Annual Report 2025

Dear Fellow Shareholder

After three years of delivery, we are now ready to RISE.

 

2025 performance

As in the two previous financial years under Deepak’s leadership, the targets we set at the beginning of the year were met or exceeded, with revenue up 6.1% on a reported basis which equates to 5.3% on an underlying basis¹ and trading profit margin and operating profit margin¹ both up 160bps. Free cash flow¹ was up by $289 million, with cash generated from operations up $304 million and adjusted return on invested capital (ROIC)¹ up 90bps including a -160bps headwind from portfolio rationalisation. Adjusted earnings per share¹ increased by 17.7¢ per share (earnings per share up 24.9¢), and the Board is recommending a final dividend of 24.1¢ per share. This is in addition to the $500 million share buyback announced and executed in the second half of 2025. Together with the interim dividend of 15.0¢ per share, this will give a total distribution of 39.1¢ per share. Full details of our financial performance are set out in the report, but the final year of our 12-Point Plan clearly underlines the extent of the operational and financial transformation that the Smith+Nephew management team has delivered, and the 28% increase in the share price during the year was pleasing evidence that investors are beginning to appreciate the progress we have made.

 

Strategy

Our 12-Point Plan, which was presented to investors in 2022, set our priorities for the three years to 2025. Its objectives were: to improve the performance of the Orthopaedics business; to accelerate growth in our leading Sports Medicine and Advanced Wound Management businesses; and to embed sustainable improvements in operations and performance to improve productivity and support margin expansion. I am pleased to say that these objectives have been largely achieved by Deepak and his team.

 

Over the last three years, Smith+Nephew has transformed from being a low growth business to one which can deliver mid single-digit reven

ue growth; trading margin has significantly expanded despite external headwinds; adjusted ROIC¹has improved by 170bps, and free cash flow¹ has improved from $56 million in 2022 to $840 million in 2025. These metrics are evidence of a business which has been materially improved by a process of transformation.

 

At our Capital Markets Days in December, management set out our strategy for the next three years, which is called, appropriately, “RISE”. It focuses on Reach (expanding our product portfolio and market penetration to reach more patients); Innovation (accelerating growth through innovation in products and services); Scale through strategic investment (shifting capital allocation to higher growth areas and investing in market access and development); and Executing efficiently (driving Group-wide productivity improvements and further operational savings).

 

Alongside these operational objectives, management has set out ambitious but achievable financial targets. Over the next three years, the team believes it can deliver organic revenue¹ compound annual growth rate (CAGR) of 6-7%, trading profit¹CAGR of 9-10%, and, in 2028, free cash flow¹ of over $1 billion and adjusted ROIC¹ of 12-13%. Achieving these targets will deliver significant value to shareholders. Deepak covers RISE and the three-year financial targets in greater detail in the following pages.

 

An effective, energised Board

 

Over the last two and a half years, the Board has seen much change in its membership: a new Chair (me), a new Executive Director (John Rogers, Chief Financial Officer) and six new Non-Executive Directors, amongst whom are a new senior independent director (Thérèse Esperdy, who will succeed Angie Risley at the AGM in May 2026); a new Chair of the Audit Committee (Jez Maiden); and a new chair of the Remuneration Committee (Sybella Stanley).

 

In managing this level of change on the Board, we have been keen to balance the skills and experience needed for a complex, highly regulated business where growth is driven by innovation in advanced technologies; where product portfolio management is a key contributor to value; which has complex supply chains and significant in-house manufacturing. And it is also a business which faces many of the same challenges as other listed companies of similar scale, such as AI, IT transformation and cyber defence, skills and succession, turbulent geopolitics, M&A, investor relations and capital markets.

 

Recent additions to our Board reflect these diverse requirements. Both David King and Garheng Kong are US-based and bring deep knowledge of the MedTech sector. David has been both CEO and Chair of significant US MedTech companies, and Garheng is by training a physician, engineer and a scientist and a highly successful investor in high-growth MedTech companies. Thérèse Esperdy is based in the US and has a long and distinguished track record as the Chair of one FTSE-50 company and as Senior Independent Director of another, as well as senior executive experience in investment banking in Asia and the US. Sybella Stanley has been Chair of the Remuneration Committee at two other UK-listed businesses and has wide experience of M&A. I think that this combination of skills and experience will serve the Board well in the years ahead.

