Smith & Nephew half-year results 2026: profit rises despite revenue guidance cut

Smith & Nephew's first-half numbers tell a mixed but reasonably resilient story. Revenue growth was softer than management expected, prompting a reduction in full-year guidance, but profit, margins and adjusted earnings all moved higher.

The medical technology group now expects full-year underlying revenue growth of around 4%, down from around 6%. However, its guidance for trading profit growth, free cash flow and adjusted return on invested capital remains unchanged.

That balance is the central issue for investors. Smith & Nephew is not growing sales as quickly as planned, particularly in US Orthopaedics and Advanced Wound Bioactives. For now, efficiency savings are protecting the profit outlook.

The full details are available in the original company announcement.

Smith & Nephew's first-half figures

Metric	H1 2026	H1 2025	Change
Revenue	$3,097 million	$2,961 million	4.6% reported
Underlying revenue growth	2.3%	Not disclosed	Not applicable
Operating profit	$448 million	$429 million	4.3%
Operating profit margin	14.5%	14.5%	Unchanged
Trading profit	$566 million	$523 million	8.1%
Trading profit margin	18.3%	17.7%	Up 60 basis points
Adjusted EPS	47.7 cents	42.9 cents	11.0%
Basic EPS	35.6 cents	33.5 cents	6.2%
Free cash flow	$231 million	$244 million	Down 5.2%
Interim dividend	15.6 cents	15.0 cents	Up 4.0%

Underlying revenue growth strips out currency movements and certain acquisition or disposal effects. On this measure, first-half growth was 2.3%. Reported growth was higher at 4.6%, helped by a 230 basis point foreign exchange tailwind.

There was also one fewer trading day than in the previous first half. On an average daily sales basis, underlying growth was 3.1%.

Profit growth is the strongest part of the update

The most encouraging feature was Smith & Nephew's ability to increase profit faster than revenue.

Trading profit rose 8.1% to $566 million, while the trading profit margin improved from 17.7% to 18.3%. Adjusted earnings per share increased by 11.0% to 47.7 cents.

Trading profit is the company's preferred measure of underlying operational performance. It excludes items including acquisition costs, restructuring charges and amortisation of acquired intangible assets.

The margin improvement was supported by $130 million of efficiency savings realised during the half. Smith & Nephew now expects approximately $200 million of savings for the full year, up from its previous forecast of around $150 million.

This additional cost reduction is important because management expects it to offset the profit effect of weaker revenue growth. The company identified another $50 million of potential savings, mainly across manufacturing, procurement, and sales and marketing.

Tariffs were also less troublesome than previously feared. Refunds meant the net first-half impact was broadly neutral, and management now expects tariffs to have a broadly neutral year-on-year effect on full-year trading profit.

Sports Medicine remains the growth engine

The performance varied considerably between Smith & Nephew's three main business units.

Business unit	H1 revenue	Underlying growth	Trading profit margin
Sports Medicine & ENT	$1,017 million	7.7%	24.7%
Advanced Wound Management	$867 million	Down 0.1%	22.0%
Orthopaedics	$1,213 million	Down 0.1%	13.0%

Sports Medicine & ENT was the clear standout. Revenue increased by 7.7% on an underlying basis, with Sports Medicine Joint Repair growing 10.3%. Products including REGENETEN, Q-FIX and CARTIHEAL AGILI-C contributed to the momentum.

The division's trading profit margin increased by 160 basis points to 24.7%, helped by operating leverage from higher sales.

Advanced Wound Management was broadly flat during the half and declined by 2.1% in the second quarter. Bioactives remained the weak point, with reimbursement changes affecting US skin substitutes and SANTYL delivering a softer second quarter.

The expected full-year headwind from skin substitutes is now towards the upper end of the previously guided $20 million to $40 million range.

Orthopaedics also struggled to generate underlying growth. Second-quarter revenue declined by 1.0%, including a 4.3% fall in Knee Implants. US Knee Implants revenue fell 7.2%, while US Hip Implants declined 1.5% after four consecutive quarters of above-market growth.

Management expects new products and greater equipment deployment to improve the trajectory, but it accepts that Orthopaedics is not yet performing where it wants it to be.

Investors following the wider business can find further coverage on the Smith & Nephew company page.

Cash flow dipped as investment increased

Cash generated from operations rose 6.9% to $605 million, but free cash flow declined by $13 million to $231 million.

The reduction largely reflected a $51 million increase in capital expenditure, including spending on a new UK wound care factory and IT upgrades. Management says this year-on-year increase will not repeat in the second half and expects cash generation to be stronger than in the comparable 2025 period.

Full-year free cash flow guidance remains around $800 million.

Net debt increased to $3,019 million from $2,759 million at the end of 2025. The adjusted net debt to EBITDA ratio stood at 1.8 times, while the group had access to committed facilities of $4.7 billion.

Smith & Nephew is also returning capital. Its interim dividend increased by 4.0% to 15.6 cents per share, and $216 million of the announced $500 million share buyback had been settled by 3 August 2026.

Full-year revenue guidance has been reduced

Smith & Nephew now expects full-year underlying revenue growth of around 4%, compared with its previous expectation of around 6%.

To reach that revised target, second-half revenue growth needs to accelerate to between 5.0% and 5.5%. Management expects support from continued Sports Medicine momentum, stabilisation in US skin substitutes, new wound care products and an improving US Orthopaedics performance. An extra trading day in the fourth quarter should also help.

Despite the revenue downgrade, Smith & Nephew continues to expect:

• Around 8% trading profit growth excluding acquisitions
• Trading profit of around $1.3 billion including Integrity Orthopaedics
• Free cash flow of around $800 million
• Adjusted return on invested capital above 10%, excluding Integrity Orthopaedics

What investors should watch next

The positive interpretation is that Smith & Nephew's restructuring and efficiency work is producing tangible results. Margins expanded, adjusted earnings grew by double digits and the main profit and cash targets survived a meaningful revenue guidance reduction.

The less comfortable point is that cost savings cannot replace organic sales growth indefinitely. Orthopaedics remains under pressure, Advanced Wound Bioactives faces reimbursement disruption and the second-half outlook assumes a clear acceleration from the first half.

The key question is therefore whether new products and improved execution can revive revenue growth while the company continues to protect margins. Evidence of recovery in US Knee and Hip Implants, alongside stabilisation in wound bioactives, will be particularly important when Smith & Nephew publishes its third-quarter trading report on 6 November 2026.