Smith & Nephew plc: 2025 Full Year and Q4 2025 Results Summary
Business Context and Reporting Period
This Form 6-K, dated March 2, 2026, reports the Fourth Quarter and Full Year 2025 results for Smith & Nephew plc, a global medical technology business. The reporting period covers the fiscal year ended December 31, 2025. The company operates three primary business units: Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management. The filing marks the completion of the company's "12-Point Plan" transformation and the launch of the new "RISE" strategy targeting 2028 financial goals.
Key Financial Metrics (Full Year 2025)
| Metric | 2025 ($m) | 2024 ($m) | Reported Growth | Underlying Growth |
|---|---|---|---|---|
| Revenue | 6,164 | 5,810 | 6.1% | 5.3% |
| Operating Profit | 794 | 657 | 20.7% | N/A |
| Operating Profit Margin | 12.9% | 11.3% | +160 bps | N/A |
| Trading Profit | 1,211 | 1,049 | 15.5% | N/A |
| Trading Profit Margin | 19.7% | 18.1% | +160 bps | N/A |
| Cash from Operations | 1,549 | 1,245 | 24.4% | N/A |
| Free Cash Flow | 840 | 551 | 52.5% | N/A |
| EPS (Basic) | 72.1 cents | 47.2 cents | 52.8% | N/A |
| EPSA (Adjusted) | 102.0 cents | 84.3 cents | 21.0% | N/A |
Balance Sheet & Liquidity: Net debt (including lease liabilities) was $2,759 million at year-end. The adjusted net debt/EBITDA leverage ratio was 1.7x. Cash and cash equivalents totaled $557 million. The company completed a $500 million share buyback in the second half of 2025.
Material Changes vs. Prior Period
- Revenue Growth: Full year underlying revenue growth of 5.3% exceeded the guided target of ~5%. Growth was broad-based across all three business units. Excluding China, underlying growth was 7.0%.
- Profitability Expansion: Trading profit margin expanded by 160 basis points to 19.7%, driven by operating leverage and productivity savings, offsetting headwinds from tariffs and inventory revaluation.
- Cash Generation: Free cash flow more than doubled to $840 million, aided by a 21-day reduction in Days Sales of Inventory (DSI) and a one-off $26 million property transaction benefit.
- Segment Performance: Orthopaedics delivered its strongest quarterly growth in over two years (Q4 underlying growth 7.9%). Sports Medicine & ENT grew 7.3% in Q4 despite China headwinds. Advanced Wound Management grew 2.8% in Q4, impacted by skin substitute weakness ahead of 2026 reimbursement changes.
- Non-IFRS Adjustments: A $159 million non-cash excess and obsolescence provision was recognized in 2025 related to portfolio rationalization, impacting reported gross margin but excluded from trading profit.
Guidance, Outlook, and Risks
2026 Outlook:
- Revenue: Underlying revenue growth is expected to accelerate to around 6% for the full year.
- Trading Profit: Organic trading profit growth is expected to be around 8%. Including dilution from the Integrity Orthopaedics acquisition, total trading profit is expected to be around $1.3 billion.
- Cash Flow: Free cash flow is expected to be around $800 million.
- ROIC: Adjusted ROIC is expected to be greater than 10% (excluding Integrity Orthopaedics impact).
Strategic Initiatives:
- RISE Strategy: Launched in December 2025, focusing on Reach, Innovation, Scale, and Execute. Targets 2028 goals include 6-7% organic revenue CAGR and >$1 billion free cash flow.
- Acquisition: Completed acquisition of Integrity Orthopaedics (Jan 2026) for $225 million upfront plus up to $225 million in performance payments to strengthen Sports Medicine leadership.
Risks and Contingencies:
- China Headwinds: Volume-Based Procurement (VBP) continues to impact Sports Medicine and ENT; further VBP implementation expected in 2026 for Arthroscopic Enabling Technologies and ENT.
- Reimbursement Changes: Anticipated negative impact on US Advanced Wound Management skin substitutes in 2026 ($20-$40 million incremental impact).
- Tariffs: Expected $60 million impact in 2026 (vs. $17 million in 2025).
- Portfolio Rationalization: Ongoing phase-out of 50+ product families in Orthopaedics, expected to reduce gross inventory by ~$500 million over 3-5 years.
Investor Verification Checklist
- Verify the reconciliation of "Underlying Revenue Growth" to reported IFRS revenue, specifically the currency and acquisition adjustments.
- Confirm the impact of the $159 million inventory obsolescence charge on reported gross margins versus trading margins.
- Monitor the execution of the Integrity Orthopaedics integration and its impact on 2026 trading profit dilution.
- Track the progress of the portfolio rationalization program and the associated reduction in Days Sales of Inventory (DSI).
- Assess the severity of 2026 reimbursement changes in the US Advanced Wound Management segment and China VBP implementation.
- Review the $500 million share buyback completion and its effect on the adjusted leverage ratio (1.7x).