets can be disclosed at this stage. They will be disclosed retrospectively in the
2024 Annual Report, when performance against those targets is determined.

Long-term incentives

Performance Share Programme (PSP)

Scheme Interests Vesting during the Year: PSP 2021
Since the end of the year, the Committee has reviewed the vesting of the conditional award made to the CFO in 2021 under the Global
Share Plan 2020. Vesting of the conditional award made in 2021 was subject to performance against four equally weighted performance
measures – TSR, global revenue growth, cumulative free cash flow and return on invested capital – measured over a three-year period
commencing 1 January 2021.

TSR performance 25% of the award was based on the Company’s TSR performance relative to two equally weighted peer groups
against which the Company’s TSR performance was measured as follows:
– A sector-based peer group based on those companies classified as the S&P 1200 Global Healthcare subset comprising medical

devices, equipment and supplies companies (official industry classifications of ‘Health Care Equipment and Supplies, Life Sciences
Tools & Services and Health Care Technology’). The Company’s TSR was -25.7% against an index threshold TSR for the peer group of
-16.3%.

– FTSE 100 constituents excluding financial services and commodities companies. This is in response to shareholders who assess our
performance not based on sector, but instead based on the index we operate in. The Company’s TSR was -25.7% against an index
threshold TSR for the peer group of 15.4%.

In aggregate, therefore, the Company’s TSR performance results in a final vesting outcome of 0% out of the 25% target.

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OTHER INFORMATION

Long-term incentives continued

Performance Share Programme continued

Global revenue growth 25% of the award was based on global revenue growth. The threshold set in 2021 was $15,799 million
with a target of $17,173 million and a maximum of $18,547m. Over the three-year period, the adjusted revenues in Global Revenue
Growth were $16,732 million. These adjustments include translational foreign exchange and Board-approved M&A.

This part of the award therefore vested at 21% out of the 25% target.

Cumulative free cash flow performance 25% of the award was based on cumulative cash flow performance. The threshold set in 2021
was $1,370m with a target of $1,713 million and a maximum of $2,055 million. Over the three-year period, the adjusted cumulative free
cash flow was $629 million which was below threshold. These adjustments include translational foreign exchange and Board-approved
M&A and restructuring programmes.

This part of the award therefore vested at 0% out of the 25% target.

Return on invested capital (ROIC) 25% of the award was based on return on invested capital defined as follows:

Operating profit1 less adjusted taxes2
(Opening net operating assets + closing net operating assets)3 ÷ 2

1 Operating Profit is as disclosed in the Group income statement in the Annual Report less amortisation of acquired intangible assets.
2 Adjusted taxes represents our taxation charge per the Group income statement adjusted for the impact of tax on items not included in Adjusted Operating Profit notably amortisation of acquired

intangible assets, interest income and expense, other finance costs and share of results of associates.

3 Net Operating Assets comprises net assets from the Group balance sheet (Total assets less total liabilities) excluding the following items: accumulated amortisation of acquired intangible assets,
investments, investments in associates, retirement benefit assets and liabilities, long-term borrowings, bank overdrafts, borrowings and loans, IFRS 16 lease liabilities and right-of-use assets,
and cash at bank.

The threshold set in 2021 was 9.8% with a target of 11.8% and a maximum at 13.8%. The adjusted ROIC measurement was 6.7%.
These adjustments include Board-approved M&A.

This part of the award therefore vested at 0% of the 25% target.

In summary, therefore, the Performance Share Programme award made in 2021 vested at 21% of target as follows:

TSR
Global revenue growth
Cumulative free cash flow
Return on invested capital

Threshold
Equal to Index
$15,799m
$1,370m
9.8%

Target

Maximum
– 8% Above Index
$18,547m
$2,055m
13.8%

$17,173m
$1,713m
11.8%

Actual
Below Index
$16,732m
$508m
6.7%

Percentage
Vesting
0%
21%
0%
0%

As well as considering the monetary outcome of the formulaic calculation of these awards, the Committee considered whether
discretion should be applied to override these formulaic outcomes and concluded that the monetary outcomes were aligned with
the financial performance of the Company during the performance period and the intention of the Remuneration Policy.

Scheme Interests Granted during the Year: PSP 2023
In accordance with the Remuneration Policy approved by shareholders at the 2023 Annual General Meeting, performance share
awards were granted to the Executive Directors under the Global Share Plan 2020 to a maximum value of 275% of salary (137.5% for
target performance) measured over the three financial years commencing 1 January 2023 against four equally weighted performance
measures: Indexed TSR, Global Revenue Growth, ROIC and Cumulative Free Cash Flow. The performance conditions for these awards
were determined in February 2023 and the awards were made in March 2023. The maximum payout under each element will only be
for significant outperformance. On vesting, sufficient shares will be sold to cover taxation obligations and the Executive Directors will be
required to hold the net shares for a further period of two years.

Smith+Nephew Annual Report 2023

145

Remuneration continued
Remuneration Implementation Report continued

TSR performance 25% of the award is based on the Company’s TSR performance measured against two equally weighted peer groups
as defined for the awards made in 2020.

TSR performance is relative to the two separate indices as follows:

Relative TSR
Below the index
Equalling the index (Threshold vesting at 50% of target)
8% above the index (Maximum vesting at 200% of target)

Sector Based Peer Group
Nil
8.6%
34.4%

Award vesting as % of salary
at date of grant
FTSE 100 Peer Group
Nil
8.6%
34.4%

Awards vest on a straight-line basis between these points. The maximum has been set significantly above target reflecting the maximum
opportunity for outperformance.

Global revenue growth 25% of the award is based on global revenue growth against the following targets:

Revenue growth over three-year period commencing 1 January 2023
Below Threshold
Threshold (–8% of target)
Target – set by reference to our expectations
Maximum or above (+8% of target)

Award vesting as % of salary
Nil
17.2%
34.4%
68.8%

It is not possible to disclose precise targets for sales growth as this will give commercially sensitive information to our competitors
concerning our growth plans and is considered to be potentially price-sensitive information. This target however will be disclosed in the
2026 Annual Report, when the Committee will discuss performance against the target. The maximum has been set significantly above
target reflecting the increased maximum opportunity for outperformance.

Return on invested capital (ROIC) 25% of the award is based on ROIC, as defined for the awards made in 2020, with the
following targets:

Return on Invested Capital (three-year average)
Below Threshold 8.5%
Threshold 8.5%
Target 9.5% (+1.0% of threshold)
Maximum or above 10.5% (+1.0% of target)

Award vesting as % of salary
Nil
17.2%
34.4%
68.8%

Awards vest on a straight-line basis between these points

Cumulative free cash flow 25% of the award is based on cumulative cash flow performance defined for the awards made in 2020,
with the following targets:

Cumulative free cash flow
Below $1,233m
$1,233 (–20% of target)
$1,541m
$1,695m (target) or more (+10% of target)

Award vesting as % of salary
Nil
17.2%
34.4%
68.8%

The maximum has been set significantly above target reflecting the maximum opportunity for out-performance.

Awards vest on a straight-line basis between these points.

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GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Scheme Interests To be Granted Post Year End: PSP 2024
The Remuneration Committee reviewed the incentive scorecard during 2023, taking into account its prior commitment to introduce
ESG metrics into the Performance Share Programme (“PSP”) from 2024. In early 2024, the Committee considered the performance
framework and determined the targets for the PSP awards due to be made in 2024. In line with the results of its review, it was agreed
that performance would be measured under a slightly modified set of performance measures and weightings compared to those applied
in 2023. The measures for 2024 are indexed TSR, Global Revenue Growth, ROIC, and ESG Objectives, as set out below. The Executive
Directors will be granted an award under the PSP 2024 with a maximum opportunity for the CEO of 300% of base salary (subject
to shareholder approval at the AGM) and a maximum opportunity for the CFO of 275% of base salary. The award for the CFO will be
granted in March 2024 and the award for the CEO will be granted following shareholder approval in accordance with the rules of the
Global Share Plan 2020.

TSR performance 30% of the award will be based on the Company’s TSR performance. The Committee have made refinements to both
peer groups in order to remove outliers. The targets remain the same as the awards made in 2023.

Revenue growth 30% of the award will be based on global revenue growth. It is not possible to disclose precise targets for sales growth
as this will give commercially sensitive information to our competitors concerning our growth plans and is considered to be potentially
price-sensitive information.

ROIC 30% of the award will be based on ROIC as defined for the awards made in 2023. Targets will be 8.5% at Threshold, 9.5% at Target
and 10.5% at Maximum.

ESG objectives 10% of the award will be based on objectives relating to strategic priorities in this area.

Details of outstanding awards made under the Performance Share Programme
Details of conditional awards over shares granted to Executive Directors subject to performance conditions are shown below.
These awards were granted under the Global Share Plan 2020. The performance conditions and performance periods applying to these
awards are detailed below:

Deepak Nath
Deepak Nath
Anne-Françoise Nesmes
Anne-Françoise Nesmes
Anne-Françoise Nesmes

Date granted
9 March 2023
20 May 2022
9 March 2023
20 May 2022
21 May 2021

Outstanding number of ordinary shares
under award at maximum
283,748
259,422
140,106
134,648
102,936

Date of vesting
9 March 2026
20 May 2025
9 March 2026
20 May 2025
21 May 2024

1 The award granted on 21 May 2021 will vest at 21%.

Summary of scheme interests awarded during the financial year (audited)

Director
Performance Share Programme award
at maximum (see pages 145–146)
Deferred Share Bonus Plan award (2022 bonus)

Number of shares

Deepak Nath
Face value

Number of shares

Anne-Françoise Nesmes
Face value

283,748
26,014

£3,430,513.32
£314,509.26

140,106
16,877

£1,693,881.54
£204,042.93

Please see Policy Table contained within the Annual Report 2022 on pages 119–128 on our website at www.smith-nephew.com for
details of how the above plans operate. The number of shares is calculated using the closing share price on the day before grant, which
for the Performance Share Programme award granted on 9 March 2023 was 1,209p. The Deferred Share Bonus Plan award granted on
9 March 2023 is calculated using the closing share price on the day before grant being 1209.0p.

Smith+Nephew Annual Report 2023

147

Remuneration continued
Remuneration Implementation Report continued

Restricted Share Programme 2024
In line with the new Remuneration Policy being presented for shareholder approval, the Remuneration Committee intends to make
an award in 2024 to the CEO under a new long-term incentive plan for which only US-based Executive Directors are eligible. It is
expected that the CEO will be granted an award under the RSP, to the value of 125% of his base salary, subject to shareholder approval
in accordance with the rules of the Restricted Share Programme. The award will vest in equal tranches on the first, second and third
anniversaries of the grant date.

Single total figure on remuneration
Chair and Non-Executive Directors (audited)

Director
Rupert Soames2
Roberto Quarta3
Jo Hallas7
Erik Engstrom
Robin Freestone⁴
Jez Maiden5
John Ma
Katarzyna Mazer-Hofsaess8
Rick Medlock
Marc Owen6
Angie Risley
Bob White

2023
£138,340
£335,085
£69,500
£69,500
–
£20,583
$129,780
£69,500
£69,500
$129,780
£69,500
$129,780

Basic annual fee1
2022
–
£428,645
£64,250
£69,500
£53,750
–
$129,780
£69,500
£69,500
$129,780
£69,500
$129,780

Committee Chair/
Senior Independent
Director fee
2022
–
–
–
–
£15,000
–
–
–
£20,000
$35,000
£20,000
–

2023
–
–
–
–
–
–
–
–
£20,000
$35,000
£20,000
–

Intercontinental
travel fee
2022
–
£3,500
£3,500
–
–
–
$21,000
£3,500
£3,500
$21,000
£3,500
$7,000

2023
£3,500
–
£3,500

–
–
$42,000
£3,500
£3,500
$42,000
£3,500
$35,000

2023
£141,840
£335,085
£73,000
£69,500
–
£20,583
$171,780
£73,000
£93,000
$206,780
£93,000
$164,780

Total
2022
–
£432,145
£67,750
£69,500
£68,750
–
$150,780
£73,000
£93,000
$185,780
£93,000
$136,780

1 The basic annual fee includes shares purchased for the Non-Executive Directors and previous Chair (Roberto Quarta) in lieu of part of the annual fee, details of which can be found on the table

below. Rupert Soames fee does not include a “share” element. See below disclosure “Chair and Non-Executive Director fees”.

2 Rupert Soames joined the Board on 26 April 2023, becoming the Chair on 15 September 2023.
3 Roberto Quarta stepped down from the Board on 15 September 2023.
4 Robin Freestone stepped down from the Board on 30 September 2022.
5 Jez Maiden joined the Company on 14 September 2023.
6 Marc Owen waives his right to receive $35,000 in relation to his role of Senior Independent Director (effective from 1 October 2022).
7 Jo Hallas joined the Board on 1 February 2022.
8 Katarzyna Mazur-Hofsaess joined the Board on 1 November 2020.

Chair and Non-Executive Director fees
In February 2024, the fees paid to the Chair and the Non-Executive directors were reviewed. It was determined that the Non-Executive
Director annual fees and the fee for the Senior Independent Director and Committee Chair roles be increased with effect from 1 April
2024. There was no change in the fee for the Chair or to the intercontinental travel fees.

Annual fee paid to the Chair¹
Annual fee paid to Non-Executive Directors
Intercontinental travel fee (per meeting)
Fee for Senior Independent Director and Committee Chair

£450,000
£72,250 of which £6,757 paid in shares or $135,000 of which $10,173 paid in shares
£3,500 or $7,000
£20,800 or $36,400

1 The Chair is required, each year, to purchase shares worth at least 25% of his post-tax annual fee. On 27 April 2023, he purchased 9,040 shares at a price of 12.94p per share.

Payments made to former Directors (audited)
Roland Diggelmann ceased to be Chief Executive Officer and a member of the Board on 31 March 2022. As detailed in the 2021
Remuneration Report, in accordance with his employment agreement and with the Remuneration Policy approved by shareholders
on 9 April 2020, Roland Diggelmann continued to receive his base salary of CHF1,380,000, pension payments and benefits up to
28 February 2023. Accordingly, he received a total of CHF255,238 for the period 1 January 2023 to 28 February 2023.

Roland Diggelmann holds an award over 42,113 shares under the Deferred Share Bonus Plan (“DBP”) which was granted on 9 March
2022. This represented 50% of his 2021 bonus which vests after three years in line with the Remuneration Policy. He received a further
award over 6,678 shares under the DBP on 9 March 2023 to the value of 50% of his 2022 annual bonus. Roland also holds awards (in
aggregate) over 191,048 shares at maximum under the Performance Share Programme, exclusive of dividend equivalents. These shares
were pro-rated to his date of leaving and vest subject to achievement of the relevant performance conditions. His prorated 2021 PSP
award will vest at 21% on 21 May 2024.

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GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Service contracts
Existing Executive Directors are employed on rolling service contracts with notice periods of up to 12 months from the Company and
six months from the Executive Director. In line with our updated 2024 Remuneration Policy, future appointments to Executive Director
positions will apply rolling service contracts with notice periods of up to 12 months from the Company and 12 months from the
Executive Director. Further information can be found on page 126 of the Policy Report contained within the 2022 Annual Report.

Directors’ interests in ordinary shares (audited)
Beneficial interests of the Executive Directors in the ordinary shares of the Company are as follows:

Ordinary shares
Share options
Deferred Share Bonus Plan award (2022 bonus)
Buy-out award agreement
Performance Share Programme awards2

1 January
2023
97,784
–
–
205,208
259,422

31 December
2023
159,850
–
26,014
108,179
543,170

Deepak Nath
16 February
20241
160,667
–
26,014
108,179
543,170

1 January
2023
–
1,621
24,169
–
280,310

Anne-Françoise Nesmes
16 February
20241
–
1,621
41,046
–
377,690

31 December
2023
–
1,621
41,046
–
377,690

1 The latest practicable date for this Annual Report.
2 These share awards are subject to further performance conditions before they may vest. The performance conditions attached to the award granted to the CFO on 21 May 2021 will vest at 21%

on 20 May 2024 (see pages 144–145 for further details).

The beneficial interest of each Executive Director is less than 1% of the ordinary share capital of the Company.

Beneficial interests of the Directors in the ordinary shares of the Company are as follows:

Director
Rupert Soames5
Roberto Quarta6
Erik Engstrom
Jo Hallas
John Ma4
Jez Maiden7
Katarzyna Mazur-Hofsaess
Rick Medlock
Deepak Nath4
Anne-Françoise Nesmes
Marc Owen4
Angie Risley
Bob White4

1 January 2023
(or date of
appointment
if later)
–
73,300
16,774
5,332
924
–
880
3,564
97,784
–
16,478
5,343
7,284

31 December 2023
(or date of
retirement

if earlier) 16 February 20241
9,040
78,813
17,097
5,655
1,500
1,000
1,368
3,917
160,667
–
16,858
5,666
7,860

9,040
78,813
17,097
5,655
1,500
1,000
1,368
3,917
159,850
–
16,858
5,666
7,860

Shareholding
as % of annual
salary/fee2,3,8
71.19
262.58
274.78
86.53
12.25
54.27
20.93
47.05
164.03
38.92
114.38
68.05
66.92

1 The latest practicable date for this Annual Report.
2 Calculated using the closing share price of 1,117.0p per ordinary share and $28.06 per ADS on 16 February 2024, and an exchange rate of £1:$1.2583.
3 Due to their length of service some Non-Executive Directors have not met their shareholding requirements, but this will continue to be monitored in accordance with the Remuneration Policy.
4 John Ma, Marc Owen and Bob White hold their shares in the form of ADRs. Deepak Nath also holds some of his shares in the form of ADRs.
5 Rupert Soames joined the Board on 26 April 2023 and assumed chairmanship on 15 September 2023.
6 Roberto Quarta stepped down from the Board as Chairman on 15 September 2023; his shareholding stated is therefore as at 15 September 2023.
7 Jez Maiden was appointed Non-Executive Director on 14 September 2023.
8 For the purposes of calculating an Executive Director’s performance against their shareholding requirement, ordinary shares or ADRs held by the individual and their immediate family are included
as are unvested awards under the DBP (on a net of tax basis) but not awards subject to an ongoing performance condition. The percentages in this column are consistent with this methodology.

The beneficial interest of each Non-Executive Director is less than 1% of the ordinary share capital of the Company.

Smith+Nephew Annual Report 2023

149

Remuneration continued
Remuneration Implementation Report continued

Chief Executive Officer remuneration compared to employees generally
The percentage change in the remuneration of the Chief Executive Officer between 2021, 2022 and 2023 compared to that of
employees generally was as follows:

% change 2022/2023
Annual
Taxable
benefits

incentive Salary/fees

% change 2021/2022
Annual
Taxable
benefits

incentive Salary/fees

% change 2020/2021
Annual
Taxable
incentive
benefits

Salary/fees

Executive Directors
CEO

Deepak Nath1
Anne-
Françoise Nesmes
CFO
Rupert Soames2
Chairman
Former Chairman Roberto Quarta3

Non-Executive Directors

Erik Engstrom4
Angie Risley
Marc Owen5
Rick Medlock
Bob White5
Katarzyna
Mazur-Hofsaess
Jo Hallas
John Ma5
Jez Maiden5,6

Average of all employees

39.61%

55.81%

168.5%

0.00%

-55.54%

44.89%

0.00%

4.18%
100.00%
-22.46%

3.60%
–
–

129.6%
–
–

0.00%
0.00%
11.30%
0.00%
20.47%

0.00%
7.75%
13.93%
0.00%
5.18%

–
–
–
–
–

4.62%
–
0.82%

0.00%
3.91%
8.15%
3.91%
5.39%

5.04%
272.81%
32.88%
–
5.95%

3.97%
–
–

-29.50%
–
–

0.00%
–
0.37%

0.00%
–
–

–
–
–
–
–

0.00%
0.00%
0.00%
51.58%
44.55%

– 561.90%
–
–
–
–
–
–
1.64%
–

–
–
–
–
–

–

–
–
–

–
–
–
–
–

1 Deepak Nath was appointed CEO on 1 April 2022.
2 Rupert Soames joined the Board as a Non-Executive Director and Chair Designate on 26 April 2023 and was appointed Chair of the Board on 15 September 2023.
3 Roberto Quarta stepped down as Chair of the Board on 15 September 2023.
4 Erik Engstrom stepped down from the Board as a Non-Executive Director on 31 December 2023.
5 The change in benefits is due to changes in travel spend during the year.
6 Jez Maiden joined the Board as a Non-Executive Director on 14 September 2023.

The average cost of wages and salaries for employees generally increased by 7.54% in 2023 (see Note 3.1 to the Group accounts).
Figures for annual cash bonuses are included in the numbers.

When considering remuneration arrangements for our Executive Directors, the Committee takes into account pay across the Group
in the following ways:
– Salary levels and increases for all employees including Executive Directors take account of the scope and responsibility of position,
the skills, experience and performance of the individual and general economic conditions within the relevant geographical market.
When considering increases to Executive Director base salaries, the Committee considers the average pay increases in the market
where the Executive Director is based.

– All employees including the Executive Directors have performance objectives determined at the beginning of the year which cascade

down from the Strategic Imperatives for the Group.

– The level of variable pay determined for all employees, whether in the form of shares or cash is dependent on performance against

these imperatives, both financially and personally.

– Executive Directors participate in benefits plans and arrangements comparable to benefits paid to other senior executives in the
relevant geography. Executive Directors participate in the same senior executive incentive plans (currently the Annual Bonus Plan
and the Performance Share Programme) as other Executive Officers and senior executives. The level of award reflects the differing
seniority of participants and the market where the Executive is located. Performance conditions for the Performance Share
Programme are the same for Executive Directors and Executive Officers. Executives, however, have only three measures with no
reference to ROIC. For the Annual Bonus Plan (ABP) Performance Measures apply to all Executives consistently, however, weighting
between Financials and Non-Financials differs based on the position.

150

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Chief Executive Officer pay ratio
The regulations provide three options which may be used to calculate the pay for the employees at the 25th percentile, median and 75th
percentile. We have used option A (as set out in the Companies (Miscellaneous Reporting) Regulations 2018), following guidance issued
by some proxy advisers and institutional shareholders. The ratio has been calculated by comparing against the full-time equivalent pay
of all UK employees within the Group including both our entities Smith & Nephew UK Limited and T.J. Smith and Nephew, Limited.

Option A calculates pay for all employees on the same basis as the single figure for remuneration calculated for Executive Directors.
The period for which the employee pay has been calculated under Option A is the calendar year 2023. Figures are calculated by
reference to 31 December 2023 using actual pay data from 1 January 2023 to 31 December 2023. The single figure for remuneration
for each employee includes earned salary, annual incentive, allowance, pension and benefits for 2023. Part-time employees have been
excluded for the purpose of calculations.

Comparisons have been made with employees at median (P50), lower (P25) and upper (P75) quartiles. We have used the actual salaries
paid to our employees in the UK. The values were listed lowest to highest and three percentiles were identified. We are confident this
methodology gives us the most reflective pay at the median. The Committee is satisfied that the individuals identified in the employee
comparison group appropriately reflect the employee pay profile at those quartiles, and that the overall picture presented by the ratios
is consistent with our pay, reward and progression policies for UK employees.

The table below sets out the ratio at the median, lower and upper quartiles:

Year
2019
2020
2021
2022
2023

P25 (lower
quartile)
116:1
42:1
71:1
160:1
102:1

P50
(median)
81:1
29:1
49:1
107.1
72:1

P75 (upper
quartile)
51:1
19:1
32:1
70:1
46:1

In 2023, the ratio was impacted by the vesting of the performance award under the 2022 buy-out award agreement made to Deepak
Nath. Excluding this one-off arrangement, the median ratio would have been 55:1.

The table below provides the total pay figure used for each quartile employee, and the salary component within this.

Component
Salary
Total pay

CEO
$1,512,726
$4,658,252

P25
(lower quartile)
$45,600
$45,600

P50
(median)
$51,244
$64,627

P75
(upper quartile)
$77,454
$101,369

Relative importance of spend on pay
When considering remuneration arrangements for our Executive Directors and employees as a whole, the Committee also takes
into account the overall profitability of the Company and the amounts spent elsewhere, particularly in returning profits to shareholders
in the form of dividends and share buy-backs.

The following table sets out the total amounts spent in 2023 and 2022 on remuneration, the attributable profit for each year and the
dividends declared and paid in each year.

Attributable profit for the year
Dividends paid during the year
Share buy-back1
Total Group spend on remuneration²

For the year to
31 December
2023
$263m
$327m
$0m
$1,683m

For the year to
31 December
2022
$223m
$327m
$158m
$1,565m

% change
18%
0%
-100%
7.5%

1 Shares are bought in the market in respect of shares issued as part of the executive and employee share plans. In December 2021 we announced an updated capital allocation policy to prioritise
the use of cash. The 2022 share buyback programme commenced on 22 February 2022 and $150 million was completed by 31 August 2022. As macroeconomic conditions continued to be
uncertain, including higher cost inflation, the Board decided it was prudent to delay further buy-backs until conditions improved. We remain committed to returning surplus cash to shareholders
over time.

2 See note 3.1 staff costs and employee numbers.

Smith+Nephew Annual Report 2023

151

Remuneration continued
Remuneration Implementation Report continued

Total Shareholder Return
A graph of the Company’s TSR performance compared to that of the FTSE 100 index, of which the Company, is a constituent, is shown
below in accordance with Schedule 8 to the Regulations.

Ten-year Total Shareholder Return
(measured in UK Sterling, based on monthly spot values)

300

250

200

150

100

Dec 2013
Source: S&P Capital IQ

Dec 2014

Dec 2015

Dec 2016

Dec 2017

Dec 2018

Dec 2019

Dec 2020

Dec 2021

Dec 2022

Dec 2023

Smith+Nephew

FTSE 100

As we also compare the Company’s performance to a tailored sector peer group of medical devices companies (see page 144),
when considering TSR performance in the context of the Global Share Plan 2010 and Global Share Plan 2020, we feel that the
following graph showing the TSR performance of this peer group is also of interest.

Ten-year Total Shareholder Return
(measured in US Dollars, based on monthly spot values)

700

600

500

400

300

200

100

Dec 2014

Dec 2013
Source: S&P Capital IQ
Medical Devices comparators that are still trading for awards made since 2012

Dec 2015

Dec 2016

Dec 2017

Dec 2018

Dec 2019

Dec 2020

Dec 2021

Dec 2022

Dec 2023

Smith+Nephew

S&P Medical Devices

152

Smith+Nephew Annual Report 2023

Table of historic data
The following table details information about the pay of the Chief Executive Officer in the previous 10 years:

Year
2023
2022
2022
2021
2020
2019
2019
2018
2018
2017

2016
2015
2014

Chief Executive Officer
Deepak Nath
Deepak Nath1
Roland Diggelmann
Roland Diggelmann
Roland Diggelmann
Roland Diggelmann2
Namal Nawana3
Namal Nawana
Olivier Bohuon4
Olivier Bohuon

Olivier Bohuon
Olivier Bohuon
Olivier Bohuon

Single figure of total
remuneration $
$4,658,252
$5,955,246
$603,103
$3,102,426
$1,697,773
$265,814
$4,489,374
$2,883,632
$2,383,582
$5,116,689

$3,332,850
$5,342,377
$6,785,121

Annual Cash Incentive
payout against maximum %
61
32
24
41
05
–
716
69
63
61

30
75
43

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Long-term incentive
vesting rates against
maximum opportunity
Performance Share
Programme shares %
–
–
–
–
–
–
–
–
46.5
54

8
33.5
57

1 Appointed Chief Executive Officer on 1 April 2022.
2 Appointed Chief Executive Officer on 1 November 2019 and stepped down on 31 March 2022.
3 Appointed Chief Executive Officer on 7 May 2018 and resigned on 31 October 2019.
4 Retired as Chief Executive Officer on 7 May 2018.
5 Due to the impact of Covid upon the Chief Executive Officer’s financial targets, a cash award of 0% was achieved.
6 Calculated as 106.7% for Namal Nawana (disclosed on page 108 of the Company’s Annual Report for the year ended 31 December 2019), divided by the maximum potential payout of 150%.

Gender pay ratio
In 2023, the Committee reviewed our UK gender pay ratio. It was noted that today our gender pay gap is greater than we would like it
to be, but we are seeing improvements year-on-year. Both our mean pay gap and median pay gap have decreased from 16% in 2022 to
14% in 2023. We shall continue to review these figures.

Shareholding requirements
If based outside the US, the Chief Executive Officer is expected to build a holding of Smith+Nephew shares worth three times base salary
and the Chief Financial Officer is expected to build a holding of two times base salary. If based in the US, the Chief Executive Officer is
expected to build a holding of Smith+Nephew shares worth four times base salary and the Chief Financial Officer is expected to build
a holding of three times base salary. Executive Directors have five years from their appointment within which to meet that holding
requirement. Due to the tenure of the Executive Directors neither have met their shareholding requirements, but this will continue
to be monitored in accordance with the Remuneration Policy.

Post-cessation shareholding requirements
In addition, Executive Directors are expected to hold vested shares for up to two years post-vesting of the Performance Share
Programme and Deferred Share Bonus Plan. They are expected to hold up to their shareholding requirement only. These shares are
held in the vested Share Plan Account provided by the Company’s share plan administrator.

Statement of voting at Annual General Meeting
At the Annual General Meeting held on 26 April 2023, votes cast by proxy and at the meeting and votes withheld in respect of the
votes on the Directors’ Remuneration Report are noted below. In addition, votes cast by proxy and at the meeting and votes withheld in
respect of the votes on the Directors’ Remuneration Policy, which was last approved by shareholders on 26 April 2023, are noted below:

Resolution
Approval of the Directors’ Remuneration Report
(excluding policy)
Approval of the Directors’ Remuneration Policy
at the 2023 Annual General Meeting

Votes for

% for

Votes
against

% against

Total votes
validly cast

Votes
withheld

641,046,658

94.20

39,445,391

5.80

680,492,049

435,096

643,583,465

94.55

37,067,165

5.45

680,650,630

276,215

Smith+Nephew Annual Report 2023

153

Remuneration continued
Remuneration Implementation Report continued

Senior management remuneration
The Group’s administrative, supervisory and management body (senior management) comprises, for US reporting purposes, Executive
Directors, Non-Executive Directors and Executive Officers. Details of the current Executive Directors, Non-Executive Directors and
Executive Officers are given on pages 90–95.

Compensation paid to senior management in respect of 2021, 2022 and 2023 was as follows:

Total compensation (excluding pension emoluments, but including cash payments
under the performance-related incentive plans)
Total compensation for loss of office
Aggregate increase in accrued pension scheme benefits
Aggregate amounts provided for under supplementary pension schemes

2023

2022

2021

$18,890,117
$1,659,101
–
$1,332,505

$17,211,000
–
–
$1,626,000

$15,795,000
–
–
$1,454,000

As at 16 February 2024, senior management owned 619,051 shares and 11,912 ADSs, constituting less than 0.074% of the share capital
of the Company. For this purpose, the Group is defined as the Executive Directors, members of the Executive Committee, including the
Company Secretary and their Persons Closely Associated. Details of share awards granted during the year and held as at 16 February
2024 by members of senior management are as follows:

Equity Incentive Programme awards
Deferred Share Bonus Plan awards
Performance Share Programme awards at maximum
Performance Share Programme – Supplementary awards
Conditional Share Awards under the Global Share Plan 2020
Sign-on Awards under the Global Share Plan 2020
Buy-Out Award Agreement
Options under Employee ShareSave plans

Share awards
granted during
the year
0
113,017
1,501,680
0
0
69,604
0
0

Total share
awards held as at
16 February 2024
28,648
159,442
2,943,708
0
77,399
69,604
108,179
3,756

The Smith+Nephew Employee Share Trust
Note 19.2 of these accounts states the movement in Treasury Shares and the Trust during 2023. No more shares are held within the
Trust than are required for the next twelve months’ of anticipated vestings. Any unvested shares held in the Trust are not voted upon
at shareholder meetings. No more than 5% of the issued share capital at 31 December 2023 is held within the Trust. At 31 December
2023 shares were held in the Trust representing 0.28% of the issued share capital.

Dilution headroom
The Remuneration Committee ensures that at all times the number of new shares which may be issued under any share-based plans,
including all-employee plans, does not exceed 10% of the Company’s issued share capital over any rolling 10-year period (of which up to
5% may be issued to satisfy awards under the Company’s discretionary plans). The Company monitors headroom closely when granting
awards over shares taking into account the number of options or shares that might be expected to lapse or be forfeited before vesting or
exercise. In the event that insufficient new shares are available, there are processes in place to purchase shares in the market to satisfy
vesting awards and to net-settle option exercises.

Over the previous 10 years (2014 to 2023), the number of new shares issued under our share plans has been as follows:

All-employee share plans
Discretionary share plans

By order of the Board, on 26 February 2024

6,461,742 (0.74% of issued share capital as at 16 February 2024)
9,340,452 (1.07% of issued share capital as at 16 February 2024)

Angie Risley
Chair of the Remuneration Committee

154

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Accounts

Statement of Directors’ responsibilities
Independent auditor’s UK report
Group financial statements
Notes to the Group accounts
Company financial statements
Notes to the Company accounts

156
157
172
176
227
229

Smith+Nephew Annual Report 2023

155

Statement of Directors’ responsibilities in respect
of the Annual Report and Financial Statements

The Directors are responsible for preparing
the Annual Report and Form 20-F and
the Group and Parent Company financial
statements in accordance with applicable
law and regulations.

Company law requires the Directors
to prepare Group and Parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements in
accordance with UK-adopted international
accounting standards and applicable
law and have elected to prepare the
Parent Company financial statements
in accordance with UK accounting
standards and applicable law, including
FRS 101 Reduced Disclosure Framework.
In addition the Directors have also chosen
to prepare the Group financial statements
in accordance with IFRS Accounting
Standards as issued by the International
Accounting Standards Board (IASB).

Under company law the Directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs
of the Group and Parent Company and
of their profit or loss for that period.
In preparing each of the Group and
Parent Company financial statements,
the Directors are required to:
– Select suitable accounting policies
and then apply them consistently;

– Make judgements and estimates

that are reasonable, relevant, reliable
and prudent;

– For the Group financial statements,

state whether they have been prepared
in accordance with UK-adopted
international accounting standards
and IFRS Accounting Standards as issued
by the IASB;

– For the Parent Company financial

statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the Parent Company financial
statements;

– Assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters
related to going concern; and

156

– Use the going concern basis of

accounting unless they either intend
to liquidate the Group or the Parent
Company or to cease operations,
or have no realistic alternative but
to do so.

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Parent Company
and enable them to ensure that its financial
statements comply with the Companies
Act 2006. They are responsible for such
internal control as they determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due
to fraud or error, and have general
responsibility for taking such steps as
are reasonably open to them to safeguard
the assets of the Group and to prevent
and detect fraud and other irregularities.

Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration
Report and Corporate Governance
Statement that comply with that
law and those regulations.

The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.

In accordance with Disclosure Guidance
and Transparency Rule (“DTR”) 4.1.16R, the
financial statements will form part of the
annual financial report prepared under DTR
4.1.17R and 4.1.18R. The auditor’s report
on these financial statements provides
no assurance over whether the annual
financial report has been prepared in
accordance with those requirements.

Responsibility statement
of the Directors in respect
of the Annual Report
We confirm that to the best of
our knowledge:
– The financial statements, prepared

in accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and

– The Strategic Report and Directors’
Report include a fair review of the
development and performance of the
business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.

The Strategic Report, which has
been prepared in accordance with the
requirements of the Companies Act 2006,
comprises pages IFC–87.

The Directors’ Report, prepared in
accordance with the requirements of the
Companies Act 2006 and the UK Listing
Authority’s Listing Rules, and Disclosure
Guidance and Transparency Rules,
comprising pages 7, 22–23, 34–45, 46–49,
52–66, 67–79, 82–87, 88, 98–99, 108,
111–113, 114–120, 205–211, 226,
231–234 and 248–256, was approved
by the Board and signed on its behalf.
We consider the Annual Report and
financial statements, taken as a whole,
are fair, balanced and understandable
and provide the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.

By order of the Board, on 26 February 2024.

Helen Barraclough
Company Secretary

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Independent auditor’s report to the
members of Smith & Nephew Plc

1. Our opinion is unmodified

In our opinion:
– the financial statements of Smith & Nephew plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs

as at 31 December 2023, and of the Group’s profit for the year then ended;

– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
– the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101

Reduced Disclosure Framework; and

– the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

What our opinion covers
We have audited the Group and Parent Company financial statements of Smith & Nephew plc (“the Company”) for the year ended 31 December
2023 (FY23) included in the Annual Report, which comprise:

Group (Smith & Nephew plc and its subsidiaries)

Parent Company (Smith & Nephew plc)

– Group Income Statement
– Group Statement of Comprehensive Income
– Group Balance Sheet
– Group Cash Flow Statement
– Group Statement of Changes in Equity.
Notes 1 to 23 to the Group financial statements,
including the accounting policies in Note 1.

– Company Balance Sheet
– Company Statement of Changes in Equity.
Notes 1 to 9 to the Parent Company financial statements,
including the accounting policies in Note 1.

Additional opinion in relation to IFRS accounting standards as issues by the IASB
As explained in Note 1 to the Group financial statements, the Group, in addition to complying with its legal obligation to apply UK-adopted
international accounting standards, has also applied IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB).
In our opinion, the Group financial statements have been properly prepared in accordance with IFRS as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion
and matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee (“AC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.

Smith+Nephew Annual Report 2023

157

Independent auditor’s UK report continued

2. Overview of our audit

Factors driving our view of risks

Following our FY22 audit, and considering developments affecting
the Group since then, we have updated our risk assessment.
There have been no significant changes to our risk assessment in the
current period. Our significant risks remain consistent with FY22.
As part of this we have considered the external environment including
the continued high levels of inflation and the internal environment
including the Group’s continued high levels of Inventory and
restructuring. We determined Recoverability of the Orthopaedics CGU
goodwill, Excess and Obsolescence (E&O) provision for Orthopaedics
inventory as Key audit matters due to a high degree of estimation
uncertainty, with a potential range of outcomes greater than our
materiality for the financial statements as a whole.
We have also determined Provision for metal-on-metal hip products to
be a Key audit matter, consistent with FY22, however the level of risk
in relation to the provision for metal-on-metal hip products reduced
as a result of settlements made in the year. The estimate for this
provision requires the Directors to use an actuarial model and make
a number of key assumptions relating to the number of claimants
and settlement outcome.

Audit Committee (AC) interaction

During the year, the AC met 7 times. KPMG are invited to attend all
AC meetings and are provided with an opportunity to meet with the
AC in private sessions without the Executive Directors being present.
For each Key Audit Matter, we have set out communications with the
AC in section 4, including matters that required particular judgement
for each.

Our independence

We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public
interest entities.
We have not performed any non-audit services during FY23 or
subsequently which are prohibited by the FRC Ethical Standard.
We were first appointed as auditor of the Company in 2015 following
a competitive tender in 2014. The period of total uninterrupted
engagement is for the 9 financial years ended 31 December 2023.
This is Paul Nichols’ second year as the Group engagement partner.
The average tenure of partners responsible for component audits as
set out in section 7 below is 3.3 years, with the shortest being 1 and
the longest being 6.

Key Audit Matters

Vs FY22

Recoverability of the
Orthopaedics CGU goodwill

Excess and Obsolescence
(E&O) provision for
Orthopaedics Inventory

Provision for metal-on-metal
hip products

Parent company financial statements
only: Recoverability of Parent
Company’s investment in subsidiaries

Item

4.1

4.2

4.3

4.4

The matters included in the Audit Committee report on page 115 are
materially consistent with our observations of those meetings.

Total audit fee

Audit related fees
(including interim review)

Non-audit fee as a % of total audit
and audit related fee %

Date first appointed

Uninterrupted audit tenure

Tenure of Group engagement partner

Average tenure of component
signing partners

$9.97m

$0.30m

31 December 2015

9 years

2 years

3.3 years

158

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Materiality (Item 6 below)

The scope of our work is influenced by our view of
materiality and our assessed risk of material misstatement.
We have determined overall materiality for the Group financial
statements as a whole at $33m (FY22: $35m) and for the Parent
Company financial statements as a whole at $32m (FY22: $32m).
We determined materiality benchmark with reference to Group
revenue of which it represents 0.59% (FY22: 5.15% of adjusted profit
before tax) We changed the benchmark to Group revenue because
the Group’s adjusted profit before tax continues to be volatile and
below historic levels as well as high levels of restructuring costs.
Materiality for the Parent Company financial statements was
determined with reference to a benchmark of Parent Company
total assets of which it represents 0.3% (FY22: 0.3%).

Materiality levels used in our audit

26.2

24.7

Group scope (Item 7 below)

We have performed risk assessment and planning procedures to
determine which of the Group’s components are likely to include risks
of material misstatement to the Group financial statements, the type
of procedures to be performed at these components and the extent of
involvement required from our component auditors around the world.
Of the Group’s 121 (FY22: 121) reporting components, we subjected
3 (FY22: 3) to full scope audits for Group purposes, 33 (FY22: 33)
to audits of specific account balances and specified risk focussed
audit procedures over revenue, receivables and cash (5 (FY22: 5)),
inventory (6 (FY22: 6)) and property, plant and equipment (2 (FY22: 2)).
The components within the scope of our work accounted for the
percentages illustrated opposite.
In addition, we have performed Group level analysis on the remaining
components to determine whether further risks of material
misstatement exist in those components.
We consider the scope of our audit, as communicated to the Audit
Committee, to be an appropriate basis for our audit opinion.

Group
Materiality

Group

Highest

Performance Component
Materiality Materiality

Parent
Company
Materiality

FY23 $m

FY22 $m

1.65

1.8

Lowest

Audit

Component Misstatement
Materiality

Posting
Threshold

Coverage of Group financial statements

Revenue

Profit before tax

Total assets

Full scope audits

Audit of specific account balances

Remaining components

59%

17%

24%

Full scope audits

Audit of specific account balances

Remaining components

62%

16%

22%

Full scope audits

Audit of specific account balances

Remaining components

40%

45%

15%

Smith+Nephew Annual Report 2023

159

Independent auditor’s UK report continued

2. Overview of our audit continued

The impact of climate change on our audit

In planning our audit, we considered the potential impacts of climate
change on the Group’s business and its financial statements.
The Group has set out in the Strategic Report its commitment to
achieving net zero Scope 1 and Scope 2 greenhouse gas emissions
(GHGs) by 2040 and Scope 3 GHGs by 2045 and its commitment
to several other shorter-term targets.
As a part of our audit, we have performed a risk assessment,
including enquiries of management, to understand how the impact
of commitments made by the Group in respect of climate change,
as well as the physical or transition risks of climate change, may affect
the financial statements and our audit. There was no impact of this
work on our Key audit matters.

Based on the procedures we performed in reviewing and challenging
the Group’s Road map for transitioning to net zero Scope 1 and Scope
2 GHGs, we did not identify any significant risk in this period of climate
change having a material impact on the Group’s critical accounting
estimates. This is due to the shorter-term nature of certain estimates
(inventory provisioning) and the nature of the estimate itself (metal
on metal liabilities) and the level of headroom (impairment of goodwill
and intangible assets). In addition, we did not identify any significant
risks in this period to the carrying value and useful economic lives
of property, plant and equipment or intangible assets caused by the
projected physical risks of climate change or the transition to a net
zero operating model.
We have read the disclosures of climate related information in the
Annual Report and considered their consistency with the financial
statements and our audit knowledge.

3. Going concern, viability and principal risks and uncertainties

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent
Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position means that
this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Our conclusions
– We consider that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;

– We have not identified, and concur with the Directors’ assessment

that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the
Group’s or Parent Company’s ability to continue as a going concern
for the going concern period;

– We have nothing material to add or draw attention to in relation
to the Directors’ statement in note 1 to the financial statements
on the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and
Parent Company’s use of that basis for the going concern period, and
we found the going concern disclosure in note 1 to be acceptable; and

– The related statement under the Listing Rules set out on page 78
is materially consistent with the financial statements and our
audit knowledge.

Going concern

We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
Company’s financial resources or ability to continue operations over
the going concern period. The risks that we considered most likely
to adversely affect the Group’s and Company’s available financial
resources and metrics relevant to debt covenants over this period
relates to supply chain disruption and macroeconomic factors,
including inflation. This could lead to a sustained medium-term
decline in revenue and profits.
We also considered less predictable but realistic second order
impacts, such as adverse working capital movements, including
delays in customer payments, new product liability claims giving
rise to significant claims and legal fees, pricing and reimbursement
pressures, and currency exchange volatility leading to a long-term
decline in revenue and profits.
We considered whether these risks could plausibly affect the liquidity
or covenant compliance in the going concern period by comparing
severe, but plausible downside scenarios that could arise from these
risks individually and collectively against the level of available financial
resources and covenants indicated by the Group’s financial forecasts.
We considered whether the going concern disclosure in note 1 to
the financial statements gives a full and accurate description of the
Directors’ assessment of going concern, including the identified risks,
and related sensitivities.
Accordingly, based on those procedures, we found the Directors’
use of the going concern basis of accounting without any material
uncertainty for the Group and Parent Company to be acceptable.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reason able at the time they were made, the
above conclusions are not a guarantee that the Group or the Parent
Company will continue in operation.

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Disclosures of emerging and principal risks and longer-term viability

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OTHER INFORMATION

Our reporting
We have nothing material to add or draw attention to in relation to these
disclosures.
We have concluded that these disclosures are materially consistent with the
financial statements and our audit knowledge.

Our responsibility
We are required to perform procedures to identify whether there is a
material inconsistency between the Directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
– the Directors’ confirmation within the viability statement on page

78 that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and
liquidity;

– the Emerging and Principal Risks disclosures describing these risks
and how emerging risks are identified and explaining how they are
being managed and mitigated; and

– the Directors’ explanation in the viability statement of how they
have assessed the prospects of the Group, over what period
they have done so and why they considered that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.

We are also required to review the viability statement set out on
page 78 under the Listing Rules.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Parent Company’s longer-term viability.

4. Key audit matters

What we mean

Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on:
– the overall audit strategy;
– the allocation of resources in the audit; and
– directing the efforts of the engagement team.

We include below the Key Audit Matters in decreasing order of audit significance together with our Key audit procedures to address
those matters and our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.

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4. Key audit matters continued

4.1 Recoverability of orthopaedics CGU goodwill (Group)

Financial statement elements

Goodwill (Orthopaedics CGU)

FY23

FY22

$915m

$953m

Our assessment of risk vs FY22
Our assessment is that the risk is similar to FY22.
We identify recoverability of the Orthopaedics CGU
goodwill as a Key audit matter due to a high degree
of estimation uncertainty involved.

Our results
FY23:
Acceptable
FY22:
Acceptable

Description of the key audit matter

Our response to the risk

Forecast-based valuation
As discussed in Note 8 to the consolidated financial statements,
the goodwill balance as of 31 December 2023 was $2,992 million
(FY22: $3,031 million), of which $915 million (FY22: $953 million)
related to the Orthopaedics cash generating unit (CGU).
The Group performs an impairment test for goodwill annually,
and additionally whenever an indicator of impairment is identified.
The recoverable amounts are based on value-in-use which is
calculated from pre-tax cash flow projections for three years using
data from the Group’s budget and strategic planning process and
extrapolated for a further two years.
We identified the recoverability of Orthopaedics CGU goodwill and
related disclosure as a Key audit matter. Significant auditor judgement
was required to evaluate the key assumptions used in the Group’s
impairment test, specifically the revenue growth rates and trading
profit margins. The effect of these matters is that, as part of our risk
assessment, we determined that the value in use of goodwill has
a high degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the financial
statements as a whole, and possibly many times that amount.
The financial statements (Note 8.5) disclose the sensitivity estimated
by the Group.
Disclosure quality
The financial statements (note 8.5) disclose the sensitivity estimated
by the Group. These disclosures give relevant information about
the estimation uncertainty including the risk of a reduction in the
headroom or need for an impairment as a result of a reasonably
possible change in one or more of the key assumptions.

– Benchmarking assumptions: We assessed the revenue growth

rates and trading profit margins assumptions by comparing them to
external industry forecasts; and analysts’ reports.

– Our sector experience: We challenged the reasonableness of

the resulting value in use calculation by comparing to valuations
using market based techniques including profit multiples of
competitor companies.

– Sensitivity analysis: We performed a sensitivity analysis over the key
assumptions listed to the left to assess the impact on the value in use.

– Historical comparisons: We evaluated the Group’s ability to forecast

the cash flow projections by comparing historical actual results to the
approved budgets in the previous years.

– Assessing transparency: We assessed whether the Group’s

disclosures about the sensitivity of the outcome of the impairment
assessment to a reasonably possible change in the key assumptions
listed to the left, reflect the risks inherent in the estimation of the
recoverable amount of goodwill.

