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Good morning. Thank you for attending today's Smith & Nephew quarter 1 trading report. My name is Sarah, and I'll be your moderator today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you'd like to ask a question, press star one on your telephone keypad. I'd like to pass the conference over to our host, Deepak Nath, Chief Executive Officer. Please go ahead.

Thank you. Good morning and welcome to our Smith & Nephew first quarter 2026 trading update. As just mentioned, I'm Deepak Nath. I'm the Chief Executive Officer. I'm joined today by John Rogers who's our Chief Financial Officer. We've made a good start to the year. In the first quarter, we delivered 3.1% underlying growth or 4.7% on an adjusted daily basis, which was in line with our expectations. Performance across the group was positive overall, with growth across all business units and regions. We saw strong growth in Sports Medicine and resilient results in Advanced Wound Management despite the headwind from CMS changes to skin substitute reimbursement. As expected, U.S. knees were softer in the quarter, reflecting deliberate trade-offs and continued focus on disciplined execution.

The rest of Orthopaedics delivered solid performance. This underscores the strength of having a well-balanced, diversified portfolio. Innovation continues to be a key driver of our performance, accounting for more than half of our growth. We saw strong momentum across a broad range of products spanning all business units, including CATALYSTEM, AETOS, Q-FIX, REGENETEN, CARTIHEAL AGILI-C, FASTSEAL, OASIS, and LEAF. Overall, our Q1 performance supports our confidence in the full-year outlook, which remains unchanged. We expect growth to strengthen over the remainder of the year, driven by the ramp-up of new product launches, stabilization in U.S. skin substitutes, an improving trajectory in U.S. knees, as well as an additional trading day in the fourth quarter. Today, we are also announcing that after seven years with the group, including the last two as the President of Orthopaedics, Craig Gaffin will be leaving Smith & Nephew to pursue a new opportunity.

We have appointed a highly qualified successor, Nathan Folkert, who will join us later in the month. I'll return to this later in the call. I'm pleased to announce a $500 million share buyback. This reflects our strong balance sheet and confidence in our 2026 performance and demonstrates our continued commitment to a balanced approach to capital deployment, supporting future growth while returning incremental value to shareholders. With that, I'll now hand over to John to take you through the financial performance in more detail.

Thank you, Deepak. Revenue for the quarter was $1.5 billion, representing +3.1% underlying growth and +6.6% reported, including a 350 basis points tailwind for foreign exchange. Those growth rates include the effect of one fewer trading day compared to the first quarter of 2025, on an adjusted daily sales basis, underlying growth was 4.7%. Geographically, the U.S. grew 2.1%, and other established markets grew 1%. Emerging markets grew 10.5%, and excluding China, growth was 2.9% on an underlying basis. We expect China to be broadly neutral to growth for the full year, making it the first time since 2021 that it will not be a major headwind to revenue growth.

Let me now take you through the business units in more detail. I'll start with Sports Medicine & ENT, which grew 6.7%. Within sports med, all regions contributed to growth. We saw double-digit growth in joint repair, driven by Q-FIX KNOTLESS, REGENETEN. CARTIHEAL AGILI-C also grew very strongly, albeit off a small base. We continue to roll out these products in more geographies outside of the U.S., primarily across Europe. It's still very early for Tendon Seam, which we acquired with Integrity Orthopaedics earlier this year, but integration is progressing well. AET growth was led by FASTSEAL and services. In China, we had intentionally restricted inventory in the channel at the end of last year, and with the implementation of VBP delayed by a few months, we saw strong demand for our products there during the quarter.

We now expect VBP to be implemented at the beginning of the second half. As a result of this strong performance, our sports medicine revenue exceeded our recon and robotics revenue for the first time ever, and we expect that to continue to be the case going forward. Turning to ENT, we saw particular strength in other established markets in Latin America, as well as in our ARIS ablation wands for turbinate reduction. In China, we continue to reduce inventory in the channel ahead of VBP implementation, which had a negative impact on our growth. We still expect a profit headwind from China VBP in 2026 to be around $15 million-$20 million. Let's now look at advanced wound management, which grew +2.2% in the quarter.

Within that, advanced wound care grew 4.9% with good growth overall led by ALLEVYN Life and strength in emerging markets. Our ALLEVYN COMPLETE CARE launch in the U.S. is off to a strong start. It takes time to win new contracts, but we're pleased with what we're seeing so far, and we'll be expanding the launch into Europe in the second quarter. Turning to bioactives, which were down 1.7% for the quarter. We saw strong growth in SANTYL offset by a decline in skin substitutes. As a reminder, our skin substitutes business is facing headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year. This is driving a decline in both volumes and pricing in non-surgical settings, particularly in mobile, where we have limited exposure.

We have also seen reduced billing efficiency and elevated inventory clearing in the system. The market is adapting slowly to these changes, the impact we are seeing on our business is in line with our expectations. We set out our full year outlook. We contemplated a range of outcomes, we continue to expect the trading profit headwind for the full year to remain within the $20 million-$40 million range we previously guided to. Looking ahead, we remain convinced of the long-term attractiveness of the skin substitute segment beyond this transition year. Advanced wound devices grew 1.9%, partly reflecting a strong prior year comparative. LEAF and PICO both performed well, reflecting good demand. PICO growth reflects our focused efforts to improve penetration in the surgical setting.

Sales of RENASYS in the U.S. continue to be soft in the acute care channel, while performance in the post-acute channel remains strong, and we're continuing to expand into emerging markets. Orthopaedics grew 0.8% on an underlying basis. In the U.S., hips grew above market for the 4th consecutive quarter, driven again by the strong uptake of CATALYSTEM, particularly in competitive accounts. Trauma and extremities also grew strongly, driven by EVOS, shoulder, and INTERTAN Nails. These results reflect sustained momentum in segments where we have benefited from the combination of a strengthened commercial organization and a differentiated portfolio. Where our portfolio aligns with underlying market trends, we are able to perform well. U.S. knees were weak in the quarter, consistent with the softness we had previously guided to for Q1.

This reflects our continuing and deliberate trade-offs to balance growth, profit, and asset efficiency ahead of the launch of our new kinematic knee system, Landmark. We are being disciplined about set placement and in managing our customer tail to improve the quality of our base. At the same time, the market continues to shift from cemented towards cementless knees, and our ability to compete effectively will increase when we launch the cementless version of Landmark expected in Q3 of this year, which will be followed by the launch of the cemented version in Q2 of 2027. Additionally, as mentioned earlier, we had a headwind from one fewer trading day in the quarter. Looking ahead, we continue to expect softness in the U.S. knee performance relative to the market this year as a result of these actions. We anticipate an improving trajectory from here.

We are stepping up set deployment for LEGION MS, enhancing the competitiveness of LEGION, which accounts for around half of our installed base. MS is performing strongly in the market, and only six months into the launch, 15% of procedures with LEGION implants now utilize MS inserts. This will in turn support incremental growth in LEGION CONCELOC, our cementless version of LEGION, which is currently growing double digits. Outside of the U.S., both hips and knees grew above market. Knees were particularly strong in emerging markets, and hips and trauma and extremities performed well overall, with some isolated weakness in specific markets that we are addressing. Finally, other recon grew 6%, reflecting a strong prior year comparator and contract mix. During the quarter, we signed our largest ever multi-system CORI deal with the U.S. Teaching Institute, and we continue to see encouraging trends in utilization and penetration.

I'll finish now with the outlook. We continue to expect around 6% organic revenue growth and around 8% organic trading profit growth for the year, translating into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity acquisition. We remain on track to deliver around $800 million of free cash flow and a return on invested capital above 10%. We continue to expect a stronger second half to the year compared to the first half for both revenue and profit growth, with phasing now expected to be further weighted to the second half, driven by some commercial deals moving into the second half from the first. Acceleration will be driven by the ramp-up of product launches, stabilization in skin substitutes, and an improving trajectory in U.S. knee implants, as well as an extra trading day in the fourth quarter.

As Deepak mentioned earlier, today we announced a $500 million share buyback to be completed over the next 12 months. This underscores the strength of our balance sheet and cash generation, as well as our confidence in the business while remaining fully consistent with our capital allocation framework. The program will be funded from free cash flow and existing cash balances and builds on the completion of a $500 million buyback in 2025. With that, I'll hand back to Deepak.

Thank you, John. We're now just 1 quarter into our new RISE strategy, which will accelerate growth and improve returns over the next three years. We're making good progress under each of the elements that will shape our performance in 2026 and beyond. To reach more patients, we continue to drive adoption of our differentiated portfolio by accessing more indications and geographies. This quarter, we launched shoulder execution on our latest generation of CORI and are receiving positive feedback on that. We also launched CATALYSTEM in Japan and the next generation LEAF 3.0, a cloud-based solution for our patient monitoring system. To innovate to enhance the standard of care, I'm pleased to share recently published compelling clinical evidence that supports our patient-first approach to innovation, focused on areas with the greatest opportunity to improve outcomes.

The Orthopaedic Journal of Sports Medicine published data that compared REGENETEN implant patients who had partial thickness rotator cuff tears with those who received traditional suture anchor repair. It showed early recovery time was cut in half. This is the third randomized clinical trial to demonstrate that the REGENETEN bioinductive implant improves outcome versus traditional rotator cuff repair techniques. The American Journal of Sports Medicine published evidence showing that patients treated with CARTIHEAL AGILI-C reported significantly better knee pain relief and quality of life improvements over a five-year period. To scale through strategic investment, we're deploying capital into high return, high growth categories and channels. This includes the acquisition of Integrity Orthopaedics, which we announced in January. With Tendon Seam's fundamentally novel biomechanical approach to rotator cuff repair, we're able to create one of the broadest, most advanced portfolios in shoulder pathology.

We also continue to invest in the growing PICO, in growing PICO across wound segments, including to help prevent surgical site complications. To execute efficiently, we're driving group-wide productivity by being disciplined around cost control, as well as executing an Ortho 360 program within orthopedics. We're deploying AI and data analytics to drive improvements across the business. This quarter, we created a digital twin within our supply chain, which we're integrating into our end-to-end workflows to drive process optimization and enhance decision-making. As I mentioned, we're pleased to announce that Nathan Folkert, who goes by Nate, will be joining us later this month to lead our orthopedics business. Nate brings with him more than two decades of global orthopedics leadership experience, spanning commercial and operational roles across large medical technology organizations.

He's held senior leadership roles at Stryker, CONMED, and Zimmer, including as the President of Zimmer's trauma division, where he had end-to-end responsibility for large orthopedics businesses across multiple product lines and markets. More recently, Nate has served as CEO of Orchid Orthopedic Solutions, where he led a significant business turnaround, delivering both product to profit growth and sustainable improvements. With this depth of experience, he is well-positioned to continue to execute on our strategic priorities, and we remain laser-focused on maintaining the good momentum we have across the majority of orthopedics and building on the progress we're making to improve our U.S. knees business. I want to take a moment here now to thank Craig for his contributions to Smith & Nephew over seven years. He has made a real difference here. I wish him nothing but the best in his next venture.

I look forward to welcoming Nate to Smith & Nephew as we work together to deliver a RISE strategy. In summary, we have delivered a good first quarter with performance in line with our expectations and keeping us on track to meet our full year guidance across all metrics. Strong execution in Sports Medicine and solid performance in Advanced Wound Management and the rest of orthopedics have offset the anticipated softness in U.S. knees, reflecting the resilience and balance of our portfolio. We're just one quarter into RISE, and we are already seeing progress across all four pillars, from innovation and clinical evidence to disciplined capital deployment and operational execution. The announcement of a $500 million share buyback further reflects our confidence in the outlook, supported by strong cash generation and a balanced approach to capital allocation.

I look forward to seeing many of you at our Expert Surgeon Insights event on the ninth of June. This will feature leading surgeons from major U.S. healthcare institutions discussing the innovation platforms expected to drive our next phase of growth, including REGENETEN, CARTIHEAL AGILI-C, TESSA, PICO, CORI, AETOS, and Landmark. With that, we are now ready for your questions.

Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. To remove your question, press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. Our first question is from Veronika Dubajova with Citi. Please go ahead.

Hi, guys.

Hi, Veronika.

Good morning. Thank you for taking.

Hi, Veronika.

Hi, good morning, [Deepak]. I was too slow to hit the unmute button. Thank you so much for taking my questions. I'm gonna keep it to two, please. One, just want to understand a little bit your thoughts on the U.S. Ortho franchise. Look, I think you have been very honest in flagging, you know, a softer Q1 in knees in particular. I don't think any of us expected -10. I'd kind of love to understand to what extent things might maybe haven't fully gone to plan there. You know, it sounds like from the prepared remarks from John and you Deepak as well, that maybe you're having a slightly softer expectation now for U.S. knees for the full year, and maybe you sound a bit better on hips.

I'd love to kinda get some color and thoughts from you on that. My second question is, look, I appreciate this is obviously a trading update, but, you know, inflation is becoming a big topic of conversation. It was a big headwind for Smith & Nephew back in 2022. Would love to get your thoughts, John, on how you're thinking about the pressure on margin from the higher oil price and some of the raw materials, and to what extent you see your ability to mitigate it in the current backdrop as protecting that $1.3 billion of trading profit for the year. Thank you guys so much.

Thanks for the questions, Veronika. On U.S. Ortho, just taking a step back, just wanted to acknowledge the tremendous progress we've made in this franchise over the last four years. Compared to where we were in 22 or, and each year beyond that, we're in a place where we are operating OUS at or above market. U.S. hips, as you indicated in your question, we now know is leading the market, which, you know, three years ago, we could never imagine that we would be doing that in U.S. hips. What that reflects is fundamental improvements in how we operate the business, commercial execution, supply, a product portfolio that's lined up with kind of where the market is today.

In U.S. knees, as we've acknowledged, we've got some ways to go to get our product portfolio to where the market is, particularly when it comes to cementless. On this, ahead of the launch of Landmark, which we expect to not only address the gap that we've got on the journey platform with respect to cementless knees. Actually, Landmark represents the first new knee platform on the market in the new robotics era. It's the first implant that's designed with robotics kind of integral to its design, in our case, CORI, and also a tray efficient design that's really well suited for a range of settings, especially to the ASC. We've got high hopes for what Landmark will do for us.

Ahead of that launch, we're making deliberate trade-off decisions on how much capital we want to deploy in which account and how we manage the tail of accounts. That's the impact that you see in Q1. Is it a bit softer than we had thought originally? Yes. We had flagged, as you acknowledged, that Q1 was going to be soft. The reason we think it's gonna get better from here on out is on the LEGION platform, we are launching LEGION MS, and we indicated that we're already seeing traction in the market. It enhances the competitiveness of LEGION. Not only are we seeing about 15% of our LEGION used with the MS inserts, actually, LEGION is a way to convert competitive accounts, and now we have a stronger value proposition.

We've got a good line of sight to the sets we're deploying, where we're deploying them in the balance of the year. This is the confidence that we have between now and ahead of the cementless launch of Landmark in Q3, that we'll have an improvement trajectory. Hopefully that gives you a bit of a color around not only U.S. knees, but also the context. As you indicated, U.S. hips is actually ahead of the market. The offset of, you know, slightly softer U.S. knees with slightly stronger U.S. hips, I think puts us in a good position in terms of U.S. recon overall, and hopefully you see that being on balance the improvement that we're seeing in the Ortho franchise.

John, I'll let you.

Just to build a little bit on the Ortho question as well. The reason why we've got quite good visibility, Veronica, is we're seeing in the LEGION sets that we're deploying is that they mature over time. We're actually seeing the turn rates on the sets that we've already deployed increasing over time, which is what you'd naturally expect. We're also deploying additional sets. We can take that data and extrapolate that data through the remainder of the year. That's what gives us the visibility on seeing an improving performance on knees as we progress quarter by quarter through this year. In relation to your question on inflation, obviously, we've got quite a lot of our costs hedged, so particularly our fuel and our energy costs are very much hedged forward 12 months or so.

We've obviously got supplier contracts in place on a fixed price basis. We've got a very extensive savings program that we talked about at the prelim, $150 million within this year that enables us to offset inflation. We can turn the dial up a little bit on that as well. We're very comfortable in confirming or reconfirming our guidance for the full year on both the top line and the profit line for 2026. If the situation in the Middle East were to significantly worsen or indeed becomes more protracted, then that could change. As we sit here today, we're comfortable. We've got good visibility of managing our cost base and comfortable with our guidance for the full year.

Just to build real quick, Veronika, going back to kind of progress on the 12-Point Plan, as you also indicated, we faced significant inflation. Actually, as we recapped at the Capital Market Day, the headline is that we were actually able to offset the very significant headwinds from inflation and all the other macro factors to still deliver about 230 basis points of trading margin expansion during the Twelve-Point Plan. We feel very good about our ability to be agile, to be able to look for offsets to headwinds as they come. Just want to put that into perspective as well.

Very clear. Thank you, guys.

Yep. No problem.

Thank you. Our next question is from John Unwin with Barclays. You may ask your question.

Hey, John.

Morning. Thanks for taking my questions.

Morning

are on competition, actually. We're at AAOS, and we saw two launches or two showcases of products. One, a handheld robot from one of your competitors, and then also some autonomous and semi-autonomous robots from another competitor. How are you thinking about increased competition, maybe in the ASC space from another handheld robot in the market? On the autonomous sort side, do you see this is where the market is going anytime soon? That's my first question. The second question is on nickel-free implants. We also saw a launch of a nickel-free implant from one of your competitors at AAOS, and obviously, OXINIUM is already naturally nickel-free. Do you see any risk to U.S. growth this year from customer attrition, from OXINIUM to the new competitor's launch, and how are you thinking about that? Thank you.

Great. Thanks for the great questions, John. Just on the handheld robot, obviously, you know, you know, we are aware of the competitor launches there. What I'll say is this, we see that as validation of an approach that we took early on. We could have followed in others' footsteps when we launched our robotic platform with a fixed arm. We didn't do that. We took stock of market needs and unmet needs at the time, and we went down the paradigm of a handheld format, which, by the way, is not a solution just for the ASCs, for a range of settings.

We are now quite a ways into our journey of fully featuring CORI across one platform for shoulder, for hips, for knees, and through multiple iterations, have really fleshed out kind of its capabilities across each of those joints. We feel good about where we're positioned, the choice we made quite a ways back in time around a handheld format, and the progress we've made. We welcome the competition, but we also are quite afar, quite a ways down the journey here. In terms of autonomous, you know, over time, perhaps there's a role for that. I don't think it's a near-term thing. Certainly, the way we are thinking about robotics is as a augment to what surgeons do.

It's an enabler for surgeons to perform their procedures and achieve better outcomes through robotic enablement. Surgeons are at the center of the procedure still, and that's how we think the field is actually gonna develop. And of course, we look forward to monitoring progress there. In terms of nickel-free, of course, there's developments in the field, but there is quite a few nickel-free offerings already on the market. You know, this is one more. But just to double-click on OXINIUM, in terms of utilization of OXINIUM, the vast majority of OXINIUM usage is actually for primary knees. It's how surgeons use it for their daily practice. A relatively small proportion of our OXINIUM knee for usage is as secondary knees, whether it's for nickel-free or for some other applications.

Given that composition of OXINIUM today, and given the clear differentiation of OXINIUM versus other alternatives for nickel-free, they're largely coating-based, we feel very good about kinda how we're positioned. We've got lots of data in everyday use of OXINIUM that really supports the appropriate use of OXINIUM in patients, rich data sets supporting the benefits of OXINIUM long-term use and the clear technical differentiation that OXINIUM has relative to other coatings. We feel very good about how we're positioned there.

Thank you very much.

Sure thing.

Thank you. Our next question is from Jack Reynolds-Clark with RBC Capital Markets. Please go ahead.

Hi there. Good morning. Thank you for taking the question.

Hi there.

I had 2 as well, please. I, first on ortho and kinda knees. I appreciate there's kind of some deliberate kind of management going on there. Could you talk directionally as to the impact of that decline on margins? Have your efforts been successful in supporting orthopedic margins, or actually, is there a risk that decline of double digits poses a risk to margin from kind of negative operating leverage? If you could just talk, John, directionally as to how that's progressing. On CORI Shoulder, has this started to come through in the numbers yet? Kind of if not, when would you expect it to, and what's been the feedback from the launch? Thank you.

Let me tee this up real quick on both these first. I'll turn it over to John to take a deeper dive on margins. Just the headline level, first of all, we feel very good about margin coming through, and the fundamental reason for that is the softness of knees are offset by the strength in hips. Fundamentally, as I said in the capital market day, you know, we're fundamentally agnostic to whether the volumes come from hips or knees in terms of our margin progression. Even with the level of knees being where it was in Q1, in terms of how we set up for margin through the rest of the year, we feel very good about our ability to kinda drive the margin through this.

We've also, at the capital market day, given you a multi-year outlook as to how margin progression is gonna actually happen. You know, there's 2026, and then, of course, the heading into 2027 with the inventory rebound, you know, turning into a tailwind for us in the back half of 2027. All of that remains intact, and we feel really good about how we're positioned. I'll let John kind of double-click that. In terms of CORI Shoulder, we're in the very early innings today. It's still a limited release in terms of launch. Look for that to become more material, you know, I would say in the back half of the year and starting into 2027.

There we see clear synergies between not just our base ortho business, the recon side, but actually into our sports medicine as well. As you know, Jack, there are surgeons, particularly in the U.S., who do both shoulder arthroplasty and arthroscopy. We see real benefits there with bringing multiple elements of our portfolio together to have a real solid value proposition for shoulder surgeons. With that, John, you wanna pick up further on this?

I'm not sure there's a great deal much to add further. I mean, as Deepak says, like within any portfolio and even looking just at the context of the ortho portfolio, there's swings and roundabouts, positives and negatives. In the round, you know, even context of our ortho business, we're very comfortable with the margin trajectory for the full year, notwithstanding the softness in knees that we've called out. You know, Deepak calls out the slight overperformance in hips that compensates from a margin point of view. Of course, when you look at the group more broadly, you've seen outperformance in our sports business, which we also know is a very strong margin-driven business. All of this gives us, you know, confidence in our ability to hit the guidance that we set out.

There's always gonna be some gives and takes, but overall, both the margin at the business unit level for Ortho and the margin at the overall group level, we're comfortable with the guidance that we set out.

That's super clear. Thank you.

Thanks, Jack.

