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Good morning, everyone. Welcome to the Smith & Nephew Q2 and Half One Results Presentation. I'm Deepak Nath. I'm the Chief Executive Officer, and joined by John Rogers, who is our CFO. This quarter, we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine and ENT performed strongly once again, with consistent delivery across regions and categories, and we saw double-digit growth from many of our key products. However, this was offset by softness in U.S. Orthopedics, and in Advanced Wound Bioactives. In U.S. Orthopedics, knees remain weak, reflecting similar dynamics to Q1, although we saw sequential improvement as expected, and we do anticipate further improvement through the remainder of the year. U.S. hips were affected by a delay in CATALYSTEM deployment and a tough comparator, with growth expected to resume as deployment increases during the balance of the year.

Within Bioactives, SANTYL growth was primarily impacted by strong distributor demand in the prior quarter, which did not repeat. This should normalize over the balance of the year. Despite the slower start on revenue, trading profit was strong at $566 million. Excluding M&A, trading profit grew by 9%, supported by stronger than expected efficiency savings and tariff refunds that fully offset the forecast tariff headwinds. Taking into account revenue performance, we now expect underlying revenue growth of around 4% for 2026. We recognize that Orthopedics is not where we would want it to be, but we remain focused on delivering better performance as we strengthen the portfolio and build on the margin progress that we have made. We have clear growth drivers across all three business units that support our outlook for the remainder of the year.

Importantly, despite the revised revenue outlook, we still expect to deliver our original guidance for profit, trading profit, free cash flow, and ROIC. This includes an additional $50 million in efficiency savings that we identified for 2026, taking our total expected savings from $150 million to $200 million, and a broadly neutral impact from tariffs, net of refunds. The changes that we implemented in our 12-point plan have made the group more resilient and better able to respond to these challenges.

With that, I'll hand over to John to take you through the financial performance, and I'll come back after you start. John.

Thank you, Deepak. Revenue for the quarter was $1.6 billion, representing +1.6% underlying growth and 2.8% reported, including 120 basis points tailwind from foreign exchange. Geographically, the U.S. declined by 1.3%, reflecting softer performance in Orthopedics and Advanced Wound Bioactives. Other established markets grew by 1.7%, with performance led by Canada on Australia and New Zealand, continuing the good momentum seen in the first quarter. Emerging markets grew 10.6%. Excluding China, group growth was 1.4% on an underlying basis, and we continue to expect China to be broadly neutral to growth for the full year. Let me now take you through the business units in more detail. I'll start with Sports Medicine and ENT, which had another excellent quarter and grew 8.6%. Within Sports Medicine, the underlying growth drivers remain unchanged, reflecting the continued momentum of our key growth platforms and consistency of performance across the portfolio.

Growth was broad based across regions and Joint Repair. Again, delivered double digit growth, supported by strong demand for Q-FIX KNOTLESS and REGENETEN. In AE/TE, FASTSEAL and services continued to be the main contributors to growth. In China, after intentionally restricting inventory in the channel at the end of last year and ahead of the implementation of VBP, we saw strong demand for our products during the quarter. We continue to expect VBP to be implemented in the second half. Sports Medicine revenue again exceeded our recon and robotics revenue. Turning now to ENT. Outside of China, we saw strong growth globally, including double digit growth in other established markets and emerging markets, as well as in our ARIS ablation wands for turbinate reduction and our HALO wand for tonsil and adenoid surgeries.

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 the profit headwind for China VBP to be around $15 million-$20 million for the full year. Let's now look at Advanced Wound Management, which declined by 2.1% in the quarter. Within that, Advanced Wound Care grew 3.7% with good growth overall, led by U.S. ALLEVYN and strength in our emerging markets. Our ALLEVYN COMPLETE CARE launch is off to a strong start in the U.S. with good early momentum, and we were pleased to launch in Europe in this quarter. In Bioactives, revenue declined 12.7% for the quarter, driven by the reimbursement change in skin substitutes and a soft quarter for SANTYL. SANTYL benefited from strong distributor demand in Q1, which resulted in a softer Q2.

We've also seen some impact from one of the payers introducing prior authorization for certain doses of SANTYL. Underlying demand remains healthy, but the change is creating friction in the prescription process, and we're taking action to address this and expect SANTYL to return to growth in the second half. In our skin substitutes business, we continue to face headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year. We saw a sequential improvement from the first quarter, driven by hospitals. However, volumes and pricing in non-surgical settings remained under pressure, particularly in mobile, where we have limited exposure. The market is adapting more slowly than expected, which continues to affect billing efficiency and inventory levels across the channel.

We now expect the trading profit headwind from skin substitutes to be towards the upper end of the previously guided $20 million-$40 million range. We remain confident in the long-term fundamentals of the segment and see opportunities to benefit as the market normalizes. Advanced Wound Devices grew 3.8%. LEAF delivered double digit growth, reflecting strong demand. Both PICO and RENASYS performed very strongly in emerging markets as we continue to expand geographically. PICO sales in other established markets were impacted by doctor strikes in Spain, in the surgical sector, and the timing of tender offers. In the U.S., sales of RENASYS remained soft in the acute care channel, while performance in the post-acute channel was good. Turning now to Orthopaedics. This declined 1% on an underlying basis, primarily reflecting the ongoing issues in U.S. knees ahead of new product launches and temporary headwinds in U.S. hips.

Following four consecutive quarters of above-market growth in U.S. hips, we saw softer performance this quarter against a tough comparator. CATALYSTEM continues to grow strongly, but Q2 was impacted by a delay in set deployments and an increasing proportion of existing customer retentions versus competitive conversions. We see a clear path to re-acceleration over the remainder of the year as CATALYSTEM set deployment increases. As the product moves into its third year post-launch, growth should remain strong, albeit at a lower rate than during the initial launch phase. U.S. knees remain weak, but we are seeing gradual improvement as expected. The underlying dynamics are unchanged. Deliberate portfolio and capital discipline, combined with an ongoing market shift towards cementless, continue to influence performance in the near term. Sequential improvement was driven by strong uptake of LEGION MS and double-digit growth in LEGION CONCELOC, our cementless offering.

LEGION MS now represents almost 20% of our LEGION mix, up from 15% in Q1, and is enhancing the competitiveness of our installed base. We continue to expect improvement through the year, driven by increased LEGION MS set deployments. This will remain the main driver until LANDMARK launches. Outside of the U.S., knees were impacted by a large tender order in the Middle East in the prior year quarter that did not repeat. Hips benefited from the launch of CATALYSTEM in Japan, although we saw some isolated weakness in Australia where we await regulatory approval of CATALYSTEM. Trauma and extremities performed well overall. We continue to see good growth in EVOS, IM nails, and shoulder, driven by our AETOS implant.

We are seeing the impact of competitor launches in the U.S., but we expect growth to strengthen in the second half as we launch EVOS Pelvic and ramp up TRIGEN MAX. Finally, other recon grew 0.8%. This business can show some quarter-over-quarter volatility as revenue is influenced by contract timing and mix. This was more pronounced in the period, given another strong prior year comparator. That said, we saw double-digit growth in CORI deployments globally, alongside continued growth in utilization and penetration. We expect growth to accelerate in the second half, supported by an easier comparator in Q3, continued strong demand for our robotic platform, and good uptake across ASCs and teaching institutions. Now I'll move on to the half-year financials. For the half year, revenue was $3.1 billion, up 2.3% on an underlying basis and up 4.6% on a reported basis.

