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2007 Preliminary Results

Enabling people to live healthier, more active lives

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Forward looking statementsThis presentation contains certain "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. In particular, statements regarding expected revenue growth and trading margins discussed under "Outlook" are forward-looking statements as are discussions of our product pipeline. These statements, as well as the phrases "aim", "plan", "intend", "anticipate", "well-placed”, "believe", "estimate", "expect", "target", "consider" and similar expressions, are generally intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors (including, but not limited to, the outcome of litigation, claims and regulatory approvals) that could cause the actual results, performance or achievements of Smith & Nephew, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. 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 20F, for a discussion of certain of these factors.

All forward-looking statements in this presentation are based on information available to Smith & Nephew as of the date hereof. All written or oral forward-looking statements attributable to Smith & Nephew or any person acting on behalf of Smith & Nephew are expressly qualified in their entirety by the foregoing. Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement contained herein to reflect any change in Smith & Nephew's expectation with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

John BuchananChairman

sustainable profitable growth

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Introduction

• 2007 – a very good year

• Strategy gives confidence for the future

• New management team established

• Innovation, operational excellence and demographic driven growth

sustainable profitable growth

David IllingworthChief Executive

sustainable profitable growth

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Full year highlights

• Group revenues $3.4 billion, double digit growth

– Reconstruction revenues growth outpaces the market for the 5th consecutive year

– Endoscopy generates double digit revenue growth

– Trauma and Clinical Therapies up 13%

– Advanced Wound Management restructuring fuels return to growth

• EIP delivers 130 basis points of margin improvement

sustainable profitable growth

Adrian HennahChief Financial Officer

sustainable profitable growth

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Income statement Q4 2007

21.020.523.023.7Trading margin %

469550141161Profit before taxation

-(3)--Fair value of hedge of anticipated sale proceeds of JV

6632Other finance income

(30)10(16)2Net interest income/(cost)

493537154157Operating profit

(30)(14)(8)(6)Amortisation of acquisition intangibles

(64)-(19)-Inventory revaluation

(89)(20)(41)(20)Restructuring and acquisition costs

(30)---Legal settlement

70657114%21%222183Trading profit

336927798%25%967771Revenue$m$m$m$m

20072006UnderlyingActual20072006Full YearPercentage growthFourth quarter

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Income statement Q4 2007

$m$m$m$m

52.0c45.2c10%16.6c15.1cEPS before amortisation (“EPSA”)

4804256%150142Adjusted attributable profit

(49)(6)(19)(5)Tax on excluded items

-

64

3

-

-

19

-

-

Loss on hedge

Inventory revaluation

-(351)-(19)Net profit on disposal of JV

30---Legal settlement

89204120Restructuring & acquisition costs

301486Amortisation of acquisition intangibles

Add back:

316745101140Attributable profit

-351-19Discontinued operations

316394101121Profit from continuing operations

(153)(156)(40)(40)Taxation

469550141161Profit before taxation

20072006Actual20072006Full Year

Percentage growthFourth Quarter

9

Revenue growth by business segment 2007

10

5

10

13

13

8

4

7

9

11

Underlying

%

(7)

(1)

-

(5)

(18)

(12)

(2)

-

(8)

(31)

