Interim Results

Smith & Nephew Plc
2 August 2001

2 August 2001


                             2001 INTERIM RESULTS
                  SMITH & NEPHEW DELIVERS STRONG PERFORMANCE


Smith & Nephew, the global medical devices company, announces its interim
results for the six months ended 30th June 2001.

Key points:

*         Strong first half - underlying sales up 12%.

*         Acquisitions add another 4% to sales.

*         Divestment programme complete and joint venture operational.

*         EPS before exceptional items up 9% - underlying EPS up 14%.

*         Investment in innovative products and sales force underpins future
          growth.

Dudley Eustace, Chairman, said: 'The momentum we have gained from investment
in leading-edge products and in our sales force underpins our strong
performance.  Our orthopaedics business continues to be one of the fastest
growing in its market, and the acceleration in growth from our repositioned
advanced wound management business is particularly pleasing.  We remain
confident in our aim of achieving underlying mid-teens EPS growth for the
three years from 2002.'


Enquiries


Chris O'Donnell, Chief Executive                     Tel: [phone]
Smith & Nephew plc

Peter Hooley, Finance Director                       Tel: [phone]
Smith & Nephew plc

Margaret Stewart, Group Director, Corporate Affairs  Tel: [phone]
Smith & Nephew plc

David Yates                                          Tel: [phone]
Financial Dynamics


A presentation for analysts will be held at the City Media Centre, London
Stock Exchange, Old Broad Street, London EC2N 1HP at 9.30am today.  A
tele-conference call for analysts will be held at 3pm today: please call Mo
Noonan at Financial Dynamics on 020 7831 3113 for details.  The
tele-conference will also be webcast at 3pm on www.smith-nephew.com


TRADING RESULTS

Following the completion of the restructuring programme, sales growth of the
ongoing operations was 21%.  This comprised 12% underlying growth, 4% from
acquisitions and a 5% benefit from currency translations.  Favourable pricing
contributed about 1% to underlying growth.

Operating profit before exceptional items of the ongoing businesses increased
25% on that of the first half of last year, with margins improving 1/2% from
ongoing cost and efficiency savings to 17%.

Reported group sales of £548m were 7% lower than in 2000, reflecting the
divestments made last year and this, and the formation of the BSN Medical
joint venture.  Pre-tax profit before exceptional items was £82m, 10% lower
than in 2000, again reflecting the effect of the disposals as well as the
financing costs of the special dividend last August of £416m.

EARNINGS PER SHARE, EXCEPTIONAL ITEMS AND CASH FLOW

Earnings per share before exceptional items increased 9%, reflecting the
strong operating profit increase and the benefit of the lower number of shares
in issue following the capital reconstruction of a year ago, partially
off-setting the dilution from the disposals. The ordinary tax charge was
maintained at 30%.  Dilution from disposals adversely affected EPS by 5% in
the half year.

A net exceptional profit of £31m arose from the gain of £47m on the sale of
the ENT business, less £16m of rationalisation and divestment costs.  The net
tax charge thereon was £16m.

Operating cash flow of £32m compares with £67m in 2000.  Last year benefited
from £24m of operating cash flow from the discontinued businesses.  Capital
requirements for the increased sales growth, particularly in orthopaedics and
the acquired products, together with the rationalisation and divestment costs,
accounted for the balance.

Net cash flow includes £62m proceeds from the sale of ENT, and £63m of costs
relating to Collagenase instalments, the acquisitions of the Beiersdorf and
Acticoat wound management businesses and formation costs of the BSN Medical
joint venture.

DIVIDEND

An interim dividend of 1.75p per share (2000: 1.70p) will be paid on 5
December 2001 to shareholders on the register at the close of business on 9
November.  Shareholders may participate in the company's dividend
re-investment plan.

OPERATING REVIEW

Overview

The momentum of Smith & Nephew's growth is related to favourable market
dynamics, a powerful existing product portfolio, an expanding and global sales
presence and a strong new product pipeline.

Favourable market dynamics in the health sector come from increased demand for
advanced medical devices as people live longer and require a better quality of
life, coupled with increasing healthcare budgets in our major markets.

Our businesses have major market-leading products in strong phases of growth
that will provide benefit for several years to come.  Our new product pipeline
is substantial and will reinforce this going forward.

We have deliberately built up our global sales forces in recent years.  The
benefits are now coming through and, we believe, will continue to gain pace.

Orthopaedics

Orthopaedic sales grew at an underlying 16% with reconstructive implants
growing strongly at 19% and growth in trauma picking up to 11%, following last
years launch of our TriGen intramedullary nailing system.  We continue to be
one of the fastest-growing major orthopaedic companies in a market that is
strengthening significantly.

