Annual Report 2024
Life Unlimited
Contents
$5,810m
Group revenue
37.5¢
Unchanged
Dividend per share
+4.7%
Reported
+5.3%
Underlying1
$657m
+54.6%
Operating profit
11.3%
+360bps
Operating profit margin
$1,049m
+8.2%
Trading profit1
18.1%
+60bps
Trading profit margin1
47.2¢
+56.3%
Earnings per share (EPS)
84.3¢
+1.7%
Adjusted earnings
per share1 (EPSA)
$1,245m
+50.2%
Cash generated
from operations
$999m
+57.3%
Trading cash flow1
$288m
-3.7%
Adjusted R&D investment2
7.4%
+150bps
Adjusted Return on
Invested Capital1 (ROIC)
02
03
05
01
04
Strategic Report
Our performance
IFC
At a glance
2
Chair’s statement
6
Chief Executive Officer’s review
10
Our marketplace
14
Our business model
16
Key Performance Indicators
18
Financial review
20
Elevating the standard of care
Research & Development
29
Smith+Nephew Academy
32
Manufacturing, Quality & Regulatory Affairs
34
Putting customers first
Our business units
37
Orthopaedics
39
Sports Medicine & ENT
43
Advanced Wound Management
47
Delivering Life Unlimited
51
Creating a culture to win
58
Protecting the future
Environmental, Social & Governance (ESG) excellence
65
TCFD reporting
69
CO2e strategy, reporting methodology, materiality
and scope
76
Risk report
78
Engaging with stakeholders
96
Governance
Governance at a glance
102
Board leadership and Company purpose
104
Section 172 statement
116
Nomination & Governance Committee Report
119
Compliance & Culture Committee Report
126
Audit Committee Report
130
Remuneration Committee Report
136
Directors Report
174
Accounts
Statement of Directors’ responsibilities
179
Independent auditor’s UK report
180
Group financial statements
192
Notes to the Group accounts
196
Company financial statements
248
Notes to the Company accounts
250
Other information
Group information
256
Cybersecurity risk management and governance
256
Risk factors
257
Non-IFRS financial information – adjusted measures
265
Shareholder information
272
Cross-reference to Form 20-F
278
SASB reporting
281
Glossary
283
Index
284
References from business unit sections
285
Financial calendar
289
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 Adjusted R&D investment is research and development expenses excluding $1m charge relating
to legal and other items (2023: $21m), $nil charge relating to acquisition and disposal related items
(2023: $1m), and $nil charge relating to restructuring and rationalisation expenses (2023: $18m).
Refer to note 3.2 to the Group financial statements for details.
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.
Our purpose
Together we are delivering
Life Unlimited
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
» See pages 51–57 for real-life patient case studies
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We are a leading portfolio medical
technology company. We exist to restore
people’s bodies and their self-belief.
Smith+Nephew at a glance
Smith+Nephew operates in global
markets valued at approximately
US50 billion1 annually.
These markets are shaped by strong
long-term growth drivers and technology
advancements as well as the increasing
decentralisation of care and stretched
healthcare budgets.
Through our Strategy for Growth we are transforming to a
sustainably higher-growth company with innovation at our
core, underpinned by improving productivity and
commercial execution.
Our Strategy for Growth is based on three pillars:
Fixing
Orthopaedics
Improving
productivity
Accelerating
Sports Medicine and
Advanced Wound
Management
Through our 12-Point Plan we are fundamentally changing the
way Smith+Nephew operates. By the end of 2024, the majority of
the 12-Point Plan actions were complete, with Key Performance
Indicators (KPIs) on track or exceeded. We are seeing the expected
financial outcomes across much of the business, with further
progress expected in 2025.
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.
Further accelerating
growth in our already
well-performing
Advanced Wound
Management and
Sports Medicine
businesses.
Annual market value1
$50 billion
We hold leading
positions in growing
markets…
» See pages 14–15
» See page 18
» See pages 10–13
Transform
Through innovation
and acquisition
Accelerate
Profitable growth
through prioritisation
and customer focus
Strengthen
The foundation to serve
customers sustainably and simply
with a compelling
Strategy for Growth…
delivered through our
transformative 12-Point Plan
1 Data generated by Smith+Nephew based on publicly available sources and
internal analysis and represents an indication of market shares and sizes.
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Smith+Nephew Annual Report 2024
Key facts 2024
169
year history
14m+
patients treated
with our products
~100
around 100
countries served
17,349
employees
$289m
R&D investment
16
new products
We work to improve the quality of healthcare through our investment in new
technologies and services, industry-leading medical education and clinical evidence
programmes, and efficient and resilient manufacturing and distribution.
Together we are focused on:
1. Elevating the standard of care
Smith+Nephew Academy
The Smith+Nephew
Academy network supports
the safe and effective use
of our products and provides
healthcare professionals with
opportunities to learn
innovative clinical techniques.
Global Operations
Building resilient
manufacturing and supply
chains to ensure quality and
competitiveness and support
new product development.
Research & Development
Developing new technology
through our Research
& Development (R&D)
programme, and acquiring
exciting technologies
where we can add value.
» See pages 29–31
» See pages 32–33
» See pages 34–35
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Smith+Nephew at a glance continued
2. Putting customers first
3. Delivering Life Unlimited
We take our innovation to market through three global business units: Orthopaedics, Sports
Medicine & Ear, Nose and Throat (ENT) and Advanced Wound Management (AWM). 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.
We support healthcare professionals
in returning their patients to health
and mobility, helping them to perform
to their fullest potential. Each year
around 14 million patients benefit from
treatment with Smith+Nephew products.
Smith+Nephew patients come from all
walks of life. In this report you can read
about knee implant patient Fireman
Rob, who set a world record for the
furthest distance walked wearing full
firefighter gear; Tom Aspinall, who won
the UFC Heavyweight Championship
in 2024 following a Sports Medicine
knee procedure; and Yolanda, a shared-
care patient who wanted to be able to
change her own dressing. All amazing
people living their Life Unlimited.
Sports Medicine & ENT
Our Sports Medicine & ENT business
unit offers advanced products and
instruments used to repair or
remove soft tissue. It serves
growing markets where unmet
clinical needs provide opportunities
for procedural and technological
innovation.
Advanced Wound
Management
Our Advanced Wound Management
business unit 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.
Orthopaedics
Orthopaedics includes an innovative
range of hip, knee and shoulder
replacement systems, robotics-
assisted and digital enabling
solutions that empower surgeons,
and Trauma & Extremities products
used to stabilise severe fractures
and correct hard tissue deformities.
Our three global business units
Percentage of Group revenue
40%
Percentage of Group revenue
31%
Percentage of Group revenue
29%
» See pages 36–50
» See pages 51–57
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5. Protecting the future
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.
Our Environmental, Social and Governance (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.
A culture of empathy and
understanding for each other, our
customers and their patients.
A culture of continuous learning,
innovation and accountability.
A culture of teamwork based
on mutual trust and respect.
4. Creating a culture to win
» See pages 58–63
Products
Innovating
sustainably across
the value chain.
See page 68
People
Creating a lasting
positive impact on
our employees and
communities.
See page 66
Planet
Working to reduce
our impact on the
environment.
See page 67
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Chair’s statement
The Plan is working
Dear Fellow Shareholder,
2024 is the second full year of the
implementation of our three-year
12-Point Plan, and I am pleased to say
that we are now seeing tangible
progress in Smith+Nephew’s
operational and financial performance.
Over the two full financial years since
Deepak Nath joined as CEO, the Group
has delivered sustained revenue
growth, up 6% in 2023 and 5% in 2024,
while operating profit is up from $450m
in 2022 to $657m in 2024, an increase
of 46%. Over the same period, trading
profit margin1 has increased by 80bps,
more than offsetting around -580bps of
headwinds from inflation and China.
Cash generated from operations has
increased from $581 million in the year
Deepak joined (2022) to $1,245 million
in 2024.
In both 2023 and 2024, the team
achieved the vast majority of their
operating and financial targets, which,
given some of the headwinds they have
faced, is commendable.
2024 indicates the outcomes we
can expect from the turnaround of
Smith+Nephew as revenue increases,
margins expand and greater operational
discipline improves capital productivity and
improves cash flow.
Revenue grew at 4.7% on a reported basis,
or 5.3% on an underlying1 basis; trading
margin1 improved by 60bps, leading to
trading profit1 increasing faster than
revenues; non-trading items including
restructuring costs were sharply lower
than the prior year; and as a result of all
these improvements, trading cash flow1
increased by nearly 60% to $999 million.
All of this underlines the fact that the
operational improvements of the 12-Point
Plan are taking root in the business and
delivering improved financial performance.
2025 is, we believe, going to be an inflexion
point in the fortunes of Smith+Nephew as
revenues continue to grow and margins
take a significant step up, which should
deliver a sharp improvement in both profits
and returns on capital and give us good
momentum into 2026.
Smith+Nephew still has some way to go
before reaching industry-standard levels
of margin and return, but we are now
headed in the right direction, and I believe
that investors will start to recognise
the achievements to date, as well as
the positive outlook for the future, and
reward the Company with a rating which
reflects that.
Turnarounds of large ships take time and
require patience, but the plan Deepak set
out when he joined Smith+Nephew shows
every indication that it is working and looks
set to deliver sustainable and material
improvements in operational and financial
performance, with further runway for
improvement in the years ahead.
Alongside improvements in operating
performance, we have also been
addressing the Group’s structure
and organisation.
Historically, Smith+Nephew had a
centralised, and in some parts, a matrix,
reporting structure, but over the last
18 months Deepak and his team have
reorganised the business units into direct
reporting lines. At the same time, the chart
of accounts has been restructured to
allow global business-line reporting, which
allows operational control and visibility
of profit and loss and returns on capital
by business unit, aligning responsibility
with accountability for financial and
operating performance. This reinforces
the accountability of line managers’
performance, whilst retaining the valuable
synergies arising from the businesses being
able to share, and benefit from the scale of,
services such as HR, Finance, Procurement
and IT as well as Regulatory Affairs,
Compliance and Medical Education.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
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“In both 2023 and 2024, the team
achieved the vast majority of their
operating and financial targets,
which, given some of the headwinds
they have faced, is commendable.”
Rupert Soames, OBE
Chair
Dividend
Having considered 2024 performance, 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 for 2024.
We have a progressive dividend policy, and
the Board is aware of the importance of
the dividend to shareholders. From 2025
onwards, we aim to increase our distribution
towards a payout of around 35% to 40%
of adjusted earnings per share (EPSA)1.
Board composition,
development and evaluation
I became Chair in September 2023, in
succession to Roberto Quarta, and since
then we have seen significant change
in Board membership, with four new
Directors appointed, one being the Chief
Financial Officer (CFO). For a Board of 12
people, the arrival of four new Directors
and a new Chair represents a very
significant degree of change.
In addition, Angie Risley, Chair of our
Remuneration Committee has taken on
the role of Senior Independent Director,
in succession to Marc Owen. Angie is a
very experienced Board Director, and,
having led the two consultations around
our Remuneration Policy, is well known
to, and respected by, many of our
largest shareholders.
Marc continues to serve on the Board,
and remains Chair of the Compliance and
Culture Committee and a member of
the Audit and Nomination & Governance
Committees. He has done an outstanding
job as Senior Independent Director, and
helped navigate the Board through the
succession of Roberto Quarta. I and all his
colleagues on the Board are very grateful
for his continued support and wise counsel.
Of the new appointees to the Board, John
Rogers joined the Board in the capacity of
CFO in April 2024. He is having a material
and positive impact, quickly building strong
relationships with Deepak, his colleagues
on the Executive Committee and the wider
management team.
Among the Non-Executives, Jez Maiden,
the former CFO of Croda plc, joined the
Board in September 2023 and Simon
Lowth, the CFO of BT Group plc, joined
in January 2024. Both of them bring
deep experience in finance, operations
and strategy.
In January 2025, we also announced the
appointment of Sybella Stanley to the
Board as a Non-Executive Director with
effect from 1 February 2025. Sybella is
Director of Corporate Finance at RELX
Group. She has long experience of
corporate transactions, and has been
Chair of the Remuneration Committee
at two other public companies. She will
take over as Chair of our Remuneration
Committee at the end of June 2025.
We continue our commitment to fostering
diversity in its broadest sense and to
ensuring that our Board membership draws
from a wide range of backgrounds and
cultures. In 2024, the percentage of women
on our Board decreased to 27% following
the departure of Anne-Françoise Nesmes.
The addition of Sybella Stanley in 2025 will
take us back to 33%. We actively review
the composition, skillsets, capabilities and
diversity of the Board on a regular basis
as part of our Board succession planning
process, and selection is based on ensuring
we have the best person for the role.
Further details of the Board succession
and appointment process can be found on
page 120.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
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Chair’s statement continued
The Board agendas during the year
reflected our focus on strategy,
performance, cost and capital
management, innovation, risk management
and culture, all in the context of our
responsibility to evaluate, support and
scrutinise the impact of decision making on
all stakeholder groups in the best interests
of the Company as a whole.
On a rotating basis, each Business Unit
presents to the Board at least once a year,
and most of them twice a year; standing
items at each scheduled Board include an
operating and finance report from the CEO
and CFO, as well as a presentation of our
analysis of a competitor.
Each year, the Board holds at least one
of its meetings at a Smith+Nephew site
outside the UK, during which we do a “deep
dive” on one of the Business Units; in 2024
we visited our robotics hub in Pittsburgh
and reviewed the Orthopaedics business as
well as reviewing progress on our robotics-
assisted CORI◊ Surgical System.
Our triennial external Board evaluation
was carried out by Dr Tracy Long, and was
complemented by a parallel Executive
Committee evaluation, enabling the
Board to obtain a holistic overview of both
executive and non-executive strengths
and opportunities for development and
insights to drive enhanced effectiveness
moving forward.
The evaluations included detailed
interviews with all Board and Committee
members, as well as the Executive
Committee, and covered, among other
things, the relationship between the Board
and the Executive Committee, and the
effectiveness of the Board on strategy and
performance, risk and control, and people
and culture. I am delighted to say that both
reviews provided positive insights and
commentary on the effectiveness of the
Executive Committee and the Board and
its Committees.
The evaluation highlighted the current
strengths of the Board: dynamic leadership
with a strong partnership between
Deepak and John and clear roles and
responsibilities of the Board and Executive,
resulting in a healthy Board culture
and contribution.
The Board was also pleased to note that
the Executive Committee evaluation
reflected strong accountability and
commitment under Deepak’s leadership,
with collegiate and cohesive ways of
driving change, engagement and alignment
within the organisation, with continued
focus on talent development, performance
and embedding a winning culture.
Further details of the Board evaluation
and areas for focus in 2025 can be found
on pages 124–125.
Adoption of 2024
Remuneration Policy and RSP
The Board sought approval from
shareholders at the 2024 AGM to implement
changes in respect of US Executive
Directors, long-term incentives within the
2024 Remuneration Policy and to introduce
the Restricted Stock Plan (RSP).
The purpose of these changes was to
move towards a remuneration approach
which better suits a company in which the
majority of the executive management
live and work in the United States.
The resolutions passed with a level of
approval below 80%; accordingly, the
Board conducted a further shareholder
consultation and considered all the
feedback received. The Board also took
into account the developments in the UK
governance community during the 2024
AGM season, which indicated an enhanced
understanding of the challenges faced by
companies listed in the UK who have a
majority of their business and operations
in the US.
Having full regard to all relevant factors
following the post AGM consultation, the
Board resolved to adopt and implement
the 2024 Remuneration Policy and RSP in
August 2024.
Further details of our 2024 Remuneration
Policy and its implementation can be
found on pages 142–173.
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Sustainability
With our new leadership and governance
structure in place for the past 12 months,
the Board has continued to engage, review
and evaluate the sustainability strategy
and stakeholder impact of our decisions
on environmental, social and governance
matters. Board members have also
continued to engage with investors on
their key areas of focus in this area and
have heard and seen in our Board listening
sessions how the organisation embeds
sustainability into its cultural fabric.
Further details can be found on pages
64–77 of this report.
Our colleagues
In 2024 I had the privilege of visiting sites
in Munich, Aarau, Lisbon, San Francisco,
Memphis, Colombia, Fort Worth,
Pittsburgh, Kuala Lumpur and Penang.
Wherever I went, I found teams deeply
committed to our purpose of Life Unlimited
and to continuous improvement.
I am delighted to say that our employee
survey results improved yet further,
culminating in the Company being awarded
the Gallup Exceptional Workplace Award
in 2024. I want, on behalf of the Board, to
thank each and every one of them sincerely
for their work during the year.
Outlook: building on
stronger foundations
The Board believes that the Company
is now poised to deliver a further step-
up in returns in 2025. For the full year
we are guiding to underlying revenue1
growth of around 5%, and significant
trading margin1 expansion to 19%
to 20%. This will be primarily driven
by the continued revenue leverage
and cost savings from optimising our
manufacturing network.
I would emphasise that 2025 is not the
endpoint, and we expect continued
margin accretion in 2026 and 2027, with
many of the components of delivering
this already in place.
We look forward to welcoming
shareholders to our Annual General
Meeting in person at our S+N Academy in
Croxley on 30 April 2025 and to updating
you further on the continued structural
and organisational transformation at
Smith+Nephew.
Yours sincerely,
Rupert Soames, OBE
Chair
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Dear Fellow Shareholder,
Smith+Nephew’s transformation
remains on track, with the 12-Point
Plan increasingly delivering better
financial performance. Revenue growth
is consistently above historical levels
following operational and commercial
improvements. Changes to our
organisational structure are driving
increased accountability at the
Business Unit level. Operating leverage
and productivity improvements are
supporting margin expansion despite
significant sector-wide headwinds.
Working capital discipline and asset
utilisation have driven improved cash
flow generation and better returns.
We finished the year strongly and US
Reconstruction was again sequentially
better. Our innovation continued to
deliver, with more than 60% of revenue
growth in 2024 coming from products
launched in the last five years. We have
launched nearly 50 new products over
the last three years and have an exciting
pipeline for 2025.
There is much more to be done, but we
have made solid progress fixing the
foundations and expect a step-up in
returns in 2025, including significant
margin expansion. We are confident
that this will be the year when
transformation starts to unlock
substantial value for our shareholders.
2024 results
Group revenue in 2024 was $5,810 million
(2023: $5,549 million), with reported
revenue growth of 4.7% and underlying
growth of 5.3%1.
Trading profit1 for 2024 was up 8.2%
on a reported basis to $1,049 million
(2023: $970 million). The trading profit
margin1 was 18.1% (2023: 17.5%), a
60bps improvement on the prior year.
Operating profit increased to $657 million
(2023: $425 million).
Over the last two years we have delivered
an 80bps uplift in trading profit margin.
This was achieved as productivity savings
of around 410bps and operating leverage
of around 390bps offset major headwinds
of around -490bps from input cost inflation
and merit, around -140bps from foreign
exchange and around -90bps from China.
Improving cash flow has been an area of
specific focus, with good progress made
in 2024. Cash generated from operations
was $1,245 million (2023: $829 million)
and trading cash flow1 was $999 million
(2023: $635 million), with significantly
better trading cash conversion1 of 95%
(2023: 65%). We have also reduced
restructuring costs year-on-year to
$123 million (2023: $220 million). Free cash
flow1 increased to $551 million (2023:
$129 million).
We have increased visibility and focus on
improving our adjusted Return on Invested
Capital (ROIC1) at the Business Unit level
through allocation of central costs and our
drive to improve working capital.
ROIC1 increased by 150bps year-on-year to
7.4% (2023: 5.9%), reflecting the progress
made under the 12-Point Plan. ROIC based
on the closest equivalent IFRS measures
was 4.9% (2023: 3.2%). Going forward, we
will continue to focus on driving further
improvement in our ROIC.
Transforming Smith+Nephew
In 2022, we announced our 12-Point
Plan to fundamentally change the way
we operate and transform business
performance, accelerating delivery of our
Strategy for Growth.
2024 was a meaningful step forward
on this multi-year journey. There is clear
evidence of the expected operational and
financial outcomes coming through across
the Group.
Higher revenue growth
Through delivery of the 12-Point Plan
we have transformed the revenue
growth profile of Smith+Nephew.
This progress has been achieved against
some major headwinds, including the
underperformance in our US Orthopaedics
business and the pressures of Volume
Based Procurement (VBP) programmes in
China across both our Reconstruction and
Sports Medicine Joint Repair segments.
Our transformation is on track,
with a step-up in performance
expected in 2025
Chief Executive Officer’s review
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
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The progress was underpinned by
12-Point Plan initiatives that addressed
a number of key issues that were holding
back performance. We have significantly
improved product and instrument set
availability, which were far below industry
standards, and have now exceeded target
levels. Overdue orders have improved
significantly, falling by 90% since 2022.
The percentage of sets that are available
reached target at the start of the year, and
improved further during 2024. We also
made significant progress in simplifying our
portfolio, with a third of global hip and knee
brands now phased out.
We have also improved our commercial
execution. We have turned around
performance in Trauma, which is now
a significant growth driver built upon
our new EVOS◊ Plating System, and
improved Orthopaedics outside the
US. US Orthopaedics is now also on a
clear improvement path. Here we have
introduced new management, customer
service and satisfaction levels have
improved, new growth-oriented
incentive plans are in place and employee
turnover has returned to low levels.
We strengthened our position in robotics
with a series of new features, and the
installed base now exceeds 1,000 systems.
Sports Medicine has been outperforming
its market for many years, built on
sustainable and fundamental factors
including commercial excellence, a steady
stream of innovation across procedures,
new segment development in tissue
regeneration and successful integration
of acquired assets. While we continued to
face significant VBP headwinds in China,
the overall trajectory for Sports Medicine
remains encouraging.
In Advanced Wound Management we
have delivered improved performance in
recent years based on better commercial
execution focused on our differentiated
strengths, such as our unique portfolio
breadth and evidence-based selling.
Performance in 2024 was driven by
our leading position in the high-growth
Negative Pressure Wound Therapy
(NPWT) segment.
“We have addressed the structural
weaknesses that were holding back the
Group. There is much more to be done to
drive productivity and asset efficiency
to their full potential, with significant
additional benefit expected to follow in
2025 and beyond.”
Deepak Nath, PhD
Chief Executive Officer
Strategy for Growth
Delivered through our 12-Point Plan
Fixing
Orthopaedics
Improving
productivity
Accelerating
Sports Med
and AWM
Transform
Through innovation
and acquisition
Accelerate
Profitable growth
through prioritisation and
customer focus
Strengthen
The foundation to serve
customers sustainably and simply
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Improving organisational
effectiveness
In 2023, we reorganised our global
commercial operating model around our
three business units of Orthopaedics,
Sports Medicine & ENT and Advanced
Wound Management in order to drive
more agile decision making and greater
accountability. In 2024, central costs
attributable to business units were directly
allocated to each business unit, with the
objective of driving greater business unit
accountability and efficiency, with each
business unit having full profit and loss and
capital accountability. These decisions
are already driving more informed
investment decisions in areas such as IT.
A small proportion of the corporate costs
continue to be held centrally, reflecting
the centralised infrastructure required
to support the Group and run a publicly
listed company.
These changes will support our drive to
improve our ROIC at the business unit level
through allocation of central costs and
improved working capital.
Creating value
through innovation
Smith+Nephew’s innovation pipeline
is a significant contributor to our
transformation to being a higher growth
business. In 2024, more than 60% of
underlying revenue growth came from
products launched in the last five years.
In 2023, new products accounted
for around half of our underlying
revenue growth.
We maintained our recent high cadence of
launches, with 16 new products in 2024,
bringing our total of new products to nearly
50 over the last three years. Many of these
new platforms are driving growth today
and have multi-year runways still ahead
of them as we expand indication and
applications and launch in new markets.
For 2024 major launches included the
CATALYSTEM◊ Primary Hip System,
designed to address the evolving demands
of primary hip surgery, including the
increased adoption of anterior approach
procedures. We moved to full commercial
launch of the AETOS◊ Shoulder System in
the US, enabling us to compete effectively
in the fast-growing $1.7 billion shoulder
market, and continued to build out the
platform, adding planning software and a
stemless anatomic total shoulder option.
We announced new CORIOGRAPH◊ Pre-
Operative Planning and Modelling Services
for the CORI◊ Surgical System, making it
the only orthopaedic robotics-assisted
system to offer either intra-operative
image-free or image-based registration
for knee implants. This is one of a number
of unique features for CORI◊, including
supporting revision knee procedures,
a first-of-its-kind digital tensioner for
robotics-assisted knee surgery for soft
tissue balancing and offering both burr and
saw cutting options.
In Sports Medicine, we completed the
acquisition of CartiHeal, the developer
of the CARTIHEAL AGILI-C◊ Cartilage
Repair Implant, a novel sports medicine
technology for cartilage regeneration in
the knee. We have made good progress
on market development activities in the
first year of ownership, including clinical
strategy and reimbursement milestones.
We have shown with REGENETEN◊ that
we have the market development and
commercialisation expertise to acquire
regenerative technologies and successfully
establish a new standard of care. In ENT,
we launched the ARIS◊ COBLATION◊
Turbinate Reduction Wand. This utilises
our advanced COBLATION◊ Plasma
Technology to provide a minimally invasive
way to reduce hypertrophic turbinates, a
significant opportunity in the US.
In Advanced Wound Management, we
launched the RENASYS◊ EDGE NPWT
System. This 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. We also continued our high
cadence of incremental innovation in skin
substitutes, with the launch of GRAFIX◊
PLUS in the second quarter, an easier-to-
handle new version in our lead product
family, targeting the growing post-
acute market.
In 2025 we expect to launch a number
of exciting new products. These include
next-generation digital video-based
navigation in the arthroscopic tower, a new
intramedullary nail and further extensions
to the CORI◊ Surgical System and the
AETOS◊ Shoulder System.
Cost efficiency and
margin expansion
We have made significant productivity
improvements through the 12-Point Plan,
delivering around 410bps of incremental
costs savings across 2023 and 2024.
Our trading profit margin has expanded
by 80bps since 2022, driven by revenue
leverage from the higher revenue growth
and operational efficiencies, successfully
making progress despite major headwinds
from inflation, foreign exchange and China.
Since 2022 we have improved our Sales,
Inventory & Operations Planning (SIOP)
process. This is a dynamic process
that has brought better alignment of
production plans and commercial delivery.
Further productivity improvements are
expected to come through in 2025 as we
benefit from cost savings following our
decision to shut four smaller Orthopaedics
manufacturing facilities and our reductions
in workforce.
Looking beyond 2025, we expect our work
to better align production and commercial
delivery along with capacity reduction,
and the timing of lower costs passing
through inventory, to support further
margin expansion.
Chief Executive Officer’s review continued
12
Smith+Nephew Annual Report 2024
Improved cash generation
and ROIC
In 2024 we made good progress improving
both our trading and free cash flow by
reducing our capital expenditure, working
capital and restructuring costs, and
we expect to make further progress in
2025. Through the 12-Point Plan we have
improved our Order to Cash and asset
utilisation, and started to address our high
inventory. By the end of 2024, we had
reduced our Day Sales of Inventory (DSI)
by 20 days year-on-year, with DSI down
across all business units. Further inventory
improvements will be an area of continued
focus in 2025 to further enhance working
capital and ROIC.
As stated earlier, in 2024 Group ROIC
increased year-on-year, reflecting
progress made under the 12-Point Plan.
We anticipate further improvement
in 2025. We will continue to prioritise
investment in areas where we expect to
see the highest incremental ROIC.
Culture and sustainability
When I joined Smith+Nephew in 2022,
I was immediately impressed by the strong
culture, with employees who cared deeply
about our purpose of Life Unlimited and
took pride in their work. In 2024 we were
proud to win a 2024 Gallup Exceptional
Workplace Award, recognising our high
levels of employee engagement. It is a
credit to our whole team that we continue
to make progress in building a robust,
respectful and accountable culture during
a period of considerable change.
We continue to work to make our culture
ever stronger, building on our three pillars
of Care, Collaboration and Courage. In 2024
we put a particular focus on Courage,
challenging the status quo and embracing
new ways of working. Many employees
from across the business contributed as
we identified opportunities to be more
courageous, and we look forward to
continuing this work in 2025. You can
read more about this and other important
initiatives on pages 59–63.
In 2024, we also made good progress
delivering our sustainability objectives.
As a manufacturing organisation, we
seek to drive efficiency in all we do,
which also drives environmental benefits.
Waste minimisation and energy efficiency
efforts this year have improved our waste
diversion away from landfill, and we have
further reduced our greenhouse gas (GHG)
emissions in support of our net zero carbon
journey, all while driving business growth
(see pages 64–77).
Driving greater value
2024 was a year in which we
fundamentally strengthened our Company.
As we complete the 12-Point Plan, stronger
processes and practices around cost
discipline and efficiency, greater customer-
centricity and higher levels of courage and
accountability position us to make an even
greater positive impact on our customers
and patients.
Much of the 12-Point Plan is complete,
and we have addressed the structural
weaknesses that were holding back the
Group. There is much more to be done
to drive productivity and asset efficiency
to their full potential, with significant
additional benefit expected to follow in
2025 and beyond.
In terms of outlook, for 2025 we are
targeting another year of strong revenue
growth and a significant step-up in trading
profit margin.1
For revenue, we expect to deliver
underlying1 revenue growth of around 5%.
The guidance equates to reported revenue
growth of around 4.8% based on exchange
rates prevailing on 19 February 2025.
We expect to deliver a trading profit
margin1 of 19% to 20%. This step up will
be driven by operating leverage, cost
reductions and the benefits of our network
optimisation programme. These benefits
are expected to more than offset
headwinds from China and cost inflation.
Finally, I would like to thank the
Smith+Nephew team for their contributions
during 2024. I am humbled and inspired
by their unwavering commitment to our
purpose of Life Unlimited. I feel privileged
to be part of a team that is transforming
healthcare in innovative and meaningful
ways every day.
Yours sincerely,
Deepak Nath, PhD
Chief Executive Officer
13
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Smith+Nephew operates in global markets
valued at approximately $50 billion1 annually.
Leading positions in attractive markets
Long-term growth drivers
Shaping the development
of innovative treatments
and the transformation of
healthcare delivery.
The medical technology sector is
supported by strong long-term growth
drivers that make it an attractive market.
Demographic shifts, such as an ageing
population and increased physical
activity among older adults, continue to
boost demand for healthcare services.
As the global population ages, there is a
corresponding rise in chronic and age-
related conditions that require consistent
medical attention. Additionally, the
growing incidence of lifestyle-related
health issues, like diabetes and obesity,
further drives this demand.
Technological advancements in medicine
serve as crucial catalysts for long-term
growth in healthcare. Innovations in
areas such as artificial intelligence (AI)
and biotechnology are yielding more
effective and personalised healthcare
solutions, which not only improve
patient outcomes but also create new
business opportunities that promote
further expansion.
Emerging markets
Growing healthcare demand
presenting both opportunities
and challenges for providers.
In emerging markets, economic
development is enhancing long-term
growth factors, particularly through the
emergence of a prosperous middle class
seeking improved healthcare services and
products. As living standards rise, there
is an increasing demand for high-quality
healthcare, including advanced treatments
and medical devices.
Moreover, emerging markets may lack
mature healthcare infrastructure,
necessitating investments in healthcare
technology. This situation benefits
companies that offer innovative medical
solutions, as these markets are generally
more open to adopting new and cost-
effective healthcare approaches.
Decentralised care
Facilitating accessible care
outside traditional hospital
environments.
Evolving customer and market
dynamics are creating new high-
growth opportunities for medical
technology companies.
Many countries are shifting towards more
decentralised care, with an increasing
number of procedures being performed in
outpatient settings such as Ambulatory
Surgery Centers (ASCs) in the US.
This trend has been particularly prominent
in Sports Medicine, and a growing
number of orthopaedic joint replacement
procedures are now being carried out in
these settings, resulting in cost and time
efficiencies for healthcare providers.
The move towards outpatient care was
accelerated by the Covid pandemic, as
providers aimed to minimise hospital visits
and address procedure backlogs.
1 Data generated by Smith+Nephew based on publicly
available sources and internal analysis and represents
an indication of market shares and sizes.
14
Smith+Nephew Annual Report 2024
Cost of healthcare
A global priority requiring
comprehensive strategies for
sustainable healthcare delivery.
Governments are focused on lowering
healthcare costs and are increasingly price-
sensitive. In response, medical technology
companies are innovating and providing
evidence of both the clinical and economic
benefits associated with their products.
Worldwide, countries are aiming to boost
domestic production in critical sectors,
including advanced technologies and life
sciences, through localisation policies and
export restrictions that can disrupt global
supply chains.
At the same time, many emerging
markets are implementing measures to
reduce healthcare costs and improve
accessibility, including price control policies
in government procurement. In China,
this has been seen in the introduction
of Volume Based Procurement across
various segments.
» See pages 78–95 for more details
on risks in the Risk report
High regulation
Medical devices regulation is
essential for ensuring product
safety, efficacy and quality.
The medical device sector is among the
most heavily regulated globally, creating
significant barriers to entry for new
market participants. National regulatory
authorities oversee the design,
development, approval, manufacturing,
labelling, marketing and sale of healthcare
products, as well as reviewing supporting
data to seek to ensure safety and
performance. Most countries require
prior authorisation and/or registration of
products before market entry, which must
be maintained thereafter.
Regulations and industry codes also
dictate how the industry interacts with
healthcare professionals and government
officials worldwide, including the AdvaMed
Code of Ethics and the MedTech Europe
Code of Ethical Business Practice.
Companies implement global compliance
programmes to assist employees and
third-party partners in adhering to laws,
regulations and industry standards,
often accompanied by their own codes
of conduct.
» See page 127 for more information
on our approach to compliance
Seasonality
Seasonality requires agile
business operations to meet
demand fluctuations during
the year.
There is typically a higher volume
of orthopaedic and sports medicine
procedures during winter months,
when accidents and sports-related
injuries are more common. Additionally,
elective procedures generally decline
in the summer due to vacations.
Advanced Wound Management is
less affected by seasonality due to
the nature of its procedures and
products. At Smith+Nephew, most
of our operations are in the northern
hemisphere, with approximately 50%
of revenue generated in the US and
20% in Europe.
In the US, out-of-pocket costs for
health insurance plans are tied to
medical expenses within a calendar
year. Consequently, households that
reach their annual deductible or out-of-
pocket cap before year end find it more
cost-effective to schedule necessary
procedures later in the year rather than
postponing them until the following year.
15
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 For details of changes to our product giving please see page 66.
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
invest in priority
products, technologies
and services.
Financial
strength
A robust balance
sheet and Capital
Allocation Framework
balancing short,
medium and long-
term investment and
returns.
ESG
Addressing the
long-term needs
of our customers,
employees, investors,
communities and
other stakeholders
while aiming to reduce
our impact on the
environment.
Global
operations
Resilient
manufacturing
and supply chains
to ensure quality
and competitiveness.
What we need to create value
Our business model
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 for our
shareholders.
Delivering value for stakeholders
18.1%
Trading profit
margin1
+60bps
11.3%
Operating
profit margin
+360bps
$327m
Dividend
Distribution
unchanged
$1,049m
Trading profit1
+8.2%
$657m
Operating profit
+54.6%
$5,810m
Group revenue
+4.7% reported
+5.3% underlying1
Investors
Community
380,000+
Patients helped
through product
donations2
4.24
Gallup engagement
score
+0.04
16
New products
106,734
Training sessions
Employees
Customers
16
Smith+Nephew Annual Report 2024
Customer-centricity
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.
2
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.
5
Expertise
and support
Our sales force supports
customers and works
with healthcare systems to
address complex business and
reimbursement requirements.
3
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.
4
1
Product
development
and acquisition
R&D model that provides for
customer and business unit
focused innovation and acquiring
technologies needing further
development and
commercialisation.
6
17
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Key Performance Indicators
7.4%
Adjusted ROIC1
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 sustainable performance and growth.
Revenue growth
Reported revenue
growth includes a foreign
exchange headwind
of -60bps. 2024 revenue
was $5,810m.
Revenue growth allows management
and investors to measure our
relative performance.
The Group is consistently
delivering strong revenue
growth above historical
(pre-Covid) levels.
Profit margin
Reported profit margin
reflects acquisition and
disposal-related items,
restructuring and
rationalisation costs,
amortisation and impairment
of acquisition intangibles,
and legal and other items.
Profit margin allows management
and investors to determine our
relative performance.
The 60bps year-on-year
increase reflects operating
leverage and efficiency
savings from the 12-Point
Plan offsetting headwinds
from inflation and China.
Financial Key Performance Indicators
The Adjusted ROIC¹
increased year-on-year
in 2024 by 150bps to
7.4%, reflecting the
progress made under
the 12-Point Plan.
Adjusted Return on Invested Capital1
Adjusted ROIC1 allows management
and investors to measure the return
generated on capital invested, providing
a metric for long-term value creation.
Total distribution
of 37.5¢ per share,
unchanged from 2023.
Dividend per share
Dividend payments allow investors to
receive a cash return on their investment
in Smith+Nephew.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
4.7%
Reported
revenue growth
11.3%
Operating profit margin
5.3%
Underlying1
revenue growth
18.1%
Trading profit margin1
37.5¢
Dividend per share
%
%
¢
%
%
%
Transforming Smith+Nephew
In July 2022 we announced our
12-Point Plan to fundamentally
change the way we operate and
transform business performance.
The 12-Point Plan 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
Much of the 12-Point Plan is
complete, and we have addressed
the structural weaknesses that were
holding back the Group. There is much
more to be done to drive productivity
and asset efficiency to their full
potential, with significant additional
benefit expected to follow in 2025
and beyond. More details regarding
our progress can be found in the
Chief Executive Officer’s review
on pages 10–13.
»See pages 10–13 for more
on our 12-Point Plan
0
2022
4.7
2024
5.3
2023
7.2
2022
17.3
2024
18.1
2023
17.5
2022
6.6
2024
7.4
2023
5.9
0
2022
0.1
2024
4.7
2023
6.4
2022
8.6
2024
11.3
2023
7.7
2022
37.5
2024
37.5
2023
37.5
12-Point Plan
18
Smith+Nephew Annual Report 2024
Non-financial Key Performance Indicators
Long-term sustainability targets
These KPIs allow management
and investors to measure progress
against our long-term sustainability
targets in the three focus 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)^
63%
Reduction since 2019.
Less waste to landfill
95%
Total manufacturing waste diverted
from landfill.
Product donations
380,000+
Patients supported through
product donations
^ Please refer to page 76 for our emissions reporting
methodology, materiality and scope.
Employee engagement
The Gallup Global Engagement
Survey allows management and
investors to assess how engaged our
employees are, which is a key driver of
business performance.
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.
Medical education
This KPI helps investors understand how
we support the safe and effective use
of our products through the provision
of medical education.
»See pages 32–33
106,734
Practitioner training sessions
Quality and safety
This KPI allows management and investors
to verify that we are operating a safe
working environment to high standards.
Headline safety rate
16
New products
This KPI helps us track the number of
new products either launched or ready for
launch to drive future revenue growth.
There were 16 new products in 2024.
1
Acquisition
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 January 2024 we completed the
acquisition of CartiHeal, the developer
of CARTIHEAL◊ AGILI-C◊, a novel Sports
Medicine technology for cartilage
regeneration in the knee. Smith+Nephew
paid $180 million on completion, with up
to a further $150 million contingent on
future financial performance.
In 2024, approximately
60% of revenue growth
came from products
launched in the last five
years.
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.
4.24
Engagement
Further improvement in our Grand Mean score
to 4.24 (2023: 4.20) positioned us in the top
quartile of the Gallup database. 92% of
employees participated in the survey.
»See pages 58–63
$289m
R&D investment
»See page 45
»See page 30
2022
0.22
2024
0.12
2023
0.15
2022
345
2024
289
2023
339
»See pages 64–77 for details
of how we are meeting our
sustainability commitments
19
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Improving performance
and shareholder returns
Financial review
Driving the top and bottom line
As Deepak described earlier in this report,
Smith+Nephew finished the year strongly
and delivered solid financial results across
our key performance metrics.
In 2022, we set a goal of transforming
Smith+Nephew into a higher growth
Company. As 2023 ended, we were
proud to report that we delivered higher
underlying revenue1 growth. One year
later, we have delivered another year of
strong underlying revenue1 growth despite
the headwinds we have seen in China,
demonstrating a clear trend of delivering
sustainable higher growth. Revenue grew
by 4.7% to $5,810 million in 2024 (2023:
$5,549 million) on a reported basis and
5.3% on an underlying basis1 excluding a
-60bps headwind from foreign exchange,
exceeding our revised Q3 revenue guidance
of around 4.5% due to an acceleration in
growth towards the end of the year.
We also continued to deliver trading
profit1 margin expansion, up 60 basis points
to 18.1%, which is slightly above our revised
Q3 guidance, and trading profit1 growth
of 8.2% to $1,049 million. We absorbed
headwinds of around -230bps from a
combination of input cost inflation and
merit increases, China VBP pricing and
transactional foreign exchange. Due to
our actions under the 12-Point Plan, these
were more than offset by approximately
130 basis points of revenue leverage from
price and volume, and around 160 basis
points of productivity improvements.
Productivity improvements have been
driven by a meaningful reduction in excess
capacity in our network, improved product
availability and inventory utilisation, and a
near 9% reduction in the workforce since
the start of the 12-Point Plan. More than
1,000 of these role reductions were in
2024, with the majority taking place in the
final quarter of the year. Operating profit
growth was 54.6% to $657 million as a
result of improvements described above
and lower non-trading1 costs.
Strong cash flow
Cash generation improved significantly
in 2024 due to strong working capital
management and reduced restructuring
costs. As a result, cash generated from
operations improved by more than
$400 million. I am a strong believer
that free cash flow1 is a key indicator of
an organisation’s fundamental health,
and I was pleased that we made good
progress here in 2024 with free cash flow1
of $551 million (2023: $129 million), and
expect further improvement in 2025.
As a result of our enhanced cash
generation, we have been able to reduce
the gearing in our balance sheet and
have achieved a better than target
leverage ratio.
Dear Fellow Shareholder,
I am delighted to address you for the
first time in the Annual Report as your
Chief Financial Officer. Under Deepak’s
leadership, Smith+Nephew is going
through a multi-year transformation
to strengthen the foundations
underpinning our business and I am
excited to be a part of this journey and
play a meaningful role in transforming
Smith+Nephew to deliver greater
returns over the long-term.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
20
Smith+Nephew Annual Report 2024
Relentless focus on efficiency
We continue to seek opportunities to make
our business more efficient. Building on
the existing work of the 12-Point Plan, we
identified further saving opportunities by
applying a zero-based budgeting approach
in 2024. As a result, we expect to drive cost
savings higher than we initially planned and
for longer. Total gross savings are now in
the range $325 to $375 million, including
the original $200 million announced as part
of the 12-Point Plan, and further savings
newly identified in this additional review.
This will help us get to the 2025 trading
profit margin1 guidance, and continues to
accumulate through 2026 and 2027.
Comprehensive and detailed plans are
in place for over 40 initiatives across five
work-streams, with specific target savings
and timings for each initiative. The largest
part will be from manufacturing and
procurement, but there are savings across
all parts of our business. Much of the work
was completed in the second half of 2024,
including headcount reductions of more
than 500 roles. This important extension
of what we can deliver from the 12-Point
Plan demonstrates the shift in the way
Smith+Nephew is starting to operate,
constantly seeking to drive top line growth
while also becoming ever more efficient.
Improving inventory
management
During 2024, we made significant
progress in improving product availability
and inventory utilisation and reached
industry standards by improving our
production mix and usage of field
inventory. We also reduced the cycle
time of our Sales, Inventory & Operations
Planning (SIOP) process which resulted
in improved commercial execution.
These improvements continue to translate
into further underlying growth1 and trading
margin1 improvement.
Elevating performance
We have made solid progress in
implementing the 12-Point Plan which
translated into improved financial
performance in 2024, with more benefits
expected to come through in 2025 and
beyond. In terms of outlook, for revenue,
we expect to deliver underlying1 revenue
growth of around 5.0%, which equates to
reported growth of around 4.8% based on
exchange rates prevailing on 19 February
2025. We expect to deliver a trading profit
margin1 of 19.0% to 20.0%. This step
up will be driven by operating leverage,
cost reductions and the benefits of our
network optimisation programme. See my
Financial Commentary below for important
disclosures on the drivers and phasing for
the 2025 revenue growth, trading profit
margin1 and our tax guidance.
In conclusion, we are pleased that the
operational and commercial actions,
combined with our sustained high cadence
of innovation, are producing consistently
higher growth than in the past, and
that margin expansion is beginning to
follow driven by operating leverage and
productivity improvements. Importantly,
better working capital discipline and asset
utilisation means that our profitability is
also coming with higher cash generation.
As Deepak has stated, we are very clear
that there is still much more to be done,
and more benefits are expected to follow,
and we are focused on driving greater
shareholder value while continuing to
deliver Life Unlimited to patients across
the globe.
Yours sincerely,
John Rogers,
Chief Financial Officer
Improving inventory has been a priority
under the 12-Point Plan and in 2024 we
reduced both overall inventory days and
the absolute dollar value of inventory.
Pleasingly inventory days came down
across all three business units. There was
still an overall increase in launched
products and as a result inventory mix
improved, with units of the slowest turning
quartile of SKUs down by 17% during
the year. We remain highly focused on
longer-term improvement, which will be
driven by ongoing better alignment of
production plans with commercial needs
at the SKU level, enabled by the improved
SIOP process under the 12-Point Plan.
Inventory reduction remains a focus, and
we expect further progress in 2025.
Driving innovation across
the business
More than 60% of our 2024 revenue
growth came from products launched
in the last five years. Smith+Nephew’s
long history of delivering innovation that
changes clinical practice and improves
patient outcomes is impressive. As CFO,
I am a strong advocate of driving the
innovation mindset across the whole
business, including adopting new
technologies such as AI to improve our
processes and drive greater efficiency.
You can read more about our strong
innovation track record and our AI agenda
on pages 31.
Improving accountability
and returns
Return on Invested Capital (ROIC) improved
at the Group level as well as within the
business units in 2024, reflecting the
progress made under the 12-Point Plan.
Earlier in the year we allocated the directly
attributable central costs to the business
units, with the objective of driving greater
business unit accountability. We expect
this accountability, alongside increased
trading margin1, lower non-trading costs1
and improved capital intensity to drive
further improvement in ROIC in 2025
and beyond.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
21
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Delivering higher
revenue growth
Revenue grew by 4.7% to $5,810 million in
2024 (2023: $5,549 million) on a reported
basis and 5.3% on an underlying basis1
excluding a -60bps headwind from foreign
exchange, exceeding our revenue guidance
of around 4.5% due to an acceleration in
growth towards the end of the year.
Revenue growth was driven by most
segments and markets. We have made
good progress in improving the commercial
execution in Orthopaedics resulting in an
acceleration in revenue growth towards
the end of 2024. Orthopaedics revenue
grew by 4.1% on a reported basis (and 4.6%
on an underlying basis1) driven by strong
performance in Other Established Markets2
as well as significant improvement in the
US as the year progressed, partially offset
by headwinds in China due to lower end-
customer demand.
We continue to hold a leadership position
in Sports Medicine & ENT and delivered
reported revenue growth of 5.5% (6.2%
underlying1), despite the China VBP
headwinds, due to strong performance
across all categories.
Advanced Wound Management delivered
reported revenue growth of 4.7% (5.1%
underlying1) and maintained positive
momentum in 2024 with growth
accelerating towards the end of the year.
We exited the year in a strong position with
all three global business units contributing
with accelerating revenue growth in the
fourth quarter over the first nine months.
The 2024 performance built on the good
growth delivered in 2023. In 2023, revenue
was $5,549 million (2022: $5,215 million),
an increase of 6.4% on a reported
basis and 7.2% on an underlying basis1
excluding a -80bps headwind from foreign
exchange. This revenue growth was due
to strong performance across all global
business units.
Group performance
2024
2023
2022
Change
2024
Change
2023
$m
$m
$m
$m
$m
Revenue
5,810
5,549
5,215
261
334
Gross Profit
4,046
3,819
3,675
227
144
Operating profit
657
425
450
232
(25)
Trading profit1
1,049
970
901
79
69
Profit before tax
498
290
235
208
55
Attributable profit
412
263
223
149
40
EPS
47.2¢
30.2¢
25.5¢
17.0¢
4.7¢
EPSA1
84.3¢
82.8¢
81.8¢
1.5¢
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:
Reconciling items
2024
2024
2023
Reported
growth
Underlying
growth
Acquisition/
Disposals
Currency
impact
$m
$m
%
%
%
%
US
3,123
2,979
4.8
4.8
–
–
Other Established Markets2
1,707
1,611
6.0
6.7
–
(0.7)
Total Established Markets
4,830
4,590
5.2
5.5
–
(0.3)
Emerging Markets
980
959
2.2
4.3
–
(2.1)
Total
5,810
5,549
4.7
5.3
–
(0.6)
Reconciling items
2023
2022
Reported
growth
Underlying
growth
Acquisition/
Disposals
Currency
impact
$m
$m
%
%
%
%
US
2,979
2,764
7.8
7.8
–
–
Other Established Markets2
1,611
1,504
7.1
7.3
–
(0.2)
Total Established Markets
4,590
4,268
7.5
7.6
–
(0.1)
Emerging Markets
959
947
1.3
5.1
–
(3.8)
Total
5,549
5,215
6.4
7.2
–
(0.8)
Trading profit reconciles to operating profit, the most directly comparable financial
measure calculated in accordance with IFRS, as follows:
2024
2024
2023
2023
2022
2022
$m
%
$m
%
$m
%
Operating profit
657
11.3
425
7.7
450
8.6
Aquisition and disposal
related items
94
1.6
60
1.1
4
0.1
Restructuring and
rationalisation costs
123
2.1
220
4.0
167
3.2
Amortisation and
impairment of acquisition
intangibles
187
3.2
207
3.7
205
4.0
Legal and other
(12)
(0.2)
58
1.0
75
1.4
Trading profit
1,049
18.1
970
17.5
901
17.3
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 Other Established Markets are Europe, Japan, Australia, Canada and New Zealand.
Chief Financial Officer financial commentary
Financial review continued
22
Smith+Nephew Annual Report 2024
Orthopaedics revenue grew by 4.8% on a
reported basis (and 5.7% on an underlying
basis1) mainly driven by improved
commercial execution outside the US
despite China VBP headwinds.
Sports Medicine & ENT revenue grew by
8.8% on a reported basis (10.0% on an
underlying basis1) driven by a significant
increase in ENT revenue as a result of the
backlog in the elective procedures market
and the impact of the Covid pandemic
subsided and good growth in Sports
Medicine revenue.
Advanced Wound Management revenue
grew by 6.2% on a reported basis (7.2% on
an underlying basis1) as a result of growth
across all categories.
Improved profitability
The gross profit was $4,046 million in 2024
(2023: $3,819 million, 2022: $3,675 million)
with gross profit margin of 69.6%
(2023: 68.8%, 2022: 70.5%). We continue
to maintain strong gross profit margins
whilst delivering revenue growth which is
resulting in operating efficiencies despite
the continued inflationary pressures.
The reported operating profit for 2024
was $657 million, a 55% increase from the
previous year primarily due to operating
leverage and productivity savings across
the Group. In addition, research and
development expenses decreased by
$50 million mainly due to a $20 million
reduction in legal and other items and
$18m reduction in restructuring and
rationalisation incurred in 2023, partially
offset by a $58 million, or 2.6% increase,
in marketing, selling and distribution
expenses as a result of revenue growth.
The increase in reported operating
profit was also driven by lower non-
trading costs1. Costs associated with
restructuring and rationalisation and legal
and other costs decreased by $97 million
and $70 million respectively as a larger
proportion of strategic actions under the
12-Point Plan were implemented in 2023.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 Other Established Markets are Europe, Japan, Australia, Canada and New Zealand.
Higher costs were incurred in 2023 in
relation to implementing the requirements
of the EU Medical Device Regulation and
higher charges were incurred in 2023 in
relation to ongoing metal-on-metal hip
claims. These decreases were partially
offset by $34 million increase in costs
relating to acquisition and disposal
related items in 2024 due to the Group’s
decision to continue to optimise its
product portfolio.
The reported operating profit in 2023 was
$425 million, a 6% reduction from 2022
as the costs associated with restructuring
and rationalisation and acquisitions and
disposals both rose. The restructuring
and rationalisation costs increased by
$53 million and mainly related to the
implementation of the Operations and
Commercial Excellence programme and
productivity elements of the 12-Point
Plan. Acquisition and disposal related
costs increased by $56 million and mainly
related to the impairment of Engage
goodwill. Additionally, marketing, selling
and distribution expenses increased by
$152 million or 7.4% in line with higher
revenue growth. These cost increases were
largely offset by operating leverage as a
result of higher revenue growth.
23
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Trading profit
margin expansion
In 2024, trading profit1 was $1,049 million
(2023: $970 million, 2022: $901 million),
with trading profit margin1 of 18.1%
(2023: 17.5%, 2022: 17.3%). We continue
to deliver year-on-year expansion in our
trading profit margin1 reflecting operating
leverage, continued benefits from the
12-Point Plan and productivity savings
across the Group.
In 2024, the reported profit before tax
was $498 million (2023: $290 million,
2022: $235 million). The reported profit
before tax grew in 2024 mainly due to
improvement in operating profit. In 2023,
reported profit before tax grew as an
impairment loss of $109 million in our
investment in associate, Bioventus, was
recorded in 2022.
The reported taxation charge in 2024
was $86 million (2023: $27 million, 2022:
$12 million). The increase in the reported
tax charge can principally be attributed
to the increases in profit before tax since
2022 and the jurisdictional profit mix.
In 2021, we announced a target to achieve
trading profit margin1 of at least 21% by
2024. Subsequent to this announcement,
a number of headwinds evolved that could
not have been anticipated which had
impacted our performance. In particular,
the economic environment had been
more challenging than we expected as
a result of higher inflation and global
supply chain disruptions. Additionally, the
unwind of our excess inventory was slower
than expected. These factors resulted
in a trading profit1 margin of 18.1% i.e.
290bps lower relative to the initial target
we announced when we first issued the
2024 trading profit1 margin guidance back
in 2021.
Earnings per share
In 2024, Basic earnings per share (EPS)
were up 56.3% to 47.2¢ and adjusted
earnings per share1 (EPSA) were up
1.7% to 84.3¢, reflecting improved
trading performance.
In 2023, EPS were up 18.2% to 30.2¢ and
EPSA1 were up 1.3% to 82.8¢, reflecting
improved trading performance.
Taxation
The Group is subject to various taxes in
the many countries in which it operates.
Paying tax is an integral part of our
commitment to the societies in which
we operate and a critical element of our
commitment to grow in a sustainable,
responsible and transparent way.
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, developing
workforce skills, purchasing goods and
services from local suppliers and making
capital investments.
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 in accordance with the tax laws in all
the territories in which we operate.
We manage tax risks and tax costs in
a manner consistent with regulatory
requirements and shareholders’ best
long-term interests, after taking into
account reputational and economic
factors as well as the interests of our other
stakeholders, including governments, our
people, customers and suppliers. We are
committed to transparent relationships
with all relevant tax authorities.
Our tax footprint extends beyond
corporate income tax, including significant
payments of employer social security
contributions. The Group also collects
taxes on behalf of governments (including
employee income taxes and social security
contributions, VAT and other sales taxes).
During 2024, we made global tax payments
of $888 million (2023: $833 million, 2022:
$818 million). This comprises $324 million
of taxes borne by Smith+Nephew and
$564 million of payroll and indirect
taxes collected.
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
Chief Financial Officer financial commentary continued
Financial review continued
24
Smith+Nephew Annual Report 2024
Trade receivables remained flat year-
on-year as a result of the Order to Cash
initiatives to improve collection as part
of the 12-Point Plan. These increases
were offset by a $8 million decrease in
inventories which represents a significant
improvement compared to 2023’s
$190 million inventory increase, due to
improved demand forecasting, supply
planning and efficiencies as a result of
the 12-Point Plan. Whilst the trend in
inventory reduction is promising, the
year-end position was higher than our
original expectations. Inventory reduction
continues to be a focus area with more
work to be done.
Non-current liabilities increased by
$1,059 million primarily due to two
Corporate Bonds issued by the Group in
2024 of $350 million and $650 million
bearing an interest rate of 5.15% and 5.4%
repayable in 2027 and 2034 respectively.
Current liabilities decreased by $740 million
primarily due to settlement of Private
Placement Debt of $405 million and
repayment of the Revolving Credit Facility
(RCF) of $300 million.
Balance sheet
Overall goodwill and intangible assets
decreased by $44 million or 1.1% in 2024.
Goodwill increased by $34 million as a
result of goodwill of $146 million arising
from the acquisition of CartiHeal, which
was partially offset by impairment of
goodwill of $65 million primarily as a result
of closure of the Warwick manufacturing
site and foreign exchange movements of
$47 million.
Intangible assets decreased by $78 million
mainly because of amortisation and
impairment of $246 million being partially
offset by acquisition intangibles from
CartiHeal of $84 million and other
additions of $87 million.
Other non-current assets increased by
$20 million mainly due to an increase of
$76 million of deferred tax assets, partially
offset by $48 million decrease in property,
plant and equipment and $9 million
decrease in investment in associates due to
the Group’s share of the Bioventus loss.
Current assets increased by $391 million
mainly due to a $317 million increase
in cash and cash equivalents driven by
the increase in cash generated from
operations. Additionally, trade and other
receivables increased by $81 million
in 2024 mainly due to an increase in
prepayments and other receivables.
Cash flow
In 2024, cash generated from operations
was $1,245 million after paying out
$151 million of restructuring and
rationalisation expenses, $36 million
for legal and other items and $3 million
of acquisition and disposal related
items. Trading cash flow1 increased
by $364 million driven by a significant
improvement in working capital compared
to 2023.
In 2024, restructuring costs totalled
$123 million, including costs relating to
efficiency and productivity initiatives under
the 12-Point Plan. This was a significant
reduction from 2023 when restructuring
costs were $220 million. We expect
restructuring costs to significantly
decrease from 2025 onwards. This was a
driver behind the step-up in free cash flow1
to $551 million in 2024 (2023: $129 million),
and we expect to make further progress
in 2025.
In 2023, cash generated from operations
was $829 million after paying out
$124 million of restructuring and
rationalisation expenses, $145 million
for legal and other items and $16 million
of acquisition and disposal related
items. Trading cash flow1 increased by
$191 million driven by better working
capital movements compared to 2022.
Free cash flow1 increased to $129 million
from $56 million in the prior year because
of the increase in trading cash flow1
partially offset by an increase in capital
expenditure, interest paid and income
taxes paid.
2024
2023
2022
Change
2024
Change
2023
$m
$m
$m
$m
$m
Cash generated from operations
1,245
829
581
416
248
Trading cash flow1
999
635
444
364
191
Free cash flow1
551
129
56
422
73
2024
2023
Change
$m
$m
$m
Goodwill and intangible assets
4,058
4,102
(44)
Other non-current assets
1,875
1,855
20
Current assets
4,421
4,030
391
Total assets
10,354
9,987
367
Total equity
5,265
5,217
48
Non-current liabilities
3,558
2,499
1,059
Current liabilities
1,531
2,271
(740)
Total liabilities
5,089
4,770
319
Total liabilities and equity
10,354
9,987
367
Net debt2
2,709
2,776
(67)
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 Net debt including lease liabilities is reconciled in Note 15 to the Group accounts.
25
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Liquidity and capital resources
At 31 December 2024, the Group had
access to $617 million (2023: $300 million)
in cash net of bank overdrafts. The Group’s
debt facilities comprise:
– USD $1,000 million corporate bond;
– USD $650 million corporate bond;
– EUR €500 million corporate bond;
– USD $350 million corporate bond;
– $1,000 million RCF; and
– $625 million private placement debt.
The Group had committed available
facilities of $4,145 million at 31 December
2024 of which $3,145 million was drawn.
The Group’s net debt2, excluding lease
liabilities, decreased from $2,577 million
at the beginning of 2024 to $2,513 million
at the end of 2024, representing an
overall decrease of $64 million mainly as
a result of a $416 million increase in cash
generated from operations partly offset by
dividend payments of $327 million.
In 2024, the Group issued two Corporate
Bonds of $350 million and $650 million
bearing an interest rate of 5.15% and 5.4%,
repayable in 2027 and 2034 respectively.
The Group settled Private Placement
Debt of $405 million and repaid RCF of
$300 million in 2024.
Adjusted leverage ratio1 for 2024 was 1.9x,
better than our revised target adjusted
leverage ratio of 2x and the 2.1x for 2023,
mainly driven by improved profitability.
The leverage ratio using the closest
equivalent IFRS measures for 2024 was
8.1x (2023: 11.7x). The leverage ratio using
closest equivalent IFRS measures is not
based on measures used in the calculation
of debt covenants and is not used by
management internally.
Return on Invested Capital
Return On Invested Capital (ROIC) is a
measure of the return generated on capital
invested by the Group. It encourages
compounding reinvestment within the
business and discipline around acquisitions.
Adjusted ROIC1 increased from 5.9%
in 2023 to 7.4% in 2024 reflecting the
progress made under the 12-Point Plan.
ROIC based on the closest equivalent IFRS
measures was 4.9% for 2024 (2023: 3.2%).
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 a period of at
least 12 months from the date of approval
of the financial statements. Accordingly,
the Directors continue to adopt the going
concern basis in preparing the consolidated
financial statements.
Capital allocation framework
The appropriate use of capital on
behalf of shareholders is important
to Smith+Nephew. In July 2024, we
announced an updated capital allocation
framework to prioritise the use of cash and
inform our investment decisions as follows:
– Invest in the business to drive
organic growth and meet our
sustainability targets.
– Invest in acquisitions, targeting new
technologies in high growth segments
with a strong strategic fit that meets our
financial criteria.
– Maintain an optimal balance sheet and
appropriate dividend.
– Return surplus capital to shareholders.
Available debt facilities by maturity date ($m)
2027
490
140
75
0
2026
2025
75
0
350
2028
60
60
2029
1,620
100
2030
1,095
1,000
95
2032
155
520
2034
650
155
1,000
650
EUR Bond
USD Bond
RCF Undrawn
Private placements
Maturity by date
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 Net debt including lease liabilities is reconciled in Note 15 to the Group accounts.
Chief Financial Officer financial commentary continued
Financial review continued
26
Smith+Nephew Annual Report 2024
Our first priority remains investing in the
business to drive organic growth and
meet our sustainability targets. We have
increased visibility and focus on improving
our Return on Invested Capital (ROIC) at
the business unit level through allocation
of central costs and our drive to improve
working capital. We will continue to
prioritise capital investment in those
areas where we expect to see the highest
incremental returns.
The second priority is also unchanged, and
is to invest in acquisitions, targeting new
technologies in high growth segments with
a strong strategic fit that meet our financial
criteria. On 9 January 2024, we completed
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. 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.
The third priority is to maintain an optimal
balance sheet and appropriate dividend.
Here we will continue to target investment
grade credit ratings. The adjusted
leverage ratio1 is calculated using
metrics similar to those used in the debt
covenant calculation.
The 2023 final dividend of 23.1¢
(2022: 23.1¢) per ordinary share,
totalling $202 million (2022:
$201 million), was paid on 22 May 2024
(2022: 17 May 2023). The 2024 interim
dividend of 14.4¢ (2023: 14.4¢) per
ordinary share, totalling $125 million (2023:
$126 million), was paid on 4 November
2024 (2023: 1 November 2023).
Our final priority remains to return any
surplus capital to shareholders, via a share
buyback subject to the above balance
sheet metrics.
For 2025, we are targeting another
year of revenue growth above historical
levels and a significant step-up in trading
profit margin1.
For revenue, we expect to deliver
underlying1 revenue growth of around
5.0%. Within this, we expect ongoing
improvement from US Reconstruction
and continued strong growth from
Sports Medicine outside of China, ENT
and Advanced Wound Management
offset by the impact of the anticipated
China VBP extension into Arthroscopic
Enabling Technologies (estimated
$25 million revenue headwind in 2025).
There will be one fewer trading day in
2025 than in 2024. The guidance equates
to reported growth of around 4.8%
based on exchange rates prevailing on
19 February 2025.
In terms of phasing, we expect the
headwinds from China to continue in
Reconstruction for the first quarter,
and in Sports Medicine Joint Repair
into the second quarter as we lap VBP
implementation. We expect that some
of the strong finish to 2024, particularly
in US Sports Medicine and Advanced
Wound Biactives, will normalise in the
first quarter. In addition, we have one
fewer trading day in each of the first
and second quarters versus 2024, then
one extra day in the fourth quarter. As a
result of these factors, we expect first
quarter underlying1 revenue growth to
be in the range of 1% to 2% and then be
higher across the remainder of the year.
We expect to deliver a trading
profit margin1 of 19.0% to 20.0%.
This significant step-up will be driven by
operating leverage, cost reductions and
the benefits of our network optimisation
programme. These benefits are
expected to more than offset headwinds
from China and cost inflation.
We expect trading profit1 margin to be
stronger in the second half than the first
as the impact of China headwinds reduce
and operational savings are delivered.
We expect trading cash conversion1 of
80% to 90% and restructuring costs of
around $45 million in 2025.
The tax rate on trading1 results for 2025
is forecast to be in the range of 19.0% to
20.0%, subject to any material changes
to tax law or other one-off items.
2025 Outlook
1 These non-IFRS financial measures are explained and reconciled to the most directly
comparable financial measure prepared in accordance with IFRS on pages 265–271.
27
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
01
Working to improve the quality of healthcare through our
investment in new technologies and services, industry-leading
medical education and clinical evidence programmes, and
efficient and resilient manufacturing and distribution.
Life Unlimited
Elevating the
standard of care
Together we are
28
Smith+Nephew Annual Report 2024
Delivering leadership
through innovation
Smith+Nephew’s innovation pipeline
is a significant contributor to our
transformation to being a higher-
growth business.
In 2024, approximately 60% of revenue
growth came from products launched in
the last five years.
We maintained our recent high cadence
of launches, with 16 new products in
2024, bringing our total of new products
to around 50 over the last three years.
Many of these growth platforms are
driving growth today and have multi-year
runways still ahead of them as we expand
indication and applications and launch in
new markets.
Since our founding in 1856,
Smith+Nephew has had a rich history
of transformative innovation.
Recently, we have supported advances in
clinical practices and fulfilled our mission
of delivering a “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 open
surgery was previously the standard
of care.
Research & Development
And in wound care, Smith+Nephew’s
PICO◊ single-use Negative Pressure
Wound Management System (sNPWT)
has revolutionised the availability of this
important treatment option.
Addressing unmet
clinical needs
Despite advancements in procedures
and technology, significant unmet clinical
needs remain. Patients seek better clinical
outcomes and satisfaction with reduced
complications, while healthcare systems
face challenges with treatment costs and
unaddressed problems. For example, 80%
of knee replacement recipients report
that their new knee feels “artificial1”.In
Sports Medicine, the re-tear rate for large
full-thickness rotator cuff repairs (RCRs)
can be up to 50%2. In ENT, nearly one in 16
children who undergo total tonsillectomies
experience post-operative haemorrhages3,
and in wound care, surgical site infection
treatments cost the US healthcare system
more than $3 billion annually4.
These challenges inspire us to invest in the
next generation of products and services
that will enhance clinical practice and
improve patient and payer outcomes.
We are shaping an innovation environment
driven by four key trends:
1
Robotics and digital systems:
Enabling unprecedented accuracy
and personalisation in procedures.
2
Biologics technology: Rapidly
evolving to offer diverse treatment
options, including full tissue and
function restoration.
3
Procedural innovation: Emphasising
less invasive, tissue-sparing methods
to enhance recovery times.
4
Value-focused healthcare costs:
Prioritising compelling value and
health economic benefits.
Inspiration for new products arises from
observing our customers, collaborating
with healthcare professionals during design
and development, acquiring technologies
that require further refinement and
commercialisation, and partnering with
co-development teams. Our product
development follows a rigorous phase-
gate process, starting with business
case evaluation and culminating in
launch readiness, all while integrating
sustainability principles into our design
and packaging.
Smith+Nephew’s R&D team
concentrates on growth
segments where we can
leverage our expertise to deliver
innovative solutions that meet
unmet clinical needs.”
Vasant Padmanabhan
President of Research
& Development and ENT
Invested in R&D in 2024
$289m
New products in 2024
16
» For a full list of references
see pages 285–288
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We moved to full commercial launch of the
AETOS◊ Shoulder System in the US, and
announced 510(k) clearance for its use
with ATLASPLAN◊ 3D Planning Software
and Patient Specific Instrumentation for
total shoulder arthroplasty. AETOS◊ will
enable us to compete effectively in total
shoulder arthroplasty, one of the fastest-
growing segments in Orthopaedics, with an
estimated 250,000 procedures in the US
by 2025.5
We also introduced TOTAL ANKLE◊
Patient-Matched Guides to help surgeons
plan and perform total ankle replacement
procedures. Total ankle replacements
are historically uncommon, but this is a
high-growth market bolstered by the rising
prevalence of osteoarthritis in adults and
influenced by growing patient preference
for joint preservation and restoration.
For the CORI◊ Surgical System, we
announced new CORIOGRAPH◊ Pre-
Operative Planning and Modelling Services,
making CORI◊ the only orthopaedic
robotics-assisted system to offer either
intra-operative image-free or image-based
registration for knee implants, enabling
the surgeon to choose whether or not to
perform a pre-operative MRI scan. This is
one of a number of distinct features for
CORI◊, including supporting revision knee
procedures and offering both burr and saw
cutting options.
Sports Medicine
In Sports Medicine, we completed the
acquisition of CartiHeal, the developer
of the CARTIHEAL AGILI-C◊ Cartilage
Repair Implant, a novel Sports Medicine
technology for cartilage regeneration in
the knee. We have made good progress
on market development activities in the
first year of ownership, including clinical
strategy and reimbursement milestones.
We continued to invest behind in
Arthroscopic Enabling Technology.
During the second quarter, we introduced
the INTELLIO◊ SHIFT System, which
combines our leading COBLATION◊ and
DYONICS◊ resection technologies into a
single controller alongside a multifunctional
foot pedal, simplifying the operating
room experience for surgeons. We also
launched an updated INTELLIO◊ cart,
updated software for the INTELLIO◊ Tablet,
which serves as both a control device
and image storage for the INTELLIO◊
Tower, and introduced the EVO◊ 4K Image
Management System.
In ENT, we launched the ARIS◊ COBLATION◊
Turbinate Reduction Wand. This utilises our
advanced COBLATION◊ Plasma Technology
to provide a minimally invasive way to
reduce hypertrophic turbinates, a condition
that requires 350,000 procedures per
annum in the US6.
16 new products in 2024
In 2024 we continued to expand our
portfolio with major new platforms and
product enhancements that address
unmet clinical needs and support our
higher-growth ambitions.
Orthopaedics
In Orthopaedics, new products included
implant systems for hips and shoulder, and
building out the capabilities of our CORI◊
Surgical System.
We announced a major new hip system,
the CATALYSTEM◊ Primary Hip System.
CATALYSTEM◊ is designed to address the
evolving demands of primary hip surgery,
including the increased adoption of anterior
approach procedures and the expanding
role of Ambulatory Surgery Centers (ASCs).
We introduced a new OXINIUM◊ option
for our LEGION◊ Hinged Total Knee (HK)
System, making this proprietary material
with its leading wear and corrosion
resistance technology available to hinged
knee patients for the first time.
Research & Development continued
Elevating the standard of care continued
Award-winning
innovation
RENASYS◊ EDGE
In 2024 we celebrated RENASYS◊
EDGE NPWT System winning the Red
Dot Best of the Best Award for Design
Concept in the Medical Devices and
Technology Category, recognising its
intuitive pairing of NPWT housed in a
patient-friendly design. The Red Dot
Awards celebrate new innovations
and groundbreaking designs, with
recipients ranging from concepts
and prototypes to full ready-for-
market products.
We were also proud that our CORI◊
Surgical System was nominated
for the prestigious US Prix Galien
Award that recognises products with
the potential to shape the field of
medical technology.
» See pages 285–288 for references
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Smith+Nephew Annual Report 2024
Advanced Wound Management
In Advanced Wound Management, we
launched the RENASYS◊ EDGE NPWT
System. This 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. The launch commenced in the US
and expanded into Europe in the second
half of 2024.
We also continued our high cadence of
incremental innovation in skin substitutes,
with the launch of GRAFIX◊ PLUS in the
second quarter, an easier-to-handle new
version in our lead product family, targeting
the growing post-acute market.
Compelling evidence
Clinical, scientific, and real-world evidence
continues to play a critical role in our go-
to-market strategy, with compelling and
differentiating data supporting key brands
in 2024. This included the first randomised
controlled trial with the REGENETEN◊
Bioinductive Implant,7 market-leading
20-year survivorship data for OXINIUM◊
Technology with highly cross-linked
polyethylene among all total hip
replacement bearing combinations,8 and
early impressive results for the OR3O◊
Dual Mobility Hip,9 LEGION CONCELOC◊
Cementless Knee10,11 and revision total
knee arthroplasty using the CORI◊
Surgical System.12 In Advanced Wound
Management we also published new data
supporting the use of PICO◊ sNPWT to
reduce surgical site infections13 and using
ALLEVYN◊ LIFE Dressing in a pressure injury
prevention protocol14.
GRAPHIX◊ PLUS
Launched in 2024
to target the fast-
growing post-
acute market.
Bringing artificial
intelligence to life
Artificial Intelligence (AI) is
increasingly important to
Smith+Nephew’s strategy, supporting
our growth ambitions through our
innovation programmes and our drive
to improve productivity. Strategic
direction is set by our Executive
Committee, supported by a newly
established collaboration, governance
and operating model.
AI Champions across the business
identify opportunities both within
their areas and for potential
application enterprise-wide, and drive
implementation and adoption, supported
by IT and Information Security teams.
Our AI Working Group, comprising
a cross-functional team including
members from Commercial, R&D, Audit,
Information Security, Privacy and Legal,
oversees governance to ensure that
reviews are undertaken to establish
appropriate controls across the Group,
both for AI projects and for AI-use by
employees in their day-to-day work.
For customer-facing delivery of
products and services, we are
strategically positioning AI to enhance
personalisation, automation and overall
care quality for patients, developing
solutions to address unmet clinical needs
and support operational efficiencies.
Within our R&D team, we have
established an AI Centre of Excellence
which evaluates opportunities for both
generative AI (GenAI) and machine
learning to meet different needs: GenAI
for personalisation and communication,
and machine learning for predictive
analytics and optimising workflows.
Our CORI◊ Surgical System incorporates
Personalised Planning powered by AI
and RI.INSIGHTS◊ Data Visualization
Platform, two solutions that 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.
Areas for further evaluation in
2025 include:
Integrated business planning and
forecast accuracy
Enhance forecast accuracy by using
AI to augment automation and further
connect our commercial, financial and
demand forecasts.