Thank you. Our next question is from Aisyah Noor with Morgan Stanley. You may ask your question.

Hi. Good morning. Thanks for taking my question. My first one was on the share buyback. Just quickly, what drove the decision to deploy this soon in the year, given you just concluded the last program, and would this preclude any other buybacks for the remainder of the year? Then second question was on advanced wound care. One of your peers had called out softer market dynamics in Europe, specifically pricing reform in Germany and Spain. Or France, sorry. Just wondering if this development resonates with your business, and if so, how exposed your wound business is to these countries currently. Thank you.

Yeah, maybe I'll take the question on the share buyback. I mean, as I said a few times, you know, we've got a very clear capital allocation policy, and that policy is to first and foremost ensure that we're driving our top line growth through the right investment internally and of course, through M&A, and then we've got to pay a dividend. Then if we've got line of sight then of our, you know, our leverage with respect to our target, which is 2x net debt to EBITDA, and we've got capacity, then we'll take that cash and use that for share buybacks. The reality was we exited 2025 below our target. We've continued to generate cash through Q1 at our Q1 cash position this year.

Actually, all else being equal, would end the year at a, you know, significantly below our target leverage ratio. Hence why we've been very comfortable in announcing a share buyback. That doesn't in any way, shape, or form exclude the opportunity for bolt-on M&A. We've still got capacity on the balance sheet and in line with our capital allocation policy to do bolt-on M&A. It just felt comfortable given the trajectory of the cash flow through the year to announce the buyback at the moment. It doesn't necessarily exclude doing further buybacks. You know, we'll always revert back to our capital allocation policy. We'll look at our future cash flows, and then we'll take a view depending on what opportunities we have available in front of us.

Very comfortable to announce the buyback today on the back of the $500 million that we also did last year, of course.

Great. Just to pick up your second question in terms of the AWC. Of course, the pricing kind of dynamic within Germany especially, but also France, as you called out, it's not necessarily a new phenomenon. You know, we had taken that into account in the guidance that we issued. Based on what we're seeing, we don't see a reason to update our guidance based on that. Yes, we do have exposure to it, but it's contemplated within our guidance.

Maybe it would be worth sort of taking the opportunity to reemphasize the fact that we are also launching ALLEVYN COMPLETE CARE into the European market in the second quarter of this year. That would also support our performance year-end.

Yeah. Yeah. Thanks, John.

Thank you very much.

Thanks, Ayesha.

Thank you. Our next question is from Graham Doyle with UBS. You may ask your question.

Hey, Graham.

Morning, guys. Thanks. Just two hopefully quick questions. Just John, on the margins, could you give us some color, just as we model the phasing for first half this year versus last year? I mean, it kind of feels like it should be down a little bit margin year-over-year, but good to get to clarify that. Then maybe one for Deepak. When we're modeling Landmark, how do we model the sort of ramp? Is it literally as that launches, we should expect knees to start doing better, or is it like a one, 2 quarter lag? Just to understand that as well. It would be super helpful. Thank you.

Graham, yes. Just your comment on the margins. Just to be clear, we're reiterating our guidance for the full year, which is pre-Integrity, we're expecting our top line to grow 6% and our profit, trading profit organically to grow around 8%. Obviously, there's some margin expansion implicit within those numbers. If you fully factor in the diluted impact of Integrity, we broadly get to flat margin for the year. That gives you a guidance for the full year. In terms of the half 1, half 2, as we called out on the call, we expect the phasing on the top line to be a little bit more weighted in the second half.

There's 2 commercial contracts that we had forecast to land in our 2nd quarter will now actually be just bumped into our 3rd quarter. We've got full visibility of those coming through and there'll be a little bit shifted, you know, in weighting towards the 2nd half. We expect the profit to follow that. Overall, we are comfortable with the guidance that we've given. It'll be margin expansion on a pre-acquisition basis and broadly flat if you take account of the diluted impact of Integrity.

Right. Graham, on your Landmark question, just to anchor you on the timeline, just to recap from our CMD. Q3 of this year is when we launch our cementless, and end of Q2 of 2027 is when the cemented version gets launched. That's when we have a full offering. As with any orthopedics launch, it's never a switch, right? If you do it right, which, you know, all the operational discipline we're driving with the organization, the discipline around capital, you've got to be thoughtful about how you deploy sets, and you'll bring that discipline into the Landmark launch, as we've demonstrated with CATALYSTEM. If you look to what happened with CATALYSTEM, where it was a build over a few quarters, that's what you should expect in effect with Landmark.

The competitive dynamic is a little bit different in knees or hips, but you should look to that as a directionally, the shape of how we would launch Landmark. A couple of quarters after each of those kind of timelines that I gave you would be the way to think about it.

Okay. Okay, thanks a lot, guys. That's really helpful for modeling. Thank you.

Absolutely, Graham.

Thank you. Our next question is from [Sam Janvier] from Panmure Liberum. Please go ahead.

Morning, guys. Thank you for taking my question.

Morning

questions. Just two, if I may. One, I just wanna dig a little bit deeper on the input costs. Obviously, you've talked about 2026. I'm kind of thinking, you know, if this goes on for a bit longer and we see elevated oil prices into 2027, I was wondering if you could help maybe give us a sense of what percentage of your COGS are exposed to kind of petrochemicals and how that might flow into 2027. The other one is just to dive a little bit more to Graham's question on the phasing. You've talked about perhaps a little bit more revenue phasing in the second half than the first half. Can you help us quantify that?

Is that a kind of, you know, a couple of percentage point movements or something lower than that, just to get a sense of what we are talking about? Thanks.

I'll take both of those. Look, on the input cost side, as I said earlier on, just to reiterate, you know, we've got pretty good visibility for the 2026 year. Things got a lot worse, more protracted, then it could have an impact, but we're pretty well hedged going as we in 2026. Obviously, 2027, you know, things go on for longer, that could impact 2027. We're not, we're not overly exposed as the petrochemical side of our business. It's obviously, it's embedded within our products to a degree, but it's not a huge exposure. It's relatively small in that regard. The point I would say about 2027, you know, like in any year, there's always puts and takes on the margin.

if we're looking not gonna sort of go about forecasting '27 margins, we've always said that '26 was a tough year because there was a few headwinds. '27 ought to be a little bit easier because things like the revaluation reserve and tariffs and so on reverse out. you know, there may be some pressures coming through on the cost side, but again, there's some positive tailwinds to offset that. we'll obviously set our guidance out for '27 more clearly at the time. in terms of the phasing, half one, half two, I don't wanna call it out too specifically.

I think, you know, I would say for half one, we're probably looking at somewhere around 3.5% growth and then probably in the second half, 8 or so plus, and that gets us to around 6% for the full year. That might be broadly the way we would see it shaping up. It's a little bit more weighted in the second half, as we said, but we've got very good visibility of that. You know, there's a couple of contracts that we know will shift from Q2 into Q3, so we're comfortable with the overall guidance we set out for the full year.

Brilliant. Thank you very much.

Sure, Serge.

Thank you. Our next question is from David Adlington from JPMorgan. Please go ahead.

Hey, guys. Thanks for the question. Firstly, I'm afraid, back to U.S. knees. I just wondered how Q1s were stacked up versus your internal expectations and what particular elements surprised you. Just to confirm that you do expect Q1 to be the trough for U.S. knee growth. Secondly, just on skin substitutes, just wondered how the performance there was relative to your expectations with respect to both price and also volume. Thanks.

Thanks, David, for the question. U.S. knees, as we acknowledged, a little bit softer than we had thought. The primary driver for that is the timing of where we chose to deploy LEGION sets, LEGION MS sets. That had an impact of kind of the shape of it. The broader, kind of, context for that is, as we've said, historically, we've not been very disciplined about how we've deployed capital into the business.

We've acknowledged that, and we've said, you know, during the whole 12-point plan journey, one of the things we've really worked on is being very, very intentional about how we do that going forward and the steps we would take to try and address some of the places where we had way too much capital deployed relative to the business opportunity. We had said there's a point in time when we start to kinda address that, and we've been at this now for a little while. The timing of that just depends on when the opportunity is to do this. Sometimes it's hard to forecast that within a quarter. It's the right thing to do to get the business reset and to be on more solid ground.

This is part of our efforts to do that, and there'll be some, you know, quarterly shifts around when that actually occurs. The broader thing in terms of software is just the timing of when we chose to deploy sets. Also, as John indicated earlier in this call, because we've got line of sight to A, the sets that we do have and where we plan to deploy them, in the context of when Landmark is launching and the discipline with which we're doing it and the discipline with which we are ensuring that those sets turn, gives us some good confidence in terms of how the rest of the year are gonna play out. That's kind of the U.S. knees part of it.

In terms of skin subs, we had contemplated a range of outcomes knowing that we were going into a very uncertain kind of environment. The guidance of $20 million-$40 million trading profit impact from skin subs, you know, had a range of possible scenarios that we had taken into account. What we're seeing play out is there's inventory in the channel. We had expected some level of that was going into it. It's maybe on the higher end of what we had expected. The system has taken some time to adapt in terms of how things get billed and how reimbursement actually occurs.

You know, the wiser model that the CMS has deployed and how that gets implemented within physician offices and healthcare settings, and also how physician offices, for example, bill for these services. Very different type of model in the current era compared to what they're used to. That adaptation is taking a bit of time, right? When you add these things together and we look at what's actually happening, you know, in not only kind of how the quarter turned out, but also intra-quarter moves, what we see is contemplated within that range of $20 million-$40 million that we'd set out.

Bottom line, there are puts and takes within that, but we feel good about kind of falling within the expected outcomes for your models. Anything you want to add to that, John?

I mean, you covered it. Basically, David, you know, bang in line with our expectations for the quarter. The market's pretty much performing as we expected it to. If you remember at the premiums, we gave the overarching yearly guidance of prices for us, if it's been down 20%-25% and volumes being flat to positive. Obviously, we wouldn't expect to see that in the first quarter because there's a degree of, you know, this market's got to mature over time. Actually prices were actually down a little bit less than that 20-25, and volumes were down a little bit. We weren't seeing positive return to volume.

The quarterly performance was actually bang in line with what we would expect to see as we see the market mature and transition through this state as we progress through the year. Very comfortable with where we are. To Deepak's point, the $20 million-$40 million guidance that we gave is reaffirmed.

Perfect. Thanks. Just to fully quantify, the Q1 does represent the trough for U.S. knee growth?

Oh, yes.

Yeah.

Yes, it does. Sorry, I didn't address that part of the question. Yes.

Yeah.

Yeah, we expect to see steady progression on U.S. knees as we progress through each quarter of this year.

Perfect. Great. Thank you.

Yeah.

Thank you. Our next question is from Susannah Ludwig with Bernstein. Please go ahead.

Great. Good morning, and thanks for taking my questions. I guess first you guys had called out strong SANTYL growth on the back of distributor patterns and just wondering how long that impact is expected to last. Second, you noted in AET that the China VBP has been delayed until the second half of the year. Just any commentary on sort of how you expect that to impact phasing of AET throughout the year.

SANTYL, as you know, just the way the business works, flows through distribution, and there's, you know, kinda, quarterly gyrations. Overall through the year on a year-on-year basis, pretty consistent level of growth in SANTYL. That's the way to anchor, kinda how you think about SANTYL. There's no fundamental change to underlying demand and the kind of growth that we see. In Q1, the impact of distributor stocking patterns, you know, the Q1 to Q1 comparator drove the numbers that you see. In terms of underlying demand, you know, that seems steady.

There's some perturbation, you know, with the whole skin sub thing and how the channel's adapting to things, there's some perturbation related to that, but there's actually underlying, you know, strength in the demand. That's SANTYL. In terms of AET, just to reinforce what we said earlier, which is that we're seeing a shift in when AET is gonna be implemented within the year, because, you know, we've been through this now a number of times. We had basically worked on channel inventory ahead of the expected implementation at the end of last year, as John said.

With the delay that's come, there was a greater level of demand in Q1, which we catered to. Overall for the year, you know, at the beginning of the first half, second half, we expect AET to be implemented as all the signs. You know, there's no change to the fundamental assumption other than the timing shift to that. Also wanna re-anchor you to China now, which is, it's now a significantly smaller portion of our overall group. Round about 2% or so of overall group sales is now China, it is less material to the group.

As John said, while China was not a headwind for us for the first time in quite some time, overall for the year, we expect China to be neutral in terms of growth. Listen, do you have anything you wanna color there, John?

Yeah. Well, just maybe a little bit of detail on AET. The upside that we saw in Q1 and Q2, we expect to reverse in Q3 and Q4. Actually, for the full year in China on AET, we expect to be roughly flat, that will largely play a draw. Actually, as Deepak's just said, for the business overall in China for the year, we expect to be roughly flat again. It's really neither dilutive nor accretive to our overall top line performance.

Great, thank you.

Just, just on the Scott, just on the SANTYL piece, I mean, to Deepak's point, you know, that because of the distributor stocking patterns, we've had a strong Q1. I think, you know, the corollary of that is we, you know, we might see a slightly weaker Q2. To Deepak's overarching point, when you look at the year overall, in line with expectation.

Great. Thanks, John.

Thank you. Again, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question is from Oliver Metzger with ODDO BHF. Please go ahead.

Good morning. Thanks for taking my questions. First one is also about skin substitutes in the U.S. Do you have any view that apart from the CMS price cuts, that also some market share shifts might occur on the back of the reform? Second question about advanced wound care. Some stronger growth for now the 4th consecutive quarter, which is, let's say, above historic levels. Often, pretty often, slower growth was initiated by some higher price pressure. Now we see the reforms in Germany and France. In Europe, these countries have often been the first mover with some more reforms to come. Do you expect that the overall environment now again more towards higher price pressure? Thank you.

Thanks, Oliver. In terms of CMS skin subs, first off, you know, post the 26, when clearly a year of transition, we believe this is fundamentally a great market, and we're very well positioned within that market. There's a significant medical unmet need for this in a variety of applications, whether it's diabetic foot ulcers, venous leg ulcers. The clinical need for these products remains robust, and we've got a great portfolio backed up by strong clinical evidence, directing the appropriate use for these products. What we expect to have happen is, over time, we believe utilization will shift to those products that are backed up by clinical evidence and have the quality profile that customers and patients expect.

There will be shifts that occur, and that will get played out during the course of 2026 as we get into 2027. As with Smith & Nephew, we feel very well positioned within the sector over the longer term. That's kind of the skin subs answer. In terms of AWC, as you know, we've had a higher level of growth based on historical levels. There's some comps within that. Fundamentally, we've got new products that we're launching into this category. ALLEVYN Ag has been a material driver for growth. We've got ACC or ALLEVYN COMPLETE CARE launching. It's launched in the U.S. It's coming, as John said, kind of middle part of the year within Europe. That we're expecting to take share within that category.

It's got, from a product standpoint, unique features and benefits. It's a 5-layer product that offers great opportunities for exit management, which ALLEVYN has always been known for. Together with the new silicone that ALLEVYN COMPLETE CARE features and the fact that you've got 5 layers that are not bonded together, that is great and sheer, which means it can be used in a variety of applications, makes for a very compelling value proposition for that category. We believe that product is differentiated, and we are poised to take share within that. In terms of pricing, as you rightly note, Germany often is the vanguard for something like this.

As you also know, Oliver, that what happens in Germany doesn't necessarily translate in a like for like fashion in other markets, 'cause each market is different, the reimbursement patterns are different, the clinical practice is different. Look, we're not, we're quite attuned to the dynamics of the market. We've been in the space for a long time. Our long-term plans take into account a dynamic market, we also have a great product we believe that will carry the day in a market that's dynamic. We put these pieces together. I think we're set up very nicely in an AWC category to actually be a challenger, which we haven't been in quite some time.

Okay, great. Thank you.

Thank you, Oliver.

Thank you. There are no questions waiting at this time. I'll turn the conference back over to Deepak Nath for any closing remarks.

Great. Thank you for the great questions. Just wanna end with saying that we've delivered a great first quarter. This performance that was in line with our expectations, and we feel very good about our ability to meet our full year guidance across all metrics. We look forward to coming back to you and updating you on progress at the half. Thank you again for your attention and engagement today.

Thank you. That concludes Smith & Nephew quarter one trading report. Thank you for your participation. You may now disconnect your line.

Good morning. Welcome to the Smith & Nephew Q4 and Full Year '25 Results Presentation. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is John Rogers, our CFO. I'm pleased to report a strong finish to 2025, delivering results at the high end of our guidance on revenue growth, margin and free cash flow. For the full year, underlying revenue growth of 5.3% and importantly, all three of our business units grew by over 5%. Sports Medicine & ENT and in particular, Joint Repair within that had another strong year. And in Orthopaedics, we saw meaningful progress in our U.S. recon business, particularly Hips and in Trauma. When there's more work to do in U.S. Knees, our OUS business, Knees business has remained strong throughout the year. So we had a record year of CORI placements globally and saw continued growth in adoption and utilization of our robot. Advanced Wound Management also had a good performance in 2025, driven by growth in AWD and Bioactives. Innovation remains central to our strategy with over 60% of our growth in 2025 came from products we've launched in the last 5 years. And innovations in all three business units delivered double-digit growth for the year, including Q-FIX, REGENETEN, FASTSEAL, LEGION CONCELOC, CATALYSTEM, EVOS, AETOS, PICO, and LEAF. On profitability, we saw 160 basis points of margin expansion, driven by our enterprise-wide cost savings program and the benefits of all the work we've done in our Orthopedics business dropping through to our P&L. This includes optimizing our manufacturing network, improving productivity, introducing our new sales and operation planning processes and portfolio rationalization. We expect to see further benefits from these initiatives, combined with our Ortho360 operating model and continued revenue growth that will drive us to more than 20% margin in Orthopaedics by 2030. We've also shown greater discipline around working capital management, bringing down days of inventory, and we reduced restructuring charges. Alongside growth and higher profitability, this has lifted free cash flow to $840 million, a 52.5% increase year-on-year. This enabled us to complete a $500 million share buyback program in the second half of 2025. This is a great way to finish off 3 years of incredibly hard work and focus under the 12-point plan, during which we've delivered -- consistently delivered on our targets each year and sets us up well for further acceleration of growth and returns as we go into the first year of our new RISE strategy. Turning now to 2026. We expect growth of 6% revenue and around 8% trading profit growth, both on an organic basis and consistent with what we laid out at our Capital Market Days in December, with trading profit growth ahead of our revenue growth. Since then, we've announced the acquisition of Integrity Orthopaedics, so we're also now guiding to trading profit of around $1.3 billion, including the impact of the deal. John will cover guidance in more detail in his section. So let's now round out our financial performance over the last 3 years on the 12-point plan with actual numbers. We've moved Smith & Nephew from a historically low single-digit revenue growth company to mid-single-digit growth, delivering 5.7% CAGR from 2022 to 2025. And we expanded trading margin by 240 bps from 17.3% in 2022 to 19.7% despite facing significant headwinds from VBP in China, FX volatility and higher inflation. If we exclude the total impact of the Sports Med VBP over this period, our 2025 margin would have been 20.9%, 120 bps higher than we've reported. Our increased focus on cash and capital returns has yielded a 15-fold increase in free cash flow and ROIC has increased by 170 bps from 6.6% to 8.3% or by 330 bps, excluding the 160 bps headwind from the impact of portfolio rationalization. I'm incredibly proud of what the whole team here has achieved over the life of the plan and excited about what we can deliver over the next 3 years under our new strategy, RISE. I'll come back to talk about this next phase of our growth later. But for now, I'll pass you over to John to take you through the detail of our results. John?