 

During 2025, Bob White stepped down from our Board to serve as the CEO of Olympus Corporation, and Angie Risley, currently Senior Independent Director and formerly Chair of the Remuneration Committee, will step down at the May AGM after nine years of service on our Board. I am profoundly grateful for the service of both of them, as they have brought wisdom, judgement and common sense to our proceedings. Marc Owen completes his ninth year of service in September 2026, but at the request of the Board has agreed to stay on into 2027. His knowledge of both MedTech and Smith+Nephew is deep and his contribution to the Board is immense, and I am grateful that he has agreed to continue to serve on the Board a little longer to support continuity.

 

I am pleased to say that by the end of December 2025 we are close to the 40% ambition of women on the Board and through Board rotation and retirements we will make further progress. Angie Risley will be succeeded by Thérèse Esperdy as Senior Independent Director, ensuring continued gender diversity amongst the most senior Board positions.

 

The Board also places strong emphasis on supporting our communities and reducing our impact on the planet and its resources. During the year, we reviewed progress across our sustainability strategy aligned to the objectives and interests of our key stakeholders. More information on our progress against our sustainability targets, including our roadmap to net zero, can be found on pages 64 to 77 and in our Sustainability Report.

 

The Board continues to welcome open dialogue with our shareholders on topics of interest and will continue to listen and embed feedback to shape our approach.

 

The remuneration journey continues

 

We cannot deliver our future strategy and plans to create value for stakeholders unless the Board has the ability to attract and retain management who have the skills, knowledge and experience to lead Smith+Nephew to achieve its full potential. The centre of gravity for the MedTech industry is the US, and this is reflected in the fact that we have an American citizen, resident in the US, as our CEO, and 10 out of 12 of the Group’s Executive Committee are based in the US. Over 50% of our revenues and 35% of our employees are based in the US, compared to 4% and 7%, respectively, in the UK.

 

To retain and recruit MedTech executives of the capability expected by our stakeholders to drive value creation, the Board requires the flexibility to offer compensation structures which are competitive in the market in which executive talent live and work, which in Smith+Nephew’s case is likely to be the US. Trying to persuade successful US-based executives that they should leave their current employment and accept substantially less money simply because Smith+Nephew is UK listed is not likely to be successful.

 

In 2023, we carried out a thorough review of our Executive Directors’ pay, and, as a consequence, we came to shareholders in 2024 for approval out of cycle for a Remuneration Policy for US-based Executive Directors which was more closely aligned to the norms of employees living and working in the US, the home of MedTech. We wish to thank shareholders for their support of the 2024 policy at a time when our ambitions did not fit squarely within the four corners of established UK Corporate Governance norms on remuneration. We also said at the time that our request was the first step in a journey to align our pay practices with the markets from which we source our executives.

 

In 2025, and to coincide with the launch of our RISE strategy, we reviewed Executive Directors’ pay, and concluded that we had to look again at this thorny issue for two reasons. First, when we carried out the first review in 2023, Deepak Nath was only 18 months into his first listed-company CEO role; his pay was set at a level that was at the time between Median and Lower Quartile of a benchmark peer group, which the Board felt was appropriate at the time. By the time of this year’s AGM, Deepak will have been in role for more than four years and has shown himself to be one of the most effective CEOs in the MedTech industry. Under his leadership, the financial and operational performance of the business has been transformed, and the Total Shareholder Return over the last three years has far outperformed its MedTech peer group (+22% vs -6% for peer group), and the Board believes he should be paid in line with peers in the industry. The Board also need to have a Policy which allows us to recruit someone else of the same calibre to take Smith+Nephew forward, should we need to do so.

 

Secondly, over the last two years Executive Director pay amongst our MedTech benchmark peer group has increased very markedly, resulting in current compensation being well below Lower Quartile and around half that of the Median in the peer group. We do not believe this is a sustainable position for us to be in, and in our Remuneration Report we set out the changes we propose to rectify the situation.

 

The decision to recommend a new policy was taken after our Chair of Remuneration, Sybella Stanley, and I had consulted with investors holding approximately 70% of our issued share capital over the last few months, and the Board strongly believes that making these changes is in the best interests of all stakeholders.

 

Outlook: ambitious and achievable

 

Since Smith+Nephew’s founding as a pharmacy in 1856, we have delivered innovation that has transformed patient care. From our roots in Advanced Wound Management we launched the first mass-produced elastic adhesive bandage, Elastoplast, in 1928 which combined compression, fixation and protection in a single product. In Sports Medicine we were an innovator in arthroscopic surgery and bio-inductive regeneration. In Orthopaedics we have pioneered advanced knee systems, cementless hips and robotic surgery.