Source to pay and contract adherence
Utilise AI to interpret contracts
and pricing and systematically
review invoices to identify areas
of improvement.
Customer service and
order management
Utilise AI to analyse orders received via
email or customer portals and automate
entry into the enterprise resource
planning (ERP) software system.
Enhanced automation of non-
financial reporting
Use AI to collect, analyse and verify
non-financial data, streamlining the
reporting process to improve accuracy
and consistency.
Enterprise workflow enhancement
Utilise AI natural language processing
capabilities to reduce repeat advisory
requests and manual processes for
enquiries and approvals.
RI.INSIGHTS
Data Visualization
Platform
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Striving to be a world leader
in medical education
At Smith+Nephew, we strive to be
a world leader in medical education,
helping to improve patient outcomes
through interactive learning to support
appropriate clinical decision making, and
to build trust in the safe and effective
use of Smith+Nephew technologies.
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 Smith+Nephew Academy medical
education programmes.
We are committed to providing top-
tier medical education that empowers
healthcare providers with the latest
advancements and best practices to
improve patient care and clinical outcomes.
Smith+Nephew Academy is at the
forefront of innovation in education
delivery. Our programmes blend hands-on
experience with digital education through
our AI-enabled Academy Online, surgical
simulations, interactive eLearning, live
surgery transmission, virtual reality (VR)
and podcasts. We provide personalised
curriculum and programming specifically
designed to meet the needs of the
accomplished physician, resident, fellow
and allied health professional.
In 2024 we have delivered a number of
enhancements to the Smith+Nephew
Academy aimed at supporting surgeons
throughout their careers. For residents,
doctors at the start of their career,
we have developed a first-of-its-kind
fully digital blended learning pathway
providing online and simulation education.
For fellows, doctors working to become
experts in one or more of our areas of
surgical sub-speciality, we are working to
support academic centres through tailored
programmes, including our first fellows
programme for Sports Medicine in the Asia
Pacific region.
We are relentless in our pursuit of
building and developing a community
of learners and leaders dedicated to
continuous improvement and excellence
in medical education, embracing new
technologies and innovation to provide
an engaging blended learner journey fully
focused on improving patients’ lives.”
Cynthia Walker
Senior Vice President
Medical Education
S+N Academy programmes
run by Smith+Nephew in 2024
3,874
Healthcare professional
training sessions in 2024
106,734
Through the Smith+Nephew Academy
we are working to:
– Drive awareness and adoption of new
technologies to improve patients’ lives
– Expand global reach to advance
treatment
– Inform healthcare providers of
treatment options
– Influence standard of care protocols
– Deliver a superior customer experience.
Our medical education programmes deliver
globally consistent curriculums using
interactive learning and on-site teaching
at our seven Academy centres in the US,
Singapore, Germany and the UK.
Smith+Nephew Academy
Elevating the standard of care continued
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Smith+Nephew Annual Report 2024
This on-demand tool is accessible
anywhere, anytime, through
Academy Online – an online
accredited platform offering
comprehensive educational
materials, interactive courses,
and valuable resources from
world-class surgeons and
thought leaders on robotics-
assisted surgery.
The virtual planning tool aims
to shorten the learning curve,
reproduce the same functionality
found in surgery, and let learners
refine skills and practise case
planning without the pressure
of live surgery.
700+
Modules available on
Academy Online
20,840
Healthcare professionals
trained on Academy Online
in 2024
We also continue to innovate
on our course content.
In 2024 we delivered the first courses for
the recently acquired CARTIHEAL◊ AGILI-C◊
Cartilage Repair Implant, bringing this
exciting treatment option to more patients.
In Italy, we worked in partnership with a
training hospital to enhance skills in hip
and knee arthroplasty, including robotics,
for fourth- and fifth-year residents.
We combined an online educational
pathway for self-learning with simulation
days for hands-on practice with virtual
reality, and provided a feedback
mechanism for the teaching team to
monitor progress.
In early 2025, as the first and only Official
Sports Medicine Partner of the UFC, we
ran our first Smith+Nephew UFC Combat
Sports Medicine Course.
Recognition and partnerships
We are proud recipients of Royal College
of Surgeons of England (RCSEng) Centre
Accreditation, awarded to Smith+Nephew
Academy. This is the highest level of
accreditation given by the RCSEng. It is
seen as a kite-mark of excellence and
demonstrates external validation of the
medical education training Smith+Nephew
Academy provides.
In 2024 we ran our first courses approved
by ISAKOS, the International Society
of Arthroscopy, Knee Surgery and
Orthopaedic Sports Medicine, commencing
with an expert panel for faculty members
specialising in Shoulder Sports Medicine at
Smith+Nephew Academy Singapore.
In the US, select content is accredited
by the California Board of Nursing,
including multiple elearning modules
and our podcast on Advanced Wound
Management, now in its third season.
Empowering surgeons with
interactive training tools
CORI◊ Virtual Planner
The CORI◊ Virtual Planner provides an interactive,
fully functional software tool for surgeons to
become familiar with creating a surgical plan on
the CORI◊ Surgical System.
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Transforming global operations
to improve product availability
and customer service
Global Operations has been integral
to the delivery of our 12-Point Plan,
specifically our activities fixing
Orthopaedics and improving productivity.
Through implementation of the new S+N
Operating System, we are improving
product availability and customer
service, optimising our material supply
base, reducing manufacturing costs and
aligning our manufacturing network
to ensure supply.
Product availability
Smith+Nephew has made significant
progress in achieving its service
optimisation goals, improving product
availability while also helping improve profit
margin through better inventory utilisation
and manufacturing outputs.
Line Item Fill Rate (LIFR) is the percentage
of order lines completely filled, out of the
total number of order lines. The 12-Point
Plan diagnostic had identified this as
an area of weakness. In 2024, following
improvements to our manufacturing
production mix, Global Distribution
Centres and Orthopaedics Services
Centres performance, and better use of
our field inventory and performance of our
Orthopaedic Services Centres, we reached
industry standards.
Another area of improvement has been
our Sales, Inventory & Operations Planning
(SIOP) process. This is a dynamic process
in which a company’s operating plan is
updated on a regular basis. The plans take
into account projections made by the
sales and marketing departments, and the
resources available from manufacturing,
engineering, purchasing and finance, which
are directed towards hitting the Company’s
objectives. In 2024, we increased efficiency,
accountability and stability, and reduced
our SIOP cycle time which enabled more
agile decision making and improved clarity
within our sales, inventory, and operations
planning efforts.
Across Smith+Nephew, we actively
reduced our Excess and Obsolete (E&O)
inventory. E&O is a combination of excess
stock, obsolete inventories, and shrink
inventory (damaged, lost in transit, and so
on). The focus is preventing E&O through
maturing our SIOP process, which will
improve forecasting and reduce bias
during the supply planning process.
We are also reviewing our Product
Lifecycle Management (PLM) process, as
well as New Product Introduction (NPI)
planning. Our work improving inventory
controls, supply planning and centralising
consignment stock is instrumental in our
E&O prevention efforts.
Source materials
Smith+Nephew has just over 1,000 direct
suppliers across the globe. These suppliers
provide products, raw materials and
services needed to drive production
of our end products. These suppliers’
performances directly impact our
manufacturing schedule, with further
implications for our commercial
colleagues, customers and patients.
In 2024 we made a number of
improvements to our direct procurement
process. We created a standard way of
working for site buying activities across the
Group, including formalising procedures,
purchasing and controls of supplier lead
times. We improved inventory/component
stability due to a more cohesive buying
process, increased our ability to measure
supplier performance and enhanced
supplier capacity analysis to help
resolve potential long-term systemic
supplier constraints.
Like most global manufacturers, we
measure ‘On Time In Full’ (OTIF) delivery
with our supplier partners. We have
developed a new supplier scorecard to
enable us to better measure supplier
performance, including OTIF fulfilment, so
we can support inventory and raw material
needs. This global, standardised scorecard
will allow us to measure supplier metrics
in terms of quality, cost, risk and delivery.
We also developed an enhanced supplier
development process that includes an
assessment of risk, capacity, lead time, raw
material constraints and other elements
to support more predictable supply
with fewer interruptions and help drive
efficiency in the production process.
Through developing and deploying
the Smith+Nephew Operating
System, we are taking a disciplined
approach to the way we work
founded in continuous improvement
across Global Operations.”
Paul Connolly
President, Global Operations
Manufacturing, Quality & Regulatory Affairs
Elevating the standard of care continued
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Warehousing and distribution
Currently, Smith+Nephew has a
warehousing and distribution network
that spans across more than 100 global
locations. We are working to create
efficiencies and processes across our
network that will achieve a cost to serve
comparable with industry best practices
and help offset headwinds such as
freight cost increases, inflation and the
rising costs of outsourced warehousing.
Actions include improving spend
management by re-negotiating our rates
and leveraging our best carrier capabilities,
optimising our network using consolidation
at our distribution centres to reduce
transportation spend, identifying routes
that can be switched from air to ocean to
benefit from the improved market price and
analysing our current last-mile distribution
market dynamic to minimise inefficiencies.
Quality & Regulatory Affairs
Our Quality & Regulatory Affairs
function supports full product life cycle
management of our global product
portfolio, from design and development
through manufacturing and post-
market surveillance. It establishes
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.
Throughout the year, our sites hosted 56
Health Authority Audits and Inspections,
resulting in no significant inspection
findings or regulatory actions.
Optimising our network
We are continuing execution of our
network optimisation strategy, focusing
on our core manufacturing capabilities,
aligning capacity with customer
requirements and leveraging our new
high-technology Orthopaedics facility in
Malaysia. We have closed Orthopaedics
facilities in Lyon (France) and Beijing
(China), and announced the exit of facilities
in Warwick (UK) and Tuttlingen (Germany).
We confirmed plans for a major upgrade
to our Advanced Wound Management
manufacturing capacity. Building on our
long heritage in Hull (UK), we announced
updated plans for a new facility in nearby
Melton, focused on manufacturing
intermediates, the key components
of wound care products. This major
investment will start operations in 2027
and will significantly contribute to our
sustainability goals.
Our new S+N Operating System has
established standard systems, processes
and programmes to deliver improved
manufacturing and quality throughout
our global network. The application
of LEAN principles has improved
the capability of our equipment and
processes, while providing greater agility
and responsiveness to meet demand
requirements. The ongoing deployment of
digital has allowed real-time performance
reporting and is improving material flow,
reducing scrap and driving cost efficiency.
We are also upgrading our Enterprise
Resource Planning (ERP) software system
that will standardise our business process
and enhance our end-to-end connectivity.
The Quality & Regulatory Affairs teams
directly support expansion of our global
portfolio through the registration of
new products and existing products in
new markets.
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 and have officially
closed our internal project with all files
submitted to the notified bodies, and 95%
of respective product lines have received
EU MDR certification. The Regulation
allows devices certified under previous
legislation (Medical Device Directive)
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 proposed changes
in the regulatory landscape, including, in
the EU, the world’s first comprehensive
AI law, with compliance for certain AI
devices (software or integrated software)
required by August 2027. Other significant
regulatory landscape changes include
changes in UK medical device legislation
and UKCA (UK Conformity Assessed)
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.
Smith+Nephew participates in industry-
wide partnerships that address supply
chain risk evaluation and mitigation,
including MedTech Europe, AdvaMed
and regional industry trade associations
in geographies where we have a
market presence.
We follow responsible codes of conduct
for sales interactions, including the
AdvaMed Code of Ethics on Interactions
with Healthcare Professionals in the US
and the MedTech Europe Code of Ethical
Business Practice.
We continue to seek ways to drive
efficiencies, and in recent years have
moved some work to offshore teams,
improving our cost base whilst maintaining
an excellent compliance record.
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02
Putting our
customers first
Our customers are healthcare professionals. They
range from orthopaedic surgeons to wound care nurses,
general practitioners and other clinicians, but increasingly
also economic stakeholders such as purchasing
professionals in hospitals and healthcare insurers.
Life Unlimited
Together we are
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36
Smith+Nephew serves its customers
through three global business units:
Orthopaedics, Sports Medicine & ENT,
and Advanced Wound Management.
Through this model we ensure that we
have subject and market experts leading
specialist teams dedicated to serving the
specific requirements of our customers.
Our business units are responsible for their
commercial strategy, determining which
products we take to market. They work
closely with R&D to ensure that we are
developing products that address unmet
needs, and with Global Operations to
ensure we have appropriate product
availability to meet customer needs.
We are dedicated to serving
the specific requirements of
our customers
Our sales force
Our sales representatives support
our customers through their
technical knowledge.
Depending on their area of specialism,
representatives in our surgical businesses
not only know the products that they
sell and the surgical instruments used
to implant them, but are also expected
to have an understanding of the various
surgical techniques a customer might use.
Once a sales representative is trained and
certified, they typically spend the majority
of their time working directly with and
supporting customers in the safe and
effective use of our advanced medical
technologies, or identifying and contacting
new customers.
In Advanced Wound Management, sales
representatives develop their knowledge
of how clinicians seek to prevent and
treat wounds, as well as understand the
economic benefits of using our products
within treatment protocols.
We pride ourselves on giving customers
a high standard of service and invest
in developing our sales and marketing
organisation. Our Global Commercial
Training and Education team delivers a
consistent content and curriculum-based
approach, coupled with commercial
training specialisation in key markets.
A strong portfolio
Like many other medical device companies,
Smith+Nephew is a global portfolio
business. This brings a range of benefits in
how we serve our customers.
It gives a level of scale, which covers costs
and enables us to engage with customers
in a cross-business way. The portfolio also
gives stability. There are natural product
cycles in each area of MedTech, and
diversification helps smooth our progress
across those cycles.
It also supports capital allocation,
enabling us to invest in opportunities
in particular categories in a way that
would be more financially challenging as
standalone businesses.
At the same time, operating in our global
business unit structure means each area
also has the focus, the accountability and
the ability to move at pace, that comes
with dedicated leadership and clear lines
of responsibility.
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Putting our customers first continued
As orthopaedic and sports medicine procedures
shift from the hospital to ASC outpatient settings,
Smith+Nephew is uniquely positioned to meet the
evolving needs of our customers.
Meeting changing customer needs
– Ambulatory Surgery Centres (ASCs)
Many countries are shifting towards
more decentralised care, with an
increasing number of procedures
being performed in outpatient
settings, such as ASCs in the US.
This trend has been particularly
prominent in Sports Medicine, and a
growing number of orthopaedic joint
replacement procedures are now
being carried out in these settings,
resulting in cost and time efficiencies
for healthcare providers.
At Smith+Nephew, we go beyond the
product to deliver a comprehensive
offering for ASCs.
We are uniquely positioned to
meet the needs of the market,
with procedural solutions spanning
sports medicine, hip and knee
reconstruction, robotics, trauma,
extremities and post-surgical
wound care.
Under the 12-Point Plan, we have
developed a coordinated approach
overseen by a dedicated strategic
sales team targeting ASCs.
Our ASC Partnerships Programme
features access to a robust product
portfolio, industry partnerships to
help customers build, expand and
optimise their facility, and training
programmes tailored for the unique
needs of the ASC.
Our flexible and efficient robotics-
assisted CORI◊ Surgical System,
innovative procedural solutions,
and strategic partnerships such
as HOPCo and JointVue allow our
customers to unlock value in the ASC.
The partnership with HOPCo provides
a comprehensive technology platform
that encompasses all musculoskeletal
procedures performed in the
ASC segment. The AI-powered
myrecovery® platform enhances
the clinical experience by utilising
patient engagement tools such as
remote care management, real-
time communications and remote
therapeutic monitoring, while
providing critical20 quality outcome
metrics through proprietary activity-
tracking technology, functional
outcomes reporting, patient-reported
outcomes and longitudinal data
integration across a patient’s care
journey. HOPCo’s Vitals® platform
provides tools, analytics and
dashboards to help our customers
deliver better, more efficient and
coordinated care while also meeting
value-based care requirements
aiming to reduce cost.
We continue to grow our presence in
this expanding segment, building on
our strong position in Sports Medicine.
The pace of cross-business unit deals
has more than trebled since 2022,
and the total number of deals closed
in 2024 was ahead of our target.
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Driving procedural innovation
Orthopaedics
Our Orthopaedics business unit offers
a leading portfolio of hip and knee
implants, robotics and digital enabling
technologies driving procedural
innovation and a strengthened Trauma
& Extremities portfolio.
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 are designed
to mimic natural movement and are
manufactured using materials with a track
record of longevity and performance.
The addition of our CORI◊ Surgical System
robotics platform delivers accuracy,
performance and efficiency to the surgical
procedure. We are well positioned as the
supplier of choice for surgeons across
the globe.
Orthopaedics includes an innovative range
of hip, knee and shoulder 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,
which includes our Hip and Knee Implants
and Other Reconstruction segments,
we have a broad, clinically proven and
differentiated portfolio that allows us to
compete effectively across a market worth
around $16.8 billion annually. This portfolio
includes our proprietary OXINIUM◊
Technology and our CORI◊ Surgical System,
which is strongly positioned to take
advantage of the trends towards robotics-
assisted surgery and outpatient joint
replacement seen across the segment.
The Trauma & Extremities market is worth
over $14.6 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,
in 2024.
Strategy
Our Orthopaedics business unit has an
innovative portfolio that allows us to
compete in joint reconstruction, robotics-
enabled procedures and Trauma &
Extremities markets. 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 and hip
procedures using the CORI◊ Surgical
System. Additionally, we will continue to
leverage the unique material properties of
our OXINIUM◊ Technology 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. Following the launch
of our AETOS◊ Total Shoulder System,
we expect to expand our footprint in the
shoulder replacement market.
Integrated solutions for fracture fixation
EVOS◊ Plating System
The EVOS◊ Plating System, an
evolutionary approach to simplifying
and unifying into one plating system,
offers surgeons the simplicity of one
comprehensive plating system that
addresses all of their small-, mini- and
large- fragment surgical needs.
“Through the 12-Point Plan, we strengthened
our Orthopaedics commercial delivery model to
enhance our ability to better serve our customers
and accelerate growth in our core global markets.”
Craig Gaffin
President Global Orthopaedics
»For a full list of references
see pages 285–288
39
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
2024 performance
Orthopaedics full year 2024 revenue
growth was 4.1% on a reported basis,
including an FX headwind of -50bps. On an
underlying1 basis, revenue growth was
4.6%. The business unit finished the year
strongly as we continued to make progress
delivering against the 12-Point Plan priority
to Fix Orthopaedics.
Knee and Hip Implants growth was driven
by Other Established Markets and a
significant improvement in the US over
the course of the year. This reflected the
operational progress in product supply and
sharper commercial execution following
the 12-Point Plan. Performance was held
back by China, where we saw reduced
end-customer demand in the second half
of the year, resulting in orders from our
distribution partners significantly slowing
as they reduced stock levels in response.
2024 Knee Implants growth was driven by
our JOURNEY II◊ Total Knee System and
by our cementless and revision systems.
Hip growth was led by our POLAR3◊ Total
Hip Solution and R3◊ Acetabular System.
Other Reconstruction's double-digit
growth in 2024, principally reflecting
sales of our robotics-assisted CORI◊
Surgical System and consumables.
We strengthened CORI◊ with a series of
new features during 2024, and the installed
base exceeded 1,000 systems at year end.
Progress was built upon our investment
to build out the EVOS◊ Plating System.
We also continued to roll out the launch of
the AETOS◊ Shoulder System, entering a
high-growth category.
Orthopaedics trading profit1 was up 5.5%
in 2024, with a 20bps increase in trading
profit margin1 to 11.5%. This represents
a step in the right direction following a
period of fundamental operational and
commercial improvements in the business.
We expect that these improvements will
translate into better financial outcomes
in 2025 and beyond. The recent trading
performance of the Orthopaedics
business has been considered as part of
the financial outlook to ensure that our
future performance estimates reflect
our best estimate and have accordingly
been reflected in the Orthopaedics
impairment assessment.
2023 performance
Orthopaedics revenue increased 4.8%
on a reported basis in 2023, including a
90bps headwind from foreign exchange.
Underlying revenue growth1 was 5.7%.
Knee and Hip Implants performance
outside the US benefited from improved
product supply and execution, which
remained challenges in the US.
Other Reconstruction grew strongly as we
expanded CORI◊. Trauma & Extremities
performed well in the US where we
improved availability of EVOS◊.
2023 trading profit1 declined -34.4% with
a trading profit margin1 of 11.3%, As noted
above, the 2022 segment profit was not
restated, and as a result of the allocation
of corporate costs in 2023, the trading
segment profit decreased by $147 million.
Excluding this, the profitability of the
segment improved by 3.9% in 2023, driven
by operating leverage.
Orthopaedics continued
Putting our customers first continued
Global market sharea
In our Orthopaedics business unit,
we are one of four leading players,
competing against US-based
companies Stryker, Zimmer Biomet
and DePuy Synthes.
Hip and Knee Implants
$16.8bn +5%
2023: $15.9bn +8%
A Smith+Nephew
10%
B Zimmer Biomet
31%
C Stryker
25%
D DePuy Synthesb
19%
E Others
15%
Trauma & Extremities
$14.6bn +7%
2023: $13.6bn +7%
A Smith+Nephew
4%
B DePuy Synthesb
24%
C Stryker
24%
D Zimmer Biomet
11%
E Others
37%
a Data used in 2023 and 2024 estimates generated
by Smith+Nephew are based on publicly available
sources and internal analysis and represent an
indication of market shares and sizes.
b A division of Johnson & Johnson.
Performance
2024
Revenue
2023
Revenue
2022
Revenue
2024
Reported
growth
2023
Reported
growth
2022
Reported
growth
2024
Underlying
growth1
2023
Underlying
growth1
2022
Underlying
growth1
Orthopaedics
$2,305m
$2,214m
$2,113m
4.1%
4.8%
(2.0%)
4.6%
5.7%
1.9%
Knee Implants
$947m
$940m
$899m
0.7%
4.7%
2.5%
1.3%
5.5%
6.8%
Hip Implants
$619m
$599m
$584m
3.2%
2.5%
(4.4%)
4.0%
3.8%
(0.2%)
Other Reconstruction
$131m
$111m
$87m
18.2%
27.8%
(5.6%)
18.5%
28.0%
(1.8%)
Trauma & Extremities
$608m
$564m
$543m
7.9%
3.7%
(5.7%)
8.1%
4.4%
(2.6%)
2024
2023
2022
2024
Reported
growth
2023
Reported
growth
Segment trading profit2
$265m
$251m
$383m
5.5%
(34.4%)
1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 In 2024, the Group changed the segment trading profit measure presented to the ExCo by allocating directly attributable corporate costs to business units. Accordingly, 2023 operating segment results
have been restated for comparative purposes. Corporate costs for 2022 have not been restated on the basis that the cost and effort to develop such corresponding information would be excessive.
E
A
B
C
E
A
B
C
D
D
40
Smith+Nephew Annual Report 2024
Best-in-class
just got better
CATALYSTEM◊ Primary
Hip System
Building on the clinical success of
our POLARSTEM◊ Hip System,11
the CATALYSTEM◊ System is
designed to address the changing
demands of primary hip surgery
(including the growth of Ambulatory
Surgery Centers (ASCs) and
increased adoption of anterior
approaches), introducing distinct
implant innovation.
Precise: Designed to address the
global patient population,33 the
CATALYSTEM◊ System provides
uniform proximal loading*34 and
a reduced distal stem geometry,
minimising the risk of undersizing
and distal potting, and is designed
to help minimise the risk of calcar
fractures.34–37
Confident: Achieve proven broach
to implant reproducibility using
proprietary ACCUBROACH◊
Technology, giving you the confidence
of predictable stem seating.12,39
Efficient: A single modular tray,
tailored to your approach, can provide
efficiencies in facilitating more shelf
space and reduced sterilisation costs.38
Key products by segment
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, 47–49 Our LEGION◊ CONCELOC◊
Cementless Total Knee System uses
innovative 3D-printed cementless
technology to achieve biological fixation,
bringing efficiency and versatility to the
operating room (OR).5, 50
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.*6–10 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.
Further strengthening our Hip Implant
portfolio, we launched the CATALYSTEM◊
Primary Hip System in 2024. Building on
the clinical success of our POLARSTEM◊
Hip System,11 the CATALYSTEM◊ System is
designed to address the changing demands
of primary hip surgery. The CATALYSTEM◊
Primary Hip System optimises performance
with patent-pending ACCUBROACH◊
Technology for reproducible12 implant
seating in just one modular tray. It is the
only cementless stem of its kind to feature
OXINIUM◊ Technology bearing material.
Other Reconstruction
Our Other Reconstruction business
includes the CORI◊ Surgical System, one
of the most advanced and efficient***13
handheld robotics solutions. CORI◊ is a
smaller,****14 portable solution capable
of performing robotics-assisted knee
and computer-guided hip surgery on
a single platform. In robotics-assisted
knee procedures, CORI◊ utilises handheld
precision milling which allows surgeons
to execute Total Knee Arthroplasty and
Unicondylar Knee Arthroplasty procedures
with reproducible accuracy.*****15–19 The
proprietary smart mapping feature creates
a 3D image of the patient’s anatomy in
surgery, eliminating the time, costs and
radiation exposure19 associated with pre-
operative CT scans.
In 2024, we launched the CORIOGRAPH◊
pre-operative planning and modelling
service that delivers the unique surgical
planning solution desired by some
surgeons. The addition of pre-operative
planning makes the CORI◊ Surgical
System even more versatile and flexible
than before. The proprietary software
of CORI◊ 3.0 allows CORI◊ 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◊ Surgical System.
When combined with Smith+Nephew Hip
Implants, like the CATALYSTEM◊ Primary
Hip System, POLAR3◊ Total Hip Solution
and OR3O◊ Dual Mobility System, as well as
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.51
The CORI◊ Surgical System is currently the
only solution indicated for robotics-enabled
knee procedures across the full continuum
of care – partial, total and revision
knee arthroplasty.
In addition, Personalised Planning guided by
RI.INSIGHTS◊ 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.
» For a full list of references
see pages 285–288
41
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Orthopaedics continued
Putting our customers first continued
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. In 2025,
we will further expand our EVOS◊ offering,
with the introduction of EVOS◊ Pelvic and
EVOS◊ Patella.
The portfolio also includes the TRIGEN◊
INTERTAN◊ Hip Fracture System, which is
backed by many years of strong clinical
evidence2 and SMART TSF◊, which
increases the capabilities of the TAYLOR
SPATIAL FRAME◊ External Fixator. In 2025
we will expand our TRIGEN◊ portfolio with
the introduction of the TRIGEN◊ MAX
Tibial Nailing System.
In our Upper Extremities portfolio, the
AETOS◊ Shoulder System, indicated
for both anatomic and reverse total
shoulder arthroplasty, is designed to
restore patients’ range of motion21–24
and help minimise arthritic shoulder
pain. It complements our market-leading
sports medicine shoulder repair and
biologics solutions.
In our Lower Extremities portfolio, we
expanded our offering with the launch of
TOTAL ANKLE Patient-Matched Guides
in 2024. TOTAL ANKLE Patient-Matched
Guides help surgeons visualise outcomes
through pre-operative planning and
accurate, efficient instrumentation.25–32
We also launched the LEOS◊ Plating
System and LEOS◊ Cannulated Screw
System in 2024. These systems feature
titanium fixation technology, simplified
instrumentation and modularity designed
to offer surgeons peace of mind across key
foot procedures in day-to-day practice.
Offering intra-operative convertibility, the meticulously
crafted AETOS◊ Meta Stem is designed to provide
metaphyseal fixation and stability with its inlay collar,
cruciate fin design and porous coating.21
Move with mastery
AETOS◊ Shoulder System
Featuring a range of anatomic humeral
heads and glenospheres, the AETOS◊
System facilitates total and reverse
procedures using the same stem and
the same anatomic neck resection.
Anatomic total shoulder arthroplasty
(TSA): Allows optimised head placement
and size, with central placement of the
humeral meta stem, eliminating the need
for eccentric heads in restoring native
anatomy.40
Reverse shoulder arthroplasty (RSA):
Multiple baseplate options designed
to allow implantation flexibility
and the ability to preserve bone.
Multiple glenosphere options are
designed to accommodate patient
anatomies and surgeon preferences,39
which may increase ranges of motion.21
TSA/RSA conversion: The AETOS◊ Meta
Stem has an inlay design to simplify
conversion from TSA to RSA, with fewer
surgical steps and multiple humeral
head and liner options to minimise over-
tensioning. †21,41
» For a full list of references
see pages 285–288
42
Smith+Nephew Annual Report 2024
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
in the $6.1 billion annual global sports
medicine market, which spans a broad
patient population, including athletes.
Adults 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 and 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).
Leading with innovative
procedural solutions
Sports Medicine & ENT
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.
Our 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 a 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.
INTELLIO◊ 4K CONTROLLER
We are driven to design products that
enable better outcomes and improved
quality of care. We work with
customers to ensure that 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. 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.
“2024 saw us deliver very strong growth in Sports
Medicine across our Established Markets. We look
forward to continuing this momentum into 2025.”
Scott Schaffner
President Sports Medicine
» For a full list of references
see pages 285–288
Arthroscopy solutions for the Operating Room
43
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Global market sharea
In Sports Medicine, Smith+Nephew
holds a leading position behind Arthrex
and also competes against Stryker and
DePuy Mitek.
Sports Medicine
$6.1bn +5%
2023: $5.8bn +7%
A Smith+Nephew
28%
B Arthrex
34%
C Stryker
13%
D DePuy Mitekb
9%
E Others
16%
a Data used in 2023 and 2024 estimates generated by
Smith+Nephew are based on publicly available
sources and internal analysis and represents an
indication of market shares and sizes.
b A division of Johnson & Johnson.
2024 performance
Sports Medicine & ENT full year 2024
revenue growth was 5.5% on a reported
basis, including an FX headwind of -70bps.
On an underlying1 basis, revenue growth
was 6.2%.
Excluding China, Sports Medicine & ENT
grew 9.3% on a reported basis, including
FX headwind of -70bps, and 10.0% on an
underlying1 basis. Here the sector faced
a headwind from the Volume Based
Procurement (VBP) programme, which
commenced in May 2024.
Sports Medicine Joint Repair full year
growth reflected the VBP headwind
from China. Outside of China, Sports
Medicine Joint Repair had another strong
year driven by our knee repair portfolio
and REGENETEN◊ Bioinductive Implant.
Excluding China, Sports Medicine Joint
Repair growth was 10.6% on a reported
basis and 11.3% on an underlyinga basis.
Arthroscopic Enabling Technologies
performance was significantly ahead of the
prior year, driven by our arthroscopic tower
and COBLATION◊ technologies. We expect
China to implement a VBP process
on mechanical resection blades and
COBLATION wands in the second half of
2025, which will be a headwind to growth
in this segment in 2025 and into 2026.
ENT delivered a solid year of growth
reflecting strong tonsil and adenoid
procedure volumes.
Sports Medicine & ENT trading profit1
was up 11.0% in 2024, with a 120bps
increase in trading profit margin1 to
24.0%, driven by operating leverage and
productivity improvements.
2023 performance
Sports Medicine & ENT delivered 2023
revenue growth on a reported basis of
8.8% including a 120bps headwind from
foreign exchange. Underlying growth1
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.
2023 trading profit1 declined -16.6%, and
the trading profit margin1 was 22.8%.
As noted above, the 2022 segment profit
was not restated, and as a result of the
allocation of corporate costs in 2023,
the trading segment profit decreased by
$109 million. Excluding this, the profitability
of the segment improved by 6.6% in
2023, driven by operating leverage and
productivity improvements.
Performance
2024
Revenue
2023
Revenue
2022
Revenue
2024
Reported
growth
2023
Reported
growth
2022
Reported
growth
2024
Underlying
growth1
2023
Underlying
growth1
2022
Underlying
growth1
Sports Medicine & ENT
$1,824m
$1,729m
$1,590m
5.5%
8.8%
1.9%
6.2%
10.0%
6.7%
Sports Medicine Joint Repair
$982m
$945m
$870m
4.0%
8.7%
3.6%
4.8%
9.9%
8.7%
Arthroscopic Enabling
Technologies
$632m
$588m
$567m
7.4%
3.7%
(3.8%)
8.2%
4.7%
0.9%
ENT
$210m
$196m
$153m
6.9%
28.1%
17.1%
7.3%
29.8%
20.4%
2024
2023
2022
2024
Reported
growth
2023
Reported
growth
Segment trading profit2
$437m
$394m
$472m
11.0%
(16.6%)
1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 In 2024, the Group changed the segment trading profit measure presented to the ExCo by allocating directly attributable corporate costs to business units. Accordingly, 2023 operating segment results
have been restated for comparative purposes. Corporate costs for 2022 have not been restated on the basis that the cost and effort to develop such corresponding information would be excessive.
Sports Medicine & ENT continued
Putting our customers first continued
» For a full list of references
see pages 285–288
E
A
B
C
D
44
Smith+Nephew Annual Report 2024
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.**1,2,13-15,61 Made from highly
purified type I collagen fibres organised
in a porous and oriented scaffold,72
it creates an environment that is
conducive to healing.1,13,61
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.18
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.23,62 Our REGENESORB◊
material is designed to provide a jump-
start in bone healing and formation by
full absorption and bone replacement
in 24 months.*24,26
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 14 published
clinical studies including more than 700
patients,1–12,16,17 the REGENETEN◊ Implant
has been shown to change the course of
tear progression in studies,1,13–15 aid return
to normal activity3,8,16,17 and reduce re-
tears versus conventional surgery.18 The
HEALICOIL◊ platform of shoulder anchors
features an open architecture designed
to facilitate healing and is available in our
REGENESORB◊ material, which can be
shown to be absorbed and replaced by
bone within 24 months.*24–26
In 2024 we expanded our HEALICOIL◊
platform with the introduction of
HEALICOIL◊ with MINITAPE◊ Suture Anchor.
MINITAPE◊ Suture Tape has a low profile27
and coreless design, which has been
shown to provide a lower and more evenly
distributed level of pressure.**28
We further strengthened our shoulder
portfolio by building on our Q-FIX◊ Suture
Anchor offering with the introduction of
the Q-FIX◊ KNOTLESS Suture Anchor and
the Q-FIX◊ with MINITAPE◊ Suture Anchor.
Designed for procedures such as RCR,
where anatomic space is limited, the Q-FIX◊
All-Suture Anchor provides the benefits
of a small, soft anchor with the fixation
characteristics of traditional anchor
designs.19,20,33 This radially expanding
anchor offers compact size, high fixation
strength,**29 – 33 low displacement**29
– 33 and consistent deployment.34–36
Additionally, the Q-FIX◊ KNOTLESS All-
Suture Anchor is designed for controlled
tensioning post deployment.27 Its suture
lock feature allows for best-in-class
soft tissue security***68 and it offers
streamlined suture shuttling.68
In knee repair, arthroscopic repair
techniques have become more prevalent
and widely recognised for the treatment of
meniscal tears in recent years.21,22,37 Our All
Tears, All Repairs Meniscal Repair portfolio
provides surgeons with unsurpassed
options and possibilities for meniscal repair.
In 2024, we celebrated 30 years of saving
the meniscus and advancing the standard
of care towards meniscal repair.
The CARTIHEAL◊ AGILI-C◊ Cartilage
Repair Implant, is a novel Sports Medicine
technology for cartilage regeneration in
the knee. CARTIHEAL◊ AGILI-C◊ is a porous,
biocompatible and resorbable65,66,69 scaffold
which repairs regeneration of the articular
cartilage and restoration of its underlying
subchondral bone.63–65
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, and in
2024, we launched new indications for the
REGENTEN◊ Bioinductive Implant.
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 line with our shoulder repair
offering, we also launched the Q-FIX◊
KNOTLESS Suture Anchor for hip repair.
» For a full list of references
see pages 285–288
45
Smith+Nephew Annual Report 2024
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OTHER INFORMATION
Cartilage Repair Implant
pressure injury development
CARTIHEAL◊ AGILI-C◊
CARTIHEAL◊ AGILI-C◊ Cartilage Repair
Implant is an off-the-shelf solution with a
single-stage procedure for knee cartilage
and osteochondral defect repair,63
comprising of a proprietary implant
biomaterial that is porous, biocompatible
and biodegradable.64–66
Shown to deliver clinically meaningful
improvements in pain, function and
quality of life, ††††63,76 the CARTIHEAL◊
AGILI-C◊ Implant is the only device of its
kind approved for the treatment of knee
cartilage and osteochondral defects in
patients with or without mild to moderate
osteoarthritis (KL 0-3).67
Effective: Twice the pain reduction.†††††63,76
Versatile: Treat small and large lesions,
with or without the presence of
osteoarthritis.67
Convenient: Implanted using a single,
simple surgical procedure, with no need
for donor matching or cell harvesting.
In 2024 we launched new procedure
solutions in foot and ankle soft tissue repair
with the introduction of ULTRABRACE◊ and
ULTRABRIDGE◊ Procedural Kits for ankle
instability and Achilles reconstruction
respectively. As a core technology in
our ULTRABRACE◊ Adjustable Ankle
Instability Technique, and a step forward
in ankle instability repair, we introduced
Q-FIX◊ with Needles in 2024. Q-FIX◊ with
Needles features integrated needles for
open procedures, which combine with
the system’s deployment consistency†39,40
and strength.†39,40,41 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.*****
Arthroscopic Enabling
Technologies
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. We launched the INTELLIO◊
Tablet in 2024, a durable medical-grade
tablet incorporating our proprietary
software,42–45 for use in conjunction with
the INTELLIO◊ Connected Tower. From one
centralised location, operating room staff
have the ability to remotely control and
adjust the INTELLIO◊ 4K Surgical Imaging
System, the DYONICS◊ POWER II Control
System, the WEREWOLF◊ COBLATION◊
System and the DOUBLEFLO◊ Inflow/
Outflow Pump.
The LENS◊ 4K Surgical Imaging System uses
4K ultra high definition (UHD) image quality
and network connectivity in a three-in-one
console for multi-speciality environments.
Our WEREWOLF◊ Controller enables
surgeons to remove soft tissue
precisely††38,45 in a variety of arthroscopic
procedures. With COBLATION◊ use in
chondroplasty of the knee, patients
experienced significantly less bleeding
post-operatively. †††47
In mechanical resection, we launched
the PLATINUM Handpiece in 2024.
Building on the performance of our existing
technology, the PLATINUM Handpiece
is designed ergonomically with surgeon
comfort in mind; accommodating a range
of grip styles. Facilitating the removal of
dense bone and tissue in large joints, it
features improved torque between the
working range of 4,000-10,000 RPM, when
compared to the DYONICS◊ POWERMAX◊
ELITE Shaver System.48
Ear, Nose and Throat (ENT)
In ENT, our COBLATION◊ Plasma
Technology, which has been used to
remove tonsils and adenoids for over 20
years,49–50 has an ability to remove tissue
at low temperatures with minimal
damage to surrounding tissue.51–55
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.56 Smith+Nephew offers
a full portfolio of COBLATION◊ Wands for
CIT procedures.
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.57
Our Tula◊ System provides an in-office
alternative to traditional tympanostomy
using a local anaesthesia system and
an automated, one-click tube delivery
device.58,59
As part of our comprehensive portfolio
of epistaxis (nosebleed) solutions, RAPID
RHINO◊ Epistaxis Products are inflatable
tamponades which are easy to insert
and remove,60,70,71 with an ultra-low
profile and self-lubricating hydrocolloid
fabric. In addition, we market a range of
dissolvable and removable post-operative
nasal dressings.
Sports Medicine & ENT continued
Putting our customers first continued
» For a full list of references
see pages 285–288
46
Smith+Nephew Annual Report 2024
Smith+Nephew’s Advanced Wound
Management vision remains consistent,
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 $12.5 billion per annum. Long-
term growth continues to be driven by
the needs of an ageing population and an
increasing prevalence of obesity, diabetes
and vascular disease. These conditions
are key drivers of wound prevalence and
contribute to the pressure on healthcare
spending. Healthcare systems need to do
more with less, such as enabling patients
to be treated faster, with fewer resources,
or moving them from acute to homecare
settings. The prevention of wounds is
also an important focus, with healthcare
systems increasingly working proactively
to avoid wounds such as pressure injuries
and surgical site complications.
In Advanced Wound Management,
we seek to help healthcare systems
through innovation in products and
services, to prevent wounds or deliver
accelerated healing. We do this across
our three segments of Advanced Wound
Care, Advanced Wound Bioactives and
Advanced Wound Devices.
Strategy
Our vision of Shaping What’s Possible in
Wound Care is delivered through product
innovation with strong clinical evidence
that enables protocol compliance to
ensure optimal patient outcomes.
Innovation includes new product
development, line extensions, and
acquisitions 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.
Shaping what’s possible in wound care
Advanced Wound Management
Cost-effective and
improved outcomes
PICO◊
PICO◊ Single Use Negative Pressure
Wound Therapy System (sNPWT)
is cost-effective and improves
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.58
“2024 was a good year driven by growth across all
segments. With our customer and patient focused
portfolio we are dedicated to improve patient
outcomes and are well positioned for a strong 2025.”
Rohit Kashyap
President Advanced Wound Management
& Global Commercial Operations
» For a full list of references
see pages 285–288
47
Smith+Nephew Annual Report 2024
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2024 performance
Advanced Wound Management full year
2024 revenue growth was 4.7% on a
reported basis, including an FX headwind
of 40bps. On an underlying1 basis, revenue
growth was 5.1%.
Advanced Wound Care growth was driven
by good performances in foam dressings
and infection management categories.
In Advanced Wound Bioactives, SANTYL◊
delivered growth for the full year, although
we continued to see quarter-to-quarter
variability, a long-term feature of this
product. We delivered double-digit growth
from our skin substitutes business following
the launch of GRAFIX PLUS◊.
Advanced Wound Devices delivered strong
revenue growth across the year. This was
driven by both our traditional RENASYS◊
Negative Pressure Wound Therapy System
and our single-use PICO◊ Negative Pressure
Wound Therapy System, as well as from
our LEAF◊ Patient Monitoring System as
we continued to expand the market in
pressure injury prevention.
Advanced Wound Management trading
profit1 was up 7.3% in 2024, with a 50bps
increase in trading profit margin1 to
23.7%, driven by operating leverage and
productivity improvements.
2023 performance
In 2023, Advanced Wound Management
delivered revenue growth on a reported
basis of 6.2%, including a 20bps headwind
from foreign exchange. Underlying growth1
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.
2023 trading profit1 declined -14.7%, and
the trading profit margin1 was 23.2%.
As noted above, the 2022 segment profit
was not restated, and as a result of the
allocation of corporate costs in 2023,
the trading segment profit decreased by
$100 million. Excluding this, the profitability
of the segment improved by 8.3% in
2023, driven by operating leverage and
productivity improvements.
Advanced Wound Management continued
Putting our customers first continued
Global market sharea,c
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
Bioactives we have leadership positions
in a number of our respective categories
and we have the only US Food and
Drug Administration (FDA) approved
enzymatic debrider. In Advanced Wound
Devices, we are the primary challenger
to Negative Pressure Wound Therapy
incumbent Solventum.
Advanced Wound Management
$12.5bn +6%
2023: $11.4bn +5%
A Smith+Nephew
14%
B Solventumb
15%
C Mölnlycke
10%
D ConvaTec
6%
E Others
55%
a Data used in 2023, and 2024 estimates generated by
Smith+Nephew are based on publicly available
sources and internal analysis and represent an
indication of market shares and sizes.
b Formerly part of 3M.
c Market data excludes the estimated $5 billion Cellular
and Tissue Products (CTP) market which includes part
of the physician office and similarly reimbursed other
sites of care that is at risk from the implementation of
Local Coverage Determinations (LCDs) issued by the
Medicare Administrative Contractors (MACs) in 2024.
Performance
2024
Revenue
2023
Revenue
2022
Revenue
2024
Reported
growth
2023
Reported
growth
2022
Reported
growth
2024
Underlying
growth1
2023
Underlying
growth1
2022
Underlying
growth1
Advanced Wound
Management
$1,681m
$1,606m
$1,512m
4.7%
6.2%
1.1%
5.1%
6.4%
6.4%
Advanced Wound Care
$735m
$725m
$712m
1.4%
1.8%
(2.6%)
2.0%
2.1%
5.2%
Advanced Wound Bioactives
$581m
$553m
$520m
5.1%
6.3%
4.9%
5.1%
6.2%
5.4%
Advanced Wound Devices
$365m
$328m
$280m
11.5%
17.0%
4.3%
12.2%
17.6%
11.6%
2024
2023
2022
2024
Reported
growth
2023
Reported
growth
Segment trading profit2
$399m
$372m
$436m
7.3%
(14.7%)
1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 265–271.
2 In 2024, the Group changed the segment trading profit measure presented to the ExCo by allocating directly attributable corporate costs to business units. Accordingly, 2023 operating segment results
have been restated for comparative purposes. Corporate costs for 2022 have not been restated on the basis that the cost and effort to develop such corresponding information would be excessive.
» For a full list of references
see pages 285–288
E
A
B
C
D
48
Smith+Nephew Annual Report 2024
DURAMAX◊ S
DURAMAX◊ S
Silicone Superabsorbent
Dressing for highly
exuding wounds.
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.
ALLEVYN◊ Wound Dressings are a
trusted leader when it comes to providing
an optimal environment for healing.
Our dressings provide the essentials
customers expect from a foam dressing
such as proven performance to absorb,
protect and be gentle on the skin as well as
much more.3–7
The ‘much more’ comes with ALLEVYN◊’s
extensive range of shapes and sizes as well
as its unique technologies. ALLEVYN◊ LIFE
Foam Dressing, for example, has ExuLOCK
and ExuMASK technologies.
ExuLOCK hyper-absorbent lock-away
technology absorbs exudate and spreads
it laterally across the dressing to utilise the
entire dressing area while locking it in to
help prevent leakage and to help control
malodour.8–9
ExuMASK change indicator technology
minimises the visual impact of absorbed
exudate and works as an indicator to
know when to change the dressing, which
helps minimise clinically unnecessary
changes.10–14
The effectiveness of the ALLEVYN◊
Dressing range has been demonstrated
across over 138 publications in 19
countries on over 12,000 patients and
volunteers.15
We also offer DURAMAX◊ S Silicone
Superabsorbent Dressing for highly exuding
wounds. Superabsorbers are one of the
fastest-growing categories of dressings in
Europe.16
Our infection management range, designed
to help reduce the signs and symptoms of
infection, includes ACTICOAT◊ Antimicrobial
Barrier Dressings, DURAFIBER◊ Ag
Absorbent Gelling Silver Fibrous Dressings,
ALLEVYN◊ Ag Antimicrobial Foam
Dressings, and our range of IODOSORB◊
Cadexomer Iodine products.17–27
Smith+Nephew advocates usage to
support the principles of antimicrobial
stewardship, helping to reduce the spread
of antimicrobial resistance and protecting
future patients.
Our new ALLEVYN◊ Ag+ SURGICAL
antimicrobial foam dressings were recently
launched in the US, completing our
foam portfolio and supporting growth in
expanding market segments.
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 that is available in the US
and Canada, with a unique mechanism of
action that facilitates removal of necrotic
tissue and contributes to the formation
of granulation tissue and subsequent
epithelialisation of chronic wounds and
severely burned areas.
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.28,29 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, composed of porcine small
intestinal submucosa and indicated for
the management of a wide range of acute
and chronic wounds, burns and surgical
interventions.30
Advanced Wound Devices
In Advanced Wound Devices, our portfolio
helps improve healing outcomes in
chronic wounds, reduce surgical site
complications and facilitate 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.
Our PICO◊ range of single-use NPWT
(sNPWT) systems, with their proprietary
AIRLOCK◊ Technology layer, has
demonstrated significant healing outcomes
for chronic wounds31** and in the reduction
of surgical site complications in closed
incisions,32*** in a highly portable form that
allows patients to continue with their daily
activities.33,34
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.34,35 The RENASYS◊ portfolio’s
newest innovation, RENASYS◊ EDGE,
recently won the Red Dot Award for Design
Concept 2024 in the Medical Devices and
Technology Category. RENASYS◊ EDGE has
been designed to be clinically easy to use,36
and with its self-test functionality, has
been shown to deliver higher efficiency and
utility.36–39
The VERSAJET◊ Hydrosurgery System
uses a saline jet to facilitate precise
debridement, helping to streamline and
reduce debridement procedures.****40–50
» For a full list of references
see pages 285–288
49
Smith+Nephew Annual Report 2024
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» For a full list of references
see pages 285–288
Advanced Wound Management continued
Putting our customers first continued
Hospital-acquired pressure injuries remain one
of the most significant healthcare challenges
globally51 and cost an estimated 60,000 lives and
$11 billion in the US each year.55
The future of pressure
injury prevention
Smith+Nephew’s ALLEVYN◊ LIFE
Dressings, LEAF◊ Patient Monitoring
System and SECURA◊ skincare
products are designed to improve
healthcare practices and outcomes
in pressure injury prevention.
ALLEVYN◊ LIFE Dressings have
been shown to effectively absorb
mechanical energy through a
combination of layer-on-layer
frictional sliding and material shear in
a novel laboratory testing method.50
With this distinct mode of action,
ALLEVYN◊ LIFE Dressings protect
the body from friction and shear to
provide enhanced pressure injury
prevention efficacy.51* The addition
of ALLEVYN◊ LIFE Dressings to a
pressure injury prevention protocol
significantly reduces the odds of
pressure injury development by 66%,
compared with standard care alone.56
The LEAF◊ Patient Monitoring System
uses a wearable sensor to monitor
patient mobility and provide real-time
turn status updates, which has been
shown to reduce pressure injury risk
by 94%.57 Visual alerts in the patient
room and at the nurses’ station make
it easy to see who needs to be turned
and when.58 The LEAF◊ System’s
Integrated Positioning Index™ is the
first tool that measures the quality
and effectiveness of patient turning,
including patient turn frequency and
turn angle.
Number of people in the US
affected by pressure injuries
annually.53
1-3 million
Average incremental cost
of treating a pressure injury
in the US.54
$21,767
Approximately 95% of
all pressure injuries are
preventable.55
95%
ALLEVYN◊ LIFE
ALLEVYN◊ LIFE Dressing with
independent sliding layers.
LEAF◊
Patient Monitoring System
50
Smith+Nephew Annual Report 2024
03
Delivering
Life Unlimited
We support healthcare professionals to
return their patients to health and mobility,
helping them to perform at their fullest potential.
Life Unlimited
Together we are
Smith+Nephew Annual Report 2024
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The only thing that
doesn’t hurt right now is
my OXINIUM◊ Technology knee.
That’s why this record belongs
as much to Smith+Nephew
as it does to me.”
Fireman Rob
Smith+Nephew patient
Delivering Life Unlimited continued
52
52
His record-breaking stunt took place
in Phoenix, Arizona, during the North
American Hip and Knee Symposium
(NAHKS). Despite the extreme heat
(95ºF/35ºC), Rob shattered the mark
needed, hitting 40 miles as he walked
across the NAHKS stage to the applause
of all those in attendance. As if setting
this record wasn’t enough, Rob also took
the time to hand-deliver 50 stuffed teddy
bears to the Phoenix Children’s Hospital.
Improved healing
Improved lives
Someone who embodies the power of Life
Unlimited is Rob Verhelst, a motivational
speaker, US firefighter and recipient of a
Smith+Nephew JOURNEY◊ II UK Knee with
OXINIUM◊ Technology.
Fireman Rob, as he is known, uses his years
of experience in the fire service, where
he performed search and recovery after
the September 11th attacks, to raise
awareness for the mental health of first
responders and inspire people to live their
passion. Alongside speaking engagements,
he competes in Ironman races wearing 50
pounds of firefighter gear and delivers toys
to children in hospitals worldwide.
Following his knee replacement, Rob
was able to return to the frontline of the
busiest firehouse in the City of Madison Fire
Department. What’s more, he successfully
set a world record for the ‘Farthest
Distance Travelled Over 24 Hours Wearing
Full Firefighter Gear.’
53
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53
My injury was the lowest point
of my career. But now I’m a
new man; this is a top-level
technology and I’m really happy
that it was used on me.”
Tom Aspinall
Smith+Nephew patient
Delivering Life Unlimited continued
54
54
Tom Aspinall feared, realistically, that he
might never be able to compete at the
highest level for UFC again. Nevertheless,
he approached Dr Andy Williams,
renowned orthopaedic surgeon for high-
profile athletes, to discuss options for joint
repair using Smith+Nephew technology
and his prospects for a full recovery.
Tom confesses he preferred not to ask too
much about the surgery: “I’m a little bit
squeamish so I didn’t want to know too
many details!” However, he was reassured
with the plan set forth by Dr Williams.
Following a focused rehabilitation process
with his newly repaired knee, Tom returned
to the octagon one year later and, after
winning his next three matches, was
crowned UFC heavyweight champion in
July 2024.
I don’t have to worry
about the quality of surgery
relating to the quality of the
equipment I use. I know I
have everything on my side
from Smith+Nephew.”
Dr Williams
Orthopaedic Surgeon
Better recovery
Better champions
55
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Delivering Life Unlimited continued
I wanted to be able to change
my own dressings. I didn’t want
to wait for nurses to come, and
that’s why shared wound care
worked for me because it fits
around my lifestyles and gives
me freedom.”
Yolanda
Shared-care patient
56
56
» Case study references
on page 288
Shared wound care encourages
appropriate patients to take an active
role in their ongoing wound healing.1
It has been estimated that shared-care
practices alongside long-wear advanced
foam dressings (such as ALLEVYN◊ LIFE
Dressing) could release over 10% of nursing
time per annum,2* which Henri, a nurse in
the Netherlands, benefits from immensely.
He says, “My patients and I create a
wound care plan together. The indicator
on ALLEVYN◊ LIFE helps them know when
to change the dressing. They don’t have to
wait for me and I can see more patients.”3
One such patient, Yolanda, is also positive
about the treatment: “Shared wound care
worked for me. I could stay in my own home
with care that fitted around my lifestyle,
and I felt confident changing the dressing.
Shared wound care gave me my freedom.”3
The pursuit of better
wound care is not just a
professional obligation,
it’s a moral imperative.
Each statistic represents a
patient enduring pain and
uncertainty, making empathy,
expertise and collaboration
essential for healing.”
Zena Moore
Professor and Head of the School
of Nursing & Midwifery at the
Royal College of Surgeons in Ireland
Stronger choices
Stronger recovery
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04
At Smith+Nephew, our three pillars of Care,
Collaboration and Courage are the foundations on which
we build a robust, respectful and accountable culture.
Life Unlimited
Creating a
culture to win
Together we are
Smith+Nephew Annual Report 2024
58
At Smith+Nephew, we are committed
to cultivating a high-performing,
inclusive workplace where everyone
is valued and respected, and feels a
true sense of belonging. We prioritise
creating a psychologically safe
environment that drives innovation,
fuels business success, and enhances
engagement and personal fulfilment.
Our culture pillars of Care, Courage and
Collaboration guide all we do and empower
us to deliver our purpose of Life Unlimited:
– Care: A culture of empathy and
understanding for each other, customers
and patients
– Collaboration: A culture based on
mutual trust, respect and belonging
– Courage: A culture of continuous
learning, innovation and accountability.
In 2024 we focused on improving the
employee experience in terms of wellbeing
and inclusion, and developing our people
leaders, including embedding 12-Point
Plan behaviours and engaging employees
in demonstrating courage. We made good
progress in 2024, recognised in our annual
Employee Survey and in receiving an
Exceptional Workplace Award from Gallup.
Building a culture with
the courage to win
Creating a culture to win isn’t just
about achieving results – it is about
engaging and empowering our teams,
fostering collaboration and inspiring
innovation. We believe in building a
workplace where excellence thrives,
challenges become opportunities and
success is sustainable.”
Elga Lohler
Chief HR Officer
Celebrating courage
It’s not enough to simply practise
courage: we need to encourage it
continually by celebrating examples
of accountability, innovation and
continuous learning within
our organisation.
Our annual T.E.K. summit celebrates
Technical Excellence and Knowledge
across the Company, honouring our
innovators, partners and patients.
This year’s winners were acknowledged
for pushing boundaries and adopting
new approaches to deliver the best
outcomes for patients. The event
featured a ‘Women in T.E.K’ fireside
chat, hosted by our Smith+Nephew
Women’s Network, where women
leaders and members of our Executive
Committee discussed the importance
of allyship to drive improved value in
our organisation. In addition, functions
such as Finance, Legal and HR ran
awards which recognise courage and
exceptional contribution from both
individuals and teams.
Winning together
Based on feedback from our employees
that we had an opportunity to strengthen
our culture of Courage, in 2024 we
undertook a deep dive into this pillar
with the goal of identifying our strengths
and opportunities to drive a truly
courageous culture.
Our findings identified opportunities to
remove barriers preventing our teams
from ‘taking initiative’, ‘learning and
adapting’ and ‘taking accountability’,
all identified as important commitments
if we are to be a truly courageous business.
During 2025, Courage will be an important
lever for us as we drive higher levels of
performance and deliver our strategy.
A leadership panel at T.E.K. 2024
Culture and belonging
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Allyship was an important theme
for all of us this year. Our ‘Finding
Your Superpower’ webinar series
showcased personal stories from
senior leaders which brought
together audiences globally
across the organisation.”
Helen Barraclough
Group General Counsel
& Company Secretary,
Executive Sponsor Women’s Network
The courage to learn
Courage also means pursuing continuous
learning and identifying ways to make our
teams even stronger. Improving our supply
chain has been an area of improvement
under the 12-Point Plan, and in support of
this in 2024, we launched the Supply Chain
Academy, a centralised, digital learning
platform combined with live training
sessions, tailored to attracting, developing
and retaining our team.
We also improved the purchasing
experience for our customers in 2024 with
a new Global Customer Care Strategy.
This strategy delivered a modernised
customer contact centre platform,
expanded order and invoice automation,
and provided customers with automated
order tracking options. We defined
service level targets for ourselves and
solicited feedback from customers,
and already we are seeing results.
Satisfaction scores for Ordering and
Delivering have doubled, as have those for
Customer Service Interactions.
Inclusion and allyship
Allyship was a guiding theme for
Smith+Nephew this year, promoting
advocacy, inclusion and mutual respect for
all. A 2024 goal was to have all Employee
Inclusion Groups (EIGs) active in the
programme, and each EIG now has its own
page on our allyship internal site, giving
them the opportunity to identify and
define what it means to be an ally to each
of their respective groups. Courage is about
speaking up for others, and our allyship
initiatives ensure that this happens in all
parts of the business.
Our people strategy aims to attract,
develop, accelerate and retain the growth
of diverse talent. This means we take
active steps to build a culture of belonging
to create a space in which all employees
can bring their best selves and thrive to
their fullest potential.
Our Orthopaedics for All global advisory
board is an initiative we are very proud
of. According to multiple studies, only
15% of all orthopaedic residents were
women and just 7.4% were practising
orthopaedic surgeons in the US in 2022.1
The Board is a first-of-its-kind forum for
female arthroplasty surgeons to address
this challenge by inspiring women to
pursue a career in orthopaedic surgery; 21
board members from nine countries are
building our understanding and awareness
of an underserved healthcare provider
population. The Board also meets with and
supports our Society of Women Engineers
chapter within our Women’s Network,
sharing experiences in areas such as
career development.
Culture and belonging continued
Creating a culture to win continued
Employee Inclusion Groups
At Smith+Nephew we strive to create a
culture of belonging where all employees
can bring their full selves and best ideas.
EIGs support our commitment to inclusion.
These voluntary, employee-led groups
are open to all and support diversity of
thought, background and perspective and
provide a network for employees to engage
and collaborate.
In 2024, our seven EIGs grew to 70 chapters
with more than 4,000 participants, and
hosted 170 events.
We improved our score in the Gallup
Culture of Inclusion Index for the fourth
year running. This measures if employees
feel they are being treated with respect, if
Smith+Nephew is building their strengths
as individuals, and their confidence that we
will do the right thing if they raise concerns
about ethics and integrity.
Alongside our EIGs and our site-led
Life Councils, we are fortunate to have
outstanding leadership advocacy at
Smith+Nephew, with leaders frequently
sharing personal experiences that help
to raise awareness and amplify inclusion
and belonging in the organisation.
The third annual bElongInG Awards
celebrated employees around the world
in seven categories including fostering
community and teamwork, people leaders
championing inclusion and exceptional
external outreach.
» For a full list of references
see page 285–288
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Promoting wellbeing
Following on from our expanded global
wellness programme in 2023, this year
we have continued our commitment to
wellness, which plays a critical part in
enabling employees to engage and focus
on delivering their objectives.
We’ve seen a significant rise in attendance
at our wellness webinars, while our
regional enrolment with Spring Health
doubled typical business benchmarks,
reflecting strong engagement across
locations. This year, we expanded our
Global Wellness Champion Network to
four additional countries, ensuring better
support for local teams. October provided
a global focal point for wellness at
Smith+Nephew with World Mental Health
Day. Activities included yoga, wellness fairs,
fitness challenges and guest speakers that
brought teams together worldwide.
For the second consecutive year,
Smith+Nephew was recognised as one of
only 50 employers in the US with a Best
Employer Award for creating a healthy
work culture through our employee
wellbeing and engagement programmes.
The Business Group of Health is made up of
large employers interested in ensuring that
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.
Our belief that a caring, courageous
and collaborative workplace culture is
the cornerstone of success
Delighted to win a
2024 Gallup Exceptional
Workplace Award
Since 2019 we have used the Gallup
Q12 tool to measure employee
engagement through our Global
Employee Survey.
This year, alongside an increase
in our Engagement Mean to 4.24
(2023: 4.20), we were delighted
to win a 2024 Gallup Exceptional
Workplace Award.
These awards recognise those
companies that integrate
engagement into every stage of
their employee and manager life
cycle, promote wellbeing, and
prioritise communication and
listening strategies.
Our commitment to understanding
and acting on our Gallup results
at a team level is at the heart of
our year-on-year progress since
we started working with Gallup in
2019, aligned to our belief that a
caring, courageous and collaborative
workplace culture is the cornerstone
of success.
We are proud that Smith+Nephew’s
engagement trajectory (shown
in orange in the chart below) has
remained well above the Gallup
average (black) and towards our
aspiration to be in the top quartile of
the Gallup database (blue).
To mark World Mental Health Day,
employees in Costa Rica enjoyed a
yoga session
+0.04
+0.08
-0.04
+0.17
+0.07
+0.06
+0.10
+0.04
+0.32
+0.10
+0.06
+0.05
+0.06
+0.10
1st Admin
(Baseline)
2019
2nd Admin
2020
3rd Admin
2021
4th Admin
2022
5th Admin
2023
6th Admin
2024
Grand Mean Change (Average from Baseline)
Smith+Nephew
Gallup clients average
Top 25% Gallup clients
Smith+Nephew’s culture trajectory is well above average
Note: Comparisons are based on Gallup’s (2022) Q12 Company-Level Change Analysis 2000–2021.
Gallup Clients Average is defined as 50th percentile change, and Top 25% Gallup Clients is defined as 75th
percentile change.
+0.08
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Gender ratios
In 2024 the female representation in senior management roles held steady at around one-third of the total.
We continue to encourage and develop female leaders across all levels of management through female leadership
development programmes, bespoke training and mentoring, with our next level down of managers being 35% female.
The percentage of female Board members increased to 33% in February 2025 with the appointment
of Sybella Stanley as a Non-Executive Director.
Total employees1
17,349
Male
56%
Female
44%
Senior managers and above2
1,096
Male
67%
Female
33%
Board of Directors
11
Male
73%
Female
27%
Diversity at Smith+Nephew
Ethnic diversity
In the US, the proportion of ethnically diverse managers, at 21%, is behind that of the overall employee
population at 34%. In the UK, the proportion is in line with the overall employee group at 11%.
US management3
UK management3
Female representation
in senior roles
33%
In the UK, the proportion
of ethnically diverse
managers is aligned with
our general workforce
11%
1 Number of employees at 31 December 2024, 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 and Executive
Officers and includes all statutory directors and Directors of our subsidiary companies at 31 December 2024.
3 As at 31 December 2024.
Culture and belonging continued
Creating a culture to win continued
White
89%
Ethnically diverse
11%
Unknown
0%
White
76%
Ethnically diverse
21%
Unknown
3%
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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.
An ethical employer
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.
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 that 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.
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
Our commitment to ethics
and integrity is embedded
in our culture pillars of Care,
Collaboration and Courage. We
have a continuous improvement
mindset and ensure that our
programme evolves in parallel
with business changes and
emerging risks in the sector.”
Alison Parkes
Chief Compliance Officer
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05
Protecting
the future
Addressing the long-term needs of our customers,
employees, investors, communities and other
stakeholders while aiming to reduce our impact
on the environment.
Life Unlimited
Together we are
Smith+Nephew Annual Report 2024
64
Environmental, Social and Governance (ESG) excellence
Striving to have a positive impact
on our global community
Our ESG strategy is built on our purpose
– Life Unlimited, our Strategy for Growth
and our culture pillars of Care, Courage
and Collaboration.
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 10–13, and our Capital Allocation
Framework on page 26.
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 for our
communities, and reducing our impact on
the environment. Smith+Nephew focuses
its ESG programme on three strategic
pillars of People, Planet and Products.
Our ESG pillars are aligned with the United
Nations’ Sustainable Development Goals
(SDGs), take into account the social,
environmental and economic aspects
of our business, and reflect the fact that
sustainability and financial performance
are closely linked. As a profit-seeking
business, we aim to meet our economic
objectives while at the same time
managing the social and environmental
impacts of our business activities.
We believe Smith+Nephew’s People,
Planet and Products ESG pillars can
make the most significant
contribution to eight SDGs.
Our objectives and progress against
these are summarised on pages
66–68.
People
Creating a lasting positive impact
on our employees and communities.
Planet
Working to reduce our impact on
the environment.
Products
Innovating sustainably across the
value chain.
» For more information download
our 2024 Sustainability Report
We focus ESG progress across
our People, Planet and Products
strategic pillars in ways that
support our company purpose
of Life Unlimited.”
Katya Hantel
Vice President, ESG
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People
Creating a lasting positive impact on
our employees and communities
Our objectives
Our progress in 2024
Inclusion and
belonging
Empower and promote
the inclusion of all.
4,500+
supporters across our seven
Global Employee Inclusion
Groups and sub-groups
150+
impactful employee
engagements supporting
inclusion and belonging
Volunteering
We are committed to living our
culture in our communities by providing
eight 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.
68
volunteering events
across our sites
Giving1
Improve patients’ lives
through product donations
to underserved communities.
380,000+
patients supported through
product donations
Health, safety
and wellbeing
Support health, safety and wellbeing
by maintaining an annual Total Incident
Rate (TIR2) of less than 0.5 and Lost
Time Injury Frequency Rate (LTIFR3)
of less than 0.1.
TIR
0.12
LTIFR
0.05
1 In 2024, we re-evaluated our historical giving objective of donating $125 million in products to underserved communities
between 2020 and 2030. Based on our stakeholders’ ESG priorities and benchmarking against other companies across
the healthcare sector, we have revised this objective to focus on the impact of our product donations, for example
tracking the number of patients’ lives improved via our non-profit partners.
2 TIR = Total Incident Rate, calculated per industry standards as the number of OSHA recordable incidents per hours
worked, multiplied by 200,000.
3 LTIFR = Lost Time Injury Frequency Rate, calculated per industry standards as the number of lost time injuries per hours
worked, multiplied by 200,000.
Enabling access to
vital healthcare
For over 20 years, Smith+Nephew has
partnered with International Health
Partners (IHP), a global health non-
government organisation supporting
people in disaster-hit and vulnerable
communities with vital medical aid.
Over the course of our longstanding
partnership, we have donated products
to help treat people in need in over 30
countries worldwide, including Malawi,
Ethiopia, North Macedonia and the
Middle East, helping more than 500,000
people. Smith+Nephew and IHP were
recognised by the New York Stock
Exchange as part of its 2024 Global
Giving Campaign for positive impact on
lives through product donations.
ESG excellence continued
Protecting the future continued
» More information on People
in our 2024 Sustainability Report
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.
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1 Data independently assured by ERM CV;, more details and the full assurance report are available in the
2024 Sustainability Report on pages 46–47.
2 We define zero waste to landfill as a landfill diversion rate of 90% or greater.
Globally recognised
sustainability energy
management
In May 2024, our site in Penang,
Malaysia, was certified to have an energy
management system compliant with
ISO 50001:2018, demonstrating a
commitment to energy management.
This international standard provides a
framework for organisations to manage
and reduce their energy use and costs.
Benefits include better resilience to
fluctuations in the cost and availability of
energy, and compliance with legislation.
The Smith+Nephew team installed a power
and energy system providing access to
‘live’ data enabling them to manage energy
in real time, charting consumption and
cost, while a set of indicators measures
performance and guides decisions.
Planet
Working to reduce our
impact on the environment
Our objectives
Our progress in 2024
Climate
change
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.
Scopes 1 and 2 (total)
CO2e emitted (market-based)1
63%
reduction from 2019 baseline
Scope 3
59%
reduction from 2021 baseline
Waste
Achieve zero waste to
landfill2 at our manufacturing
facilities in Memphis and
Malaysia by 2025 and at all our
manufacturing facilities by 2030.
Total manufacturing waste
diverted from landfill
95%
Malaysia 2025 zero waste to
landfill objective achieved, based
on monthly diversion rate away
from landfill throughout 2024.
Memphis 2025 zero waste to
landfill objective achieved, based
on monthly diversion rate away
from landfill by the end of 2024.
Water
Conserve water throughout
our business processes.
670,000m3
used vs 672,000m3 during 2023
We recognise the need to protect our planet. We manage energy, waste
and water, reduce our greenhouse gas (GHG) emissions where possible
and are mindful of the impact our decisions have on the environment.
Our ESG strategy extends upstream to our suppliers and downstream
to our customers. 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 products.
» More information on Planet
in our 2024 Sustainability Report
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Products
Innovating sustainably
across the value chain
Packaging material
reduction driving a
lower carbon footprint
Packaging teams have continued to
work on incorporating post-consumer
recycled content into non-sterile
packaging materials, sourcing more
sustainable packaging materials, and
reducing packaging materials while
maintaining product safety and quality.
Through a streamlined packaging design
for RENASYS◊ Gauze Kits that minimises
multiple pouches and reduces outer pouch
size, we more than tripled the number of
product units that can be transported on
a single pallet. A packaging material
reduction project focused on our
ALLEVYN◊ brand of products reduced the
number of shipped pallets by 44%, saving
transportation miles and reducing our
carbon footprint.
ESG excellence continued
Protecting the future continued
Manufacturing and supplying safe and effective products
is at the heart of our business. Our people, processes and
technology, and supplier engagement are structured to support
progress towards the objective of innovating sustainably.
Our objectives
Our progress in 2024
Product
design
Include sustainability review in
New Product Development (NPD)
for all new products and
product acquisitions.
PICO◊ Negative Pressure Wound
Therapy product component
recyclability information
available globally.
Sustainable
packaging
We are committed to reducing our
packaging, and designing with
reusable, recyclable and/or
renewable resources which are
sustainably sourced.
78%
of in-scope packaging systems
incorporate at least one
recyclable component.
Supplier
engagement
Complete a focused Corporate
Social Responsibility (CSR)
risk-based due diligence of
our Tier 1 suppliers annually,
including risk-based analysis of
sub-tier suppliers, to assure
compliance with our
sustainability requirements.
100%
of due diligence and assessments
of Tier 1 suppliers according to our
risk-based procedure have been
completed. We have continued our
supplier on-site audit programme
for suppliers identified through
risk-based analysis.
» More information on Products
in our 2024 Sustainability Report
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Pages 69–73 set out Smith+Nephew’s
disclosures which are consistent with the
recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD) framework.
Smith+Nephew has complied with
the requirements of UKLR 6.6.6(8)R
by including climate-related financial
disclosures consistent with the TCFD
recommendations and recommended
disclosures. The climate-related financial
disclosures made by Smith+Nephew
comply with the requirements of the
Companies Act 2006 as amended
by the Companies (Strategic Report)
(Climate-related Financial Disclosure)
Regulations 2022.
Governance
The way 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
Sustainability Accounting Standards Board
(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 Jez
Maiden, 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
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 Steering Committee:
– 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.
Board:
– Oversight of ESG strategy and risk
management programme.
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. For 2024,
the Committee approved that 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.
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 that the Company reports
in line with the recommendations
of the TCFD framework.
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 inclusion and
belonging, ethics, compliance,
quality and regulatory matters.
TCFD reporting
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.
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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.
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.
Matters discussed at these quarterly
updates include: science-based target
validation; science-based definition of net
zero; 2040 Scope 1 and 2 GHG emissions
net zero reduction glide path; our ESG
scorecard which monitors progress against
goals and targets; and methods to reduce
our Scope 3 GHG emissions to net zero by
2045. The ESG Steering Committee was
established in 2023 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.
As part of this governance structure, the
Vice President ESG chairs the ESG Steering
Committee, and provides quarterly
updates to the Executive Committee and
the Compliance & Culture Committee
of the Board. Sustainability and ESG
information, including climate, is shared
across relevant Executive Committee
members’ business functions and
Smith+Nephew Board Committees as
appropriate to facilitate governance and
inform business decisions.
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.
Please see pages 126–135 for
Compliance & Culture Committee and
Audit Committee reports, which outline
how sustainability and ESG topics,
which include climate change, were
considered in 2024.
Climate-related risk
Potential impact
Timeframe
Actions taken by management
Commercial execution
Inability to satisfy customers’
sustainability requirements
and expectations.
Decline in customer
demand. Lower
prices to remain
competitive.
Medium (3–7 years)
and long term (>7 years)
Continued progress of ESG programme (including
new product innovation) and ongoing customer
engagement to monitor sustainability needs.
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.
Fines and sanctions.
Short (<3 years),
medium (3–7 years)
and long term (>7 years)
The ESG Steering Committee and our Health,
Safety and Environmental Compliance function
assess new and enhanced regulations and
reporting requirements that may be climate-
related risks and work cross-functionally to
ensure compliance.
Jurisdictions in which we operate or
sell product levy carbon taxes.
Increased costs
associated
with GHG emissions.
Short (<3 years),
medium (3–7 years)
and long term (>7 years)
Improve carbon data availability in line with
emerging regulatory reporting requirements.
Net zero targets set for Scope 1, 2 and 3 GHG
emissions.
Pricing and reimbursement
Limited ability to pass on the cost
of sustainability improvements.
Margin pressures.
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 sustainability regulations
and reporting requirements.
Decline in customer
demand.
Medium (3–7 years)
and long term (>7 years)
Monitoring regulatory changes and interpreting
potential business impacts
of legislation.
Transition risks
TCFD reporting continued
Protecting the future continued
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Smith+Nephew Annual Report 2024
Scenario modelling
Implication and mitigation
Potential
severity
without
mitigation
Potential
severity
with
mitigation
Global temperature rise
Based on the Intergovernmental Panel on
Climate Change’s (IPCC'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 SSP3-7.0).
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.