Thank you, Deepak. Good morning, everyone. Revenue for Q4 was $1.7 billion, representing 6.2% underlying growth and 8.3% reported, including a 210 bps tailwind from foreign exchange. We had 1 extra trading day year-on-year. And on an average daily sales basis, growth was 4.5%. Growth was broad-based across business units and regions. The U.S. grew 5.6%; other established markets, 7.2%; and emerging markets, 6.4%. Excluding China, underlying growth was 7.2%. I'll now move on to the details by business unit, starting with Orthopaedics, which grew 7.9% on an underlying basis and delivered the strongest quarterly growth for more than 2 years. One extra trading day helped, but even if you normalize for that by looking at average daily sales, growth was still strong and accelerated nicely ahead of Q3. In the U.S., we saw a third consecutive quarter of above-market growth in Hips, acceleration in Knee growth and continued strong Trauma & Extremities growth. Hip performance continues to be driven by the uptake of CATALYSTEM, and we are seeing good competitive conversions, and we plan to increase our CATALYSTEM set deployments to support growth in 2026. U.S. Knee growth improved during the quarter following the launch of LEGION MS, which enables us to benefit from the market shift to media stabilized inserts. We are pleased with our competitive wins with the product and continue to receive positive feedback from existing and new users. In OUS, Knees, Hips, Trauma & Extremities all delivered strong performance, except for some localized weakness in Hips in certain distributor-led markets. Following the launch of CATALYSTEM in Japan, we see growth improving in our OUS Hips over the coming quarters. In Trauma & Extremities, we continue to see good growth from our TRIGEN MAX Tibia, EVOS Plating System, and AETOS Shoulder. Other Recon grew 40.8%. We're pleased with increasing CORI placements in teaching institutes and with the percentage of CORIs deployed in competitive accounts. We also deployed 45% of CORIs in ASCs in the quarter. CORI deployment is important because Knee growth is 850 bps higher in accounts where CORI is established, underscoring the potential for further improvement in Knee growth as penetration and utilization of CORI continues to grow. I'll take a moment to look more closely at U.S. Recon growth. In Hips, you can see consistent improvement in growth stand-alone and versus the market since the beginning of 2024, and we have grown above market for the last three quarters of 2025. This is driven by the changes we've made to our commercial engine, product availability and our portfolio with the launch of CATALYSTEM, which addresses the fast-growing direct anterior segment of the market. In Knees, we have also been narrowing the gap versus the market. We had a good quarter in U.S. Knees in Q4, but we recognize quarterly performance has not been as consistent as we would like. In 2026, we expect to continue to close the gap versus U.S. recon market growth. We expect U.S. Hips to track in line with or ahead of the market growth and expect U.S. Knees to start off with a softer first quarter, reflecting our continuing and deliberate trade-offs on balancing growth, profit and asset efficiency. We will then build towards market growth in Q4, supported by the launch of the Cementless version of our new Landmark Knee in the second half. Landmark brings the proven clinical benefits of our Knee portfolio into a single platform that combines advanced kinematics with the next level of personalization, robotic enablement and ease of implantation, while unlocking capital efficiency by leveraging existing instrumentation. Landmark will also feature best-in-class tray efficiency, making it particularly suitable for ASCs. Turning now to Sports Medicine & ENT, which grew 7.3%, driven by double-digit growth in Joint Repair as we annualize the impact of China VBP. We reached an important milestone this year with our Joint Repair business surpassing $1 billion in revenue for the first time. Growth continues to be driven by REGENETEN and Q-FIX KNOTLESS, along with strong performance in small joint outside of China. We saw further acceleration of AGILI-C, albeit still off a small base. AET delivered strong growth, led by FASTSEAL and patient positioning with strong growth in our U.S. markets ex China. Despite continued softness in the U.S. tonsil and adenoids market, ENT saw good growth with double-digit growth in those as well as strong international growth again ex China. We have AET and ENT China VBPs ahead of us, but the headwinds in 2026 will be much smaller given the relative size of these businesses. We are already proactively managing our inventory ahead of implementation. Advanced Wound Management grew 2.8% in the quarter. Within that, Advanced Wound Care grew 4.4%. We are very early in our launch of ALLEVYN COMPLETE CARE, but we're pleased with the performance so far, and we expect momentum to grow over the coming quarters as we roll out the product across the U.S. Moving on to Bioactives and Devices. It's important to remember that both had very strong prior year comparators of over 20% growth. Bioactives declined by 0.5%. We saw softness as we lap the GRAFIX Plus launch in Q4 '24. And we also saw a slowdown in skin subs in the physician office and outpatient setting prior to the CMS reimbursement changes that came into effect at the start of this year. Advanced Wound Devices grew 5.4%. LEAF and PICO both performed well, reflecting strong demand. PICO growth continues to demonstrate strong market demand and reflects our efforts to improve penetration in the surgical setting. U.S. RENASYS continues to be impacted by softness in the acute care channel, while performance outside the U.S. remained strong. Now I'll move on to the full year financials. For the full year, revenue was $6.2 billion, up 5.3% on an underlying basis, ahead of our guidance of around 5% and up 6.1% on a reported basis. Excluding the headwinds from China, growth would have been 7% on an underlying basis. Note also that '25 had 1 fewer trading day versus 2024. Performance was broad-based with all three reporting segments delivering growth of above 5%. Orthopaedics grew 5.1%, Sports Medicine & ENT grew 5.2% and AWN grew 5.6%, all on an underlying basis. Overall, a good set of growth figures and particularly good to see that more than 60% of our growth comes from products launched in the last 5 years as Deepak covered, giving us confidence coming into 2026. Let's now take a moment to look at our underlying revenue growth, excluding China over the last few years. You can see that growth ex China has been greater than 6% since 2023, and that China headwind peaked in 2025 at 170 bps. China was just over 2% of group sales in 2025. And although we still face VBP headwinds in '26, as I already mentioned, these headwinds will have a much smaller impact at the group level. Moving on to the summary P&L. Underlying gross profit was $4.4 billion with a gross margin of 70.9%, an increase of 60 bps. We were able to more than offset raw material inflation with price increases across our portfolio and productivity measures in manufacturing and procurement. Trading profit was $1.2 billion, an increase of $162 million, resulting in 160 bps of trading margin expansion to 19.7% for the full year, at the high end of our initial margin guidance. This was driven by positive operating leverage, our cost savings program and in particular, margin expansion in our Orthopaedics business unit. Moving further down the P&L. Adjusted earnings per share grew by 21% to $1.02. That's above trading profit growth, primarily reflecting the $500 million buyback we completed in the second half, which more than offset a higher tax rate year-over-year. Our tax rate was 19.4%, in line with our guidance of 19% to 20%. Basic earnings per share grew significantly faster, primarily driven due to the lower restructuring charges and lower acquisition and integration costs. Our restructuring charges were $47 million, down from the $123 million in 2024 and we had $32.7 million acquisition and integration costs compared to $94 million in 2024. The full year dividend is proposed to be $0.391 per share, an increase of 4.3% year-on-year. This slide shows a more detailed trading margin bridge. We absorbed headwinds of 250 bps from cost inflation, China VBP and tariffs with FX impact being broadly neutral. These were more than offset by 180 bps of revenue leverage from price and volume and 240 bps of productivity improvements, delivering 160 basis points of margin improvement for the year. Drilling down into the details of the efficiency savings, we remain on track to deliver on the 12-Point Plan and Zero-Based Budgeting savings we laid out at our interims in 2024 of $325 million to $375 million of savings by 2027. We've achieved $280 million in cumulative savings to the end of 2025 with further savings to come through in '26 and '27. We continue to anticipate total savings of about $150 million in 2026, half from this 12-Point Plan Zero-Based Budgeting savings and half from other opportunities above and beyond this across procurement, manufacturing, sales and marketing and business support. Our 2026 guidance is for 8% reported trading profit growth on an organic basis and for around $1.3 billion of trading profit, including some dilution from the Integrity acquisition. We laid out some extraordinary headwinds to profit in 2026 at our London Capital Markets Day. These include inventory revaluation, tariffs, the impact of changes to reimbursement in our U.S. AWM business and ENT VBP in China. There are no changes to any of our assumptions regarding these headwinds. We still expect $60 million impact from tariffs compared to $17 million in 2025 and $20 million to $40 million incremental impact from changes to wound reimbursement. We expect revenue leverage and operational savings to more than offset these headwinds to drive trading profit growth ahead of revenue growth before the impact of any M&A. Coming now to trading margin by business unit. We saw a 340 bps increase for Orthopaedics to 14.9%, and 20 bp decrease for Sports Medicine & ENT to 23.8% and 120 bp increase for Wound to 24.9%. Broadly speaking, expansion came from OpEx savings and leverage across all three business units. Within Orthopaedics, the increase was driven by favorable price/mix, manufacturing savings from network optimization, ongoing productivity initiatives and disciplined cost control. We expect further margin expansion to 2028 and beyond in this business unit. This will be driven by continued growth in revenues, the impact of actions already taken to rightsize our manufacturing capacity and our Ortho360 operating model, our way of running the business to balance growth, profit and returns. In Sports Medicine & ENT, the margin decrease was driven by the impact of China VBP, which more than offset revenue leverage, operational efficiencies and good cost management. Margin expansion in AWM was driven primarily by favorable product mix and productivity gains in operations. As you know, inventory has been a key focus under the 12-Point Plan, and you can see here the development of DSI, day sales inventory, over the year, both for the group and for each of the business units. Group DSI fell by 21 days, excluding the impact of portfolio rationalization that we announced at the end of last year and by 51 days, including this. The biggest reduction came from Orthopaedics, reflecting continued efforts to reduce the number of units in inventory. As covered at our Capital Markets Day, we expect inventory value to reduce further in 2026. We also saw a reduction in Sports Med DSI, including and excluding portfolio rationalization, albeit to a lesser extent than in Orthopaedics, and both Sports and Wound are already much closer to industry benchmark DSIs. We made good progress in our ROIC, delivering a 90 bp increase in ROIC to 8.3% at a group level. The improvement is being driven by trading margin expansion, lower restructuring charges, inventory reduction and overall better asset utilization. Excluding the impact of portfolio rationalization that we announced in December, ROIC was 9.9%, exceeding our cost of capital for the first time in several years. All business units contributed to ROIC improvement, including a more than doubling of Ortho ROIC in 2025, helped by trading margin expansion and lower inventory. We expect a further step-up in group ROIC in 2026, driven by a continuation of these trends. Moving on to cash flow. Trading cash flow was $1.236 billion for the year, reflecting 102% conversion. The improvement came primarily from lower working capital costs, particularly from inventory and payables. Capital expenditure was $433 million. Working capital remains a focus for 2026. Free cash flow also improved to $840 million, growing 52.5% year-on-year. This includes a $26 million one-off property transaction and a $58 million reduction in restructuring, acquisition, legal and other costs. The $840 million was well ahead of our initial guidance for over $600 million. We expect free cash flow in 2026 of around $800 million. We expect the usual increase driven by profit growth, offset by a small temporary increase in restructuring costs, driven by further optimization of our manufacturing network with the closure of our Warwick site in sourcing more into Memphis and winding down manufacturing activities in Hull as we build our new Wound facility in Melton. Overall, our cash generation and returns profile is now in a much healthier position, and there is more improvement to come as we execute our RISE strategy. Net debt increased slightly during the year to $2.76 billion, an increase of $50 million. We finished 2025 with a leverage ratio of 1.7x adjusted net debt -- adjusted EBITDA, which is within our target of around 2x. In terms of capital allocation, we continue to prioritize organic reinvestment in our business and M&A execution in order to drive top line growth. We maintain our dividend ratio of 35% to 40%, and we'll then consider returns to shareholders in the form of buybacks, subject to our target 2x leverage ratio. Including the 2026 acquisition of Integrity Orthopaedics, our leverage still remains below 2x adjusted EBITDA. Now I'll finish with our outlook for 2026. We continue to expect around 6% organic revenue growth. That includes continued good growth in Orthopaedics, Sports Medicine, excluding AET and ENT in China and Advanced Wound management, particularly in AWC and AWD. Whilst we expect headwinds in our skin substitutes business, we still expect AWD to grow, supported by the ongoing strength of SANTYL and growth in skin substitutes out of the physician office and mobile channel. We expect around 8% trading profit growth before M&A. As I've already mentioned, we faced a number of extraordinary headwinds in 2026, but we still expect trading profit growth ahead of revenue growth, driven by revenue leverage and operational savings. Since providing our provisional guidance, we've also completed the acquisition of Integrity Orthopaedics. This acquisition is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027 and accretive in 2028. Including this dilution, we expect trading profit to be around $1.3 billion. We thought it would be helpful to set out these two measures of trading profit so that you could see the performance of the business on an underlying basis as well as the total trading profit, including the impact of the acquisition. Finally, we expect around $800 million in free cash flow and greater than 10% ROIC excluding Integrity. We expect a stronger second half compared to the first half for both sales and profit growth, in line with the typical phasing we see. We also expect ALLEVYN COMPLETE CARE to ramp up over the year and the launch of LANDMARK will benefit the second half. We have 1 fewer trading day in Q1 versus 2025 and 1 more in Q4. As a reminder, trading days have a more pronounced impact on our Orthopaedics business. And with that, I'll hand back to Deepak.

Thank you, John. So the launch of RISE, our new strategy, which I laid out for you in the Capital Market Day in December, our ambition is to accelerate growth and improve returns. It's been great to see how well this new strategy has resonated internally with this focus on reaching more patients, driving innovation, scaling through investment and executing more efficiently. We're building on the behaviors embedded through the 12-Point Plan with our way to win. Our program to be better every day through a continuous improvement mindset and behaviors. So let me now highlight the key drivers shaping our performance in the first year of RISE, and I'll start here with Sports Medicine. First, the China Joint Repair VBP headwinds have now fully annualized, which means our underlying Joint Repair growth will improve this year. And importantly, we expect the upcoming AET and ENT VBP processes to be significantly less material given the relative size of those businesses. Second, we're continuing to build on the strength of our Shoulder portfolio with our acquisition of Integrity Orthopaedics, and we look forward to driving adoption of TENDON SEAM across our customer base. So I'll come on to this in a moment. Third, we're awaiting FDA approval of TESSA, our first-in-industry spatial surgery arthroscopic platform. This represents a major step forward in how surgeons visualize and execute procedures. And finally, we're also seeing ongoing growth in REGENETEN. The recent AAOS guidelines support for the use of Bioinductive Implants in rotator cuff repairs is reinforcing clinical confidence and expanding usage. I'd like to spend a few minutes on our acquisition of Integrity Orthopaedics, an asset we believe, has the potential to become a key growth driver for our sports medicine portfolio. We announced a deal earlier this year for a total consideration of up to $450 million, including performance-based payments. Integrity Orthopaedics was co-founded in 2020 by Tom Westling, who also founded Rotation Medical, the company behind REGENETEN, which we acquired in 2017. REGENETEN's growth is evidence of our proven track record of successful commercial execution, scaling an innovative shoulder product with our dedicated sales force and building the clinical evidence to drive adoption. Integrity has developed Tendon Seam, an innovative rotator cuff repair system that received FDA approval in 2023 and addresses the $875 million biomechanical repair market. Rotator cuff repair is a large and growing category with around 500,000 procedures performed annually in the United States. Despite the scale, surgical techniques have seen little meaningful innovation in over 2 decades, leaving patients with retail rates of between 20% and 40% and long recovery times. As a result, this remains a segment with significant unmet need and where meaningful innovation can shift share. Tendon Seam Introduces a fundamentally novel biomechanical approach designed to distribute load across the entire tendon rather than concentrating stress at fixation points, resulting in stronger, more stable repair. Early clinical data is promising, showing potential for lower retail rates and accelerated patient recovery, while offering a shortened and easier surgical procedure compared to the current standard of care. The acquisition is fully aligned with our RISE strategy to accelerate growth through strategic investment by deploying capital into high-growth, high-value clinical segments where we already have a strong presence, and that's underpinned by our strong balance sheet. The deal is expected to be dilutive to trading profit in '26, and as John mentioned, broadly neutral in '27 and accretive starting in 2028 as the product scales. While still early, integration is progressing as planned, and we're focused on executing the same disciplined playbook that drove REGENETEN success. TENDON SEAM is highly complementary to Smith & Nephew's extensive shoulder portfolio. With this novel and disruptive technology, it strengthens the initial repair construct in rotator cuff tears and REGENETEN then builds on that strength by promoting biological healing over time. Together, they create a differentiated end-to-end solution that addresses both the mechanical and biological drivers of successful rotator cuff repair. The total combined TAM for the two products is just under $1.2 billion. And today, we have about 25% share with opportunity to grow. Within fixation, we have the market-leading instability solutions, including our Q-FIX, All-Suture Anchor portfolio, which has 10 years of proven performance. In shoulder arthroplasty, our AETOS Shoulder System launched in 2024 with anatomic, reverse and seemless options is positioned for the high-growth replacement segment with estimated $250,000 -- 250,000 procedures annually in the U.S. in 2025. We will soon have a powerful new offering with the launch of CORI Shoulder that will enable our handheld robotics to be used in the preparation and execution of shoulder replacement with AETOS, building on what we already have with CORIOGRAPH Pre-Op Planning. We now have one of the broadest, most advanced portfolio for managing shoulder pathology spanning replacement and repair by both mechanical and biological healing technologies across our Orthopedics and Sports Medicine businesses. Turning to Advanced Wound Management. In Wound Bioactives, we have plans in place to navigate CMS reimbursement changes to skin subs in the physician office and mobile setting and to grow outside of those channels. As a reminder, CMS has introduced a pricing cap starting from the 1st of January 2026 with the aim of reducing historical distortions in the market that's incentivized a significant number of players often operating in the mobile setting to charge very high prices. We expect a reduction in non-surgical volumes, particularly in mobile, now that incentives changed and certain skin sub offerings are economically less viable to many of these players and providers. So although this will drive a value reset short term, it also creates a more sustainable, patient-focused and evidence-based market going forward with a long runway for growth. We see opportunities to benefit as the market normalizes. At the very end of last year, CMS also withdrew the skin subs local coverage determinations or LCDs. We always saw this as being broadly neutral to the business, and so this has no impact to our 2026 guidance. Even without the LCDs, we believe that clinical evidence will continue to be an important factor in this market. Towards the end of 2025, we launched ALLEVYN COMPLETE CARE, our newest 5-layer foam dressing, which addresses both chronic wound healing and the pressure injury prevention market. It has 51% superior exited management and with the new silicone adhesives stays in place more frequently than competitive products, making it a superior product for chronic wound healing. It also has a 55% greater reduction in strain relative to competition, making it ideally suited for pressure injury prevention. I'm confident that as we roll out ALLEVYN COMPLETE CARE to the market, we will capture market share in the largest and fastest-growing segment of wound dressings. We'll also continue to drive the portfolio in high-growth areas with unmet need like SANTYL in wound bed preparation and access new patient populations like those at the risk of surgical site complications or pressure injuries with PICO and LEAF. Moving now to Orthopedics. We'll continue to drive procedure growth across all joints with our CORI platform, supported by the launch of our shoulder execution capability. CORI remains a core differentiator for us. Handheld robotics are increasingly popular and CORI's size, mobility, fast setup and low cost of ownership make it well suited to both hospitals and to ASCs. In Knees, we'll continue to build out our portfolio in '26. We've already launched our Legion medial stabilized knee to meet the needs of a fast-growing segment, and we're pleased with the early momentum we've seen so far. The next leap comes in the second half of the year when we launched LANDMARK, our most differentiating knee system yet that will be available first in cementless and in cemented versions and with the best-in-class tray efficiency that's particularly suitable for ASCs. As the ASC channel starts to grow or continues to grow, we're well positioned to expand further, supported by a suite of tray-efficient implants like AETOS, CATALYSTEM and LANDMARK together with CORI. In fact, 40% of all CORIs placed in 2025 were in the ASCs, underscoring the platform's fit for this high-growth setting. We also capture further efficiencies with our Ortho360 program. This is our global operating model designed to eliminate past inefficiencies by replacing fragmented region-driven decisions with unified goals, integrated metrics and disciplined portfolio management. By maturing our sales and operation planning processes into fully integrated business process or the IBP, simplifying the portfolio, reducing inventory and enhancing capital efficiency, this should drive profitability, improved ROIC and stronger cash generation in this business unit. I'll now give an outlook for innovation over the life of RISE, given its importance to our growth, both historically and looking forward. Looking ahead, we are stepping up our R&D investment in Sports and in Wound, while maintaining a robust front-loaded pipeline across all areas of the group from 2026 and to 2028. Over the last 3 years, we successfully launched 44 products, largely on time and within budget, and we plan to increase launch cadence going forward. We launched 14 new products in '24, 15 in '25, and we expect to launch 16 in 2026. We're also building on our two major scalable technology platforms, M-TECH and Biologics. In M-TECH, we'll be launching TESSA and LUMOS in Sports Med and our next-generation LEAF monitors for pressure injury prevention in Wound. We also have a rapidly evolving robotic platform to drive procedure innovation across all joints in Orthopedics. And in Biologics, we'll build on our existing products with launches like Next GENETIN, our next generation of REGENETEN. So before I finish, I'd like to remind you of the midterm financial targets that our strategy will deliver. Through continued innovation and execution, we'll deliver organic revenue CAGR of 6% to 7% that's above our market. And our continued focus on productivity, further operational efficiencies and capital discipline will drive 9% to 10% trading profit CAGR, more than $1 billion in free cash flow in 2028 and 12% to 13% ROIC. Coming back to the near term, we've delivered on 2025 in terms of revenue growth, margin, free cash flow and ROIC, and we're looking ahead to another good year. On revenue, we're accelerating growth, launching new products and driving leverage through our P&L. We'll continue to be disciplined on our cost base to drive trading profit growth ahead of revenue growth on an organic basis. And our free cash flow generation remains strong and will deliver another step-up in ROIC, significantly exceeding our WACC in 2026. So with that, I'll now take your questions. So we'll now take your questions. Jack?

Jack Reynolds-Clark from RBC. The first is on revenue guidance in 2026. Could you kind of break down what your expectations are for market growth? How much launches contribute to that growth guidance? And what contingency is baked in to that guide? And then could you just run through the phasing through the quarters for revenue guide? And then could you remind us of your expectations for timing of the CORI shoulder -- sorry, shoulder ability in on CORI?

So with '26 and actually right through RISE, one of the benefits of the program we have is the multiple sources of growth. So we're not dependent on any one business unit or any one product to carry us through. And to remind you, we've exited 2025 meaningfully above our historical levels of low single digits. So we've now navigated to above 5%. And when you take the impact of China VBP out of it, we were actually above 7%. So what we're driving to is 6% to 7% growth for the next 3 years. Within that, '26 will be at around 6%, which will be above our market. And each of our business units will contribute to that. Innovation will be -- continue to be a key part of it. As I said, in '25, we were about 60% of our growth comes from new products. To remind you, in '24, we were above 50%. And in '23, we were still above 50%, around about 60%. So we've been consistently above the 50% mark in terms of new products driving growth. In '26, as I indicated, we'll have 16 new products. I mean, you can measure that in different ways, but we expect that new products will continue to deliver above 50% growth into 2026. So '26, around 6% growth ahead of market. We'll see growth coming from each one of our business units, and we'll have innovation that continues to fuel our growth. So that's the overall kind of revenue story. And in terms of our -- anything to add, John?

I can give a little bit of shape around the phasing.

Yes, phasing is great.

So as we said in the presentation, sort of weighted towards the second half. So Q1 will be softer. Obviously, it's 1 fewer trading day in Q1. We think U.S. Knees will be a little bit soft in Q1. We think that will build into Q2. So we're expecting the first half to outturn somewhere between, say, 4.5% to 5% top line growth. Q3 and Q4 will be stronger as we obviously introduced LANDMARK and obviously, ALLEVYN COMPLETE CARE grows through the year. So Q3 and Q4 will be stronger. Q4 also has one more trading day. So that's a little bit of a boost. And so we'd expect the second half to deliver growth of somewhere between 7.5% to 8%. You combine that 4.5% to 5% in the first half with the 7.5% to 8% in the second half, that gets you to or around 6% for the full year. That gives you a little bit of shape on the top line. And then I'll give you -- you didn't ask for it, but I'll give it to you any, because somebody will probably ask, in terms of shaping on the bottom line, again, we've got that 8% growth in our trading profit for the full year. Again, it's naturally going to be swayed to the second half given the revenue bias towards the second half. So I'd expect profit growth in the first half to be of the order of 5.5% to 6%, something of that nature, profit growth in the second half to be around 9% to 10%. The two combined gets you to your around 8%. So I'm not going to break it out by quarter, but hopefully, that gives you a little bit of a shape. So effectively building through the year, partly driven by the fact we've got one fewer trading day in Q1 and one more trading day in Q4.

And your question on CORI Shoulder. The CORIOGRAPH, which is our planning platform launched, I think, middle of last year, the key unlock is, of course, execution, and we're starting the year now that's launched. So we've got a whole AETOS portfolio, stemless -- short stem and CORI Shoulder now planning and execution. So the ability to do both reverse and anatomic and the ability to do both adenoid and humoral and with CORI to do preoperative planning, intraoperative and postoperative kind of insight. So not only a complete solution, a highly differentiated solution. Veronika next, David?