There was one fewer trading day versus the prior year, with underlying revenue growth of 3.1% on an average daily sales basis. Consistent with the performance in Q2, we saw strength in Sports Medicine offset by softness in U.S. Orthopaedics and Advanced Wound Bioactives. Moving on to the summary P&L. Underlying gross profit was $2.2 billion, representing a gross margin of 71.1%, up 60 basis points year-over-year. This was driven by greater than expected efficiency savings across manufacturing and procurement, which more than offset cost inflation and the headwind from inventory revaluation. Tariff refunds fully offset the forecast tariff headwind to gross margin. Trading profit increased $43 million to $566 million, with trading margin expanding 60 basis points to 18.3%, reflecting the benefits of higher gross margin and ongoing cost savings.

Moving further down the P&L, Our operating profit grew 4.3%, reflecting temporarily higher restructuring charges, driven by further optimization of our manufacturing network and higher acquisition costs driven by, of course, our acquisition of Integrity. Basic earnings per share grew ahead of this at 6.2%, reflecting the buyback we announced at Q1, and adjusted earnings per share grew by 11% to $0.477. The interim dividend of $0.156 per share is up 4% on half one, 2025. I'll now take you through a more detailed bridge of our trading profit growth. We absorbed $119 million of headwinds from cost inflation, inventory revaluation, changes to wound reimbursement, and China VBP while continuing to invest $33 million in our growth. This was more than offset by $59 million of operating leverage and $128 million of efficiency savings, which I'll discuss in more detail shortly.

While we had previously guided to an incremental tariff headwind in 2026, refunds received in the first half meant net tariffs were broadly neutral to profit growth. Foreign exchange also had a broadly neutral impact. As a result of all this, trading profit growth was 9%, excluding $4 million dilution from the acquisition of Integrity Orthopaedics. Now, as I said, turning now to efficiency savings, we've delivered around $133 million in the first half, well ahead of expectations. Of this, approximately $50 million came from the 12-point plan and zero-based budgeting initiatives. As a result, we have now achieved $330 million of cumulative savings since launching these programs, reaching the lower end of the $325 million-$375 million target that we set ourselves at our 2024 interim results, more than a year ahead of schedule.

We expect further benefits to be realized through the remainder of 2026 and into 2027. The remaining $80 million in the first half came from additional opportunities across procurement, manufacturing, sales and marketing, and business support functions. We expect a further $70 million of savings in the second half from both the 12-point plan and ZBB and other opportunities. This takes forecast efficiency savings for the year up from around $150 million previously to around $200 million. The additional $50 million is expected to come primarily from manufacturing, including from ongoing footprint optimization, as well as procurement and sales and marketing. Our 2026 guidance for trading profit is unchanged. We expect to deliver around 8% reported trading profit growth excluding M&A and around $1.3 billion of trading profit, including the impact of Integrity.

We now anticipate that the year-on-year impact of tariffs will be broadly neutral to trading profit, net of refunds. The headwind from skin substitutes is expected to be towards the upper end of the previously guided $20 million-$40 million range, and there are no changes to our assumptions regarding inventory revaluation or China VBP. As previously disclosed, the acquisition of Integrity Orthopaedics is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027, and accretive from 2028. Coming now to trading margin by business unit. We saw 160 basis points increase for Sports Medicine and ENT margin to 24.7%, a 10 basis points decrease for wound to 22%, and a 30 basis points increase in Orthopaedics margin to 13%. In Sports Medicine and ENT, margin expansion was driven by operating leverage and efficiency savings.

In wound, the small margin decline reflected the impact of U.S. skin substitute reimbursement changes, largely offset by savings initiatives. In Orthopaedics, manufacturing savings from network optimization, ongoing productivity initiatives, and disciplined cost control more than offset the headwind from inventory revaluation and softer revenue growth. We expect further margin expansion over time as we work through the inventory revaluation headwind and benefit from improving revenue growth, the impact of actions already taken to right-size our manufacturing capacity, and our Ortho 360 operating model. These results demonstrate the operational excellence we are driving across the business. As you know, inventory remains a key focus for us even now that we've completed the 12-point plan. Group DSI, day sales inventory, fell by 72 days, including the reclassification of instrument sets from inventory to PPE, and by 40 if you exclude that.

The bigger reduction came from Orthopaedics, down 62 days, excluding reclassification, reflecting continued work to reduce the number of units in inventory and a focus on capital efficiency. We also saw a reduction in sports med DSI, albeit to a lesser extent than in Orthopaedics, and no change in wound DSI excluding the reclassification. Both sports and wound are already much closer to industry benchmark DSIs. We expect to make further progress on inventory in 2026. Right now, moving on to cash flow. Trading cash flow was $437 million in the first half, down $50 million or so year-over-year. This reflects a $51 million step-up in CapEx year-over-year, driven by investments in our new wound manufacturing facility in Melton and in some IT investments. We do not expect this increase to repeat in the second half, and cash generation should improve versus half to 2025.

Other working capital was higher, largely due to timing of bonus accruals and related cash payments. Cash conversion was 77%, and we anticipate this will improve over the course of the year. Free cash flow was $231 million, down $13 million year-over-year, again, reflecting these factors I've just mentioned and partially offset by reduced restructuring cash costs. We continue to expect free cash flow in 2026 of around $800 million, driven by profit growth and continued focus on working capital, offset by a modest temporary increase in restructuring costs. Net debt increased over the first half to $3 billion, an increase of $260 million, resulting in a leverage ratio of 1.8x adjusted EBITDA within our target of around 2x.

The increase was driven by our investment in our business, the acquisition of Integrity Orthopaedics, growth in our dividend, and of course, the $500 million buyback we announced in Q1, of which we've actually now completed $260 million as of the 3rd of August. This is in line with our capital allocation priorities. Before I turn to guidance, I want to highlight the progress we continue to make across margins, working capital, cash flow, and returns. This broad-based improvement reflects stronger operational controls and helps make Smith & Nephew a more resilient business, better positioned to manage through periods of revenue softness or external challenges while maintaining progress against our long-term objectives. Coming now to our updated outlook. Reflecting softer performance in U.S. Orthopaedics and SANTYL, we now expect second half growth to be in the range of 5%-5.5%, and full year growth to be around 4%.

Notwithstanding the lower revenue outlook, we are maintaining all other metrics of our guidance. We continue to expect around 8% trading profit growth, excluding M&A for the year. This translates into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity acquisition. This reflects the step-up in efficiency savings that we are delivering across the business, together with the removal of the forecast tariff headwind. The progress we demonstrated in the first half gives us confidence we can remain disciplined on costs while supporting improved revenue growth in the second half. We also remain on track to deliver around $800 million of free cash flow and a return on invested capital above 10%. Let me finish by outlining why we are confident in a step-up in revenue growth. We expect second half growth of 5%-5.5%, driven by factors across all three business units.