Communications with the Smith & Nephew plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
– Our risk assessment and planned substantive procedures and the

extent of our control reliance.

Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
– Assumptions used by management in the value in use calculation
relate to the revenue growth rates and trading profit margins.

– The adequacy of the disclosures, particularly as it relates to the level

of estimation uncertainty involved.

Our results
We found the Group’s conclusion that there is no impairment of
Orthopaedics CGU’s goodwill to be acceptable (FY22: acceptable)
and we found the sensitivity disclosures made to be acceptable
(FY22: acceptable).

Further information in the Annual Report and Accounts: See the Audit Committee Report on page 115 for details on how the Audit
Committee considered Impairment of Goodwill attributable to Orthopaedics CGU as an area of significant attention, page 178 for
the accounting policy on Impairment of Goodwill attributable to Orthopaedics CGU, and note 8 for the financial disclosures.

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OTHER INFORMATION

4.2 Excess And Obsolescence (E&O) Provision For Orthopaedics Inventory (Group)

Financial statement elements

E&O Provision for Orthopaedics inventory

$445m

$416m

FY23

FY22

Our assessment of risk vs FY22
Our assessment is that the risk is similar to FY22.
We identify E&O provision for Orthopaedics
inventory to be a Key audit matter due to a high
degree of estimation uncertainty involved.

Our results
FY23:
Acceptable
FY22:
Acceptable

Description of the key audit matter

Our response to the risk

Subjective estimate
As discussed in notes 1.2 and 12 to the consolidated financial
statements, the Group’s total E&O provision is $544 million (FY22:
$504 million), approximately 82% of which is related to Orthopaedics.
The Group has high levels of Orthopaedics inventory that is available
for customers’ immediate use. Complete sets of products including
large and small sizes of inventory (which are used less frequently) have
to be available to customers at their premises. An assessment is made
by the Group to identify excess or obsolete inventory.
The key input into this provision is the estimate of the forecasted
usage of inventory on hand.
There is a high degree of subjectivity in assessing a number of the
assumptions applied by the Group in calculating the future utilisation
of inventory. Future utilisation which is based on assumptions of
historical sales of inventory adjusted for other internal or external
factors such as effectiveness of inventory deployment, length of
product lives and planned phase out of products which may impact
the demand for the product.
The effect of these matters is that, as part of our risk assessment,
we determined that the provision has a high degree of estimation
uncertainty, with a potential range of reasonable outcomes greater
than our materiality for the financial statements as a whole over
the longer term.

Communications with the Smith & Nephew plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
– Our approach to the audit of E&O provision including details of

our planned substantive procedures and the extent of our control
reliance.

– Our conclusions on the appropriateness of Smith & Nephew plc’s

provisioning methodology and policy.

– The adequacy of the disclosures, particularly as it relates to the

level of estimation uncertainty involved.

Our procedures to address the risk included:
– Control operation: We evaluated the design and implementation and
tested the operating effectiveness of certain internal controls over
the Group’s process for assessing the E&O provision, including controls
over the key assumptions used to determine forecasted usage of
Orthopaedics inventory.

– Test of detail: We assessed and challenged the key assumptions
used to determine the E&O provision through a combination of
interviews of both finance and operations personnel and inspection of
internal budgets, including a selection of product plans to assess the
impact of plans for phasing out product lines on forecasted usage of
Orthopaedics inventory.

– Historical comparisons: We evaluated the Group’s ability to accurately

estimate the E&O provision by comparing historically recorded
provisions to actual inventory write-offs and historic estimates of
forecasted usage to actual usage.

– Sensitivity analysis: We assessed the sensitivity of the key

assumptions, listed to the left, incorporating the recent actual
results in sales of inventory, to consider their impact on the Group’s
determination of the provision recognised.

– Assessing disclosures: We assessed the adequacy of the Group’s

disclosures in respect of the E&O provision.

Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
– Assumptions used by management in relation to the estimate of

the forecasted usage of inventory on hand.

Our results
We considered the level of E&O provisions for Orthopaedics inventory
to be acceptable (FY22: acceptable).

Further information in the Annual Report and Accounts: See the Audit Committee Report on page 115 for details on how the Audit
Committee considered E&O provision for Orthopaedics inventory as an area of significant attention, page 177 for the accounting policy
on E&O provision for Orthopaedics inventory, and note 12 for the financial disclosures.

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4. Key audit matters continued

4.3 Provision for metal-on-metal hip products (Group)

Financial statement elements

Provision for metal-on-metal hip products

$149m

$239m

FY23

FY22

Our assessment of risk vs FY22
We determined that the level of risk in relation to
provision for metal-on-metal hip products reduced
as a result of settlements made in the year.

Our results
FY23:
Acceptable
FY22:
Acceptable

Description of the key audit matter

Our response to the risk

Subjective estimate
As discussed in note 17.1 to the consolidated financial statements,
the Group holds a provision of $149 million (FY22: $239 million)
relating to the present value at 31 December 2023 of the estimated
costs to resolve all other known and anticipated metal-on-metal hip
claims globally.
The estimate for this provision requires the Group to use an actuarial
model and make a number of key assumptions relating to the number
of claimants and settlement outcomes. We identified the evaluation of
the provision for metal-on-metal hip products and related disclosure
for these potential liabilities as a Key audit matter because especially
challenging auditor judgement and specialised skills and knowledge
was required in assessing the key assumptions above. The effect of
these matters is that, as part of our risk assessment, we determined
that the provision has a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater than our materiality
for the financial statements as a whole.

Our procedures to address the risk included:
– Control operation: We evaluated the design and implementation and
tested the operating effectiveness of certain internal controls over
the Group’s legal provision process. This included controls related
to the Group’s review, challenge and assessment of the metal-on-
metal provision and related key assumptions including estimating the
number of claimants and the settlement outcomes.

– Enquiry of lawyers: We obtained correspondence directly from the

Group’s external counsel on the status of open metal-on-metal court
proceedings and settlement negotiations. We compared the number
of open metal-on-metal claims per the Group’s records against this
correspondence, and considered any relevant information provided in
our evaluation of the related exposure.

– Our actuarial expertise: We involved actuarial specialists with

relevant skills and knowledge, who assisted in challenging the number
of claimants and settlement outcomes used in statistical projections
in determining the provision, as well as the range of reasonably
possible outcomes determined by the Group, by reference to historical
data including settlement amounts, number of new claimants, and
experience of other cases. In addition, the actuarial professionals
assisted in evaluating the statistical model applied by the Group with
actuarial professional standards and industry practice for similar
product liability claims. We evaluated the scope, competency, and
objectivity of the Group’s experts involved in developing the actuarial
model used in the determination of the provision by considering the
work they were engaged to perform, their professional qualifications,
and reporting lines.

– Assessing disclosures: We assessed the Group’s disclosures in

respect of the metal-on metal hip provision in relation to the range of
possible outcomes considering how these reflect the underlying facts
and circumstances.

Communications with the Smith & Nephew plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
– Our approach to the audit of the provision for metal-on-metal hip
including details of our planned substantive procedures and the
extent of our control reliance.

Areas of particular auditor judgement
We identified the following as the areas of particular auditor
judgement:
– Assumptions relating to the number of claimants and settlement

outcome, which are used in the actuarial model.

– Our conclusions on the appropriateness of Smith & Nephew plc’s

provisioning methodology and policy.

– The adequacy of the disclosures, particularly as it relates to the level

Our results
We found the level of provisioning in respect of metal-on-metal hip
products to be acceptable (FY22: acceptable).

of estimation uncertainty involved.

Further information in the Annual Report and Accounts: See the Audit Committee Report on page 115 for details on how the Audit
Committee considered the Provision for metal-on-metal hip products as an area of significant attention, page 178 for the accounting
policy on Provision for metal-on-metal hip products, and note 17.1 for the financial disclosures.

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OTHER INFORMATION

4.4 Recoverability of Parent Company’s investment in subsidiaries (Parent Company only)

Financial statement elements

Investments in subsidiaries

$7,092m

FY23

FY22

Our assessment of risk vs FY22
There are no significant new factors, which affected
our risk assessment in FY23 and the risk level is
unchanged as compared to FY22.

Our results
FY23:
Acceptable
FY22:
Acceptable

Description of the key audit matter

Our response to the risk

Low risk, high value
The carrying amount of the Parent Company’s investments in
subsidiaries held at cost less impairment represents 68% (FY22: 69%)
of the Parent Company’s total assets.
We do not consider the valuation of these investments to be at a high
risk of significant misstatement, or to be subject to a significant level
of judgement. However, due to their materiality in the context of the
Parent Company financial statements as a whole, this is considered to
be the area which had the greatest effect on our overall audit strategy
and allocation of resources in planning and completing our Parent
Company audit.

Communications with the Smith & Nephew plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
– Our audit approach as set out above; and
– Our conclusions from the procedures performed.

We performed the tests below rather than seeking to rely on any of the
Company’s controls because the annual assessment meant that detailed
testing is inherently the most effective means of obtaining audit evidence.
Our procedures included:
– Test of detail: Comparing a sample of the highest value investments
representing 98% (FY22: 98%) of the total investment balance with
the relevant subsidiaries’ draft balance sheets to identify whether
their net assets, being an approximation of their minimum recoverable
amount, were in excess of their carrying amount and assessing
whether those subsidiaries have historically been profit-making.
– Assessing subsidiary audits: Assessing the work performed by the

subsidiary audit teams on that sample of subsidiaries and considering
the results of their work, on those subsidiaries’ profits and net assets.

We did not identify any areas of significant auditor judgement
in relation to this Key audit matter.
Our results
We found the Parent Company’s conclusion that there is no
impairment of its investments in subsidiaries to be acceptable
(FY22: acceptable).

Further information in the Annual Report and Accounts: See page 229 for the accounting policy on Recoverability of Parent Company’s
investment in subsidiaries, and page 229 for the financial disclosures.

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5. Our ability to detect irregularities, and our response

Fraud – Identifying and responding to risks of material misstatement due to fraud

Fraud risk assessment

Risk communications

Fraud risks

Procedures to address fraud risks

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions
that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
– Enquiring of Directors, the Audit Committee, internal audit, compliance officers and

inspection of policy documentation as to the Group’s high-level policies and procedures
to prevent and detect fraud, including the internal audit function, and the Group’s channel
for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or
alleged fraud.

– Reading Board and all relevant committee minutes.
– Inspecting management’s own fraud risk assessment and considering the applicability

of identified risk factors.

– Considering remuneration incentive schemes (primarily the annual bonus plan) and

performance targets for management and Directors, including revenue and trading margin
targets for management remuneration.

– Using analytical procedures to identify any usual or unexpected relationships.
– Using our own forensic specialists to assist us in identifying fraud risks based on discussions

of the circumstances of the Group and Company.

We communicated identified fraud risk factors throughout the audit team and remained alert to any
indications of fraud throughout the audit. This included communication from the Group audit team to all
in-scope component audit teams of relevant fraud risk factors identified at the Group level and request
to component audit teams to report to the Group audit team any instances of fraud that could give rise
to a material misstatement at the Group level.

As required by auditing standards and taking into account our overall knowledge of the control
environment, we perform procedures to address the risk of management override of controls, in
particular the risk that Group and component management may be in a position to make inappropriate
accounting entries and the risk of bias in accounting estimates and judgements such as inventory
provisioning. On this audit we do not believe there is a fraud risk related to revenue recognition based on
the following assessment:
– The accounting for the majority of the Group’s sales is non-complex, and subject to limited
levels of judgement with limited opportunities for manual intervention in the sales process
to fraudulently manipulate revenue. There is also a short period of time between order
and delivery.

– Revenue related rebates and deductions are relevant for sales made to distributors in certain
markets, and the calculation of these includes a level of estimation which may be subject to
management bias. However, given the materiality of the respective accruals, their contractual
terms, and the historic profile of these deductions, including frequency of settlement, we are
satisfied that there is no significant risk of fraud associated with these sales.

– We are also satisfied that there are no significant risks around fraudulent sales to distributors,
including channel stuffing, given the materiality of these arrangements, number and size of
agreements and levels of channel inventory.

We did not identify any additional fraud risks.

In determining the audit procedures, we considered the results of our evaluation and testing of the
operating effectiveness of the Group-wide fraud risk management controls.
We also performed procedures including:
– Identifying journal entries and other adjustments to test for all full scope components and

those in scope as audit of account balance based on specific risk-based criteria and comparing
the identified entries to supporting documentation. These included those posted by senior
finance management, those posted to unusual accounts, and those with missing user
identification; and

– Assessing significant accounting estimates for bias.

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Laws and regulations – Identifying and responding to risks of material misstatement relating to compliance with laws and regulations

Laws and regulations risk assessment

Risk communications

Direct laws context and link to audit

Most significant indirect law/regulation areas

We identified areas of laws and regulations that could reasonably be expected to have a material effect
on the financial statements from our general commercial and sector experience, through discussion with
the Directors and other management (as required by auditing standards), and from inspection of the
Group’s regulatory and legal correspondence and discussed with the Directors and other management
the policies and procedures regarding compliance with laws and regulations. We engaged forensic
specialists to assist in the review of relevant correspondence and attend discussions with management
on relevant matters.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control
environment including the entity’s procedures for complying with regulatory requirements.

We communicated identified laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. This included communication from the group audit
team to all in-scope component audit teams of relevant laws and regulations identified at the Group
level, and a request for component auditors to report to the group audit team any instances of non-
compliance with laws and regulations that could give rise to a material misstatement at the Group level.

The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including
financial reporting legislation (including related companies legislation), distributable profits legislation,
and taxation legislation and we assessed the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the financial statements,
for instance through the imposition of fines or litigation or the loss of the Group’s licence to operate.
We identified the following areas as those most likely to have such an effect: Food and Drug
Administration regulations in the US and the compliance of business practices with the UK Bribery Act
and the US Foreign Corrupt Practices Act recognising the regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and
regulations to enquiry of the Directors and other management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that breach.

Actual or suspected breaches discussed
with AC

We discussed with the Audit Committee other matters related to actual or suspected breaches of laws
or regulations, for which disclosure is not necessary, and considered any implications for our audit.

Context

Context of the ability of the audit to detect
fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected
some material misstatements in the financial statements, even though we have properly planned
and performed our audit in accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would
identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
controls. Our audit procedures are designed to detect material misstatement. We are not responsible
for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws
and regulations.

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6. Our determination of materiality

The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating
the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.

$33m
(FY22: $35m)
Materiality for the Group
financial statements as
a whole

$24.7m
(FY22: $26.2m)
Performance materiality

$1.7m
(FY22: $1.8m)
Audit misstatement
posting threshold

What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at $33m (FY22: $35m). This was
determined with reference to a benchmark of Group’s revenue (FY22: Group’s adjusted profit before tax).
The benchmark in the previous period was the Group’s adjusted profit before tax. We selected the
Group revenue as the benchmark in the current period as it is more suitable for the size of the business
operations compared to the adjusted profit before tax, as the Group continues to see volatility in
post-pandemic earnings with margins below historic levels as well as high levels of restructuring costs.
When using a benchmark of revenue to determine overall materiality, KPMG’s approach for listed entities
considers a guideline range 0.5% – 1% of the measure. In setting overall Group materiality, we applied
a percentage of 0.59% to the benchmark (FY22: 5.15% of adjusted profit before tax).
Materiality for the Parent Company financial statements as a whole was set at $32.5m (FY22: $32m),
determined with reference to a benchmark of Parent Company total assets, of which it represents
0.3% (FY22: 0.3%).

What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial
statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY22: 75%) of materiality for
Smith & Nephew plc’s Group financial statements as a whole to be appropriate.
The Parent Company performance materiality was set at $24.3m (FY22: $24m), which equates
to 75% (FY22: 75%) of materiality for the Parent Company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.

What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from
a quantitative point of view. We may become aware of misstatements below this threshold which
could alter the nature, timing and scope of our audit procedures, for example if we identify smaller
misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to the
Smith & Nephew plc’s Audit Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (FY22: 5%) of our materiality for the Group
financial statements. We also report to the Audit Committee any other identified misstatements
that warrant reporting on qualitative grounds.

The overall materiality for the Group financial statements of $33m (FY22: $35m) compares as follows to the main financial statement
caption amounts:

Financial statement caption

Group Materiality as % of caption

Total Group Revenue

Group profit before tax
(FY22: adjusted profit before tax)*

FY23
$5,549m

0.59%

FY22
$5,215m

0.67%

FY23
$290m

11.38%

FY22
$679m

5.15%

Total Group Assets

FY23
$9,987m

0.33%

FY22
$9,966m

0.35%

* Adjusted to exclude restructuring costs of $168 million, legal & other charges of $82 million, a charge of $162 million related to acquisition and disposal related items as disclosed in note 6 and

excluding charge for impairment of acquisition intangible assets of $32 million, as disclosed in note 9.

168

Smith+Nephew Annual Report 2023

7. The scope of our audit
Group scope

Group audit
team oversight

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

What we mean
How the Group audit team determined the procedures to be performed across the Group.
Of the Group’s 121 (FY22: 121) reporting components, we subjected 3 (FY22: 3) to full scope audits
for Group purposes, 33 (FY22: 33) to audits of specific account balances and specified risk focussed
audit procedures over revenue, receivables and cash (5 (FY22: 5)), inventory (7 (FY22: 7)) and property,
plant and equipment (2 (FY22: 2)).
The latter were not individually financially significant enough to require a full scope audit for Group
purposes but did present specific individual risks that needed to be addressed.
The remaining 24% (FY22: 23%) of total Group revenue, 22% (FY22: 23%) of Group profit before tax
and 15% (FY22: 15%) of total Group assets is represented by 85 (FY22: 85) reporting components,
none of which individually represented more than 5% (FY22: 5%) of any of total Group revenue, Group
profit before tax or total Group assets. For these residual components, we performed analysis at an
aggregated Group level to re-examine our assessment that there were no significant risks of material
misstatement within these.
The Group team instructed component auditors as to the significant areas to be covered, including the
relevant risks detailed above and the information to be reported back. The Group team approved the
component materialities, which ranged from $6 million to $24 million (FY22: $6 million to $24 million),
having regard to the mix of size and risk profile of the Group across the components. The work on 9
of the 36 components (FY22: 10 of the 36 components) was performed by component auditors and
the rest, including the audit of the Parent Company, was performed by the Group team.

Scope
Full scope audit

Audit of one or more
account balances

Number of components
3

Range of materiality applied
$6m–$24m

$6m–$12m

We have also performed audit procedures centrally across the Group, and beyond the components
scope set out above, in the following areas:
– Testing of IT systems;
– The items excluded from adjusted Group profit before tax;
– Goodwill and acquired intangible assets impairment assessment; and
– Defined benefit pension.
These items were audited by the Group team because those are managed centrally by the Group’s
management. Where relevant, the Group team communicated the results of these procedures to the
component teams. In addition, we have performed Group level analysis on the remaining components
to determine whether further risks of material misstatement exist in those components.
We were able to rely upon the Group’s internal control over financial reporting in several areas of our
audit, where our controls testing supported this approach, which enabled us to reduce the scope of our
substantive audit work; in the other areas the scope of the audit work performed was fully substantive.

What we mean
The extent of the Group audit team’s involvement in component audits.
Senior members of the Group engagement team oversaw the component auditor work, by performing
site visits and video conference discussions with management of the component locations in scope
of the Group audit. In the course of the year the Group audit team visited 6 component audit teams
(FY22: 7) in the US, UK, China and Netherlands and in addition visited local/regional management in
Switzerland and Singapore. The Group engagement team assessed the audit risk and strategy and
directed the audit work of component auditors. The Group audit team also evaluated the sufficiency
of the audit evidence obtained through discussions and remote review of the audit working papers of
component teams.

Smith+Nephew Annual Report 2023

169

Independent auditor’s UK report continued

8. Other information in the annual report

The Directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion thereon.

All other information

Our responsibility
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent
with the financial statements or our audit knowledge.

Strategic report and Directors’ report

Our responsibility and reporting
Based solely on our work on the other information described above
we report to you as follows:
– we have not identified material misstatements in the strategic

report and the Directors’ report;

– in our opinion the information given in those reports for the

financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance

with the Companies Act 2006.

Directors’ remuneration report

Our responsibility
We are required to form an opinion as to whether the part of the
Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.

Corporate governance disclosures

Our responsibility
We are required to perform procedures to identify whether there is
a material inconsistency between the financial statements and our
audit knowledge, and:
– the Directors’ statement that they consider that the annual

report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy;

– the section of the annual report describing the work of the

Audit Committee, including the significant issues that the Audit
Committee considered in relation to the financial statements,
and how these issues were addressed; and

– the section of the annual report that describes the review of

the effectiveness of the Group’s risk management and internal
control systems.

Our reporting
Based solely on that work we have not identified material misstatements
or inconsistencies in the other information.

Our reporting
In our opinion the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.

Our reporting
Based on those procedures, we have concluded that each of these
disclosures is materially consistent with the financial statements and
our audit knowledge.

We are also required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions of
the UK Corporate Governance Code specified by the Listing Rules for
our review.

We have nothing to report in this respect.

170

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Other matters on which we are required to report by exception

Our responsibility
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
– adequate accounting records have not been kept by the Parent

Company, or returns adequate for our audit have not been received
from branches not visited by us; or

– the Parent Company financial statements and the part of the

Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are

not made; or

– we have not received all the information and explanations we

require for our audit.

Our reporting
We have nothing to report in these respects.

9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 156, the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group
and Parent Company’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 they either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and
Transparency Rule (“DTR”) 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report
has been prepared in accordance with those requirements.

10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006
and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report, and the further matters we are required to state to
them in accordance with the terms agreed with the Company, 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 and the Company’s members, as a body, for our audit work,
for this report, or for the opinions we have formed.

Paul Nichols (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants
15 Canada Square
London E14 5GL

26 February 2024

Smith+Nephew Annual Report 2023

171

Group financial statements
Group
ncial statements

fina

Group income statement

Revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Research and development expenses
Operating profit
Interest income
Interest expense
Other finance costs
Share of results of associates
Gain on disposal of interest in associate
Profit before taxation
Taxation
Attributable profit for the year1
Earnings per ordinary share1
Basic
Diluted

Group statement of comprehensive income

Attributable profit for the year1
Other comprehensive income:
Items that will not be reclassified to income statement
Remeasurement of net retirement benefit obligations
Taxation on other comprehensive income
Total items that will not be reclassified to income statement

Items that may be reclassified subsequently to income statement
Cash flow hedges – forward foreign exchange contracts

Gains arising in the year
(Gains)/losses transferred to inventories for the year
Exchange differences on translation of foreign operations
Taxation on other comprehensive income
Total items that may be reclassified subsequently to income statement
Other comprehensive (loss)/income for the year, net of taxation
Total comprehensive income for the year1

1 Attributable to equity holders of the Company and wholly derived from continuing operations.

Notes
2

3
3
2 & 3
4
4
4
11

Year ended
31 December
2023
$ million
5,549
(1,730)
3,819
(3,055)
(339)
425
34
(132)
(7)
(30)
–
290
(27)
263

Year ended
31 December
2022
$ million
5,215
(1,540)
3,675
(2,880)
(345)
450
14
(80)
(8)
(141)
–
235
(12)
223

Year ended
31 December
2021
$ million
5,212
(1,543)
3,669
(2,720)
(356)
593
6
(80)
(17)
9
75
586
(62)
524

30.2¢
30.1¢

25.5¢
25.5¢

59.8¢
59.7¢

Notes

Year ended
31 December
2023
$ million
263

Year ended
31 December
2022
$ million
223

Year ended
31 December
2021
$ million
524

18
5

(89)
18
(71)

23
(25)
56
–
54
(17)
246

30
(7)
23

24
(37)
(102)
2
(113)
(90)
133

79
(22)
57

34
7
(53)
(5)
(17)
40
564

172

The Notes on pages 176–226 are an integral part of these accounts.

Smith+Nephew Annual Report 2023

Group balance sheet

Assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments
Investments in associates
Other non-current assets
Retirement benefit assets
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current tax receivable
Cash at bank

Total assets

Equity and liabilities
Equity attributable to owners of the Company
Share capital
Share premium
Capital redemption reserve
Treasury shares
Other reserves
Retained earnings
Total equity
Non-current liabilities
Long-term borrowings and lease liabilities
Retirement benefit obligations
Other payables
Provisions
Deferred tax liabilities

Current liabilities
Bank overdrafts, borrowings, loans and lease liabilities
Trade and other payables
Provisions
Current tax payable

Total liabilities
Total equity and liabilities

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

At
31 December
2023
$ million

At
31 December
2022
$ million

Notes

7
8
9
10
11
13
18
5

12
13

15
18
14
17
5

15
14
17

1,470
2,992
1,110
8
16
18
69
274
5,957

2,395
1,300
33
302
4,030
9,987

175
615
20
(94)
(405)
4,906
5,217

2,319
88
35
48
9
2,499

765
1,055
233
218
2,271
4,770
9,987

1,455
3,031
1,236
12
46
12
141
177
6,110

2,205
1,264
37
350
3,856
9,966

175
615
20
(118)
(459)
5,026
5,259

2,712
70
90
84
36
2,992

160
1,098
243
214
1,715
4,707
9,966

The accounts were approved by the Board and authorised for issue on 26 February 2024 and are signed on its behalf by:

Rupert Soames, OBE
Chair

Deepak Nath, PhD
Chief Executive Officer

Anne-Françoise Nesmes
Chief Financial Officer

Smith+Nephew Annual Report 2023

The Notes on pages 176–226 are an integral part of these accounts.
173

Group financial statements continued

Group cash flow statement

Cash flows from operating activities
Profit before taxation
Net interest expense
Depreciation, amortisation and impairment
Loss on disposal of property, plant and equipment and software
Share-based payments expense (equity-settled)
Share of results of associates
Gain on disposal of interest in associate
Net movement in post-retirement benefit obligations
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables and provisions
Cash generated from operations1
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisitions, net of cash acquired
Capital expenditure
Purchase of investments
Distribution from associate
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Purchase of own shares
Payment of capital element of lease liabilities

Proceeds from borrowings due within one year

Settlement of borrowings due within one year
Proceeds from borrowings due after one year
Settlement of borrowings due after one year
Proceeds from own shares
Settlement of currency swaps
Equity dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange adjustments
Cash and cash equivalents at end of year2

Year ended
31 December
2023
$ million

Year ended
31 December
2022
$ million

Year ended
31 December
2021
$ million

Notes

22
11

20
20
20

20
20
20
20
20
19

20
20

290
98
683
18
39
30
–
3
(178)
(49)
(105)
829
8
(104)
(125)
608

(21)
(427)
–
–
(448)

–
–
(52)

326
(151)
–
–
–
4
(327)
(200)
(40)
344
(4)
300

235
66
617
11
40
141
–
6
(407)
(103)
(25)
581
7
(73)
(47)
468

(113)
(358)
(2)
1
(472)

1
(158)
(54)

–

(407)
485
(474)
5
3
(327)
(926)
(930)
1,285
(11)
344

586
74
567
14
41
(9)
(75)
–
(151)
(81)
82
1,048
6
(80)
(97)
877

(285)
(408)
(2)
4
(691)

2
–
(59)

–

(267)
–
–
12
(4)
(329)
(645)
(459)
1,751
(7)
1,285

Includes $124m (2022: $120m, 2021: $108m) of outgoings on restructuring and rationalisation expenses, $16m (2022: $22m, 2021: $28m) of outgoings on acquisition and disposal-related items
and $145m outflow (2022: $133m, 2021: $111m) of legal and other items.

2 Cash and cash equivalents is net of bank overdrafts of $2m (2022: $6m, 2021: $5m).

174

The Notes on pages 176–226 are an integral part of these accounts.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Group statement of changes in equity

At 31 December 2020
Attributable profit for the year1
Other comprehensive income
Equity dividends declared and paid
Share-based payments recognised
Taxation on share-based payments
Cost of shares transferred to beneficiaries
Issue of ordinary share capital5
At 31 December 2021
Attributable profit for the year1
Other comprehensive income
Equity dividends declared and paid
Share-based payments recognised
Taxation on share-based payments
Purchase of own shares
Cost of shares transferred to beneficiaries
Cancellation of treasury shares
Issue of ordinary share capital5
At 31 December 2022
Attributable profit for the year1
Other comprehensive income
Equity dividends declared and paid
Share-based payments recognised
Cost of shares transferred to beneficiaries
At 31 December 2023

Share
capital
$ million
177
–
–
–
–
–
–
–
177
–
–
–
–
–
–
–
(2)
–
175
–
–
–
–
–
175

Share
premium
$ million
612
–
–
–
–
–
–
2
614
–
–
–
–
–
–
–
–
1
615
–
–
–
–
–
615

Capital
redemption
reserve
$ million
18
–
–
–
–
–
–
–
18
–
–
–
–
–
–
–
2
–
20
–
–
–
–
–
20

Treasury
shares2
$ million
(157)
–
–
–
–
–
37
–
(120)
–
–
–
–
–
(158)
31
129
–
(118)
–
–
–
–
24
(94)

Other
reserves3
$ million
(329)
–
(17)
–
–
–
–
–
(346)
–
(113)
–
–
–
–
–
–
–
(459)
–
54
–
–
–
(405)

Retained
earnings4
$ million
4,958
524
57
(329)
41
(1)
(25)
–
5,225
223
23
(327)
40
(3)
–
(26)
(129)
–
5,026
263
(71)
(327)
39
(24)
4,906

Total
equity
$ million
5,279
524
40
(329)
41
(1)
12
2
5,568
223
(90)
(327)
40
(3)
(158)
5
–
1
5,259
263
(17)
(327)
39
–
5,217

1 Attributable to equity holders of the Company and wholly derived from continuing operations.
2 Refer to Note 19.2 for further information.
3 Other reserves comprises gains and losses on cash flow hedges, foreign exchange differences on translation of foreign operations and net changes on fair value of trade investments.

The cumulative translation loss within other reserves at 31 December 2023 was $396m (2022: $452m, 2021: $350m).

4 Within retained earnings is a capital reserve of $2,266m (2022: $2,266m, 2021: $2,266m).
5

Issue of ordinary share capital in connection with the Group’s share incentive plans.

Smith+Nephew Annual Report 2023

The Notes on pages 176–226 are an integral part of these accounts.
175

Group financial statements continued

Notes to the Group accounts
1 Basis of preparation
Smith & Nephew plc (the “Company”) is a public limited company incorporated in England and Wales. In these accounts, the ‘Group’
means the Company and all its subsidiaries. The principal activities of the Group are to develop, manufacture, market and sell medical
devices and services.

The Group has prepared its accounts in accordance with UK-adopted International Accounting Standards. The Group has also prepared
its accounts in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB) effective
as at 31 December 2023. IFRS as adopted in the UK differs in certain respects from IFRS Accounting Standards as issued by the IASB.
However, the differences have no impact for the periods presented.

The preparation of accounts in conformity with IFRS requires management to use estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts
of revenues and expenses during the year. The accounting policies requiring management to use significant estimates and assumptions
are: valuation of inventories, liability provisions and impairment. These are discussed in Note 1.2 below. Although these estimates are
based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

The uncertainties as to the future impact on the financial performance and cash flows of the Group as a result of the current challenging
economic environment have been considered as part of the Group’s adoption of the going concern basis in these financial statements,
in which context the Directors reviewed cash flow forecasts prepared for a period of at least 12 months from the date of approval
of these financial statements. Having carefully reviewed those forecasts, the Directors concluded that it was appropriate to adopt
the going concern basis of accounting in preparing these financial statements for the reasons set out below.

The Group had access to $300m of cash and cash equivalents at 31 December 2023. The Group’s net debt, excluding lease liabilities,
at 31 December 2023 was $2,577m with access to committed facilities of $3.6bn with an average maturity of 5.2 years. At the date
of approving these financial statements the funding position of the Group has remained unchanged and the cash position is not
materially different.

The Group has $405m of private placement debt due for repayment in 2024. $1,030m of private placement debt is subject to financial
covenants. The principal covenant on the private placement debt is a leverage ratio of <3.5 which is measured on a rolling 12-month
basis at half year and year end. There are no financial covenants in any of the Group’s other facilities.

The Directors have considered various scenarios in assessing the impact of the economic environment on future financial performance
and cash flows, 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 economic 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 have a reasonable expectation that the Company and the Group are well placed to manage their business risks,
have sufficient funds to continue to meet their liabilities as they fall due and to continue in operational existence for a period of at
least 12 months from the date of the approval of these financial statements. The financial statements have therefore been prepared
on a going concern basis.

Accordingly, the Directors continue to adopt the going concern basis (in accordance with the guidance ‘Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting’ issued by the FRC) in preparing these financial statements.

New accounting standards effective 2023
A number of new amendments to standards are effective from 1 January 2023 but they do not have a material effect on the Group’s
financial statements except for Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendment to IAS 12,
which the Group has adopted. The amendments narrow the scope of the initial recognition exemption to exclude transactions that give
rise to equal and offsetting temporary differences such as leases.

The Group previously accounted for deferred tax on leases where the deferred tax asset or liability was recognised on a net basis.
Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax
liability in relation to its right-of-use assets. However, there is no impact on the balance sheet because the balances qualify for offset
under paragraph 74 of IAS 12. There was also no impact on the opening retained earnings as at 1 January 2023 as a result of the change.
The policy for recognising and measuring income taxes is consistent with that applied in the comparative years except for the changes
outlined above as a result of the Group’s adoption of the amendments to IAS 12. The change in accounting policy will also be reflected
in the Group’s consolidated financial statements for the year ending 31 December 2023.

176

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

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 2024 and earlier
application is permitted; however, the Group has not adopted them early in preparing these 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 will take effect for the Group from 1 January 2024.

1.1 Consolidation
The Group accounts include the accounts of Smith & Nephew plc and its subsidiaries for the periods during which they were members
of the Group.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are
consolidated in the Group accounts from the date that the Group obtains control and continue to be consolidated until the date
that such control ceases. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated on consolidation. All subsidiaries have year ends which are coterminous with the Group’s, with the
exception of jurisdictions whereby a different year end is required by local legislation.

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary and any related components
of equity. Any resulting gain or loss is recognised in profit or loss. Any retained interest in the former subsidiary is measured at fair value.

1.2 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 Group’s accounting policies do not include any critical judgements. The Group’s accounting policies are set out in Notes 1–23
of the Notes to the Group accounts. Of those, the policies which require the most use of management’s estimation are outlined below.
The critical estimates are consistent with 31 December 2022. Management have considered the impact of the uncertainties around
the current challenging economic environment below.

Valuation of inventories
A feature of the Orthopaedics business unit (which accounts for approximately 66% of the Group’s total inventory and approximately
82% of the total provision for excess and obsolete inventory) is the high level of product inventory required, some of which is located
at customer premises and is available for customers’ immediate use. Complete sets of products, including large and small sizes, have
to be made available in this way. These sizes are used less frequently than standard sizes and towards the end of the product life cycle
are inevitably in excess of requirements. Adjustments to carrying value are therefore required to be made to orthopaedic inventory to
anticipate this situation. These adjustments are calculated in accordance with a formula based on levels of inventory compared with
historical usage. This formula is applied on an individual product line basis and typically is first applied when a product group has been
on the market for two years. This method of calculation is considered appropriate based on experience, but it does require management
estimate in respect of customer demand, effectiveness of inventory deployment, length of product lives and phase-out of old products.
See Note 12 for further details.

Current economic environment impact assessment: In assessing the increase in provision for excess and obsolete inventory,
management have considered the impact of higher input cost inflation on increased inventory levels. Management have not changed
their accounting policy since 31 December 2022, nor is a change in the key assumptions underlying the methodology expected in
the next 12 months. Primarily due to inventory growth, the provision has increased from $504m at 31 December 2022 to $544m
at 31 December 2023. The provision for excess and obsolete inventory is not considered to have a range of potential outcomes that
is significantly different to the $544m at 31 December 2023 in the next 12 months. The provision has a high degree of estimation
uncertainty given the range of products and sizes, with a potential range of reasonable outcomes that could be material over the
longer term.

Smith+Nephew Annual Report 2023

177

Group financial statements continued
Notes to the Group accounts continued

1 Basis of preparation continued
Liability provisioning
The recognition of provisions for legal disputes related to metal-on-metal cases is subject to a significant degree of estimation.
Provision is made for loss contingencies when it is considered probable that an adverse outcome will occur and the amount of
the loss can be reasonably estimated. In making its estimates, management takes into account the advice of internal and external
legal counsel. Provisions are reviewed regularly and amounts updated where necessary to reflect developments in the disputes.
The value of provisions may require future adjustment if experience such as number, nature or value of claims or settlements changes.
Such a change may be material in 2024 or thereafter. The ultimate liability may differ from the amount provided depending on the
outcome of court proceedings and settlement negotiations or if investigations bring to light new facts. See Note 17 for further details.

Current economic environment impact assessment: Management considered whether there had been any changes to the number
and value of claims due to current challenging economic environment and to date have not identified any significant changes in trends.
If the experience changes in the future, the value of provisions may require adjustment.

Impairment
In carrying out impairment reviews of intangible assets and goodwill, a number of significant assumptions have to be made when
preparing cash flow projections. These include the future rate of market growth, discount rates, the market demand for the products
acquired, the future profitability of acquired businesses or products, levels of reimbursement and success in obtaining regulatory
approvals. If actual results should differ or changes in expectations arise, impairment charges may be required which would adversely
impact operating results. There has been an increase in the level of headroom in relation to goodwill impairment testing for the
Orthopaedics CGU which is still sensitive to a reasonably possible change in assumptions. In 2023, the Group impaired $84m of
goodwill and $37m of intangible assets related to Engage as a result of the impairment reviews undertaken for the voluntary product
discontinuation. For other intangible assets and goodwill CGUs, this critical estimate is not considered to have a significant risk of
material adjustment in 2024 or thereafter based on sensitivity analyses undertaken (as outlined below). See Notes 8 and 9 for
further details on impairment reviews.

Current economic environment impact assessment: Management have assessed the non-current assets held by the Group at
31 December 2023 to identify any indicators of impairment as a result of current economic environment. Where an impairment
indicator has arisen, impairment reviews have been undertaken by comparing the expected recoverable value of the asset to the
carrying value of the asset. The recoverable amounts are based on cash flow projections using the Group’s base case scenario
in its going concern models, which was reviewed and approved by the Board.

1.3 Climate change considerations
The impact of climate change has been considered as part of the assessment of estimates and judgements in preparing the
Group accounts. The climate change scenario analyses undertaken this year in line with TCFD recommendations did not identify
any material financial impact. The following considerations were made in respect of the financial statements:
– The impact of climate change on the going concern assessment and the viability of the Group over the next three years.
– The impact of climate change on the cash flow forecasts used in the impairment assessments of non-current assets

including goodwill.

– The impact of climate change on the carrying value and useful economic lives of property, plant and equipment.

1.4 Foreign currencies
Functional and presentation currency
The Group accounts are presented in US Dollars. The Company’s functional currency is US Dollars.

Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group companies at exchange rates
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional
currency at the exchange rate as at the reporting date. Non-monetary items are not retranslated.

178

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Foreign operations
Balance sheet items of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into US
Dollars on consolidation at the exchange rates at the reporting date. Income statement items and the cash flows of foreign operations
are translated at average rates as an approximation to actual transaction rates, with actual transaction rates used for large
one-off transactions.

Foreign currency differences are recognised in ‘Other comprehensive income’ and accumulated in ‘Other reserves’ within equity.
These include: exchange differences on the translation at closing rates of exchange of non-US Dollar opening net assets; the differences
arising between the translation of profits into US Dollars at actual (or average, as an approximation) and closing exchange rates; to the
extent that the hedging relationship is effective, the difference on translation of foreign currency borrowings or swaps that are used
to finance or hedge the Group’s net investments in foreign operations; and the movement in the fair value of forward foreign exchange
contracts used to hedge forecast foreign exchange cash flows.

The exchange rates used for the translation of currencies into US Dollars that have the most significant impact on the Group results were:

Average rates
Sterling
Euro
Swiss Franc
Year end rates
Sterling
Euro
Swiss Franc

2023

2022

2021

1.24
1.08
1.11

1.27
1.10
1.19

1.23
1.05
1.05

1.21
1.07
1.08

1.38
1.18
1.09

1.35
1.13
1.10

2 Business segment information
The Group’s operating structure is organised around three global business units and the chief operating decision maker monitors
performance, makes operating decisions and allocates resources on a global business unit basis. Accordingly, the Group has concluded
that there are three reportable segments.

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.

The Executive Committee (‘ExCo’) comprises the Chief Financial Officer (‘CFO’), the business unit presidents and certain heads of
function, and is chaired by the Chief Executive Officer (‘CEO’). ExCo is the body through which the CEO uses the authority delegated
to him by the Board of Directors to manage the operations and performance of the Group. All significant operating decisions regarding
the allocation and prioritisation of the Group’s resources and assessment of the Group’s performance are made by ExCo, and while
the members have individual responsibility for the implementation of decisions within their respective areas, it is at the ExCo level
that these decisions are made. Accordingly, ExCo is considered to be the Group’s chief operating decision maker as defined by IFRS 8
Operating Segments.

In making decisions about the prioritisation and allocation of the Group’s resources, ExCo reviews financial information for the three
business units (Orthopaedics, Sports Medicine & ENT and Advanced Wound Management) and determines the best allocation of
resources to the business units. In 2023, ENT is identified as a new operating segment, however, it does not meet the quantitative
threshold requirement to be disclosed as a reporting segment. It will remain aggregated with Sports Medicine to be an operating
segment as they share similar characteristics. This information is prepared substantially on the same basis as the Group’s IFRS
financial statements aside from the adjustments described in Note 2.2. Financial information for corporate costs is presented on
a Group-wide basis. The ExCo is not provided with total assets and liabilities by segment, and therefore these measures are not
included in the disclosures below. The results of the segments are shown below.

Smith+Nephew Annual Report 2023

179

Group financial statements continued
Notes to the Group accounts continued

2 Business segment information continued
2.1 Revenue by business segment and geography

Accounting policy
Revenue is recognised as the performance obligations to deliver products or services are satisfied and is recorded based on the
amount of consideration expected to be received in exchange for satisfying the performance obligations. Revenue is recognised
primarily when control is transferred to the customer, which is generally when the goods are shipped or delivered in accordance
with the contract terms, with some transfer of services taking place over time. Substantially all performance obligations are fulfilled
within one year. There is no significant revenue associated with the provision of services. Payment terms to our customers are based
on commercially reasonable terms for the respective markets while also considering a customer’s credit rating. Appropriate provisions
for returns, trade discounts and rebates are deducted from revenue. Rebates primarily comprise chargebacks and other discounts
granted to certain customers. Chargebacks are discounts that occur when a third-party purchases product from a wholesaler at
its agreed price plus a mark-up. The wholesaler in turn charges the Group for the difference between the price initially paid by the
wholesaler and the agreed price. The provision for chargebacks is based on expected sell-through levels by the Group’s wholesalers
to such customers, as well as estimated wholesaler inventory levels.

Orthopaedics and Sports Medicine & ENT (Ear, Nose & Throat)
Orthopaedics and Sports Medicine & ENT consists of the following businesses: Knee Implants, Hip Implants, Other Reconstruction,
Trauma & Extremities, Sports Medicine Joint Repair, Arthroscopic Enabling Technologies and ENT. Sales of inventory located
at customer premises and available for customers’ immediate use are recognised when notification is received that the product
has been implanted or used. Substantially all other revenue is recognised when control is transferred to the customer, which is
generally when the goods are shipped or delivered in accordance with the contract terms. Revenue is recognised for the amount
of consideration expected to be received in exchange for transferring the products or services.

In general our business in Established Markets is direct to hospitals and ambulatory surgery centers whereas in the Emerging Markets
we generally sell through distributors.

Advanced Wound Management
Advanced Wound Management consists of the following businesses: Advanced Wound Care, Advanced Wound Bioactives and
Advanced Wound Devices. Substantially all revenue is recognised when control is transferred to the customer, which is generally
when the goods are shipped or delivered in accordance with the contract terms. Revenue is recognised for the amount of
consideration expected to be received in exchange for transferring the products or services. Appropriate provisions for returns,
trade discounts and rebates are deducted from revenue, as explained above.

The majority of our Advanced Wound Management business, and in particular products used in community and homecare facilities,
is through wholesalers and distributors. When control is transferred to a wholesaler or distributor, revenue is recognised accordingly.
The proportion of sales direct to hospitals is higher in our Advanced Wound Devices business in Established Markets.

Segment revenue reconciles to statutory revenues from continuing operations as follows:

Reportable segment revenue
Orthopaedics
Sports Medicine & ENT
Advanced Wound Management
Revenue from external customers

2023
$ million

2022
$ million

2021
$ million

2,214
1,729
1,606
5,549

2,113
1,590
1,512
5,215

2,156
1,560
1,496
5,212

180

Smith+Nephew Annual Report 2023

Disaggregation of revenue:
The following table shows the disaggregation of Group revenue by product by business unit:

Revenue by product from continuing operations
Knee Implants
Hip Implants
Other Reconstruction
Trauma & Extremities
Orthopaedics
Sports Medicine Joint Repair
Arthroscopic Enabling Technologies
ENT (Ear, Nose and Throat)
Sports Medicine & ENT
Advanced Wound Care
Advanced Wound Bioactives
Advanced Wound Devices
Advanced Wound Management
Consolidated revenue from continuing operations

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023
$ million

2022
$ million

2021
$ million

940
599
111
564
2,214
945
588
196
1,729
725
553
328
1,606
5,549

899
584
87
543
2,113
870
567
153
1,590
712
520
280
1,512
5,215

876
612
92
576
2,156
839
590
131
1,560
731
496
269
1,496
5,212

The following table shows the disaggregation of Group revenue by geographic market and product category. The disaggregation of
revenue into the two product categories below reflects that in general the products in the Advanced Wound Management business unit
are sold to wholesalers and intermediaries, while products in the other business units are sold directly to hospitals, ambulatory surgery
centers and distributors. The further disaggregation of revenue by Established Markets and Emerging Markets reflects that in general our
products are sold through distributors and intermediaries in the Emerging Markets while in the Established Markets, with the exception
of the Advanced Wound Care and Bioactives products, which are in general sold direct to hospitals and ambulatory surgery centers.
The disaggregation by Established Markets and Emerging Markets also reflects their differing economic factors including volatility in
growth and outlook.

Orthopaedics, Sports Medicine & ENT
Advanced Wound Management
Total

Established
Markets1
$ million
3,184
1,406
4,590

Emerging
Markets
$ million
759
200
959

2023

Total
$ million
3,943
1,606
5,549

Established
Markets1
$ million
2,949
1,319
4,268

Emerging
Markets
$ million
754
193
947

2022

Total
$ million
3,703
1,512
5,215

Established
Markets1
$ million
2,969
1,327
4,296

Emerging
Markets
$ million
747
169
916

2021

Total
$ million
3,716
1,496
5,212

1 Established Markets comprises the US, Australia, Canada, Europe, Japan and New Zealand.

Sales are attributed to the country of destination. US revenue for 2023 was $2,979m (2022: $2,764m, 2021: $2,658m), China revenue
for 2023 was $275m (2022: $319m, 2021: $352m) and UK revenue for 2023 was $201m (2022: $186m, 2021: $189m).

Smith+Nephew Annual Report 2023

181

Group financial statements continued
Notes to the Group accounts continued

2 Business segment information continued
Contract assets and liabilities
The nature of our products and services do not generally give rise to contract assets as we do not typically incur costs to fulfil a contract
before a product or service is provided to the customer. The Group generally satisfies performance obligations within one year from
the contract inception date. There was no material revenue recognised in the current reporting period that related to carried-forward
contract liabilities (deferred income) or performance obligations satisfied in the previous year. There is no material revenue that is
likely to arise in future periods from unsatisfied performance obligations at the balance sheet date. Therefore, there are no associated
significant accrued income and deferred income balances at 31 December 2023. As of 31 December 2023, contract assets principally
comprise trade receivables and contract liabilities principally comprise rebates (as described in the accounting policy above). The accrual
for rebates at 31 December 2023 was $92m (2022: $103m) with $383m being recognised in revenue in 2023.

Major customers
No single customer generates revenue greater than 10% of the consolidated revenue.

2.2 Trading and operating profit by business segment
Trading profit is a trend measure which presents the profitability of the Group excluding the impact of specific transactions that
management considers affect the Group’s short-term profitability and the comparability of results. The Group presents this measure
to assist investors in their understanding of trends. The Group has identified the following items, where material, as those to be excluded
from operating profit when arriving at trading profit: 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.
Further detail is provided in Notes 2.3, 2.4, 2.5 and 2.6.

