Full Year 2016 Results

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Forward looking statements
This document may contain forward-looking statements that may or may not prove accurate. For example, statements
regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking
statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target",
"consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to
differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include: economic
and financial conditions in the markets we serve, especially those affecting health care providers, payers and customers;
price levels for established and innovative medical devices; developments in medical technology; regulatory approvals,
reimbursement decisions or other government actions; product defects or recalls or other problems with quality
management systems or failure to comply with related regulations; litigation relating to patent or other claims; legal
compliance risks and related investigative, remedial or enforcement actions; disruption to our supply chain or operations or
those of our suppliers; competition for qualified personnel; strategic actions, including acquisitions and dispositions, our
success in performing due diligence, valuing and integrating acquired businesses; disruption that may result from
transactions or other changes we make in our business plans or organisation to adapt to market developments; and
numerous other matters that affect us or our markets, including those of a political, economic, business, competitive or
reputational nature. Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange
Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual
report on Form 20-F, for a discussion of certain of these factors. Any forward-looking statement is based on information
available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to
Smith & Nephew are qualified by this caution. Smith & Nephew does not undertake any obligation to update or revise any
forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.

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Olivier Bohuon
Chief Executive Officer
Full Year 2016 highlights
Full Year
Underlying
2016 2015
growth
Comments
$m $m
Revenue 4,669 4,634 2% Revenues +2% underlying (+1%
reported)
Sports Medicine Joint Repair +8%
Trading profit 1,020 1,099 BlueBelt up more than 50%
Recon +2% with Knees +4%
Trading profit margin 21.8% 23.7%
strong PICO growth continues

Trading profit margin 21.8% (-190bps)

Operating profit 801 628
Operating profit EPSA 82.6 (-3% reported)
17.2% 13.6%
margin
Full year dividend [30.8]

EPS 88.1 45.9

EPSA 82.6 85.1
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 Q4 revenue growth of -1% underlying*

Geographical growth Revenue split Product franchise growth

Sports Medicine 5%
Joint Repair

Arthroscopic
0% Enabling Tech -3%
US
Trauma &
-4%
Extremities
Other Surgical 15%

Knees 0%

-3%
Est OUS Hips -6%
-3%
AWC
1%
Emerging AWB 2%
3%
AWD

-5% 0% 5% -10% 0% 10%

Underlying change (%) Underlying change (%)

* Underlying growth is not adjusted for the impact of four fewer selling days in Q4 2016 compared to Q4 2015
Est OUS is Australia, Canada, Europe, Japan and New Zealand;
Other Surgical includes ENT and robotics sales (excluding implant sales)

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Sports Medicine, Trauma & OSB

Q4 revenue performance*
Sports Medicine Joint Repair +5% ($159m)
Arthroscopic Enabling Technologies (AET) -3% ($168m)
Trauma & Extremities -4% ($120m)
Other Surgical Businesses** +15% ($48m)

Commentary
LENS and WEREWOLF well received
Gulf States remain a headwind in Trauma
first NAVIO sale in India

LENS
Surgical Imaging System

* Underlying growth rates are not adjusted for the impact of four fewer selling days in Q4 2016 compared to Q4 2015
** Other Surgical Businesses includes ENT and robotics sales (excluding implant sales)
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Reconstruction

Q4 revenue performance*
Knees: global 0%, US -3%, OUS +3% ($247m)
Hips: global -6%, US -5 %, OUS -7 % ($153m)

Commentary
JOURNEY II remains primary growth driver
ANTHEM launched in several Emerging Market
countries
REDAPT Revision System starting to contribute to
growth
ANTHEM
Knee System

* Underlying growth rates are not adjusted for the impact of four fewer selling days in Q4 2016 compared to Q4 2015
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Advanced Wound Management
Q4 revenue performance*
Advanced Wound Care -3% ($186m)
Advanced Wound Bioactives +1% ($97m)
Advanced Wound Devices +2% ($44m)

Commentary
AWC: strong US growth off-set by Europe
and China
PICO growth continues
SANTYL volume growth