 

Over the last three years, Smith+Nephew has continued that tradition of innovation, and has been transformed into a strong, agile, higher-growth company. The Board is greatly encouraged by the progress the Group has made, and is excited to see the Company’s new strategy and the ambitious financial and operational targets which management is confident it can deliver.

 

On behalf of the Board, I would like to recognise and express our appreciation to all our Smith+Nephew colleagues, who remain focused on our purpose of Life Unlimited, helping people to take the limits off living and restore and promote health and wellbeing. The Board is extremely grateful for their hard work and is proud to be part of the same team.

 

We look forward to welcoming shareholders to our Annual General Meeting in person in May and to updating you further on our strategy and performance.

 

Yours sincerely,

Rupert Soames, OBE
Chair

 

^{1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 285–292 of the full Annual Report.}

Dear Fellow Shareholder

 

We delivered a strong set of full year results, including good revenue growth and significant improvements in profitability, cash generation and return on invested capital. All three business units contributed, as we offset meaningful headwinds through disciplined execution and cost control. We also maintained a strong cadence of new product launches and increased investment in R&D to support an exciting pipeline of future innovation.

 

We have now completed our three-year 12-Point Plan transformation, creating a fundamentally stronger business and a springboard for future growth. We have significantly improved Smith+Nephew’s financial performance, meeting our commitments each year, and delivering a step-change in revenue growth and meaningful trading profit margin expansion despite significant and unexpected macro pressure.

 

Building on this progress, we launched our new RISE strategy in December, marking an ambitious but achievable next phase for Smith+Nephew.

 

RISE is our roadmap to reach more patients, unlock new categories of innovation, scale through strategic investment, and execute efficiently. Together, it will allow us to step-up performance towards new 2028 financial targets. These include delivering a 6-7% organic revenue¹ compound annual growth rate (CAGR) and 9-10% trading profit¹ CAGR. We expect continued strong cash generation and to reach over $1 billion free cash flow¹ by 2028, with 12-13% adjusted Return on Invested Capital¹ (ROIC), significantly above our cost of capital.

 

Over the next three years, we expect every business unit to contribute uniquely to our value creation. Sports Medicine, Advanced Wound Management and ENT are expected to drive above-market growth through innovation and disciplined execution, while Orthopaedics, operating in a more mature segment, is expected to return to delivering market-level growth, supporting margin expansion, and enhanced returns.

 

We expect to grow free cash flow, enabling ongoing investment in innovation and open new strategic opportunities, and we intend to empower our highly engaged workforce with world-class tools and processes.

 

2026 is the first step in that journey and we are confident in delivering an acceleration in growth and returns. With our strengthened foundations and new strategy we are well set to expand our leadership in healthcare innovation and deliver sustainable value for shareholders, customers, employees and communities into the future.

 

2025 performance

 

Group revenue for 2025 was $6,164 million (2024: $5,810 million), reflecting underlying revenue growth of 5.3%, ahead of our 2025 guided target of around 5%. Reported growth of 6.1% was after incurring an 80bps tailwind from foreign exchange, primarily due to the strength of the Euro. Each of our three global business units delivered underlying revenue growth above 5%.

 

Trading profit¹ for 2025 was up 15.5% to $1,211 million (2024: $1,049 million). The trading profit margin1 was 19.7% (2024: 18.1%), a 160bps improvement on the prior year. Operating profit increased 20.7% to $794 million (2024: $657 million).

 

Cash generated from operations was up 24.4% to $1,549 million (2024: $1,245 million) and trading cash flow, at $1,236 million (2024: $999 million), was up 23.7%, with 102% trading cash conversion (2024: 95%). Free cash flow¹ increased by 52.5% to $840 million (2024: $551 million), including the benefit of a one-off $26 million property transaction, well ahead of our initial 2025 guidance of more than $600 million.

 

We also improved adjusted ROIC¹, which was up 90bps to 8.3% including a -160bps headwind from the portfolio rationalisation programme announced in December 2025. The improvement in adjusted ROIC¹ reflected our continued progress under the 12-Point Plan and the stronger operational discipline now embedded across the organisation.

 

Given our strong cash generation, and in line with our capital allocation policy, we completed a share buyback in the second half of 2025, returning $500 million to shareholders while maintaining our leverage ratio, and without compromising our growth plans.