High
Medium
Sea-level rise
We modelled the following scenarios
out to 2030 and 2050:
– Sea-level rise up to 5 metres
– Distance from nearest coastline.
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 the impact of sea-level rise and
accordingly reduces the potential impact.
Medium
Low
Extreme weather
We modelled the following extreme
weather scenarios out to 2030 and 2050:
– Precipitation
– Wind
– Drought.
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.
Medium
Low
Physical risks
Strategy
Our ESG strategy is built on our purpose –
Life Unlimited, our Strategy for Growth
and our culture pillars 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 SDGs. Our strategy
reflects the importance of the social,
environmental and economic aspects of
sustainable development.
The identification process for both climate
change risks and opportunities is split
between those affecting individual site
locations or business units and those
with the potential to impact the Group
as a whole. From an individual asset (or
location) viewpoint, we consider direct
factors at a local level; these could include
(but are not restricted to) those associated
with climate change such as abnormal
weather (including floods, earthquakes and
tornadoes), changes in our customer base
and the regulatory pathways governing the
sales of our products.
From a company-wide or Group level, this
process can drive reputational risk and
opportunities which could impact our
ability to deliver products and services to
customers. These risks and opportunities
are assessed at a Group level by the ESG
Steering Committee and incorporated into
a series of business continuity plans and
objectives. The risks are also assessed at
a local (asset) level using knowledge of the
local environment and conditions. This is
performed by careful consideration of
the likelihood of the risk and its potential
impact. At local (asset) level, the risks are
reviewed within wider Business Continuity
and Disaster Recovery Plans based on site-
specific risks.
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ACCOUNTS
OTHER INFORMATION
A dedicated team of Health, Safety and
Environment, Facilities and Business
Continuity Practitioners meet quarterly
to review all risks associated with
climate change and share best practice.
The criteria used to determine priorities
include the nature and level of the
anticipated risk and its associated
impact on the business. We also prioritise
improvement initiatives based on the
likely period of return on investment, and
following best practice based on initial
benchmarking against peers.
Our Principal Risks capture our physical
and transitional climate-related risks
in our Enterprise Risk Management (ERM)
process.
The resilience of our strategy considered
short-term (by 2030) and long-term (by
2050) acute and chronic risks for three
different climate scenarios: Representative
Concentration Pathway (RCP) 2.6 scenario
that would likely limit global warming to
below 2 degrees Celsius by the end of the
21st century, RCP 4.5 scenario that would
likely limit global warming to between 2
and 3 degrees Celsius by the end of the
21st century, and RCP 8.5 representing
a scenario with high greenhouse gas
emissions, leading to significant global
warming by the end of the 21st century.
We used the climate scenarios described
to stress test the resilience of the
organisation by considering the impacts
of potential physical and transition
risks and opportunities on the locations
where we operate, as described in the
table on pages 70–71. The modelling
did not identify any material impact on
our business resilience. Our definition of
material impact for climate risk modelling
aligns with our enterprise risk management
programme and company-wide approach
to principal risks, as determined per our
risk assessment process. Aligned with the
broader risk assessment process, climate-
related risks are considered as part of
principal risk assessments. Principal risk
assessments factor in both likelihood
and impact, including quantitative and
qualitative factors. The outcomes of risk
assessments are aligned with the company
risk appetite as approved by the Board.
Energy efficiency audits have been carried
out at sites in the UK and Germany
in 2023 with the recommendations
added to improvement action plans.
In 2024, we expanded energy audits to
additional facilities in the US and Asia,
with corresponding recommendations and
action plans. The new UK site at Melton,
on the outskirts of Hull, will be designed
to have a significant focus on energy
and resource efficiency. The site aims to
generate on-site renewable energy.
Scenario analysis
The scenario analysis undertaken in
2024 was supported by a third party and
included nearly 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 70–71, our
physical and transition risks are captured
in our ERM process. Refer to our Risk report
on page 78 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.
Risk management
Climate-related risks are managed through
our comprehensive ERM process. 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.
TCFD reporting continued
Protecting the future continued
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.
Our measure of mitigated severity is a
qualitative assessment based on our
business continuity plans and wider ESG
efforts. Refer to the risk management
section on page 79 and the Risk report
on page 78 for more details on our risk
management process.
Climate-related opportunities
Climate-related opportunities are
identified and addressed through our ESG
strategy and programmes and monitored
via our ESG scorecard. 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 2024.
We completed construction of our
Malaysia facility in 2021 and photovoltaic
(PV) panels started generating renewable
energy on-site at the beginning of 2023.
Similarly, at our facility in Suzhou (China),
solar PV 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.
In 2021, we aligned with the
recommendations of the IPCC 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.
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Smith+Nephew Annual Report 2024
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.
As part of this exercise, we maintain a
Sustainability Risk Register which captures
climate risks and how they link to the
Group’s Principal Risks. Each sustainability
risk has a control and mitigation
strategy to reduce the impact of the
risk. The Sustainability Risk Register is
reviewed by the ESG Steering Committee
and updated at least quarterly. ESG risks
are raised to the Executive Committee
on a quarterly basis. Refer to page 70 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.
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 GHG emissions
and waste to landfill. Our key objectives
in relation to these metrics are net zero
GHG 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 66–68 of the Annual Report and in
our Sustainability Report.
For 2024, the Remuneration Committee
approved that 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 2 GHG
emissions, and during 2022 we 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 to reduce
our Scope 1 and 2 GHG emissions by 70%,
and we are on track to meet this objective.
See our 2024 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
emissions data from 13 categories, and
in 2024 we have reported data from 14
categories. We have carbon reduction
roadmaps for our Scope 1 and 2 GHG
emissions to show our pathway to meet
our objectives. In 2024, we developed
a roadmap for Scope 3 GHG emissions
identifying strategies to meet our objective
of net zero by 2045.
Our Scope 1, 2 and 3 GHG emissions data
are provided on page 77 of the Annual
Report with more detailed information
also available in our Sustainability Report.
In 2024, our combined Scope 1 and market-
based Scope 2 GHG emissions reduced by
63% compared to our 2019 baseline year.
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.
During 2024 we have continued the roll-out
of electric vehicles to employees across
Europe. This initiative will help to lower
our GHG emissions arising from employee
commuting. In 2024, we also improved
manufacturing energy efficiency metrics
and reduced overall energy use globally,
driving year-over-year Scope 1 and Scope 2
carbon emissions reduction.
» Our policies are available online at
www.smith-nephew.com
Non-financial and
sustainability information
statement
The following aligns to the non-
financial reporting requirements
contained in sections 414CA and
414CB of the Companies Act 2006.
Description of the business model
– Our business model
16
Environmental matters
– Environment
– Climate-related financial
disclosures (TCFD)
67
69
Our employees
– Our culture
– Inclusion and belonging
– Employee wellbeing
– UK gender pay gap
– Board diversity
59
60
61
167
102
Social matters
– Access to healthcare
– Health and safety
66
66
Human rights
– Human rights
– Working with third parties
63
100
Ethical business practices
– Anti-bribery and corruption
– Code of Conduct and Business
Principles
– Reporting a concern
84
129
129
Policy, due diligence and outcomes
– Risk management
– Audit Committee report
– Principal risks
78
130
83
Key performance indicators
(including non-financial)
– Our 2024 performance
1
ESG Policies/Statements
– Modern Slavery
– Conflict minerals
– Health, Safety and Environment Policy
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ACCOUNTS
OTHER INFORMATION
Reducing operational carbon
emissions 70% by 2025
(Scope 1 and 2)
In line with our net zero ambition, we
have formulated a Scope 1 and 2 carbon
reduction roadmap to reduce emissions by
70% by the end of 2025 compared to our
2019 baseline.
In accordance with the California Voluntary
Carbon Market Disclosures Act (AB1305),
detailed information is available on pages
25–28 of the 2024 Sustainability Report.
In 2024, the total market-based Scope 1
and Scope 2 GHG emissions footprint was
24,662 tonnes of CO2e. This represents
a reduction of 63% against our 2019
baseline, marking significant progress
towards our objective of a 70% reduction
by the end of 2025. This reduction was
primarily a result of energy efficiency
projects, increases in the renewable energy
we source and on-site energy generation.
We are on track to meet this objective
with initiatives underway for completion
during 2025.
Smith+Nephew’s Scope 1 and 2 carbon
reduction journey is supported by eco-
conscious building design principles such
as Leadership in Energy and Environmental
Design (LEED), one of the world’s most
widely used green building rating systems.
LEED-certified sites include several
manufacturing sites and corporate offices
certified to the silver or gold level.
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.
We continue to procure
energy from renewable
sources, with both
bundled and unbundled
green energy certificates
in our portfolio
of contracts.
Throughout 2024, our
manufacturing sites in
Suzhou, China, and
Penang, Malaysia,
generated 3GWh of
renewable solar energy.
During 2024, energy
efficiency measures
implemented at
operational sites resulted
in a 3.4% reduction in our
energy use relative to the
production output, which
equated to 8.1GWh, the
annual energy use for 570
UK households.1
Net zero Scope 1 and 2 carbon emissions by 2040
Our strategy to achieve net zero Scope 1 and 2 carbon emissions by 2040 includes:
Energy
efficiency
On-site renewable
energy-generation
projects
Renewable
energy sourcing
1 The average UK household uses 2,700kWh of electricity and 11,500kWh of gas per year.
Both systems began operating in early
2023 and combined the two solar-powered
systems continued to reduce our Scope
2 GHG emissions by over 2,100 tonnes of
CO2e in 2024.
Sourcing renewable energy reduces our
market-based GHG emissions – that is, the
emissions from the electricity we purchase.
We continued to source renewable wind
energy for all our locations in Memphis, US.
We also sourced hydroelectric energy for
our manufacturing locations in Malaysia
and China. These were achieved through
the purchase of renewable energy
certificates (RECs). From October 2023,
all our UK sites began sourcing 100%
renewable electricity from its supplier.
We have installed solar PV panels at our
Suzhou and Penang sites.
Reducing our energy use and GHG emissions
Protecting the future continued
74
Smith+Nephew Annual Report 2024
Reducing value chain greenhouse gas emissions (Scope 3)
During 2024, we calculated our Scope 3 GHG emissions for 14 categories.
Our
2030 manufacturing
zero waste to landfill
objective helps drive
progress on our
Scope 3 GHG
emissions reductions
by reducing the carbon
impacts of waste.
Encouraging fewer
employee travel miles
and lower-carbon
modes of transport,
such as cycling, public
transport, providing
on-site electric vehicle
charging for employees
and visitors, and issuing
a company travel
policy that encourages
more efficient
transport planning.
Our new sustainable
product design
and development
programme
incorporates
considerations for the
carbon impacts of
a product and
its packaging.
Encouraging fewer
transport miles and
using lower-carbon
modes of transport
across the value chain
– from incoming
materials to site
and warehouse
transportation of goods.
We engaged with our
key suppliers via the
CDP Supply Chain
programme again this
year. The data from this
process helps us
understand and
improve our Scope 3
GHG emissions data
and learn about the
maturity of our
suppliers’ net zero
plans. We also
identified the suppliers
that contribute most
significantly to our
Scope 3 emissions
and collaborated with
them to enhance
engagement in this
topic, including with
carbon reduction plans.
Supplier
engagement
Optimising upstream
and downstream
transportation
Reducing greenhouse
gas emissions
from waste
Sustainable employee
and business travel
practices
Lower-carbon
product design
Net zero Scope 3 carbon emissions by 2045
Our strategy to achieve net zero Scope 3 carbon emissions by 2045 includes:
www.smith-nephew.com
» More details can be found in the
2024 Sustainability Report on
pages 25–28.
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ACCOUNTS
OTHER INFORMATION
Our focus is on the areas of largest
environmental impact, including
manufacturing sites, warehouses, R&D
sites and offices.
Smaller locations representing fewer
than 2% of our overall emissions are
not included. Acquisitions completed
before 2024 are included in the data, with
those completed during 2024, or more
recently, 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 and 2024
we included 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 2024, we have
data available for 14 categories.
Energy efficiency and carbon
emissions reduction
In 2023, the principal energy efficiency
measures included conducting a detailed
analysis of our energy usage data, carrying
out energy efficiency audits at our sites
in the UK and Germany, and undertaking
energy efficiency projects.
During 2024, energy efficiency measures
implemented at operational sites resulted
in a 3.4% reduction in our energy use
relative to the production output, which
equated to 8.1GWh, the annual energy use
for 570 UK households.1
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 2024, we continued
to purchase RECs through GreenFlex, a
voluntary renewable energy programme.
Certified by Green-e Energy, North
America’s leading certification programme
for renewable energy, GreenFlex 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 locations
in Penang (Malaysia) and Suzhou (China)
through the purchase of RECs.
Throughout 2024, all our UK sites
continued to source renewable power.
Our sites in Suzhou and Penang generate
electricity on-site using solar PVs.
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 Department for Environment, Food &
Rural Affairs (Defra) for 2024.
We have applied the emission factors
most relevant to the source data, including
Defra 2024 (for UK locations), IEA 2022
(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 2024.
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.
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 2024. We are including
UK-specific energy and emissions data to satisfy the
Streamlined Energy and Carbon Reporting (SECR)
requirements.
1 The average UK household uses 2,700kWh of electricity
and 11,500kWh of gas per year.
Carbon emissions (CO2e) strategy,
reporting methodology, materiality and scope
Protecting the future continued
76
Smith+Nephew Annual Report 2024
2024
2023
2019 (baseline year)
UK
Global
(excluding UK)
Total
UK
Global
(excluding UK)
Total
UK
Global
(excluding UK)
Total
CO2e emissions (tonnes) from:
Direct emissions (Scope 1)1
5,038
7,756
12,7942
5,682
10,219
15,9013
4,747
5,141
9,8884
Indirect emissions (Scope 2)
(location-based)
3,497
55,604
59,1012
3,997
55,015
59,0123
4,911
62,413
67,3244
Total (location-based)
8,535
63,360
71,8952
9,679
65,234
74,9133
9,658
67,554
77,2124
Indirect emissions (Scope 2)
(market-based)
0
11,868
11,8682
3,800
20,565
24,3653
5,072
52,080
57,1524
Total (market-based)
5,038
19,624
24,6622
9,482
30,784
40,2663
9,819
57,221
67,0404
Energy consumption to calculate
Scope 1 and 2 emissions (GWh)1
43
186
229
48
195
243
45
168
213
Intensity ratio (market-based):
CO2e (t) per $m sales revenue
4.3
7.3
13.1
CO2e (t) per full-time employee
1.4
2.1
3.7
2024
2023
2021 (baseline year)
Other indirect emissions
(Scope 3)5,6
667,620
1,276,079
1,614,573
1 A total of 14 European countries were included in 2023 and 2024 Scope 1 vehicle data.
2 Data independently assured by ERM CVS; more details and the full assurance report are available in the 2024 Sustainability Report on pages 46–47.
3 Data independently assured by ERM CVS; more details and the full assurance report are available in the 2023 Sustainability Report on pages 59–60.
4 Data independently assured by ERM CVS;more details and the full assurance report are available in the 2022 Sustainability Report on pages 60–61.
5 Measurement of 2023 and 2024 Scope 3 GHG emissions from 13 categories in 2023 and 14 categories in 2024. Refer to ‘Reporting our Scope 3 emissions’ above for more details.
6 Total Scope 3 emissions reductions shown result from both business efficiency efforts and as a product of improvements to data quality, methodologies applied and analyses undertaken by
Smith+Nephew or third parties. See ‘Data disclosure in this report’ in the 2024 Sustainability Report on page 48 for additional notes.
2024 data includes recent acquisitions completed and new site openings during 2023.
Revenue: 2024: $5.8bn; 2023: $5.5bn; 2019: $5.1bn. Average full-time employee data: 2024: 18,060; 2023: 19,081; 2019: 18,030.
Reporting our
Scope 3 emissions
During 2024, we have worked with our
global energy partner to measure our
Scope 3 GHG emissions using recognised
protocols. Our calculation of our 2024
Scope 3 GHG emissions was 667,620
tonnes of carbon dioxide equivalent from
the 14 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
second global commuting survey.
» More details and the full limited
assurance report can be found in the
2024 Sustainability Report on pages
46–47.
» www.smith-nephew.com/
sustainability
Our Scope 3 GHG emissions assessment
was made using the best available 2024
data. As expected, in line with our peer
group, purchased goods and services
contributes the most significant proportion
of our Scope 3 GHG emissions, at over
73%. Further details of the methodology
are available in the 2024 Sustainability
Report on page 45.
Independent assurance
In 2024, selected Scope 1 and
Scope 2 GHG emissions data were
independently assured by ERM CVS.
In accordance with ISAE 3000, a limited
assurance engagement was performed.
Previously the 2023, 2022 and 2019
baseline data were assured.
77
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OTHER INFORMATION
Risk report
Business area and function
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.
Executive Committee
– 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.
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.
Group Risk team
– 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.
Group Risk Team
Internal Audit
Board of
Directors and
Board Committees
Executive Committee
Business Area and Function
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.
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.
Our risk governance
framework
Our Board has responsibility for oversight
of risk management, setting 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
its approved risk appetite throughout
our organization through the Executive
Committee, risk owner community and
our Group management teams.
The Board assesses the effectiveness of
risk management and internal control
over financial reporting through the Audit
Committee who conduct regular reviews
of reporting on principal risks, the risk
management framework and internal
control processes. Further details of the
Audit Committee’s work in this area is set
out below on pages 81 and 82.
Our Risk Management Policy, endorsed by
our Chief Executive Officer, is supported
by an Enterprise Risk Management Manual
and the Group Risk team providing training
to Risk Champions appointed for each
of our global business units and relevant
functions. Risks continue to be managed
through a ‘top-down’ and ‘bottom-up’
process, with regular oversight from the
Executive Committee, quarterly reports to
the Audit Committee and regular reports
to the Board on any specific areas of focus.
Our risk management life cycle
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Smith+Nephew Annual Report 2024
How we assess our principal risks
through the ‘top down’ process:
The Executive Committee review monthly
trends in operational risk in respect of each
of the principal risks. They also conduct
a formal ‘top down’ evaluation of risk,
consisting of the assessment of ‘grey swan’
scenarios and a round-table discussion of
significant and emerging risks. The output
of this session is used to ensure that the
bottom-up risk registers align to the top-
down assessment of risks faced by the
Group, identify any required update to
gross and net risk scores, mitigation plans
and any required overarching changes to
the principal and emerging risks.
Emerging risks
We define emerging risks as risks that are
perceived to be potentially significant but
have not yet been fully understood and/
or assessed.
As part of the bottom-up risk management
process defined above, the emerging
risk identification process requires fresh
thinking on what new and emerging
risks may be relevant, using a variety of
techniques including review of external
thought leadership and geopolitical
and macroeconomic risk indicators and
events, risk identification interviews
with key stakeholders, risk identification
questionnaires on identified topics relating
to emerging risks, group discussion
during a risk workshop to determine
the likelihood, severity and priority of
potential emerging risks and PESTLE
(political, economic, social, technological,
legal and environmental) analysis.
Executive Committee risk owners also scan
the horizon for new and emerging risks as
part of the ‘top down’ risk management
process explained above.
Emerging risks identified through these
processes are reported up to the Executive
Committee via the Group Risk team and
ultimately to the Board as part of its annual
review of principal and emerging risks.
Our risk management process
Our Enterprise Risk Management (ERM) framework continues to be 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.
1. Risk identification
Gain full understanding of any area of uncertainty the
Group or business unit/function faces which might
create, prevent, accelerate or delay the achievement
of our strategy and/or business objectives.
Articulate the risk in the relevant risk register including
the risk consequence and risk causes.
2. Gross (inherent)
risk assessment
Measure the risk according to the Group’s impact
and likelihood scoring methodology, assuming there
are no effective controls in place to manage the risk.
3. Current control
identification
Identify what is currently being done or proposed to
be done to reduce the likelihood and/or impact should
the risk occur.
4. Net (residual)
risk assessment
Measure the risk according to the Group’s impact and
likelihood scoring methodology, taking account of the
current controls in place and the assessment of how
effective they are, and proposed mitigation plans to
the extent they are not yet implemented.
5. Risk response
planning
Assign an individual risk owner and determine whether
additional mitigation is required, taking into account
the risk appetite for that risk. If further mitigation is
required, identify actions and action owners to achieve
the additional identified mitigation. Assign risk
response, deadline, status and review dates.
6. Risk reporting
Risk champions ensure that risk registers are
completed and maintained. These risk registers are
reported to the Group Risk Team on a quarterly basis.
The Group Risk Team prepares a consolidated risk
register and principal risk heatmap which is reported
to the Audit Committee on a quarterly basis.
7. Monitoring and
review
Risk and response plans do not remain static and are
managed on a rolling basis. Risk management is an
agenda item at regular management meetings and
there is a defined escalation process for out-of-cycle
risk identification and/or material change in risk
management status. Risk champions are also
charged with discussing the status of mitigation
plans regularly with business owners.
What we review and actions we take when assessing our principal risks
through the ‘bottom up’ process:
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ACCOUNTS
OTHER INFORMATION
The following emerging risks identified in
2023 continue to be assessed as relevant
emerging risks in 2024:
– Our customers, investors and other
internal and external stakeholders are
increasingly focused on our approach to
Environmental, Social and Governance
(ESG) matters relevant to our business
and how we ensure that we consider
ESG considerations in all relevant areas
of our business.
– We have a formal ESG governance
structure (please see Page 69), which
flows through to the Board and its
Committees to ensure that relevant
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 supported by an
appropriate 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 governance
framework around the use and
implementation of AI technologies is
designed to provide 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 AI business
use policy that defines the governance
and controls required to ensure the use
of AI is appropriate, transparent, and
properly implemented and monitored
and training on this policy was delivered
to all employees in 2024. In addition, the
AI Governance Working Group has been
established to implement appropriate
governance frameworks around the use
of AI within the organisation in order to
create value, mitigate risk and ensure
compliance within an increasingly
complex regulatory landscape, including
the EU AI Act.
– Increased geopolitical uncertainty: A
significant number of elections globally
during the past 12 months leading to
widespread changes in trade policy
and approach, together with increasing
regional tensions and conflicts in
Ukraine and the Middle East have led to
significant changes in the geopolitical
landscape since our last Annual
Report. Our Executive Committee
and our Board continue to review and
consult as appropriate both internally
and externally on changes in the
geopolitical landscape in order to ensure
that scenario planning and business
continuity planning is undertaken to
evaluate the risks and opportunities
aligned to our strategic objectives and
global business operations.
Internal Controls
Management is 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 global and
regional business units.
The main elements of the internal control
framework include:
– Clearly defined lines of accountability
and delegations of authority in relation
to the establishment and monitoring of
internal controls.
– Responsibility for internal controls is
held by relevant individuals in the Group
and local country management who
are accountable for establishing and
maintaining internal controls in their
respective business and functional areas.
– The Group’s IT organisation is responsible
for the establishment of effective
IT controls within the core financial
systems and supporting IT infrastructure.
– The Financial Controls & Compliance
Group has responsibility for the review
of the effectiveness of internal controls
over financial reporting including
financial, operational, and IT controls.
They fulfil this responsibility 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.
– MAPs compliance is validated through
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.
– 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.
Risk report continued
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Smith+Nephew Annual Report 2024
– A treasury operating framework and
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.
– We have established a working group
to evaluate the Group’s material
controls for each principal risk aligned
to our current ERM framework in
preparation to meet requirements
under the new reporting obligations
set out in the UK Corporate
Governance Code 2024.
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.
Effectiveness of risk
management and
internal control
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.
Risk management
Whilst the Board is responsible for ensuring
oversight of strategic risks relating to the
Group, 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, the Audit Committee
reviewed the risk management processes
and progress was discussed at its meetings
in February, April, July, and December.
The Audit Committee approved the
risk management programme for 2024
and monitored performance against
that programme, reviewing the work
undertaken by the risk champions across
the Group, identifying the risks which could
impact their areas of our business.
Throughout the year, the Audit Committee
maintained oversight of our risk
management programme, and reviewed
the principal risks identified and the heat
maps prepared by management showing
how these risks were being managed.
The Audit Committee discussed the
reasons and justifications behind any
change in gross or net risk profile and
sought to determine the level of comfort
of the management team in respect of
the effectiveness of the mitigation plans
in place.
Since the year end, the Audit Committee
has reviewed a report from Internal
Audit into the effectiveness of the risk
management programme throughout
the year, considered the principal risks
and the actions taken by management to
review those risks as well as the Board risk
appetite in respect of each risk. Due to the
internal promotion of the Senior Director
of Risk (having responsibility for the
operational implementation of the ERM
framework within the Group) to Group
Head of Internal Audit during 2024, a
third party conducted the review of the
effectiveness of the risk management
programme in 2024 in order to provide
independent assurance to the Audit
Committee on the effectiveness of
the programme. The Audit Committee
concluded that there was an effective risk
management process in place throughout
2024 and up to the date of approval of this
Annual Report.
Internal control
The Audit Committee, reviewing the work
undertaken by 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 2024 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 2024.
Based upon the evaluation, the Chief
Executive Officer and Chief Financial
Officer concluded on 24 February
2025 that the disclosure controls
and procedures were effective as at
31 December 2024.
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OTHER INFORMATION
2024 Risk management
development and 2025 risk
management plan
2024 has seen continuous maturing of how
we manage risk aligned to the restructuring
of the organisation into the global business
unit structure.
We reviewed our risk champions and
aligned them to our new global business
unit structure and provided further training
to our new risk champions in addition
to the annual training provided to all.
We conducted quarterly risk champion
workshops focused on topics including
business change, product regulation
risks, cybersecurity and integration of
strategic initiatives.
The output of these workshops was
reflected in the bottom-up risk registers.
We continue to benchmark our risk
disclosures against peers as one of many
inputs into our assessment of principal and
emerging risk.
Executive Committee risk owners
continued to report and discuss principal
risk monthly trends from an operational
perspective in Executive Committee
meetings which was valuable to evaluate
specific occurrences and trends within
operational risk profiles aligned to our
principal risks. For example, the monthly
review would evaluate the impact on the
principal risk on pricing and reimbursement
of any public announcements from CMS
and other regulators.
Our work will continue to evolve in 2025
with a particular focus on:
– AI risks and opportunities aligned to
enterprise strategy
– geopolitical risk mapping across the
global business
– Cyber incident risk mitigation; and
– Business Continuity global planning.
This will include deep-dive sessions
facilitated by internal management team
leads and external consultants where
appropriate into specific risks with cross-
functional teams and our risk champions.
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.
– Management is responsible for
establishing and maintaining an
adequate internal control framework.
Based on their assessment, management
concluded and reported that, as at
31 December 2024, the Group’s internal
control including financial, operational
and compliance controls and risk
management processes were effective
based on those criteria.
Having received the report from
management, the Audit Committee
reports to the Board on the effectiveness
of controls. Deloitte, an independent
registered public accounting firm, audited
the financial statements included in
the 2024 Annual Report, containing the
disclosure required by this item.
Having evaluated the effectiveness of the
Company’s internal controls, the Audit
Committee has satisfied itself that the
Group is meeting the required standards
and that the Group’s internal control
are effective both for the year ended
31 December 2024 and up to the date of
approval of this Annual Report.
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 2018 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.
Risk report continued
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Smith+Nephew Annual Report 2024
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 10–13 for further information on our Strategy for Growth
A Audit Committee
N Nomination & Governance Committee
R Remuneration Committee
C Compliance & Culture Committee
B Board
Compliance
and reputation
– Legal
and compliance
– Quality
and regulatory
External
– Political
and economic
Financial
– Financial markets
– Pricing and
reimbursement
Operational
– Cybersecurity
– Global supply chain
– Mergers
and acquisitions
– New product
innovation, design
& development
including intellectual
property
– Strategy and
commercial
execution
People
– Talent management
Increased risk
Reduced risk
No change
Risk Grouping
Risk change from 2023
Risk oversight
Risk key
Impact framework
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.
3
2
1
2024 Principal Risks
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OTHER INFORMATION
2024 Principal Risks continued
Risk report continued
Legal and compliance
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
resulting in violations of data privacy
laws and regulations, including the
General Data Protection Regulation
(GDPR).
– The development, manufacture and
sale of medical devices entails risk of
product liability claims or recalls.
– Failure to identify new or changes
in legal or regulatory and reporting
requirements including trade
compliance, ESG and AI 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 ethical
and compliance practices
and programmes.
– Global compliance programme,
policies and procedures in place and
regularly updated to reflect changes
in global or market-related laws,
regulations and industry codes.
– All employees required to undertake
training and certify compliance with
our Code of Conduct and Business
Principles annually.
– Group Compliance monitoring and
auditing programmes in place with
reporting to Executive Committee and
Board/Committees.
– Established confidential independent
reporting channels for employees and
third parties to report concerns.
– Global trade compliance programme,
policies and procedures and training
programme. Global trade compliance
function partners with business units in
order to diligence commercial models,
new/developing regulations and
implementation of trade compliance
policies and procedures.
– The ESG Steering Committee assesses
new and enhanced regulations
and reporting requirements
and works cross-functionally to
ensure compliance.
– The AI Working Group evaluates
governance frameworks for AI
enterprise strategic projects and
regulatory developments.
– Monitoring new regulatory and
enforcement trends.
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 (including connected and AI enabled)
healthcare products and services.
Operating across this complex and dynamic legal
and compliance environment, which includes
regulations on fraud, bribery and 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.
Compliance and reputation risks
Oversight
C
Link to Strategy
1. Strengthen
2. Accelerate
3. Transform
Change from 2023
1
2
3
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Smith+Nephew Annual Report 2024
Quality and regulatory
Examples of risks
– 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.
Actions taken by management
– The Quality departments within
each Business Unit regularly monitor
activities to comply with new and
amended requirements.
– 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.
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
Link to Strategy
1. Strengthen
2. Accelerate
Change from 2023
Compliance and reputation risks continued
C
1
2
3
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OTHER INFORMATION
Political and economic
Examples of risks
– Global political and economic
uncertainty and conflict, including in
Ukraine and the Middle East.
– Global or regional recession and
increasing macroeconomic controls
impact on customer financial strength.
– Market access rights and changes
in policy which negatively impact
multinational participants.
– Failure to pivot on business
strategy in light of changes in
trade policy, conflicts and sanction
programmes globally.
– Failure to implement changes to
operating model at pace to address
legislation changes in the US and other
key markets.
– Increases in import and labour costs.
– Increases in tariffs and restrictions on
global trade.
– Inflationary pressures impacting raw
materials, freight, salaries and wages.
– Failure to meet sustainability targets
and public policy changes.
– Potential for significant tax rate
changes and/or base broadening
measures in key jurisdictions where we
operate including OECD proposals and
US tax reform.
Actions taken by management
– The Group tax team continually
monitors developments in tax
legislation and obtain external advice
where relevant.
– Actively horizon scan, monitor and
evaluate potential changes in public
policy and legislation and develop plans
to mitigate potential risk to operating
models in each market.
– Actively participate in trade
associations to enhance education and
advocacy efforts with policymakers.
– Continued engagement with
governments, administrations,
and regulatory bodies to enhance
education and advocacy efforts
with policymakers.
– Implement sustainability strategy
aligned to our purpose, business
strategy, and culture pillars, and
track and benchmark targets within
the industry.
– Our ESG Operating Committee
implements and operationalises ESG
strategy and provides data and metrics
to monitor implementation.
– Global trade compliance programme,
policies and procedures and training
programme. Global trade compliance
function partners with business units in
order to diligence commercial models,
new/developing regulations and
implementation of trade compliance
policies and procedures.
– Business continuity plans in place 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 caused by
geopolitical and environmental events.
– Ongoing engagement and monitoring/
lobbying on localisation initiatives.
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, preference for local
suppliers, import quotas, economic sanctions and
terrorist activities.
External risks
Oversight
Link to Strategy
1. Strengthen
2. Accelerate
Change from 2023
B
1
2
3
2024 Principal Risks continued
Risk report continued
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Financial Markets
Examples of risks
– Risk of adverse movement to trading
profit 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.
– Typically the Group has access to the
investment grade funding market,
however this can become restricted
from time to time for example during
periods of financial crisis.
– The Group’s credit rating could be
downgraded if business underperforms
or increases the leverage from capital
allocation decisions such as M&A
investments. This in turn could reduce
access to debt funding.
– The cash and short term investments
could reduce in value in the event of an
insolvency of a financial counterparty.
– The rate of interest paid on the Group’s
borrowings could increase as a result
of increased central bank rates and
also increased credit charges required
by investors.
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 movements in financial
markets and treasury management.
– Liquidity risk is evaluated through
the Going Concern and Viability
Statement assessments.
– Group funding comprises a variety
of public bonds, private placements,
and bank facilities with a balanced
maturity profile over the next 10
years. The Group works closely
with its relationship banks in the
revolving credit facility and maintains
relationships with public and private
debt markets and investors.
– Maintaining significant undrawn debt
facilities, including for example the
revolving credit facility and cash to
manage liquidity risks.
– Retaining an investment grade credit
rating and considering the implications
of capital allocation decisions on
the ratings.
– Investing surplus funds in bank deposit
and money market fund instruments
with strong credit rated institutions
to manage counterparty credit risk
exposure whilst preserving the value of
the investments.
– Actively balancing exposure to interest
rate movements through the use of
fixed rate borrowing and derivatives.
We operate a global business and are therefore
exposed to a variety of external financial risks in
relation to exchange rate, interest rate and access
to funding markets. Volatility in rates can impact our
results and it may not be possible to fully mitigate
against them.
Financial risks
Oversight
Link to Strategy
1. Strengthen
Change from 2023
N/A*
A
1
2
3
* Foreign Exchange Principal Risk expanded to Financial Markets Principal Risk to reflect a broader risk subset.
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Pricing and reimbursement
Examples of risks
– Volume-based procurement in China
and other markets.
– Limited ability to pass on increased
costs such as raw materials, freight,
sustainability improvements and the
cost of compliance with regulations to
our customers.
– 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.
– Limited access to non-clinical
decision makers.
– Impact of global trade policy changes
and implementation of tariffs could
impact standard cost and margin
on pricing.
Actions taken by management
– Successful 12-Point Plan initiative on
pricing strategy and execution resulted
in pricing improvement in 2024.
Ongoing efforts to mitigate inflationary
impact embedded in business-as-
usual practices.
– Optimise market and portfolio
prioritization and portfolio mix and
promote differentiated products.
– Ongoing development of 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 execution and training to improve
capability to communicate the clinical
and economic value proposition to
non-clinical decision makers.
– Implementation innovative contracting
models designed to support adoption
and coverage for healthcare providers
and payers.
– Ongoing engagement with payer
bodies to influence reimbursement
mechanisms to reward innovation.
– Scenario planning and deep dive
evaluation undertaken for key markets
and products with continued horizon
scanning to support agile positioning
in the event of implementation of
proposed tariff schemes.
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.
Financial risks
Oversight
Link to Strategy
1. Strengthen
2. Accelerate
Change from 2023
B
1
2
3
2024 Principal Risks continued
Risk report continued
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Cybersecurity
Examples of risks
– Loss or misuse of confidential or
sensitive information, intellectual
property and/or data privacy breach
resulting in both financial and
reputational harm.
– Inadequate consideration of
cybersecurity in the design of new
products, systems and/or processes
increasing potential for vulnerabilities.
– Disruption to business operations and
resultant financial and reputational
negative impact due to a significant
cybersecurity incident.
– Enhanced changes in regulatory
environment and increased
enforcement and reporting obligations.
– Increase in sophistication of
bad actors/threat profile due to
geopolitical instability.
– 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.
Actions taken by management
– Desktop exercises for management
on cybersecurity incidents/
ransomware attacks supported by
enhanced policies and procedures
approved by the Security & Privacy
Steering Committee.
– Board awareness session focused
on roles and responsibilities and
third party consultancy support for
cyber incidents.
– Cybersecurity maturity programme
monitored by the Audit Committee.
– Development and implementation of
enhanced IT Disaster Recovery Plan
and reporting framework for disclosure
of cyber incidents.
– 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.
– Enhanced global security training and
awareness activities including email
communications, intranet posts,
visuals, videos and email phishing
training activities.
– Multi-factor authentication
tools to reduce the likelihood of
remote attacks.
– Security information and event
management 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.
– Monitor developments from
governments/regulators and raise
changes and developments with
Global IT Security and Security &
Privacy Steering Committee.
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 and
increasingly may incorporate certain elements of AI
functionality.
Our systems and the systems of third parties and
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.
Oversight
Link to Strategy
1. Strengthen
3. Transform
Change from 2023
Operational risks
A
1
2
3
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Global supply chain
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.
– Manufacturing and supply chain
overcapacity leading to a negative
impact on Group profitability.
– 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 geopolitical events and conflicts,
resulting in disruptions of operations.
– Labour attrition and delays
in backfilling.
– Failure to transform to achieve our
sustainability targets.
Actions taken by management
– Successful implementation of 12-Point
Plan initiatives to improve product
availability and inventory, enhance
procurement and management of
transportation costs and optimisation
of our manufacturing network.
– Adoption of S+N Operating System and
enhanced focus on lean manufacturing
and quality as part of business-as-
usual activities.
– Addressing capacity in the network
including closure of sites (Tuttlington,
BDA, Warwick).
– Ongoing implementation of
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 aligned to
S+N operating system.
– Ongoing risk-based review
programmes undertaken for
critical suppliers.
– Implementation of global, regional and
local business continuity and disaster
recovery planning programme to
support crisis management.
– Enhancement of Sales Inventory
and Operations (SIOP) process to
improve demand and supply planning
across all business units to ensure
executive oversight of sales and
operational planning.
– Enhanced co-ordination between
commercial, supply chain and logistics
to improve forecast accuracy as part
of business-as-usual activities.
– Comprehensive product quality
processes in place from design to
customer supply.
– Supplier contract agreements
to achieve and manage
regulatory compliance.
– Initiatives ongoing to improve
manufacturing efficiency and reduce
overhead costs.
– Emergency and incident management
and business recovery plans in place
at major facilities and for key products
and key suppliers.
– An ESG Steering 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
manufacturing facility for Advanced
Wound Management in Melton, UK.
Our ability to make, distribute and sell medical
products to customers in around 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
Link to Strategy
1. Strengthen
2. Accelerate
Change from 2023
Operational risks continued
B
1
2
3
2024 Principal Risks continued
Risk report continued
90
Smith+Nephew Annual Report 2024
1
2
3
New product innovation,
design & development
including intellectual property
Examples of risks
– Failure to develop, partner or acquire
a competitively differentiated
innovation at pace with competition in
the market.
– 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.
Actions taken by management
– Ongoing delivery of 12-Point Plan
initiatives to reposition our knee and
hip portfolio at pace.
– 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
and enforcement and monitisation of
Group rights.
– Ongoing intellectual property training
for business counterparts.
– Sustainability criteria built into new
product development processes.
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.
Mergers and acquisitions
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.
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 and specific deep dives on
acquisitions as appropriate.
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
Link to Strategy
3. Transform
Change from 2023
Oversight
B
Link to Strategy
3. Transform
Change from 2023
Operational risks continued
B
1
2
3
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OTHER INFORMATION
Strategy and commercial execution
Examples of risks
– Failure to execute our strategy
adequately from high-level ambition
to specific actions to make the
ambition a reality.
– Failure to transition from and embed
our 12-Point Plan framework, KPIs and
metrics in business-as-usual objectives
could slow progress in achieving our
strategic 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.
– Limits on healthcare professional
access to medical education.
– Failure to achieve potential
from 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.
Actions taken by management
– Changed our commercial operating
model from a franchise and regions
model to business unit model.
– Continued Executive oversight of
changes to our commercial operating
model and focus on commercial
execution as part of business as usual
activities following delivery of the
12-Point Plan.
– Strategic planning process clearly
linked to business, operations and
Group risk.
– Continued new product launches and
monitoring of innovation pipeline.
– Enhanced implementation of Sales
Inventory and Operations (SIOP)
process to improve demand and supply
planning across all business units.
– Enhanced accessible digital sales
information and training modules for
sales staff.
– Enhanced virtual medical education
platforms and enhancement of
the education offerings of the
Smith+Nephew Academy.
– Continued focus on product and
technology acquisitions and product
launches and effective implementation
of new product launches.
– Enhanced project management
governance, toolkits and project
steering committee oversight to
support successful execution of
programme and projects.
The long-term success of our business depends on
developing our vision and strategy and setting the
right strategic priorities in our three-year strategic
plan following the successful conclusion of the
12-Point 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 within our global business unit organisational
structure 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 execute on priorities will impact
our ability to continue to grow our business profitably
and sustainably and to serve our customers.
Oversight
B
Link to Strategy
1. Strengthen
2. Accelerate
3. Transform
Change from 2023
Operational risks continued
1
2
3
2024 Principal Risks continued
Risk report continued
92
Smith+Nephew Annual Report 2024
1
2
3
People
Talent management
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.
– Failure to align to market
salary expectations.
Actions taken by management
– Our 2024 Remuneration Policy
included a package of long-term
incentive plan adjustments for US
Executive Directors to be more closely
aligned with norms in the US in terms
of structure and quantum.
– Completed a review of our short
and long-term incentive plan
arrangements for employees and
implemented several changes to
ensure our arrangements remain
market competitive to attract and
retain talent.
– Talent planning and people
development processes are well
established across the Group.
– Talent strategy, management and
succession planning is discussed twice
yearly by the Board and regularly by
the Executive Committee.
– Utilising ‘Success Profiles’ that have
been created for our high value
roles to benchmark talent against
requirements needed for success in
critical roles.
– Focusing on enhancing people leader
capabilities, delivered from line
leading training.
– Identification of high-value roles and
ensuring that these roles are filled with
our high-performance individuals with
strong succession plans in place.
– Provided employees with access
to tools and resources to manage
their emotional, physical, and
mental wellness.
– Continued focus on inclusion in
order to foster culture of belonging
within the organisation and promote
engagement, attraction and retention
of top talent.
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
Link to Strategy
1. Strengthen
2. Accelerate
Change from 2023
People
C
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OTHER INFORMATION
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 78–93
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 November 2024, the
Executive Committee met to review
the 2024 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
and maintain risk registers. The Risk
Champions nominated by the Executive
Committee are senior employees and
sufficiently tenured with the organisation
to adequately identify and manage risk.
– Using the outputs from the Business
Area ‘bottom-up’ risk identification
completed quarterly throughout the year
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 2024 Principal
Risks facing the Company and again
in January 2025 as final disclosures.
– 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 2024.
– Final Principal Risks were presented
to the Audit Committee and the Board
in February 2024 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 2027
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 78-93 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 and
Emerging 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 2025.
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 2024.
We will continue to evaluate any
additional risks which might impact
the business model.
By order of the Board, on 24 February 2025.
Helen Barraclough
Company Secretary
Our Viability Statement
Risk report continued
94
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2024 Scenarios modelled
Scenario 1: Global economic downturn, operational risk and mergers and acquisitions
Significant global economic recession, leading to sustained lower
healthcare spending across both public and private systems.
Action taken: We have modelled 10% lower revenue throughout 2025
and 5% lower revenue throughout 2026.
Reduced reimbursement levels and increasing pricing pressures.
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 2025–2027.
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 2025–2027.
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 2026.
Increases in raw materials, freight and labour costs.
Action taken: We have modelled an increase in our input costs by an
additional 5% in each of the periods 2025–2027, due to continued
inflationary pressures.
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 2026 and
2027 due to a weakening in other currencies relative to the US Dollar by 5%.
Failure to integrate newly acquired business effectively to achieve
expected growth.
Action taken: We have modelled a scenario of 12 months of revenue loss
due to delay in getting FDA approvals on CartiHeal in 2026.
Link to strategy
– Strengthen the foundation to serve customers sustainably
and simply.
– Transform our business through innovation and acquisition.
– Accelerate profitable growth through prioritisation
and customer focus.
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.
– Pricing and reimbursement.
– Mergers and acquisitions.
Scenario 2: Financial Markets, global supply chain, legal, regulatory and compliance risks and cybersecurity
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-2025 for two years, and returning to lower
volumes in mid-2027.
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 2026.
Product liability claim.
Action taken: We have modelled a group of product liability claims
resulting in a settlement agreement requiring cash payment in each of
the periods 2025–2027, without any insurance coverage.
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 2025.
Link to strategy
– Strengthen the foundation to serve customers sustainably
and simply.
Link to Principal Risks
– Legal and compliance.
– Quality and regulatory.
– Global supply chain.
– Foreign exchange.
– Cybersecurity.
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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.
Understanding stakeholder views is
critical to our Purpose.
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.
The Board recognises that aligning the
interests of our stakeholders with our
Purpose, Strategy and Culture Pillars is
fundamental to sustainable growth.
» See pages 51–57 for
more on Life Unlimited
» See pages 59–63 for
more on our culture
» Read more in the Chief Executive
Officer’s Review pages 10–13,
and the Governance report on the
Board activities on pages 113–115.
» Read more about the Board’s s172
duties on pages 116–117.
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 following sections 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. Our s172 statement on pages 116–117 provides further details on how
the Board discharges its duties under s172 of the Companies Act 2006.
The Board seeks to engage with and build positive relationships with all stakeholders
and 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.
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.
Our Stakeholders
Engaging with our stakeholders
Our People
Our
Shareholders
Governments
and regulators
Environment
and communities
Customers
and suppliers
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Smith+Nephew Annual Report 2024
Our People
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.
How we engage
– Direct engagement led by a number of Non-
Executive Directors through Board/employee
listening sessions has been an insightful way
to understand more about the Company
culture, employee engagement and inclusion
and belonging.
– Site visits and Board meetings at our offices
enable the Board to meet with our employees
for further engagement.
– The “Direct to Deepak” section of our intranet
and townhalls addresses employee questions,
comments and feedback.
– Review of the Gallup employee engagement
survey responses and our Culture session
at the Compliance & Culture Committee
(CCC) provide insight into employee views
and sentiment.
– Board inductions enable the Board to hear
directly from employees on purpose, strategy
and culture.
– Engagement with our Employee Inclusion
Groups (EIGs) on site visits enables the Board
to engage with a wider cross section of the
employee community.
– The Remuneration Committee and the CCC
receive updates at each meeting on the
activities of our EIGs, and enable an ongoing
review of programmes to support the
wider workforce.
– The Board and its Committees are provided
with updates on leadership, talent development
and succession planning for senior executives.
– Marc Owen is our Non-Executive Director
who has responsibility for ensuring Board
engagement with the wider workforce in his
role as Chair of the CCC.
2024 Outcome/impact
– In 2024 the Company received the Gallup
Exceptional Workplace Award. In the sixth
year of running the Gallup Engagement
Survey, the Board noted an 92% participant
survey completion rate and improved
scores on most questions, supporting the
view that employee engagement continues
on a positive trajectory.
– The Board received valuable feedback
from the 2024 listening sessions focusing
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 site visits to Hull and Croxley in the
UK, Pittsburgh, Memphis and Andover in
the US, and Coimbra, Portugal provided
an opportunity for informal employee
touchpoints as well as more formal
presentations which enable the Board
to measure and monitor the culture of
the organisation.
– Feedback from the CFO and new Non-
Executive Directors has been positive
on the breadth and depth of the
induction programme.
2025 Focus
– 2025 listening sessions will focus on
each global business unit (Orthopaedics,
Sports Medicine & ENT and Advanced
Wound Management).
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.
Significant
areas of interest
– Purpose, strategy and culture
– Leadership and
succession planning
– Talent, retention and
opportunities for
development and progression
– Employee wellbeing and cost
of living
– Inclusion and belonging
– A healthy and safe
working environment
Although members of the Board engage
directly with stakeholders as part of site
visits, listening sessions and informal
employee engagement touchpoints,
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 discussions and the
decision making process.
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.
» See pages 59–63 for People
and pages 126–129 for
Compliance & Culture
Committee
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Our Shareholders
Our Shareholders are the owners of our business. The Board seeks to engage with
them regularly throughout the year to understand their perspectives on performance,
value, risk and governance. See www.smith-nephew.com for our Investor presentations.
How we engage
– Face to face engagement at our in-person
AGM at the Company’s Croxley offices enables
investors to have the opportunity to engage
with Board members and management.
– Our Remuneration Committee Chair together
with our Chair engaged and communicated
with investors comprising more than 75% of our
issued share capital as part of the consultation
process on our 2024 Remuneration Policy.
– Our Chair, CEO and CFO regularly engage with
investors during the year on topics such as
strategy, financial performance, operational
excellence, remuneration, talent management
and succession planning, sustainability
and diversity.
– Our Chair and Senior Independent Director
engage with investors and governance teams
on topics of investor interest including Board
composition, diversity and sustainability.
– Our CEO and our CFO engage regularly with
investors as part of an ongoing dialogue
throughout the year as well as through the post
results roadshows and Q&A sessions.
– The Board receives analyst reports, reviews the
share register and receives reports on investor
meetings at every Board meeting as well as
investor perceptions of the Company from
external advisors.
2024 Outcome/impact
– The Chair, CEO and CFO engaged in more
than 150 investor meetings during the year.
– Good engagement with debt investors and
a strong credit story led to high demand and
attractive pricing for our USD Bond issuance
in March 2024.
– Further to the extensive shareholder
consultation exercise around the 2024
Remuneration Policy, the Board resolved
to adopt and implement the Policy and the
Restricted Share Plan on the terms approved
by the majority of shareholders at the AGM.
– Recommended a final dividend for the
FY2024 of 23.1c per ordinary share (46.2c
per ADS) to shareholders for approval at
the 2025 AGM; and declared an interim
dividend for HY2024 of 11.10 pence per
ordinary share.
– The Board and management regularly
discuss investor sentiment, perspectives and
expectations on performance improvement,
value creation and cost management.
Board listening sessions
Significant
areas of interest
– Strategy, business model
and performance
– Capital allocation
and dividend
– Cost management and
restructuring programmes.
– Remuneration
– Leadership and
succession planning
– Sustainability
– Inclusion and belonging
» See pages 272–277 for
shareholder information
“The Board listening session was a great experience and
gave me a real feel for the employee perspective on
the strategy and direction of the Company, particularly
following the change to a global business unit structure.
The listening sessions cover a broad range of topics,
and in doing so, help us to gather direct feedback which
supports the effective governance and oversight of the
Board. They are an important way for us to engage and
communicate with employees and help to build trust and
alignment on the organisation’s key priorities.”
Kartarzyna Mazur Hofsaess
Non-Executive Director
“Having the opportunity to engage with our people in
Board listening sessions is a privilege. It enables Board
members to gain valuable insights into the culture of
the organisation, the connection to our purpose of Life
Unlimited and how our employees live our culture pillars
of Care, Collaboration and Courage. I have been
consistently impressed with the professionalism,
commitment and drive of our people to meet the needs
of our customers, patients, their colleagues and to
serve the communities in which they live and work,
especially during a time of transformation within the
Company. These sessions also help us as a Compliance
& Culture Committee to understand the vitality of the
culture of the organisation and the views of our
employees as they continue to drive performance
and execution aligned to the Company’s strategy.”
Bob White
Non-Executive Director
Engaging with our stakeholders continued
98
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. The Company reports regularly
to the Board on its engagement with industry bodies and similar organisations on
key issues impacting the organisation and the MedTech industry more broadly.
Our Environment and communities
People, Planet and Products are at the heart of our ESG strategy aiming to create a positive impact
on our communities, reduce the impact on our environment and enable us to innovate sustainably
Significant
areas of interest
– Product safety
– Compliance with
applicable legal and
regulatory requirements
– Promotion of fair competition
– Social and economic concerns
Significant
areas of interest
– Investment and innovation in
local communities
– Understanding how the
Company’s business impacts
local communities and
the environment
How we engage
– The Board approves the Sustainability
Strategy annually and receives updates on
ESG initiatives and stakeholder feedback 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, CEO and Company Secretary
as well as other members of senior
management attend industry roundtable
and panel discussions on ESG matters which
impact the Company.
2024 Outcome/impact
– As part of strategic planning and investment
choices, the presentations received by the
Board for consideration include analysis on
the potential impact of key projects on all
stakeholder groups including the environment
and communities.
– Remuneration Policy 2024 includes ESG
metrics for both short-term and long-term
incentive plans.
– We provide grants and donations to
charitable or not-for-profit organisations,
medical institutions, accredited educational
programme vendors, medical foundations and
professional societies. In 2024, giving activities
totalled approximately $7million.
– 30 Smith+Nephew colleagues from six
different countries – the UK, US, Denmark,
Netherlands, France, and Switzerland –
completed a challenging 470 km cycle ride
from Croxley to Paris, with the shared goal of
raising funds for Leukaemia Care, a charity
dedicated to supporting individuals affected by
blood cancer.
How we engage
– Engagement with local representatives
from the Chamber of Commerce at the
Pittsburgh site visit.
– 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 CEO 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 CEO and senior management meet with
governments and regulators, as applicable.
2024 Outcome/impact
– The CEO 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 relating to any
material legal matters of which the Board
should be aware.
– The Board and its Committees are provided
with updates on new or amended laws,
regulations and reporting requirements such as
CSRD, the revised UK Corporate Governance
Code, European Crime and Corporate
Transparency Act and the likely impact of new
regulations on the organisation.
Number of patients
supported through product
donations
380,000+
» See page 35 for Quality
& Regulatory Affairs
» See pages 65–77 for
ESG report
99
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Our customers and suppliers
Healthcare Professionals and patients are central to all that we do. Effective
engagement 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 Code of Conduct and our values.
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 8 and 23.
Significant
areas of interest
– Innovation and
improved outcomes
– Ensuring product quality,
compliance 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, complaints, legal, compliance and
ethical matters.
– 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.
– We work with third parties who adhere to
our Code of Conduct, Business Principles
and health, safety, social and environmental
standards consistent with our own.
Our Third Party Guide to working with
Smith+Nephew is located on our website
at: https://www.smith-nephew.com/en/
compliance#code-of-conduct-+- third-
party-guide-+-global-policies and sets out
our requirements for third parties based on
the laws, regulations and industry codes that
apply to Smith+Nephew.
2024 Outcome/impact
– The Board and CCC received regular reports on
quality audits as part of ongoing monitoring.
– The CCC monitors the Company’s 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.
– The Board approved the Modern Slavery
Statement, available on our website at
https://www.smith-nephew.com/en-us
– 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.
– See also Sustainability Report for further
details on how we plan to continue to consider
areas of importance to our customers.
The Strategic Report comprising pages
IFC–100 was approved by the Board on
24 February 2025.
Deepak Nath, PhD
Chief Executive Officer
» See pages 29–31 on
innovation highlighting
initiatives designed to
support unmet customer
needs.
» See pages 8 and 34–39 of
our Sustainability
Report which highlight
our customer and
supplier focus.
Engaging with our stakeholders continued
100
Smith+Nephew Annual Report 2024
Corporate governance
Governance at a glance
102
Board leadership and company purpose
Board of Directors
104
Executive Committee
108
Division of responsibilities
Corporate governance framework
110
How we are governed
111
Board activities and priorities
113
S172 statement
116
Composition, succession and evaluation
Nomination & Governance Committee report
119
Compliance and culture
Compliance & Culture Committee report
126
Our culture
129
Audit Risk and Control
Audit Committee Report
130
Remuneration
Remuneration Committee Report
136
Remuneration at a glance
140
Directors’ Remuneration policy
142
Annual Remuneration Report
154
Directors’ report
174
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Smith+Nephew Annual Report 2024
101
1
8
10
11
9
2
3
7
5
6
4
12
The Board continues to be committed to maintaining the
highest standards of corporate governance and ensuring
purpose, values and behaviours are consistent across
Smith+Nephew.
2024 Board sites visit map
Board nationality
Board ethnicity
White British or White
(including minority
white groups)
10
Asian/Asian British
2
Board composition as at 24 February 2025
British
7
American
3
British/American
1
Polish/German
1
Governance at a glance
» See more on pages
104–107 and 121–122
Board tenure
0-3 years
7
3-6 years
3
6+ years
2
Board gender diversity
33.3% female
66.7% male
Senior Board Positions
Chair
Chief Financial Officer
Chief Executive Officer
Senior Independent Director
» See more on page 122
As at 31 December 2024, Board gender diversity was
27.3% female, 72.7% male.
» See more on page 118
1
Coimbra, Portugal
4
Brisbane, Australia
7
Pittsburgh, US
10 Munich, Germany
2
Andover, US
5
Fort Worth, US
8
Croxley, UK
11 Aarau, Switzerland
3
Memphis, US
6
Singapore
9
Hull, UK
12 Penang, Malaysia
102
Smith+Nephew Annual Report 2024
UK Corporate
Governance Code
UK Corporate Governance Code
2018 (the Code): 2024 Statement
of Compliance
Throughout the year ended 31 December
2024, the Company complied with
all the provisions of the Code and the
Disclosure Guidance and Transparency
Rules requirements to provide a Corporate
Governance Statement.
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.
Board leadership and
company purpose
Board focus on the long-
term sustainable success
of the Company. It leads by
example, ensuring effective
engagement with, and
considering the interests of,
stakeholders.
Division of responsibilities
Effective leadership,
with the correct balance
of Executive and Non-
Executive Directors with
clear definition of the
respective responsibilities
of the Board and the
executive leadership.
Composition, succession
and evaluation
Ensures an appropriate
balance of skills,
experience and
knowledge. An effective
evaluation of Board
performance and
succession planning is
crucial in this.
Board and Committee attendance
How we comply with the Code
During 2024 there were eight scheduled Board meetings
Total meetings
Board
Nomination &
Governance
Compliance
& Culture
Audit
Remuneration
Attendees1
Appointed
Committee membership
8
5
4
7
8
Rupert Soames
April 2023
N R
8/8
5/5
N/a
N/a
8/8
Deepak Nath
April 2022
8/8
N/a
N/a
N/a
N/a
John Rogers
April 2024
7/7
N/a
N/a
N/a
N/a
Anne-Françoise Nesmes
July 2020
1/1
N/a
N/a
N/a
N/a
Angie Risley
September 2017
N R
7/8
5/5
1/1
N/a
8/8
Jo Hallas
February 2022
A C
8/8
N/a
3/3
7/7
N/a
Simon Lowth
January 2024
A N
8/8
5/5
N/a
7/7
N/a
John Ma
February 2021
C
7/8
N/a
4/4
N/a
N/a
Jez Maiden
September 2023
A R
8/8
N/a
N/a
7/7
8/8
Katarzyna Mazur-Hofsaess
November 2020
C
8/8
N/a
3/4
N/a
N/a
Rick Medlock
April 2020
1/1
N/a
N/a
2/2
N/a
Marc Owen
October 2017
A C N
8/8
5/5
4/4
7/7
N/a
Bob White
May 2020
C R
8/8
N/a
4/4
N/a
8/8
1 Anne-Françoise Nesmes stepped down as CFO on 1 April 2024 and was replaced by John Rogers on the same date. Rick Medlock stepped down from the Board on 1 May 2024.
Jo Hallas became a member of the Compliance & Culture Committee on 1 May 2024, with Angie Risley stepping down from the Committee on the same date.
Member of the
Audit Committee
Member of the
Remuneration Committee
Member of the Nomination
& Governance Committee
Member of the Compliance
& Culture Committee
Committee
Chair
A
R
N
C
Committee key
Compliance and culture
Driving performance
aligned to the Life
Unlimited Purpose and
its culture around Care,
Collaboration and Courage.
Ensuring business is
conducted ethically.
Audit, risk and
internal control
With the oversight of the
Board, the Audit Committee
oversees the independence
and effectiveness of
internal and external audit
functions, satisfies itself on
the integrity of financial and
narrative statements, and
reviews the effectiveness
of processes to manage risk
and internal control.
Remuneration
Aims to ensure that
the executive team is
appropriately and fairly
incentivised, and aligned
with long-term, sustainable
strategic execution.
We also monitor wider
colleague remuneration
across the business.
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
103
Smith+Nephew Annual Report 2024
John Rogers
Chief Financial Officer
Appointed Chief Financial Officer
in April 2024.
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.
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
R
N
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:
Director of MDIC (effective February
2025) and AdvaMed.
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
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:
John has served as the Chief Financial
Officer at WPP plc, where he
successfully led the implementation
of their global transformation
programme. Prior to this, he served
as Chief Executive Officer of Argos,
Habitat and Sainsbury’s clothing and
general merchandise businesses,
and as Chief Financial Officer at
J Sainsbury plc. John also acted as
Chair of the Audit Committee for
Travis Perkins.
Nationality:
British
Board of Directors
Board leadership and company purpose
Deepak Nath
Chief Executive Officer
Appointed Chief Executive Officer
in April 2022.
Rupert Soames OBE
Chair
Appointed as an Independent
Non-Executive Director in April 2023
and as Chair in September 2023.
Key skills and competencies:
Angie has held both executive and non-
executive roles in a wide range of sectors,
including a regulated environment,
ensuring she is well placed to fulfil her
obligations as Senior Independent Director.
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, Chair of
the Remuneration Committee and
member of the Responsible Business
and Nominations Committees 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
J 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 attended Remuneration
Committees of Whitbread plc and
Lloyds Bank.
Nationality:
British
Angie Risley
Senior Independent Director
Appointed Independent Non-
Executive Director in September 2017,
Senior Independent Director from
October 2024.
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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
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
C
A
Key skills and competencies:
Simon has extensive experience
in finance, accounting, risk and
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.
Previous experience:
Simon was previously Group Chief
Financial Officer at BG Group,
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:
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.
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 Non-Executive Director
for both Haier Electronics Group and
Clinical Innovations LLC.
Nationality:
American
Simon Lowth
Independent
Non-Executive Director
Appointed as Independent Non-Executive
Director in January 2024.
Jo Hallas
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in February 2022 .
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
plc. 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
Jez Maiden
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director and as a member of the
Audit and Remuneration Committees
in September 2023. Appointed Chair
of the Audit Committee in March 2024.
John Ma
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in February 2021 .
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A
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 the
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 the
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
organisation. Her responsibility
includes research and development,
quality and regulatory,
manufacturing, supply chain and
commercial operations.
Nationality:
German/Polish
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 became
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
Specialty 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
Marc Owen
Independent Non-Executive
Director
Appointed Independent Non-Executive
Director in October 2017 and held the
role of Senior Independent Director from
September 2022 to September 2024.
Katarzyna Mazur-Hofsaess
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in November 2020.
Board of Directors continued
Board leadership and company purpose continued
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:
- Member of the Board of Cadence, Inc.
- Member of the Supervisory Board
of Philips (pending approval at AGM,
May 2025).
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
Bob White
Independent
Non-Executive Director
Appointed Independent Non-Executive
Director in May 2020.
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Key skills and competencies:
Sybella brings broad international
executive and non-executive
experience of culturally diverse
multinational organisations and
interactions with the London
Investment Community.
Current external appointments:
Director of Corporate Finance at
RELX Group, the global provider of
information and analytics, and Co-
Chair of the Development Board of
Somerville College, Oxford.
Previous experience:
Sybella retired in December 2024
from the Board of Tate & Lyle
plc where she served for nine
years as an Independent Non-
Executive Director and was Chair
of the Remuneration Committee.
She served for nine years as an
Independent Non-Executive Director
of Merchants Trust PLC and as Senior
Independent Director and Chair
of the Remuneration Committee
until her retirement in March 2024.
She was a member of the Industrial
Development Advisory Board of the
Department for Business, Energy &
Industrial Strategy for eight years.
Sybella qualified as a barrister and,
before joining RELX Group, she was a
member of the M&A advisory teams
at Baring Brothers and Citigroup.
Nationality:
British
Sybella Stanley
Independent
Non-Executive Director
Appointed Independent Non-
Executive Director in February
2025. Sybella is a member of the
Remuneration Committee and
will assume the role of Chair of
the Remuneration Committee
from 30 June 2025.
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
Helen Barraclough
Group General Counsel
and Company Secretary
Appointed Company Secretary
in April 2022.
Directors who have joined the Board
since 31 December 2024
Board members whose tenure
ceased during the year
R
Anne-Françoise Nesmes, CFO, stepped
down from the Board on 31 March 2024.
Rick Medlock did not stand for re-election
at the AGM on 1 May 2024.
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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.
Nationality:
American
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.
Nationality:
British
Location: Hull, UK
Prior to moving into her current
role, Alison served in multiple roles
across the Company, including as the
Compliance Officer for the Global
Advanced Wound Management
business, as the Compliance Leader
for APAC and Emerging Markets,
and establishing and leading the
Global Compliance Programme
Effectiveness & Improvement team.
Nationality:
American
Location: Austin, US
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.
Nationality:
American/Irish
Location: Andover, US
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.
Nationality:
American
Location: Georgia, US
Mizanu brings more than 25 years
of leadership experience in Quality
and Regulatory Affairs. Prior to
Smith+Nephew, Mizanu held senior
roles at Avanos Medical, Life
Technologies SETRIS Corporation and
Johnson & Johnson family companies.
Rohit Kashyap
President Advanced Wound
Management and Global
Commercial Operations
Alison Parkes
Chief Compliance Officer
Scott Schaffner
President Sports Medicine
Mizanu Kebede
Chief Quality &
Regulatory Affairs Officer
Executive Committee
Board leadership and company purpose continued
Paul Connolly
President Global Operations
» See page 104 for CEO and CFO biographies
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Executive Officers whose tenures
ceased during 2024, and recent appointments
Brad Cannon, President Orthopaedics & Americas, served
until 4 March 2024. Craig Gaffin was appointed President
Orthopaedics effective as of 4 March 2024.
Nationality:
American
Location: Andover, US
Vasant has over 25 years of global
MedTech 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.
Vasant Padmanabhan
President Research &
Development, ENT and
Emerging Markets
Nationality:
American/South African
Location: Fort Worth, US
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).
Nationality:
British
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.
Nationality:
British
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.
Elga Lohler
Chief HR Officer
Nationality:
American
Location: Memphis, US
Craig has held numerous commercial
leadership roles over the past 25
years with leading Medical Device
and Biotechnology companies such
as Stryker and Amgen. Craig has
led through progressive complexity,
challenge and scale across sales
and marketing in both start-up and
established organisations. Craig is a
graduate of the University of Vermont
and the Olin School of Business at
Washington University in St. Louis.
Helen Barraclough
Group General Counsel
and Company Secretary
Phil Cowdy
Chief Corporate Development
& Corporate Affairs Officer
Craig Gaffin
President Orthopaedics
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Finance & Banking Committee
A Committee comprising senior executives which approves
banking and treasury matters, guarantees and Group structure
changes relating to mergers, acquisitions and disposals.
Disclosures Committee
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.
Compliance & Culture
Committee
» pages 126–129
Reviews, 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.
Audit Committee
» pages 130–135
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.
Nomination &
Governance Committee
» pages 119–125
Reviews size, skills, experience,
knowledge and composition
of the Board, succession
planning, diversity and
governance matters.
Remuneration
Committee
» pages 136–139
Determines Remuneration
Policy and packages for
Executive Directors and senior
management, having regard to
pay across our workforce.
Ensures that the reward
strategy aligns with our
purpose, values and long-
term strategy.
Group Ethics & Compliance
Committee
Mergers & Acquisitions
Investment Committee
12-Point Plan Steering
Committee*
ESG Steering Committee
Global Crisis Management
team
New Product Development
Review Committee
Security & Privacy
Steering Committee
AI Working Group
Corporate governance framework
Division of responsibilities
Our Board
www.smith-nephew.com
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 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.
Executive Committee
» pages 108–109
The Board delegates the day-to-day operational management and implementation of Group strategy to the
CEO 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 delivering Group strategy.
The Executive Committee forms subcommittees including those listed below:
* Committee retired in 2025 following closure of the majority of workstreams under the 12-Point Plan.
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How we are governed
Senior Independent Director
Angie Risley
– 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).
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.
– Ensures effective communication
and dialogue with the Company’s
stakeholders, while maintaining
an appropriate balance between
stakeholders’ interests.
– 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.
– Regularly reviews the Board
composition 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.
Chief Financial Officer
John Rogers
– Supports the CEO 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.
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.
Independent Non-Executive Directors
Jo Hallas, John Ma, Katarzyna Mazur-Hofsaess, Simon Lowth,
Jez Maiden, Marc Owen, Sybella Stanley 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/
small group can dominate the Board’s
decision making.
– Provide constructive challenge, give
strategic guidance, offer specialist
advice and hold executive management
to account.
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At the close of each Board meeting, the
full Board meets for a short closed-session
discussion; this is followed by a closed
session for the Chair and 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. The Board has 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 from
the Group 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 and during
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, or 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
13 February 2025.
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.
If any Director becomes aware of any
situation that 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 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
during the year, 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.
Deepak Nath is a Director of MDIC
and AdvaMed, and John Rogers is
a Non-Executive Director of Grab
Holdings Limited.
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 AGM.
Each Director may be removed at any time
by the Board or the shareholders.
Board support
Together with the Executive Directors
and the Company Secretary, the Chair
ensures that the Board is kept properly
informed. Each Director has access to
the 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 judgement 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.
How we are governed continued
Division of responsibilities continued
112
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Board activities
The following pages provide an
overview of the key topics reviewed,
monitored, considered and debated by
the Board in the year to 31 December
2024. Board and Committee members
also have informal touchpoints,
updates and calls throughout the year
as needed.
Every Board session included:
– A report from the CEO
– 12-Point Plan update
– Group finance report and outlook
– Updates from Committee Chairs
– A report from legal and governance
– An Investor Relations report
– A closed session for the full
Board followed by a NED closed-
session discussion.
Where Board meetings take place at
the Croxley offices, a lunch in the office
canteen is scheduled for Board members.
February
Site visits to Hull and Croxley,
approval of Annual Report,
Sustainability Report, risk
review, FY results and dividend
March
Chair visit to
Portugal and
senior leadership
team meeting
April
Greater China deep dive, cyber
and business continuity review,
M&A and post-acquisition reviews,
funding and liquidity review, Q1
trading statement approval
May
AGM and investor
touchpoints
June
Site visits to Andover
and Pittsburgh,
portfolio discussion
July
Investor and register review, zero-
based budget and restructuring
update, H1 trading statement
approval, sustainability strategy
review, IT investment update
September
Strategy review and Board discussion,
update on 12-Point Plan move to
business-as-usual and portfolio review,
Board evaluation, talent management
strategy review, approval of Senior
Independent Director appointment,
review of Melton project
October
Q3 trading
statement
approval
December
Approval of 2025 budget and
three- year plan, Investor sentiment
discussion, succession planning,
cyber incident response session,
update on geopolitical risk mapping,
review of enterprise IT and AI
strategy, competitor overview
January
Completion
of CartiHeal
acquisition
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Strategy and
operational excellence
Continued monitoring of 12-Point Plan,
embedding a performance culture and
flawless execution across all areas of
the business
2024 activities and outcomes
– Reviewing performance against strategy,
budgets, and financial and business plans
– Approving half-year, full-year and
trading updates
– In-depth sessions on Orthopaedics,
Sports Medicine & ENT and Advanced
Wound Management business units
aligned with 12-Point Plan initiatives and
broader long-term strategic initiatives
– Monitoring Global Operations updates
and response to external and internal
challenges in line with key metrics
and deliverables
– Deep-dive session on Greater
China business.
Areas of focus for 2025
– Review of implementation of post-12-
Point Plan vision and strategy
– Continued monitoring of Orthopaedics
execution excellence and metrics
– Monitoring of implementation of AI and
IT strategy and roadmap.
Purpose and culture
Reviewing decision making in alignment
with the purpose of Life Unlimited and
culture pillars of Care, Collaboration
and Courage
2024 activities and outcomes
– Reviewing and monitoring Group
strategy to ensure alignment to Life
Unlimited and culture pillars
– Approval of the Code of Conduct and
Business Principles
– Review of sustainability strategy,
climate-related disclosures and key
performance metrics
– Board listening sessions with
wider workforce
– Review of initiatives to support employee
wellbeing including further improvement
of the employee assistance programme
– Review of Gallup results and employee
engagement, gender pay gap data
and reporting, and initiatives for the
wider workforce
– Review of initiatives to strengthen
and embed a culture of inclusion
and belonging throughout the
Group, including receiving reports on
engagement with employee interest
groups at Board listening sessions
– Overseeing succession planning at
Board and senior management level
and talent management strategy within
the organisation.
Areas of focus for 2025
– Reviewing and monitoring of continued
implementation of performance-based
culture aligned with Life Unlimited,
culture pillars and Code of Conduct
– Continued focus on talent management
strategy and succession planning
– Monitoring implementation of CSRD
framework and reporting.
1
2
3
5
4
1
2
3
5
4
Link to our strategic priorities
Link to stakeholder groups
People
Investors
Customers/Suppliers
Governments/Regulators
Environment/Communities
1
2
3
5
4
In 2024, the Board continued to
focus on its stated priorities:
3
2
1
Board priorities, stakeholders and outcomes
Division of responsibilities continued
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Smith+Nephew Annual Report 2024
Capital allocation
and cost management
Ensuring efficient and effective use of
company resources and implementation
of cost and restructuring programmes
2024 activities and outcomes
– Setting priorities for capital investment
across the Group
– Reviewing and monitoring progress
against the 12-Point Plan and
related metrics in support of the
Group strategy
– Approving annual budget, financial plan,
three-year strategic plan
– Approving major borrowings and
finance and banking arrangements
– Approving the $1 billion general
corporate purposes bond issue which
was used to repay private placements
and drawn amounts under the RCF
– Determining the dividend policy and
dividend recommendations.
Areas of focus for 2025
– Continuing to review structure and
cost management activities against
strategic plans including zero-based
budgeting (ZBB) initiatives
– Focus on ROIC, cash and EPS
key metrics to drive shareholder
value creation.
Innovation and portfolio
Understanding the industry, competitor
landscape and innovation pipeline and
portfolio to drive value creation
2024 activities and outcomes
– Review of performance and return
on investment of acquisitions and
integration planning
– Review of global innovation pipeline
and product portfolio with a focus on
differentiation and delivery for our
customers, patients and stakeholders.
Areas of focus for 2025
– Continued focus on portfolio
– In-depth reviews of competitor
landscape and opportunities
to differentiate.
Risk management
and oversight
Evaluating strategy and decision making
within risk appetite and ongoing review
of the controls environment
2024 activities and outcomes
– Overseeing the Group’s risk management
programme and related processes
– Review and approval of principal risks
of the Group and adapting Board agenda
to reflect these accordingly
– Review of the risk registers, risk mapping
exercises and annual review of the Board
appetite for risk
– Ongoing consideration of key risks within
all Board discussions including AI and IT
strategy and investment, Greater China
strategy, cybersecurity and incident
response, business continuity and disaster
recovery and geopolitical events
– Discussion at Board and Committee
meetings on key topics including the
potential impact of cybersecurity attacks
and breaches in the current geopolitical
context, regulatory changes, supply chain
disruption, global talent outlook, and
post pandemic constraints and trends
– Review of investor perspectives and
sentiment throughout the year
– Review of Board and executive
succession planning and changes to
the composition of the Board and
its Committees.