In Sports Medicine, we expect continued momentum across segments, including strong growth in REGENETEN and FAST-FIX. In Advanced Wound Management, we expect to see stabilization in U.S. skin substitutes, building on the sequential improvement we saw in Q2 versus Q1. We also expect a return to growth in SANTYL, further rollout of ALLEVYN COMPLETE CARE in Europe, the ongoing launch of next generation LEAF, and the benefits of greater investment behind PICO. In Orthopaedics, we expect an improving trajectory in U.S. knee implants driven by LEGION MS and the launch of the cementless version of LANDMARK. We also expect U.S. hip implants to return to growth as we deploy more CATALYSTEM sets. Of course, we'll also have one extra trading day in the fourth quarter.

With that, I'll hand you back over to Deepak.

Thank you, John. Before we conclude, I wanted to spend a few minutes talking about the progress we've made in the first half against each pillar of RISE, which is our strategy for the next three years. These are the actions we are taking to strengthen the business today and position ourselves for sustainable growth over the long term. In order to reach more patients, we continue to expand access to our technologies through geographic expansion, new product introductions, and important clinical milestones across our portfolio, including completing the first knee and shoulder procedures using our CORI XT handheld robotics platform and the European launches of ALLEVYN COMPLETE CARE and RENASYS EDGE.

To innovate, we advanced our pipeline, strengthened our clinical evidence base, and launched a number of new products across all of our business units, including FLOW FLEXTEND and LYNX in Sports Medicine and ENT, EVOS Pelvic in Orthopaedics, and LEAF 3.0 in Advanced Wound Management. That brings the total number of new products launched so far this year to nine, putting us well on track to launch 16 for the full year. A key highlight was receiving the FDA approval for TESSA, our spatial surgery system, which I'll come on to shortly. To scale, we continue to invest behind our highest priority growth opportunities, including the acquisition of Integrity Orthopaedics to strengthen our leading shoulder repair portfolio, sales force expansion for PICO, and continued progress in our new Advanced Wound Management manufacturing facility in Melton, which remains on track to open actually in 2027.

To execute, remain focused on driving productivity across the group, portfolio simplification, and operational excellence. We're making good progress on streamlining our portfolio, which will allow us to manage significantly fewer SKUs across our value chain and improve our capital efficiency. Earlier this quarter, our Advanced Wound Management manufacturing facility in Suzhou, China, was recognized with the prestigious Shingo Prize, which reflects more than a decade of sustained operational excellence and continuous improvement. These aren't just strategic priorities. They're translating into tangible growth platforms that we believe can create value for shareholders for many years to come. The clearest example of that is in innovation, where we're building a portfolio of technologies designed to both take share in existing markets and create entirely new growth opportunities. In Sports Medicine, we now have four differentiated growth platforms that we refer to as our Big Four.

REGENETEN continues to perform strongly, delivering around 20% growth in the first half, with significant runway remaining to expand penetration in rotator cuff repair and across other tendons and extra-articular ligaments. Our Integrity acquisition is performing ahead of our expectations, and integration is progressing well as we increase manufacturing capacity and expand our commercial capabilities. With CARTIHEAL AGILI-C, we're continuing to build awareness and adoption in the U.S. ahead of the new reimbursement beginning in January of 2027, while also expanding internationally with our first cases completed in Australia, Italy, and in Belgium. In this quarter, we achieved an important milestone with the FDA approval of TESSA, the first in industry spatial surgery platform. TESSA combines advanced imaging, navigation, and AI-enabled assistance to help surgeons perform arthroscopic procedures with greater precision.

The initial application is femoral tunnel drilling. We see a significant long-term opportunity to extend the platform across multiple joints and procedures. In Advanced Wound Management, ALLEVYN COMPLETE CARE strengthens our position in one of the largest and fastest-growing segments of the wound care market. Initial customer feedback has been encouraging, highlighting meaningful differentiation versus current products that are actually on market today. We're also expanding our Advanced Wound market through the recent launch of LEAF 3.0 and by bringing PICO into new care settings and patient populations. In Orthopaedics, we continue to build a connected ecosystem around CORI, linking planning, execution, and outcomes to support more personalized care and better optimized clinical workflows. CORI XT provides the foundation for our existing robotics platform.

We performed our first robotic shoulder procedures on XT in February, the first knee procedures on it in May. We remain on track to launch our hip execution in the first half of 2027. Alongside robotics, our implant innovation continues to gain traction. CATALYSTEM is growing and becoming an important contributor within hips, while in knees, increasing set deployments and supporting broader LEGION MS adoption. We're also looking forward to the launch of LANDMARK in the third quarter, our most robotically enabled implant system that we've developed to date. The breadth and strength of these innovation platforms give us confidence in our ability to deliver sustainable growth over time through a combination of market expansion, share gains, and new category creation.

In summary, our second quarter performance was below our expectation, with the strong momentum in Sports Medicine offset by softness in U.S. Orthopaedics and Advanced Wound Bioactives. That's leading us to reduce our revenue outlook for the year. That said, we remain confident that the growth will step up in the second half. John has taken you through the drivers of all of that across our business units. Importantly, while we are lowering our revenue outlook, we remain on track to deliver our original trading profit guidance, free cash flow, and ROIC. This is supported by a step-up forecast of efficiency saving, including a further $50 million of savings that we've identified, which helps offset the impact of lower revenue growth. We also continue to build a more resilient and agile business.

We're investing behind our growth platforms while driving improvements in margin, cash flow, and return, strengthening our ability to respond effectively to challenges. While Orthopaedics is not where we want it to be, we remain focused on improving execution and delivering better performance. At the same time, we are positioning the business to capitalize on the significant opportunities that we see ahead. These include the LANDMARK launch in knees, robotic execution on CORI in hips, the Big Four in Sports Medicine, launching new products and entering new settings in wound, and our broader pipeline of innovation. Taken together, these factors reinforce our confidence in the underlying strength of the business and our ability to create long-term value.

With that, we are ready for your questions.

Hi there. Jack Reynolds-Clark from Morgan Stanley. Thank you very much for taking the questions. I have three, please. First, on U.S. Orthopaedics, could you run through specifically what went wrong here? How much of it was the market, how much of it was other issues, and what you're seeing so far in Q3? If it has any impact on your assumptions around midterm margin expansion. On 2026. The H2 guide obviously implies a pretty substantial step-up versus H1. Given the comments around VBP delay, where do you see the biggest half-on-half step-up on a segmental basis and really what gives you the confidence in that new guide?

Lastly, on the midterm guidance, 4% growth in 2026 is very much below the midterm guidance range. What do you see as stepping up in future years to offset that?

Yeah, sure. Let me talk about that in turn. U.S. Ortho, there's some market slowdown. That's not the biggest factor. The biggest factor are really company-specific factors. Fundamentally, it's a knees. We had flagged that we are behind the market largely because of the portfolio gap we have. We're not able to participate in the fastest-growing part of knees, which is cementless. We only have that on one half of our installed base. In Q3, when we launch LANDMARK, we'll be better able to retain the market in the other half where we don't have a cementless offering. By far, that's the biggest factor. That's the challenging thing that we're navigating through. We called that out as a factor in Q1. We continue to see it in Q2, although there was some sequential improvement.

