UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

INFORMATION FOR SHAREHOLDERS (Mark One)


☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14978

Smith & Nephew

(Exact name of Registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

Building 5, Croxley Park, Hatters Lane, Watford, Hertfordshire WD18 8YE

(Address of principal executive offices)

Helen Barraclough, +44-1923-477340, helen.barraclough@smith-nephew.com

Building 5, Croxley Park, Hatters Lane, Watford, Hertfordshire WD18 8YE

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name on each exchange on which registered
American Depositary Shares Ordinary Shares of 20¢ each 2.032% Notes due 2030 4.565% Notes due 2029	SNN SNN 30 SNLN	New York Stock Exchange New York Stock Exchange* New York Stock Exchange New York Stock Exchange

* Not for trading, but only in connection with the first registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the issuer’s class of capital or common stock as of the close of the period covered by the annual report: 877,649,585 Ordinary Shares of 20¢ each

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ⌧ No ◻

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Yes ◻ No ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.


Large Accelerated Filer ⌧	Accelerated Filer ◻	Non-accelerated filer ◻
Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ◻

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentivebased compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


◻ U.S. GAAP		⌧ International Financial Reporting Standards as issued by the International Accounting Standards Board
		◻ Other

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ◻ Item 18 ◻

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

Contents

Our performance

Strategic report

Our performance

IFC

$5,215m

Group revenue

37.5¢ Unchanged

Dividend per share

Who we are

Chair’s statement

Chief Executive Officer’s review

Reported

+0.1%

Underlying¹

+4.7%

Our business model

Key Performance Indicators

Financial review

Serving healthcare customers

Manufacturing and quality

Strengthening our Culture through leadership

$450m -24%

Operating profit

8.6% -280bps

Operating profit margin

For a healthy and sustainable future

Risk report

Our stakeholders

Governance

$901m -4%

Trading profit¹

17.3% -70bps

Trading profit margin¹

Letter from the Chair

Board leadership and purpose

Nomination & Governance Committee report

Audit Committee report

101

Compliance & Culture Committee report

108

25.5¢ -57%

Earnings per share (EPS)

81.8¢ +1%

Adjusted earnings per share¹ (EPSA)

Engaging with stakeholders

112

Directors’ Remuneration report

116

Accounts

Statement of Directors’ responsibilities

147

$581m -45%

Cash generated from operations

$444m -46%

Trading cash flow¹

Report of Independent Registered Public Accounting Firm

148

Group income statement

164

Group statement of
comprehensive income

164

Group balance sheet

165

$345m -3%

R&D investment

6.6% -150bps

Return on invested capital¹ (ROIC)

Group cash flow statement

166

Group statement of changes in equity

167

Notes to the Group accounts

168

Company financial statements

221

Notes to the Company accounts

223

Other information

Group information

229

1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 236–240.

Other information

230

Shareholder information

240

The images used throughout the report represent the ways that Smith+Nephew is taking the limits off living and helping patients live Life Unlimited. Images used are not photographs of our patients unless expressly indicated.