 

Our 2025 financial results demonstrate clear operational progress and a sustained step up in performance across each of our three global business units. It is the third consecutive year of improved performance and delivery against our commitments.

 

12-Point Plan transformation

 

Since I became CEO in 2022, my priority has been executing the 12-Point Plan to transform Smith+Nephew.

 

This plan had three pillars, designed to fix our underperforming Orthopaedics business, improve overall productivity, and accelerate our leading Sports Medicine and Wound businesses. We have made demonstrable progress across these pillars, delivering the step-change in financial performance described above.

 

Within Orthopaedics, we have addressed supply issues and right-sized capacity, returned Trauma and Hip Implants growth to market levels or higher, and accelerated the underlying revenue growth of our Orthopaedics business unit from 1.9% in 2022 to 5.1% in 2025 (reported growth was -2.0% in 2022 and 5.7% in 2025). We continue to prioritise improving performance in US Knee Implants, which represents less than 9% of Group revenue. We expect the launch of our new LANDMARK◊ Knee System in the second half of the year. LANDMARK will bring the proven clinical benefits of our knee portfolio into a single platform that combines advanced kinematics with personalisation, robotic enablement, and ease of implantation, while unlocking capital efficiency by leveraging on existing instrumentation. With it, we will be able to address key surgeon preferences and participate in all key segments across all sites of care. It will also feature best in class tray efficiency, making it particularly suitable for Ambulatory Surgery Centers.

 

We also continued to deliver strong results from our faster growth, higher margin Sports Medicine and Wound businesses throughout the period.

 

Smith+Nephew’s innovation pipeline has been a significant contributor to our transformation. In 2025, more than 60% of underlying revenue growth came from products launched in the last five years, and we improved our portfolio with 15 new platforms and product enhancements across all global business units.

 

Significantly strengthened the business

 

The 12-Point Plan was designed not only to deliver on specific actions in the short term, but also to embed fundamental, lasting changes in our behaviours, operations and performance, and raise the standard on how we deliver for our patients, customers and shareholders.

 

I’m pleased to confirm that we have successfully embedded these changes, thanks to the collective effort of every Smith+Nephew employee. We have put in place new processes to transform how we work, bringing greater focus, rigour and consistency to everything we do.

 

In 2023, we moved our commercial operations from a complex matrix-based model across franchises and regions to a simpler global business unit structure, with vertical teams for each of Orthopaedics, Sports Medicine & ENT and Advanced Wound Management. This is driving greater accountability, faster decision making and execution, and has allowed us to increase customer focus across the portfolio.

 

Importantly, we have sharpened our focus on cash and capital returns through a number of initiatives, and aggressively tackled the cost base. The move to allocate central costs attributable to each business unit is driving greater accountability and efficiency, with each business unit having full profit and loss and capital accountability.

 

We are on track to deliver the $325 to $375 million of gross cost savings we targeted, with the largest savings coming from manufacturing and procurement.

 

We also introduced much greater rigour and discipline in capital allocation, improving inventory set turn rates by deploying sets to more productive accounts. The resultant increase in free cash flow¹ allowed us to step up our focus on innovation and deliver a high cadence of new products.

 

Stronger financial performance

 

Through the 12-Point Plan, we have moved Smith+Nephew from an historically low single-digit revenue growth company to one consistently delivering mid single-digit growth, with a reported CAGR of 5.7% over the last three years.

 

We have expanded trading profit margin¹ by 240bps, from 17.3% in 2022 to 19.7% this year, whilst also overcoming some 1,000bps of macro challenges from Volume Based Procurement in China and higher inflation.

 

Our increased focus on cash and capital returns has yielded an impressive fifteen-fold increase in free cash flow¹ from $56 million in 2022 to $840 million in 2025. Finally, adjusted ROIC1 has increased 170bps from 6.6% to 8.3% including the -160bps headwind from portfolio rationalisation.

 

I am proud of these achievements. We have proven that we are capable of executing on multiple high priority imperatives at the same time. We have emerged a stronger organisation as a result. But this transformation is just the beginning, not the limit of our ambition.

 

Reach more patients

We believe RISE will allow Smith+Nephew to Reach more patients, moving from the more than 15 million we treat today to around 20 million in 2028.