Segment trading profit is reconciled to the statutory measure below:

Segment profit
Orthopaedics
Sports Medicine & ENT
Advanced Wound Management
Segment trading profit
Corporate costs
Group trading profit
Acquisition and disposal-related items1
Restructuring and rationalisation expenses
Amortisation and impairment of acquisition intangibles1
Legal and other1
Group operating profit

2023
$ million

2022
$ million

2021
$ million

398
503
472
1,373
(403)
970
(60)
(220)
(207)
(58)
425

383
472
436
1,291
(390)
901
(4)
(167)
(205)
(75)
450

367
459
474
1,300
(364)
936
(7)
(113)
(172)
(51)
593

1 During 2023, management evaluated the commercial viability of Engage products and concluded that they should be discontinued. A total of $109m of Engage’s assets and liabilities were written
off as a result of this action, which includes goodwill of $84m (included in acquisition and disposal-related items), intangible assets of $37m (included in amortisation and impairment of acquisition
intangibles), inventory of $21m (included in legal and other), partially offset by remeasurement of contingent consideration of $33m (included in acquisition and disposal-related items).

2.3 Acquisition and disposal-related items
For the year ended 31 December 2023, costs primarily relate to the acquisition of CartiHeal and impairment of Engage goodwill,
partially offset by credits relating to remeasurement of contingent consideration from prior year acquisitions.

For the year ended 31 December 2022, costs primarily relate to the acquisition of Engage and prior year acquisitions, partially offset
by credits relating to remeasurement of deferred and contingent consideration for prior year acquisitions.

For the year ended 31 December 2021, costs primarily relate to the acquisition of Extremity Orthopaedics and prior year acquisitions,
partially offset by credits relating to remeasurement of contingent consideration for prior year acquisitions.

2.4 Restructuring and rationalisation costs
For the year ended 31 December 2023 and 2022, these costs include efficiency and productivity elements of the 12-Point Plan.

For the years ended 31 December 2023, 2022 and 2021, these costs also relate to the Operations and Commercial
Excellence programme.

For the years ended 31 December 2021, these costs also include the implementation of the Accelerating Performance and Execution
(APEX) programme that was announced in February 2018.

182

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2.5 Amortisation and impairment of acquisition intangibles
For the years ended 31 December 2023, 2022 and 2021, these costs relate to the amortisation and impairment of intangible assets
acquired in material business combinations.

2.6 Legal and other
For the year ended 31 December 2023, charges primarily relate to legal expenses for ongoing metal-on-metal hip claims partially offset
by an decrease of $8m 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 and by the release of a provision for an intellectual property dispute.

For the year ended 31 December 2022, charges primarily relate to legal expenses for ongoing metal-on-metal hip claims. These charges
in the year to 31 December 2022 were partially offset by a credit of $7m relating to insurance recoveries for ongoing metal-on-metal
hip claims.

For the year ended 31 December 2021, charges primarily relate to legal expenses for ongoing metal-on-metal hip claims. These charges
in the year to 31 December 2021 were partially offset by a credit of $35m relating to insurance recoveries for ongoing metal-on-metal
hip claims.

The years ended 31 December 2023, 2022 and 2021 also include costs for implementing the requirements of the EU Medical Device
Regulation which came into effect in May 2021 with a transition period to May 2024.

2.7 Non-current assets by geography
The following table presents the non-current assets of the Group based on their location:

United Kingdom
United States of America
Other
Total non-current assets of the consolidated Group1

1 Non-current assets exclude retirement benefit assets and deferred tax assets.

3 Operating profit

2023
$ million
525
3,692
1,397
5,614

2022
$ million
487
3,918
1,387
5,792

2021
$ million
541
4,125
1,447
6,113

Accounting policy
Research and development
Research expenditure is expensed as incurred. Internal development expenditure is only capitalised if the recognition criteria in
IAS 38 Intangible Assets have been satisfied. The Group considers that the regulatory, technical and market uncertainties inherent
in the development of new products mean that in most cases development costs should not be capitalised as intangible assets
until products receive approval from the appropriate regulatory body.

Payments to third parties for research and development projects are accounted for based on the substance of the arrangement.
If the arrangement represents outsourced research and development activities the payments are generally expensed except
in limited circumstances where the respective development expenditure would be capitalised under the principles established
in IAS 38. By contrast, the payments are capitalised if the arrangement represents consideration for the acquisition of intellectual
property developed at the risk of the third party.

Capitalised development expenditures are amortised on a straight-line basis over their useful economic lives from product launch.

Advertising costs
Advertising costs are expensed as incurred.

Smith+Nephew Annual Report 2023

183

Group financial statements continued
Notes to the Group accounts continued

3 Operating profit continued

Revenue
Cost of goods sold1
Gross profit
Research and development expenses2
Selling, general and administrative expenses:
Marketing, selling and distribution expenses
Administrative expenses3,4,5,6

Operating profit

2023
$ million
5,549
(1,730)
3,819
(339)

(2,218)
(837)
(3,055)
425

2022
$ million
5,215
(1,540)
3,675
(345)

(2,066)
(814)
(2,880)
450

2021
$ million
5,212
(1,543)
3,669
(356)

(2,013)
(707)
(2,720)
593

1 2023 includes $27m charge relating to legal and other items, $73m charge relating to restructuring and rationalisation expenses and $3m charge relating to acquisition and disposal-related
items (2022 includes $4m charge relating to legal and other items, $20m charge relating to restructuring and rationalisation expenses and $5m charges relating to acquisition and disposal-
related items, 2021: $7m charge relating to legal and other items and $29m charge relating to restructuring and rationalisation expenses).

2 2023 includes $21m charge relating to legal and other items (2022: $35m, 2021: $39m), $1m charge relating to acquisition and disposal-related items (2022: $5m, 2021: $7m) and $18m

charge relating to restructuring and rationalisation expenses (2022: $5m, 2021: $nil).

3 2023 includes $51m of amortisation of software and other intangible assets (2022: $56m, 2021: $65m).
4 2023 includes $207m of amortisation and impairment of acquisition intangibles and $129m of restructuring and rationalisation expenses (2022: $205m of amortisation and impairment
of acquisition intangibles and $142m of restructuring and rationalisation expenses, 2021: $172m of amortisation and impairment of acquisition intangibles and $84m of restructuring
and rationalisation expenses).

5 2023 includes $10m charge relating to legal and other items (2022: $36m charge, 2021: $5m charge).
6 2023 includes $56m charge relating to acquisition and disposal-related items (2022: $6m credit, 2021: $nil).

Note that items detailed in 1, 2, 4, 5 and 6 are excluded from the calculation of trading profit, the segments’ profit measure.

Operating profit is stated after charging/(crediting) the following items:

Other operating income
Amortisation of intangible assets
Impairment of intangible assets¹

Impairment of Engage's goodwill

Impairment of property, plant and equipment
Fair value remeasurement of trade investments
Depreciation of property, plant and equipment2
Loss on disposal of property, plant and equipment and intangible assets
Advertising costs

2023
$ million
–
221
37

31
4
306
18
88

2022
$ million
(7)
229
39

–
30
–
319
11
92

2021
$ million
(35)
237
2

–
1
1
326
14
81

1 The 2023 impairment of intangible assets includes Engage’s intangible assets of $37m due to the voluntary product discontinuation.
2 The 2023 depreciation charge includes $54m (2022: $56m, 2021: $56m ) related to right-of-use assets.

In 2023, other operating income comprises insurance recoveries for ongoing metal-on-metal hip claims of $nil (2022: $7m, 2021: $35m).
In 2023, $nil (2022: $7m, 2021: $35m) of other operating income was included with legal and other items, as explained in Note 2.6,
and does not form part of trading profit, the segments’ profit measure.

184

Smith+Nephew Annual Report 2023

3.1 Staff costs and employee numbers
Staff costs during the year amounted to:

Wages and salaries
Social security costs
Pension costs (including retirement healthcare)
Share-based payments

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Notes

18
22

2023
$ million
1,683
242
95
39
2,059

2022
$ million
1,565
215
88
40
1,908

2021
$ million
1,562
223
93
41
1,919

During the year ended 31 December 2023, the average number of employees was 19,081 (2022: 19,094, 2021: 18,976).

3.2 Audit Fees – information about the nature and cost of services provided by the auditor

Audit services:

Group accounts
Local statutory audit pursuant to legislation

Other services:

Audit-related services

Total auditor’s remuneration
Arising:

In the UK
Outside the UK

4 Interest and other finance costs
4.1 Interest income/(expense)

Interest income
Interest expense:

Bank borrowings
Private placement notes
Lease liabilities
Corporate bond
Other¹

Net interest expense

1 Other interest expenses included mainly swap interest expenses in 2023.

4.2 Other finance costs

Retirement benefit net interest expense
Unwinding of discount
Other
Other finance costs

2023
$ million

2022
$ million

2021
$ million

7.9
2.1

0.3
10.3

6.0
4.3
10.3

7.2
2.2

0.4
9.8

5.3
4.5
9.8

5.5
2.0

0.1
7.6

3.5
4.1
7.6

2023
$ million
34

2022
$ million
14

2021
$ million
6

(10)
(38)
(8)
(46)
(30)
(132)
(98)

(3)
(39)
(6)
(27)
(5)
(80)
(66)

(3)
(46)
(7)
(21)
(3)
(80)
(74)

Notes
18

2023
$ million

(1)
(6)
–
(7)

2022
$ million
(2)
(9)
3
(8)

2021
$ million
(3)
(10)
(4)
(17)

Smith+Nephew Annual Report 2023

185

Group financial statements continued
Notes to the Group accounts continued

5 Taxation

Accounting policy
The charge for current taxation is based on the results for the year as adjusted for items which are non-assessable or non-deductible.
It is calculated using tax rates that have been enacted or substantively enacted as at the balance sheet date.

The Group operates in numerous tax jurisdictions around the world. At any given time, the Group typically is involved in tax audits
and other disputes and will have other tax returns potentially subject to audit. Significant issues may take several years to resolve.
In estimating the probability and amount of any tax charge, management takes into account the views of internal and external
advisers and updates the amount of tax provision where considered appropriate. The ultimate tax liability may differ from the
amount provided depending on factors including interpretations of tax law and settlement negotiations.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised: for temporary differences related to investments in subsidiaries and associates where the Group is
able to control the timing of the reversal of the temporary difference and it is probable that this will not reverse in the foreseeable
future; on the initial recognition of non-deductible goodwill; and on the initial recognition of an asset or liability in a transaction that
is not a business combination and that, at the time of the transaction, does not affect the accounting or taxable profit.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they
can be used. Deferred tax assets are reviewed at each reporting date taking into account the recoverability of the deferred tax assets,
future profitability and any restrictions on use. The Group considers available evidence to assess future profitability over a reasonably
foreseeable time period, depending on the circumstances and typically a minimum of five years. Any material unrecognised deferred
tax assets are disclosed in Note 5.2.

Deferred tax is measured on an undiscounted basis, and at the tax rates that have been enacted or substantively enacted as at the
balance sheet date that are expected to apply in the periods in which the asset or liability is settled. It is recognised in the income
statement except when it relates to items credited or charged directly to other comprehensive income or equity, in which case
the deferred tax is also recognised within other comprehensive income or equity respectively.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority, the Group
intends to settle its current tax assets and liabilities on a net basis, offset is permissible according to the relevant jurisdiction’s
tax laws and that authority permits the Group to make a single net payment.

In 2023, the Group has adopted IAS 12-Deferred Tax related to Assets and Liabilities arising from a Single Transaction amendments, which
narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences
such as leases. The Group previously accounted for deferred tax on leases where the deferred tax asset or liability was recognised on a net
basis. Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax
liability in relation to its right-of-use assets. However, there is no impact on the balance sheet because the balances qualify for offset under
paragraph 74 of IAS 12. There was also no impact on the opening retained earnings as at 1 January 2023 as a result of the change.

5.1 Taxation charge attributable to the Group

Current taxation:

UK corporation tax at 23.5% (2022: 19.0%; 2021: 19.0%)
Overseas tax

Current income tax charge
Adjustments in respect of prior periods
Total current taxation
Deferred taxation:

Origination and reversal of temporary differences
Changes in tax rates
Adjustments to estimated amounts arising in prior periods

Total deferred taxation
Total taxation as per the income statement
Taxation in other comprehensive income
Taxation in equity
Taxation charge attributable to the Group
186

2023
$ million

2022
$ million

2021
$ million

15
165
180
(45)
135

(116)
(2)
10
(108)
27
(18)
–
9

17
104
121
(10)
111

(77)
(5)
(17)
(99)
12
5
3
20

14
126
140
(33)
107

(35)
(14)
4
(45)
62
27
1
90

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The 2023, 2022 and 2021 net prior period adjustments of $35m, $27m and $29m respectively relate principally to provision releases
following the resolution of tax audits and other uncertain tax matters, and other one-off items.

The total taxation charge of $27m as per the income statement includes a $113m net credit (2022: $127m net credit, 2021: $85m net
credit) as a consequence of restructuring and rationalisation-related costs, acquisition and disposal-related items, amortisation and
impairment of acquisition intangibles, legal and other items.

Factors affecting future tax charges
The Group operates in numerous tax jurisdictions around the world and is subject to factors that may affect future tax charges including
transfer pricing, tax rate changes, tax legislation changes, tax authority interpretation, expiry of statute of limitations, tax litigation,
and resolution of tax audits and disputes.

At any given time, the Group has unagreed years outstanding in various countries and is involved in tax audits and disputes, some
of which may take several years to resolve. Provisions are based on best estimates and management’s judgements concerning the
likely ultimate outcome of any audit or dispute. Management considers the specific circumstances of each tax position and takes
external advice, where appropriate, to assess the range of potential outcomes and estimate additional tax that may be due. Total tax
liabilities include $121m (2022: $150m) in relation to uncertain tax positions which relate to multiple issues across the jurisdictions in
which the Group operates. Other payables include $13m (2022: $10m) of interest on these provisions. There are $33m (2022: $37m)
of tax receivables.

The Group believes that it has made adequate provision in respect of additional tax liabilities that may arise from unagreed years, tax
audits and disputes, the majority of which relate to transfer pricing matters, as would be expected for a Group operating internationally.
However, the actual liability for any particular issue may be higher or lower than the amount provided, resulting in a negative or positive
effect on the tax charge in any given year. A reduction in the tax charge may also arise for other reasons such as an expiry of the relevant
statute of limitations. Depending on the final outcome of tax audits which are currently in progress, statute of limitations expiry, and
other factors, an impact on the tax charge could arise. Whilst such an impact can vary from year to year, these releases depend on
factors which are uncertain, both as to outcome and timing. However, at the current time, we believe the possibility of a material impact
on the tax charge for 2024 is unlikely.

Pillar Two
The OECD Pillar Two GloBE Rules (Pillar Two) introduce a global minimum corporation tax rate of 15% applicable to multinational
enterprise groups with global revenue over €750m. All participating OECD members are required to incorporate these rules into national
legislation. The Pillar Two rules will apply to the Group for its accounting period commencing 1 January 2024. On 23 May 2023, the
International Accounting Standards Board (IASB) amended IAS 12 to introduce a mandatory temporary exception to the accounting for
deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules. On 19 July 2023 the UK Endorsement Board
adopted the IASB amendments to IAS 12.

The Group has performed an assessment of its potential exposure to Pillar Two income taxes based on 2023 financial data and considers
that the rules will result in an increase in the Group tax rate. The main jurisdictions which would give rise to Pillar Two income tax are
Switzerland, Singapore and Costa Rica; all jurisdictions in which the Group has substantial operations. It is estimated that the Pillar Two
income tax would increase the Group tax rate by around 1.5%. The actual Pillar Two impact in 2024 will depend on factors such as
revenues, costs and foreign currency exchange rate impacts by jurisdiction.

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.

The Group does not meet the threshold for application of the Pillar One transfer pricing rules.

Smith+Nephew Annual Report 2023

187

Group financial statements continued
Notes to the Group accounts continued

5 Taxation continued
The UK standard rate of corporation tax for 2023 is 23.5% (2022: 19.0%, 2021: 19.0%). Overseas taxation is calculated at the rates prevailing
in the respective jurisdictions. The table below reconciles the expected tax charge at the UK statutory rate with the actual tax charge.

The UK corporation tax rate increased to 25% from 1 April 2023. The impact of this rate change is reflected in the calculation of the
taxation charge, and in the tax reconciliation below.

Profit before taxation
Expected taxation at UK statutory rate of 23.5% (2022: 19.0%, 2021: 19.0%)
Differences in overseas taxation rates
Innovation reliefs
Tax losses and other deferred tax assets not recognised
Recognition of previously unrecognised tax losses
Expenses not deductible for tax purposes1
Change in tax rates
Withholding tax on unremitted earnings
Adjustments in respect of prior years²
Total taxation charge as per the income statement

2023
$ million
290
68
(24)
(7)
–
(14)
38
(2)
3
(35)
27

2022
$ million
235
45
(19)
(10)
–
(4)
31
(5)
1
(27)
12

In 2023, this includes a $7m impact of non-tax deductible impairment on UK owned investments (2022: $7m impact of non-tax deductible impairment on UK owned investments,
2021: $17m impact of non-taxable accounting gains recognised on UK-owned investments).

2 The adjustment in respect of prior years are explained on page 187.

5.2 Deferred taxation
Movements in the main components of deferred tax assets and liabilities were as follows:

At 31 December 2021
Exchange adjustment
Movement in income statement – current year
Movement in income statement – prior years
Movement in other comprehensive income
Movement in equity
Changes in tax rate
At 31 December 2022
Exchange adjustment
Movement in income statement – current year
Movement in income statement – prior years
Movement in other comprehensive income
Changes in tax rate
At 31 December 2023

Represented by:

Deferred tax assets
Deferred tax liabilities
Net position at 31 December

Accelerated
tax
depreciation
$ million
(45)
–
(28)
–
–
–
(2)
(75)
–
(15)
–
–
(1)
(91)

Intangibles
$ million
(199)
1
15
4
–
–
(2)
(181)
(1)
43
1
–
–
(138)

Retirement
benefit
obligations
$ million
(18)
2
1
1
(7)
–
–
(21)
(3)
–
–
18
–
(6)

Losses
and other
tax attributes
$ million
130
–
1
9
–
–
–
140
1
63
(10)
–
4
198

Inventory,
provisions
and other
differences
$ million
189
(10)
88
3
2
(3)
9
278
1
25
(1)
–
(1)
302

2023
$ million
274
(9)
265

2021
$ million
586
111
(17)
(12)
7
(2)
22
(14)
(4)
(29)
62

Total
$ million
57
(7)
77
17
(5)
(3)
5
141
(2)
116
(10)
18
2
265

2022
$ million
177
(36)
141

188

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The deferred tax asset of $302m (2022: $278m) relating to inventory, provisions and other differences comprises deferred tax relating
to inventory of $125m (2022: $117m), provisions and other short-term temporary differences of $169m (2022: $153m) and bad debt
provisions of $8m (2022: $8m).

The Group has gross unused trading and non-trading tax losses of $1,145m (2022: $839m), gross unused research and development tax
credits of $16m (2022: $24m) and gross unused capital losses of $102m (2022: $97m), available for offset against future profits. $262m
of losses will expire within 10 years from the balance sheet date if not utilised.

A deferred tax asset of $198m (2022: $140m) has been recognised in respect of $885m (2022: $541m) of the trading and non-trading
tax losses and $16m (2022: $12m) of research and development tax credits. No deferred tax asset has been recognised on the remaining
unused tax losses as it is not probable that future taxable profits will be available against which they can be utilised.

Management will reassess the recoverability of deferred tax assets at each balance sheet date by taking into account all relevant and
available information. The Group assesses the likelihood of these being recovered within a reasonably foreseeable time frame, being
typically a minimum of five years, taking into account the future expected profit profile and business model of each relevant company
or country, and any potential legislative restrictions on use. Short-term timing differences are generally recognised ahead of losses
and other tax attributes as being likely to reverse more quickly.

6 Earnings per ordinary share

Accounting policy
Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders by the weighted average number of
ordinary shares in issue during the year, excluding shares held by the Company in the Employees’ Share Trust or as treasury shares.

Diluted earnings per share
Diluted earnings per share is calculated by adjusting the basic earnings per share for the effect of conversion to ordinary shares
associated with dilutive potential ordinary shares, which comprise share options and awards granted to employees.

Adjusted earnings per share
Adjusted earnings per share (or adjusted basic earnings per share) is a trend measure which presents the long-term profitability
of the Group excluding the impact of specific transactions that management considers affects the Group’s short-term profitability.
The Group presents this measure to assist investors in their understanding of trends. Adjusted attributable profit is the numerator
used for this measure. The Group has identified the following items as those to be excluded when arriving at adjusted attributable
profit: acquisition and disposal-related items including amortisation and impairment of acquisition intangible assets; significant
restructuring programmes; significant gains and losses arising from legal disputes and other significant items (including UK tax
litigation) and taxation thereon. Adjusted diluted earnings per share is calculated by adjusting the adjusted basic earnings per share
for the effect of conversion to ordinary shares associated with dilutive potential ordinary shares, which comprise share options and
awards granted to employees.

Smith+Nephew Annual Report 2023

189

Group financial statements continued
Notes to the Group accounts continued

6 Earnings per ordinary share continued
The calculations of the basic, diluted and adjusted earnings per ordinary share are based on the following attributable profit and numbers
of shares:

Earnings
Attributable profit for the year
Adjusted attributable profit (see below)

Attributable profit is reconciled to adjusted attributable profit as follows:

Attributable profit for the year
Acquisition and disposal-related items1
Restructuring and rationalisation costs2
Amortisation and impairment of acquisition intangibles3
Legal and other4
Taxation on excluded items
Adjusted attributable profit

2023
$ million

2022
$ million

2021
$ million

263
722

223
713

524
710

Notes

3
9

2023
$ million
263
78
223
207
64
(113)
722

2022
$ million
223
162
168
205
82
(127)
713

2021
$ million
524
(73)
113
172
59
(85)
710

1 Acquisition and disposal-related items includes a $60m charge within operating profit (2022: $4m charge, 2021: $7m charge) and a $18m charge within share of result of associates

(2022: $158m charge, 2021: $5m credit) and a $nil gain on disposal of interest in associate (2022: $nil, 2021: $75m gain). See details in Note 11.

2 Restructuring and rationalisation costs include a $220m charge within operating profit (2022: $167m, 2021: $113m) and a $3m charge within share of result of associates (2022: $1m, 2021: $nil).
In 2023, amortisation and impairment of acquisition intangibles includes a $207m charge within operating profit (2022: $205m charge within operating profit, 2021: $172m charge within
3
operating profit).

4 Legal and other in 2023 includes $58m charge (2022: $75m charge, 2021: $51m charge) within operating profit (refer to Note 2.6) and a $6m charge (2022: $7m charge, 2021: $8m charge)

within other finance costs for unwinding of the discount on the provision for known, anticipated and settled metal-on-metal hip claims globally.

The numerators used for basic and diluted earnings per ordinary share are the same. The denominators used for all categories of earnings
per ordinary share are as follows:

Number of shares (millions)
Basic weighted number of shares
Dilutive impact of share incentive schemes outstanding
Diluted weighted average number of shares

Earnings per ordinary share
Basic
Diluted
Adjusted:
Basic
Diluted

2023

2022

2021

871
2
873

30.2¢
30.1¢

82.8¢
82.7¢

872
1
873

25.5¢
25.5¢

81.8¢
81.6¢

877
1
878

59.8¢
59.7¢

80.9¢
80.8¢

190

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

7 Property, plant and equipment

Accounting policy
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using
the straight-line method over their estimated useful lives, and is ultimately recognised in profit or loss. Leased assets are depreciated
over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end
of the lease term. Freehold land is not depreciated. The estimated useful lives of items of property, plant and equipment is 3–20 years
and for buildings is 20–50 years.

Assets in course of construction are not depreciated until they are available for use.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Finance costs relating to the purchase or construction of property, plant and equipment and intangible assets that take longer than
one year to complete are capitalised based on the Group weighted average borrowing costs. All other finance costs are expensed
as incurred.

Leased assets
The assessment of whether a contract is or contains a lease takes place at the inception of the contract. The assessment involves
whether the Group obtains substantially all the economic benefits from the use of that asset and whether the Group has the right
to direct the use of the asset. The Group allocates the consideration in the contract to each lease and non-lease component.
The non-lease component, where it is separately identifiable, is not included in the right-of-use asset.

The Group leases many assets including properties, motor vehicles and office equipment. The Group availed itself of the exemptions
for short-term leases and leases of low-value items for leases other than those for properties and motor vehicles. The use of these
exemptions does not have a material impact. The Group recognises a right-of-use asset and a lease liability at the commencement
of the lease. The right-of-use asset is initially measured based on the present value of lease payments that are not paid at the
commencement date plus initial direct costs less any incentives received. The lease payments are discounted using an incremental
borrowing rate which is country-specific and reflective of the lease term. The right-of-use asset is depreciated over the shorter
of the lease term or the useful life of the underlying asset.

Cash flows arising on lease interest payments are included in operating cash flows whereas cash flows arising on the capital
repayments of the lease liability are included in financing cash flows.

Impairment of assets
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating unit to which it belongs.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use.
In assessing value-in-use, its estimated future cash flow is discounted to its present value using a pre-tax discount rate that reflects
the current market assessment of the time value of money and the risks specific to the asset.

Smith+Nephew Annual Report 2023

191

Group financial statements continued
Notes to the Group accounts continued

7 Property, plant and equipment continued

Cost
At 1 January 2022
Exchange adjustment
Acquisitions
Additions
Disposals
Impairment
Transfers
At 31 December 2022
Exchange adjustment
Additions
Disposals
Impairment

Reclassification

Transfers
At 31 December 2023
Depreciation and impairment
At 1 January 2022
Exchange adjustment
Charge for the year
Impairment
Disposals
Transfers
At 31 December 2022
Exchange adjustment
Charge for the year
Impairment
Disposals

Reclassification

Transfers
At 31 December 2023
Net book amounts
At 31 December 2023
At 31 December 2022

Plant and equipment

Land and
buildings
$ million

Notes

Instruments

$ million

Other
$ million

Assets in
course of
construction
$ million

Total
$ million

688
(18)
–
51
(45)
–
50
726
8
69
(39)
–

27
795

249
(8)
62
18
(37)
–
284
4
63
21
(34)

–
342

453
442

1,694
(66)
2
129
(58)
–
9
1,710
10
211
(88)
–

–

1,282
(39)
–
24
(49)
–
114
1,332
21
29
(51)
–

–

303
(6)
–
136
(1)
(3)
(173)
256
4
70
(2)
(5)

–

3,967
(129)
2
340
(153)
(3)
–
4,024
43
379
(180)
(5)

1
1,844

102
1,433

(153)
170

(23)
4,242

1,292
(52)
172
8
(58)
4
1,366
8
154
1
(76)

–

(1)
1,452

392
344

913
(29)
85
1
(47)
(4)
919
15
89
4
(50)

–

1
978

455
413

–
–
–
–
–
–
–
–
–
–
–

–

–
–

2,454
(89)
319
27
(142)
–
2,569
27
306
26
(160)

–
2,772

170
256

1,470
1,455

Land and buildings includes land with a cost of $37m (2022: $22m) that is not subject to depreciation. Transfers from assets in course of
construction includes $23m (2022: $nil) of software. Assets under construction in 2023 reflect that the Group is undergoing investment
in its manufacturing facilities including expanding facilities in Costa Rica, and the development of new manufacturing facility in Hull, UK.
Group capital expenditure relating to property, plant and equipment contracted but not provided for amounted to $12m (2022: $20m).
The amount of borrowing costs capitalised in 2023 and 2022 was minimal.

Information about the Group’s right-of-use assets is outlined below:

2023
Additions
Depreciation charge in the year
Net book value at 31 December

192

Land and
buildings
$ million
45
42
157

Plant and
equipment
$ million
11
12
28

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

8 Goodwill

Accounting policy
Goodwill is not amortised but is reviewed for impairment annually. Goodwill is allocated to the cash-generating unit (CGU) that is
expected to benefit from the acquisition. The goodwill is tested annually for impairment by comparing the recoverable amount to
the carrying value of the CGUs. The CGUs identified by management are at the aggregated product operating levels of Orthopaedics,
Sports Medicine, ENT and Advanced Wound Management, in the way the core assets are used to generate cash flows.

If the recoverable amount of the CGU is less than its carrying amount then an impairment loss is determined to have occurred.
Any impairment losses that arise are recognised immediately in the income statement and are allocated first to reduce the
carrying amount of goodwill and then to the carrying amounts of the other assets of the CGU.

When an acquired business included within a CGU ceases to operate permanently, then the acquired business no longer forms part
of the CGU and is therefore tested for impairment on a standalone basis. The portion of goodwill allocated to this acquired business
is measured based on its relative value within the CGU, unless another method is considered more appropriate.

In carrying out impairment reviews of goodwill, a number of significant assumptions have to be made when preparing cash flow
projections. These include the future rate of market growth, discount rates, the market demand for the products acquired, the future
profitability of acquired businesses or products, levels of reimbursement and success in obtaining regulatory approvals. If actual results
should differ, or changes in expectations arise, impairment charges may be required which would adversely impact operating results.

When the composition of CGUs changed, goodwill would be allocated using a relative value approach at the date of the reorganisation
similar to that used when an operation within a CGU is disposed of or a method that could provide a better allocation of goodwill to
the reorganised units.

Cost and net book value
At 1 January
Exchange adjustment

Impairment

Acquisitions
At 31 December

Notes

2023
$ million

2022
$ million

3,031
45

(84)

–
2,992

2,989
(42)

–

84
3,031

Management has identified five CGUs in applying the provisions of IAS 36 Impairment of Assets: Orthopaedics, Sports Medicine, ENT,
Advanced Wound Care & Devices and Bioactives.

In 2023, ENT was identified as a separate operating segment following change in the Group’s management structure. Therefore, ENT
was identified as a new CGU for goodwill impairment reviews.

For the purpose of goodwill impairment testing, the Advanced Wound Care & Devices and Bioactives CGUs have been aggregated
(Advanced Wound Management), as this is the level at which goodwill is monitored and level at which the economic benefits relating
to the goodwill within these CGUs is realised.

During 2023, management evaluated the commercial viability of Engage products and concluded that they should be discontinued.
The goodwill related to Engage of $84m, previously included in the Orthopaedics CGU, was fully impaired.

Goodwill is allocated to the Group’s CGUs as follows:

Orthopaedics
Sports Medicine1
ENT1

Advanced Wound Management

2023
$ million
915
1,154

287

636
2,992

2022
$ million
953
1,455

–

623
3,031

In 2022, Sports Medicine and ENT was combined CGU whereas ENT is identified as a separate CGU in 2023.

Impairment reviews were performed as of September 2023 and September 2022 by comparing the recoverable amount of each CGU
with its carrying amount, including goodwill. These were reviewed during December, taking into account any significant events that
occurred between September and December.

Smith+Nephew Annual Report 2023

193

Group financial statements continued
Notes to the Group accounts continued

8 Goodwill continued
The current challenging economic environment, including inflation, was considered in the goodwill impairment reviews. Additionally,
severe downside sensitivity analyses have been undertaken on the base case scenario. Although the headroom for the Orthopaedics
CGU has increased it is still considered sensitive to a reasonably possible change in assumptions, no impairment was identified as a
result of the impairment reviews and sensitivity analyses undertaken.

For each CGU, the recoverable amounts are based on value-in-use which is calculated from pre-tax cash flow projections for
three years using data from the Group’s budget and strategic planning process, the results of which are reviewed and approved by
the Board. These projections were extrapolated for a further two years to reflect expected growth in the CGUs above the terminal
growth rate which is based on long term GDP growth. The initial three-year period is in line with the Group’s strategic planning
process. In determining the growth rates used in the calculations of the value-in-use, management considered annual revenue growth.
Projections are based on anticipated volume and value growth in the markets served by the Group and assumptions as to market
share movements. Each year the projections for the previous year are compared to actual results and variances are factored into
the assumptions used in the current year.

The discount rates used in the value-in-use calculations reflect management’s assessment of risks specific to the assets of each CGU.
Our determination of the discount rates is based on Group’s weighted average cost of capital (WACC) which includes a risk-free rate,
based on market participant’s cost of equity, an equity risk premium specifically adjusted to the medical technology industry and
after-tax cost of debt and reflects the risks inherent in the cash flows adjusted for CGU specific risk.

8.1 Orthopaedics CGU
The cash flows used in the value-in-use calculation for the Orthopaedics CGU, which includes the Reconstruction and Trauma
businesses, reflects management’s distinctive orthopaedic reconstruction strategy, which combines cutting-edge innovation,
disruptive business models and a strong Emerging Markets platform to drive our performance.

The headroom for the Orthopaedics CGU has increased from $0.6bn in the prior year to $1.2bn in the current year, primarily due to
higher revenue growth and expected margin improvement thereon. Revenue is expected to grow above market growth rates due to
new product launches and improved commercial execution. The trading profit margin is expected to grow over the five-year period
as a result of revenue growth as well as productivity and efficiency improvements related to the 12-Point Plan. The average growth
rate used to extrapolate the cash flows beyond the five-year period (2022: five-year period) in calculating the terminal value is 2.0%
(2022: 2.0%). The pre-tax discount rate used in the Orthopaedics CGU value-in-use calculation reflects the geographical mix and is
10.8% (2022: 10.1%).

8.2 Sports Medicine CGU
The cash flows used in the value-in-use calculation for the Sports Medicine CGU reflects growth rates and cash flows consistent with
management’s strategy to maintain growth in Sports Medicine.

The weighted average growth rate used to extrapolate the cash flows beyond the five-year period (2022: five-year period) in calculating
the terminal value is 2.0% (2022: 2.0%). The pre-tax discount rate used in the Sports Medicine CGU value-in-use calculation reflects the
geographical mix of the revenues and is 10.8% (2022: 10.1%).

8.3 ENT CGU
The cash flow used in the value-in-use calculation for the ENT CGU reflects growth rates and cash flows consistent with
management’s strategy.

The weighted average growth rate used to extrapolate the cash flows beyond the five-year period in calculating the terminal value
is 2.0%. The pre-tax discount rate used in the ENT CGU value-in-use calculation reflects the geographical mix of the revenues and is
10.8%.

8.4 Advanced Wound Management CGU
The aggregated Advanced Wound Management CGU comprises the Advanced Wound Care & Devices and Bioactives CGUs.

In performing the value-in-use calculation for this combined CGU, management considered the Group’s focus across the wound
product, focusing on widening access to the customer, the higher added value sectors of healing chronic wounds and tissue repair using
bioactives, and by continuing to improve efficiency.

The weighted average growth rate used to extrapolate the cash flows beyond the five-year period (2022: five-year period) in calculating
the terminal value is 2.0% (2022: 2.0%). The pre tax discount rate used in the Advanced Wound Management CGU value-in-use
calculation reflects the geographical mix and industry sector and is 10.8% (2022: 10.1%).

194

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

8.5 Sensitivity to changes in assumptions used in value-in-use calculations
Management have performed a sensitivity analysis of the value-in-use calculations for the identified CGUs and there was no impact
on the reported amounts of goodwill as a result of this review for the Sports Medicine, ENT and Advanced Wound Management CGUs.
Management do not believe a reasonably possible change in assumptions used for the Orthopaedics CGU value-in-use, other than
trading profit margin, could result in a material impairment. Management’s consideration of this sensitivity is set out below:

Trading profit margin – management has considered the impact of a decrease in the trading profit margin. This sensitivity analysis
shows that for the recoverable amount of the Orthopaedics CGU to be less than its carrying value, the terminal period and year 5
trading profit margin would have to decrease by more than 550 basis points.

9 Intangible assets

Accounting policy
Intangible assets
Intangible assets acquired separately from a business combination (including purchased patents, know-how, trademarks, licences
and distribution rights) are initially measured at cost. The cost of intangible assets acquired in a material business combination
(referred to as acquisition intangibles) is the fair value as at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any accumulated impairment losses. All intangible assets are amortised on a
straight-line basis over their estimated useful economic lives. The estimated useful economic life of software ranges between three
and seven years. The estimated useful economic life of technology assets ranges between 6–20 years, product-related assets ranges
between 2–20 years, and customer and distribution assets ranges between 2–14 years. Internally-generated intangible assets are
expensed in the income statement as incurred. Purchased computer software and certain costs of information technology projects
are capitalised as intangible assets. Software that is integral to computer hardware is capitalised as plant and equipment.

Impairment of intangible assets
The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate the carrying
value may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the CGU to which it belongs. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value
less costs to sell and its value-in-use. In assessing value-in-use, its estimated future cash flow is discounted to its present value using
a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset.

In carrying out impairment reviews of intangible assets, a number of significant assumptions have to be made when preparing cash
flow projections. These include the future rate of market growth, discount rates, the market demand for the products acquired,
the future profitability of acquired businesses or products, levels of reimbursement and success in obtaining regulatory approvals.
If actual results should differ, or changes in expectations should arise, impairment charges may be required which would adversely
impact operating results.

Smith+Nephew Annual Report 2023

195

Group financial statements continued
Notes to the Group accounts continued

9 Intangible assets continued

Cost
At 1 January 2022
Exchange adjustment
Acquisitions
Additions
Disposals
Impairment
Transfers
At 31 December 2022
Exchange adjustment
Additions
Disposals
Transfers
At 31 December 2023
Amortisation and impairment
At 1 January 2022
Exchange adjustment
Charge for the year
Impairment
Disposals
At 31 December 2022
Exchange adjustment
Charge for the year
Impairment
Disposals
At 31 December 2023
Net book amounts
At 31 December 2023
At 31 December 2022

Notes

Technology
$ million

Product-
related
$ million

Customer and
distribution-
related
$ million

Assets
in course of
construction
$ million

Software
$ million

Total
$ million

588
(6)
–
–
–
–
–
582
4
–
(1)
(3)
582

180
(2)
46
4
–
228
2
46
–
–
276

306
354

2,206
(21)
44
3
–
–
–
2,232
36
2
(7)
10
2,273

1,482
(19)
123
28
–
1,614
36
121
37
(7)
1,801

472
618

231
(2)
–
7
(1)
–
–
235
(1)
2
–
–
236

145
(2)
17
–
–
160
–
16
–
–
176

60
75

491
(14)
–
32
(5)
–
4
508
5
36
(4)
2
547

379
(8)
43
6
(5)
415
4
38
–
(4)
453

94
93

68
(2)
–
35
–
(1)
(4)
96
4
64
–
14
178

–
–
–
–
–
–
–
–
–
–
–

178
96

3,584
(45)
44
77
(6)
(1)
–
3,653
48
104
(12)
23
3,816

2,186
(31)
229
38
(5)
2,417
42
221
37
(11)
2,706

1,110
1,236

Transfers into software and assets in course of construction includes $23m (2022: $nil) of software transferred from property,
plant and equipment. Group capital expenditure relating to software contracted but not provided for amounted to $7m (2022: $7m).

Amortisation and impairment of acquisition intangibles is set out below:

Technology
Product-related
Customer and distribution-related
Total

2023
$ million
46
150
11
207

2022
$ million
51
142
12
205

In 2023, the Group impaired $37m of Engage’s intangible assets as a result of the voluntary product discontinuation. In 2022,
$32m of impairment charges were booked in relation to immaterial product assets in acquisition intangibles.

196

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Management have assessed the acquisition intangible assets held by the Group to identify any indicators of impairment as of
September 2023. These were updated during December to take into account any significant events that occurred between September
and December. Where an impairment indicator has arisen, impairment reviews have been undertaken by comparing the expected
recoverable value of assets to the carrying value of assets.

The table below provides further detail on the largest intangible assets and their remaining amortisation period:

Intangibles acquired as part of the ArthroCare acquisition
Intangibles acquired as part of the Osiris acquisition
Intangibles acquired as part of the Healthpoint acquisition

10 Investments

Carrying value

$ million
257
171
143

Remaining
amortisation
period
10 years
1–5 years
4 years

Accounting policy
Investments, other than those related to associates, are initially recorded at fair value plus any directly attributable transaction costs
on the trade date. The Group has investments in unquoted entities and an entity that holds mainly unquoted equity securities, which
by their nature have no fixed maturity date or coupon rate. These investments are classed as fair value through profit or loss. The fair
value of these investments is based on the underlying fair value of the equity securities: marketable securities are valued by reference
to closing prices in the market; non-marketable securities are estimated considering factors including the purchase price; prices of
recent significant private placements of securities of the same issuer; and estimates of liquidation value. Changes in fair value based
on externally observable valuation events are recognised in profit or loss.

At 1 January
Additions
Fair value remeasurement
At 31 December

11 Investments in associates

2023
$ million

12
–
(4)
8

2022
$ million
10
2
–
12

Accounting policy
Investments in associates, being those entities over which the Group has a significant influence and which is neither a subsidiary
nor a joint venture, are accounted for using the equity method, with the Group recording its share of the associates’ profit and loss
and other comprehensive income. The Group’s share of associates’ profit or loss is included in one separate income statement line
and is calculated after deduction of their respective taxes.

The carrying amounts of investments in associates are reviewed for impairment as at the balance sheet date. For the purposes
of impairment testing, the recoverable amounts of these investments would be based on their observable market value.
Any impairment loss is subsequently reversed only to the extent that the recoverable amounts of the investments increase.

At 31 December 2023, the Group holds 27.96% (2022: 28.3%) of Bioventus Inc. (Bioventus) which is the holding company of
Bioventus LLC. The decrease in the Group’s holding between 2023 and 2022 was because of the exercise of Bioventus employee share
options. The company’s headquarters is located in Durham, North Carolina, US, and its medical product development is focused around
active healing therapies and the surgical performance of orthobiologics. The active healing therapies product line supports accelerated
and more complete healing of bone fractures, and treats the chronic pain associated with osteoarthritis.

The loss after taxation recognised in the income statement relating to Bioventus was $30m (2022: $141m loss) which comprises
the Group’s share of loss of $30m (2022: $32m loss), and an impairment loss of $nil (2022: $109m). The balance sheet carrying value
relating to Bioventus is $16m (2022: $46m). The Group’s ability to recover the value of its investment is dependent upon the ongoing
clinical and commercial success of these products.

The Group did not identify any impairment indicator for Bioventus as part of 2023 impairment assessment. In 2022, Bioventus’ trading
share price decreased significantly and the company disclosed a substantial doubt about their ability to continue as a going concern.
Given these impairment indicators, management recorded an impairment loss of $109m in 2022.

Smith+Nephew Annual Report 2023

197

Group financial statements continued
Notes to the Group accounts continued

11 Investments in associates continued
The amounts recognised in the balance sheet and income statement for associates are as follows:

Balance sheet
Income statement loss
Impairment of interest in associate

2023
$ million
16
(30)
–

2022
$ million
46
(32)
(109)

Summarised financial information for significant associates
Set out below is the summarised financial information for Bioventus, adjusted for differences with Group accounting policies. For the
2023 financial year, full-year information for Bioventus has not been released at the date of approval of these financial statements and
is market sensitive given Bioventus is a publicly traded company. Accordingly, the summary financial information for 2023 is presented
for a nine-month period, with adjustments made for any significant transactions or events which occur in the fourth quarter.

Summarised statement of comprehensive income
Revenue
Attributable loss for the year
Group adjustments1
Total comprehensive loss
Group share of loss for the year at 27.96% (2022: 28.3%)

Summarised balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net equity attributable to owners
Group’s share of net assets at 27.96% (2022: 28.3%)
Group adjustments1,2
Impairment loss
Group’s carrying amount of investment at 27.96% (2022: 28.3%)

2023
$ million

2022
$ million

377
(152)
46
(106)
(30)

386
(129)
17
(112)
(32)

2023
$ million

2022
$ million

562
249
(424)
(160)
227
227
64
(48)
–
16

1,128
271
(730)
(288)
381
381
108
47
(109)
46

1 Group adjustments include adjustments to align with Group policy.
2

In 2023, Group adjustments also include impairment loss of share in associates of $109m from 2022.

The investment in Bioventus had a fair value less costs of disposal of $93m as at 31 December 2023.

During the year, the Group received a $nil (2022: $1m) cash distribution from its associates.

At 31 December 2023, the Group held equity investments in two other associates (2022: two) with a carrying value of $nil (2022: $nil).

198

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

12 Inventories

Accounting policy
Finished goods and work-in-progress are valued at factory cost, including appropriate overheads, on a first-in first-out basis.
Raw materials and bought-in finished goods are valued at purchase price. All inventories are reduced to net realisable value where
lower than cost. Inventory acquired as part of a business acquisition is valued at selling price less costs to sell and a profit allowance
for selling efforts.

Orthopaedic instruments are generally not sold but provided to customers and distributors for use in surgery. They are recorded
as inventory until they are deployed at which point they are transferred to plant and equipment and depreciated over their useful
economic lives of between three and seven years.

A feature of the orthopaedic business is the high level of product inventory required, some of which is located at customer premises
and is available for customers’ immediate use (referred to as consignment inventory). Complete sets of product, including large and
small sizes, have to be made available in this way. These outer sizes are used less frequently than standard sizes and towards the
end of the product life cycle are inevitably in excess of requirements. Adjustments to carrying value are therefore required to be
made to orthopaedic inventory to anticipate this situation. These adjustments are calculated in accordance with a formula based on
levels of inventory compared with historical or forecast usage. This formula is applied on an individual product line basis and is first
applied when a product group has been on the market for two years. This method of calculation is considered appropriate based
on experience but it involves management judgements on effectiveness of inventory deployment, length of product lives, phase-out
of old products and efficiency of manufacturing planning systems.

Raw materials and consumables
Work-in-progress
Finished goods and goods for resale

2023
$ million
503
60
1,832
2,395

2022
$ million
474
78
1,653
2,205

Management have not changed their policy for calculating the provision since 31 December 2022, nor is a change in the key assumptions
underlying the methodology expected in the next 12 months. As a result of increased inventory levels, the provision has increased
from $504m at 31 December 2022 to $544m at 31 December 2023. The provision, however, increased as a result of foreign exchange
movements of $3m. The determination of the estimate of excess and obsolete inventory is a critical accounting estimate and includes
assumptions on the future usage of all different items of finished goods. The provision for excess and obsolete inventory is not considered
to have a range of potential outcomes that is significantly different to the $544m at 31 December 2023 in the next 12 months.
The provision has a high degree of estimation uncertainty given the range of products and sizes, with a potential range of reasonable
outcomes that could be material over the longer term.

The cost of inventories recognised as an expense and included in cost of goods sold amounted to $1,459m (2022: $1,302m, 2021:
$1,407m). In addition, $106m was recognised as an expense within cost of goods sold resulting from inventory write-offs and provision
increases (2022: $117m, 2021: $105m).

In 2023, management wrote off $21m related to Engage’s inventory as a result of the voluntary product discontinuation.

Notwithstanding inventory acquired within acquisitions, no inventory is carried at fair value less costs to sell in any year.

Smith+Nephew Annual Report 2023

199

Group financial statements continued
Notes to the Group accounts continued

13 Trade and other receivables

Accounting policy
Trade and other receivables are carried at amortised cost, less any allowances for uncollectable amounts. They are included
in current assets, except for maturities greater than 12 months after the balance sheet date when they are classified as
non-current assets.

The Group manages credit risk through credit limits which require authorisation commensurate with the size of the limit and
which are regularly reviewed. Credit limit decisions are made based on available financial information and the business case.
Significant receivables are regularly reviewed and monitored at Group level. The Group has no significant concentration of credit risk,
with exposure spread over a large number of customers and geographies. Furthermore, the Group’s principal customers are backed
by government and public or private medical insurance funding, which historically represent a lower risk of default. The maximum
exposure to credit risk at the reporting date is the fair value of each class of receivable. The Group does not hold any collateral as
security. Allowance losses are calculated by reviewing lifetime expected credit losses using historic and forward-looking data on
credit risk. The Group performed the calculation of expected credit loss rates separately for customer groups which were segmented
based on common risk characteristics such as credit risk grade and type of customer (such as government and non-government).

Trade and other receivables due within one year
Trade receivables
Less: loss allowance
Trade receivables – net
Derivatives – forward foreign exchange, currency swaps and interest rate contracts
Other receivables
Prepayments

Due after more than one year
Other non-current assets

2023
$ million

2022
$ million

1,104
(45)
1,059
27
122
92
1,300

18
1,318

1,076
(49)
1,027
47
114
76
1,264

12
1,276

Other non-current assets primarily relate to long-term prepayments and in 2023 interest rate contracts. Management considers
that the carrying amount of trade and other receivables approximates the fair value. Allowance losses are calculated by reviewing
lifetime expected credit losses using historic and forward-looking data on credit risk. The loss allowance relating to other receivables
is de minimis.

The loss allowance expense for the year was $3m (2022: $4m, 2021: $3m).