Areas of focus for 2025
– Enhanced focus on geopolitical risk
mapping and crisis management
– Continued focus on cyber resilience and
implementation of governance around
AI strategy
– Embedding new risk reporting
requirements and enhanced material
controls framework.
Our investor presentations are
available to download on our website
www.smith-nephew.com
1
2
3
5
4
1
2
3
5
4
1
2
3
5
4
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S172 Statement
Division of responsibilities continued
Board members are required to promote the success of the Company for the benefit of our stakeholders, including customers,
investors, employees, suppliers, regulators and our wider communities. Details of our engagement with our main stakeholder
groups is set out on pages 96-100. This statement summarises how our Directors addressed the matters set out in section 172(1)
(a) to (f) of the Companies Act 2006.
The likely consequence of any decision in the long term
Directors appreciate that assessing the consequences of their long-term
decisions, particularly in the current political and geopolitical
environment, is complex and often requires careful balancing of
competing stakeholder interests.
Matters considered by the Board include:
– Innovation pipeline and product portfolio review
– Budget planning aligned to our strategy
– Capital allocation priorities
– Business unit reviews (Orthopaedics, Sports Medicine & ENT and
Advanced Wound Management)
– Dividend policy
– Sustainability strategy
– Succession planning and talent management
– Consideration of these factors within our ERM framework and
principal risks.
For more details of our business model, see pages 16–17.
To support their decision making, Directors are provided with information
that describes the long-term proposal under consideration and how it
aligns with, or otherwise impacts, the Group’s strategy, budget and
three-year plan as well as our purpose of Life Unlimited.
Proposals for significant Board decisions include a potential stakeholder
impact assessment covering employees, suppliers, customers,
government, regulators, local communities, environment and investors.
Interests of our people
We are committed to cultivating a high-performing, inclusive workplace
where everyone is valued and respected, and feels a true sense of
belonging. We prioritise creating a psychologically safe environment that
drives innovation, fuels business success, and enhances engagement and
personal fulfilment. Our three pillars of Care, Collaboration and Courage
are the foundations on which we build a robust, respectful and
accountable culture.
Matters considered by our Board and its Committees include:
– Alignment of Group strategy to Life Unlimited and cultural pillars
– Code of Conduct and Business Principles
– Board listening sessions with the wider workforce
– Initiatives to support employee wellbeing
– Gallup results and employee engagement
– Initiatives to support talent development and succession planning
– Performance against health and safety metrics.
For more information, see the culture and belonging report on
pages 59–63.
Papers relevant to the Directors’ assessment of how effectively this is
being achieved are normally provided by the Chief HR Officer or Head of
Reward, for input and challenge and decision or awareness by Directors.
The importance of developing the Group’s business relationships
with suppliers, customers and others
A key priority for Directors as custodians of a responsible business is to
ensure the Company develops and maintains relationships with
customers, suppliers and other stakeholders that support the Group’s
purpose of Life Unlimited.
Matters considered by our Board and its Committees include:
– Quality audits and product governance
– Modern Slavery Statement
– Sustainability strategy
– Third party guide to working with Smith+Nephew
– Supply chain and procurement
– Smith+Nephew Academy and medical education initiatives to support the
safe and effective use of our products
– Consideration of these factors within our ERM framework and
principal risks.
Our suppliers are expected to adhere to our Code of Conduct and
Business Principles, and maintain corporate standards and behaviours
consistent with our own.
Papers relevant to the Directors’ assessment of how effectively these
relationships are being managed are provided for input and challenge and
decision or awareness.
The impact of the Group’s operations on the community and our environment
We recognise the need to reduce our impact on our planet.
We implement initiatives to manage energy, waste and water efficiently
and reduce our GHG where possible, and are mindful of the impact our
decision have on the environment.
Matters considered by our Board and its Committees include:
– Sustainability strategy
– Consideration of sustainability within our ERM framework and
principal risks
– Evaluation of ESG performance versus goals and metrics
– ESG-related measures for executive remuneration plans
– Our people and culture strategy
– Emerging legislation which may have impact in these areas.
For more information, see the ESG Report on 65–77.
Papers relevant to the Directors’ assessment of how effectively we are
managing our impact on the community and environment are provided
for input and challenge and decision or awareness by Directors.
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Smith+Nephew Annual Report 2024
Decision making
When making decisions, the Board supports the Company’s objective of working to improve the quality of healthcare through
investment in new technologies and services, industry-leading medical education and evidence programmes, and efficient and resilient
manufacturing and distribution, while balancing the interests of all of our stakeholders. Examples of how stakeholder interests are taken
into account in Board decision making include:
Decision
How stakeholder interests were taken into account
Stakeholder groups
Investment
in innovation
Directors review the product development pipeline and approve annual investment into R&D.
New product development is driven by observation and engagement with customers to identify unmet
clinical needs. Our product development follows a vigorous phase-gate process to ensure that the
product meets the needs of customers, will contribute to Smith+Nephew’s transformation to being a
higher-growth business, and integrates sustainability principles into design and packaging.
Patients,
customers,
investors
Cybersecurity
Our Board and its Committees review the cybersecurity and information security strategy and
implementation/risk reports in order to ensure that the Company is effectively managing risk, both in
terms of the opportunities to enhance our governance and deliver value to our patients and customers
through connected products and the risk management framework that the Company adopts and
implements in order to develop a robust framework to protect the data and interests of our stakeholders.
Patients,
customers,
suppliers,
investors
Acquisition
of CartiHeal
The acquisition of CartiHeal was completed by the Group in January 2024 (see page 12).
Directors reviewed the acquisition strategy and potential impact on patients, customers, suppliers,
employees, investors and regulators, particularly in light of the geopolitical and macroeconomic
conditions in the region at the time of completion. Post-completion, the Directors received regular
updates on the progress of integration of the acquisition from a strategic, financial, operational and
cultural perspective in order to evaluate the ongoing impact on stakeholders post-acquisition.
Patients,
customers,
suppliers,
employees,
investors,
regulators
Melton
project
Since initial approval of the project to design and develop a new site in Melton near Hull, Directors have
regularly reviewed the implementation plans for the site and the potential impact of any proposed
changes to the plan on customers, suppliers, employees, investors and regulators, particularly in light of
increased macroeconomic pressures which have exacerbated since initial approval of the project.
The Directors receive regular updates on the progress of implementation of the project from a strategic,
financial, operational and cultural perspective in order to evaluate the ongoing impact on stakeholders of
any proposed changes to the project in line with the Company’s strategy to transform to a higher-
margin business.
Customers,
suppliers,
employees,
investors,
regulators, local
communities
Our desire to maintain our reputation for high standards of business conduct
Our strong culture pillars of Care, Courage and Collaboration promote
good governance across our business and are crucial to fostering an
environment of doing business the right way. Directors have a
commitment to doing business ethically, with integrity, honesty
and professionalism.
Matters considered by our Board and its Committees include:
– Code of Conduct and Business Principles
– Ethics and compliance programmes
– Global data privacy compliance
– Corporate governance framework
– ERM framework
– Whistleblower policies, investigations and effectiveness review
– Anti-bribery and corruption policy.
For more information, see ‘How we are governed’ on pages 110–112 and
the Compliance & Culture Committee report on pages 126–129.
Papers relevant to the Directors’ assessment of how effectively we are
maintaining our high standards of business conduct are provided for
input and challenge, and decision or awareness.
Our aim to act fairly between members of the Group
Directors seek to act fairly in the interests of all shareholders. It is
acknowledged that shareholders often have differing views and opinions
and Directors seek to weigh up the range of opinions to arrive at
decisions that promote the long-term success of the Group.
Matters considered by our Board and its Committees include:
– AGM
– Group and individual shareholder meetings
– Board discussions on investor feedback
– Investor relations plan.
For more information, see shareholder engagement on page 98.
There is an extensive investor engagement programme throughout the
year and retail shareholders have access to Directors at the AGMs, as
well as through our investor.relations@smith-nephew.com email.
Papers relevant to this duty are provided for input and challenge, and
decision or awareness.
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Smith+Nephew Annual Report 2024
1
12
7
8
10
2
3
11
5
6
4
9
10. Hull (UK)
The visit included a focus on the AWM R&D
and innovation pipeline, the vision and future
of the Melton site, a tour of the manufacturing
facility and labs, and touchpoints with staff
members over lunch and coffee.
Board Directors who visited
Jez Maiden and Simon Lowth
11. Pittsburgh (US)
Board members learned about Smith+Nephew’s
Robotics journey from the acquisition of Blue Belt
Technologies in 2014, to the Brainlab strategic
alliance in 2019, to the CORI◊ ecosystem.
They received presentations on market overviews
and drivers for robotics-assisted surgery, the
multiple benefits to surgeons and patients
including enhanced precision, repeatable
outcomes and hospital differentiation, competitor
developments and trends, and ASC strategy.
The Board also met members of the Pittsburgh
Chamber of Commerce for: an overview of the
Pittsburgh Healthtech and MedTech environment
and insights into data-driven healthcare; product
demonstrations on CORI◊ and various AI solutions
under development; a townhall meeting and lunch
with the Robotics team, customer calls with four
surgeons for a customer’s perspective on
Smith+Nephew, its products, innovation and
customer service; a government affairs
presentation on potential healthcare implications
and the impact on Smith+Nephew of elections in
the US/UK; and an evening event with Sports
Medicine and Advanced Wound Management
sales representatives to understand more about
the sales representative role and experience at
Smith+Nephew and the view of the organisation
from a rep perspective.
Board Directors who visited
Rupert Soames, Jo Hallas. Bob White,
Marc Owen, Katarzyna Mazur-Hofsaess,
John Ma and Jez Maiden
2024 site visits were aligned to key
strategic and operational priorities
for the Board with a focus on
Smith+Nephew’s robotics platform
in Pittsburgh and Croxley, and the
AWM business in Hull. In addition
to the formal site visits, our
Non-Executive Directors also visited
various sites throughout the year
(see map) with customised
programmes providing on-the-
ground insights into Smith+Nephew’s
global business unit organisation,
strategy, operations, innovation,
risk, people and culture, regulators,
government, investors, local
communities and the environment.
Site visits and Board
Directors who visited
1. Coimbra (Portugal)
Rupert Soames
2. Andover (US)
Rupert Soames, Jez Maiden
and Jo Hallas
3. Memphis (US)
Rupert Soames and
Jez Maiden
4. Brisbane (Australia)
Jez Maiden
5. Fort Worth (US)
Rupert Soames, Jez Maiden
6. Singapore
Rupert Soames
7. Munich (Germany)
Rupert Soames
8. Aarau (Switzerland)
Rupert Soames
9. Penang (Malaysia)
Rupert Soames
12. Croxley (UK)
Board members toured the Academy and surgeon
centre and had a hands-on experience of our
robotics-assisted CORI Surgical System.
Board Directors who visited
Rupert Soames, Jez Maiden, Jo Hallas
and Bob White
Board site visits
Division of responsibilities continued
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Smith+Nephew Annual Report 2024
Our focus for 2025
– 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 sense and to evaluate
potential opportunities to increase
diversity within the Board and the
timeline for doing so.
– Continued enhancement of
Board education programmes
for Board members, including on
the competitor and regulatory
landscape, the impact of
geopolitical events on the
organisation and continued focus on
incident planning.
Highlights in 2024
– Appointments of Simon Lowth effective
1 January 2024 as Independent Non-
Executive Director and a member of the
Audit and Nomination & Governance
Committees, Jez Maiden on 1 March
2024 as Chair of the Audit Committee
and John Rogers as Executive Director
with effect from 1 April 2024.
– Appointment of Angie Risley as Senior
Independent Non-Executive Director
with effect from 1 October 2024.
– Conducting the Board external
evaluation between June and September
2024 (see page 124).
– In-depth Non-Executive discussions
on talent management strategy and
succession planning respectively.
– Continued implementation of
comprehensive induction plans and
ongoing development programmes for
Board members (see page 123).
Nomination & Governance Committee Report
Composition, succession and evaluation
“The work of the Committee this year
reflects the Board’s commitment to
succession planning, bringing together
a range of diverse talent, expertise,
skills and experience, and ensuring the
effective transition of responsibilities.”
Rupert Soames
Chair of the Nomination
& Governance Committee
Committee roles
and responsibilities
The responsibilities of the Nomination
& Governance Committee as set
out in the terms of reference on our
website are:
– Reviewing the structure, size and
composition of the Board and
recommending the appointment of
Directors and Company Secretary.
– Monitoring the range of skills,
knowledge, experience,
independence and diversity of
the Board.
– Overseeing the annual Board
evaluation process, led either
externally or internally by the Senior
Independent Director.
– Overseeing Board succession
plans, including engaging external
search consultancies and making
recommendations on appointments
to the Board.
– 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.
– Approving external directorships to
be held by the Board and reviewing
any conflicts of interest.
Board and Executive
appointments in 2024
We welcomed Simon Lowth on 1 January
2024 as a Non-Executive Director and
member of the Audit Committee and
Nomination & Governance Committee.
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, has been
a strong addition to the Board.
The Board appointed Angie Risley as Senior
Independent Non-Executive Director with
effect from 1 October 2024. Angie brings
a wealth of experience from her non-
executive portfolio roles over a number
of years which make her ideally placed to
take over the mantle from Marc Owen.
We wish to thank Marc for his exceptional
contribution in the SID role during his
tenure, driving and managing the Chair
appointment and induction. Marc remains
Chair of the Compliance & Culture
Committee and a member of the Audit and
Nomination & Governance Committees.
In January 2025, we were delighted to
announce the appointment of Sybella
Stanley to the Board as a Non-Executive
Director with effect from 1 February 2025.
Sybella will serve as a member of the
Remuneration Committee and will succeed
Angie Risley as Chair of the Remuneration
Committee with effect from 30 June 2025.
Sybella has worked for RELX Plc since
1997 and is currently Director of Corporate
Finance. She retired in December 2024
from the Board of Tate & Lyle plc where she
The Terms of Reference for the Nomination &
Governance Committee describe the role and
responsibilities of this Committee more fully and
can be found on our website.
www.smith-nephew.com/en/
who-we-are/corporate-
governance#terms-of-reference
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Nomination & Governance Committee Report continued
Composition, succession and evaluation continued
served for nine years as an Independent
Non-Executive Director and was Chair
of the Remuneration Committee. I am
delighted that our Board has been able
to attract such a strong candidate, and
we look forward to welcoming Sybella
and supporting her as she takes the
Remuneration mandate forward, built
on the huge contribution that Angie has
made during her time as Chair of the
Remuneration Committee.
We also approved various other changes
to our Committees to support succession
planning and to enable Non-Executive
Directors to broaden their experience
of the organisation. Jez Maiden was
appointed as Chair of the Audit Committee
on 1 March 2024, succeeding Rick
Medlock. Jo Hallas became a member
of the Compliance & Culture Committee
with effect from 1 May 2024, with Angie
stepping down from the Committee on the
same date.
John Rogers was appointed as an
Executive Director with effect from
1 April 2024 following the departure of
Anne-Françoise Nesmes. John is a highly
regarded CFO 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.
With these changes we continue our
commitment to fostering diversity in its
broadest sense and to ensuring that our
Board membership draws from a wide
range of backgrounds and cultures.
New Director appointments
and process
For our new Board appointments in 2024,
the Committee followed the process
outlined on the right and considered the
shortlist of candidates for each position,
taking into account:
– the purpose, values and culture of
the business and the Company’s
strategic priorities;
– the key skills and experience which
may be required on the Board and its
Committees; and
– 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
that we select the most qualified candidate
for the role in the best interests of the
organisation as a whole.
Board and Executive
succession planning
Succession planning is a key focus for
the Board from both a leadership and
governance perspective. The Committee
and the full Board engaged in a review
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 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,
digital/cyber experience, ESG and
enhancing diversity in the boardroom.
The full Board also reviewed the Board
Skills Composition Matrix (please see
table on page 121), 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 Board discusses succession plans
with management for senior executives,
with two dedicated closed sessions for
the Non-Executive Directors with the
Chief Human Resources Officer on the
talent management strategy and also on
succession planning, the internal talent
pipeline and the development programmes
which support those initiatives. Pages 108-
109 give details of the members of the
Executive Committee, 25% of whom are
female, one of whom is of African heritage,
one of Asian ethnicity and two of other
ethnic groups.
* Russell Reynolds was appointed as the search firm
in respect of the appointment of Simon Lowth. Spencer
Stuart was engaged for the CFO appointment and Egon
Zehnder was engaged for the appointment of Sybella
Stanley. All three firms have no other connection with
the Company or individual Directors.
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 advisers, as
appropriate, to compile a shortlist
of candidates based on the
role description.
3
The Committee (together with
external advisers*) 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
CFO 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.
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Smith+Nephew Annual Report 2024
Diversity
The Committee believes that a Board
and management team which has a
range of diverse skills, backgrounds and
experience is best equipped to take the
decisions that will deliver sustainable value
to shareholders and other stakeholders.
Our Board and Committee Diversity Policy
is designed to support these principles.
As part of fulfilling the objective of this
policy, the Board has focused on robust
and proactive succession planning to
address diversity on the Board and will
continue to review the composition of the
Board to ensure that we have a diverse
range of experience and backgrounds.
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 other specific diversity measure.
Our diversity statement is located on our
website: www.smith-nephew.com/en/
about-us/corporate-governance/diversity-
statements.
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
Skills and experience matrix
Executive Directors
Tenure
Employee
engagement
CEO
Financial
International
Healthcare/
Medical
Devices
Emerging
Markets
Cyber-
security
ESG
UK
Governance
Remuneration
Deepak Nath
2y 8m
Anne-Françoise
Nesmes
3y 8m
John Rogers1
0y 8m
Non-Executive
Directors
Tenure
Employee
engagement
CEO
Financial
International
Healthcare/
Medical
Devices
Emerging
Markets
Cyber-
security
ESG
UK
Governance
Remuneration
Rupert Soames
1y 7m
Marc Owen
7y 2m
Jo Hallas
2y 10m
Simon Lowth
0y 11m
John Ma
3y 9m
Jez Maiden2
1y 2m
Katarzyna
Mazur-Hofsaess
4y 1m
Rick Medlock3
4y 0m
Angie Risley
7y 2m
Bob White
4y 7m
Notes
1 John Rogers replaced Anne-Françoise Nesmes as CFO from 31 March 2024.
2 Jez Maiden became Chair of the Audit Committee on 1 March 2024.
3 Rick Medlock stepped 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 2024
Nomination & Governance Committee Report continued
Composition, succession and evaluation continued
Diversity reporting
Smith+Nephew is a global company with
the majority of its revenue, operations and
senior management in the US. Around 8%
of employees are based in the UK and
around 5% of Group revenues are derived
from the UK.
Our reported global objective of 25%
ethnic diversity within senior management
by 2027 and our reported current
percentage of 27% are calculated based
on the ethnicity definitions applicable to
senior management in the markets where
they live and work. For senior management
based in the UK, we use the Office for
National Statistics’ definition of ethnicity in
order to calculate the proportion of ethnic
diversity of senior management in the UK.
Based on the composition of our business
and the fact that the vast majority of
our senior management, operations and
revenue are based outside the UK, we
feel it is appropriate to continue to report
against a global measure in order to show
our global progress.
In order to comply with UK Corporate
Governance requirements, this year we
have included a UK senior management
ethnicity objective of 10% by 2027.
Where there are opportunities to bring
senior managers into the UK organisation,
we will continue to consider a broad and
diverse slate of candidates in accordance
with our diversity policies and hiring
procedures. We will continue to review and,
where appropriate, revise our UK and global
commitments on an annual basis.
We have numerous training courses in
Learning Unlimited, our internal learning
platform, for people leaders on the topics
of allyship, inclusion, and belonging.
Since 2021 Smith+Nephew have run
personal data campaigns to encourage
disclosure of missing gender, race/ethnicity,
veterans and disability data, and we have
made significant progress to ensure we
have data sets that are as complete as
possible. We respect the privacy rights
of individuals and comply with applicable
laws in the collection of data.
Prepared in accordance with
UK Listing Rule 6.6.6(10) as at
31 December 2024
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 2024)
Men
8
73
3
9
75
Women
3
27
1
3
25
Other categories
0
0
0
0
0
Not specified/
prefer not to say
0
0
0
0
0
Ethnic background: Board & executive management (as at 31 December 2024)
White British or other
White (including
minority White groups)
9
82
3
8
67
Mixed/multiple
ethnic groups
0
0
0
0
0
Asian/Asian British
2
18
1
1
8
Black/African/
Caribbean/Black
British
0
0
0
1
8
Other ethnic group,
including Arab
0
0
0
2
17
Not specified/
prefer not to say
0
0
0
0
0
1 Executive management is the Executive Committee (most senior executive body below the Board).
Board and executive management diversity
Explanation against LR 6.6.6(9)
The table above provides our Board and executive management diversity data as at
31 December 2024, our chosen reference date, which has been prepared in accordance with
UK Listing Rule 6.6.6. 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 27% 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 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 121.
Source of data
Data concerning gender and ethnicity representation on the Board and Executive Committee
is set out above. 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 included an option not to specify an answer.
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Smith+Nephew Annual Report 2024
Board development
Board induction and
development programme
During 2024, we implemented
structured and robust induction
programmes for Jez Maiden, Simon
Lowth and John Rogers.
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 which
we operate in.
Induction programmes
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.
In 2024, the Non-Executive induction
programmes included:
– A strategic overview and
introduction to MedTech and
medical devices coupled with an
immersive introduction to our
purpose, culture pillars and people
– One-to-one sessions with
each member of the Executive
Committee, Investor Relations and
Finance Global Leadership Teams
– Subject matter expert sessions
on medical device regulation,
healthcare compliance, ERM and
inventory/asset utilisation
– Site visits to Hull, Croxley and
Pittsburgh together with any
additional site visits as may
be requested
– Informal office touchpoints with
employees at the UK Group Head
Office (Croxley)
– Introductory sessions with
external advisers, auditors, brokers
and consultants
– Additional internal and external
sessions upon request based
on interest.
Areas of strength and focus for 2024
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 129.
– 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 the
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/
relevant to the Board.
The Chair regularly reviews the
development needs of individual
Directors and the Board as a whole.
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Smith+Nephew Annual Report 2024
Board effectiveness
About Boardroom Review
Tracy founded Boardroom Review in
2004 and has conducted more than 400
international reviews across publicly
listed, mutual, privately owned and
public sectors. She currently serves
as the senior independent on various
government appointment panels and is a
mentor to young female professionals.
Tracy also conducted the review in 2021
against which the 2024 evaluation could
be benchmarked.
Tracy has reviewed the narrative set out
in this report. Boardroom Review has not
provided any other services to the Group
and there are no conflicts between
Boardroom Review and the Group or any
of its Directors that could compromise
the independence of the evaluation.
Boardroom Review is a signatory to the
Chartered Governance Institute’s Code
of Practice for board reviewers and has
applied it in undertaking the evaluation.
Nomination & Governance Committee Report continued
Composition, succession and evaluation continued
1
Initial briefings with the Chair
and Senior Independent Director
to ensure the evaluation was
tailored specifically to meet the
Board’s needs and priorities.
2
In-depth information review
across core areas including
The 12-Point Plan and strategy,
risk, cyber security, talent,
ESG and other key areas of
focus for the Board.
3
Confidential interviews with
each Board member and the
Company Secretary focused on
Board effectiveness.
4
Observation of all Board
and Committee meetings
in July 2024.
Methodology for evaluation
Selection of evaluator
Following a vendor evaluation process which
included a review of various evaluation models,
tools and platforms, the Board approved the
appointment of Dr Tracy Long CBE of Boardroom
Review. The Board and Committee external
evaluation was conducted in accordance with
the guidance in the Code.
Board external evaluation
The 2024 Board evaluation was
conducted externally by Dr Tracy Long of
Boardroom Review and sought to review
key aspects of Board effectiveness.
The reviews in 2025 and 2026 will be
facilitated internally and led by the
Senior Independent Director, supported
by the Company Secretary. The next
external evaluation will be in 2027.
5
Feedback from the Chair and CEO, culminating in the collective
Board discussion in September to assess the Board’s strengths and
opportunities. The full Board discussion included core topics such as
the work of the Board on strategy, risk and controls, people and
stakeholders, Board dynamics, use of time and information, and
contribution and composition of the Board and its Committees.
6
An Executive Committee (ExCo) review was conducted by Boardroom
Review in parallel with the Board evaluation in order to evaluate and
report on ways to further enhance effectiveness of those entities
both individually and collectively. The ExCo review provided helpful
commentary and insights for the Board, highlighting the thoughtful
and execution-focused approach of the CEO, the strong partnership
between the CEO and the new CFO and the improved levels of
reporting and transparency to enable data-driven decision making.
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Smith+Nephew Annual Report 2024
Strategy following
completion of 12-Point Plan
As we complete the 12-Point Plan
the Board will focus on new ways
to drive value for the business,
including reviewing the portfolio.
Industry landscape and
portfolio
Detailed reviews of competitors
at each meeting so the Board
has a good understanding of the
market dynamics and landscape.
Ongoing review of strategy and
structure, incorporating industry
performance insights, supported
by external advisers as necessary.
Ongoing focus on
embedding and supporting
performance culture
Celebration of examples of
high performance and flawless
execution; ongoing evaluation of
learnings to strengthen culture,
iteratively incorporating feedback
from internal and external
sources, acknowledging areas for
improvement and making changes
in direction if necessary.
Crisis management,
response and recovery
Continued enhancement
of the Board programme to
include ongoing threat analysis
(incorporating market insights
from external advisers as
appropriate), scenario planning
and the role of the Board.
Talent development
and tracking success
Ongoing succession planning and
talent strategy discussions to
further refine key competencies
aligned with strategy, leadership
and diversity, and mitigation
of risks.
Areas of focus for
2025 to further enhance
Board effectiveness
Strengths and opportunities
Strengths
– Alignment between Board and ExCo on
the Purpose of Life Unlimited as central
to culture and strategy
– Engaged Chair, experienced SID with
strong transition to new appointment
– Dynamic open CEO leadership and
strong partnership with CFO
– Good mix of tenure and diversity of NED
background and experience
– Positive executive/NED relationships
with healthy Board culture
and contribution
– Clear roles, responsibilities and strong
capabilities within Committees
– Improved Board visibility and confidence
in complex supply chain issues
– Good attention to the ESG agenda
and strategy
– Healthy corporate culture and
attention to values (including Board
listening sessions)
– Good level of attention to leadership
development and executive succession
– Good use/management of time and
respected secretariat support.
Opportunities
In the current environment of
transformation, several opportunities to
continue to strengthen Board effectiveness
were noted, including:
– Opportunity to build on and deepen
understanding of industry and
competitor landscape
– Continued focus on supply chain
and visibility
– Continued focus on technology
and cybersecurity
– Embedding transition from 12-Point Plan
to business-as-usual activities.
Composition, succession
and evaluation
Overall, the Smith+Nephew Board believes
it is operating effectively as assessed both
holistically and against the areas of focus
for 2024:
– The Board agenda in 2024 has been
shaped around the core areas of
innovation and portfolio, strategy
and operational excellence, cost
management and capital allocation,
and oversight of risk management and
controls to identify further opportunities
to drive longer-term strategic
value creation.
– The Board has regularly evaluated
risks, opportunities and progress
on commercial and operational
transformation, including through
business unit strategic updates, a
deep-dive session on Greater China,
the transition from the 12-Point
Plan to business-as-usual activities,
reorganisation to a global business
unit structure and the zero-based
budgeting project.
– The Board has had further discussions
on the macro challenges, regulations
and trends globally within healthcare
and MedTech. External experts have
provided further insights to enhance
understanding of the industry and
the frameworks which the Company
operates in.
– The Board held additional talent
management strategy and succession
planning sessions on talent pipeline and
gap analysis at Board level, together with
a review of long-term people strategy
with an emphasis on developing strong
pipelines of senior leaders. The Board
and its Committees have monitored
employee engagement scores, the
internal talent pipeline and the
development framework, in particular for
high-value roles within the Company.
– Closing sessions with the full Board
and also NEDs at each Board meeting
have facilitated transparent and
detailed discussion. Members of the
ExCo and their direct reports have
spent time over the year with Board
members during inductions, site visits
and strategic presentations fostering
constructive discussion.
– Continuing to build trust and credibility
to strengthen governance.
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Smith+Nephew Annual Report 2024
Compliance & Culture Committee Report
Compliance & Culture
“Smith+Nephew is driving performance closely
aligned to its purpose of Life Unlimited and its
culture pillars of Care, Collaboration and Courage
with a commitment to doing business ethically,
with integrity, honesty and professionalism.”
Marc Owen
Chair of the Compliance
& Culture Committee
Our focus for 2025
– Continued evaluation of the
impact of ethics and compliance,
regulatory, quality and cultural
activities, and trends in the context
of Group strategy.
– Continued monitoring of the
Company’s progress against our
sustainability strategy, measuring
actions against objectives and
metrics and evaluating the
effectiveness of implementation.
– Continued evaluation of the impact
of Committee and Board decision
making on our people, communities
and the environment.
– 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.
– Continue Board listening sessions
to supplement the annual
employee engagement survey,
which is the primary mechanism
by which the Board gains insight
and understanding into the health
of the organisation and employee
perspectives on the Company.
– Continued evaluation of stakeholder
interests aligned with the Group
sustainability strategy.
– Review and approval of key
annual disclosures such as the
Sustainability Report and Modern
Slavery Statement.
– Oversight of whistle-blower policies
and procedures and an annual
review of effectiveness.
Committee roles and responsibilities
Ethics and compliance
– Overseeing ethics and compliance
programmes, strategies and plans.
– Monitoring ethics and compliance
process improvements
and enhancements.
– Reviewing whistle-blower policies and
overseeing investigation reports.
– Assessing compliance performance
based on monitoring, auditing,
and internal and external
investigations data.
– Discussion 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.
Sustainability
– Overseeing the implementation
of our ESG 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 Steering Committee focused
on alignment of our ESG strategy with
stakeholder requirements and our
Strategy for Growth.
Culture
– Board listening sessions with
employees aim to proactively support
and reinforce our strategy and shared
purpose of Life Unlimited, and our
culture of Care, Collaboration and
Courage. These sessions provide
the Board with an opportunity to
engage directly with employees to
understand employee perspectives on
certain topics.
– Talent planning and people
development including line
manager initiatives.
– Receiving and assessing performance
against purpose and culture, talent,
people leadership and engagement,
and inclusion and belonging initiatives.
– Organisational effectiveness and
embedding culture.
Quality and Regulatory Affairs (QARA)
– 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 QARA Officer on QARA
strategy and operations.
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.
www.smith-nephew.com/en/who-we-are/corporate-governance#terms-of-reference
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Smith+Nephew Annual Report 2024
Committee meetings
In 2024, the Committee held four meetings.
The Chair, CEO, CFO, Group General
Counsel and Company Secretary, Chief
Compliance Officer, Chief QARA Officer,
Chief HR Officer, President of Global
Operations and VP ESG also attended all or
part of the meetings by invitation.
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 provides
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 that 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 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 whistle-blower effectiveness
review as well as details of investigations,
actions taken to address substantiated
matters and developing trends.
The Committee receives updates on
potentially significant findings from
compliance audits and oversight actions,
including details 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 programme 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 2024, the Committee also received
updates with a regional focus on our
compliance programmes in India, which
demonstrates how the global programme
is adapted to mitigate market-specific
risks. The Committee also explored the
focus topic of the Third-Party Seller
Management programme.
Sustainability/ESG
The Committee received updates
throughout the year from the President
Global Operations and Vice President ESG
on our performance against People, Planet
and Products initiatives.
Utilising dashboards and strategy reporting
developed by the ESG Steering Committee,
the Committee monitors management
actions taken, and tracks progress
against the organisation’s ESG objectives
through KPIs, metrics and leading
stakeholder indicators.
Driven by an increased focus on driving
business value, the Committee reviewed
the 2024 Sustainability Plan throughout
the year to align with the ESG priorities
of Company stakeholders. Based on
stakeholder and industry best practice
assessments, the Committee approved
updates to product donation and
waste objectives.
During each of the four Committee
meetings during the year, the Committee
was updated on Scope 1 and 2 carbon
emissions reductions and spend on green
certificates (Renewable Energy Credits) to
support emissions reductions.
In February 2024, the Committee reviewed
the draft 2023 Sustainability Report and
the Committee report for final approval
and publishing. The Committee also
considered and approved the Modern
Slavery Statement.
During May 2024, the Committee reviewed
our customers’ and investors’ focus on ESG
and sustainability.
In July 2024, the Committee was
presented with a detailed review of our
ESG ratings and a roadmap to meet the
Company’s 2040 and 2025 net zero carbon
emissions objectives. The Committee also
discussed the performance metrics in
respect of the Performance Share Plan, in
particular the EPS performance measures.
In December 2024, the Committee
reviewed the Company’s 2025 plan for
People, Planet and Products initiatives
and ESG efforts supporting each of the
Company’s business stakeholder groups.
The Committee Chair continues to engage
with investors, governance teams and
other stakeholders on sustainability and
ESG topics.
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 QARA 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
programmes and activities.
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Smith+Nephew Annual Report 2024
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, including the Clean Air Act,
amendments to the EU Medical Devices
Regulation programme and reviewing
the evolving US FDA’s cybersecurity
regulatory environment.
During the year, the Committee reviewed
progress in areas of focus including
complaints benchmarking, quality
assurance programme 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.
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 areas for 2024 centred
around initiatives that enhanced our
culture. Focus groups were held to
solicit feedback to understand how the
Courage element from Our Commitments
can be played out in everyday life at
Smith+Nephew. The Committee also
received briefings on projects in the
employee experience space, such as
People+Connect, how the Company is
enhancing people leader capabilities,
and how the Company is measuring
organisational effectiveness and
embedding various changes throughout.
The Committee was pleased to receive
updates on how the Company is enhancing
the overall employee experience.
Details around the improved wellbeing
plans, our progress on pay equity and
transparency, our evolving continued focus
on inclusion and belonging, and the creation
of an automated employee experience
platform, People+Connect. Progress on
employee engagement is tracked through
the annual survey and associated internal
and external KPIs and metrics to ensure
that the organisation is achieving its
objectives. Discussions at the Committee
on people leader capabilities focused on
refreshed leadership programmes, which
provided introductory leadership training
to early-career employees who show
aspirations and potential to play a larger
role in leading and inspiring people.
The Committee was made aware of the
positive impact of the 2024 wellbeing
events, including mental health awareness/
resilience, work-life balance and
manager emotional wellness training.
Global EIGs events were also reported to
the Committee, including the Empower
& Care EIG’s Men’s Health month event,
International Women’s Day activities in
2024 and Pride Month.
The 2024 Gallup global employee survey
results were shared with the Committee.
These results allow Smith+Nephew to
benchmark against similar companies in
our industry, and in 2024 demonstrated
an increased participation rate of 92%.
The Committee was pleased to celebrate
the Company receiving the Gallup
Exceptional Workplace Award in 2024, and
noted that the Company had displayed an
improvement trajectory above the majority
of other Gallup participants.
Compliance & Culture Committee report continued
Compliance & Culture continued
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Smith+Nephew Annual Report 2024
The Board is committed to the purpose
of Life Unlimited and supporting the
strong culture within the organisation.
Our strong cultural pillars of Care,
Courage and Collaboration promote good
governance across our business and are
crucial to fostering an environment of
ethical performance.
A key forum where culture is at the
top of the agenda is the Compliance &
Culture Committee, which monitors and
measures the ways in which culture is
embedded in the organisation.
Code of Conduct
The Code of Conduct is reviewed by
the Board annually and approves any
amendments. Our Code of Conduct
sets out the expected behaviours and
as such is a clear foundation of our
corporate culture.
Each Board member is required to
certify compliance with the Code of
Conduct annually.
Our Code of Conduct is available to
view at www.smith-nephew.com/
en/compliance
Board, Committee
Strategy meetings
Routine reporting at Board, Committee
and strategy meetings together with
senior employees’ attendance and
presentations provide valuable insight
into culture across the Group.
The Board effectively engages with
employees at site visits and meetings
held at the Company’s offices.
Employee Inclusion Groups
The Board recognises that a culture of
inclusivity is key to enable individuals
to bring their whole selves to work.
Our EIGs are driven by our employees
and their passion to foster an ethos of
belonging and create a community to
discuss relevant topics knowing that
their voice and contributions matter.
» See page 60 for
more on our EIGs
Whistle-blowing
The Board has ensured that there is
a clear and accessible platform for
employees to confidentially raise any
concerns through the whistle-blowing
hotline. A report on whistle-blowing
matters including trends and monitoring
is presented to the Committee.
This information is a key alert to any
cultural issues and workforce concerns.
Board listening sessions
In 2024, Board members in addition
to Committee members engaged in
listening sessions and other touchpoints
with employees during their visits to
the Company’s facilities, enabling us
to experience the employee voice in a
number of ways.
Directors directly engaged with
employees during five Board listening
sessions in 2024. A wide variety of
matters were discussed, including
how our corporate functions enable
our Company’s success, checking in
on the progress of our international
commercial models and how best we
serve our customers, and the progress
of our 12-Point Plan, enabling the Board
to hear the employee voice directly.
These sessions are a key way for the
Board to monitor the cultural climate of
the Group.
Number of listening sessions
throughout the year
5
Employee annual
engagement survey
A positive and collaborative culture
for our employees is key to enabling
us to deliver our success. The annual
engagement survey is reviewed by the
Board and considered to be a helpful
indicator of culture across the Group
and provides insights at each level of
the business.
4,346
Colleagues’ survey comments
reviewed and analysed
Outcomes of embedding our
culture
– Improved employee engagement at
92%, overall evidence of higher job
satisfaction and winner of the Gallup
Exceptional Workplace Award
– Developing and retaining talent
– Opportunities for employees to bring
their whole selves to work
Improved employee engagement
92%
Our culture
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Smith+Nephew Annual Report 2024
Audit Committee Report
Audit, Risk and Internal Control
“I am pleased to present my first Audit
Committee Report since becoming Chair of
the Committee. In 2024, we have delivered
oversight of high-quality financial reporting
and external auditing, strong financial controls
and compliance, and effective internal audit
and risk management for Smith+Nephew.”
Jez Maiden
Audit Committee Chair
Our focus for 2025
In delivering its responsibilities in 2025,
the Committee will build on its 2024
focus areas, including:
Financial reporting and
external audit
– Supporting the second year of
Deloitte’s audit, with a focus
on identifying improvement
opportunities in finance processes.
– Reviewing implementation of the
enhancements to sustainability
reporting as part of EU
CSRD requirements.
Financial controls
– Continued oversight of the
governance and maturity of IT
controls, given ongoing investment
in information technology across
the Group.
– Reviewing the final design for
the monitoring and review of
material controls, ready for UK
Corporate Reform compliance in
2026, alongside implementation
of a revised European Crime and
Corporate Transparency Act-
compliant fraud control framework.
Risk management
– Assessing the impact of a changing
global environment on the Group’s
principal risks, together with
monitoring of cyber resilience, as part
of the Group’s ongoing investment
and maturity programme.
Finance organisation
– Expanding the Committee’s exposure
to finance resource across the Group,
supporting talent development.
Committee roles and responsibilities
– Ensuring the integrity of the
Company’s financial reporting to
shareholders and any announcements
relating to the Group’s financial
performance.
– Ensuring financial statements
comply with UK and US statutory
requirements.
– Reviewing the content of the Annual
Report and advising the Board on
whether, taken as a whole, it is fair,
balanced and understandable, and
providing the information necessary
for shareholders to assess the
Company’s performance, business
model and strategy.
– On behalf of the Board, reviewing
management’s assessment of and
reporting on the effectiveness of
internal controls, and compliance with
the 2018 UK Corporate Governance
Code and the Sarbanes-Oxley
Act 2002.
– Ensuring the effectiveness of the
Internal Audit function, agreeing audit
plans and considering outcomes of
internal audits.
– Reviewing the operation of the Group’s
risk management framework.
– On behalf of the Board, carrying out a
robust assessment of the principal and
emerging risks facing the Group.
– Ensuring the effectiveness of the
external auditor, agreeing the scope
of audits (including materiality
thresholds and areas of risk for focus),
and the auditor’s fees and terms
of engagement.
– Monitoring enhancements to fraud
assessment and considering any
reported frauds and any concerns
raised by the Company’s whistle-
blowing process.
– Overseeing other matters, including
cybersecurity, IT governance, tax
and treasury.
The Terms of Reference for the Audit Committee describe the role and responsibilities of this Committee more fully and can
be found on our website.
www.smith-nephew.com/en/who-we-are/corporate-governance#terms-of-reference
130
Smith+Nephew Annual Report 2024
Committee meetings
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
(GHIA) without management present.
The Committee Chair held individual
meetings with the external auditor, CFO,
GHIA, Group Financial Controller and the
Group Head of Financial Controls and
Compliance through the year.
All members of the Committee are
deemed to be Independent Directors
and I am the designated financial expert
under the SEC Regulations and, along
with Simon Lowth, we are the Committee
members with recent and relevant financial
experience in accordance with the UK
Corporate Governance Code.
Our focus in 2024
As part of its responsibilities, set out above,
the Committee’s particular areas of focus
in 2024 included:
Financial reporting and external audit
– Reviewing implementation of a change
in the Company’s operating model,
which created greater accountability
for each business, and monitoring
its impact on external reporting.
In addition, the Committee reviewed
the implementation of the allocation of
directly attributable central costs to the
business units.
– Considering significant and other
financial matters which could impact the
financial statements, as set out on pages
132 and 133.
– Monitoring the transition of the external
audit and ensuring continued audit
quality, with Deloitte completing its first
audit in 2024.
– Reviewing the acquisition accounting
in relation to the CartiHeal acquisition
and the allocation between acquired
intangibles and goodwill.
– Monitoring enhancements to
sustainability reporting and preparation
for the implementation of EU CSRD
reporting in 2025.
– Supporting the Remuneration
Committee in its assessment of,
selection of and performance against
financial metrics in short- and long-term
incentive schemes.
– In October 2024, the US Securities and
Exchange Commission (SEC) issued a
comment letter to the Group in relation
to its Form 20-F for the year ended
31 December 2023. We reviewed
management’s written responses to the
SEC, which were accepted, and their
review was closed in December 2024.
This review has resulted in a number of
enhancements in disclosures included
in the Group’s Form 20-F for the year
ended 31 December 2024.
Financial controls and compliance
– Reviewing the operation of financial
controls across the Group, which
included introduction of a streamlined
approach leveraging the Group’s global
processes and piloting of continuous
monitoring of process controls.
– Overseeing improvements in the
maturity of IT controls, including the
remediation of deficiencies relating to
user access management.
– Reviewing plans and progress to
introduce enhanced controls reporting
to meet UK Corporate Reform (UKCR
or ‘provision 29’) requirements in 2026,
along with revisions to the Group’s
fraud prevention framework to meet
the requirements of the UK Economic
Crime and Corporate Transparency Act
(ECCTA).
Internal audit and risk management
– Confirming the continued operation of a
satisfactory control environment across
the Group, through monitoring of the
planning and delivery of an efficient,
high-quality internal audit programme,
focused on compliance, process and risk-
driven audits as set out under Internal
Audit on page 134.
– On behalf of the Board, monitoring the
Group’s ERM framework, including the
control and mitigation of principal risks
against agreed risk appetites.
– Regular ‘deep dives’ into the Group’s
cyber resilience, including progress on
further improving cyber maturity.
Finance organisation
– Reviewing treasury and tax operations,
including the tax impact of a new global
tax system (‘Pillar 2’) and ongoing
refinancing activities.
– Monitoring and supporting management
change in key finance roles, including
a new CFO, Group Financial Controller
and GHIA.
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Smith+Nephew Annual Report 2024
Audit Committee report continued
Audit, Risk and Internal Control continued
IT systems
The Group’s IT systems form a key
component of the Group’s financial
reporting activities. The Group
operates key IT controls to prevent
inappropriate changes being
made to IT systems in relation to
application functionality, transactional
processing and direct changes to
underlying data. Given the reliance
placed on these systems, IT controls
testing is fundamental to Deloitte’s
audit approach.
Our action
We reviewed management’s
reports on the testing of IT general
controls, including the remediation
of deficiencies relating to user
access management, and monitored
the completion of mitigating and
remedial activities.
Deloitte response
Deloitte noted IT control deficiencies
relating to user access management
for certain IT systems and designed
and executed audit procedures to
respond to the risk arising from this.
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
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 had a particular
focus on goodwill impairment
testing for the Orthopaedics cash-
generating unit (CGU), as the level
of headroom has decreased and it
is sensitive to a reasonably possible
change in assumptions, in particular
the projected trading profit margin.
We challenged the downside
sensitivity analysis undertaken and
concluded that the carrying value
of these assets 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.
Deloitte response
Deloitte evaluated management’s
approach on the impairment
conclusions and the basis of
the assessment.
Significant matters related
to the financial statements
We considered the following key areas of
judgement in relation to the 2024 financial
statements and at each half year and quarterly
trading report, which we discussed in all cases
with management and the external auditor:
Valuation of inventories
A feature of the Orthopaedics business
unit (which accounts for approximately
68% of the Group’s total inventory
and approximately 83% 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.
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 20%
at 31 December 2024 (2023: 21%).
We challenged the basis of the
provisions and concluded that the
proposed levels were appropriate and
have been consistently estimated.
Deloitte response
During 2024 Deloitte evaluated
management’s approach to inventory
provisioning considering the use of a
lookback sales demand methodology.
132
Smith+Nephew Annual Report 2024
Other matters related to
the financial statements
As well as the identified significant matters,
other matters that the Audit Committee
considered during 2024 were:
Going concern
The impact of a global economic downturn
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 for a period
of at least 12 months from the date of
approval of the financial statements, for
going concern purposes and concurred
with management that the continued
adoption of the going concern basis is
appropriate, as set out on page 135.
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 scheme and concurred with
management that these assumptions
were appropriate. We also reviewed the
assumptions, accounting and disclosures
for the US scheme termination and
deemed them appropriate.
Non-IFRS financial information
Trading profit is a key metric used to assess
the performance of the Group. We annually
review the policy and principles applied
to adjust Operating profit for items which
materially impact the Group’s profitability.
Liability provisioning
The Group has provisions for legal disputes
which require estimation. We received
regular updates from the Group
General Counsel & Company Secretary.
These updates form the basis for the
level of provisioning. We received detailed
reports from management, including the
actuarial model used to estimate the
provision for metal-on-metal hip claims,
and challenged the key assumptions.
We concurred with management that the
proposed levels of provisioning at year end
of $123 million included within ‘provisions’
in Note 17.1 in 2024 (2023: $159 million)
were appropriate in the circumstances.
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 2024 and the Annual Report 2024,
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,
and the KPIs and their link to the strategy.
External auditor
Independence of external auditor
As previously reported, following a
competitive tender process Deloitte LLP
(Deloitte) was appointed auditor of the
Company with effect from 1 January 2024,
as approved by shareholders at the AGM
in May 2024. We are satisfied that Deloitte
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. Andrew Bond was appointed as our
senior lead audit partner on 1 May 2024.
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 2024 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 Deloitte.
The Audit Committee receives feedback
from Deloitte 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
Deloitte had carried out their audit for
2024 effectively.
Appointment of external auditor
at AGM
Resolutions will be put to the AGM to
be held on 30 April 2025 for the re-
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.
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, Deloitte, 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.
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Smith+Nephew Annual Report 2024
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 SVP Group Treasurer & Tax and
SVP Group Finance and amounts up to
$50,000 by the CFO. Any individual amount
over $50,000 must be pre-approved by
the Chair of the Audit Committee and
amounts in excess of $100,000 by 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 Deloitte and KPMG
in 2024 and 2023, which were approved
in accordance with the Auditor
Independence Policy.
2024
$ million
2023
$ million
Audit-related services
0.4
0.3
Assurance-related
services
–
–
Audit-related fees in 2024 primarily
consisted of routine services and were
deemed by the Committee not to infringe
upon auditor objectivity or independence.
Following a competitive tender process,
the Committee approved the selection
of Deloitte as the Company’s Corporate
Sustainability Reporting Directive (CSRD)
assurance provider. Deloitte has confirmed
that assurance of CSRD will be standalone
from the financial audit and the Committee
concluded that the appointment would
not infringe upon auditor objectivity or
independence. The ratio of non-audit
fees to audit fees for the year ended
31 December 2024 is 0.04. The ratio of
non-audit fees to audit fees for the year
ended 31 December 2023 was 0.03.
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 Deloitte and KPMG, the Group’s
independent auditors and other local
statutory auditors in each of the last
two fiscal years, in each of the following
categories were:
2024
$ million
2023
$ million
Audit fees
9.1
10.0
Audit-related fees
0.4
0.3
Total
9.5
10.3
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 Internal Audit team, led by the GHIA,
consists of appropriately qualified and
experienced employees. Third parties
may be engaged to support audit work
as appropriate.
The GHIA 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.
During the year, the team completed 32
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
including IT disaster recovery and cyber
maturity; and an ERP implementation
review in Japan. Group-level reviews
included ERM effectiveness, business
continuity management arrangements,
sales inventory and operational process
effectiveness, 12-Point Plan benefits
realisation, procurement processes and
supplier master data management.
The team also performed reviews of
the China Sports Medicine commercial
business post-VBP and a review of the
China channel and distributor management
processes. Management have taken
swift action to implement Internal Audit’s
recommendations. The team continues to
leverage data analytics combined with on-
site and remote audit work as appropriate.
Audit Committee report continued
Audit, Risk and Internal Control continued
134
Smith+Nephew Annual Report 2024
The team carries out its work in
accordance with the Institute of Internal
Auditors’ International Professional
Practices Framework. 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.
The Audit Committee, which re-approved
the function’s charter in December 2024,
has satisfied itself that adequate, objective
internal audit standards and procedures
exist within the Group and that the Internal
Audit function is effective.
Risk management programme
The work the Committee has carried out
in respect of risk management and internal
controls is explained in the Risk Report on
pages 78–82.
Viability Statement
The Committee reviewed management’s
work in conducting a robust assessment
of those risks which would threaten
the 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.
Based on this analysis, the Committee
recommended to the Board that it could
approve and make the Viability Statement
on page 94.
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
20–27 and the principal risks on pages
83–93.
The financial position of the Group,
its cash flows, liquidity position and
borrowing facilities are described on pages
20–27. 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.
The Group has considered several
scenarios (refer to Viability Statement on
pages 94 and 95) 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
downturn 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.
Code of Ethics for
Senior Financial Officers
We have adopted a Code of Ethics for
Senior Financial Officers, which applies
to the CEO, the CFO, the Group Financial
Controller, 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 2024 or up until 24 February
2025. 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 CFO that they
have complied with the Finance Code
of Conduct.
Jez Maiden
Chair of the Audit Committee
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Activities during 2024
– Reviewed, proposed, and consulted
with shareholders on changes to our
Remuneration Policy in respect of US
Executive Directors.
– Set performance measures and
targets for our short and long-term
incentive plans.
– Monitored performance against the
targets of our short and long-term
incentive plans.
– Reviewed and updated the incentive
plan arrangements for employees
below Board.
– Monitored the remuneration and benefit
arrangements of the wider workforce.
– Received regulatory, market, and best
practice updates.
– Reviewed and approved the Committee’s
Terms of Reference.
Remuneration Committee Report
Directors’ Remuneration Report
Chair’s Letter
Dear Fellow Shareholder,
During 2024, the Company made
good progress with improving financial
performance, delivering significant
cost savings, and improving cash flow
generation, reflecting the benefits from the
the 12-Point Plan. The year ended strongly,
enabling the Company to deliver solid
financial results across its key performance
metrics. This is testament to the resolve
and hard work of Deepak in partnership
with John and the executive team as well
as Smith+Nephew employees to deliver
for both our shareholders and the patients
who benefit from our products.
This year, the Remuneration Committee
has maintained its focus on ensuring our
remuneration arrangements effectively
attract and retain top talent, which is
aligned to the Board’s objective of fostering
long-term stability. The Board is focused on
ensuring that these arrangements support
the delivery of our strategic business
objectives and help cultivate a culture of
performance and innovation that will
enable sustainable growth and success to
deliver long-term value for both our
shareholders and employees.
As reported in our 2023 Annual Report and
in line with our goal to retain talent and
ensure stability among our executive and
senior leadership teams, we conducted a
comprehensive review and shareholder
consultation regarding changes to our
Remuneration Policy for US-based
Executive Directors. This review was
important, as the Company and the Board
needs to have the ability to compete for
talent in the US market given the size and
scope of its business and the MedTech
talent that is predominantly based there.
“Our remuneration arrangements are
designed to incentivise and reward the
delivery of sustainable value creation
and long-term growth.”
Angie Risley
Chair of the Remuneration Committee
Our focus areas for 2025
– Align incentive plan performance
measures with the evolution
of strategy.
– Set incentive plan performance
targets for the year ahead.
– Monitor performance against our
short and long-term incentive
plan targets.
– Oversee our approach to
pay transparency for the
wider workforce.
Committee roles
and responsibilities
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 Executive Directors
and the leadership team is aligned to
the Company’s purpose and values
and is clearly 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.
The Terms of Reference for the Remuneration
Committee describe the role and responsibilities of this
Committee more fully and can be found on our website.
www.smith-nephew.com/en/who-
we-are/corporate-governance#terms-of-
reference
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Smith+Nephew Annual Report 2024
The Board is keenly aware that the
Company has had four CEOs and three
CFOs in the past seven years, and with
every change there has been downstream
leadership attrition and loss of talent from
our internal pipeline which has had a
longer-term negative impact on the
Company. It was therefore important that
the Board start to address this with a new
Remuneration Policy. Further detail on the
reasons for the change are set out in our
Directors’ Remuneration Report within the
2023 Annual Report.
The changes to our Remuneration Policy
were presented at our Annual General
Meeting (AGM) on 1 May 2024, and we
greatly appreciated the engagement and
input from shareholders throughout the
process, as the views and comments
shared helped us ensure that we were
considering all the issues, and ultimately
enabled us to shape the final proposal. The
Board appreciated the support from the
majority of our shareholders, with 57%
voting in favour of the changes and 56%
backing the adoption of a new Restricted
Share Plan (RSP).
During the initial consultation process,
Rupert Soames and I engaged with
shareholders representing 67% of our
issued share capital. We also consulted
with proxy advisers who were most
representative of our shareholder base at
the time of the initial consultation, being
IA/IVIS, Glass Lewis, and ISS.
Following the AGM vote, we analysed the
vote patterns to better understand the
outcome so that we could further engage
effectively with shareholders. This analysis
showed that passive investment funds,
which held almost 40% of our issued share
capital at the time, had predominantly
decided to vote against the proposed
changes.
In line with UK corporate governance
requirements, following the AGM we
contacted shareholders that represented
75% of our issued share capital, including
passive investment funds, to seek further
feedback and comments on the proposals.
The Board decided to pause the
implementation of the Remuneration
Policy, while further consultation took
place as the Board wanted to hear the
views of shareholders given the voting
outcome. This further consultation ran for a
six-week period during June and July. The
majority of shareholders who had
previously engaged with us confirmed that
they had supported the vote, but
regrettably only a few of the funds who had
voted against the new policy (the majority
of whom were passive funds) engaged in
the second round of consultation.
We acknowledge that certain UK investor
governance teams were not able to
support our proposals due to the
parameters deemed acceptable within the
pre-existing UK corporate governance
environment. However, we also note that
following the AGM season in 2024, the UK
environment has begun to change, with an
acknowledgement that UK-headquartered
companies such as Smith+Nephew, with a
majority of their business, employees, and
revenues in the US, need the ability to offer
remuneration arrangements for US-based
senior executives which are competitive
and aligned to the norms of the industry
and jurisdiction in which they live and work.
The Board met at the end of July 2024 to
discuss the outcome of the consultation,
the AGM vote, and the interests of all
applicable stakeholder groups. Given the
lack of additional investor feedback during
the further consultation and the continued
support of the majority of shareholders
who had voted in favour of the proposed
Remuneration Policy, the Committee and
Board determined that they would
implement the wishes of the majority of
shareholders and announced that they
would adopt the Policy and new Restricted
Share Plan (RSP) with no further changes.
The changes were implemented in August
2024.
As a result, for US Executive Directors the
annual award under the Performance
Share Plan (PSP) increased from 275% to
300% of base salary, and an annual award
would be granted under the Restricted
Share Plan (RSP) equal to 125% of base
salary vesting in three equal annual
instalments, which is aligned to US market
practice for RSP vesting schedules. The
vesting of this RSP award is subject to a
reasonable judgement underpin. In
addition, the shareholding requirement for
a US-based CEO increased from 300% to
500% of base salary. There is no change to
the Annual Incentive Plan (AIP) opportunity
of 215% of base salary, but once the
shareholding requirements are met, the
annual bonus deferral will reduce from
50% to 30%. Further details are set out on
page 143.
Following adoption of the policy in August
2024, a top-up PSP award of 25% was
granted to our US-based CEO in respect of
the 2024-2026 PSP award. This top-up had
the same performance conditions as the
2024-2026 PSP award of 275% granted in
March 2024. In addition, a 2024 RSP award
of 125% of base salary was awarded,
which will vest in three annual instalments
on the first, second and third anniversaries
of the award.
The potential incentive awards under the
new Remuneration Policy move the target
total direct compensation of the CEO’s
package from 20% below the lower
quartile of our global MedTech peer group
(see page 149 for further details on this
peer group), to the lower quartile. In
relation to FTSE 20-60 companies, the
CEO’s arrangements would be above the
upper quartile and towards the upper end
of UK-listed company practice, but not as
an outlier. The new arrangements do not
fully match US remuneration arrangements
but will enable the Board to compensate
US-based Executive Directors more
appropriately relative to their US industry
peers and make a more competitive offer if
needed.
We acknowledge that executive pay is
a topic that attracts strong and often
differing opinions among investors,
and the Board fully understands that
financial performance remains a focus
for investors. However, the Board firmly
believes that the provisions of the 2024
Remuneration Policy are in the long-term
interests of the Company and will support
the commitment to deliver on financial
performance and value for shareholders.
85%
Our CEO pay is 85%
performance-based
57%
paid in shares
500%
and a shareholding requirement
of 500% of base salary.
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Remuneration Committee Report continued
Directors’ Remuneration Report continued
Our approach to remuneration
Our remuneration strategy is designed to
motivate talent to achieve our strategic
objectives, deliver on customer
commitments, innovate to improve patient
outcomes, inspire our employees, and drive
long-term success and growth, ultimately
delivering value to our shareholders. This
focus on long-term performance aligns
with our shareholders interests and is
embedded in our Remuneration Policy,
which includes incentives deliberately
weighted towards long-term goals, coupled
with meaningful shareholding
requirements for Executive Directors both
during and after their employment.
Performance targets are set to be relevant,
stretching and aligned to our business
strategy. We also consider how
performance is delivered when determining
incentive plan outcomes. Appropriate
consideration is given to applicable ESG
risks to ensure that the performance
delivered is sustainable and fully aligned
with our Company values and culture, with
malus and clawback applied to all forms of
variable pay.
Our remuneration approach is also
designed to be competitive within the
MedTech industry and across the diverse
markets in which we operate, enabling us
to attract and retain top talent globally.
Wider employee remuneration
We operate in a highly competitive global
market for skills and talent, with our
workforce playing a critical role in achieving
our business goals. To compete effectively,
our remuneration approach must be
flexible and tailored to different markets,
ensuring we remain responsive to
competitive challenges. In addition, we
prioritise pay equity, reviewing pay levels to
ensure fairness, and are committed to the
real living wage and narrowing the gender
pay gap, as well as tackling the root causes
of gender imbalance to ensure a truly
inclusive culture that supports diversity.
Over the past year, we reviewed the
short-term and long-term incentives for
senior managers below the Board level, and
implemented several changes. These
adjustments enhance our competitiveness
in attracting and retaining talent, while also
promoting greater differentiation in
performance-based rewards over both the
short and long term.
Our reward framework also recognises that
non-financial benefits play a crucial role in
creating a supportive culture, with
employee wellbeing forming a key part of
our overall employment proposition.
In September, I chaired a listening session
with some of our employees to talk about
our approach to remuneration and its
alignment with the Company’s purpose,
values and long-term strategy. Along with
insights from our annual employee
engagement survey, this feedback provides
valuable context for decision making
around our remuneration arrangements.
2024 incentive plan outcomes
The Company finished the year strongly
and delivered solid financial results across
its key performance metrics. Revenue grew
by 4.7% on a reported basis (5.3% on an
underlying basis) and the Company
continued to deliver year-on-year
expansion in its trading profit margin which
increased to 18.1%. Cash flow generation
was improved, with free cash flow
increasing to $551 million from $129
million, and trading cash flow increased to
$999 million driven by significant
improvement in working capital compared
to 2023. These results reflect the benefits
from the 12-Point Plan being realised.
The Committee strives to maintain a
clear link between pay and performance,
focusing on setting challenging
performance targets and evaluating
both Company-wide and individual
achievements. In that context, we believe
that the payments outlined in this report
fairly reflect the performance achieved and
that the Remuneration Policy operated as
intended during the year.
Annual incentive
For Executive Directors, 85% of
their Annual Incentive Plan (AIP)
bonus opportunity is tied to financial
performance, with the remaining 15% tied
to strategic objectives.
Based on our financial performance and
the achievement of individual objectives
over the year, the total bonus payable to
Deepak Nath is 60.6% of maximum (or
130.3% of base salary) and to John Rogers
is 60.7% of maximum (or 130.6% of base
salary). Half of this bonus payable will be
deferred in shares for a period of three
years. More details on the performance
against the annual targets are set out on
page 157.
Long-term incentive
The Committee reviewed the performance
of PSP awards granted in April 2022
against the award performance conditions
and determined that, based on actual
performance over the three year
performance period ended 31 December
2024, these 2022-2024 PSP awards will
vest at 29.7% of maximum opportunity
(59.4% of target). (see page 161 for
further details).
Deepak joined the Company in April 2022
and was granted a 2022-2024 PSP award
in May 2022 – this award will vest at 29.7%
of maximum opportunity (59.4% of target)
in May 2025. John joined the Company in
December 2023 and so was not granted a
2022-2024 PSP award.
Applying the Remuneration
Policy in 2025
Base Salary
Following a review of the salary of
Executive Directors, the Committee
decided to award increases aligned with
the wider workforce in the US for the CEO,
and in the UK for the CFO. This resulted in
an increase of 3% for Deepak and a 3.5%
increase for John, both effective from
1 April 2025.
Annual Incentive Plan
The maximum opportunity will remain
at 215% of base salary for Executive
Directors and the target will continue to be
set at 50% of the maximum. For 2025, the
Committee decided to reduce the payout
at Threshold from 15% of maximum
to zero.
The Committee reviewed the choice of
performance measures and decided to
replace trading cash flow conversion
with free cash flow as this measure is
considered to be a more comprehensive
measure of financial health and better
aligns with shareholder value creation;
it also rewards more efficient capital
allocation decisions. As a result, the
performance measures will focus on
revenue (35% weighting), trading profit
margin percentage (35% weighting), free
cash flow (15% weighting) and strategic
objectives (15% weighting), which includes
a combination of business and ESG
objectives. Further details are set out on
page 171.
138
Smith+Nephew Annual Report 2024
number of industry sectors. His extensive
experience in transformation and capital
markets is especially important given our
focus on driving greater shareholder value.
John’s remuneration upon recruitment was
set in line with our Remuneration Policy,
and further details are provided on pages
142-144.
2024 AGM
I very much hope that this year’s
report provides a clear overview of the
Committee’s considerations and decisions,
as well as an explanation of the 2024
remuneration outcomes. Additionally,
I hope you will continue to support
the Committee in its commitment to
ensuring competitive, fair and effective
remuneration that is aligned with business
performance and shareholder returns,
while securing and retaining the best
talent and essential skills needed for our
future success.
I would like to extend my thanks to
shareholders and proxy advisers who have
given their time and valuable insights over
the year to help us shape our approach to
executive remuneration, and to all those
who have supported me in my role as
Chair of the Remuneration Committee,
Finally, I’d like to welcome Sybella Stanley
to the Remuneration Committee, who will
succeed me as Chair of the Committee
from 30 June 2025.
Angie Risley
Chair of the Remuneration Committee
Performance Share Plan
The Committee intends to grant PSP
awards in line with its Remuneration Policy,
which equates to 300% of base salary for
Deepak Nath, being a US-based Executive
Director and 275% of base salary for
John Rogers being a UK-based Executive
Director. The Committee reviewed the
choice of performance measures for
the award to be granted in 2025 and
decided to replace the current global
revenue growth performance measure
with an earnings per share (EPS) measure
to reflect our long-term strategy of
sustainable profitable growth. This change
also considers the views of a number
of our shareholders who indicated their
preference for an EPS measure during our
recent Remuneration Policy consultation.
As a result, the performance measures for
the 2025-2027 PSP award will include a
combination of earnings per share (30%
weighting), return on invested capital (30%
weighting), relative total shareholder return
(30% weighting) and ESG objectives (10%
weighting). Further details on the intended
awards, including the performance
measures and associated targets, are set
out on page 171.
Restricted Share Plan
In line with its Remuneration Policy, the
Committee intends to grant Deepak Nath,
being a US-based Executive Director an
award in the Restricted Share Plan (RSP)
equal to 125% of base salary. This award
will vest, subject to a reasonable
judgement underpin at the time of release,
in three equal instalments on the first,
second, and third anniversaries of the
award. John Rogers, being a UK based
Executive Director is not eligible for an
RSP award.
Chair and Non-Executive
Director fees
The fees payable to the Chair of the Board
and Non-Executive Directors are reviewed
annually. In line with the increase in base
salaries for Executive Directors, the Chair
fee and Non-Executive Director base fee
will be increased by 3% for US-based
and 3.5% for UK-based Non Executive
Directors from 1 April 2025. The additional
fees for acting as a Chair of a Committee
were also reviewed (see page 146 for
further details).
Board Changes
Anne-Françoise Nesmes stepped down
from the Board on 31 March 2024 and left
the Company on 1 May 2024. As Anne-
Françoise provided the Board with
significant advance notice of her intention
to step down, demonstrated dedication
to her role, and supported the transition
to John Rogers as incoming CFO, the
Remuneration Committee exercised its
discretion to treat Anne-Françoise as a
good leaver for the purposes of unvested
PSP awards that were granted in 2021,
2022 and 2023. She also received a
payment under the 2023 AIP in March
2024, of which 50% was deferred in
shares, and she will retain her outstanding
Deferred Bonus Plan (DBP) awards which
will vest in 2025, 2026 and 2027. Anne-
Françoise was not eligible for a bonus under
the 2024 AIP.
John Rogers joined the Company on
1 December 2023 and was appointed to
the Board on 31 March 2024. The Board
considers John to be an outstanding
candidate, with a proven track record
operating around the world and across a
Compliance statement
We have prepared this Director’s remuneration report (the Report) in accordance with The Enterprise and Regulatory Reform Act 2012–2013 (clauses 81–84), sections 420–422 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 Director’s 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 154–173 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 30 April 2025. The Implementation Report explains how the Remuneration Policy was implemented during 2024. The following sections have been audited by Deloitte:
The Single Figure Tables on Remuneration including related notes (pages 155–161); details of awards made under the Performance Share Plan and Restricted Share Plan (page 162);
Summary of Scheme Interests during the year (page 162–163); Payments to former Directors (page 164); Directors interests in Ordinary Shares (pages 163 and 165) and Senior Management
Remuneration (page 170).
The Directors’ Remuneration Policy was approved by shareholders at the Annual General Meeting on 1 May 2024. This Policy can be found on our website within the 2023 Annual Report
and 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.
Trading Profit Margin, Trading Cashflow Conversion, Free Cash Flow and ROIC are non-IFRS financial measures used in the Directors Remuneration report from page 136–173. They are
explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 265–271.
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Smith+Nephew Annual Report 2024
2024 in numbers
1 Trading Profit, Cashflow Conversion and ROIC are non-IFRS financial measures. They are explained and reconciled
to the most directly comparable financial measure prepared in accordance with IFRS on pages 265-271.
2 Only wages and salaries. Per note 3.1, a further $379m of employee benefits cost are not included.
Remuneration at a glance
Our at a glance summary sets
out the total remuneration paid
to our Executive Directors in 2024.
Base salary
» See more on page 142
Pension and benefits
» See more on page 142
Annual bonus (AIP)
» See more on page 157
Long-term incentive plan
(PSP and RSP)
» See more on page 161
Financial Performance
Group
Remuneration
& Relative Spend
$5,810m
Global Revenue
(2023: $5,549m)
$1,049m
Trading Profit1
(2023: $970m)
$1,663m
Total Employee Cost2
(2023: $1,683m)
$657m
Operating profit
(2023: $425m)
18.1%
Trading Profit Margin1
(2023: 17.5%)
3%
US Average Salary
Increase
(2023: 3%)
95.2%
Cashflow Conversion1
(2023: 65.5%)
7.4%
Return on Invested
Capital1
(2023: 5.9%)
3.5%
UK Average Salary
Increase
(2023: 3.65%)
47.2c
Earnings per Share
(2023: 30.2c)
-3.5%
Total Shareholder
Return
(2023: -1.3%)
$327m
Returns to
Shareholders
(2023: $327m)
Directors’ Remuneration Report continued
140
Smith+Nephew Annual Report 2024
Executive Directors
Former Executive Directors
Deepak Nath
(CEO)1
John Rogers
(CFO)2
Anne-Françoise Nesmes
Former CFO3
Salary
$1,560,093
$694,913
$203,687
Pension & Benefits
$158,605
$94,904
$28,549
Annual Incentive Plan (Bonus)
$2,034,434
$1,210,073
–
Performance Share Plan
$1,052,397
–
$546,233
Restricted Share Plan4
$1,965,517
–
–
Forfeited Incentives1
$1,041,513
–
–
Total
$7,812,559
$1,999,889
$778,469
1 Deepak Nath received buy-out awards in respect of outstanding incentives he forfeited on leaving his former company, Siemens Healthineers. All awards were provided on a like-for-like
basis in terms of the value provided and their performance and/or vesting periods. Further detail on these awards is included within our 2021 Annual Report, and further details on the
amounts paid 2024 are shown on page 155.
2 John Rogers joined the Company on 1 December 2023 as CFO designate. The amounts shown represent the period from 1 April 2024 when John was appointed as CFO and as an
Executive Director.
3 Anne-Françoise Nesmes left the Company on 1 May 2024 and was not eligible for a salary review in April 2024, a payment from the 2024 AIP, or a PSP award in March 2024.
4 Restricted Shares were issued to Deepak post shareholder approval in August 2024 at a share price of £11.701 and GBP/USD 1.277.
Single figure of remuneration ($)
2024 in numbers continued
Deepak Nath
(CEO)
John Rogers
(CFO)
Anne-Françoise Nesmes
(former CFO)
Base Salary
Pension and Benefits
Forfeited Incentives
PSP
AIP
RSP
0
1000
2000
3000
4000
5000
7000
8000
6000
(Received during 2024)
Executive Director Remuneration
Deepak Nath
Chief Executive Officer (CEO)
John Rogers
Chief Finance Officer (CFO)
Anne-Françoise Nesmes
Former Chief Finance Officer
$7.8m
Single Figure
(2023: $4.7m)
$2.0m
Single Figure
(2023: n/a)
$0.8m
Single Figure
(2023: $2.0m)
3%
2024 Base Salary Increase
(2023: 3.5%)
0%
2024 Base Salary Increase
(2023: n/a)
0%
2024 Base Salary Increase
(2023: 3.5%)
60.6%
2024 Annual Incentive Plan
(% of maximum opportunity)
(2023: 61.4%)
60.7%
2024 Annual Incentive Plan
(% of maximum opportunity)
(2023: n/a)
n/a
2024 Annual Incentive Plan
(% of maximum opportunity)
(2023: 59.8%)
29.7%
2022-24 Performance Share Plan
(% of maximum opportunity)
(2023: n/a)
n/a
2022-24 Performance Share Plan
(% of maximum opportunity)
(2023: n/a)
29.7%
2022-24 Performance Share Plan
(% of maximum opportunity)
(2023: 10.5%)
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Smith+Nephew Annual Report 2024
Policy overview
Remuneration Policy and 2024 Implementation for Executive Directors
This section provides a summary of the key features of the Remuneration Policy approved by shareholders at the 2024 AGM
as it applies to Executive Directors. Please refer to the 2023 Annual Report (available on the Company’s website) for full details.
Reward Element
Policy Summary
2024 Implementation
Base Salary
2024
2025
2026
2027
2028
Operation
Base salaries are reviewed annually and
allow for scope of role and the individual’s
experience and time in role as well as
their performance.
Maximum level
Increases will generally not exceed the
average increase for the wider employee
population within the Executive Director’s
home country. A higher increase may be made
if there is an increase in scope or responsibility
of the individual’s role; or to recognise
development of the individual in role.
Performance
Business and individual performance will be
taken into account.
Base Salary
Effective
1 April 2024
Effective
1 April 2023
%
Increase
Deepak Nath
John Rogers
Anne-Françoise Nesmes
$1,572,424
£725,000
£637,519
$1,526,625
£725,0001
£637,5192
3.0%
0%
0%
1 John Rogers joined on 1 December 2023. The salary shown is as at this date.
He was not eligible for a salary review in April 2024.
2 Anne-Françoise Nesmes left the Company on 1 May 2024 and was not eligible
for a salary review in April 2024.
Pension and payment in lieu of pension
2024
2025
2026
2027
2028
Operation
Executive Directors receive a cash allowance
in lieu of membership of a pension plan
unless local laws require participation in a
pension plan.
Maximum level
The maximum allowance will be no more than
the percentage the Company pays towards
pension in respect of the wider workforce in
the Executive Director’s home country.
Performance
No performance conditions.
Pension contributions during 2024
%
Deepak Nath1
John Rogers1
Anne-Françoise Nesmes1,2
7.5%
12.0%
12.0%
1 The contribution paid is in line with the contribution paid to the wider workforce in
the Executive Director’s home country.
2 Anne-Françoise Nesmes left the Company on 1 May 2024.
Benefits
2024
2025
2026
2027
2028
Operation
Benefits which are competitive and in line
with the Executive Director’s home country.
Maximum level
The maximum is determined by the cost of
providing the relevant benefits subject to plan
limits and any tax or regulatory limits.
Performance
No performance conditions.
Benefits during 2024 include
– Medical benefits
– Life insurance
– Transportation benefits
– Financial and tax advice support
– All employee share purchase plan
Directors’ Remuneration Report continued
Directors’ Remuneration Policy
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Smith+Nephew Annual Report 2024
Reward Element
Policy Summary
2024 Implementation
Annual Incentive Plan
50% deferral
in shares for
three-years
2024
2025
2026
2027
2028
Operation
Annual cash bonus designed to reward
performance over the year against financial
and business objectives. One-half of the
bonus payable is compulsory deferred into
shares for three years without any matching.
If the minimum shareholding requirement has
been met, one-third rather than one-half of
the bonus is deferred. Malus and clawback
provisions apply.