PICO
Single Use Negative Pressure Wound Therapy

* Underlying growth rates are not adjusted for the impact of four fewer selling days in Q4 2016 compared to Q4 2015
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Ian Melling
SVP Group Finance

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Q4 and Full Year Revenue growth

Q4 2016(1) FY 2016(1)
Growth % Growth %

Underlying -1% Underlying 2%

Acquisitions / Acquisitions /
-1% 0%
Disposals Disposals

Currency -1% Currency -1%

Reported -3% Reported 1%

(1) Q4 2016 comprises 60 trading days (2015 64 trading days). Full year comprises 251 days (2015 251 days)

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Full Year Financial Highlights

Reported Trading
2016 2015 2016 2015

Revenue $4,669m $4,634m $4,669m $4,634m

Operating profit $801m $628m

Trading profit(1) $1,020m $1,099m

Operating / Trading profit margin(1) 17.2% 13.6% 21.8% 23.7%

EPS / EPSA(1) 88.1 45.9 82.6 85.1

Cash generated from operating activities / Trading

$1,035m $1,203m $765m $936m
cash flow(1)

(1) Non-GAAP measure: Reconciled to the relevant GAAP measure in the Fourth Quarter Trading and Full Year 2016 Results announcement
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Full year trading income statement

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Group trading margin 2016

Year-on-year trading margin movement Key trading margin drivers

23.7%
21.8% Exchange and price

Robotic Technologies and GYN

disposal

Loss of leverage from lower sales

growth

Group Optimisation

2015 2016

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Full year IFRS profit adjusting items

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Full year EPSA and EPS

Tax rate* 2016: 23.8% 2015: 26.8%

* Tax rate on Trading results of 23.8% in 2016 includes a one-off benefit following agreement with IRS
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Full year free cash flow

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 Cash flow and capital allocation

Reinvest for Progressive Acquisitions Return

organic dividend & disposals excess to
growth
1 policy
2 3 share-
holders
4
0

(300)

(600)
$m

(900)
(392)
(1,200)
(279) 9
(1,500) (1,361) 849
(300)
(1,800) (76) (1,550)
Dec-15 FCF pre capex Capex Dividends BlueBelt and Share buy Other Dec-16
Net Debt GYN back Net Debt

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Olivier Bohuon
Chief Executive Officer
Strategic priorities and rebalancing

Winning in Established Markets 2011* Future

Accelerating development in
Emerging Markets Lower Higher
Growth Growth
Innovating for value 65% 65%
Simplifying and improving our Improving
operating model Strengthening
Higher Creating Lower
Supplement organic growth Growth Growth
through acquisitions 35% 35%
Proportion of Revenue
* Excluding Clinical Therapies

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2011-2016: our journey here
We invested in our growth platforms
and our infrastructure
Stepped up R&D investment
Organic Built our presence in Emerging
investments Markets
Built a global infrastructure
Healthpoint, ArthroCare
Acquisitions Distribution in Emerging Markets
Technologies e.g. Robotics
We simplified the Group structure
and invested in talent
Streamlined from four independent silos to a
single group structure
Created single country MD model and global
functions
Established governance and rigour around
capital deployment
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2017 2018: driving improved execution
A structure fit to implement
our strategy
Organisational structure is fully
in place
Commercial operations; single
country MD model
Global functions to drive
excellence and efficiency
Tools to execute better
Improve salesforce excellence
Drive better pricing
Support sales with compelling
Health Economic evidence
Enhance market access in
procurement driven
environments
Ongoing improvement
programmes
Research & Development
Strengthening supply chain
Responding to increasing
regulatory requirements
Harmonising our IT systems
Shared Business Services
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Innovation remains at the heart of Smith & Nephew
Driving innovation
Global R&D function
Single group R&D strategy with focused
organisation
Prioritisation and harmonisation of
projects
Better execution of product launches
External vs internal competencies
Strong product lines
JOURNEY II Knee System
REDAPT Revision Hip System
NAVIO Surgical System
Our comprehensive Joint Repair portfolio
COBLATION WEREWOLF System
LENS Surgical Imaging System
TRIGEN INTERTAN Intertrochanteric Nail
PICO Single Use NPWT
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Our 2017 guidance and medium-term outlook

Sales growth: Trading profit margin: Tax rate(2):

2017 Reported(1): 1.2% to 2.2% 20-70bp improvement Around 26%
Underlying: 3% to 4%

Underlying sales growth: Trading profit margin: Cash:

Medium -
Consistent growth above Ongoing improvement Releasing cash to
term market invest in M&A and/or
return to shareholders

(1) Based on exchanges rates prevailing on 31st January 2017.