Acquisitions

%

(2)20Trauma and Clinical Therapies

(4)21Trauma and Clinical Therapies

21

12

13

35

25

13

10

49

Actual

%

Full Year

(4)Reconstruction

(3)Endoscopy

(6)Advanced Wound Management

(4)Group

(3)Endoscopy

(7)Advanced Wound Management

(7)Reconstruction

(5)Group

Currency

%Quarter 4

10

Underlying revenue growth by geography &business segment 2007

1550

157

361

414

618

418

45

97

113

163

US$m

12

9

4

13

18

10

5

4

10

16

Growth%

1177

419

230

120

408

359

113

67

38

141

Europe$m

8

4

15

16

7

7

3

12

10

6

Growth%

642

203

141

84

214

190

58

37

25

70

ROW$m

9

6

16

13

6

5

6

7

3

3

Growth%

3369

779

732

618

1240

967

216

201

176

374

Total$m

13Trauma and Clinical Therapies

9Trauma and Clinical Therapies

13Reconstruction

10Endoscopy

5Advanced Wound Management

10

11Reconstruction

7Endoscopy

4Advanced Wound Management

8

Full Year

Growth%Quarter 4

11

Revenue$m2007

Full Year- - - - - - - - - - - Q4 - - - - - - - - - - -

20.523.7183771

16.320.840192Advanced Wound Management

19.022.040182Endoscopy

19.623.334146Trauma and Clinical Therapies

25.427.569251Reconstruction

2006

21.824.8215866Memo: Excluding Plus and Blue Sky

21.023.0222967Total

(2)3- BlueSky

18.421.646213Advanced Wound Management - excluding BlueSky

20.123.948201Endoscopy

413- Plus

21.026.443163Trauma and Clinical Therapies - excluding Plus

585- Plus

25.927.078289Reconstruction - excluding Plus

Margin%

Margin%

Trading Profit$m

Profitability by business segment Q4 2007

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Share buy back

• 13m shares bought back for $164m in Q4

• In total c.55m shares bought back for c. $690m to end of last week

• $400m target buy back over next year

sustainable profitable growth

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Outlook for 2008

• Revenue growth

– Reconstruction – exceeds market growth

– Trauma – Fixation close to market growth

– Endoscopy – arthroscopy steady, visualisation & DOR volatile

– Advanced Wound Management – excluding NPWT, at or slightly above served market; NPWT, no guidance

• Margin expansion

- on track

- from H2 the year-on-year effect of consolidating lower margin Plus falls away

• Tax rate 30-31% on Trading Profit less Interest and Finance Costs

sustainable profitable growth

David IllingworthChief Executive

sustainable profitable growth

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Key business objectives

• To be the company that active, informed patients look to for advanced treatment options

• To offer orthopaedic customers a seamless “continuum of care”from early intervention to revision

• To have a strong market presence in the major US wound management market

• To have a true global balance and profile– to keep us close to our customers– for producing/sourcing product

• To lead the industry in the high value growth segments• To drive improved financial performance

sustainable profitable growth

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Key drivers of performance

• Above market growth rates in all segments

• Improve operating margin by an average of at least 1% per year, to end 2010

• Our core strengths of customer focused sales and marketing, our industry leading innovation and product development

• Focus on being a high growth, high value, medical device leader

sustainable profitable growth

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BHR Hemi-arthroplastyFocal defect repair

BHR™ & BHR CASEarly intervention hip

Younger Older

Mid head

MIS stem

R3 cup

Primary stems Defect filling

Modular revision implantsImplant removal

Early intervention hip (active) Primary hip Revision hip

Continuum of care

sustainable profitable growth

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Pre-Plus

71081– US

910153†Knees – global

372774– US

21

13

% Growth*Full Year

11289Revenue

14

% Growth*Q4

127†Hips – global

$mQ4 07

Reconstruction

• 5 years outperforming the market• Australian registry data establishes

BHR™ System as the gold standard• Plus integration on track• Margin up 50 basis points for the year• Knee growth recovers globally

First choice in solutions for the active/informed reconstruction patient* Growth is at underlying rates. †Amended. These numbers were transposed on the presentation given on 7th February.

LEGION™Revision Knee System

Traditional hip replacement

BHR™System

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Reconstruction – recent new products

JOURNEY™ DEUCE™Bi-Compartmental Knee System

R3™Acetabular System

JOURNEY™ BCSBi-Cruciate Stabilised Knee System with OXINIUM™

BIRMINGHAM HIP™Resurfacing System

LEGION™Revision Knee System

JOURNEY™ BCSBi-Cruciate Stabilised Knee Systemin cobalt chromium

ANTHOLOGY™Primary Hip System with OXINIUM™ femoral head

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Trauma & Clinical Therapies

• Fixation volumes strong• #1 in bone stim, growth 3 x market• Fixation now a full service offering• Joint fluid market under pressure,

volumes good• Margin up 140 basis points for the

year

Leader in innovative point of care service for fracture repair, healing & clinical therapies* Growth is at underlying rates

Pre-Plus

107101Fixation201162Clinical Therapies

13

% Growth*Full Year

9163Revenue

% Growth*Q4

Q4 07$m

EXOGEN 4000+™Ultrasound Bone Healing System

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Endoscopy

• Double digit revenue growth for year• Arthroscopy market strong• Knee and shoulder repair performing

well• Resection growing in mid single digits• HD camera well received in the

market• Margin up over 110 basis points for

the year

First choice provider for arthroscopy solutions* Growth is at underlying rates

107161Arthroscopy9640DOR/Visualisation

154

10

% Growth*Full Year

7201Revenue

104

% Growth*Q4

97US104Outside US

Q4 07$m

CLEAR-TRAC™ FLEXIBLECannula System

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Advanced Wound Management

• US revenue growth sustained• Silver product range expanded• Manufacturing reorganisation

underway• Substantial headcount reductions• Margin up 120 basis points for the

year• Global NPWT launch in 2008

Global innovation leader in emerging wound care solutions* Growth is at underlying rates

495

% Growth*Full Year

4216Revenue

45

% Growth*Q4

45US171Outside US

Q4 07$m

ALLEVYN™ AgAbsorbent Silver Barrier Dressing

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Strategy for continued value growth

