Full Year 2015 Results

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. 2

Chief Executive Officer

Olivier Bohuon

Full year 2015 highlights

Key Comments

• Revenues +4% underlying (+0% reported) ‐ Advanced Wound Care +8% ‐ Recon +3% with Knees +5% ‐ Sports Medicine Joint Repair +7% ‐ Emerging Markets +11%

• Five technology and distribution acquisitions

• Trading profit margin 23.7% (+80bps)

• EPSA 85.1¢ (+2% reported, +9% CER)

• Full year dividend 30.8¢ (up 4%)

Full Year

2015 2014 Underlying

growth

$m $m %

Revenue 4,634 4,617 4

Trading profit 1,099 1,055 5

Trading Profit Margin 23.7% 22.9%

EPSA 85.1¢ 83.2¢

4

Progress on our Strategic Priorities in 2015

5

Sh

are

ho

lde

r V

alu

e

• Strong existing product portfolio and new models • Attractive pipeline, both internal and acquired • Creating single R&D function to focus pipeline development

• Strong double digit growth ex China • Acquisitions in Russia, Colombia, mid-tier • Emerging markets growth story remains intact

Emerging Markets

Established Markets • Strong US dynamic (AWM turn-around, Recon, Sports Med) • Europe stabilised • Increased focus on commercial excellence

Innovation

• Group optimisation plan delivering on benefits • Extending single MD model to US • Establishing Global Business Services

Simplification

Acquisitions • Success of Arthrocare and Healthpoint acquisitions • Emerging market deals strengthening position • Attractive technologies - ZUK, Blue Belt Technologies

Driving commercial excellence and pioneering innovation

6

Commercial

Regional sales organisations

Global commercial organisation

Global R&D

Global Operations

Customer-facing franchises

Business support

functions

Single MD model in all Established and

Emerging countries

Commercial strategy Upstream marketing

Market access Salesforce excellence

Pricing

Finance HR

Legal Compliance

IT

Pioneering innovative technologies and models

7

Sports Medicine

• Leading knee , hip

and shoulder portfolios

• COBLATION™ & DYONICS™

• Rotator Cuff Solution

• WEREWOLF™ • Regenerative e.g.

BST-CarGel

Segment-leading

growth

Hip & Knee

• VERILAST™ technology

• JOURNEY™ II family • ZUK uni knee

• Syncera™ model • NAVIO™ system • REDAPT™ revision

hip

Segment-leading

growth

Wound

• ALLEVYN™ Life • PICO™ • SANTYL™

• RENASYS™ TOUCH • Solutions based

models

Segment-leading growth

TODAY: Drive growth with

differentiated products

FUTURE: Accelerate growth with disruptive innovations

and solutions

Note: excludes mid-tier, ENT, GYN and Trauma & Extremities portfolios

Three full years since acquisition

• Provided scale to our US wound management business

• Transaction delivered results ahead of plan

• 3-year sales CAGR >20%

• Year three ROCE exceeds WACC

Building a strong M&A track record

8

First full year since acquisition

• Integration completed

• Results tracking to plan

• Cost synergies achieved

• US Sports Medicine benefiting from sales synergies

Enterprise Value: $0.8bn Enterprise Value: $1.5bn

2%

9%

0% 5% 10% 15%

Excluding China Emerging

Est OUS

US

AWD

AWB

AWC

Hips

Knees

Arthroscopic Enabling Tech

Sports Medicine Joint Repair

Trauma & Extremities

Other Surgical

15%

16%

4%

1%

6%

13%

0%

3%

9%

0% 10% 20%

Q4 revenue growth of 5% underlying

9

Geographical growth Product franchise growth Revenue split

Underlying change (%) Underlying change (%)

Note: ‘Est OUS’ is Australia, Canada, Europe, Japan and New Zealand, ‘Other Surgical’ includes Gynaecology and ENT.

