Smith and Nephew's progress in expanding margins over the year is being tempered by modest growth in revenues. Revenues from Orthopaedic segment is expected to be continue being impacted by pricing pressure while Endoscopy segment revenues are expected to be challenged by capital expenditure constraints implemented by hospitals in view of prevailing economic conditions. We expect the Advanced Wound Management segment to benefit from deeper penetration in Europe as a result of consolidation of the company's UK sales distribution network. The company's new manufacturing unit in China is responsible for production of the ALLEVYN gentle range. We believe cheaper production costs will result in further improvement in margins going forward. New products such as R3 Acetabular System, PROMOS Modular Shoulder System, TRUCLEAR System, ACTICOAT Flex and ALLEVYN products are expected to contribute significantly to revenue growth over the next 2 years. Moreover, Smith and Nephew's acquisition of Nucryst assets on 12 November 2009 bodes well with the company's strategy of investing for growth in each of their businesses by providing them with opportunities in nanocrystalline silver technology, which is expected to benefit the AWM segment. Margins are expected to continue expanding as a result of implementation of EIP, further supported by stricter cost cutting measures and favorable product mix. Consequently, we believe the benefits from the EIP will continue improving EBITDA margin over the next year, despite pressure on revenues due to weak economic conditions. Hence, we maintain our positive outlook for the company.

From September 2009, the Research Oracle will begin to accept research submissions from readers – whether amateur or professional analysts – from around the globe. To receive notification of the launch and rules, contributors may register now at
http://www.iirgroup.com/researchoracle/researchoracleaward