(2) Tax rate on trading result

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A stronger Smith & Nephew

iple growth drivers

A fundamentally in a unique, strong, with multiple drivers of
transformed Group global position higher growth

Sports Medicine leadership

Innovative Knee portfolio
including robotics
PICO changing the NPWT
landscape
Emerging Markets
M&A optionality

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Appendices
Trading income statement - half and full year
H1 H2 Full Year

2016 2015 2016 2015 2016 2015

$m $m $m $m $m $m

Revenue 2,328 2,272 2,341 2,362 4,669 4,634

Cost of goods sold (632) (566) (640) (577) (1272) (1,143)

Gross profit 1,696 1,706 1,701 1,785 3,397 3,491

Gross profit margin 72.8% 75.1% 72.7% 75.6% 72.8% 75.3%

Selling, general and admin (1,100) (1,084) (1,047) (1,086) (2,147) (2,170)

Research and development (113) (110) (117) (112) (230) (222)

Trading profit 483 512 537 587 1,020 1,099

Trading profit margin 20.8% 22.5% 22.9% 24.9% 21.8% 23.7%

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IFRS profit adjusting items half and full year
H1 H2 Full Year

2016 2015 2016 2015 2016 2015

$m $m $m $m $m $m

Trading profit 483 512 537 587 1,020 1,099

Acquisition related costs (6) (13) (3) 1 (9) (12)

Restructuring and rationalisation (35) (19) (27) (46) (62) (65)
Amortisation of acquisition intangibles (67) (78) (111) (126) (178) (204)
Legal and other items (18) 37 48 (227) 30 (190)

IFRS Operating profit 357 439 444 189 801 628

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EPSA and EPS half and full year
H1 H2 Full Year

2016 2015 2016 2015 2016 2015

$m $m $m $m $m $m
Trading profit 483 512 537 587 1,020 1,099
Net interest payable (24) (21) (22) (20) (46) (41)
Other finance costs (6) (7) (5) (6) (11) (13)
Share of results from associate - (3) 2 (2) 2 (5)
Adjusted profit before tax 453 481 512 559 965 1,040
Taxation (119) (131) (111) (148) (230) (279)
Adjusted attributable profit 334 350 401 411 735 761

Number of shares million 894 894 881 894 890 894

Adjusted earnings per share ("EPSA") 37.4 39.1 45.5 46.0 82.6 85.1

Earnings per share ("EPS") 27.0 33.0 61.6 12.9 88.1 45.9

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Free cash flow half and full year
H1 H2 Full Year
2016 2015 2016 2015 2016 2015
$m $m $m $m $m $m
Trading profit 483 512 537 587 1,020 1,099
Share based payment 14 13 13 16 27 29
Depreciation and amortisation 147 148 153 159 300 307
Capital expenditure (174) (161) (218) (197) (392) (358)
Movements in working capital and other (215) (130) 25 (11) (190) (141)
Trading cash flow 255 382 510 554 765 936

Trading cash conversion 53% 75% 95% 94% 75% 85%

Restructuring, rationalisation, acquisition

(49) 36 (73) (127) (122) (91)
& other
Operating cash flow 206 418 437 427 643 845
Net interest paid (24) (17) (21) (19) (45) (36)
Taxation paid (87) (72) (54) (65) (141) (137)
Free cash flow 95 329 362 343 457 672
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Franchise revenue analysis
2015 2016
Full
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Full Year
Year
Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth
% % % % % % % % % $m %
Sports Medicine, Trauma &
5 4 2 5 4 5 4 4 1 1,907 3
OSB
Sports Medicine Joint Repair 9 7 4 9 7 11 10 8 5 587 8
Arthroscopic Enabling
(2) 1 (2) 3 - 4 4 2 (3) 631 2
Technologies
Trauma & Extremities 5 2 2 - 2 (7) (6) 1 (4) 475 (4)
Other Surgical Businesses* 11 7 10 13 10 19 14 12 15 214 15