I'll come on to what we see for half-on-half, that's the fundamental factor that's driving softness in U.S. Ortho. There was a temporary blip in U.S. hips. CATALYSTEM continued to grow very nicely. We're in the third full year of launch. We do expect as we go step forward from here, at some point, we're going to need to pivot from competitive take-outs to more holding onto our business retention. That'll happen as we progress through the launch. There was a slower than expected deployment of sets. These instrument sets are optimized for one or the other products. For example, if we're trying to take business away from one competitor versus the other competitor, we need to have slightly different instrument sets. Getting that right is a bit challenging. That's what paced our set deployment from the quarter. It's a blip.

We expect to regain that in the back half of the year. Those are the two really the fundamental factors, not so much slowdown in procedures, of which there was some. Half-on-half, fundamentally what we expect is in Orthopaedics, it's LEGION MS, which strengthens our LEGION offering. That's going to be the most material driver. As we bring LANDMARK Porous onto market, which will be largely a Q4 effect, like I said, we'll be able to better retain the business that we have. Once we go into 2027, when we have the complete offering with LEGION cemented as well by the end of Q2, we'll be able to go from defense into more of an offensive crouch. In Orthopaedics, it's LEGION MS and launch of Porous. In Sports, we'll continue the trend that you have seen quarter-on-quarter.

There hasn't really been a H1, H2 effect in Sports when you take away the China effect, and we expect the same to continue in this year. In Wound, it's PICO. We're investing behind geographic expansion of PICO. We're starting to see some proof of that in Q2, we expect to see that build in the back half of the year. Skin subs, which there was sequential improvement Q1 to Q2. As we've said, we're on the upper end of the guidance range that we've given in terms of the impact on reimbursement, H1 to H2, we expect to see an improvement. Those are the components of H1 to H2 in terms of what accounts for the step-up in growth that we see. Turning to finally the third question, which is around midterm guidance.

Look, we always knew 2026 was going to be a challenging year. Obviously, it's proved to be a bit more challenging than we thought, and that's largely on the back of U.S. knees that we talked about and the prior authorizations that one of the larger insurers ruled out this year that's impacting. There's more friction in the system with prescriptions. It's not end-user demand, it's really the rate at which prescriptions get filled. That's the reason for why we called down 2026. The fundamental growth drivers, which are new products, either in existing categories or in creative new categories, those drivers remain well intact, whether it's in Orthopaedics, we talked about LANDMARK launch, we talked about hip execution on CORI, AETOS which is on shoulder, and in trauma, rounding out our EVOS portfolio with the Pelvic offering that's new.

On the nail part of the portfolio, IM nails continuing to improve. Multiple growth drivers in Orthopaedics we've got to look forward to in 2027. In Sports, Big Four, continued execution on those. Finally, in wound, it's PICO. It's building out of RENASYS and normalization of skin subs. These are the growth drivers, as you can see, is multiple of them across all of our business units. It gives us confidence that we are fundamentally a 6%-7% growth company.

Yeah.

Perfect answer. Maybe just a little bit of color on the phasing in terms of the second half, so Q3, Q4. We do expect to see a step-up in Q4 performance versus Q3 performance. Q3 will improve on Q2, clearly, Q4 will be stronger. That's not jam tomorrow. That is very clearly because of the timing of investments that we're making, specifically in relation to the launch of LANDMARK. In the context of skin substitutes, we're actually starting to lap the impact of last year. Remember, Q4 last year was tough in skin substitutes because of the actions that were being taken by the market in anticipation of the changes to reimbursement.

We've got a much softer comp in Q4 on skin subs. There's not only the continued recovery that we've already seen in Q2 on Q1, that we'll see come through in Q3, but we also start to lap in Q4 the impact from last year. That would be particularly positive on skin subs. Of course, dare I say it, we should also mention the fact we have got one extra trading day in Q4. When you add all that up, you'll see a big step-up in growth in Q4 versus Q3, just to make that absolutely clear.

To your point around the headwinds on sports, you're right. Deepak's absolutely spot on, of course, that we're continuing to see the momentum. We would expect sports and ENT to be a little bit softer in Q3 than we saw in Q1 and Q2 because of the impact of VBP coming in both of those areas in the second half. We've factored that into our forecast, and that's fully baked into the expectation of the top line guidance of the 4% and also the profit guidance as well, which remains unchanged.

That's great, thank you. Could I seek in a cheeky follow-up? If you were to quantify Q3 versus Q4 growth, the phasing there, would you be able to offer any color there?

I could.

That'd be really helpful.

I think, in Q3, we will see growth in the order of sort of Q1 type dimensions. If you remember in Q1, we were 3.1% growth, 4.7% on an ADS basis. In Q3, we will see growth of a similar level. In Q4, we will see a step-up in that growth. You can work out the maths, but at the growth level, it will be sort of 6%-7%. Actually on an ADS basis, it'll be just north of five because of the extra trading day. That is a step-up on Q3 in absolute terms, not stripping out the trading day impact. That is because of the skin subs, because of the investments being made in PICO, and the timing of those investments, and because, of course, of the launch of LANDMARK, which takes place towards the end of Q3.

Those are the reasons why we've got confidence in our ability to deliver that 4% for the full year.

That's great. Thank you.

Yeah.

Thanks.

Hi, good afternoon. Hassan Al-Wakeel from Barclays. A couple from me on Ortho. Firstly, maybe to ask Jack's question a little differently. We've seen knee softness this year. Now we're seeing hips, which has been really strong before today. You've said this isn't market driven. What are you doing differently when it comes to execution? Why shouldn't some of these set delays in hips weigh on the second half? Specifically on U.S. hips, how are you thinking about growth here beyond the next quarter or two as CATALYSTEM matures as a product? Secondly, on robotics, if you can try and unpack the growth in the quarter and the development inquiry, is it entirely a function of comps? How should we think about growth in the second half and beyond given the launch of Mako RPS last month?

Okay. With hips, just to emphasize again kind of what I'd said around set deployment. First there was a comparator. We had a strong competitor in Q2, that numerically had an impact. When you look at a two-year stack, it's actually not that much of a deceleration in hips, it's largely kind of consistent. With set deployments, just to double-click kind of what I said, largely it has to do with instrument sets. When you're trying to take a customer from their existing kind of approach, whether it's one of our legacy products or one of our competitor products, the instrument that you have to deploy to cater to the surgical approach of that particular surgeon has some variability. It's not just some standard instrument that you deploy that works regardless of which legacy platform that they're using.

Getting the demand right for that instrument is a bit tricky because of that variability. We didn't quite get that right, and we were somewhat paced by that in Q2. The combination of numerically stronger comp plus this has kind of led to what you saw. We've also said, as we progress through the launch, typically what happens in Orthopaedics launches, certainly in the way we approach CATALYSTEM, is we targeted competitive surgeons initially. You expect to do that for a period of time, but eventually, you are going to have to address your base of customers. That mix of competitor versus retention will start to flip from competitor-heavy against retention to more retention-heavy, smaller competitor. At some point, that will normalize, so we'll get back to, in effect, market levels of growth in hips.