The following table provides information about the ageing of and expected credit losses for trade receivables:

Not past due
Past due not more than 3 months
Past due more than 3 months
Past due more than 6 months

Loss allowance
Trade receivables – net

2023 Weighted
average loss
rate
%
-0.1%
-0.6%
-3.9%
-48.2%

2023 Loss
allowance
$ million
(1)
(1)
(2)
(41)
(45)

2023 Gross
carrying
amount
$ million
788
180
51
85
1,104
(45)
1,059

2022 Gross
carrying
amount
$ million
610
228
97
141
1,076
(49)
1,027

200

Smith+Nephew Annual Report 2023

The Group’s expected credit loss accounting policy includes guidance on how the expected credit loss percentages should be
determined; it does not include present limits as the customer groups and risk profiles are not consistent across all of our markets.
Each market determines their own percentages based on historic experience and future expectations, and in line with the
general guidance in the Group’s policy.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Movements in the loss allowance were as follows:

At 1 January
Exchange adjustment
Net receivables provided during the year
Utilisation of provision
At 31 December

Trade receivables include amounts denominated in the following major currencies:

US Dollar
Sterling
Euro
Other
Trade receivables – net

14 Trade and other payables

Trade and other payables due within one year
Trade and other payables
Derivatives – forward foreign exchange, currency swaps and interest rate contracts
Acquisition consideration

Other payables due after one year
Acquisition consideration
Derivatives – forward foreign exchange, currency swaps and interest rate contracts
Other payables

2023
$ million
49
1
3
(8)
45

2023
$ million
506
39
224
290
1,059

2022
$ million
57
(3)
4
(9)
49

2022
$ million
465
37
215
310
1,027

2023
$ million

2022
$ million

1,016
28
11
1,055

25
–
10
35

1,029
43
26
1,098

66
13
11
90

The acquisition consideration includes $32m (2022: $78m) contingent upon future events.

The acquisition consideration due after more than one year is expected to be payable as follows: $9m in 2025, $2m in 2026
and $14m in 2027 (2022: $29m in 2024, $35m in 2025, $2m in 2026).

Smith+Nephew Annual Report 2023

201

Group financial statements continued
Group financial statements continued
Notes to the Group accounts continued

15 Cash and borrowings
15.1 Net debt
Net debt comprises borrowings and credit balances on currency swaps less cash at bank.

Bank overdrafts, borrowings and loans due within one year
Corporate bond
Private placement notes
Borrowings
Cash at bank

Credit balance on derivatives – currency swaps

(Debit)/credit balance on derivatives – interest rate swaps
Net debt
Non-current lease liabilities
Current lease liabilities
Net debt including lease liabilities

Borrowings are repayable as follows:

2023
$ million
710
1,550
625
2,885
(302)

(7)
2,577
144
55
2,776

At 31 December 2023
Bank loans
Bank overdrafts
Corporate bond
Private placement notes
Lease liabilities1

At 31 December 2022
Bank overdrafts
Corporate bond
Private placement notes
Lease liabilities1

Within
one year or
on demand
$ million

Between
one and
two years
$ million

Between
two and
three years
$ million

Between
three and
four years
$ million

Between
four and
five years
$ million

After
five years
$ million

303
2
–
405
55
765

6
–
105
49
160

–
–
–
–
44
44

–
–
430
42
472

–
–
–
75
33
108

–
–
–
32
32

–
–
–
140
25
165

–
–
75
24
99

–
–
–
60
18
78

–
–
140
18
158

–
–
1,550
350
35
1,935

–
1,510
410
45
1,965

1 The lease liabilities presented above of $210m (2022: $210m) are on an undiscounted basis. The lease liabilities on a discounted basis, as outlined above, are $199m (2022: $196m).

2022
$ million
111
1,510
1,055
2,676
(350)

–

13
2,339
147
49
2,535

Total
$ million

303
2
1,550
1,030
210
3,095

6
1,510
1,160
210
2,886

202

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

15.2 Liquidity risk exposures
The Board has established a set of policies to manage funding and currency risks. The Group only uses derivative financial instruments
to manage the financial risks associated with underlying business activities and their financing. Liquidity risk is the risk that the Group is
not able to settle or meet its obligations on time or at a reasonable price. The Group’s policy is to ensure that there is sufficient funding
and facilities in place to meet foreseeable borrowing requirements. The Group manages and monitors liquidity risk through regular
reporting of current cash and borrowing balances and periodic preparation and review of short-and medium-term cash forecasts,
having regard to the maturities of investments and borrowing facilities. The Group has available committed facilities of $3.6bn
(2022: $3.7bn). During 2022, the Group issued its debut EUR Corporate Bond, in the form of €500m (before expenses and underwriting
discounts) of notes bearing an interest rate of 4.565% repayable in 2029. In 2023, the Group repaid $130m of private placement debt.

The interest payable on borrowings under committed facilities is either at fixed or floating rates. Euro floating rates are typically
based on EURIBOR and US Dollar rates are typically based on the Term Secured Overnight Financing Rate (Term SOFR). The Company is
subject to financial covenants under its private placement agreements. 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 31 December 2023, 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.

The Group refinanced its $1bn Revolving Credit Facility (“RCF”) in Q4 2023. This extends the facility maturity to 2028, with options to
extend the maturity to 2030.

The Group’s committed facilities at 31 December 2023 are:

Facility

$100 million 3.89% Senior Notes
$305 million 3.36% Senior Notes
$75 million 3.99% Senior Notes
$140 million 2.83% Senior Notes
$60 million 2.90% Senior Notes
$1.0 billion syndicated revolving credit facility
$100 million 2.97% Senior Notes
€500 million 4.565% EUR Corporate Bond
$95 million 2.99% Senior Notes
$1.0 billion 2.032% USD Corporate Bond
$155 million 3.09% Senior Notes

Date due

January 2024
November 2024
January 2026
June 2027
June 2028
October 2028
June 2029
October 2029
June 2030
October 2030
June 2032

Smith+Nephew Annual Report 2023

203

Group financial statements continued
Notes to the Group accounts continued

15 Cash and borrowings continued
15.3 Year end financial liabilities by contractual maturity
The table below analyses the Group’s year end financial liabilities by contractual maturity date, including contractual interest payments
and excluding the impact of netting arrangements:

At 31 December 2023
Non-derivative financial liabilities:

Bank overdrafts and loans
Corporate bond
Trade and other payables
Private placement notes
Acquisition consideration

Derivative financial instruments:

Currency swaps/forward foreign exchange contracts – outflow
Currency swaps/forward foreign exchange contracts – inflow

At 31 December 2022
Non-derivative financial liabilities:

Bank overdrafts and loans
Corporate bond
Trade and other payables
Private placement notes
Acquisition consideration

Derivative financial instruments:

Currency swaps/forward foreign exchange contracts – outflow
Currency swaps/forward foreign exchange contracts – inflow

Within one
year or on
demand
$ million

Between
one and
two years
$ million

Between
two and
five years
$ million

After
five years
$ million

Total
$ million

305
53
1,016
434
11

2,913
(2,912)
1,820

6
37
1,029
143
26

2,598
(2,601)
1,238

–
53
–
19
9

–
–
81

–
37
–
461
31

–
–
529

–
158
–
317
2

–
–
477

–
111
–
265
39

–
–
415

–
1,614
–
373
15

–
–
2,002

–
1,620
–
444
–

–
–
2,064

305
1,878
1,016
1,143
37

2,913
(2,912)
4,380

6
1,805
1,029
1,313
96

2,598
(2,601)
4,246

The amounts in the tables above are undiscounted cash flows, which differ from the amounts included in the balance sheet where the
underlying cash flows have been discounted.

15.4 Liquidity and capital resources
The Group’s policy is to ensure that it has sufficient funding and facilities to meet foreseeable borrowing requirements.

At 31 December 2023, the Group held $300m (2022: $344m, 2021: $1,285m) in cash net of bank overdrafts. The Group had committed
facilities available of $3.6bn at 31 December 2023 of which $2.9bn was drawn.

The principal variations in the Group’s borrowing requirements result from the timing of dividend payments, acquisitions and disposals
of businesses, timing of capital expenditure and working capital fluctuations. Smith+Nephew believes that its capital expenditure needs
and its working capital funding for 2024, as well as its other known or expected commitments or liabilities, can be met from its existing
resources and facilities. The Group’s net debt including leases increased from $2.5bn at the beginning of 2023 to $2.8bn at the end
of 2023, representing an overall increase of $0.3bn.

204

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

16 Financial instruments and risk management

Accounting policy
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value at subsequent balance sheet dates. Changes in the fair value of derivative financial
instruments that are designated and effective as cash flow hedges of forecast third-party transactions are recognised in other
comprehensive income until the associated asset or liability is recognised. Amounts taken to other comprehensive income are
transferred to the income statement in the period in which the hedged transaction affects profit and loss. Where the hedged item
is the cost of a non-financial asset, the amounts taken to other comprehensive income are transferred to the initial carrying value
of the asset.

On adoption of IFRS 9 on 1 January 2018, the Group elected to continue to apply the hedge accounting guidance in IAS 39 Financial
Instruments: Recognition and Measurement. Changes in the fair values of hedging instruments that are designated and effective as
net investment hedges are matched in other comprehensive income against changes in value of the related net assets. Interest rate
derivatives transacted to fix interest rates on floating rate borrowings are accounted for as cash flow hedges and changes in the
fair values resulting from changes in market interest rates are recognised in other comprehensive income. Amounts taken to other
comprehensive income are transferred to the income statement when the hedged transaction affects profit and loss. Interest rate
derivatives transacted to convert fixed rate borrowings into floating rate borrowings are accounted for as fair value hedges and
changes in the fair values resulting from changes in market interest rates are recognised in the income statement. Any ineffectiveness
on hedging instruments and changes in the fair value of derivative financial instruments that do not qualify for hedge accounting
are recognised in the income statement within other finance costs as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in other comprehensive
income is retained there until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in other comprehensive income is transferred to the income statement.

16.1 Foreign exchange risk management
The Group operates in many countries and as a consequence has transactional and translational foreign exchange exposure. It is the
Group’s policy for operating units not to hold material unhedged monetary assets or liabilities other than in their functional currencies.

Foreign exchange variations affect trading results in two ways. Firstly, on translation of overseas sales and profits into US Dollars
and secondly, transactional exposures arising where some, or all of the costs of sale are incurred in a different currency from the sale.
The principal transactional exposures arise as the proportion of costs in US Dollars, Sterling and Swiss Francs exceed the proportion
of sales in each of these currencies and correspondingly the proportion of sales in Euros exceeds the proportion of costs in Euros.

The impact of currency movements on the cost of purchases is partly mitigated by the use of forward foreign exchange contracts.
The Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge forecast third-party trading cash flows
up to one year. When a commitment is entered into, forward foreign exchange contracts are normally used to increase the hedge
to 100% of the exposure. Cash flows relating to cash flow hedges are expected to occur within 12 months of inception and profits
and losses on hedges are expected to enter into the determination of profit (within cost of goods sold) within a further 12-month
period. The principal currencies hedged by forward foreign exchange contracts are US Dollars, Euros, Sterling and Singapore Dollars.
At 31 December 2023, the Group had contracted to exchange within one year the equivalent of $2.4bn (2022: $2.2bn). Based on
the Group’s net borrowings as at 31 December 2023, if the US Dollar were to weaken against all currencies by 10%, the Group’s
net borrowings would increase by $37m (2022: $41m) principally due to the Euro-denominated term loans.

Smith+Nephew Annual Report 2023

205

Group financial statements continued
Notes to the Group accounts continued

16 Financial instruments and risk management continued
If the US Dollar were to weaken by 10% against all other currencies, then the fair value of the forward foreign exchange contracts as
at 31 December 2023 would have been $67m lower (2022: $50m lower). Similarly, if the Euro were to weaken by 10% against all other
currencies, then the fair value of the forward foreign exchange contracts as at 31 December 2023 would have been $38m higher
(2022: $35m higher). Movements in the fair value of forward foreign exchange contracts would be recognised in other comprehensive
income or in the income statement.

A 10% strengthening of the US Dollar or Euro against all other currencies at 31 December 2023 would have had the equal but opposite
effect to the amounts shown above, on the basis that all other variables remain constant.

The Group’s policy is to hedge all actual foreign exchange exposures and the Group’s forward foreign exchange contracts are designated
as cash flow hedges. The net impact of transaction-related foreign exchange on the income statement from a movement in exchange
rates on the value of forward foreign exchange contracts is not significant. In addition, the movements in the fair value of other financial
instruments used for hedging such as currency swaps for which hedge accounting is not applied offset movements in the values of
assets and liabilities and are recognised through the income statement. Hedge ineffectiveness is caused by actual cash flows in foreign
currencies varying from forecast cash flows.

16.2 Interest rate risk management
The Group is exposed to interest rate risk on cash, borrowings and certain currency and interest rate swaps which are at floating
rates. When required the Group uses interest rate derivatives to meet its objective of protecting borrowing costs within parameters
set by the Board. These interest rate derivatives are accounted for as cash flow hedges and, as such, changes in fair value resulting
from changes in market interest rates are recognised in other comprehensive income and accumulated in the hedging reserve, with
the fair value of the interest rate derivatives recorded in the balance sheet. Additionally, the Group uses interest rate swaps to reduce
the overall level of fixed rate debt, within parameters set by the Board. When used in this way, interest rate derivatives are accounted
for as fair value hedges. The fair value movement of the derivative is offset in the income statement against the fair value movement
in the underlying fixed rate debt.

In 2022, the Group entered into a new €500m fixed to floating interest rate swap.

Based on the Group’s gross borrowings and cash as at 31 December 2023, if interest rates were to increase by 100 basis points in all
currencies, then the annual net interest charge would increase by $5m (2022: $4m). A decrease in interest rates by 100 basis points
in all currencies would have an equal but opposite effect to the amounts shown above.

16.3 Credit risk management
The Group limits exposure to credit risk on counterparties used for financial instruments through a system of internal credit limits.
The financial exposure of a counterparty is determined as the total of cash and deposits, plus the risk on derivative instruments,
assessed as the fair value of the instrument plus a risk element based on the nominal value and the historic volatility of the market
value of the instrument. The Group does not anticipate non-performance of counterparties and believes it is not subject to material
concentration of credit risk as the Group operates within a policy of counterparty limits designed to reduce exposure to any
single counterparty.

The maximum credit risk exposure on derivatives at 31 December 2023 was $27m (2022: $47m), being the total debit fair values
on forward foreign exchange contracts and currency swaps. The maximum credit risk exposure on cash at bank at 31 December
2023 was $302m (2022: $350m). The Group’s exposure to credit risk on cash is mitigated as the amounts are held in a wide number
of high credit quality financial institutions. Credit risk on trade receivables is detailed in Note 13.

206

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The amounts relating to items designated as hedging instruments were as follows:

Nominal
amount
million

Carrying
amount
assets
$ million

Carrying
amount
liabilities
$ million

Changes in
fair value
in OCI
$ million

Hedge
ineffectiveness
in profit or loss
$ million

Amounts reclassified
from hedging reserve
to profit or loss
$ million

Line item in
profit or loss

At 31 December 2023
Foreign currency risk
Forward exchange contracts1
Interest rate risk
Interest rate swaps2
At 31 December 2022
Foreign currency risk
Forward exchange contracts1
Interest rate risk
Interest rate swaps2

2,913

(28)

(500)

–

(3)

–

2,598

(43)

(13)

(500)

–

(13)

–

(25)

Cash flow hedges

–

Fair value hedge

(37)

Cash flow hedges

–

Fair value hedge

1 Presented in Trade and other receivables and Trade and other payables on the Balance Sheet. The nominal amount is in $ million.
2 Presented in Non-current other receivables in 2023 and in Non-current other payables in 2022 on the Balance Sheet. The nominal amount is in € million.

16.4 Net investment hedge
Part of the Group’s net investment in its Euro subsidiaries is hedged by €500m ($552m equivalent) of our debut EUR Corporate Bond
which mitigates the foreign currency risk arising from the subsidiaries’ net assets. The Bond is designated as a hedging instrument for
the changes in the value of the net investment that is attributable to changes in the EUR/USD spot rate.

To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the hedged item
by comparing changes in the carrying amount of the debt that is attributable to a change in the spot rate with changes in the investment
in the foreign operation due to movements in the spot rate (the offset method). The Group’s policy is to hedge the net investment only
to the extent of the debt principal. Hedge ineffectiveness occurs if the value of the Euro-denominated Corporate Bond exceeds the
value of the Euro subsidiaries.

16.5 Currency and interest rate profile of interest bearing liabilities and assets
Short-term receivables and payables are excluded from the following disclosures.

Currency and interest rate profile of interest bearing liabilities:

At 31 December 2023
US Dollar
Other
Total interest bearing liabilities
At 31 December 2022
US Dollar
Other
Total interest bearing liabilities

Gross
borrowings
$ million

Currency
swaps
$ million

Interest
rate
swaps
$ million

Total
liabilities
$ million

Floating
rate liabilities
$ million

Fixed rate
liabilities
$ million

(2,324)
(561)
(2,885)

(2,159)
(517)
(2,676)

(329)
(219)
(548)

(163)
(206)
(369)

–
–
–

–
(13)
(13)

(2,653)
(780)
(3,433)

(2,322)
(736)
(3,058)

(628)
(224)
(852)

(193)
(220)
(413)

(2,025)
(556)
(2,581)

(2,129)
(516)
(2,645)

Fixed rate liabilities
Weighted
average
time
for which
rate is fixed
Years

Weighted
average
interest rate
%

2.7

5.1

2.7

5.9

In 2023, the Group also had liabilities due for deferred and contingent acquisition consideration (denominated in US Dollars, Swiss Francs
and Euros) totalling $36m (2022: $92m, 2021: $91m) on which no interest was payable (see Note 14). There were no other significant
interest bearing or non-interest bearing financial liabilities. Euro floating rates are typically based on EURIBOR and US Dollar rates are
typically based on Term SOFR. The weighted average interest rate on floating rate borrowings as at 31 December 2023 was almost 6%
(2022: over than 3%).

Smith+Nephew Annual Report 2023

207

Group financial statements continued
Notes to the Group accounts continued

16 Financial instruments and risk management continued
Currency and interest rate profile of interest bearing assets:

At 31 December 2023
US Dollar
Other
Total interest bearing assets
At 31 December 2022
US Dollar
Other
Total interest bearing assets

Cash
at bank
$ million

Currency
swaps
$ million

Interest rate
swaps
$ million

Total assets
$ million

Floating
rate assets
$ million

Fixed
rate assets
$ million

98
204
302

207
143
350

217
331
548

205
164
369

–
7
7

–
–
–

315
542
857

412
307
719

315
542
857

412
307
719

–
–
–

Floating rates on assets are typically based on the short-term deposit rates relevant to the currency concerned.

16.6 Fair value of financial assets and liabilities

Accounting policy
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial assets
and liabilities and non-financial assets acquired in a business combination (see Note 21).

When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values
are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices
included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices);
and Level 3: inputs for the asset or liability that are not based on observable data (unobservable inputs).

The Group recognises transfers between the levels of the fair value hierarchy at the end of the reporting period during which
the change has occurred.

There has been no change in the classification of financial assets and liabilities, the method and assumptions used in determining fair
value and the categorisation of financial assets and liabilities within the fair value hierarchy from those disclosed in the Annual Report
for the year ended 31 December 2022.

The Group enters into derivative financial instruments with financial institutions with investment grade credit ratings. The fair value
of forward foreign exchange contracts is calculated by reference to quoted market forward exchange rates for contracts with similar
maturity profiles. The fair value of currency swaps is determined by reference to quoted market spot rates. As a result, foreign forward
exchange contracts and currency swaps are classified as Level 2 within the fair value hierarchy. The changes in counterparty credit
risk had no material effect on the hedge effectiveness for derivatives designated in hedge relationships and other financial instruments
recognised at fair value. 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. There were no transfers between Levels 1, 2 and 3 during 2023 and 2022. 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 and October
2022 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.

208

Smith+Nephew Annual Report 2023

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the
fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

At 31 December 2023
Financial assets measured
at fair value
Forward foreign exchange contracts
Investments
Contingent consideration receivable
Interest rate swaps
Currency swaps

Financial liabilities measured
at fair value
Acquisition consideration
Forward foreign exchange contracts
Currency swaps

Financial assets not measured
at fair value
Trade and other receivables
Cash at bank

Financial liabilities not measured
at fair value
Acquisition consideration
Bank overdrafts

Bank loans

Corporate bond not in a hedge
relationship
Corporate bond in a hedge
relationship
Private placement debt not in a
hedge relationship
Trade and other payables

Fair value –
hedging
instruments
$ million

Amortised
cost
$ million

Fair value
through
OCI
$ million

Fair value
through
profit
or loss
$ million

Other
financial
liabilities
$ million

Carrying
amount

Fair value

Total
$ million

Level 2
$ million

Level 3
$ million

Total
$ million

25
–
–
7
2

–
8
18
–
–

25
8
18
7
2

–
(25)
(3)

(32)
–
–

(32)
(25)
(3)

25
–
–
7
–
32

–
(25)
–
(25)

–
–
–
–
–
–

–
–
–
–

1,163
–
1,163

–
302
302

–
–

–

–
–
–

–
–

–

–
–
–

–
–
–
–
2
2

–
–
(3)
(3)

–
–
–

–
–

–

–
–
–

–
8
18
–
–
26

(32)
–
–
(32)

–
–
–

–
–

–

–
–
–

–
–
–
–
–
–

–
–
–
–

–
–
–

25
8
18
7
2
60

(32)
(25)
(3)
(60)

1,163
302
1,465

(4)
(2)

(303)

(995)

(555)

(1,030)
(1,026)
(3,915)

At 31 December 2023, the book value and market value of the USD corporate bond were $995m and $826m respectively (2022: $994m
and $783m), the book value and market value of the EUR Corporate bond were $555m and $585m respectively (2022: $516m and $531m).
The book value and fair value of the private placement debt were $1,030m and $959m respectively (2022: $1,160m and $987m).

Smith+Nephew Annual Report 2023

209

Group financial statements continued
Notes to the Group accounts continued

16 Financial instruments and risk management continued
During the year ended 31 December 2023, acquisition consideration decreased by $56m due to $21m of payments for acquisitions
made in prior years, and $35m of remeasurement and discount unwind. The fair value of contingent consideration is estimated
using a discounted cash flow model. The valuation model considers the present value of expected payment, discounted using a risk-
adjusted discount rate. The expected payment is determined by considering the possible scenarios, which relate to the achievement
of established milestones and targets, the amount to be paid under each scenario and the probability of each scenario. As a result,
contingent consideration is classified as Level 3 within the fair value hierarchy.

At 31 December 2022
Financial assets measured
at fair value
Forward foreign exchange contracts
Investments
Contingent consideration receivable
Currency swaps

Financial liabilities measured
at fair value
Acquisition consideration
Forward foreign exchange contracts
Interest rate swaps
Currency swaps

Financial assets not measured
at fair value
Trade and other receivables
Cash at bank

Financial liabilities not measured
at fair value
Acquisition consideration
Bank overdrafts
Corporate bond not in a hedge
relationship
Corporate bond in a hedge
relationship
Private placement debt not in a
hedge relationship
Trade and other payables

Fair value –
hedging
instruments
$ million

Amortised
cost
$ million

Fair value
through
OCI
$ million

Fair value
through
profit
or loss
$ million

Other
financial
liabilities
$ million

Total
$ million

Level 2
$ million

Level 3
$ million

Total
$ million

Carrying
amount

Fair value

46
–
–
1

–
12
18
–

–
(42)
(13)
(1)

(78)
–
–
–

46
12
18
1

(78)
(42)
(13)
(1)

46
–
–
–
46

–
(42)
(13)
–
(55)

–
–
–
–
–

1,123
–
1,123

–
350
350

–
–

–

–
–
–

–
–

–

–
–
–

–
–
–
1
1

–
–
–
(1)
(1)

–
–
–

–
–

–

–
–
–

–
12
18
–
30

(78)
–
–
–
(78)

–
–
–

–
–

–

–
–
–

–
–
–
–
–

–
–
–

46
12
18
1
77

(78)
(42)
(13)
(1)
(134)

1,123
350
1,473

(14)
(6)

(994)

(516)

(1,160)
(1,040)
(3,730)

The fair value of contingent acquisition consideration is estimated using a discounted cash flow model. The valuation model considers
the present value of risk adjusted expected payments, discounted using a risk-free 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.

210

Smith+Nephew Annual Report 2023

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 2023 and 2022 for financial instruments measured using Level 3 valuation methods are presented below:

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Investments
At 1 January
Additions
Fair value remeasurement
At 31 December

Contingent consideration receivable
At 1 January
Receipts
At 31 December

Acquisition consideration liability
At 1 January
Arising on acquisitions
Payments
Remeasurements
Discount unwind
At 31 December

17 Provisions and contingencies

2023
$ million

2022
$ million

12
–
(4)
8

18
–
18

(78)
–
13
33
–
(32)

10
2
–
12

20
(2)
18

(84)
(32)
20
19
(1)
(78)

Accounting policy
In the normal course of business the Group is involved in various legal disputes. Provisions are made for loss contingencies when it is
deemed probable that an adverse outcome will occur and the amount of the losses can be reasonably estimated. Where the Group is
the plaintiff in pursuing claims against third parties, legal and associated expenses are charged to the income statement as incurred.
The recognition of provisions for legal disputes is subject to a significant degree of estimation. In making its estimates, management
takes into account the advice of internal and external legal counsel. Provisions are reviewed regularly and amounts updated where
necessary to reflect developments in the disputes. The ultimate liability may differ from the amount provided depending on the
outcome of court proceedings or settlement negotiations or as new facts emerge. Insurance recoveries are recognised when the
inflow of benefits is virtually certain and are presented within other receivables.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower
than the unavoidable cost of meeting its obligations under the contract.

A provision for restructuring and rationalisation is recognised when the Group has approved a detailed and formal restructuring plan
and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.

Smith+Nephew Annual Report 2023

211

Group financial statements continued
Notes to the Group accounts continued

17 Provisions and contingencies continued
17.1 Provisions

At 1 January 2022
Charge to income statement
Release to income statement
Unwinding of discount
Utilised
Exchange adjustment
At 31 December 2022
Charge to income statement
Release to income statement
Unwinding of discount
Utilised
Exchange adjustment
At 31 December 2023
Provisions – due within one year
Provisions – due after one year
At 31 December 2023
Provisions – due within one year
Provisions – due after one year
At 31 December 2022

Restructuring
and
rationalisation
provisions
$ million
18
169
(2)
–
(154)
(1)
30
220
–
–
(160)
1
91
91
–
91
30
–
30

Metal-on-metal
$ million
289
19
–
7
(76)
–
239
–
(8)
5
(87)
–
149
111
38
149
165
74
239

Legal and other
provisions
$ million
50
19
(5)
–
(6)
–
58
9
(19)
–
(7)
–
41
31
10
41
48
10
58

Total
$ million
357
207
(7)
7
(236)
(1)
327
229
(27)
5
(254)
1
281
233
48
281
243
84
327

The principal elements within restructuring and rationalisation provisions relate to the Operations and Commercial Excellence
programme announced in February 2020 and the efficiency and productivity elements of the 12-Point Plan.

The Group has estimated a provision of $149m (2022: $239m) relating to the present value at 31 December 2023 of the estimated costs
to resolve all other known and anticipated metal-on-metal hip claims globally. The estimated value of the provision has been determined
using an actuarial model. Given the inherent uncertainty in assumptions including sensitivity to factors such as the number, outcome and
value of claims the actual costs may differ significantly from this estimate. A range of expected outcomes less than 55th and more than
90th percentile generated by the actuarial model would not give rise to a material adjustment. The potential for more adverse outcomes
exists and for example at the 97th percentile a charge similar to that incurred in 2019 ($121m) would be required in 2024 or thereafter.
The provision does not include any possible further insurance recoveries on these claims or legal fees associated with defending claims.

The legal and other provisions mainly relate to various other product liability and intellectual property litigation matters. The Group
carries considerable product liability insurance, and will continue to defend claims vigorously.

All provisions are expected to be substantially utilised within five years of 31 December 2023 and none are treated as
financial instruments.

212

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

17.2 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.

17.3 Legal proceedings
Product liability claims
The Group faces claims from time to time for alleged defects in its products and has on occasion recalled or withdrawn products from
the market. Such claims are endemic to the medical device industry. The Group maintains product liability insurance subject to limits
and deductibles that management believes are reasonable. All policies contain exclusions and limitations, however, and there can be
no assurance that insurance will be available or adequate to cover all claims.

This includes matters raising concerns about possible adverse effects of hip implant products with metal-on-metal (MoM) bearing
surfaces for which the Group has incurred and will continue to incur expenses to defend claims in this area.

As of December 2023, approximately 276 such claims were pending with the Group around the world. This includes approximately
48 cases associated with a Multi-district Litigation (MDL) pending in Baltimore, Maryland due to a 5 April 2017 court order consolidating
Smith+Nephew Birmingham Hip◊ Resurfacing (BHR◊) cases pending or later filed in US federal court for pre-trial proceedings. Most claims
relate to the Group’s BHR product, including its two modular metal-on-metal components: the Birmingham Hip Modular Head (BHMH)
and the optional metal liner component of the R3◊ Acetabular System (R3ML). The BHMH and R3ML are no longer on the market: the
R3ML was withdrawn in 2012 and the BHMH was phased out in 2014. In 2015, the Group ceased offering smaller sizes of the BHR and
restricted instructions for BHR use in female patients. These actions were taken to ensure that the BHR is used only in those patient
groups where it continues to demonstrate strong performance.

Through the end of 2023, entities of the Group have entered into several group, as well as individual, MoM related settlements without
admitting liability. The Group requested indemnity from its product liability insurers for most of these MoM hip implant settlements
and insurers have indemnified the Group to the limits of their respective applicable policies.

Litigation outcomes are difficult to predict and defence costs can be significant. The Group takes care to monitor the clinical evidence
relating to its products, including its metal hip implant products, to help ensure that its product offerings are designed to serve
patients’ interests.

Intellectual property disputes
The Group engages, as both plaintiff and defendant, in litigation with various competitors and others over claims of patent infringement
and other intellectual property matters. These disputes are heard in courts in the US and other jurisdictions and also before agencies
that examine patents. Outcomes are rarely certain and costs are often significant.

Arthrex asserted suture anchor patents against Smith+Nephew in 2014 and 2015 in the US District Court for the Eastern District of
Texas. In February 2017, the parties reached a settlement resulting in the dismissal of all patent litigation. Smith+Nephew agreed to pay
additional payments contingent on the outcome of patent validity proceedings pending at the US Patent & Trademark Office. In August
2019, the Court of Appeals for the Federal Circuit affirmed US Patent & Trademark Office ruling invalidating one of the asserted Arthrex
patents. In October 2019, the Court of Appeals for the Federal Circuit vacated an earlier US Patent & Trademark Office ruling invalidating
the other asserted Arthrex patent. The United States Supreme Court granted certiorari. The Supreme Court ruling allowed Arthrex to
petition the Director of the US Patent & Trademark Office to review the decision invalidating the second asserted Arthrex patent. The
US Patent & Trademark Office declined Arthrex’s rehearing request in October 2021. In May 2022, the Court of Appeals for the Federal
Circuit affirmed the US Patent & Trademark Office’s invalidity ruling and its denial of Arthrex’s rehearing request. Arthrex petitioned the
United States Supreme Court to review the US Patent & Trademark Office’s denial of Arthrex’s rehearing request. On 22 March 2023,
the US Supreme Court denied Arthrex’s cert petition and on 7 June 2023, the US Patent & Trademark Office issued an IPR certificate
officially cancelling all the claims of Arthrex’s patent.

17.4 Tax matters
At any given time the Group has unagreed years outstanding in various countries and is involved in tax audits and disputes, some of
which may take several years to resolve. Provisions are based on best estimates and management’s judgements concerning the likely
ultimate outcome of any audit or dispute. Management considers the specific circumstances of each tax position and takes external
advice, where appropriate, to assess the range of potential outcomes and estimate additional tax that may be due. The Group believes
that it has made adequate provision in respect of additional tax liabilities that may arise. See Note 5 for further details.

Smith+Nephew Annual Report 2023

213

Group financial statements continued
Notes to the Group accounts continued

18 Retirement benefit obligations

Accounting policy
The Group sponsors defined benefit plans in a number of countries. A defined benefit pension plan defines an amount of pension
benefit that an employee will receive on retirement or a minimum guaranteed return on contributions, which is dependent on various
factors such as age, years of service and final salary. The Group’s obligation is calculated separately for each plan by discounting
the estimated future benefit that employees have earned in return for their service in the current and prior periods. The fair value
of any plan assets is deducted to arrive at the net liability.

The calculation of the defined benefit obligation is performed annually by external actuaries using the projected unit credit method.
Remeasurements arising from defined benefit plans comprise actuarial gains and losses and the return on the plan assets in excess
of the discount rate net of the costs of managing the plan assets. The Group recognises these immediately in other comprehensive
income (OCI) and all other expenses, such as service cost, net interest cost, administration costs and taxes, are recognised in the
income statement.

A number of key assumptions are made when calculating the fair value of the Group’s defined benefit pension plans. These
assumptions impact the balance sheet asset and liabilities, operating profit, finance income/costs and other comprehensive income.
The most critical assumptions are the discount rate, the rate of inflation and mortality assumptions to be applied to future pension
plan liabilities. The discount rate is based on the yield at the reporting date on bonds that have a credit rating of AA, denominated
in the currency in which the benefits are expected to be paid and have a maturity profile approximately the same as the Group’s
obligations. In determining these assumptions management takes into account the advice of professional external actuaries
and benchmarks its assumptions against external data.

The Group determines the net interest expense/income on the net defined benefit liability/asset for the period by applying the
discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit
liability/asset.

The Group also operates a number of defined contribution plans. A defined contribution plan is a pension plan under which the
Group and employees pay fixed contributions to a third-party financial provider. The Group has no further payment obligations
once the contributions have been paid. Contributions are recognised as an employee benefit expense when they are due.

The Group’s retirement benefit assets/(obligations) comprise:

Funded plans:
UK Plan
US Plan
Other plans

Unfunded plans:
Other plans
Retirement healthcare

Amount recognised on the balance sheet – liability
Amount recognised on the balance sheet – asset

2023
$ million

2022
$ million

61
8
(13)
56

(65)
(10)
(19)
(88)
69

114
24
(5)
133

(52)
(10)
71
(70)
141

The Group sponsors defined benefit pension plans for its employees or former employees in 13 countries and these are established
under the laws of the relevant country. Funded plans are funded by the payment of contributions and the assets are held by separate
trust funds or insurance companies. The provision of retirement and related benefits across the Group is kept under regular review.
Employees’ retirement benefits are the subject of regular management review. The Group’s defined benefit plans provide employees
with an entitlement to benefits, payable typically either as a lump sum or annuity, or a mixture of the two. Most plans are now closed
to future accrual. The level of entitlement is typically dependent on the salary and years of service of the employee, in line with local
practices. Pension benefits are generally limited to 66.7% of final salary in key markets.

214

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The Group’s two major defined benefit pension plans are in the UK and US. Both these plans were closed to new employees in 2003
and defined contribution plans are offered to new joiners. The US and UK Plans were closed to future accrual in March 2014 and
December 2016 respectively.

The UK Plan operates under trust law and responsibility for its governance lies with a Board of Trustees. This Board is composed of
representatives of the Group, plan participants and an independent trustee, who act on behalf of members in accordance with the
terms of the Trust Deed and Rules and relevant legislation. The UK Plan’s assets are held by the trust. Annual increases on benefits
in payment are dependent on inflation.

The 2018 and 2020 court cases in relation to Guaranteed Minimum Pensions do not impact the UK Plan as members were not
contracted out of the State Earnings-Related Pension Scheme (SERPS) between 1990 and 1997.

In June 2023, the Trustee with the support of the Company concluded a full buy-in of the Main Fund with Rothesay Life. The total
transaction value was £260m. The transaction completed the Main Fund and Executive Scheme de-risking journey which included
partial buy-in transactions in 2013, 2017, and 2022, whereby the liabilities of the scheme are now covered by a bulk annuity insurance
policy, that operate as investment assets, insuring all liabilities to pay all future defined benefit pensions for the remaining members
of the Fund. The bulk annuity policy matches the Trust’s cash flow benefit obligations to its members, removing longevity and other
demographic risks as well as investment, interest rate and inflation risks.

When the full UK Fund buy-in was concluded in June 2023 no decision on a future buy-out had been reached by the Company.
Whilst the contract between the Life Insurer (Rothesay) and the Trustee allows for a buy-out, a number of steps would need to be
concluded before this could be achieved. Not least, the conclusion of the due diligence process with the Life Insurer which is expected
to continue into the second half of 2024. Thereafter, the Trustee and the Company could not act unilaterally to move to a buy-out and
the UK Fund governance structure lays out a number of steps the Company would be required to conclude for a buy-out decision.
The transaction resulted in a $58m loss being recognised in OCI with $nil cash impact.

The US Plan is governed by a US Pension Committee which comprises representatives of the Group. In the US, the Pension Protection
Act (2006) established both a minimum required contribution and a maximum deductible contribution. Failure to contribute at least
the minimum required amount will subject the Company to significant penalties, and contributions in excess of the maximum deductible
have negative tax consequences. The minimum funding requirement is intended to fully fund the present value of accrued benefits
over seven years.

In October 2022, US Pension Plan members were notified that Smith & Nephew Inc. (SNI) would begin the termination process for the
US Plan. In December 2023, Fidelity & Guaranty Life was selected to take over responsibility for the remaining US Pension Plan obligation
and administration upon termination. A premium amount of $245m was paid in cash by the US Plan on 4 January 2024. Certain active
employees and terminated vested participants elected to receive a lump sum in exchange for their plan benefit of $80m. This resulted
in $4m settlement costs which were recognised in 2023, representing the difference between defined benefit obligation (DBO) and the
lump sums paid to members in December 2023. Following this transaction, members move to having a direct relationship with Fidelity &
Guaranty Life with SNI no longer retaining any obligation for the settlement of accrued member benefits following a short administrative
transition and due diligence process.

There is no legislative minimum funding requirement in the UK. The Trust Deed of the UK Plan and the Plan Document of the US Plan
provide the Group with a right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a plan wind-up.
Furthermore, in the ordinary course of business the UK Board of Trustees and US Pension Committee have no rights to unilaterally wind
up, or otherwise augment the benefits due to members of the Plans. Based on these rights, any net surplus in the UK and US Plans
is recognised in full.

Smith+Nephew Annual Report 2023

215

Group financial statements continued
Notes to the Group accounts continued

18 Retirement benefit obligations continued
18.2 Reconciliation of retirement benefit obligations and pension assets
The movement in the Group’s pension benefit obligation and pension assets is as follows:

Amounts recognised on the balance sheet at
beginning of the period
Income statement expense:
Current service cost
Settlements
Interest (expense)/income
Administration costs and taxes
Costs recognised in income statement
Remeasurements:
Actuarial (loss)/gain due to liability experience
Actuarial gain due to financial assumptions
change
Actuarial gain due to demographic assumptions
Return on plan assets (less)/greater than
discount rate
Remeasurements recognised in OCI
Cash:
Employer contributions
Employee contributions
Benefits paid directly by the Group
Benefits paid, taxes and administration costs
paid from scheme assets
Net cash

Exchange movements
Amount recognised on the balance sheet
Amount recognised on the balance sheet –
liability
Amount recognised on the balance sheet –
asset

Represented by:

UK Plan
US Plan
Other Plans
Total

Obligation
$ million

Asset
$ million

2023
Total
$ million

Obligation
$ million

Asset
$ million

2022
Total
$ million

(984)

1,055

(1,582)

1,637

(6)
75
(45)
(5)
19

(14)

(25)
14

–
(25)

–
(3)
2

67
66

(37)
(961)

(229)

(732)

–
(79)
49
–
(30)

–

–
–

(64)
(64)

7
3
–

(69)
(59)

40
942

141

801

(6)
(4)
4
(5)
(11)

(14)

(25)
14

(64)
(89)

7
–
2

(2)
7

3
(19)

(88)

(9)
4
(29)
(3)
(37)

(43)

503
1

–
461

–
(3)
2

81
80

94
(984)

(194)

(790)

–
(4)
30
–
26

–

–
–

(431)
(431)

6
3
–

(83)
(74)

(103)
1,055

124

931

(9)
–
1
(3)
(11)

(43)

503
1

(431)
30

6
–
2

(2)
6

(9)
71

(70)

141

Obligation
$ million
(457)
(259)
(245)
(961)

Asset
$ million
518
267
157
942

2023
Total
$ million
61
8
(88)
(19)

Obligation
$ million
(438)
(336)
(210)
(984)

Asset
$ million
552
360
143
1,055

2022
Total
$ million
114
24
(67)
71

The actuarial loss on obligation of $25m primarily relates to the decrease in discount rates in 2023 compared to 2022 and the actuarial
loss from the return on plan assets of $64m is mainly due to the impact of UK Plan buy-in.

All benefits are vested at the end of each reporting period. The weighted average duration of the defined benefit obligation at the
end of the reporting period is 14 years and 9 years for the UK and US Plans respectively.

216

Smith+Nephew Annual Report 2023

18.3 Plan assets
The market value of the US, UK and Other Plans assets are as follows:

UK Plan:
Assets with a quoted market price:

Cash and cash equivalents
Equity securities
Other bonds
Short dated credit fund
Liability driven investments
Diversified growth funds

Other assets:

Insurance contract
Market value of assets
US Plan:
Assets with a quoted market price:

Cash and cash equivalents
Equity securities
Government bonds – fixed interest
Corporate bonds
Market value of assets
Other Plans:
Assets with a quoted market price:

Cash and cash equivalents
Equity securities
Government bonds – fixed interest
Government bonds – index linked
Corporate and other bonds
Insurance contracts
Property
Other quoted securities

Other assets:

Insurance contracts
Market value of assets
Total market value of assets

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023
$ million

2022
$ million

2021
$ million

61
–
–
–
–
–
61

457
518

267
–
–
–
267

7
50
5
–
10
23
28
10
133

24
157
942

2
3
30
81
225
55
396

156
552

120
–
43
197
360

7
49
7
–
10
21
22
5
121

4
84
50
126
370
89
723

233
956

6
50
201
246
503

5
55
5
4
11
33
23
8
144

22
143
1,055

34
178
1,637

No plans invest directly in property occupied by the Group or in financial securities issued by the Group.

Both the UK and US Plans hold predominantly matching assets. The UK Plan is comprised of annuity policies purchased by the Trustee.
The US Plan in 2023 held predominantly matching assets. In 2024, following the scheme termination, the investment risks have been
transferred to a US Life Insurer.

Smith+Nephew Annual Report 2023

217

Group financial statements continued
Notes to the Group accounts continued

18 Retirement benefit obligations continued
18.4 Expenses recognised in the income statement
The total expense relating to retirement benefits recognised for the year is $95m (2022: $88m, 2021: $93m). Of this cost recognised
for the year, $84m (2022: $77m, 2021: $77m) relates to defined contribution plans and $11m (2022: $11m, 2021: $16m) relates to
defined benefit plans.

The cost charged in respect of the Group’s defined contribution plans represents contributions payable to these plans by the Group at
rates specified in the rules of the Plans. These were charged to operating profit in costs of goods sold, selling, general and administrative
expenses, and research and development expenses. There were $nil outstanding payments as at 31 December 2023 due to be paid
over to the Plans (2022: $nil, 2021: $nil).

Defined benefit plan costs comprise service cost which is charged to operating profit in selling, general and administrative expenses
and net interest cost and administration costs and taxes which are reported as other finance costs.

The defined benefit pension costs charged for the UK and US Plans are $nil (2022: $nil, 2021: $nil).

18.5 Principal actuarial assumptions
The following are the principal financial actuarial assumptions used at the reporting date to determine the UK and US defined benefit
obligations and expense.

UK Plan:

Discount rate
Future salary increases
Future pension increases
Inflation (RPI)
Inflation (CPI)

US Plan:

Discount rate
Future salary increases
Inflation

2023
% per annum

2022
% per annum

2021
% per annum

4.5
n/a
3.0
3.1
2.5

5.0
n/a
n/a

4.8
n/a
3.3
3.3
2.3

5.3
n/a
n/a

1.9
n/a
3.4
3.4
2.7

2.7
n/a
n/a

Actuarial assumptions regarding future mortality are based on mortality tables. The UK uses the S3NA with projections in line with
the CMI 2022 table, which places partial weight on post pandemic experience, and the US uses the PRI-2012 table with MP-2021 scale.
The Directors will continue to monitor any potential future impact on the mortality assumptions used.

The current longevities underlying the values of the obligations in the defined benefit plans are as follows:

Life expectancy at age 60
UK Plan:
Males
Females

US Plan:
Males
Females

Life expectancy at age 60 in 20 years’ time
UK Plan:
Males
Females

US Plan:
Males
Females

218

2023
years

2022
years

2021
years

26.9
29.7

25.0
27.2

28.4
31.1

25.0
27.6

27.4
30.1

24.9
27.1

28.9
31.5

24.9
27.6

27.6
30.1

24.7
26.8

29.1
31.5

24.6
27.3

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

18.6 Sensitivity analysis
The calculation of the defined benefit obligation is sensitive to the assumptions used. The following table summarises the increase/
decrease on the UK and US defined benefit obligation and pension costs as a result of reasonably possible changes in some of the
assumptions while holding all other assumptions consistent. The sensitivity to the inflation assumption change includes corresponding
changes to the future pension increase assumptions. The analysis does not take into account the full distribution of cash flows expected
under the Plan.

Changes to the inflation assumption will not have any effect on the US Pension Plan as it was closed to future accrual in 2014 and it has
no other inflation-linked assumptions.

$ million
UK Plan:

Discount rate
Inflation
Mortality

US Plan:

Discount rate
Mortality

18.7 Risk
The pension plans expose the Group to the following risks:

Increase/(decrease) in pension
obligation

Increase /(decrease) in pension
cost

+50bps/+1yr

-50bps/-1yr

+50bps/+1 yr

-50bps/-1yr

(29.0)
21.0
18.0

(10.0)
8.0

33.0
(24.0)
(11.0)

11.0
(8.0)

–
–
–

–
–

–
–
–

–
–

Interest rate risk

Inflation risk

Investment risk

Longevity risk

Volatility in financial markets can change the calculations of the obligation significantly as the calculation
of the obligation is linked to yields on AA rated corporate bonds. A decrease in the bond yield will increase
the measure of plan liabilities, although this will be partially offset by increases in the value of matching
plan assets such as bonds and insurance contracts.
The UK buy-in in June 2023 removed all remaining material pension liability exposure from the balance
sheet, hence, eliminating the interest rate risk for the UK Plan. Following the completion of the US buy-out
on 4 January 2024, no further interest risk is linked to the valuation of liability for the US Plan as no liability
will remain in the Plan.

The UK Plan is linked to inflation. A high rate of inflation will lead to a higher liability. This risk is managed
by holding inflation-linked bonds and an inflation-linked insurance contract in respect of some of the
obligation. In the UK, the liability matching portfolio held in conventional and index-linked gilts was
transferred into liability driven investments in order to reduce inflation risk.
The UK Plan is closed to future accrual which reduces the exposure to this risk. The US Plan is also closed to
future accrual and has no other inflation-linkage thus eliminating the exposure to this risk. Following the full
UK Pension buy-in in 2023, the residual inflation risks associated with the UK Plan have been transferred to
the UK Plan’s Life Insurance Partners.

If the return on plan assets is below the discount rate, all else being equal, there will be an increase
in the Plan deficit.
In the UK, following the full buy-in for the UK Plan, the investment risk has been transferred to the UK
Plan’s Life Insurer Partners.
The US Plan has a dynamic de-risking policy to shift plan assets from return-seeking (growth) assets to
liability matching assets over time. The US Pension Plan has an established glide path that is designed to
stabilise funding status by reducing the Plan’s exposure to return-seeking assets. Following the completion
of the US buy-out on 4 January 2024, no further investment risk is linked to the valuation of liability for the
US Plan as no liability will remain in the Plan.

The present value of the Plan’s defined benefit liability is calculated by reference to the best estimate
of the mortality of the Plan participants both during and after their employment. An increase in the life
expectancy of plan participants above that assumed will increase the benefit obligation.
Following the full buy-in, the UK Plan has entered into insurance contract which covers all of the
pensioners’ obligations.
Following the completion of the US buy-out on 4 January 2024, there is no further longevity risk linked to
the valuation of liability for the US Plan as no liability will remain in the Plan.

Smith+Nephew Annual Report 2023

219

Group financial statements continued
Notes to the Group accounts continued

18 Retirement benefit obligations continued
18.8 Funding
A full valuation is performed by actuaries for the Trustees/Pension Committee of each plan to determine the level of funding required.
Employer contribution rates, based on these full valuations, are agreed between the Trustees/Pension Committee of each plan and
the Group. The assumptions used in the actuarial valuations used for funding purposes may differ from the accounting assumptions
set out above.