All our product areas have grown strongly and we have started construction of
additional manufacturing capacity in Memphis.  Our worldwide sales force has
increased 11% since the end of last year.  We launched 6 new products, the
most significant of which was the Oxidised Zirconium knee.  This product,
which introduces a new longer lasting material for knee joint replacement, has
been well received by surgeons.

Endoscopy

Endoscopy sales picked up to an underlying 10% growth, with the OBL shoulder
products acquisition adding a further 2% to this.  Growth was spread across
the arthroscopy line, led by soft tissue repair.  The worldwide sales force in
endoscopy has increased 8% since the end of 2000.  The momentum of new product
launches continued, and included FasT-Fix meniscus repair, radio frequency
ablation and new camera systems.

Wound Management

Wound Management sales growth accelerated to an underlying 13%, with a further
sizeable increase of 14% coming from the acquisitions of Beiersdorf's advanced
woundcare business, the roll-out of Collagenase products in Europe and the
Acticoat burns dressing.  This has been a period of intense activity for Wound
Management not only with the integration of the acquisitions but also with the
transfer of the traditional woundcare business to the BSN Medical joint
venture.  The acquisitions have brought with them additional sales people,
resulting in the largest dedicated advanced wound management sales force in
the world.

Rehabilitation

Rehabilitation sales grew an underlying 4%, faced by a flat-to-declining
clinical supplies market in the US.  Our transition programme is now underway
to refocus the business on the physiotherapy market.  In the second quarter,
the US sales force was increased by 40% by additional specialist salespersons
and 3 new products were launched into our target physiotherapy market.


BSN Medical Joint Venture

The BSN Medical joint venture with Beiersdorf commenced operations
successfully in April and has traded satisfactorily since.  £8m of annualised
sales will be divested later this year to comply with EU competition
conditions.


OUTLOOK

We have had a strong start to the year and market conditions going forward are
positive.  We believe the major products already in our portfolio provide the
basis for continued growth, and new product introductions will maintain the
momentum.  We remain confident in our aim of achieving underlying EPS growth
in the mid-teens for the three years from 2002.



                   Unaudited Group Profit and Loss Account
                     for the Half Year Ended 30 June 2001
     Year
     2000                                                  2001      2000
       £m                                         Notes      £m        £m

          Turnover                                 1, 2
    835.4 Ongoing operations                              488.8     404.0
    138.6 Operations contributed to the joint              35.3      69.7
          venture
    974.0 Continuing operations                           524.1     473.7
    160.7 Discontinued operations                          23.7     118.5
  1,134.7 Group turnover                                  547.8     592.2
          Share of joint venture                      3    41.9         -
        -
  1,134.7                                                 589.7     592.2

          Operating profit
          Ongoing operations
    143.3     - before exceptional items                   82.8      66.3
    (7.7)     - exceptional items*                    4  (14.0)     (2.0)
    135.6                                                  68.8      64.3
          Operations contributed to the joint
          venture
     16.2     - before exceptional items              3     3.6       9.8
    (8.6)     - exceptional items*                    4       -     (4.2)
                                                      
    143.2 Continuing operations                            72.4      69.9

     18.9 Discontinued operations                     2     1.5      15.9
    162.1                                                  73.9      85.8
          Share of operating profit of the
          joint venture
        -     - before exceptional items              3     4.0         -
        -     - exceptional items*                    5   (2.5)         -
                                                          
    162.1                                                  75.4      85.8
    106.3 Discontinued operations - net               2    47.1      88.3
          profit on disposals*
    268.4 Profit on ordinary activities                   122.5     174.1
          before interest
    (7.0) Interest                                    6   (9.5)     (0.7)
                                                          
    261.4 Profit on ordinary activities                   113.0     173.4
          before taxation
     56.2 Taxation                                    7    40.3      31.2
    205.2 Attributable profit                              72.7     142.2


   19.85p Basic earnings per ordinary share          10   7.90p    12.72p

   19.73p Diluted earnings per ordinary share        10   7.83p    12.70p

          Results before exceptional items           11
          (*)
  £171.4m Profit before taxation                         £82.4m    £91.3m
   11.61p Adjusted basic earnings per                10   6.26p     5.72p
          ordinary share
   11.54p Adjusted diluted earnings per              10   6.20p     5.71p
          ordinary share

          Cost of dividends
   £41.3m Interim/final                               8  £16.1m    £15.6m
  £415.6m Special dividend                            9       -   £415.6m