 

Our rich portfolio contains several key products, already launched, each with significant growth potential. We are sharpening our focus on these to maximise the reach of our most highly differentiated products through new market entry, expanded indications to access new patient populations, driving adoption globally, and accessing high growth channels and new care settings.

 

These products include:

• REGENETEN◊ where we are redefining tendon and ligament repair with our bioinductive implant
• AGILI-C◊ which is addressing unmet needs in cartilage repair
• PICO◊ which transforms negative pressure wound therapy in the outpatient and home settings, and where we see significant opportunity to use for enhanced surgical wound healing post surgical procedures
• ALLEVYN◊ Complete Care which is our unique five layer dressing, and
• CORI◊ with our differentiated approach to robot-assisted orthopaedic surgery, which is one platform for all joints.

 

Each of these products is a growth engine in its own right – and together, they represent a powerful portfolio that will expand the market and take share. Through these products, we can reduce recovery times and re-admissions, get people back to their daily lives and return to work quicker – which is good for patients and their families, for healthcare systems and for economies.

 

We are well positioned to take full advantage of market shifts, such as the transition of joint replacement into Ambulatory Service Centers from hospital inpatient settings with our CORI system. We intend to transform the standard of care with disruptive products like TULA◊ in ENT and increase participation in high-growth emerging markets.

 

Through these actions, we expect to achieve our clear ambition to move from category to market leadership in Sports Medicine and Advanced Wound Management.

 

Innovate to enhance the standard of care

In addition to these key products, we expect to maintain our industry-leading cadence of new product launches, with more than 75 launches over the last five years.

 

We are excited by the pipeline of products we have coming in Orthopaedics over the next 18 months, including the launch of our new LANDMARK Knee System, which is expected to leapfrog ahead of competition with its differentiating features.

 

We have a significant opportunity to enhance standard of care with our scalable biologics platform which we can accelerate to deliver more highly differentiated solutions across our business and the full continuum of care. And with solutions like TESSA◊, our first in industry spatial surgery arthroscopic platform, we remain on the cutting edge of care through procedural advances to improve surgical outcomes.

 

Through our patient first approach, we are focusing innovation where there is the greatest unmet need, such as our next-generation cloud-connected LEAF◊ patient monitoring sensor to prevent pressure injuries.

 

Scale through strategic investments

We have demonstrated our ability to generate significant cash through our strengthened business and, going forward, we intend to allocate this capital to higher growth segments.

 

These initiatives will focus primarily on our Sports Medicine and Advanced Wound Management businesses, where we will leverage our capabilities in market access to develop compelling health economic outcomes research whilst further strengthening our commercial execution and innovation by reinvesting productivity gains back into these functions. Accelerating our M-TECH platform capabilities is a great example of the opportunity we have to scale up solutions that we can deploy across the Group through targeted inorganic partnerships.

 

Within our Orthopaedics business, we will be focused on allocating capital and deploying inventory to those platforms which have proven returns, such as robotics.

 

We plan to deploy our increased free cash flow into our high growth, high return businesses and see opportunity for acquisitions to support our strategy to build on our areas of strength. Whilst there are many opportunities in the MedTech space, we will remain laser focused, only pursuing those that fit our strategy.

 

This approach was clearly demonstrated in January 2026 with the acquisition of Integrity Orthopaedics, the developer of an innovative rotator cuff repair system designed to significantly reduce re‑tear rates and improve patient outcomes. This acquisition demonstrates our strategy in action and will be an important building block in our ambition to become the global leader in Sports Medicine. You can read more about this new technology and how it fits into our impressive shoulder portfolio [on page 32 of the full report].

 

Execute efficiently

Through RISE we expect to continue to improve our execution.

 

Actions include strengthening our Orthopaedics commercial engine discipline through a programme called Ortho 360. This programme includes revamped sales incentives and targeted deployment of new sets. We also intend to continue to reduce the complexity of our overall portfolio by exiting low-return categories and improve inventory health by shifting towards higher moving lines. This will enable better service levels and lower working capital.

 

We plan to adopt a single global Enterprise Resource Planning (ERP) platform and leverage analytics and artificial intelligence (AI) to drive performance and productivity across the Group. A single ERP system is expected to drive simplification, standardisation of processes and sharper execution through tighter controls.

 

We also intend to employ AI, machine learning and data analytics to drive improvements in critical processes such as supply chain, manufacturing, inventory management and pricing. This is expected to reduce our cost to serve and improve demand and supply accuracy.