That's what you should expect as we proceed to the back half of this year, and beyond. Hopefully, that explains the blip in instrument deployment that paced Q2, but what you should expect as we go through the launches. The second question that you had was in CORI for this quarter and beyond. I think, John, you said we had double-digit growth in CORI placements in quarter two, and also that got a similar number in first half. Continue to be pleased with the pace at which we're placing CORI, and also where we're placing them, hospitals versus ASCs, teaching institutions versus across the mix. We're having actually nice impact across a range of care settings. Generally speaking, when I look across the board, we are at least at our market share. That's encouraging.

When I look in the ASC, it's slightly ahead of our market share in terms of CORI placements within the ASC. Not by leaps and bounds, but certainly. What it shows is that we are tracking relative to our share. The strategy we're following is that we're not just placing first and then allowing utilization to catch up. We're placing where we see a demand, where we see a surgeon who wants to integrate it into their practice, and we're equally monitoring utilization as we are placement. We could have followed a different approach, but ours is actually placement and utilization. I'm actually pleased with not only the headline, but also the texture of the thing. You referenced Stryker coming up with their handheld. Look, for me as a headline, there are always questions around, well, is CORI a science experiment?

Is this really in a mainstream platform or not? The last reported number was 1,100 that we talked about. We've talked about double-digit growth off of that, and you can do the rough math. The fact we're placing in proportion to our share says CORI is a mainstream product where it's being accepted by the market. The fact that there's competitors who are now thinking that they need to have their own handheld platform is validation of our approach, and also speaks to the innovation that's in Smith & Nephew at our scale, where we have taken bold bets. We could have come up with our handheld, rather a fixed-arm robot, too, but we didn't. We had the strength of our conviction to go with a handheld platform, and great that our competitors are following suit.

At the end of the day, it's deploying them in the playbook that we've developed, and I feel very confident about how we're doing that. I think those are the questions that you had.

Just to build a little bit just on Deepak's comments, notwithstanding that double-digit growth in placements, of course, when you place CORI initially, they start off with low utilization and then slowly ramp up over time. Notwithstanding that double-digit growth in placements, we continue to see progression on both utilization, which has gone up 4 or 5 percentage points from the end of 2025, also in penetration, which has gone up about 2 percentage points from the end of 2025. Notwithstanding the dilutive impact of putting out more CORI there and the buildup curve that those necessitate, we're still continuing to see improving trends in penetration and utilization, which I think is very encouraging.

I'll move so I don't betray a leftward bias in who I call on. I'll go to the right part of the room and I'll call on colleagues there, I'll hop around the room.

Seb Jantet with Panmure Liberum. Couple of questions. Just on tariffs, obviously, you've had the guidance change, but remember, you were talking about $60 million hit prior to that. I just want to check that the gross and the net numbers haven't changed so that the refund is still $60 million, just check the logic that that just shifts as a headwind into 2027 rather than 2026.

Yes. You're right. Just to say it was really clear on tariffs. The P&L impact for last year was $15 million. The anticipated P&L impact for this year was $60 million, it was a $45 million drag. We now expect refunds for this year to be around $50 million. Net-net, when you net all that out, it broadly means that tariffs in total compared to last year is neutral on the P&L. The refunds effectively offset what would've been the P&L charge.

We'll get the headwind next year, effectively.

You will get the headwind next year. The cash tariffs is of the order of $15 million. That's the P&L impact in next year will be circa that quantum. There's also a little bit of further refunds that will come through likely in next year. There's a lot of moving parts on tariffs. We've still got to see the outcome of the Section 232 review that we probably won't find out about until the back end of this year. There's lots of moving parts on tariffs, as you always expect. We would expect a little bit of an offset of the P&L charge next year with some further refunds. Obviously, we'll provide more guidance on that when we come to our prelims in 2020.

Okay, thanks. The second question then is just around the cost savings. Obviously you've managed to get some decent momentum in the cost savings. If I heard you correctly, you were saying the extra $50 million is largely coming from manufacturing and things like footprint reduction, that type of area. I'm just wondering how, those in my experience take quite a lot of time to achieve, so how have you managed to find new ones so quickly there?

There's a lot of efficiency savings in the way that we run our facilities. There's some benefit coming through from the changes that were made historically that was better than expected. There's an element of historical change that has come through better than we thought would come through in terms of the way it's flowing through the P&L. There's also been changes that we've made in how we operate things. We've also streamlined our operations, for example, from Austin, and also Warwick, which we closed. We consolidated that into our Memphis facility, and we've delivered greater than expected efficiency savings. The efficiency savings are not just in manufacturing. The bulk of them, you're right to say, are in manufacturing, but there's also savings we're seeing in sales and marketing. There's also savings that we're seeing in our business services as well.

Procurement.

Procurement. Thank you, Deepak. I think it's very exciting. I think I alluded to, I read back the script to the Q1 or the prelim number, and I think I said at the time, $150 million or possibly better, and we always had a little bit of line of sight of being able to beat that $150 million. I think it's very pleasing to be able to talk about the $200 million target today. I think it really reflects an ongoing discipline around our cost savings, that we built initially through the 12-point plan and then added to with the ZBB program.

Today, we're now looking at our next wave, and we're not going to talk too much detail about this, but a lot of the stuff that we're doing, for example, on putting in new systems and also the overlay of AI, and we're doing a lot of work in the business now to look at how do we fundamentally simplify and streamline our end-to-end processes, which remain quite complex. We've gone through sort of three phases of cost reduction in our business, the first of which was just to get the P&L in a decent shape to deliver the numbers, the second of which is to basically take our existing processes and take away some of the, what we call the fat and the cost in those. The third wave is to fundamentally simplify and automate and streamline our processes.

We're now in that third wave. No doubt we'll talk more in the future about what the opportunity to come is.

Just two things. One clarification and just more a broader point. Just when you talk about footprint, it's not that we're closing any more factories that we hadn't contemplated, and you're right, those things take time. It's actually how we're utilizing our current footprint that's the key driver, apart from all of the things that John said, how we use Malaysia versus Memphis, in terms of optimizing across our network, for example, in Orthopaedics, is one of the contributors to that. We've called out the spirit of continuous improvement as kind of the key underlying things that enables the strategy to happen. I'm pleased to report that some of those things the organizations have embraced very nicely.

The spirit of continuous improvements that lead to these additional savings, it's not a point in time activity, it's actually how we are operating the business this way, and that's what enabled us to hold to a profit target despite the revenue miss. Yes, there's not the headwind that we had from tariffs that we expected, it's more than that. It's all of these additional savings that allow us to make essentially that simple statement come true.

Thank you. Charles Weston from RBC. Just to quickly clarify that, how much of that $50 million is brought forward from 2027, and how much of it is incremental and we should be modeling off that for 2027?

Sure. Do you want to take that or I can?

The way I think about it is a little bit of the $50 million that's-- In terms of first half performance, there's an element of bringing forward some of the half two into half one. In terms of the back half of the year, there's an element of bringing in some of the half one 2027 into the half two of 2026. It's always shifting everything forward. We're not going to sit here and guide now to 2027 numbers, the point I would make is that this is not a one-off exercise. To Deepak's language just now, he deliberately used the words continuous improvement. I also talked a little bit about some of the savings that we're now driving through things like our ERP program and also AI as well.