Reconstruction 1 4 3 4 3 7 3 2 (2) 1,529 2

Knee Implants 2 7 6 6 5 9 5 4 - 932 4
Hip Implants (1) 1 (2) 1 - 4 - - (6) 597 (1)

Advanced Wound Management 1 7 6 8 6 - (3) (1) (1) 1,233 (1)

Advanced Wound Care 9 12 6 4 8 - (7) (2) (3) 719 (3)
Advanced Wound Bioactives 5 6 2 16 7 (4) 4 (3) 1 342 -
Advanced Wound Devices (27) (9) 17 14 (3) 11 1 5 2 172 5

Group 3 5 4 5 4 4 2 2 (1) 4,669 2

All revenue growth rates are on an underlying basis 30

* Other Surgical Businesses includes ENT, Gynaecology (prior to divestment in August) and robotic sales (excluding implant sales)
 Regional revenue analysis
2015 2016

Full
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Full Year
Year

Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth

% % % % % % % % % $m %

Geographic regions

US 1 4 4 9 5 8 4 2 - 2,299 3

Other Established Markets (2) 3 1 2 1 4 1 - (3) 1,679 -

Established Markets - 3 3 6 3 6 3 1 (1) 3,978 2

Emerging Markets 22 14 8 2 11 (6) (2) 6 3 691 -

Group 3 5 4 5 4 4 2 2 (1) 4,669 2

Other Established Markets is Australia, Canada, Europe, Japan and New Zealand.
All revenue growth rates are on an underlying basis
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2017 Technical guidance
Guidance Full year

Restructuring costs Nil

Acquisition and integration costs c. $5m
Amortisation of acquisition intangibles c. $120m
Income from associates ~$0m
Net interest payable $50m - $55m
Other finance costs similar to 2016
Tax rate on Trading result c. 26%

Foreign exchange and other

Impact of disposal of Gynaecology business on revenue -80bps
Impact of translational FX* on revenue c. -1%

* Based on foreign exchange rates prevailing on 31st January 2017 32

Analysis of restructuring costs
P&L Charge Cash Spend
Previous Previous
FY Total to date FY Total to date
Total to Date Total to Date
Group Optimisation
$m $m $m $m $m $m
Plan
Cash costs 105 57 162 84 60 144

Asset w/offs - 3 3 n/a n/a n/a

Total 105 60 165 84 60 144

Structural Efficiency
$m $m $m $m $m $m
Programme

Cash costs 149 2 151 146 2 148

Asset w/offs 21 - 21 n/a n/a n/a

Total 170 2 172 146 2 148

Of the $62m total charged in the full year, all $62m are reflected in selling, general and administrative expenses and nothing in
cost of goods sold in the Group Income Statement.

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Business days per quarter

Q1 Q2 Q3 Q4 Full Year
2015 61 63 63 64 251

2016 64 64 63 60 251

2017 64 63 63 60 250

Year-on-year differences in the number of trading days typically impacts our surgical
businesses in the Established Markets more than our wholesaler and distributor-supported
businesses.

We define trading days as week days adjusted for significant holidays in our principal countries.

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Exchange rates

Q4/15 FY/15 Q1/16 Q2/16 Q3/16 Q4/16 FY/16

$:
Period end 1.09 1.09 1.14 1.11 1.12 1.05 1.05
Average 1.10 1.11 1.10 1.13 1.12 1.08 1.11

$:
Period end 1.48 1.48 1.42 1.33 1.30 1.23 1.23
Average 1.52 1.53 1.43 1.43 1.31 1.24 1.35

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