Half Year 2024 Smith & Nephew PLC Earnings Call

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Operator: Wake for the safe hours, segment to be here.

Deepak Nath: Good morning. And welcome to the Smith & Nephew Second Quarter and Half Year Results presentation. I'm Deepak Nath from the Chief Executive Officer, and joining me is Chief Financial Officer John Rogers.

Smith: And welcome to the Smith, <unk> nephew second quarter and half year results presentation.

Deepak S. Nath: Good morning, and welcome to the Smith & Nephew second quarter and half-year results presentation. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is Chief Financial Officer John Rogers. I'm pleased to report a solid set of numbers that represents a good step toward our full-year guidance and further progress on our strategy to transform Smith & Nephew. On revenue, we delivered the acceleration that we expected with 5.6% growth in the quarter. The sports medicine business continued its good momentum across categories and regions.

Deepak Naphtha: And Deepak naphtha from the Chief Executive Officer, and joining me as Chief Financial Officer, John Rogers.

Deepak Nath: I'm pleased to report a solid set of numbers that represents a good step towards our full year guidance and further progress on our strategy to transform Smith & Nephew. On revenue, we delivered the acceleration that we expected, with 5.6% growth in the quarter. The sports medicine business continued its good momentum across categories and regions. The advancement management will return to growth with a better quarter in both bio-actives and in A.W.C. In orthopedics, all of trauma and extremities, robotics, and X-US recon have kept performing well, and we've made good progress with addressing our performance in U.S.

Deepak Naphtha: I'm pleased to report a solid set of numbers that represents a good step towards our full year guidance and further progress on our strategy to transform Smith <unk> nephew.

Deepak Naphtha: On revenue, we delivered the acceleration that we expected with five 6% growth in the quarter.

Deepak Naphtha: The sports Medicine business continued its good momentum across categories and regions.

Deepak S. Nath: In Advanced Wound Management, we return to growth with a better quarter in both bioactives and in AWC, in orthopedics, all of trauma, and extremities. Robotics, and Ex-US Recon have kept performing well, and we've made good progress with addressing our performance in U.S. Recreation. On profitability, 140 basis points of expansion is around the upper end of the guidance range we gave back in May. Operating leverage, and our productivity measures in the 12-point plan more than offset external pressures and have positioned us well to deliver a full-year target.

Deepak Naphtha: And advanced wound management, we returned to growth with a better quarter and both bioactive at an AWAC.

Deepak Naphtha: In orthopedics all of trauma and extremities.

Deepak Naphtha: Robotics and ex U S recon have kept performing well.

Deepak Naphtha: And we've made good progress with addressing our performance in U S recon.

Deepak Nath: recon. On profitability, 140 basis points of expansion is around the upper end of the guidance range we gave back in May. Operating leverage and our productivity measures in the 12 point plan more than offset external pressures and have positioned this well to deliver a full year target. It's very encouraging to see double-digit profit growth and also, importantly, translating into cash with 60% trading cash conversion, which is well ahead of where we were last year. My assessment when we began this turnaround was that Smith & Nephew was a portfolio of fundamentally good businesses with excellent technology and the right to win in every part of the company.

Deepak Naphtha: On profitability of 140 basis points of expansion is around the upper end of the guidance range. We gave back in May.

Deepak Naphtha: Operating leverage and our productivity measures and the 12 point plan more than offset external pressures and have positioned us well to deliver our full year target.

Deepak Naphtha: It's very encouraging to see double digit profit growth and also importantly, translating into cash with 60% trading cash conversion, which is well ahead of where we were last year.

Deepak S. Nath: It's very encouraging to see double-digit profit growth and, importantly, translating into cash, with 60% trading cash conversion, which is well ahead of where we were last year. My assessment, when we began this turnaround, was that Smith & Nephew was a portfolio of fundamentally good businesses, with excellent technology and the right to win, in every part of the company. The diagnosis of why we weren't at full potential was that we had challenges around execution and culture, and we developed a 12-point plan to address those remaining issues. The progress we've made since 2022 is evidence that we had the right diagnosis.

Speaker Change: My assessment when we began this turnaround was the Smith <unk> nephew was a portfolio are fundamentally good businesses.

Speaker Change: With excellent technology and the right to win in every part of the company.

Deepak Nath: The diagnosis of why we weren't at full potential was that we had challenges around execution and culture, and we developed the 12 point plan to address those remaining issues. The progress we've made since 2022 is evidence that we had the right diagnosis, and we are now firmly on the path to the better financial outcomes that we've been aiming for. The first half of 24 shows that we're delivering good results from the large majority of the portfolio, making up about 85% of sales. That is a transformation from where we were at the outset, and particularly in orthopedics, would be turned around the majority of the business.

Speaker Change: The diagnosis of why we werent that full potential was that we had challenges around execution and culture and we developed the 12 point plan to address those remaining issues.

Speaker Change: The progress we've made since 2022 is evidence that we had the right diagnosis.

Deepak S. Nath: And we are now firmly on the path to the better financial outcomes that we've been aiming for. The first half of 24 shows that we're delivering good results from the large majority of the portfolio, making up about 85% of sales. That is a transformation from where we were at the outset, particularly in orthopedics, and will turn around the majority of the business. Trauma and OUS Recon are now consistently delivering growth well above our history, and Corey has successfully developed from being a new challenger in the market to being recognized as a leading system, with strong adoption across a range of settings, from Ambulatory Surgical Care Centers to Academic Medical. And it's how we've done all of this that makes me convinced. The U.S. Recon is poised to do the same.

Speaker Change: And we are now firmly on the path to.

Speaker Change: To the better financial outcomes that we've been aiming for.

The first half of 'twenty four shows that we are delivering good results.

Speaker Change: From the large majority of the portfolio, making up about 85% of sales.

Speaker Change: That is a transformation from where we were at the outset.

Speaker Change: And particularly in orthopedics.

Speaker Change: We've turned around the majority of the business.

Deepak Nath: Trauma and OUS Recon are now consistently delivering growth well above our history, and Korea successfully developed from being a new challenger in the market to being recognized as a leading system with strong adoption across a range of settings. From ambulatory surgical care centers to academic medical centers. And it's how we've done all of this that makes me convinced that U.S. Recon is poised to do the same. Firstly, the specific ways we've driven the rest of orthopedics are exactly what we're doing in the U.S. by driving product availability, capital efficiency, and innovation delivery through the various initiatives of the 12-point plan.

Speaker Change: Trauma and O U S. Recon are now consistently delivering growth well above our history.

And Korea successfully developed from being a new challenger in the market.

Speaker Change: To being recognized as a leading system.

Speaker Change: With strong adoption across a range of settings.

Speaker Change: From ambulatory surgical care centers to academic medical centers.

Speaker Change: And it's how we've done all of this that makes me convinced that U S recon.

Is poised to do the same.

Speaker Change: Firstly, the specific ways, we've driven the rest of orthopedics or exactly.

Deepak S. Nath: Firstly, the specific ways we've driven the rest of orthopedics are exactly what we're doing in the US, driving Product Availability, Capital Efficiency, and Innovation Delivery through the various initiatives of the 12-Point Plan. Secondly, we've confirmed the strength of our technology by delivering outperformance with the same products in other markets. And thirdly, I can see the discipline and focus that have come from the 12-point plan and are being shipped to a verticalized, more accountable set of business units.

Speaker Change: What we're doing in the U S.

Speaker Change: But driving product availability.

Speaker Change: Capital efficiency.

Speaker Change: And innovation delivery through the various initiatives of the 12 point plan.

Deepak Nath: Secondly, we've confirmed the strength of our technology by delivering outperformance with the same products in other markets. Thirdly, I can see the discipline and focus that has come from the 12-point plan and are shipped to a verticalized, more accountable set of business units, and those benefits apply equally to every part of our portfolio.

Speaker Change: Secondly, we've confirmed the strength of our technology by delivering outperformance with the same products in other markets.

Speaker Change: And thirdly, I can see the discipline and focus that has come from the 12 point plan and our shift to a vertical lives more accountable set of business units.

Deepak S. Nath: And those benefits apply equally to every part of our portfolio. I'll return to some of these themes later, and John will talk more about cash returns and accountability in his presentation. For now, I'll take you through the details of the quarter.

Speaker Change: And those benefits apply equally to every part of our portfolio.

Deepak Nath: I'll return to some of these themes later, and John will talk more about cash returns and accountability in his presentation. For now, I'll take you through the detail of the quarter. Revenue in the quarter was $1.4 billion with 5.6% underlying growth and 4.6% reported, with 100 basis points headwind from foreign exchange. Growth also included a tailwind from one more trading day than in the prior year. All three business units accelerated sequentially, and I'll come to the detail in a moment. Geographically, the US grew at 3.6%, and other established markets grew 6.9%. Emerging markets grew at 9.5%, with strong double-digit growth across the Middle East, India, and Latin America.

Speaker Change: I'll return to some of these themes later and John will talk more about cash returns and accountability in his presentation.

For now I'll take you through the detail of the quarter.

John Rogers: Revenue in the quarter was one point put $4 billion with five 6% underlying growth and four 6% reported with a 100 basis points headwind.

Deepak S. Nath: Revenue in the quarter was $1.4 billion, with 5.6% underlying growth and 4.6% reported, with a hundred basis points headwind from Foreign Exchange. However, growth also included a tailwind for one more trading day than in the prior year. All three business units accelerated sequentially, and I'll come to the detail in a moment. Geographically, the U.S. grew at 3.6%, and other established markets grew 6.9%. Emerging markets grew at 9.5%, with strong double-digit growth across the Middle East, India, and Latin America.

Speaker Change: From foreign exchange.

John Rogers: Growth also included a tailwind.

John Rogers: For one more trading day than in the prior year.

John Rogers: All three business units accelerated sequentially and I'll come to the details in a moment.

John Rogers: Geographically the U S grew at three 6% and other established markets grew six 9%.

John Rogers: Emerging markets grew at nine 5% with strong double digit growth across the Middle East, India and Latin America.

Deepak Nath: For the business unit performance, I'll start with Orthopedics which grew at 5.8% underlying. Global needs and hips grew by 2.1% and 4.4%, respectively. The geographic trends in recent quarters continued with higher growth in the US segment, particularly in Europe. Almost half of our recon business is in those international markets where we're demonstrating what our portfolio can deliver with good execution. And even as we laugh, of course, laugh stronger comes. The US recon was still behind for the quarter as a whole, but there were encouraging signs of progress. Our operational improvements under the 12-point plan are now at goal, with both implants supply and now set availability at target levels.

John Rogers: For the business unit performance I'll start with orthopedics, which grew at five 8% underlying.

Deepak S. Nath: For the business unit performance, I'll start with orthopedics, which grew at 5.8% underlying. Global knees and hips grew by 2.1% and 4.4%, respectively. The geographic trends of recent quarters continued, with higher growth in the OUS segment, particularly in Europe. Almost half of our recon business is in those international markets where we're demonstrating what our portfolio can deliver with good execution. And even as we, of course, lap stronger comp

John Rogers: Global knees and hips grew by two 1% and 4.4% respectively.

Speaker Change: Did your graphic trends in recent quarters continued with higher growth in the O U S segment, particularly in Europe, almost half of our recon business is in those international markets, where we're demonstrating what our portfolio can deliver with good execution.

Speaker Change: And even as we lapped a course lap stronger comps.

Speaker Change: U S recon was still behind for the quarter as a whole, but there were encouraging signs of progress.

Deepak S. Nath: U.S. Recon was still behind for the quarter as a whole, but there were encouraging signs of progress. Our operational improvements under the 12-point plan are now at gold, with both implant supply and now set availability at target levels. And that's for both hips and knees as well.

Speaker Change: Our operational improvements under the 12 point plan are now at goal with both implant supply and now set availability of target levels and thats for both hips and knees as well.

Deepak Nath: And that's for both hips and knees as well. We're also seeing indicators of commercial effectiveness moving favorably, particularly around staff retention. Other recon grew 17.8% and reflects another good quarter of robotics placements, particularly in the US. We've also continued to develop our offering with the launch in June of the Choreograph preoperative planning and modeling. The launch makes Corey the only robotics system to offer a choice of image-free and image-based planning. And is another element in our approach of supporting a range of surge and preferences on a single platform. Chroma and extremities grew 11.8%, providing half of the overall orthopedics growth.

Deepak S. Nath: We're also seeing indicators of commercial effectiveness moving favorably, particularly around staff retention. Other recon grew 17.8% and reflects another good quarter of robotics placements, particularly in the U.S. We've also continued to develop our offering with the launch in June of the choreographed preoperative planning and modeling. The launch makes CORI the only robotics system to offer a choice of image-free and image-based planning and is another element in our approach to supporting a range of surgeon preferences on a single platform.