14% 2%

Sports Medicine, Trauma & OSB

• Q4 Revenue performance

‐ Sports Medicine Joint Repair +9% ($169m)

‐ Arthroscopic Enabling Technologies (AET) +3% ($159m)

‐ Trauma & Extremities +0% ($127m)

‐ Other Surgical Businesses* +13% ($56m)

• Commentary

‐ both Joint Repair and AET benefitting from ArthroCare integration

‐ very strong US Joint Repair growth (+17%) led by shoulder

‐ ENT and GYN generating good growth

10

* ‘Other Surgical Businesses’ includes Gynaecology and ENT

Comprehensive Product Offerings for Rotator Cuff Repair

• Q4 Revenue performance

‐ Knees: global +6%*, US +7%*, OUS +4%* ($248m)

‐ Hips: global +1%, US +0%, OUS +1% ($163m)

• Commentary

‐ continued strong growth in global Knees

‐ ZUK sales ahead of guidance

‐ Blue Belt Technologies acquisition completed and integration off to a good start

Reconstruction

11 * Excludes the effect of ZUK product acquisition

JOURNEY™ II BCS Bi-Cruciate Stabilised Knee System

Advanced Wound Management

• Q4 Revenue performance

‐ Advanced Wound Care +4% ($196m)

‐ Advanced Wound Bioactives +16% ($96m)

‐ Advanced Wound Devices +14% ($43m)

• Commentary

‐ sustainable improvement in AWC trend

‐ AWB strong final quarter as expected

‐ AWD benefitted from PICO growth

12

PICO◊ Single Use Negative Pressure Wound

Therapy

Chief Financial Officer

Julie Brown

14

Growth

2015 2014 Reported CER(1) Underlying(2)

Revenue $4,634m $4,617m 0% 8% 4%

Trading Profit $1,099m $1,055m 4% 10% 5%

Trading Margin 23.7% 22.9%

EPSA 85.1¢ 83.2¢ 2% 9%

Trading cash flow $936m $781m

Free cash flow $672m $308m

Full Year Financial Highlights

(1) Constant exchange rates (2) Growth at constant exchange rates, adjusted for acquisitions and disposals

FY 2015(1) Q4 2015(1)

Q4 and Full Year Revenue growth

15 (1) Q4 2015 comprises 64 trading days (2014 – 63 trading days). Full year comprises 251 days (2014 – 251 days) (2) Constant exchange rates

Growth % Growth %

Underlying Underlying

Acquisitions Acquisitions

CER(2) CER(2)

Currency Currency

Reported Reported

5%

2%

7%

-6%

1%

4%

4%

8%

-8%

0%

16

Full Year

2015 2014

$m $m

Revenue 4,634 4,617

Cost of goods sold (1,143) (1,127)

Gross profit 3,491 3,490

Gross profit margin 75.3% 75.6%

Selling, general and admin (2,170) (2,200)

Research and development (222) (235)

Trading profit 1,099 1,055

Trading profit margin 23.7% 22.9%

Full year trading income statement

17

Group trading margin 2015

Trading margin history Selected 2015 margin drivers

2013 2014 2015

22.7% 22.9%

23.7% Group optimisation

ArthroCare synergies

Price, mix and exchange

RENASYS™ hold

18

Full year IFRS profit adjusting items Full Year

2015 2014

$m $m

Trading profit 1,099 1,055

Acquisition related costs (12) (118)

Restructuring and rationalisation (65) (61)

Amortisation of acquisition intangibles (204) (129)

Legal and other items (190) 2

IFRS Operating profit 628 749

19

Metal on metal

• Majority of US metal-on-metal hip claims settled

• Insurance covered majority of settlement

• $25m net cash cost (incl. insurance receivable to date)

• Q4 accounting charge of $203m

• Represents cost of US settlement, net of insurance, and present value of all other current and anticipated claims, before insurance

• Excludes future legal charges

• Group carries considerable product liability insurance

Legal settlements

Full Year Growth

2015 2014 Reported CER

$m $m

Trading profit 1,099 1,055 4% 10%

Interest receivable 6 13

Interest payable (47) (28)

Other finance costs (13) (11)

Share of results from associate (5) (2)

Adjusted profit before tax 1,040 1,027

Taxation (279) (284) Tax rate* 26.8%

Adjusted attributable profit 761 743

Number of shares – million 894 893

Adjusted earnings per share ("EPSA") 85.1¢ 83.2¢ 2% 9%

Earnings per share ("EPS") 45.9¢ 56.1¢ 20

Full year EPSA and EPS

* Full year rate on Trading results

Full year free cash flow

21

Full Year

2015 2014

$m $m

Trading profit 1,099 1,055

Share based payment 29 32

Depreciation and amortisation 307 310

Capital expenditure (358) (375)

