Smith & Nephew (SN) H2 2024 earnings summary

Executive summary

• Achieved 8.3% underlying growth in Q4 and 5.3% for the full year 2024, with all business units contributing.

• 12-Point Plan drove operational improvements, innovation, and margin expansion, with 60 basis points of trading margin growth and 95% cash conversion.

• U.S. market performance was strong, while China remained a significant headwind, impacting group growth by 280 basis points in Q4.

• ROIC improved to 7.4%, with further gains expected as restructuring and cost-saving initiatives continue.

• Four consecutive years of above-average revenue growth, underpinned by innovation and improved commercial execution.

Financial highlights

• Full year 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; trading margin expanded 60 basis points to 18.1%.

• Adjusted EPS grew 1.7% to $0.843; IFRS EPS rose more sharply due to lower restructuring charges.

• Free cash flow increased to $551 million, with trading cash conversion at 95%.

• Net debt reduced to $2.7 billion; leverage ratio at 1.9x Adjusted EBITDA.

Outlook and guidance

• 2025 guidance: ~5% underlying revenue growth, trading margin between 19%-20%.

• Margin expansion to be driven by operating leverage, cost savings, and manufacturing network optimization, especially in H2.

• China remains a headwind, with 150 basis points drag on group growth expected and one fewer trading day in 2025.

• Continued margin accretion anticipated in 2026 and 2027.