I would say we've got good visibility, and we're not going to set out the guidance now, but we've got good visibility of future opportunities to drive further efficiency savings in this business, and we'll set out that much more clearly, of course, when we give the guidance for 2027. I would not classify it as robbing Peter to pay Paul in terms of bringing it forward from 2027 into 2026. There'll be plenty more to come in 2027.

Okay. Thank you. Sorry, that was a long clarification, but I had two actual questions. One of them on ACA. Have you noticed changes in terms of either procedure volumes or CapEx sale or CapEx demand from U.S. hospitals? Secondly, just in terms of Landmark launch timing, can you just confirm that everything's on track for both cemented and cementless and the typical, I think you said it's two quarter ramp to really start meaningfully getting sales from those. Thanks.

Sure. On ACA, we did see some impact of that in terms of procedures. It's both across elective procedures. You've have some hospital systems comment on that. We did see that, but it was not the most pronounced effect, so we didn't overly major on that. There is an impact of ACA-related procedures laydown that we have seen both across knees and hips. Like I said, it's not the dominant factor that explains our performance. In terms of Landmark timing, Porous is the very end of Q3, so largely a Q4 effect. Then the cemented version of Landmark is the end of Q2 of 2027. As you know, Charles, there's a ramp associated with that. You've talked about two quarters. It isn't quite as straightforward as that. It depends on competitive dynamics.

There's a good way and not so good way of introducing these launches. One, you can throw a lot of capital at it and encourage a lot of trial, at a great deal of capital expense. A more methodical and a proper way to do an orthopedics launch is to be much more mindful in terms of how you deploy capital in order to encourage trial and then ultimately adoption. One of the things that we've gotten much, much better as an organization is around capital discipline and capital efficiency in orthopedics business that we did not consistently have. That does impact top line. We've called that out in previous quarters. We expect to bring that level of capital discipline and efficiency mindset to the Landmark launch.

The consequence of that is a more slower ramp, it'd be, I think, a more durable one and also the more disciplined way to tackle these.

Thank you.

Sure thing. Okay. One question here, we'll go online.

Thank you very much. Richard Felton from Goldman Sachs. The first one, I want to ask about something that's been coming up a little bit more in our investor conversations, that is on potential competitive risk for SANTYL. Could you remind us the size of that product today, how revenue splits between different care settings, what you perceive as the key competitive strengths for SANTYL?

The second one is on advanced wound devices. I suppose over the last four quarters or so, we've seen a bit of a deceleration from kind of double-digit growth to mid-single digit growth for that part of the business. What has been driving that, what is the right way to think about the trajectory for advanced wound devices going forward? Thank you.

Sure. SANTYL, we don't typically give product-level detail. It is a multiple hundred million-dollar product. To your point, it's a category where effectively, a large proportion of that market there is some competitive activity in that. Just want to emphasize that that's not what's driving our numbers today. Just want to clearly emphasize that. Where we stand out in SANTYL is we don't require refrigeration, supply chain is simpler. There isn't pain associated with the use of our product, which some of our competitors feature. One of the disadvantages is that it is a slower process. It takes time for the product to take effect. That's one of the downsides of SANTYL.

Having said that, it's got a proven kind of track record in utilization across a range of use cases and across settings, whether it's an acute setting or when patients get discharged home with a prescription for SANTYL. It is across all of those areas. We feel very good about how we're positioned within that category. We have line of sight, obviously, to what competitor products are, what they offer, and how SANTYL continues to be differentiated relative to it. Of course, we're not resting on our laurels there. There is a next-gen product, we aim to improve upon SANTYL, building upon its advantages around supply chain, its advantages around the level of pain, of which there isn't, with the use of the product, but actually have it be faster in terms of how it works. That's our next-gen SANTYL.

In terms of AWD, there's two broad categories, the single use and traditional negative pressure. We also classify LEAF within that, and LEAF has both the device component and the dressing component, just to kind of disaggregate what's in our AWD. Largely, the deceleration that you see is in our traditional negative pressure category, which is our RENASYS platform. There, as we've highlighted, we're doing well in the post-acute segment. We are not taking share in the acute kind of channel. The answer to that is actually have a better-rounded offering with RENASYS. Both in terms of the next-gen canister, but actually having a whole assortment of dressings that's fit for purpose for the application, whether it's OB-GYN, whether it's GI procedures, orthopedic procedures, and the like.

That each one's got a specialized kind of dressing and We have a narrower range there than the large competitor within that. We obviously have product development to address that, and we'll start to build that out in 2027. The deceleration is largely within the acute care segment of traditional negative pressure. On the single use with PICO, that's been a product that's been a growth engine for us for quite some time. In addition to its use across care settings, we're actually invested to drive it into geographies where we're not present in the same way today. That's part of the investment that we've talked about, and we expect to see the benefits of that come through in Q3 and especially in Q4, right?

We continue to do well there. There's competitor activity within the single-use segment. We feel well-positioned within that, we also have our pipeline there that we expect to, I think, we called that out in our capital market day presentation, somewhere in the 2028 timeframe, we expect to come up with our next generation PICO. Hopefully it gives you a feel for kind of how that segment is categorized and the dynamics within that.

Got you.

Yeah. We'll now go online first, then I'll come back into the room.

Thank you. As a reminder, to ask a question on the telephone line, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is muted totally. Our first question is from Veronika Dubajova from Citi. Your line is now open. Please go ahead.

Hi, guys. Good afternoon, and thank you for taking my questions. I have two, please. One sort of slightly diving into the nitty-gritty, just curious to get your thoughts on what's happening in trauma extremities. Obviously, we had a number of good years post the ATLASPLAN launch. The growth there has really accelerated pretty dramatically year to date. Just curious if you can touch upon the dynamics you're seeing in trauma versus extremities, and if there are things you can do to get that growth rate back into the mid-to-high single digits.

My second question is a big picture one. I apologize, I have to come back to the midterm guide. I think even just to hit the low end of the 6%-7% that you've guided for previously, if you are doing four this year, you'd have to do 7% in the other two years. That would be a pretty dramatic acceleration versus the trends we've seen in the last couple of years. I appreciate there are headwinds to this year, but there were also headwinds to last year and the year before. I'm just trying to understand the logic for why you are sticking to that 6%-7%. Is there any way at all in your mind to get anywhere above the low end of that range? I guess what gives you the confidence at this point in time to maintain that? Thanks, guys.

Sure. Thanks, Veronika. I'll take them in order. Trauma and extremities, I'll talk about trauma and then I'll talk about extremities. With trauma, we're positioned kind of nicely with our EVOS platform. I've talked about pelvic, which is something like 1.5% of the overall pie, but it's an important piece that we're going to launch into. It'll be even fuller now. We've been expecting competitors to launch within that category, and two of our competitors are in fact at various stages of launch in the core plating category. There will be some level of trial, some level of adoption as those competitors launch within that category. We're seeing some impact of that. That's not a new factor. It's just that's been out there in the market. I think the EVOS compares very favorably to competitors' offerings.

