Chairman's statement

Sir John Buchanan

“ Our financial strength – and confidence in continued strategic progress – enabled the Board to review the dividend policy during the year.”

Dear shareholder,

Smith & Nephew made good progress in 2012, both financially and strategically, as we delivered on our commitments to reshape the Company.

Our underlying revenues were up 2% to $4,137m, with reported revenue reflecting the successful transaction to create Bioventus. Trading profit was up 6% underlying at $965m, giving an 80 basis points increase in trading profit margin, which was up at 23.3%. Free cash flow, at $637m, was again healthy, demonstrating the vitality of our business.

This performance shows the effects of the major strategic programme announced last year to make Smith & Nephew fit and effective for the future. Throughout the year we made great progress driving efficiencies and liberating resources. This has allowed us to invest to realise the opportunities we see in our higher growth markets and sectors.

We have achieved all this and maintained our commitment to health and safety, ethics and the environment.

Enhanced returns for shareholders

Our financial strength – and confidence in continued strategic progress – enabled the Board to review the dividend policy during the year.

As a result, we increased the level of the Interim Dividend payment by 50% to 9.9¢ per share. The Board is pleased to recommend a proposed Final Dividend for the year of 16.2¢ per share, also up 50% on 2011. We intend to pursue a progressive dividend policy going forward.

Board changes

We were very pleased that Julie Brown joined us as Chief Financial Officer in February 2013. She brings top-level financial expertise, commercial experience and a deep knowledge of the healthcare sector. Julie replaces Adrian Hennah who left with our very best wishes and thanks for his significant contribution to Smith & Nephew.

We have also welcomed two new Non-Executive Directors during 2012. Ajay Piramal is one of India’s most impressive businessmen and Baroness Bottomley brings a wealth of experience from her successful career across both private and public sectors. We said farewell to Rolf Stomberg and Geneviève Berger, who we also thank for their valuable input.

In April, we shall welcome Michael Friedman to our Board who is renowned for his US healthcare expertise, in particular gained leading the prestigious City of Hope cancer institution in California.

Thank you

My Board colleagues and I visited a number of our global sites during the year. We welcome these opportunities to meet our employees, and would like to thank everyone at Smith & Nephew for their continued dedication to serving our customers.

We are also fortunate to meet and hear from shareholders regularly, both institutional and private. Your support and feedback are both appreciated, and continue to inform our thinking.

Smith & Nephew is evolving. We are already seeing the material benefits of our choices and actions. There is much more to come and we look forward to continuing to build ever more value for you into the future.

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Sir John Buchanan

Chairman

  Download "Strategy and performance" from our Annual Report 2012