               Abridged Group Balance Sheet as at 30 June 2001


    Year
    2000                                                         2001      2000
      £m                                                Notes      £m        £m


         Fixed assets
   163.0 Intangible assets                                      195.4     148.4
   251.1 Tangible assets                                        233.5     240.8
       - Investment in joint venture*                       3   100.2         -
    24.0 Investments                                             26.1      15.4
   438.1                                                        555.2     404.6

         Working capital

   228.2 Stocks                                                 224.5     244.2
   277.8 Debtors                                                274.1     312.9
       - Creditors  - special dividend                      9       -   (415.6)
  (40.6)                  - acquisition consideration          (23.1)    (42.9)
 (289.7)                  - other                             (286.3)   (312.4)
   175.7                                                        189.2   (213.8)

  (47.9) Provisions                                            (47.3)    (48.8)
                                                                         
   565.9                                                        697.1     142.0

   329.6 Share capital and reserves                             399.5     288.5
   236.3 Net borrowings/(cash)                                  297.6   (146.5)
   565.9                                                        697.1     142.0

*  Investment in joint venture comprises share of gross tangible assets £91.9m
less share of gross liabilities £52.7m, goodwill £32.6m and loans £28.4m.

                 Abridged Movement in Shareholders' Funds
                     for the Half Year Ended 30 June 2001

    Year
    2000                                                         2001      2000
      £m                                                           £m        £m

   551.7 Opening shareholders' funds                            329.6     551.7
   205.2 Attributable profit                                     72.7     142.2
  (41.3) Dividends   - interim/final                           (16.1)    (15.6)
 (415.6)                    - special dividend                      -   (415.6)
   (9.9) Exchange adjustments                                   (8.5)     (7.4)
     7.7 Issue of shares                                          3.9       1.4
    31.8 Goodwill on operations contributed to the joint         17.9      31.8
         venture/disposals
   329.6 Closing shareholders' funds                            399.5     288.5



        Abridged Group Cash Flow for the Half Year Ended 30 June 2001


     Year
     2000                                                          2001    2000
       £m                                                            £m      £m

    162.1 Operating profit                                         73.9    85.8
     62.9 Depreciation and amortisation **                         30.7    30.4
   (21.0) Working capital and provisions                         (42.1)  (28.9)
    204.0 Net cash inflow from operating activities*               62.5    87.3

   (66.7) Capital expenditure and financial investment           (31.0)  (20.4)
    137.3 Operating cash flow                                      31.5    66.9

    (7.0) Interest paid                                           (9.3)   (0.7)
   (46.5) Tax paid                                               (33.4)  (21.4)
  (475.9) Equity dividends paid                                  (25.8)  (44.7)
   (51.1) Acquisitions                                           (63.2)  (32.6)
    209.8 Disposals                                                61.7   185.2
      7.7 Issue of ordinary share capital                           3.9     1.4
  (225.7) Net cash (outflow)/inflow                              (34.6)   154.1

   (32.9) Exchange adjustments                                   (26.7)  (29.9)
     22.3 Opening net (borrowings)/cash                         (236.3)    22.3
  (236.3) Closing net (borrowings)/cash                         (297.6)   146.5

** Includes goodwill amortisation of £4.8 million (£7.5m for full year 2000 and
   £3.5m at the half year).

* After £12.2m (2000 - £6.1m at the half year and £23.1m in the full year) of
outgoings on rationalisation, acquisition integration and divestment costs.


                      NOTES TO THE 2001 INTERIM RESULTS

1.  Segmental performance for the half year ended 30 June 2001 was as follows:


    Group turnover by product

      
           Year
           2000                                    2001        2000 Underlying
             £m                                      £m          £m  sales      
                                                                     growth

          329.3       Orthopaedics                196.4       161.9  +16%
          216.4       Endoscopy                   123.2       104.8  +10%
          221.5       Advanced Wound Management   131.5       102.4  +13%
           68.2       Rehabilitation               37.7        34.9  +4%
          835.4       Ongoing operations          488.8       404.0  +12%
          138.6       Operations contributed to    35.3        69.7
                      the joint venture
          160.7       Discontinued operations      23.7       118.5
        1,134.7                                   547.8       592.2


      Group turnover by geographic market

      Year
        2000                                             2001  2000  Underlying
          £m                                               £m    £m       sales
                                                                         growth

       230.4       Europe*                              140.4 113.0        +13%
       460.6       America                              281.2 232.5        +12%
       144.4       Africa, Asia and Australasia          67.2  58.5        +14%
       835.4       Ongoing operations                   488.8 404.0        +12%
       138.6       Operations contributed to the joint   35.3  69.7
                   venture
       160.7       Discontinued operations               23.7 118.5
     1,134.7                                            547.8 592.2


*  Includes United Kingdom sales of £43.7m (£73.4m for full year 2000 and £
   39.4m at the half year).