Opportunity
The maximum opportunity is 215% of base
salary. No bonus is payable for performance
below threshold. A bonus equal to no more
than 15% of maximum is payable at threshold
and 50% of maximum is payable for target
performance. The payout is determined on
a straight-line basis between threshold and
target and between target and maximum.
Performance
Typically, at least 80% of the 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 weightings of each measure.
At target
(% of base
salary)
At maximum
(% of base
salary)
Actual 2024
(% of
maximum)
Deepak Nath
107.5%
215%
60.6%
John Rogers
107.5%
215%
60.7%
Anne-Françoise Nesmes1
107.5%
215%
n/a
1 Anne-Françoise left the Company on 1 May 2024 and was not eligible for a bonus in
respect of the 2024 financial year.
Further details on the performance of the 2024 AIP is shown on
page 157.
2024 Performance Measures
applicable to all Executive Directors
Weighting
Revenue ($)
35%
Trading Profit Margin (%)
35%
Trading Cash Flow Conversion (%)
15%
Strategic Objectives (including ESG)
15%
TOTAL
100%
Long-Term Incentives
Performance Shares
Performance
Period
Holding
Period
2024
2025
2026
2027
2028
Restricted Shares
(US Executive Directors only)
Award
1/3 Vesting
Period
2024
2025
2026
2027
2028
Operation
Performance Share Plan awards are subject to
a three-year performance conditions. To the
extent the performance conditions are met,
once sufficient shares have been sold to cover
the tax liability, the remaining shares are
subject to a two-year holding period.
US Executive Directors receive Restricted
Share Plan (RSP) awards which vest, subject
to a reasonable judgement underpin as
determined by the Committee at the time
of vesting, on the first, second and third
anniversaries of the award in line with US
market practice.
Opportunity
The maximum PSP award is 300% for US-
based Executive Directors and 275% for
UK-based Executive Directors. The maximum
RSP award is 125% for US-based Executive
Directors and UK Executive Directors are not
eligible for an RSP award. For the PSP awards,
if performance is below threshold, then there
is no vesting. For threshold performance,
30% of the maximum will vest, and target
performance results in 50% of maximum
vesting. Vesting is on a straight line between
threshold and maximum.
Performance Shares
2024 PSP
Award
(% of base
salary)
2024 RSP
Award
(% of base
salary)
PSP Vesting
in 2024
(% of
maximum)
Deepak Nath1
300%
125%
29.7%
John Rogers2
275%
n/a
n/a
Anne-Françoise Nesmes3
n/a
n/a
29.7%
1 Deepak was granted a PSP award of 275% of Base Salary in March 2024. In August
2024 he was granted a top-up award of 25% of Base Salary following the adoption by
the Board of the new Remuneration Policy submitted to the AGM in May 2024. This
top-up award was on the same conditions as the original award. He was also granted
an RSP award of 125% in August 2024. He was eligible for a vesting in 2024 in respect
of the PSP award granted in 2022.
2 John Rogers joined on 1 December 2023, as a result, he did not have a PSP award
vesting in 2024. John was awarded a PSP award of 275% of Base Salary in
March 2024.
3 Anne-Françoise left the Company on 1 May 2024 and was not eligible for a
PSP award in 2024. She was eligible for a vesting in 2024 in respect of the PSP award
granted in 2022.
Further details on the performance of the 2022-2024 PSP award
vesting in 2025 are shown on page 161.
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Reward Element
Policy Summary
2024 Implementation
Long-Term Incentives (continued)
Performance
For the PSP, the performance measures are
aligned with our key long-term strategic
objectives. The measures typically include
financial measures, shareholder return
measures and strategic measures.
The make-up and weighting of each measure
is determined by the Committee each year,
taking into account the strategic objectives
over the relevant performance period.
The Committee has discretion to override
the formulaic outcome if it is not reflective of
underlying performance. Malus and clawback
provisions apply.
No performance conditions apply to the RSP
awards. However, a reasonable judgement
underpin applies which considers, for example,
factors such as the Company’s financials over
the vesting period as well as environmental,
social, governance, reputational and
safety considerations.
Shareholding requirement
2024
2025
2026
2027
2028
Executive Directors are required to establish
and maintain a minimum shareholding over
a reasonable period of time recognising that
award vesting and differing international tax
regimes may affect the pace at which the
shareholding may be met.
Executive Directors are required to retain a
minimum shareholding (or their actual holding
on departure if lower) for a period of two years
after cessation of employment.
Performance Shares
Minimum
Shareholding
Requirement (% of
base salary)
Actual
Shareholding
at 31 Dec ’24
(% of base salary)
Deepak Nath1
500%
267%
John Rogers2
200%
98%
Anne-Françoise Nesmes3
200%
71%
1 The minimum shareholding requirement for Deepak was increased from 300% to
500% as part of the Remuneration Policy submitted to shareholders at our AGM in
May 2024.
2 John Rogers joined on 1 December 2023 and is gradually building his shareholding.
He purchased 71,920 shares on 19 December 2024.
3 Anne-Françoise left the Company on 1 May 2024 and had not achieved her minimum
shareholding at that time but will be required to have a shareholding at least equal to
what she had at her time of leaving for a period of two years following her departure.
2022-24 PSP Award Performance Measures1
(performance period 1 January 2022 to 31 December 2024)
Weighting
Revenue
25%
Free Cash Flow
25%
Return on Invested Capital
25%
Total Shareholder Return
25%
50% FTSE 100 companies excluding financial,
commodities (basic materials and oil and gas)
50% S&P Global 1200 Healthcare subset
comprising medical devices, equipment and
supplies companies
Total
100%
2024-26 PSP Award Performance Measures1
(performance period 1 January 2024 to 31 December 2026)
Weighting
Revenue
30%
Return on Invested Capital
30%
Total Shareholder Return
30%
50% FTSE 100 companies excluding financial,
commodities (basic materials and oil and gas),
food retail and utilities
50% MedTech Peer Group (see page 160)
ESG Objectives
10%
50% Environmental (reduction in Scope 1 & 2
greenhouse gas emission)
50% People (increase in representation of female
people leaders)
Total
100%
1 The definitions of the performance measures are shown on page 159.
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Remuneration Policy and 2024 Implementation for Non-Executive Directors
This section provides a summary of the key features of the Remuneration Policy approved by shareholders at the 2024 AGM
as it applies to Non-Executive Directors. Please refer to 2023 Annual Report (available on the Company’s website) for full details.
Basic Fee
2024
2025
2026
2027
2028
Operation
Base fees are reviewed annually. Any increase
will be paid in shares until 25% of the total fee is
paid in shares.
Maximum level
Increases will generally not exceed the average
increase for the wider employee population
within the Non-Executive Director’s home
country. A higher increase may be made if there
is an increase in activity or time commitment.
The total maximum aggregate fee to Non-
Executive Directors will not exceed the limit set
out in the Company’s Articles of Association.
Performance
None.
Basic Fee
Effective
1 April 2024
Effective
1 April 2023
%
Increase
Chair1
£450,000
–
n/a
UK NED2
£72,250
£69,500
4%
US NED2
$135,000
$129,780
4%
1 The Chair joined in September 2023 and the fee shown is his starting fee, and he
was not eligible for an increase in 2024. Each year the Chair is required, to purchase
shares equal to at least 25% of his post-tax annual fee.
2 The fee for both UK and US Non-Executive Directors is paid partly in cash and
partly in Company shares.
Additional Fee
2024
2025
2026
2027
2028
Operation
A fixed fee paid to reflect additional
responsibilities such as a Committee Chair or
Senior Independent Director(SID). The fee is
reviewed annually.
Maximum level
The total maximum aggregate fee to Non-
Executive Directors will not exceed the limit set
out in the Company’s Articles of Association.
Performance
None.
Additional Fee
Effective
1 April 2024
Effective
1 April 2023
%
Increase
SID Supplement
$36,400
$35,000
4%
Committee Chair
£20,800
£20,000
4%
Intercontinental Travel
2024
2025
2026
2027
2028
Operation
A fee to compensate for the time spent
travelling to attend meetings in another
continent. The fee is reviewed annually.
Maximum level
The total maximum aggregate fee to Non-
Executive Directors will not exceed the limit set
out in the Company’s Articles of Association.
Performance
None.
Travel Fee
Per Meeting
Effective
1 April 2024
Effective
1 April 2023
%
Increase
UK NED
£3,500
£3,500
–
US NED
$7,000
$7,000
–
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This section provides a summary of how the Committee expects to implement the Remuneration Policy for Executive Directors in 2025.
US Executive Directors
UK Executive Directors
Base Salary
3.0% increase
(in line with average increase
to US employees)
3.5% increase
(in line with average increase
to UK employees)
Pension and Benefits
Pension
Defined Contribution
(7.5% of Base Salary)
Cash Supplement
(12% of Base Salary)
Benefits
Medical benefits
Life Insurance
Transportation benefits
Financial and tax advice support
All employee share purchase plan
Medical benefits
Life insurance
Transportation benefits
Financial and tax advice support
All employee share purchase plan
Annual Incentive Plan
Target
(% of Base Salary)
107.5%
107.5%
Maximum
(% of Base Salary)
215%
215%
Performance Conditions
85% financial1
15% non-financial2
85% financial1
15% non-financial2
Bonus Deferral
50% deferred in shares for three
years if minimum shareholding
requirement not met, otherwise 30%
deferred in shares for three years
50% deferred in shares for three
years if minimum shareholding
requirement not met, otherwise 30%
deferred in shares for three years
Performance Share Plan
Maximum Award
(% of Base Salary)
300%
275%
Performance Conditions
30% Earnings per Share3
30% Return on Invested Capital
30% Total Shareholder Return
10% ESG Objectives
30% Earnings per Share3
30% Return on Invested Capital
30% Total Shareholder Return
10% ESG Objectives
Vesting
Three-year performance condition
plus a two-year holding period
Three-year performance condition
plus a two-year holding period
Restricted Share Plan
Award
(% of Base Salary)
125%
n/a
Vesting
1/3 of award will vest on the
first, second and third anniversaries
of award, subject to a reasonable
judgement underpin
n/a
Shareholding Requirement
During Employment
500%
200%
Post-employment
500% for two-years
200% for two-years
1 Revenue, trading profit margin, free cash flow. Free cash flow replaced trading cash conversion as a performance metric (compared to 2024), as the Committee believes that this measure is a
more comprehensive measure and will also reward more efficient capital allocation decisions.
2 Strategic objectives including ESG.
3 Earnings per share replaced revenue as a performance metric (compared to 2024) to reflect our long-term strategy of sustainable profitable growth.
This section provides a summary of the application of the Remuneration Policy for Non-Executive Directors in 2025.
Chairman1
Non-Executive Directors1
Basic Fee
3.0% increase
UK: 3.5% increase
US: 3.0% increase
Additional Fee
Senior Independent Director
n/a
UK: 3.5% increase
US: 3.0% increase
Committee Chair
n/a
UK: 3.5% increase
US: 3.0% increase
1 Increases awarded are no greater than the average salary increase awarded to employees in the relevant country.
Note that all payments made to the Chair of the Board are determined by the Committee, while payments made to the Non-Executive
Directors are determined by those Directors who are not themselves Non-Executive Directors, currently the Chair of the Board, Chief
Executive Officer, and Chief Financial Officer.
Directors’ Remuneration Policy continued
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2025 Executive Director Remuneration Scenarios
Below is an illustration of the potential future remuneration that could be received by each Executive Director during 2025, both in
absolute terms and as a proportion of the total reward under different performance scenarios. In developing the scenarios, the following
assumptions have been made:
Below threshold
Fixed elements of remuneration (Base Salary, Pension & Benefits) plus for the CEO 100% of RSP award
Threshold
Fixed remuneration plus 25% of PSP maximum opportunity plus for the CEO 100% of RSP award
Target
Fixed elements of remuneration plus 50% of maximum bonus plus 50% of PSP maximum opportunity
plus for the CEO 100% of RSP award
Maximum
Fixed elements of remuneration plus 100% of maximum bonus plus 100% of PSP maximum
opportunity plus for the CEO 100% of RSP award
Maximum plus 50% share price growth
Maximum plus a 50% share price growth on the PSP award and 100% of RSP award
Deepak Nath, CEO
Value of Package ($)
Composition of Package
0
2000
4000
6000
8000 10000 12000 14000 16000
Maximum
(incl 50% Share Price Growth)
Maximum
Target
Threshold
Below Threshold
0%
20%
40%
60%
80%
100%
Maximum
(incl 50% Share Price Growth)
Maximum
Target
Threshold
Below Threshold
Base Salary
Pension
Benefits
PSP
AIP
PSP (Share Price Growth)
RSP
RSP (Share Price Growth)
John Rogers, CFO
Value of Package ($)
0
2000
4000
6000
8000 10000 12000 14000 16000
Maximum
(incl 50% Share Price Growth)
Maximum
Target
Threshold
Below Threshold
Composition of Package
0%
20%
40%
60%
80%
100%
Maximum
(incl 50% Share Price Growth)
Maximum
Target
Threshold
Below Threshold
Base Salary
Pension
Benefits
PSP
AIP
PSP (Share Price Growth)
Note that PSP and RSP awards have been shown at face value. The charts provide illustrative values of the remuneration package in
2025. Actual outcomes may differ from those shown.
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Reward strategy and application
Our reward approach is designed to be competitive across the diverse markets in which we operate, allowing us to attract and retain
top talent globally. In this context, the Remuneration Committee is responsible for setting the remuneration arrangements for Executive
Directors, ensuring alignment with the Company’s values and long-term business strategy. In doing so, the Committee also considers the
remuneration arrangements of the broader workforce, related policies, and the alignment of incentives and reward with culture.
The table below outlines the strategic rationale for each component of remuneration and how our remuneration structure applies to
different employee groups within Smith+Nephew.
Reward element and
strategic rationale
Executive
Directors
Executive
Committee
Senior
Executives
Senior
Managers
Managers
Wider
Workforce
Base salary
Fair and competitive pay
to attract and
retain employees..
Base salary is set with reference to the relevant local market and takes account of the
employee’s knowledge, experience, and contribution to the role. Base salaries are usually
reviewed annually and take into account local salary norms, local wage inflation and business
conditions. Increases in base salary for Executive Directors will take into account the level of
salary increases granted to all employees within the Group in the Executive Director’s
home country.
Base salary is either
subject to
negotiation with
local trade unions or
follows the market
pay approach
outlined
for managers.
Pensions and Benefits
Support employees in the
performance of their role
and to ensure the package is
market competitive
Employment and post-retirement benefits are offered in line with relevant home market.
Short-Term Incentives
Nearly all employees are
eligible to participate in an
annual incentive plan.
The bonus opportunity
varies by role level.
The performance objectives
within the plans cascade
from the objectives set for
Executive Directors at the
start of the year to ensure
the performance of all
employees is linked to the
Company’s strategy.
Annual incentive
based on 85%
financial metrics
plus 15% strategic
objectives.
Compulsory
deferral into shares
for three years.
Annual incentive based
on 80% financial
metrics plus 20%
strategic objectives.
Compulsory deferral
into shares for
three years.
Annual incentive based on 70% financial metrics
plus 30% strategic objectives.
Certain employees within commercial or sales
roles participate in a sales incentive plan instead
of the annual incentive plan.
Annual incentive is
either subject to
negotiation with
local trade unions;
follows the
standard annual
incentive
framework for
managers with 60%
financial metrics
and 40% strategic
objectives; or is a
sales incentive plan.
Long-Term Incentives
Longer term reward,
predominantly in shares, to
recognise and reward
performance delivery and
create alignment with
shareholder interests.
PSP awards are
subject to a
three-year
performance period
and a two-year
holding period.
PSP awards are subject to a three-year
performance period.
RSP awards are
awarded to US
Executive Directors
only. The awards
vest in three equal
annual instalments
and are subject
to continued
employment and
a reasonable
judgement underpin.
RSP awards are awarded and vest in three equal annual
instalments subject to continued employment and
good standing.
The level of award granted to employees is dependent on
the role level, personal performance, and company
performance conditions in the year prior to the award.
RSP awards may be granted as
special recognition or to motivate
and retain key talent.
Awards typically vest in three equal
annual instalments subject to
continued employment and
good standing.
Eligible employees may participate in the Smith+Nephew all employee share purchase plan. This plan enables
employees to save on a regular basis (up to certain limits) and then buy shares in the Company at a discount.
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The chart below shows how our incentive plan performance measures for 2025 align directly align with the Company’s Strategy
for Growth.
Incentive Plan and Performance Measures
Strengthen
Accelerate
Transform
Annual Incentive
Revenue ($)
Trading Profit Margin (%)
Free Cash Flow ($)
Strategic Objectives (incl. ESG)
Long Term Incentive
Earnings per Share
Return on Invested Capital
Total Shareholder Return
ESG Objectives
We operate in a highly competitive global market for skills and talent, and our workforce plays a critical role in achieving our business
goals. To compete effectively, our remuneration approach must be flexible and tailored to different markets, ensuring we remain
responsive to competitive challenges. As a result, we regularly review the market and benchmark our employee total reward to ensure
that we remain competitive in the markets in which we compete for talent.
To assess the competitiveness of our reward arrangements, we analyse market data to compare our reward arrangements with similar
other organisations in terms of size, industry, and geographic location. The precise benchmarking group used can vary by role to ensure
we capture the market dynamics and competitiveness of strategically important roles, for example, for the recent CEO benchmarking
exercise the following specific MedTech peer group was used:
– Align Technology Inc.
– Coloplast A/S
– Koninklijke Philips NV
– Alcon Inc.
– Dentsply Sirona Inc
– QuidelOrtho Corp.
– Bausch + Lomb Corp.
– Edwards Lifesciences Corp.
– Resmed Inc.
– Baxter International Inc.
– GE HealthCare Tech Inc.
– Sonova Holding AG
– Becton Dickinson & Co
– Hologic Inc.
– Steris Plc
– Boston Scientific Corp.
– IDEXX Laboratories Inc.
– The Cooper Companies Inc.
– bioMerieux SA
– Intuitive Surgical Inc.
– Zimmer Biomet Holdings Inc.
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 10 to 13 for further information on our Strategy for Growth
1
2
3
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When designing and implementing the approach to remuneration for Executive Directors, in addition to considering the arrangements
of the broader workforce and the market for global and local talent, the Committee also takes account of shareholder expectations
and the remuneration factors set out in Provision 40 of the UK Corporate Governance Code.
Factor within Provision 40
How the Factor is addressed
Clarity
Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and
the workforce.
In line with our commitment to full transparency and engagement with our shareholders on
the topic of executive remuneration, the Committee Chair periodically engages with our major
shareholders, and in a year of significant change, the Committee Chair will consult with our
major shareholders to discuss and seek views on any proposals.
The Company consults directly with the broader employee population on their remuneration
through a variety of methods including meetings, guides, human resources or business-led
briefings, direct line manager engagement and materials posted on the intranet or to
employees’ homes.
Simplicity
Remuneration structures should avoid
complexity and their rationale and
operation should be easy to understand.
Remuneration arrangements for Executive Directors avoid unnecessary complexity and
consist of a simple construct that includes:
– Salary set to be market competitive to attract and retain.
– Benefits and pension contributions set in line with the broader workforce and in the
Executive Director’s home country.
– Annual Incentive Plan (AIP), a portion of which is deferred into shares.
– Performance Share Plan (PSP) awards, and in the case of US Executive Directors Restricted
Share Plan (RSP) awards, which ensure a focus on performance over the longer term.
Risk
Remuneration arrangements should
ensure reputational risks, and other risks,
that may result from excessive rewards,
and behavioural risks that can arise from
target-based incentive plans, are identified
and mitigated.
A range of design features exist within our remuneration arrangements to take risks into
account as follows:
– Malus and clawback provisions within annual and long-term incentives.
– Reasonable discretion to override formulaic outcomes.
– Reasonable judgement underpins applicable to vesting of RSP awards in the case of US
Executive Directors.
Predictability
The range of possible values of rewards
to individual directors and any other
limits or discretions should be identified
and explained at the time of approving
the policy.
Our Remuneration Policy contains the following:
Maximum award levels and vesting outcomes applicable to AIP, PSP and RSP awards.
The Committee can apply malus, clawback and reasonableness discretion where appropriate.
Proportionality
The link between individual awards, the
delivery of strategy and the long-term
performance of the Company should
be clear. Outcomes should not reward
poor performance.
Performance conditions attached to annual and long-term incentive arrangements require
a minimum level of performance to be achieved before any payout is made. There is a direct
link between an individual’s reward and their contribution to driving strategy and increasing
Company performance. No payment is made for poor performance. Any individual’s
performance that is below expectations is dealt with as part of our performance management
process – any individual leaving due to performance issues would not be entitled to any
incentive payments.
Alignment to culture
Incentive schemes should drive behaviours
consistent with Company purpose, values
and strategy.
There is a direct link between driving our business strategy and an individual’s reward, with
incentive measures chosen to align with the Company’s strategic objectives which are
cascaded through the organisation, ensuring that there are shared common goals.
Engagement on Remuneration
Shareholders
In line with our commitment to transparency and active shareholder engagement regarding executive remuneration, the Committee
Chair regularly engages with our major shareholders and proxy advisers to discuss proposed changes to our remuneration policies.
Notably, during the development of proposed changes to the remuneration of US Executive Directors, both the Chair of the Board
and the Committee Chair held direct meetings with major shareholders to discuss and gather feedback on the proposals. This direct
engagement was highly valued by the Board and Committee and played a crucial role in shaping the policy changes presented at our
AGM in May 2024.
Additionally, the Committee regularly receives updates on the collective views of shareholders and investor advisory bodies from its
independent adviser, Willis Towers Watson.
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Employees
The Board receives regular updates on employee engagement, including employee engagement survey results. The Board and the
Compliance & Culture Committee also actively engage with employees. Feedback from the Committee’s activities, along with insights
from Board interactions during site visits and other forums, provides valuable context. Combined with data and reports from senior
management, this helps the Board understand employee perspectives and priorities. In 2024, we engaged employees across the Group
through various channels, including in-person and virtual meetings, as well as listening forums.
Our Employee Inclusion Groups (EIGs) play a key role in fostering inclusivity where everyone feels they belong, and in educating
employees about the unique issues our colleagues face in and out of the workplace. We consult with employees and their
representatives regularly, and on a wide variety of topics, incorporating their views into our decision-making process.
This report is the main way we communicate with employees on how executive pay aligns with the broader workforce. While the
Committee doesn’t directly consult employees when determining executive pay, the Committee Chair shared an overview of Executive
Director remuneration, including recent changes for US Executive Directors, at a Board listening forum. Those employees attending
understood and supported the changes, recognising the importance of a stable leadership in delivering business growth and long-
term value.
Wider workforce remuneration
The Committee believe that well-designed reward arrangements can be a tool of culture change and improvement in Company
performance. As a result, it periodically reviews, and receives updates on, reward matters that affect the broader workforce.
Approach to Recruitment
The Recruitment Policy provides a suitable framework for attracting individuals with the necessary expertise to lead a company of our
size, scale, and complexity. The table below outlines the policy, for both internal and external recruitment, and the different elements
that may be included within a remuneration package for an Executive Director, along with the approach the Remuneration Committee
would take for each element.
Element
Policy and operation
Overall
The policy of the Board is to recruit the best candidate possible for any Board position and to structure pay and benefits
in line with the Remuneration Policy. The ongoing structure of a new recruit’s package would be the same as for existing
directors, with the possible exception of an identifiable buy-out provision, as set out below.
Base salary
Base salary is positioned at a fair and appropriate level allowing for a range of factors including the executive’s current
remuneration and experience, internal relativities, an assessment against relevant comparator groups and cost. If a new
Executive Director is initially appointed at a lower rate, the Committee retains the ability to award larger increases in
subsequent years to realign the salary over time as the individual develops in the role.
Benefits
and pension
An Executive Director will be eligible for benefits and pension arrangements in line with the arrangements offered to
comparable roles in the country in which the Executive Director is based.
Annual incentive
The maximum level of opportunity is 215% of base salary. The Committee retains discretion to set different performance
targets for a new externally appointed Executive Director, or to adjust performance targets and/or measures in the case
of an internal promotion, to be assessed over the remainder of the financial year. In this case any bonus payment would be
made at the same time as for existing directors, such award to be pro-rated for the time served in the performance period.
Long-term incentive
The maximum level of opportunity is as set out in the Remuneration Policy. For US Executive Directors, it is 425% (300%
PSP plus 125% RSP) and for UK Executive Directors it is 275% (PSP). To achieve rapid alignment with Smith+Nephew
and shareholder interests, the Committee retains discretion to grant an award to a new externally appointed Executive
Director on, or soon after, appointment if they join outside of the normal grant period.
Replacement or
buy-out awards
The Committee retains discretion to grant replacement buy-out awards (in cash or shares) to a new externally appointed
Executive Director to reflect the loss of awards granted by a previous employer. Where this is the case, the Committee will
seek to structure the replacement award such that overall it is on an equivalent basis to broadly replicate that foregone,
using appropriate performance terms. If the Executive Director’s prior employer pays any portion of the remuneration that
was anticipated to be forfeited, the replacement awards shall be reduced by an equivalent amount.
Other
If the Committee concludes that it is necessary and appropriate to secure an appointment, relocation-related support
and international mobility benefits may be provided, depending on the circumstances and in line with the Group’s
broader approach. In addition, where a new Executive Director requires legal or other professional advice related to the
appointment to understand the obligations, duties and legal and regulatory requirements of the new role, the associated
fees may be paid (or reimbursed) by the Company.
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Service contracts and policy on payment for loss of office
The following table sets out the key provisions of the service contracts of Executive Directors and the treatment of payments on
termination of employment. The Executive Director service contracts (as well as the terms and conditions of appointment of the
Non-Executive Directors) are available for inspection at the Company’s registered office (Building 5, Croxley Park, Hatters Lane,
Watford, WD18 8YE, United Kingdom).
In exceptional circumstances, the Committee may authorise, where it considers it to be in the best interests of the Company and
shareholders, entering into contractual arrangements with a departing Executive Director, for example a settlement, confidentiality,
restrictive covenant or other arrangement, pursuant to which sums not set out in the following table may become payable.
Full disclosure of the payments will be made in accordance with the remuneration reporting requirements.
Deepak Nath
John Rogers
Date of service agreement
1 April 2022
1 December 2023
Date of appointment as director
1 April 2022
1 April 2024
Employing company
Smith & Nephew Inc
Smith & Nephew Plc
Contract duration
No fixed term
Notice period
No more than 12 months’ notice
Post-termination restrictions
The contracts of employment contain the following restrictions on the Director for 12 months from the
date of termination of employment:
– Non-compete clause for employment
– Non-dealing and non-solicitation of client/customers
– Non-solicitation of suppliers and non-interference with supply chain
– Non-solicitation of employees
Summary termination –
payment in lieu of notice
The Company may, at its absolute discretion, terminate the employment of the Director with immediate
effect by giving written notice together with payment of a sum equivalent to the Director’s base salary
and the value of his contractual benefits as at the date such notice is given, in respect of the Director’s
notice period, less any period of notice worked. The Company may elect to make this payment monthly
or as a lump sum.
Termination payment –
change of control
The Company shall pay, 12 months’ base salary, together with a sum equivalent to the value of the
Director’s contractual benefits, as at the date of termination within one year of change of control.
Reasonable outplacement costs will also be covered.
Termination – treatment of
annual incentive awards
Annual bonus awards are made at the discretion of the Remuneration Committee. Executive Directors
will receive a bonus, pro rata to service for the current performance year, unless the reason for leaving
is resignation or misconduct, in which case the awards will lapse on cessation of employment. Prior
deferred bonus awards may still be awarded in case of resignation as set out in the Remuneration Policy.
Termination – treatment of
long-term incentive awards
PSP and RSP awards are made at the discretion of the Remuneration Committee. Executive Directors will
be eligible for PSP awards, pro rata to service for the performance period, unless the reason for leaving is
resignation or misconduct, in which case the awards will lapse on cessation of employment. Similarly, US
Executive Directors eligible for RSP awards will receive outstanding awards pro rata for service over the
award vesting period.
Redundancy arrangements
12 months’ base salary and contractual benefits. Reasonable outplacement costs.
Holiday
Upon termination for any reason entitled to payment in lieu of accrued but untaken holiday entitlement
(subject to overriding local law and regulation).
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Chair and Non-Executive Directors
The Chair of the Board and each of the Non-Executive Directors have letters of appointment. The letters of appointment do not contain
any contractual entitlement to a termination payment and the Non-Executive Directors can be removed in accordance with the
Company’s Articles of Association. Directors are required to retire at each AGM and seek re-election by shareholders.
The details of the service contracts in relation to the Non-Executive Directors who served during the year are set out in the table below.
Neither the Chair of the Board nor the Non-Executive Directors have provisions in their letter of appointment that relate to a change of
control of the Company.
Committee Appointments
Date of Appointment
Expiry of Current Term
Chair
Initial term of
appointment is for 36
months subject
to election at each
AGM. Thereafter, the
appointment is for 12
months following
re-election at
each AGM
Rupert Soames
24 April 2023
Non-Executive Directors
Marc Owen
1 October 2017
Jo Hallas
1 February 2022
John Ma
17 February 2021
Katarzyna Mazur-Hofsaess
1 November 2020
Angie Risley
18 September 2017
Bob White
1 May 2020
Jez Maiden
14 September 2023
Simon Lowth
1 January 2024
Rick Medlock
9 April 2020
30 April 24
N
A
R
C
Committee key
Member of the
Audit Committee
Member of the
Remuneration Committee
Member of the Nomination
& Governance Committee
Member of the Compliance
& Culture Committee
Committee
Chair
R
N
C
A
C
C
R
N
R
C
R
A
C
N
A
A
N
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
This section provides details on how the Directors’ Remuneration Policy was implemented during 2024 (the Implementation Report) and
how we intend to apply it in 2025.
About the Remuneration Committee
The members of the Remuneration Committee include Angie Risley (Chair), Rupert Soames, Jez Maiden and Bob White. Details of
attendance at Committee meetings during the year are shown on page 103.
The Committee’s role is to ensure that our Remuneration Policy and practices are aligned with the business strategy and promote long-
term sustainable success. The Committee’s Terms of Reference can be found on our website. These terms include the determination
of fair remuneration for Director and the Chair of the Board (no individual participates in discussions about their own remuneration).
In addition, the Committee receives recommendations from the Chief Executive Officer on the remuneration of those reporting to him,
as well as advice from the Chief HR Officer.
Advisers to the Committee
During the year under review, the Committee received material assistance and advice on remuneration policy from the Head of Reward
and Chief HR Officer. The Chief Executive Officer also provided advice that was of material assistance to the Committee.
The Committee appoints independent remuneration consultants who attend Committee meetings and provide independent advice and
information on corporate governance developments and market trends on pay and incentive arrangements.
The Committee appointed Willis Towers Watson as adviser to the Committee in 2023 following a competitive tender process. The total
fees paid to Willis Towers Watson in respect of its services to the Committee during the year were £165,271. The fees paid are based
on the standard market rates for remuneration committee advisory services. Willis Towers Watson is a signatory to the Remuneration
Consultants Group Code of Conduct.
Willis Towers Watson also provides consultancy services to the Company in relation to certain employee and benefit matters applying
to those below the Board. The Committee is satisfied that the advice provided by Willis Tower Watson was independent and objective
and that the provision of additional services did not compromise that independence. The Committee is also satisfied that the team who
provided advice do not have any connection to Smith+Nephew that may impair their independence and objectivity.
The work carried out by the Committee during the year is set out on pages 136-139.
Statement of Shareholder Voting
We carefully monitor shareholder voting on our Remuneration Policy and its implementation. We recognise the importance of our
shareholders’ continued support for our remuneration arrangements.
The table below shows the results of the polls taken on the resolution to approve the Remuneration Policy, the Director’s Remuneration
Report, and Restricted Share Plan at our AGM in May 2024.
Resolution
Number of votes cast
For
Against
Votes Withheld
Remuneration Policy
677,164,841
384,484,538
(56.78%)
292,680,303
(43.22%)
1,744,476
Directors’ Remuneration Report
(excluding Policy)
678,550,473
661,110,005
(97.43%)
17,440,468
(2.57%)
357,619
Restricted Share Plan
677,177,266
378,880,121
(55.95%)
298,297,145
(44.05%)
1,728,668
The Committee appreciated the engagement and input from shareholders throughout the consultation on the recent changes to our
Remuneration Policy, and we are grateful for the support from the majority of our shareholders, with 57% voting in favour of the changes
and 56% backing the adoption of a new Restricted Share Plan.
In line with UK corporate governance requirements, following the AGM we contacted shareholders that represented 75% of our issued
share capital to seek further feedback and comments on the proposed changes to our Remuneration Policy. While shareholders who had
engaged with us welcomed the majority vote in favour, those who had voted against did not provide any further comments.
Directors’ Remuneration Report continued
Annual report on remuneration
154
Smith+Nephew Annual Report 2024
Following this further consultation, the Board met to discuss the proposed changes, the AGM vote, and the interests of all applicable
stakeholder groups. Given the lack of additional investor feedback during the further consultation and the continued support of active
investors for the change in the Remuneration Policy, the Committee and Board determined that they would implement the wishes of the
majority of shareholders and adopt the Policy and new Restricted Share Plan with no further changes. The changes were implemented in
August 2024.
Remuneration for the year ended 31 December 2024
Our Remuneration Policy operated as intended over the year, and the table below sets out the single total figure of remuneration for
each Executive Director received in respect of qualifying service over 2024 together with comparatives for 2023. An explanation of how
the figures are calculated follows the table.
Executive Directors – Single figure of remuneration (audited)
Executive Directors
Former Executive Director
Deepak Nath
(appointed 1 April 2022)
John Rogers1
(from 1 April 2024)
Anne-Françoise Nesmes1
(up until 31 March 2024)
000s USD
2024
2023
2024
2023
2024
2023
Fixed pay
Base salary
1,560
1,513
695
–
204
786
Pension
117
25
83
–
24
94
Benefits
42
40
12
–
4
15
Total Fixed Pay
1,719
1,578
790
–
232
895
Annual variable pay
Annual Incentive Plan (AIP)
Cash
1,017
998
605
–
–
505
Deferred Shares
1,017
999
605
–
–
505
Total AIP
2,034
1,997
1,210
–
–
1,010
Long Term Incentive Plans (LTIPs)
Performance Share Plan2
1,298
–
–
–
674
154
Share Price Appreciation3
-246
–
–
–
-128
–
Restricted Share Plan2
1,966
–
–
–
–
–
Forfeited Incentives4
1,042
1,083
–
–
–
–
Total LTIPs
4,060
1,083
n/a
–
546
n/a
Total Variable Pay
6094
3,080
1,210
–
–
1,165
Total Single Figure
7,813
4,658
2,000
–
778
2,060
1 All data is presented in our reporting currency of US Dollars. Amounts for John Rogers and Anne-Françoise Nesmes have been converted from British Pounds to US Dollars using a 12-month
average exchange rate (£1 to $1.278).
2 Dividend equivalent shares are applied on vested PSP and RSP awards and are valued at the grant price for the awards and included in the face-value figure. The impact of the share price
change for awards vesting is included under share price appreciation.
3 Share price appreciation is being reported in the single figure for 2024 onwards. For Anne-Françoise Nesmes’, share appreciation pertaining to 2023 PSP vesting was valued at -$68K.
4 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, Siemens
Healthineers. Full details of the buy-out awards can be found in our 2021 Annual Report. During the year ended 31 December 2024, 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 2024.
– Partial vesting of RSU award over a total of 14,364 shares: 4,788 shares vested on 13 November 2024.
– Partial vesting of a Performance Share Award granted over a total of 97,360. Following confirmation of performance against the targets attached to the original award, 75,254 shares
vested on 4 December 2024, with the remaining balance of 22,106 shares lapsing on the same date. The shares are valued at 9.812, being the S+N share price as at the grant date.
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Base salary
Base salaries of Executive Directors are reviewed annually and allow for scope of role and the individual’s experience and time in role
as well as their performance. The increases awarded were in line with the wider workforce within the country in which the Executive
Director is based.
000s
Annual Base Salary
1 April 2024
Annual Base Salary
1 April 2023
%
change
Executive Directors
Deepak Nath
$1,572
$1,527
3%
John Rogers1,2
$927
(£725)
–
–
Former Executive Directors
Anne-Françoise Nesmes1,2
$814
(£637)
$792
(£637)
0%
1 John Rogers and Anne-Françoise Nesmes were based in the UK and paid in British Pounds. The figure in parenthesis represents the value in local currency.
2 Anne-Françoise Nesmes was CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board and left the Company on 1 May 2024. She was not eligible for a salary
increase on 1 April 2024 given her impending departure. John Rogers joined in December 2023 and was appointed as CFO and Executive Director from 1 April 2024 and was not eligible for an
increase in 2024.
Pensions
Executive Directors either participate in a defined contribution pension plan at a rate equivalent to that of the wider workforce in the
country in which they are based, or receive a cash allowance in lieu of membership of a pension plan.
Amount
’000s
Benefit
(% of Base Salary)
Executive Directors
Deepak Nath1
$117
7.5%
John Rogers2
$83
(£65)
12%
Former Executive Directors
Anne-Françoise Nesmes2,3
$24
(£19)
12%
1 Due to an administrative oversight, Deepak was underpaid pension contributions in 2023. This was rectified in January 2024 and the impact of this correction is included in the figure shown.
The figure for 2024 excluding this error was $25,875.
2 John Rogers and Anne-Françoise Nesmes were based in the UK and paid in British Pounds. The figure in parenthesis represents the value in local currency.
3 Anne-Françoise Nesmes was a CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board, and left the Company on 1 May 2024. The amount shown is for the
period she was an Executive Director.
Benefits
Executive Directors are provided with benefits that are competitive in their home country. This includes, medical, life insurance,
transportation benefits plus tax advice services.
Medical
Transportation
(car and fuel allowance)
Tax Support Services
000s
2024
2023
2024
2023
2024
2023
Executive Directors
Deepak Nath
$13
$12
$13
$13
$16
$15
John Rogers1
$1
(£1)
–
$11
(£9)
–
–
–
Former Executive Directors
Anne-Françoise Nesmes1,2
$1
(£1)
$1
(£1)
$4
(£3)
$14
(£11)
–
–
1 John Rogers and Anne-Françoise Nesmes were based in the UK and paid in British Pounds. The figure in parenthesis represents the value in local currency.
2 Anne-Françoise Nesmes was CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board, and left the Company on 1 May 2024.
The amount shown is for the period she was an Executive Director.
Directors’ Remuneration Report continued
Annual report on remuneration continued
156
Smith+Nephew Annual Report 2024
Annual Incentive Plan (AIP)
The 2024 AIP is based on performance for the year ended 31 December 2024. The bonus opportunity for Executive Directors is 215%
of Base Salary with 85% of the bonus opportunity tied to financial performance and the remaining 15% tied to strategic objectives
(including ESG objectives).
To the extent a bonus is payable, one-half is deferred into shares for three years without any matching. If the Executive Director has met
the minimum shareholding requirement, 30% rather than 50% of the bonus is deferred. The figures in the table below represent the total
annual bonus amount to be paid, including the amount deferred in shares.
The performance measures and weightings which applied to the 2024 Annual Incentive Plan were as follows:
2024 Performance Range and Outcome1
Weighted Vested Outcome
(%)
Performance Measure
Threshold
(15% max)
Target
(50% max)
Maximum
(100% max)
% of Target
Weighting
Deepak Nath
John Rogers
Financial
Revenue
Target
$5,757m
$5,868m
$6,025m
Actual $5,884
110.1%
x
35%
=
38.5%
38.5%
Trading Profit Margin
Target
17.5%
18.0%
18.5%
Actual
18.0%2
99.2%
x
35%
=
34.7%
34.7%
Trading Cash Flow Conversion Target
75%
80%
90%
Actual
94.4%
200.0%
x
15%
=
30.0%
30.0%
Strategic Objectives (see page 158)
Deepak Nath
120.0%
x
15%
=
18.0%
–
John Rogers
121.7%
x
15%
=
–
18.3%
Total (% of maximum)
100%
=
60.6%
60.7%
x
x
Maximum Bonus opportunity
(% of Base Salary)
215%
215%
x
x
2024 Base Salary3
$1,560,974
$926,550
(£725,000)
=
=
2024 Annual Bonus
(of which 50% is deferred in shares for three years)
$2,034,434
$1,210,073
(£946,849)
% of Target Bonus Opportunity
121.2%
121.5%
% of Base Salary
130.3%
130.6%
1 All numbers have been rounded to the nearest decimal. For the purpose of incentive calculations, we are using constant currency rates.
2 Actual Trading Profit Margin is 17.99%.
3 Base Salary for bonus purposes is determined based on the actual Base Salary received over the 12-month period ended 31 December 2024.
Anne-Françoise Nesmes was CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board, and left
the Company on 1 May 2024. She was eligible for a bonus payment in respect of the 2023 Annual Incentive Plan but was not eligible for a
payment from the 2024 Annual Incentive Plan.
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Annual Incentive Plan (AIP) continued
Strategic Objectives
Key strategic objectives represent 15% of the annual bonus opportunity. For 2024, these objectives focused on the delivery of the
Group’s strategy, our people and processes, customers and advancing our sustainability agenda.
Objective
Assessment
Weighting
Outcome
(% of maximum)
Deepak Nath
Enable and drive long-term growth
and profitability through the delivery
of the in-year milestones within
the 12-Point Plan, plus 2024 cost
reduction program.
Enhance internal talent succession
pipeline for all Executive Committee
roles to help support the successful
delivery of the business strategy
over the longer term.
Very good progress on the delivery of the 2024 milestones,
with most targets being either met or exceeded. In addition,
the level of cost reduction achieved during the year exceeded
target, with $246m of annualised savings being delivered, plus
a further embedding of a cost focused culture.
As a result of proactive management and personal
development initiatives, the number of potential successors in
the talent pipeline for Executive Committee roles increased by
17% over the year.
5%
60%
Strategic portfolio development,
including M&A plus product pipeline
development and launch.
Fifteen new products developed ready for launch on time and
within budget, with good progress also being made in our new
product development and early innovation projects.
The integration of CartiHeal is on track and will deliver in line
with the acquisition plan over the coming year.
5%
ESG scorecard with targets
relating to:
– Reduction in Scope 1 & Scope
2 Greenhouse Gas emissions
(relative to 2019 baseline)
– Employee engagement score
– Voluntary employee turnover
– Female representation in people
leader roles
– Ethnic representation in
management roles in the UK
and US.
A reduction of 63% in our Scope 1 and Scope 2 GHG emissions
(relative to our 2019 baseline) was achieved which exceeded
our 2024 target (60%), and good progress was made in
implementing initiatives that will enable us to hit our net
zero ambition.
Our employee engagement (as measured by Gallup) increased
over the year to the 61st percentile, and our voluntary global
employee turnover reduced to 9.5%, which is materially lower
than the prior year.
Good progress was made in relation to our diversity and
inclusion goals, with an increase in female representation in
people leader roles to 34.8% (from 34%) and an increase in
our ethnicity representation to 11.4% and 20.6% in the UK and
US respectively.
5%
John Rogers
Enable and drive long-term growth
and profitability through the delivery
of the in-year milestones within
the 12-Point Plan specifically in
relation to Order-to-Cash and
pricing strategies.
Very good progress on the delivery of the 2024 milestones with
most targets (including those relating to Order-to-Cash and
pricing) being either met or exceeded. In addition, the level of
cost reduction achieved during the year exceeded targets, with
$246m of annualised savings being delivered.
5%
60.83%
Establish high-performing teams in
Finance, GBS and IT that will execute
refreshed strategies and deliver
improved and efficient processes,
reporting and insights.
Further strengthened and diversified the Finance, IT and GBS
teams with key hires. Improved a number of key processes
including, for example, a new rigorous and robust budgeting
process that enabled additional cost saving opportunities to be
identified and greater cost discipline.
5%
ESG scorecard with targets
relating to:
– Reduction in Scope 1 & Scope
2 Greenhouse Gas emissions
(relative to 2019 baseline)
– Employee engagement score
– Voluntary employee turnover
– Female representation in people
leader roles
– Ethnic representation in
management roles in the UK
and US.
A reduction of 63% in our Scope 1 and Scope 2 GHG emissions
(relative to our 2019 baseline) was achieved, which exceeded
our 2024 target (60%), and good progress was made in
implementing initiatives that will enable us to hit our net
zero ambition.
Our employee engagement (as measured by Gallup) increased
over the year to the 61st percentile, and our voluntary global
employee turnover reduced to 9.5%, which is materially lower
than the prior year.
Good progress was made in relation to our diversity and
inclusion goals, with an increase in female representation in
people leader roles to 34.8% (from 34%) and an increase in
our ethnicity representation to 11.4% and 20.6% in the UK and
US respectively.
5%
Directors’ Remuneration Report continued
Annual report on remuneration continued
158
Smith+Nephew Annual Report 2024
Decision on 2024 AIP Outcomes
The Committee strive to maintain a clear link between pay and performance, focusing on setting challenging performance targets and
evaluating both company-wide and individual achievements.
The performance has been assessed according to the extent to which the Executive Directors have met the expectations of the Board,
and how they have performed in respect of our culture pillars of Care, Collaboration and Courage. The Committee believes that the
payments outlined in this report fairly reflect the performance achieved, and leadership behaviours exhibited, and as such there was no
need to apply discretion. The Committee believes that the Remuneration Policy operated as intended during the year.
Performance Share Plan (PSP)
Executive Directors are ordinarily awarded annual PSP awards equal to 275% of Base Salary. From 2024, US Executive Directors are
awarded annual PSP awards equal to 300% of Base Salary. PSP awards are subject to a three year performance condition, and vest on
a straight-line basis between threshold and maximum. To the extent the performance conditions are met, once sufficient shares have
been sold to cover the tax liability, the remaining shares are subject to a two-year holding period.
For existing awards granted up to an including 31 December 2024, the following performance measures and weightings apply.
2022-24
PSP Award
2023-25
PSP Award
2024-26
PSP Award
Performance Measures
Performance
Period
1 Jan 2022 to
31 Dec 2024
1 Jan 2023 to
31 Dec 2025
1 Jan 2024 to
31 Dec 2026
Revenue
25%
25%
30%
Free Cash Flow
25%
25%
Return on Invested Capital
25%
25%
30%
Total Shareholder Return
25%
25%
30%
ESG Objectives
10%
The description of the performance conditions and targets for the 2022-2024 PSP (that vested in March 2024) and each outstanding
PSP award is shown below.
Metric
Description
Performance Conditions
2022-24
PSP Award
2023-25
PSP Award
2024-26
PSP Award
Revenue
The cumulative global revenue over the three year
performance period on constant foreign exchange rates and
adjusted for any Board approved M&A.
Threshold
$15,983m
Target
$16,782m
Commercially
Sensitive1
Commercially
Sensitive1
Maximum
$17,621m
Free Cash Flow
The cumulative free cash flow over the three year
performance period on constant foreign exchange rates and
adjusted for any Board approved M&A.
Threshold
$1,535m
n/a
Target
$1,913m
Commercially
Sensitive1
n/a
Maximum
$2,104m
n/a
Return on
Invested Capital
The return earned on the total capital invested defined as:
Operating profit1 less adjusted taxes2
(Opening net operating assets + closing net operating
assets)3 ÷ 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, cash and cash equivalents.
Threshold
8.0%
8.5%
8.5%
Target
9.0%
9.5%
9.5%
Maximum
10.5%
10.5%
10.5%
1 It is not possible to disclose precise targets for this measure at the current time as this will give commercially sensitive information to our competitors concerning our business plans and is
considered to be potentially price-sensitive information. The targets will be disclosed retrospectively in the Annual Report following the end of the relevant performance period.
STRATEGIC REPORT
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ACCOUNTS
OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Metric
Description
Performance Conditions
2022-24
PSP Award
2023-25
PSP Award
2024-26
PSP Award
Total Shareholder
Return
Total shareholder return relative to two equally weighted
comparator groups.
1 FTSE 100 companies, excluding financial services,
commodities (basic materials and oil and gas). From the
2024-26 PSP, food retail and utility companies were
also excluded.
2 A sector peer group based on the S&P Global 1200
Healthcare subset comprising medical devices, equipment
and supplies companies1. From the 2024-26 PSP the
S&P 1200 comparator group was replaced with a
specific MedTech industry peer group consisting of the
following companies:
Threshold
Index
Return
Index
Return
Index
Return
Alcon Inc.
Bausch + Lomb Corp.
Baxter International Inc.
Becton Dickinson & Co
bioMerieux SA
Carl Zeiss Meditec AG Corp.
Coloplast A/S
ConvaTec Group Plc
Demand A/S
Dentsply Sirona Inc
DiaSorin SpA
Edwards Lifesciences Corp
Elekta AB
Enovis Corp.
Envista Holdings Corp.
GE HealthCare Tech Inc.
Globus Medical Inc.
Hologic Inc.
Insulet Corp.
Integer Holdings Corp.
Integra Lifesciences Hold.
Intuitive Surgical Inc.
Koninklijke Philips NV
Resmed Inc.
Sonova Holding AG
Steris Plc
Straumann Holding AG
Stryker Corp.
The Cooper Companies Inc.
Zimmer Biomet
Holdings Inc.
Maximum
Index
Return +8%
Index
Return +8%
Index
Return +8%
ESG Objectives
Consists of two equally weighted measures linked to our
sustainability agenda in relation to our transition to net zero,
and an increase in female people leader representation.
Reduction in Scope 1 and
Scope 2 GHG
Emissions (relative to a
2019 baseline)
Threshold
n/a
n/a
70%
Target
n/a
n/a
72%
Maximum
n/a
n/a
75%
Female people leader
representation
Threshold
n/a
n/a
35%
Target
n/a
n/a
35.5%
Maximum
n/a
n/a
36%
1 Official industry classification of “Health Care Equipment and Supplies, Life Sciences Tools & Services and Health Care Technology”.
Performance Share Plan (PSP) continued
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160
Smith+Nephew Annual Report 2024
Performance Share Plan (PSP) continued
2022-24 PSP Award
The three year performance period of the 2022-2024 PSP award ended on 31 December 2024. The performance measures, targets,
weightings and achievement against the performance conditions are shown below.
Performance Range Against Targets1
Weighted
Vested
Outcome (%)
Performance Measure
Threshold
(25% vesting)
Target
(50% vesting)
Maximum
(100% vesting)
% of Target
vesting
Weighting
Cumulative Revenue
Target
$15,983m
$16,782m
$17,621m
Actual
$17,229
153.3%
x
25%
=
38.3%
Cumulative Free Cash Flow
Target
$1,530m
$1,913m
$2,104m
Actual $757
0%
x
25%
=
0%
Return on Invested Capital
Target
8.0%
9.0%
10.5%
Actual 6.7%
0%
x
25%
=
0%
Total Shareholder Return
Index Return
Index Return +8%
FTSE 100 Comparator Group2
Target
7.6%
35.5%
Actual
-14.1%
0%
x
12.5%
=
0%
S&P 1200 Comparator Group3
Target
-28.7%
-10.1%
Actual
-14.1%
168.2%
x
12.5%
=
21.0%
Total (% of Target vesting)
59.4%
Total (% of Maximum vesting)
29.7%
1 All numbers have been rounded to the nearest decimal. For the purpose of incentive calculations we are using constant currency rates.
2 FTSE 100 companies, excluding financial services, commodities (basic materials and oil and gas).
3 S&P Global 1200 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’).
Decision on 2022-2024 PSP Award Outcome
Smith & Nephew finished 2024 strongly and delivered solid financial results across all key performance metrics. The 2024 growth in
revenue of 4.7% on a reported basis (5.3% on an underlying basis) contributed towards delivering strong cumulative revenue growth
over the three year performance period of the 2022-2024 PSP award. Over 2024, the Return on Invested Capital increased by 150bps
to 7.4% and Free Cash flow increased from $129 million to $551 million both reflecting the continued progress made under the 12-Point
Plan; however, both measures fell below the required three year threshold performance level for a vesting.
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. As a result, the
Committee believes that the level of vesting for the 2022-2024 PSP award at 29.7% of maximum is appropriate.
2022-24 PSP Awards
Shares
Awarded
Shares
Vesting
Shares
Forfeit
Dividend
Shares
Total Shares
Vesting
Value of
Vesting Shares
at Award
Price1
(000s)
Share Price
Appreciation2
(000s)
Total Value
Vesting
(000s)
(1) (2)=(1)x29.7%
(3)=(1)-(2)
(4)
(5)=(2)+(4)
(6)
(7)
(8)=(6)+(7)
Executive Directors
Deepak Nath
259,422
76,984
182,439
6,078
83,062
$1,298,723
-$246,329
$1,052,397
John Rogers3
–
–
–
–
–
–
–
–
Former Executive Directors
Anne-Françoise Nesmes4,5
134,648
39,957
94,691
3,155
43,112
$674,085
(£542,349)
-$127,852
(-£114,937)
$546,233
(£427,412)
1 The 2022-24 PSP award share price was £12.58 ($15.64), which was the share price at closing the day before the award was granted.
2 This represents the impact of the share price change between the award date and the vesting date. No discretion has been applied to the award outcome as a result of the share price
movement since award.
3 John Rogers joined in December 2023 and was appointed as CFO and an Executive Director on 1 April 2024 and as such does not have a 2022-24 PSP award.
4 Anne-Françoise Nesmes was the CFO and an Executive Director up until 31 March 2024, when she stepped down from the Board and left the Company on 1 May 2024. Upon leaving, her
outstanding PSP awards were pro-rated to reflect her service over the performance period. However, as the performance of the 2022-24 PSP had ended prior to her leaving, her 2022-24 PSP
was not pro-rated.
5 Anne-Françoise Nesmes was based in the UK and paid in British Pounds. The figure in parenthesis represents the value in local currency.
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
161
Smith+Nephew Annual Report 2024
Awards Granted
Details of share awards granted to Executive Director during 2024
Performance Share Plan
Restricted Share Plan
Deferred Bonus Plan
Shares
Awarded
Value at
Award Price1
’000s
Shares
Awarded
Value at
Award Price2
’000s
Shares
Awarded
Value at
Award Price1
’000s
Executive Directors
Deepak Nath
330,250
$4,581,945
131,517
$1,965,517
72,005
$999,010
John Rogers3
183,332
$2,543,580
(£1,994,652)
–
–
–
–
Former Executive Directors
Anne-Françoise Nesmes3,4
–
–
–
–
37,368
$518,450
(£406,563)
1 The 2024-26 PSP award and 2024 DBP award share price was £10.88 ($13.90) .
2 The 2024 RSP award share price was £11.70 ($14.94) and was based on the averaging share price over the 10 working days prior to the date of grant on 16 August 2024.
3 John Rogers and Anne-Françoise Nesmes were based in the UK and paid in British Pounds. The figure in parenthesis represents the value in local currency.
4 Anne-Françoise Nesmes was CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board and left the Company on 1 May 2024. She was not eligible for a PSP
award in 2024 but did receive an award in the Deferred Bonus Plan in respect of her bonus from the 2023 Annual Incentive Plan.
Details of outstanding share awards granted to Executive Directors
The conditional share awards granted to Executive Directors that continue to be subject to performance or vesting conditions are
shown below.
Award Type
Date of Award
Number of Shares
Date of Vesting
Executive Directors
Deepak Nath
PSP
16 August 2024
27,520
8 March 2027
8 March 2024
302,730
8 March 2027
9 March 2023
283,748
9 March 2026
20 May 2022
259,422
20 May 2025
Total
873,420
RSP1
16 August 2024
43,839
16 August 2025
16 August 2024
43,839
16 August 2026
16 August 2024
43,839
16 August 2027
Total
131,517
DBP
8 March 2024
72,005
8 March 2027
9 March 2023
26,014
9 March 2026
Total
98,019
Buy-Out Awards
29 April 2022
3,016
8 November 2025
John Rogers
PSP
8 March 2024
183,332
8 March 2027
Former Executive Directors
Anne-Françoise Nesmes2
PSP
9 March 2023
140,106
9 March 2026
20 May 2022
134,648
20 May 2025
Total
Total
274,754
DBP
8 March 2024
37,368
8 March 2027
9 March 2023
16,877
9 March 2026
9 March 2022
24,169
9 March 2025
Total
Total
78,414
1 Following a majority shareholder vote in favour of changes to our Remuneration Policy at our AGM in May 2024, US Executive Directors are eligible to receive an annual RSP award equal to 125%
of Base Salary that will vest, subject to a reasonable judgement underpin, on the first, second and third anniversaries of the award. This rateable vesting schedule is in line with US market practice
for RSP awards.
2 Anne-Françoise Nesmes was CFO and an Executive Director up until 31 March 2024 when she stepped down from the Board and left the Company on 1 May 2024. Upon leaving, her outstanding
PSP awards were pro-rated to reflect her service over the performance period. As a result, the number of outstanding shares shown takes this pro-rating into account.
Directors’ Remuneration Report continued
Annual report on remuneration continued
162
Smith+Nephew Annual Report 2024
Executive Directors interests in ordinary shares
The interests of Executive Directors who served during the year in terms of shares of the Company held as at 31 December 2024 are
as follows:
Ordinary
Shares1
Share awards with
performance conditions
Share awards without
performance conditions
Performance
Share Plan Awards2
Buy-Out Awards3
Deferred Bonus
Plan Awards
Restricted Share
Plan Awards4
Executive Directors
Deepak Nath
216,433
873,420
3,016
72,005
131,517
John Rogers
71,920
183,332
n/a
n/a
n/a
Former Executive Directors
Anne-Françoise Nesmes
6,383
274,754
n/a
78,414
n/a
1 Ordinary shares for Deepak Nath include 4,611 American Depository Shares.
2 The PSP awards are subject to further performance conditions before they vest.
3 The buy-out awards granted to Deepak are in respect of an RSP award granted by his former employer that were bought out on a like for like basis and will vest in November 2025.
4 The RSP awards are subject to a reasonable judgement underpin before they vest.
The interests of each Executive Director shown in the table include any shares held by any connected person. The beneficial interest of
each Executive Director is less than 1% of the ordinary share capital of the Company.
There have been no other changes in the interests of Executive Directors in the shares of the Company between 31 December 2024 and
13 February 2025 (the latest practicable date for inclusion in this report).
Shareholding Requirement
Executive Directors are required to establish and maintain a minimum shareholding over a reasonable period of time (expected to
be around five years) recognising that incentive plan vesting and differing international tax regimes may affect the pace at which the
shareholding may be met.
The adoption of the changes to our Remuneration Policy at our AGM in May 2024 resulted in the minimum shareholding requirement for
a US-based CEO increasing from 300% to 500% of Base Salary. The minimum shareholding requirement for the CFO is equal to at least
200% of Base Salary.
Executive Directors are required to retain 50% of the shares (after tax) that vest under the Company’s long-term incentive plans.
This reduces to 30% once the minimum shareholding requirement has been met.
Where an Executive Director leaves employment for any reason, a post-cessation shareholding requirement will apply. The post-
cessation minimum shareholding requirement is equal to the requirement during employment and will apply for a period of two years
after cessation of employment.
Minimum Shareholding Requirement
(% of Base Salary)
Actual Shareholding
(% of Base Salary)
Executive Directors
Deepak Nath1
500%
267%
John Rogers2
200%
98%
Former Executive Directors
Anne-Françoise Nesmes3
200%
71%
1 Deepak Nath joined on 1 April 2022 and is gradually building his shareholding.
2 John Rogers joined on 1 December 2023 and is gradually building his shareholding. He purchased 71,920 shares on 19 December 2024.
3 Anne-Françoise Nesmes left the Company on 1 May 2024 and had not achieved her minimum shareholding requirement of 200% of Base Salary at that time. The minimum shareholding
requirement above represents Anne-Françoise’s actual holding upon leaving and so reflects her post-cessation shareholding requirement.
Fees retained for external non-executive directorships
Executive Directors may hold an external non-executive director appointment and retain the fees paid for such a role. John Rogers
served as a non-executive director of Grab Holdings Ltd (Singapore).
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
163
Smith+Nephew Annual Report 2024
Payments to former directors (audited)
Anne-Françoise Nesmes ceased to be Chief Financial Officer and a member of the Board on 31 March 2024 and left the Company on
1 May 2024. Anne-Françoise continued to receive her salary, benefits and cash contribution in lieu of pension in the normal way during
her employment with the Company up to 1 May 2024. She received a payment in lieu of accrued but untaken annual leave as at the
termination date in accordance with the terms of her employment agreement.
Anne-Françoise received a payment under the 2023 Annual Incentive Plan as she remained employed on 31 March 2024.
Outstanding Deferred Bonus Plan awards will vest in full in accordance with their original timeframes in 2025 and 2026 and (in respect of
any Deferred Bonus Plan award granted in 2024 relating to the bonus from the 2023 Annual Incentive Plan) in 2027.
In respect of outstanding PSP awards granted in 2022 and 2023, these will vest in accordance with the plan rules. Unvested awards
will be pro-rated up to the termination of employment and remain subject to performance assessment at the end of the relevant
performance period. These awards will vest in 2024, 2025 and 2026 respectively, and each award will be released at the end of the
relevant two-year post-vesting holding period. No PSP grant was or will be made in 2024.
Anne-Françoise’s incentive awards will remain subject to malus and clawback provisions and Anne-Françoise will comply with
Smith+Nephew’s post-employment shareholding guidelines for two years after termination.
The Company made a capped contribution of £5,000 plus VAT towards Anne-Françoise’s legal fees incurred in connection with her departure.
Anne-Françoise will not receive any other remuneration payment.
Payments for loss of office (audited)
There were no payments made to, or in respect of, any former Director for loss of office in 2024.
Chair and Non-Executive Directors – Single figure of remuneration (audited)
000s
Committee
Membership
Basic Fee
Supplemental
Fee
Intercontinental
Travel Fee
Total
2024
2023
2024
2023
2024
2023
2024
2023
Chair
Rupert Soames1
$575
(£450)
$178
(£139)
–
–
$4
(£3)
$4
(£3)
$579
(£453)
$182
(£142)
Non-Executive Directors
Simon Lowth2
$92
(£72)
–
–
–
–
–
$92
(£72)
–
Jo Hallas
$92
(£72)
$89
(£70)
–
–
$4
(£3)
$4
(£3)
$96
(£75)
$93
(£73)
Jez Maiden3
$92
(£72)
$27
(£21)
$20
(£16)
–
$4
(£3)
–
$116
(£91)
$27
£21
John Ma
$134
$130
–
–
$42
$42
$176
$172
Katarzyna Mazer-
Hofsaess
$92
(£72)
$89
(£70)
–
–
$4
(£3)
$4
(£3)
$96
(£75)
$93
(£73)
Bob White
$134
$130
–
–
$35
$35
$169
$165
Marc Owen
$134
$130
$36
$35
$28
$42
$198
$206
Angie Risley
$92
(£72)
$89
(£70)
$33
(£26)
$26
(£20)
$4
(£3)
$4
(£3)
$129
(£101)
$119
(£93)
Former Chair
Roberto Quarta4
–
$428
(£335)
–
–
–
–
–
$428
(£335)
Former Non-Executive Directors
Erik Engstrom5
–
$89
(£70)
–
–
–
–
–
$89
(£70)
Rick Medlock6
$33
(£26)
$89
(£70)
–
$26
(£20)
–
$4
(£3)
$33
(£26)
$119
(£93)
N
A
R
C
Committee key
Member of the
Audit Committee
Member of the
Remuneration Committee
Member of the Nomination
& Governance Committee
Member of the Compliance
& Culture Committee
Committee
Chair
1 Rupert Soames joined the Board on 26 April 2023,
became the Chair on 15 September 2023.
2 Simon Lowth was appointed on 1 January 2024.
3 Jez Maiden was appointed on 14 September 2023 .
4 Roberto Quarta stepped down from the Board
on 15 September 2023.
5 Erik Engstrom stepped down from the Board
on 31 December 2024.
6 Rick Medlock stepped down from the Board
on 30 April 2024.
Directors’ Remuneration Report continued
Annual report on remuneration continued
C
C
A
R
N
R
R
N
A
N
A
C
R
C
A
N
C
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Smith+Nephew Annual Report 2024
Chair Fees
The fee for the Chair of the Board is set by the Remuneration Committee. Rupert Soames’ fee was set at £450,000 ($575,100) upon
joining in April 2023, after which he was appointed as Chair in September 2023.
During December 2024, the Chair’s fee was reviewed by the Committee and the decision taken to apply an increase of 3.5% from
1 April 2025. This increase did not exceed the average increase applied to the broader UK workforce. While the Chair is a member of the
Remuneration Committee, he did not attend the meeting while his fee was being reviewed and discussed by the Committee.
The Chair is required each year to purchase shares worth at least 25% of his post-tax annual fee.
Non-Executive Director Fees
The fee for Non-Executive Directors is periodically reviewed by the Chair of the Board and the Executive Directors. Following a review in
December 2024, it was decided to increase the fees by 3.0% for Non-Executive Directors based in the US and 3.5% for those based in
the UK. These increases did not exceed the average increase applicable to the broader workforce in these countries. A proportion of the
fee payable to Non-Executive Directors is paid in shares.
UK1
US
2024
2023
2024
2023
Base Fee
Cash
$83,700
(£65,493)
$80,514
(£63,000)
$124,827
$120,000
Shares
$8,635
(£6,757)
$8,307
(£6,500)
$10,173
$9,780
Total
$92,336
(£72,250)
$88,821
(£69,500)
$135,000
$129,780
Senior Independent
Director Supplement
$26,582
(£20,800)
$25,560
(£20,000)
$36,400
$35,000
Committee Chair Supplement
$26,582
(£20,800)
$25,560
(£20,000)
$36,400
$35,000
Intercontinental Travel2
$4,473
(£3,500)
$4,473
(£3,500)
$7,000
7,000
1 Non-Executive Directors based in the UK are paid in British Pounds. For the purposes of comparison, the fees have been converted into our reporting currency (US Dollars) at an exchange rate
of £1 to $1.278.
2 A fixed fee only payable when a Non-Executive Director is required to travel to attend meetings in another continent.
The interests of the Chair of the Board and Non-Executive Directors who served during the year, in terms of shares of the Company held
as at 31 December 2024 or at date of separation as applicable, are as follows:
Number of Shares
Chair
Rupert Soames
14,384
Non-Executive Directors
Simon Lowth1
300
Jo Hallas
6,190
Jez Maiden2
1,293
John Ma
2,134
Katarzyna Mazer-Hofsaess
1,830
Rick Medlock3
3,917
Bob White
8,376
Marc Owen
17,206
Angie Risley
5,978
1 Simon Lowth was appointed on 1 January 2024.
2 Jez Maiden was appointed on 14 September 2023.
3 Rick Medlock stepped down from the Board on 30 April 2024.
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
165
Smith+Nephew Annual Report 2024
The interests of the Chair of the Board and Non-Executive Directors shown in the table include any shares held by any connected
person. The beneficial interest of the Chair of the Board and each Non-Executive Director is less than 1% of the ordinary share capital of
the Company.
There have been no other changes in the interests of the Chair or Non-Executive Directors in the shares of the Company between
31 December 2024 and 13 February 2025 (the latest practicable date for inclusion in this report).
Annual percentage change in directors’ remuneration
The table below shows how the actual remuneration received by Executive Directors, the Chair of the Board and Non-Executives, has
changed over the year ended 31 December 2024 and prior years compared to the average salary of other employees. The average salary
in 2024 of UK employees increased by 5.3%, and that of US employees increased by 4.7%.
% Change 2024/2023
% Change 2023/2022
% Change 2022/21
Salary
/Fees
Benefits
Annual
Bonus
Salary
/Fees
Benefits
Annual
Bonus
Salary
/Fees
Benefits
Annual
Bonus
Executive Directors
Deepak Nath1
3.1%
144%
1.9%
39.6%
55.8%
168.5%
–
–55.5%
44.9%
John Rogers2
100%
100%
100%
–
–
–
–
–
–
Chair
Rupert Soames3
219.7%
–
–
100%
–
–
–
–
–
Current Non-Executive Directors
Simon Lowth4
–
–
–
–
–
–
–
–
–
Jo Hallas
2.9%
–
–
7.8%
–
–
272.8%
–
–
Jez Maiden5
339.5%
–
–
–
–
–
–
–
–
John Ma
2.3%
–
–
13.9%
–
–
32.9%
–
–
Katarzyna
Mazer-Hofsaess
2.9%
–
–
0%
–
–
5.0%
–
–
Bob White
2.4%
–
–
20.5%
–
–
5.4%
–
–
Marc Owen
-4.3%
–
–
11.3%
–
–
8.2%
–
–
Angie Risley
8.5%
–
–
0%
–
–
3.9%
–
–
Former Executive Directors
Anne-Françoise
Nesmes6
-74.8%
-74.7%
-100.0%
4.2%
3.6%
129.6%
4.62%
3.97%
–29.5%
Former Non-Executive Directors
Erik Engstrom7
–
–
–
0%
–
–
0%
–
–
Rick Medlock8
-72.0%
–
–
0%
–
–
3.9%
–
–
Directors’ Remuneration Report continued
Annual report on remuneration continued
1 Deepak joined on 1 April 2022, his pension was corrected in 2024, refer to page 156.
2 John Rogers was appointed Executive Director on 1 April 2024.
3 Rupert Soames joined the Board on 26 April 2023 and was paid part year.
4 Simon Lowth was appointed on 1 January 2024.
5 Jez Maiden was appointed on 14 September 2023.
6 Anne-Françoise Nesmes stepped down from the Board on 31 March 2024.
7 Erik Engstrom stepped down from the Board on 31 December 2023.
8 Rick Medlock stepped down from the Board on 30 April 2024.
166
Smith+Nephew Annual Report 2024
Pay Comparisons
Chief Executive Officer Pay Ratio
The Committee is mindful of the relationship between the remuneration of the Chief Executive Officer and that of other employees more
generally. The table below compares the single total figure of remuneration for the Chief Executive Officer to the total pay and benefits
of full-time equivalent UK employees, who are ranked at the lower quartile, median and upper quartile across all UK employees.
The reporting regulations permit three different calculation methodologies for determining the pay ratio. The ratios shown in the
table above have been calculated using Option A, which calculates pay for employees on the same basis as the single figure for
remuneration calculated for Executive Directors. The period for which actual employee pay has been calculated is from 1 January 2024
to 31 December 2024. The single figure for remuneration for each full-time employee as at 31 December 2024 includes earned salary,
annual incentive bonus payments, allowances, pension and benefits. Part-time employees have been excluded for the purpose of
the calculations.
20241
20231
2022
2021
2020
2019
Upper Quartile (75th percentile)
73:1
46:1
70:1
32:1
19:1
51:1
Median (50th percentile)
110:1
72:1
107:1
49:1
29:1
81:1
Lower Quartile (25th percentile)
156:1
102:1
160:1
71:1
42:1
116:1
1 In 2024 and 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 95:1 for 2024 and 55:1 for 2023.
The total remuneration of our Chief Executive includes a substantial proportion of variable pay and therefore the single total figure will
vary considerably depending on the level of performance against the measures driving the Annual Incentive Plan, Performance Share
Plan and Restricted Share Plan.
In contrast, employees in the calculation receive a higher proportion of their remuneration in the form of fixed pay. The ratios are
consistent with our market-based approach to reward, with the ratio increasing as the Chief Executive’s remuneration is compared
with that of more junior employees. The overall picture presented by the ratios is also consistent with our policies on pay, reward and
career progression.
The table below provides information on the salary and total pay and benefits paid to employees ranked at the Lower Quartile, Median
and Upper Quartile.
2024
2023
Salary
Total Pay
& Benefits
Salary
Total Pay
& Benefits
Chief Executive Officer
$1,560,093
$7,812,559
$1,512,726
$4,658,252
Upper Quartile
(75th percentile)
$70,371
(£55,064)
$107,146
(£83,839)
$77,454
(£60,606)
$101,369
(£79,318)
Median
(50th percentile)
$66,258
(£51,845)
$71,001
(£55,556)
$51,244
(£40,097)
$64,627
(£50,569)
Lower Quartile
(25th percentile)
$50,382
(£39,422)
$50,123
(£39,220)
$45,600
(£35,681)
$45,600
(£36,39)
Note: UK employees are paid in British Pounds. For the purposes of comparison the pay and benefits have been converted into our reporting currency (US Dollars) at a exchange rate of £1 to $1.278.
Gender Pay Ratio
We are seeing improvements year on year. Our mean pay gap for the UK has reduced from 14% in 2023 to 13% in 2024 and our median
pay gap has reduced from 14% in 2023 to 10% in 2024. Our mean bonus gap has increased from 22% to 25% and the median bonus gap
has also increased from 14% to 24%; the increase in gap is mainly driven by more men in sales roles and eligible for sales incentives as
compared to women, and also higher earnings in sales commissions as compared to our annual bonus payments.
We continue our efforts to review and close the gaps through consistent and unbiased global pay and incentive plans. Our internal
pay practices and incentive plan designs are gender neutral and our performance management reviews are undertaken based on
objective criteria.
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
167
Smith+Nephew Annual Report 2024
Relative Importance of spend on Pay
When considering remuneration arrangements for our Executive Directors and employees as a whole, the Committee also take 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 chart below shows the relative importance of spend on pay compared to returns to shareholders and trading profit.
Total Employee Costs
0
200
400
600
800
1000
1200
1400
1600
1800
1,683
1,663
2024
2023
$m
Return to Shareholders
0
200
400
600
800
1000
1200
1400
1600
1800
327
327
2024
2023
$m
* Returns to shareholders comprise of dividends to ordinary shareholders only as there have been no share buy-backs over the period
Attributable Profit
0
200
400
600
800
1000
1200
1400
1600
1800
263
412
2024
2023
$m
Total Shareholder Return (TSR) performance and Chief Executive Pay
The chart below shows the value as at 31 December 2024 of £100 invested in Smith+Nephew shares on 31 December 2014, compared
to £100 invested in the FTSE 100 on the same date. The FTSE 100 was chosen as the comparator because it is a broad equity index of
which the Company is a constituent member and reflects the investment interests of our UK shareholder base.
Source: S&P Capital IQ
Smith+Nephew
FTSE 100
Ten-year Total Shareholder Return
(measured in UK Sterling, based on monthly spot values)
0
50
100
150
200
Dec 2015
Dec 2014
Dec 2016
Dec 2017
Dec 2019
Dec 2020
Dec 2024
Dec 2022
Dec 2023
Dec 2021
Dec 2018
Directors’ Remuneration Report continued
Annual report on remuneration continued
168
Smith+Nephew Annual Report 2024
We also compare the Company’s performance to a tailored peer group of medical device companies (see page 160), for the purposes
of our long-term Performance Share Plan awards. The chart below shows the value as at 31 December 2024 of £100 invested in
Smith+Nephew shares on 31 December 2014, compared to £100 invested in this peer group.