Speaker Change: We're also seeing indicators of commercial effectiveness moving favorably, particularly around staff retention.

Speaker Change: Other recon grew 17, 8% and reflects another good quarter of robotics placements, particularly in the U S.

Speaker Change: We've also continued to develop our offering with the launch in June of the choreograph pre operative planning and modeling.

Speaker Change: The launch makes Corey the only robotics system to offer a choice of imagery and image based planning and as another element in our approach of supporting a range of surgeon preferences on a single platform.

Deepak S. Nath: Trauma and extremities grew 11.8%, providing half of the overall orthopedics growth. The EVOS plating system continues to be a key driver within core trauma, and the growth contribution of Atos' shoulder is steadily increasing as we deploy capital, more capital, and recruit new surgeons. Sports medicine and ENT grew 7.6 in the quarter.

Speaker Change: Trauma and extremities grew 11, 8%.

Speaker Change: Providing half of the overall orthopedics growth.

Deepak Nath: The EVO's plating system continues to be a key driver within core trauma, and the growth contribution of ATO's shoulder is steadily increasing as he deployed capital, more capital, and convert new surgeons. Sports medicine in ENT grew 7.6% in the quarter. Within that, joint repair growth was 6%, including the expected headwind from volume-based procurement in China. But the implementation began only in May; we saw ordering patterns affected for the whole of the second quarter. Excluding China, joint repair growth would have been 11.8%, with the very strong quarter across our other major markets, our other markets. By product, the neat repair portfolio and regenerative were again key contributors, and were well advanced with the post-acquisition integration of Cardiheal, a GILI C.

Speaker Change: The Evo plating system continues to be a key driver within core trauma and the growth contribution of Ito shoulder is steadily increasing as you deploy capital more capital and converting new surgeons.

Sports Medicine, and Ian Tea grew seven six in the quarter.

Deepak S. Nath: Within that, joint repair growth was 6%, including the expected headwind from volume-based procurement in China. While the implementation began only in May, we saw ordering patterns affected for the whole of the second quarter. Excluding China, joint repair growth would have been 11.8%, with a very strong quarter across our other major markets or other markets. By product, the NEAP Repair Portfolio and RE-Janiton were again key contributors, and were well-advanced with the post-acquisition integration of Cartagena Agile C. That's one of our next-generation growth drivers. Early cohorts of sales reps have completed the training, and we're starting to build out patient and surgeon access. Orthoscopic enabling technologies grew by 8.7%.

Speaker Change: Within that joint repair growth was 6%, including the expected headwind from volume based procurement in China.

Speaker Change: While the implementation began only in may we saw ordering patterns affected for the whole of the second quarter.

Speaker Change: Excluding China joint repair growth would have been 11, 8% with a very strong quarter across our other major markets or other markets.

Speaker Change: By product the knee repair portfolio, and regenerated, where again key contributors and we're well advanced with the post integration post acquisition integration of car to heal a jealousy.

Deepak Nath: That's one of our next generation growth drivers. Early cohorts of sales reps have completed the training and were starting to build out patient and surgeon access. Our dystopic enabling technologies grew by 8.7%. Higher growth in the quarter came from the expected recovery in video capital sales and continued good performance from our radio frequency platform, both from core ablation and from wearable fast seal. ENT revenue growth of 11.6% was driven by our core tonsil and adenoid business. While underlying demand continues to grow well, I'd remind you that the next quarter will have a very strong primary comparator. Within the effect that the ENT grows in Q3 is likely to be around flat.

Speaker Change: That's one of our next generation growth drivers.

Speaker Change: Early cohorts of sales reps have completed their training and we're starting to build out patient and surgeon access.

Speaker Change: Arthroscopic, enabling technologies grew by eight 7%.

Deepak S. Nath: Higher growth in the quarter came from the expected recovery in video capital sales and continued good performance from our radio frequency platform, both from core ablation and from wearable fast seals. ENT revenue growth of 11.6% was driven by our core tonsil and adenoid visbos. While underlying demand continues to grow well, I'd remind you that the next quarter will have a very strong prior-year comparator, with the effect that ENT growth in Q3 is likely to be around flat.

Higher growth in the quarter came from the expected recovery in video capital sales and continued good performance for radiofrequency platform, both from core ablation and for wearable fast seal.

Speaker Change: Ian T revenue growth of 11, 6% was driven by our core core tonsil and adenoid business.

Speaker Change: While underlying demand continues to grow well I'd remind you that the next quarter, we'll have a very strong prior year comp.

Comparator within the effect that the anti growth in Q3 is likely to be around flat.

Deepak Nath: Looking now at advanced wood management would return to growth at plus 3.3% with recovery, as I said earlier, with both AWC and in bioactives. In AWC, 3% growth reflected continued strong performance in foams and anti-infectives and improvement in films. In bioactives, growth came from a strong sequential recovery in central, along with a more normalized prior year comparator. As we previously indicated, the recent quarter-to-quarter growth volatility of variability is quite normal for SANTIL, and we expect further improvement from the rest of the year. Offsetting SANTIL was a slower second quarter for our lead skin substitute product graphics ahead of the launch of a new version called Graphics Plus.

Speaker Change: Looking now at advanced wound management, which returned to growth at plus three 3% with recovery as I said earlier with both AWP and <unk> bioactive.

Deepak S. Nath: Looking now at advanced wound management with return to growth at plus 3.3%, with recovery, as I said earlier, with both AWC and bioactive. In AWC, 3% growth reflected continued strong performance in foams and anti-infectives and improvement in film. In bioactives, growth came from a strong sequential recovery in Santil, along with a more normalized prior-year comparison. As we've previously indicated, the recent quarter-to-quarter growth volatility or variability is quite normal for Central, and we expect further improvement from the rest of the year. Offsetting Santel was a slower second quarter for our lead skin substitute product, Graphix, ahead of the launch of a new version called Graphix Plus.

Speaker Change: In EWC, 3% growth reflected continued strong performance in foams and anti Infectives.

Speaker Change: An improvement in films.

Speaker Change: And bioactive growth came from a strong sequential recovery in central along with a more normalized prior year comparator.

Speaker Change: As we've previously indicated the recent quarter to quarter growth volatility or variability is quite normal for central and we expect further improvement from the rest of the year.

Speaker Change: Offsetting central was a slower second quarter for our lead skin substitute product graphics ahead of the launch of a new version called graphics plus.

Deepak S. Nath: Finally, Advanced Wound Devices revenue grew by 8%, led by our single-use negative pressure platform, PICO. Renesas Edge is also an important part of our growth plans and received the CE Mark in the quarter. We plan to launch it in Europe in the second half of the year, adding to the U.S. rollout that's currently underway. And with that, I'll hand it over to John. Thank you, Deepak.

Speaker Change: Finally.

Deepak Nath: Finally, advanced wood devices revenue grew by 8%, led by our single-use negative pressure platform, PICO. Redis' edge is also an important part of our growth plans and received CE mark in the quarter.

Speaker Change: Advanced wound devices revenue grew by 8% led by our single use negative pressure platform Pico.

Speaker Change: <unk> edge is also an important part of our growth plans and received CE mark in the quarter.

Deepak Nath: We plan to launch in Europe in the second half of the year, adding to the US rollout that's currently underway.

Speaker Change: We plan to launch in Europe in the second half of the year, adding to the U S rollout that's currently underway.

John Rogers: With that, I'll hand it over to John.

Speaker Change: And with that I'll hand, it over to John.

John Rogers: Thank you, Deepak. It's a pleasure to be sent to you all in person this morning. Today's announcement actually marks four months into my time as CFO, and as you'd expect, I've spent a lot of my time digging into the detail of the company, the 12-point plan, and that's very much an ongoing exercise, but it has already identified opportunities to go further with some of the initiatives. So, as I take you through the first half financials, I'd like to share some of my thinking on our opportunities and financial priorities in the coming years. Ported revenue was up 3.4%, including a foreign exchange headwind of 90 basis points.

John Rogers: Thank you Deepak, it's a pleasure to be presenting to you all in in person. This morning.

John Rogers: It's a pleasure to be presenting to you all in person this morning. Today's announcement actually marks four months into my time as CFO, and as you'd expect, I've spent a lot of my time digging into the details of the company, the 12-point plan, and the financials. That's very much an ongoing exercise, but it has already identified opportunities to go further with some of the initiatives. So, as I take you through the first half financials, I'd like to share some of my thinking on our opportunities and financial priorities in the coming years. I'll start with the P&L. Revenue for the half was $2.8 billion, up 4.3% on an underlying basis compared to half won in 2023. However, reported revenue was up 3.4%, including a foreign exchange headwind of 90 basis points.

John Rogers: At today's announcement actually marks four months into my time as CFO and as you'd expect I spent a lot of my time digging into the details of the company. The 12 point plan and the financials.

John Rogers: That's very much an ongoing exercise, but it has already identified opportunities to go further with some of the initiatives.

John Rogers: As I take you through the first half financials I'd like to share some of my thinking on our opportunities and financial priorities in the coming years.

John Rogers: I'll start with the P&L revenue for the half was $2 $8 billion up four 3% on an underlying basis compared to half one 2023.

John Rogers: Reported revenue was up three 4%, including a foreign exchange headwind of 90 basis points.

John Rogers: As you can see, growth was higher in our surgical businesses, with AWM growth reflecting the slow first quarter. Looking at the trading P&L, growth profit was 1.98 billion with a growth margin of 70.1%, which is 30 basis points of expansion over prior year. We also delivered positive leverage across our operating expenses, with good control of our cost base. That resulted in the 140 basis points of trading margin expansion to 16.7%, around the upper end of our guidance range and trading profit growth of 12.8% to 471 million. Slide 12 shows a more detailed trading margin bridge.

John Rogers: As you can see, growth was higher in our surgical businesses, with AWM growth reflecting the slow first quarter. Looking at the trading pier now, gross profit was 1.98 billion with a gross margin of 70.1%, which is 30 basis points of expansion over the prior years. We also deliver positive leverage across our operating expenses with good control of our cost base. That resulted in 140 basis points of trading margin expansion to 16.7% at the upper end of our guidance and trading profit growth of 12.8% to $471 million.

John Rogers: As you can see growth was higher in our surgical businesses with AWS, great, reflecting the slow first quarter.

John Rogers: Looking at the trading P&L gross profit was 1.98 billion with a gross margin of 71%, which is 30 basis points of expansion over prior year.

John Rogers: We also delivered positive leverage across our operating expenses with good control of our cost base.

John Rogers: That resulted in 140 basis points of trading margin expansion to 16, 7% around the upper end of our guidance range and trading profit growth of 12, 8% to $471 million.

John Rogers: Slide 12 shows a more detailed trading margin bridge.

John Rogers: Slide 12 shows a more detailed trading margin bridge. Going through the moving parts, we absorbed headwinds of 120 basis points from input cost inflation and merit increases and 50 basis points from transactional effects, but these were more than offset by 120 basis points of revenue leverage from price and volume and 190 basis points from productivity improvements, mainly for manufacturing but also across all other areas of operating expenses. If I look back at the same bridge from last year, the overall profile of puts and takes is much more favorable today.

John Rogers: Going through the moving parts, we absorbed headwinds of 120 basis points from input cost inflation and merit increases, and 50 basis points from transactional FX. But more than offset then with 120 basis points of revenue leverage from price and volume, and 190 basis points from productivity improvements, mainly for manufacturing but also across all other areas of operating expenses. If I look back at the same bridge from last year, the overall profile of puts and takes is much more favorable today. Inflation pressure was less than half of what it was in 2023, and we were able to fully offset with revenue leverage.

John Rogers: Going through the moving parts, we absorbed headwinds of 120 basis points from input cost inflation and merit increases and.

John Rogers: And 50 basis points from transactional FX, but more than offset them with 120 basis points of revenue leverage from price and volume.

John Rogers: 190 basis points through productivity improvements, mainly for manufacturing, but also across all other areas of operating expenses.

John Rogers: If I look back at the same bridge from last year. The overall profile of puts and takes is much more favorable today inflation.

John Rogers: Inflation pressure was less than half of what it was in 2023, and we were able to fully offset it with revenue leverage. That means that much of what we gain through efficiency savings is now dropping straight through to trading profits. I'll talk later about where there are further savings opportunities beyond what we initially planned. Looking further down the P&L, adjusted earnings per share grew by 8% to 37.6%. That's slightly less than trading profit due to the higher tax and interest expense that we pointed to in our technical guidance at the start of the year. The interim dividend of 14.4 cents per share is unchanged.

John Rogers: Inflation pressure was less than half of what it was in 2023, and we were able to fully offset with revenue leverage.