• Customer and market focus

– Innovation to provide clinical benefits and value for healthcare systems

– Focus on active informed patients

• Value enhancing acquisitions

– Unique/additive technologies

– Improved channels to market

• Earnings improvement

– Aim for above market revenue growth

– Continue to invest in R&D/innovation

– Margin enhancement through EIP

sustainable profitable growth

Appendices

26

Exchange rates

1.371.451.271.31Average

1.461.461.321.32Period end

FY07Q4/07FY06Q4/06€ : $

27

Smith & Nephew Key Product Line Revenues, excluding Plus, in $m at Average Rates Quarterly and Underlying Growth*

* All revenue growths are on an underlying basis as previously reported, excluding the effects of acquisitions, currency translation and variations in revenue days

Revenue Growth Revenue Growth Revenue Growth Revenue Growth Revenue Growth$m % $m % $m % $m % $m %

Orthopaedic Reconstruction

Knees 143 12% 142 7% 130 5% 153 10% 568 9%Hips 112 23% 118 29% 112 20% 127 14% 469 21%

Orthopaedic Trauma

Fixation 90 13% 91 10% 94 9% 101 7% 376 10%Clinical therapies 46 33% 55 25% 52 15% 62 11% 215 20%

Endoscopy

Arthroscopy 144 10% 145 12% 142 11% 161 7% 592 10%Visualisation & DOR 33 20% 33 9% 34 2% 40 6% 140 9%

Advanced Wound Management

ALLEVYN™ 51 10% 56 8% 61 17% 66 14% 234 13%ACTICOAT™ 13 1% 15 10% 16 11% 16 5% 60 7%

Smith & Nephew 744 12.0% 785 12% 771 10% 869 8% 3,169 10%

2007Full Year Q4Q1 Q2 Q3

Quarterly revenues

28

--(5)-- asset w/offs

(72)(26)(89)(41)(18)(1)71Other income/(costs)

(22)(17)(46)(27)Plus Integration cash costs

(32)

-

(8)

-

(41)

(4)

(15)

-

EIP – cash costs

- asset w/offs

$m$m$m$m

FYQ4FYQ4

Cash costP&L Charge

Analysis of restructuring and acquisition costs

29

17%24%70657114%21%222183Total Smith & Nephew

689571215183Smith & Nephew

(6)-(2)-BlueSky

23-9-Plus

Trading profit

10%21%336927798%25%967771Total Smith & Nephew

31632779866771Smith & Nephew

6-3-BlueSky

200-98-Plus

Revenue

CERActual2007$m

2006$m

CERActual2007$m

2006$m

Percentage growthFull YearPercentage growthQuarter 4

Plus and BlueSky

30

3549874879530586687774Total

7

37

3

13

85

Q4$m

1069191620131515Total

1822(4)175956586461Trauma & Clinical Therapies

931119121691111Reconstruction

Underlying growth %

401089339888Trauma & Clinical Therapies

31464798627277606966Reconstruction

Revenue

2007$m

Q3$m

Q2$m

Q1$m

2006$m

Q4$m

Q3$m

Q2$m

Q1$m

20072006

Plus revenue by business segment

31

Plus guidance (given 12 March 2007)

• EPSA

– Broadly neutral in 2007

– Accretive in 2008 and beyond

• Return on invested capital

– Exceeds WACC in third full year

• Year three synergies

– Costs: Equivalent to at least 15% of acquired cost base

– Revenue: Approximately 15% of current acquired revenue

• Cost of synergies

– Cash costs estimated at 1.5x – 2.0x year three cost savings

32

Earnings Improvement ProgrammePrincipal Financial Effects (given 3 May 2007)• Group trading margin increase averaging at least 1% p.a. to end 2010

– Net of an increase in R&D spend from 4.3% of sales in 2006 to c. 5% of sales – Includes both EIP and other improvements (except Plus)– Assumes no change in current pricing environment– Starting 2007

• Annual margin benefits exceeding $100m in 2009 and $150m in 2010

• Cash restructuring costs of c. $125m over three years– Some incremental capex will also be required, slightly increasing the usual run-rate

of around 8% of sales

• Non-cash costs (asset write-offs) will also be incurred

- C.$75m

• Excludes Plus

33

Earnings Improvement ProgrammePrincipal Financial Effects(given 3 May 2007)• Costs expected to be incurred broadly evenly over three years

– but provisioning will be more uneven

• Not providing a break-down of targets by GBU, but– Around half improvement in Ortho– Much of the remainder in Wound– Modest improvement in Endo

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Blue Sky Guidance (given May 11)

The acquisition of Blue Sky is expected to dilute Smith & Nephew’s 2007 earnings by around 1%, to be broadly neutral in 2008, and to be accretive from 2009 onwards. The impact in 2007 will be to reduce the trading margin of the Advance Wound Management business by approximately 1% (approximately 2% in the second half).