Half Year 2026 Smith & Nephew PLC Earnings Call Transcript
Key Points
- Strong trading profit growth of 9% (excluding M&A) with margin expansion of 60 bps to 18.3%, driven by efficiency savings and tariff refunds.
- Sports Medicine & ENT delivered another excellent quarter with 8.6% underlying growth, led by double-digit growth in REGENETEN, FASTSEAL, and joint repair.
- Efficiency savings increased to $200 million for 2026, with $133 million delivered in H1, and cumulative savings reached the lower end of the $325-$375 million target a year ahead of schedule.
- Tariff refunds fully offset the forecast tariff headwind, resulting in a broadly neutral impact on trading profit for 2026.
- Strong innovation momentum with FDA approval of TESSA, launch of 9 new products year-to-date, and continued growth in CORI robotics placements and utilization.
- Inventory reduction improved significantly, with group DSI down 72 days (40 days excluding reclassification), reflecting better capital efficiency.
- Maintained full-year guidance for trading profit (~$1.3 billion), free cash flow (~$800 million), and ROIC above 10% despite lower revenue outlook.
- Underlying revenue growth of 1.6% in Q2 was below expectations, leading to a reduced full-year revenue growth outlook of around 4%.
- US Orthopaedics remained weak, with knees continuing to underperform due to a portfolio gap in Cementless implants and hips impacted by CATALYSTEM set deployment delays.
- Advanced Wound Bioactives declined 12.7% in Q2, driven by SANTYL softness (due to prior authorization friction and distributor demand normalization) and skin substitutes reimbursement headwinds.
- Skin substitutes trading profit headwind is now expected to be towards the upper end of the $20-$40 million guidance range, with market adaptation slower than expected.
- US revenue declined 1.3% in Q2, reflecting softer performance in Orthopaedics and Advanced Wound Bioactives.
- China VBP implementation is expected to create a profit headwind of $15-$20 million for the full year, with continued inventory reduction impacting growth.
- The acquisition of Integrity Orthopaedics is expected to be marginally dilutive to trading profit in 2026, with accretion only from 2028.
Good morning, everyone. Welcome to the Smith & Nephew Q2 and half one results presentation. I'm Deepak Nath, I'm the Chief Executive Officer; and joined by
So this quarter, we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine & ENT performed strongly once again, with consistent delivery across regions and categories, and we saw double-digit growth from many of our key products. However, this was offset by softness in US Orthopaedics and in Advanced Wound Bioactives.
In US Orthopaedics, knees remain weak, reflecting similar dynamics to Q1, although we saw a sequential improvement as expected. And we do anticipate further improvement
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