John Rogers: That means that much of what we gained through efficiency savings is now dropping straight through to trading profit. I'll talk later about where there are further savings opportunities beyond what we initially planned for. Looking further down the P&L, adjusted earnings per share grew by 8% to 37.6%. That's slightly less in trading profit due to the higher tax and interest expense that we pointed to in our technical guidance at the start of the year. The interim dividend of 14.4 cents per share is unchanged. Trading cash flow in the period was 284 million, with trading cash conversion is 60%, well ahead of the 26% in 2023.

John Rogers: That means that much of what we gain through efficiency savings is now dropping straight through to trading profit.

John Rogers: I'll talk later about where there are further savings opportunities beyond what we initially planned for.

John Rogers: Looking further down the P&L adjusted earnings per share grew by 8% to 37 six cents.

John Rogers: But slightly less in trading profit due to the higher tax and interest expense that we pointed to in our technical guidance at the start of the year.

John Rogers: The interim dividend of $14.04 per share is unchanged.

John Rogers: Trading cash flow in the period was $284 million with trading cash conversion of 60% well ahead of the 26% in 2023.

John Rogers: Trading cash flow in the period was 284 million, with trading cash conversion of 60%, well ahead of the 26% in 2023. The improvement came from lower working capital outflows, particularly from inventory and payables. And as you know, inventory has been a focus of the 12-point plan, so it's an encouraging step for inventory data to be broadly leveled off after many years of increases. For the fall year, we're targeting trading cash conversion around 85%, which is a return to our historical levels and includes the usually higher conversion in the second half of the year.

John Rogers: The improvement came from lower working capital outflows, particularly from inventory and payables. And as you know, inventory has been a focus of the 12 point plan, so it's an encouraging step for inventory days have broadly leveled off after many years of increases. For the full year, we're targeting trading cash conversion around 85%, which is a return to our historical levels and includes the usually higher conversion in the second half of the year. Free cash flow was positive at 39 million, with improved trading cash conversion partially offset by restructuring costs related to the 12 point plan.

The improvement came from lower working capital outflows, particularly from inventory and payables and as you know inventory has been a focus of the $12 plan. So it's an encouraging step for inventory days are broadly level golf after many years of increases.

John Rogers: For the full year, we're targeting trading cash conversion around 85%, which is a return to our historical levels and includes the usually higher conversion in the second half of the year.

John Rogers: Free cash flow was positive at $39 million with improved trading cash conversion, partially offset by restructuring costs related to the 12 point plan, we should see our free cash flow improve as profit steps up in planned restructuring charges are lower in the second half of the year.

John Rogers: Free cash flow was positive at £39 million, with improved trading cash conversion partially offset by restructuring costs related to the 12-point plan. We should see our free cash flow improve as profit steps up and planned restructuring charges are lower in the second half of the year. More broadly, we are past the peak of restructuring, and we expect it to improve further in 2025. I'd like to go into a little bit more detail on inventory.

John Rogers: We should see our free cash flow improve as profit steps up and planned restructuring charges are lower in the second half of the year. More broadly, we are past the peak of restructuring, and we expect it to improve further in 2025. I'd like to give a little bit more detail on inventory. Slide 15 shows the trajectory of DSI, both for the group and the business units. With 553 overall days, broadly flat compared to the end of half-form 2023. That we had some initial build-up of inventory, early in the year to support product launches including ATOS and Renner's Edge, and then started to see days reduce again as we exited the first half.

John Rogers: More broadly we are past the peak of restructuring and we expect it to improve further in 2025.

Speaker Change: I'd like to go into a little bit more detail on inventory slide 15 shows the trajectory of DSO and.

John Rogers: Slide 15 shows the trajectory of DSI, both for the group and the business unit, with 553 overall days broadly flat compared to the end of half one 2023. We had some initial build-up of imagery early in the year to support product launches including ATOS and Renesas Edge, and then started to see days reduce again as we exited the first half. Behind the overall number, there is also some encouraging progress on MIPS.

Speaker Change: Both for the group and the business units with 553 overall days broadly flat compared to the end of half one 2023.

Dave: We had some initial buildup of inventory early in the year to support product launches, including a toss and renesys edge and they started to say, Dave who Keith again as we exited the first half.

John Rogers: Behind the overall number is also some encouraging progress on MIX. One of the drivers of our long-term growth inventory was past overproduction of slow-turning SKUs, and that has now reversed. Just in half one, we reduced inventory volume at the slowest turning units by 9%. Given that the offsetting increases are in new growth products, that amounts to significant improvement in our inventory health. Our goal remains to reduce both DSI's and the absolute dollar value of inventory. We expect improvement across all business units in the second half of 2024, as the new product launches progress, and as we continue to deploy instrument sets.

Dave: Behind the overall number is also some encouraging progress on mix.

John Rogers: One of the drivers of our long-term growth in inventory was passed over production of slow-turning SKUs, and that has now reversed. Just in half a year, we reduced inventory volume at the slowest turning units by 9%. Given that the offsetting increases are in new-grade products, that amounts to a significant improvement in our inventory health. Our goal remains to reduce both DSIs and the absolute dollar value of imagery.

Dave: One of the drivers of our long term growth in inventory was Paul stay with production slow turning skus and that has now reversed just in half one we reduced inventory volume, but the slowest turning units by 9%.

Dave: Given that the offsetting increases our new growth products that amounts to a significant improvement in our inventory health.

Dave: Our goal remains to reduce both DSO eyes, and the absolute dollar value of inventory, we expect improvement across all business units in the second half of 2024 as the new product launches progress and as we continue to deploy instruments sets.

John Rogers: We expect improvement across all business units in the second half of 2024 as the new product launches progress and as we continue to deploy instrument sets. Longer term improvement will mainly be down to systematically better alignment of our production plans with commercial needs, down to the SKU level. That's enabled by our improved sign-up process that we established under the 12-point plan and have now fully embedded. To conclude on the first half financials, net debt ended the half year at £3.1 billion.

John Rogers: Long-term improvement will mainly be down to systematically better alignment of our production plans, with commercial needs, down to the SKU level. That's enabled by our improved site process that we established under the 12-point plan and have now fully embedded. To conclude on the first half financials, NetDeath ended the half year at 3.1 billion. This is an increase of 310 billion from the start of the year, including 202 billion from paying the final dividend for 2023 and 186 from M&A, which is principally the acquisition of Carter Hill. The leverage ratio finished the half at 2.2 times adjusted EBITDA, with the increase in the start of the year reflecting our usually seasonality from timing of cash generation and dividend payments. We expect to end the year with a leverage ratio of around two times.

Dave: Longer term improvement will mainly be down to just systematically better alignment of our production plans with commercial needs down to the SKU level. That's enabled by our improved salt process that we established under the 12 point plan and have now fully embedded.

Dave: To conclude on the first half financials net debt ended the half year at $3 1 billion. This is an increase of 310 billion from the start of the year, including 202 million paying the final dividend for 2023, and 186 from M&A, which is principally the acquisition of Cardinal Hill.

John Rogers: This is an increase of £310 billion from the start of the year, including £202 million from paying the final dividend for 2023 and £186 million from M&A, which is principally the acquisition of Castle. The leverage ratio finished the half at 2.2x adjusted EBITDA, with the increase from the start of the year reflecting our usual seasonality and the timing of cash generation and dividend payments. We expect to end the year with a leverage ratio of around 2.0x.

Dave: The leverage ratio finished the half at two two times adjusted EBITDA with the increase in the start of the year, reflecting a usually seasonality and from timing of cash generation and dividend payments, we expect to end the year with a leverage ratio of around two times.

John Rogers: As we continue to improve our cash generation, capital allocation will become more of a focus, and I'll come to our thinking around that in a moment.

Dave: As we continue to improve our cash generation capital allocation will become more of a focus and I'll come to our thinking around that in a moment.

John Rogers: As we continue to improve our cash generation, capital allocation will become more of a focus, and I'll come to our thinking around that in a moment. Next, I'll cover our outlook. After a strong second quarter, we're confident in our four-year revenue guidance of five to six percent underlying growth.

John Rogers: Next, I'll cover our outlook. After a strong second quarter, we're confident in our four-year revenue guidance of 5% to 6% underlying growth. That implies higher growth in the second half than the first, so I'll set out where that will come from. Within all the PDX, you should expect a stronger half-to-overall consisting of continued good growth in trauma and extremities, OUS needs and hips and other recon. Together with improvement in U.S. Recon, as we build on our progress during the second quarter, we also expect improved advanced wound management with further growth recovery, particularly in biorectives. In sports medicine, growth will continue to be tempered by DPP, which will be a headwind for the whole of the second half.

Dave: Next I'll cover our outlook after a strong second quarter, we are confident in our full year revenue guidance of 5% to 6% underlying growth that implies higher growth in the second half than the first so I'll set out where that will come from.

John Rogers: That implies higher growth in the second half than in the first, so I'll set out where that will come from. Within orthopaedics, you should expect a stronger half-two overall consisting of continued good growth in trauma and extremities, OUS knees and hips, and other repairs, together with improvement in US recon as we build on our progress during the second quarter. We also expect improved advanced wound management with further growth and recovery, particularly in bioactive wounds. Sports Medicine is rated to continue to be tempered by DBP, which will be a headwind for the whole of the second half.

Dave: Within orthopedics, you should expect a stronger half to overrule consisting of continued good growth in trauma and extremities of U S knees and hips and other recon.

Dave: Together with improvement in U S recon as we build on our progress during the second quarter.

Dave: We also expect improved advanced wound management with further growth recovery, particularly in bioactive.

Dave: And sports Medicine growth will continue to be tempered by the BP, which will be a headwind for the whole of the second half in E. N. T. You should also note that more challenging comparisons as we lap the period of Backorder clearance helped growth in the third quarter of 2023.

John Rogers: In ENT, you should also note a more challenging comparator as we lap the period of backorder clearance that helped growth in the third quarter of 2023. And finally, second half growth will benefit from two additional trading days versus 2023 compared to unchanged trading days in the first half. As we've previously commented, that benefit should mainly be seen in our surgical business. For phasing within the half, the benefit of the trading days will come in the fourth quarter, although given where those trading days fall, we do not expect a fully proportional step-up.

John Rogers: In ENTs, you should also note a more challenging comparator, as we lack the period of back-order clearance that helped growth in the third quarter of 2023. And finally, second half growth will benefit from two additional trading days versus 2023, compared to unchanged trading days in the first half. As we previously commented, that benefit should mainly be seen in our surgical businesses. For phasing within the half, the benefit that the trading days will come in the fourth quarter, although given where those trading days fall, we do not expect a fully proportional step up. Our trading margin guidance has also unchanged, at least 18%, while the margin headwind from VBP will step up in the second half.

Dave: And finally second half growth will benefit from two additional trading days versus 2023 compared to unchanged trading days in the first half.

Dave: As we've previously commented that benefits should mainly be seen in our surgical businesses.

Dave: For phasing within the half the benefit of trading days will come in the fourth quarter without giving away those trading days before we do not expect a fully proportionate step up.

Dave: Our trading margin guidance is also unchanged at least 18% while the margin headwind from VB people step up in the second half, we expect to see our usual seasonal higher profitability.

John Rogers: Our Trading Margin Guidance is also unchanged, at least 18%, while the Margin Headwind from VBP will step up in the second half. We expect to see our usual season at higher profitability. Slide 18 shows the bridge to the second half margin of 19.3% that's implied by our four-year target. And starting from 19.6% from the prior year, you'll see that the drivers are mostly very similar to what we saw in the first half.

John Rogers: We expect to see our usual season at higher profitability. Slide 18 shows the bridge to the second half margin of 19.3% that's implied by our four-year target, and starting from 19.6% from the prior year, you'll see that the drivers are mostly very similar to what we saw in the first half. We expect headwinds of around 130 basis points from input cost inflation and merit increase, 50 basis points from transactional effects, and tailwinds of around 120 basis points from revenue leverage and 150 basis points from efficiency savings. The additional factor will be around 130 basis points of headwind from China VBP pricing, with that lower joint repair pricing in place the whole of the second half.

Dave: Slide 18 shows the bridge for the second half margin of 19, 3% as implied by our full year target and starting from 19, 6% from the prior year, you'll see that the drivers are mostly very similar to what we saw in the first half.

John Rogers: We expect headwinds of around 130 basis points from Input Cost Inflation and Merit Increase, 50 basis points from Transactional FX, and tailwinds of around 120 basis points from Revenue Leverage and 150 basis points from Efficiency Safe. The additional factor will be around 130 basis points of headwind from China BBP prices, with that lower joint repair pricing in place the whole of the second. That's a gross number representing the pure price impact before any volume or cost mitigation, and it's consistent with our previous indication of 70 basis points for the four years.