Movements in working capital (141) (241)

Trading cash flow 936 781

Trading cash conversion 85% 74%

Restructuring, rationalisation, acquisition & other (91) (195)

Operating cashflow after capital expenditure 845 586

Net interest paid (36) (33)

Taxation paid (137) (245)

Free cash flow 672 308

(1,613) (1,361)

1,030

-

(358)

(272) (71)

(77)

(1,800)

(1,600)

(1,400)

(1,200)

(1,000)

(800)

(600)

(400)

(200)

0

Dec-14

Net Debt

FCF pre

capex

Capex Dividends Acquisitions Share buy

back

Other Dec-15

Net Debt

Cash flow and capital allocation

22

$m

Reinvest for organic growth

Progressive dividend policy

Acquisition in line with strategy

Return excess to share-holders 1 2 3 4

EPSA growth at CER

Trading margin development

Established Markets

Revenue growth

23

Emerging Markets

Innovation

Simplification

Acquisitions

Optimising Cash

Delivering returns through capital

allocation framework

Our 2016 guidance

Maintain good underlying growth

Continued tax rate improvement

Continued margin improvement; more than offset by FX and Blue Belt

Chief Executive Officer

Olivier Bohuon

Summary

• 2015 delivered acceleration in sales and improvement in profitability

‐ sustained improvement in franchises and regions

‐ strong execution of efficiency programmes

‐ further strengthening through acquisitions

• Outlook

‐ continue the positive underlying revenue growth trend

‐ in the medium term, we anticipate increasingly outperforming our markets

‐ strategy continues to transform the profile of Smith & Nephew

25

Questions

Appendices

2016 Technical guidance

28

Guidance Full year

Restructuring costs c. $50m

Acquisition and integration costs c. $10m

Amortisation of acquisition intangibles c. $140m

Income from associates Slightly negative

Interest payable(1) ~ 3%

Other finance costs c. $10m

Tax rate on Trading result 26.5% or slightly lower

(1) Long term borrowings were $1,434m at the end of 2015, pre Blue Belt.

29

H1 H2 Full Year

2015 2014 2015 2014 2015 2014

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

Revenue 2,272 2,220 2,362 2,397 4,634 4,617

Cost of goods sold (566) (538) (577) (589) (1,143) (1,127)

Gross profit 1,706 1,682 1,785 1,808 3,491 3,490

Gross profit margin 75.1% 75.8% 75.6% 75.4% 75.3% 75.6%

Selling, general and admin (1,084) (1,078) (1,086) (1,122) (2,170) (2,200)

Research and development (110) (120) (112) (115) (222) (235)

Trading profit 512 484 587 571 1,099 1,055

Trading profit margin 22.5% 21.8% 24.9% 23.8% 23.7% 22.9%

Trading income statement - half and full year

30

IFRS profit adjusting items – half and full year

H1 H2 Full Year

2015 2014 2015 2014 2015 2014

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

Trading profit 512 484 587 571 1,099 1,055

Acquisition related costs (13) (58) 1 (60) (12) (118)

Restructuring and rationalisation (19) (19) (46) (42) (65) (61)

Amortisation of acquisition intangibles (78) (54) (126) (75) (204) (129)

Legal and other items 37 10 (227) (8) (190) 2

IFRS Operating profit 439 363 189 386 628 749

H1 H2 Full Year

2015 2014 2015 2014 2015 2014

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

Trading profit 512 484 587 571 1,099 1,055

Interest receivable 2 7 4 6 6 13

Interest payable (23) (11) (24) (17) (47) (28)

Other finance costs (7) (5) (5) (6) (13) (11)

Share of results from associate (3) (2) (2) - (5) (2)

Adjusted profit before tax 481 473 559 554 1,040 1,027

Taxation (131) (133) (148) (151) (279) (284)

Adjusted attributable profit 350 340 411 403 761 743

Number of shares – million 894 893 894 893 894 893

Adjusted earnings per share ("EPSA") 39.1¢ 38.1¢ 46.0¢ 45.1¢ 85.1¢ 83.2¢

Earnings per share ("EPS") 33.0¢ 26.8¢ 12.9¢ 29.3¢ 45.9¢ 56.1¢ 31

EPSA and EPS – half and full year

Free cash flow – half and full year

32

H1 H2 Full Year

2015 2014 2015 2014 2015 2014

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

Trading profit 512 484 587 571 1,099 1,055

Share based payment 13 16 16 16 29 32

Depreciation and amortisation 148 140 159 170 307 310

Capital expenditure (161) (161) (197) (214) (358) (375)