	Smith+Nephew Annual Report 2022

	STRATEGIC REPORT
	GOVERNANCE
	ACCOUNTS
	OTHER INFORMATION


The Board seeks to foster an environment where there is a shared urgency to see measurable improvements in performance whilst recognising that leadership needs time to effect lasting positive change. We reviewed and endorsed the 12-point plan brought forward by Deepak and his leadership team, welcoming the deep root-cause analysis, focused programme of actions, pace of execution and commitment to demonstrable outcomes. The Board regularly monitors progress and is encouraged by the early successes which Deepak describes in the next few pages. Shareholder value Stock markets were challenging in 2022, and Smith+Nephew’s share price reflected this as well as our recent performance. While our shares performed in line with or better than many of our European medtech peers during the year, we continued to lag behind our US counterparts. Delivering our commitments with urgency to deliver value to our shareholders is a priority for the Board and management team. For 2022 the Board is recommending a Final Dividend of 23.1¢ per share. Together with the Interim Dividend of 14.4¢ per share this will give a total distribution of 37.5¢ per share, unchanged from 2021. The Board welcomes discussion with shareholders and during the year we engaged with many of our larger investors. We also received regular communication from private shareholders and welcomed the opportunity to meet face-to-face at our Annual General Meeting (AGM), which was also live-streamed to enable maximum participation during the meeting. Culture and sustainability The Board puts great value on how Smith+Nephew operates, and invests considerable time in meeting employees and understanding their experience and commitment to the Company.		“The Board feels that the Company, under new leadership, has a renewed energy and all Board members strongly support the actions being taken to move the Company forward.”
			During the year members of the Board met with employees, both virtually and in person, and were impressed by their enthusiasm for the work they do. In September, the Board had the opportunity to meet with employees at the Company’s Memphis site and learn about both our exciting product portfolio and scrutinise our plans to improve manufacturing productivity. The Board was pleased to see that external benchmarking highlighted a strong employee connection to the purpose of Life Unlimited and an overall upward trend in engagement compared with last year. Management continues to work to build the culture and during the year the Board approved new Commitments which define the specific ways in which the Company expects employees to demonstrate our culture every day. On behalf of the whole Board I would like to take this opportunity to thank all the employees for their contributions during 2022. Sustainability has continued to receive focus and scrutiny from the Board and its Committees to ensure our sustainability programme is aligned with our stakeholders’ expectations and to monitor actions and progress against our targets, including towards net zero carbon emissions by 2045. We welcomed the decision to strengthen executive oversight of sustainability with the creation of the ESG Operating Committee, formed in January 2023, comprising experienced executives from across many Smith+Nephew functions. Reflections and thanks As this will be my final year on the Board and as your Chair, I wanted to take the opportunity to reflect on events during my time at Smith+Nephew. In 2014 when I was formally appointed as Chair, no one had any indication of the scale of the global challenges and uncertainty we would all come to experience, in terms of political and geographical upheaval, the pandemic and the impact it would have on our economies, supply chains and ways of working.		During the early years of my tenure, I was privileged to have been part of driving the growth and success achieved by the Company. The Board supported the Company’s strategic expansion into higher growth markets and segments through organic growth and acquisition, all guided by the renewed purpose, enthusiasm and winning culture of Life Unlimited. However, my time as Chair has not been without its disappointments. As a Board, we have always made every effort to support the Company through the changes required to deliver value and growth for all stakeholders and to enable the Company to achieve its full potential. The loss of momentum emerging from the pandemic was something that the Board was very keen to address with the appointment of Deepak in April 2022 to accelerate business recovery. The Board have been impressed with the way that Deepak has quickly made every effort to evaluate, analyse and improve the business at pace in alignment with the purpose, strategy and values of the Company. I will retire as Chair of Smith+Nephew in 2023 with a proposed transition over the next few months to our new Chair, Rupert Soames OBE, subject to shareholder approval. I firmly believe the management alignment and focus on execution at pace, the strong culture embedded within the organisation, and our leading portfolio of innovation together give Smith+Nephew the platform to deliver its full potential.
Read about Governance	Link to AGM			Roberto Quarta Chair

Smith+Nephew Annual Report 2022


Chief Executive Officer’s review

Transforming to consistently higher growth		Executing our 12-point plan In July 2022 we announced a 12-point plan to fundamentally change the way Smith+Nephew operates, to drive higher growth and improve productivity, maximising the opportunities we have built, and addressing the challenges. Through this plan, we expect to accelerate delivery of our Strategy for Growth and deliver on our ambition to transform to a consistently higher-growth company. Our Strategy for Growth is based on three pillars: – First, 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, Accelerate our growth profitably, through more robust prioritisation of resources and investment, and with continuing customer focus. – Third, continue to Transform ourselves for higher long-term growth, through investment in innovation and acquisitions. The 12-point plan supports the growth pillars to Strengthen and Accelerate, and is focused on: – Fixing Orthopaedics, to regain momentum across hip and knee implants, robotics and trauma, and earn market share with our differentiated technology; – Improving productivity, to support trading profit margin expansion; and – Further accelerating growth in our already well-performing Advanced Wound Management and Sports Medicine & ENT.

Dear Shareholder It was an honour to be appointed Chief Executive Officer in April 2022 and I am pleased to have this opportunity to review the last year, and outline what we are doing to transform performance at Smith+Nephew. When I joined Smith+Nephew I found a company that had many more opportunities than challenges, despite the backdrop of a difficult macro environment, including the impacts of higher inflation, war in Ukraine and Covid in China. We are a company with innovation at our core, with leading technology across the business. We have a strong, energised management team and employees who are deeply committed to our purpose of Life Unlimited. Together, we are working to improve our execution to realise our opportunities and deliver greater value for our customers, investors, employees and other stakeholders.	We delivered 4.7% underlying revenue growth¹ in 2022 (0.1% reported), operating profit margin of 8.6% and a trading profit margin¹ of 17.3%. Performance in Orthopaedics and manufacturing and supply chain, alongside the difficult macro environment, held back our growth and trading profit margin during the year. We worked hard to closely manage the impact of the widely reported global shortages of some raw materials and components. We are benefitting from our increased investment in innovation, with more than 60% of growth in 2022 coming from products launched in the last five years. We exited the year with good momentum, with all three global franchises contributing to a strong finish to the year, and all accelerated revenue growth over the first nine months.