Veronika Dubajova from Citi. Two questions from me, please. The first one, I just want to go back to joint repair. Obviously, Deepak, you said that the China headwind has annualized out now, but we've had it basically for eight quarters. So I just want to confirm what's happening in Joint Repair China specifically and sort of what gives you the confidence this year that it's not going to be a drag to the overall Joint Repair number to the extent that we've seen. Obviously, the China improvement is a big part of the guide for the year. So if you can talk about that, please? And then just kind of a big picture question around the margin and organic and inorganic development. Obviously, very exciting to see organic margin improvement this year, but it is being eaten away by Integra. (sic) [ Integrity ] So I don't know if you can maybe talk a little bit more broadly how you think about capital allocation and M&A sort of having an impact on the bottom line growth? And to what extent that's sort of a favorable trade-off that you're willing to take? And maybe if there is anything else in the pipeline beyond Integra that we should be kind of looking out for this year?

Integrity.

Integrity -- Sorry, Integrity. I'm so sorry. Clearly, my second cup of coffee hasn't kicked in.

Right. So let me talk about Joint Repair. So as we mentioned, Joint Repair has annualized at this point. So going forward, we'll have a clean kind of comp or rather Joint Repair growth alloyed by China VBP. And that is a key part of our growth story, as you highlighted. And as we've called out a number of times, when you actually dissect our sports growth, it's been well balanced across geographies. You take China out of it, and we've actually grown high single-digit growth, not only across markets, but actually across categories, which is one of the key features of our Sports Medicine, which is a balanced portfolio selling that we've undertaken. So I feel very, very good about commercializing our portfolio and now that the impact of China VBP and Joint Repair is going away. What is left, though, is AET. Right? The AET part started last year. I think it will be Q3, right, John, something like that, Q3 or early into Q4 by the time we fully lap AET. But the impact to the group is relatively small at this point, right? And then the other part is we report ENT and Sports together. It's ENT that's not going through this. And it started kind of towards late last year. We'll fully annualize that towards the end of this year. But again, both of those while important to those business segments at a group level will now be a relatively small portion of the portfolio. So overall, like I said, I feel very, very good about the continued momentum that -- the momentum we've built and capitalizing on that momentum as we go into 2026. In terms of margin, as we noted, we've driven 240 bps of margin improvement over the life of the 12-Point Plan program. That's a combination of leverage and cost improvement and all of the work that we've done over the 3 years of the program, not only deliver the 240 bps, but what's most impressive about that is the sheer scale of headwinds that we've overcome. If you just take China Joint Repair VBP, that's just 120 bps on its own. And if you just add that to 19.7%, we would be at 20.9%. I'm absolutely proud of what we as an organization have delivered with focus not only on the top margin. As we've said, going forward, the focus will be on revenue growth and driving sustainable above-market revenue growth and profit growth. So that's kind of what we are orienting and guiding toward, recognizing that we'll continue to drive productivity. We'll continue to take costs out in order to, in effect, drive margin as well. In terms of capital allocation, our focus remains on investments in organic, right, to drive top line growth above market and to further accelerate our growth. That remains a key feature or a key priority for us in terms of capital allocation. What we've also said, of course, is that's a mix of R&D and M&A. And within our RISE strategy, what we've said is we will undertake M&A that allows us to scale in areas where we have strength. And that's within Sports and within Wound and areas where we see clear ability to build on what is a solid foundation. And Integrity fits very squarely within that. As I've highlighted, the advantage of Integrity is within Sports Medicine, it allows us to be a clear leader in biomechanical repair, right? We were very, very positively impressed with TENDON SEAM and all that it has to offer in terms of an alternative to existing approaches. And together with what we have, I think it will be a great complement, right, in terms of mechanical repair. But what's most exciting is when you couple that with REGENETEN, where we clearly have market leadership in biologics, that's a fantastic portfolio. And we should expect us to act as the leaders that we are in Sports Medicine where we see an asset, unique technology that augments our position. But actually, what's even more impressive is when you couple that with what we've got in arthroplasty with CORI and a full portfolio of AETOS, we are now very, very strongly positioned within Shoulder. And just to remind you, there's significant channel overlap in Shoulders. So surgeons who do arthroplasty also do soft tissue repair. So that's what's most exciting about this. So Integrity fits very squarely as I said, in our RISE strategy, where we will make investments in order to shore up our position and to drive great growth. And as it turns out, within this particular asset, it's the group that gave us REGENETEN, and you've seen what we've done not only commercially, but actually investing clinically to develop the clinical evidence to drive adoption. So that's what's most exciting about it and hopefully gives you a little bit of color on capital allocation.

And maybe if I can just -- if I will just give you a little bit more on China as well. There's obviously a topic that comes up a lot in conversation. Just to sort of set the scene, in 2024 in sort of Greater China, I think we said this number before, we were doing around $210 million, $220 million or so of sales. In 2025, we saw broadly a sort of a reduction of 1/3 as a consequence of all the impacts that we talked about. So roughly getting to about $160 million. Actually, when we look at 2026, it's actually a very similar number to 2025. So we're really not expecting to see much relative movement in our Greater China sales, '26 on '25. Now actually, you need to unpack that a little bit because it's a combination of a couple of factors taking place, one of which is we're actually expecting to see Sports recover a little bit. Now the reason why that's the case is because we've done a really successful job of managing channel inventory in 2025. We've taken inventory where we've had to, we've taken inventory out of the channel. So we are confident, and we can start to come through in Q4 of last year, which is the reason that gives us confidence. So we expect to see a little bit of a bounce in our Sports business in China. Of course, for the overall number to be flat, that means at least negative somewhere. And of course, the negative exists in the AET and in the ENT that we haven't really seen the impact of that in '25. It's going to really come through in '26. That's the negative. But overall, those two play a draw to be neutral on the top line. When you look at the bottom line, profit again for '25 was let's sort of call it around $50 million to $60 million. We will expect to see a $15 million to $20 million reduction in that profit year-on-year into '26, and that's being driven again by the VBP on AET and ENT. So again, we've done a really good job of managing the channel inventory on ENT. So again, we can be reasonably comfortable with that number. So as we've very clearly stated, China will not be in 2026, a drag on the top line in the way that it has been historically. And it will be a drag on the bottom line, but to a much more limited extent, call it, $15 million to $20 million, which is what we set out at the Capital Markets Day in December and what we're reiterating today in terms of the impact of VBP, AET and ENT for '26. So that's absolute clarity. And that's the thing that gives us confidence. When you look at our growth ex China for '25, we were 7% growth. Because we're no longer seeing that drag come through in '26, that's what gives us confidence with regards to our around 6% growth at the top line of our business, notwithstanding some of the headwinds we've clearly talked about.

David.

David Adlington, JPMorgan. You've seen two or three of your competitors in skin substitutes, downgrade their -- downgrade the expectations in the last few weeks that you've maintained yours that you had before Christmas. Just wondered if you could talk about what you're seeing in the market and your assumptions around price and volumes for this year? And then secondly, one more for John. The inventory write-down, $159 million, is that all coming from the portfolio rationalization? Or is there anything more underlying in there? And is that now complete? Or should we expect more changes coming through?

Yes. So in terms of skin subs, we are seeing the channel adapt to the changes that are coming. So just to remind everyone, it's really in the physician office and the mobile channels where we're seeing most of the impact. And within that mobile is more impacted than physician office or the hospital outpatient segment, right? So -- but in the Surgical segment, we're continuing to see growth. So in terms of parsing what different players have said, it really has to do with the mix of our business is how much of our business is in each of those channels. The other factor within that is the type of products you have within each segment, right? You've got products that you can segment both from a customer standpoint and from a price standpoint. So put all these pieces together, what we're seeing is definitely impact in terms of price that has hit. To remind everyone, typically within the physician office segment and mobile segment, the payment terms or reimbursement levels or cycles are between 40 and 45 -- 30 and 45 days. So we're now heading into a period with the first tranche of reimbursements have gone in and physician offices are starting to see just what comes through from CMS around that. So there's still a fair amount of uncertainty in the channel in terms of not only utilization, but how these products get reimbursed and the mechanism under which the CMS is actually reimbursing those products. So what we've said is the guidance we've provided for our business in terms of how we're impacted hasn't fundamentally changed from last year. But longer term, David, I'm very, very bullish on the segment. Once we get through this period of adaptation, we believe that the clinical unmet need is there. There will be a drive towards using products that have clinical evidence -- and as you know, we've invested considerably over the years to develop not only products, but clinical evidence to drive the appropriate use of those products. And that combined with the growing unmet need based on demographics, right, makes us an attractive channel. And inventory, do you want to take that?

Well, I was going to say just maybe give a little bit of color around the -- how do you get to our 20% to 40% impact on the bottom line. I mean we've said before that our skin subs business is around a couple of hundred million. If you look at the -- we think that from a pricing perspective, we think for our portfolio, we'll see a sort of price reduction of around sort of 20%, 25% or so. Now that's a lot lower than the overall industry will see, because we haven't necessarily participated in quite the same high price points as the inventory average. So we will expect prices to come down a little bit. At the same time, we would expect our volumes to be broadly neutral, maybe even a little bit positive as we grab a little bit more share from the channel. So overall, a sort of 15% to 20% reduction in our revenues. If you work out that on the 200 and drop that through as a margin, that gives you your 20% to 40% impact on our bottom line that we put in our margin bridge. So there's lots of assumptions that build into that, lots of uncertainty around that, but that's just the basis on which we give the guidance. And we haven't seen anything in the market to date that would want to take that guidance and that's a broad -- a reasonably broad range of about $20 million to $40 million. In terms of the inventory and the portfolio rationalization, that we see this as being really positive thing. This is -- we've taken this opportunity to accelerate the rationalization of our product portfolio. It means circa 2/3 reduction in our Ortho SKU count, a circa 10% reduction in our Sports SKU count. And these only represent in '26, probably about 7% of our sales. So it's a huge number of SKUs representing a very small percentage of our sales, which we will expect to -- over the next 2, 3 years to roll off. And this is an opportunity for us to simplify the portfolio, offer our customers our latest products. And it's very much building on the work. There was a portfolio rationalization work that was kicked off at the very beginning of the 12-Point Plan. This is the second wave of that a little bit more focused on Trauma. The initial plan was more focused on Knees and Hips. But we see this as being a really positive thing. And we don't -- by the way, we don't anticipate any further changes. And for the avoidance of doubt, the $159 million charge is just the portfolio rationalization. We haven't hidden anything else in there. It's simply what it is, but it's a very -- we think it's a very positive thing for the business.

Just to reinforce something here, which is we've called out Ortho360 a couple of times today. We've mentioned that actually in our Capital Market Day. It's really important to emphasize how we're running this business better than we have historically. So balancing capital deployment, growth and margin, so we achieve a better balance across those things that we've historically done, is an important part of how we operate this business. It's not chasing growth at all costs, but rather drive the right kind of balance. So they've historically been not as disciplined around deploying capital in this business, which has led to some of the challenges around ROIC and inventory that we've seen. So it's really important to emphasize where we're operating this business better in a more disciplined rate than we historically ever have done. Question here, the last question in the room and then we go to questions. We go to the phone.

Richard Felton from Goldman Sachs. Two questions, please, both on Shoulders. I think it's 13 or 14 consecutive quarters where REGENETEN has been called out as a strong contributor to growth. Could you help us with roughly how much that product contributes to your Sports Medicine business today? And then on the AAOS guidance, what does that change in practice? Is it because of that guidance, that shifts reimbursement conversations? Does that guidance have a material impact on surgeon behavior? Anything you can help us with to frame how material that shift in guidance is to be really helpful. And the second one also on Shoulders. Deepak, I think you referenced REGENETEN Integrity addresses a TAM of $1.2 billion. How do you get to that $1.2 billion? Is that all rotated cuffs? Is it a subset of rotated cuffs done with Bioinductive Implants today? Any parameters to provide color around that and how fast it's growing?

So REGENETEN, I think -- we haven't called out REGENETEN, have we previously? Sorry, I need to confirm what you've actually...

I think we've given some rough guidance, I think you can give a -- at least range.

So think multiple hundred million, okay. So I've got to be careful on what I say. So it's a key driver of growth. As you rightly note, we've -- it's been a fantastic story for us. And as we've said, we took a relatively small -- when it was launched when we acquired it, kind of like Integrity, right, early stages. And what we've done is put it into our channel, our commercial sales organization. And we've done more, right? We've invested in developing clinical evidence. We've, in previous earnings calls, called out the wonderful data that have come out right, at different time points, 1 year initially and then 2-year time points in terms of statistically significant reduction in retail rates that we've seen with REGENETEN, right? So that's been a great story. So it's not only the commercial channel strength, but also the evidence investment that leads to the kind of utilization that we've seen. What the guidance does is actually help surgeons determine the appropriate use. So there's different levels of clinical evidence, right? So this doesn't -- over time, we'll have this be reimbursed, right? But today, it's part of the DRG. There's not a specific reimbursement for REGENETEN. What it helps surgeons do is, take all the clinical data they've seen in papers. Now that the society has now come up with guidance and appropriate use of it, it's a way to further increase adoption, is the way to think about it. The $1.2 billion market is about $875 million of it is mechanical, biomechanical repair, right? It's the sutures and anchors and everything else that goes into repairing rotator cuff. And that's all rotator cuff, Richard. And the remaining bit of it is biologics. And within that, we are a large part of that. I mean, there's some other collagen-based implants, but we are the -- essentially the largest player within that space. So you add the two together, $875 million, the balance, you get $1.2 billion. And that's the market in which we participate. And as I mentioned, when you combine the two together, we're about 1/4 of the market. And the potential we see now with TENDON SEAM is the ability to actually have a full solution, actually now with TENDON SEAM, a very unique solution biomechanical repair, right? So that allows us to treat even more cases. But what is important, as I highlighted, is now to include biological healing, right, on top of when the repair is initially done. That's the real helpful part. And what we see with TENDON SEAM is at time 0, right, after the procedure, the anchors actually leave the tendon with twice the amount of strength that the traditional repair has. So there's some intriguing possibility of faster recovery time for patients coming out of a sling quicker. There's some great early experience around that, that makes us think that this would be a very nice complement to what's out there, right? So that's the Sports Medicine part of it. The other exciting thing, just as I reinforce within Shoulder is with AETOS, right? We are a relatively small player in arthroplasty today within Shoulder. But with AETOS, we now have a full solution that's stemless, short stem, anatomic -- reverse anatomic. So we've got a full range of implants. And in the Shoulder anatomy, a handheld form factor is particularly well suited for that anatomy, so robotics is. And CORI with its handheld form factor is super well suited for that. And just to remind everyone, the adoption of robotics in Shoulder is very, very early stages today, right? So we see an opportunity now CORI plus AETOS where we start to take share within the arthroplasty market. And together with the robust portfolio we've got in soft tissue repair within shoulder, we now have what we think is a very, very compelling offering in a fast-growing part of Orthopedics. So that's all of these different pieces to come together, Richard. Questions over the phone I'm told.

[Operator Instructions] Our first question comes from Graham Doyle from UBS.

Just one on skin subs and then on LANDMARK. On skin subs, the flat volumes assumption, it's quite a benign assumption versus what we're seeing in the market over the past sort of 1.5 months. How would you expect that to sort of flow in H1? Would you expect maybe down 50 plus 50 in H2? And then just on LANDMARK Knee, could you just talk us through how you imagine the ramp would be? So is there -- are there things you need to do on inventory or getting people ready for that launch? And do the old factors sort of slow down to launch? Do you then ramp up quite quickly? Just to get a sense when we're modeling that, that would be really helpful.

Sure thing. Let me start off with skin substance, and John, maybe you can take the phasing of it, right? So in terms of flat volume, and John kind of alluded to it in his remarks earlier, fundamentally, when you double-click, it has to do with parts of our portfolio we're actually seeing growth. And OASIS, for example, in our portfolio, we're seeing very significant uptick in volumes and usage and utilization of that product and price impacts that impact one or the other part of the portfolio. So in terms of volumes, it's both channels, as I said earlier, right, where the volumes are quite stable in the surgical channel. And then when you look at hospital outpatient, physician office and in mobile, the greatest impact actually is in mobile and physician office, right? And in terms of our mix of business, what we're seeing is gains in one area offsetting declines in another, right, as the channel depth. So the net impact of which will be a draw. As I said, it's still early going yet. So in terms of how the channel is responding to it, we're now in the first early stages of physician offices billing right, from the utilization they've had in the early part of the year and now in a position to see how CMS is responding in terms of reimbursement. And that will help inform how the balance of the half goes and how H2 is kind of set up. Anything you want to color to that, John?

Not really. I mean, Graham, I actually thought we were being quite detailed in the guidance that we were giving for the year as a whole. So in terms of the volume impact and the pricing impact, I don't think I want to get drawn into specifically quarter-by-quarter other than to say, to Deepak's point, it's still working its way through as we speak. I'd expect half 1 to be a little bit softer, half 2 to be a little bit stronger as the market starts to normalize. But I don't think we're going to get drawn on very specific guidance quarter-by-quarter on skin subs.

Okay. Good. In terms of LANDMARK, this will come in stages. So in the second half, I think end of Q3, Q4, we'll launch LANDMARK first on cementless and then we'll bring forward cemented in the first half of 2027. The focus there is one platform that combines the best of essentially our existing platforms in terms of degree of personalization, ease of implantation, and preserving some of the benefits of kinematics and the other benefits that we have within our existing portfolio. The other important kind of design considerations around LANDMARK is trade efficiency. We've brought this thinking in CATALYSTEM and with AETOS, because what we're looking ahead to is ASC, where space matters and trade efficiency is super important. So we've built that thinking now into LANDMARK, not only is it about the designs of the implant itself but also making the procedure more efficient. More efficient, not only in terms of ease of implantation, but also the mechanics of getting to a case, less capital intensive, right? So those are the features of LANDMARK. And it also is comes in cementless and cemented and with the medial stabilized kind of paradigm, which is where the market is going. And keep in mind today, we've got cementless on the LEGION platform, and we don't have this on the JOURNEY platform. So LANDMARK allows us to fill kind of the gap that we've got for JOURNEY today, right? And so the way we expect to launch as you know, this will be a build over time. So we'll in the back half of the year with the cementless launch will have kind of the initial kind of foray into this. And then, as we go into the first half of '27, we'll have both cemented and cementless. It will be the same instruments for cemented and cementless, right? So again, keeping that trade efficiency paradigm front and center in what we do. So hopefully, that addresses your question, Graham.

And just to -- sorry, just to build on a comment that we also made in the presentation that we're also mindful -- we're very mindful as to how we're deploying capital on our existing platforms in the buildup to the launch of LANDMARK in the second half. Because we want to make sure that we maintain our capital efficiency. We've continued to build over the last couple of years. And for that reason, we do expect the first half to be a little bit softer, therefore, on U.S. Knees as we grow. So Q1 will be a little bit softer, because of the fewer trading day. We'll expect to see that grow a little bit in Q2, but then it's really Q3 and Q4 upon the launch of LANDMARK where we expect to see U.S. Knees grow in line with the market by the end of the year. So that's the sort of trajectory we're expecting U.S. Knees.

And this type of capital discipline, again, as part of Ortho360, we've actually -- 360 we've displayed in how we've launched CATALYSTEM. It's very different to how we've done it. You've seen all the growth numbers, right? We are above market now. Again, in Q4, we exceeded the market in U.S. Hips, right? So as important as that growth is how we've achieved that is, in many ways, even more important because we brought a high level of capital discipline in terms of how we approach that launch the market. And you should expect the same with LANDMARK. It's a bit more complicated because we've got to straddle -- we've got multiple elements of our portfolio and needs that we have to navigate through, but we will strike a better balance in terms of growth, capital deployment and margin. It's not just growth for the sake of growth, right? Super important to keep in mind. So we'll take one more question online, and then we'll turn come back to the room if there aren't any.

Our next question comes from Kane Slutzkin from Deutsche Bank. ahead.

Just on CORI, could you just talk a little bit on the competition you're seeing in the sort of smaller handheld space. We obviously recently had Mako announced a limited market release of the handheld. So just wondering what you're seeing there are presumably they're going to be targeting the same sort of ASC space. And then just on J&J spinning out of its Ortho business. I assume, are we expecting sort of a bit of disruption in the market over the next sort of year or so due to that split out? And if so, what are the sort of challenges and opportunity you're seeing there? And just finally, I did notice there was a shortage of bone cement in the U.K. I mean, I appreciate U.K. is probably small in your life nowadays, do you have any comments around that?