Movements in working capital (130) (222) (11) (19) (141) (241)

Trading cash flow 382 257 554 524 936 781

Trading cash conversion 75% 53% 94% 92% 85% 74%

Restructuring, rationalisation, acquisition & other

36 (37) (127) (158) (91) (195)

Operating cash flow 418 220 427 366 845 586

Net interest paid (17) (12) (19) (21) (36) (33)

Taxation paid (72) (136) (65) (109) (137) (245)

Free cash flow 329 72 343 236 672 308

Franchise revenue analysis

33 All revenue growth rates are on an underlying basis * ‘Other Surgical Businesses’ includes Gynaecology and ENT

2014 2015

Q1 Q2 Q3 Q4 Full Year

Q1 Q2 Q3 Q4 Full year

Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth

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

Sports Medicine, Trauma & OSB

2 6 7 5 5 5 4 2 5 1,881 4

Sports Medicine Joint Repair 5 9 11 8 8 9 7 4 9 606 7

Arthroscopic Enabling Technologies

(2) (1) 3 2 1 (2) 1 (2) 3 573 -

Trauma & Extremities (1) 7 8 3 4 5 2 2 - 497 2

Other Surgical Businesses* 23 18 6 6 10 11 7 10 13 205 10

Reconstruction - 3 1 2 2 1 4 3 4 1,487 3

Knee Implants - 2 1 3 2 2 7 6 6 883 5

Hip Implants - 3 1 2 1 (1) 1 (2) 1 604 -

Advanced Wound Management - - (1) (2) (1) 1 7 6 8 1,266 6

Advanced Wound Care (6) (8) (3) (1) (4) 9 12 6 4 755 8

Advanced Wound Bioactives 8 21 14 16 15 5 6 2 16 344 7

Advanced Wound Devices 13 1 (17) (27) (9) (27) (9) 17 14 167 (3)

Group 1 3 3 2 2 3 5 4 5 4,634 4

Regional revenue analysis

34

‘Other Established Markets’ is Australia, Canada, Europe, Japan and New Zealand. All revenue growth rates are on an underlying basis

2014 2015

Q1 Q2 Q3 Q4 Full Year

Q1 Q2 Q3 Q4 Full year

Growth Growth Growth Growth Growth Growth Growth Growth Growth Revenue Growth

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

Geographic regions

US (2) 4 2 - 1 1 4 4 9 2,217 5

Other Established Markets 1 (3) (2) (1) (1) (2) 3 1 2 1,702 1

Established Markets (1) 1 - - - - 3 3 6 3,919 3

Emerging Markets 9 17 20 18 17 22 14 8 2 715 11

Group 1 3 3 2 2 3 5 4 5 4,634 4

Analysis of restructuring costs

35

Of the $57m total charged in the full year, all $57m are reflected in ‘selling, general and administrative expenses’ and nothing in ‘cost of goods sold’ in the Group Income Statement.

Structural Efficiency target of $160m cash costs and $40m asset write-offs.

Group Optimisation target of $150m total costs.

P&L Charge Cash Spend

Previous

Total to Date FY Total to date

Previous Total to Date

FY Total to date

Group Optimisation Plan

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

Cash costs 48 57 105 39 45 84

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

Total 48 57 105 39 45 84

Structural Efficiency Programme

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

Cash costs 141 8 149 139 7 146

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

Total 162 8 170 139 7 146

Business days per quarter

36

Q1 Q2 Q3 Q4 Full Year

2014 62 63 63 63 251

2015 61 63 63 64 251

2016 64 64 63 60 251

Exchange rates

37

Q4/14 FY/14 Q1/15 Q2/15 Q3/15 Q4/1

5 FY/15

$:€

Period end 1.21 1.21 1.09 1.12 1.12 1.09 1.09

Average 1.25 1.33 1.13 1.11 1.11 1.10 1.11

$:£

Period end 1.56 1.56 1.49 1.57 1.52 1.48 1.48

Average 1.58 1.65 1.51 1.53 1.55 1.52 1.53