 

In commercial functions, we expect to employ digital platforms to strengthen customer engagement, expand virtual training and service, and generate evidence of value for providers.

 

Finally, we intend to continue to drive Group-wide productivity improvements and reinvest these gains back into innovation and our commercial capabilities.

 

Our cultural framework

But actions can only take us so far, our purpose and culture will support successful delivery of our strategy.

 

Everyone at Smith+Nephew is united by our Purpose, to allow our patients to live Life Unlimited. This is supported by a strong culture, which was developed by our colleagues, characterised by the three pillars of Care, Courage and Collaboration. We are well prepared for the years ahead as we focus on Our Way to Win by being better, every day, through our continuous improvement mindset and behaviours.

 

Each year, we measure our progress strengthening our culture and performance through a Global Engagement Survey run by Gallup. In 2025, we saw our highest ever participation rate of 95%, with more than 16,000 colleagues heard, and our scores improved across all dimensions of the survey. Our overall engagement score has climbed to 4.33, bringing us closer to the top quartile of global companies and showing steady improvement year-on-year. We were also proud to receive the Gallup Exceptional Workplace Award for the second consecutive year.

 

I am also pleased with our progress in creating long-term value through environmental, social, and governance (ESG) excellence. This year’s achievements reflect our commitment to sustainable growth, operational efficiency and stakeholder value, core elements of our new RISE strategy. These areas are covered both in this Annual Report and in further detail in our Sustainability Report which is available on our website.

 

Taking Smith+Nephew to the next level

The 12-Point Plan has delivered, and we now have a much stronger foundation from which to deliver the next phase of our growth.

 

We have an ambitious but achievable new strategy called RISE, through which we expect to reach five million more patients by 2028.

 

Through increased investment in innovation and better execution, we are targeting share gains in Sport Medicine, Wound and ENT, while maintaining share in Orthopaedics.

 

Our continued focus on productivity and further operational efficiencies, particularly in Orthopaedics, are expected to drive profit growth. We aim to drive 300 to 400bps of Orthopaedics trading profit margin¹ expansion by 2028, and expect to exceed 20% by 2030, with a doubling of adjusted ROIC¹. Our expected strong cash generation will provide optionality for strategic M&A to reinforce success.

 

I would like to thank the entire Smith+Nephew team for their dedication and focus through our transformation. As we look ahead, I am excited by what we can achieve together. Guided by our culture pillars of Care, Courage and Collaboration, we will deliver on our purpose of Life Unlimited and be better every day for our customers, their patients, and each other.

 

Yours sincerely

 

Deepak Nath, PhD

Chief Executive Officer

^{1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 285–292 of the full report.}

Dear Fellow Shareholder

It is a privilege to write to you in a year that marks a defining moment for Smith+Nephew – one in which we completed a multi-year transformation, delivered further improvements in financial performance, and set out an ambitious new strategy to accelerate growth and returns.

A stronger business, and a step-change in financial ambition

2025 represents the culmination of work that began three years ago under the 12-Point Plan: strengthening our operational foundations, restoring performance in Orthopaedics, accelerating our Sports Medicine and Wound businesses, and embedding a culture of accountability, discipline and continuous improvement across the Group.

Our 2025 financial results demonstrate clear operational progress and a sustained step up in performance across our three global business units.

Revenue increased to $6,164 million in 2025, up 6.1% on a reported basis and 5.3% on an underlying1 basis excluding a +80bps tailwind from foreign exchange (2024: $,5,810 million), with all three global business units delivering underlying¹ revenue growth above 5%.

Trading profit¹ grew to $1,211 million in 2025, up 15.5%, driven by strong operating leverage, productivity gains and disciplined cost control. Operating profit rose by 20.7% to $794 million in 2025 demonstrating consistent delivery of margin expansion.

Free cash flow¹ reached $840 million in 2025 (2024: $551 million), an increase of 52.5% evidencing strong working capital discipline. Cash generated from operations increased to $1,549 million (2024: $1,245 million).

During 2025, we continued to improve inventory health, network efficiency and commercial execution.

This foundation has enabled us to deliver consistent higher revenue growth, expanding margins, and significantly stronger cash generation, positioning the Group for the next stage of value creation under our new strategic framework, RISE.

RISE strategy

In December 2025, we launched RISE, our strategy for the next three years. RISE is aimed to elevate performance by reaching more patients with our differentiated portfolio, innovating at a higher cadence and scaling existing innovation platforms, through investment in high return areas, and executing efficiently through higher productivity and asset efficiency to accelerate margins and cash delivery.