Yes. So first, CORI, it's important to keep in mind that when we talk about CORI ASCs and we said something like excess of 40% of our placements in '25 have been into ASC, it's important to remember that CORI isn't just for the ASC. And while it is a handheld robot, fundamentally, it's a robot across a whole range of settings, hospitals, ASCs. We've got quite a bit of focus on teaching institutions, and we've got great traction over the last couple of years in terms of the adoption of CORI and teaching institutions. So it's important to keep in mind that CORI isn't just a handheld. It's a robotic system that happens to be handheld, right? And it has resonance across a range of settings. So therefore, in terms of competition, we feel very, very good about what CORI is, the features and benefits that it's got. It's one platform that can do Knees, Hips and Shoulders. And the type of kind of features and benefits we've brought on board over the last 3 years is absolutely impressive in terms of how quickly we've done it. So that's the short answer to this. It's a robotic platform that happens to be handheld rather than us competing in one segment. In terms of J&J, look, we've got a very good set of priorities we're executing towards. We feel very good about how competitive we've been in Hips and how we've gone from basically lagging the market to when we've got a product, we've launched. We've launched it in a very disciplined way. And now you see the benefits of that flowing through, not only in terms of growth, but the leverage that we're coming through with that. Pharma, that whole process started earlier on supply improving and us executing commercially with a great product portfolio with EVOS and now with TRIGEN MAX. We're starting to -- we're not starting to -- we've had multiple quarters now where we've surpassed the market in our Trauma and Extremities. And so we expect to do the same with Knees, right, on the launch of LANDMARK in the back half of the year. LEGION MS now that we recently brought to market and of course, continued adoption of CORI, where we -- as we've said, we are pleased with the kind of uptake we've had in competitive accounts with CORI, right? And not to mention the traction in ASC. You put all this together, we've got a set of priorities. We're executing to those priorities. In terms of J&J, we don't underestimate any competitor. And no matter what kind of they're going through, I believe with continued focus on what we're doing, we will be competitive and increasingly competitive within the market. In terms of shortage of bone cement in the U.S., as you highlighted, in the U.K. rather, U.K. is a relatively small proportion of our market. It doesn't fundamentally impact any of our guidance or financially. I do believe now there's a solution in the market in the U.K. And so the market should see some relief from that shortage in bone cement. It doesn't fundamentally impact any of our financials or guidance as a result of it. Thank you. I think that's the time. Absolutely, Graham. I think that's all the time we have today. So I just wanted to close by saying thank you for being here. Thank you for your time and attention. Just to recap now, 2025 was a very strong year for us of delivery. It marked the successful completion of the 3-year 12-Point Plan. We've built momentum across the group. And as we enter 2026, we do so from a position of strength and we're well aligned with our ambition to deliver the 2028 RISE targets. So looking ahead, what I'm really pleased about is the multiple growth drivers that we have over the next 3 years, including 2026 and the fact that innovation, just like it's been over the last 3 years, will continue to be a key to us delivering our targets. The investments we've made in R&D so far is starting to bear fruit, will continue to bear fruit, and we're now pivoting to stepping up our investments in Sports and in Wound. And that, combined with sharper commercial execution, positions us to accelerate revenue growth as we progress to market leadership in both Sports and in Wound. So in parallel, the positive actions that we've taken in Orthopedics, together with our focus on group-wide productivity and operational efficiency, we will make sure that our top line growth actually translates into sustained trading profit growth as well. The strong cash generation underpins this progress and gives us the flexibility to pursue value-accretive strategic M&A, and that will be further reinforcement of our success. So we are confident in the year ahead, and we look forward to updating you on progress as we -- through Q1 and beyond. So thank you very much for your time and attention today.

Welcome to the Smith & Nephew second quarter and first half results meeting. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is Chief Financial Officer, John Rogers. So 2025 is a key year of delivery for Smith & Nephew. I'm pleased to announce the results that put us firmly on track for both our full year growth target and the guided step-up in profitability. On revenue, 6.7% underlying growth in the quarter reflects sequential acceleration across all regions and business units. In Sports Medicine, we've maintained the strong momentum across Joint Repair and AET outside of China. In Wound, the continued performance of AWD and the rebound in bioactives produced double-digit growth for the business unit as a whole. In Orthopaedics, we delivered yet another quarter of growth and in line with our previous commitment, our Recon and Robotics business sustained its recent improvement, both internationally and importantly, in the U.S. This is now the fourth quarter of sequential improvement in U.S. Recon and Robotics. On profitability, 100 basis points of first half trading margin expansion is slightly ahead of what we indicated as we brought some efficiency savings forward. We remain on track for our full year margin guidance of 19% to 20%, which includes the impact of tariffs. There's still a lot of uncertainty about where tariffs will settle, but we continue to expect a net headwind of about $15 million to $20 million in 2025. As previously indicated, we expect that margin expansion will pick up further in the second half. This should come from cost savings increasingly dropping through to our P&L, particularly from our manufacturing network optimization over the last 2 years, together with the reduced year-on-year headwind from value-based procurement in China. I've talked already about the improvements in growth and profitability. At the same time, better alignment of the commercial organization and operations has enabled us to bring down days of inventory. The delivery of our ambitious cost savings and a move to ongoing efficiencies has also brought down restructuring charges. The result is a 70% increase in trading cash flow and almost $250 million of free cash flow in the first half. Finally, I'm also pleased to announce an additional element of value creation for shareholders with a $500 million share buyback in the second half of 2025. This is made possible by the operational efficiencies delivered under the 12-Point Plan and will be fully funded by the 2025 cash flow and existing balances. So it can be delivered while maintaining our leverage and without compromising any of our growth plans. I'll return to some of these themes later, and John will talk more about profitability, cash and returns in his presentation. For now, I'll take you through the details of the quarter. Revenue in the quarter was $1.6 billion with 6.7% underlying growth and 7.8% reported following a 110 basis point tailwind from foreign exchange. Growth also included a headwind from 1 fewer trading day than in the prior year. All business units accelerated sequentially, and I'll come to the detail in a moment. Geographically, the U.S. grew 8.7% and other established markets grew 7.4%. Emerging markets declined 0.2%, reflecting strong double-digit growth across the Middle East and India and the impacts of volume-based procurement in China beginning to ease. Excluding China, emerging markets grew by 12.2%. As we indicated in our Q1 announcement, we have passed the peak of the China impacts, and we expect these to continue to ease through the second half as distributor destocking in Orthopaedics reduces and as we lap the effects of Joint Repair VBP. For business unit performance, I'll start with Orthopaedics, which grew 5.5% underlying, and this is an overall solid performance. Total Reconstruction Robotics grew 5.2% with the U.S. growth of 4%. This is the fourth quarter of sequential growth improvement in the U.S. on an ADS adjusted basis. Global Knees and Hips grew by 2.9% and 3.4%, respectively. Growth remains higher outside the U.S. with Knees benefiting this quarter from the timing of a tender order in the Middle East. Almost half of our Recon business is outside the U.S., where we're demonstrating that our portfolio can deliver with good execution. As you know, China has been a headwind in recent quarters due to destocking at distributors. The inventory levels have continued to come down and have approached more normal levels at the end of June. In addition, we expect the destocking to ease during the third quarter. So we should see the China headwind on our OUS sales start to fall away in the second half. U.S. Hips and Knees together showed acceleration over Q1 with 2% underlying growth and 3.6% adjusted for the 1 fewer day, a measure we refer to as average daily sales or ADS. This is the fourth quarter of sustained improvement for U.S. Hips and Knees combined. Hip performance was strong as we continue to roll out the CATALYSTEM Hip System, which makes us more competitive in the high-growth direct anterior segment of the market. We'll accelerate set deployment in Q3 and are also preparing to bring the platform to other markets starting in Japan. The softer U.S. Knee growth was due in part to some slowing in procedures toward the end of the quarter among our active surgeon base as well as positive actions that we are taking to increase profitability through streamlining the portfolio and focusing on higher volume accounts. Reassuringly, the balance of competitive wins versus losses has continued to remain favorable. On an ADS basis, U.S. Knees grew 0.1% and Hips at 9.1%. Other Recon grew 39.8% and reflects another good quarter of Robotics placements, particularly in the U.S., where we're seeing strong growth in ASCs and in teaching institutes. This should mean we're well positioned as the market continues to pivot away from the inpatient procedures and ideally placed to capture future leading surgeons. We also continue to develop our offering with the launch in June of the CORIOGRAPH preoperative planning and modeling for shoulder replacements. Trauma and Extremities grew 4.4%. The AETOS growth contribution is steadily increasing as we deploy more capital and convert new surgeons, while the EVOS plating system continues to be a key driver, partially offset by a slower quarter for some of our legacy systems. We're continuing to refresh the portfolio with the launch this quarter of the TRIGEN MAX Tibia Nailing System, which could expand our indication range and features modernized instrumentation. Further nail launches are expected in the coming quarters, and we expect Trauma and Extremities to return to stronger growth in the second half. Sports Medicine and ENT grew 5.7% in the quarter. Within that, Joint Repair growth was 8.4%, including the expected headwind from VBP in China. This is expected to be the last quarter before we lap the effect of the implementation in Q3 of 2024. Excluding China, Joint Repair growth would have been 13.7%, representing an acceleration in Q1 2025 with a very strong quarter across our other markets. Growth was double digit across all of knee, shoulder and hip repair with the REGENETEN and Q-FIX KNOTLESS suture anchors remaining the key contributors. We expect this good momentum to continue as we extend REGENETEN into Hip and Achilles and as we further roll out Q-FIX. We are developing CartiHeal AGILI-C as a longer-term growth platform, including a new disposable instrument set, which we expect to launch in the near future. Arthroscopic Enabling Technologies grew 2.3%, again, improving sequentially. We saw continued growth from WEREWOLF FASTSEAL, which is supporting strong COBLATION revenues. ENT grew 3.6% with good growth driven by our ARIS for turbinate reduction, offsetting a softer quarter for tonsils and adenoid procedures in the U.S. Looking forward, we expect ENT to follow Sports Medicine with the VBP process in China that's expected to take effect in 2026. To give a sense of the size of our business, total ENT sales were around $35 million in 2024. So while VBP would be a noticeable drag on ENT growth, it should be a significantly more modest headwind at a group level than previous VBP processes. Looking now at Advanced Wound Management, where growth increased to 10.2% following the strong rebound in Bioactives. In Advanced Wound Care, 2.6% growth reflected continued strong performance in foams, films and skin care, offset by a decline in infection management. In Bioactives, growth came from the expected sequential recovery in SANTYL alongside double-digit growth in skin substitutes. Although we'll face tougher competitors in H2 as we lap the launch of GRAFIX PLUS, we now anticipate mid-single-digit growth for Bioactives in the year. You'll have seen the proposed updates to Medicare reimbursement of skin subs in the outpatient and physician office setting, including moving to a single payment. Since no products were excluded from participating in the market, it is unclear how clinical practice will be impacted. So while the details of the proposal are yet to be finalized, we anticipate that this will be a headwind to both Advanced Wound Management sales and profitability in 2026. And that would be before any mitigating actions. Finally, Advanced Wound Devices revenue grew by 12.7%, led by our single-use negative pressure platform, PICO, and with strong growth from Leaf, our patient monitoring system. In traditional negative pressure, competitive wins are an important part of our growth opportunity. I'm delighted that we were recently awarded a U.S. Department of Defense contract for RENASYS TOUCH, succeeding in a competitive tender process, having demonstrated clinical efficacy and operational fitness. With an initial term of 5 years, which can be extended to 10 years, this contract is worth up to $75 million. Coupled with an ongoing broader refresh of AWM, we are confident about the long-term outlook for Wound. And with that, I'll hand over to John.

Thank you, Deepak. Revenue was $3 billion in the first half, up 5% on an underlying basis compared to Half 1 2024. Reported revenue was up 4.7%, including a foreign exchange headwind of 30 basis points from the relative strength of the dollar against most major currencies versus the same period last year. As the dollar weakened in the second quarter, the ForEx headwind on revenue became a tailwind, and we now expect a circa 50 bps ForEx tailwind on revenue for the full year. Performance in China was in line with expectations. And excluding these headwinds, growth would have been 7.2% on an underlying basis. This represents a 220 bps headwind in Half 1, in line with our guided full year impact of circa 150 bps as the impact of Sports VBP unwind in the second half. Performance was broad-based with all 3 business units contributing significantly to the overall group. Orthopaedics grew 4.1%. Sports Medicine and ENT grew 4.1%, although again, excluding China, growth would have been 9%. Advanced Wound Management grew 7.1%. Overall, a good set of growth figures and particularly good to see that 3/4 of our growth is drawn from products launched in the last 5 years. Moving now to the summary P&L. Gross profit was $2.1 billion, resulting in a gross margin of 70.5%, which is a 40 basis point increase on the prior year, driven by positive variances on price and volume. We saw a further 60 basis points of positive leverage across our operating expenses as we benefited from operational savings in SG&A and only a small uptick in R&D spend driven by Half 1, Half 2 phasing. Operational savings were slightly ahead of expectations as we accelerated some of our operational savings into the first half. We also expect to catch up some of the shortfall in R&D spend in the second half as well as absorb the bulk of the $15 million to $20 million tariff impact Deepak outlined earlier. So overall, trading profit grew 11.2% to $523 million with a margin of 17.7%, up 100 bps. And I'll explain the various drivers of the margin expansion on the following slide. Slide 12 shows the detailed trading margin bridge. Going through the moving parts, we absorbed headwinds of 130 basis points from input cost inflation and 140 basis points from the introduction of VBP in China. These costs were more than offset with 190 basis points of revenue leverage from price and volume and 170 basis points from productivity improvements, not only in manufacturing, but also across all other areas of operating expense. FX movements contributed 10 basis points. We have now sustained a trend of revenue leverage offsetting input cost inflation, which means VBP aside, cost savings have been able to drop through to trading profit. As previously guided, we expect the impact of VBP China to unwind in the second half, such that the full year impact is around 110 basis points. We expect operational savings to step up slightly in the second half versus the first, albeit not as much as previously cited given the acceleration of savings I mentioned earlier. Furthermore, we expect the bulk of the $15 million to $20 million tariff impact to take place in the second half as well as some catch- up on R&D spend. The net effect is that we expect a step-up in margin in the second half, such that the Half 1 to Half 2 margin uplift remains comparable to previous years to deliver margin in line with our guidance of 19% to 20% for the full year. I'll now come on to trading margin by business unit. As you can see from this slide, the majority of the margin expansion came through Orthopaedics, where our transformation initiatives to reduce inventory, streamline instrument set allocation, portfolio simplification and focus on higher volume accounts resulted in 230 basis points of margin expansion in Half 1 2025. We expect these dynamics to continue into the second half. Sports Medicine and ENT margin declined 130 basis points, reflecting the VBP impact in China. If we stripped out China from these numbers, we would have seen margin accretion in the first half. As we annualize the impact of VBP on joint recovery, we expect to deliver margin accretion in the second half. Advanced Wound Management margin increased 160 basis points due to mix, ongoing efficiency gains and the timing of SANTYL revenues in the prior year. And for 2025, we reiterate that the bulk of our margin expansion will come from Orthopaedics at over 200 basis points with accretion of around 50 basis points coming from Sports Medicine and Advanced Wound Management combined. As we've already mentioned at previous results, we've changed our central cost allocation process to better align costs to the appropriate business unit. With this fuller allocation in place, only $28 million has remained as truly central costs, in line with prior year and our previous guidance that these will be broadly flat year-on-year in 2025. The purpose of the change was to create transparency and accountability, and there are already positive behavioral changes as a result. We've seen greater scrutiny of spending plans, lower demand for new projects and greater discipline in constructing robust business plans for new IT investment spend, as an example. We showed you this slide at our interims last year. As a reminder, it details the gross run rate savings of $325 million to $375 million we are targeting for 2023 through 2027. As we set out at our prelims in February, including '23 and 2024, we have delivered a cumulative savings of $210 million. This comprised $155 million relating to the 12-Point Plan and zero-based budgeting and $55 million relating to earlier programs. That's actually the faint dotted line you see there on the 2023 column. On zero-based budget, implementation is on track across all business units and central functions. Across our 5 work streams, 51 initiatives have been mobilized, which over half are now complete. We anticipate $120 million to $130 million of savings coming through in 2025. And as you saw from the margin chart earlier, we delivered circa $50 million of these in the first half, slightly ahead of our plan as we were able to bring some efficiency savings forward from Half 2 into Half 1. In total, therefore, that delivers run rate savings from the 12-Point Plan and ZBB of circa $275 million to $285 million at the end of 2025 with a further $50 million to $100 million of savings to come through in 2026 and 2027, very much in line with what we set out on this chart this time last year. We've now embedded our ZBB approach into our standard processes in line with our culture of continuous improvement. Looking further down the P&L, earnings per share grew strongly, up 37% to $0.335 and adjusted earnings per share grew strongly, up 14% to $0.429, reflecting both revenue leverage, operational savings and significantly lower restructuring costs, which were $8 million in the first half compared to $62 million in the first half last year. We remain on track to incur an estimated $45 million of restructuring charge for the full year. The interim dividend of $0.15 per share is up 4.2% on Half 1 2024, in line with our policy set out this time last year of paying 40% of prior year full year dividend as the interim dividend. As you know, inventory management has been a key priority of our 12-Point Plan, and I'm pleased to report a further 46-day reduction in DSI across the group to 506 inventory days, in line with our full year 2024 year-end position. The reduction in DSI delivered a $69 million reduction in inventory value at constant currency. All business units contributed to this performance with the biggest reduction in Sports Medicine and ENT. There was still an overall increase in inventory for launch products in the first half versus the same period last year. And this means our inventory mix has also improved with the units of the slowest turning quartile of SKUs down by 14% in Half 1 '25 versus Half 1 2024 and down 22% since the start of 2023. Longer-term improvement will be down to improved forecasting and better alignment of production plans with the commercial needs at the SKU level, enabled by the improved SIOP process. There is still more work to do here, including aligning our SIOP process with our financial forecasting in a truly integrated business plan. Inventory reduction remains a focus, and we expect further progress in Half 2 2025. Trading cash flow in the period was $487 million, with trading cash conversion of 93%, well ahead of the 60% in Half 1 2024. The improvement came from lower working capital outflows, particularly from the inventory day reductions I detailed on the previous slide. Capital expenditure is slightly lower year- on-year, but we expect to catch up some of this in the second half of the year as we continue to progress the development of our new manufacturing facility in Melton. We expect to exit the year at a similar level of spend to last year. For the full year, we continue to target trading cash conversion of over 90%. With lower restructuring costs offset by slightly higher tax, free cash flow increased over 500% to $244 million. We expect to deliver free cash flow of well over $600 million for the full year. This strong cash generation broadly covered the cost of CapEx, dividend and other costs in the period, meaning net debt at the 28th of June 2025 was only $38 million higher than at year-end 2024. The leverage ratio has also decreased slightly to 1.8x. As we maintain and build on this improved cash generation, capital allocation continues to be a focus. This is our capital allocation framework that you should now all be familiar with. As Deepak mentioned in his introduction, the good start of the year in terms of profitability and cash conversion has enabled us to increase our cash returns to shareholders in line with our capital allocation policy. We intend to complete a $500 million share buyback during the second half of 2025. This will be fully financed from free cash flow and existing cash balances so can be delivered while keeping our leverage ratio broadly stable for the full year and without compromising any of our growth ambitions. I'll finish with our outlook for 2025, which, as you can see, is unchanged. We expect to see a step-up in margin in Half 2, in line with what we experienced in both 2023 and 2024, reflecting the timing of cost savings and reduced China headwinds. The tariffs announced by the U.S. government early in the year have continued to evolve, and it remains to be seen what the final outcome will be, but we continue to expect a net headwind of around $15 million to $20 million, mainly to impact in the second half of the year. We expect to deliver well over $600 million free cash flow for the full year and the strong start to the year in terms of profitability and cash conversion has enabled us to increase our cash returns to shareholders with a $500 million share buyback during the second half, as I've just mentioned. You should see this as further demonstrating our commitment to value creation for shareholders in addition to our extensive operational improvements. And with that, I'll hand back to Deepak.

Thank you, John. So when we launched the 12-Point Plan, one of our core ambitions was to reposition Smith & Nephew as a consistently higher growth business. We're very much on track. In the first 2 years of the plan, we delivered growth of over 7% and 5%, respectively. And in the first half of the year, we've delivered yet another 5% despite some significant headwinds. That includes 2 fewer trading days for the half. And while China headwind has passed its peak, it still had an impact on H1. So if you look through the detail of the quarter, you'll see we're doing what we said we would do. Sports Medicine and Wound continue to grow well. In U.S. and the U.S. Recon specifically, we're showing progressive improvement quarter-by-quarter. And our investment in innovation is supporting the acceleration in revenue growth. Let me take a moment to go into more detail on these 2 last points. A year ago, we highlighted the strong performance in Trauma & Extremities based on new product introductions, implant supply, capital deployment and improved commercial execution. We also detailed that all the same elements were in place to improve performance in our U.S. Recon and Robotics business as well. As with T&E, these actions have driven 4 consecutive quarters of sequential improvements in U.S. Recon and Robotics revenue growth. On implant supply, key product line item fill rate reached its target in the fourth quarter of 2023 and capital availability followed soon after. With hip set shipment also was at goal in fourth quarter of 2023 and knee sets started reaching their goal in the second quarter of 2024. This is also being supported by a steady stream of product launches over time, such as the newly launched short-stem hip. We also launched 10 new features on CORI between 2022 and 2024, further contributing to the recent recovery in our hip and knee implant sales growth. We have further new product launches planned to continue this positive momentum. Innovation has been a key significant driver in our transformation to a higher-growth business. Across '23 and '24, more than half of our underlying revenue growth came from products launched in the previous 5 years. In H1, this proportion was 3/4 or 75%. We continue to invest in our innovation pipeline and introduce new products across all of our business units in the first half of the year, which we're confident will help us sustain our improved revenue growth profile. In Orthopaedics, we expanded our nailing range with a new system for stable and unstable tibial fractures. TRIGEN MAX builds on more than 2 decades of proven performance and industry-leading design from our TRIGEN nails portfolio. In Robotics, we received FDA clearance for CORIOGRAPH pre-op planning and modeling services in total shoulder replacement during the second quarter of 2025, which expands our offering to cover all joint replacement procedures; knees, hips and shoulders. In Sports Medicine, for the first time, Smith & Nephew is able to market REGENETEN for extra-articular ligament injuries in the U.S., creating opportunities to reach more patients with soft tissue injuries around the body. With an initial focus on hips capsule repair, we have future expansion planned in other extra-articular ligament repairs. In addition to new products, we also announced a number of significant evidence milestones during the first half of 2025, supporting the adoption of key product families. For instance, a recently published randomized controlled trial of Smith & Nephew's handheld robotic system demonstrated the value for patients and surgeons of robotically assisted total knee replacement with JOURNEY II BCS. Patients experienced significantly better outcomes, including reduced pain, improved function and higher satisfaction compared to conventional surgery at the 1-year time point. In conclusion, I've talked a lot about our 12-Point Plan. We're now in the final year of our 3-year transformation that I first set out for you in July 2022. And Q2 performance is yet another proof point that we are on track to deliver our ambitions. Each of the 3 parts of the 12-Point Plan is delivering great progress. The rewiring of our Orthopaedics business is well underway with sequential growth acceleration over the last 4 quarters at the global ortho, U.S. ortho and U.S. Recon and Robotics levels. Orthopaedic inventory levels have improved, and we've seen the associated expected step-up in ortho margin. Both Sports Medicine and Wound Management have shown consistent momentum since the start of the program and productivity improvements are clearly visible in the P&L. In other words, our operational improvements are increasingly translating into financial gains. In Q2, once again, we delivered revenue growth ahead of historical levels, even with headwinds from trading days and China. This higher organic growth is underpinned by fundamental competitive strengths, better commercial execution and a high cadence of innovation across our portfolio. Cash flow has also stepped up significantly in the last 12 months with better control of inventory to the point where we can start returning excess cash to shareholders through our $500 million share buyback. There's still more to do around profitability, but the 100 basis points of expansion puts us on track to deliver the guided step-up in full year margin. As a reminder, we've delivered 240 basis points group margin expansion from H1 2023 to H1 2025 despite greater headwinds than we expected when we first laid out the plan in 2022. As I told you in the full year 2024 results, since the start of '23, we've successfully offset over 700 basis points of headwinds from inflation, foreign exchange and VBP. Finally, these improvements are sustainable. A key objective of the 12-Point Plan has been to drive increased accountability and greater discipline in execution, both of which are now embedded in our culture and our ways of working. As I've said before, the 12-Point Plan is a necessary step, but it is not the limit of our long-term ambitions. We'll set out the next stage of our strategy at a Capital Markets Day in early December. I'm looking forward to seeing you all there and formal invitations will follow shortly. So with that, we'll now take your questions.