Source: S&P Capital IQ
Medical Devices comparators that are still trading for awards made since 2013
Smith+Nephew
S&P Medical Devices
Ten-year Total Shareholder Return
(measured in US Dollars, based on monthly spot values)
Dec 2015
Dec 2014
Dec 2016
Dec 2017
Dec 2019
Dec 2020
Dec 2024
Dec 2022
Dec 2023
Dec 2021
Dec 2018
600
500
400
300
100
0
200
The table below details the CEO’s single total figure of remuneration and incentive outcomes over the period 1 January 2015 to
31 December 2024.
$000s
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Chief Executive’s single total figure
Deepak Nath1
5,955
4,658
7,813
Roland Diggelmann2
266
1,698
3,102
603
Namal Nawana3
2,883
4,489
Olivier Bohuon4
5,342
3,333
5,117
2,384
5,342
3,333
5,117
5,267
4,755
1,698
3,102
6,558
4,658
7,813
Annual Incentive (% of maximum)
Deepak Nath1
32%
61%
61%
Roland Diggelmann2
0%5
24%
Namal Nawana3
69%
71%6
Olivier Bohuon4
75%
30%
61%
63%
75%
30%
61%
–
71%
0%
24%
32%
61%
61%
Long Term Incentives (% of maximum)
Deepak Nath1
–
–
29.7%
Roland Diggelmann2
–
–
Namal Nawana3
–
Olivier Bohuon4
33.5%
8%
54%
46.5%
33.5%
8%
54%
46.5%
–
–
–
–
–
29.7%
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%.
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
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 104-111.
Remuneration paid to senior management in respect of 2022, 2023 and 2024 was as follows:
2024
2023
2022
Total remuneration
$20,526,132
$18,890,117
$17,211,000
Total remuneration for loss of office
$1,491,790
$1,659,101
–
Aggregate amounts provided to supplementary pension plans
$1,552,480
$1,332,506
$1,626,000
The interests of senior management who served during the year in terms of shares of the Company held as at 31 December 2024
are shown in the table below. For this purpose, senior management is defined as the Executive Directors, members of the Executive
Committee, including the Company Secretary, and their connected persons (or closely associated persons).
Ordinary
Shares
American
Depositary
Shares
Share capital
of Company
Total for all senior management
908,699
16,607
0.1%
There have been no other changes in the interests of senior management in the shares of the Company between 31 December 2024 and
13 February 2025 (the latest practicable date for inclusion in this report).
Details of share awards granted during the year to members of senior management and held as at 31 December 2024 are shown in the
table below.
Awards
Share awards
granted during 2024
Total share
awards held as at
31 December 2024
Deferred Share Plan1
218,079
379,047
Restricted Share Plan2
131,517
131,517
Performance Share Plan1
1,575,896
3,915,930
Conditional Awards1
47,797
138,654
Sign-On Awards1
–
–
Buy-Out Agreement1
–
3,016
1 These awards are granted through the Smith+Nephew Global Share Plan 2020.
2 Awards granted before 1 August 2024 were granted through the Smith+Nephew Global Share Plan 2020, all awards after this date were granted through the Smith+Nephew Restricted Share
Plan 2024.
There have been no new awards or changes to awards held by senior management between 31 December 2024 and 13 February 2025
(the latest practicable date for inclusion in this report).
Directors’ Remuneration Report continued
Annual report on remuneration continued
170
Smith+Nephew Annual Report 2024
Implementing the Remuneration Policy for 2025
Selection of Performance Targets
Performance targets are set to be relevant, stretching and aligned to our business strategy, and we also consider how performance is
delivered when determining incentive plan outcomes, with appropriate consideration given to any environmental, social and governance
risks to ensure that the performance delivered is sustainable and fully aligned with our Company values and culture, malus and clawback
applied to all forms of variable pay.
Annual Incentive Plan (AIP)
Financial performance targets under the AIP are set by the Remuneration Committee with reference to the budgets and business plan
for the year ahead as well as anticipated market conditions, ensuring that the levels to achieve threshold, target or maximum payout are
appropriately challenging.
The performance targets for 2025 are predominantly based on financial measures (85% of maximum opportunity). They include revenue
(35%), trading profit margin (35%), free cash flow (15%) and strategic objectives (15%).
Commercial sensitivity precludes the advance publication of the actual targets for our financial measures, but these will be
retrospectively published in our annual report on remuneration for 2025. The Committee considers the range of financial targets set
for 2025 to be similarly challenging to those set in prior years. Free cash flow replaced trading cash conversion as a performance metric
(compared to 2024), as the Committee believes that this measure is a more comprehensive measure and will also reward more efficient
capital allocation decisions.
The strategic objectives are based on key deliverables that support our near and long-term strategy as well as our sustainability
framework. Two-thirds of the strategic objectives (i.e. 10% of the bonus opportunity) will relate to the delivery of the Group’s strategy
and focus on maintaining and growing our business, while the remaining one-third (i.e. 5% of the bonus opportunity) will be based on our
sustainability agenda, including employee engagement; and reduction in Scope 1 and Scope 2 greenhouse gas emissions.
The strategic objectives and their outcome will be disclosed in our 2025 Annual Report, while the performance targets for the ESG and
sustainability goals are shown below.
ESG & Sustainability Objectives
(5% of bonus opportunity)
2025 Performance Targets
Threshold
Target
Maximum
Improve Employee Engagement (Gartner mean)
4.24
4.27
4.30
Reduction in Scope 1 & 2 GHG emissions (relative to 2019 baseline)
70%
71%
72%
Note: Vesting will be on a straight-line basis between threshold and target and between target and maximum.
The Committee decided not to include female and ethnic representation as a specific performance metric within the AIP for 2025 as
was done for 2024. The reason for this was because a lot of good work was done during 2024 to improve representation and embed
processes that support greater inclusion and belonging to the extent that the Committee felt that further specific incentivisation on this
was not needed. In addition, people leaders now have individual objectives based on broader inclusion and belonging goals.
Performance Share Plan (PSP)
The performance targets under the PSP are set to reflect the Company’s longer-term growth objectives at a level where the maximum
represents genuine outperformance. Market consensus is also considered when setting the performance range. The performance
measures for the 2025 award are adjusted earnings per share (EPSA), total shareholder return (TSR), return on invested capital (ROIC)
and strategic objectives linked to our ESG agenda.
Measure
2025 Performance Targets
Earnings per share
(30% weighting)
Adjusted EPS (EPSA) is considered a simple and clear measure of absolute growth in line with our business
strategy. The EPSA targets that the Committee intends to set for the 2025-27 PSP award are:
Threshold
Target
Maximum
EPSA
8%
10.5%
13%
Vesting
25%
50%
100%
Note: Vesting will be on a straight-line basis between threshold and target and between target and maximum.
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OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Performance Share Plan (PSP) continued
Measure
2025 Performance Targets
Total Shareholder Return
(30% weighting)
TSR is considered a simple and clear performance measure relative to a comparator group. For the
2025-2027 PSP award the Committee intends to measure TSR performance relative to two equally
weighted comparator groups, which are the same as those adopted for the 2024-2026 PSP award granted in
2024, namely:
1 The FTSE 100 excluding financial services, utilities, commodities (basic materials and oil and gas)
and food retail companies; plus
2 A MedTech industry peer group consisting of the following companies:
Alcon Inc.
Edwards Lifesciences Corp.
Koninklijke Philips NV
Bausch + Lomb Corp.
Elekta AB
Resmed Inc.
Baxter International Inc.
Enovis Corp.
Sonova Holding AG
Becton Dickinson & Co
Envista Holdings Corp.
Steris Plc
bioMerieux SA
GE HealthCare Tech Inc.
Straumann Holding AG
Carl Zeiss Meditec AG
Globus Medical Inc.
Stryker Corp.
Coloplast A/S
Hologic Inc.
Teleflex Inc.
ConvaTec Group Plc
Insulet Corp.
The Cooper Companies Inc.
Demand A/S
Integer Holdings Corp.
Zimmer Biomet Holdings Inc.
Dentsply Sirona Inc
Integra Lifesciences Hold. Corp.
DiaSorin SpA
Intuitive Surgical Inc.
Index
Weighting
Threshold
Maximum
FTSE 100 Peer Group
50%
Equal to Index
8% Above Index
MedTech Peer Group
50%
Equal to Index
8% Above Index
Note: Vesting will be on a straight-line basis between threshold and maximum.
Return on Invested Capital
(30% weighting)
Return on invested capital aligns with our focus to ensure we return value on investments for our
shareholders. The targets that the Committee intends to set for the 2025-2027 PSP award are:
Threshold
Target
Maximum
ROIC
9%
10%
11%
Vesting
25%
50%
100%
Note: Vesting will be on a straight-line basis between threshold and target and between target and maximum.
Strategic Objectives
(10% weighting)
The strategic objectives consist of metrics related to our ESG and sustainability framework, namely a
reduction in our environmental impact (Scope 1 and Scope 2 Greenhouse Gas emissions relative to a 2019
baseline). The targets that the Committee intends to set for the 2025-2027 PSP award are:
Weighting
Threshold
Target
Maximum
Scope 1 and Scope 2 GHG
50%
72%
74%
76%
Vesting
25%
50%
100%
Note: Vesting will be on a straight-line basis between threshold and target and between target and maximum.
The Committee decided not to include female and ethnic representation as a specific performance metric
within the PSP for 2025-27 as was done for 2024-26 as good progress was made in 2024 to improve
representation and embed processes that support greater inclusion and belonging to the extent that the
Committee felt that further incentivisation beyond 2026 was not needed.
Restricted Share Plan (RSP)
The conditions attached to RSP awards relate to continued employment and good standing. In addition, for US Executive Directors, the
award vesting is subject to a reasonable judgement underpin. If the Remuneration Committee is not satisfied that the underpin has been
met, the Committee may scale back the vesting (including to zero). In assessing the underpin, the Committee will consider the following:
– A review of overall financial performance over the vesting period;
– Whether there have been any sanctions or fines issued by a regulatory authority;
– Whether there have been any material environmental, social or governance issues;
– Whether a major safety incident has occurred; and
– Whether there has been material damage to the reputation of the Company.
Directors’ Remuneration Report continued
Annual report on remuneration continued
172
Smith+Nephew Annual Report 2024
Discretion and Judgement
The Committee retains the flexibility to apply discretion and judgement to ensure fair outcomes, as no remuneration policy or
framework, however well-designed, can anticipate every situation.
The Committee can exercise discretion in several areas when administering the Company’s incentive plans, in accordance with the
relevant plan rules. These include, but are not limited to:
– Selection of participants.
– The size of awards each year (subject to the limits outlined in the Remuneration Policy).
– The level of payments, or vesting, based on achievement of the relevant performance conditions.
– Determining individuals as good or ordinary leavers and the treatment of outstanding awards (in line with plan rules and
Remuneration Policy).
– Managing outstanding awards and evaluating performance in the event of a change of control.
Additionally, if circumstances arise that lead the Committee to believe that a performance condition is no longer appropriate, they may
substitute, adjust, or waive the condition to ensure a fairer evaluation of performance.
Malus and Clawback
The Board has a clawback policy which provides for the recovery of certain incentive-based remuneration from current and former
Executive Directors and 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. This policy is in addition to the rights granted to the
SEC under applicable legislation and the malus and clawback provisions set forth in the Company’s incentive plan rules.
Under the Company’s incentive plan rules, malus and clawback may be applied to AIP, DBP, PSP and RSP awards in certain
circumstances including:
– Cases of fraud, negligence or gross misconduct by the Executive Director;
– Material financial misstatement in the audited financial results;
– Error in calculation; or
– Other exceptional circumstances at the Committee’s discretion.
Cash bonuses will be subject to clawback, with deferred shares being subject to malus, over the deferral period. PSP and RSP awards will
be subject to malus over the vesting period and clawback from the vesting date to the third anniversary of the relevant vesting date.
STRATEGIC REPORT
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ACCOUNTS
OTHER INFORMATION
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Smith+Nephew Annual Report 2024
Disclosure
Section in Annual Report
Page
Directors in office during the year
Directors’ Report
177
Dividend recommendation for the year
Chair’s Statement
7
Disclosure of information to auditor
Directors’ Report
177
Qualifying third-party indemnity provisions
for Directors
Directors’ Report
177
Charitable and political donations
Directors’ Report
177
Financial instruments – risk
management objectives and policies
Notes to the Accounts
224
Post balance sheet events
Notes to the Accounts
247
Likely future developments
Chair’s statement
9
Research and development
Research and Development
29–31
Policies governing employment and
opportunities for disabled persons
Culture and belonging
63
Employee communication and engagement
Engaging with our stakeholders
96–100
How Directors have performed under section 172
Section 172 statement
116–117
How the Directors have had regard to the need to
foster the Company’s business relationships and
effect on principal decisions
Section 172 statement
116–117
List of subsidiaries and branches outside of the UK
Notes to the Accounts
252–255
Structure of share capital including restrictions
on the transfer of securities, voting rights and
interests in voting rights
Directors’ Report
175
Significant holdings of the Company’s securities
Directors’ Report
176
Rights attaching to shares
under employee share schemes
Directors’ Report
175
Rules governing the appointment and
replacement of Directors
Directors’ Report
177
Rules governing changes to the Company’s
Articles of Association
Directors’ Report
176
Powers of the Directors
Directors’ Report
177
Significant agreements
Directors’ Report
177
Agreements relating to compensation for
loss of office or employment relating to a takeover
Directors’ Remuneration Policy
152
Greenhouse gas emissions
TCFD
77
Corporate Governance Statement
Directors’ Report
177
Internal control and risk management
Risk Report
81–82
Diversity policy
Nomination & Governance
Report
121
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 American Depositary Shares
(ADSs) evidenced by American Depositary
Receipts (ADRs). From 14 October 2014,
each ADS has represented two ordinary
shares, 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 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 £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.
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.
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.
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.
Directors’ Report
Directors’ Report disclosures
Index to principal Directors’ Report disclosures
174
Smith+Nephew Annual Report 2024
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 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 2024.
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.
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.
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ACCOUNTS
OTHER INFORMATION
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Smith+Nephew Annual Report 2024
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);
– 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 to the Company’s
Articles of Association
The Company does not have any special
rules about amendments to its Articles of
Association beyond those imposed by law.
Shareholdings
As at 13 February 2025, to the knowledge
of the Group, there were 10,973 registered
holders of ordinary shares, of whom 87
had registered addresses in the US and
held a total of 159,471 ordinary shares
(0.02% 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 13 February 2025, 36,428,537 ADSs
equivalent to 72,857,074 ordinary shares or
approximately 8.3% of the total ordinary
shares in issue, were outstanding and were
held by 88 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 13 February 2025, 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 below, 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.
As at 31 December 2024 the Company had
received notifications in accordance with
the FCA’s Disclosure and Transparency Rule
5.1.2 of the following interests in the voting
rights of the Company. There were no new
notifications between 31 December 2024
and 13 February 2025.
Shareholder
As at
13 February
2025
As at
31 December
2024
% of voting
rights over
ordinary shares
of US20¢ each
% of voting
rights over
ordinary shares
of US20¢ each
Blackrock, Inc.
6.44
6.44
Cevian Capital
II GP Limited
5.02
5.02
Norges Bank
3.05
3.05
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
any shares during 2024 nor during the
period to 13 February 2025.
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.
Directors’ Report continued
Directors’ Report disclosures continued
176
Smith+Nephew Annual Report 2024
Charitable and political donations
The Group made no political donations
during the year (2023: $nil). Details of
charitable donations can be found on
page 99.
Directors
The Directors of the Company who
served during the financial year ended
31 December 2024 were as follows:
Rupert Soames, Deepak Nath, John
Rogers, Marc Owen, Jo Hallas, John
Ma, Katarzyna Mazur-Hofsaess, Angie
Risley, Bob White, Jez Maiden and Simon
Lowth. Anne-Françoise Nesmes and Rick
Medlock served as Directors until their
resignation on 31 March 2024 and 1 May
2024 respectively. Details of the Directors’
interests in the Company’s shares can be
found on pages 163 and 165.
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 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 or her 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.
Directors’ Indemnities
The Company maintained appropriate
insurance to cover Directors’ and Officers’
liability for itself and its subsidiaries and
such insurance was in force for the whole
of the year ended 31 December 2024.
The Company also indemnifies the
Directors under deeds of indemnity
for the purposes of section 236 of the
Companies Act 2006. Such indemnities
contain provisions that are permitted
by the Director liability provisions of the
companies Act 2006 and the Company’s
Articles of Association.
Significant contracts
The only significant contracts to which
the Company is a party that take effect,
alter or terminate upon a change of control
are the $625m of outstanding private
placement notes due between January
2026 and March 2034 and the Revolving
Credit Facility dated 20 October 2023,
which contain customary prepayment,
cancellation and default provisions
including repayment of principal and
interest on a change of control.
Disclosure of information to auditor
So far as the Directors are aware, there is
no relevant audit information of which the
auditor is unaware; and the Directors have
taken all the steps that they ought to have
taken as directors to make themselves
aware of any relevant audit information
and to establish that the auditor is aware of
that information.
Corporate Governance Statement
A statement confirming compliance with
the UK Corporate Governance Code is set
on page 103. The 2018 Code can be found
at www.frc.org.uk/library/standards-
codes-policy/corporate-governance/uk-
corporate-governance-code/
Cautionary statement
The review of the business and its future
development in the Annual Report has
been prepared solely to provide additional
information to shareholders to assess
the Group’s strategies and the potential
for these strategies to succeed. It should
not be relied on by any other party for
any other purpose. The review contains
forward-looking statements which are
made by the Directors in good faith based
on information available to them at the
time of the approval of these reports
and should be treated with caution due
to the inherent uncertainties associated
with such statements. The Directors,
in preparing the Strategic Report, have
complied with s417 of the Companies
Act 2006.
Helen Barraclough
Company Secretary
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
177
Smith+Nephew Annual Report 2024
Accounts
Statement of Directors’ responsibilities
179
Independent auditor’s UK report
180
Group income statement
192
Group statement of comprehensive income
192
Group balance sheet
193
Group cash flow statement
194
Group statement of changes in equity
195
Notes to the Group accounts
196
Company financial statements
248
Notes to the Company accounts
250
178
Smith+Nephew Annual Report 2024
178
Statement of Directors’ responsibilities in respect
of the Annual Report and Financial Statements
– 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
– 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–100.
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, 9, 29–31, 63,
76–77, 81–82, 96–100, 116–117, 122,
152, 175–177, 222, 247 and 252–255 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 24 February 2025.
Helen Barraclough
Company Secretary
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 Group financial statements,
present information, including accounting
policies, in a manner that provides
relevant, reliable, comparable and
understandable information and provide
additional disclosures when compliance
with the specific requirements in IFRS
Accounting Standards are insufficient to
enable users to understand the impact
of particular transactions, other events
and conditions on the entity’s financial
position and financial performance;
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OTHER INFORMATION
1. Opinion
In our opinion:
– The financial statements of Smith & Nephew plc (the “Parent Company”) and its subsidiaries (the “Group”) give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs as at 31 December 2024 and of the Group’s profit for the year then ended;
– The Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards
and IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB);
– The Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
– The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise the:
Group (Smith & Nephew plc and its subsidaries)
Parent Company (Smith & Nephew plc)
– Group balance sheet as at 31 December 2024;
– Group income statement for the year then ended;
– Group statement of comprehensive income for the year then
ended;
– Group statement of changes in equity for the year then ended;
– Group cash flow statement for the year then ended; and
– Notes 1 to 23 to the financial statements, which includes the
material accounting policy information.
– Balance sheet as at 31 December 2024;
– Statement of changes in equity for the year then ended; and
– Notes 1 to 9 to the financial statements, which includes the
material accounting policy information.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, United
Kingdom adopted international accounting standards and IFRS Accounting Standards as issued by the IASB. The financial reporting
framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the “FRC’s”) Ethical Standard as
applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and
Parent Company for the year are disclosed within the Audit
Committee Report within the Corporate Governance section of
the Annual Report. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard to
the Group or the Parent Company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independent auditor’s report to the
members of Smith & Nephew Plc
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3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
– Valuation of Orthopaedics cash generating unit (CGU) goodwill;
– Valuation of excess and obsolescence (E&O) provision for Orthopaedics inventory;
– IT systems which impact financial reporting.
We have identified IT systems which impact financial reporting as a new key audit matter given the
significance of the effect on the overall audit strategy.
Two key audit matters were identified by the previous auditor and described in their report for the year
ended 31 December 2023 and are not included in our audit report for the year ended 31 December 2024,
as we did not consider them to be key audit matters in the current year;
– Provision for metal-on-metal hip products, and
– Parent Company financial statements only : recoverability of parent company’s investment in
subsidiary.
Materiality
The materiality that we used for the Group financial statements was $35 million. We considered a
number of metrics when determining Group materiality, including: revenue; trading profit; and profit
before taxation. Our selected materiality represents 0.60% of revenue, 3.34% of trading profit and 7.03%
of profit before taxation.
Scoping
We performed a significant proportion of our audit procedures centrally in the UK, in addition to four
Global Shared Service Centres and 13 reporting units.
Our audit scope addressed 73% of the Group’s revenue, 68% of the Group’s profit before tax and 82% of
the Group’s total assets.
First-year audit transition
The year ended 31 December 2024 is our first year as auditor of the Group. We have been independent
since July 2023 and commenced our transition activities from that date. Our work included:
– Establishing a detailed audit transition plan;
– Shadowing the previous auditor through the 31 December 2023 audit, including attendance at key
meetings, including audit committee meetings;
– Reviewing the previous auditor’s audit files;
– Holding transition workshops with key component finance and operational management, including
internal audit, treasury, tax, legal and Group finance teams to inform our audit planning;
– Auditing historical accounting policies and accounting judgements; and
– Holding a Group audit planning meeting with our component audit teams and conducting Group audit
team visits to key markets and Shared Service Centre locations.
These procedures built our understanding of the Group which informed our audit risk assessment,
through which we identified the risks of material misstatement to the Group’s financial statements.
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OTHER INFORMATION
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent
Company’s ability to continue to adopt the going concern basis of
accounting included:
– Testing controls over management’s going concern model, including
the review of the inputs and assumptions used in the model;
– Evaluating the key assumptions, including those relating to
the current macroeconomic uncertainty, and evaluating the
appropriateness of these assumptions and their consistency with
management’s presentations to the Board and Audit Committee;
– Comparing the forecasts within the going concern model to recent
historical financial information to assess historical forecasting
accuracy;
– Testing the mechanical accuracy of the going concern model;
– Testing the current and forecast covenant compliance calculations
and headroom thereof at the balance sheet date, both under the
Group’s forecasts and in severe downside scenarios;
– Evaluating whether inclusion of EBITDA and Net Debt in the
convenance compliance calculations aligns with the definition
provided in the private placement note agreements;
– Confirming the existence and availability of financing facilities;
– Evaluating the appropriateness of management’s sensitivity
analysis modelled under their most severe scenario, including an
evaluation of the mitigating actions available to management; and
– Evaluating the appropriateness of disclosures on going concern in
the financial statements.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s
and Parent Company’s ability to continue as a going concern for a
period of at least 12 months from when the financial statements are
authorised for issue.
In relation to the reporting on how the Group has applied the UK
Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ Statement in the financial
statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of this
report.
Independent auditor’s UK report continued
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5. Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included 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.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
5.1. Valuation of Orthopaedics cash generating unit (CGU) goodwill
Key audit matter description
The Group performs an annual impairment test of goodwill at the CGU level in accordance with IAS 36:
Impairment of Assets by comparing the recoverable amount to the carrying value of the CGU.
The carrying value of the Orthopaedics CGU goodwill at 31 December 2024 was $807 million (2023:
$915 million), which represents 27% of the total goodwill balance. The recoverable amount is derived
from the CGU’s value-in-use, calculated from cash flow projections involving key assumptions, principally
relating to trading profit margin, which is sensitive to changes. The carrying value of the Orthopaedics
CGU 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.
We identified the valuation of Orthopaedics CGU goodwill as a key audit matter due to the significant
judgements made by the Group in preparing cash flow projections. This required a high degree of auditor
judgement and an increased extent of effort to evaluate the reasonableness of the Group’s estimate
related to forecasting trading profit margin.
The impairment assessment of the Orthopaedics CGU is disclosed as an accounting estimate in note 1 of
the Group financial statements, with further disclosures provided in note 8, including disclosures around
sensitivity of trading profit margin. The matter is also discussed in the Audit Committee report within the
Corporate Governance section of the Annual Report.
How the scope of our audit
responded to the key audit
matter
We performed the following audit procedures relating to the forecasting of trading profit margin in the
Orthopaedics CGU:
– Tested the effectiveness of controls related to management’s determination and forecasting of future
trading profit margins.
– Evaluated forecast cash flows by comparing the trading profit margin assumption used within
the impairment model to approved budgets, business plans, third-party market data and analyst
expectations.
– Performed sensitivity analyses to assess the potential impact of a range of reasonably possible
outcomes.
– Evaluated the accuracy of the Group’s cash flow projections by comparing historical actual results to
the approved budgets in the previous years.
– Evaluated compliance with the disclosures required by the accounting standards relating to a
reasonably possible change in a key assumption, including their clarity and understandability to users
of the financial statements.
Key observations
We are satisfied that the valuation of the Orthopaedics CGU goodwill, including the key assumption in
relation to trading profit margin, is acceptable.
We are satisfied that the disclosures in the financial statements with respect to the sensitivity of trading
profit margin disclosures are appropriate.
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OTHER INFORMATION
5.2. Valuation of Excess and Obsolescence (E&O) provision for Orthopaedics inventory
Key audit matter description
The Group holds an E&O provision to reduce the carrying value of inventories on the balance sheet to net
realisable value to comply with the requirements of IAS 2: Inventories.
The Group’s total inventories at 31 December 2024 are $2,387 million (2023: $2,395 million) net of
the total E&O provision, which was $511 million (2023: $544 million), of which a significant proportion
relates to US Orthopaedics finished goods. The estimation of this provision is judgemental, as it involves a
number of key estimates, in particular as it pertains to product groups where longer forecasting periods
of future product demand are applied.
We identified the valuation of the E&O provision for Orthopaedics inventory as a key audit matter due
to the significant judgements made by the Group to identify and assess excess or obsolete inventory.
This required a high degree of auditor judgement and an increased extent of effort to evaluate
the reasonableness of the Group’s estimate related to forecasting future product demand for US
Orthopaedics inventory.
The Group’s total E&O provision is disclosed as an accounting estimate in note 1 of the Group financial
statements, with further disclosures provided in note 12. The matter is also discussed in the Audit
Committee report within the Corporate Governance section of the Annual Report.
How the scope of our
audit responded to the key
audit matter
We performed the following audit procedures relating to the forecasting of future product demand for
product groups within US Orthopaedic finished goods where longer forecasting periods are applied:
– Tested the effectiveness of controls related to management’s determination over product demand
forecasting.
– Evaluated the appropriateness of the allocation of product groups where longer forecasting periods are
applied for the purposes of the provision calculation by:
a) Assessing whether all product groups have been considered as to whether the longer demand
forecast should be applied in the calculation of the provision.
b) Evaluating any changes compared with the prior year to the allocation of product groups where the
longer demand forecast is used.
c) Assessing the historical demand which management uses in its estimate of future demand.
d) Evaluating the results of this assessment to determine the reasonableness of management’s
product group allocation.
e) Obtaining the expected future product demand and challenging that expectation against:
i) Recent demand for that product group; and
ii) Evidence of any product discontinuation, including issues around product quality or litigation.
– Performed enquries with individuals outside of finance to challenge demand forecasts submitted,
obsolete products/product groups identified, marketing strategy of the product group or any expected
or active litigative actions.
– Recalculated the US Orthopaedic finished goods provision based on the forecasting of future product
demand methodology applied, assessing whether it is applied accurately.
Key observations
We are satisfied that the valuation of the Orthopaedics E&O provision, including estimates of product
groups where longer forecasting periods of future product demand are applied, is acceptable.
Independent auditor’s UK report continued
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5.3. IT systems which impact financial reporting
Key audit matter description
The IT systems within the Group form a key component of the Group’s financial reporting activities and
impact all account balances, and as such the Group place reliance on their IT systems and the associated
controls.
We have identified IT systems which impact financial reporting as a key audit matter, given the level of
reliance placed on these systems by the Group. Due to the planned significant level of reliance on the IT
systems underpinning our audit approach, an increased extent of auditor effort was required to evaluate
the large number of relevant IT systems, including key system-generated reports and automated
business process application controls.
Key IT controls, in the context of our scope for the financial audit, primarily relate to:
– Access security - Controls relating to the security configuration of the systems and the restriction and
administration of user access
– Change management - Controls relating to requesting, developing, testing and approving changes to
systems.
The purpose of such controls is to prevent inappropriate changes being made to IT systems in relation to
application functionality, transactional processing and direct changes to underlying data.
The matter is also discussed in the Audit Committee report within the Corporate Governance section of
the Annual Report.
How the scope of our
audit responded to the key
audit matter
We performed the following risk assessment and audit procedures to test IT controls over the IT systems
determined to be relevant for financial reporting purposes:
– Identified the IT risks for each IT system based on our understanding of the flows of transactions and
the IT environment;
– Determined whether each general IT control, individually or in combination with other controls is
appropriately designed to address the associated IT risk; and
– Tested the effectiveness of the relevant general IT controls.
IT control deficiencies were noted relating to user access management for certain IT systems and the
associated infrastructure which increased the risk that information from these systems may not be
reliable. We designed and executed audit procedures to respond to this risk (including the potential fraud
risk – see section 11 below), including testing of mitigation and remediation activities performed by
Group management.
Key observations
We are satisfied that IT controls impacting the Group’s financial reporting activities are designed and
operating effectively or control deficiencies identified were remediated by year end, or mitigated by a
combination of compensating controls or procedures.
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OTHER INFORMATION
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for
the financial statements as a whole as follows:
Group financial statements
Parent Company financial statements
Materiality
$35 million (2023 predecessor auditor:
$33 million)
$31.5 million (2023 predecessor auditor:
$32 million)
Basis for determining
materiality
We considered a number of metrics when
determining Group materiality, including: revenue;
trading profit; and profit before taxation.
The definition of trading profit is explained in the
non-IFRS financial information section within
Other Information in the Annual Report.
Our selected materiality represents 0.60% of
revenue, 3.34% of trading profit and 7.03% of
profit before taxation.
The predecessor auditor used 0.59% of revenue
in determining the prior year materiality.
The basis for materiality is total assets.
The materiality used represents 0.87% of total
assets and is capped at 90% of Group materiality.
The predecessor auditor used 0.3% of total
assets in determining the prior year materiality.
Rationale for the
benchmark applied
We have determined that the primary benchmark
for the Group was revenue because we consider
this measure to be the primary focus of users of
the financial statements and the Group’s profit
before tax continues to be volatile and below
historic levels. We also considered trading profit
and profit before taxation as relevant metrics to
the users of the financial statements.
Due to the nature of the Company as a parent
entity holding company, we consider total assets
to be the most appropriate basis for materiality.
6.2. Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the
financial statements as a whole.
Group financial statements
Parent Company financial statements
Performance materiality
70% of Group materiality (2023 predecessor
auditor: 75%)
70% of Parent Company materiality (2023
predecessor auditor: 75%)
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
– Our understanding of the entity and its environment; and
– our risk assessment, including our assessment of the Group’s overall control environment.
Independent auditor’s UK report continued
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6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of $1.75 million (2023
predecessor auditor: $1.70 million), as well as differences below
that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation
of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The Group is headquartered in the UK, with operations in more than
100 countries across five continents, the largest being the USA
(Americas). The Group has four Shared Service Centres to support
both financial reporting and controllership functions across a number
of global key business processes. The concentration of activity and
controllership in the Group, including the centralisation of the finance
function in the Group’s Head Office and Shared Service Centres,
enabled us to structure the audit more centrally.
The identification of significant accounts, including the identification
and classification of risks of material misstatement was performed
by the Group audit team, including scoping of relevant IT systems and
controls relevant to the audit. For certain business processes where
activities included potential variation due to local-market factors, we
involved our component auditors in further localised risk-assessment
procedures to refine the scope of our audit.
Our data analytical tools allow us to scrutinise large transactional data
sets for unusual trends, characteristics, outliers or transaction flows to
support our identification of audit risks.
Audit procedures undertaken at a Group level and on
the Parent Company
We performed audit work on certain functions, predominantly Head
Office, at the Group level. Further, we performed audit work at Group
and on the Parent Company financial statements, including but not
limited to the consolidation of the Group’s results, the preparation of
the financial statements, certain disclosures within the Directors
Remuneration Report, litigation provisions and exposures in addition
to management’s entity level and oversight controls relevant to
financial reporting.
Audit procedures undertaken at a Group level were performed
to Group materiality, or, where tested at a component level, to
component performance materiality. The range of component
performance materialities used was $3.68 million - $17.15 million.
Audit work performed at Global Shared Service
Centres and local reporting units
A significant amount of the Group’s operational processes which
cover financial reporting are undertaken at the Group’s Shared
Service Centres. The Group audit team exercised direction,
supervision and review over the audit work at the shared service
centres in scope for the Group audit, so that we developed an
understanding of the end-to-end view of the key processes that
supported significant account balances, classes of transactions,
disclosures and controls.
Audit work was performed in all four Shared Service Centres located
in India, Malaysia, Poland and Costa Rica, with the work conducted
both by the Group audit team and a component team in India.
For local-market activities where we identified risks of material
misstatement to the Group financial statements, we identified 14
reporting units located in the USA, Costa Rica, UK, Netherlands,
Germany, Malaysia, China, Japan and Australia as in-scope
components. The work relating to these reporting units was split
between the Group team and the component audit teams, applying
component performance materiality.
Coverage and consideration of residual
Based on our Group risk assessment, we determined whether the
audit procedures were sufficient to support the Group audit opinion
through ensuring that the coverage gained was reflective of the level
of risk within each financial statement line item. On a stand-back
basis, we assessed the coverage achieved over three metrics (being
revenue, profit before tax and gross assets).
At the group level we also carried out analytical procedures to
obtain further assurance that there were no significant risks of
material misstatement of the aggregated financial information of the
remaining account balances, transactions and disclosures not subject
to audit or specified audit procedures.
Revenue
Profit before tax
Total assets
Specified audit
procedures
73%
Review at
group level
27%
Specified audit
procedures
68%
Review at
group level
32%
Specified audit
procedures
82%
Review at
group level
18%
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7.2. Our consideration of the control environment
Based on our understanding of the control environment gathered
during our transition, early phasing of controls testing and historic
outcomes of prior audits, our audit approach was to place reliance on
management’s controls over all business cycles affecting significant
account balances, transactions and disclosures, where possible.
We have outlined in our key audit matters above the work performed
to assess the operating effectiveness of general IT controls and IT
controls related to material and significant account balances to
the Group audit, including the conclusions relating to our reliance
on IT controls and mitigating procedures performed relating to any
significant deficiencies identified in those controls.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of
climate change on the Group’s business and its financial statements.
The Group has assessed the risk and opportunities relevant to
climate change, and the Group’s Principal Risks capture physical and
transitional climate-related risks as determined in the Enterprise
Risk Management Process. The risks have also been considered and
embedded into the businesses, as explained in the Strategic Report.
As part of our audit procedures, we have obtained management’s
climate-related risk assessment and held discussions with those
charged with governance to understand the process of identifying
climate-related risks, the determination of mitigating actions and the
impact on the Group’s financial statements.
While management has acknowledged the risks posed by climate
change, they have assessed that climate change does not create
any further key sources of estimation uncertainty in the financial
statements as at 31 December 2024, as explained in note 1.3 to the
accounts.
We performed our own qualitative risk assessment of the potential
impact of climate change on the Group’s account balances and
classes of transactions, with particular focus on areas of judgement
such as goodwill, and did not identify any additional risks of material
misstatement. Our procedures include reading disclosures included in
the Annual Report to consider whether they are materially consistent
with the financial statements and our knowledge obtained in the audit
and assessing compliance with TCFD recommendations.
7.4. Working with other auditors
The Group audit team are responsible for the scope and direction of
the audit process. To ensure appropriate direction, supervision and
review activities over our Shared Service Centre and in-market
component auditors, the Group team:
– Identified key component audit partners and their teams during the
transition year of the Group audit;
– Held four global planning sessions with component teams covering
onboarding, strategy and delivery;
– Built a dedicated component oversight team, who engaged in
regular communication with component auditors, enabling timely
comparisons and challenge of outcomes across the Group and
component audit;
– Provided detailed referral instructions that were tailored for each
component auditor, and through regular engagement refined those
instructions during the audit as required;
– Actively participated in all component team planning and close
meetings for each phase of work;
– Performed virtual and in-person file reviews over higher risk areas
throughout the year; and
– Varied the extent of our oversight of the component auditors based
on the risk-profiles of each reporting unit in scope.
8. Other information
The other information comprises the information included in
the Annual Report, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other
information contained within the Annual Report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of
the audit, or otherwise appears to be materially misstated.
We have nothing to report in this regard.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to
report that fact.
Independent auditor’s UK report continued
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9. Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view,
and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the 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 the
Directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
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 an auditor’s report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a 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 the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements. A further
description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s
report.
11. Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect
of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
– the nature of the industry and sector, control environment
and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus
levels and performance targets;
– the Group’s own assessment of the risks that irregularities may
occur either as a result of fraud or error that was approved by the
Board on 11 February 2025;
– results of our enquiries of management, internal audit, the Directors
and the Audit Committee about their own identification and
assessment of the risks of irregularities, including those that are
specific to the group’s sector;
– any matters we identified having obtained and reviewed the Group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations
and whether they were aware of any instances of non-
compliance;
– detecting and responding to the risks of fraud and whether they
have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or
non-compliance with laws and regulations;
– the matters discussed among the audit engagement team including
significant component audit teams and relevant internal specialists,
including tax, valuations, impairment, pensions, IT, ESG, legal actuarial
and fraud specialists regarding how and where fraud might occur in
the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in revenue recognition, in
unusual transactions arising within revenue recognised resulting from
the IT deficiencies in the period. In common with all audits under ISAs
(UK), we are also required to perform specific procedures to respond
to the risk of management override, including adjustments made in
the financial reporting process outside of local operational reporting.
We also obtained an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the Securities and Exchange Commission rules,
Securities Law in the UK and US, the UK Listing Rules, the UK
Companies Act, pensions legislation, and tax legislation in the Group’s
various jurisdictions.
In addition, we considered provisions of other laws and regulations
that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to
operate or to avoid a material penalty. These included General Data
Protection Requirements, US Foreign Corrupt Practices Act, US Food
and Drug Administration Regulation, EU Medical Device Regulation,
and the UK Bribery Act.
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OTHER INFORMATION
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
– the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
– the Strategic Report and the Directors’ Report have been prepared
in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and
the Parent Company and their environment obtained in the course of
the audit, we have not identified any material misstatements in the
Strategic Report or the Directors’ Report.
13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in
relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance
with the provisions of the UK Corporate Governance Code specified
for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
– the Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 179;
– the Directors’ explanation as to its assessment of the Group’s
prospects, the period this assessment covers and why the period is
appropriate set out on page 94;
– the Directors’ statement on fair, balanced and understandable set
out on page 131;
– the Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 94;
– the section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems
set out on page 81; and
– the section describing the work of the Audit Committee set out on
page 130.
11.2. Audit response to risks identified
As a result of performing the above, we did not identify any key audit
matters related to the potential risk of fraud or non-compliance with
laws and regulations.
Our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on
the financial statements;
– enquiring of management, the Audit Committee and in-house and
external legal counsel concerning actual and potential litigation and
claims;
– performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
– reading minutes of meetings of those charged with governance,
reviewing internal audit reports and correspondence with
regulators; and
– in addressing the risk of fraud in unusual transactions arising within
revenue as a result of certain IT deficiencies in the period, we
performed testing over the recognition of those specified revenue
transactions to supporting evidence and respective cost of sales
entries; and obtained confirmations directly from customers to test
accounts receivables that were outstanding; and
– in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in
making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including
internal specialists and component audit teams, and remained alert to
any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Independent auditor’s UK report continued
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Smith+Nephew Annual Report 2024
14. Matters on which we are required to report by exception
14.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
– we have not received all the information and explanations we
require for our audit; or
– 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 are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ Remuneration have not been
made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Company at the Annual General Meeting on 1 May 2024 to
audit the financial statements for the year ending 31 December 2024 and subsequent financial periods.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
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.
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 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.
As required by the Financial Conduct Authority (FCA) Disclosure
Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these
financial statements will form part of the Electronic Format Annual
Financial Report filed on the National Storage Mechanism of the FCA
in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report
provides no assurance over whether the Electronic Format Annual
Financial Report has been prepared in compliance with DTR 4.1.15R –
DTR 4.1.18R.
Andrew Bond, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
24 February 2025
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Group income statement
Year ended
Year ended
Year ended
31 December
31 December
31 December
2024
2023
2022
Notes
$ million
$ million
$ million
Attributable profit for the year1
412
263
223
Other comprehensive income:
Items that will not be reclassified to income statement
Remeasurement of net retirement benefit obligations
18
16
(89)
30
Taxation on other comprehensive income
5
(1)
18
(7)
Total items that will not be reclassified to income statement
15
(71)
23
Items that may be reclassified subsequently to income statement
Cash flow hedges – forward foreign exchange contracts
Gains arising in the year
38
23
24
Gains recycled to income statement in the year
(1)
(25)
(37)
Exchange differences on translation of foreign operations
(124)
56
(102)
Taxation on other comprehensive income
5
(5)
–
2
Total items that may be reclassified subsequently to income statement
(92)
54
(113)
Other comprehensive loss for the year, net of taxation
(77)
(17)
(90)
Total comprehensive income for the year1
335
246
133
1 Attributable to equity holders of the Company and wholly derived from continuing operations.
Group statement of comprehensive income
The Notes on pages 196–247 are an integral part of these accounts.
Year ended
Year ended
Year ended
31 December
31 December
31 December
2024
2023
2022
Notes
$ million
$ million
$ million
Revenue
2
5,810
5,549
5,215
Cost of goods sold
(1,764)
(1,730)
(1,540)
Gross profit
4,046
3,819
3,675
Selling, general and administrative expenses
3
(3,100)
(3,055)
(2,880)
Research and development expenses
3
(289)
(339)
(345)
Operating profit
2 & 3
657
425
450
Interest income
4
24
34
14
Interest expense
4
(145)
(132)
(80)
Other finance costs
4
(28)
(7)
(8)
Share of results of associates
11
(10)
(30)
(141)
Profit before taxation
498
290
235
Taxation
5
(86)
(27)
(12)
Attributable profit for the year1
412
263
223
Earnings per ordinary share1
6
Basic
47.2¢
30.2¢
25.5¢
Diluted
47.0¢
30.1¢
25.5¢
Group financial statements
192
Smith+Nephew Annual Report 2024
Group balance sheet
At
At
31 December
31 December
2024
2023
Notes
$ million
$ million
Assets
Non-current assets
Property, plant and equipment
7
1,422
1,470
Goodwill
8
3,026
2,992
Intangible assets
9
1,032
1,110
Investments
10
9
8
Investments in associates
11
7
16
Other non-current assets
13
24
18
Retirement benefit assets
18
63
69
Deferred tax assets
5
350
274
5,933
5,957
Current assets
Inventories
12
2,387
2,395
Trade and other receivables
13
1,381
1,300
Current tax receivable
34
33
Cash and cash equivalents
15
619
302
4,421
4,030
Total assets
10,354
9,987
Equity and liabilities
Equity attributable to owners of the Company
Share capital
19
175
175
Share premium
615
615
Capital redemption reserve
20
20
Treasury shares
19
(66)
(94)
Other reserves
(497)
(405)
Retained earnings
5,018
4,906
Total equity
5,265
5,217
Non-current liabilities
Long-term borrowings and lease liabilities
15
3,258
2,319
Retirement benefit obligations
18
79
88
Other payables
14
95
35
Provisions
17
95
48
Deferred tax liabilities
5
31
9
3,558
2,499
Current liabilities
Bank overdrafts, borrowings, loans and lease liabilities
15
63
765
Trade and other payables
14
1,128
1,055
Provisions
17
108
233
Current tax payable
232
218
1,531
2,271
Total liabilities
5,089
4,770
Total equity and liabilities
10,354
9,987
The accounts were approved by the Board and authorised for issue on 24 February 2025 and are signed on its behalf by:
Rupert Soames, OBE
Deepak Nath, PhD
John Rogers
Chair
Chief Executive Officer
Chief Financial Officer
The Notes on pages 196–247 are an integral part of these accounts.
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Group cash flow statement
The Notes on pages 196–247 are an integral part of these accounts.
Year ended
Year ended
Year ended
31 December
31 December
31 December
2024
2023
2022
Notes
$ million
$ million
$ million
Cash flows from operating activities
Profit before taxation
498
290
235
Net interest expense
4
121
98
66
Depreciation, amortisation and impairment
645
683
617
Loss on disposal of property, plant and equipment and software
22
18
11
Share-based payments expense (equity-settled)
22
40
39
40
Share of results of associates
11
10
30
141
Pension costs less cash paid
16
3
6
Increase in inventories
(42)
(178)
(407)
Increase in trade and other receivables
(81)
(49)
(103)
Decrease/(increase) in trade and other payables and provisions
16
(105)
(25)
Cash generated from operations
1,245
829
581
Interest received
22
8
7
Interest paid
(140)
(104)
(73)
Income taxes paid
(140)
(125)
(47)
Net cash inflow from operating activities
987
608
468
Cash flows from investing activities
Acquisitions, net of cash acquired
21
(186)
(21)
(113)
Capital expenditure
(381)
(427)
(358)
Purchase of investments
(1)
–
(2)
(Investment in)/distribution from associate
11
(1)
–
1
Net cash used in investing activities
(569)
(448)
(472)
Cash flows from financing activities
Proceeds from issue of ordinary share capital
20
–
–
1
Purchase of own shares
20
–
–
(158)
Payment of capital element of lease liabilities
20
(55)
(52)
(54)
Proceeds from borrowings due within one year
20
–
326
–
Settlement of borrowings due within one year
20
(705)
(151)
(407)
Proceeds from borrowings due after one year
20
1,000
–
485
Settlement of borrowings due after one year
20
–
–
(474)
Proceeds from own shares
20
1
–
5
Settlement of currency swaps
20
–
4
3
Equity dividends paid
19
(327)
(327)
(327)
Net cash used in financing activities
(86)
(200)
(926)
Net increase/(decrease) in cash and cash equivalents
332
(40)
(930)
Cash and cash equivalents at beginning of year
20
300
344
1,285
Exchange adjustments
20
(15)
(4)
(11)
Cash and cash equivalents at end of year1
617
300
344
1 Cash and cash equivalents is net of bank overdrafts of $2m (2023: $2m, 2022: $6m).
Group financial statements continued
194
Smith+Nephew Annual Report 2024
Group statement of changes in equity
The Notes on pages 196–247 are an integral part of these accounts.
Capital
Share
Share
redemption
Treasury
Other
Retained
Total
capital
premium
reserve
shares2
reserves3
earnings4
equity
$ million
$ million
$ million
$ million
$ million
$ million
$ million
At 31 December 2021
177
614
18
(120)
(346)
5,225
5,568
Attributable profit for the year1
–
–
–
–
–
223
223
Other comprehensive income
–
–
–
–
(113)
23
(90)
Equity dividends declared and paid
–
–
–
–
–
(327)
(327)
Share-based payments recognised
–
–
–
–
–
40
40
Taxation on share-based payments
–
–
–
–
–
(3)
(3)
Purchase of own shares
–
–
–
(158)
–
–
(158)
Cost of shares transferred to beneficiaries
–
–
–
31
–
(26)
5
Cancellation of treasury shares
(2)
–
2
129
–
(129)
–
Issue of ordinary share capital5
–
1
–
–
–
–
1
At 31 December 2022
175
615
20
(118)
(459)
5,026
5,259
Attributable profit for the year1
–
–
–
–
–
263
263
Other comprehensive income
–
–
–
–
54
(71)
(17)
Equity dividends declared and paid
–
–
–
–
–
(327)
(327)
Share-based payments recognised
–
–
–
–
–
39
39
Cost of shares transferred to beneficiaries
–
–
–
24
–
(24)
–
At 31 December 2023
175
615
20
(94)
(405)
4,906
5,217
Attributable profit for the year1
–
–
–
–
–
412
412
Other comprehensive income
–
–
–
–
(92)
15
(77)
Equity dividends declared and paid
–
–
–
–
–
(327)
(327)
Share-based payments recognised
–
–
–
–
–
40
40
Taxation on share-based payments
–
–
–
–
–
(1)
(1)
Cost of shares transferred to beneficiaries
–
–
–
28
–
(27)
1
At 31 December 2024
175
615
20
(66)
(497)
5,018
5,265
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 2024 was $520m (2023: $396m, 2022: $452m).
4 Within retained earnings is a non-distributable capital reserve of $2,266m (2023: $2,266m, 2022: $2,266m) which arose as a result of the Group’s reorganisation in 2008.
5 Issue of ordinary share capital in connection with the Group’s share incentive plans.
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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 2024. IFRS as adopted in the UK differs in certain respects from IFRS Accounting Standards as issued by the IASB.
However, the differences have no impact for the periods presented.
The preparation of accounts in conformity with IFRS requires management to use estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts
of revenues and expenses during the year. The accounting policies requiring management to use significant estimates and assumptions
are discussed 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 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 $617m of cash and cash equivalents at 31 December 2024. The Group’s net debt, excluding lease liabilities,
at 31 December 2024 was $2,513m with access to committed facilities of $4.1bn with an average maturity of 5.5 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 does not have any debt that is due for repayment in 2025.
$625m of private placement debt is subject to financial covenants. The principal covenant on the private placement debt is a leverage
ratio of <3.5 which is measured on a rolling 12-month basis at half year and year end. There are no financial covenants in any of the
Group’s other facilities.
The Directors have considered various scenarios in assessing the impact of the economic environment on future financial performance
and cash flows, including the impact of a significant global economic downturn, leading to lower healthcare spending across both public
and private systems. Throughout these scenarios, which include a severe but plausible outcome, the Group continues to have headroom
on its borrowing facilities and financial covenants.
The Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks,
have sufficient funds to continue to meet their liabilities as they fall due and to continue in operational existence for a period of at
least 12 months from the date of the approval of 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 2024
A number of new amendments to standards are effective from 1 January 2024 but they do not have a material effect on the Group’s
financial statements.
The Group is adopting the mandatory temporary exception from the recognition and disclosure of deferred taxes arising from the
jurisdictional implementation of the Pillar Two model rules which took effect for the Group from 1 January 2024.
Notes to the Group accounts
Group financial statements continued
196
Smith+Nephew Annual Report 2024
Accounting standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2025 and earlier
application is permitted; however, the Group has not adopted them early in preparing these Financial Statements.
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.
Management regularly reviews, and revises as necessary, the accounting judgements that significantly impact the amounts recognised
in the financial statements and the estimates that are considered to be critical estimates due to their potential to give rise to material
adjustments in the Group’s financial statements in the next financial year. The Group’s accounting policies do not include any critical
judgements. The critical accounting estimate with a significant risk of a material change to the carrying value of assets and liabilities
within the next year is impairment of Orthopaedics CGU as outlined below. In addition, other estimates have also been identified that
are not considered to be critical in respect of the provision for excess and obsolete inventory and liability provisioning for legal disputes
relating to metal-on-metal cases.
The Group’s accounting policies are set out in Notes 1–23 of the Notes to the Group accounts. Management have considered the impact
of the uncertainties around the current economic environment below.
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. The Orthopaedics CGU is sensitive to a reasonably possible change in assumptions, in particular the projected
trading profit margin. For other intangible assets and goodwill CGUs, this critical estimate is not considered to have a significant risk of
material adjustment in 2025 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 2024 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.
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OTHER INFORMATION
1 Basis of preparation continued
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, particularly in the context of the risks identified in the TCFD disclosures on pages 69 to 73. 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.
While there is currently no material medium term impact expected, the Group closely monitors climate-related risks given the changing
nature of these risks and management consider the impact of climate change as part of the decision-making process and continue to
assess the impact on judgements and estimates, and on preparation of the consolidated financial statements.
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.
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:
2024
2023
2022
Average rates
Sterling
1.28
1.24
1.23
Euro
1.08
1.08
1.05
Swiss Franc
1.14
1.11
1.05
Japanese Yen
0.0066
0.0071
0.0076
Year end rates
Sterling
1.25
1.27
1.21
Euro
1.04
1.10
1.07
Swiss Franc
1.10
1.19
1.08
Japanese Yen
0.0064
0.0071
0.0076
Notes to the Group accounts continued
Group financial statements continued
198
Smith+Nephew Annual Report 2024
2 Business segment information
The Group’s operating structure is organised around four global business units (Orthopaedics, Sports Medicine, ENT and Advanced
Wound Management) and the chief operating decision maker monitors performance, makes operating decisions and allocates
resources on a global business unit basis. Business unit presidents have responsibility for upstream marketing, driving product portfolio
and technology acquisition decisions, full commercial responsibility and for the implementation of their business unit strategy globally.
Accordingly, the Group consists of four operating segments.
The Group has concluded that Sports Medicine and ENT meet the aggregation criteria and therefore, these operating segments have
been aggregated into a single operating segment. In applying the aggregation criteria prescribed by IFRS 8 Operating Segments,
management made certain judgements pertaining to the economic indicators relating to these operating segments including those
relating to the similarities in the expected long-term market growth rates, the geographic and operational risks and the competitive
landscape that these segments operate in. Therefore, in accordance with IFRS 8, the Group has three operating segments which are
also reportable segments.
The Executive Committee (‘ExCo’) comprises the Chief Financial Officer (‘CFO’), the business unit presidents and certain heads of
function, and is chaired by the Chief Executive Officer (‘CEO’). ExCo is the body through which the CEO uses the authority delegated
to him by the Board of Directors to manage the operations and performance of the Group. All significant operating decisions regarding
the allocation and prioritisation of the Group’s resources and assessment of the Group’s performance are made by ExCo, and while
the members have individual responsibility for the implementation of decisions within their respective areas, it is at the ExCo level
that these decisions are made. Accordingly, ExCo is considered to be the Group’s chief operating decision maker as defined by IFRS 8
Operating Segments.
In making decisions about the prioritisation and allocation of the Group’s resources, ExCo reviews financial information for the business
units and determines the best allocation of resources to the business units. This information is prepared substantially on the same basis
as the Group’s IFRS financial statements aside from the adjustments described in Note 2.2. In 2024, the Group changed the segment
trading profit measure presented to the ExCo by allocating directly attributable corporate costs to business units. Financial information
for corporate costs relating to centralised infrastructure costs such as compliance and group functions is presented on a Group-wide
basis. The ExCo is not provided with total assets and liabilities by segment, and therefore these measures are not included in the
disclosures below. The results of the segments are shown below.
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OTHER INFORMATION
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.
The Group is applying the practical expedient in IFRS15.121 not to disclose the aggregate amount of the transaction price allocated
to performance obligations that are unsatisfied at the end of the reporting period as substantially all performance obligations are
fulfilled within one year.
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:
2024
2023
2022
$ million
$ million
$ million
Reportable segment revenue
Orthopaedics
2,305
2,214
2,113
Sports Medicine & ENT
1,824
1,729
1,590
Advanced Wound Management
1,681
1,606
1,512
Revenue from external customers
5,810
5,549
5,215
Notes to the Group accounts continued
Group financial statements continued
200
Smith+Nephew Annual Report 2024
Disaggregation of revenue:
The following table shows the disaggregation of Group revenue by product by business unit:
2024
2023
2022
$ million
$ million
$ million
Revenue by product from continuing operations
Knee Implants
947
940
899
Hip Implants
619
599
584
Other Reconstruction
131
111
87
Trauma & Extremities
608
564
543
Orthopaedics
2,305
2,214
2,113
Sports Medicine Joint Repair
982
945
870
Arthroscopic Enabling Technologies
632
588
567
ENT (Ear, Nose and Throat)
210
196
153
Sports Medicine & ENT
1,824
1,729
1,590
Advanced Wound Care
735
725
712
Advanced Wound Bioactives
581
553
520
Advanced Wound Devices
365
328
280
Advanced Wound Management
1,681
1,606
1,512
Consolidated revenue from continuing operations
5,810
5,549
5,215
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.
2024
2023
2022
Established
Markets1
Emerging
Markets
Total
Established
Markets1
Emerging
Markets
Total
Established
Markets1
Emerging
Markets
Total
$ million $ million $ million
$ million $ million $ million
$ million $ million $ million
Orthopaedics, Sports Medicine & ENT
3,366
763
4,129
3,184
759
3,943
2,949
754
3,703
Advanced Wound Management
1,464
217
1,681
1,406
200
1,606
1,319
193
1,512
Total
4,830
980
5,810
4,590
959
5,549
4,268
947
5,215
1 Established Markets comprises the US, Australia, Canada, Europe, Japan and New Zealand.
Sales are attributed to the country of destination. US revenue for 2024 was $3,123m (2023: $2,979m, 2022: $2,764m), China revenue
for 2024 was $210m (2023: $275m, 2022: $319m) and UK revenue for 2024 was $226m (2023: $201m, 2022: $186m).
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 2024. The Group does not have any material contract assets
and contract liabilities comprise rebates. The accrual for rebates at 31 December 2024 was $106m (2023: $92m) with $412m being
recognised in revenue in 2024.
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ACCOUNTS
OTHER INFORMATION
2 Business segment information continued
Major customers
No single customer generates revenue greater than 10% of the consolidated revenue.
2.2 Trading profit by business segment
The segment profit measure presented to the ExCo is the segment trading profit. The Group has identified the following items, where
material, as those to be excluded from operating profit when arriving at segment trading profit: corporate costs; acquisition and disposal-
related items; significant restructuring programmes; amortisation and impairment of acquisition intangibles; gains and losses arising from
legal disputes; and other significant items. Further detail is provided below and in Notes 2.3, 2.4, 2.5 and 2.6.
In 2024, the Group changed the segment trading profit measure presented to the ExCo by allocating directly attributable corporate
costs to business units except for corporate costs relating to centralised infrastructure costs such as compliance and group functions.
Accordingly, 2023 operating segment results have been restated for comparative purposes. Due to the significant cost and effort
required to develop the information and the associated complexity of the changes to the Group’s reporting tools, corporate costs for
2022 have not been restated on the basis that the cost and effort to develop such corresponding information would be excessive.
Segment trading profit is reconciled to the statutory measure below:
2024
2023
2022
$ million
$ million
$ million
Segment profit
Orthopaedics
265
251
383
Sports Medicine & ENT
437
394
472
Advanced Wound Management
399
372
436
Segment trading profit
1,101
1,017
1,291
Corporate costs1
(52)
(47)
(390)
Acquisition and disposal-related items2
(94)
(60)
(4)
Restructuring and rationalisation expenses
(123)
(220)
(167)
Amortisation and impairment of acquisition intangibles2
(187)
(207)
(205)
Legal and other2
12
(58)
(75)
Operating profit
657
425
450
Interest income
24
34
14
Interest expense
(145)
(132)
(80)
Other finance costs
(28)
(7)
(8)
Share of results of associates
(10)
(30)
(141)
Profit before taxation
498
290
235
1 In 2024 and 2023, corporate costs include centralised infrastructure costs such as compliance and group functions. In 2022, corporate costs include global business services, IT, HR, finance, legal
and centralised infrastructure costs such as compliance and group functions.
2 During 2024, the Group announced its intention to close the Warwick manufacturing site that manufactures Birmingham Hip Resurfacing (BHR) products. As a result, a total of $68m of BHR
assets and liabilities were written off, which mainly includes goodwill of $63m (included in acquisition and disposal-related items). 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).
Depreciation and amortisation included in the segment profit is presented below:
2024
2023
2022
$ million
$ million
$ million
Depreciation and amortisation
Orthopaedics
213
194
191
Sports Medicine & ENT
98
97
82
Advanced Wound Management
62
56
41
1 2024 and 2023 include an allocation of corporate costs related to depreciation and amortisation that were previously excluded from segment trading profit. 2022 excludes an allocation of
corporate costs related to depreciation and amortisation the cost and effort to develop such corresponding information would be excessive.
2.3 Acquisition and disposal-related items
For the year ended 31 December 2024, costs primarily relate to impairment of BHR goodwill, disposal of certain products and integration
costs relating to CartiHeal.
Notes to the Group accounts continued
Group financial statements continued
202
Smith+Nephew Annual Report 2024
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 deferred and contingent consideration for 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.
2.4 Restructuring and rationalisation costs
For the year ended 31 December 2024, 2023 and 2022, these costs include efficiency and productivity elements of the 12-Point Plan
and the Operations and Commercial Excellence programme. These costs primarily consist of severance, business advisory services,
asset write-offs, contractual terminations and integration and dual running costs.
2.5 Amortisation and impairment of acquisition intangibles
For the years ended 31 December 2024, 2023 and 2022, 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 2024, the credit mainly relates to a $28m reduction in the provision for ongoing metal-on-metal hip
claims as a result of a decrease in the present value of the estimated costs to resolve all known and anticipated metal-on-metal hip
claims, partially offset by legal expenses for ongoing metal-on-metal hip claims.
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 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.
The years ended 31 December 2024, 2023 and 2022 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:
2024
2023
2022
$ million
$ million
$ million
United Kingdom
465
525
487
United States of America
3,517
3,692
3,918
Other
1,538
1,397
1,387
Total non-current assets of the consolidated Group1
5,520
5,614
5,792
1 Non-current assets exclude retirement benefit assets and deferred tax assets.
3 Operating profit
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.
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OTHER INFORMATION
3 Operating profit continued
2024
2023
2022
$ million
$ million
$ million
Revenue
5,810
5,549
5,215
Cost of goods sold1
(1,764)
(1,730)
(1,540)
Gross profit
4,046
3,819
3,675
Research and development expenses2
(289)
(339)
(345)
Selling, general and administrative expenses:3,4,5,6
Marketing, selling and distribution expenses
(2,276)
(2,218)
(2,066)
Administrative expenses
(824)
(837)
(814)
(3,100)
(3,055)
(2,880)
Operating profit
657
425
450
1 2024 includes $6m charge relating to legal and other items, $20m charge relating to restructuring and rationalisation expenses and $13m charge relating to acquisition and disposal-related items
(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).
2 2024 includes $1m charge relating to legal and other items (2023: $21m, 2022: $35m), $nil charge relating to acquisition and disposal-related items (2023: $1m, 2022: $5m) and $nil
charge relating to restructuring and rationalisation expenses (2023: $18m, 2022: $5m).
3 2024 includes $58m of amortisation and impairment of software and other intangible assets (2023: $51m, 2022: $56m).
4 2024 includes $187m of amortisation and impairment of acquisition intangibles and $103m of restructuring and rationalisation expenses (2023 : $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).
5 2024 includes $19m credit relating to legal and other items (2023: $10m charge, 2022: $36m charge).
6 2024 includes $81m charge relating to acquisition and disposal-related items (2023: $56m charge, 2022: $6m credit).
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:
2024
2023
2022
$ million
$ million
$ million
Other operating income
–
–
(7)
Amortisation of intangible assets
230
221
229
Impairment of intangible assets
16
37
39
Impairment of goodwill1
65
84
–
Impairment of property, plant and equipment
9
31
30
Fair value remeasurement of trade investments
–
4
–
Restructuring and rationalisation costs
123
220
167
Depreciation of property, plant and equipment2
325
306
319
Loss on disposal of property, plant and equipment and intangible assets
22
18
11
Advertising costs
84
88
92
1. The 2024 impairment of goodwill includes BHR’s goodwill of $63m and 2023 includes impairment of Engage’s goodwill of $84m.
2. The 2024 depreciation charge includes $54m (2023: $54m, 2022: $56m ) related to right-of-use assets.
In 2024, other operating income comprises insurance recoveries for ongoing metal-on-metal hip claims of $nil (2023: $nil, 2022: $7m).
In 2024, $nil (2023: $nil, 2022: $7m) 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.
Notes to the Group accounts continued
Group financial statements continued
204
Smith+Nephew Annual Report 2024
3.1 Staff costs and employee numbers
Staff costs during the year amounted to:
2024
2023
2022
Notes
$ million
$ million
$ million
Wages and salaries
1,663
1,683
1,565
Social security costs
244
242
215
Pension costs (including retirement healthcare)
18
95
95
88
Share-based payments
22
40
39
40
2,042
2,059
1,908
During the year ended 31 December 2024, the average number of employees was 18,060 (2023: 19,081, 2022: 19,094).
3.2 Audit Fees – information about the nature and cost of services provided by the auditors
2024
2023
2022
$ million
$ million
$ million
Audit services:
Group accounts
7.1
7.9
7.2
Local statutory audit pursuant to legislation
2.0
2.1
2.2
Other services:
Audit-related services
0.4
0.3
0.4
Total auditor’s remuneration
9.5
10.3
9.8
Arising:
In the UK
7.0
6.0
5.3
Outside the UK
2.5
4.3
4.5
9.5
10.3
9.8
4 Interest and other finance costs
4.1 Interest income/(expense)
2024
2023
2022
$ million
$ million
$ million
Interest income
24
34
14
Interest expense:
Bank borrowings
(8)
(10)
(3)
Private placement notes
(29)
(38)
(39)
Corporate bond
(89)
(46)
(27)
Lease liabilities
(8)
(8)
(6)
Other
(11)
(30)
(5)
(145)
(132)
(80)
Net interest expense
(121)
(98)
(66)
4.2 Other finance costs
2024
2023
2022
Notes
$ million
$ million
$ million
Retirement benefit net interest expense
18
(4)
(1)
(2)
Unwinding of discount1
(19)
(6)
(9)
Other
(5)
–
3
Other finance costs
(28)
(7)
(8)
1 Includes discount unwind on provision for metal-on-metal hip claims and acquisition related liabilities.
205
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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.
5.1 Taxation charge attributable to the Group
2024
2023
2022
$ million
$ million
$ million
Current taxation:
UK corporation tax at 25.0% (2023: 23.5%; 2022: 19.0%)
13
15
17
Overseas tax
182
165
104
Current income tax charge
195
180
121
Adjustments in respect of prior periods
(37)
(45)
(10)
Total current taxation
158
135
111
Deferred taxation:
Origination and reversal of temporary differences
(79)
(116)
(77)
Changes in tax rates
–
(2)
(5)
Adjustments to estimated amounts arising in prior periods
7
10
(17)
Total deferred taxation
(72)
(108)
(99)
Total taxation as per the income statement
86
27
12
Taxation in other comprehensive income
6
(18)
5
Taxation in equity
1
–
3
Taxation charge attributable to the Group
93
9
20
Notes to the Group accounts continued
Group financial statements continued
206
Smith+Nephew Annual Report 2024
The 2024, 2023 and 2022 net prior period adjustments of $30m, $35m and $27m 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 $86m as per the income statement includes a $87m net credit (2023: $113m net credit, 2022: $127m net
credit) as a consequence of restructuring and rationalisation-related costs, acquisition and disposal-related items, amortisation and
impairment of acquisition intangibles and 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 $95m (2023: $121m) in relation to uncertain tax positions which relate to multiple issues across the jurisdictions in
which the Group operates. Other payables include $14m (2023: $13m) of interest on these provisions. There are $34m (2023: $33m)
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. While 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 2025 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 applied 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 exposure to Pillar Two income taxes and the Pillar Two current tax charge for the period
ended 31 December 2024 is approximately $8m.
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.
207
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
5 Taxation continued
The UK standard rate of corporation tax for 2024 is 25.0% (2023: 23.5%, 2022: 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.
2024
2023
2022
$ million
$ million
$ million
Profit before taxation
498
290
235
Expected taxation at UK statutory rate of 25.0% (2023: 23.5%, 2022: 19.0%)
125
68
45
Differences in overseas taxation rates1
(33)
(24)
(19)
Innovation reliefs2
(10)
(7)
(10)
Recognition of previously unrecognised temporary differences3
(8)
(14)
(4)
Expenses not deductible for tax purposes4
32
38
31
Pillar Two top up taxes5
8
–
–
Change in tax rates
–
(2)
(5)
Withholding tax
2
3
1
Adjustments in respect of prior years6
(30)
(35)
(27)
Total taxation charge as per the income statement
86
27
12
1 Difference between profits taxed at UK tax rate and countries with a lower tax rate, partially offset by profits taxed in countries with a higher tax rate than the UK.
2 Innovation incentives relating to R&D expenditure and income arising from UK patents.
3 Deferred tax credit arising from reassessment of deferred tax asset recoverability using latest forecasts.
4 In 2024, this includes a $16m impact of non-tax deductible closure cost and other permanent differences where items are deductible for accounting but not tax purposes (2023: $7m impact of
non-tax deductible impairment on UK owned investments, 2022: $7m impact of non-tax deductible impairment on UK owned investments).
5 Additional taxes arising from the implementation of Pillar Two legislation (see above) which was effective from 1 January 2024.
6 The adjustments in respect of prior years are explained on page 207.
5.2 Deferred taxation
Movements in the main components of deferred tax assets and liabilities were as follows:
Inventory,
Accelerated
Retirement
Losses
provisions
tax
benefit
and other
and other
depreciation
Intangibles
obligations
tax credits
differences
Total
$ million
$ million
$ million
$ million
$ million
$ million
At 31 December 2022
(75)
(181)
(21)
140
278
141
Exchange adjustment
–
(1)
(3)
1
1
(2)
Movement in income statement – current year
(15)
43
–
63
25
116
Movement in income statement – prior years
–
1
–
(10)
(1)
(10)
Movement in other comprehensive income
–
–
18
–
–
18
Changes in tax rate
(1)
–
–
4
(1)
2
At 31 December 2023
(91)
(138)
(6)
198
302
265
Exchange adjustment
–
–
–
(1)
(7)
(8)
Movement in income statement – current year
7
22
4
32
14
79
Movement in income statement – prior years
(11)
–
–
–
4
(7)
Movement in other comprehensive income
–
–
(1)
–
(5)
(6)
Movement in equity
–
–
–
–
(1)
(1)
Acquisitions
–
(19)
–
16
–
(3)
At 31 December 2024
(95)
(135)
(3)
245
307
319
Represented by:
2024
2023
$ million
$ million
Deferred tax assets
350
274
Deferred tax liabilities
(31)
(9)
Net position at 31 December
319
265
Notes to the Group accounts continued
Group financial statements continued
208
Smith+Nephew Annual Report 2024
The deferred tax asset of $307m (2023: $302m) relating to inventory, provisions and other differences comprises deferred tax relating
to inventory of $92m (2023: $125m), provisions and other short-term temporary differences of $206m (2023: $169m) and bad debt
provisions of $9m (2023: $8m).
The Group has gross unused tax losses and other credits of $1,342m (2023: $1,145m), gross unused research and development tax
credits of $28m (2023: $16m) and gross unused capital losses of $142m (2023: $102m), available for offset against future profits. $269m
of losses will expire within 4-6 years from the balance sheet date if not utilised.
A deferred tax asset of $245m (2023: $198m) has been recognised in respect of $1,094m (2023: $885m) of tax losses and other tax
credits and $16m (2023: $16m) 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 timeframe, 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.
The calculations of the basic and diluted earnings per ordinary share are based on the following attributable profit and numbers
of shares:
2024
2023
2022
$ million
$ million
$ million
Earnings
Attributable profit for the year
412
263
223
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:
2024
2023
2022
Number of shares (millions)
Basic weighted number of shares
873
871
872
Dilutive impact of share incentive schemes outstanding
3
2
1
Diluted weighted average number of shares
876
873
873
Earnings per ordinary share
Basic
47.2¢
30.2¢
25.5¢
Diluted
47.0¢
30.1¢
25.5¢
209
Smith+Nephew Annual Report 2024
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.
Notes to the Group accounts continued
Group financial statements continued
210
Smith+Nephew Annual Report 2024
Plant and equipment
Assets in
Land and
course of
buildings
Instruments
Other
construction
Total
Notes
$ million
$ million
$ million
$ million
$ million
Cost
At 1 January 2023
726
1,710
1,332
256
4,024
Exchange adjustment
8
10
21
4
43
Additions
69
211
29
70
379
Disposals
(39)
(88)
(51)
(2)
(180)
Impairment
–
–
–
(5)
(5)
Reclassification
4
–
–
–
4
Transfers
27
1
102
(153)
(23)
At 31 December 2023
795
1,844
1,433
170
4,242
Exchange adjustment
(15)
(61)
(18)
–
(94)
Additions
28
225
35
53
341
Disposals
(25)
(84)
(69)
(7)
(185)
Impairment
–
–
–
(12)
(12)
Transfers
6
–
68
(82)
(8)
At 31 December 2024
789
1,924
1,449
122
4,284
Depreciation and impairment
At 1 January 2023
284
1,366
919
–
2,569
Exchange adjustment
4
8
15
–
27
Charge for the year
63
154
89
–
306
Impairment
21
1
4
–
26
Disposals
(34)
(76)
(50)
–
(160)
Reclassification
4
–
–
–
4
Transfers
–
(1)
1
–
–
At 31 December 2023
342
1,452
978
–
2,772
Exchange adjustment
(8)
(51)
(12)
–
(71)
Charge for the year
66
163
96
–
325
Impairment
(5)
–
2
–
(3)
Disposals
(24)
(73)
(64)
–
(161)
At 31 December 2024
371
1,491
1,000
–
2,862
Net book amounts
At 31 December 2024
418
433
449
122
1,422
At 31 December 2023
453
392
455
170
1,470
Land and buildings includes land with a cost of $37m (2023: $37m) that is not subject to depreciation. Transfers from assets in course
of construction includes $8m (2023: $23m) of software (refer to Note 9). Assets under construction in 2024 reflect that the Group
is undergoing investment in its manufacturing facilities including expanding facilities in Costa Rica, and the development of a new
manufacturing facility in Hull, UK. Group capital expenditure relating to property, plant and equipment contracted but not provided for
amounted to $15m (2023: $12m). The amount of borrowing costs capitalised in 2024 and 2023 was minimal.
Information about the Group’s right-of-use assets is outlined below:
Land and
buildings
Plant and
equipment
2024
$ million
$ million
Opening Balance
157
28
Exchange Adjustment
(5)
(1)
Additions
25
22
Depreciation charge in the year
(41)
(13)
Impairment
1
–
Net book value at 31 December
137
36
211
Smith+Nephew Annual Report 2024
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.
2024
2023
Notes
$ million
$ million
Cost and net book value
At 1 January
2,992
3,031
Exchange adjustment
(47)
45
Impairment
(65)
(84)
Acquisitions
21
146
–
At 31 December
3,026
2,992
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.
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 2024, the Group announced its intention to close the Warwick manufacturing site that manufactures Birmingham Hip
Resurfacing (BHR) products. As a result, goodwill of $63m relating to BHR was written-off. In addition, a $2m goodwill impairment charge
was recorded as a result of disposal of certain products.
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:
2024
2023
$ million
$ million
Orthopaedics
807
915
Sports Medicine
1,302
1,154
ENT
287
287
Advanced Wound Management
630
636
3,026
2,992
Impairment reviews were performed as of September 2024 and September 2023 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.