Dave: We expect headwinds of around 130 basis points from input cost inflation, and merit increase 50 basis points from transactional FX and tailwind of around 120 basis points from revenue leverage and 150 basis points from efficiency savings.

Dave: The additional factor will be around 130 basis points of headwind from China, BBB pricing with that lower joint repair pricing in place for the whole of the second half that's a gross number representing the pure price impact before any volume or cost mitigation and it's consistent with our previous indication of 70 basis points for the full year.

John Rogers: That's a gross number, representing the pure price impact before any volume or cost mitigation, and it's consistent with our previous indication of 70 basis points for the four-year. Our progress in half one also keeps us on track for our 2025 margin target of at least 20%. As in the first half of 2024, leverage from revenue growth should broadly offset the effects of input cost inflation and merit increases, with a significant step up in the pace of cost savings to drive the overall margin expansion. About two-thirds of this will be in manufacturing and distribution, including the benefits of our manufacturing footprint optimization coming through as we move through the more advanced stages of our restructuring plans, but with continued productivity improvements also continuing in our operating expenses.

Dave: Our progress in half one also keeps us on track for our 2025 margin target of at least 20%.

John Rogers: Our progress in half one also keeps us on track for our 2025 margin target of at least 25%. As in the first half of 2024, leverage from revenue growth should broadly offset the effects of input cost inflation and merit increases, with a significant step up in the pace of cost savings to drive the overall margin. About two-thirds of this will be in manufacturing and distribution, including the benefits of our manufacturing footprint optimisation coming through as we move through the more advanced stages of our restructuring plans, but with continued productivity improvements also continuing in our operating expenditure. We still have to fully annualise China VVP in the first half, but when considered net of mitigation and other offsets, we do not expect a meaningful incremental effect on the 2025 trading market.

Dave: As in the first half of 2024 leverage from revenue growth should broadly offset the effects of input cost inflation and merit increases with a significant step up in the pace of cost savings to drive the overall margin expansion.

Dave: About two thirds of this will be in manufacturing and distribution, including the benefits of our manufacturing footprint optimization coming through as we move through the more advanced stages of our restructuring plans, but with continued productivity improvements also continuing in our operating expenses.

John Rogers: We still have to annual fully annualized China VBP in the first half, but when considered net as mitigation and other offsets, we do not expect a meaningful incremental effect on the 2025 trading margin. However, there is still an initial 2024 headwind, and as you are aware, it was not known at the time we set our margin target. We continue to seek opportunities, therefore, to make our business more efficient and offset such headwinds. Building on the existing work of the 12-point plan, we have identified further saving opportunities by applying a zero-based budgeting approach. This means that we can drive the cost savings higher than we initially planned for, and also for longer.

Dave: We still have two annual fully annualize China V. BP in the first half, but when considered net of mitigation and other offsets we do not expect a meaningful incremental effect on the 2025 trading margin.

However, there is still an issue or 2024 headwind and as you're aware it was not known at the time, we set our margin target.

John Rogers: However, there is still an initial 2024 headwind, and as you're aware, it was not known at the time we set our margin target. We continue to seek opportunities, therefore, to make our business more efficient and offset such headwinds. Building on the existing work of the 12-point plan, we have identified further saving opportunities by applying a zero-based budgeting approach.

Dave: We continue to seek opportunities therefore can make our business more efficient and offset such headwinds.

Dave: Building on the existing work of the 12 point plan, we have identified further saving opportunities by applying a zero based budgeting approach.

John Rogers: This means that we can drive the cost savings higher than we initially planned for and also for longer. We now see total growth savings at £325 million to £375 million, which, to be clear, includes both the £200 million we already announced in 2023 and also further savings newly identified in this additional review. This will help us get to the 2025 margin target and continue to accumulate through 2027, with indicative phasing as shown here in the chart. I want to emphasize two things about this.

Dave: This means that we can drive the cost savings higher than we initially planned for and also for longer.

John Rogers: We now see total growth savings at 325 to 375 million, which, to be clear, includes both the 200 million we already announced in 2023 and also further savings newly identified in this additional review. This will help us get to the 2025 margin target and continue to accumulate through 2027 with indicative phasing shown here in the child. I want to amplify two things about this work. First, you can see on the right that there are comprehensive and detailed plans behind this. Over 40 initiatives across seven work streams, with specific target savings and timings that each. The largest part will be from manufacturing and procurement, but there are savings across all parts of our business.

Dave: We now see total gross savings of 325 to three in central 5 million, which to be clear includes both the 200 billion, we already announced in 2023 and also further savings newly identified in this additional review.

Dave: This will help us get to the 28 2025 margin Targa and continues to accumulate through 2027 with indicative phasing shown here in the chart.

Dave: I want to emphasize two things about this work.

John Rogers: First, you can see on the right that there are comprehensive and detailed plans behind them, over 40 initiatives across 7 workstreams with specific target savings and timings for each initiative. The largest part will be from manufacturing and procurement, but there are savings across all parts of our business. Second, this is not a new restructuring. It's an extension of what we can deliver from the 12-point plan. And as such, you should expect that there will not be significant additional restructuring charges beyond what we've previously guided.

Dave: First you can see on the right that there are comprehensive and detailed plans behind this.

Dave: Over 40 initiatives across seven work streams with specific target savings in timings for each initiative.

Dave: The largest part will be from manufacturing and procurement.

Dave: There are savings across all parts of our business.

John Rogers: Second, this is not a new restructuring plan. It's an extension of what we can deliver from the 12-point plan. And as such, you should expect that there will not be significant additional restructuring charges beyond what we've previously guided.

Dave: Second this is not a new restructuring plan.

Dave: It's an extension of what we can deliver from the 12 point plan.

Dave: And as such you should expect that there will not be significant additional restructuring charges beyond what we previously guided.

Dave: We're also planning a change in our segmental reporting.

John Rogers: We're also planning a change in our segmental reporting. After the move to the business unit model, this is the next step we envisage to help embed greater focus and accountability on costs as a normal way of operating. Under our current reporting, we have 211 million of corporate costs in the first half, which is around 9% of the total Smith & Nephew cost base. There are a lot of different things, including numbers, such as GNA costs of HR, Finance, Legal and GBS, IT costs, shared sales, support functions and some shared R&D costs. In reality, the majority aren't pure central costs, but are services to the business units.

John Rogers: We're also planning a change in our segmental reporting. After the move to the business unit model, this is the next step we envisage to help embed greater focus and accountability on costs as a normal web operator. Under our current reporting, we have £211 million of corporate costs in the first half, which is around 9% of the total Smith & Nephew cost base.

Dave: After the move to the business unit model. This is the next step we envisage to help impact greater focus and accountability on costs as a normal way of operating.

Dave: Under our current reporting we have $211 million of corporate costs in the first half which is around 9% of the total Smith <unk> nephew cost base.

Dave: There are a lot of different things, including such as G&A costs in HR finance legal and GBS I T.

John Rogers: There are a lot of different things included in the number, such as G&A costs from HR, finance, legal, and GBS, IT costs, shared sales support functions, and some shared R&D costs. In reality, the majority aren't pure central costs but are services to the business unit. We started the process of adopting a full allocation of those attributable costs to the business units, and from the full year 2024 reporting onwards, only costs that are specifically supporting the PLC will remain as high.

Dave: Costs shared sales support functions and some shared R&D costs.

Dave: In reality, the majority on pure central costs, but our services to the business units.

John Rogers: We started the process of adopting a full allocation of those trivial costs to the business units. And from the four-year 2024 reporting onwards, only costs that are specifically supporting the PLC will remain as corporate. As a result, corporate costs will be around 10-15% of what you can see today. By making this change, both the business units and the corporate centre will have greater accountability for all of their costs and better visibility on the really fully allocated underlying returns. Coming now to those returns, Smith & Nephew has talked less about return on invested capital in the past, but we're making it more of a priority at both the group and the business unit level.

Dave: We started the process of adopting a full allocation of those attributable costs to the business units and from the full year 2024 reporting onwards, only costs that are specifically supporting the plc will remain as corporate.

Dave: As a result, corporate cost will be around 10% to 15% of what you can see today by.

John Rogers: As a result, corporate costs will be around 10-15% of what you can see today. By making this change, both the business units and the corporate center will have greater accountability for all of their costs and better visibility on the really fully allocated underlying return. Coming now to those returns, Smith & Nephew has talked less about return on invested capital in the past, but we're making it more of a priority at both the group and the business unit level.

Dave: By making this change both the business units and the corporate center will have greater accountability all of their costs and better visibility on the really fully allocated underlying returns.

Dave: Yeah.

Speaker Change: Coming now to those returns with nephew his talk less about rich.

Speaker Change: Return on invested capital in the past, but.

Speaker Change: But we're taking we're making it more of a priority at both the group and the business unit level.

John Rogers: There's good opportunity to drive returns higher through both profitability and asset utilisation. We've given our target for margin expansion from both operating leverage and cost savings under the 12-point plan, and the drag from restructuring and the EUMDR project should reduce over time. I've already touched on how we're working to reduce inventory and both the manufacturing network optimisation and instruments that utilisation investors should help drive fixed-asset turns. Given our progress already, we expect that the group rowing will start to rise again in 2024. By division, that will come from orthopedics and advanced green management, while sports medicine absorbs Carter Hill and VBP.

Speaker Change: There's good opportunity to drive returns higher through both profitability and asset utilization.

John Rogers: There's a good opportunity to drive returns higher through both profitability and asset utilisation. We've given our target for margin expansion from both operating leverage and cost savings under the 12-point plan, and the drag from restructuring and the EU MDR project should reduce over time. I've already touched on how we're working to reduce inventory, and both the manufacturing network optimisation and instrument set utilisation initiatives should help drive fixed asset terms. Given our progress already, we expect that the group ROIC will start to rise again in 2024. By division, that will come from orthopaedics and advanced wound management, while sports medicine absorbs Carter-Hill and VBP.

Speaker Change: We've given a target for margin expansion from both operating leverage and cost savings under the 12 point plan and the drag from restructuring and the EU MTR projects should reduce over time.

Speaker Change: I've already touched on how we're working to reduce inventory in both the manufacturing network optimization and instrument set utilization initiatives should help drive fixed asset turns.

Speaker Change: Given our progress already we expect that the group ROIC will start to rise again in 2024.

By Division that would come from orthopedics and advanced wound management, while sports medicine absorbs cost of hail and Pvp.

John Rogers: As I mentioned earlier, capital allocation will become a more active consideration as our profitability and cash flow improve.

Speaker Change: As I mentioned earlier, our capital allocation will become a more active consideration as a profitability and cash flow improves so I've taken the opportunity to refresh our policy, which is shown on slide 23.

John Rogers: As I mentioned earlier, capital allocation will become a more active consideration as our profitability and cash flow improves. So I've taken the opportunity to refresh our policy, which is shown on slide 23. The first priority remains investing in the business to drive organic growth and to meet our sustainability targets. The focus on ROIC at business unit level and the greater allocation of central costs will give us the visibility to target our investment more effectively and will prioritise investment in the areas where we can expect to see the highest incremental returns on capital.

John Rogers: So I've taken the opportunity to refresh our policy, which is shown on slide 23. The first priority to remain investing in the business to drive organic growth and to meet our sustainability targets. The focus on rowing, business unit level and the greater allocation of central costs will give us the visibility to target our investment more effectively and will prioritise investment in the areas where we can expect to see the highest incremental returns on... Caxle. The second priority is to invest in acquisitions. In line with our current approach, we'll target new technologies and high growth segments, whether it is a strong strategic fit and we've transactions that meet our financial criteria.

Speaker Change: The first priority remains investing in the business to drive organic growth and to meet our sustainability targets the.

John Rogers: The second priority is to invest in acquisitions. In line with our current approach, we'll target new technologies and high-growth segments where there is a strong strategic fit and with transactions that meet our financial criteria. The third priority is to maintain an optimal balance, and inappropriate, on Leverage. Leverage will continue to target investment grade credit rates, and we're updating our target leverage ratio to around 2x net debt to adjusted EBITDA. We have a progressive dividend policy, and from 2025 onwards, we expect a payout ratio of around 35-40% of EPSA. For 2024, we expect the total dividend to be flat year-on-year.

Speaker Change: The focus on ROIC business unit level, and the greater allocation of central costs will give us the visibility to target our investment more effectively and we'll prioritize investment in the areas, where we can expect to see the highest incremental returns on capital.

Speaker Change: The second priority is to invest in acquisitions in.

Speaker Change: In line with our current approach, we're targeting new technologies and high growth segments, where there is a strong strategic fit and with transactions that meet our financial criteria.

