Smith & Nephew plc: Second Quarter and First Half 2026 Results Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited financial results for Smith & Nephew plc for the second quarter and first half ended June 27, 2026. The company is a global medical technology business operating in three segments: Sports Medicine & ENT, Advanced Wound Management, and Orthopaedics. The reporting period included 63 trading days in Q2 and 124 trading days in H1 (one fewer than the prior year).
Key Financial Metrics (H1 2026)
| Metric | H1 2026 ($m) | H1 2025 ($m) | Change (%) |
|---|---|---|---|
| Revenue | 3,097 | 2,961 | 4.6 |
| Operating Profit | 448 | 429 | 4.3 |
| Trading Profit (Non-IFRS) | 566 | 523 | 8.1 |
| Trading Profit Margin | 18.3% | 17.7% | +60 bps |
| EPS (Basic) | 35.6 cents | 33.5 cents | 6.2 |
| EPSA (Adjusted) | 47.7 cents | 42.9 cents | 11.0 |
| Cash from Operations | 605 | 568 | 6.9 |
| Free Cash Flow | 231 | 244 | (5.2) |
| Net Debt | 3,019 | 2,759 (Dec 2025) | N/A |
Material Changes vs. Prior Period
- Revenue Growth: H1 revenue grew 4.6% (2.3% underlying), driven by a 230bps FX tailwind. Underlying growth was 3.1% on an Average Daily Sales (ADS) basis, accounting for one fewer trading day.
- Profitability: Trading profit grew 8.1% to $566 million, outpacing revenue growth due to efficiency savings ($130 million realized in H1) and tariff refunds that neutralized forecast tariff headwinds.
- Segment Performance:
- Sports Medicine & ENT: Strong growth (+10.2% revenue), led by REGENETEN, Q-FIX, and the integration of Integrity Orthopaedics.
- Advanced Wound Management: Flat revenue (+2.6%) due to a 12.5% decline in Bioactives (skin substitutes reimbursement changes) offset by growth in Wound Care and Devices.
- Orthopaedics: Flat revenue (+1.7%) with declines in US Knee Implants (-3.8%) and US Hip Implants (-1.5%) ahead of new product launches.
- Cash Flow: Free cash flow decreased by $13 million year-over-year, primarily due to a $51 million increase in capital expenditure for the new UK Wound factory and IT upgrades.
Guidance, Outlook, and Management Commentary
- Revenue Guidance Revision: Full-year underlying revenue growth guidance was reduced from "around 6%" to "around 4%" due to a softer first half.
- Second Half Outlook: Management expects H2 underlying revenue growth to accelerate to the range of 5.0% to 5.5%, driven by new product launches (LANDMARK Knee, cementless Hip) and stabilization in skin substitutes.
- Profit and Cash Flow Guidance: Full-year guidance for Trading Profit (~8% growth), Free Cash Flow (~$800 million), and Adjusted ROIC (>10%) remains unchanged.
- Efficiency: Total efficiency savings for 2026 are now expected to reach ~$200 million, including an additional $50 million identified to offset lower revenue leverage.
- Capital Allocation: A $500 million share buyback was announced in May; $216 million was settled as of August 3, 2026. The interim dividend was increased 4.0% to 15.6 cents per share.
Investor Verification Checklist
- Orthopaedics Recovery: Verify the timeline and uptake of the cementless LANDMARK Knee System and LEGION MS to confirm the expected H2 revenue acceleration.
- Skin Substitutes Stabilization: Monitor Q3 results for the anticipated return to growth in SANTYL and stabilization of US skin substitute volumes following reimbursement changes.
- Capital Expenditure: Confirm that the elevated H1 capex ($190 million) does not repeat in H2, as projected, to ensure Free Cash Flow targets are met.
- Tariff Impact: Validate that tariff refunds continue to offset headwinds as management anticipates a "broadly neutral" net impact for the full year.
- Integrity Orthopaedics Integration: Assess the contribution of the $390 million acquisition to Sports Medicine revenue and margin in upcoming quarters.