Notes to the Group accounts continued
Group financial statements continued
212
Smith+Nephew Annual Report 2024
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. The Orthopaedics CGU is considered sensitive
to a reasonably possible change in assumptions, however, 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 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. The pre-tax rate is then calculated using WACC
as a starting point.
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 decreased from $1.2bn in the prior year to $0.7bn in the current year, primarily due to lower
revenue growth and expected margin reduction thereon, partially offset by an increased forecast cash conversion. Revenue is expected
to grow inline with 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 (2023: five-year period)
in calculating the terminal value is 2.0% (2023: 2.0%). The pre-tax discount rate used in the Orthopaedics CGU value-in-use calculation
reflects the geographical mix and is 11.4% (2023: 10.8%).
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 (2023: five-year period) in calculating
the terminal value is 2.0% (2023: 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 11.6% (2023: 10.8%).
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 11.0%
(2023: 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 (2023: five-year period) in calculating
the terminal value is 2.0% (2023: 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 11.3% (2023: 10.8%).
213
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
8 Goodwill continued
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 350 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.
Notes to the Group accounts continued
Group financial statements continued
214
Smith+Nephew Annual Report 2024
Customer and
Assets
Product-
distribution-
in course of
Technology
related
related
Software
construction
Total
Notes
$ million
$ million
$ million
$ million
$ million
$ million
Cost
At 1 January 2023
582
2,232
235
508
96
3,653
Exchange adjustment
4
36
(1)
5
4
48
Additions
–
2
2
36
64
104
Disposals
(1)
(7)
–
(4)
–
(12)
Transfers
(3)
10
–
2
14
23
At 31 December 2023
582
2,273
236
547
178
3,816
Exchange adjustment
(7)
(35)
(6)
(10)
(1)
(59)
Acquisitions
21
81
3
–
–
–
84
Additions
–
1
4
30
52
87
Disposals
–
–
–
(9)
(1)
(10)
Transfers
1
(3)
–
143
(133)
8
At 31 December 2024
657
2,239
234
701
95
3,926
Amortisation and impairment
At 1 January 2023
228
1,614
160
415
–
2,417
Exchange adjustment
2
36
–
4
–
42
Charge for the year
46
121
16
38
–
221
Impairment
–
37
–
–
–
37
Disposals
–
(7)
–
(4)
–
(11)
At 31 December 2023
276
1,801
176
453
–
2,706
Exchange adjustment
(3)
(33)
(5)
(9)
–
(50)
Charge for the year
54
109
15
52
–
230
Impairment
15
–
–
1
–
16
Disposals
–
–
–
(8)
–
(8)
At 31 December 2024
342
1,877
186
489
–
2,894
Net book amounts
At 31 December 2024
315
362
48
212
95
1,032
At 31 December 2023
306
472
60
94
178
1,110
Transfers into software and assets in course of construction includes $8m (2023: $23m) of software transferred from property,
plant and equipment (refer to Note 7). Group capital expenditure relating to software contracted but not provided for amounted to $4m
(2023: $7m).
Amortisation and impairment of acquisition intangibles is set out below:
2024
2023
$ million
$ million
Technology
69
46
Product-related
108
150
Customer and distribution-related
10
11
Total
187
207
215
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
9 Intangible assets continued
In 2024, the Group recognised an impairment charge of $15m in relation to immaterial technology assets in acquisition intangibles.
In 2023, the Group impaired $37m of Engage 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.
Management have assessed the acquisition intangible assets held by the Group to identify any indicators of impairment as of
September 2024. 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:
Remaining
Carrying value
amortisation
$ million
period
Intangibles acquired as part of the CartiHeal acquisition
77
9-10 years
Intangibles acquired as part of the ArthroCare acquisition
205
9 years
Intangibles acquired as part of the Osiris acquisition
139
3-4 years
Intangibles acquired as part of the Healthpoint acquisition
107
3 years
10 Investments
Accounting policy
Investments, other than those related to associates, are initially recorded at fair value on the trade date. Transaction costs relating
to investments are expensed as incurred. 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.
2024
2023
$ million
$ million
At 1 January
8
12
Additions
1
–
Fair value remeasurement
–
(4)
At 31 December
9
8
11 Investments in associates
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 2024, the Group holds 27.13% (2023: 27.96%) of Bioventus Inc. (Bioventus) which is the holding company of
Bioventus LLC. The decrease in the Group’s holding between 2024 and 2023 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.
Notes to the Group accounts continued
Group financial statements continued
216
Smith+Nephew Annual Report 2024
The loss after taxation recognised in the income statement relating to Bioventus was $10m (2023: $30m loss, 2022: $32m loss)
and an impairment loss of $nil (2023: $nil, 2022: $109m). The balance sheet carrying value relating to Bioventus is $6m (2023:
$16m). 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 the 2024 and 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.
The amounts recognised in the balance sheet and income statement for associates are as follows:
2024
2023
2022
$ million
$ million
$ million
Balance sheet
7
16
46
Income statement loss
(10)
(30)
(32)
Impairment of interest in associate
–
–
(109)
Summarised financial information for significant associates
Set out below is the summarised financial information for Bioventus, adjusted for differences with Group accounting policies.
2024
2023
2022
$ million
$ million
$ million
Summarised statement of comprehensive income
Revenue
420
377
386
Attributable loss for the year
(34)
(152)
(129)
Group adjustments1
(2)
46
17
Total comprehensive loss
(36)
(106)
(112)
Group share of loss for the year at 27.13% (2023: 27.96%, 2022: 28.3%)
(10)
(30)
(32)
2024
2023
$ million
$ million
Summarised balance sheet
Non-current assets
471
562
Current assets
299
249
Non-current liabilities
(371)
(424)
Current liabilities
(211)
(160)
Net assets
188
227
Net equity attributable to owners
188
227
Group’s share of net assets at 27.13% (2023: 27.96%)
51
64
Group adjustments1,2
(45)
(48)
Group’s carrying amount of investment at 27.13% (2023: 27.96%)
6
16
1 Group adjustments include adjustments to align with Group policy.
2 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 $186m as at 31 December 2024 (2023: $93m).
During the year, the Group received a $nil (2023: $nil) cash distribution from its associates.
At 31 December 2024, the Group held equity investments in two other associates (2023: two) with a carrying value of $1m (2023: $nil).
217
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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.
Risks and rewards of ownership of consignment inventory are transferred to the customer when the product is used in surgery.
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.
2024
2023
$ million
$ million
Raw materials and consumables
469
503
Work-in-progress
45
60
Finished goods and goods for resale
1,873
1,832
2,387
2,395
The determination of the estimate of excess and obsolete inventory includes assumptions on the future usage of all different items of
finished goods. 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.
Management have not changed their policy for calculating the excess and obsolete inventory provision since 31 December 2023, nor is a
change in the key assumptions underlying the methodology expected in the next 12 months. The provision has decreased from $544m
at 31 December 2023 to $511m at 31 December 2024. Foreign exchange movements of $11m contributed to the decrease in provision.
$120m was recognised as an expense within cost of goods sold resulting from inventory write-offs and provision movements (2023:
$106m, 2022: $117m).
The cost of inventories recognised as an expense and included in cost of goods sold amounted to $1,583m (2023: $1,459m, 2022:
$1,302m).
In 2024, management wrote off $17m of inventory due to the disposal of certain products and voluntary product discontinuation.
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.
Notes to the Group accounts continued
Group financial statements continued
218
Smith+Nephew Annual Report 2024
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 carrying value of each class of receivable. The Group does not hold any collateral as
security. The Group applies the simplified approach and 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).
2024
2023
$ million
$ million
Current
Trade receivables
1,100
1,104
Less: loss allowance
(41)
(45)
Trade receivables – net
1,059
1,059
Derivatives1
47
27
Other receivables2
148
122
Prepayments
127
92
1,381
1,300
Non-current
Other non-current assets
24
18
1,405
1,318
1 Refer to note 16.6 for details of derivatives.
2 Other receivables include deposits, rebates and other items of a similar nature.
Other non-current assets primarily relate to long-term prepayments and interest rate contracts. Refer to note 16.2 for details of
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 $1m (2023: $3m, 2022: $4m).
The following table provides information about the ageing of and expected credit losses for trade receivables:
2024 Weighted
average loss
rate
2024 Loss
allowance
2024 Gross
carrying
amount
2023 Weighted
average loss
rate
2023 Loss
allowance
2023 Gross
carrying
amount
%
$ million
$ million
%
$ million
$ million
Not past due
-0.8%
(7)
860
-0.1%
(1)
788
Past due not more than 3 months
-0.6%
(1)
154
-0.6%
(1)
180
Past due more than 3 months
-7.7%
(2)
26
-3.9%
(2)
51
Past due more than 6 months
-51.7%
(31)
60
-48.2%
(41)
85
(41)
1,100
(45)
1,104
Loss allowance
(41)
(45)
Trade receivables – net
1,059
1,059
219
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ACCOUNTS
OTHER INFORMATION
13 Trade and other receivables continued
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.
Movements in the loss allowance were as follows:
2024
2023
2022
$ million
$ million
$ million
At 1 January
45
49
57
Exchange adjustment
(2)
1
(3)
Net receivables provided during the year
1
3
4
Utilisation of provision
(3)
(8)
(9)
At 31 December
41
45
49
Trade receivables include amounts denominated in the following major currencies:
2024
2023
$ million
$ million
US Dollar
518
506
Sterling
36
39
Euro
207
224
Other
298
290
Trade receivables – net
1,059
1,059
14 Trade and other payables
2024
2023
$ million
$ million
Current
Trade and other payables
1,082
1,016
Derivatives1
18
28
Acquisition consideration
28
11
1,128
1,055
Non-current
Acquisition consideration
77
25
Derivatives1
16
–
Other payables
2
10
95
35
1 Refer to note 16.6 for details of derivatives.
The acquisition consideration includes $84m (2023: $32m) contingent upon future events.
The acquisition consideration due after more than one year is expected to be payable as follows: $5m in 2026, $13m in 2028 and $59m
in 2029 (2023: $9m in 2025, $2m in 2026, $14m in 2027).
Notes to the Group accounts continued
Group financial statements continued
220
Smith+Nephew Annual Report 2024
15 Cash and borrowings
15.1 Net debt
Net debt comprises borrowings and credit balances on currency swaps less cash and cash equivalents.
2024
2023
$ million
$ million
Bank overdrafts, borrowings and loans – current
2
710
Corporate bond
2,498
1,550
Private placement notes
625
625
Borrowings
3,125
2,885
Cash and cash equivalents1
(619)
(302)
Credit balance on derivatives – currency swaps
1
1
Credit/(debit) balance on derivatives – interest rate swaps
6
(7)
Net debt excluding lease liabilities
2,513
2,577
Non-current lease liabilities
135
144
Current lease liabilities
61
55
Net debt
2,709
2,776
1 In 2024, cash and cash equivalents include cash at bank of $419m and cash equivalents of $200m.
Borrowings are repayable as follows:
Within
Between
Between
Between
Between
one year or
one and
two and
three and
four and
After
on demand
two years
three years
four years
five years
five years
Total
$ million
$ million
$ million
$ million
$ million
$ million
$ million
At 31 December 2024
Bank overdrafts
2
–
–
–
–
–
2
Corporate bond
–
–
348
–
527
1,623
2,498
Private placement notes
–
75
140
60
100
250
625
Lease liabilities1
61
46
36
23
17
24
207
63
121
524
83
644
1,897
3,332
At 31 December 2023
Bank loans
303
–
–
–
–
–
303
Bank overdrafts
2
–
–
–
–
–
2
Corporate bond
–
–
–
–
–
1,550
1,550
Private placement notes
405
–
75
140
60
350
1,030
Lease liabilities1
55
44
33
25
18
35
210
765
44
108
165
78
1,935
3,095
1 The lease liabilities presented above of $207m (2023: $210m) are on an undiscounted basis. The lease liabilities on a discounted basis are $196m (2023: $199m).
221
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ACCOUNTS
OTHER INFORMATION
15 Cash and borrowings continued
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
$4.1bn (2023: $3.6bn). During 2024, the Group issued two corporate bonds of $350m and $650m (before expenses and underwriting
discounts) of notes bearing an interest rate of 5.15% and 5.40% repayable in 2027 and 2034. In 2024, the Group repaid $405m 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 principal covenant on the private placement debt is a
leverage ratio of <3.5 which is measured on a rolling 12-month basis at half year and year end using net debt excluding lease liabilities
as set out in note 15.1. 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 2024, the Company was in compliance with these covenants. The facilities are also subject
to customary events of default, none of which are currently anticipated to occur. As the measure included in the financial covenants
represents net debt excluding lease liabilities, the Group also presents the net debt position to provide a complete and comprehensive
view of its financial position.
The Group’s $1bn Revolving Credit Facility (“RCF”) matures in 2029 with an option to extend the maturity to 2030.
The Group’s committed facilities at 31 December 2024 and at 31 December 2023 are:
Facility 2024
Date due
$75 million 3.99% Senior Notes
January 2026
$350 million 5.15% US Corporate Bond
March 2027
$140 million 2.83% Senior Notes
June 2027
$60 million 2.90% Senior Notes
June 2028
$1.0 billion syndicated revolving credit facility
October 2029
$100 million 2.97% Senior Notes
June 2029
€500 million 4.565% EUR Corporate Bond
October 2029
$95 million 2.99% Senior Notes
June 2030
$1.0 billion 2.032% USD Corporate Bond
October 2030
$155 million 3.09% Senior Notes
June 2032
$650 million 5.40% USD Corporate Bond
March 2034
Facility 2023
Date due
$100 million 3.89% Senior Notes
January 2024
$305 million 3.36% Senior Notes
November 2024
$75 million 3.99% Senior Notes
January 2026
$140 million 2.83% Senior Notes
June 2027
$60 million 2.90% Senior Notes
June 2028
$1.0 billion syndicated RCF
October 2028
$100 million 2.97% Senior Notes
June 2029
€500 million 4.565% EUR corporate bond
October 2029
$95 million 2.99% Senior Notes
June 2030
$1.0 billion 2.032% USD corporate bond
October 2030
$155 million 3.09% Senior Notes
June 2032
Notes to the Group accounts continued
Group financial statements continued
222
Smith+Nephew Annual Report 2024
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:
Within one
Between
Between
year or on
one and
two and
After
demand
two years
five years
five years
Total
$ million
$ million
$ million
$ million
$ million
At 31 December 2024
Non-derivative financial liabilities:
Bank overdrafts and loans
2
–
–
–
2
Corporate bond
98
95
1,109
1,825
3,127
Trade and other payables
1,082
–
–
–
1,082
Private placement notes
19
92
335
263
709
Acquisition consideration
28
5
165
–
198
Derivative financial instruments:
Currency swaps/forward foreign exchange contracts – outflow
2,869
–
–
–
2,869
Currency swaps/forward foreign exchange contracts – inflow
(2,898)
–
–
–
(2,898)
1,200
192
1,609
2,088
5,089
At 31 December 2023
Non-derivative financial liabilities:
Bank overdrafts and loans
305
–
–
–
305
Corporate bond
53
53
158
1,614
1,878
Trade and other payables
1,016
–
–
–
1,016
Private placement notes
434
19
317
373
1,143
Acquisition consideration
11
9
2
15
37
Derivative financial instruments:
Currency swaps/forward foreign exchange contracts – outflow
2,913
–
–
–
2,913
Currency swaps/forward foreign exchange contracts – inflow
(2,912)
–
–
–
(2,912)
1,820
81
477
2,002
4,380
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 2024, the Group held $617m (2023: $300m, 2022: $344m) in cash net of bank overdrafts. The Group had committed
facilities available of $4.1bn at 31 December 2024 of which $3.1bn was drawn. The $1bn undrawn amount relates to the RCF.
The Group has sufficient liquidity to support all known or expected business requirements for 2025 such as dividend payments,
acquisition and disposals of businesses, capital expenditure, working capital fluctuations and trading activity.
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OTHER INFORMATION
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 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. Changes in the fair value of derivative financial
instruments that are not designated as cash flow hedges are recognised directly in profit and loss.
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 2024, the Group had contracted to exchange within one year the equivalent of $2.4bn (2023: $2.4bn). Based on
the Group’s net borrowings as at 31 December 2024, if the US Dollar were to weaken against all currencies by 10%, the Group’s
net borrowings would increase by $40m (2023: $37m) principally due to the Euro-denominated term loans.
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 2024 would have been $48m lower (2023: $67m 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 2024 would have been $36m higher
(2023: $38m 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 2024 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.
Notes to the Group accounts continued
Group financial statements continued
224
Smith+Nephew Annual Report 2024
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.
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. 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.
In 2024, the Group entered into a one year $500m forward fixed to floating interest rate swap starting in March 2025 through to March
2034. This is in addition to the €500m fixed to floating interest rate swap that was issued in 2022.
Based on the Group’s gross borrowings and cash as at 31 December 2024, if interest rates were to increase by 100 basis points in all
currencies, then the annual net interest charge would increase by $5m (2023: $5m). A decrease in interest rates by 100 basis points
in all currencies would have an equal but opposite effect to the amounts shown above.
The amounts relating to items designated as hedging instruments to manage the foreign exchange and interest rate risk were as follows:
Carrying
Carrying
Changes in
Hedge
Amounts reclassified
Nominal
amount
amount
fair value
ineffectiveness
from hedging reserve
amount
assets
liabilities
in OCI
in profit or loss
to profit or loss
Line item in
million
$ million
$ million
$ million
$ million
$ million
profit or loss
At 31 December 2024
Foreign currency risk
Forward exchange contracts1
2,415
46
(16)
38
–
(1)
Cash flow hedges
Interest rate risk
Interest rate swaps2
(1,020)
10
(16)
–
–
–
Fair value hedge
At 31 December 2023
Foreign currency risk
Forward exchange contracts1
2,913
27
(28)
(3)
–
(25)
Cash flow hedges
Interest rate risk
Interest rate swaps2
(500)
7
–
–
–
–
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 In 2024, the nominal amount relates to a hedge of the €500 million EUR corporate bond ($520 million translated at closing USD/EUR rate) and a hedge of $500 million out of the $650 million
corporate bond. In 2023, the nominal amount relates to a hedge of the €500 million EUR corporate bond. The carrying amount of the interest rate swap in relation to the €500 million corporate
bond is presented in Non-current other receivables on the Balance Sheet. The carrying amount of the interest rate swap in relation to the $500 million out of the $650 million corporate bond is
presented in Non-current other payables in 2024 .
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 2024 was $56m (2023: $27m), being the total debit fair values
on forward foreign exchange contracts, currency swaps and interest rate swaps. The maximum credit risk exposure on cash and cash
equivalents at 31 December 2024 was $619m (2023: $302m). 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.
225
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OTHER INFORMATION
16 Financial instruments and risk management continued
16.4 Net investment hedge
Part of the Group’s net investment in its Euro subsidiaries is hedged by €500m ($520m equivalent) of our 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:
Fixed rate liabilities
Weighted
average
Interest
Weighted
time
Gross
Currency
rate
Total
Floating
Fixed rate
average
for which
borrowings
swaps
swaps
liabilities
rate liabilities
liabilities
interest rate
rate is fixed
$ million
$ million
$ million
$ million
$ million
$ million
%
Years
At 31 December 2024
US Dollar
(2,594)
(310)
(16)
(2,920)
(324)
(2,596)
3.5
4.1
Other
(531)
(144)
–
(675)
(148)
(527)
Total interest bearing liabilities
(3,125)
(454)
(16)
(3,595)
(472)
(3,123)
At 31 December 2023
US Dollar
(2,324)
(329)
–
(2,653)
(628)
(2,025)
2.7
5.1
Other
(561)
(219)
–
(780)
(224)
(556)
Total interest bearing liabilities
(2,885)
(548)
–
(3,433)
(852)
(2,581)
In 2024, the Group also had liabilities due for deferred and contingent acquisition consideration (denominated in US Dollars and Euros)
totalling $105m (2023: $36m) 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 2024 was 5.1% (2023: 6.0%). The Group has
entered into interest rate swap contracts to convert the interest payments on €500m debt from fixed rate to floating rate basis.
Notes to the Group accounts continued
Group financial statements continued
226
Smith+Nephew Annual Report 2024
Currency and interest rate profile of interest bearing assets:
Cash and cash
Currency
Interest rate
Floating
Fixed
equivalents
swaps
swaps
Total assets
rate assets
rate assets
$ million
$ million
$ million
$ million
$ million
$ million
At 31 December 2024
US Dollar
482
146
–
628
628
–
Other
137
307
10
454
454
–
Total interest bearing assets
619
453
10
1,082
1,082
–
At 31 December 2023
US Dollar
98
217
–
315
315
–
Other
204
331
7
542
542
–
Total interest bearing assets
302
548
7
857
857
–
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 2023.
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 interest rate swaps is determined by reference to quoted market interest rates. The fair value of
currency swaps is determined by reference to quoted market spot rates. As a result, foreign forward exchange contracts, interest
rate swaps and currency swaps are classified as Level 2 within the fair value hierarchy. The 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 2024 and 2023. For cash and
cash equivalents, short-term loans and receivables, overdrafts and other short-term liabilities which have a maturity of less than
three months, the book values approximate the fair values because of their short-term nature.
Long-term borrowings are measured in the balance sheet at amortised cost. The corporate bonds issued in October 2020, October
2022 and March 2024 are publicly listed and a market price is available. The Group’s other long-term borrowings are not quoted publicly,
their fair values are estimated by discounting future contractual cash flows to net present values at the current market interest rates
available to the Group for similar financial instruments as at the year end. The fair value of the private placement notes is determined
using a discounted cash flow model based on prevailing market rates.
There are no financial assets and liabilities that are subject to master netting or similar arrangements.
227
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16 Financial instruments and risk management continued
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.
Carrying amount
Fair value
Fair value –
hedging
instruments
Amortised
cost
Fair value
through
OCI
Fair value
through
profit
or loss
Other
financial
liabilities
Total
Level 2
Level 3
Total
At 31 December 2024
$ million
$ million
$ million
$ million
$ million
$ million $ million $ million
$ million
Financial assets measured
at fair value
Forward foreign exchange contracts
46
–
–
–
–
46
46
–
46
Investments
–
–
–
9
–
9
–
9
9
Interest rate swaps
10
–
–
–
–
10
10
–
10
Currency swaps
–
–
–
1
–
1
1
–
1
56
–
–
10
–
66
Financial liabilities measured
at fair value
Acquisition consideration –
contingent
–
–
–
(84)
–
(84)
–
(84)
(84)
Forward foreign exchange contracts
(16)
–
–
–
–
(16)
(16)
–
(16)
Interest rate swaps
(16)
–
–
–
–
(16)
(16)
–
(16)
Currency swaps
–
–
–
(2)
–
(2)
(2)
–
(2)
(32)
–
–
(86)
–
(118)
Financial assets not measured
at fair value
Trade and other receivables
–
1,190
–
–
–
1,190
Cash and cash equivalents
–
619
–
–
–
619
–
1,809
–
–
–
1,809
Financial liabilities not measured
at fair value
Acquisition consideration – deferred
–
(21)
–
–
–
(21)
Bank overdrafts
–
(2)
–
–
–
(2)
Corporate bond not in a hedge
relationship
–
(1,492)
–
–
–
(1,492)
Corporate bond in a hedge
relationship
–
(1,006)
–
–
–
(1,006)
Private placement debt not in a
hedge relationship
–
(625)
–
–
–
(625)
Trade and other payables
–
(1,084)
–
–
–
(1,084)
–
(4,230)
–
–
–
(4,230)
At 31 December 2024, the book value and market value of the 2020 USD corporate bond were $995m and $836m respectively
(2023: $995m and $826m), the book value and market value of the $650m USD 2024 corporate bond maturing in 2034 were $628m
and $642m respectively, the book value and market value of the $350m USD 2024 corporate bond maturing in 2027 were $348m and
$352m respectively, the book value and market value of the EUR corporate bond were $527m and $547m respectively (2023: $555m and
$585m). The book value and fair value of the private placement debt were $625m and $573m respectively (2023: $1,030m and $959m).
Notes to the Group accounts continued
Group financial statements continued
228
Smith+Nephew Annual Report 2024
During the year ended 31 December 2024, acquisition consideration increased by $69m due to a $67m increase in relation to the
CartiHeal acquisition, a $13m increase due to discount unwind, partially offset by $9m of payments for acquisitions made in prior years
and remeasurements of $2m. 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.
Carrying amount
Fair value
Fair value –
hedging
instruments
Amortised
cost
Fair value
through
OCI
Fair value
through
profit
or loss
Other
financial
liabilities
Total
Level 2
Level 3
Total
At 31 December 2023
$ million
$ million $ million
$ million
$ million $ million $ million $ million
$ million
Financial assets measured
at fair value
Forward foreign exchange contracts
25
–
–
–
–
25
25
–
25
Investments
–
–
–
8
–
8
–
8
8
Contingent consideration receivable
–
–
–
18
–
18
–
18
18
Interest rate swaps
7
–
–
–
–
7
7
–
7
Currency swaps
–
–
2
–
–
2
2
–
2
32
–
2
26
–
60
Financial liabilities measured
at fair value
Acquisition consideration –
contingent
–
–
–
(32)
–
(32)
–
(32)
(32)
Forward foreign exchange contracts
(25)
–
–
–
–
(25)
(25)
–
(25)
Currency swaps
–
–
(3)
–
–
(3)
(3)
–
(3)
(25)
–
(3)
(32)
–
(60)
Financial assets not measured
at fair value
Trade and other receivables
1,163
–
–
–
–
1,163
Cash and cash equivalents
–
302
–
–
–
302
1,163
302
–
–
–
1,465
Financial liabilities not measured
at fair value
Acquisition consideration - deferred
–
–
–
–
(4)
(4)
Bank overdrafts
–
–
–
–
(2)
(2)
Bank loans
–
–
–
–
(303)
(303)
Corporate bond not in a hedge
relationship
–
–
–
–
(995)
(995)
Corporate bond in a hedge
relationship
–
–
–
–
(555)
(555)
Private placement debt not in a
hedge relationship
–
–
–
–
(1,030)
(1,030)
Trade and other payables
–
–
–
–
(1,026)
(1,026)
–
–
–
–
(3,915)
(3,915)
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OTHER INFORMATION
16 Financial instruments and risk management continued
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 2024 and 2023 for financial instruments measured using Level 3 valuation methods are presented below:
2024
2023
$ million
$ million
Investments
At 1 January
8
12
Additions
1
–
Fair value remeasurement
–
(4)
At 31 December
9
8
Contingent consideration receivable
At 1 January
18
18
Transferred to receivables
(18)
–
At 31 December
–
18
Contingent acquisition consideration liability
At 1 January
(32)
(78)
Arising on acquisitions
(49)
–
Payments
6
13
Remeasurements
(9)
33
At 31 December
(84)
(32)
17 Provisions and contingencies
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 communicated to those affected. Restructuring provisions primarily include
severance costs and are expected to be utilised within one year. Future operating losses and costs associated with ongoing activities
are not provided for.
Notes to the Group accounts continued
Group financial statements continued
230
Smith+Nephew Annual Report 2024
17.1 Provisions
Restructuring
and
rationalisation
Legal and other
provisions
Metal-on-metal
provisions
Total
$ million
$ million
$ million
$ million
At 1 January 2023
30
239
58
327
Charge to income statement
220
–
9
229
Release to income statement
–
(8)
(19)
(27)
Unwinding of discount
–
5
–
5
Utilised
(160)
(87)
(7)
(254)
Exchange adjustment
1
–
–
1
At 31 December 2023
91
149
41
281
Charge to income statement
123
–
12
135
Release to income statement
–
(28)
(2)
(30)
Unwinding of discount
–
6
–
6
Utilised
(153)
(14)
(20)
(187)
Exchange adjustment
(2)
–
–
(2)
At 31 December 2024
59
113
31
203
Provisions – due within one year
59
28
21
108
Provisions – due after one year
–
85
10
95
At 31 December 2024
59
113
31
203
Provisions – due within one year
91
111
31
233
Provisions – due after one year
–
38
10
48
At 31 December 2023
91
149
41
281
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.
For the year ended 31 December 2024, charges primarily include severance, asset write-offs and integration and dual running costs.
For the year ended 31 December 2023, charges primarily include severance, business advisory services, asset write-offs, contractual
termination and integration and dual running costs.
The restructuring and rationalisation provisions as at 31 December 2024 and 2023 primarily relate to severance costs.
The Group has estimated a provision of $113m (2023: $149m) relating to the present value at 31 December 2024 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. While the provision is based on a number of assumptions, including factors such as the number, outcome and
value of claims, a reasonable change in assumptions would not give rise to a material adjustment. 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 2024 and none are treated as
financial instruments.
231
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
17 Provisions and contingencies continued
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 are
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 2024, approximately 300 such claims were pending with the Group around the world. 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 2024, 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. The Group provides for these types of matters when
and where appropriate.
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.
Notes to the Group accounts continued
Group financial statements continued
232
Smith+Nephew Annual Report 2024
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.
18.1 Retirement benefit assets and obligations
The Group’s retirement benefit assets/(obligations) comprise:
2024
2023
$ million
$ million
Funded plans:
UK Plan
63
61
US Plan
–
8
Other plans
(10)
(13)
53
56
Unfunded plans:
Other plans
(60)
(65)
Retirement healthcare
(9)
(10)
(16)
(19)
Amount recognised on the balance sheet – liability
(79)
(88)
Amount recognised on the balance sheet – asset
63
69
The Group sponsors defined benefit pension plans for its employees or former employees in 12 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.
233
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OTHER INFORMATION
18 Retirement benefit obligations continued
The Groups two major defined benefit pension plans were in 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.
While 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. 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 in 2023 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
contribution 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 the US buyout, 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.
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.
Notes to the Group accounts continued
Group financial statements continued
234
Smith+Nephew Annual Report 2024
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:
2024
2023
Obligation
Asset
Total
Obligation
Asset
Total
$ million
$ million
$ million
$ million
$ million
$ million
Amounts recognised on the balance sheet at
beginning of the period
(961)
942
(19)
(984)
1,055
71
Income statement expense:
Current service cost
(7)
–
(7)
(6)
–
(6)
Settlements
255
(250)
5
75
(79)
(4)
Interest (expense)/income
(26)
26
–
(45)
49
4
Administration costs and taxes
(4)
–
(4)
(5)
–
(5)
Costs recognised in income statement
218
(224)
(6)
19
(30)
(11)
Remeasurements:
Actuarial (loss)/gain due to liability experience
(6)
–
(6)
(14)
–
(14)
Actuarial gain due to financial assumptions
change
62
–
62
(25)
–
(25)
Actuarial gain due to demographic assumptions
1
–
1
14
–
14
Return on plan assets (less)/greater than
discount rate
–
(41)
(41)
–
(64)
(64)
Remeasurements recognised in OCI
57
(41)
16
(25)
(64)
(89)
Cash:
Employer contributions
–
(9)
(9)
–
7
7
Employee contributions
(3)
3
–
(3)
3
–
Benefits paid directly by the Group
3
–
3
2
–
2
Benefits paid, taxes and administration costs
paid from scheme assets
41
(45)
(4)
67
(69)
(2)
Net cash
41
(51)
(10)
66
(59)
7
Exchange movements
20
(17)
3
(37)
40
3
Amount recognised on the balance sheet
(625)
609
(16)
(961)
942
(19)
Amount recognised on the balance sheet –
liability
(213)
134
(79)
(229)
141
(88)
Amount recognised on the balance sheet –
asset
(412)
475
63
(732)
801
69
Represented by:
2024
2023
Obligation
Asset
Total
Obligation
Asset
Total
$ million
$ million
$ million
$ million
$ million
$ million
UK Plan
(396)
459
63
(457)
518
61
US Plan
–
–
–
(259)
267
8
Other Plans
(229)
150
(79)
(245)
157
(88)
Total
(625)
609
(16)
(961)
942
(19)
The actuarial gain on obligation of $57m primarily relates to the increase in discount rates in 2024 compared to 2023 and the actuarial
loss from the return on plan assets of $41m is mainly due to the impact of the UK Plan.
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 for the UK Plan.
235
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
2024
2023
2022
$ million
$ million
$ million
UK Plan:
Assets with a quoted market price:
Cash and cash equivalents
56
61
2
Equity securities
–
–
3
Other bonds
7
–
30
Short dated credit fund
–
–
81
Liability driven investments
–
–
225
Diversified growth funds
–
–
55
63
61
396
Other assets:
Insurance contract
396
457
156
Market value of assets
459
518
552
US Plan:
Assets with a quoted market price:
Cash and cash equivalents
–
267
120
Government bonds – fixed interest
–
–
43
Corporate bonds
–
–
197
Market value of assets
–
267
360
Other Plans:
Assets with a quoted market price:
Cash and cash equivalents
2
7
7
Equity securities
56
50
49
Government bonds – fixed interest
6
5
7
Corporate and other bonds
12
10
10
Insurance contracts
18
23
21
Property
25
28
22
Other quoted securities
11
10
5
130
133
121
Other assets:
Insurance contracts
20
24
22
Market value of assets
150
157
143
Total market value of assets
609
942
1,055
No plans invest directly in property occupied by the Group or in financial securities issued by the Group.
The UK Plan is comprised of annuity policies purchased by the Trustee. In 2024, following the US scheme termination, the investment risks
have been transferred to a US Life Insurer.
18 Retirement benefit obligations continued
18.3 Plan assets
The market value of the US, UK and Other Plans assets are as follows:
Notes to the Group accounts continued
Group financial statements continued
236
Smith+Nephew Annual Report 2024
18.4 Expenses recognised in the income statement
The total expense relating to retirement benefits recognised for the year is $95m (2023: $95m, 2022: $88m). Of this cost recognised
for the year, $89m (2023: $84m, 2022: $77m) relates to defined contribution plans and $6m (2023: $11m, 2022: $11m) 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 2024 due to be paid
over to the Plans (2023: $nil, 2022: $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 (2023: $nil, 2022: $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.
2024
2023
2022
% per annum % per annum % per annum
UK Plan:
Discount rate
5.5
4.5
4.8
Future salary increases
n/a
n/a
n/a
Future pension increases
3.0
3.0
3.3
Inflation (RPI)
3.2
3.1
3.3
Inflation (CPI)
2.7
2.5
2.3
US Plan:
Discount rate
n/a
5.0
5.3
Future salary increases
n/a
n/a
n/a
Inflation
n/a
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 2023 table, which places partial weight on post pandemic experience. The Directors will continue to monitor any potential
future impact on the mortality assumptions used.
237
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
18 Retirement benefit obligations continued
The current longevities underlying the values of the obligations in the defined benefit plans are as follows:
2024
2023
2022
years
years
years
Life expectancy at age 60
UK Plan:
Males
26.6
26.9
27.4
Females
29.5
29.7
30.1
US Plan:
Males
n/a
25.0
24.9
Females
n/a
27.2
27.1
Life expectancy at age 60 in 20 years’ time
UK Plan:
Males
28.1
28.4
28.9
Females
30.9
31.1
31.5
US Plan:
Males
n/a
25.0
24.9
Females
n/a
27.6
27.6
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 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.
Increase/(decrease) in pension
obligation
Increase /(decrease) in pension
cost
$ million
+50bps/+1yr
-50bps/-1yr
+50bps/+1yr
-50bps/-1yr
UK Plan:
Discount rate
(25.0)
28.0
–
–
Inflation
22.0
(21.0)
–
–
Mortality
18.0
(18.0)
–
–
Notes to the Group accounts continued
Group financial statements continued
238
Smith+Nephew Annual Report 2024
18.7 Risk
The pension plans expose the Group to the following risks:
Interest rate 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
remains in the Plan.
Inflation risk
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.
Investment risk
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 remains in the Plan.
Longevity risk
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 remains in the Plan.
239
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GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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 2023. Future accruals to the UK Plan ceased
as at 31 December 2016. Contributions to the UK Plan in 2024 were $nil (2023: $nil, 2022: $nil). This included supplementary payments
of $nil (2023: $nil, 2022: $nil).
Following the completion of the 30 September 2023 valuation, a dynamic contribution mechanism was agreed. The Fund was expected
to be in surplus at 30 September 2023, therefore no recovery plan was required. The Fund will meet administrative and other running
costs from the surplus, with no expense contributions due from the Company.
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 (2023: $nil, 2022: $nil) which represented supplementary payments of $nil
(2023: $nil, 2022: $nil).
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 is 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
Ordinary shares (20¢)
Deferred shares (£1.00)
Total
Thousand
$ million
Thousand
$ million
$ million
Authorised
At 31 December 2022
1,223,591
245
50
–
245
At 31 December 2023
1,223,591
245
50
–
245
At 31 December 2024
1,223,591
245
50
–
245
Allotted, issued and fully paid
At 1 January 2022
885,191
177
50
–
177
Share options
229
–
–
–
–
Shares cancelled
(7,770)
(2)
–
–
(2)
At 31 December 2022
877,650
175
50
–
175
Share options
23
–
–
–
–
At 31 December 2023
877,673
175
50
–
175
Share options
31
–
–
–
–
At 31 December 2024
877,704
175
50
–
175
Notes to the Group accounts continued
Group financial statements continued
240
Smith+Nephew Annual Report 2024
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:
2024
2023
2022
$ million
$ million
$ million
Share capital
175
175
175
Share premium
615
615
615
Capital redemption reserve
20
20
20
Treasury shares
(66)
(94)
(118)
Retained earnings and other reserves
4,521
4,501
4,567
5,265
5,217
5,259
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. No shares were purchased in 2024 and 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.
241
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
19 Equity continued
The movements in Treasury shares and the Employees’ Share Trust are as follows:
Employees’
Treasury
Share Trust
Total
$ million
$ million
$ million
At 1 January 2023
67
51
118
Shares transferred from treasury
(13)
13
–
Shares transferred to Group beneficiaries
(1)
(23)
(24)
At 31 December 2023
53
41
94
Shares transferred to Group beneficiaries
(2)
(26)
(28)
At 31 December 2024
51
15
66
Employees’
Treasury
Share Trust
Total
Number
Number
Number
of shares
of shares
of shares
million
million
million
At 1 January 2023
4.3
3.2
7.5
Shares transferred from treasury
(0.8)
0.8
–
Shares transferred to Group beneficiaries
(0.1)
(1.6)
(1.7)
At 31 December 2023
3.4
2.4
5.8
Shares transferred to Group beneficiaries
(0.1)
(1.5)
(1.6)
At 31 December 2024
3.3
0.9
4.2
19.3 Dividends
2024
2023
2022
$ million
$ million
$ million
The following dividends were declared and paid in the year:
Ordinary final of 23.1¢ for 2023 (2022: 23.1¢, 2021: 23.1¢) paid 22 May 2024
202
201
202
Ordinary interim of 14.4¢ for 2024 (2023: 14.4¢, 2022: 14.4¢) paid 8 November 2024
125
126
125
327
327
327
A final dividend for 2024 of 23.1 US cents per ordinary share was proposed by the Board on 20 February 2025 and will be paid, subject
to shareholder approval, on 30 April 2025 to shareholders on the Register of Members on 31 March 2025. The estimated amount of this
dividend is $202m. 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 2024 amounted to $3,119m.
Notes to the Group accounts continued
Group financial statements continued
242
Smith+Nephew Annual Report 2024
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, cash and cash equivalents includes cash at bank,
other short-term liquid investments with original maturities of three months or less and excludes bank overdrafts.
Analysis of net debt including lease liabilities
Borrowings
Overdrafts
Due within
one year
Due after
one year
Net
currency
swaps
Net
interest
swaps
Total
liabilities
- financing
activities
Cash
and cash
equivalents
Net debt
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
At 1 January 2022
(5)
(486)
(2,848)
–
–
(3,339)
1,290
(2,049)
Net cash flow/debt movement
1
302
94
(3)
–
394
(931)
(537)
Fair value changes including exchange
adjustments
(2)
23
45
3
(13)
56
(9)
47
Corporate bond issuance expense
–
–
3
–
–
3
–
3
IFRS 16 lease liabilities movement
–
7
(6)
–
–
1
–
1
At 31 December 2022
(6)
(154)
(2,712)
–
(13)
(2,885)
350
(2,535)
Net cash flow/debt movement
8
(604)
429
(4)
–
(171)
(48)
(219)
Fair value changes including exchange
adjustments
(4)
–
(39)
3
20
(20)
–
(20)
Corporate bond issuance expense
–
–
1
–
–
1
–
1
IFRS 16 lease liabilities movement
–
(6)
3
–
–
(3)
–
(3)
At 31 December 2023
(2)
(764)
(2,318)
(1)
7
(3,078)
302
(2,776)
Net cash flow/debt movement
1
705
(1,000)
–
–
(294)
331
37
Fair value changes including exchange
adjustments
(1)
–
46
–
(13)
32
(14)
18
Corporate bond issuance expense
–
–
9
–
–
9
–
9
IFRS 16 lease liabilities movement
–
(2)
5
–
–
3
–
3
At 31 December 2024
(2)
(61)
(3,258)
(1)
(6)
(3,328)
619
(2,709)
243
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
20 Cash flow statement continued
Reconciliation of net cash flow to movement in net debt including lease liabilities
2024
2023
2022
$ million
$ million
$ million
Net cash flow from cash net of overdrafts
332
(40)
(930)
Settlement of currency swaps
–
(4)
(3)
Net cash flow from borrowings
(295)
(175)
396
Change in net debt from net cash flow
37
(219)
(537)
IFRS 16 lease liabilities
3
(3)
1
Exchange adjustment
18
(20)
47
Corporate bond issuance expense
9
1
3
Change in net debt in the year
67
(241)
(486)
Opening net debt
(2,776)
(2,535)
(2,049)
Closing net debt
(2,709)
(2,776)
(2,535)
Cash and cash equivalents
For the purposes of the Group cash flow statement, cash and cash equivalents at 31 December 2024 comprise cash at bank and other
short-term liquid investments with original maturities of three months or less and bank overdrafts.
2024
2023
2022
$ million
$ million
$ million
Cash at bank and other short-term liquid investments with original maturities of three
months or less
619
302
350
Bank overdrafts
(2)
(2)
(6)
Cash and cash equivalents
617
300
344
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
Borrowing
Proceeds from
Repayment
Cash outflow/
Proceeds from own
of bank
of bank
Corporate
of lease
(inflow)
Purchase of
shares/issue of
loans1
loans1
Bond issue
liabilities
from other
Dividends
own shares
ordinary shares
Total
2024
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
Debt
705
–
(1,000)
55
–
–
–
–
(240)
Equity
–
–
–
–
–
327
–
(1)
326
Total
705
–
(1,000)
55
–
327
–
(1)
86
2023
Debt
151
(326)
–
52
(4)
–
–
–
(127)
Equity
–
–
–
–
–
327
–
–
327
Total
151
(326)
–
52
(4)
327
–
–
200
2022
Debt
881
–
(485)
54
(3)
–
–
–
447
Equity
–
–
–
–
–
327
158
(6)
479
Total
881
–
(485)
54
(3)
327
158
(6)
926
1 This includes drawdown and repayment of the syndicated RCF.
Notes to the Group accounts continued
Group financial statements continued
244
Smith+Nephew Annual Report 2024
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 2024
On 9 January 2024, the Group completed the acquisition of 100% of the share capital of CartiHeal (2009) Ltd (CartiHeal), the
developer of CARTIHEAL◊ AGILI-C◊, a novel Sports Medicine technology for cartilage regeneration in the knee. The acquisition of this
disruptive technology supports our strategy to invest behind our successful Sports Medicine & ENT business unit. The fair value of the
consideration amounted to $231m. This is comprised of contingent consideration of $49m, which represents the discounted value of
$150m of consideration contingent upon the achievement of a single future financial performance milestone in the next 10 years, and
initial cash consideration of $180m adjusted for cash acquired and other liabilities assumed, of which $18m was transferred in to escrow
to be released in equal instalments to the seller in 12 and 18 months from completion. The fair value of assets acquired and liabilities
assumed is set out below:
CartiHeal
(2009) Ltd
$ million
Intangible assets – Product-related and trade name
84
Inventory
1
Cash
6
Other liabilities
(2)
Trade and other payables
(1)
Net deferred tax liability
(3)
Net assets
85
Goodwill
146
Consideration
231
The product-related intangible assets and trade name were valued using a relief-from-royalty methodology with the key inputs being
revenue, profit and discount rate. The cash outflow from acquisitions of $186m (2023: $21m) comprises payments of consideration
of $177m net of cash acquired (2023: $nil) relating to acquisitions in the current year and payments of deferred and contingent
consideration of $9m (2023: $21m) relating to acquisitions completed in prior years.
The goodwill represents the control premium, acquired workforce and the synergies expected from integrating CartiHeal into the
Group’s existing business. The carrying value of goodwill increased from $2,992m at 31 December 2023 to $3,026m at 31 December
2024. The acquisition in the year ended 31 December 2024 increased goodwill by $146m, this was partially offset by goodwill
impairment of $65m and foreign exchange movements of $47m.
For the year ended 31 December 2024, the contribution from CartiHeal to the Group’s revenue and profit was immaterial. If the business
combination had occurred at the beginning of the year the contribution to revenue and profit would not have been materially different.
Year ended 31 December 2023
No acquisitions were completed in 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.
245
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
21 Acquisitions continued
The fair value of assets acquired and liabilities assumed is set out below:
Engage
Surgical
$ million
Intangible assets – Product-related
44
Property, plant and equipment
2
Inventory
2
Trade and other payables
(1)
Net assets
47
Goodwill
84
Consideration (net of $nil cash acquired)
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 comprises payments of consideration of $89m relating to acquisitions in the
current year and payments of deferred and contingent consideration of $24m 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.
Notes to the Group accounts continued
Group financial statements continued
246
Smith+Nephew Annual Report 2024
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 and employee shareplans: 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 2024, 4,587,000 options (2023: 5,138,000, 2022: 5,202,000) were outstanding with a range of exercise prices from
843 to 1,541 pence.
At 31 December 2024, the maximum number of shares that could be awarded under the Group’s long-term incentive plans was
9,899,000 (2023: 8,452,000, 2022: 7,371,000). 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 $40m (2023: $39m, 2022: $40m).
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 (2023: $nil, 2022: $nil).
Key management personnel
The remuneration of Executive Officers (including Executive Directors and Non-Executive Directors) during the year is
summarised below:
2024
2023
2022
$ million
$ million
$ million
Short-term employee benefits
22
21
17
Share-based payments expense
10
9
10
Pension and post-employment benefit entitlements
1
1
2
33
31
29
Directors’ remuneration disclosures are included on pages 136–173.
Retirement benefit schemes
Details of the Group’s retirement benefit schemes are set out in Note 18.
23 Post balance sheet events
There have been no events between the balance sheet date, and the date on which the financial statements were approved by the
Board, which would require adjustment to the financial statements or any additional disclosures.
247
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Company balance sheet
At 31 December At 31 December
2024
2023
Notes
$ million
$ million
Non-current assets
Investments
2
7,092
7,092
Debtors
3
2,408
7
9,500
7,099
Current assets
Debtors
3
733
3,317
Cash and cash equivalents
5
487
82
1,220
3,399
Total assets
10,720
10,498
Equity and liabilities
Equity attributable to owners of the Company
Share capital
175
175
Share premium
615
615
Capital redemption reserve
20
20
Capital reserve
2,266
2,266
Treasury shares
(66)
(94)
Exchange reserve
(52)
(52)
Profit and loss account
3,237
3,479
Total equity
6,195
6,409
Non-current liabilities
Borrowings
5
3,124
2,168
Other creditors
4&5
16
–
3,140
2,168
Current liabilities
Borrowings
5
2
711
Other creditors
4
1,383
1,210
1,385
1,921
Total liabilities
4,525
4,089
Total equity and liabilities
10,720
10,498
The attributable profit for the year dealt with in the accounts of the Company is $72m (2023: $58m).
The accounts were approved by the Board and authorised for issue on 24 February 2025 and signed on its behalf by:
Rupert Soames, OBE
Deepak Nath, PhD
John Rogers
Chair
Chief Executive Officer
Chief Financial Officer
Company financial statements
248
Smith+Nephew Annual Report 2024
Company statement of changes in equity
Capital
Total
Share
Share
redemption
Capital
Treasury
Exchange
Profit and
shareholders’
capital
premium
reserve
reserve
shares
reserve
loss account
funds
$ million $ million
$ million $ million $ million $ million
$ million
$ million
At 1 January 2023
175
615
20
2,266
(118)
(52)
3,733
6,639
Attributable profit for the year
–
–
–
–
–
–
58
58
Equity dividends paid in the year
–
–
–
–
–
–
(327)
(327)
Share-based payments recognised1
–
–
–
–
–
–
39
39
Cost of shares transferred to beneficiaries
–
–
–
–
24
–
(24)
–
At 31 December 2023
175
615
20
2,266
(94)
(52)
3,479
6,409
Attributable profit for the year
–
–
–
–
–
–
72
72
Equity dividends paid in the year
–
–
–
–
–
–
(327)
(327)
Share-based payments recognised1
–
–
–
–
–
–
40
40
Cost of shares transferred to beneficiaries
–
–
–
–
28
–
(27)
1
At 31 December 2024
175
615
20 2,266
(66)
(52)
3,237
6,195
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 approximate to the balance on the profit and loss account reserve, less treasury
shares and exchange reserves, which at 31 December 2024 amounted to $3,119m (2023: $3,333m). 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 Deloitte 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.
249
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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.
The Company’s accounting policies do not include any critical judgements and estimates.
During the year, the Company made certain presentational changes to the balance sheet, however no significant rearrangements have
been made.
2 Investments
Accounting policy
Investments in subsidiaries are stated at cost less provision for impairment.
2024
2023
$ million
$ million
At 1 January and 31 December
7,092
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.
Notes to the Company accounts
Company financial statements continued
250
Smith+Nephew Annual Report 2024
3 Debtors
2024
2023
$ million
$ million
Current
Amounts owed by subsidiary undertakings
664
3,284
Prepayments and accrued income
6
6
Current asset derivatives – forward foreign exchange contracts
46
25
Current asset derivatives – forward foreign exchange contracts – subsidiary undertakings
16
–
Current asset derivatives – currency swaps
1
2
733
3,317
Non-current
Amounts owed by subsidiary undertakings
2,398
–
Non-current asset derivatives – interest rate swaps
10
7
2,408
7
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 (2023: de minimis).
In 2024, the Company reclassified certain amounts owed by subsidiary undertakings from current to non-current debtors to reflect
expectations for realisation of the amounts as a result of as a result of revised contractual terms.
4 Other creditors
2024
2023
$ million
$ million
Current
Amounts owed to subsidiary undertakings
1,286
1,158
Other creditors
33
24
Current liability derivatives – forward foreign exchange contracts
16
–
Current liability derivatives – forward foreign exchange contracts – subsidiary undertakings
46
25
Current liability derivatives – currency swaps
2
3
1,383
1,210
Non-current
Non-current liability derivatives – interest rate swaps
16
–
16
–
5 Cash and borrowings
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.
2024
2023
$ million
$ million
Bank loans, borrowing and overdrafts due within one year or on demand
2
711
Borrowings due after one year
3,124
2,168
Borrowings
3,126
2,879
Cash and cash equivalents
(487)
(82)
Credit/(debit) balance on derivatives – interest rate swaps
6
(7)
Net debt
2,645
2,790
All currency swaps are stated at fair value. These currency swaps have notional values of Gross US Dollar equivalents of $453m (2023:
$548m) receivable and $455m (2023: $549m) payable. Currency swaps comprise foreign exchange swaps and were used in 2024 and
2023 to hedge intra-group loans.
251
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Notes to the Company accounts continued
Company financial statements continued
6 Contingencies
2024
2023
$ million
$ million
Guarantees in respect of subsidiary undertakings
–
–
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 $120m (2023: $79m) 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 2024, 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
Country of
operation and
incorporation
Registered
Office
UK
Additive Instruments Limited
England & Wales
Watford
Michelson Diagnostic Limited3 (6.4%)
England & Wales
Nottingham
Neotherix Limited3 (24.9%)
England & Wales
York
Smith & Nephew (Overseas) Limited1,4
England & Wales
Watford
Smith & Nephew Beta Limited2
England & Wales
Watford
Smith & Nephew China Holdings
UK Limited1
England & Wales
Watford
Smith & Nephew Employees
Trustees Limited2
England & Wales
Watford
Smith & Nephew ESN Limited2
England & Wales
Watford
Smith & Nephew Extruded Films Limited2
England & Wales
Hull
Smith & Nephew Finance2
England & Wales
Watford
Smith & Nephew Finance Oratec2
England & Wales
Watford
Smith & Nephew Healthcare Limited2
England & Wales
Hull
Smith & Nephew Investment
Holdings Limited1
England & Wales
Watford
Smith & Nephew Lilia Limited2
England & Wales
Watford
Smith & Nephew Medical Fabrics Limited2
England & Wales
Watford
Smith & Nephew Medical Limited
England & Wales
Hull
Smith & Nephew Nominee
Company Limited2
England & Wales
Watford
Smith & Nephew Nominee Services Limited2 England & Wales
Watford
Smith & Nephew Orthopaedics Limited
England & Wales
Watford
Smith & Nephew Pharmaceuticals Limited2
England & Wales
Hull
Smith & Nephew Raisegrade Limited1,2
England & Wales
Watford
Smith & Nephew Rareletter Limited2
England & Wales
Watford
Smith & Nephew Trading Group Limited1
England & Wales
Watford
Smith & Nephew UK Executive Pension
Scheme Trustee Limited2
England & Wales
Watford
Smith & Nephew UK Limited1,4
England & Wales
Watford
Company name
Country of
operation and
incorporation
Registered
Office
Smith & Nephew UK Pension Fund
Trustee Limited2
England & Wales
Watford
Smith & Nephew USD Limited1
England & Wales
Watford
Smith & Nephew USD One Limited1
England & Wales
Watford
T.J.Smith and Nephew, Limited
England & Wales
Hull
The Albion Soap Company Limited2
England & Wales
Watford
TP Limited1
Scotland
Edinburgh
Rest of Europe
Smith & Nephew GmbH
Austria
Vienna
Smith & Nephew S.A.-N.V
Belgium
Zaventem
Smith & Nephew A/S
Denmark
Kobenhavn
Smith & Nephew Oy
Finland
Helsinki
Smith & Nephew France SAS1
France
Neuilly-sur-
Seine
Smith & Nephew S.A.S.
France
Neuilly-sur-
Seine
Smith & Nephew Business Services GmbH
& Co. KG1
Germany
Hamburg
Smith & Nephew Business Services
Verwaltungs GmbH
Germany
Hamburg
Smith & Nephew Deutschland (Holding)
GmbH1
Germany
Hamburg
Smith & Nephew GmbH
Germany
Hamburg
Smith & Nephew Orthopaedics GmbH
Germany
Tuttlingen
Smith & Nephew Robotics GmbH
Germany
Munich
Smith & Nephew (Ireland) Trading Limited
Ireland
Dublin
Smith & Nephew S.r.l.
Italy
Milan
Smith & Nephew International S.A.1
Luxembourg
Luxembourg
Smith & Nephew (Europe) B.V.1
Netherlands
Amsterdam,
2132NP
Smith & Nephew B.V.
Netherlands
Amsterdam,
2132NP
Smith & Nephew Nederland CV
Netherlands
Amsterdam,
2132NP
252
Smith+Nephew Annual Report 2024
Company name
Country of
operation and
incorporation
Registered
Office
Smith & Nephew Operations B.V.
Netherlands
Amsterdam,
2132NP
Serda B.V.3 (48.32%)
Netherlands
Amsterdam,
1105BP
Smith & Nephew AS
Norway
Oslo
Smith & Nephew sp. z.o.o.
Poland
Warsaw
Smith & Nephew Lda
Portugal Forte da Casa
S&N ORION PRIME, S.A.
Portugal
Coimbra
DC LLC
Russian
Federation
Puschino
Smith & Nephew LLC
Russian
Federation
Moscow
Smith & Nephew S.A.U
Spain
Barcelona
Smith & Nephew Aktiebolag
Sweden
Molndal
Lumina Adhesives AB3 (1.59%)
Sweden
Gothenburg
Atracsys Sàrl
Switzerland
Puidoux
Plus Orthopedics Holding AG1
Switzerland
Zug
Smith & Nephew Manufacturing AG
Switzerland
Aarau
Smith & Nephew Orthopaedics AG1
Switzerland
Zug
Smith & Nephew Schweiz AG
Switzerland
Zug
Smith & Nephew AG
Switzerland
Zug
Smith & Nephew Orthopaedics AG
Aarau Branch5
Switzerland
Aarau
US
Arthrocare Corporation
United States
Wilmington
Ascension Orthopedics, Inc.
United States
Wilmington
Austin Miller Trauma LLC
United States
Wilmington
Bioventus Inc.3,6 (27.13%)
United States
Wilmington
Bioventus LLC3,7 (9.54%)
United States
Wilmington
Blue Belt Technologies, Inc.
United States
Philadelphia
CartiHeal Inc.
United States
Wilmington
Ceterix Orthopaedics, Inc.
United States
Wilmington
Engage Uni LLC
United States
Wilmington
Integrated Shoulder Collaboration, Inc.
United States
Wilmington
IntraFuse LLC Investment 3 (42.16%)
United States
Utah
Leaf Healthcare Inc.
United States
Wilmington
Miach Orthopaedics, Inc3 (8.22%)
United States
Dover GD
Osiris Therapeutics, Inc.
United States
Timonium
Rotation Medical, Inc.
United States
Wilmington
Sinopsys Surgical, Inc.3 (1.44%)
United States
Wilmington
Smith & Nephew Consolidated, Inc.1
United States
Wilmington
Smith & Nephew, Inc.1
United States
Wilmington
Trice Medical Inc.3 (0.5%)
United States
Wilmington
19808
Tusker Medical, Inc.
United States
Wilmington
Africa, Asia, Australasia and Other Americas
Smith & Nephew Argentina S.R.L.2
Argentina Buenos Aires
Smith & Nephew Pty Limited
Australia
Macquarie
Park
Smith & Nephew Surgical Holdings
Pty Limited1,2
Australia
Macquarie
Park
Company name
Country of
operation and
incorporation
Registered
Office
Smith & Nephew Surgical Pty Limited2
Australia
Macquarie
Park
Smith & Nephew Comercio de Produtos
Medicos LTDA
Brazil
São Paulo
Smith & Nephew Comercio de Produtos
Medicos LTDA, Diadema Branch5
Brazil
Diadema
Smith & Nephew Comercio de Produtos
Medicos LTDA, Rio de Janeiro Branch5
Brazil
Rio de
Janeiro
Smith & Nephew Comercio de Produtos
Medicos LTDA, São José dos Campos Branch5
Brazil
São José
Smith & Nephew Inc.1
Canada
Ontario
Smith & Nephew Finance Holdings Limited4
Cayman Islands George Town
1104
TEAMfund, LP3 (6.765%)
Cayman Islands George Town
9008
Smith & Nephew Chile SpA2
Chile
Chile
Plus Orthopedics (Beijing) Co. Limited2
China
Shunyi
District,
Beijing
Smith & Nephew Medical (Shanghai) Limited
China
Shanghai
Ao Na Rd
Smith & Nephew Medical (Shanghai) Limited
Beijing Branch5
China
Dong Cheng
Smith & Nephew Medical (Shanghai) Limited
Chengdu Branch5
China
Wu Hou
Smith & Nephew Medical (Shanghai) Limited
Guangzhou Branch5
China
Yue Xiu
Smith & Nephew Medical (Shanghai) Limited
Shanghai Branch5
China
Jing’an
Smith & Nephew Medical (Shanghai) Limited
Shanghai Second Branch5
China
Shanghai
Xin Jin Qiao Rd
Smith & Nephew Medical (Suzhou) Limited
China
Suzhou City
Smith & Nephew Orthopaedics
(Beijing) Co., Ltd
China
Kechuang
Dongliujie
S&N Holdings SAS1
Colombia
Bogota
Smith & Nephew Colombia S.A.S
Colombia
Bogota
ArthroCare Costa Rica Srl
Costa Rica
Alajuela
Smith & Nephew Curaçao N.V.2
Curaçao
Willemstad
Smith & Nephew Beijing Holdings Limited1
Hong Kong
Hong Kong
Smith & Nephew Limited
Hong Kong
Hong Kong
Smith & Nephew Suzhou Holdings Limited1
Hong Kong
Hong Kong
Smith & Nephew GBS Private Limited
India
Pune
Smith & Nephew Healthcare Private Limited
India
Mumbai
Smith & Nephew KK
Japan
Tokyo
Smith & Nephew Chusik Hoesia
Korea,
Republic of
Seoul
Smith & Nephew Healthcare Sdn. Bhd
Malaysia Kuala Lumpur
Smith & Nephew Operations Sdn. Bhd
Malaysia Kuala Lumpur
Smith & Nephew Services Sdn. Bhd
Malaysia Kuala Lumpur
Smith & Nephew S.A. de C.V.
Mexico
Mexico City
Smith & Nephew Limited1
New Zealand
Auckland
Smith & Nephew Superannuation
Scheme Limited
New Zealand
Auckland
253
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Notes to the Company accounts continued
Company financial statements continued
Company name
Country of
operation and
incorporation
Registered
Office
Smith & Nephew (Overseas) Limited
Philippines Branch2,5
Philippines
Manila
Smith & Nephew, Inc.
Puerto Rico
San Juan
Smith & Nephew USD Limited Office for
Technical & Scientific Services5
Saudi Arabia
Riyadh
Branch of Smith & Nephew Regional
Headquarter Company5
Saudi Arabia Riyadh 13244
Smith & Nephew Asia Pacific Pte. Limited1
Singapore
Singapore
Smith & Nephew Pte Limited
Singapore
Singapore
Smith & Nephew (Pty) Limited1
South Africa
Westville
Smith & Nephew Pharmaceuticals
(Proprietary) Limited2
South Africa
Westville
Smith & Nephew (Overseas) Limited
Taiwan Branch5
Taiwan
Taipei
Smith & Nephew Limited
Thailand Huai Khwang
District,
Bangkok
Smith ve Nephew Medikal Cihazlar Ticaret
Limited Sirketi
Turkey
Istanbul
Smith & Nephew FZE
United Arab
Emirates
Jebel Ali,
Dubai
Smith & Nephew FZE (DHCC Branch)5
United Arab
Emirates
HealthCare
City, Dubai
The Representative Office Of Smith &
Nephew Asia Pacific Pte. Limited
Vietnam
Ho Chi Minh
City
CartiHeal Ltd1
Israel
Kfar Saba
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 27.13% voting rights and 7.68% economic interest.
7 Represents 9.54% economic interest.
Registered Office addresses
UK
Watford
Building 5, Croxley Park, Hatters Lane, Watford,
Hertfordshire, WD18 8YE
Nottingham
80 Mount Street , Cumberland Court, Nottingham ,
NG1 6HH.
York
25, Carr Lane, York, YO26 5HT
Hull
101 Hessle Road, Hull, HU3 2BN
Edinburgh
4th Floor, 115 George Street, Edinburgh, EH2 4JN
Rest of Europe
Vienna
Concorde Business Park, C3, 2320,
Schwechat, Austria
Zaventem
Ikaroslaan 45, 1930 Zaventem, Belgium
Kobenhavn
Kay Fiskers Plads 9, 1. 2300. Kobenhavn S, Denmark
Helsinki
Lentäjäntie 1, 01530 Vantaa, Finland
Neuilly-sur-Seine
40-52, Boulevard du Parc, 92200 Neuilly-sur-Seine,
France
Hamburg
Friesenweg 30, 22763, Hamburg, Germany
Munich
Rosenheimer Straße 116, Munich, 81669, Germany
Registered Office addresses
Tuttlingen
Alemannenstrasse 14, 78532, Tuttlingen, Germany
Dublin
9 Clare Street, Dublin 2, D02 HH30, Ireland
Milan
Sesto San Giovanni (MI) Viale T. Edison 110
CAP 20099 Italy
Amsterdam 2132NP Bloemlaan 2, 2132NP, Hoofddorp, The Netherlands
Amsterdam 1105BP Paasheuvelweg 25, 1105BP, Amsterdam,
The Netherlands
Oslo
Snaroyveien 36, FORNEBU, 1364, Norway
Warsaw
Ul Osmanska 12, 02-823, Warsaw, Poland
Forte da Casa
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
Coimbra
Rua Pedro Nunes, Instituto Pedro Nunes, Edificio IPN-D,
3030-199, Coimbra, Portugal
Moscow
2nd Syromyatnichesky Lane, 9th floor, Premises 1,
Room 1, Moscow, 105120, Russian Federation
Puschino
8/1 Stroiteley Street, 142290, City of Puschino,
Moscow Region, Russian Federation
Barcelona
Edificio Conata I, c/Fructuos Gelabert 2 y 4,
San Joan Despi – 08970, Barcelona, Spain
Molndal
Krokslatts fabriker 39 431 37 Molndal, Sverige, Sweden
Gothenburg
Varbergsgatan 2A/412 65 Göteborg, Sweden
Puidoux
Route du Verney 20, 1070, Puidoux, Switzerland
Zug
Theilerstrasse 1A, 6300, Zug, Switzerland
Aarau
Schachenallee 29, 5000, Aarau, Switzerland
US
Wilmington
CT Corporation, 1209 Orange Street, Wilmington
DE 19801, USA
Philadelphia
CT Corporation 1515 Market Street, Philadelphia,
PA 19102, USA
Wilmington 19808
251 Little Falls Drive, Wilmington DE 19808, USA
Dover GD
160 Greentree Drive, Suite 101, Dover, DE, 19904, USA
Pennsylvania
63 Burke Road, Cranberry Township, Butler County
PA 16066, USA
Timonium
CT Corp. 2405 York Road, Suite 201, Lutherville
Timoniun, MD 21093, USA
Utah
P.O. Box 6008, North Logan, UT 84341, USA
Phoenix
CT Corporation System, 3800 North Central Avenue,
Suite 460, Phoenix AZ 85012, USA
Africa, Asia, Australasia and Other Americas
Buenos Aires
Maipu 1300, 13th Floor, Buenos Aires, Argentina
Macquarie Park
Suite 1.01, Level 1, Building B, Pinnacle Office Park,
4 Drake Avenue, Macquarie Park, NSW 2113, Australia
São Paulo
Av. das Nações Unidas, 14171- 23º andar –
Torre C-Crystal, Vila Gertrudes, São Paulo,
CEP 043794-000, Brazil
Diadema
Avenida Fagundes de Oliveira, 538, Piraporinha,
Mbigucci Diadema Business Park, Module B21 and B22,
City of Diadema São Paulo CEP 09950-300 Brazil
Rio de Janeiro
Rua Francisco de Sousa e Melo, 1590, Galpao 3
Armazem 103 parte, Bairro Cordovil, Rio de Janeiro,
CEP 21010-900, Brazil
8 Group companies continued
254
Smith+Nephew Annual Report 2024
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 2024:
– 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)
Registered Office addresses
São José
Rua Dionizio Chinelato Nr. 100 – Complemento
Galpão 01 – Sala o1 CEP 12.238-578 Bairro – Eldorado,
Municipio São José dos Campos SP
Ontario
2280 Argentia Road, , Mississauga ON L5N 6H8, Canada
Chile
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
Chao Yang District,
Beijing
Room 17-021, Internal B17 floor, B3-24th floor, No 3
Xin Yuan South Rd, Chao Yang District, Beijing, China
Shunyi District,
Beijing
22 Linhe Avenue, Linhe Economic Development Zone,
Shunyi District, Beijing, 101300, China
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,
Dongshong Street Dong Cheng District, Beijing, China
Wu Hou District
No 5. 15th Floor, Unit 1, Building, 1 Li Bao Building,
No 62 North Ke Hua Rd, Wu Hou District,
Chengdu, China
Yue Xiu District
Room 2503, No 33, 6th Jian She Rd, Yue Xiu District,
Guang Zhou, China
Jing’an District
Unit 09, Nominal Level 12 (Actual Level 11), Central
Section of Bohua Square Office Tower, No. 669 Xinzha
Road, Jing’an District, Shanghai, China
Shanghai Xin Jin
Qiao Rd
Room 102, Floor 1, Building 3 (B1), No. 1599,
Xin Jin Qiao Road China (Shanghai) Pilot Free Trade Zone,
Shanghai, China
Suzhou City
12, Wuxiang Road, West Area of Comprehensive
Bonded Zone, Suzhou Industrial Park, Suzhou City, SIP,
Jiangsu Province, China
Riyadh
Business Gate Exit 8 Airport Road, Riyadh, Saudi Arabia
Riyadh 13244
7555- Muhammad AI Barwadi Qurtubah, Riyadh 2474-
13244, Unit Number 301, Kingdom of Saudi Arabia
Kechuang Dongliujie No. 98 Kechuang Dongliujie, Beijing Economic
and Technical Development Area, Beijing, China
Bogota
Calle 100 No. 7 – 33 to 1 P3, Bogota D.C., Colombia
Alajuela
Building B32, 50 meters South of Revisión Téchnica
Vehicular, Province de Alajuela, Canton Alajuela,
Coyol Free Zone, District San José, Costa Rica
Registered Office addresses
Willemstad
Pietermaai 15, PO Box 4905, Curaçao
Hong Kong
Unit 813 – 816, 8/F, Delta House, 3 On Yiu Street,
Shatin, New Territories, Hong Kong
Pune
Podium Floor Tower 4, World Trade Center S No1
Kharadi, Pune, Maharashtra-MH, 411014, India
Mumbai
501-B – 509-B Dynasty Business Park, Andheri Kurla
Road, Andheri East, Mumbai-59, Maharashtra, India
Tokyo
14th Floor, World Trade Center Building South Tower,
2-4-1 Hamamatsucho, Minato-ku, Tokyo, 105-5114,
Japan
Seoul
13th Floor, ASEM Tower, Gangnam-gu 13th Floor,
ASEM Tower, 159-1 Samsung-dong, Seoul, Korea
Kuala Lumpur
Level 25, Menara Hong Leong, NO. 6 Jalan Damanlela
Bukit Damansara Kuala Lumpur W.P. 50490
Kuala Lumpur, Malaysia
Mexico City
Av. Insurgentes Sur, numero 1602, Piso No.7, Oficina 702,
Colonia Credito, Constructor, Delegacion Benito Juarez,
C.P. 03940, Mexico
Auckland
621 Rosebank Road, Avondale, Auckland, 1026,
New Zealand
Manila
6/F Alfaro St, Salcedo Village, Makati City, Metro Manila,
Philippines
San Juan
Edificio Cesar Castillo, Calle Angel Buonomo #361,
Hato Rey, 00917, Puerto Rico
Singapore
29 Media Circle, #06-05, Alice@Mediapolis, Singapore,
138565, Singapore
Westville
30 The Boulevard, Westway Office Park, Westville,
3629, South Africa
Taipei
9F-2, No. 50, Sec. 1, Xinsheng South Road, Zhongzheng
District Taipei City 10059, Taiwan
Huai Khwang
District, Bangkok
16th Floor Building A, 9th Tower Grand Rama 9,
33/4 Rama 9 Road, Huai Khwang District, Bangkok,
10310, Thailand
Istanbul
Mahmutbey Mahallesi, 2538. Sokak, Kısık Plaza Apt.
No:6/Z1, Istanbul, Bağcılar, Turkey
Jebel Ali, Dubai
PO Box 16993 LB02016, Jebel Ali, Dubai,
United Arab Emirates
HealthCare City,
Dubai
Floor 1, Building 52, Dubai Healthcare City, Dubai,
United Arab Emirates
Ho Chi Minh City
Room 02, 18th floor, TNR building, 180-192, Nguyen
Cong Tru street, Nguyen Thai Binh Ward, District 1,
Ho Chi Minh City, Vietnam
Kfar Saba
17 Atir Yeda St, Kfar Saba, 4464313, Israel
255
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Other 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.
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.
Cybersecurity risk
management and
governance
Cyber-attacks are acknowledged to be a
growing threat across all industries. There is
likely to be an increased risk of information
security or cybersecurity incidents,
including cyber-attacks as a result of
increased global tensions. The Group has
adopted a holistic strategy which seeks
to protect our data, people, products,
and customers through a combination of
people, processes, and technology. We are
investing in additional technologies and
engage third-party expertise for added
support. Our dedicated cybersecurity team
is led by a CISSP-certified Chief Information
Security Officer (CISO) with over 25 years
of experience.
We manage the risk of evolving threats
through proactive measures and
continuous updates to our defences.
Our hybrid security strategy covers
potential entry points, including networks,
systems, applications, and devices, which
aims to ensure protection for the Group
and create a resilient defence against
cyber threats.
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
Group information
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.
Approximate area
(square feet 000s)
Group Head Office and surgical training facility in Watford, UK
60
Manufacturing and office facilities in Memphis, Tennessee, US
886
Wound management manufacturing, research and office facility in Hull, UK
473
Surgical training and office facilities in Memphis, Tennessee, US
292
Manufacturing facility in Suzhou, China
288
Manufacturing facility in Penang, Malaysia
250
Manufacturing facility in Alajuela, Costa Rica
243
Manufacturing facility in Oklahoma City, Oklahoma, US
155
Research & development and office facility in Austin, Texas, US
125
Manufacturing facility in Aarau, Switzerland
116
Logistics facility in Lawrenceville, US
115
Office facilities in Andover, Massachusetts, US
112
Manufacturing facility in Beijing, China
109
Manufacturing facility in Ft Worth, US
108
Manufacturing facility in Mansfield, Massachusetts, US
98
Research & development facility in Pittsburgh, Pennsylvania, US
65
Office facility in Sant Joan, Spain
50
Warehouse in Shanghai, China
48
Business services centre in Pune, India
46
Manufacturing, Office facilities and laboratory space in Kfar Saba, Israel
8
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 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.
256
Smith+Nephew Annual Report 2024
risk management processes, which
include assessment, documentation and
treatment, have been integrated into
our overall enterprise risk management
system. This is achieved through both
the top-down process driven by our
Executive Committee which have
identified Cybersecurity as one of our
principal risks as well as the bottom-up
IT risk register maintained by members
of the cybersecurity team (refer to page
79 for additional detail on the Group’s
risk management process). Further,
the cybersecurity function has defined
processes for handling information
security and cybersecurity incidents,
incorporating analysis and prioritisation
mechanisms aligned with enterprise risk
management. During an incident, the
information security team continuously
monitors and assesses the impact on
the organisation. Predefined thresholds
trigger the formation of a subcommittee,
bringing together a cross-functional
team which includes information
security, information technology, legal,
compliance and communications
expertise. This subcommittee manages the
assessment of materiality, invocation of
crisis management, Executive Committee
and Board engagement, and assessment of
requirements for regulatory notifications.
In the event of a major cybersecurity
incident, including those with a material
impact on the Group, the CISO, supported
by internal and/or external legal advisers
and other third-party specialist advisers as
appropriate, co-ordinates the engagement
on the cyber incident response with the
executive and crisis management teams.