John Rogers: The third priority is to maintain an optimal balance sheet and an appropriate dividend. On leverage, we'll continue to target investment grade credit ratings, and we're updating our target leverage ratio to around two times net debt to adjusted EBITDA. We have a progressive dividend policy, and from 2025 onwards, we expect a payout ratio of around 35% to 40% of EPSA. For 2024, we expect the total dividend to be flat year on year, and finally, we'll return surplus capital to shareholders via share buybacks, subject to these target balance sheet metrics.

Speaker Change: The third priority is to maintain an optimal balance sheets.

On an appropriate dividend.

Speaker Change: On leverage we will continue to target investment grade credit ratings, and we're updating our target leverage ratio to around two times net debt to adjusted EBITDA.

Speaker Change: We have a progressive dividend policy and from 2025 onwards, we expect a payout ratio of around 35% to 40% of EPS.

Speaker Change: For 2024, we expect the total dividend to be flat year on year.

Speaker Change: And finally, we'll return surplus capital to shareholders via share buybacks subject to these target balance sheet metrics.

John Rogers: And finally, we'll return surplus capital to shareholders via share buybacks subject to these target balances. I'd like to finish by summarizing my key areas of focus for the finance team, as shown on the slide. There's efficiency in driving cost savings to support margin expansion and reinvestment for growth. The expansion of our 12-point plan, Productivity Targets, is an early example of that, and will also drive greater visibility and accountability through how we report both internally and externally, as with the move to full absorption of attributable central costs. The third focus is cash conversion.

John Rogers: I'd like to finish by summarising my key areas of focus for the finance team shown on this live. First, there's efficiency in driving cost savings to support margin expansion and reinvestment for growth. The expansion of our 12-point productivity target is an early example of that. Second, we'll also drive greater visibility and accountability through how we report both internally and externally, as with the move to full absorption of attributable central costs. A third focus is cash conversion, and that's both on trading cash conversion, including reducing working capital, and also free cash flow by reducing restructuring charges. Finally, we have a renewed focus on improving return on invested capital.

Speaker Change: I'd like to finish by summarizing my key areas of focus for the finance team shown on the slide.

John Rogers: And that's both on trading cash conversion, including reducing working capital, and also free cash flow by reducing restructuring. And finally, we have a renewed focus on improving return on investment. We're establishing greater visibility of capital returns at the business unit level, and we'll make use of that to drive improvement for both the group and the individual business. Part of that is to have a disciplined approach to capital allocation in line with our updated framework. Taken together, this is a wide-ranging commitment. Drive improved financial performance. [inaudible] And with that, I'll hand it back to you. Thank you, Jan.

Speaker Change: First there's efficiency and driving cost savings to support margin expansion and reinvestment for growth.

Speaker Change: Spansion about 12 point plan productivity targets is an early example of that.

Speaker Change: Second.

Speaker Change: We'll also drive greater visibility and accountability through how we report both internally and externally as with the move to full absorption of attributable central costs.

Speaker Change: A third focus is cash conversion and that's both on trading cash conversion, including reducing working capital and also free cash flow by reducing restructuring charges.

Speaker Change: And finally, we have a renewed focus on improving return on invested capital.

John Rogers: We're establishing greater visibility of capital returns at the business unit level, and we'll make use of that to drive improvement for both the group and the individual business units. Part of that is to have a disciplined approach to capital allocation in line with our updated framework.

Speaker Change: We're establishing greater visibility of capital returns of the business unit level.

Speaker Change: And we'll make use of that to drive improvement for both the group and the individual business units.

Speaker Change: And part of that is to have a disciplined approach to capital allocation in line with our updated framework.

Deepak Nath: Taken together, this is a wide-ranging commitment to drive improved financial performance and create share out of value, and with that, I'll hand back to Deepak. Thank you, John. So, as I said in my introduction, we recognize the start of this turnaround, that while Smith and Nephew is a portfolio of fundamentally good businesses, we have a series of challenges around execution and culture that we're holding us back. We said about addressing those challenges with a comprehensive 12-point plan, which is summarized on this slide. Should be familiar to you. It's nearly two years now since we first announced the program, so I'd like to take a moment to reflect on how far we've come.

Speaker Change: Taken together.

Speaker Change: This is a wide ranging commitment to drive improved financial performance and create shareholder value.

Speaker Change: And with that I'll hand back to Deepak.

Deepak Naphtha: Thank you John.

Deepak Naphtha: <unk>.

Deepak S. Nath: So, as I said in my introduction, we recognized at the start of this turnaround that while Smith & Nephew is a portfolio of fundamentally good businesses. We had a series of challenges around execution and culture that were holding us back. This set about addressing those challenges with a comprehensive 12-point plan, which is summarized on this slide, should be familiar to you. It's nearly two years now since we first announced this program, so I'd like to take a moment to reflect on how far we've come.

Deepak Naphtha: So as I said in my introduction.

Speaker Change: We recognize that started this turnaround that was Smith <unk> nephew as a portfolio are fundamentally good businesses.

Speaker Change: We had a series of challenges around execution and culture that were holding us back.

This set about addressing those challenges with a comprehensive 12 point plan.

Speaker Change: Which is summarized on this slide should be familiar to you.

Speaker Change: It's nearly two years now since we first announced the program so I'd like to take a moment to reflect on how far we've come.

Deepak Nath: Slide 27 has some of our achievements. There's a lot on here, and that reflects the scale of the transformation that we've delivered, both by activity and also, importantly, culture. There are three key things I'd like to particularly call out. First is a successful rewiring of orthopedics where we would address the longstanding challenges around getting products to customers. At the start of the plan, we had both implant shortages and rising inventory, and on the capital side, both instruments shortages and poor utilization. We've now turned all of that around. Implant availability has risen to our target levels across the key brands, and we've stopped the rise in inventory days at the same time.

Speaker Change: Slide 27 has some of our achievements.

Deepak S. Nath: Slide 27 shows some of our achievements. There's a lot on here, and that reflects the scale of the transformation that we've delivered, both by activity and, also importantly, culture. There are three key things I'd like to particularly call out.

Speaker Change: There's a lot on here and that reflects the scale of the transformation that we've delivered.

Both by activity.

Speaker Change: And also importantly culture.

Speaker Change: There are three key things I'd like to particularly call out.

Speaker Change: First is the successful re wiring of orthopedics.

Deepak S. Nath: First is the successful rewiring of orthopedics, where we've addressed the longstanding challenges around getting products to customers. At the start of the plan, we had both implant shortages and Rising Inventory. And on the capital side, both instrument shortages and poor utilization.

Speaker Change: We've addressed a longstanding challenges around getting products to customers.

Speaker Change: At the start of the plan, we had both implants shortages.

Speaker Change: And rising inventory.

Speaker Change: And on the capital side, both instruments shortages and poor utilization.

Speaker Change: We've not turn all of that around.

Deepak S. Nath: We've now turned all of that around; implant availability has risen to our target levels across the key brands, and we've stopped the rise in inventory days at the same time. There's a similar picture with capital, where set availability is now at gold, and Seth Terns has risen 25% since the start of 2022. For the majority of orthopedics, this operational improvement has already produced better sales growth. The second point to highlight is the breadth of our productivity improvement. We've worked out all the levers at the same time, including product pricing, procurement, and manufacturing.

Speaker Change: Implant availability has risen to our target levels across the key brands and.

Speaker Change: And we've stopped the ryzen inventory days at the same time.

Deepak Nath: This is a similar picture with capital where set availability is now at goal and set turns have risen 25% since the start of 2022. For the majority of orthopedics, this operational improvement has already produced better sales growth. The second point to highlight is the breadth of our productivity improvements. We've worked up all levels at the same time, including product pricing, procurement, and manufacturing. Clearly, the full benefit isn't yet in our recorded margins, but you should see it more clearly as we move through 24 and into 25, and particularly as we optimize our manufacturing footprint with four facility closures that we've now announced.

Speaker Change: This is a similar picture with capital.

Speaker Change: We're set availability is now at goal.

Speaker Change: And set turns have risen 25% since the start of 2022.

Speaker Change: For the majority of orthopedics. This operational improvement has already produced better sales growth.

Speaker Change: The second point to highlight is the breadth of our productivity improvements.

Speaker Change: We've worked at all levers at the same time, including product pricing procurement.

Speaker Change: And manufacturing.

Deepak S. Nath: Clearly, the full benefit isn't yet in our reported margin, but you should see it more clearly as we move through 24 and into 25, and particularly as we optimize our manufacturing footprint with four facility closures that we've now announced. And third, we've continued to drive the businesses that were already performing well. The verticalized business unit structure means that sports and MOOND have stayed focused through the changes that were happening elsewhere and have delivered on their own set of key initiatives.

Speaker Change: Clearly the full benefit isn't yet in our reported margins, but you should see it more clearly as we move through 'twenty, four and into 'twenty, five and particularly as we optimize our manufacturing footprint with four facility closures that we've now announced.

Deepak Nath: And third, we've continued to drive the businesses that were already performing well. The verticalized business unit structure means that Sports and Moon have stayed focused through the changes that were happening elsewhere and have delivered on their own set of key initiatives. In sports, we've trebled the pace of cross-division deals to the point where 10% of the U.S. Capital sales are with cross division support. In Moon, we've brought a new growth platform to our major markets with Renesis Edge. We do understand there's a lot of interest, and where we still have more to do, and I'll spend a bit more time on our progress and orthopedics.

Speaker Change: And third we've continued to drive the businesses that we're already performing well.

Speaker Change: The vertical is business unit structure means that sports and wound have stayed focused.

Speaker Change: Through the changes that were happening elsewhere.

Speaker Change: And have delivered on their own set of key initiatives.

Deepak S. Nath: In sports, we've trebled the pace of cross-division deals to the point where 10% of US capital sales are with cross-divisional support. In MUND, we've brought a new growth platform to our major markets with Renesas Edge. We do understand there's a lot of interest and where we still have more to do. And I'll spend a bit more time on our progress in orthopedics. Importantly, we've already seen clear examples of operational improvements turning into revenue growth and flexibility, such as in trauma and extremities and an OUS report.

Speaker Change: In sports, we've trebled the pace of cross division deals to the point, where 10% of U S capital sales are with cross divisional support.

Speaker Change: And mood, we brought a new growth platform to our major markets with Renesys edge.

Speaker Change: We do understand there's a lot of interest and where we still have more to do and I'll spend a bit more time on our progress in orthopedics.

Deepak Nath: Importantly, we've already seen clear examples of operational improvements turning into revenue growth inflections. That's in trauma and extremities and in OUS recon. These are both high performing segments now, and when we started the 12 point plan, they were in a very different place, and trauma had been a drag on overall group growth for many years. The elements of how we've turned trauma into an important growth driver map very closely to the plan initiatives. We delivered key innovation with the U.S. launch of Evo's large in the third quarter of 2022 and that completed our plates and screws offering.

Speaker Change: Importantly, we've already seen clear examples of operational improvements turning into revenue growth inflections.

Speaker Change: That's a trauma and extremities and an O U S recon.

Deepak S. Nath: These are both high-performing segments now, and when we started the 12-point plan, they were in a very different place, and trauma had been a drag on overall group growth for many years. The elements of how we've turned trauma into an important road driver map very closely to the Plot Initiative. We delivered key innovation with the U.S. launch of EVOS LARGE in the third quarter of 2022, and that completed our plates and screws office.

Speaker Change: These are both high performing segments now and when we started the 12 point plan they were in a very different place.

Speaker Change: And trauma had been a drag on overall group growth for many years.

The elements of how we've turned trauma into an important growth driver Matt.

Matt: Map very closely to the planned initiatives.

Matt: We delivered key innovation with the U S launch of Evo is large.

The third quarter of 2022, and that completed our plates and screws offering.

Deepak Nath: An extra implant availability stepped up with Evo small first hitting its life or target in 2022, third quarter 2022, and then staying consistently at goal in subsequent quarter. The final piece was capital availability when set deployments started to infect upwards in the first quarter of 2023. With these things in place, along with good commercial execution, implant sales accelerated in the quarters that followed, getting to growth above our history and, in fact, above the market. The growth outlook has been further supplemented by our entry into extremities, particularly with the recent long of the ATO shoulder. US Recon is not as far along in this path, but you can see that the same key elements are in there as well.

Matt: Next our implant availability stepped up with Evo small first hitting its life our target in 2022 quite Q third quarter 2022, and then stay consistently at goal in subsequent quarters.