Jack.

Jack Reynolds-Clark from RBC. I've three, please. The first is on revenue guidance. So with Q2 having been, I guess, stronger than I think people were expecting, does that imply that there's upside to the 5% target for the full year? Or are you expecting things to slow down elsewhere in the business? Then on margin guidance. So I appreciate you mentioned some kind of moving around of R&D and possibly some other expenses as well. But could you walk us through, John, the bridge in H2 margin and whether the kind of upper end of the 19% to 20% margin range is possibly more achievable? And then the last question was on U.S. Knees. So could you just run us through some more detail of the work you're doing there and kind of how much of the weakness was driven by the market versus your own activities and how you're thinking about kind of growth versus margin in that segment going forward?

Sure. I'll frame this up, and I'll leave it to John to kind of give you the margin guidance. So overall, as we mentioned, given all the puts and takes that we see, we feel good about the guidance for the full year. So there are positives and negatives as we go through. We'll continue to improve commercially in the back half of the year, but we do have a step-up that we expect, right, both from a revenue standpoint and from a profit standpoint. We're in a more uncertain environment. We've characterized for you what we expect the impact of tariffs to be. But fundamentally, there is a much more uncertain period. That, coupled with the step-up that we need to see in the back half of the year, particularly around margins and all the various effects around comparators, China VBP falling off and other things, we feel at this point, it is prudent to maintain the guidance that we've given, both in terms of revenue and margin. In terms of U.S. knees, as we unpack that a little bit, the headline is that at a U.S. Orthopaedics level, including Trauma and Recon, U.S. Recon and Robotics level and at a Global Orthopaedics level, we're seeing sequential improvement. And those are very, very strong proof points that the improvements in supply and product availability, commercial execution, our ability to connect all the different pieces together is delivering the desired effects. So that's the headline in terms of where we are. I'm pleased with the progress we're making. The softness in knees, which were offset by the greater-than-expected strength in hips, a couple of factors. First, we are going through a step to refocus our commercial organization to the higher volume accounts. I've said in previous settings that we've got a relatively long tail of accounts where we have surgeons use our products on an occasional basis with particular patient populations or what have you. While that's an important part of our business, we do want our commercial activities focused on driving kind of key primary use of our kness or hip platforms. So that's some concerted effort there going on. There's also some level of portfolio rationalization work that we're doing, and I've highlighted that in the past. So we've got 3 Knee families that are relevant in the U.S. We are trying to get that down to 2 knee platforms, LEGION and JOURNEY. And there's work involved in having to transition surgeons and doing that. By and large, we're successful in retaining most of our customers when we go through that process, but not all, and that does have an impact on top line. But these actions actually get us to a better position as far as our U.S. business is concerned from a margin standpoint. And these steps do contribute on the back of all the other improvements we're making in the factory and in terms of inventory control for the margin step-up that John talked about. But what we also saw related to this was particularly in the end of the quarter that we saw some slowdown in terms of the number of procedures in our active base of surgeons. And that did contribute to the numbers that we see. So with that, John, do you want to take the margin...

Yes. Just to sort of build on a little bit what we said, we saw the 230 bps of margin accretion in Orthopaedics in the first half, which was a reflection of those changes that Deepak just talked about. And that very much puts us on track to deliver the margin expansion that we set out last year for Orthopaedics. So we ended last year with just below 12%. And if we look forward to this year, we should end north of 14%. So a big step-up, a big improvement in margin for Orthopaedics. In terms of setting a little bit of color on the revenue guidance, I mean you're right to highlight that we did say that we would expect to see a step-up in Q3 given China annualizing, given the reversal of the impact of trading days. So in Q3, we've got level trading days year-on-year as opposed to 2 less in the first half. So we will expect to see a step-up in Q3. That said, important to remind you that Q4 for us last year was a very strong quarter, particularly in the U.S. So we've got quite a tough comparator. So I would say that we're only 6 months of the way through the year. There continues to be significant sort of uncertainty over macro and external conditions like tariffs, for example. So now is not the time to be changing our guidance. In terms of the margin phasing, again, we talked about bringing savings forward from Half 2 into Half 1. And of course, those savings will repeat in Half 2. So that's an upside. At the same time, we've got the impact of tariffs, the $15 million to $20 million that we made reference to. And that will, of course, primarily hit us in the second half. So that broadly offsets that. And then also, we've got the U.S. OUS mix in Q4 as well. Again, we had a very strong U.S. in Q4 of last year. So again, at this stage, I would say now is not the time to be changing our guidance on margin, the 19% to 20% holds. And we've said in the past that we expect it to be broadly center of that range. And actually, if you look at the bridge from Half 2 '24 to Half 2 '25, so I'll give you a little bit of color here. We'd expect sort of cost inflation of around 1.9% or so. VBP on China will be about a drag of 80 bps or so. Remember, we said it was going to be 110 bps for the year. So that's averaging out Half 1, Half 2. We'd expect to see revenue leverage of around 200 bps or so and then operating savings of a similar amount to get us up to the circa 19% to 20% margin for the full year. So that gives you a little bit of color on the Half 2 bridge.

Richard.

Richard Felton from Goldman Sachs. First one, just a follow-up on margin. John, can you remind us the drivers of the operating savings in H2? How well advanced are those programs? How much visibility do you have that, that is going to be achieved and fully derisked? And then also, what elements of those operating savings are structural? And how should we think about that dynamic into FY '26? That's the first one. The second one, just a follow-up on U.S. Knees, Deepak. You mentioned at the end of the quarter, a slightly softer procedure environment. Why do you think that happened? Why was that the case? And have you seen that continuing into Q3?

Sure. I'll take the U.S. Knees part. So this is in our base of customers, right? And it's hard to speculate. We don't know the reasons really. I mean we can talk about vacation schedules because there's vacations every year on that time frame. So it's hard to kind of really divide that. So it's hard to tell what drove that. What we can tell is there was a slowdown in our base. I've in the past, been somewhat loath to comment on market. We're in a period of performance recovery in the Orthopaedics business, where it's sometimes difficult to parse how much of something is you or us versus the market, right? We can do that in Wound. We can do that in Sports. I've been loath to comment on that. Now we're in a better place actually, much better place even in Orthopaedics in the U.S. than we were a year ago or 2 years ago. But having said that, what I do feel comfortable is talking about what's happening with our account base, right? And so -- but there seems to be, at least from what we can tell in our numbers, some slowdown related to vacations. Surgeon transitions was another factor. As surgeons were moving practices in some cases, from hospitals to ASC settings or across networks that did have an impact unless something within our base. What's encouraging for me is when I look at churn, you've heard me comment about that in the past, where through much of '23 and early '24, we were net unfavorable. In other words, we lost more surgeons than we gained. For a variety of factors, retirements and those types of things were the large factor. And we had some competitive losses, too. But we also commented in the previous period that those have turned favorable starting in really the Q3, Q4 of 2024. And I'm pleased to report that, that trend has continued even into Q2, building off of Q1. So I feel good about the operational progress that we're making. And I do feel confident as we go through the second half of the year, we'll be at a different place. And again, I come back to, in the end, there's different ways to slice and dice this. But what I'm looking at, in addition, knees [indiscernible], and we're looking at knees and hips separately as well. But in the aggregate, when you look at U.S. Recon, we're seeing nice sequential improvement, and we are closing the gap to market. We'll see, of course, not all of our competitors reported in the quarter. But when we look at the trend, Q3 '24, Q4 '24, Q1 of '25, we are closing the gap at the U.S. Recon level. And of course, outside the U.S., we've seen some strength now over the last couple of years. We've continued to maintain that. So overall, I feel good about where we're positioned. So I'll hand it to you, John, for...

So in terms of the savings and where they're coming from, again, I'd point you to the slide that we've got in the deck, which sets out, I hope quite clearly, they come from across the board. There's a big chunk clearly that come from manufacturing, procurement, but there's also warehousing and distribution, business support, sales and marketing. We're seeing savings across the entirety of our business. We had 51 different programs, most of which are -- all of which are already in train and many of which are already complete. And so in terms of visibility of those savings, I feel pretty confident that we'll see that margin accretion come through in the second half, as we said, consistently before. In terms of '26 and '27, again, point you to the chart, we should expect to see another $50 million to $100 million of savings flow through in '26 and '27 as a consequence of some of the changes we're making now as we see those flow through into future years. So again, we should see a little bit of support for margin improvement as we go into '26 and '27.

It's Graham from UBS. Just two for me, please. On the Ortho inventory in terms of the lower cost inventory started to flow through post the site closures over the last 12, 18 months. Have we seen much of that yet? I think we always thought that would be like a H2 sort of weighted story. So it'd be interesting to get some color on that. And then just on tariffs. One of your peers appears to be able to not pay tariffs on Hips and Knees. So just to get your sense as to have you explored the Nairobi Treaty for that protocol? And is there anything to do there?

Graham. So in terms of inventory, you're right, we've previously called out that the big -- the accumulated benefits of all of the network optimization efforts we've done will fully manifest in the second half of the year. We remain kind of on track to that. So that will be one of the key drivers of the continued margin step-up from where we are today into the back half of the year. But it's not like we haven't seen the impact of that already. So those have come over the period of time one at a time. And so mechanically, what happens is you close a site, obviously, there's upfront costs associated with the site closure. We'll typically build up some level of inventory as safety stock in terms of what we manufacture there. And then we transition that production to elsewhere within our network. So the impact of all of that will flow through and there's a time scale associated with it. What we're actually doing also in addition to that is as part of improving our product availability, which has twin objectives. One is to improve availability and actually reduce our inventory, right? And there, it's about how we connect supply and demand down to SKU levels. And we've been at this now since the start of the program. And there, we've made really, really good progress, in terms of being able to connect that at a much better level. Now there's still more work to be done. But when I compare to where we were in '22 versus this, it's kind of a night and day thing. And that's part of what John talked about in terms of our inventory health being better. So he provided some stats around what our slow turning inventory has been doing. And in fact, when we started out, our mix wasn't great, right? We had too much of the stuff we don't need and not enough of the stuff we did need, right? And part of that is because in our business, Trauma is relatively higher proportion compared to Recon. Trauma has particularly high inventory requirements and are particularly slow turning in that. So some of that is related to it, right? But we have actually brought down the slow turning inventory levels significantly. So that is another contributor in terms of both inventory levels and days of inventory coming down. And of course, the impact of that as it flows through the balance sheet and P&L is a bit more complex, right? There's inflation impacts that -- for which there are time scales associated with it. The second thing is our capacity, manufacturing capacity. So we've taken down capacity, right? But we've navigated through much of this period with excess capacity. And that has obviously complicated impacts on both balance sheet and P&L. But all these put together, we are on track to delivering the margin expansion associated with this just as we said, and as you rightly call out, that was the second half of the year. In terms of tariffs, obviously, we're looking at all different ways, including the one you mentioned as ways to mitigate. But as far as we can tell, based on our read of the situation, we're calling for a $15 million to $20 million impact. To remind you of our network, I think your question was more within Orthopaedics, referencing one of our competitors. For us, we've got 2 primary sites, well, 3 total, but it's Memphis, it's Malaysia, and we've got Switzerland. And so on the one hand, because a significant part of our Orthopaedics production comes from Memphis, we're naturally hedged in that regard. But it's not 0. It's very much down to SKU level in terms of what comes from there. So there is actually impact, not to mention the impact of raw materials, the input feedstock that comes in from other places. So look, it's a very dynamic situation. It's hard to call out where things actually settle out. So we've got a Tiger team that's looking at this at the pace that you would expect companies like ours to look at. And we're keeping that situation under review.

Just to build on Deepak's point there. If you look at our manufacturing network, as it happens, the more of the tariff impact comes through for us on Wound and Sports and less on Ortho because most of our manufacturing is U.S.-based for Ortho. So there's a little bit more of an impact in Wound and Sports than there is in Ortho.

I think, David, you had a question?

A couple from David Adlington at JP Morgan. Just on the buyback, John, given the strong cash flow in the first half, I just wondered how you're thinking about ending the year in terms of net debt to EBITDA? And then secondly, also good to see progress on the inventories. As you look into the medium term, where do you think you can get down to? And how much cash could that free up?

Do you want to take that, John?

Yes. So on the buyback, notwithstanding the $500 million buyback in the second half, I'm still expecting us to exit the year below our 2x net debt-to-EBITDA sort of target level. So giving us plenty of capacity for all of our growth ambitions, et cetera. So very strong cash flow, which is very positive. On the inventory side, obviously, we don't want to overly guide to what we're going to deliver in the future. But you've seen the direction of travel over '24 and 2025. And we would expect that improvement to continue. I think when it comes to Sports and Wound, we're now getting down to what would be pretty good industry levels. I think the opportunity continues to exist in Ortho, and we've seen good improvement in the first half. We'd expect that to continue into the second half of this year and then further improvement in Ortho next year as well.

It's Sam England from Berenberg. So the first one, just in Hips, you called out the benefit from CATALYSTEM in Q2. How should we think about the market share gains you think this can drive, especially in the ASC channel given the focus on anterior surgery and how crowded is that space becoming now for anterior products? And then just looking at the other Recon business and the growth there that you called out was driven by Robotics. Can you just talk a bit about demand and placements for CORI in Q2? And I suppose, is more of the demand being driven by the hospital or ASC channel, just some sense for the sort of split of demand between channels?

Yes. So we're pleased with the uptake of CATALYSTEM. Obviously, not every one of our competitors have reported, but you've seen 2 report. We feel good about where we're positioned. The surgeon feedback on CATALYSTEM has been very, very good. And so we feel good about how we're positioned there and continuing to have traction across a range of settings, not only in ASCs, but also in hospitals, academic centers and community hospitals as well. So we feel good about its value proposition. As you know, the market over the last 3 or 4 years has gone through a fairly profound shift from a traditional approach into direct anterior approach. So we were among the later players, not the first players to come into that space, but we have a very compelling product offering in a segment that's rapidly growing. So feel good about the surgeon feedback and the resonance that we're getting across the range of settings. In terms of Robotics, what I'm looking at -- what we're looking at is not just placements, right? We could be executing a place first kind of strategy. What we're looking at is both placements and utilization. And we're seeing very nice uptake. In other words, where we place, we've got surgeon champions that are using that integrated into their kind of routine practice, which is really kind of the true measure of what we're trying to do. We're also looking at whether it's driving competitive conversions. So we're using that primarily to retain our existing customer base, both of which are important. So there's multiple things we're looking at around CORI, placements just being one of many factors. And continue to be pleased with the progress there. We're looking at how we do an ASC channel as well as in teaching institutions where historically, we've kind of skipped a beat or 2. And so the progress we're making on both of those is very, very encouraging for me. So overall, very pleased with how CORI is doing across channels, and the type of utilization that's getting and maybe where we replace them.

And just again, just to build on Deepak's comments there. We're not going to split out, obviously, numbers that go into the channel, but it's fair to say that in the second quarter, we certainly over-indexed in ASCs in terms of the proportion of our CORI placements that went into ASCs in the second quarter, which I think is really encouraging. We said before, we think that CORI in terms of its form factor, in terms of size and its footprint and also its capital cost being significantly lower than the competition, actually puts it in a very strong position, particularly in the ASC channel. And we're starting to see that come through in terms of the number of placements we're putting into that channel.

Should we turn to the phone.

[Operator Instructions] The first question comes from Veronika Dubajova of Citi.

Hope you can hear me okay. I have three, please. First one is just Joint Repair. Again, another impressive quarter for you guys with double-digit growth, excluding China. Just curious, Deepak, if you could touch upon the drivers that are enabling you to deliver that growth and how sustainable you think that is not just into the back half of this year, but also as we think about 2026? My second question is just maybe if you can elaborate a little bit on the skin substitute exposure that you have and the risks that you might see there from the new proposal and maybe just give us a flavor for where your current pricing stands relative to the $125 that's been proposed by CMS. And then my final question is around the buyback. And just to what extent do you feel this year is giving us a good indication for your ongoing recurring future capacity to return cash to shareholders?

Sure. So in terms of Joint Repair growth, we take China out of it, as we've indicated multiple times, we will annualize the impact of Joint Repair VBP as we head into Q3. But when you look at our performance across all other regions, very, very nice double-digit growth. The key drivers are Q-FIX and what we've done with that and REGENETEN. And REGENETEN, it's increasing adoption within rotator cuff, which was kind of our lead indication. But as we expand indications into the Achilles in particular, we're seeing a bigger proportion of REGENETEN use -- not big a proportion, but increasing proportion within the Achilles as well. And of course, we're not stopping there. Hips is another area that we're going after. So very nice uptake of REGENETEN, we expect it to be a platform technology. So we're starting to see its utilization across different joints. So Q-FIX, REGENETEN key drivers of Joint Repair growth everywhere outside of China. In terms of skin subs, look, it will be a net headwind, both from a revenue and profit standpoint for our Wound business. Fundamentally, obviously, there's the pricing that you mentioned. But in addition to that, there was no products got taken off the market as a result of this. So how practice patterns change as a result of that does remain to be seen. But relative to a previous version of this where on the back of expected clinical evidence, there'll be fewer players in the market at lower price point with some limits on adoption was for us, we had characterized it as a net neutral thing for us as we pivot into this regime, which, of course, hasn't been finalized, it would be a net headwind. Obviously, for the year, we've taken this into account in our guide and made some remarks and John did as well. So we feel good about our ability to kind of navigate through this headwind for 2025. And of course, as to 2026, as we look in the year, we're not going to guide to that quite yet. Now it's not the moment to do so. But let's just say that we're active participants in it. We remain committed to bringing forward products that have strong clinical evidence back in. And in terms of what we're going to do, we're going to stick to what we think will be the right way to develop products that are substantiated with clinical evidence, and we'll see how things evolve from there. In terms of buyback, do you want to take that, John?

Yes, I'll cover that. Again, just to make very clear, I'll sort of draw your attention to the capital allocation policy, which is very clearly set out. So first and foremost, we want to be able to invest in our organic growth. That's absolutely clear. That's one of our key objectives is to drive the growth of our business forward. Secondly, we want to be able to acquire businesses that are complementary to our portfolio that will assist in driving growth. Thirdly, we've got to pay a dividend. And then if there's anything left over from that, then, of course, we have the option of paying a share buyback or doing another share buyback. But I want to make it very clear that, that is the last option and that the primary focus is driving our top line growth, investing in our business through organic growth and acquisitions and obviously paying a dividend. And then as the last element of the capital allocation, share buyback. So we were able to make the share buyback in the second half of this year of $500 million. As I said earlier on, we will expect to still end the year below our target leverage ratio and with all the capacity that we need to drive our top line growth.

The next question comes from Hassan Al-Wakeel of Barclays.

I have three, please. Firstly, Deepak, if I can follow up on your comment on slowing procedures amongst more active surgeons in Knees. I wonder if you're seeing this beyond Knees. And separately, any color on the weaker OUS Hip performance and any key challenges faced here. And I guess, combined, what are your expectations here and in U.S. Knees in the second half? And then secondly, if I can follow up on Skin subs. Was the stronger growth in the quarter supported by any physician behavior changes due to the LCD? And then on the proposed reimbursement, I appreciate behavior can change as can volumes. But what is the impact from the lower price in isolation? And what is your exposure to the hospital inpatient channel? And what are the mitigating actions that you could take? And then finally, how are you thinking about the pipeline of potential bolt-on deals, particularly as we look into next year given the buyback announced for this year?

Okay. So what we've seen in terms of procedure slowdown was really in Knees and Hips. And medically, a different level of, I would say, urgency around knee placements versus hip replacements, as you know. So what we've seen in our active base was really more around knees compared to hips. And so that's that. In terms of hips OUS, there's a China factor or an ex-China factor OUS. There's a little bit in Japan, for example, that we're looking at. But overall, OUS orthopaedics performance remains an area of strength. So we continue to perform well commercially and although there's quarterly volatility, primarily around timing of distributor orders and things, we feel good about how we're positioned OUS very large. But there are individual markets where there may be something from one quarter to the next. In terms of Skin subs, in terms of physician behavior changes in response to pricing, we did see some of that, but it was not to the extent that, that was the dominant kind of factor driving our performance there. Now we have not previously split out how much of our business is Skin subs. But I'll just say it's material, but in the realm of -- from a group impact standpoint, I expect that with pricing changes here, we'll be able to navigate through this. So I guess, rather than get into breaking out the impact of Skin subs, I'll just leave it at that. In terms of proportion of utilization in hospital versus physician office, it's about 25% of -- sorry, 40% of use is in the physician office compared to the hospital. In terms of our own activities, we've always had a strong presence on the hospital side, which we continue to maintain. And in terms of development of products, we continue to be focused on not just coming up with the next version of skin subs, but also investing behind the development of clinical evidence. And that will remain the case as we go into next year and beyond. So skin subs. And in terms of acquisitions, as John mentioned, a key priority is to drive growth, top line. And at the level of buyback that we've announced, we are not going to be limited in terms of the type of bolt-on acquisitions that we're going to be able to do as a result of it. So we feel good about the opportunity set in front of us and the ability to execute on that. Bolt-on M&A or M&A in general is a key part of value creation in MedTech. We have an active corporate development team that's well plugged into the ecosystem, and we've got a pipeline that we feel good about. And we don't feel constrained in our ability to do those bolt-on M&A even with the announced buyback.