UK Plan
The most recent full actuarial valuation of the UK Plan was undertaken as at 30 September 2020. Future accruals to the UK Plan ceased
as at 31 December 2016. Contributions to the UK Plan in 2023 were $nil (2022: $nil, 2021: $7m). This included supplementary payments
of $nil (2022: $nil, 2021: $7m).

Following the completion of the 30 September 2020 valuation, a dynamic contribution mechanism was agreed. Under that dynamic
contribution mechanism, no further contributions were required in 2022 or 2023.

In 2023, the Trustees concluded a full buy-in of the UK Defined Benefit Fund. The transaction resulted in a $58m loss being
recognised in OCI with $nil cash impact. Following the conclusion of the UK full buy-in, no further contributions are expected
from the sponsor company.

US Plan
The most recent full actuarial valuation of the US Plan was undertaken as at 1 January 2022. Future accruals to the US Plan ceased as
at 31 March 2014. Contributions to the US Plan were $nil (2022: $nil, 2021: $nil) which represented supplementary payments of $nil
(2022: $nil, 2021: $nil).

There are no planned supplementary contributions to the US Plan for 2024.

A premium amount of $245m was paid in cash by the US Plan on 4 January 2024 to settle the annuity purchase agreement with Fidelity
& Guaranty Life. $4m of settlement costs were accounted for in 2023 and are linked to the lump sum payments settled in December
2023 of $80m. A $2m credit will be recorded in 2024 linked to the annuity purchase contract concluded with Fidelity & Guaranty Life
on 4 January 2024.

19 Equity

Accounting policy
Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction
from equity.

When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable
costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and
are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is
recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within share premium.

19.1 Share capital

Authorised
At 31 December 2021
At 31 December 2022
At 31 December 2023
Allotted, issued and fully paid
At 1 January 2021
Share options
Shares cancelled
At 31 December 2021
Share options
Shares cancelled
At 31 December 2022
Share options
At 31 December 2023

220

Ordinary shares (20¢)
$ million

Thousand

Deferred shares (£1.00)
$ million

Thousand

Total
$ million

1,223,591
1,223,591
1,223,591

884,885
306
–
885,191
229
(7,770)
877,650
23
877,673

245
245
245

177
–
–
177
–
(2)
175
–
175

50
50
50

50
–
–
50
–
–
50
–
50

–
–
–

–
–
–
–
–
–
–
–
–

245
245
245

177
–
–
177
–
(2)
175
–
175

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The deferred shares were issued in 2006 in order to comply with English Company law. They are not listed on any stock exchange
and have extremely limited rights and effectively have no value. These rights are summarised as follows:

– The holder shall not be entitled to participate in the profits of the Company;
– The holder shall not have any right to participate in any distribution of the Company’s assets on a winding-up or other distribution
except that after the return of the nominal amount paid up on each share in the capital of the Company of any class other than
the deferred shares and the distribution of a further $1,000 in respect of each such share there shall be distributed to a holder
of a deferred share (for each deferred share held) an amount equal to the nominal value of the deferred share;

– The holder shall not be entitled to receive notice, attend, speak or vote at any general meeting of the Company; and
– The Company may create, allot and issue further shares or reduce or repay the whole or any part of its share capital or other

capital reserves without obtaining the consent of the holders of the deferred shares.

The Group’s objectives when managing capital are to ensure the Group has adequate funds to continue as a going concern and sufficient
flexibility within the capital structure to fund the ongoing growth of the business and to take advantage of business development
opportunities including acquisitions.

The Group determines the amount of capital taking into account changes in business risks and future cash requirements. The Group
reviews its capital structure on an ongoing basis and uses share buy-backs, dividends and the issue of new shares to adjust the
retained capital.

The Group considers the capital that it manages to be as follows:

Share capital
Share premium
Capital redemption reserve
Treasury shares
Retained earnings and other reserves

2023
$ million
175
615
20
(94)
4,501
5,217

2022
$ million
175
615
20
(118)
4,567
5,259

2021
$ million
177
614
18
(120)
4,879
5,568

19.2 Treasury shares
Treasury shares represent the holding of the Company’s own shares in respect of the Smith & Nephew Employees’ Share Trust and
shares bought back as part of the share buy-back programme. In 2022, the Group purchased a total of 10.1m shares for a cost of $158m
and no shares were purchased in 2023.

The Smith & Nephew 2004 Employees’ Share Trust (the Trust) was established to hold shares relating to the long-term incentive plans
referred to in the Directors’ Remuneration Report. The Trust is administered by an independent professional trust company resident
in Jersey and is funded by a loan from the Company. The cost of the Trust is charged to the income statement as it accrues. A dividend
waiver is in place in respect of those shares held under the long-term incentive plans. The Trust only accepts dividends in respect of
nil-cost options and deferred bonus plan shares. The waiver represents less than 1% of the total dividends paid.

Smith+Nephew Annual Report 2023

221

Group financial statements continued
Notes to the Group accounts continued

19 Equity continued
The movements in Treasury shares and the Employees’ Share Trust are as follows:

At 1 January 2022
Shares purchased
Shares transferred from treasury
Shares transferred to Group beneficiaries
Shares cancelled
At 31 December 2022
Shares transferred from treasury
Shares transferred to Group beneficiaries
At 31 December 2023

19.3 Dividends

The following dividends were declared and paid in the year:
Ordinary final of 23.1¢ for 2022 (2021: 23.1¢, 2020: 23.1¢) paid 17 May 2023
Ordinary interim of 14.4¢ for 2023 (2022: 14.4¢, 2021: 14.4¢) paid 1 November 2023

Treasury
$ million
93
150
(41)
(6)
(129)
67
(13)
(1)
53

Treasury
Number
of shares
million
5.4
9.7
(2.6)
(0.4)
(7.8)
4.3
(0.8)
(0.1)
3.4

Employees’
Share Trust
$ million
27
8
41
(25)
–
51
13
(23)
41

Employees’
Share Trust
Number
of shares
million
1.6
0.4
2.6
(1.4)
–
3.2
0.8
(1.6)
2.4

Total
$ million
120
158
–
(31)
(129)
118
–
(24)
94

Total
Number
of shares
million
7.0
10.1
–
(1.8)
(7.8)
7.5
–
(1.7)
5.8

2023
$ million

2022
$ million

2021
$ million

201
126
327

202
125
327

203
126
329

A final dividend for 2023 of 23.1 US cents per ordinary share was proposed by the Board on 22 February 2024 and will be paid, subject
to shareholder approval, on 22 May 2024 to shareholders on the Register of Members on 31 March 2024. The estimated amount of this
dividend is $201m. The Group pursues a progressive dividend policy, with the aim of increasing the US Dollar value of ordinary dividends
over time broadly based on the Group’s underlying growth in earnings, while taking into account capital requirements and cash flows.
Future dividends will be dependent upon future earnings, the future financial condition of the Group and the Board’s dividend policy.
The Board reviews the appropriate level of total annual dividend each year at the time of the full-year results. Smith & Nephew plc,
the Parent Company of the Group, is a non-trading investment holding company which derives its distributable reserves from dividends
paid by subsidiary companies. The distributable reserves of the Parent Company approximate to the balance on the profit and loss
account reserve, less treasury shares and exchange reserves, which at 31 December 2023 amounted to $3,333m.

222

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

20 Cash flow statement

Accounting policy
In the Group cash flow statement, cash and cash equivalents includes cash at bank, other short-term liquid investments with original
maturities of three months or less and bank overdrafts. In the Group balance sheet, bank overdrafts are shown within bank overdrafts,
borrowings, loans and lease liabilities under current liabilities.

Analysis of net debt including lease liabilities

At 1 January 2021
Net cash flow/debt movement
Exchange adjustment
Corporate bond issuance expense
IFRS 16 lease liabilities movement
At 31 December 2021
Net cash flow/debt movement
Exchange adjustment
Corporate bond issuance expense
IFRS 16 lease liabilities movement
At 31 December 2022
Net cash flow/debt movement
Exchange adjustment
Corporate bond issuance expense
IFRS 16 lease liabilities movement
Net debt including lease
liabilities at 31 December 2023

Cash
$ million
1,762
(466)
(6)
–
–
1,290
(931)
(9)
–
–
350
(48)
–
–
–

Overdrafts
$ million
(11)
7
(1)
–
–
(5)
1
(2)
–
–
(6)
8
(4)
–
–

Due within
one year
$ million
(326)
(162)
–
–
2
(486)
302
23
–
7
(154)
(604)
–
–
(6)

Due after
one year
$ million
(3,353)
429
72
(1)
5
(2,848)
94
45
3
(6)
(2,712)
429
(39)
1
3

Net
currency
swaps
$ million
–
4
(4)
–
–
–
(3)
3
–
–
–
(4)
3
–
–

Borrowings
Net
interest
swaps
$ million
2
–
(2)
–
–
–
–
(13)
–
–
(13)
–
20
–
–

Total
$ million
(1,926)
(188)
59
(1)
7
(2,049)
(537)
47
3
1
(2,535)
(219)
(20)
1
(3)

302

(2)

(764)

(2,318)

(1)

(2,776)

Reconciliation of net cash flow to movement in net debt including lease liabilities

Net cash flow from cash net of overdrafts
Settlement of currency swaps
Net cash flow from borrowings
Change in net debt from net cash flow
IFRS 16 lease liabilities
Exchange adjustment
Corporate bond issuance expense
Change in net debt in the year
Opening net debt
Closing net debt

2023
$ million
(40)
(4)
(175)
(219)
(3)
(20)
1
(241)
(2,535)
(2,776)

2022
$ million
(930)
(3)
396
(537)
1
47
3
(486)
(2,049)
(2,535)

Cash and cash equivalents
For the purposes of the Group cash flow statement, cash and cash equivalents at 31 December 2023 comprise cash at bank net
of bank overdrafts.

Cash at bank
Bank overdrafts
Cash and cash equivalents

Smith+Nephew Annual Report 2023

2023
$ million
302
(2)
300

2022
$ million
350
(6)
344

2021
$ million
(459)
4
267
(188)
7
59
(1)
(123)
(1,926)
(2,049)

2021
$ million
1,290
(5)
1,285

223

Group financial statements continued
Notes to the Group accounts continued

20 Cash flow statement continued
The Group operates in over 100 countries around the world, some of which impose restrictions over cash movement. These restrictions
have only a minimal impact on the management of the Group’s cash.

Cash outflows/(inflows) arising from financing activities

Repayment
of bank
loans1
$ million
151
–
151

Borrowing
of bank
loans1
$ million
(326)
–
(326)

Proceeds from
Corporate
Bond issue
$ million
–
–
–

Repayment
of lease
liabilities
$ million
52
–
52

Cash outflow/
(inflow)
from other
$ million
(4)
–
(4)

Dividends
$ million
–
327
327

Purchase of
own shares
$ million
–
–
–

Proceeds from own
shares/issue of
ordinary shares
$ million
–
–
–

Total
$ million
(127)
327
200

881
–
881

267
–
267

–
–
–

(485)
–
(485)

–
–
–

54
–
54

59
–
59

(3)
–
(3)

4
–
4

–
327
327

–
329
329

–
158
158

–
–
–

–
(6)
(6)

–
(14)
(14)

447
479
926

330
315
645

2023
Debt
Equity
Total

2022
Debt
Equity
Total

2021
Debt
Equity
Total

1 This includes drawdown and repayment of the syndicated revolving credit facility.

21 Acquisitions

Accounting policy
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill
that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified
as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value
of the contingent consideration are recognised in profit or loss.

Year ended 31 December 2023
No acquisitions were completed in the year ended 31 December 2023.

During 2023, management evaluated the commercial viability of Engage products and concluded that they should be discontinued
(see Note 2.2 for further details).

Year ended 31 December 2022
On 18 January 2022, the Group completed the acquisition of 100% of the share capital of Engage Uni, LLC (doing business as Engage
Surgical), owner of the only cementless unicompartmental (partial) knee system commercially available in the US. The maximum
consideration, all payable in cash, is $135m and the provisional fair value consideration is $131m and includes $32m of contingent
consideration. The goodwill represents the control premium, the acquired workforce and the synergies expected from integrating
Engage Surgical into the Group’s existing business. The majority of the consideration is expected to be deductible for tax purposes.

224

Smith+Nephew Annual Report 2023

The fair value of assets acquired and liabilities assumed is set out below:

Intangible assets – Product-related
Property, plant and equipment
Inventory
Trade and other payables
Net assets
Goodwill
Consideration (net of $nil cash acquired)

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Engage
Surgical
$ million
44
2
2
(1)
47
84
131

The product-related intangible assets were valued using a relief-from-royalty methodology with the key inputs being revenue,
profit and discount rate. The cash outflow from acquisitions of $113m (2021: $285m) comprises payments of consideration of
$89m (2021: $236m) relating to acquisitions in the current year and payments of deferred and contingent consideration of $24m
(2021: $49m) relating to acquisitions completed in prior years.

The carrying value of goodwill increased from $2,989m at 31 December 2021 to $3,031m at 31 December 2022. The acquisition in
the year ended 31 December 2022 increased goodwill by $84m, this was partially offset by foreign exchange movements of $42m.

For the year ended 31 December 2022, the contribution from Engage Surgical to revenue and to profit was immaterial. If the business
combination had occurred at the beginning of the year the contribution to revenue and profit would not have been materially different.

Year ended 31 December 2021
On 4 January 2021, the Group completed the acquisition of the Extremity Orthopaedics business of Integra LifeSciences Holdings
Corporation (‘Extremity Orthopaedics’). The acquisition significantly strengthens the Group’s extremities business by adding a
combination of a focused sales channel, complementary shoulder replacement and upper and lower extremities portfolio, and
a new product pipeline. The transaction comprised the acquisition of the entire issued share capital of two wholly owned US
subsidiaries of Integra LifeSciences Holdings Corporation group and certain assets of the Extremity Orthopaedics business held both
in and outside the US. The maximum consideration is $240m and the fair value of consideration is $236m and includes no deferred
or contingent consideration.

The goodwill represents the control premium, the acquired workforce and the synergies expected from integrating Extremity
Orthopaedics into the Group’s existing business, and is expected to be partly deductible for tax purposes.

The fair value of assets acquired and liabilities assumed is set out below:

Intangible assets – Product-related
Intangible assets – Customer-related
Property, plant and equipment
Inventory
Other payables
Net deferred tax asset
Net assets
Goodwill
Consideration (net of $nil cash acquired)

Extremity
Orthopaedics
$ million
101
11
22
41
(23)
(12)
140
96
236

The product-related intangible assets were valued using an excess earnings methodology with the key inputs being revenue, profit
and discount rate. The cash outflow from acquisitions of $285m (2020: $170m) comprises payments of consideration of $236m
(2020: $117m) relating to the acquisition which completed in the current year and payments of deferred and contingent consideration
of $49m (2020: $53m) relating to acquisitions completed in prior years.

The carrying value of goodwill increased from $2,928m at 31 December 2020 to $2,989m at 31 December 2021. The acquisition in
the year ended 31 December 2021 increased goodwill by $96m, this was partially offset by foreign exchange movements of $35m.
For the year ended 31 December 2021, the contribution from Extremity Orthopaedics to revenue was $82m and to profit was
immaterial. If the business combination had occurred at the beginning of the year the contribution to revenue and profit would not
have been materially different.

Smith+Nephew Annual Report 2023

225

Group financial statements continued
Notes to the Group accounts continued

22 Other notes to the accounts
22.1 Share-based payments

Accounting policy
The Group operates a number of equity-settled executive and employee share plans. For all grants of share options and awards,
the fair value at the grant date is calculated using appropriate option pricing models. The grant date fair value is recognised over
the vesting period as an expense, with a corresponding increase in retained earnings.

The Group operates the following equity-settled executive and employee share plans: Smith & Nephew Global Share Plan 2010,
Smith & Nephew Global Share Plan 2020, Smith & Nephew Share Save Plan (2012) and Smith & Nephew International Share
Save Plan (2012). At 31 December 2023, 5,138,000 options (2022: 5,202,000, 2021: 4,472,000) were outstanding with a range
of exercise prices from 843 to 1,541 pence.

At 31 December 2023, the maximum number of shares that could be awarded under the Group’s long-term incentive plans was
8,452,000 (2022: 7,371,000, 2021: 5,997,000). These include conditional share awards granted to senior employees and equity
and performance share awards granted to senior executives under the Global Share Plan 2010 and Global Share Plan 2020.

The expense charged to the income statement for share-based payments for the year is $39m (2022: $40m, 2021: $41m).

22.2 Related party transactions
Trading transactions
In the course of normal operations, the Group traded with its associates detailed in Note 11. The aggregated transactions,
which have not been disclosed elsewhere in the financial statements, are $nil (2022: $nil, 2021: $nil).

Key management personnel
The remuneration of Executive Officers (including Non-Executive Directors) during the year is summarised below:

Short-term employee benefits
Share-based payments expense
Pension and post-employment benefit entitlements

Directors’ remuneration disclosures are included on pages 121–154.

Retirement benefit schemes
Details of the Group’s retirement benefit schemes are set out in Note 18.

2023
$ million
21
9
1
31

2022
$ million
17
10
2
29

2021
$ million
16
7
1
24

23 Post balance sheet events
On 9 January 2024, the Group completed the acquisition of 100% of the share capital of 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. Smith+Nephew paid $180m in cash on
completion, with up to a further $150m contingent on future financial performance.

This acquisition will be treated as a business combination under IFRS 3-Business Combinations. The provisional value of acquired net
tangible assets is not material and is not expected to have material fair value adjustments. The remaining consideration will be allocated
between identifiable intangible assets (product-related) and goodwill, with the majority expected to be goodwill representing the
control premium, the acquired workforce and the synergies expected from integrating CartiHeal into the Group’s existing business.

In October 2022, US Pension Plan members were notified that Smith & Nephew Inc. (SNI) would begin the termination process for the US
Plan. In December 2023, Fidelity & Guaranty Life was selected to take over responsibility for the remaining US Pension Plan obligation
and administration upon termination. A premium amount of $245m was paid in cash by the US Plan on 4 January 2024 to settle the
annuity purchase agreement with Fidelity & Guaranty Life. Certain active employees and terminated vested participants elected to
receive a lump sum in exchange for their plan benefit of $80m. This resulted in $4m of settlement costs which were recognised in 2023,
representing the difference between defined benefit obligation (DBO) and the lump sums paid to members in December 2023. A $2m
credit will be recorded in 2024 linked to the annuity purchase contract concluded with Fidelity & Guaranty Life on 4 January 2024.

226

Smith+Nephew Annual Report 2023

Company financial statements

Company balance sheet

Non-current assets
Investments

Debtors

Current assets
Debtors
Cash at bank

Creditors: amounts falling due within one year
Borrowings
Other creditors

Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Borrowings
Other creditors

Total assets less total liabilities

Equity shareholders’ funds
Share capital
Share premium
Capital redemption reserve
Capital reserve
Treasury shares
Exchange reserve
Profit and loss account
Shareholders’ funds

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

At 31 December
2023
$ million

At 31 December
2022
$ million

Notes

3
5

5
4

7,092

3,317
82
3,399

(711)
(1,210)
(1,921)
1,478
8,577

(2,168)
–
(2,168)
6,409

175
615
20
2,266
(94)
(52)
3,479
6,409

7,092

–

2,991
190
3,181

(109)
(947)
(1,056)
2,125
9,217

(2,565)
(13)
(2,578)
6,639

175
615
20
2,266
(118)
(52)
3,733
6,639

The attributable profit for the year dealt with in the accounts of the Company is $58m (2022: $80m).

The accounts were approved by the Board and authorised for issue on 26 February 2024 and signed on its behalf by:

Rupert Soames, OBE
Chair

Deepak Nath, PhD
Chief Executive Officer

Anne-Françoise Nesmes
Chief Financial Officer

Smith+Nephew Annual Report 2023

Excluding Note 8 ‘Group Companies’, the Parent Company financial statements of Smith & Nephew plc on pages
229–234 do not form part of the Smith & Nephew plc Annual Report on Form 20-F as filed with the SEC.
227

Company financial statements continued

Company statement of changes in equity

At 1 January 2022
Attributable profit for the year
Equity dividends paid in the year
Share-based payments recognised1
Cost of shares transferred to beneficiaries
New shares issued on exercise of share options
Cancellation of treasury shares
Treasury shares purchased
At 31 December 2022
Attributable profit for the year
Equity dividends paid in the year
Share-based payments recognised1
Cost of shares transferred to beneficiaries
At 31 December 2023

Share
capital
$ million
177
–
–
–
–
–
(2)
–
175
–
–
–
–
175

Share
premium
$ million
614
–
–
–
–
1
–
–
615
–
–
–
–
615

Capital
redemption
reserve
$ million
18
–
–
–
–
–
2
–
20
–
–
–
–
20

Capital
reserve
$ million
2,266
–
–
–
–
–
–
–
2,266
–
–
–
–
2,266

Treasury
shares
$ million
(120)
–
–
–
31
–
129
(158)
(118)
–
–
–
24
(94)

Exchange
reserve
$ million
(52)
–
–
–
–
–
–
–
(52)
–
–
–
–
(52)

Profit and
loss account
$ million
4,095
80
(327)
40
(26)
–
(129)
–
3,733
58
(327)
39
(24)
3,479

Total
shareholders’
funds
$ million
6,998
80
(327)
40
5
1
–
(158)
6,639
58
(327)
39
–
6,409

1 The Company operates a number of equity-settled executive and employee share plans. For all grants of share options and awards, the fair value as at the date of grant is calculated using
an appropriate option pricing model and the corresponding expense is recognised over the vesting period. Subsidiary companies are recharged for the fair value of share options that relate
to their employees. The disclosure relating to the Company is detailed in Note 22.1 of the Notes to the Group accounts.

Further information on the share capital of the Company can be found in Note 19.1 of the Notes to the Group accounts.

The total distributable reserves of the Company are $3,333m (2022: $3,563m). In accordance with the exemption permitted by
Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account.

Fees paid to KPMG LLP for audit and non-audit services to the Company itself are not disclosed in the individual accounts because
Group financial statements are prepared which are required to disclose such fees on a consolidated basis. The fees for the consolidated
Group are disclosed in Note 3.2 of the Notes to the Group accounts.

228

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Notes to the Company accounts
1 Basis of preparation
Smith & Nephew plc (the “Company”) is a public limited company incorporated in England and Wales.

The separate accounts of the Company are presented as required by the Companies Act 2006. These financial statements and
accompanying notes have been prepared in accordance with the Financial Reporting Standard 101 Reduced Disclosure Framework
(‘Reduced Disclosure Framework’) for all periods presented. The financial information for the Company has been prepared on the same
basis as the consolidated financial statements, applying identical accounting policies as outlined throughout the Notes to the Group
accounts. The Directors have determined that the preparation of the Company financial statements on a going concern basis is appropriate
as the Company receives dividend cash receipts from its subsidiary undertakings which enable it to meet its liabilities as they fall due.

In applying these policies, management is required to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues
and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events
and actions, actual results ultimately may differ from those estimates.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
– A cash flow statement and related notes;
– Comparative period reconciliations for share capital and tangible fixed assets;
– Disclosures in respect of transactions with wholly-owned subsidiaries;
– Disclosures in respect of capital management;
– The effects of new but not yet effective IFRSs; and
– Disclosures in respect of the compensation of key management personnel.

As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
– IFRS 2 Share Based Payments in respect of Group-settled share-based payments; and
– Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures.

The Company proposes to continue to adopt the Reduced Disclosure Framework of FRS 101 in its next financial statements.

2 Investments

Accounting policy
Investments in subsidiaries are stated at cost less provision for impairment.

At 1 January and 31 December

2023
$ million
7,092

2022
$ million
7,092

Investments represent holdings in subsidiary undertakings. In accordance with Section 409 of the Companies Act 2006, a listing of all
entities invested in by the consolidated Group is provided in Note 8.

Smith+Nephew Annual Report 2023

Company financial statements continued
Notes to the Company accounts continued

3 Debtors

Amounts falling due within one year:

Amounts owed by subsidiary undertakings
Prepayments and accrued income
Current asset derivatives – forward foreign exchange contracts
Current asset derivatives – forward foreign exchange contracts – subsidiary undertakings
Current asset derivatives – currency swaps

Amounts falling due after one year

Non-current asset derivatives - interest rate swaps

2023
$ million

2022
$ million

3,284
6
25
–
2

3,317

3,324

2,896
6
46
42
1

2,991

–

2,991

Allowance losses on amounts owed by subsidiary undertakings are calculated by reviewing 12-month expected credit losses using
historic and forward-looking data on credit risk. The loss allowance expense for the year was de minimis (2022: de minimis).

4 Other creditors

Amounts falling due within one year:

Amounts owed to subsidiary undertakings
Other creditors
Current liability derivatives – forward foreign exchange contracts
Current liability derivatives – forward foreign exchange contracts – subsidiary undertakings
Current liability derivatives – currency swaps

Amounts falling due after one year:

Non-current liability derivatives – interest rate swaps

5 Cash and borrowings

2023
$ million

2022
$ million

1,158
24
–
25
3
1,210

–
–

837
21
42
46
1
947

13
13

Accounting policy
Financial instruments
Currency swaps are used to match foreign currency assets with foreign currency liabilities. They are initially recorded at fair value
and then for reporting purposes remeasured to fair value at exchange rates and interest rates at subsequent balance sheet dates.

Changes in the fair value of derivative financial instruments are recognised in the profit and loss account as they arise.

Bank loans, borrowing and overdrafts due within one year or on demand
Borrowings due after one year
Borrowings
Cash at bank
(Debit) / credit balance on derivatives – interest rate swaps
Net debt

2023
$ million
711
2,168
2,879
(82)
(7)
2,790

2022
$ million
109
2,565
2,674
(190)
13
2,497

All currency swaps are stated at fair value. Gross US Dollar equivalents of $548m (2022: $369m) receivable and $549m
(2022: $369m) payable have been netted. Currency swaps comprise foreign exchange swaps and were used in 2023 and 2022
to hedge intra-group loans.

230

Smith+Nephew Annual Report 2023

6 Contingencies

Guarantees in respect of subsidiary undertakings

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023
$ million
–

2022
$ million
–

The Company gives guarantees to banks to support liabilities and cross guarantees to support overdrafts.

The Company operated defined benefit pension plans in 2004 but at the end of 2005 its pension plan obligations were transferred to
Smith & Nephew UK Limited. The Company has provided guarantees to the trustees of the pension plans to support future amounts
due from participating employers (see Note 18 of the Notes to the Group accounts).

7 Deferred taxation
The Company has gross unused capital losses of $79m (2022: $75m) available for offset against future chargeable gains.
No deferred tax asset has been recognised on these unused losses as they are not expected to be realised in the foreseeable future.

8 Group companies
In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries, associates, joint arrangements, joint ventures and
partnerships are listed below as at 31 December 2023, including their country of incorporation. All companies are 100% owned, unless
otherwise indicated. The share capital disclosed comprises ordinary shares which are indirectly held by Smith & Nephew plc, unless
otherwise stated.

Company name
UK
Additive Instruments Limited
Michelson Diagnostic Limited3 (6.4%)
Neotherix Limited3 (24.9%)
Smith & Nephew (Overseas) Limited1,4
Smith & Nephew Beta Limited2
Smith & Nephew China Holdings
UK Limited1
Smith & Nephew Employees
Trustees Limited2
Smith & Nephew ESN Limited2
Smith & Nephew Extruded Films Limited2
Smith & Nephew Finance2
Smith & Nephew Finance Oratec2
Smith & Nephew Healthcare Limited2
Smith & Nephew Investment
Holdings Limited1
Smith & Nephew Lilia Limited2
Smith & Nephew Medical Fabrics Limited2
Smith & Nephew Medical Limited
Smith & Nephew Nominee
Company Limited2

Smith & Nephew Nominee Services Limited2 England & Wales
Smith & Nephew Orthopaedics Limited
England & Wales
Smith & Nephew Pharmaceuticals Limited2 England & Wales
Smith & Nephew Raisegrade Limited1,2
England & Wales
Smith & Nephew Rareletter Limited2
England & Wales
Smith & Nephew Trading Group Limited1
England & Wales
England & Wales
Smith & Nephew UK Executive Pension
Scheme Trustee Limited2
Smith & Nephew UK Limited1,4

England & Wales

Country of
operation and
incorporation

Registered
Office

England & Wales
Watford
England & Wales Nottingham
York
England & Wales
Watford
England & Wales
Watford
England & Wales
Watford
England & Wales

England & Wales

Watford

England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales

England & Wales
England & Wales
England & Wales
England & Wales

Company name

Smith & Nephew UK Pension Fund
Trustee Limited2
Smith & Nephew USD Limited1
Smith & Nephew USD One Limited1
T.J.Smith and Nephew, Limited
The Albion Soap Company Limited2
TP Limited1
Rest of Europe
Smith & Nephew GmbH
Smith & Nephew S.A.-N.V
Smith & Nephew A/S
Smith & Nephew Oy
Smith & Nephew France SAS1

Smith & Nephew S.A.S.

Smith & Nephew Business Services GmbH
& Co. KG1
Smith & Nephew Business Services
Verwaltungs GmbH
Smith & Nephew Deutschland (Holding)
GmbH1
Smith & Nephew GmbH
Smith & Nephew Orthopaedics GmbH
Smith & Nephew Robotics GmbH
Smith & Nephew (Ireland) Trading Limited
Smith & Nephew S.r.l.
Smith & Nephew International S.A.1
Smith & Nephew (Europe) B.V.1

Smith & Nephew B.V.

Watford
Hull
Watford
Watford
Hull
Watford

Watford
Watford
Hull
Watford

Watford
Watford
Hull
Watford
Watford
Watford
Watford

Watford

Smith & Nephew Nederland CV

Country of
operation and
incorporation
England & Wales

Registered
Office
Watford

England & Wales
England & Wales
England & Wales
England & Wales
Scotland

Watford
Watford
Hull
Watford
Edinburgh

Vienna
Austria
Zaventem
Belgium
Kobenhavn
Denmark
Finland
Helsinki
France Neuilly-sur-
Seine
France Neuilly-sur-
Seine
Hamburg

Germany

Hamburg

Germany

Hamburg

Germany
Germany
Germany
Ireland
Italy

Hamburg
Tuttlingen
Munich
Dublin
Milan
Luxembourg Luxembourg
Netherlands Amsterdam,
2132NP
Netherlands Amsterdam,
2132NP
Netherlands Amsterdam,
2132NP

Smith+Nephew Annual Report 2023

Company financial statements continued
Notes to the Company accounts continued

8 Group companies continued

Company name
Rest of Europe
Smith & Nephew Operations B.V.

Serda B.V.3 (48.32%)

Smith & Nephew AS
Smith & Nephew sp. z.o.o.
Smith & Nephew Lda
S&N ORION PRIME, S.A.

DC LLC

Smith & Nephew LLC

Smith & Nephew S.A.U
Smith & Nephew Aktiebolag
Lumina Adhesives AB3 (3.04%)
Atracsys Sàrl
Plus Orthopedics Holding AG1
Smith & Nephew Manufacturing AG
Smith & Nephew Orthopaedics AG1
Smith & Nephew Schweiz AG
Smith & Nephew AG
Smith & Nephew Orthopaedics AG
Aarau Branch5
US
Arthrocare Corporation
Ascension Orthopedics, Inc.

Austin Miller Trauma LLC
Bioventus Inc.3,6 (27.96%)
Orthopaedics Biosystem Ltd, Inc
Bioventus LLC3,7 (20.05%)
Blue Belt Technologies, Inc.
Ceterix Orthopaedics, Inc.
Engage Uni LLC

Integrated Shoulder Collaboration, Inc.

Leaf Healthcare Inc.
Miach Orthopaedics, Inc3 (8.76%)
Osiris Therapeutics, Inc.
Rotation Medical, Inc.

Sinopsys Surgical, Inc.3 (1.44%)
Smith & Nephew Consolidated, Inc.1
Smith & Nephew, Inc.1
IntraFuse LLC Investment 3 (42.16%)
Trice Medical Inc.3 (0.5%)

Tusker Medical, Inc.

Country of
operation and
incorporation

Registered
Office
Netherlands Amsterdam,
2132NP
Netherlands Amsterdam,
1105BP
Oslo
Warsaw
Portugal Forte da Casa
Coimbra
Portugal

Norway
Poland

Moscow

Puschino

Russian
Federation
Russian
Federation
Barcelona
Spain
Sweden
Molndal
Sweden Gothenburg
Puidoux
Zug
Aarau
Zug
Zug
Zug
Aarau

Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland

United States Wilmington
United States Wilmington
Centreville
United States Wilmington
United States Wilmington
United States
Phoenix
United States Wilmington
United States Philadelphia
United States Wilmington
United States Wilmington
19808
United States Wilmington
19808
United States Wilmington
Dover GD
United States
United States
Columbia
United States Wilmington
19808
United States Wilmington
United States Wilmington
United States Wilmington
United States
Utah
United States Wilmington
19808
United States Wilmington
19808

Company name
Africa, Asia, Australasia and Other Americas
Smith & Nephew Argentina S.R.L.2
Smith & Nephew Pty Limited

Smith & Nephew Surgical Holdings
Pty Limited1,2
Smith & Nephew Surgical Pty Limited2

Smith & Nephew Comercio de Produtos
Medicos LTDA

Country of
operation and
incorporation

Registered
Office

Argentina Buenos Aires
Australia Macquarie
Park
Australia Macquarie
Park
Australia Macquarie
Park
São Paulo

Brazil

Diadema

Rio de
Janeiro
São José

Smith & Nephew Comercio de Produtos
Medicos LTDA, Diadema Branch5
Smith & Nephew Comercio de Produtos
Medicos LTDA, Rio de Janeiro Branch5
Smith & Nephew Comercio de Produtos
Medicos LTDA, São José dos Campos Branch5
Smith & Nephew Inc.1
Ontario
Smith & Nephew Finance Holdings Limited4 Cayman Islands George Town
1104
Cayman Islands George Town
9008
Chile
Shunyi
District,
Beijing
Shanghai
Ao Na Rd
China Dong Cheng

Smith & Nephew Chile SpA2
Plus Orthopedics (Beijing) Co. Limited2

Smith & Nephew Medical (Shanghai) Limited

TEAMfund, LP3 (6.765%)

Chile
China

Canada

China

Smith & Nephew Medical (Shanghai) Limited
Beijing Branch5
Smith & Nephew Medical (Shanghai) Limited
Chengdu Branch5
Smith & Nephew Medical (Shanghai) Limited
Guangzhou Branch5
Smith & Nephew Medical (Shanghai) Limited
Shanghai Branch5
Smith & Nephew Medical (Shanghai) Limited
Shanghai Second Branch5
Smith & Nephew Medical (Suzhou) Limited
Smith & Nephew Orthopaedics
(Beijing) Co., Ltd
S&N Holdings SAS1
Smith & Nephew Colombia S.A.S
ArthroCare Costa Rica Srl
Smith & Nephew Curaçao N.V.2
Smith & Nephew Beijing Holdings Limited1
Smith & Nephew Limited
Smith & Nephew Suzhou Holdings Limited1
Smith & Nephew GBS Private Limited
Smith & Nephew Healthcare Private Limited
Smith & Nephew KK
Smith & Nephew Chusik Hoesia

China

Wu Hou

China

Yue Xiu

China

Jing’an

China

Colombia
Colombia
Costa Rica

Shanghai
Xin Jin Qiao Rd
China Suzhou City
Kechuang
China
Dongliujie
Bogota
Bogota
Alajuela
Curaçao Willemstad
Hong Kong
Hong Kong
Hong Kong
Pune
Mumbai
Tokyo
Seoul

Hong Kong
Hong Kong
Hong Kong
India
India
Japan
Korea,
Republic of

232

Smith+Nephew Annual Report 2023

Country of
operation and
incorporation

Registered
Office
Malaysia Kuala Lumpur
Malaysia Kuala Lumpur
Malaysia Kuala Lumpur
Mexico Mexico City
Auckland
Auckland

New Zealand
New Zealand

Philippines

Puerto Rico
Saudi Arabia

Singapore
Singapore
South Africa
South Africa

Manila

San Juan
Riyadh

Singapore
Singapore
Westville
Westville

Company name
Africa, Asia, Australasia and Other Americas
Smith & Nephew Healthcare Sdn. Bhd
Smith & Nephew Operations Sdn. Bhd
Smith & Nephew Services Sdn. Bhd
Smith & Nephew S.A. de C.V.
Smith & Nephew Limited1
Smith & Nephew Superannuation
Scheme Limited
Smith & Nephew (Overseas) Limited
Philippines Branch2,5
Smith & Nephew, Inc.
Smith & Nephew USD Limited Office for
Technical & Scientific Services
Smith & Nephew Asia Pacific Pte. Limited1
Smith & Nephew Pte Limited
Smith & Nephew (Pty) Limited1
Smith & Nephew Pharmaceuticals
(Proprietary) Limited2
Smith & Nephew (Overseas) Limited
Taiwan Branch5
Smith & Nephew Limited

Taiwan

Taipei

Moscow

Thailand Huai Khwang
District,
Bangkok
Istanbul

Turkey

United Arab
Jebel Ali,
Emirates
Dubai
HealthCare
United Arab
Emirates
City, Dubai
Vietnam Ho Chi Minh
City

Smith ve Nephew Medikal Cihazlar Ticaret
Limited Sirketi
Smith & Nephew FZE

Smith & Nephew FZE (DHCC Branch)5

The Representative Office Of Smith &
Nephew Asia Pacific Pte. Limited

1 Holding company.
2 Dormant company.
3 Not 100% owned by Smith & Nephew Group.
4 Directly owned by Smith & Nephew plc.
5 Branch of a company in Smith & Nephew Group.
6 Represents 27.96% voting rights and 7.91% economic interest.
7 Represents 20.05% economic interest.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Registered Office addresses

Neuilly-sur-Seine

Hamburg
Munich
Tuttlingen
Dublin
Milan

40-52, Boulevard du Parc, 92200 Neuilly-sur-Seine,
France
Friesenweg 30, 22763, Hamburg, Germany
Rosenheimer Straße 116, Munich, 81669, Germany
Alemannenstrasse 14, 78532, Tuttlingen, Germany
9 Clare Street, Dublin 2, D02 HH30, Ireland
Sesto San Giovanni (MI) Viale T. Edison 110
CAP 20099 Italy
1A, rue Jean Piret, L-2350, Luxembourg, Luxembourg

Luxembourg
Amsterdam 2132NP Bloemlaan 2, 2132NP, Hoofddorp, The Netherlands
Amsterdam 1105BP Paasheuvelweg 25, 1105BP, Amsterdam,

Oslo
Warsaw
Forte da Casa

Coimbra

Puschino

Barcelona

Molndal
Gothenburg
Puidoux
Zug
Aarau
US
Wilmington

Wilmington
Centreville
Philadelphia

The Netherlands
Snaroyveien 36, FORNEBU, 1364, Norway
Ul Osmanska 12, 02-823, Warsaw, Poland
Rua do Parque Tejo, numbers 7, 7-A and 7-B 2625-437
Forte da Casa, Povoa de Santa Iria and Forte da Casa,
Vila Franca de Xira, Portugal
Rua Pedro Nunes, Instituto Pedro Nunes, Edificio IPN-D,
3030-199, Coimbra, Portugal
2nd Syromyatnichesky Lane, Moscow, 105120,
Russian Federation
8/1 Stroiteley Street, 142290, City of Puschino,
Moscow Region, Russian Federation
Edificio Conata I, c/Fructuos Gelabert 2 y 4,
San Joan Despi – 08970, Barcelona, Spain
Krokslatts fabriker 39 431 37 Molndal, Sverige, Sweden
Varbergsgatan 2A/412 65 Göteborg, Sweden
Route du Verney 20, 1070, Puidoux, Switzerland
Theilerstrasse 1A, 6300, Zug, Switzerland
Schachenallee 29, 5000, Aarau, Switzerland

CT Corporation, 1209 Orange Street, Wilmington
DE 19801, USA
Corporation Services Company, Suite 400, 2711,
Centreville Road, Wilmington DE, USA
CT Corporation 1515 Market Street, Philadelphia,
PA 19102, USA

Registered Office addresses
UK
Watford

Nottingham

York
Hull
Edinburgh
Rest of Europe
Vienna

Zaventem
Kobenhavn
Helsinki

Building 5, Croxley Park, Hatters Lane, Watford,
Hertfordshire, WD18 8YE
80 Mount Street , Cumberland Court, Nottingham , NG1
6HH.
25, Carr Lane, York, YO26 5HT
101 Hessle Road, Hull, HU3 2BN
4th Floor, 115 George Street, Edinburgh, EH2 4JN

Concorde Business Park, C3, 2320,
Schwechat, Austria
Ikaroslaan 45, 1930 Zaventem, Belgium
Kay Fiskers Plads 9,1. 2300. Kobenhavn S, Denmark
Lentäjäntie 1 , 01530 Vantaa, Finland

Wilmington 19808 251 Little Falls Drive, Wilmington DE 19808, USA
Dover GD
Pennsylvania

160 Greentree Drive, Suite 101, Dover, DE, 19904, USA
63 Burke Road, Cranberry Township, Butler County
PA 16066, USA
7015 Albert Einstein Dr., Columbia, Howard County
MD 21046 USA
P.O. Box 6008, North Logan, UT 84341, USA
CT Corporation System, 3800 North Central Avenue,
Suite 460, Phoenix AZ 85012, United State

Columbia

Utah
Phoenix

Africa, Asia, Australasia and Other Americas
Buenos Aires
Macquarie Park

Maipu 1300, 13th Floor, Buenos Aires, Argentina
Suite 1.01, Level 1, Building B, Pinnacle Office Park,
4 Drake Avenue, Macquarie Park, NSW 2113, Australia
Av. das Nações Unidas, 14171- 23º andar –
Torre C-Crystal, Vila Gertrudes, São Paulo,
CEP 043794-000, Brazil

São Paulo

Smith+Nephew Annual Report 2023

Company financial statements continued
Notes to the Company accounts continued

8 Group companies continued

Registered Office addresses

Registered Office addresses
Africa, Asia, Australasia and Other Americas
Africa, Asia, Australasia and Other Americas
Diadema

Rio de Janeiro

São José

Ontario
Chile

Avenida Fagundes de Oliveira, 538, Piraporinha,
Mbigucci Diadema Business Park, Module B21 and B22,
City of Diadema São Paulo CEP 09950-300 Brazil
Rua Francisco de Sousa e Melo, 1590, Galpao 3
Armazem 103 parte, Bairro Cordovil, Rio de Janeiro,
CEP 21010-900, Brazil
Rua Dionizio Chinelato Nr. 100 – Complemento
Galpão 01 – Sala o1 CEP 12.238-578 Bairro – Eldorado,
Municipio São José dos Campos SP
2280 Argentia Road, , Mississauga ON L5N 6H8, Canada
Alonso de Cordova 5320 OF 1401 PS14, Las Condes,
Rol 751-76, Santiago, Chile

Georgetown 1104 c/o Maples Corporate Services Limited, P.O. Box 309,

Ugland house, Grand Cayman, KY1-1104,
Cayman Islands

Georgetown 9008 Walkers Corporate Limited, Cayman Corporate Centre,

27 Hospital Road, George Town, Grand Cayman,
KY1-9008, Cayman Islands
Room 17-021, Internal B17 floor, B3-24th floor, No 3
Xin Yuan South Rd, Chao Yang District, Beijing, China
22 Linhe Avenue, Linhe Economic Development Zone,
Shunyi District, Beijing, 101300, China

Chao Yang District,
Beijing
Shunyi District,
Beijing
Shanghai Ao Na Rd Part B, 4th Floor, Tong Yong Building, No 188 Ao Na Rd,

Shanghai Free Trade Test Zone, Shanghai, China

Dong Cheng District Unit B1, 2/F, Tower A, East Gate Plaza No.9,

Wu Hou District

Yue Xiu District

Jing’an District

Shanghai Xin Jin
Qiao Rd

Suzhou City

Dongshong Street Dong Cheng District, Beijing, China
No 5. 15th Floor, Unit 1, Building, 1 Li Bao Building,
No 62 North Ke Hua Rd, Wu Hou District,
Chengdu, China
Room 2503, No 33, 6th Jian She Rd, Yue Xiu District,
Guang Zhou, China
Unit 09, Nominal Level 12 (Actual Level 11), Central
Section of Bohua Square Office Tower, No. 669 Xinzha
Road, Jing’an District, Shanghai, China
Room 102, Floor 1, Building 3 (B1), No. 1599,
Xin Jin Qiao Road China (Shanghai) Pilot Free Trade Zone,
Shanghai, China
12, Wuxiang Road, West Area of Comprehensive
Bonded Zone, Suzhou Industrial Park, Suzhou City, SIP,
Jiangsu Province, China
Business Gate Exit 8 Airport Road, Riyadh, Saudi Arabia

Riyadh
Kechuang Dongliujie No. 98 Kechuang Dongliujie, Beijing Economic

Bogota

and Technical Development Area, Beijing, China
Calle 100 No. 7 – 33 to 1 P3, Bogota D.C., Colombia

Alajuela

Willemstad
Hong Kong

Pune

Mumbai

Tokyo

Seoul

Kuala Lumpur

Mexico City

Auckland

Manila

San Juan

Singapore

Westville

Taipei

Huai Khwang
District, Bangkok

Istanbul

Jebel Ali, Dubai

HealthCare City,
Dubai
Ho Chi Minh City

Building B32, 50 meters South of Revisión Téchnica
Vehicular, Province de Alajuela, Canton Alajuela,
Coyol Free Zone, District San José, Costa Rica
Pietermaai 15, PO Box 4905, Curaçao
Unit 813 – 816, 8/F, Delta House, 3 On Yiu Street,
Shatin, New Territories, Hong Kong
Podium Floor Tower 4, World Trade Center S No1
Kharadi, Pune, Maharashtra-MH, 411014, India
501-B – 509-B Dynasty Business Park, Andheri Kurla
Road, Andheri East, Mumbai-59, Maharashtra, India
Shiba Park blg A-3F , 2-4-1, Shiba -Koen , Minato -Ku,
Tokyo, 105-0011, Japan
13th Floor, ASEM Tower, Gangnam-gu 13th Floor,
ASEM Tower, 159-1 Samsung-dong, Seoul, Korea
Level 25, Menara Hong Leong, NO. 6 Jalan Damanlela
Bukit Damansara Kuala Lumpur W.P. 50490
Kuala Lumpur, Malaysia
Av. Insurgentes Sur, numero 1602, Piso No.7, Oficina 702,
Colonia Credito, Constructor, Delegacion Benito Juarez,
C.P. 03940, Mexico
621 Rosebank Road, Avondale, Auckland, 1026,
New Zealand
6/F Alfaro St, Salcedo Village, Makati City, Metro Manila,
Philippines
Edificio Cesar Castillo, Calle Angel Buonomo #361,
Hato Rey, 00917, Puerto Rico
29 Media Circle, #06-05, Alice@Mediapolis, Singapore,
138565, Singapore
30 The Boulevard, Westway Office Park, Westville,
3629, South Africa
9F-2, No. 50, Sec. 1, Xinsheng South Road, Zhongzheng
District Taipei City 10059, Taiwan
16th Floor Building A, 9th Tower Grand Rama 9,
33/4 Rama 9 Road, Huai Khwang District, Bangkok,
10310, Thailand
Mahmutbey Mahallesi, 2538. Sokak, Kısık Plaza Apt.
No:6/Z1, Istanbul, Bağcılar, Turkey
PO Box 16993 LB02016, Jebel Ali, Dubai,
United Arab Emirates
Floor 1, Building 52, Dubai Healthcare City, Dubai,
United Arab Emirates
Room 02, 18th floor, TNR building, 180-192, Nguyen
Cong Tru street, Nguyen Thai Binh Ward, District 1,
Ho Chi Minh City, Vietnam

9 Subsidiary undertakings exempt from audit
The following UK subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006
for the year ended 31 December 2023:
– Additive Instruments Limited (Registration number: 12323687)
– Smith & Nephew China Holdings UK Limited (Registration number: 9152387)
– Smith & Nephew Investment Holdings Limited (Registration number: 384546)
– Smith & Nephew Trading Group Limited (Registration number: 681256)
– Smith & Nephew USD One Limited (Registration number: 10428326)
– TP Limited (Registration number: SC005366)

234

Smith+Nephew Annual Report 2023

Other information

Group information
Business overview and Group history
Smith+Nephew’s operations have been
organised into three global business units
(previously franchises) (Orthopaedics,
Sports Medicine & ENT and Advanced
Wound Management) within the medical
technology industry.