The CISO is also a key member of the
crisis management team who supports
on co-ordinating and communicating with
the Board.
Recognising cybersecurity as a
multifaceted discipline, the Group
emphasises a continuous improvement
approach, measured via annual security
assessments, penetration testing,
vulnerability scanning and audits using
a dedicated 24x7 security platform
and monitoring through the internal
audit function.
The Group uses a wide variety of
information systems, programmes,
and technology to secure and manage
its business. The Group also develops
and sells digitally enabled products,
some of which connect to networks
and/or the internet. Layered security is
implemented to prevent, detect, and
respond to threats to minimise the risk
and disruption of intrusions. Access to
systems and services are protected using
multi-factor authentication over Virtual
Private Networks (VPN) connected back
into the Group network to safeguard
remote access.
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 on a 24x7 basis, by utilising
a dedicated service via a market-leading
third party, reducing the risk of supply
chain attacks.
The information and cybersecurity function
conducts an annual mandatory information
security awareness training programme
for Group employees, covering topics such
as physical security, email security, data
privacy, ransomware guidance, phishing
and general online safety.
While the Group strives for effective
governance and measures, there is no
assurance against future interruptions
that could potentially disrupt business
operations, divert staff resources and
attention and materially adversely
affect the organisation’s performance.
Throughout 2024, 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.
It is not possible to 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 260 ‘Risk Factors –
Cybersecurity’ in this Annual Report.
Risk factors
There are known and unknown risks and
uncertainties relating to Smith+Nephew’s
business. The factors listed on pages
257–264 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
conflicts in Ukraine and in the Middle
East, 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 and 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,
warehousing 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
and, 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, Red Sea and Suez Canal
disruption) could result in a further increase
in the Group’s costs of production and
distribution. We cannot guarantee that
third-party manufacturers or suppliers will
be able to meet our near-term or long-term
manufacturing or supply requirements
of certain raw materials, component
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parts and products, which could result
in lost sales and have an adverse effect
on our business. The rise in geopolitical
uncertainty over the past 12 months, with
elections being held in many key markets
including the US and UK, and the increased
potential for significant changes in trade
policy, sanctions and countersanctions,
tariffs, import and export controls, in
addition to those flowing from geopolitical
events such as the conflicts in Ukraine and
the Middle East, 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. The increase in
regulation in the area of Environmental,
Social and Governance (ESG) matters
in many markets in which the Group
operates, including the preparation
for compliance with the reporting
requirements of the Corporate
Sustainability Reporting Directive (CSRD)
may also require suppliers to expend
additional resource in their business and
incur additional costs to provide required
data sets and implement additional policies
and procedures which could increase
the supplier’s cost of doing business and
subject the supplier to fines, penalties
and operational disruption for failure to
comply with applicable laws, regulations
and reporting 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,
or to grow at a slower rate than demand
for healthcare services. 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 ongoing continuous
improvements in Operations and
Commercial excellence, 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.
In addition, the transition or interaction
of the Group’s systems with third-party
supplier systems or the information
held by the supplier may be subject to
cybersecurity or privacy breach or attack
which may negatively impact the Group’s
financial performance and reputation.
Failure to effectively manage these
risks and execute on these programmes
may negatively impact the Group’s
performance, revenue and operating profit.
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 continues to be exposed to
fluctuations in salary and wage costs for
its employees and contractors due to
increased costs of living, market forces
and the impact of inflation in the markets
in which it operates. 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 completed the elements within
the control of the Group 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). However, there continue
to be significant capacity constraints in
terms of the responses to be provided by
notified bodies and other third parties to
enable compliance with 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.
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 failure
to implement appropriate sales and
operational planning and forecasting and
inadequate supply chain or manufacturing
capacity to support customer demand
and growth. Failure to appropriately
rightsize manufacturing capacity based on
forecasting failure and inaccuracy could
lead to unnecessary increases in inventory
levels and resultant costs for the business,
having a negative impact on Group
operating profit.
Widespread outbreaks of infectious
diseases or pandemics and related
restrictions on society and the operation of
the Group’s business, could have a negative
impact on the Group’s revenue, profit and
outlook. 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.
Risk factors continued
Other information continued
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Smith+Nephew Annual Report 2024
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 deliver on customer requirements
due to inadequate commercial execution
may result in loss of market share and
impact the financial performance and
reputation of the Company. Failure to
leverage the advantages of cross-business
unit selling within the existing or new
customer base and institutions, 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.
Failure to execute on Group strategy to
the satisfaction of the Group’s investors
could result in investor divestment of stock
and failure to obtain new investment.
Failure to deliver value creation in line with
shareholder expectations may also result
in additional shareholder pressure on the
Board and Executive Management to make
fundamental changes to the structure and
strategic focus of the organisation.
The Group’s business requires continuous
improvement and depends on its ability to
execute business change programmes at
pace and to transition successfully from
the 12-Point Plan initiatives to business-
as-usual activities retaining strong
governance, KPIs and metrics in order
to hold management and employees to
account. 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. Failure to pivot in the event
of any significant in-market changes
in competitor activity or necessary
changes to our business model, whether
due to public policy, legal or regulatory
requirements or other factors, could have
a negative impact on the Group’s financial
performance and reputation.
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 due to
the size and scale of their businesses.
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. Failure to differentiate
the Group’s product and service offerings
within each relevant market, and failure to
address and manage challenges related to
the size and scale of the Company could
impact the financial performance and
reputation of the Group.
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
We seek to maintain ethical working
relationships with respected physicians
and medical personnel in healthcare
organisations, such as hospitals and
universities, who assist in product R&D.
We rely on these professionals to assist
us in the development and improvement
of proprietary products. If we are unable
to maintain these relationships due to
regulatory considerations, hospital access
restrictions for non-patients or for other
reasons, our ability to develop, market and
sell new and improved products could be
adversely affected.
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 operating profit.
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
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
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gain share which can negatively impact
Group revenues and operating profit.
The Group is increasingly exposed to
changes in reimbursement policy, tax
policy and pricing, in large part 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.
The rise in geopolitical uncertainty over the
past 12 months, with elections being held
in many key markets, including the US and
UK, the political and trade relationships
between global powers and the increased
potential for significant changes in public
policy, and trade policy including tariffs,
import and export controls, could result
in a significant negative impact on pricing
and reimbursement and the financial
performance of the Group.
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
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 demand,
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.
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
Risk factors continued
Other information continued
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Smith+Nephew Annual Report 2024
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. Geopolitical instability may
lead to an increase in sophistication of bad
actors/threat profile. The Group’s systems
have been and will continue to be the target
of such threats, including as a result of
remote working. Inadequate consideration
of cybersecurity in the design of new
products, systems and/or processes would
increase the potential for vulnerabilities.
There is increasing government focus
on cybersecurity including changes in
the regulatory environment which may
lead to increased enforcement and
reporting obligations. Increasing demand
for cybersecurity expertise could impact
the Group’s ability to attract and retain
cybersecurity talent.
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 fraud, 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. In this regard, the Group
is investigating allegations of possible
violations of anti-corruption laws, including
in India, and responding to related requests
for information from the United States
Securities and Exchange Commission (SEC).
It is not possible to predict the nature,
scope (or possible involvement of other
governmental authorities), or outcome of
the investigations, including the extent
to which, if at all, this could result in any
liability to the Group.
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 regarding the handling of
personal information. The complexity
of legal, regulatory, risk and governance
issues associated with the use and
implementation of artificial intelligence
(AI) technologies being developed at
pace, together with the likely increase
in regulation of AI technologies poses
additional legal, compliance and regulatory
challenges for the Group to navigate.
As privacy and AI continue to be a focus
for regulators and consumers particularly
in respect of health information and
healthcare technologies, new and
enhanced privacy and AI laws and
regulations and enforcement frameworks
continue to develop globally.
Increase in geopolitical tensions and events
such as conflict in Ukraine and the Middle
East have led to an increase in sanctions
and trade compliance programmes
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 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
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future, or that the Group will be able to
resolve such claims within insurance limits.
As at 31 December 2024, a provision of
$113m 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. 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 operating profit 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 conflicts
in Ukraine and the Middle East 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 government’s
approach to trade policy, tariffs, 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,
tariffs, import quotas, taxation or other
matters could adversely affect the Group’s
revenue and operating profit.
Conflict such as in Ukraine and the Middle
East, 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.
Financial Markets
The Group has financial indebtedness
which could reduce business flexibility.
Deterioration of business performance or
global economic conditions could restrict
access to adequate debt funding and/
or cause a deterioration in credit rating.
This could also increase the cost of funding
and reduce access to liquidity.
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 207) and
US tax reform proposals. These external
factors may require the Group to adjust its
operating model.
Financial markets
Failure to maintain strong investment
grade ratings would adversely affect
the Group’s cost of funding and could
adversely affect liquidity and access to
capital markets.
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
Risk factors continued
Other information continued
262
Smith+Nephew Annual Report 2024
products be authorised or registered prior
to manufacture, marketing or sale and
that such authorisation or registration
be subsequently maintained. The trend
in increased regulation of AI in respect
of products, data and business more
broadly will require additional time,
resource, skills and expertise in order to
navigate successfully.
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 EU Medical Devices Regulation
(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 and
coverage decisions 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. The Group typically has access
to the investment grade funding market,
however this can become restricted from
time to time, for example during periods
of financial crisis. The Group’s credit rating
could be downgraded if the business
underperforms or increases leverage from
capital allocation decisions such as M&A
investments. This in turn could reduce
access to debt funding. Cash and short-
term investments could reduce in value
in the event of an insolvency of a financial
counterparty. As a result, the Group
could fail 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.
Failure to ensure effective transfer
of knowledge and orderly transitions
involving exiting employees could result
in a negative impact on our business
and the Group’s ability to execute on
strategy. 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.
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. Implementation of
environmental goals, initiatives and
regulatory and reporting compliance
requires increasing levels of investment
and may depend on third-party
performance or data that is often difficult
to obtain, or is outside the control of
the organisation. Further, the Group will
be exposed to the physical impacts of
climate change, which may impact the
263
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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 differing focus levels 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 in the global markets in which
it operates. 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
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 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 operating profit 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 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 223.
Artificial intelligence technologies
The Group has an enterprise strategy
for the use and deployment of AI which
is outlined on page 31. The regulatory
landscape for AI is rapidly evolving, and
various governments are exploring or
implementing frameworks to govern the
development, deployment, and use of
AI. Our AI Governance Group monitors
regulations and guidance for changes
to the regulatory landscape that may
be imposed on AI systems. We may
need to make material changes to our
technology, development or deployment
strategies to align to the developing
regulatory environment. Compliance with
AI regulations may be costly and could
significantly impact our operations,
financial condition, or our ability to offer
AI-driven products and services.
Our AI technologies rely on large volumes
of data, which must be accurate, current,
and free of biases to yield reliable results.
If our data is insufficient, outdated, or
biased, it could lead to unreliable outputs,
loss of customer trust, and potential
regulatory scrutiny. We may be subject
to liability if our AI tools inadvertently
yield biased results or impact certain
groups disparately, leading to legal and
reputational risks.
AI development and deployment
involves handling vast amounts of data,
including potentially sensitive or personal
information. Cyber-attacks, data breaches,
or accidental exposure of data could result
in substantial harm to our customers and
business, as well as regulatory penalties.
Non-compliance with data protection
laws, such as the General Data Protection
Regulation (GDPR) and the California
Consumer Privacy Act (CCPA), may
expose us to significant fines and legal
consequences, especially as we scale AI-
related activities.
As AI becomes more integral to our
business, the potential for unexpected
outcomes, including unintended or harmful
consequences, increases. For example,
erroneous predictions or recommendations
made by our AI systems could negatively
impact our clients or end-users. These risks
could result in litigation, reputational harm
and liability, particularly if such outcomes
are deemed preventable or foreseeable.
AI is an intensely competitive field with
rapid innovation and technological
advancements. Protecting any AI-related
intellectual property will be challenging,
as new developments may quickly
render existing protections obsolete.
Competitors may also develop similar
or superior AI capabilities, impacting our
market position and revenue.
The effective development and
deployment of AI requires skilled personnel
and infrastructure investment. An inability
to attract or retain qualified individuals
could hinder our ability to innovate or scale
our AI efforts. Additionally, failures in AI
infrastructure or operational shortcomings
could disrupt business functions, impair
performance and damage our competitive
standing, leading to both financial and
reputational risk and harm.
These risk factors are inherently uncertain,
and the potential impacts outlined above
may vary based on future technological
developments, regulatory actions, and
market conditions. There is no guarantee
that our AI-related initiatives will be
successful or that we will be able to
mitigate the risks associated with AI
technologies effectively.
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 R&D through the use of AI.
Investor perception of, or the actual 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 business unit
reviews on pages 39–50, the Financial
review on pages 20–27 and the Taxation
information for shareholders on pages
274–276.
Risk factors continued
Other information continued
264
Smith+Nephew Annual Report 2024
Non-IFRS financial information – adjusted measures
The annual report includes financial measures that are not prepared in accordance with International Financial Reporting Standards
(IFRS). This additional information presented is not uniformly defined by all companies including those in the Group’s industry.
Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain
information presented is derived from amounts calculated in accordance with IFRS but is not itself a measure defined under IFRS.
Such measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure. The non-IFRS measures
discussed in this document are set out below.
Performance measures
Non-IFRS
measure
Purpose
Definition
Closest
equivalent
IFRS
measure
Reconciled on
Underlying
revenue
growth
Underlying revenue growth is used
to compare revenue in a given year
to the previous year on a like-for-
like basis. This measure is used
by both management and the
investor community.
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’.
The ‘constant currency exchange effect’ is a measure of the increase/decrease
in revenue resulting from currency movements on non-US Dollar sales and is
measured as the difference between: 1) the increase/decrease in the current
year revenue translated into US Dollars at the current year average exchange rate
and the prior year revenue translated at the prior year rate; and 2) the increase/
decrease being measured by translating current and prior year revenues into US
Dollars using the 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.
Revenue
growth
267
Trading
profit
Trading profit is used in conjunction
with operating profit to assess
the performance and profitability
of the Group. It is a key internal
and external metric used by
the investor community to
assess our performance. It is our
segment performance measure
in accordance with IFRS 8
Operating Segments.
Trading profit is operating profit excluding the impact of acquisition and disposal
related items arising in connection with business combinations, including
amortisation of acquisition intangible assets, impairments and integration costs;
restructuring events; and gains and losses resulting from legal disputes and
uninsured losses. In addition to these items, gains and losses that materially impact
the Group’s profitability on a short-term or one-off basis are excluded.
Operating
profit
269
Trading
profit
margin
This measure is used to assess the
performance and profitability of the
Group. It is a key external metric
used by the investor community to
assess our performance.
Trading profit margin is trading profit divided by revenue.
Operating
profit
margin
268
Trading
profit
before
tax
Trading profit before tax is used in
conjunction with profit before tax to
assess performance and profitability
of the Group. This measure is
intended to enable the users to
assess the performance of the Group
by excluding items that impact the
short-term profitability of the Group.
Trading profit before tax is profit before tax excluding impact of acquisition and
disposal related items arising in connection with business combinations, including
amortisation of acquisition intangible assets, impairments and integration costs;
restructuring events; and gains and losses resulting from legal disputes and
uninsured losses. In addition to these items, gains and losses that materially impact
the Group’s profitability on a short-term or one-off basis are excluded.
Profit
before tax
268
Trading
taxation
Trading taxation is used in
conjunction with taxation to assess
taxation that corresponds to trading
profit before tax. This metric is
used by both management and the
investor community.
Trading taxation is taxation excluding the impact of acquisition and disposal
related items arising in connection with business combinations, including
amortisation of acquisition intangible assets, impairments and integration costs;
restructuring events; and gains and losses resulting from legal disputes and
uninsured losses. In addition to these items, gains and losses that materially impact
the Group’s profitability on a short-term or one-off basis are excluded.
Taxation
268
Trading
attributable
profit
This metric is used in the
calculation of adjusted earnings
per share.
Trading attributable profit is attributable profit excluding the impact of acquisition
and disposal related items arising in connection with business combinations,
including amortisation of acquisition intangible assets, impairments and integration
costs; restructuring events; and gains and losses resulting from legal disputes and
uninsured losses. In addition to these items, gains and losses that materially impact
the Group’s profitability on a short-term or one-off basis are excluded.
Attributable
profit
268
265
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Non-IFRS financial information – adjusted measures continued
Other information continued
Other measures
Non-IFRS
measure
Purpose
Definition
Closest
equivalent
IFRS
measure
Reconciled on
Free cash
flow
Free cash flow is a measure of
the cash generated for the Group
to use after capital expenditure
according to its Capital Allocation
Framework. This metric is used
by both management and
investor community.
Free cash flow is cash generated from operations less capital expenditure,
payment of lease liabilities and cash flows from interest and income taxes.
Cash
generated
from
operations
269
Adjusted
EBITDA
Adjusted EBITDA is used in
the calculation of adjusted
leverage ratio.
Adjusted EBITDA is attributable profit excluding taxation, share of results of
associates, other finance costs, interest expense, interest income, acquisition
and disposal related items, restructuring and rationalisation costs, amortisation
and impairment of acquisition intangibles, legal and other costs, depreciation and
impairment of property, plant and equipment and amortisation and impairment of
other intangible assets.
Attributable
Profit
270
Adjusted
leverage
ratio
Adjusted leverage ratio is used
in the calculation relating to
debt covenants.
We calculate adjusted leverage ratio by dividing net debt by adjusted EBITDA.
Net debt is defined as total borrowings less cash and cash equivalents in the
statement of financial position. Total borrowings include bank overdrafts,
borrowings, loans and lease liabilities and long-term borrowings and
lease liabilities.
Leverage
ratio
(using IFRS
measures)
270
Adjusted
return on
invested
capital
(‘Adjusted
ROIC’)
Adjusted ROIC is a metric used
by investor community and 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. Adjusted ROIC is a
key performance measure under
the Performance Share Program.
Adjusted 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).
Return on
invested
capital
(‘ROIC’)
(using IFRS
measures)
271
Performance measures continued
Non-IFRS
measure
Purpose
Definition
Closest
equivalent
IFRS
measure
Reconciled on
Adjusted
earnings per
share (EPSA)
EPSA is a trend measure. The Group
presents this measure to assist
investors in their understanding
of trends.
Adjusted earnings per share is trading attributable profit divided by the
weighted average number of shares outstanding. This is the same denominator
used when calculating basic earnings per share.
Basic
earnings
per share
268
Trading
cash flow
Trading cash flow is used in
conjunction with cash generated
from operations to assess the
conversion of trading profit into
cash. It is key external metric used
by the investor community and
is a key performance measure
for management.
Trading cash flow is cash generated from operations excluding the impact
of acquisition and disposal related items arising in connection with business
combinations, including 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 cash flows on a
short-term or one-off basis are excluded. Trading cash flow includes payment
of capital element of lease liabilities and capital expenditure as presented in
the Group cash flow statement.
Cash
generated
from
operations
268
Trading cash
conversion
This measure is used to assess the
conversion of trading profit into
cash. It is a key external metric
used by the investor community
and is a key performance measure
for management.
Trading cash conversion is trading cash flow divided by trading profit.
Cash
generated
from
operations
268
266
Smith+Nephew Annual Report 2024
Reported revenue growth, the most directly comparable financial measure calculated in accordance with IFRS, reconciles to underlying
revenue growth as follows:
Reconciling items
2024
Reported growth
Underlying growth
Acquisitions/
disposals
Currency impact
Consolidated revenue by business unit
%
%
%
%
Knee Implants
0.7
1.3
–
(0.6)
Hip Implants
3.2
4.0
–
(0.8)
Other Reconstruction
18.2
18.5
–
(0.3)
Trauma & Extremities
7.9
8.1
–
(0.2)
Orthopaedics
4.1
4.6
–
(0.5)
Sports Medicine Joint Repair
4.0
4.8
–
(0.8)
Arthroscopic Enabling Technologies
7.4
8.2
–
(0.8)
ENT (Ear, Nose and Throat)
6.9
7.3
–
(0.4)
Sports Medicine & ENT
5.5
6.2
–
(0.7)
Advanced Wound Care
1.4
2.0
–
(0.6)
Advanced Wound Bioactives
5.1
5.1
–
–
Advanced Wound Devices
11.5
12.2
–
(0.7)
Advanced Wound Management
4.7
5.1
–
(0.4)
Total
4.7
5.3
–
(0.6)
Reconciling items
2023
Reported growth
Underlying growth
Acquisitions/
disposals
Currency impact
Consolidated revenue by business unit
%
%
%
%
Knee Implants
4.7
5.5
–
(0.8)
Hip Implants
2.5
3.8
–
(1.3)
Other Reconstruction
27.8
28.0
–
(0.2)
Trauma & Extremities
3.7
4.4
–
(0.7)
Orthopaedics
4.8
5.7
–
(0.9)
Sports Medicine Joint Repair
8.7
9.9
–
(1.2)
Arthroscopic Enabling Technologies
3.7
4.7
–
(1.0)
ENT (Ear, Nose and Throat)
28.1
29.8
–
(1.7)
Sports Medicine & ENT
8.8
10.0
–
(1.2)
Advanced Wound Care
1.8
2.1
–
(0.3)
Advanced Wound Bioactives
6.3
6.2
–
0.1
Advanced Wound Devices
17.0
17.6
–
(0.6)
Advanced Wound Management
6.2
6.4
–
(0.2)
Total
6.4
7.2
–
(0.8)
267
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Non-IFRS financial information – adjusted measures continued
Other information continued
Operating
Profit before
Attributable
Cash generated
Earnings
profit1
tax2
Taxation3
profit4
from operations5
per share6
$ million
$ million
$ million
$ million
$ million
¢
2024 Reported
657
498
(86)
412
1,245
47.2
Acquisition and disposal related items8
94
106
(9)
97
3
11.2
Restructuring and rationalisation costs
123
123
(29)
94
151
10.8
Amortisation and impairment of acquisition intangibles8
187
187
(42)
145
–
16.6
Legal and other 7,8
(12)
(6)
(7)
(13)
36
(1.5)
Lease liability payments
–
–
–
–
(55)
–
Capital expenditure
–
–
–
–
(381)
–
2024 Non-IFRS*
1,049
908
(173)
735
999
84.3
* These Non-IFRS measures are defined on pages 265 and 266.
Acquisition and disposal-related items: For the year ended 31 December 2024, costs primarily relate to impairment of BHR goodwill,
disposal of certain products and integration costs relating to integration of CartiHeal. Trading profit before tax additionally excludes
losses related to the Group’s shareholding in Bioventus. This primarily includes the Group’s share of loss recognised by Bioventus in its
financial statements.
Restructuring and rationalisation costs: For the year ended 31 December 2024, these costs include efficiency and productivity elements
of the 12-Point Plan to the Operations and Commercial Excellence programme. These costs primarily consist of severance, asset write-
offs and integration and dual running costs.
Amortisation and impairment of acquisition intangibles: For the year ended 31 December 2024, charges related to the amortisation and
impairment of intangible assets acquired in material business combinations.
Legal and other: For the year ended 31 December 2024, the credit mainly relates to a $28m reduction in the provision for ongoing metal-
on-metal hip claims as a result of decrease in the present value of the estimated costs to resolve all known and anticipated metal-on-
metal hip claims, partially offset by legal expenses for ongoing metal-on-metal hip claims and costs of implementing the requirements
of the EU Medical Device Regulation that was effective from May 2021 with a transition period to May 2024. Trading profit before tax
additionally excludes $6m of finance costs for the unwind of discount relating to the provision for metal-on-metal hip claims.
Lease liability payments and capital expenditure: For the year ended 31 December 2024, trading cash flow includes payment of capital
element of lease liabilities and capital expenditure as presented in the Group cash flow statement.
Operating
Profit before
Attributable
Cash generated
Earnings
profit1
tax2
Taxation3
profit4
from operations5
per share6
$ million
$ million
$ million
$ million
$ million
¢
2023 Reported
425
290
(27)
263
829
30.2
Acquisition and disposal related items8
60
78
(14)
64
16
7.3
Restructuring and rationalisation costs
220
223
(42)
181
124
20.7
Amortisation and impairment of acquisition
intangibles8
207
207
(45)
162
–
18.6
Legal and other 7,8
58
64
(12)
52
145
6.0
Lease liability payments
–
–
–
–
(52)
–
Capital expenditure
–
–
–
–
(427)
–
2023 Non-IFRS*
970
862
(140)
722
635
82.8
* These Non-IFRS measures are defined on pages 265 and 266.
268
Smith+Nephew Annual Report 2024
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. Trading 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. These costs primarily relate to severance, business advisory services, asset write-offs, contractual terminations and
integration and dual running costs. Trading 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.
Lease liability payments and capital expenditure: For the year ended 31 December 2023, trading cash flow includes payment of capital
element of lease liabilities and capital expenditure as presented in the Group cash flow statement.
1 Represents a reconciliation of operating profit to trading profit.
2 Represents a reconciliation of reported profit before tax to trading profit before tax.
3 Represents a reconciliation of reported tax to trading tax.
4 Represents a reconciliation of reported attributable profit to trading attributable profit.
5 Represents a reconciliation of cash generated from operations to trading cash flow.
6 Represents a reconciliation of basic earnings per ordinary share to adjusted earnings per share (EPSA).
7 The ongoing funding of defined benefit pension schemes that are closed to future accrual is not included in management’s definition of trading cash flow as there is no defined benefit service
cost for these schemes.
8 During 2024, the Group announced its intention to close the Warwick manufacturing site that manufactures Birmingham Hip Resurfacing (BHR) products. As a result, a total of $68m of BHR
assets and liabilities were written off, which mainly includes goodwill of $63m (included in acquisition and disposal-related items). 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
A reconciliation from cash generated from operations, the most comparable IFRS measure, to free cash flow is set out below:
2024
2023
2022
$ million
$ million
$ million
Cash generated from operations1
1,245
829
581
Capital expenditure
(381)
(427)
(358)
Interest received
22
8
7
Interest paid
(140)
(104)
(73)
Payment of lease liabilities
(55)
(52)
(54)
Income taxes paid
(140)
(125)
(47)
Free cash flow
551
129
56
1 See Group cash flow statement on page 194.
269
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Non-IFRS financial information – adjusted measures continued
Other information continued
Adjusted Leverage ratio
The calculation of the adjusted leverage ratio and leverage ratio is set out below. Adjusted leverage ratio is calculated using metrics
similar to those used in the debt covenant calculation.
2024
2023
$ million
$ million
Net debt including lease liabilities
2,709
2,776
Attributable profit
412
263
Taxation
86
27
Share of results of associates
10
30
Other finance costs
28
7
Interest expense
145
132
Interest income
(24)
(34)
Acquisition and disposal-related items
94
60
Restructuring and rationalisation costs
123
220
Amortisation and impairment of acquisition intangibles
187
207
Legal and other
(12)
58
Depreciation of property, plant and equipment
325
306
Impairment and amortisation of other intangible assets and impairment of property, plant and
equipment
67
51
Adjusted EBITDA
1,441
1,327
Adjusted leverage ratio
1.9
2.1
Leverage ratio (using closest equivalent IFRS measures)
The Leverage ratio using closest equivalent IFRS measures is not based on measures used in the calculation of debt covenants and is not
used by management internally. This measure is not used for the Company’s covenant in its private placement debt.
2024
2023
$ million
$ million
Bank overdrafts, borrowings, loans and lease liabilities
63
765
Long-term borrowings and lease liabilities
3,258
2,319
Total borrowings
3,321
3,084
Attributable profit
412
263
Leverage ratio
8.1
11.7
270
Smith+Nephew Annual Report 2024
Adjusted Return on invested capital
The calculation of Adjusted return on invested capital and is set out below:
2024
2023
2022
$ million
$ million
$ million
Attributable profit for the year
412
263
223
Share of results of associates
10
30
141
Other finance costs
28
7
8
Interest expense
145
132
80
Interest income
(24)
(34)
(14)
Amortisation and impairment of acquisition intangibles
187
207
205
Taxation adjustment1
(73)
(77)
(86)
Operating profit before amortisation and impairment of acquisition intangibles less adjusted taxes
685
528
557
Total equity
5,265
5,217
5,259
Accumulated amortisation and impairment of acquisition intangibles net of associated tax
1,470
1,365
1,175
Retirement benefit assets
(63)
(69)
(141)
Investments
(9)
(8)
(12)
Investments in associates
(7)
(16)
(46)
Right-of-use assets
(173)
(185)
(187)
Cash and cash equivalents
(619)
(302)
(350)
Long-term borrowings and lease liabilities
3,258
2,319
2,712
Retirement benefit obligations
79
88
70
Bank overdrafts, borrowings, loans and lease liabilities
63
765
160
Net operating assets
9,264
9,174
8,640
Average net operating assets2
9,219
8,907
8,424
Adjusted return on invested capital
7.4%
5.9%
6.6%
1 Being the taxation on amortisation and impairment of acquisition intangibles, interest income, interest expense, other finance costs and share of results of associates.
2 (Opening net operating assets + closing net operating assets)/2.
Return on invested capital (using closest equivalent IFRS measures)
The calculation of Return on invested capital using closest equivalent IFRS measures is set out below:
2024
2023
2022
$ million
$ million
$ million
Attributable profit
412
263
223
Long term borrowings and lease liabilities
3,258
2,319
2,712
Bank overdrafts, borrowings, loans and lease liabilities
63
765
160
Investments
(9)
(8)
(12)
Investments in associates
(7)
(16)
(46)
Retirement benefit assets
(63)
(69)
(141)
Retirement benefit obligations
79
88
70
Total Equity
5,265
5,217
5,259
Invested Capital at end of the year
8,586
8,296
8,002
Average Invested Capital for the year
8,441
8,149
8,328
Return on invested capital using IFRS measures
4.9%
3.2%
2.7%
271
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
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.
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.
Persons depositing or
withdrawing shares must pay
For
$5.00 (or less) per 100 ADSs
(or portion of 100 ADSs)
$0.05 (or less) per ADS
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
$0.05 (or less) per ADS per calendar year
Registration or transfer fees
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
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
As necessary
Any charges incurred by the depositary
or its agents for servicing the
deposited securities
As necessary
ADS payment information
Other information continued
272
Smith+Nephew Annual Report 2024
ADS payment information
The Company hereby discloses ADS
payment information for the year ended
31 December 2024 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.
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 2024, a fee of 1 US cent per ADS
was collected by J.P. Morgan Chase Bank
N.A. on the 2023 final dividend paid in May
2024 and a fee of 1.5 US cent per ADS was
collected on the 2024 interim dividend paid
in November. In the period 1 January 2024
to 13 February 2025, the total programme
payments made by J.P. Morgan Chase
Bank N.A. was $1,187,586.
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.
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 £500 per tax year are
tax free for UK income tax purposes and
dividends above £500 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. 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 2024
of 23.1 US cents per ordinary share, the
record date will be 28 March 2025 and
the payment date will be 28 May 2025.
The Sterling equivalent per ordinary share
will be set following the record date.
Years ended 31 December
2024
2023
2022
2021
2020
Pence per share:
Interim
11.10
11.89
12.91
10.50
11.07
Final
18.451
18.49
18.38
18.40
16.62
Total
29.55
30.38
31.29
28.90
27.69
US cents per share:
Interim
14.40
14.40
14.40
14.40
14.40
Final
23.10
23.10
23.10
23.10
23.10
Total
37.50
37.50
37.50
37.50
37.50
1 Translated at the Bank of England rate on 13 February 2025.
Dividends per share
273
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Shareholders may elect to receive their
dividend in either Sterling or US Dollars
and the last day for election will be
6 May 2025. The ordinary shares will trade
ex-dividend on both the London and New
York Stock Exchanges from 27 March 2025.
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 2024 of 37.5 US cents.
Shareholdings
As at 13 February 2025, to the knowledge
of the Group, there were 10,973 registered
holders of ordinary shares, of whom 87
had registered addresses in the US and
held a total of 159,471 ordinary shares
(0.02% 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 13 February 2025, 36,428,537 ADSs
equivalent to 72,857,074 ordinary shares
or approximately 8.3% of the total ordinary
shares in issue, were outstanding and
were held by 88 registered ADS holders.
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.
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 2024.
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.
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
tax purposes, US Holders holding ADSs
or ordinary shares as part of a hedging,
Shareholder information continued
Other information continued
274
Smith+Nephew Annual Report 2024
Dividends paid to certain non-corporate
US Holders of ordinary shares or ADSs
may be subject to US federal income tax
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
of a permanent establishment of an
enterprise situated in the UK.
The above discussion reflects current
UK tax law. The Finance Bill currently
proceeding through the UK Parliament
contains provisions affecting UK
inheritance tax from 6 April 2025 (which,
broadly, provide for the repeal of the
concepts of domicile and deemed domicile
and their replacement with a long-term
residence-based approach). US Holders
who may be impacted by these changes
should consult with their tax advisers
as necessary.
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
to HM Revenue & Customs and the
appropriate stamp duty paid.
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 an
enhanced rate of 1.5% of the consideration
(or, in some cases, the value of the shares
concerned) where ordinary shares are
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
275
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Securities and Exchange Commission (SEC).
The information in this document will be
updated and supplemented at the time
of filing with the SEC or later amended
if necessary.
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 283.
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.
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 13 February 2025,
the latest practicable date for this Annual
Report, the Bank of England rate was
US$1.2523 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 concluded their engagement as
our auditors with effect from 1 May 2024.
Deloitte LLP was appointed as the Group’s
auditors with effect from the same date.
The audit opinion provided by KPMG for
the financial year ended 31 December
2023 did not include an adverse opinion or
disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope
or accounting principles.
Insider trading policies
Our Board of Directors adopted insider
trading policies and procedures governing
the purchase, sale, and other dispositions
of our securities by directors, senior
management, and employees that
are reasonably designed to promote
compliance with applicable insider trading
laws, rules, and regulations, and any listing
standards applicable to the Group.
apply to certain capital raising or qualifying
listing arrangements. 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.
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
$5.8bn in 2024. 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
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 2024. 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
Shareholder information continued
Other information continued
276
Smith+Nephew Annual Report 2024
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
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:
global supply chain; 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 and loss of
reputation 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; talent management; 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; artificial
intelligence technologies and disruptor
products. Specific risks faced by the
Group are described under ‘Risk factors’
on pages 257–264 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.
Annual Reports 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
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Cross-reference to Form 20-F
The information in this document that is referenced in the following table will be included in our Annual Report on
Form 20-F for 2024 filed with the SEC (the ‘2024 Form 20-F’). The information in this document will be updated and
supplemented at the time of filing with the SEC or later amended if necessary. No other information in this document
is included in the 2024 Form 20-F or incorporated by reference into any filings by us under the Securities Act.
Part 1
Form 20-F caption
Location in this document
Page
Item 1
Identity of Directors, Senior Management and Advisers
Not applicable
–
Item 2
Offer Statistics and Expected Timetable
Not applicable
–
Item 3
Key Information
A – (Reserved)
Not applicable
–
B – Capitalisation and Indebtedness
Not applicable
–
C – Reason for the Offer and Use of Proceeds
Not applicable
–
D – Risk Factors
Risk factors
257–264
Item 4
Information on the Company
A – History and Development of the Company
Corporate Headquaters and Regional Office
277
Note 1 ‘Basis of preparation’
196
Group Information
256
About Smith+Nephew
276
Note 21 ‘Acquisitions’
245–246
Capital allocation framework
26–27
Note 7 ‘Property, plant and equipment’
210–211
Note 9 ‘Intangible assets
214–216
Note 15 ‘Cash and borrowings’
221–223
Documents on display
277
B – Business Overview
Smith+Nephew at a glance
2-5
Orthopaedics Segment
39, 41–42
Sports Medicine & ENT Segment
43, 45–46
Wound Segment
47, 49–50
Chair’s statement
6-9
Chief Executive Officer’s review
10–13
Leading positions in attractive markets
14–15
Our business model
16–17
Elevating the standard of care
28–35
Putting our customers first
36–50
Disaggregation of revenue
201
Seasonality
15
Source materials
34
2024 Principal Risks
83-93
Note 12 ‘Inventories’
218
Risk Factors
257–264
Accelerating Sports Medicine and AWM
11
Product availability
34
Our sales force
37
Note 3 ‘Operating profit’
203–204
Note 9 ‘Intangible assets
214–216
Engaging with our stakeholder
96–100
Compliance and Culture Committee Report
126–129
C – Organisational Structure
Note 8 ‘Group companies’
252–255
Group Information
256
D – Property, Plants and Equipment
Note 7 ‘Property, plant and equipment’
210–211
Group Information
256
Item 4A
Unresolved Staff Comments
None
–
Item 5
Operating and Financial Review and Prospects
A – Operating Results
Chair’s statement
6–9
Chief Executive Officer’s review
10–13
KPIs
18–19
Other information continued
278
Smith+Nephew Annual Report 2024
Part 1
Form 20-F caption
Location in this document
Page
A – Operating Results
Financial review
20–27
Research & Development
29–31
Orthopaedics Performance
40
Sports Medicine & ENT Performance
44
Advanced Would Management Performance
48
Group financial statements
192–247
B – Liquidity and Capital Resources
Liquidity and capital resources
26
Note 15 ‘Cash and borrowings’
221–223
Note 20 ‘Cash flow statement’
243–244
C – Research and Development, Patents and Licences, etc.
Chief Executive Officer’s review
10–13
Research & Development
29–31
Operating profit
203–204
New product innovation, design and development,
including intellectual property
260
D – Trend Information
Chief Executive Officer’s review
10–13
Delivering value for stakeholders
16–17
Outlook
27
Elevating the standard of care
28–35
Putting our customers first
36–50
Risk factors
257–264
E – Critical Accounting Estimates
Note 1.2 ‘Critical judgements and estimates’
197
Item 6
Directors, Senior Management and Employees
A – Directors and Senior Management
Board of Directors
104–107
Executive Committee
108–109
B – Compensation
Remuneration Committee Report
136–173
Retirement benefit obligations
233–240
C – Board Practices
Board of Directors
104–107
Corporate Governance
110–173
D – Employees
Diversity at Smith+Nephew
62
Our People
97
Note 3.1 ‘Staff costs and employee numbers’
205
An ethical employer
63
E – Share Ownership
Share Capital
174–176
Note 6 ‘Earnings per ordinary share’
209
Directors’ interests in ordinary shares
163–165
Note 19 ‘Equity’
240–242
Note 22.1 ‘Share-based payments’
247
Performances Share Plan
159–163
Shareholder information
272–277
F – Disclosure of a Registrant’s Action to Recover Erroneously
Awarded Compensation
Not applicable
–
Item 7
Major Shareholders and Related Party Transactions
A – Major Shareholders
Major Shareholders
176
Shareholder information
272–277
B – Related Party Transactions
Note 22.2 ‘Related party transactions’
247
C – Interests of Experts and Counsel
Not applicable
–
Item 8
Financial Information
A – Consolidated Statements and Other Financial Information
Statement of Directors’ responsibilities in respect of
the Annual Report and Financial Statements
179
Independent auditor’s report to the members of
Smith & Nephew Plc
180–191
Group financial statements
192–247
Legal Proceedings
Note 17.3 ‘Legal proceedings’
232
Dividends
Shareholder information
272–277
Item 9
The Offer and Listing
A – Offer and Listing Details
UK Corporate Governance Code 2018 (“the Code”):
2024 Statement of Compliance
103
Share Capital
174–176
Business overview and Group history
256
Shareholder information
272–277
279
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Part 1
Form 20-F caption
Location in this document
Page
B – Plan of Distribution
Not applicable
–
C – Markets
UK Corporate Governance Code 2018 (“the Code”):
2024 Statement of Compliance
103
Share Capital
174–176
Business overview and Group history
256
Shareholder information
272–277
D – Selling Shareholders
Not applicable
–
E – Dilution
Not applicable
–
F – Expenses of the Issue
Not applicable
–
Item 10
Additional Information
A – Share Capital
Not applicable
–
B – Memorandum and Articles of Association
Articles of Association
174
C – Material Contracts
Not applicable
–
D – Exchange Controls
Exchange controls and other limitations affecting
security holders
274
E – Taxation
Taxation information for shareholders
272–276
F – Dividends and Paying Agents
Not applicable
–
G – Statement by Experts
Not applicable
–
H – Documents on Display
Documents on display
277
I – Subsidiary Information
Group companies
252–255
J - Annual report to security holders
Annual report to security holders
To be filed as
exhibit to Form 6-K
Item 11
Quantitative and Qualitative Disclosure about Market Risk
Note 16 ‘Financial instruments and
risk management’
224–230
Item 12
Description of Securities other than Equity Securities
A – Debt Securities
Not applicable
–
B – Warrants and Rights
Not applicable
–
C – Other Securities
Not applicable
–
D – American Depositary Shares
Shareholder information
272–277
Part 2
Form 20-F caption
Location in this document
Page
Item 13
Defaults, Dividend Arrearages and Delinquencies
Not applicable
–
Item 14
Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable
–
Item 15
Controls and Procedures
Risk report
78–82
Audit Committee Report
130–135
Independent auditor’s report to the members of
Smith & Nephew Plc
180–191
Item 16
(Reserved)
Not applicable
–
A – Audit Committee Financial Expert
How we assess our prospects
94–95
Committee meetings
131
B – Code of Ethics
Code of Ethics for Senior Financial Officers
135
C – Principal Accountant Fees and Services
Non-audit fees paid to the auditor
134
Audit fees paid to the auditor
134
Note 3.2 ‘Audit Fees – information about the nature
and cost of services provided by the auditor’
205
D – Exemptions from the Listing Standards for Audit Committees
Not applicable
–
E – Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Major Shareholdings
176
Purchase of ordinary shares on behalf of
the Company
176
F – Change in Registrant’s Certifying Accountant
Change in auditor
276
G – Corporate Governance
Governance at a glance
102–103
H – Mine Safety Disclosure
Not applicable
–
I – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
–
J – Insider Trading Policies
Insider trading
276
K – Cybersecurity
Cybersecurity risk management and governance
256–257
Part 3
Form 20-F caption
Location in this document
Page
Item 17
Financial Statements
Not applicable
–
Item 18
Financial Statements
Group Financial Statements
192–247
Item 19
Exhibits
Cross-reference to Form 20-F continued
Other information continued
280
Smith+Nephew Annual Report 2024
SASB reporting
Topic
Metric
2024 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.
Not reported.
HC-MS-240a.1
Description of how price information
for each product is disclosed to
customers or to their agents.
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.
HC-MS-240a.2
Product safety
Number of recalls issued, total
units recalled.
In 2024, Smith+Nephew reported 10
recalls globally: 0 class I and 10 Class II.
A total of 21,822 units were impacted
globally. All impacted products were
either removed from the market or
corrected per the applicable regulations
and/or standards.
HC-MS-250a.1
List of products listed in the
FDA’s MedWatch Safety
Alerts for Human Medical
Products database.
Smith+Nephew reports all
data as required by FDA.
The MedWatch database is available at
https://www.fda.gov/safety/medwatch-
fda-safety-information-and-adverse-
event-reporting-program
HC-MS-250a.2
Number of fatalities related to
products as reported in the FDA
Manufacturer and User Facility
Device Experience (MAUDE).
Smith+Nephew reports all
data as required by FDA.
The FDA MAUDE database is available at
https://www.accessdata.fda.gov/scripts/
cdrh/cfdocs/cfmaude/search.cfm
HC-MS-250a.3
Number of FDA enforcement
actions taken in response to
violations of current Good
Manufacturing Practices (cGMP),
by type.
In 2024, Smith+Nephew received:
– 0 Form 483 (0 observations in total).
– 0 Warning letters.
– 0 Seizures.
– 0 Recalls (FDA reportable events).
– 0 Consent decrees.
HC-MS-250a.4
Ethical
marketing
Description of code of ethics
governing promotion of off-label use
of products.
See the Product Promotion and
Scientific Disclosures section of
our Code of Conduct and Business
Principles (Compliance (smith-nephew.
com)) and the Business Ethics section
of our Sustainability Report for
additional information.
HC-MS-270a.2
281
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STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Topic
Metric
2024 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.
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.
HC-MS-410a.1
Total amount of products accepted
for takeback and reused, recycled, or
donated, broken down by: (1) devices
and equipment and (2) supplies.
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.
HC-MS-410a.2
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.
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
ISO 13485. Additionally, all Tier 1 material
suppliers are compliant with ISO 13485.
HC-MS-430a.1
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.
HC-MS-430a.2
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 78 and our
Conflict Minerals Disclosure Report on our
website (www.smith-nephew.com) for
additional information.
HC-MS-430a.3
Business ethics
Total amount of monetary losses as a
result of legal proceedings associated
with bribery or corruption.
In 2024, 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 health
care 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 Business Ethics
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
2024 Sustainability Report at www.smith-nephew.com/sustainability
SASB reporting continued
Other information continued
282
Smith+Nephew Annual Report 2024
Term
Meaning
ADR
In the US, the Company’s ordinary shares are traded in the
form of American Depositary Shares evidenced by American
Depositary Receipts (ADRs).
ADS
In the US, the Company’s ordinary shares are traded in the
form of American Depositary Shares (ADSs).
Arthroscopic
Enabling
Technologies
(AET)
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.
Advanced
Wound
Bioactives (AWB)
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.
Advanced
Wound Care
(AWC)
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.
Advanced
Wound Devices
(AWD)
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.
AGM
Annual General Meeting of the Company.
Arthroscopy
Endoscopy of the joints is termed ‘arthroscopy’, with the
principal applications including the knee and shoulder.
ASC
Ambulatory Surgery Center.
Basis Point
One hundredth of one percentage point.
Chronic
wounds
Chronic wounds are those with long or unknown healing times
including leg ulcers, pressure sores and diabetic foot ulcers.
Company
Smith & Nephew plc or, where appropriate, the Company’s
Board of Directors, unless the context otherwise requires.
Companies
Act
Companies Act 2006, as amended, of England and Wales.
Emerging
Markets
Emerging Markets include Latin America, Asia (excluding
Japan), Middle East, Africa and Russia.
EPSA
Adjusted earnings per ordinary share as defined on page 268.
Endoscopy
Through a small incision, surgeons are able to see inside
the body using a monitor and identify and repair defects.
ENT
Ear, Nose and Throat.
Established
Markets
Established Markets are United States of America, Europe,
Australia, New Zealand, Canada and Japan.
Euro or €
References to the common currency used in the majority
of the countries of the European Union.
FDA
US Food and Drug Administration.
Financial
statements
Refers to the consolidated Group Accounts
of Smith & Nephew plc.
FTSE 100
Index of the largest 100 listed companies on the London
Stock Exchange by market capitalisation.
Group or
Smith+Nephew
Used for convenience to refer to the Company and
its consolidated subsidiaries, unless the context
otherwise requires.
Health
economics
A branch of economics concerned with issues related to
efficiency, effectiveness, value and behaviour in the production
and consumption of health and healthcare.
Hip Implants
A product group which includes specialist products for
reconstruction of the hip joint.
IFC
Inside Front Cover.
IBC
Inside Back Cover.
Term
Meaning
IFRS
International Financial Reporting Standards issued by the
International Accounting Standards Board.
Knee
implants
A product group which includes an innovative range of
products for specialised knee replacement procedures.
LSE
London Stock Exchange.
MDR
Medical Device Regulation.
MHRA
The Medicines and Healthcare products Regulatory Agency
in the UK.
Negative
Pressure Wound
Therapy (NPNT)
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.
NHS
The UK National Health Service.
NYSE
New York Stock Exchange.
Orthopaedic
products
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.
Other
Reconstruction
A product group which includes robotics-assisted surgery,
bone cement and accessory products.
OXINIUM
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.
Parent
Company
Smith & Nephew plc.
Pound Sterling,
Sterling, £, pence
or p
References to UK currency. 1p is equivalent to one hundredth
of £1.
SEC
US Securities and Exchange Commission.
Sports
Medicine
Joint Repair
Sports Medicine Joint Repair includes instruments,
technologies and implants necessary to perform minimally
invasive surgery of joints.
Trading
results
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 265 for further information.
Trauma &
Extremities
A product group which includes internal and external devices
used in the stabilisation of severe fractures and deformity
correction procedures.
UK
United Kingdom of Great Britain and Northern Ireland.
Underlying
growth
Growth after adjusting for the effects of currency translation
and the inclusion of the comparative impact of acquisitions
and exclusion of disposals.
US
United States of America.
US Dollars,
$, or cents or ¢
References to US currency. 1 cent is equivalent to one hundredth
of US$1.
Unless the context indicates otherwise, the following terms have
the meanings shown below:
Glossary
283
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
Accounting policies
196–247
Accounts presentation
276
Acquisitions
19, 23, 26–27, 47, 68, 76, 91, 95–96,
110, 117, 131, 202–203, 245–246,
Acquisition and disposal related items
18, 23, 25, 202–203, 268–269
American Depositary Shares
272
Articles of Association
174–177
Audit fees
134, 205
Board
104–107
Business overview
2–5, 256
Business segment information
39–50, 199–203
Cash and borrowings
221–223
Chair’s statement
6–9
Chief Executive Officer’s review
10–13
Company balance sheet
248
Company notes to the accounts
250–255
Contingencies
230–232, 252
Critical judgements and estimates
197
Cross-reference to Form 20-F
278–280
Currency fluctuations
264
Currency translation
198
Deferred taxation
208–209
Directors’ Remuneration Report
136–177
Directors’ responsibility statement
179
Dividends
7, 242
Earnings per share
24, 192, 209
Employee share plans
247
Executive team
108–109
Factors affecting results of operations
264
Financial instruments
224–230
Financial review
20–27
Free cash flow
269
Glossary of terms
283
Goodwill
212–214
Group balance sheet
193
Group cash flow statement
194
Group companies
252–255
Group history
276
Group income statement
192
Group notes to the accounts
196–247
Group overview
2–5, 256
Group statement of changes in equity
195
Group statement of comprehensive income
192
Independent auditor’s report
180–191
Intangible assets
214–216
Intellectual property disputes
232
Interest and other finance costs
205
Inventories
218
Investments
216
Investment in associates
216–217
Key Performance Indicators
18–19
Legal and other
203, 268–269
Legal proceedings
232
Leverage ratio
270
Liquidity and capital resources
26, 223
Manufacturing and quality
34–35
Medical education
3, 6, 19, 32–33
Net debt
221
New accounting standards
196-197
Operating profit
203–204
Other finance costs
205
Our approach to stakeholders
116–118
Our global markets
40, 44, 48
Outlook and trend information
9, 27, 257–264
People/Employees
66
Post balance sheet events
247
Provisions
230–232
Property, plant and equipment
210–211
Regulation
15, 35, 69–70, 84–85
Related party transactions
247, 256
Research & development
29–31, 91, 203–204
Restructuring and rationalisation expenses
203, 268–269
Retirement benefit obligations
233–239
Return on invested capital (ROIC)
18, 21, 26–27, 271
Risk factors
257–264
Risk report
78–95
SASB reporting
281–282
Share-based payments
247
Share capital
240–242
Shareholder information
272–277
Staff costs and employee numbers
205
Stakeholder statement
116–117
Statement of compliance
103
Strategy for Growth
10–13
Sustainability
65–77
Taxation
206–209
Taxation information for shareholders
274–276
TCFD reporting
69–73
Total shareholder return
168–169
Trade and other payables
220
Trade and other receivables
219–220
Treasury shares
241–242
Index
Other information continued
284
Smith+Nephew Annual Report 2024
References from business unit sections
References from Elevating the Standard of Care
(pages 28–35)
1. Collins M, Lavigne M, Girard J, Vendittoli PA. Joint
perception after hip or knee replacement surgery. Orthop
Traumatol Surg Res.2012;98:275–280.
2. 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.
3. 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.
4. National Healthcare Safety Network report on surgical site
infections, January 2023.
5. SmartTrak Report, 2023.
6. Komodo Health, 2022.
7. Ruiz Ibán MA, Navlet MG, Marco SM, et al. Augmentation of
a transosseous equivalent repair in posterosuperior
non-acute rotator cuff tears with a bioinductive collagen
implant decreases the re-tear rate at one year. A
randomised controlled trial. Arthroscopy. 2024. Volume 40,
Issue 6, 1760 – 1773.
8. Smith PN, Gill DR, McAuliffe MJ, McDougall C, Stoney JD,
Vertullo CJ, Wall CJ, Corfield S, Page R, Cuthbert AR, Du P,
Harries D, Holder C, Lorimer MF, Cashman K, Lewis PL. Hip,
Knee and Shoulder Arthroplasty: 2023 Annual Report,
Australian Orthopaedic Association National Joint
Replacement Registry, AOA: Adelaide, South Australia.
2023. https://doi.org/10.25310/YWQZ9375.
9. Schaffler BC, Raymond HE, Black CS, Habibi AA, Ehlers M,
Duncan ST, Schwarzkopf R. Two-year outcomes of novel
dual-mobility implant in primary total hip arthroplasty. Adv
Orthop. 2024;2024:4125965. Published 2024 Jan 16.
10. Laende EK, Gascoyne TC, Teeter MG, et al. Poster presented
at Orthopaedic Research Society 2024 Annual Meeting,
February 2–6, 2024; Long Beach, CA, USA.
11. Prinos A, Cardillo c, Greenky S, et al. Poster presented at
Orthopaedic Research Society 2024 Annual Meeting,
February 2–6, 2024; Long Beach, CA, USA.
12. Cochrane NH, Kim BI, Stauffer TP, et al. Revision total knee
arthroplasty with an imageless, second-generation robotic
system. J Arthroplasty. Published online February 12, 2024.
13. James K, Glasswell A, Costa B. Single-use negative
pressure wound therapy versus conventional dressings for
the reduction of surgical site infections in closed surgical
incisions: systematic literature review and meta-analysis.
Am J Surg. 2024;228:70–77.
14. Atkinson L, Costa B. Pressure injury prevention with a
unique multi-layer foam dressing: a systematic review and
meta-analysis of randomized controlled trials. Poster
presented at: European Wound Management Association
(EWMA); May 1–3, 2024; London, UK.
References from Orthopaedics (pages 39–42)
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.
3. 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. National Joint Registry for England, Wales, Northern Ireland
and the Isle of Man: 20th Annual Report. 2023.
7. Australian Orthopaedic Association National Joint
Replacement Registry (AOANJRR). Hip, Knee & Shoulder
Arthroplasty: 2024 Annual Report. Adelaide: AOA, 2024.
8. 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.
9. 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.
10. 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. Smith + Nephew 2024. Internal Report. 10143423 Rev A.
12. Smith + Nephew 2024. Internal Report. 10144794.
13. Smith+Nephew 2020. NAVIO Technical Specification
Comparison. March 2020. Internal Report ER0488 REVB.
14. Smith+Nephew 2020. Comparison of operating room
footprint for robotic-assisted knee arthroplasty systems.
Internal Report. EO.REC.PCS015.002.v1.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. https://www.federalregister.gov/
documents/2023/11/22/2023-24293/medicare-program-
hospital-outpatient-prospective-payment-and-
ambulatory-surgical-center-payment. Accessed 12.
December 2024.
21. Smith+Nephew 2023. AETOS Inlay Design Features. Internal
Report. ER-04-0990-0017.
22. 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.
23. 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.
24. 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.
25. 3D Systems. Internal Report. RPT-1059.
26. 3D Systems. Internal Report. RPT-1102.
27. 3D Systems. Internal Report. WI-01098.
28. 3D Systems. Internal Report. DCD-00360.
29. 3D Systems. Internal Report. DCD-00361.
30. 3D Systems. Internal Report. WI-01184.
31. 3D Systems. Internal Report. DCD-00359.
32. 3D Systems. Internal Report. DCD-00388.
33. Smith + Nephew 2024. Internal Report. 10143591.
34. Smith + Nephew 2024. Internal Report. OR-24-025.
35. Smith + Nephew 2024. Internal Report. 10142796.
36. Smith+Nephew 2024. Internal Report. 10142827.
37. Smith+Nephew 2024. Internal Report. TM-24-034.
38. Smith+Nephew 2024. Internal Report. 10143458 Rev A.
39. Smith + Nephew 2023. Cadaver Validation of the
CATALYSTEM Total Hip System. Internal Report. OR-23-106.
40. Smith+Nephew 2023. Internal Report. ER-04-0990-0019.
41. Smith+Nephew 2023. Internal Report. ER-04-0990-0020.
42. Smith+Nephew 2022. Optimus TKA Tensioner Gap
Assessment Verification Report. Internal Report.
10059269.
43. Smith+Nephew 2021. Tensioner Design Verification Test
Report. Internal Report. TR100123.
44. Smith+Nephew 2022. Tensioner KPC: Tensioner Calibration
Check. Internal Report. TR100116, Rev.B.
45. Smith+Nephew 2023. 37753 V2 CORI Digital Tensioner
Evidence in focus White paper 0923.
46. Burkhardt J, Chow J, Antell N, Li B, Johnston A, Ayers T,
Nherera L, Aros B, Guild G, Kaper BP, McKissick RC,
Nishiyama S, Seyler T, Sweet II R, Urish KL. Operating room
and sterilization efficiencies for total, revision and
unicompartmental knee arthroplasty using a handheld
robotic-assisted surgical system. Poster presented at:
ISPOR 2024; May 5-8, 2024; Atlanta, GA, USA.
47. Carpenter RD, Brilhault J, Majumdar S, Ries MD. Magnetic
resonance imaging of in vivo patellofemoral kinematics
after total knee arthroplasty. Knee. 2009;16(5):332-336.
48.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.
49. Smith LA, Nachtrab J, LaCour M, et al. In Vivo Knee
Kinematics: How Important Are the Roles of Femoral
Geometry and the Cruciate Ligaments? JArthroplasty.
2021;36:1445-1454.
50. Watson J, Jordan J. LEGION◊ Primary Knee System for total
knee arthroplasty: Design rationale and early results. Bone
& Joint Science. 2015;5(1):1-8.
51. Naito Y, et al. BMC Muscoskeletal Disorders. 2021:1:1-8.
* Based on BSC evidence.
** We thank the patients and staff of all the hospitals in
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.
† Compared to a competitive shoulder system.
285
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
33 Douglass NP, Behn AW, Safran MR. Cyclic and Load to
Failure Properties of All-Suture Anchors in Synthetic
Acetabular and Glenoid Cancellous Bone. Arthroscopy.
2017;33(5):977-985 e975.
34 Nagra NS, Zargar N, Smith RD, Carr AJ. Mechanical
properties of all-suture anchors for rotator cuff repair. Bone
Joint Res. 2017;6(2):82-89.
35 Ruder JA, Dickinson EY, Peindl RD, Habet NA, Trofa DP,
Fleischli JE. Cyclic and Load-to-Failure Properties of
All-Suture Anchors in Human Cadaveric Shoulder Glenoid
Bone. Arthroscopy. 2019;35(7):1954-1959 e1954.
36 Smith and Nephew 2023. Q-FIX with MINITAPE Claims
Report. Internal Report. 10090792- Revision B.
37 Bergstein V., Ahiarakwe U, Haft M, Mikula J, Best M.
Decreasing Incidence of Partial Meniscectomy and
Increasing Incidence of Meniscus Preservation Surgery
From 2010 to 2020 in the United States. Arthroscopy: The
Journal of Arthroscopic & Related Surgery. 2024 Aug.
10:S0749-8063(24)00558-9.
38 Amiel D, Ball ST, Tasto JP. Chondrocyte viability and
metabolic activity after treatment of bovine articular
cartilage with bipolar radiofrequency: an in vitro study.
Arthroscopy. 2004;20(5):503-510.
39 Smith+Nephew 2023. Verif, Q-FIX with Needles Hard Bone
Insertion, Fixation, and Cyclic. Internal Report. 15012313
Rev A.
40 Smith+Nephew 2023. Verif, Q-FIX with Needles Fixation
(12pcf, 25/5pcf), Needle Attachment Strength, and Knot
Tensile Strength Testing. Internal Report. 15012288 Rev A.
41 Smith+Nephew 2023. Competitive Claims, Q-FIX with
Needles, Fixation Report. Internal Report. 10093596 Rev A.
42 Smith+Nephew 2022. ANAKIN Shock and Vibration
(Advantech Test Report). Internal Report. 15011068 Rev A.
43 Smith+Nephew 2022. INTELLIO 4K CCU Environmental
Testing. Internal Report. 15010785 Rev A.
44 Smith+Nephew 2022. ANAKIN Expected Life Summary
Report. Internal Report. 15011066 Rev A.
45 TUV Rheinland 2022. SNE LENS 4K 60601-1 Report.
Internal Report. 31892667.001.
46 ArthroCare 2014.Comparative Performance of the FLOW
50 Wand and the Predicate Wands in Tissue Models. P/N
52918-01.
47 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.
48 Smith+Nephew 2021.Protocol, Claims, PLATINUM
MDU- Torque. Internal Report. 15011440 Rev A.
49 Smith+Nephew 2017. Coblation Dissection Versus
Monopolar Dissection – A Systematic Review and
Meta-analysis P/N 91999 Rev. A.
50 Temple RH, Timms MS. Paediatric coblation tonsillectomy.
Int J Pediatr Otorhinolaryngol. 2001;61(3):195–198.
51 Smith+Nephew 2010. Temperature Study – PEAK
PlasmaBlade® TnA and Covidien EDGE®. Internal Report.
PN 86791 Rev. 1.
52 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.
53 Smith+Nephew 2010. PROCISE LW & MLW, Thermal
Measurement and Comparison to CO2 and KTP Laser
Systems. Internal Report. P/N 86257 Rev. A.
54 Smith+Nephew 2010. PROcise XP Comparative Thermal
Measurement Bench-Top Study. Internal Report. P/N
60736–01 Rev. A.
References from Sports Medicine & ENT (pages 43–46)
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, et al. Histologic
Evaluation of Biopsy Specimens Obtained After Rotator
Cuff Repair Augmented With a Highly Porous Collagen
Implant. Arthroscopy. 2017 Feb;33(2):278-283.
3 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.
4 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;31(12):2532-41.
5 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).
6 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.
7 Camacho-Chacon JA, Cuenca-Espierrez J, Roda-Rojo V,
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.
8 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).
9 Dai A, Campbell A, Bloom D, Baron S, Begly J, Meislin R.
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10 Schlegel TF, Abrams JS, Angelo RL, Getelman MH, Ho CP,
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11 Yeazell S, Lutz A, Bohon H, Shanley E, Thigpen CA,
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13 Schlegel TF, Abrams JS, Bushnell BD, Brock JL, Ho CP.
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14 Bokor DJ, Sonnabend DH, Deady L, et al. Healing of
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15 McElvany MD, McGoldrick E, Gee AO, Neradilek MB, Matsen
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20 Saper MG, Meijer K, Winnier S, Popovich J, Jr., Andrews JR,
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21 Bansal S, Floyd ER, A Kowalski M, Aikman E, Elrod P, Burkey
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23 Chahla J, Liu JN, Manderle B, et al. Bony ingrowth of
coil-type open-architecture anchors compared with
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24 Vonhoegen J, John D, Hägermann C. Osteoconductive
resorption characteristics of a novel biocomposite suture
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25 Smith+Nephew 2010. Micro-CT and histological evaluation
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TE045-700-08.
26 Smith+Nephew 2016. Healicoil Regenesorb Suture Anchor
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27 Smith + Nephew 2016.Feasability, MINITAPE Knot Stack
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28 Smith + Nephew 2013.ULTRATAPE Pressure Film Testing.
15001847. Rev A.
29 ArthroCare 2019. Comparative Testing of Bone Anchor
Devices, 1.8mm Q-FIX Mini Soft Suture Anchor P/N
49193-02 Rev.B.
30 Barber FA, Herbert MA. All-Suture Anchors: Biomechanical
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31 Nagra NS, Zargar N, Smith RD, Carr AJ. Mechanical
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32 Ruder JA, Dickinson EY, Peindl RD, Habet NA, Trofa DP,
Fleischli JE. Cyclic and Load-to-Failure Properties of
All-Suture Anchors in Human Cadaveric Shoulder Glenoid
Bone. Arthroscopy. 2019;35(7):1954-1959 e1954.
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55 Magdy EA, Elwany S, El-Daly AS, Abdel-Hadi M, Morshedy
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dissection-ligation, monopolar electrocautery and laser
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56 Sedgwick MJ, Saunders C, Bateman N. Intracapsular
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57 Smith+Nephew 2023.ARIS Targeted Hemostasis. Internal
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58 Lustig LR, Ingram A, Vidrine M, et. al. In-Office
Tympanostomy Tube Placement in Children Using
Iontophoresis and Automated Tube Delivery. Laryngoscope.
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59 IFU007011, available at www.tulatubes.com/IFU.
60 Singer AJ, Blanda M, Cronin K, et al. Comparison of nasal
tampons for the treatment of epistaxis in the emergency
department: a randomized controlled trial. Ann Emerg Med.
2005;45(2):134-9.
61 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.
62 Smith+Nephew 2021. Technical Report, HEALICOIL Implant
Volume Comparison. Internal Report. 15010823 Rev A.
63 Altschuler N, Zaslav KR, Di Matteo B, et al. Aragonite-Based
Scaffold Versus Microfracture and Debridement for the
Treatment of Knee Chondral and Osteochondral Lesions:
Results of a Multicenter Randomized Controlled Trial. Am J
Sports Med. 2023;51(4):957-967.
64 Kon E, Di Matteo B, Verdonk P, et al. Aragonite-Based
Scaffold for the Treatment of Joint Surface Lesions in Mild
to Moderate Osteoarthritic Knees: Results of a 2-Year
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65 Kon E, Filardo G, Shani J, et al. Osteochondral regeneration
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66 de Caro F, Vuylsteke K, Van Genechten W, Verdonk P.
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Follow-Up Study. Cartilage. 2024;15(4):399-406.
67 CartiHeal 2009. Indications for Use: Agili-C™ implant.
68 ArthroCare Corporation 2017. Report: Design Verification,
1.8mm Q-FIX MINI Soft Suture Anchor. P/N 10144423B.
69 Kon E, Filardo G, Robinson D, et al. Osteochondral
regeneration using a novel aragonite-hyaluronate bi-phasic
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prospective randomised controlled trial comparing Merocel
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72 Smith+Nephew 2020 REGENETEN Collagen Implant
Physical Characteristics. Internal Report. 15009769.
73 Hak DJ. The use of osteoconductive bone graft substitutes
in orthopaedic trauma. J Am Acad Orthop.
74 Surg. 2007;15(9):525-536.
75 Allison DC, Lindberg AW, Mirzayan R, Samimi B, Menendez
LR. A Comparison of Mineral Bone Graft Substitutes for
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76 Costantino PD, Friedman CD. Synthetic bone graft
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77 Conte P, Anzillotti G, Crawford DC, et al. Differential
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Int Orthop. 2024;48(12):3117-3126.
a These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial
measure prepared in accordance with IFRS on pages
265-271.
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.
*Demonstrated clinically and in-vivo.
**compared to traditional #2 suture.
***as compared to the competitive device in cyclic
benchtop testing.
**** 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 in benchtop testing.
†† as demonstrated ex-vivo.
†††As compared to mechanical debridement for knee
chondroplasty; n=60; p<0.001.
††††over 2 and 4 year follow up.
†††††Versus microfracture debridement.
References from Advanced Wound Management
(pages 47-50)
1 Smith+Nephew 2024. Methodology for calculating the
reduction in global packaging material and Greenhouse Gas
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2 Smith+Nephew 2024. Methodology for calculating the
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3 Smith+Nephew 2022.Post Market Clinical Follow-Up
(PMCF) Report for ALLEVYN GENTLE. CSD.AWM.22.050.
4 Hurd T, Gregory L, Jones A, Brown S.A multi-centre
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5 Leonard S, Mccluskey P, Long S, et al. An evaluation of
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6 Rossington A, Drysdale K, Winter R. Clinical performance
and positive impact on patient wellbeing of ALLEVYN Life.
Wounds UK. 2013;9(4):91–95.
7 White, R., Hartwell, S., and Brown,S., Interim report on a
study to assess the effectiveness and improved fluid uptake
of new ALLEVYN. Wounds UK. 2007; 3(4):122-127 Available
here: https://www.woundsinternational.com/resources/
details/interim-report-on-the-study-to-assess-the-
effectiveness-and-improvedfluid-uptake-of-new-allevyn.
8 Tiscar-González V, Menor-Rodríguez MJ, Rabadán-Sainz C,
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9 Simon D, Bielby A. A structured collaborative approach to
appraise the clinical performance of a new product.
Wounds UK. 2014;10(3):80–878.
10 Rossington A, Drysdale K, Winter R. Clinical performance
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Wounds UK. 2013;9(4):91–95.
11 S+N Data on File. Odour reducing properties of ALLEVYN
LIFE. Internal Report. DS/12/127/DOF. 2012.
12 Tiscar-González V, Menor-Rodríguez MJ, Rabadán-Sainz C,
et al. Clinical and Economic Impact of Wound Care Using a
Polyurethane Foam Multilayer Dressing. Adv Skin Wound
Care. 2021;34(1):23-30.
13 Simon D, Bielby A.A structured collaborative approach to
appraise the clinical performance of a new product.
Wounds UK. 2014;10(3):80–87.
14 S+N Data on File. Wound Model Testing of New ALLEVYN
Life Gen2wcl Dressing using Horse Serum at a Flow Rate
Modelling that of a Moderately Exuding Wound.
DS/14/303/R. 2016.
15 Smith+Nephew 2021. Internal Report. EA/AWM/
ALLEVYN/001v4.
16 SmartTrak Report, 2022.
17 Smith+Nephew. Internal Report. 151008.
18 Nherera LM et al. Wound Repair Regen. 2017;25(4):707–721.
19 Smith+Nephew. Internal Report. RR-WMP07330-10-03.
20 Skog E et al. British Journal of Dermatology. 1983;109:77–
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21 Fitzgerald DJ et al. Wound Repair Regen. 2016;25(1):13–24.
22 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.
23 Smith+Nephew 2007. Antimicrobial Activity of Allevyn Ag
Non-Adhesive Dressing against a Broad Spectrum of
Microorganisms. Internal Report. DOF 0703006.
24 Smith+Nephew 2007. Antimicrobial activity of ALLEVYN Ag
dressings against a broad spectrum of wound pathogens
using a dynamic shake flask method. Internal Report.
DOF 0707052.
25 Smith+Nephew 2008. A multi-centre in-market evaluation
of ALLEVYN Ag dressings. Internal Report. SR/CIME/009.
26 Smith+Nephew 2018. PMCF Research for Allevyn Ag
Adhesive. Internal Report. PMS-273-01.
27 Smith+Nephew 2007. Antimicrobial Activity of ALLEVYN Ag
Adhesive Dressing Against a Broad Spectrum of
Microorganisms. Internal Report. DOF 0703007.
28 Lavery et al. Int Wound J. 2014; 11(5): 554–560.
29 McGinness K, Kurtz Phelan DH. Wounds. 2018; 30(4):
90–95.
30 Nherera et al. Ostomy Wound Manage. 2017;63(12):38–47.
31 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.
32 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.
33 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.
34 Forlee M, van Zyl L, Louw V, Nel J, Fourie N, Hartley R. A
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287
Smith+Nephew Annual Report 2024
STRATEGIC REPORT
GOVERNANCE
ACCOUNTS
OTHER INFORMATION
35 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.
36 Smith+Nephew 2022. RENASYS EDGE System Human
Factors Summative Report Summary. Internal Report. CSD.
AWM.22.071.
37 Smith+Nephew 2022. Summary of footprint, portability,
wearability, weight and audible noise for the RENASYS
EDGE system. Internal Report. CSD.AWM.22.067.
38 Smith+Nephew 2022. Summary of RENASYS EDGE pump
mechanical and electronic reliability testing. Internal
Report. CSD.AWM.22.069.
39 Smith+Nephew 2022. Summary of RENASYS EDGE pump
cleaning, self-test and maintenance. Internal Report. CSD.
AWM.22.068.
40 Rennekampff HA, et al. Burns. 2006;32(1):64 - 69.
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48 Murray F. Paper presented at: European Wound
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49 Granick MS, et al. WOUNDS. 2006;18(2):35-39.
50 Smith + Nephew 2005. The use of VERSAJET™ in the limb
salvage following failure of minor amputation in diabetic
foot. Internal Report.
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52 Agency for Healthcare Research and Quality website.
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54 Wassel C, Delhougne G, Gayle J et al. Risk of readmissions,
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55 Awoke N, Tekalign T, Arba A, Lenjebo TL. Pressure injury
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South Ethiopia: a cross-sectional study. BMJ Open.
2022;12(3):e047687.
56 Atkinson L, Costa B. Pressure injury prevention with a
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(EWMA); May 1–3, 2024; London, UK.
57 Agency for Healthcare Research and Quality website.
Preventing pressure ulcers in hospitals: a toolkit for
improving quality of care. https://www.ahrq.gov/
professionals/systems/hospital/pressureulcertoolkit/
putool1.html. Updated October 2014. Accessed February 1,
2018.
58 Klaeb M, Krafft K, Walters B, Lowe J, Cooley A. The Influence
of Wearable Technology on Nursing Attitudes and
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Conference; March 5–March 7, 2019; Orlando, Florida, USA.
59 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
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2014;60(3):30–36.
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.
* Based on ALLEVYN Dressings actual sales in 2023 and
shipment of product to our primary
distribution warehouses.
*Compared to baseline trajectory, n=52 wounds; p=0.006.
**Compared to standard of care.
***Compared to sharp debridement.
References from Case Studies (pages 51-57)
1 Moore Z, Coggins T (2021) Clinician attitudes to
shared-care and perceptions on the current extent of
patient engagement in wound care: Results of a clinician
survey. Wounds International 12(1): 48–53.
2 Moore Z, et al. Wounds International. 2022;13(2):32–38.
3 Smith+Nephew 2023. S+N video. 2023. 39451.
References from Creating a Culture to Win section
(pages 58-63)
1 Peterman N, Macinnis B, Stauffer K, Mann R, Yeo E,
Carpenter K. Gender Representation in Orthopaedic
Surgery: A Geospatial Analysis From 2015 to 2022.
References from business unit sections continued
Other information continued
288
Smith+Nephew Annual Report 2024
Financial calendar
Annual General Meeting
The Company’s Annual General Meeting (‘AGM’) will
be held on Wednesday, 30 April 2025 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 AGM or
notification of availability of the Notice of AGM.
This report was printed by Park Communications, a
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Park works to the EMAS standard and its Environmental
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have been calculated and offset by supporting
recognised carbon offset projects.
CBP029634
2025
Annual General Meeting
30 April
First quarter Trading Report
30 April
Payment of 2024 final dividend
28 May
Half-year results announced
31 July¹
Third quarter Trading Report
6 November
Payment of 2025 interim dividend
7 November
2026
Full year results announced
February¹
Annual Report available
February/March
Annual General Meeting
April/May
1 Dividend declaration dates.
289
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STRATEGIC REPORT
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OTHER INFORMATION
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Hatters Lane, Watford,
Hertfordshire, WD18 8YE,
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Tel. +44 (0)1923 477 100
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