Turnover and profits for year 2000 have been restated to reflect the final
outcome of the Joint Venture Agreement  whereby Smith & Nephew retained
distribution of BSN Medical products in certain countries.

Underlying sales growth is sales growth adjusted to eliminate the effect of
translational currency, acquisitions and disposals.


2.    Discontinued operations comprise the results and net profit on disposal
of the ear, nose and throat business disposed of in June 2001 for net proceeds
of £62m.  Discontinued operations in 2000 represent the results and net profit
on disposal of the Consumer business.

3.    On 1 April 2001, the casting and bandaging and traditional woundcare
businesses were contributed to a joint venture with Beiersdorf AG called BSN
Medical in return for a 50% equity interest. The results of these businesses
prior to contribution represent operations contributed to the joint venture in
the group profit and loss account.

4.    Operating exceptional items within ongoing operations comprise £8.7m of
costs of rationalisation consequent on the contribution of businesses to BSN
Medical and £5.3m of integration costs in connection with the acquisition of
the Advanced Woundcare business from Beiersdorf AG.  The costs in the
corresponding period principally relate to the integration of the Collagenase
acquisition.  The costs in 2000 full year comprised expenditure on the
manufacturing rationalisation programme of £4.3m and acquisition integration
expenditure of £3.4m.  Operating exceptional items within operations
contributed to the joint venture in 2000 represent manufacturing
rationalisation costs of operations subsequently contributed to BSN Medical.

5.    The group's share of exceptional items of the joint venture relates to
its share of manufacturing rationalisation costs of BSN Medical.

6.    Interest includes £0.2m in respect of the group's share of the net
interest charge of the joint venture in BSN Medical.

7.    The tax charge is based on an estimated effective rate of 30% on the
full year's results before exceptional items and £15.5m in respect of the net
exceptional items.  Of the total, £34.6m relates to overseas taxation and £
0.5m relates to the group's share of the tax of the joint venture in BSN
Medical.

8.    An interim dividend of 1.75 pence per ordinary share (2000 - 1.70
pence per ordinary share) will be paid on 5 December 2001 to all shareholders
on the register at the close of business on 9 November 2001.  Shareholders may
participate in the dividend reinvestment plan.

9.    In 2000, the company changed its capital structure through the return
of £415.6m of cash to shareholders by way of a special dividend of 37.14 pence
per share together with a related consolidation of ordinary share capital by
conversion into 9 new shares for every 11 old shares in issue.  No adjustment
has been made to comparative data in respect of the share consolidation as,
together with the special dividend payment, the overall effect was that of a
share repurchase at fair value.

10.  The basic average number of ordinary shares in issue was 920m (2000 -
1,118m).  The diluted average number of ordinary shares in issue was 929m
(2000 - 1,120m).

11.  Results before exceptional items state profit before taxation before
charging the cost of exceptional items and the net profit on the disposal of
discontinued operations.  Adjusted earnings per ordinary share is based on the
attributable profit before accounting for these items and associated taxation
thereon.

12.  No statement of total recognised gains and losses has been presented as
there are no items of significance to be reported other than those in the
profit and loss account.

13.  The interim financial information has been prepared on the basis of the
accounting policies set out in the full annual accounts of the group for the
year ended 31 December 2000 with the exception of Note 14 below.

14.  BSN Medical is an entity in which the group holds an interest on a long
term basis and is jointly controlled by the group and one other under a
contractual arrangement.  In the group accounts BSN Medical is accounted for
as a  joint venture under the gross equity method. The difference arising
between the group's net assets contributed (including 50% of goodwill
previously written off to reserves on acquisition) and the group's share of
the joint venture's net assets has been accounted for as goodwill.  Goodwill
will be subject to annual impairment testing and will not be amortised.

15.  The financial information for the year ended 31 December 2000 has been
extracted from the full annual accounts of the group which have been filed
with the Registrar of Companies.  The auditors' report on those accounts was
unqualified.

Independent Review Report to Smith & Nephew plc

We have been instructed by the company to review the financial information set
out on pages 5 to 10 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors.  The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board.  A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed.  A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions.  It is substantially less in scope than an audit performed
in accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit.  Accordingly we do not express an audit opinion on
the financial information.

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the half year
ended 30 June 2001.



Ernst & Young LLP
London                                                            2 August 2001