Yes. And just to add some color to your question on Hips, Hassan. Just looking at the numbers for the second quarter, we were actually up on an average daily sales basis. Globally, we were up around 5% for Q2. And actually, if you look at ex China, we were up 7.5%. So you're right to highlight the OUS growth was pretty flat in the second quarter. But to Deepak's point, we expect that to significantly step-up in the OUS numbers, significantly step up in the second half as some of the impacts on China start to reverse. And we should see a pretty strong Half 2 on our Hips ADS growth on OUS basis.

The next question comes from Robert Davies of Morgan Stanley.

I have three. First one was just how you're thinking about the strategic position within Ortho, I guess, within the context of both the 12-Point Plan and within the context of -- you mentioned the constructive discussions with the activist. Maybe just provide us a little more color on that. The second question was around the trajectory for margins beyond 2025 and whether the sort of savings plans that you've laid out has changed your views over the midterm profitability targets of the company? And then the final one was just around the sustainability of growth, I guess, and just getting a little more color on the future pipeline. You've obviously made a lot of comments over the last couple of years around the products you brought to market. I just wondered if you could provide some color around the pipeline looking forward over the next couple of years. Anything meaningful to look out for?

Yes, sure. So with Orthopaedics -- look, we're a portfolio company as many other MedTech companies are. And in terms of Orthopaedics, what we've said a number of times is, as we look dispassionately at all different ways in which we can drive shareholder value, far and away, the best opportunity is to get orthopaedics functioning as it has the potential to do and as it once did within our portfolio. And as I've detailed in this quarter and its previous presentations, we're making really good progress in our ability to do that. And there's a number of elements associated with it in terms of product availability, the way we connect supply and demand, our commercial execution, which itself has multiple pieces around people, process, how we manage the business. On every one of those fronts, we've made tremendous progress. So when I take a step back and look at all the things we could be doing, driving performance improvement along the dimensions that I've outlined is by far the best thing we can do for shareholders at this point. And we are well on a path to doing that. And I do believe we get it to where this business can perform in its ability to deliver great returns, whether it's in terms of revenue growth contributor, contributor in terms of margin expansion, which, as John mentioned earlier, we're on track to go to about 14% margin this year, which is more than 200 bps. As we look ahead, that journey will continue. 14% is not the endpoint, but it's a waypoint along the journey. So as we look ahead, we expect it to do its part in driving growth, importantly, driving margin expansion as we get it back to levels at which we were a number of years ago. And importantly, as we move into a position where it starts to deliver excess return ahead of its -- on cost of capital. So we have all of those opportunities in front of us in Orthopaedics. I think we've, with Q2 delivered yet another proof point on our journey there, but we've got more to do in the balance of 2026 and then, of course, as we look into the future. And that brings me to the second question that you have around continued margin expansion. We have said that the target for '25, which is 19% to 20%, that's not an endpoint. It is a punctuation, but we expect to continue to improve beyond that. In particular, Orthopaedics margins, we expect to continue to expand as we go into 2026. The right time for us to be talking about what we expect to do would be on the back of full year 2026 results so that you can judge how we did on the 3-year transformation program, where we're positioned and what makes sense in terms of reasonable midterm targets. So we'll come out and do that. As a prequel to it, in our Capital Market Day, we'll detail out what we see as the key growth drivers. I'll take the mystery out of it. We are an innovation-driven company. We've said 3/4 of our growth in H1 was from products launched in the past 5 years. And we've commented on that periodically. Full year 2024, that number was about 50%, in 2023, that number was about a little over 50%, I think we might have said 60%. So we've had a good track record of bringing forward innovations. We're not always first to market, but what we bring forward, and if you look at our greatest hits wheel, if you will, we're actually punching above our weight class in terms of the type of innovations we bring forward. And as an organization, we're very, very committed to maintaining our levels of investment within R&D. That will be one of the key drivers of growth. So going forward, we expect to build off of where we hope to exit in 2025 in terms of further margin progression, but we'll detail that out at the right time. In terms of sustainability of growth, we've gone from kind of being a low single-digit growth kind of company into kind of a mid-single-digit growth company during this transformation period. I think at this point, we've given you enough proof points in terms of our ability to do that. So the next chapter will be to build off of where we've come, right? So here, I'll leave this a little bit of a mystery, so you can come to the Capital Market Day and see what those drivers are. And then of course, with the full year, we'll give you that in more detail.

And just to sort of comment on the margin trajectory. As always, there's a lot of moving parts on margin. As Deepak highlighted, we've got the positives in terms of the additional savings coming through, and I talked about $50 million to $100 million at least coming through in '26 and '27. We've got the positives in terms of the continued progression on the Orthopaedics margin, as Deepak says, 14% is not our end game. We expect to continue to improve that over time. At the same time, of course, we've got to offset the challenges of tariffs coming in, in '26 and also, of course, the impact of Skin subs. So there's always lots of moving parts, but we hope to set out at the Capital Markets Day clear direction of travel as to where we expect things to go forward and also, obviously, at the prelims in February of next year, provide very clear guidance as to what we expect to happen in 2026.

Yes. Just a quick build on what you said, John, in terms of sustainability of both growth and margin. Part of being a portfolio company is being able to go through all these different factors and offset these things to deliver more consistent kind of top line growth and margin expansion. That's part of being a portfolio company. But another thing that I'll accentuate here is in terms of sustainability. When you look at how Q2 turned out, the growth came from all regions and all of our businesses. And that's been a theme that if you go back and kind of look at our messaging over previous quarters, that is something that's been true actually for a number of quarters now. So it's not just coming from one particular part of our business, but the growth has been relatively broad-based. And that you should take as another encouraging sign in terms of the sustainability of growth as we move out of this period of transformation or turnaround into more kind of new and improved Smith & Nephew.

The next question comes from Kane Slutzkin of Deutsche Bank.

Just quickly on U.S. Recon, you're obviously still targeting the market growth rates by end of year, I would assume. I'm just wondering if anything has changed in your thinking there in terms of how you get there given the softer U.S. Knees, but stronger Hips? And then just secondly, you obviously mentioned you're in the final year of the transformation. You're making good progress against this plan. Without being too sensational, I'm just wondering with the Sapient stake sort of slowly building, could you sort of just provide us with any confirmation or details of the nature of any discussions you've had with them, what their influence has been to date, if at all? And I guess, just how active have they been?

Sure. In terms of what we're targeting, as we've said before, getting to market growth in U.S. Recon remains a goal. Ideally, we would like to do that with all parts of our business kind of working, right? So in other words, we want to continue to show progress in Knees and progress in Hips, right? But obviously, there's multiple ways we could get there. In Q2, we had -- not overperformance, great performance in Hips that offsets a somewhat softer performance in Knees, right? So we expect to build on both of those things as we go into Q3, Q4, but the objective is at the U.S. Recon level to exit market. So it could be a different shape, but that remains the goal. In terms of Sapient, as you know, our position has always been we maintain open dialogue with all of our shareholders. We spend a considerable amount of time, John and I do, engaging with our shareholders in an open and constructive way. And so we have done that with Sapient as well. The conversations so far have been quite deep, quite meaningful and constructive, and we expect to maintain that as we move forward as well.

The next question comes from Dylan van Haaften of Stifel.

So just one clarification at the end for me. Baked into your tariff guide, are you using the Nairobi protocol for any of the, let's say, non-U.S. for U.S. business? And I'll stop there.

The short answer is no, not at this time.

We currently have no further questions. So I'd like to hand back to the management team for any final remarks.

Great. Thank you very much for your questions. As we said, we're very encouraged by where we are in Q2 and remain confident in our ability to deliver within the guidance that we've set out. So thank you for your attention today.

Ladies and gentlemen, welcome to the Smith & Nephew Q1 Trading Report. My name is Jenny, and I will be coordinating your call today. Certain statements in this presentation are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in those statements due to a variety of factors. More information about these factors is contained in the company's filings with the Securities and Exchange Commission. [Operator Instructions] I will now hand over to Deepak Nath to begin. Please go ahead.

Thank you. Good morning. I'm joined here by our Chief Financial Officer, John Rogers. I'm pleased to report a good start to the year. We achieved 3.1% underlying revenue growth in the first quarter, was ahead of the guidance we provided in February with consistent performance across all of our business units. Sports Medicine and Advanced Wound Management continue to perform well in established markets and U.S. recon is maintaining the improvement that we saw in 2024. We have successfully absorbed known headwinds, including a 240 basis points headwind in China and there being 1 fewer trading day. As we get into the detail of the quarter, you'll see that we're building on the operational and commercial improvements of the 12-Point Plan, which has brought better product availability, better commercial execution and the focus and accountability of the business unit model. Those foundations are enabling innovation-driven growth across our key platforms. To highlight a few, CORI, EVOS, REGENETEN and our Negative Pressure Wound Therapy portfolio, all delivered strong double-digit growth in the quarter and are visibly driving the broader segment growth rates. We're also delivering further innovations at a rapid pace. Later, I'll discuss new product launches that are expanding our offerings in the high-growth categories of foams dressings, foams, dressings and cementless knees. Additionally, I'll share new clinical evidence related to OXINIUM and rotator cuff repair. Overall, this quarter keeps us on track for our full year guidance, which remains unchanged on both revenue growth and trading margin. We should see higher growth in the remaining 9 months, giving a lower trading day effect on growth for the full year and the peak of the China headwinds having passed and continued fundamental progress in our commercial delivery, particularly a fifth piece. The drivers of the guided step-up in profitability have been in place for some time now, and we should see the benefits of our cost savings and network optimization flow through to the P&L. John will come back later to the effects of the recently announced tariffs on our business. But to summarize for '25, we expect to absorb the impact within our existing margin guidance. And first, John will take you through the detail. John?

Thank you, Deepak, and good morning, everyone. So revenue for the quarter was $1.4 billion with a 3.1% underlying growth and 1.6% reported after 150 basis points headwind from foreign exchange. Those growth rates include the effect of 1 fewer trading day than in the first quarter of 2024, which is considered proportionately reduced growth by around 1.7 percentage points. Growth was largely consistent across the business units, and I'll come to the detail in a moment. Driven by region, growth was stronger in established markets with 3.6% growth in the U.S. and 5% in other established markets. The 1.7% decline in emerging markets was due to the continuing headwinds in China, which we believe has now peaked. Growth in the other emerging markets was much stronger at 14.7%. For the business units, I'll start with Orthopaedics, which grew by 3.2% in the quarter and 5.1% excluding China. As indicated with the full year results, we've changed our reporting practice around robotics to be more in line with our Orthopaedics peers. As of this quarter, robotics consumable sales are now recorded under the procedure where they are used, while capital and service revenue remain in other recon. Growth rates are all on a comparable basis. In U.S. recon, the sequential trend in the headline underlying growth numbers mainly reflects trading days. Normalizing for that, U.S. recon maintained the improved performance from the previous quarter. The dynamics continue to be encouraging with customer churn moving to being net favorable in Q4 and maintaining that in Q1, and a pipeline of competitive conversions building for the rest of 2025. On the product portfolio, CATALYSTEM continues to perform well against our plans with excellent feedback from existing and competitive customers. Outside the U.S, recon growth reflects the expected slow quarter in China with distributors continuing to reduce their inventory of implants. The overall level in the channel has come down significantly, and we expect it to reach a normal level again in the middle of the year. Excluding China, OUS growth was healthier at around 4 points higher in Knees and 7 points higher in Hips. Other recon grew by 46.6%, driven by robotics, reflecting both growth in units placed and a higher proportion of outright capital sales in the quarter's business mix. Trauma & Extremities grew by 6.3%. As in recent quarters, the EVOS Plating System was the primary major growth driver. The growth contribution of the AETOS Shoulder is increasingly significant, and we continue to develop the platform. We'll launch a stemless implant in the U.S. in the coming quarters, and we also aim to introduce planning solutions in half 2 as part of CORIOGRAPH, with execution on CORI to follow in 2026. Coming back to U.S. recon growth. This slide shows a time series of underlying growth, both as we report and adjusted the trading days. Adjusting for days gives a more representative measure of our progress from quarter to quarter, particularly with the 3-day swing from the 2 extra trading days versus the prior year in Q4 2024 to 1 fewer day in Q1 2025. We are also now reflecting the new reporting of robotics consumables. As I mentioned earlier, you can see that we have maintained the improvement from Q4. Our expectation is for further improvement in average daily sales growth as we move through 2025, supported by product availability, the improvements we've made in commercial execution and the benefits of key growth products like CATALYSTEM and CORI. Sports Medicine and ENT grew by 2.4%, largely reflecting the headwind from China. This was due to lower year-on-year pricing in VBP in joint repair and early effects in Arthroscopic Enabling Technologies as we proactively managed the channel ahead of the expected implementation in the second half of the year. We believe we are now past the peak of the China headwind. Comparisons in joint repair will become easier in Q2 with the effect fully lapping midyear. Although the AET implementation is still to come, it should be a smaller overall drag. At the same time, consistent performance from key launches and growth drivers continued in the rest of the world, even after the strong finish to 2024, and this should be increasingly reflected in headline growth as we move through the year. For Q1, joint repair grew by 2.9% and 10.6%, excluding China. REGENETEN remains a key driver with strong double-digit growth. We added further to the evidence base with the publication of a 2-year follow-up from a randomized controlled trial of rotator cuff repair augmented with REGENETEN, showing significantly lower re-tear rates compared with repair alone. There was also good momentum from new product launches, including Q-FIX KNOTLESS and developing foot and ankle repair business. Arthroscopic Enabling Technologies Grew by 3.3%, excluding China. There was solid performance across multiple categories with double-digit growth from both Video and WEREWOLF FASTSEAL. FASTSEAL is an application of our COBLATION technology in orthopaedics procedures and is a leading example of commercial synergy in our portfolio. ENT grew by 7.8%, marking a return to more normalized growth after Q4. This growth was led by tonsil and adenoid business with the HALO Wand for the COBLATION Intracapsular Tonsillectomy technique. We also continued the rollout of the ARIS Wand, which further extends the use of COBLATION technology in turbinate reduction with launches in Europe and emerging markets. I'll finish with Advanced Wound Management, which grew by 3.8% in the quarter. Advanced Wound Care grew 2.5% with high single-digit growth in foam dressings. We continue to develop our foam portfolio and in early stages of launching ALLEVYN Ag+ SURGICAL into the U.S. market. Bioactives had a slower quarter as expected with a decline of 2%. While skin substitutes remained in double-digit growth, this has started to moderate as the benefit of the GRAFIX PLUS launch eases. There was also a slow quarter for SANTYL after strong finish to Q4, again reflecting wholesaler stocking patterns. As a reminder, we expect AWB growth for full year to be in the low single digits. Lastly, Advanced Wound Devices saw impressive growth of 15.7%, mainly driven by the Negative Pressure Wound Therapy with double-digit growth from both PICO and RENASYS. I'll finish with our outlook. As you can see on the slide, it's unchanged. There's clearly a lot of interest in the implications of the tariffs announced by the U.S. government and the situation remains dynamic. But to give you some sense of our business mix, just over half our revenue is from the U.S., of which around two thirds is manufactured domestically. We also manufacture in Costa Rica, the UK, Malaysia, China and Switzerland. We're working to mitigate tariffs on products and raw materials imported into the U.S. as far as we can. In particular, we have global manufacturing network that we can leverage in terms of mix and supply routes. Our approach is not to rely on external factors, but there still may also be some mitigation of foreign exchange, and we are engaging with industry groups like Abiomed to explore the potential for expansion. Based on the tariffs as currently announced and including those coming into effect after the current course, we expect a net impact of around $15 million to $20 million, which we expect to be able to absorb in our unchanged full year guidance. And with that, I'll hand back to Deepak.

Thanks, John. It's a good first quarter, building on the operational and commercial improvements to the 12-Point Plan. Better product availability, commercial execution, and the focus and accountability of the business unit, all have established strong foundations for sustainably improved performance. As I set out at the beginning, innovation also continues to be a key component of our growth story, and you can see that playing out across our businesses. In Orthopaedics, EVOS, AETOS, CATALYSTEM and CORI are all growing well. In Sports and ENT, there's regenerative, the foot and ankle portfolio and the multiple applications of our COBLATION technology across our surgical businesses. And Advanced Wound Management, we had good growth in foams, skin substitutes and negative pressure. And we're continuing to build on that with a high cadence of innovation, delivering further new products and new clinical evidence in the quarter. In recon, we further developed our cementless knee offering with the addition of the LEGION Medial Stablized Inserts, which received 510(k) clearance. These are designed to provide surgeons with stability and improved kinematics while aligning LEGION with three major market trends in knees, the shift to medial stabilized inserts, which are now used in over 30% of procedures and the trends towards robotics and cementless fixation. In Wound, ALLEVYN Ag+ SURGICAL is in the early stages of its U.S. launch, adding a new antimicrobial dressing to our foams portfolio, including new silicone technology for gentle adhesion. We're continuing to innovate in this category as a high-growth segment within AWC. On clinical evidence, OXINIUM continues to demonstrate exceptional long-term performance. A report from the Australian National Registry reveals a 20-year survival rate in total hip arthroplasty of 94.1%, which is the highest among all bearing combinations. This corroborates similar results and peer-reviewed publications from the National Joint Registry in the UK and is powerful evidence of our proprietary technology. For REGENETEN, building support for adoption and coverage through clinical evidence is a key part of our growth story. We added significant new data in the quarter with 2-year follow-up data from a randomized controlled trial in full thickness rotator cuff repair. REGENETEN showed a highly statistically significant reduction in the re-tear rate with a 65% lower relative risk compared to repair alone. With the combination of increasing penetration in rotator cuff, supported by evidence, and the addition of new clinical applications in ligaments and foot and ankle, REGENETEN is set to continue as a long-term growth driver for the company. I've said many times that 2025 is a key year of delivery and 3.1% growth in Q1 is a good first step. When I look at the moving parts, the long-term tailwinds of commercial improvements and innovation-driven growth are continuing to come through, while the two headwinds of China and trading days have both peaked. This is a good setup for the rest of 2025 and beyond, and I look forward to updating you further as we move through the year. And now we can move to your questions.

[Operator Instructions] We will now have our first question from Richard Felton from Goldman Sachs. Please go ahead.

Two, please. The first one is on the phasing of growth through the year. On your full year call, you shared some reasonably detailed thoughts on how to think about phasing. Has anything changed in your view as you move through Q1? Can you maybe remind us of how you see top line growth progressing in Q2 and beyond. That's the first one. My second question is a product question on REGENETEN. I mean, could you maybe give us a little bit more color on what is driving growth within that product family? How big it is in your portfolio today? And then following the 510 clearance for the extra articular ligament repair at the end of last year, how much traction are you seeing there? And how big could that opportunity be over time? Thank you.

I'll maybe take a quick shot at REGENETEN, and I'll turn to John to color. But generally speaking, Q1 was our lowest growth quarter as this is what we guided to at full year. And because of the receding impact of the headwind from China as we flow through the year and the unfavorable impact of trading days also falling away, we should have growth pick up sequentially in each of the quarters going through. So we expect in Sports for growth ex-China to continue at near double digits, and in Wound as well across all the categories to continue to build as we go through the quarter. In Orthopaedics, what we have guided to is specifically in the U.S. recon side for sequential improvement quarter-on-quarter as we get to market growth levels by Q4 of this year in recon, and we are on track to achieving that. So I'll let John cover further details beyond that, but you should expect sequential improvement as we flow through the year. In terms of REGENETEN, last year, most of REGENETEN utilization was in the shoulder. We've indicated that REGENETEN is a platform technology, and we expect to develop evidence for appropriate use of that in other joints. What we have found now is roughly 10% of our utilization of REGENETEN is actually in now foot and ankle, which is a change relative to where we were last year, and that points to increasing utilization of REGENETEN, not only with further penetration into shoulder to rotator cuff repair, but also now increasing adoption of other joints and foot and ankle is the second category. So we expect REGENETEN to be a meaningful growth driver as we called out that it's now a material part of the growth story.

And maybe just to add a little bit of color on the growth trajectory. I think Deepak has covered some of the key component parts, but we all expect that Q1 would be a little bit soft. We guided to the 1.2 obviously delivering 3.1 base in Q1. We expect to see a step-up in Q2. And then in all likelihood, I think Q3 will be a little bit of a further step up. So we'll see another step up in Q3. And then Q4 will actually step back a little bit because obviously, we had a very strong Q4 in 2024. But generally speaking, that's the shape of the growth trajectory, all of which, of course, aggregates to around 5% growth for the year overall.

Next, we will have Julien Dormois from Jefferies. Please go ahead.

I have two. The first one relates to the performance of the recon business outside of the U.S. So it would be interesting if you could shed more light on what's going on outside of the U.S. So obviously, your performance in the U.S. is improving by the day, but maybe at the expense of what's happening outside of the U.S. So maybe if you could shed more light on what's happening there, that would be helpful. And the second question relates to more of a housekeeping question in light of the market swings in FX. Could you just remind us of what your expectations would be at this stage for the FX impact on your margin this year? I think you have a hedging policy in place that probably delays some of the potential benefits from a weaker dollar, but any color there would be helpful. Thank you.

Yeah, so just on your last question on the margin impact. I think we said at the prelims, we expect the Forex to be broadly neutral. Obviously, since then, there's been a weakening of the dollar. And we think that's going to translate into a tailwind of 20, 25 bps related to the full year, of course that could change with the stepup and volatile market environment, but 20 to 25 bps or so. In terms of the question on the OUS Orthopaedics, I mean, we saw 2.7% growth for the quarter. So it seems reasonably healthy. Knees, slightly positive. Hips, a little bit more challenged, but certainly good growth in other recon, plus 46%. So good quality sales in the quarter. But overall, we're very comfortable with the trajectory. We should see Q2 be relatively similar to Q1 and then we should see a step-up in Q3 come through is the expectation. And OUS, just to remind you again on the slides, ex-China, it's 4% in Knees and 7% in Hips. Exactly and to your point, that explains the step-up as you go into Q3 as you see the China impacts starting to annualize through Q2, hence why there will be a step-up in Q3 and Q4.

We will next have Jack Reynolds-Clark from RBC Capital Markets.

Two for me also. So starting with revenue guide. So obviously, Q1 is stronger than expected. I'm just wondering kind of how is Q2 shaping up so far? John, you talked about a step-up in Q2. Are you seeing that kind of come through? And then should we be thinking about potential upside to that kind of around 5% underlying revenue guide given that you're not expecting things really to slow down through the remainder of the year? And then the second question was just on tariffs. Could you talk a little bit more about the offsets you're implementing, i.e., sort of give a bit of detail around the operational offsets and kind of what is it comprised and how much you might be able to implement price increases.