Deepak S. Nath: Next, our implant availability stepped up, with EvoSmall first hitting its LIFER target in 2022, third quarter 2022, and then staying consistently at goal in subsequent quarters. The final piece was capital availability, when SEC deployments started to inflect upwards in the first quarter of 2023, with these things in place along with good commercial execution. Implant sales accelerated in the quarters that followed, getting to growth above our history and, in fact, above the market.

Matt: The final piece was capital availability when set deployments started to inflect upwards in the first quarter of 2023.

Matt: With these things in place along with good commercial execution in.

Matt: Implant sales accelerated in the quarters that followed getting to growth above our history and in fact above the market.

Matt: The growth outlook has been further supplemented by our entry into extremities, particularly with the recent launch of the eight O shoulder.

Deepak S. Nath: The Growth Outlook has been further supplemented by our entry into extremities, particularly with the recent launch of the ATOS shoulder. U.S. Recon is not as far along on this path, but you can see that the same key elements are in there as well. On implant supply, Key Product Lifer reached its target in the fourth quarter of 2023, and Capital Availability followed soon after, with hip set shipment also reaching its goal in Q4, and knee set shipments reaching their goal in the second quarter of 2024.

Matt: U S recon is not as far along this path, but you can see that the same key elements are in there as well.

Deepak Nath: On implant supply, key product lifer reached its target in the fourth quarter of 2023, and capital availability followed soon after, with hip set shipment also at goal in Q4, and knee sets reaching their goal in the second quarter. This is also being supported by a steady stream of product launches over time, such as the newly launched short stem hip. So we're also making progress on improving recon across commercial execution. You'll remember this slide from the last quarter. We had already done a lot, including establishing new business unit leadership with Craig Gaffin, who had previously led our trauma and extremities turnaround.

Matt: On implant supply key product like for reached its target in the fourth quarter of 2023.

Matt: And capital availability, followed soon after with hips set shipment also at goal in Q4 and nice sets, reaching their goal in the second quarter of 2024.

Deepak S. Nath: This is also being supported by a steady stream of product launches over time, such as the newly launched ShortStem HIP. So we're also making progress on improving recon across commercial execution. You'll remember this slide from the last course.

Matt: This is also being supported by a steady stream of product launches over time.

Matt: The newly launched short stem hit.

Matt: So we're also making progress on improving recon across commercial execution.

Speaker Change: You'll remember this slide from the last quarter, we had already done a lot, including establishing new business unit leadership with Craig Gaffin, who had previously led our trauma and extremities turnaround.

Deepak S. Nath: We had already done a lot, including establishing new business unit leadership with Craig Gaffin, who had previously led our trauma and extremities turnaround. And the team has made good progress on the remaining issues in the second quarter, with those items in orange on the slide. I just highlighted better capital availability, and we now have a more settled commercial team. Key leadership roles are filled, staff turnover is back to a low level, and the new growth-oriented compensation plan is now fully in place between OUS recon, trauma, and extremities, and other recon. 60% of orthopedics is already growing well.

Deepak Nath: And the team has made good progress on the remaining issues in the second quarter, with those items in orange on the slide. I just highlighted better capital availability, and we now have a more settled commercial team. He leadership roles are filled, staff turnover is back to a low level, and the new growth-oriented compensation plan is now fully in place. Between OUS Recon, trauma and extremities, and other recon, 60% of orthopedics is already growing well. We know that US recon is taking longer to turn, but we also know that what we're doing works. The US is selling the same product portfolio that's performing well in Europe.

Speaker Change: And the team has made good progress on the remaining issues in the second quarter with those items in orange on the slide.

Speaker Change: I, just highlighted better capital availability and we now have a more settled commercial team.

Speaker Change: Leadership roles are filled staff turnover is back to a low level and the new growth oriented compensation plan is now fully in place.

Speaker Change: Between O U S recon trauma and extremities and other recon.

Speaker Change: 60% of orthopedics is already growing well.

Deepak S. Nath: We know that U.S. recon is taking longer to turn, but we also know that what we're doing works. The U.S. is selling the same product portfolio that's performing well in Europe, even with some different market dynamics. It's following the same playbook that has already succeeded in U.S. trauma, and it's being driven by the same leader.

Speaker Change: We know that U S recon is taking longer to turn but.

Speaker Change: But we also know that what we're doing works.

Speaker Change: The U S is selling the same product portfolio, that's performing well in Europe.

Deepak Nath: Even with some different market dynamics, it's following the same playbook that has already succeeded in US trauma, and it's being driven by the same leaders. Supporting that, we've continued the high cadence of innovation, which is central to our strategy. In recon, we've announced the 510(k) clearance of catalyst stem. This is a new, shorter hip stem suited to the direct anterior approach, which represents about half of the US market and is growing at double digits. Catalyst stem is designed to be easier to prepare an insert, including simpler instrumentation in just one tray, so it will make us more competitive and differentiated in this fastest-during segment of hips.

Speaker Change: Even with some different market dynamics.

Speaker Change: Following the same playbook that has already succeeded in U S trauma, and it's being driven by the same leaders.

Speaker Change: Supporting that we've continued the high cadence of innovation.

Deepak S. Nath: Supporting that, we've continued the high cadence of innovation, which is central to our strategy. In Recon, we announced the 510K clearance of Catalyst STEM. This is a new, shorter hip STEM suited to the direct anterior approach, which represents about half of the U.S. market and is growing at double digits. Catalyst STEM is designed to be easier to prepare and insert, including simpler instrumentation in just one tray, so it will make us more competitive and differentiated in this fastest-growing segment of hips.

Speaker Change: Which is central to our strategy.

Speaker Change: And recon, we've announced five 10-K clearance of catalysts stem.

Speaker Change: This is a new sugar hip stem suited to the direct anterior approach, which represents about half of the U S market and is growing at double digits.

Catalysts stem is designed to be easier to prepare an insert including simpler instrumentation and just one tray. So it will make us more competitive and differentiated in this fastest growing segment of hips.

Deepak Nath: In robotics, we've continued to develop Corey with the addition of preoperative planning. We have a uniquely flexible platform at Corey, supporting both Burr and Saul-based resection, and now also image-free and image-based planning for knee surgery. and hip will soon follow. This takes us to 10 new features on Corey since 2022, and that has resulted in higher adoption, with an installed base that's 70% larger than it was at the start of 2022. And importantly, utilization is also increasing. The innovation delivery has continued across the portfolio as well. The full commercial launch of ATO's shoulder was in Q2, after the initial steps were made last year in 2023.

Speaker Change: In robotics, we have continued to develop Corey.

Deepak S. Nath: In robotics, we've continued to develop Cori, with the addition of preoperative planning. We have a uniquely flexible platform at Cori, supporting both Burr and Saw-based resection, and now also image-free and image-based planning for knee surgery, and HIP will soon follow. This takes us to 10 new features on Cori since 2022, and that has resulted in higher adoption, with an installed base that's 70% larger than it was at the start of 2022.

Speaker Change: With the addition of preoperative planning.

Speaker Change: We have a uniquely flexible platform it Corey supporting both behr and solve based resection and now also image free and image based planning for knee surgery.

Speaker Change: And hip will soon follow.

Speaker Change: This takes us to 10 new features.

Speaker Change: And Corey since 2022.

Speaker Change: And that has resulted in higher adoption with an installed base, that's 70% larger than it was at the start of 2022.

Deepak S. Nath: And importantly, utilization is also important. Innovation delivery has continued across the portfolio as well. The full commercial launch of Ato's Shoulder was in Q2, after the initial steps were made last year in 2023. We're also commercializing Graphics Plus, which is a new version in the Graphics Skin Substitute range that is easier to handle and targets the growing post-acute market.

Speaker Change: And importantly utilization is also increasing.

Speaker Change: The innovation delivery has continued across the portfolio as well the full commercial launch of <unk> a shoulder was in Q2.

Speaker Change: After the initial steps were made last year in 2023.

Deepak Nath: We're also commercializing Graphics Plus, which is a new version in the graphics skin substitute range, that is easier to handle and targets the growing post-acute market. Finally, I'd like to connect all of this to what we said we would do at last year's Meet the Management event. On growth, our aim is to be consistently a higher growth company than in the past, with annual revenue growth of at least 5%. After a good Q2, we're on track for a third consecutive year of delivery against that, based on the three components of higher growth we identified at that time.

Speaker Change: We're also commercializing graphics, plus which is a new version and the graphics skin substitute range.

Speaker Change: That is easier to handle and targets the growing post acute market.

Speaker Change: Finally, I'd like to connect all of this to what we said we would do at last year's meet the management event.

Deepak S. Nath: Finally, I'd like to connect all of this to what we said we would do at last year's Meet the Management event. On growth, our aim is to be consistently a higher growth company than in the past, with annual revenue growth of at least 5%. After a good Q2, we're on track for a third consecutive year of delivery against that, based on the three components of higher growth we identified at that time.

Speaker Change: On growth our aim is to be consistently a higher growth company than that than in the past with annual revenue growth of at least 5%.

Speaker Change: After a good Q2, we're on track for a third consecutive year of delivery against that based on the three components of higher growth we identified at that time.

Deepak Nath: The first was fixing the foundations of orthopedics, as I've just set out. Most of the business units is now growing strongly, and the team and the necessary operational fixes are in place for the rest. The second was to continue the strength of sports medicine and advanced room management. We're delivering that as well. Sports medicine maintained its long-term market-up performance in 2023, and although AWM has quoted a quarter volatility, it also had its third consecutive year of better growth, as 6.4% versus 5% for the market, and is set to accelerate in the second half. And we're very proud of the innovation we've delivered across our portfolio.

Deepak S. Nath: The first was fixing the foundations of orthopedics, as I've just set out. Most of the business unit is now growing strongly, and the team and the necessary operational fixes are in place for the rest. The second was to continue the strength of sports medicine and advancement in management.

Speaker Change: The first was fixing the foundation support the Phoenix as I've just set out most of the business unit is now growing strongly on the team and the necessary operational fixes are in place for the rest of.

Speaker Change: The second was to continue the strength of sports medicine, and advanced wound management.

Deepak S. Nath: We're delivering that as well. Sports Medicine maintained its long-term market-share performance in 2023, and although AWM has quarter-to-quarter volatility, it also had its third consecutive year of better growth, 6.4% versus 5% for the market, and is set to accelerate in the second half. And we're very proud of the innovation we've delivered across our portfolio. We've launched more than 70 new products in the last five years, and the three key launches we define as the next wave of innovation are now starting to ramp up. Atos, Renesas Edge, and Jillis.

Speaker Change: We're delivering that in as well.

Speaker Change: Sports Medicine maintained its long term market outperformance in 2023, and although AWS has quarter to quarter volatility.

Speaker Change: It also had its third consecutive year of better growth of six 4% versus 5%.

Speaker Change: For the market.

Speaker Change: And is set to accelerate in the second half.

Speaker Change: And we're very proud of the innovation, we've delivered across our portfolio.

Deepak Nath: We've launched more than 70 new products in the last five years, and the three key launches we defined as the next wave of innovation are now starting to ramp up. Atos, Renisus Edge, and Gylici. John has set out our progress on profitability and returns. Again, the trajectory is improving. The trading margin expansion in the first half puts us on track for this year's target, and we have further margin drivers in the pipe for 2025 and beyond. Cash flow is improving, working capital costs are falling, and restructuring costs are set to also improve. The 12-point plan is increasingly delivering the outcomes that we designed at four.

Speaker Change: We've launched more than 70, new products in the last five years and the three key launches we define as the next wave of innovation are now starting to ramp up.

Speaker Change: Eight dose renesys edge and jealousy.

Speaker Change: John has set out our progress on profitability and returns again the trajectory is improving.

Deepak S. Nath: John has set out our progress on profitability and returns. Again, the trajectory is improving. The trading margin expansion in the first half puts us on track for this year's target, and we have further margin drivers in the pipeline for 2025 and beyond. Cash flow is improving, working capital costs are falling, and restructuring costs are set to improve. The 12-Point Plan is increasingly delivering the outcomes that we designed it for.

John Rogers: The trading margin expansion in the first half puts us on track for this year's target and we have further margin drivers in the pipe for 2025.

Speaker Change: And beyond.

Speaker Change: Cash flow is improving working capital costs are falling and restructuring costs are set to also improve.

Speaker Change: The 12 point plan is increasingly delivering the outcomes that we designed it for we are.

Deepak Nath: We identified the necessary actions for each priority, and they translated first into improving KPIs, then into better revenue growth. But these results, you can see that better profitability and cash flow is starting to come through as well. There's still work to do, and the financial benefits will continue to accumulate. Supported by a new embedded culture of focus and accountability, and I'm confident. and the shareholder value will follow.