The Group has a history dating back more
than 160 years to the family enterprise
of Thomas James Smith who opened
a small pharmacy in Hull, UK, in 1856.
Following his death in 1896, his nephew
Horatio Nelson Smith took over the
management of the business.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

By the late 1990s, Smith+Nephew
had expanded into being a diverse
healthcare company with operations
across the globe, producing various
medical devices, personal care products
and traditional and advanced wound
care treatments. In 1998, Smith+Nephew
announced a major restructuring to focus
management attention and investment
on three global business units – Advanced
Wound Management, Endoscopy
and Orthopaedics – which offered
high growth and margin opportunities.
In 2011, the Endoscopy and Orthopaedics
businesses were brought together to
create an Advanced Surgical Devices
division. In 2015, the Advanced Wound
Management and Advanced Surgical
Devices divisions were brought together
to form a global business across nine
product franchises.

Smith+Nephew was incorporated and
listed on the London Stock Exchange in
1937 and in 1999 the Group was also listed
on the New York Stock Exchange. In 2001,
Smith+Nephew became a constituent
member of the FTSE 100 index in the UK.
This means that Smith+Nephew is included
in the top 100 companies traded on the
London Stock Exchange measured in
terms of market capitalisation.

Today, Smith+Nephew is a public limited
company incorporated and headquartered
in the UK and carries out business around
the world.

Related party transactions
Except for transactions with associates
(see Note 22.2 of Notes to the Group
accounts), no other related party had
material transactions or loans with
Smith+Nephew over the last three
financial years.

Properties
The table below summarises the main properties which the Group uses and their approximate areas.

Group head office and surgical training facility in Watford, UK
Manufacturing and office facilities in Memphis, Tennessee, US
Wound management manufacturing, research and office facility in Hull, UK
Surgical training and office facilities in Memphis, Tennessee, US
Manufacturing facility in Suzhou, China
Manufacturing facility in Penang, Malaysia
Manufacturing facility in Alajuela, Costa Rica
Manufacturing facility in Oklahoma City, Oklahoma, US
Manufacturing, Office facilities and laboratory space in Fort Worth, Texas, US
Research & development and office facility in Austin, Texas, US
Manufacturing facility in Aarau, Switzerland
Logistic facility in Lawrenceville, US
Office facilities in Andover, Massachusetts, US
Manufacturing facility in Beijing, China
Manufacturing facility in Mansfield, Massachusetts, US
Business services centre in Pune, India
Research & development facility in Pittsburgh, Pennsylvania, US
Manufacturing, Office facility in Tuttlingen, Germany
Manufacturing facility in Columbia, Maryland, US

Approximate area
(square feet 000’s)
60
923
473
292
288
277
270
155
139
125
116
115
112
109
98
74
65
64
61

The Group Global Operations strategy includes ongoing assessment of the optimal facility footprint. The Orthopaedics manufacturing
facilities in Memphis are largely freehold, a portion of Tuttlingen and the Advanced Wound Management facilities in Hull are freehold
while other principal locations are leasehold. The Group has freehold and leasehold interests in real estate in other countries throughout
the world, but no other is individually significant to the Group. Where required, the appropriate governmental authorities have approved
the facilities.

Smith+Nephew Annual Report 2023

235

While the Group strives for effective
governance and measures, there is
no absolute assurance against future
interruptions that could potentially
disrupt business operations and materially
adversely affect the organisation’s
performance. Throughout the year 2023,
there were no cybersecurity incidents
identified which materially affected or
are reasonably likely to materially affect
the Group’s business strategy, results of
operations or financial condition and no
incidents have been reported to regulatory
authorities during this period.

However, despite our efforts, we cannot
eliminate all risks from cybersecurity
threats, or provide assurances that we
have not experienced an undetected
cybersecurity incident. For more
information about these risks, please see
page 240 ‘Risk Factors – Cybersecurity’
in this Annual Report on Form 20-F.

Other information continued

Cybersecurity risk
management and
governance
The Group has a dedicated information and
cybersecurity function of 49 employees,
led by an ISC2 Certified Information
Systems Security Professional (CISSP)
certified Chief Information Security
Officer (CISO) with over 25 years of
experience in this field. The CISO actively
participates in Audit Committee and
Executive Committee meetings. They are
also responsible for offering updates
and oversight on the information and
cybersecurity strategy and reporting
material cybersecurity risks and
mitigation strategies to the Board and
its subcommittees. Additionally, the
CISO chairs a subcommittee comprised
of business stakeholders, including, but
not limited to legal, compliance, finance,
internal audit, risk management and human
resources. The committee has overall
approval and sign-off of security and
privacy policies, which allows for focused
discussions and strategy alignment for
both security and privacy. The committee
provides necessary updates to the Board
where required.

The Group’s cybersecurity risk
management processes, which include
assessment, documentation and
treatment, have been integrated into
our overall enterprise risk management
system. The cybersecurity function has
well-defined processes for handling
information security and cybersecurity
incidents incorporating analysis and
prioritisation mechanisms aligned with
enterprise risk management. During the
handling of an incident, the information
security team will continuously monitor
and assess the impact to the organisation.
Thresholds have been set, which once
triggered will bring information security,
legal and compliance together as a
subcommittee. The subcommittee
will own the management assessment
of materiality, invocation of crisis
management, Board notification and the
drafting of any regulatory notifications.

In the event of a major cybersecurity
incident, including those with a material
impact on the Group, the CISO maintains
the engagement with the executive and
crisis management teams and the Board
if required.

The information and cybersecurity
function conducts an annual mandatory
information security awareness training
programme for all users, covering
topics such as physical security, email
security, data privacy, ransomware
guidance, phishing and general online
safety. Regular security campaigns are
also implemented to educate and raise
awareness among users about emerging
cyber threats. Our cybersecurity team
adopts a hybrid model to ensure coverage
and expertise across all areas; this
includes utilising a small set of managed
security service providers where required,
including but not limited to security
assessments, 24x7 monitoring and
service enhancements.

The Group uses a wide variety of
information systems, programs, and
technology to manage its business.

The Group also develops and sells digitally
enabled products some of which connect
to networks and/or the internet.

Recognising cybersecurity as a
multifaceted discipline covering people,
process, and technology, the Group
emphasises a continuous improvement
approach, measured via annual security
assessments and audits using a dedicated
24x7 security platform scoring service and
our own internal audit function.

A layered security strategy is implemented
to prevent, detect, and respond to threats
in an effort to minimise the risk and
disruption of intrusions. Robust governance
practices are in place across the
information security and cyber function,
including an assessment of suppliers and
vendors security and compliance posture
prior to the onboarding and activation of
any service. Active monitoring of third-
party providers is implemented once live
on a 24x7 basis, by utilising a dedicated
service via a market-leading third party,
reducing the risk of supply chain attacks.

236

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Risk factors
There are known and unknown risks and
uncertainties relating to Smith+Nephew’s
business. The factors listed on pages
237–243 could cause the Group’s
business, financial position and results
of operations to differ materially and
adversely from expected and historical
levels. In addition, other factors not listed
here that Smith+Nephew cannot presently
identify or does not believe to be equally
significant could also materially adversely
affect Smith+Nephew’s business, financial
position or results of operations.

Global supply chain
The Group’s manufacturing production
is concentrated at several main facilities
including Memphis, Mansfield, Columbia
and Oklahoma City in the US, Hull in
the UK, Aarau in Switzerland, Suzhou
in China, Penang in Malaysia and
Alajuela in Costa Rica. If major physical
disruption or unavailability of critical
system infrastructure and applications
took place at any of these sites, it could
adversely affect the results of operations.
Disruptions to our supply chain as a result
of geopolitical events such as the war in
Ukraine and conflict in Gaza on the access
to and cost of supply channels, freight,
raw materials and components have had
and may continue to have an adverse
effect on the Group’s results of operations.
Physical loss and consequential loss
insurance carried to cover major physical
disruption to these sites is subject to limits
and deductibles, generally does not cover
pandemic or war related disruptions, and
may not be sufficient to cover catastrophic
loss. Management, forecasting and
production planning for inventory is
complex and failures in operational
execution could lead to excess inventory
or individual product shortages. Further,
as the Group continues to transform its
supply chain network and operationalise
its warehouse and distribution functions,
there is a risk that, if the transition,
transformation and ongoing operations do
not go as planned, the supply of products
may be disrupted and impact performance.

The Group is reliant on certain key
suppliers of raw materials, components,
finished products and packaging
materials or in some cases on a single

supplier. Disruptions in the supply chain
and operations of the Group’s suppliers,
increased freight costs and cycle times
due to disruptions to shipping routes
(for example most recently through the
Red Sea and Suez Canal) and increased
sanctions, import and export controls
flowing from geopolitical events such
as the war in Ukraine and conflict in
Gaza could result in a further increase
in the Group’s costs of production and
distribution. Suppliers must provide
materials and perform services in
compliance with legal and regulatory
requirements and in accordance with the
Group’s standard quality requirements.
A supplier’s failure to comply with legal or
regulatory requirements or otherwise meet
expected quality standards could create
reputational harm and liability for the
Group and adversely affect Group sales.
The Group may be forced to pay higher
prices to obtain raw materials and/or to
sterilise its products and may not be able
to pass on those costs to its customers in
the form of increased prices for its finished
products. This risk is particularly relevant in
the medical devices sector due to complex
supply chains, increasing regulation
and enforcement and the potential for
healthcare budgets globally to be reduced.
As certain raw materials may become
unavailable and/or capacity for sterilisation
services may become increasingly
constrained beyond current capacity levels,
in particular due to supply challenges and
increased regulation and enforcement,
there can be no assurance that the Group
will be able to obtain suitable and cost-
effective substitutes. Interruption of supply
caused by these or other factors has had
and may continue to have a negative
impact on Smith+Nephew’s revenue and
operating profit.

The Group will, from time to time, including
as part of the Operations and Commercial
Excellence programme, outsource or
insource the manufacture of components
and finished products to or from third
parties and will periodically relocate the
manufacture of product and/or processes
between existing and/or new facilities.
Failure to effectively execute on these
programmes may negatively impact
the Group’s performance, revenue and
profit margin.

Natural disasters, weather and climate
change-related events and unavailability
of critical system infrastructure and
applications can also lead to manufacturing
and supply delays, product shortages,
excess inventory, unanticipated costs,
lost revenues and damage to reputation.
In addition, the pace of development
and expansion of environmental and
sustainability regulations globally,
coupled with more active enforcement
of regulations, can impact the Group’s
ability to manufacture, sterilise and
supply product. In addition, the Group’s
physical assets and supply chains are also
vulnerable to weather and climate change
(e.g. sea level rise, increased frequency and
severity of extreme weather events, and
stress on water resources). Where such
events impact a manufacturing facility,
the Group may be unable to manufacture
products. In this case, if there are
insufficient manufacturing alternatives
for the relevant products, the Group may
not be able to supply those products to
its customers.

The Group is exposed to increasing salary
and wage costs for its employees and
contractors due to global inflation and the
cost of living crisis. This, combined with
labour attrition and longer cycle times to
backfill roles, may adversely impact the
Group’s performance. Requirements of
global regulatory agencies have become
more stringent in recent years and the
Group expects this to continue. The
Group’s Quality and Regulatory Affairs
team has implemented its programme
to transition to the EU Medical Devices
Regulation (MDR) regulatory regime,
which includes requirements for the
manufacture, supply and sale of all CE
marked products sold in Europe (i.e.
those products that conform with health,
safety and environmental protection
standards within the European Economic
Area). MDR requires the re-registration of
all medical devices, regardless of where
they are manufactured. There continue
to be significant capacity constraints in
implementing MDR given the small number
of notified bodies certified under MDR.
This could continue to cause delays for
medical device approvals for the industry
more broadly and may result in delays
for patients.

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Risk factors continued

The European Commission has taken some
important steps to aid implementation,
including delaying the EU database
(EUDAMED) and providing a longer
implementation timeline for certain Class lR
devices (ie. reusable surgical instruments).
More recently the EU Commission has
implemented transitional requirements to
support products to continue to be made
available. This supports both the Group as
well as supporting capacity constraints
within the Notified Bodies.

The Group operates with a global remit
and the speed of technological change
in an already complex manufacturing
process leads to greater potential for
disruption. Additional risks to supply
include inadequate sales and operational
planning and inadequate supply chain
or manufacturing capacity to support
customer demand and growth.

Widespread outbreaks of infectious
diseases, and restrictions and lockdowns
arising therefrom, could create uncertainty
and challenges for the Group. These include,
but are not limited to, declines in and
cancellations of elective procedures at
medical facilities, reduction in staffing and
other support within institutions, disruptions
at manufacturing facilities and disruptions
in supply and other commercial activities
due to travel restrictions and government
restrictions on exports.

Strategy and commercial execution
Strong commercial execution requires
effective cross-functional alignment,
accountability, engagement and
communication across the Group within
embedded governance structures and
frameworks. Effective engagement
with customers, suppliers and other
stakeholders is also a crucial factor to
ensure strong commercial execution.
Failure to effectively implement the
Group’s programmes within appropriate
governance frameworks or failure
to understand or take into account
customer, supplier and stakeholder
needs and requirements could adversely
affect the Group’s performance.
Additional commercial execution risks
include medical facilities stopping or
severely restricting sales representative
access due to increased post-pandemic
pressure on these facilities and their staff.

The Group’s business requires continuous
improvement and depends on its ability
to execute business change programmes
such as the 12-Point Plan at pace, whilst
continuing to operate business as usual.
The pace and scope of the Group’s business
change initiatives may increase execution
risk for the change programmes as well as
for the Group’s business-as-usual activities.
The Group’s business depends on its ability
to plan for and be resilient in the face of
events that threaten one or more of its
key locations.

Highly competitive markets
The Group competes across a diverse
range of geographic and product
markets. Each market in which the
Group operates contains a broad range
of competitors, including specialised and
international corporations.

Significant product innovations, technical
advances or the intensification of price
competition by competitors could
adversely affect the Group’s operating
results. Some competitors may have
greater financial, marketing and
other resources than Smith+Nephew.
These competitors may be able to initiate
technological advances in the field, deliver
products on more attractive terms, more
aggressively market their products or
invest larger amounts of capital and
research and development (R&D) into
their businesses.

Further consolidation of competitors
could adversely affect the Group’s ability
to compete with larger companies due
to insufficient financial resources. If any
of the Group’s businesses were to lose
market share or achieve lower than
expected revenue growth, there could be
a disproportionate adverse impact on the
Group’s share price and its strategic options.
Competition exists among healthcare
providers to gain patients on the basis of
quality, service and price. There has been
some consolidation in the Group’s customer
base and this trend is expected to continue.
Some customers have joined group
purchasing organisations or introduced
other cost containment measures that
could lead to downward pressure on
prices or limit the number of suppliers
in certain business areas, which could
adversely affect Smith+Nephew‘s results of
operations and hinder its growth potential.

Relationships with
healthcare professionals
The Group seeks to maintain effective
and ethical working relationships with
physicians and medical personnel who
assist in the development of new products
or improvements to its existing product
range and in product training and medical
education. If the Group is unable to
maintain these relationships, this may
affect its ability to innovate, meet patients’
needs and ensure its products are used
safely and effectively.

Customer and other stakeholder
sustainability expectations
The Group’s customers continue to develop
more stringent sustainability requirements
that they request or expect the Group
to implement or adhere to in addition to
the laws and regulations applicable to
the Group. A failure to meet customers’
requirements or expectations may
adversely impact the Group’s financial
performance. Increased investment related
to customer requests in this area may
impact profit margin.

Acquisitions
Challenges in integration of new
acquisitions may arise following completion
of the deal, including external macro
factors and geopolitical events. This may
lead to the Group not achieving the
planned synergies and results from
the acquisition.

Pricing and reimbursement
Dependence on government
and other funding
In most global markets, expenditure on
medical devices is ultimately controlled
to a large extent by governments and
healthcare systems. Funds may be made
available or withdrawn from healthcare
budgets depending on government policy.
The Group is therefore dependent on
future governments providing increased
funds commensurate with the increased
demand arising from demographic trends.

Pricing of many of the Group’s products
is governed in most markets by
governmental reimbursement authorities.
Increasing numbers of initiatives sponsored
by government agencies, legislative bodies
and the private sector to relieve the

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pressure on healthcare budgets and limit
the growth of healthcare costs, including
price regulation on products or entire
procedures, value and volume-based
procurement initiatives, excise taxes and
competitive pricing are being implemented
at pace in markets where the Group
has operations. The Group is exposed
to government policies favouring locally
sourced or manufactured products in many
markets in which it operates, impacting
its ability to compete effectively and gain
share which can negatively impact Group
revenues and profit margins.

The Group is increasingly exposed to
changes in reimbursement policy, tax
policy and pricing, including as a result of
financial pressure on governments and
hospitals caused by recession and inflation
in its markets, which may have an adverse
impact on revenue and operating profit.
Reimbursement codes are increasingly
more widely interpreted to provide for
remote delivery of healthcare services
indicating a continued trend to shift site
of care and manage related healthcare
budgets away from traditional inpatient
treatment. There may also be an increased
risk of adverse changes to government
funding policies arising from deterioration
in macroeconomic conditions from time to
time in the Group’s markets.

The Group must adhere to the rules
laid down by government agencies that
fund or regulate healthcare, including
extensive and complex rules in the US.
Failure to do so could result in fines,
litigation, reputational damage and/or loss
of customers and future funding.

Procurement and supply chain
verification processes
Global recessionary and inflationary
pressures and the commoditisation
of entire product groups have led to
an increase globally in price-driven
approaches to customer procurement
processes and tenders, such as the value-
based procurement programme in China
and further consolidation of customer
buying groups. Non-clinical staff are
often key decision-makers in customers’
procurement processes, with access
to these decision-makers being limited
for some customers. These factors can
adversely impact the pricing that the
Group achieves for its products.

Due to geopolitical conflicts and events
and increased regulation relating to
sustainability, supplier verification
and trade compliance, procurement
processes are now required to evaluate
and demonstrate the provenance of raw
materials, components and products
at many levels in the medical product
supply chain. Given the high level of
complexity and multiple tiers within the
industry supply chain, there is a risk that
the Group is unable to verify the ultimate
provenance of certain materials which
may result in fines, penalties, seizure of
goods, reputational harm and impact to
performance of the Group.

New product innovation, design
and development, including
intellectual property
Development and introduction
of new products
The medical devices industry has
a high level of innovation and new
product introduction. In order to remain
competitive, the Group must continue to
develop innovative products that satisfy
customer needs and preferences, meet
unmet needs, and/or provide cost or other
advantages. Developing new products is
a costly, lengthy and uncertain process.
The Group may fail to innovate due to
insufficient R&D investment, an R&D
skills gap or poor product development.
A potential product may not be brought to
market or not succeed in the market for
any number of reasons, including failure to
work optimally, failure to receive regulatory
approval, failure to be cost-competitive,
infringement of patents or other
intellectual property rights and changes in
consumer demand.

The Group’s products and technologies
are also subject to marketing challenge by
competitors. Furthermore, new products
that are developed and marketed by the
Group’s competitors may affect price levels
in the various markets in which the Group
operates. If the Group’s new products
do not remain competitive with those of
competitors, the Group’s revenue could
decline. The Group maintains reserves for
excess and obsolete inventory resulting
from the potential inability to sell its
products at prices in excess of current
carrying costs. Marketplace changes
resulting from the introduction of new
products or surgical procedures may cause

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GOVERNANCE
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OTHER INFORMATION

some of the Group’s products to become
obsolete. The Group makes estimates
regarding the future recoverability of
the costs of these products and records
a provision for excess and obsolete
inventories based on historical experience,
expiration of sterilisation dates and
expected future trends. If actual product
life cycles, product demand or acceptance
of new product introductions are less
favourable than projected by management,
additional inventory write-downs may
be required.

All new products that the Group develops
need to be designed and manufactured in a
sustainable manner. A failure in this aspect
may impact the willingness of customers to
purchase the new products and adversely
impact the Group’s ability to continue
selling the product.

Where the Group has critical gaps in its
product portfolio that are not filled by new
products there is a risk that the Group will
lose market share to competitors that
can offer a more innovative or broader
product portfolio.

Proprietary rights and patents
Due to the technological nature of medical
devices and the Group’s emphasis on
serving its customers with innovative
products, the Group has been subject to
patent infringement claims and is subject
to the potential for additional claims.
Claims asserted by third parties regarding
infringement of their intellectual property
rights, if successful, could require the
Group to expend time and significant
resources to engage in dispute resolution
and, if unsuccessful, pay damages, develop
non-infringing products or obtain licences
to the products which are the subject
of such litigation, affecting the Group’s
growth and profitability.

Smith+Nephew protects its intellectual
property and opposes third-party
patents and trademarks where it deems
appropriate. If Smith+Nephew fails
to protect and enforce its intellectual
property rights effectively, its competitive
position could suffer, which could
negatively impact performance. In addition,
intellectual property rights may not
be protectable or enforceable to the
same extent in all countries in which the
Group operates.

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Other information continued
Risk factors continued

Cybersecurity
Reliance on information technology
and cybersecurity
The Group uses a wide variety of
information systems, programmes and
technology to manage its business.
The Group also develops and sells certain
products that are or will be digitally
enabled including connection to networks
and/or the internet. The Group’s systems
and the systems of the entities it acquires
are vulnerable to a cyber-attack, theft of
intellectual property, malicious intrusion,
loss of data privacy or other significant
disruption. The Group’s systems have been
and will continue to be the target of such
threats, including as a result of remote
working. There is increasing government
focus on cybersecurity including changes in
the regulatory environment.

Cybersecurity is a multifaceted discipline
covering people, process and technology.
It is also an area where more can always be
done; it is a continually evolving practice.

There is no assurance that the Group’s
ongoing commitment to prevent, detect
and respond to cyber incidents and
potential threats will prove effective.
As a result, the Group could lose
customers, have disputes with healthcare
professionals, suffer regulatory sanctions
or penalties, experience increases in
operating expenses or an impairment in its
ability to conduct its operations, patients
or employees could be exposed to financial
or medical identity theft or suffer a loss of
product functionality, and the reputation
and performance of the Group could be
materially adversely affected.

Although the Company maintains
insurance coverage for various business
continuity risks, all costs or losses incurred
would not be fully insured.

Legal and compliance risks including
international regulation, product
liability claims and loss of reputation
Global regulation
The Group operates globally and is
subject to extensive complex legislation,
regulation, and reporting requirements,
including without limitation in respect
of anti-bribery and corruption, data
protection, trade compliance and

corporate governance and sustainability in
each country in which the Group operates.
The Group’s global operations are governed
by the UK Bribery Act and the US Foreign
Corrupt Practices Act which prohibit
the Group or its representatives from
making or offering improper payments to
government officials and other persons
or accepting payments for the purpose
of obtaining or maintaining business.
The Group’s international operations which
operate through distributors and agents
increase our Group exposure to these
risks. The Group undertakes investigations
into allegations of possible violations
of laws and regulations, supported by
external counsel where appropriate. It is
not possible to predict the nature, scope
or outcome of investigations, including the
extent to which, if at all, this could result
in any liability or reputational harm to
the Group.

The Group is required to comply with the
requirements of data privacy laws and
regulations in the markets in which it
operates which impose obligations regarding
the handling of personal data. As privacy
and data protection continue to be a focus
for regulators and consumers, new and
enhanced privacy and data protection
laws and regulations and enforcement
frameworks, continue to develop globally.

Geopolitical events such as the war in
Ukraine have led to an increase in sanctions
and trade compliance programmes with
which the Group is required to comply
and which often require evaluation and
implementation at pace.

Increased stakeholder focus from customers,
suppliers, investors, regulators and
governments on environmental, social and
governance matters and AI means that the
Group is required to evaluate and ensure
compliance with laws, regulations and
reporting requirements in these areas.

Ensuring compliance with all evolving laws,
regulations, and reporting requirements
on a global basis may require the Group
to change or develop its current business
models and practices and may increase its
cost of doing business. Despite efforts to
manage and mitigate legal and compliance
risk across the organisation, there is a risk
that the Group may be subject to fines and
penalties, litigation and reputational harm

in connection with its activities where
breaches are found to have occurred.
Failure to comply with the requirements
of laws, regulations and reporting
requirements could adversely affect the
Group’s business, reputation, financial
condition or results of operations.

Operating in multiple jurisdictions also
subjects the Group to local laws and
regulations including without limitation
relating to tax, pricing, reimbursement,
regulatory requirements, product
safety, and varying levels of protection
of intellectual property. This exposes
the Group to additional risks and
potential costs.

Product liability claims and loss
of reputation
The development, manufacture and sale
of medical devices entails risk of product
liability claims or recalls. Design and
manufacturing defects with respect
to products sold by the Group or by
companies it has acquired could damage,
or impair the repair of, body functions.
The Group may become subject to liability,
which could be substantial, because of
actual or alleged defects in its products.
In addition, product defects could lead to
the need to recall from the market existing
products, which may be costly and harmful
to the Group’s reputation. There can be no
assurance that customers, particularly in
the US, the Group’s largest geographical
market, will not bring product liability or
related claims that would have a material
adverse effect on the Group’s financial
position or results of operations in the
future, or that the Group will be able to
resolve such claims within insurance limits.

As at 31 December 2023, a provision of
$149m is recognised relating to the present
value of the estimated costs to resolve all
unsettled known and unknown anticipated
metal-on-metal hip implant claims globally.
See Note 17 to the Group accounts for
further details.

Financial reporting, compliance and control
The Group’s financial results depend on its
ability to comply with financial reporting
and disclosure requirements, comply
with tax laws, appropriately manage
treasury activities and avoid significant
transactional errors and customer defaults

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Quality and regulatory
Regulatory standards and compliance
in the healthcare industry
Business practices in the healthcare
industry are subject to regulation and
review by various government authorities.
In general, the trend in many countries in
which the Group does business is towards
higher expectations and increased
enforcement activity by governmental
authorities. While the Group is committed
to doing business with integrity and
welcomes the trend to higher standards
in the healthcare industry, the Group and
other companies in the industry have
been subject to investigations and other
enforcement activity that have incurred
and may continue to incur significant
expense. Under certain circumstances,
if the Group were found to have violated
the law, its ability to sell its products to
certain customers may be restricted.

Regulatory approval
The international medical device industry is
highly regulated. Regulatory requirements
are a major factor in determining
whether substances and materials can
be developed into marketable products
and the amount of time and expense that
should be allotted to such development.
National regulatory authorities administer
and enforce a complex series of laws
and regulations that govern the design,
development, approval, manufacture,
labelling, marketing and sale of healthcare
products. They also review data
supporting the safety and efficacy of
such products. Of particular importance
is the requirement in many countries that
products be authorised or registered prior
to manufacture, marketing or sale and
that such authorisation or registration be
subsequently maintained.

(the risk of which has been heightened
post-pandemic). Failure to comply with the
Group’s financial reporting requirements
or relevant tax laws can lead to litigation
and regulatory penalties and sanction and
ultimately to potential material loss to
the Group. Potential risks include failure
to report accurate financial information
in compliance with accounting standards
and applicable legislation, failure to comply
with current tax laws, failure to manage
treasury risk effectively and failure to
operate adequate financial controls over
business operations.

Political and economic
World economic conditions
Demand for the Group’s products is driven
by demographic trends, including the
ageing population and the incidence of
osteoporosis and obesity. Supply of, use
of and payment for the Group‘s products
are also influenced by world economic
conditions which could place increased
pressure on demand and pricing, adversely
impacting the Group’s ability to deliver
revenue and margin growth. The conditions
could favour larger, better capitalised
groups, with higher market shares and
margins. As a consequence, the Group’s
prosperity is linked to general economic
conditions and there is a risk of deterioration
of the Group’s performance and finances
during adverse macroeconomic conditions.
The impact of geopolitical conditions such
as the war in Ukraine and the conflict in
Gaza on global economies and financial
markets may trigger a recession or
slowdown in various markets in which the
Group operate which would significantly
reduce customer capital spending and
customer financial strength.

Economic conditions worldwide continue
to create several challenges for the Group,
including the US Administration’s approach
to trade policy, increased global sanctions
and countersanctions in response to local
or global conflicts, heightened inflation and
pricing pressure (arising across the costs of
raw materials, freight and employee salaries
and wages), increasing tax rates, significant
declines in capital equipment expenditures
at hospitals and increased uncertainty
over the collectability of government debt.
These factors could have an increased
impact on growth in the future.

The Group is increasingly seeing sustainability
targets and public policies being promulgated
in the markets in which the Group operates
as well as by its customers, suppliers and
other stakeholders. A failure to meet these
targets and policies could impact the Group’s
sales and growth in those markets.

Political uncertainties
The Group operates on a worldwide basis
and has distribution channels, agents and
purchasing entities in over 100 countries.
Political upheaval in some of those
countries or in surrounding regions may
impact the Group’s results of operations.
Political changes in a country could prevent
the Group from receiving remittances
of profit from a member of the Group
located in that country or from selling its
products or investments in that country.
Furthermore, changes in government policy
regarding preference for local suppliers,
import quotas, taxation or other matters
could adversely affect the Group’s revenue
and operating profit.

War and conflict such as in Ukraine and
Gaza, economic sanctions, terrorist
activities or other conflict could also
adversely impact the Group whether in
terms of increased compliance resources
and cost to serve, increased freight
cycle times, market exit, disruption to
operations and/or reputational damage.
There remains a level of political and
regulatory uncertainty in the UK following
the exit from the European Union and the
introduction of new legislation in the UK.

Taxation
The Group operates a global business and
is therefore required to comply with tax
legislation in multiple jurisdictions. There is
the potential for an adverse impact on
the Group’s financial performance due to
significant tax rate changes, or broadening
of the tax base, in key jurisdictions in which
the Group operates. These include OECD
Pillar Two (as outlined on page 187) and
US tax reform proposals. These external
factors may require the Group to adjust its
operating model.

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Other information continued
Risk factors continued

The major regulatory agencies for
Smith+Nephew’s products include the
Food and Drug Administration (FDA) in
the US, the Medicines and Healthcare
products Regulatory Agency in the UK,
the Ministry of Health, Labour and Welfare
in Japan, the National Medical Products
Administration in China and the Australian
Therapeutic Goods Administration. At any
time, the Group is awaiting a number
of regulatory approvals which, if not
received, could adversely affect results of
operations. Following the entry into force
in May 2017 of the MDR, the increase
in the time required by Notified Bodies
to review product submissions and site
quality systems’ certification time has
had and may continue to have an adverse
impact on the Group’s ability to meet
customer demand.

The trend is towards more stringent
regulation and higher standards of technical
appraisal and there are increasingly stringent
local requirements for clinical data across
many of the markets globally in which the
Group operates. Such controls have become
increasingly demanding to comply with
and management believes that this trend
will continue. Privacy, environmental and
sustainability laws and regulations have
also been developed and implemented
at pace globally and have become
more stringent, supported by enhanced
enforcement frameworks and resources.

There is also an increase in regulation
relating to labelling and reporting in the
markets in which the Group operates
which results in increased resourcing and
cost to the Group. Regulatory requirements
may also entail inspections for compliance
with appropriate standards, including those
relating to Quality Management Systems or
Good Manufacturing Practices regulations.
All manufacturing and other significant
facilities within the Group are subject to
regular internal and external audit for
compliance with national medical device
regulation and Group policies. Payment for
medical devices may be governed by
reimbursement tariff agencies in a number
of countries. Reimbursement rates may
be set in response to perceived economic
value of the devices, based on clinical
and other data relating to cost, patient
outcomes and comparative effectiveness.

They may also be affected by overall
government budgetary considerations.
The Group believes that its emphasis on
innovative products and services should
contribute to success in this environment.
Failure to comply with these regulatory
requirements could have a number
of adverse consequences, including
withdrawal of approval to sell a product
in a country, temporary closure of a
manufacturing facility, fines and potential
damage to Company reputation.

Mergers and acquisitions
Failure to make successful acquisitions
A key element of the Group’s strategy for
continued growth is to make acquisitions
or alliances to complement its existing
business. Failure to identify appropriate
acquisition targets or failure to conduct
adequate due diligence or to integrate
them successfully would have an adverse
impact on the Group’s competitive position
and profitability. This could result from the
diversion of management resources from the
acquisition or integration process, challenges
of integrating organisations of different
geographic, cultural and ethical backgrounds,
as well as the prospect of taking on
unexpected or unknown liabilities. In addition,
the availability of global capital and increased
interest rates may make financing less
attainable or more expensive and could
result in the Group failing in its strategic
aim of growth by acquisition or alliance.

Talent management
The Group’s continued ability to deliver
business objectives depends on its
ability to hire, successfully engage and
retain highly skilled talent with particular
expertise and knowledge in each business
unit and market in which it operates.
This is critical, particularly in general
management, new product development
and in data analytics and insights. Since the
Covid-19 pandemic, employee priorities
have shifted in terms of work-life balance
resulting in increased global movement of
talent and higher requirement for flexibility
from both our current talent and external
candidates. Attracting and retaining talent
efforts continue across all disciplines and
geographies to ensure that we mitigate
impacts on revenue and operating profits.

Additionally, if the Group is unable to
attract, develop and engage talent
this could have an impact on effective
succession planning, it may not be able
to meet its strategic business objectives,
and may lose competitive advantage and
intellectual capital.

Environment and sustainability
Climate change and sustainability-related
risks have the potential to impact the
Group’s business model and performance.
The impacts of climate change on
the Group’s business may arise from
new regulations and requirements to
obtain certain sustainability standards,
international sustainability accords and
agreements, and changing business
practices and trends to accommodate
climate change risks. Further, the Group
will be exposed to the physical impacts
of climate change, which may impact
the manufacture of its products and the
supply chain to deliver them to its markets.
The Group may need to adapt its business
model and processes to accommodate
the changes brought about by climate-
related issues and increased focus and
regulation of sustainability requirements
by governments, regulators, customers,
investors and other stakeholders. If the
Group does not achieve the climate
change and sustainability targets and
objectives set by the Group, or set by the
governments and regulators in the markets
where it operates, or by its customers,
there may be an impact on the Group’s
performance and ability to grow.

Foreign exchange
The Group operates a global business
and is therefore exposed to exchange
rate volatility. There is the potential for an
adverse impact on the Group’s financial
performance due to currency fluctuations.

Currency fluctuations
Smith+Nephew’s results of operations
are affected by transactional exchange
rate movements in that they are subject
to exposures arising from revenue in a
currency different from the related costs
and expenses. The Group‘s manufacturing
cost base is situated principally in the US,
the UK, China, Costa Rica, Malaysia and
Switzerland, from which finished products

242

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Disruptor products
Innovative products in the wider healthcare
industry have the potential to disrupt the
medical device industry, especially as the
pharmaceutical sector looks to accelerate
research and development through the
use of AI. Investor perception of the impact
of compounds, such as glucagon-like
peptide-1 (GLP-1) receptor agonists, on
the medical device industry could have a
negative impact on the industry as a whole
as well as a potential negative impact on
the strategy and financial performance
of the Group.

Factors affecting results
of operations
Government economic, fiscal, monetary
and political policies are all factors that
materially affect the Group’s operation
or investments of shareholders. Other
factors include sales trends, currency
fluctuations and innovation. Each of these
factors is discussed further in the Taking
our innovation to market section on
pages 34–45, the Manufacturing section
on pages 32–33, the Financial review on
pages 20–23 and the Taxation information
for shareholders on pages 251–253.

are exported to the Group’s selling
operations worldwide. Thus, the Group is
exposed to fluctuations in exchange rates
between the US Dollar, Sterling and Swiss
Franc and the currency of the Group’s
selling operations, particularly the Euro,
Chinese Yuan, Australian Dollar, Malaysian
Ringgit and Japanese Yen.

If the US Dollar, Sterling or Swiss Franc
should strengthen against the Euro,
Australian Dollar and the Japanese Yen, the
Group’s trading margin could be adversely
affected. The Group manages the impact
of exchange rate movements on operating
profit by a policy of transacting forward
foreign currency contracts when firm
commitments exist. In addition, the
Group’s policy is for forecast transactions
to be covered between 50% and 90% for
up to one year. However, the Group is still
exposed to medium to long-term adverse
movements in the strength of currencies
compared to the US Dollar. The Group uses
the US Dollar as its reporting currency.
The US Dollar is the functional currency
of Smith & Nephew plc. The Group’s
revenues, profits and earnings are also
affected by exchange rate movements on
the translation of results of operations in
foreign subsidiaries for financial reporting
purposes. See ‘Liquidity and capital
resources’ on page 204.

Artificial Intelligence
Advances in Artificial Intelligence (AI),
machine learning, robotics, and other
technologies create opportunities for the
Group when used within a clear governance
framework. These technologies can help us
to innovate to meet unmet patient needs
and earn and retain market share through
improved productivity and customer
service. The use of AI technology should
be implemented with clear guidance on
usage and risk management in order to
mitigate the risk of employees or third
parties inadvertently disclosing proprietary
information or confidential or sensitive
data. As many AI tools are limited by the
information within the data sets that they
are trained on, human oversight is required
in order to manage risk and avoid outputs
that are inherently biased or untrue.

Smith+Nephew Annual Report 2023

243

Other information continued

Non-IFRS financial
information –
Adjusted measures
These financial statements include
financial measures that are not prepared
in accordance with International
Financial Reporting Standards (IFRS).
These measures, which include trading
profit, trading profit margin, trading profit
before tax, adjusted attributable profit,
tax rate on trading results (trading tax
expressed as a percentage of trading profit
before tax), EPSA, ROIC, trading cash flow,
free cash flow, trading profit to trading
cash conversion ratio, leverage ratio and
underlying revenue growth, exclude the
effect of certain cash and non-cash items
that Group management believe are not
related to the underlying performance
of the Group. These non-IFRS financial
measures are also used by management
to make operating decisions because
they facilitate internal comparisons of
performance to historical results.

Non-IFRS financial measures are
presented in these financial statements
as the Group’s management believe that
they provide investors with a means of
evaluating performance of the business
segments and the consolidated Group
on a consistent basis, similar to the
way in which the Group’s management
evaluate performance, that is not
otherwise apparent on an IFRS basis,
given that certain non-recurring,
infrequent, non-cash and other items
that management does not otherwise
believe are indicative of the underlying
performance of the consolidated Group
may not be excluded when preparing
financial measures under IFRS.
These non-IFRS measures should not
be considered in isolation from, as
substitutes for, or superior to financial
measures prepared in accordance
with IFRS.

Payments of lease liabilities are included
in trading cash flow. IFRS 16 right-of-use
assets and IFRS 16 lease liabilities are
included in net operating assets in
arriving at ROIC.

Underlying revenue growth
‘Underlying revenue growth’ is used
to compare the revenue in a given year to
the previous year on a like-for-like basis.
This is achieved by adjusting for the impact
of sales of products acquired in material
business combinations or disposed of
and for movements in exchange rates.

Underlying revenue growth is considered
by the Group to be an important measure
of performance as it excludes those items
considered to be outside the influence
of local management. The Group’s
management use this non-IFRS measure in
their internal financial reporting, budgeting
and planning to assess performance
on both a business and a consolidated
Group basis. Revenue growth at constant
currency is important in measuring
business performance compared to
competitors and compared to the
growth of the market itself.

The Group considers that revenue from
sales of products acquired in material
business combinations results in a
step-up in growth in revenue in the year
of acquisition that cannot be wholly
attributed to local management’s efforts
with respect to the business in the year
of acquisition. Depending on the timing
of the acquisition, there will usually be
a further step change in the following
year. A measure of growth excluding the
effects of business combinations also
allows senior management to evaluate the
performance and relative impact of growth
from the existing business and growth
from acquisitions. The process of making
business acquisitions is directed, approved
and funded from the Group corporate
centre in line with strategic objectives.

The material limitation of the underlying
revenue growth measure is that it excludes
certain factors, described above, which
ultimately have a significant impact on
total revenues. The Group compensates
for this limitation by taking into account
relative movements in exchange rates
in its investment, strategic planning and
resource allocation. In addition, as the
evaluation and assessment of business
acquisitions is not within the control
of local management, performance of
acquisitions is monitored centrally until
the business is integrated.

The Group’s management consider that
the non-IFRS measure of underlying
revenue growth and the IFRS measure
of growth in revenue are complementary
measures, neither of which management
use exclusively.

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.

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

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

244

Smith+Nephew Annual Report 2023

Reported revenue growth, the most directly comparable financial measure calculated in accordance with IFRS, reconciles to underlying
revenue growth as follows:

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

2023

Consolidated revenue by business unit
Knee Implants
Hip Implants
Other Reconstruction
Trauma & Extremities
Orthopaedics
Sports Medicine Joint Repair
Arthroscopic Enabling Technologies
ENT (Ear, Nose and Throat)
Sports Medicine & ENT
Advanced Wound Care
Advanced Wound Bioactives
Advanced Wound Devices
Advanced Wound Management
Total

2022
Consolidated revenue by business unit
Knee Implants
Hip Implants
Other Reconstruction
Trauma & Extremities
Orthopaedics
Sports Medicine Joint Repair
Arthroscopic Enabling Technologies
ENT (Ear, Nose and Throat)
Sports Medicine & ENT
Advanced Wound Care
Advanced Wound Bioactives
Advanced Wound Devices
Advanced Wound Management
Total

Reported growth
%
4.7
2.5
27.8
3.7
4.8
8.7
3.7
28.1
8.8
1.8
6.3
17.0
6.2
6.4

Reported growth
%
2.5
(4.4)
(5.6)
(5.7)
(2.0)
3.6
(3.8)
17.1
1.9
(2.6)
4.9
4.3
1.1
0.1

Underlying growth
%
5.5
3.8
28.0
4.4
5.7
9.9
4.7
29.8
10.0
2.1
6.2
17.6
6.4
7.2

Underlying growth
%
6.8
(0.2)
(1.8)
(2.6)
1.9
8.7
0.9
20.4
6.7
5.2
5.4
11.6
6.4
4.7

Acquisitions/disposals
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Reconciling items
Currency impact
%
(0.8)
(1.3)
(0.2)
(0.7)
(0.9)
(1.2)
(1.0)
(1.7)
(1.2)
(0.3)
0.1
(0.6)
(0.2)
(0.8)

Reconciling items
Currency impact
%
(4.3)
(4.2)
(3.8)
(3.1)
(3.9)
(5.1)
(4.7)
(3.3)
(4.8)
(7.8)
(0.5)
(7.3)
(5.3)
(4.6)

Trading profit, trading profit margin, trading cash flow and trading profit to trading cash conversion ratio
Trading profit, trading profit margin (trading profit expressed as a percentage of revenue), trading cash flow and trading profit to trading
cash conversion ratio (trading cash flow expressed as a percentage of trading profit) are trend measures, which present the profitability
of the Group. The adjustments made exclude the impact of specific transactions that management consider affect the Group’s short-term
profitability and cash flows, and the comparability of results. The Group has identified the following items, where material, as those to
be excluded from operating profit and cash generated from operations, the most directly comparable IFRS measures, when arriving at
trading profit and trading cash flow, respectively: 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 or cash flows on a short-term or one-off basis are excluded from operating profit and cash generated from operations when
arriving at trading profit and trading cash flow. The cash contributions to fund defined benefit pension schemes that are closed to future
accrual are excluded from cash generated from operations when arriving at trading cash flow. Payment of lease liabilities is included
within trading cash flow.

Smith+Nephew Annual Report 2023

245

Other information continued
Non-IFRS financial information – Adjusted measures continued

Adjusted earnings per ordinary share (EPSA)
EPSA is a trend measure, which presents the profitability of the Group excluding the post-tax impact of specific transactions that
management consider affect the Group’s short-term profitability and comparability of results. The Group presents this measure to
assist investors in their understanding of trends. Adjusted attributable profit is the numerator used for this measure and is determined
by adjusting attributable profit for the items that are excluded from operating profit when arriving at trading profit and items that are
recognised below operating profit that affect the Group’s short-term profitability. The most directly comparable financial measure
calculated in accordance with IFRS is basic earnings per ordinary share (EPS).

2023 Reported
Acquisition and disposal-related items8
Restructuring and rationalisation costs
Amortisation and impairment of acquisition
intangibles8
Legal and other7,8
Lease liability payments
Capital expenditure
2023 Adjusted

Revenue
$ million
5,549
–
–

–
–
–
–
5,549

Operating
profit1
$ million
425
60
220

Profit before
tax2
$ million
290
78
223

Taxation3
$ million
(27)
(14)
(42)

Attributable
profit4
$ million
263
64
181

Cash generated
from operations5
$ million
829
16
124

Earnings
per share6
¢
30.2
7.3
20.7

207
58
–
–
970

207
64
–
–
862

(45)
(12)
–
–
(140)

162
52
–
–
722

–
145
(52)
(427)
635

18.6
6.0
–
–
82.8

Acquisition and disposal-related items: For the year ended 31 December 2023, costs primarily relate to the acquisition of CartiHeal
and impairment of Engage goodwill, partially offset by credits relating to remeasurement of contingent consideration for prior
year acquisitions. Adjusted profit before tax additionally excludes losses of $18m related to the Group’s shareholding in Bioventus.
This primarily includes the Group’s share of loss recognised by Bioventus in its financial statements.

Restructuring and rationalisation costs: For the year ended 31 December 2023, these costs relate to the implementation of the
Operations and Commercial Excellence programme announced in February 2020 and also include efficiency and productivity elements
of the 12-Point Plan. Adjusted profit before tax additionally excludes $3m of restructuring costs related to the Group’s share of results
of associates.

Amortisation and impairment of acquisition intangibles: For the year ended 31 December 2023, charges relate to the amortisation and
impairment of intangible assets acquired in material business combinations.

Legal and other: For the year ended 31 December 2023, charges primarily relate to legal expenses for ongoing metal-on-metal hip claims
partially offset by a decrease of $8m in the provision that reflects the present value of the estimated cost to resolve all other known and
anticipated metal-on-metal hip claims, and by the release of a provision for an intellectual property dispute. Charges also include the
costs for implementing the requirements of the EU Medical Device Regulation that was effective from May 2021 with a transition period
to May 2024.

2022 Reported
Acquisition and disposal-related items
Restructuring and rationalisation costs
Amortisation and impairment of acquisition
intangibles
Legal and other7
Lease liability payments
Capital expenditure
2022 Adjusted

Revenue
$ million
5,215
–
–

–
–
–
–
5,215

Operating
profit1
$ million
450
4
167

Profit before
tax2
$ million
235
162
168

Taxation3
$ million
(12)
(31)
(30)

Attributable
profit4
$ million
223
131
138

Cash generated
from operations5
$ million
581
22
120

Earnings
per share6
¢
25.5
15.1
15.8

205
75
–
–
901

205
82
–
–
852

(45)
(21)
–
–
(139)

160
61
–
–
713

–
133
(54)
(358)
444

18.4
7.0
–
–
81.8

Acquisition and disposal-related items: For the year to 31 December 2022, costs primarily relate to the acquisition of Engage and
prior year acquisitions, partially offset by credits relating to remeasurement of deferred and contingent consideration for prior year
acquisitions. Adjusted profit before tax additionally excludes losses of $158m related to the Group’s shareholding in Bioventus.
This primarily includes an impairment charge of $109m and the Group’s share of impairment recognised by Bioventus in its
financial statements.

246

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Restructuring and rationalisation costs: For the year to 31 December 2022, these costs relate to the implementation of the Operations
and Commercial Excellence programme announced in February 2020 and also include efficiency and productivity elements of the
12-Point Plan. Adjusted profit before tax additionally excludes $1m of restructuring costs related to the Group’s share of results
of associates.

Amortisation and impairment of acquisition intangibles: For the year to 31 December 2022, charges relate to the amortisation and
impairment of intangible assets acquired in material business combinations.

Legal and other: For the year ended 31 December 2022, charges primarily relate to legal expenses for ongoing metal-on-metal hip claims
and an increase of $19m in the provision that reflects the present value of the estimated cost to resolve all other known and anticipated
metal-on-metal hip claims. Charges also include the costs for implementing the requirements of the EU Medical Device Regulation that
was effective from May 2021 with a transition period to May 2024. These charges in the year to 31 December 2022 were partially offset
by a credit of $7m relating to insurance recoveries for ongoing metal-on-metal hip claims.

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 adjusted 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 is not included in management’s definition of trading cash flow as there is no defined benefit service cost for these schemes.
8 During 2023, management evaluated the commercial viability of Engage products and concluded that they should be discontinued. A total of $109m of Engage’s assets and liabilities were

written off as a result of this action, which includes goodwill of $84m (included in acquisition and disposal-related items), intangible assets of $37m (included in amortisation and impairment
of acquisition intangibles), inventory of $21m (included in legal and other), partially offset by remeasurement of contingent consideration of $33m (included in acquisition and disposal-
related items).