Sure. In terms of revenue guide, obviously, we're not commenting on subsequent quarters, but we've maintained our revenue guidance of around 5% for the full year. And given that we exited at 3.1%, you can expect that growth should step up in subsequent quarters for us to attain the revenue guide. And we feel good about how we're positioned really right across the portfolio. When you look at our business across regions, we already commented on China, but look at all the established markets, emerging markets, we feel good about how we're positioned there and we look across our businesses. We feel really good about our position there. In particular, in Orthopaedics and especially in the U.S. recon part, which was the last bit of our business, we were expecting to turn around this year. We feel good about how we're positioned, how we performed in the quarter in terms of maintaining the momentum from Q4. And as we look at the rest of the year, we're particularly encouraged by the fact that the churn in surgeons has reduced. Now that started to minimize towards the end of Q3 and really turned positive. In other words, a net gain of surgeons in Q4. And that picture was maintained in Q1. And that sets us up nicely for the rest of the year. The contrast to that is in years past, where we had surgeon churn in the negative territory in the beginning of the year, which, of course, would create challenges for the balance of the year. So we feel good about how we're positioned to achieve the top line for the guidance we've provided. In terms of tariffs, what we're focused on is mitigating actions for that. As John pointed out, we've got a manufacturing network that gives us a measure of flexibility in terms of how we supply the market, how we direct product flows in order to minimize the impact of tariffs. And we've given you a sense of what the impact is going to be net of the mitigations that we can foresee operationally. And in terms of the longer term, obviously, we've got the manufacturing sites where we've got it, and there's different levels of exposure across our businesses. In Orthopaedics, we're relatively well positioned because of our manufacturing presence in Memphis, which is our major orthopaedics manufacturing center. But we also have Malaysia ramping up at the same time that allows us to actually position ourselves depending on how retaliatory tariffs go into effect. So there's a very dynamic picture, as John said. So we'll have to figure out how we balance where we manufacture and how we supply markets, from which factories to supply the markets. So those are some of the things underneath the headline of mitigations.

And maybe just to sort of help you and to clarify in terms of our guidance number, the bottom end of our range is based on the current, what I might describe as the 10% base case scenario, so basically 10% plus, of course, China. And the bottom end assumes that being in place for the remainder of the year. The upper end of our range, the $20 million assumes the reversion to the announced rates coming through on July 8. And that, of course, includes the China retaliatory rate as well. So just to be clear, what we've assumed in giving you that guidance number.

We will now have Lisa Clive from Bernstein. Please go ahead.

Could you just give us a little bit more guidance on the margin progression around the Malaysia ramp-up and then specifically the -- I think you were going to be closing down four plants, were those all in Europe? Just trying to understand in terms of the progression of your COGS this year and also potentially in the next year, how to think about that? And then just second on tariffs. Thank you for the guidance on that. It's very helpful. Between the U.S. and Europe, I mean, it seems U.S., China, you're pretty well positioned. U.S. and Europe, my understanding is there's a bit more back and forth. I think I'm right that there's a fair amount of Sports Medicine that goes from the U.S. into Europe. Just thinking through in a worst-case scenario where things ramp up with Europe, how well positioned you are to mitigate that?

Sure. I'll take that. Lisa, so first, in terms of margin progression, what we've said in '25 is the step-up in margin will come through the benefits of the network actions we've taken in Orthopaedics coming through this year. So we've closed four plants, as you alluded to. And three of them were in Europe, one in China, is how that plays out. And that's an important part. In other words, that taking out of fixed costs associated with those plants is where the benefit comes in. And what we've done is transfer the production that was occurring in those plants into either Memphis or Malaysia. What's important to keep in mind is these plants were specialized by particular SKUs. So it's not like we have four factories producing everything, right? So there were particular SKUs being produced in these factories and which we've transferred, as I said, into Malaysia and into Memphis. So from a margin progression standpoint, it's the overall costs coming out that contributes to that and the benefits of that production coming through in Malaysia, where we have lower labor costs, and in Memphis, where we've got scale, greater scale that we had in those factories, translating into better COGS. So that's the benefit that we see coming through in 2025 as a key underpin for the step-up in the back half of the year. Regarding tariffs, in terms of U.S. and Europe, I mean, roughly the way to think about it is, we've got China, we've got Costa Rica and we've got Malaysia. And roughly 2/3 of the tariff impacts come from China. So China, you've got high tariff levels, relatively low volumes in terms of where the impact is. Costa Rica is relatively high volumes, but relatively low, not that low, but lower tariff levels. And Malaysia, somewhere in-between. So as we think through this now between U.S. and Europe, in terms of Sports Medicine, most of the volumes actually come from Costa Rica. Relative to U.S. and Europe, they're not necessarily going to be impacted. So we do have a factory in Mansfield in Massachusetts that does supply the world and it would impact Europe along with other geographies. But the volume is out of Costa Rica for Sports Medicine. And so in general, I would say, for your modeling, you should take a look at China, Costa Rica and Malaysia as the principal sources of impact.

We'll next have Hassan Al-Wakeel from Barclays. Please go ahead.

I have three, please. Firstly, on margin, Deepak at the full year, you pointed to tightening the range at the Q1 stage. Appreciate things are changing very rapidly. But given the $15 million to $20 million impact from tariffs or around 30 basis points, is the lower end now more realistic? Secondly, on growth, which was stronger than your expectation at the full year, can you talk about any updated views on hospital utilization for the rest of the year? And also any competitive dynamics that you're observing given some launches in hips at some of your peers? And then finally, can you talk about the strength in CORI placement in the quarter and what is driving this regionally? Also, given the restatement of consumable revenue, can you provide the growth in consumable revenue in the quarter that has now moved to recon and whether this was meaningfully different to underlying growth in the recon business prior to the restatement?

So in terms of margin, no, we've set a range of 19% to 20%. We've said you should think somewhere in the middle of that as the expected outcome was kind of our commentary, and that hasn't changed. And you can work out now what that means given that we've said that in the face of a tariff impact of $15 million to $20 million. So bottom line, no change in the guide or no change in expected outcome. Second, in terms of growth being stronger, as I said, we've anchored to around 5% at the beginning of the year, and we've reiterated that guidance. And implied within that is a step-up and I've already answered that previously, which is it's expected to come across all of our businesses and indeed all of our geographies. In terms of the competitive picture in Hips, we actually feel very good about how we're positioned with CATALYSTEM. As you'll recall, until recently, we didn't have a short stem offering, which basically meant we had limited participation in the direct anterior approach that's now increasingly a bigger part of hip procedures, particularly in the United States. With the launch of CATALYSTEM, we now have the ability to better participate in that growing portion of the market. And our early results a quarter-plus into the launch, we couldn't be happier with the level of uptake and the type of feedback we've received, not only from our own surgeons, but also from competitive surgeons as well. So really, really nice uptake of CATALYSTEM, which we believe will be a growth driver, and we feel very, very good about how we're positioned relative to competitors there. In terms of utilization in the overall procedures, historically, I've said I've shied away from commenting directly in terms of what's happening in the recon market in the U.S. because we've had performance challenges. And when you're in that position, it can be hard to parse what's going on in the market versus what's you. And given we're still in that recovery path, I'm loath to comment independently from our vantage point beyond what we see in terms of the reports and everything else that everyone else sees. So still loath to comment on that. But generally speaking, I feel good about our ability to progress relative to market in each quarter and exiting the year at market levels. And so we remain committed to that. In terms of CORI placements, very, very pleased with the mix, the geographic mix, as you alluded to. In particular, we've been quite strong OUS over the last few years. The picture in the U.S. has continued to improve, and that improved also in Q1. We're encouraged by not only that, the relative strength in the U.S., but also where we're placing them. We're placing them in hospital settings. We're placing them in ASCs. And as important as placements are, utilization is really the thing that we're looking for because it's not about just placing CORI, it's about whether they're being used. And that utilization rate continues to remain very healthy in the face of increasing placements that goes to show the level of uptake we're having with CORI. In terms of how we're doing this, we're not restating the numbers, we're simply reporting utilization within the relevant category to bring ourselves more in line with peers. We obviously are providing the breakdown. So you can compare ourselves any which way you'd like. So there's perfect transparency to how we're commenting on the numbers. So overall, in terms of consumables, a very healthy uptake in terms of utilization, which is what the consumables number tells you. There's a little bit of a mix thing that John commented on, which is we had a bit more capital placements, so outright sales versus placed capital in this quarter. That does tend to vary from quarter to quarter just based on the individual contract dynamics. So there's not much to read into that. But what you should take away from the growth in consumables overall is that the CORI that we are placing are getting utilized, which is a sign of health that we're looking for. So overall, very pleased with the type of picture that's evolving on robotics.

And just to maybe give you a little bit more color, Hassan, on the size of the consumables piece and the impact it has in sort of shifting it from other recon into Knees and Hips. Just from a Knees point of view, I mean, it's relatively de minimis. So the numbers under the new reporting regime for Q4 versus Q1 is 4.2 playing 4.6 in new money, if you like, and then 4.1 playing 3.6 in old money. So it really doesn't make much of a difference on U.S. Hips. In relation to Knees, obviously, where it's a bigger impact, we're shifting somewhere in the region of sort of $5 million to $6 million from other recon into U.S. Knees. And so the Q4 number we talked about in old money was around 2% and in new money is around 3%. If you remember at the time, we said it would make roughly a 1% plus contribution. So the Q4 number shifts from 2% to 3% in old versus new money. And the Q1 number roughly sort of 1.5% or so to 2.5%. Again, 1% addition to that. That helps you to size..

We'll next have Kane Slutzkin from Deutsche Bank. Please go ahead.

Just a quick one, John, just on the U.S. recon. I seem to recall you saying at the sort of roundtable in February that the U.S. Knees needed to be sort of 2% in Q1 and sort of the exit at 3% in order to kind of really be on track to return to market growth. Could you just confirm that was the case? And on the adjusted measures you've given for the trading days, would it be fair to say you're there and thereabouts?

Spot on. I mean I think we said from an ADS basis, we want to be around sort of -- we said we'd be consistent Q4 to Q1 around sort of 2% or so. And then we expect to see that 2% grow on an ADS basis through Q2, through Q3, and we then we will plan to exit the year at around 4% or so. And in fact, the numbers we're reporting today confirm that trajectory, and we remain confident in looking forward to our pipeline and Deepak's comments earlier on about the account wins and account losses and the continued positive trends that we're seeing there that we remain on track to deliver that improved trajectory through the remainder of this year.

Right. John, sorry, I just missed something you mentioned earlier you were talking about sort of the sort of scenarios that play out to get you to the lower and the upper end of that 19% to 20% range. I appreciate Deepak gave us sort of a view that you're probably going to come somewhere in the middle. But just could you just relay those scenarios? I completely missed it, you were sort of suggesting something around what gets you to 19% versus 20%.

Yes. The bottom just to be clear, the range on tariffs is $15 million to $20 million. The bottom end of the range is based on what I describe as being the current 10% base case and most countries on a 10% tariff. China on 145 retaliatory, 125 on China, et cetera. If that's in place for the remainder of this year, that gives you the bottom end of the range. The top end of the range, the $20 million assumes on July 8 that none of these issues are resolved and we revert back to the tariffs as announced. And again, I won't go through all the details, but that's largely the China remaining in place and clearly Malaysia kicks up 24%, Costa Rica goes up a little bit and so on and so forth. So the tariffs, as announced, as we would revert to all else being equal on July 8. That represents the top end of the range. So that gives you the balance at both the bottom and the top end of what we provided.

We will next take David Adlington from JPMorgan. Please go ahead.

Firstly, just on China, maybe you could just remind us of where China peaked as a percentage of sales and where you've come down to as of this quarter in terms of percentage of sales? And following on from that, does it still make commercial sense to maintain a presence in China? And then secondly, just to fully clarify, John, because I might have a bit this morning. But when you talk about the range and the top of the end of guidance that you just pointed to, are you talking about 15% to 20%, I think the impact of the tariffs or the 19% to 20% margin range that you've given?

I'm talking about the tariffs, David. The bottom end being 15%, the top end being 20%.

Yes, right. Understood. Perfect.

$20 million tariff impact just to be clear. So regarding China, David. So today, when we talk about the China impact fading away, so we've seen the peak in Q1. And what we mean by that now is China was previously for us about 7% of sales. This year, when we look at our budget, it's down to about 1.7%, 1.8% of sales.

For Q1, we're about 1.9%. For the full year, we think we'll be about 2.4%.

Thank you, John. So China is now a significantly smaller portion of our business. So when we talk about now AET part of our sports business coming under VBP, that gets implemented, we think, in the back half of the year. The impact of that is significantly lower than joint repair because it is a smaller portion of our business. And China overall is now quite a smaller proportion of our overall business. So hopefully, that gives you a little bit of a picture about the reducing proportion of China within our book of business. In terms of commercial steps to Canada and China, obviously, we've got some practice of this, if you will. We implemented changes in our go-to-market model in China following the implementation of VBP in recon. And when that came through in sports, we were informed by our experience of our recon side that we applied. So suffice it to say that we're applying the lessons as we go forward. And at the end of the day, to make the business now at a significantly lower price level be profitable for us. And that involves a series of steps that we've got to make in country in order to make the business profitable there. But we've got experience now doing this having gone through this a couple of times.

And David, maybe just to help you a little bit more shape on the China trajectory as well because this is obviously a key driver for our improving performance on the top line as we progress through the year and indeed also on the margin as well. In Q1, year-on-year, we were down roughly 50% in China, and we think that's the peak of the China impact. In Q2, we're forecasting to be down 35% to 40%. In Q3, down 30%, and in Q4, down 10% to 15%. So you can see it having less and less of an impact as we progress through the year, which correspondingly helps our top line and equally helps the drop-through in terms of our profitability.

And just to clarify, are you profitable in China currently in any of the businesses?

So just I was going to come back to that actually. As a result of the commercial steps we've taken, when you look at the profitability of our affiliates in China, it's kind of middle of the road when you look at the country level profitability across our geographic mix. So in other words, we are profitable with our current book of business. And in terms of league tables, it's kind of middle to maybe a little bit on the upper end of the range when you look at the country mix.

We will next have Veronika Dubajova from Citi. Please go ahead.

Most have been asked and answered already, but maybe just two. One, I guess, just looking into 2026 and the tariff impact as it annualizes out on the worst-case scenario, is there any more mitigation that you can do, John, as you think about 2026? Or should we be taking the number you've given us for this year and doubling it for next year as far as tariffs are concerned? That's my first question. And then my second question is, no one's asked about what we spent all the time on ortho, but the strength in devices, if you can talk to what's driving it and how sustainable you feel that is through the rest of the year? Thank you, guys.

Maybe if I come to the tariff one and Deepak talk on the AWB. Look, I mean, it's obvious there's a lot of moving parts on tariffs, a lot of uncertainty out there. But as you'd expect, we've done all the scenario planning, positive, variations, permutations and combinations and so forth. I think without getting drawn into a huge amount of detail on picking that, I think what we can feel reasonably confident of is when we've looked at all those in the rounds and we've combined that with, of course, our improving margin trajectory and the savings that we've got coming through, both operational savings as well as what we can do from a very specific tariff mitigation point of view, then we're comfortable that we'll continue to see an increasing margin come through in '26 and beyond.

And regarding devices, just to orient you, it's both our single-use that's PICO and our traditional use product portfolio in RENASYS and of course, there are some other products like Leaf that are included in there. And all of those products are growing. So very encouraged by the performance there. PICO has had a long track record of delivering growth. And so Q1 just builds upon the trajectory that we've built up over time. So it's a picture of continuing performance. With RENASYS now, it too was a growth driver, but we've got a very solid kind of performance of RENASYS as well in Q1. As we adapt our business model within that category, we expect that to be a more meaningful growth driver as we get into subsequent quarters. So very pleased with how we're positioned there and how we're starting to perform. And Leaf is another component of devices. It's still a relatively small part of our overall portfolio, but it's been a nice growth driver for us. Hopefully, you'll hear us talk more about it as we go through the future. But overall, all of the product portfolio is growing nicely within that category.

We will next have Dylan van Haaften from Stifel. Please go ahead.

So just first one, just on the current working capital and with Ortho, because from my understanding, you guys have missed a couple of years of working capital theoretically in Ortho. Does that help you offset some of the tariff impacts? And is that sort of embedded into this number?

So short answer is yes, but I wouldn't get too carried away with the favorable impact of inventory because the devil, if you will, is in the details and it's in the SKU mix, right? So what we have actually, and you've heard me comment on this before, which is one of the challenges we have, is not only do we have high inventory, we started at the beginning of the 12-Point Plan in 2022 with the wrong mix, if you will, right? We produced not quite the right assortment of products given our underlying demand, which means that our inventory -- our new -- the new production now, the new inventory we're putting up is much, much healthier, and we've given you some proxies to assess that. But the base inventory level will grow into over time. So you put those pieces together, yes, at a high level, it does help you having a bunch of inventory. But the truth is that there's devil is in the detail. And as we get -- produce the right mix of products to cater demand, that will be hit with the level of tariffs that we've got today. But you're right, at a first level, the inventory does kind of help you.

And just one follow-up. Just thinking about sort of progression into the year. Are you guys at all concerned about any consumer dynamics? And could you maybe just remind us what the rough ortho private payer and co-pay exposure is? And if you are at all concerned, any change in behavior there could change growth dynamics for the market?

Look, I think the operative word here is dynamic or uncertain. I mean, there's clearly enough uncertainty and enough dynamics here. But -- so here's how we put it. There's an underlying demand that's driven by demographics. If you look at kind of our mix of businesses that go through kind of Medicare versus commercial, that kind of helps you think about the relative exposure in each of our businesses. At the end of the day, the demand for our products are based on medical need and underlying kind of demographic factors. So the demand is likely to be there. But of course, particularly in the U.S., things like co-pay and other things do determine the level of -- the ability for patients to access that care. So yes, there is some level of concern. And going back to some of the questions that people asked earlier on top line will be based on how we outturned in Q1 where we raised our guidance for the full year. Part of the reason why we haven't is, in fact, to take some of these uncertainties into account.

We will next have Robert Davies from Morgan Stanley. Please go ahead.

I had three. The first one was just in terms of the China phasing that you gave the sort of down 50%, which is progressing towards minus 10% over the year. Just curious in terms of the visibility. Give us a bit more color perhaps in terms of where that comes from, what's the underlying assumption in that trajectory over the year? The second one was just on -- I know you mentioned in some slightly old manufacturing or factory closures in different places. Just wondered if there's anything more to do on that? And that sort of ties in with the third question, which is just where we are big picture on the 12-Point Plan. What are the key elements of the 12-Point Plan you still have got to achieve? And are there any additional opportunities that you've come across over the last year relative to what you started out with?

Sure. So in terms of factory closures, the hard work around closing the factories, people impact associated with it, all those things, that's already done. So all of that done. Work was completed in '23 and the early part of 2024. So what we're expecting now in terms of the financial impact of that, as I indicated earlier, is when we transfer the production into our remaining facilities in Orthopaedics, Memphis and Malaysia, that we will see the benefits of basically the better cost position we have in those factories coming through. And of course, the fixed costs coming out of our cost base of the factories that we closed. So that is -- we're on track to seeing those financial benefits come through. So there's no more, if you will, operational work that needs to be around factory closures. In terms of the 12-Point Plan, essentially, there's ongoing work from what we embarked upon as part of the program that needs to progress and the benefits of that to accumulate. But there's no new initiatives that we need to kick off. It's just a continued kind of execution of the work that we identified and really embedding the new ways of working, the new rigor, the new culture of accountability that we've built in the organization that I'm very pleased with how that's gotten kind of embedded within the organization. So in effect, taking the improvements that we've already made around 12-Point Plan and making them stick. We've always said, once the program kind of formally concludes as it has, the full benefits of that will flow through in the remaining year, and that's the year in 2025. One of those examples is related to the factory closures that you asked about. But there is some of those in each of the other 11 elements of the plan. What we have said last year is, we faced increased level of headwinds compared to what we started at the initiation of the 12-Point Plan. Inflation, a higher level of inflation for longer than we assumed. VBP and Sports, that was not a factor at all at the time that we announced the program that ended up being highly material for us. So we had to look for ways to offset those increasing headwinds. Some of those were going deeper and further than we originally envisioned in some of the elements of the 12-Point Plan. In other ways, we had to look more deeply into our cost structure. And when John came on board, we kicked off a zero-based budgeting kind of approach that allowed us to go after a higher level of cost savings and more productivity, which is one of the elements of the 12-Point Plan, we just went deeper as a result of some of the work we did there. So we have, in fact, already done that in order to address the higher level of headwinds that we saw relative to when we kicked off the program. So I feel very good about not only what these initiatives have delivered already as we highlighted in our full year, but also how we're set up now to see the cumulative benefits of those coming through in 2025. So all that going well. And maybe, John, you can take the question around the phasing.

I mean, I'm reluctant to give you even more breakdown on what is now a relatively small part of our business in terms of the phasing. Q1, we can get quite a little deeper, but just I'll shape things a little bit. Obviously, on the ortho side, we expect to see a reasonably strong recovery in our ortho as we work through the channel down this organic phase. We were down quite significantly in Q1. We expect it also to continue to be down in Q2, but on improvement traject. Q3, a little bit down, but maybe flat, and then a little bit up in Q4 as we fully work through channel adjustments. Then it's the same pattern of recovery through the year, but there's a number of different dynamics there. There's the annualization of the joint recovery piece as we go through the second quarter. And then, of course, there's the impact of the AET, VBP in the second half. So that means that the actual movement in our Sports whilst it remains negative through the year, it's an improving negative trajectory. So call that around 50% down in Q1 and then improving, getting less negative as we progress through the year, but still exiting negatively because of the impact of AET. And then you look at our Wound business and of course, our ENT business, both of those remain in reasonably pretty healthy growth actually and having quite strong performance. So that gives you a little bit of the component parts that shape up the overall trajectory that I just got to tell you.

Absolutely. So that was our last question. So appreciate all of the interest, all the questions. Just to summarize, we've had a great start to Q1, and we're set up well for continued delivery through 2025, and I look forward to updating you as we progress through the year. So thank you very much.