Deepak S. Nath: We identified the necessary actions for each priority, and they translated first into improving KPIs, then into better revenue growth. With these results, you can see that better profitability and cash flow are starting to come through as well. There's still work to do, and the financial benefits will continue to accumulate, supported by a new embedded culture of focus and accountability. Shareholder value will follow. So with that, John and I will be happy to take... I don't know if they want to moderate.

Speaker Change: <unk> the necessary actions for each priority and they translated first into improving kpis that into better revenue growth, but these results you can see that better profitability and cash flow is starting to come through as well.

Speaker Change: There is still work to do.

Speaker Change: And the financial benefits will continue to accumulate.

Speaker Change: Supported by new embedded culture of focus and accountability and I'm confident.

Speaker Change: That shareholder value will follow.

Operator: So, with that, John and I will be happy to take your questions.

Speaker Change: So with that John and I will be.

John Rogers: Be happy to take your questions.

John Rogers: Philip you want to moderate.

John Rogers: Okay.

Deepak S. Nath: First on margin, so how much conservatism is baked into the guidance for a full year, and actually, could there be a meaningful upside to that 18%? Then on Cori, you talked about the record quarter of placements, sorry, revenues in Q2. How does that translate into placements and utilisation? And do you have any targets you can share for placements for the full year? And then lastly on cost savings, so on the additional 125 million and 175 million of cost savings you identified, you said that there was no additional investment needed, but then you talked about restructuring charges in 2025, so can you just tell us what your expectations are for those? So let me take the Corey question, your second question first, and I'll hand it over to John so he can take the first and third.

Philip: Three please first on margin.

Jack Reynolds: First on margin, so how much is it that is baked into the guidance for four years, and actually could there be a means of upside to the 18 percent?

Philip: How much conservatism is baked into the guidance for full year.

Speaker Change: Would be meaningful upside to the 80%.

Jack Reynolds: Then on quarry, do you talk about the record quarter of placements in, sorry, revenues in Q2?

Corey: And then on Corey.

So you talked about the record quarter.

Corey: So your revenues in Q2.

Jack Reynolds: How does that translate into placements and utilization, and do you have any target you to share for placements for the four years?

Corey: How does that translate in placements and utilization.

Speaker Change: Of any targets you can share for the full year.

Speaker Change: And then lastly on cost savings. So the additional 120 575 million of cost savings you identified you said that there was no additional needed and then you talked about.

Jack Reynolds: And then lastly on cost savings, so on the additional 125, 175 million of cost savings are identified, you said that there was no additional investment needed.

Jack Reynolds: Then you talked about restructuring charges in 2025, so can you just tell us what your expectations are for those charges?

Speaker Change: Structuring charges in turn 25, so can you just tell us what your expectations are for those charges.

Deepak Nath: Sure, thanks, Jack. So let me take the Corey question, your second question, first. I'll hand it over to John so he can take the first and third. So, on Quarry, we haven't issued quarterly targets, right? We're tracking; we report revenue from robotics and other recon. What I would say is, in terms of placements, we're into double digit range in terms of growth, period over period. What I'm particularly encouraged by is actually the resonance that it's having across a range of care settings. Not only in the ASCs and regular size hospitals, but it's also in academic medical centers.

Speaker Change: Sure. Thanks, Jack So let me take the core question. Your second question first and I'll hand, it over to Jonathan you can take take you out of the first and third so on Corey.

Deepak S. Nath: So on Corey, we haven't issued quarterly targets, right? We're tracking, and we report revenue from robotics and other recon. But what I would say is in terms of placement, We're into the double-digit range in terms of growth, period over period. What I'm particularly encouraged by is actually the resonance that it's having across a range of care settings, not only in ASCs and regular-sized hospitals, but it's also in academic medical centers. In the past, I've said we haven't necessarily been particularly strong in that part of our business, in AMCs. And what I'm particularly pleased about is that we're getting traction in that segment as well. So it's serving, or it's progressing as I had hoped it would.

Speaker Change: We haven't issued quarterly targets right we're tracking.

Speaker Change: We report revenue from from a robotics and other recon, but what I would say is in terms of placements.

Speaker Change: We're into double digit range in terms of growth period over period, what I'm, particularly encouraged by is actually the resins that it's having across a range of care settings, not only in the asc's and regular sized hospitals, but it's also an academic medical centers and in the past I've said, we haven't necessarily been particular.

Deepak Nath: And in the past, I've said we haven't necessarily been particularly strong in that part of our business in AMCs. And what I'm particularly pleased about is that we're getting traction in that segment as well. So it's serving, or it's progressing as I'd hoped it would. The important thing also is we're not just placing these out there. We're placing it where there's a demand for it, where there's a need for it, and where your surgeons are using them. So utilization is actually improving as well.

Speaker Change: Really strong in that part of our business and am sees and what I'm, particularly pleased about is that we're getting traction in that segment as well. So it's serving or it's progressing as I had hoped it would be important thing also is we're not just placing these out there, replacing it where there's a demand for it where there's a need for it and where your surgeons are using them. So.

Deepak S. Nath: The important thing also is we're not just placing these out there; we're placing them where there's a demand for them, where there's a need for them, and where your surgeons are using them. So utilization is actually improving as well. So we'll come back at year-end and tell you how we did in the year. I don't want to get into this quarterly kind of what it is. But what I'll leave you with is I'm pleased with not only the placements but also the fact that they're being used to a healthy level. So I'll leave you with that, and John, if you want to take another two.

Speaker Change: Nation is actually improves improving as well so we will come back at year end and tell you. How we did in the year I don't want to get into this quarterly kind of what it is but what I'll leave you with is I'm pleased with not only placements, but also the fact that they are being used to.

Deepak Nath: So we'll come back at year end and tell you how we did in the year. I don't want to get into this quarterly kind of what it is. What I'll leave you with is I'm pleased with not only placements, but also the fact that they're being used to healthy levels.

Speaker Change: To a healthy levels right. So.

John Rogers: So I'll leave you with that, and John, do you want to take another two? Sure. Your first question regarding margin guidance and conservatism. I mean, the guidance is the guidance. There is no conservatism built in. Obviously, for the first half, as we said, 16.7 was around the upper end of the range that we gave. It's important to remember, though, that we've got the full impacts of VBP, trying to VBP coming in the second half. And we signal that in the margin, the margin slide. So, with that uncertainty, we're comfortable in reiterating our 18% plus guidance for the full year.

John Rogers: So I'll leave you believe that and John do you want to take the other two Shaw you.

John Rogers: Sure. Your first question regarding Margin Guidance and Conservatism. I mean, the guidance is the guidance. There is no conservatism built in.

John Rogers: Your first question regarding margin guidance and conservatism I mean, the guidance is the guidance.

John Rogers: There is no conservatism built in obviously for the first half as we said 16.7 was around the upper end of the range that we gave.

John Rogers: Obviously, for the first half, as we said, 16.7 was around the upper end of the range that we gave. It's important to remember, though, that we've got the full impacts of VBP, China VBP, coming in the second half, and we signal that in the margin slide, so with that uncertainty, we're comfortable in reiterating our 18% plus guidance for the full year. But I wouldn't assume, just because there's been a strong first half, that there's any beat in terms of the cost, the restructuring cost question. I think we signaled a very strong. 12-point plan that would be sort of circa 270, 275 million or so of restructuring costs associated with it. That guidance remains the same today. Now, we will see probably circa...

Speaker Change: It's important to remember, though that we've got the full impacts of ABP Chinese EVP coming in the second half.

Speaker Change: And we signaled that in the margin the margin slide with that with that uncertainty, where we're comfortable in reiterating our 18% plus guidance for the full year, but I wouldn't assume just because there's been a strong first half that theres any beat to that.

John Rogers: But I wouldn't assume just because there's been a strong first half that there's any beat to that.

John Rogers: In terms of the cost of the restructuring cost question, I think we signal at a very start of the 12-point plan. That would be sort of a circle 272.75 million or so of restructuring costs associated with the 12-point plan. That guidance remained the same today. Day. Now, we will see probably circa, you know, say, 80 million or so in this year's number on restructuring. And if you do your math, that means there's a small rump likely to fall into 2025, probably around 10, 15 million or so, but we're not anticipating any further step up in restructuring.

In terms of the cost the restructuring cost question I think we signaled at the very start of the 12 point plan that'll be sort of circa 270 tuners in 5 million or so of restructuring costs associated with the $12 plan.

Speaker Change: That guidance remains the same today.

Speaker Change: Now we will see probably circa you know I'd say 80 million or so in this year's number on restructuring and if you do your math that means there's a small rump likely to fall into 2025, probably around 10 to 15 million or site, but we're not anticipating any further step up in restructuring than they may have.

John Rogers: It would be around, let's say, £80 million or so in this year's number on restructuring. And if you do your math, that means there's a small rump likely to fall into 2025, probably around £10-15 million or so. But we're not anticipating any further step up in restructuring. There may be some small nominal costs associated with the additional savings that we've identified. But we'll take those above the line, where we're comfortable, for guidance on restructuring. David Haddington, J.D.

John Rogers: Then there may be some small cost, nominal cost associated with the additional savings that we've identified, but we'll take those a month of line, and that's where we're comfortable with the guidance on restructuring costs.

Speaker Change: Some small cost nominal costs associated with the additional savings that we've identified but we will tell you that is above the line.

Speaker Change: Where we're comfortable with.

Speaker Change: The guidance on restructuring costs.

Speaker Change: Okay.

David Adlington: Thanks, David Adlington; Jane Morgan. Firstly, just on your additional focus on returns, that was quite interesting. Could that lead you to reassess whether some of the low-return businesses still remain part of the portfolio? And then secondly, also margins, but maybe we should think about the additional cost savings you've found. Now, obviously supporting next year's margins, but beyond next year, obviously, when it begins looking to 2026, how do you think about the margin's directory beyond 25?

Speaker Change: Thanks, David Adlington JP Morgan Firstly, just on your additional.

John Rogers: Morgan, firstly, just on your additional focus on returns, I thought it was quite interesting. Could that lead you to reassess whether some of the lower-return... and then secondly, also on margins. Maybe if you think about the additional cost savings you've found now. Supporting next year's margins, but beyond next year, obviously, we're going to begin to look into 2021 to think about the margins directory beyond 25. Yes, I'll take the last question on margins.

David Adlington: Focus on returns that was quite interesting.

Speaker Change: Could that lead you to reassess whether some of the low return businesses still remain part of the portfolio.

Speaker Change: And then secondly on margins, but.

Speaker Change: Maybe if you think about the additional cost savings you've found now also supporting next year's margins, but beyond Nextgen.

But can you look into 'twenty 'twenty six how do we think about the margin trajectory beyond the 24.

Deepak Nath: So I'll take that, John. Yes, I'll take the last question on margin structure. I think we're very comfortable in reiterating this year's guidance, so we're comfortable in the target set for next year.

Speaker Change: So I'll take that John.

John Rogers: I think we're very comfortable with reiterating this year's guidance. We're comfortable with the target set for next year. I'm not going to get drawn into a conversation about what's going to happen in 2026 and beyond.

Speaker Change: Yeah. So I'll take the last question on a margin structure I think we're very comfortable in reiterating this year's guidance and we're comfortable in the target set for next year I'm not going to get drawn into a conversation on what's going to happen in 2026 and beyond obviously you will see from the.

Deepak Nath: I'm not going to get drawn into a conversation on what's going to happen in 2026 and beyond. Obviously, you'll see from the trajectory on the chart, the cost savings will assume we've got a little bit more coming through in 2026 and a little bit more coming through in 27 on facing. But, as you can see from our various margin bridges that we provide you, there's lots of moving parts in the margin: inflation, costs, leverage, et cetera, et cetera. So at this stage, I think it's too premature to assume to what extent those additional cost savings and then relatively nominal frame to be, how they're going to fall through into margin in 26 and 27. Obviously, will provide you with that guidance closer to the time.

John Rogers: Obviously, you'll see from the... The trajectory on the chart, the cost savings would assume we've got a little bit more coming through in 2026 and a little bit more coming through in 2027 on phasing, but as you can see from our various margin bridges that we provide you, there are lots of moving parts in the margin, you know, inflation, costs, leverage, etc, etc. So, at this stage, I think it's too premature to assume to what extent those additional cost savings, and they're relatively nominal, frankly, how they're going to fall through into margin in 2026 and 2027. I'll provide you with that guidance closer to the time, and in terms of returns.

Speaker Change: The trajectory on the chart the cost savings would assume you've got a little bit more coming through in 'twenty six a little bit more coming through in 2007 on phasing, but as you can see from our various margin bridges that we provide to you there's lots of moving parts in the margin and inflation costs leverage et cetera et cetera. So at this stage I think it's too premature.

