Smith & Nephew (SN) H2 2024 earnings summary

Executive summary

• Achieved 8.3% underlying growth in Q4 and 5.3% for FY 2024, with all business units contributing and four consecutive years of above-average revenue growth driven by the 12-Point Plan and operational improvements.

• Margin expansion of 60 basis points to 18.1% and cash conversion at 95%, exceeding targets, with ROIC at 7.4%.

• Cost savings and leverage offset inflation and China VBP headwinds; U.S. business, especially Recon, showed strong improvement, while China remained a significant headwind.

• The 12-Point Plan and major product launches drove innovation, accountability, and cost efficiency, positioning for further gains in 2025.

• Four Orthopaedics facility closures and ~9% headcount reduction since 2022 contributed to cost savings.

Financial highlights

• FY 2024 revenue reached $5.81 billion, up 5.3% underlying and 4.7% reported; excluding China, underlying growth was 6.7%.

• Trading profit rose 8.2% to $1.05 billion; adjusted EPS up 1.7% to $0.843; IFRS operating profit $657 million (+54.6%).

• Gross margin was 70.3%, down 40bps due to China VBP pricing; trading margin expanded 60bps to 18.1%.

• Free cash flow improved to $551 million; trading cash conversion at 95%; net debt reduced to $2.7 billion.

• Adjusted EPS (EPSA) was 84.3¢ (+1.7%); reported EPS 47.2¢ (+56.3%).

Outlook and guidance

• 2025 guidance: ~5% underlying revenue growth, trading margin expansion to 19%-20%, with margin expansion weighted to H2.

• Guidance includes a ~150bps China headwind and one fewer trading day than 2024.

• Continued margin accretion anticipated in 2026 and 2027 as cost savings annualize.

• Free cash flow expected to exceed $600 million in 2025.