Over time, as surgeons try those, you'll see some quarterly variations depending on who's trying, who's adopted, and so forth. I feel very good about how we're positioned within that category. We do have drivers of our own beyond EVOS. IM Nails, we launched that, I guess, in Q1. You'll have to remind me, John. But yeah, in the recent quarter or two, we launched our own IM Nail offering. We hadn't had a new product there in, my sales force likes to remind me, in far too long. But we've got a nice offering there that should expect to drive growth, and we called that out in the last quarter. Core trauma category, nicely positioned in terms of our products, but there is competitor launches, particularly in plating. On extremities, our presence now, we're a relatively small player in extremities, as you know.

For us, the real call-out here is shoulder with AETOS. There, again, we are a relatively small player, but we now have more or less the offering we need on the implant side. Actually, importantly, we've got CORI enabled for planning and execution, and there's some real differentiation there within that anatomic, reverse anatomic, glenoid, and humeral planning and execution which is quite a differentiating feature. Their handheld robot actually is differentiated relative to a fixed-arm robot for shoulder surgery. But we are working off of a small base, and we are in the early stages of launch. It'll be more group relevant, I would say 2027, 2028. We're in that early stages, and then we're getting nice traction, not only with surgeons who are trying it, but surgeons who have actually integrated that as part of their routine practice.

It's there, it's just not as material to the group given the small base. Hopefully it gives you a bit of texture and color around trauma and extremities. On the midterm guide, look, as I said 2026 was softer. Veronika, you've done a bit of the numerics around four and then 6%-7%. The reality is we're two quarters into a three-year plan, right? Obviously, we've thought through the numerics ourselves, and we've gone through the fundamentals of what actually drives the 6%-7%. As I said earlier, once we get through the period today, what's holding us back this year? Why did we actually reduce the guide? One, it's our position in U.S. knees and how that's impacting us today with the gap in the portfolio. The second is SANTYL, right, with the prior authorization that we are having to contend with.

On the skin subs side, we're on the upper end of the range, but still within the corridor that we guided to. That is, in combination, not a great thing to have to navigate in this year because you have a bunch of headwinds and not a whole lot of tailwinds. As we move into 2027, we expect to normalize the skin subs. We expect to normalize on the SANTYL, and then we'll have the portfolio complete in the way that allows us to be competitive. Now, there will be a ramp starting in Q4 this year. Cement was first, and then starting in the back half of next year with cemented LANDMARK Knee System. There will be a phasing or pacing in terms of how we become more competitive in knees. You put all of that together.

We feel good about the growth drivers we've got stacked up in Orthopaedics. I've talked about knees and hips. It's about getting execution capability in CORI. We're seeing contracting activity that ties together both knees and hips. I think we'll be able to better compete within that as we have execution ability in CORI as well on the CORI XT platform. Then as I've talked about AETOS becoming more relevant in the 2027, 2028 period. Then in sports, we've talked about Big Four, and they're very nice growth drivers that are kind of lined up within that business unit.

In Wound, beyond the normalization of skin subs, you've got new product launches coming in the traditional negative pressure category where we have given up ground, and I've previously commented on the fact that that's one part of the 12-point plan that didn't work as well, right? The growth rates were great, but when you looked at the placements of RENASYS, we were behind on that. We have addressed that. We understand the reasons why. As we turn into 2027, that will become a growth driver together with the investments we've made in LEAF and next gen PICO. You stack all of that up. That gives us the confidence that at the end of the day, we are a 6%-7% growth company despite the challenges we're navigating through in 2026.

We'll come back into the room and then back online.

Hi, can you hear me? It's Kane Slutzkin, Deutsche. John, just a quick one for you on the savings. Can you give us some comfort that, I guess, none of what's been done over the last few years or still to be done sort of is at the detriment of growth down the line? Often we do see these sort of situations where you could cut too close to the bone. Just for Deepak, just quickly coming back to the U.S. environment. You mentioned sort of some of it is a slower growth. Your bigger peers have kind of seemed to push back at a sort of view that the market is weakening. There was one smaller peer suggesting that we go back to pre-COVID sort of growth rates.

Just wondering if you have any thoughts on that with a view to obviously trying to launch.

Do you want to take it first?

Yeah. I think we can be categorically clear that we're not sort of strangling the business vis-a-vis growth. In fact, we're very deliberately investing in growth in the business. We've been very conscious about how do we deliver cost and efficiency savings, and how do we actually invest in our growth. Much so that we actually split it out in the bridge that we give you. We're really super transparent. You see the savings in that bridge, and you see the sort of $33 million investment that we're making in growth. What does that look like in practice? Very simply, if you look at it just purely in headcount terms, and I'm massively in favor of cutting headcount where we can, but actually, over the last 12 months or so, we've actually increased our headcounts.

The areas where we've actually reduced our headcount, permanent headcount, in those areas where we can drive efficiency savings, say, for example, manufacturing and operations. We've actually reduced our overall permanent headcount. We've actually increased our headcount almost singularly in Sports and Wound, where we see very specific opportunities to grow our business. Obviously, the Sports story is very clear, and Deepak's talked about the four opportunities we have across CARTIHEAL and TESSA and REGENETEN and et cetera. That's very clear. In Wound, we have the opportunities in PICO and ACC and skin subs. If you actually look at the increase in our headcount, all of it comes into Wound and Sport, and at least 75% of that increase comes in the front line. In other words, into sales, into medical education, into customer service.

We're not adding to the back office. I can be absolutely clear that we are recycling resource. We are taking resource away from things like the back office functions, where we're streamlining and taking cost out, and we're reinvesting into the frontline to drive that top-line growth. Now, we won't see a return on that investment within 2026. There are $33 million that we're investing in that growth. To Deepak's earlier comments about what gives us confidence in our ability to deliver, why do we think we're a 6%-7% growth company? Because we're investing in that growth. We're being very deliberate, and we're spelling that out for you as well. It's not sort of assumed in one lump in the bridge. We're very clearly separating out the cost savings from the investment piece.

Just a couple builds on it. As we navigated the 12-point plan journey, I'll tell you, with all the margin pressures we faced, it would've been easy for us to kind of meet the targets, particularly within the years, the interim years by cutting R&D. I can tell you that was a place we could have gone, although we more or less got there at the end of the three-year period. You'll remember the periods in 2023, 2024, where there was tremendous margin pressure, and there were all the questions whether we were going to get to kind of what we set out. We resisted the urge to do that, right? We maintained the level of investment in R&D in order to fuel the growth, and we're starting to see the benefits of that, and it will come even as we go through the next three years.

Life's a balancing act, what we have actually held on to is to not cut the things that position this business for sustainable kind of growth over the longer term. John's talked about the trade-offs there in manufacturing and commercial investments, particularly in R&D as well. We've made sure that we have ring-fenced or protected the things that really drive long-term growth of this business. In terms of your question on U.S. procedure, I assume it's primarily in Orthopaedics. Believe it or not, it's actually harder to get at what the market is doing than you might think, right? Third-party data sources in the space are not as robust as it is in other areas. We're all trying to parse based on limited data points kind of what the market actually is doing, right?

I have been somewhat loath to comment on the market because we've had performance challenges in the U.S., I've been less front-footed on commenting on the market historically. Now, our performance still is challenged, but it's not necessarily all because of commercial execution. I've got a little bit more visibility into kind of what's going on in the market. When I tell you there's a little bit of a market effect, it's based on what we can see, and I wouldn't have been able to say that even last year, never mind two years ago. Against that backdrop of market as not as robust third-party sources call it, I do believe when you look, it's an exercise in triangulation. What are those things you look at?

