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Chief Executive Officer’s review

Dear Shareholder

At Smith+Nephew, we share a purpose to deliver Life Unlimited for our customers and their patients.

Over the past year, we’ve demonstrated our culture time and again. We remained strong through a global pandemic, served our customers, cared for one another, progressed our Inclusion, Diversity & Equity programme, and brought life-changing products to market.

In our annual Global Employee Survey we saw a strong connection to our purpose and a continued commitment to respectful and ethical behaviour.

I am proud of our team and thank every employee for their contribution.

2021 Performance

2021 was a solid step forward as we delivered revenue of $5.2 billion, up 10.3% compared to 2020 on an underlying basis. Reported revenue grew 14.3%, including a foreign exchange benefit of 210 basis points, and 190 basis points from acquisitions.

Sports Medicine and Advanced Wound Management, representing about two thirds of our business, delivered revenue above 2019 levels. Orthopaedics was held back as supply chain challenges prevented us from participating fully in the market recovery. The reopening of the ENT market was slow due to the impact of COVID and we expect this segment to accelerate in 2022.

I am pleased that we delivered on the guidance we set in April on both revenue and trading profit margin. Renewed COVID outbreaks meant that external conditions weren’t always ideal, however I’m proud of the dedication of our team in ensuring we met our commitments.

Looking beyond our financial performance, we achieved much else in 2021. We executed key launches, including our first cementless total knee, bringing lifechanging technologies to our customers and their patients. We announced a Medical Education Centre in APAC and Innovation and Surgery Centre in EMEA to educate healthcare professionals on our products and help them hone their techniques. We expanded our pipeline of innovation, both through our own work and acquisitions. We made a commitment to net zero emissions by 2045. And we launched Workplace Unlimited to create a more flexible and inclusive workplace for all employees. You can read more about these initiatives and other examples of our progress in this report.

Strategy for Growth

In December we announced our Strategy for Growth. Through this we will compound our outperformance in Advanced Wound Management and Sports Medicine, and regain momentum in Orthopaedics.

The strategy is based on three pillars.

First, we will Strengthen the foundations of Smith+Nephew. A solid base in commercial and manufacturing will enable us to serve customers sustainably and simply, and deliver the best from our core portfolio.

Second, we will Accelerate our growth profitably, through more robust prioritisation of resources and investment, and with continuing customer focus.

Third, we will continue to Transform ourselves for higher long-term growth, through investment in innovation and acquisitions.

Through our Strategy for Growth we are targeting consistent 4–6% underlying revenue growth by 2024, structurally ahead of historical levels. We also expect to rebuild our trading profit margin, targeting at least 21% by 2024, with further improvements thereafter.

The strategy is underpinned by a refreshed capital allocation framework, including a new annual share buy-back, which our Chief Financial Officer Anne-Francoise describes in detail in the Financial Review on page 17.

Strategy for Growth will be delivered through the four key value builders of productivity, commercial execution, innovation and acquisitions.


Our actions to drive productivity include optimising manufacturing and supply and driving ongoing commercial efficiencies through simplification.

We expect our industry to continue to be impacted by the widely reported global shortages of some raw materials and components, such as electronics. We are closely managing such supply issues on a case-by-case basis, and have simplified our processes to be more agile when additional supply becomes available.

We are also stabilising the Smith+Nephew specific challenges. Beyond this we are building long-term efficiencies, including through the Operations and Commercial Excellence programme. The transfer to a specialist third-party logistics partner in Europe is complete, and in Memphis is due to complete later this year. The new Orthopaedics manufacturing facility in Malaysia is on track to supply ahead of our previous target of the end of 2022, and Costa Rica will shortly move to become a multi-franchise manufacturing facility. These changes will create a more resilient network for supplying our customers.

In terms of efficiencies we are working to focus our commercial resources to better balance growth and margins. Smith+Nephew sells into more than 100 countries, but over 80% of revenue comes from the ten largest. Going forward global launches will focus more narrowly on the largest markets first. We also intend to simplify our portfolio, addressing multiple product lines serving the same clinical need as a result of previous acquisitions or legacy products in some categories. Through this we expect to reduce commercial costs, simplify distribution and enable better control of inventory.

Commercial execution

Our actions to drive commercial execution are focused on maximising the value of our strong portfolio, where we already have leading technology across the franchises.

We have a strong track record to build on, including in Advanced Wound Management where we have returned the European business to growth despite the maturity of the market and competition from low-cost regional players.

In Sports Medicine & ENT ‘selling the procedure’ rather than individual products has already been a core part of our strategy and we intend to replicate that success in Orthopaedics. For instance the launch of our uncemented knee gives us a strong suite of primary and revision knee implants supported by enabling technologies.


Our commitment to innovation is central to our Strategy for Growth. In recent years we have stepped up our level of investment in R&D from 4.7% of sales in 2017 to 6.8% in 2021. In 2021 we launched multiple new products across the franchises and segments with our major launches described on pages 32–33.

The delivery in 2021 reflects only the early stages of the increased R&D investment. From here, we intend to Accelerate our business by launching flawlessly and to scale, and transform our longer-term outlook with investments in disruptive platform technologies with cross-franchise applications. These include robotics, with the further development of our CORI Surgical System, where we have already expanded into new geographies, and new indications, adding hip surgery for instance.


The final value builder is acquisitions. We have acquired assets over recent years that move a number of our segments to structurally higher growth potential, including adding the Osiris skin substitutes to Advanced Wound Bioactives, the Tula◊ system for in-office delivery of ear tubes to our ENT business, and an Extremities Orthopaedics business to Trauma. We will continue to use bolt-on acquisitions to enhance our portfolio and pipeline.

In January 2022 we acquired Engage Surgical, owner of the only cementless partial knee system commercially available in the US.

New commercial model

Changing customer and market dynamics have created new high-growth opportunities. To take advantage of these, in Q4 2021 we brought our surgical franchises under one leadership team mandated with driving excellence in execution and identifying efficiencies across the franchises. With this new approach we will build on our consistently strong performance in Sports Medicine and return our Orthopaedics franchise to a growth trajectory reflecting its strong portfolio.

Smith+Nephew enters 2022 with a clear strategy. Our market fundamentals are strong, and we are among the leading global players in all our franchises. We have a strong and innovative portfolio, and new products on the horizon from our investments in R&D and acquisitions. We have a proven track record in driving improved performance with two of our three franchises, representing around 60% of sales, and in Orthopaedics we are filling the portfolio gap that has held us back and we have clear plans to drive growth.

New leadership

As announced in February 2022, I will shortly be leaving Smith+Nephew. It has been a privilege to lead the Company over my time here. Working through the pandemic has obviously been a challenge for all of us but I’m proud of how the team pulled together, stayed committed to our purpose and kept working to transform the Company.

When I look at Smith+Nephew today, the Company is prepared for the opportunities in the coming years. We have acquired and integrated a range of new growth assets. We have put the commercial structures in place to serve the changing ways of delivering healthcare. And the deep pipeline of innovation that is now in place across the portfolio is truly impressive.

Smith+Nephew is at an inflection point, with a clear ambition and Strategy for Growth. I’d like to wish my successor all the best in leading this great Company through its next exciting chapter.


Roland Diggelmann
Chief Executive Officer