Free cash flow
Free cash flow is a measure of the cash generated for the Group to use after capital expenditure according to its Capital Allocation
Framework, it is defined as the cash generated from operations less capital expenditure and cash flows from interest and income taxes.
A reconciliation from cash generated from operations, the most comparable IFRS measure, to free cash flow is set out below:

Cash generated from operations1
Capital expenditure
Interest received
Interest paid
Payment of lease liabilities
Income taxes paid
Free cash flow

1 See Group cash flow statement on page 174.

2023
$ million
829
(427)
8
(104)
(52)
(125)
129

2022
$ million
581
(358)
7
(73)
(54)
(47)
56

2021
$ million
1,048
(408)
6
(80)
(59)
(97)
410

Leverage ratio
The leverage ratio is net debt including lease liabilities to adjusted EBITDA. Net debt is reconciled in Note 15 to the Group accounts.
Adjusted EBITDA is defined as trading profit before depreciation and impairment of property, plant and equipment and amortisation
and impairment of other intangible assets, goodwill and trade investments.

The calculation of the leverage ratio is set out below:

Net debt including lease liabilities

Trading profit
Depreciation of property, plant and equipment
Amortisation of other intangible assets, impairment of goodwill and trade investments
Impairment of property, plant and equipment
Impairment of other intangible assets
Adjustment for items already excluded from trading profit
Adjusted EBITDA
Leverage ratio (x)

Smith+Nephew Annual Report 2023

2023
$ million
2,776

970
306
139
31
–
(119)
1,327
2.1

2022
$ million
2,535

901
319
56
30
7
(31)
1,282
2.0

247

Other information continued
Non-IFRS financial information – Adjusted measures continued

Return on invested capital
Return on invested capital (ROIC) is a measure of the return generated on capital invested by the Group. It provides a metric for long-term
value creation and encourages compounding reinvestment within the business and discipline around acquisitions with low returns and
long payback. ROIC is defined as Operating Profit (before amortisation and impairment of acquisition intangibles) less Adjusted Taxes/
((Opening Net Operating Assets + Closing Net Operating Assets)/2).

Operating profit
Amortisation and impairment of acquisition intangibles
Operating profit before amortisation and impairment of acquisition intangibles
Taxation
Taxation adjustment1
Operating profit before amortisation and impairment of acquisition intangibles less
adjusted taxes

Total equity
Accumulated amortisation and impairment of acquisition intangibles net of associated tax
Retirement benefit assets
Investments
Investments in associates
Right-of-use assets
Cash at bank
Long-term borrowings and lease liabilities
Retirement benefit obligations
Bank overdrafts, borrowings, loans and lease liabilities
Net operating assets
Average net operating assets2
Return on invested capital

2023
$ million
425
207
632
(27)
(77)

2022
$ million
450
205
655
(12)
(86)

2021
$ million
593
172
765
(62)
(55)

528

557

648

5,217
1,365
(69)
(8)
(16)
(185)
(302)
2,319
88
765
9,174
8,907
5.9%

5,259
1,175
(141)
(12)
(46)
(187)
(350)
2,712
70
160
8,640
8,424
6.6%

5,568
1,035
(182)
(10)
(188)
(191)
(1,290)
2,848
127
491
8,208
8,029
8.1%

1 Being the taxation on amortisation and impairment of acquisition intangibles, interest income, interest expense, other finance costs and share of results of associates.
2 (Opening Net Operating Assets + Closing Net Operating Assets)/2.

Shareholder information
Ordinary shareholders
Registrar
All general enquiries concerning
shareholdings, dividends, changes to
shareholders’ personal details and the
Annual General Meeting (the ‘AGM’)
should be addressed to:
Computershare Investor Services plc,
The Pavilions, Bridgwater Road,
Bristol, BS99 6ZZ.

Tel: 0370 703 0047
Tel: +44 (0) 117 378 5450
from outside the UK*
www.investorcentre.co.uk

* Lines are open from 8:30 am to 5:30 pm Monday to Friday,

excluding public holidays in England and Wales.

Shareholder communications
We make quarterly financial announcements,
which are made available through Stock
Exchange announcements and on the
Group’s website (www.smith-nephew.com).
Copies of recent Annual Reports, press
releases, institutional presentations and audio
webcasts are also available on the website.

We send paper copies of the Notice of
Annual General Meeting and Annual Report
only to those shareholders and ADS holders
who have elected to receive shareholder
documentation by post. Electronic copies
of the Annual Report and Notice of Annual
General Meeting are available on the Group’s
website at www.smith-nephew.com.
Both ordinary shareholders and ADS holders
can request paper copies of the Annual
Report, which the Company provides free of
charge. The Company will continue to send
to ordinary shareholders by post the Form
of Proxy notifying them of the availability
of the Annual Report and Notice of Annual
General Meeting on the Group’s website.

If you elect to receive the Annual Report
and Notice of Annual General Meeting
electronically you are informed by email
of the documents’ availability on the
Group’s website. ADS holders receive the
Form of Proxy by post, but will not receive
a paper copy of the Notice of Annual
General Meeting.

Investor communications
The Company maintains regular dialogue
with individual institutional shareholders,
together with results presentations.
To ensure that all members of the Board
develop an understanding of the views
of major investors, the Executive Directors
review significant issues raised by investors
with the Board. Non-Executive Directors are
sent copies of analysts’ and brokers’ briefings.
There is an opportunity for individual
shareholders to put their questions to the
Directors at the Annual General Meeting.
The Company regularly responds to letters
from shareholders on a range of issues.

248

Smith+Nephew Annual Report 2023

UK capital gains tax
For the purposes of UK capital gains
tax, the price of the Company’s ordinary
shares on 31 March 1982 was 35.04p.

Smith & Nephew plc share price
The Company’s ordinary shares are
quoted on the London Stock Exchange
under the symbol SN. The Company’s
share price is available on the Group’s
website (www.smith-nephew.com) and
at www.londonstockexchange.com
where the live financial data is updated
with a 15-minute delay.

American Depositary Shares
(‘ADSs’) and American Depositary
Receipts (‘ADRs’)
In the US, the Company’s ordinary shares
are traded in the form of ADSs, evidenced
by ADRs, on the New York Stock Exchange
under the symbol SNN. Each American
Depositary Share represents two ordinary
shares. J.P. Morgan Chase Bank N.A.
is the authorised depositary bank for
the Company’s ADR programme.

ADS enquiries
All enquiries regarding ADS holder
accounts and payment of dividends
should be addressed to:
EQ Shareowner Services
P.O. Box 64504
St Paul, MN 55164-0504

US toll free phone: +1-800-990-1135
Online: Visit www.shareowneronline.com
and select ‘Contact Us’.

Smith & Nephew plc ADS price
The Company’s ADS price can be obtained
from the official New York Stock Exchange
website at www.nyse.com and the Group’s
website (www.smith-nephew.com) where
the live financial data is updated with
a 15-minute delay, and is quoted daily
in the Wall Street Journal.

ADS payment information
The Company hereby discloses ADS
payment information for the year ended
31 December 2023 in accordance with
the Securities and Exchange Commission
rules 12.D.3 and 12.D.4 relating to Form
20-F filings by foreign private issuers.
The depositary collects its fees for
delivery and surrender of ADSs directly
from investors depositing shares or
surrendering ADSs for the purpose
of withdrawal or from intermediaries
acting for them.

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

For
– Issuance of ADSs, including issuances resulting

from a distribution of shares or rights or
other property

– Cancellation of ADSs for the purpose
of withdrawal, including if the deposit
agreement terminates

– Any cash distribution to ADS registered holders,

including payment of dividend

– Depositary services
– Transfer and registration of shares on

our share register to or from the name of
the depositary or its agent when shares
are deposited or withdrawn

– As necessary

Persons depositing or
withdrawing shares must pay
$5.00 (or less) per 100 ADSs
(or portion of 100 ADSs)
$0.05 (or less) per ADS

$0.05 (or less) per ADS per calendar year
Registration or transfer fees

Taxes and other governmental charges
the depositary or the custodian have
to pay on any ADS or share underlying an
ADS, for example, stock transfer taxes,
stamp duty or withholding taxes

Any charges incurred by the depositary
or its agents for servicing the
deposited securities

The depositary collects fees for making
distributions to investors, including
payment of dividends by the Company by
deducting those fees from the amounts
distributed or by selling a portion of
distributable property to pay the fees.
The depositary may collect its annual
fee for depositary services by deductions
from cash distributions or by directly billing
investors or by charging the book-entry
system accounts of participants acting for
them. The depositary may generally refuse
to provide fee-attracting services until its
fee for those services is paid.

During 2023, a fee of 1 US cent per ADS
was collected by J.P. Morgan Chase Bank
N.A. on the 2022 final dividend paid in May
2023 and a fee of 1 US cent per ADS was
collected on the 2023 interim dividend paid
in November. In the period 1 January 2023
to 16 February 2024, the total programme
payments made by J.P. Morgan Chase
Bank N.A. was $787,719.19.

Dividend history
Smith & Nephew plc has paid dividends
on its ordinary shares in every year since
1937. Following the capital restructuring
and dividend reduction in 2000, the
Group adopted a policy of increasing its
dividend cover (the ratio of EPSA, as set
out in the ‘Selected financial data’, to
ordinary dividends declared for the year).
This was intended to increase the financing
capability of the Group for acquisitions
and other investments. From 2000

to 2004, the dividend increased in line
with inflation and, in 2004, dividend
cover stood at 4.1 times. Having achieved
this level of dividend cover the Board
changed its policy, from that of increasing
dividends in line with inflation, to that
of increasing dividends for 2005 and after
by 10%. Following the redenomination
of the Company’s share capital into US
Dollars, the Board reaffirmed its policy
of increasing the dividend by 10% a year
in US Dollar terms.

On 2 August 2012, the Board announced
its intention to pursue a progressive
dividend policy, with the aim of increasing
the US Dollar value of ordinary dividends
over time broadly based on the Group’s
underlying growth in earnings, while
taking into account capital requirements
and cash flows.

At the time of the full-year results, the
Board reviews the appropriate level of
total annual dividend each year. The Board
intends that the interim dividend will be
set by a formula and will be equivalent to
40% of the total dividend for the previous
year. Dividends will continue to be declared
in US Dollars with an equivalent amount
in Sterling payable to those shareholders
whose registered address is in the UK,
or who have validly elected to receive
Sterling dividends.

An interim dividend in respect of each
fiscal year is normally declared in July or
August and paid in October or November.

249

Shareholder information continued

A final dividend will be recommended by
the Board of Directors and paid subject to
approval by shareholders at the Company’s
Annual General Meeting.

Future dividends of Smith & Nephew plc
will be dependent upon: future earnings;
the future financial condition of the
Group; the Board’s dividend policy; and
the additional factors that might affect
the business of the Group set out in
‘Special note regarding forward-looking
statements’ and ‘Risk Factors’.

Dividends per share
The table below sets out the dividends
per ordinary share in the last five years.

Dividends below £1,000 per tax year are
tax free for UK income tax purposes and
dividends above £1,000 per tax year are
subject to UK personal income tax at
the rate of 8.75% for basic rate taxpayers,
33.75% for higher rate taxpayers and
39.35% for additional rate taxpayers. If you
need to pay UK tax, how you pay depends
upon the amount of dividend income
you receive in a year. For the tax year
2024–2025 and subsequent tax years, the
£1,000 dividend nil rate will be reduced
to £500. If your dividend income is up to
£10,000 you can request HMRC to change
your tax code so that the tax will be taken
from your wages or pension or you can
complete a self-assessment tax return.
If your dividend income is over £10,000 in
the tax year, you will need to complete a
self-assessment tax return. This will apply
to both cash and dividend reinvestment
plan (‘DRiP’) dividends, although dividends
paid on shares held within pensions and
ISAs will be unaffected, remaining tax free.

Since the second interim dividend for 2005,
all dividends have been declared in US
cents per ordinary share.

In respect of the proposed final dividend
for the year ended 31 December 2023
of 23.1 US cents per ordinary share,
the record date will be 2 April 2024 and
the payment date will be 22 May 2024.
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
30 April 2024. The ordinary shares will
trade ex-dividend on both the London
and New York Stock Exchanges from
28 March 2024. The proposed final
dividend of 23.1 US cents per ordinary
share, which together with the interim
dividend of 14.4 US cents, makes a
total for 2023 of 37.5 US cents.

Share capital
The principal trading market for the
ordinary shares is the London Stock
Exchange. The ordinary shares were
listed on the New York Stock Exchange
on 16 November 1999, trading in the
form of ADSs evidenced by ADRs.
Each ADS represents two ordinary
shares from 14 October 2014, before
which time one ADS represented five
ordinary shares. The ADS facility is
sponsored by J.P. Morgan Chase Bank
N.A. acting as depositary. All the ordinary
shares, including those held by Directors
and Executive Officers, rank pari passu
with each other. On 23 January 2006,
the ordinary shares of 122/9p were
redenominated as ordinary shares
of US 20 cents (following approval by
shareholders at the Extraordinary General
Meeting in December 2005). The new
US Dollar ordinary shares carry the same
rights as the previous ordinary shares.
The share price continues to be quoted
in Sterling. In 2006, the Company issued

Dividends per share

Pence per share:

Interim

Final

Total

US cents per share:

Interim

Final

Total

2023

2022

2021

2020

2019

Years ended 31 December

11.89
18.361

30.25

14.40
23.10

37.50

12.91
19.07

31.98

14.40

23.10

37.50

10.50

18.40

28.90

14.40

23.10

37.50

11.07

16.62

27.69

14.40

23.10

37.50

11.19

18.66

29.85

14.40

23.10

37.50

1 Translated at the Bank of England rate on 16 February 2024.

250

£50,000 of shares in Sterling in order to
comply with English law. These were issued
as deferred shares, which are not listed on
any stock exchange. They have extremely
limited rights and therefore effectively
have no value. These shares are held by
the Company Secretary, although the
Board reserves the right to transfer them
to a member of the Board should it so wish.

Shareholdings
As at 16 February 2024, to the knowledge
of the Group, there were 11,560 registered
holders of ordinary shares, of whom
90 had registered addresses in the US
and held a total of 163,350 ordinary
shares (0.018% of the total issued).
Because certain ordinary shares are
registered in the names of nominees, the
number of shareholders with registered
addresses in the US is not representative
of the number of beneficial owners of
ordinary shares resident in the US.

As at 16 February 2024, 38,222,517 ADSs
equivalent to 76,445,034 ordinary shares
or approximately 8.7% of the total ordinary
shares in issue, were outstanding and
were held by 86 registered ADS holders.

Major shareholders
As far as is known to Smith+Nephew, the
Group is not directly or indirectly owned
or controlled by another corporation or
by any Government and the Group has not
entered into arrangements, the operation
of which may at a subsequent date result
in a change in control of the Group.

As at 16 February 2024, the Company
is not aware of any person who has a
significant direct or indirect holding of
securities in the Company, as defined in the
Disclosure and Transparency Rules (DTRs)
of the Financial Conduct Authority (FCA),
other than as shown on page 251, and is
not aware of any persons holding securities
which may control the Company. There are
no securities in issue which have special
rights as to the control of the Company.
The table on page 251 shows the last
notification(s) received by the Company,
in accordance with the FCA’s DTRs relating
to notifiable interests in the voting rights
in the Company’s issued share capital.

Purchase of ordinary shares
on behalf of the Company
At the AGM, the Company will be seeking
a renewal of its current permission from
shareholders to purchase up to 10% of its
own shares. The Company did not purchase

Smith+Nephew Annual Report 2023

Purchase of ordinary shares on behalf of the Company

2023

Total shares
purchased
000’s
–

Average price
paid per share
pence
–

Approximate value
of shares purchased
$ million
–

any shares during 2023 nor during the
period to 16 February 2024.

Exchange controls and other
limitations affecting security holders

There are no UK governmental laws, decrees
or regulations that restrict the export or
import of capital or that affect the payment
of dividends, interest or other payments to
non-resident holders of Smith & Nephew
plc’s securities, except for certain restrictions
imposed from time to time by His Majesty’s
Treasury of the United Kingdom pursuant
to legislation, such as the United Nations
Act 1946 and the Emergency Laws Act
1964, against the Government or residents
of certain countries.

There are no limitations, either under
the laws of the UK or under the Articles
of Association of Smith & Nephew plc,
restricting the right of non-UK residents
to hold or to exercise voting rights in
respect of ordinary shares, except that
where any overseas shareholder has not
provided to the Company a UK address
for the service of notices, the Company is
under no obligation to send any notice or
other document to an overseas address.
It is, however, the current practice of the
Company to send every notice or other
document to all shareholders regardless
of the country recorded in the register of
members, with the exception of details of
the Company’s dividend reinvestment plan,
which are not sent to shareholders with
recorded addresses in the US and Canada.

Taxation information for shareholders
The comments below are of a general
and summary nature and are based on
the Group’s understanding of certain

aspects of current UK and US federal
income tax law and practice relevant to
the ADSs and ordinary shares not in ADS
form. The comments address the material
US and UK tax consequences generally
applicable to a person who is the beneficial
owner of ADSs or ordinary shares and who,
for US federal income tax purposes, is a
citizen or resident of the US, a corporation
(or other entity taxable as a corporation)
created or organised in or under the laws
of the US (or any State therein or the
District of Columbia), or an estate or trust
the income of which is included in gross
income for US federal income tax purposes
regardless of its source (each a US Holder).
The comments set out below do not
purport to address all tax consequences
of the ownership of ADSs or ordinary
shares that may be material to a particular
holder and in particular do not deal with
the position of US Holders who directly,
indirectly or constructively own 10% or
more of the Company’s issued ordinary
shares. This discussion does not apply to
(i) US Holders whose holding of ADSs or
ordinary shares is effectively connected
with or pertains to either a permanent
establishment in the UK through which a
US Holder carries on a business in the UK
or a fixed base from which a US Holder
performs independent personal services in
the UK, or (ii) US Holders whose registered
address is inside the UK. This discussion
does not apply to certain US Holders
subject to special rules, such as certain
financial institutions, tax-exempt entities,
insurance companies, broker-dealers and
traders in securities that elect to use the
mark-to-market method of tax accounting,
partnerships or other entities treated
as partnerships for US federal income

Major shareholders

BlackRock, Inc.

16 February 2024
%*
5.2

16 February 2024
’000
46,427

2023
%*

5.2

2022
’000

46,427

* Percentage of ordinary shares in issue, excluding Treasury shares.

Smith+Nephew Annual Report 2023

As at 31 December

2021
%*

5.2

As at 31 December

2020
’000

46,427

2022
%*

5.2

2021
’000

46,427

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

tax purposes, US Holders holding ADSs
or ordinary shares as part of a hedging,
conversion or other integrated transaction
or US Holders whose functional currency
for US federal income tax purposes is
other than the US Dollar. In addition, the
comments below do not address the
potential application of the provisions
of the US Internal Revenue Code known
as the Medicare contribution tax, any
alternative minimum tax consequences,
any US federal tax other than income tax
or any US state, local or non-US (other
than UK) taxes. The summary deals only
with US Holders who hold ADSs or ordinary
shares as capital assets for tax purposes.
The summary is based on current UK and
US law and practice which is subject to
change, possibly with retroactive effect.
US Holders are recommended to consult
their tax advisers as to the particular tax
consequences to them of the ownership
of ADSs or ordinary shares.

The Company believes, and this discussion
assumes, that the Company was not a
passive foreign investment company for
its taxable year ended 31 December 2023.

This discussion assumes that each
obligation under the deposit agreement
and any related agreement will be
performed in accordance with its terms.
For purposes of US federal income tax
law, US Holders of ADSs will generally be
treated as owners of the ordinary shares
represented by the ADSs.

Taxation of distributions
in the UK and the US
The UK does not currently impose a
withholding tax on dividends paid by a
UK corporation, such as the Company.

For US federal income tax purposes,
distributions paid by the Company will
generally be foreign source dividends to the
extent paid out of the Company’s current
or accumulated earnings and profits as
determined for US federal income tax
purposes. Because the Company does
not maintain calculations of its earnings
and profits under US federal income tax
principles, it is expected that distributions
generally will be reported to US Holders
as dividends. Such dividends will not
be eligible for the dividends-received
deduction generally allowed to corporate
US Holders.

Dividends paid to certain non-corporate
US Holders of ordinary shares or ADSs
may be subject to US federal income tax

251

Shareholder information continued

at lower rates than those applicable to
other types of ordinary income if certain
conditions are met. Non-corporate
US Holders should consult their own
tax advisers to determine whether they
are subject to any special rules that
limit their ability to be taxed at these
favourable rates.

Taxation of capital gains
US Holders, who are not resident for tax
purposes in the UK, will not generally
be liable for UK capital gains tax on any
capital gain realised upon the sale or other
disposition of ADSs or ordinary shares
unless the ADSs or ordinary shares are held
in connection with a trade carried on in the
UK through a permanent establishment
(or in the case of individuals, through
a branch or agency). Furthermore, UK
resident individuals who acquire ADSs
or ordinary shares before becoming
temporarily non-UK residents may remain
subject to UK taxation of capital gains
on gains realised while non-resident.

For US federal income tax purposes, gains
or losses realised upon a taxable sale or
other disposition of ADSs or ordinary shares
by US Holders generally will be US source
capital gains or losses and will be long-
term capital gains or losses if the ADSs or
ordinary shares were held for more than
one year. The amount of a US Holder’s
gain or loss will be equal to the difference
between the amount realised on the sale
or other disposition and such holder’s
tax basis in the ADSs, or ordinary shares,
each determined in US Dollars.

Inheritance and estate taxes
HM Revenue & Customs imposes
inheritance tax on capital transfers which
occur on death and in the seven years
preceding death. HM Revenue & Customs
considers that the US/UK Double Taxation
Convention on Estate and Gift Tax applies
to inheritance tax. Consequently, a US
citizen who is domiciled in the US and is
not a UK national or domiciled in the UK
will not be subject to UK inheritance tax
in respect of ADSs and ordinary shares.

A UK national who is domiciled in the
US will be subject to UK inheritance
tax but will be entitled to a credit for
any US federal estate tax charged in
respect of ADSs and ordinary shares in
computing the liability to UK inheritance
tax. Special rules apply where ADSs and
ordinary shares are business property

252

of a permanent establishment of an
enterprise situated in the UK.

to HM Revenue & Customs and the
appropriate stamp duty paid.

US information reporting and backup
withholding
Payments of dividends on, or proceeds
from the sale of, ADSs or ordinary shares
that are made within the US or through
certain US-related financial intermediaries
generally will be subject to US information
reporting, and may be subject to backup
withholding, unless a US Holder is an
exempt recipient or, in the case of
backup withholding, provides a correct
US taxpayer identification number and
certain other conditions are met.

Any backup withholding deducted may
be credited against the US Holder’s US
federal income tax liability, and, where
the backup withholding exceeds the
actual liability, the US Holder may obtain
a refund by timely filing the appropriate
refund claim with the US Internal
Revenue Service.

US Holders who are individuals or certain
specified entities may be required to
report information relating to securities
issued by a non-US person (or foreign
accounts through which the securities
are held), subject to certain exceptions
(including an exception for securities held
in accounts maintained by US financial
institutions). US Holders should consult
their tax advisers regarding their reporting
obligations with respect to the ADSs or
ordinary shares.

UK stamp duty and stamp duty
reserve tax
UK stamp duty is charged on documents
and in particular instruments for the
transfer of registered ownership of ordinary
shares. Transfers of ordinary shares in
certificated form will generally be subject
to UK stamp duty at the rate of ½% of the
consideration given for the transfer with
the duty rounded up to the nearest £5.

UK stamp duty reserve tax (SDRT) arises
when there is an agreement to transfer
shares in UK companies ‘for consideration
in money or money’s worth’, and so an
agreement to transfer ordinary shares
for money or other consideration may
give rise to a charge to SDRT at the rate
of ½% (rounded up to the nearest penny).
The charge of SDRT will be cancelled, and
any SDRT already paid will be refunded,
if within six years of the agreement
an instrument of transfer is produced

Transfers of ordinary shares into CREST
(an electronic transfer system) are
exempt from stamp duty so long as the
transferee is a member of CREST who
will hold the ordinary shares as a nominee
for the transferor and the transfer is in a
form that will ensure that the securities
become held in uncertificated form within
CREST. Paperless transfers of ordinary
shares within CREST for consideration
in money or money’s worth are liable to
SDRT rather than stamp duty. SDRT on
relevant transactions will be collected by
CREST at ½%, and this will apply whether
or not the transfer is effected in the UK
and whether or not the parties to it are
resident or situated in the UK.

UK legislation provides for a charge to
stamp duty or SDRT to be payable at
the rate of 1.5% of the consideration (or,
in some cases, the value of the shares
concerned) where ordinary shares are
issued or transferred to the depositary or
to certain persons providing a clearance
service (or their nominees or agents) for
the conversion into ADRs and will generally
be payable by the depositary or person
providing clearance service. In accordance
with the terms of the Deposit Agreement,
any tax or duty payable by the depositary
on deposits of ordinary shares will be
charged by the depositary to the party to
whom ADRs are delivered against such
deposits. However, such transfers to the
depository or to certain persons providing
a clearance service (or their nominees or
agents) will not attract stamp duty or SDRT
where they satisfy the conditions of an
exemption, including exemptions which can
apply to certain capital raising or qualifying
listing arrangements. The discussion above
assumes that the Finance Bill currently
proceeding through the UK Parliament
(provision of which, broadly, provide for the
repeal of certain 1.5% SDRT charges on
the issue of securities by a UK company to
depositary receipt issuers and clearance
services) is enacted in substantively the
same form as currently published and has
retroactive effect from 1 January 2024.
Until the Finance Bill receives Royal Ascent
(which is likely to be later in 2024) relevant
provisions affecting stamp duty and SDRT
have been given provisional statutory
effect, as if they were contained in an
Act of Parliament, under ( in the case of
SDRT) the Provisional Collection of Taxes

Smith+Nephew Annual Report 2023

Act 1968 and (in the case of stamp duty)
the Finance Act 1973, through resolutions
of the House of Commons passed on
27 November 2023. Specific professional
advice should be sought before paying
the 1.5% SDRT or stamp duty charge in
any circumstances.

No liability for stamp duty or SDRT will
arise on any transfer of, or agreement to
transfer, an ADS or beneficial ownership
of an ADS, provided that the ADS and
any instrument of transfer or written
agreement to transfer remains at all times
outside the UK, and provided further that
any instrument of transfer or written
agreement to transfer is not executed in
the UK and the transfer does not relate
to any matter or thing done or to be done
in the UK (the location of the custodian
as a holder of ordinary shares not being
relevant in this context). In any other case,
any transfer of, or agreement to transfer,
an ADS or beneficial ownership of an ADS
could, depending on all the circumstances
of the transfer, give rise to a charge to
stamp duty or SDRT.

Any UK stamp duty or SDRT imposed
upon transfers of ADSs or ordinary shares
will not be treated as a creditable foreign
tax for US federal income tax purposes.
US Holders should consult their tax
advisers regarding whether any such UK
stamp duty or SDRT may be deductible
or reduce the amount of gain (or increase
the amount of loss) recognised upon a
sale or other disposition of the ADSs or
ordinary shares.

Charitable and Political Donations
The Group made no political donations
during the year (2022: $nil). Details of
charitable donations can be found on
page 54.

Suppliers’ Payment Policy
Terms of payment are agreed with
individual suppliers prior to supply.
The Group aims to pay its creditors
promptly, in accordance with terms agreed
for payment. Further information can be
obtained from the government payment
practice reporting portal.

Articles of Association
The following summarises certain material
rights of holders of the Company’s ordinary
shares under the material provisions of the
Company’s Articles of Association, being
those which were adopted at the 2021
Annual General Meeting and English law.

Smith+Nephew Annual Report 2023

This summary is qualified in its entirety by
reference to the Companies Act and the
Company’s Articles of Association.

In the following description, a ‘shareholder’
is the person registered in the Company’s
register of members as the holder of an
ordinary share.

The Company is incorporated under
the name Smith & Nephew plc and is
registered in England and Wales with
registered number 324357.

The Company’s ordinary shares may be
held in certificated or uncertificated form.
No holder of the Company’s shares will be
required to make additional contributions
of capital in respect of the Company’s
shares in the future. In accordance with
English law, the Company’s ordinary
shares rank equally.

Directors
Under the Company’s Articles of
Association, a Director may not vote in
respect of any contract, arrangement,
transaction or proposal in which he or
she, or any person connected with him or
her, has any interest which is to his or her
knowledge a material interest other than
by virtue of his interests in securities of,
or otherwise in or through, the Company.
This is subject to certain exceptions
relating to proposals (a) indemnifying
him in respect of obligations incurred on
behalf of the Company, (b) indemnifying
a third party in respect of obligations of
the Company for which the Director has
assumed responsibility under an indemnity
or guarantee, (c) relating to an offer of
securities in which he will be interested
as an underwriter, (d) concerning another
body corporate in which the Director is
beneficially interested in less than 1% of
the issued shares of any class of shares
of such a body corporate, (e) relating to
an employee benefit in which the Director
will share equally with other employees
and (f) relating to any insurance that the
Company is empowered to purchase for
the benefit of Directors of the Company in
respect of actions undertaken as Directors
(and/or officers) of the Company.

A Director shall not vote or be counted
in any quorum present at a meeting in
relation to a resolution on which he/she is
not entitled to vote.

The Board is empowered to exercise all
the powers of the Company to borrow
money, subject to the limitation that the

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

aggregate amount of all monies borrowed
after deducting cash and current asset
investments by the Company and its
subsidiaries shall not exceed the sum
of $8,500,000,000.

Any Director who has been appointed
by the Board since the previous Annual
General Meeting of shareholders, either
to fill a casual vacancy or as an additional
Director, holds office only until the
conclusion of the next Annual General
Meeting (notice of which was given after
his or her appointment) and then shall be
eligible for re-election by the shareholders.
The Company’s Articles of Association
provide that all Directors are subject to
annual re-election in accordance with
the UK Corporate Governance Code.

If not re-appointed, a Director retiring
at a meeting shall retain office until the
meeting appoints someone in his place,
or if it does not do so, until the conclusion
of the meeting.

The Directors are subject to removal
with or without cause by the Board or the
shareholders. Directors are not required
to hold any shares of the Company by
way of qualification. Under the Company’s
Articles of Association and English law,
a Director may be indemnified out of the
assets of the Company against liabilities he
or she may sustain or incur in the execution
of his or her duties.

Rights attaching to ordinary shares
Under English law, dividends are payable
on the Company’s ordinary shares only
out of profits available for distribution, as
determined in accordance with accounting
principles generally accepted in the UK and
by the Companies Act 2006. Holders of the
Company’s ordinary shares are entitled to
receive final dividends as may be declared
by the Directors and approved by the
shareholders in a general meeting, rateable
according to the amounts paid up on such
shares, provided that the dividend cannot
exceed the amount recommended by
the Directors.

The Company’s Board of Directors may
declare such interim dividends as appear
to them to be justified by the Company’s
financial position.

If authorised by an ordinary resolution
of the shareholders, the Board may also
make a direct payment of a dividend
in whole or in part by the distribution of

253

Shareholder information continued

specific assets (and in particular of paid-
up shares or debentures of the Company).

Any dividend unclaimed after 12 years
from the date the dividend was declared,
or became due for payment, will be
forfeited and will revert to the Company.
Provided that during this 12-year period,
at least three dividends whether interim
or final on or in respect of the share in
question have become payable, and
provided further the Company has
taken steps which the Board considers
reasonable during this 12-year period
to trace the shareholder (including, if
appropriate, engaging a professional
tracing agent) and has sent notice of
the Board’s intention to sell the shares,
the Board can sell the shares and use
such proceeds for any purpose that
the Board thinks fit.

There were no material modifications
to the rights of shareholders under
the Company’s Articles of Association
during 2023.

Voting rights of ordinary shares
The Company’s Articles of Association
provide that voting at any General Meeting
of shareholders is by a show of hands
unless a poll, which is a written vote,
is duly demanded and held. On a show of
hands, every shareholder who is present in
person at a General Meeting has one vote
regardless of the number of shares held.
On a poll, every shareholder who is present
in person or by proxy has one vote for each
ordinary share held by that shareholder.
A poll may be demanded by any of
the following:
– The Chair of the meeting;
– At least five shareholders present or by
proxy entitled to vote on the resolution;

– Any shareholder or shareholders

representing in the aggregate not less
than one-tenth of the total voting rights
of all shareholders entitled to vote on
the resolution; or Any shareholder or
shareholders holding shares conferring
a right to vote on the resolution on
which there have been paid-up sums
in aggregate equal to not less than one-
tenth of the total sum paid up on all the
shares conferring that right.

A Form of Proxy will be treated as giving the
proxy the authority to demand a poll, or
to join others in demanding one, as above.

It is the Company’s usual practice to
vote by poll at Annual General Meetings.

254

The necessary quorum for a General
Meeting is two shareholders present in
person or by proxy carrying the right to
vote upon the business to be transacted.

Matters are transacted at General
Meetings of the Company by the
processing and passing of resolutions of
which there are two kinds: ordinary and
special resolutions:
– Ordinary resolutions include resolutions
for the re-election of Directors, the
approval of financial statements, the
declaration of dividends (other than
interim dividends), the appointment and
re-appointment of auditors or the grant
of authority to allot shares. An ordinary
resolution requires the affirmative
vote of a majority of the votes of those
persons voting at the meetings at
which there is a quorum.

– Special resolutions include resolutions
amending the Company’s Articles
of Association, dis-applying statutory
pre-emption rights or changing the
Company’s name; modifying the rights
of any class of the Company’s shares at
a meeting of the holders of such class or
relating to certain matters concerning
the Company’s winding-up. A special
resolution requires the affirmative
vote of not less than three-quarters of
the votes of the persons voting at the
meeting at which there is a quorum.

Annual General Meetings must be
convened upon advance written notice
of 21 days. Other General Meetings
must be convened upon advance written
notice of at least 14 clear days. The days
of delivery or receipt of notice are not
included. The notice must specify the
nature of the business to be transacted.
Meetings are convened by the Board.
Members with 5% of the ordinary share
capital of the Company may requisition
the Board to convene a meeting. Any two
Members may call a General Meeting in
order to appoint one or more additional
Directors in the event that there are
insufficient Directors to be able to call
a General Meeting, or where they are
unwilling to do so.

Variation of rights
If, at any time, the Company’s share capital
is divided into different classes of shares,
the rights attached to any class may be
varied, subject to the provisions of the
Companies Act, with the consent in writing
of holders of three-quarters in nominal

value of the issued shares of that class or
upon the adoption of a special resolution
passed at a separate meeting of the
holders of the shares of that class. At every
such separate meeting, all the provisions
of the Articles of Association relating to
proceedings at a General Meeting apply,
except that the quorum is to be the
number of persons (which must be two
or more) who hold or represent by proxy
not less than one-third in nominal value
of the issued shares of the class and at
any such meeting a poll may be demanded
in writing by any person or their proxy
who hold shares of that class. Where a
person is present by proxy or proxies, he or
she is treated as holding only the shares in
respect of which the proxies are authorised
to exercise voting rights.

Rights in a winding-up
Except as the Company’s shareholders
have agreed or may otherwise
agree, upon the Company’s winding-
up, the balance of assets available
for distribution:
– After the payment of all creditors

including certain preferential creditors,
whether statutorily preferred creditors
or normal creditors;

– Subject to any special rights attaching

to any other class of shares; and

– Is to be distributed among the holders
of ordinary shares according to the
amounts paid-up on the shares held
by them. This distribution is generally
to be made in US Dollars. A liquidator
may, however, upon the adoption of
any extraordinary resolution of the
shareholders and any other sanction
required by law, divide among the
shareholders the whole or any part
of the Company’s assets in kind.

Limitations on voting and shareholding
There are no limitations imposed by
English law or the Company’s Articles of
Association on the right of non-residents
or foreign persons to hold or vote the
Company’s ordinary shares or ADSs, other
than the limitations that would generally
apply to all of the Company’s shareholders.

Transfers of shares
The Board may refuse to register the transfer
of shares held in certificated form which:
– Are not fully paid (provided that it shall
not exercise this discretion in such a
way as to prevent stock market dealings
in the shares of that class from taking
place on an open and proper basis);

Smith+Nephew Annual Report 2023

– Are not duly stamped or duly certified
or otherwise shown to the satisfaction
of the Board to be exempt from stamp
duty, lodged at the Transfer Office
or at such other place as the Board
may appoint and (save in the case of
a transfer by a person to whom no
certificate was issued in respect of the
shares in question) accompanied by
the certificate for the shares to which it
relates, and such other evidence as the
Board may reasonably require to show
the right of the transferor to make the
transfer and, if the instrument of transfer
is executed by some other person on his
or her behalf, the authority of that person
so to do;

– Are in respect of more than one class

of shares; or

– Are in favour of more than

four transferees.

Deferred shares
Following the re-denomination of share
capital on 23 January 2006, the ordinary
shares’ nominal value became 20 US
cents each. There were no changes to the
rights or obligations of the ordinary shares.
In order to comply with the Companies
Act 2006, a new class of Sterling shares
was created, deferred shares, of which
50,000 shares of £1 each were issued
and allotted in 2006 as fully paid to the
Chief Executive Officer. These shares were
subsequently transferred and are now
held by the Company Secretary, although
the Board reserves the right to transfer
them to a member of the Board should it
so wish. These deferred shares have no
voting or dividend rights and on winding-up
are only entitled to repayment at nominal
value only if all ordinary shareholders have
received the nominal value of their shares
plus an additional US$1,000 each.

Amendments
The Company does not have any special
rules about amendments to its Articles of
Association beyond those imposed by law.

About Smith+Nephew
The Smith+Nephew Group (the Group)
is a portfolio medical technology business
with leadership positions in Orthopaedics,
Advanced Wound Management and Sports
Medicine, and revenue of approximately
$5.5bn in 2023. Smith & Nephew plc
(the Company) is the Parent Company of
the Group. It is an English public limited
company with its shares listed on the
premium list of the UK Listing Authority

Smith+Nephew Annual Report 2023

and traded on the London Stock Exchange.
Shares are also traded on the New York
Stock Exchange in the form of American
Depositary Shares (ADSs).

This is the Annual Report of Smith
& Nephew plc for the year ended
31 December 2023. It comprises, in a
single document, the Annual Report and
Accounts of the Company in accordance
with UK requirements and the Annual
Report on Form 20-F in accordance
with the regulations of the United States
Securities and Exchange Commission (SEC).

Smith+Nephew operates on a worldwide
basis and has distribution channels in
over 100 countries. The Group is engaged
in a single business activity, being the
development, manufacture and sale of
medical technology products and services.
In 2023, Smith+Nephew’s operations were
organised into three global business units
(Orthopaedics, Sports Medicine & ENT,
and Advanced Wound Management)
within the medical technology industry.

Smith+Nephew’s corporate website,
www.smith-nephew.com, gives additional
information on the Group, including an
electronic version of this Annual Report.
Information made available on this website,
or other websites mentioned in this Annual
Report, are not and should not be regarded
as being part of, or incorporated into,
this Annual Report.

The terms ‘Group’ and ‘Smith+Nephew’
are used to refer to Smith & Nephew plc
and its consolidated subsidiaries, unless
the context requires otherwise.

For the convenience of the reader, a
Glossary of terms used in this document
is included on page 260.

The product names referred to in this
document are identified by use of capital
letters and the ◊ symbol (on first occurrence
on a particular page) and are trademarks
owned by or licensed to members of
the Group.

Presentation
The Group’s fiscal year end is 31 December.
References to a particular year in this
Annual Report are to the fiscal year, unless
otherwise indicated. Except as the context
otherwise requires, ‘ordinary share’ or
‘share’ refer to the ordinary shares of
Smith & Nephew plc of 20 US cents each.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

The Group Accounts of Smith & Nephew
plc in this Annual Report are presented
in US Dollars. Solely for the convenience
of the reader, certain parts of this Annual
Report contain translations of amounts
in US Dollars into Sterling at specified
rates. These translations should not be
construed as representations that the US
Dollar amounts actually represent such
Sterling amounts or could be converted
into Sterling at the rate indicated.

Unless stated otherwise, the translation
of US Dollars and cents to Sterling and
pence in this Annual Report has been made
at the Bank of England exchange rate on
the date indicated. On 16 February 2024,
the latest practicable date for this Annual
Report, the Bank of England rate was
US$1.2584 per £1.00.

The results of the Group, as reported in
US Dollars, are affected by movements
in exchange rates between US Dollars
and other currencies.

The Group applied the average exchange
rates prevailing during the year to translate the
results of companies with functional currency
other than US Dollars. The currencies
which most influenced these translations
in the years covered by this report were
Sterling, Swiss Franc and the Euro.

The Accounts of the Group in this Annual
Report are presented in millions (m)
unless otherwise indicated.

Change in auditor
KPMG will conclude their engagement as
our auditors with effect from 1 May 2024.
The audit opinions provided by KPMG for
the financial years ended 31 December
2022 and 2023 did not include an adverse
opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty,
audit scope or accounting principles.
Given that the Group was approaching
the 10 year period when a competitive
tender would be required, the Group
chose to engage in a rigorous auditor
selection process and invited other audit
firms to submit detailed proposals for a
new engagement. Following a thorough
review of the proposals submitted by
prospective audit firms, Deloitte LLP was
selected as the new auditor of the Group
with effect from 1 May 2024 and the
appointment of Deloitte LLP as the Group’s
auditors was recommended by the Audit
Committee and approved by the Board.
For the financial years 2022 and 2023

255

Shareholder information continued

there were no material disagreements (as
defined in Item 16F(a)(1)(iv) of Form 20-F)
with KPMG on matters of accounting
principles or practices, financial statement
disclosure, or auditing scope or procedure,
which disagreement(s), if not resolved
to the satisfaction of KPMG, would have
caused KPMG to make reference to the
subject matter of the disagreement(s) in
connection with its report.

During the financial years ended
31 December 2022 and 2023, there were
no reportable events as defined under Item
16F(a)(1)(v).

During the financial years ended
31 December 2022 and 2023, the Group
did not consulted Deloitte LLP regarding:
– The application of accounting principles

to a specified transaction, either
completed or proposed;

– The type of audit opinion that might
be rendered on the Group’s financial
statements, and either a written report
was provided to the registrant or oral
advice was provided that Deloitte LLP
concluded was an important factor
considered by the registrant in reaching a
decision as to the accounting, auditing or
financial reporting issue; or

– Any matter that was either the subject
of a disagreement (as defined in Item
16F(a)(1)(iv) of Form 20-F) or a reportable
event (as described in Item 16F(a)(1)(v)
of Form 20-F) between Smith+Nephew
and KPMG

The Group has requested that KPMG LLP
furnish it with a letter addressed to the SEC
stating whether or not it agrees with the
above statements. A copy of such letter is
filed as an Exhibit to this Annual Report.

Special note regarding
forward-looking statements
The Group’s reports filed with, or
furnished to, the US Securities and
Exchange Commission (SEC), including
this document and written information
released, or oral statements made, to
the public in the future by or on behalf
of the Group, contain ‘forward-looking
statements’ within the meaning of the
US Private Securities Litigation Reform
Act of 1995, that may or may not prove
accurate. For example, statements
regarding expected revenue growth and
trading profit margins discussed in the
‘Strategic Report’, market trends and
our product pipeline are forward-looking

256

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: risks related to factors such as
the conflicts in Ukraine 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 dispositions, 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; 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;
relationships with healthcare professionals;
reliance on information technology and
cybersecurity. Specific risks faced by the
Group are described under ‘Risk factors’
on pages 237–243 of this Annual Report.

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.

Product data
Product data and product share estimates
throughout this report are derived from
a variety of sources including publicly
available competitors’ information,
internal management information and
independent market research reports.

Documents on display
It is possible to read and copy documents
referred to in this Annual Report at
the Registered Office of the Company.
Documents referred to in this Annual
Report that have been filed with the
Securities and Exchange Commission
in the US may be read and copied at the
SEC’s public reference room located at
450 Fifth Street, NW, Washington DC
20549. Please call the SEC at 1-800-SEC-
0330 for further information on the public
reference rooms and their copy charges.
The SEC also maintains a website at
www.sec.gov that contains reports and
other information regarding registrants
that file electronically with the SEC.

This Annual Report on Form 20-F and
some of the other information submitted
by the Group to the SEC may be accessed
through the SEC website.

Corporate headquarters
and registered office
The corporate headquarters is in the
UK and the registered office address is:

Smith & Nephew plc,
Building 5, Croxley Park,
Hatters Lane, Watford,
Hertfordshire, WD18 8YE,
United Kingdom.

Registered in England and Wales
No. 324357.

Tel. +44 (0)1923 477 100
www.smith-nephew.com

Smith+Nephew Annual Report 2023

Cross-reference to Form 20-F
This table provides a cross-reference from the information
included in this Annual Report to the requirements of Form 20-F.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Part I
Item 1

Identity of Directors, Senior Management
and Advisers

Item 2 Offer Statistics and Expected Timetable
Item 3 Key Information
A – (Reserved)
B – Capitalisation and Indebtedness
C – Reason for the Offer and Use of Proceeds
D – Risk Factors
Information on the Company
A – History and Development

Item 4

of the Company

B – Business Overview
C – Organisational Structure
D – Property, Plants and Equipment

Page

Part I

n/a

n/a
n/a
n/a
237–243

8–11, 14–23, 26–45, 58–59,
172–228, 224–225, 231–235,
246, 248–251, 255–256,
266, IBC
2–79, 180–183, 235–243
197–198, 231–234
191–192, 235
None

Item 4A Unresolved Staff Comments
Item 5 Operating and Financial Review and Prospects

A – Operating Results
B – Liquidity and Capital Resources
C – Research and Development, Patents

and Licences, etc.
D – Trend Information
E – Critical Accounting Estimates

IFC, 16, 18–23, 237–243
23, 202–204, 223–224
11, 16–17, 19, 75, 183,
239
7, 23, 26–45, 58–59, 237–243
159–171

Item 6 Directors, Senior Management and Employees
A – Directors and Senior Management
B – Compensation
C – Board Practices
D – Employees
E – Share Ownership

88–97
121–154, 214–220
88–93, 96–154
46–49, 185
136–140, 144–145,
146–149, 153–154, 220–222, 226, 228
n/a

F – Disclosure of a Registrant’s

Action to Recover Erroneously
Awarded Compensation

Item 7 Major Shareholders and Related Party Transactions

A – Major Shareholders
B – Related Party Transactions
C – Interests of Experts and Counsel

Item 8 Financial information

A – Consolidated Statements and

Other Financial Information

Legal Proceedings
Dividends

B – Significant Changes

Item 9 The Offer and Listing

250–251, 253–255
226, 235
n/a

155–231, 249–250

211–213
249–250
None

A – Offer and Listing Details

88, 248–250

Smith+Nephew Annual Report 2023

B – Plan of Distribution
C – Markets
D – Selling Shareholders
E – Dilution
F – Expenses of the Issue

Item 10 Additional Information

A – Share Capital
B – Memorandum and Articles of Association
C – Material Contracts
D – Exchange Controls
E – Taxation
F – Dividends and Paying Agents
G – Statement by Experts
H – Documents on Display
I – Subsidiary Information

Item 11 Quantitative and Qualitative Disclosure

about Market Risk

Item 12 Description of Securities other than Equity Securities

A – Debt Securities
B – Warrants and Rights
C – Other Securities
D – American Depositary Shares

Part II
Item 13 Defaults, Dividend Arrearages and Delinquencies
Item 14 Material Modifications to the Rights of Security

Holders and Use of Proceeds

Item 15 Controls and Procedures

Item 16 (Reserved)

A – Audit Committee Financial Expert
B – Code of Ethics
C – Principal Accountant Fees and Services
D – Exemptions from the Listing Standards

for Audit Committees

E – Purchases of Equity Securities by the
Issuer and Affiliated Purchasers

F – Change in Registrant’s
Certifying Accountant
G – Corporate Governance
H – Mine Safety Disclosure
I – Disclosure Regarding Foreign Jurisdictions

that Prevent Inspections

J – Insider Trading Policies
K – Cybersecurity

Part III
Item 17 Financial Statements
Item 18 Financial Statements
Item 19 Exhibits

Page

n/a
5, 88, 248–250
n/a
n/a
n/a

n/a
253–255
None
251
251–253
n/a
n/a
256
231–234
205–211

n/a
n/a
n/a
249–250

Page

None
None

114, 116–120,
156–171
n/a
92, 114
120
116–117, 185
n/a

226, 251

107, 116–117, 137,
255–256
88
n/a
n/a

73, 236, 240

Page

n/a
172–228

257

SASB reporting

Topic

Metric

2023 Reporting

Code

Affordability
and pricing

Ratio of weighted average rate of
net price increases (for all products)
to the annual increase in the US
Consumer Price Index.

Description of how price information
for each product is disclosed to
customers or to their agents.

Product safety

Number of recalls issued,
total units recalled.

List of products listed in the
FDA’s MedWatch Safety
Alerts for Human Medical
Products database.