Read about our CORI^◊
Surgical System

¹These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial measure
prepared in accordance with IFRS on pages 236-240.

8	Smith+Nephew Annual Report 2022

Chief Executive Officer’s review continued

The ‘What’ of our strategy

Transform

Through innovation

and acquisition

Accelerate

Profitable growth through prioritisation and customer focus

Strengthen

The foundation to serve customers sustainably and simply

Fixing

Orthopaedics

Improving
productivity

Accelerating Sports Med
and AWM

– More opportunities than challenges.

– Multiple positive factors coming together in Orthopaedics.

– Next wave of innovative implants coming to market.

– Unique expansions for CORI.

– Revitalised management team in place.

– Rewiring our commercial delivery underway.

– Reinforcing our AWM and Sports Medicine leadership positions.

– Bringing together leading technology and execution to drive performance.

Fixing Orthopaedics, to regain momentum across hip and knee implants, robotics and trauma, and win share with our differentiated technology:

– Rewire Orthopaedics commercial delivery.

– Earn market share with our technology.

– Streamline our reconstruction portfolio.

Improving productivity, to support trading profit margin expansion:

– Improve value and cash processes.

– Optimise procurement.

– Manufacturing optimisation.

Further accelerating growth in our already well-performing Advanced Wound Management and Sports Medicine & ENT businesses, representing approximately 60% of Group revenue:

– Scale Negative Pressure Wound Therapy.

– Drive cross-selling in Ambulatory Surgery Centers (ASCs).

The ‘How’ – Executing our 12-point plan

The ‘Now’ of the opportunity

Our Sports Medicine business has delivered above market growth consistently for many years, building on our reputation for innovation. Many of the drivers for further growth are already in place, including expanding both our REGENETEN^◊ biologics platform into new indications and our technology leadership by adding advanced surgical capability onto our surgical tower. For ENT, we have a favourably positioned tonsil and adenoid business and are in the early stages of the roll-out of our unique Tula^R System for in-office delivery of ear tubes.

We expect to continue to deliver further operational and financial benefits as we progress through the two-year life of the plan.

Innovation-led

Our commitment to innovation is central to our Strategy for Growth and we continued to invest behind recent product launches and in our R&D programme as well as clinical evidence to drive future growth.

New product launches in Orthopaedics included expanding our robotics-enabled CORI^◊ Surgical System by bringing both cementless total knee and total hip arthroplasty onto the platform. We also became the first company to receive FDA 510(k) clearance for a revision knee indication using a robotics-assisted platform and completed the first cases on CORI. Revisions account for around 10% of all knee procedures in the US.

In Sports Medicine, we announced encouraging evidence supporting REGENETEN, which delivered a significant 86% reduction in rotator cuff re-tear rates at 12 months in interim results from a randomised controlled trial (see page 37).

Read about our

KPIs

10	Smith+Nephew Annual Report 2022

	STRATEGIC REPORT
	GOVERNANCE
	ACCOUNTS
	OTHER INFORMATION

“In July 2022 we announced a 12-point plan to fundamentally change the way Smith+Nephew operates, to drive higher growth and improve productivity.”

Supporting Net Zero

Our Strategy for Growth also embraces sustainability, and this report details our progress made against our commitment to achieve net zero carbon emissions by 2045. We are developing our Scope 3 emissions reduction roadmap in preparation for submitting this to the Science Based Target Initiative (SBTi) for validation. You can read more about our progress across our sustainability focus areas of People, Planet and Products on pages 59–63.

Transforming Smith+Nephew

We will continue to face macroeconomic headwinds in 2023. However, I believe the drivers of further growth are in place, including leading technologies across all three franchises. With our 12-point plan, we are fundamentally changing the way Smith+Nephew operates to drive higher growth and improve productivity. Overall, we expect to deliver both faster revenue growth and margin expansion in the coming year, and are setting a solid foundation for our midterm ambitions as we transform to a consistently higher growth company.

Deepak Nath, PhD

Chief Executive Officer

In Advanced Wound Management, we introduced the WOUND COMPASS^◊ Clinical Support App, a comprehensive digital support tool for healthcare professionals that aids wound assessment and decision making to help reduce practice variation, and launched our DURAMAX^◊ S Silicon Super Absorbent Dressing for high exuding wounds in Europe, where superabsorbers are one of the fastest growing categories of dressings.

We continued to deliver successful acquisitions, bringing novel and disruptive technologies into our portfolio. In January 2022 we acquired Engage Surgical, owner of the only cementless partial knee system commercially available in the US. The system will have an application on CORI in the future.