First is look at reimbursement. Those are public, and you can see what's happening to how procedures, knees, and hips get reimbursed in various care settings. You can see what that's done in the past, what it's projected to do in 2027. That's one data point. The second data point you've got is the shift in site of care. As you go from a hospital setting into an ASC, the reimbursements are lower. There's an impact on ASPs as you go through that. That's a very dynamic thing, but there's impact around that. Against that, you've got other factors like mix. In the shift from cemented to cementless, you have a mixed benefit that runs counter to the things that I've talked about.

You put all of these pieces together, working out what the market is doing in revenue terms and what it's doing in volume terms can be trickier. You've got the ACA impact that you asked about earlier, which is not only patients who are coming off of the ACA rolls as they lose subsidies, but also what's really happening to those who are in commercial programs that are not necessarily recipients of those subsidies, but their out-of-pocket fees have gone up, the premiums have gone up, and how that impacts their desire or their willingness or ability to undertake elective procedures is also another factor into this.

You put all of this in. What I see and what I've seen in Q2 is a slowdown, but I'm not going there to explain our performance in the quarter. Hopefully it gives you a bit of color around market, the position that I've taken, why I've taken it based on what I see. Back to the calls. Yes.

Thank you. Our next question on the telephone line is from Caitlin Roberts from Canaccord. Your line is now open. Please go ahead.

Great. Thank you for taking the question. Maybe just starting with skin subs. How are you thinking about the recovery of this business as you noted it taking longer for the market to adapt and could this weakness bleed into 2027? Are there any efforts that you're making to really help the market adopt these changes?

Right. I didn't get your name. I think that's Caitlin. On skin subs, what's happening there? First, there's the utilization of skin sub across settings. It's in the hospital setting, it's in physician offices, it's in HOPD settings, so hospital outpatient settings. That's in mobile, right? What we're talking about here in terms of impact is greatest in the mobile setting, followed by physician office and hospital outpatient. By and large, in-hospital users have been impacted by the change in reimbursement. The second thing that we're talking about is what products get used. Right? You've got new entrants that have products that don't have a lot of clinical data supporting them.

You've got players like us and a couple of others who've been in the market for a long period of time, who've got products that have stood the test of time, and who've got a great deal of clinical data supporting the appropriate use in the clinic for those products. What is happening this year now is, as the change in reimbursement has gotten implemented, the mobile is where we expected the greatest impact, and that's what we're seeing. We, as Smith & Nephew, have had the least exposure in the mobile segment. We've had exposure in the physician office and HOPD in the physician office, and we've previously detailed that out. You can go back through our previous releases to see how we've parsed that. Right?

Generally speaking, that impact on mobile office is playing out as we thought. In the physician office, how they get reimbursed has changed. There's the mechanics of how you bill for it, whether it's per application or per episode of care, and that has changed. Right? As physician offices have adapted to the new ways of billing, that's introduced friction into the system. Right? That part has taken time. The reimbursement part of it has also been slower, and there are about four max within the U.S. that have gone through or are currently covered under the WISeR Model, which you've heard about either from us or from other disclosures, where there's an AI-based algorithm for how claims are reimbursed.

There's been friction associated with that. Right? What are we doing about it? We had always expected that the parts of our portfolio that we've always had uptake based on the clinical data and everything else, will get robust utilization, and we're seeing that. In fact, our OASIS product line is growing by leaps and bounds. Right? That's been great. As we move into 2027, where all of this administrative friction that I'm talking about, whether in terms of how claims get submitted or how claims get processed and how physicians then adapt their care to which products they use, all of that we expect to settle out in 2027 as the new calendar year or the new fiscal year in the United States turns over.

In that new world, we expect to be very well-positioned because we've got a product portfolio that's very relevant to that category. We've got a price point that works within the reimbursement level that the government has set at $127 per square centimeter. We've got the clinical evidence for the products that we aim to use. It's a great category, growing at double digit when products are used appropriately. Right? When it's relevant for a clinical setting, we're very well-positioned within that. It's really about navigating this year that's been a challenge, based on taking all of these factors into account, we provided a range of something like $20 million-$40 million. Right? We're navigating to the upper end of that range, we're still within that corridor that we had provided all of these dynamics.

Within that, we had also called for sequential improvement or normalization from first half to the second half. We have seen sequential improvement from Q1 to Q2, we expect that trend from first half to second half. Hopefully that unpacks the skin subtopic. Anything you want to add to that, John?

Just a little bit of color just on the numbers, because you remember at the beginning of the year, we said that revenues would be down 15%-20%. That was driven by a 20%-25% reduction in price, offset by a slight positive on volumes. That's what got us to the $20 million-$40 million range, and actually we were slap bang in the middle of that range, hence why we said $20 million-$40 million. What we've actually seen in practice is that actually revenues in the first half were off about 20% or so towards the upper end of that range. That's broadly speaking, what we're now forecasting for the full year. We're not expecting the price impact for 20%-25% that we've previously called out to be quite as harsh. The price impact will be less than that.

Equally, the converse, we're not necessarily expecting the volume to be as flat to positive. We are expecting now to be a slight decline in the volume. Volume is a little bit worse than we thought. Price, a little bit better than we thought. The net is that we're up towards the upper end of that $20 million-$40 million range, but it's not a million miles from where we thought we would be. What's really important is Deepak's point that sequentially, we've seen Q2 is better than Q1. We are seeing the market change just a little bit slower than we first forecast.

Right. Shall we come back to the room? David, you've had your hand up for a while.

Thanks, guys. David Adlington from JPMorgan. Sorry, John, just to come back on tariffs. The net amount I think was $5 million in the first half. I just wonder what the gross was. Was it all $50 million received in the first half? How do you expect that to play out through the second half? Just wondering how that was spread across the three businesses.

It's slightly focused towards Orthopaedics, then a little bit more so on sports, with wound being the least impacted is roughly the way it trades out. To be honest, it's not massively differentiated across all businesses. Basically we saw a net benefit in the first half between tariffs and the refunds of $5 million or so. We're expecting to see a net benefit in the second half between the tariffs and the refunds of about $1 million or so. For the overall year, it will be plus or minus $4 million, $5 million, or something of that nature. Effectively in both halves, on a year-on-year basis, the refund is effectively offsetting the tariff headwind.

Great. Thank you.

Just to be absolutely clear, we still expect to see a net tariff cost in the year, last year we saw a net tariff cost of $15 million. This year, we expect to see a net tariff cost of $10 million. The delta is the $5 million positive. Make sense?

Yeah.

I think we'll draw this to a close. Just to summarize then, while our revenue performance in the first half was of course below our expectations, we did deliver a strong profit performance, and in doing that, we demonstrated the inherent resilience in our business that we've built. We do remain confident of the actions we're taking to drive better performance more consistently over time.

Just want to take the moment to thank you for joining us today. Appreciate the engagement, the support, and your questions, and we do look forward to coming back and updating you on progress as we move forward. Thank you very much.

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.