Number of fatalities related to
products as reported in the FDA
Manufacturer and User Facility
Device Experience (MAUDE).

Number of FDA enforcement
actions taken in response
to violations of current Good
Manufacturing Practices (cGMP),
by type.

Ethical
marketing

Description of code of ethics
governing promotion of off-label
use of products.

Not reported.

HC-MS-240a.1

Smith+Nephew uses several methods
to disseminate price information to
customers, including quotes, agreements,
responses to requests for proposal,
tender bid submissions, discount
and rebate reporting and through
large group purchasing organisation/
integrated delivery network customers
to their members.

In 2023, Smith+Nephew reported 14
recalls globally. A total of 136,848 units
were impacted globally. All impacted
products were either removed from the
market or corrected per the applicable
regulations and/or standards.

Smith+Nephew reports all
data as required by the FDA.
The MedWatch database is available at
https://www.fda.gov/safety/medwatch-
fda-safety-information-and-adverse-
event-reporting-program

Smith+Nephew reports all
data as required by the FDA.
The FDA MAUDE database is available at
https://www.accessdata.fda.gov/scripts/
cdrh/cfdocs/cfmaude/search.cfm

In 2023, Smith+Nephew received:
– 1 Form 483 (1 observation in total).
– 0 Warning letters.
– 0 Seizures.
– 7 Recalls (FDA reportable events).
– 0 Consent decrees.

See the Product Promotion and
Scientific Disclosures section of our
Code of Conduct and Business Principles
(http://www.smith-nephew.com/
compliance) and the Acting with Integrity
section of our Sustainability Report for
additional information.

HC-MS-240a.2

HC-MS-250a.1

HC-MS-250a.2

HC-MS-250a.3

HC-MS-250a.4

HC-MS-270a.2

258

Smith+Nephew Annual Report 2023

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

Topic

Metric

2023 Reporting

Code

Product design
and lifecycle
management

Discussion of process to assess and
manage environmental and human
health considerations associated
with chemicals in products, and meet
demand for sustainable products.

Total amount of products accepted
for takeback and reused, recycled,
or donated, broken down by:
(1) devices and equipment and
(2) supplies.

Supply chain
management

Percentage of (1) entity’s facilities
and (2) Tier 1 suppliers’ facilities
participating in third-party audit
programmes for manufacturing
and product quality.

Sustainability reviews are incorporated
in New Product Development phase
reviews for new products and acquisitions.
Additionally, regulatory changes regarding
chemicals in products are tracked and
actioned, as appropriate.
See our Sustainability Report for
more information.

Smith+Nephew operates takeback
schemes where required by law.
Smith+Nephew does not measure
the amount of products reused or
recycled for our business purposes.
See the People section of our
Sustainability Report for information
on product donations.

All Smith+Nephew direct manufacturing
locations participate in the Medical
Device Single Audit Program (MDSAP).
All Smith+Nephew direct and third-party
manufacturing locations are certified
to ISO13485. Additionally, all Tier 1
material suppliers are compliant
with ISO13485.

Description of efforts to
maintain traceability within
the distribution chain.

All Smith+Nephew products are labelled
with either Unique Device Identifiers or
HIBC barcodes to maintain traceability.

Description of the management
of risks associated with the use
of critical materials.

Supply chain risks are captured within
Smith+Nephew’s Enterprise Risk
Management process and Global
Supply Chain is identified as one of our
Principal Risks.
See our Risk Report on page 67 and our
Conflict Minerals Disclosure Report on
our website (www.smith-nephew.com)
for additional information.

HC-MS-410a.1

HC-MS-410a.2

HC-MS-430a.1

HC-MS-430a.2

HC-MS-430a.3

Business ethics

Total amount of monetary losses as a
result of legal proceedings associated
with bribery or corruption.

In 2023, Smith+Nephew did not have
monetary losses due to legal proceedings
associated with bribery or corruption.

HC-MS-510a.1

Description of code of ethics
governing interactions with
healthcare professionals.

See our website
(www.smith-nephew.com) for our Code
of Conduct and Business Principles, our
Anti-Bribery Policy, our Annual Report,
and also the Acting with Integrity
section of our Sustainability Report
for additional information.

HC-MS-510a.2

Activity metric

Number of units sold
by product category.

Not reported.

HC-MS-000.A

You can learn more about our sustainability targets and strategy in our
2023 Sustainability Report at www.smith-nephew.com/sustainability

Smith+Nephew Annual Report 2023

259

Glossary

Unless the context indicates otherwise, the following terms have
the meanings shown below:

Meaning
In the US, the Company’s ordinary shares are traded in the
form of American Depositary Shares evidenced by American
Depositary Receipts (ADRs).
In the US, the Company’s ordinary shares are traded in the
form of American Depositary Shares (ADSs).
A product group which includes a variety of technologies
such as fluid management equipment for surgical access,
high definition cameras, digital image capture, scopes,
light sources and monitors to assist with visualisation
inside the joints, radio frequency, electromechanical and
mechanical tissue resection devices, and hand instruments
for removing damaged tissue.
A product group which includes biologics and other bioactive
technologies that provide unique approaches to debridement
and dermal repair/regeneration, and regenerative
medicine products including skin, bone graft and articular
cartilage substitutes.
A product group which includes products for the treatment
and prevention of acute and chronic wounds, including leg,
diabetic and pressure ulcers, burns and post-operative wounds.
A product group which includes traditional and single-use
Negative Pressure Wound Therapy, a patient monitoring
system for pressure injury prevention and patient mobility
monitoring, and hydrosurgery systems.
Annual General Meeting of the Company.
Endoscopy of the joints is termed ‘arthroscopy’, with the
principal applications including the knee and shoulder.
Ambulatory Surgery Center.
One hundredth of one percentage point.
Chronic wounds are those with long or unknown healing times
including leg ulcers, pressure sores and diabetic foot ulcers.
Smith & Nephew plc or, where appropriate, the Company’s
Board of Directors, unless the context otherwise requires.
Companies Act 2006, as amended, of England and Wales.

Emerging Markets include Latin America, Asia (excluding Japan),
Middle East, Africa and Russia.
Adjusted earnings per ordinary share as defined on page 246.
Through a small incision, surgeons are able to see inside
the body using a monitor and identify and repair defects.
Ear, Nose and Throat.
Established Markets are United States of America, Europe,
Australia, New Zealand, Canada and Japan.
References to the common currency used in the majority
of the countries of the European Union.
US Food and Drug Administration.
Refers to the consolidated Group Accounts
of Smith & Nephew plc.
Index of the largest 100 listed companies on the London
Stock Exchange by market capitalisation.
Used for convenience to refer to the Company and its
consolidated subsidiaries, unless the context otherwise requires.
A branch of economics concerned with issues related to
efficiency, effectiveness, value and behaviour in the production
and consumption of health and healthcare.
A product group which includes specialist products for
reconstruction of the hip joint.
Inside Front Cover.
Inside Back Cover.

Term
ADR

ADS

Arthroscopic
Enabling
Technologies
(AET)

Advanced
Wound
Bioactives
(AWB)

Advanced
Wound Care
(AWC)
Advanced
Wound Devices
(AWD)

AGM
Arthroscopy

ASC
Basis Point
Chronic
wounds
Company

Companies
Act
Emerging
Markets
EPSA
Endoscopy

ENT
Established
Markets
Euro or €

FDA
Financial
statements
FTSE 100

Group or
Smith+Nephew
Health
economics

Hip
Implants
IFC
IBC

260

Term
IFRS

Knee
implants
LSE
MDR
MHRA

Negative
Pressure
Wound
Therapy (NPNT)
NHS
NYSE
Orthopaedic
products

Other
Reconstruction
OXINIUM

Parent
Company
Pound Sterling,
Sterling, £,
pence or p
SEC
Sports
Medicine
Joint Repair
Trading
results

Trauma &
Extremities

UK
Underlying
growth

Meaning
International Financial Reporting Standards issued by the
International Accounting Standards Board.
A product group which includes an innovative range of
products for specialised knee replacement procedures.
London Stock Exchange.
Medical Device Regulation.
The Medicines and Healthcare products Regulatory Agency
in the UK.
A technology used to treat chronic wounds such as diabetic
ulcers, pressure sores and post-operative wounds through the
application of sub-atmospheric pressure to an open wound.

The UK National Health Service.
New York Stock Exchange.
Orthopaedic reconstruction products include joint replacement
systems for knees, hips and shoulders and support products
such as computer-assisted surgery and minimally invasive
surgery techniques. Orthopaedic trauma devices are used in
the treatment of bone fractures including rods, pins, screws,
plates and external frames.
A product group which includes robotics-assisted surgery,
bone cement and accessory products.
OXINIUM material is an advanced load bearing technology.
It is created through a proprietary manufacturing process
that enables zirconium to absorb oxygen and transform to a
ceramic on the surface, resulting in a material that incorporates
the features of ceramic and metal. Management believes
that OXINIUM material used in the production of components
of knee and hip implants exhibits unique performance
characteristics due to its hardness, low-friction and
resistance to roughening and abrasion.
Smith & Nephew plc.

References to UK currency. 1p is equivalent to one hundredth
of £1.

US Securities and Exchange Commission.
Sports Medicine Joint Repair includes instruments, technologies
and implants necessary to perform minimally invasive surgery
of joints.
Trading profit, trading profit margin (trading profit expressed
as a percentage of revenue), trading cash flow and trading
profit to trading cash conversion ratio (trading cash flow
expressed as a percentage of trading profit) are trend measures,
which present the profitability of the Group. The adjustments
made exclude the impact of specific transactions that
management considers affect the Group’s short-term
profitability and cash flows, and comparability of results.
Refer to page 245 for further information.
A product group which includes internal and external devices
used in the stabilisation of severe fractures and deformity
correction procedures.
United Kingdom of Great Britain and Northern Ireland.
Growth after adjusting for the effects of currency translation
and the inclusion of the comparative impact of acquisitions
and exclusion of disposals.
United States of America.

US Dollars,
$, or cents or ¢

References to US currency. 1 cent is equivalent to one hundredth
of US$1.

Smith+Nephew Annual Report 2023

Index

Accounting policies

Accounts presentation

Acquisitions

Acquisition and disposal related items

American Depositary Shares

Articles of Association

Audit fees

Board

Business overview

Business segment information

Cash and borrowings

Chair’s statement

Chief Executive Officer’s review

Company balance sheet

Company notes to the accounts

Contingencies

Critical judgements and estimates

Cross-reference to Form 20-F

Currency fluctuations

Currency translation

Deferred taxation

Directors’ Remuneration Report

Directors’ responsibility statement

Dividends

Earnings per share

Employee share plans

Executive team

Factors affecting results of operations

Financial instruments

Financial review

Free cash flow

Glossary of terms

Goodwill

Group balance sheet

Group cash flow statement

Group companies

Group history

Group income statement

Group notes to the accounts

Group overview

Group statement of changes in equity

Group statement of comprehensive income

Independent auditor’s report

Intangible assets

Smith+Nephew Annual Report 2023

176–226

Intellectual property disputes

255

Interest and other finance costs

9, 10, 17–19,
20–23, 29, 42, 65,
69, 75, 82, 87, 98,
224–226, 246–248

18, 182, 190,
246–248

249

253–255

117, 185

90–93

2–3, 235

Inventories

Investments

Investment in associates

Key Performance Indicators

Legal and other

Legal proceedings

Leverage ratio

Liquidity and capital resources

Manufacturing and quality

Medical education

34–45, 179–183

Net debt

202–204

New accounting standards

4–7

8–11

227

229–234

211–213, 231

177–178

257

242–243

178–179

188–189

121–154

156

21, 222

Operating profit

Other finance costs

Our approach to stakeholders

Our global markets

Outlook and trend information

People/Employees

Post balance sheet events

Provisions

Property, plant and equipment

Regulation

Related party transactions

Research & development

Restructuring and rationalisation expenses

21, 172, 189–190

Retirement benefit obligations

226

94–95

243

205–211

20–23

247

260

193–195

Return on invested capital (ROIC)

Risk factors

Risk report

SASB reporting

Share-based payments

Share capital

Shareholder information

Staff costs and employee numbers

173

174

Stakeholder statement

Statement of compliance

231–234

Strategy for Growth

235

172

Sustainability

Taxation

176–226

2–3, 235

175

172

157–171

195–197

Taxation information for shareholders

TCFD reporting

Total shareholder return

Trade and other payables

Trade and other receivables

Treasury shares

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

213

185

199

197

197–198

18–19

183, 247

212–213

247

22, 203

32–33

2, 7, 30–31

202

176

183–184

185

82, 82–87

35, 39, 43

7, 23, 237–241

226

212–213

191–192

15, 33, 53, 70

226, 235

182, 246–247

214–220

18, 248

237–243

67–78

258–259

226

221

248–256

185

82–87

8–11

52–66

186–189

251–253

60–64

152

201

200–201

221–222

261

References from business unit sections

References from Innovation (pages 26–33)
1

Iriuchishima T, Ryu K. A Comparison of Rollback Ratio
between Bicruciate Substituting Total Knee Arthroplasty
and Oxford Unicompartmental Knee Arthroplasty.
J Knee Surg. 2018;31(6):568–572.

2 Murakami K, Hamai S, Okazaki K, et al. Knee kinematics
in bi-cruciate stabilized total knee arthroplasty during
squatting and stair climbing activities. J Orthop.
2018;15(2):650–654.

3 Nodzo SR, Carroll KM, Mayman DJ. The Bicruciate

Substituting Knee Design and Initial Experience. Techniques
in Orthopaedics. 2018;33(1):37–41

7 Grieco TF, Sharma A, Dessinger GM, Cates HE, Komistek RD.
In Vivo Kinematic Comparison of a Bicruciate Stabilized
Total Knee Arthroplasty and the Normal Knee Using
Fluoroscopy. J Arthroplasty. 2018;33(2):565–571.

8 Murakami K, Hamai S, Okazaki K, et al. In vivo kinematics of
gait in posterior-stabilized and bicruciate-stabilized total
knee arthroplasties using image-matching techniques. Int
Orthop. 2018;42(11):2573–2581.

9 Smith LA, Nachtrab J, LaCour M, et al. In Vivo Knee

Kinematics: How Important Are the Roles of Femoral
Geometry and the Cruciate Ligaments? J Arthroplasty.
2021;36:1445–1454.

4 Murakami K, Hamai S, Okazaki K, et al. In vivo kinematics

10 Parikh A, Hill P, Pawar V, Sprague J. Long-term Simulator

of gait in posterior-stabilized and bicruciate-stabilized total
knee arthroplasties using image-matching techniques.
Int Orthop. 2018;42(11):2573–2581.

Wear Performance of an Advanced Bearing Technology for
THA. Poster presented at: 2013 Annual Meeting of the
Orthopaedic Research Society. Poster no. 1028

5 Mayman DJ, Patel AR, Carroll KM. Hospital related clinical
and economic outcomes of a bicruciate knee system in
total knee arthroplasty patients. Poster presented at:
ISPOR Symposium; May 19–23, 2018; Baltimore,
Maryland, USA.

6 Takubo A, Ryu K, Iriuchishima T, Tokuhashi Y. Comparison

of muscle recovery following bicruciate substituting versus
posterior stabilized total knee arthroplasty in an Asian
population. J Knee Surg. 2017;30(7):725–729.

7 Noble PC, Gordon MJ, Weiss JM, Reddix RN, Conditt MA,
Mathis KB. Does total knee replacement restore normal
knee function? Clin Orthop Relat Res. 2005(431):157–165

8 Collins M, Lavigne M, Girard J, Vendittoli PA. Joint

perception after hip or knee replacement surgery. Orthop
Traumatol Surg Res.2012;98:275–280.

9 Rashid MS, Cooper C, Cook J, et al. Increasing age and tear
size reduce rotator cuff repair healing rate at 1 year. Acta
Orthop. 2017;88:606–611.

10 Data from a recent study, Mitchell RB et. al. Clinical practice

guideline: Tonsillectomy in children (Update).
Otolaryngology – Head and Neck Surgery. 2019;160(1
Suppl):S1–S42.

11 Papannagari R, Hines G, Sprague J, Morrison M. Long-term
wear performance of an advanced bearing technology for
TKA. Poster presented at: 2011 Annual Meeting of the
Orthopaedic Research Society. Poster no. 1141.

12 National Joint Registry for England, Wales, Northern Ireland

and the Isle of Man: 20th Annual Report. 2023.
13 Australian Orthopaedic Association National Joint

Replacement Registry (AOANJRR). Hip, Knee & Shoulder
Arthroplasty: 2022 Annual Report. Adelaide: AOA, 2022.
14 Peters RM, Van Steenbergen LN, Stevens M, Rijk PC, Bulstra
SK, Zijlstra WP. The effect of bearing type on the outcome
of total hip arthroplasty. Acta Orthop. 2018:89;163–169.
15 Atrey A, Ancarani C, Fitch D, Bordini B. Impact of bearing
couple on long-term component survivorship for primary
cementless total hip replacement in a large arthroplasty
registry. Poster presented at: Canadian Orthopedic
Association; June 20–23, 2018; Victoria, British Columbia,
Canada.

16 Davis ET, Pagkalos J, Kopjar B. Bearing surface and survival
of cementless and hybrid total hip arthroplasty in the
National Joint Registry of England, Wales, Northern Ireland
and the Isle of Man. JBJS OA. 2020;5:e0075.

11 National Healthcare Safety Network report on surgical

17 Smith+Nephew 2020. NAVIO Technical Specification

28 Smith+Nephew 2023. Surgical tray and instrumentation

data collection for conventional and robotic knee surgeries.
Clinical Activity Report.

29 Seyler MT. Revision total knee arthroplasty with an
imageless, 2nd generation robot system. Podium
Presentation at: 2023 Members Meeting of The Knee
Society; September 7–9, 2023; Monterey, California, US.
30 Mayman DJ, Patel AR, Carroll KM. Hospital related clinical
and economic outcomes of a bicruciate knee system in
total knee arthroplasty patients. Poster presented at:
ISPOR Symposium; May 19–23, 2018; Baltimore,
Maryland, USA.

31 Takubo A, Ryu K, Iriuchishima T, Tokuhashi Y. Comparison of
muscle recovery following bicruciate substituting versus
posterior stabilized total knee arthroplasty in an Asian
population. J Knee Surg. 2017;30(7):725–729.

32 Noble PC, Gordon MJ, Weiss JM, Reddix RN, Conditt MA,
Mathis KB. Does total knee replacement restore normal
knee function? Clin Orthop Relat Res. 2005(431):157–165.

33 The Orthopaedic Data Evaluation Panel (ODEP).
www.odep.org.uk. Accessed 1 December 2023.

34 Smith+Nephew 2023. AETOS Inlay Design Features. Internal

Report. ER-04-0990-0017.

35 Arenas-Miquelez A, Murphy R, Rosa A, Caironi D, Zumstein
M. Impact of humeral and glenoid component variations on
range of motion in reverse geometry total shoulder
arthroplasty. A standardised computer model study. (8214).
Swiss Medical Weekly. 2020;150(SUPPL 244):2S.

36 Kalouche I, Sevivas N, Wahegaonker A, Sauzieres P, Katz D,
Valenti P. Reverse shoulder arthroplasty: Does reduced
medialisation improve radiological and clinical results? Acta
Orthopaedica Belgica. 2009;75(2):158–166.

37 Lädermann A, Tay E, Collin P, et al. Effect of critical shoulder
angle, glenoid lateralization, and humeral inclination on
range of movement in reverse shoulder arthroplasty. Bone
Joint Res. 2019;8(8):378–386.

38 Harmer L, Throckmorton T, Sperling JW. Total shoulder

arthroplasty: are the humeral components getting shorter?
Curr Rev Musculoskelet Med. 2016;9(1):17–22.

site infections, January 2023

12 SmartTrak Report, 2023

* Compared to non-JOURNEY™ II knees; Based on

BCS evidence

** Based on BSC evidence

References from Orthopaedics (pages 34–37)
1 Smith+Nephew. Evidence Outcomes Report EO.TRA.

PCS001.v1. 2021.

2 Quartley M, Chloros G, Papakostidis K, Saunders C,

Giannoudis PV. Stabilisation of AO OTA 31-A unstable
proximal femoral fractures: Does the choice of
intramedullary nail affect the incidence of post-operative
complications? A systematic literature review and
meta-analysis. Injury. 2022;53(3):827–840
Iriuchishima T, Ryu K. A Comparison of Rollback Ratio
between Bicruciate Substituting Total Knee Arthroplasty
and Oxford Unicompartmental Knee Arthroplasty. J Knee
Surg. 2018;31(6):568–572.

4 Murakami K, Hamai S, Okazaki K, et al. Knee kinematics in

bi-cruciate stabilized total knee arthroplasty during
squatting and stair climbing activities. J Orthop.
2018;15(2):650–654.

5 Yayac M, Harrer S, Hozack WJ, Parvizi J, Courtney M.

The use of cementless components does not significantly
increase procedural costs in total knee arthroplasty.
J Arthroplasty. 2020;35:407–712.

6 Nodzo SR, Carroll KM, Mayman DJ. The Bicruciate
Substituting Knee Design and Initial Experience.
Techniques in Orthopaedics. 2018;33(1):37–41

Comparison. March 2020. Internal Report ER0488 REVB.

39 SmartTrak Report, 2023. Accessed 1 December 2023.

18 Smith+Nephew 2020. Comparison of operating room

footprint for robotic-assisted knee arthroplasty systems.
Internal Report. EO.REC.PCS015.002.v1.

* Based on BSC evidence
** We thank the patients and staff of all the hospitals in

19 Gregori A, Picard F, Bellemans J, Smith JR, Simone A.

Handheld Precision Sculpting Tool for Unicondylar Knee
Arthroplasty. A Clinical Review. Poster presented at: 15th
EFORT Congress; 4–6 June, 2014; London, UK.

20 Bollars P, Boeckxstaens A, Mievis J, Janssen D. The Learning

Curve and Alignment Assessment of an Image-Free
Handheld Robot in TKA: The First Patient Series in Europe.
Poster presented at: 19th Annual Meeting of the
International Society for Computer Assisted Orthopaedic
Surgery 2019; New York, USA.

21 Kopjar B, Schwarzkopf R, Chow J, et al. NAVIO Robotic

Assisted Surgical System for Total Knee Arthroplasty Using
JOURNEY II Guided-Motion Total Knee System. Poster
presented at: ISTA 2–5 October, 2019; Toronto, Canada.

22 Geller JA, Rossington A, Mitra R, Jaramaz B, Khare R,
Netravali NA. Rate of learning curve and alignment
accuracy of an image-free handheld robot for total Knee
Arthroplasty. European Knee Society Arthroplasty
Conference;2019; Valencia, Spain.

23 Ponzio DY, Lonner JH. Preoperative Mapping in

Unicompartmental Knee Arthroplasty Using Computed
Tomography Scans Is Associated with Radiation Exposure
and Carries High Cost. J Arthroplasty. 2015;30(6):964–967

24 Smith+Nephew 2022. Optimus TKA Tensioner Gap
Assessment Verification Report. Internal Report.
10059269.

25 Smith+Nephew 2021. Tensioner Design Verification Test

Report. Internal Report. TR100123

26 Smith+Nephew 2022. Tensioner KPC: Tensioner Calibration

Check. Internal Report. TR100116, Rev.B

27 Smith+Nephew 2023. 37753 V2 CORI Digital Tensioner

Evidence in focus White paper 0923.

England, Wales and Northern Ireland who have contributed
data to the National Joint Registry. We are grateful to the
Healthcare Quality Improvement Partnership (HQIP), the
NJR Steering Committee and staff at the NJR Centre for
facilitating this work. The views expressed represent those
of the authors and do not necessarily reflect those of the
National Joint Registry Steering Committee or the Health
Quality Improvement Partnership (HQIP) who do not vouch
for how the information is presented.
*** Compared to NAVIO™ Handheld Robotics
**** Compared to Mako and ROSA
***** With use of handpiece
† All data from US-based CORI system surgeons (rTKa, n=8).
†† Cost savings estimated based on single surgeon, single

center experience and may not be representative. Savings
based on surgical tray sterilisation cost reductions and
decreased OR Time. Average sterilization cost of $58.18 per
tray, with a reduction from 13 to 4 trays per case. OR time
decreased by average 25 minutes/case, with OR time
estimated to cost $40/minute.

††† Compared to conventional techniques.
†††† Compared to the NAVIO◊ Surgical System and previous
software versions. 29% faster resection demonstrated in
total knee cadaver studies

^ 2005 ASM International Engineering Materials

Achievement Award

262

Smith+Nephew Annual Report 2023

References from Sports Medicine & ENT (pages 38–41)
1 Bokor DJ, Sonnabend D, Deady L, et al. Evidence of

healing of partial-thickness rotator cuff tears following
arthroscopic augmentation with a collagen implant:
a 2-year MRI follow-up. Muscles, Ligaments Tendons J
2016;6(1):16–25.

2 Arnoczky SP, Bishai SK, Schofield B, Sigman S, Bushnell BD,

Hommen JP, Van Kampen C. Histologic Evaluation of Biopsy
Specimens Obtained

3 Schlegel TF, Abrams JS, Bushnell BD, Brock JL, Ho CP.
Radiologic and clinical evaluation of a bioabsorbable
collagen implant to treat partial-thickness tears: a
prospective multicenter study. J Shoulder Elbow Surg. 2018
27(2):242–251.

4 Bokor DJ, Sonnabend DH, Deady L, et al. Healing of

partial-thickness rotator cuff tears following arthroscopic
augmentation with a highly porous collagen implant: a
5-year clinical and MRI follow-up. Muscles, Ligaments
Tendons J. 2019;9(3):338–347.

5 Van Kampen C, Arnoczky S, Parks P, et al. Tissue-

engineered augmentation of a rotator cuff tendon using a
reconstituted collagen scaffold: a histological evaluation in
sheep. Muscles Ligaments Tendons J. 2013;3(3):229–235.
6 McElvany MD, McGoldrick E, Gee AO, Neradilek MB, Matsen
FA, 3rd. Rotator cuff repair: published evidence on factors
associated with repair integrity and clinical outcome. Am J
Sports Med. 2015;43(2):491–500.

7 Ruiz Iban MA et al. The effect on healing rate of the addition
of a bioinductive implant to a rotator cuff repair. The results
of a randomized controlled trial in 124 subjects.
ISAKOS 2023.

8 Chahla J, Liu JN, Manderle B, et al. Bony ingrowth of
coil-type open-architecture anchors compared with
screw-type PEEK anchors for the medial row in rotator cuff
repair: a randomized controlled trial. Arthroscopy. 2019 Dec
3. 2020;36(4):952–961. Epub ahead of print

9 Smith+Nephew 2021. Technical Report, HEALICOIL Implant
Volume Comparison. Internal Report. 15010823 Rev A
10 Vonhoegen J, John D, Hägermann C. Osteoconductive

resorption characteristics of a novel biocomposite suture
anchor material in rotator cuff repair. Orthop Traumatol
Surg Res. 2019;14(1):12.

11 Smith+Nephew 2010. Micro-CT and histological evaluation
of specimens from resorbable screw study (RS-II/OM1-08)
24-month post-implantation. Internal Report WRP-
TE045-700-08.

12 Smith+Nephew 2016. Healicoil Regenesorb Suture Anchor
– a study to assess implant replacement by bone over a 2
year period. NCS248.

13 McIntyre LF, McMillan S, Trenhaile SW, Bishai SK, Bushnell

BD. Full-Thickness Rotator Cuff Tears Can Be Safely Treated
With Resorbable Bioinductive Bovine Collagen Implant:
One-Year Results of a Prospective, Multicenter Registry.
Arthrosc Sports Med Rehabil. 2021 Aug 20;3(5):e1473–
e1479.

14 Bushnell BD, Connor P, Harris HW, Ho CP, Trenhaile SW,
Abrams JS. Two-year outcomes with a bioinductive
collagen implant used in augmentation of arthroscopic
repair of full-thickness rotator cuff tears: Final results of a
prospective multi-center study. J Shoulder Elbow Surg.
2022 Jul 1:S1058–2746.

15 Micheloni GM, Salmaso G, Zecchinato G, Giaretta S, Barison
E, Momoli A. Bio-inductive implant for rotator cuff repair:
our experience and technical notes. Acta Biomed. 2020 Dec
30;91(14–S).

16 Thon SG, O’Malley L 2nd, O’Brien MJ, Savoie FH 3rd.

Evaluation of Healing Rates and Safety With a Bioinductive
Collagen Patch for Large and Massive Rotator Cuff Tears:
2-Year Safety and Clinical Outcomes. Am J Sports Med.
2019 Jul;47(8):1901–1908.

STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION

18 Bushnell BD, Bishai SK, Krupp RJ, McMillan S, Schofield BA,
Trenhaile SW, McIntyre LF. Treatment of Partial-Thickness
Rotator Cuff Tears With a Resorbable Bioinductive Bovine
Collagen Implant: 1-Year Results From a Prospective
Multicenter Registry. Orthop J Sports Med. 2021 Aug
13;9(8).

19 Dai A, Campbell A, Bloom D, Baron S, Begly J, Meislin R.
Collagen-Based Bioinductive Implant for Treatment of
Partial Thickness Rotator Cuff Tears. Bull Hosp Jt Dis
(2013). 2020 Sep;78(3):195–201.

20 Schlegel TF, Abrams JS, Angelo RL, Getelman MH, Ho CP,

Bushnell BD. Isolated bioinductive repair of partial-
thickness rotator cuff tears using a resorbable bovine
collagen implant: two-year radiologic and clinical outcomes
from a prospective multicenter study. J Shoulder Elbow
Surg. 2021 Aug;30(8):1938–1948.

21 Yeazell S, Lutz A, Bohon H, Shanley E, Thigpen CA,

Kissenberth MJ, Pill SG. Increased stiffness and reoperation
rate in partial rotator cuff repairs treated with a bovine
patch: a propensity-matched trial. J Shoulder Elbow Surg.
2022 Jun;31(6S):S131–S135.

35 Roje Z, Racic G, Dogas Z, Pesutić Pisac V, Timms M.
Postoperative morbidity and histopathologic
characteristics of tonsillar tissue following coblation
tonsillectomy in children: A prospective randomized
single-blind study. Coll Antropol. 2009;33:293–298.
36 Smith+Nephew 2010. PROCISE LW & MLW, Thermal
Measurement and Comparison to CO2 and KTP Laser
Systems. Internal Report. P/N 86257 Rev. A.

37 Smith+Nephew 2010. PROcise XP Comparative Thermal
Measurement Bench-Top Study. Internal Report. P/N
60736–01 Rev. A.

38 Magdy EA, Elwany S, El-Daly AS, Abdel-Hadi M, Morshedy
MA. Coblation tonsillectomy: A prospective, double-blind,
randomised, clinical and histopathological comparison with
dissection-ligation, monopolar electrocautery and laser
tonsillectomies. J Laryngol Otol. 2008;122:282–290.
39 Sedgwick MJ, Saunders C, Bateman N. Intracapsular
Tonsillectomy Using Plasma Ablation Versus Total
Tonsillectomy: A Systematic Literature Review and
Meta-Analysis. OTO open. 2023;7(1):e22.

40 Smith+Nephew 2023.ARIS Targeted Hemostasis. Internal

22 Bokor DJ, Sonnabend D, Deady L et al. Preliminary

Memo. 10094398 Rev A.

investigation of a biological augmentation of rotator cuff
repairs using a collagen implant: a 2-year MRI follow-up.
Muscles, Ligaments Tendons J. 2015;5(3):144–150.

23 McIntyre L, Bishai SK, Brown PB, Bushnell BD, Trenhaile SW.

Patient-Reported Outcomes Following Use of a
Bioabsorbable Collagen Implant to Treat Partial and
Full-Thickness Rotator Cuff Tears. Arthroscopy. 2019
35(8):2262–2271.

24 Bokor DJ, Sonnabend D, Deady L, et al. Evidence of healing

of partial-thickness rotator cuff tears following
arthroscopic augmentation with a collagen implant: a
2-year MRI follow-up. Muscles, Ligaments Tendons J.
2016;6(1):16–25.

25 Bokor DJ, Sonnabend D, Deady L et al. Preliminary

investigation of a biological augmentation of rotator cuff
repairs using a collagen implant: a 2-year MRI follow-up.
Muscles, Ligaments Tendons J. 2015;5(3):144–150.
26 Smith+Nephew 2019. An overview of the outcomes
associated with the standard of care for the surgical
treatment of rotator cuff tears. Internal Report EO/SPM/
REGENETEN/005/v1.

27 Hein J, Reilly JM, Chae J, Maerz T, Anderson K. Retear Rates
After Arthroscopic Single-Row, Double-Row, and Suture
Bridge Rotator Cuff Repair at a Minimum of 1 Year of
Imaging Follow-up: A Systematic Review. Arthroscopy.
2015;31(11):2274–2281.

28 Bushnell BD, Connor PM, Harris HW, Ho CP, Trenhaile SW,
Abrams JS. Retear rates and clinical outcomes at 1 year
after repair of full-thickness rotator cuff tears augmented
with a bioinductive collagen implant: a prospective
multicenter study. JSES Int. 2021;5(2):228–237

29 Konan S, Haddad F. Outcomes of Meniscal Preservation

Using All-inside Meniscus Repair Devices. Clin Orthop Relat
Res. 2010;468:1209–1213.

30 ArthroCare 2014.Comparative Performance of the FLOW
50 Wand and the Predicate Wands in Tissue Models. P/N
52918-01.

31 Spahn G, Kahl E, Muckley T, Hofmann GO, Klinger HM.
Arthroscopic knee chondroplasty using a bipolar
radiofrequency-based device compared to mechanical
shaver: results of a prospective, randomized, controlled
study. Knee Surg Sports Traumatol Arthrosc.
2008;16(6):565–573.

32 Smith+Nephew 2017. Coblation Dissection Versus
Monopolar Dissection – A Systematic Review and
Meta-analysis P/N 91999 Rev. A.

33 Temple RH, Timms MS. Paediatric coblation tonsillectomy.

Int J Pediatr Otorhinolaryngol. 2001;61(3):195–198.

41 Lustig LR, Ingram A, Vidrine M, et. al. In-Office

Tympanostomy Tube Placement in Children Using
Iontophoresis and Automated Tube Delivery. Laryngoscope.
2020;130:S1–S9, 2020.

42 IFU007011, available at www.tulatubes.com/IFU
43 Adam J. Singer, MD Michelle Blanda, MD, Kerry Cronin, MD,
et al. Comparison of Nasal Tampons for the Treatment of
Epistaxis in the Emergency Department: A Randomized
Controlled Trial. The American College of Emergency
Physicians. Volume 45, no. 2 : February 2005. doi:10.1016/j.
annemergmed. 2004.10.002

* Compared to predicate device.
** The REGENETEN Implant is cleared for use on any tendon

where there is not substantial loss of tendon tissue.
REGENETEN Bone Anchors are only indicated for use in
rotator cuff repair. Published clinical outcomes are for
rotator cuff. The REGENETEN Implant is currently approved
for use in treating Gluteus Medius and Achilles tears only in
the US.

*** As demonstrated ex vivo
**** Demonstrated clinically and in vivo
***** As compared to mechanical debridement for knee

chondroplasty; n=60; p<0.001

References from Advanced Wound Management
(pages 42–45)
1 National Scorecard on Hospital-Acquired Conditions,
Agency for Healthcare Research and Quality (AHRQ).
January 2019 update. AHRQ National Scorecard on
Hospital-Acquired Conditions Updated Baseline Rates and
Preliminary Results 2014–2017.

2 Schutt SC, Tarver C, Pezzani M. Pilot study: Assessing the
effect of continual position monitoring technology on
compliance with patient turning protocols. Nurs Open.
2017;5(1):21–28.

3 Pickham D, Berte N, Pihulic M, Valdez A, Mayer B, Desai M.
Effect of a wearable patient sensor on care delivery for
preventing pressure injuries in acutely ill adults: A pragmatic
randomized clinical trial (LS-HAPI study). Int J Nurs Stud.
2018;80:12–19.

4 Klaeb M, Krafft K, Walters B, Lowe J, Cooley A. The Influence

of Wearable Technology on Nursing Attitudes and
Adherence to Patient Turning and Repositioning. Poster
presented at: Patient Handling and Mobility Annual
Conference; March 5–March 7, 2019; Orlando, Florida, USA.

5 Forni C, D’alessandro F, Gallerani P, et al. Effectiveness

of using a new polyurethane foam multi-layer dressing in
the sacral area to prevent the onset of pressure ulcer in
the elderly with hip fractures: A pragmatic randomised
controlled trial. Int Wound J. 2018;15(3):1–8.

6 Smith+Nephew 2018.Pressure Redistribution Testing of

ALLEVYN Life vs Mepilex Border and Optifoam Gentle SA.
Internal Report. DS/18/351/R45.

263

17 Camacho-Chacon JA, Cuenca-Espierrez J, Roda-Rojo V,

34 Smith+Nephew 2010. Temperature Study – PEAK

Martin-Martinez A, Calderon-Meza JM, Alvarez-Alegret R,
Martin-Hernandez C. Bioinductive collagen implants
facilitate tendon regeneration in rotator cuff tears. J Exp
Orthop. 2022 Jun 8;9(1):53.

PlasmaBlade® TnA and Covidien EDGE®. Internal Report.
PN 86791 Rev. 1.

Smith+Nephew Annual Report 2023

38 Smith+Nephew 2008. A multi-centre in-market evaluation
of ALLEVYN Ag dressings. Internal Report. SR/CIME/009.

39 Smith+Nephew 2018. PMCF Research for Allevyn Ag

for use, contraindications, effects, precautions and
warnings, please consult the product’s Instructions for Use
(IFU) prior to use.

References from business unit sections continued

7 Smith+Nephew 2019. Properties of ALLEVYN LIFE

36 Smith+Nephew 2007. Antimicrobial Activity of Allevyn

advanced wound care dressing that can contribute to
the effective use as part of a Pressure Injury Prevention
protocol. Internal Report. RD/19/177.

Ag Non-Adhesive Dressing against a Broad Spectrum of
Microorganisms. Internal Report. DOF 0703006.

37 Smith+Nephew 2007. Antimicrobial activity of ALLEVYN

8 European Pressure Ulcer Advisory Panel, National

Pressure Injury Advisory Panel and Pan Pacific Pressure
Injury Alliance. Prevention and Treatment of Pressure
Ulcers/Injuries: Clinical Practice Guideline. Emily Haesler
(Ed.) EPUAP/NPIAP/PPPIA: 2019.

9 State of the world’s nursing 2020: investing in education, jobs
and leadership. Geneva: World Health Organization; 2020.

10 Moore, Z and Probst, S. Building the business case for
shared wound care: A cost-benefit case for service
providers. Wounds International 2023. 2023; 4(3) 10–15.

11 Moore Z et al. Wounds International. 2022;13(2):32–8.
12 USC University of Southern California. What Does Self-Care
Mean for Individuals With Diabetes? Accessed May 19, 2022.
https://nursing.usc.edu/blog/self-care-with-diabetes/
13 di Gesaro A. Self-care and patient empowerment in stoma
management. Gastrointestinal Nursing. 2012;10(2):19–23.

14 Spinks J. Self care in urinary incontinence. SelfCare.

2011;2(6):160–166.

15 Smith+Nephew 2016.Wound Model Testing of New

ALLEVYN◊ Life Gen2 wcl Dressing using Horse Serum at a
Flow Rate Modelling that of a Moderately Exuding Wound.
DS/14/303/R.

16 Smith+Nephew 2016. Product Performance of Next
Generation ALLEVYN Life Internal Report. (HVT080)
GMCA-DOF/08.

Ag dressings against a broad spectrum of wound pathogens
using a dynamic shake flask method. Internal Report.
DOF 0707052.

Adhesive. Internal Report. PMS-273-01.

40 Smith+Nephew 2007. Antimicrobial Activity of ALLEVYN

Ag Adhesive Dressing Against a Broad Spectrum of
Microorganisms. Internal Report. DOF 0703007.
41 Lavery et al. Int Wound J. 2014; 11(5): 554–560.
42 McGinness K, Kurtz Phelan DH. Wounds. 2018; 30(4): 90–95.
43 Nherera et al. Ostomy Wound Manage. 2017;63(12):38–47.
44 Dowsett C, Hampton K, Myers D, Styche T. Use of PICO to
improve clinical and economic outcomes in hard-to-heal
wounds. Wounds International. 2017;8(2):5258

45 Saunders C, Nherera LM, Horner A, Trueman P. Single-Use
negative-pressure wound therapy versus conventional
dressings for closed surgical incisions: systematic literature
review and meta-analysis. BJS Open. 2021;0(0):1–8.

46 Gilchrist B, Robinson M, Jaimes H. Performance, safety, and
efficacy of a single use negative pressure wound therapy
system for surgically closed incision sites and skin grafts:
A prospective multi-centre follow-up study. Paper presented
at: SAWC; 2020; Virtual.

17 Lisco C. Evaluation of a new silicone gel-adhesive

47 Hurd T, Trueman P, Rossington A. Use of a Portable,

Single-use Negative Pressure Wound Therapy Device in
Home Care Patients with Low to Moderately Exuding
Wounds: A Case Series. Ostomy Wound Manage.
2014;60(3):30–36.

48 Forlee M, van Zyl L, Louw V, Nel J, Fourie N, Hartley R. A

randomised controlled trial to compare the clinical efficacy
and acceptability of adjustable intermittent and continuous
Negative Pressure Wound Therapy (NPWT) in a new
portable NPWT system. Paper presented at: EWMA; 2018;
Krakow, Poland.

49 Forlee M, Richardson J, Rossington A, Cockwill J, Smith J.
An interim analysis of device functionality and usability
of RENASYS TOUCH – a new portable Negative Pressure
Wound Therapy (NPWT) system. Paper presented at:
Wounds UK; 2016; Harrogate, UK.

50 Smith+Nephew 2022. RENASYS EDGE System Human
Factors Summative Report Summary. Internal Report.
CSD.AWM.22.071.

51 Smith+Nephew 2022. Summary of footprint, portability,
wearability, weight and audible noise for the RENASYS
EDGE system. Internal Report. CSD.AWM.22.067.

52 Smith+Nephew 2022. Summary of RENASYS EDGE pump
mechanical and electronic reliability testing. Internal
Report. CSD.AWM.22.069.

53 Smith+Nephew 2022. Summary of RENASYS EDGE pump
cleaning, self-test and maintenance. Internal Report.
CSD.AWM.22.068.

54 Agency for Healthcare Research and Quality website.
Preventing pressure ulcers in hospitals: a toolkit for
improving quality of care. Updated October 2014. Accessed
February 2021. https://www.ahrq.gov/professionals/
systems/hospital/pressureulcertoolkit/putool1.html

55 Wassel C, Delhougne G, Gayle J et al. Risk of readmissions,

mortality, and hospital-acquired conditions across
hospital-acquired pressure injury (HAPI) stages in a
US National Hospital discharge database. Int Wound J.
2020;1–11.

hydrocellular foam dressing as part of a pressure ulcer
prevention plan for ICU patients. In: WOCN; 2013.

18 Rossington A, Drysdale K, Winter R. Clinical performance
and positive impact on patient wellbeing of ALLEVYN Life.
Wounds UK. 2013;9(4):91–95.

19 Stephen-Haynes J, Bielby A, Searle R. The clinical

performance of a silicone foam in an NHS community trust.
Journal of Community Nursing. 2013;27(5):50–59.
20 Simon D, Bielby A. A structured collaborative approach
to appraise the clinical performance of a new product.
Wounds UK. 2014;10(3):80–87.

21 Smith+Nephew 2012. Simulated Wound Model Testing
of ALLEVYN Life and Mepilex Border. Internal Report.
DS/12/130/DOF.

22 Smith+Nephew. Subjective comparison of masking ability
of the New ALLEVYN LIFE versus Current ALLEVYN LIFE
by Healthcare Professionals. Internal Report. 2016;
DS/16/061/R.

23 Smith+Nephew 2023. Calculation of global packaging

comparison for ALLEVYN Dressings compared to leading
competitors. Internal report CSD.AWM.23.010.

24 Smith+Nephew 2016.New ALLEVYN Life Gen2 wcl –
Physical Testing. Internal Report. DS/15/025/R.

25 Smith+Nephew 2018. Use of Moisture Vapour Permeability*
(MVP) and Moisture Vapour Transmission Rate** (MVTR)
data to support product claims referring to moist wound
healing. Internal Report. EO.AWM.PCSgen.001.v2.

26 Rossington A, Drysdale K, Winter R. Clinical performance
and positive impact on patient wellbeing of ALLEVYN Life.
Wounds UK. 2013;9(4):91–95.

27 Smith+Nephew 20 June 2016.A Randomised Cross-Over

Clinical Evaluation to Compare Performance of ALLEVYN™
Life and Mepilex® Border Dressings on Patient Wellbeing-
Related Endpoints. Internal Report. CE/047/ALF.

28 Smith+Nephew 14 June 2012. Odour reducing properties

of ALLEVYN Life. Internal Report. DS/12/127/DOF.

29 Smith+Nephew 2021. Internal Report. EA/AWM/

ALLEVYN/001v4.

30 Smith+Nephew. Internal Report. 151008.
31 Nherera LM et al. Wound Repair Regen. 2017;25(4):707–721.
32 Smith+Nephew. Internal Report. RR-WMP07330-10-03.
33 Skog E et al. British Journal of Dermatology. 1983;109:77–83.
34 Fitzgerald DJ et al. Wound Repair Regen. 2016;25(1):13–24.
35 Roche ED, Woodmansey EJ, Yang Q, et al. Cadexomer iodine
effectively reduces bacterial biofilm in porcine wounds
ex vivo and in vivo. Int Wound J. 2019;16(3):674–83.

264

* Up to 5 days for the sacral area.
** OASIS is manufactured by Cook Biotech, Inc.
*** Compared to baseline trajectory, n=52 wounds; p<0.006.
† Compared to care with standard dressings; p<0.00001;
meta-analysis of 29 studies (odds ratio (OR): 0.37).

†† Between 2014 and 2017 in the US.
^ For detailed product information, including the indications

References from products (page 59)
1 Smith+Nephew 2022. Summary of footprint, portability,
wearability, weight and audible noise for the RENASYS
EDGE system. Internal Report. CSD.AWM.22.067

2 Smith+Nephew 2022. How the RENASYS EDGE Negative
Pressure Wound Therapy System provides continuity
of care to the patient Internal Report. EO.AWM.
PCS270.003.V1.

3 Smith and Nephew 2022. RENASYS EDGE System Human

Factors Summative Report Summary. Internal Report. CSD.
AWM.22.071.

4 Smith+Nephew 2022. Summary of RENASYS EDGE pump
cleaning, self-test and maintenance. Internal Report. CSD.
AWM.22.068.

5 Smith+Nephew 2022. Summary of RENASYS EDGE pump
mechanical and electronic reliability testing. Internal
Report. CSD.AWM.22.069.

6 When EDGE device operates at a standard -125mmHg

with a power consumption of 1.14W/hour vs when TOUCH
operates at a standard -120mmHg with a power
consumption of 3.75W/hour.

7 Amount of electricity saved by RENASYS EDGE instead
of RENASYS TOUCH being equivalent to charging an
iPhone 13 Pro over 2,866 times with a 12Wh battery
e.g. iPhone13 Pro is 11.97Wh (https://en.wikipedia.org/
wiki/IPhone_13_Pro, accessed Nov 7th 2023) over a 5-year
period assuming a RENASYS EDGE utilisation of 30%. 5
years is the device’s lifetime as per design input assuming
a 30% utilisation rate equivalent to 13,149 run hours.

8 Over a 5-year period of use in the U.S. assuming a RENASYS
EDGE utilisation of 30% and U.S. national Grid intensity of
0.857 lbCO2/kWh. (Source: https://www.epa.gov/system/
files/documents/2023-01/eGRID2021_summary_tables.
pdf, accessed Nov 7th 2023).

Smith+Nephew Annual Report 2023

Financial calendar
Annual General Meeting
The Company’s Annual General Meeting (‘AGM’) will
be held on Wednesday, 1 May 2024 at 12:00pm at
Smith+Nephew Academy London, Building 5, Croxley
Park, Hatters Lane, Watford, Hertfordshire, WD18 8YE.

Please refer to the Notice of Meeting for detailed information on how to vote
and submit your questions.

The meeting will commence at 12:00pm with doors opening from 11.00am.
Registered shareholders have been sent either a Notice of Annual General
Meeting or notification of availability of the Notice of Annual General Meeting.

2024
Annual General Meeting

First quarter Trading Report

Payment of 2023 final dividend

Half-year results announced

Third quarter Trading Report

1 May

22 May

1 August1

31 October

Payment of 2024 interim dividend

October/November

2025
Full year results announced

Annual Report available

Annual General Meeting

1 Dividend declaration dates.

February¹

February/March

April

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