Alongside RISE, we also announced 2028 financial targets, including:

• 6-7% organic revenue compound annual growth rate (CAGR),
• 9-10% trading profit¹ CAGR,
• Free cash flow¹ > $1 billion, and
• Adjusted Return on Invested Capital¹ (Adjusted ROIC) of 12-13%.

These targets reflect both the strength of our core business and the opportunity created through the transformation of the last three years.

Strong cash flow

Cash generation improved significantly in 2025, driven by strong working capital discipline and lower restructuring costs. As a result, cash generated from operations improved by 24.4% to $1,549 million in 2025 (2024: $1,245 million). This translated into a significant improvement in free cash flow¹ which was up 52.5% to $840 million in 2025 (2024: $551 million), well ahead of the $600 million guidance issued at the beginning of the year. In 2025, free cash flow also includes the benefit of a one-off $26 million property transaction.

Stronger cash generation also supported a further reduction in gearing, resulting in a leverage position ahead of target and reinforcing the Group’s financial resilience as we execute against our strategic priorities. It also supported the repurchase of $500 million of shares, returning additional value to shareholders.

Improving capital efficiency through portfolio simplification

In 2025, we announced a Group-wide inventory portfolio rationalisation programme, as part of the RISE strategy, aimed at structurally reducing inventory levels and improving capital efficiency. We expect that this rationalisation programme will result in a material reduction in gross inventory, and release $500 million of capital employed over time. This action will free up cash for reinvestment into strategic growth platforms and to support progress towards the delivery of the RISE 2028 adjusted ROIC¹ target of 12–13%.

As a result of this programme, the Group recognised a $159 million non-cash excess and obsolescence provision in 2025.

Strengthening operational discipline

During 2025, we continued to strengthen the operational discipline established over the past three years. Our focus remained on driving sustainable improvements in productivity, cost efficiency and asset utilisation across the Group. This work builds on the progress delivered through the 12-Point Plan and reflects our ambition under the RISE strategy to operate with greater consistency, accountability and efficiency.

Through the year, we further embedded the zero-based budgeting approach adopted in 2024, enabling us to identify additional, durable savings. More than 40 initiatives across five workstreams remained in active execution, with the largest contributions driven by manufacturing and procurement, supported by efficiencies across commercial and enabling functions. These actions strengthened trading margin¹ and operating leverage. The foundations created through prior network and organisational restructuring also continued to underpin performance in 2025.

Driving innovation to support growth

Innovation remained a core driver of performance in 2025, with more than 60% of revenue growth coming from products launched in the last five years.

This momentum is fully aligned with our RISE strategy, which places Innovation at the centre of elevating clinical outcomes and accelerating financial performance.

As part of this strategy, we continue to advance new product development and scale existing innovation platforms, supported by the adoption of technologies such as AI to enhance productivity and operational efficiency. As CFO, I believe that this disciplined focus on innovation will enable us to deliver sustained growth in the years ahead.

You can read more about our strong innovation track record and our AI agenda on pages 27–32 [of the full report].

Improving accountability and returns

ROIC improved significantly in 2025, reflecting continued progress under the 12‑Point Plan and the stronger operational discipline now embedded across the organisation. The allocation of directly attributable central costs to business units, introduced in 2024 to reinforce ownership of performance, has enhanced accountability and sharpened focus on returns. Combined with higher trading margins¹, lower non‑trading costs¹ and improved capital efficiency, these actions delivered a clear step‑up in ROIC for the year.

Looking ahead with confidence

We enter 2026 with strong momentum and a clear roadmap. Despite extraordinary headwinds relating to inventory revaluation, tariffs, skin substitute reimbursement changes and ENT VBP in China, we expect continued revenue acceleration and trading profit¹ growth.

Our ambition is clear: to deliver sustainable, compounding value creation for our shareholders while advancing our commitment to helping patients live Life Unlimited.

Outlook

In terms of outlook, for revenue, we expect to deliver underlying¹ revenue growth to accelerate to around 6%, which equates to reported growth of around 7.8% based on exchange rates prevailing on 24 February 2026. Trading profit¹ growth is expected to be around 8%. See my Financial Commentary below for important disclosures on the details of our 2026 outlook including tax guidance.

Yours sincerely,

John Rogers

Chief Financial Officer