Smith & Nephew plc: 2025 Full Year and Q4 2025 Results Summary
Business Context and Reporting Period
Company: Smith & Nephew plc (LSE:SN, NYSE:SNN)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Full Year and Fourth Quarter ended December 31, 2025
Filing Date: March 2, 2026
Smith & Nephew, a global medical technology business, reported the completion of its three-year "12-Point Plan" transformation. The company has launched a new strategy, "RISE," targeting accelerated growth and returns through 2028. The results reflect strong performance across Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management, driven by new product introductions and operational discipline.
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 |
| EPS (Basic) | 72.1 cents | 47.2 cents | 52.8% | N/A |
| EPSA (Adjusted) | 102.0 cents | 84.3 cents | 21.0% | N/A |
| Cash from Operations | 1,549 | 1,245 | 24.4% | N/A |
| Free Cash Flow | 840 | 551 | 52.5% | N/A |
| Net Debt | 2,759 | 2,709 | N/A | N/A |
| Adjusted Leverage Ratio | 1.7x | 1.9x | N/A | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Full year underlying revenue growth of 5.3% exceeded the 5% target. Growth was broad-based, with all three business units delivering >5% underlying growth. 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 (up 52.5%), aided by a $26 million one-off property transaction benefit and improved working capital discipline (DSI reduced by 21 days).
- Segment Performance:
- Orthopaedics: Delivered its strongest quarter of growth in over two years (Q4 underlying growth 7.9%).
- Sports Medicine & ENT: Grew 7.3% underlying in Q4 despite China headwinds.
- Advanced Wound Management: Grew 2.8% underlying in Q4, impacted by a strong prior year comparison and weakness in skin substitutes ahead of 2026 reimbursement changes.
- Portfolio Rationalisation: Recognized a $159 million non-cash excess and obsolescence provision related to phasing out 50 additional product families in Orthopaedics.
Guidance, Outlook, and Risks
2026 Outlook:
- Revenue: Underlying revenue growth expected to accelerate to around 6% (reported growth ~7.8%).
- Trading Profit: Organic growth expected around 8%. Including dilution from the Integrity Orthopaedics acquisition, total trading profit expected to be ~$1.3 billion.
- Free Cash Flow: Expected to be around $800 million.
- ROIC: Adjusted ROIC expected to be >10% (excluding Integrity Orthopaedics impact).
Strategic Initiatives:
- RISE Strategy: Launched to drive growth through Reach, Innovate, Scale, and Execute. Targets 6-7% organic revenue CAGR and >$1 billion free cash flow by 2028.
- Acquisition: Completed acquisition of Integrity Orthopaedics (Jan 2026) for $225 million upfront plus up to $225 million contingent. Expected to be marginally dilutive in 2026, accretive by 2028.
- Capital Allocation: Completed $500 million share buyback in H2 2025. Final dividend increased 4.3% to 24.1 cents per share.
Risks and Contingencies:
- China Headwinds: Ongoing impact from Volume Based Procurement (VBP) in Sports Medicine and ENT, with further VBP expected in 2026.
- Reimbursement Changes: Anticipated negative impact on US Advanced Wound Management skin substitutes in 2026.
- Macro Factors: Tariffs (estimated $60 million impact in 2026) and foreign exchange volatility.
- Inventory Rationalisation: Ongoing costs and margin pressure from phasing out product lines.
Investor Verification Checklist
- China Exposure: Verify the specific revenue impact of VBP in Sports Medicine and ENT for 2026, as this remains a significant headwind.
- Integrity Orthopaedics Integration: Monitor the integration progress and financial impact of the $225 million acquisition, specifically the dilution in 2026 vs. accretion in 2028.
- Wound Reimbursement: Assess the magnitude of the expected revenue decline in US skin substitutes due to 2026 reimbursement changes.
- Inventory Reduction: Confirm the execution of the $500 million inventory reduction target and its impact on working capital and future margins.
- 2028 Targets: Evaluate the feasibility of the new 2028 targets (6-7% revenue CAGR, >$1B FCF) given current macroeconomic conditions.