Finally, we made further investment behind medical education. I was proud to attend the opening of a new Smith+Nephew Academy in Singapore. Our Academies in the US, Europe and now Asia Pacific, as well as our online resources, provide tens of thousands of healthcare professionals with opportunities to evaluate the latest evidence, learn innovative clinical techniques as well as safe and effective use of our products through hands-on and state-of-the-art digital interactive learning experiences.

Building a winning culture

Our strong culture and connection to our purpose of Life Unlimited helped us navigate the challenges of 2022. We improved our employee engagement scores as measured by Gallup, and made good progress in building a diverse and inclusive workplace through our Employee Inclusion Groups (EIGs). I have spent time with employees at many of our sites and through our global town hall meetings, and was impressed by their welcome and the enthusiasm to go the extra mile to serve our customers. I would like to thank every one of our colleagues for their dedication and care.

We continue to work to build our culture, and to ensure it supports our Strategy for Growth, and during the year we defined the specific expectations and behaviours we believe are needed, introducing our Commitments. We also took steps to support our employees as the cost of living rose sharply in some of our locations. You can read more about these and other initiatives on pages 48–53.

Read about our
WOUND COMPASS
Clinical Support App

Smith+Nephew Annual Report 2022

Our business model

How we create value

Through our business model we strive to transform outcomes for the patients we serve, for clinicians and the healthcare systems we support, for the company and our shareholders. Our Strategy for Growth focuses our efforts, and our purpose of Life Unlimited inspires us every single day.

What we need to create value

People

A purpose-driven culture based on authentic values committed to doing business the right way.

R&D

Innovation is at the heart of our business and we prioritise investment in new products, technologies and services.

Financial strength

A robust balance sheet and capital allocation framework balancing investments in the future and returns today.

Sustainability

Addressing the long-term needs of our customers, employees, communities and stakeholders, reducing our impact on the environment.

Global operations

Resilient manufacturing and supply chains to ensure quality and competitiveness.

Medical education

Committed to educating and training healthcare professionals on the safe and effective use of our products.

Delivering value for stakeholders

Investors

Dividend

$327m

Group revenue

$5,215m

+0.1%

Operating profit

$450m

-24%

Community

Volunteer hours

11,500

Employees

Engagement score

4.12

+0.04

Operating
profit margin

8.6%

-280bps

Trading profit¹

$901m

-4%

Customers

Training sessions

121,963

Product launches

Trading profit

margin¹

17.3%

-70bps

1 These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 236–240.

14	Smith+Nephew Annual Report 2022

Key Performance Indicators

Measuring our progress

Smith+Nephew uses a number of financial and non-financial Key Performance Indicators (KPIs) to track and evaluate performance and delivery against its Strategy for Growth and other business objectives. Those KPIs in the public domain are consolidated below. A number of other KPIs are commercially sensitive and are not published but are used internally to drive performance and growth.

Financial Key Performance Indicators

Revenue growth Revenue growth allows management and investors to measure our relative performance. We are targeting underlying revenue growth of 5%+ in the medium term.							Profit margin Profit margin allows management and investors to determine our relative performance. We are targeting at least a 20% trading profit margin in 2025, with improvements year-on-year.								12-point plan KPIs Multiple KPIs are used to measure delivery against the 12-point plan. These examples express some of the process improvement elements of the plan. KPIs covering R&D and growth elements, such as a new product acceleration metric, are commercially sensitive and not disclosed externally. Orthopaedics non-set line-item fill rate 16 Percentage point improvement in the US year-on-year to 31 December 2022 This KPI helps us track improving performance in filling customer orders. Orthopaedic Reconstruction set turns 23% Improvement from 2021 baseline This KPI helps us measure improvements in utilisation of Orthopaedic Reconstruction surgical instrument sets, enabling more procedures and supporting sales. Procurement improvements 0% Reduction since 2022 peak This KPI enables us to track our productivity by measuring our success reducing direct and indirect spend (including transportation) as a percentage of revenue. Manufacturing conversion cost 95bps Reduction since 2022 peak This KPI measures the cost to convert raw materials to finished products as a percentage of revenue to track manufacturing efficiency improvements.

Revenue growth – reported						%	Operating profit margin						%

+0.1% Reported revenue growth includes a foreign exchange headwind of 460bps.	-11.2		14.3		0.1		8.6% Reported profit margin reflects restructuring costs, as well as acquisition and disposal-related items, amortisation and legal and other items.	6.5		11.4		8.6











		2020		2021		2022			2020		2021			2022

	Global Head Office
	Major manufacturing sites
	Smith+Nephew Academies
	Smith+Nephew Academy opening in 2023