Speaker Change: You see to what extent those additional cost savings in that relatively nominal frankly, how they can afford through into margin in 'twenty six 'twenty seven obviously will provide EBITDA guidance closer and closer to the time.

John Rogers: And in terms of returns, do you want to take that a little bit? Well, look, I think that we are the moment team. We're focused on returns at the business unit level; we're focused on returns at the group level. I think we see the opportunity to improve across the board, particularly also business. If you look at our offer business, but we're on a journey there. And so we'll talk through the return numbers at the end in your C. We expect to see significant improvement in capital returns, but we're very focused on how we think about the portfolio, where we allocate capital.

Speaker Change: And in terms of returns.

John Rogers: Alright, do you want to take that or do you want to... Well, look, I think that we as a management team are focused on returns at the business unit level, we're focused on returns at the group level. I think we see the opportunity to improve across the board, particularly in the ortho business, if you look at our ortho business. We're on a journey there, and so we'll talk through the return numbers at year end, and you'll see we expect to see significant improvement in capital returns, but we're very focused on how we think about the portfolio, where we allocate capital. And as I said in my presentation, the intention will be very much to really only allocate capital where we consider we can get our highest, incremental returns. Once more, I'll build on that, David.

Speaker Change: Take that out.

Speaker Change: Well look I think that we as a management team. We're focused on returns of the business unit level. We're focused on returns at the group level I think we see the opportunity to improve across the board.

Speaker Change: Taking the ortho business, if you look at our ortho business.

Speaker Change: But we're on a journey, there and say well, we'll talk through the return numbers the year end and you'll see that.

Speaker Change: We expect to see significant improvement in capital returns, but we're very focused on how we think about the portfolio.

Speaker Change: Where we allocate capital and as I said in my presentation. The intention will be very much to really only allocate capital where we consider we can get our highest incremental returns going forward.

Deepak Nath: And, as I said in my presentation, the intention will be very much to really only allocate capital where we consider we can get our highest incremental returns going forward. This one small build on that, David, where we've historically struggled, part of the culture change in our company is that often capital is treated as free. And the biggest impact was in the orthopedic business. So when John in his slide puts up the focus on margins, it's, of course, important, right? Because it's particularly on the orthopedic side. Equally is important is the focus on asset efficiency. So, in terms of what we're changing and how we're operating and how we're behaving as a company, those are the key areas that we look to get the improvements in return capital of the pittings that oath.

Speaker Change: This one small bills on that David.

John Rogers: Where we've historically struggled, part of the culture change in our company is that often capital is treated as freedom, and the biggest impact was in orthopedics. So when John, in this slide, puts the focus on margins, which of course is important, right? Because it's particularly on the orthopedic side.

David Adlington: Where we've historically struggled part of the cultural change in our company is that often capitals triggers tree.

David Adlington: And the biggest impact was in the orthopedics business, so, but John this slide puts up the focus on margins, which of course is important right because it's particularly on the orthopedic side equally as important is our focus on asset efficiency. So in terms of what we're changing in how we are operating and how we're behaving as a company those are the key areas that we look to two.

John Rogers: Equally as important is the focus on acid. So in terms of what we're changing and how we're operating and how we're behaving as a company, those are the key areas that we look to to get the improvements in return capital orthopedics, to better returns, so the better road to work. And just to bring that to life and give you a little bit of color, I've actually got a meeting at the end of this week with the team to talk about how we extend, for example, inventory performance metrics across a broader part of the business.

David Adlington: Get the improvements and return capital orthopedics that ultimately feeds into the to the better returns. So the better road, where we're targeting and just the just to bring that to life and give you a little bit of color. You know I have actually got a meeting at the end of this week with the team to talk about how do we extend for example.

Deepak Nath: Smith and Nephew to the better returns or the better relics we're targeting.

Deepak Nath: And just to bring that to life and give you a little bit of color, I have actually got a meeting at the end of this week with the team to talk about how do we extend, for example, inventory performance metrics across the broader path of the business. It's mainly focused on operations historically. How do we get our commercial teams really talking and thinking about inventory in the way that we would like them to. To Deepak's point, historically, they've seen it as being free, and therefore it's often on the business on a just-in-case basis rather than a just-in-time basis.

Inventory performance metrics across a broader part of the business mainly focus in operations historically.

John Rogers: They need to be focused on operations historically. How do we get our commercial teams really talking and thinking about infantry in the way that we would like them to? To Deepak's point, historically, they've seen it as being free rather than as an adjusting time.

David Adlington: How do we get our commercial teams really talking and thinking about inventory in the way that we would we would licensee.

David Adlington: Deep X point, historically, they've seen it as being free and therefore, as the who often when the business only just in case basis, rather than adjusting time basis. So this additional focus on inventory and capital more broadly I think will be supportive of the improved trajectories that we're expecting to see.

John Rogers: So this additional focus on inventory and capital more broadly, I think will be supportive of the improved trajectories that we're experiencing. There's no signal here that you're looking at divesting any particular part of the business that doesn't meet any returns.

Deepak Nath: So this additional focus on inventory and capital more broadly, I think will be supportive of the improved trajectories that we're expecting to see.

Deepak Nath: Just to be clear, there's no signal here that you're looking at divesting any particular part of the business that doesn't meet any returns goals. No, I think we're very comfortable with the portfolio overall.

Just to be clear, there's no signal here that you're looking at divesting any particular part of the business that doesn't meet any returns go.

John Rogers: No, I think we're very comfortable with... With the portfolio overall, this exercise is being done to ensure that we focus on returns across the group and at the individual BUs, and part of the exercise of allocating our corporate car is an extension of that so that we can appropriately measure the capital returns at the DU level and, therefore, from them, make sure that we're driving the right actions and right behaviors across the business to improve. But we're, you know, obviously always conscious of individual business units' performance and returns.

David Adlington: No I think we're very comfortable with where the portfolio. Overall. This exercise is being done to ensure that we focus on returns across the group and individual be used to make and part of the exercise of allocating out.

Deepak Nath: This exercise is being done to ensure that we focus on returns across the group and that the individual be used. And part of the exercise of allocating out the corporate costs is an extension of that so that we can appropriately measure the capital returns at the BU level and therefore, from that, make sure that we're driving the right actions and right behaviors across the business to improve those returns. But we're obviously always conscious of individual business units, performance, and returns, and we're conscious of it in the context of where do we want to allocate our capital.

David Adlington: The corporate costs is an extension of that so that we can appropriately measure the capital returns at the D level and therefore from that make sure that we're driving the right actions and right behaviors across the business to improve those returns, but we're obviously always conscious of individual business unit performance and returns and.

John Rogers: And we're conscious of it in the context of where we want to allocate our capital. We have choices about where we invest, where we place our R&D funds, where we invest in driving growth in our business, and providing visibility of these returns will give us a better means to make sure that we're allocating cash and our capital where we expect to see the best. Hi, I'm Seb Jantet with Panmure Liberum.

David Adlington: We're conscious of it in the context of where do we want to allocate our capital we have choices about where we invest where we place our R&D funds, where we invest in driving growth in our business and providing visibility of these returns will give us.

Deepak Nath: We have choices about where we invest, where we place our R&D funds, where we invest in our driving growth in our business and providing visibility of these returns, or better means to make sure that we're allocating our cash and our capital, where we expect to see the best returns. Thanks.

David Adlington: Better with better needs to make sure that we're allocating all.

David Adlington: Cash and our capital, where we expect to see the best returns.

David Adlington: Thanks.

Speaker Change: Thanks, so much.

John Rogers: I'm just going back to returns again, so like David, I welcome the focus on ROIC. Can I ask if you can give us a little bit of the different returns between the divisions ROIC at the moment so we can kind of get a sense of where that lies and also just want to check are you going to give us the assets by division so we can calculate this ourselves going forward? The first question and second question is on the bridge that you put for the 18-20% margin.

Operator: Hi.

Sebastien Jantet: I'm Seb Jonte with Pam; you're in Liberum. I'm just going back to returns again, then. So, David, I welcome the focus on ROIC. Can I ask if you can give us a little bit of the difference of returns between the divisions ROIC at the moment so we can kind of get a sense of where that lies and also to want to check. Are you going to give us the assets by division so we can calculate this ourselves going forward? That's the first question. Second question is on the bridge that you put for the 18 to 20 percent margin.

Speaker Change: Pam you Liberum, just going back to returns again, so that David and I welcome him to focus on where I see.

Speaker Change: Can I ask if you can give us a little bit of the.

Pam: The difference in returns between the divisions armor, what I see at the moment. So we can kind of get a sense of where that lies and also just want to check are you going to give us the assets by division. So we can calculate this ourselves going forwards.

Pam: First question second question is on the bridge that you put for the 18% to 20% margin.

John Rogers: I couldn't see anything in there for FX; presumably, there will be some annualization of FX in that. I just want to check that 20% isn't a constant currency guidance. And also, within that, what are your assumptions for pricing?

John Rogers: I couldn't see anything in there for FX; presumably, there will be some annualization of FX in that. I just want to check that 20 percent isn't a constant currency guidance. And also within that, what are your assumptions for pricing? Because obviously, as we kind of come out of a high inflationary environment where we've been in a slightly unusual pricing environment for MedTech, what are you assuming in terms of pricing in 2025? And then the last question is coming back to these additional restructuring kind of savings. So, great that I think it's between 1,500 million of additional savings.

Speaker Change: Couldn't see anything in there for FX, presumably there will be some and utilization of FX in that just want to check that 20% isn't.

Speaker Change: Currency guidance and also within that what are your assumptions for pricing because obviously as we kind of came out of a high inflationary environment, where we've been in a slightly unusual pricing environment for mid Tex what are you assuming in terms of pricing in 2025, and then the last question is going to coming back to these additional restructuring or restructuring.

John Rogers: Because obviously, as we kind of come out of a high inflationary environment where we've been in a slightly unusual pricing environment for medtechs, what are you assuming in terms of pricing in 2025? And then the last question is coming back to these additional restructuring kinds of savings. So great that I think you found, I think it's between 50 and 100 million in additional savings. Perhaps you could give us a little bit more detail on what those are and why they don't have any cost.

Speaker Change: Kind of savings.

Speaker Change: So great, though I think that you found I think it's between 50 and 100 million of additional savings.

John Rogers: Perhaps if you give us a little bit more detail on why they don't have any costs with them.

Speaker Change: Perhaps you could give us a little bit more detail on what those are and why they don't have any cost with them.

John Rogers: Maybe I'll take the pricing point, and then you can get the rest. On pricing, as I've commented previously when the questions come up, our ability to pass through inflation-related pricing in the medtex sector is quite limited. Against that backdrop, we've been able to pass through some of that pricing. We've also indicated that our plan... are guidance that we gave, didn't necessarily factor in exceptional pricing. And I did indicate that over this period that we get back to a more normalized kind of a pricing environment. That is the basis of our planning, and we do expect some of this tailwind on pricing or ability to pass through inflationary costs to kind of peter out here as we get into $24.25.

John Rogers: I think I'll take the pricing point and then you can get the rest, John. So on pricing, as I've commented previously when the questions come up, our ability to pass through inflation-related pricing in the Metech sector is quite limited. Against that backdrop, we've been able to pass through some of that pricing. We've also indicated that our plan... The guidance that we gave didn't necessarily factor in exceptional pricing. And I did indicate that over this period, we get back to a more normalized kind of a pricing environment. That is the basis of our planning, and we do expect some of this tailwind on pricing or ability to pass through inflation-related costs to kind of peter out here as we go. So maybe.

Speaker Change: Sure maybe I'll take the pricing point and then you can yes, John so on pricing as I've commented previously when the questions come up.

Speaker Change: Our ability to pass through inflation.

Speaker Change: Inflation related pricing in the Med Tech sector is quite limited against that backdrop, we've been able to.

John Rogers: But you do two passengers over that pricing. We've also indicated that our plans our guidance that we gave didn't necessarily factor in.

John Rogers: Exceptional.

John Rogers: Pricing.

John Rogers: And I did indicate that over this period that we get back to more normalized kind of a pricing environment.

John Rogers: That is the basis of our planning and we do expect some of this tailwind on pricing or ability to pass through.

Speaker Change: Inflation related cost to kind of Peter out here as we get into 'twenty four 'twenty five so maybe you can take the rest of them.

John Rogers: So maybe you can take the rest, John. So I think your first question was, can I give you some indications to the current returns by business unit? First and foremost, we will split all of that out and give you that detail at the end. And we're not going to disaggregate the balance sheet for you, but we will give you the heroic number by business units, so you'll see that. You can sort of infer the assets if you want to. But to give you a little bit of color on it, it won't be of any surprise to you that if you look at our sports business as an example, that's broadly speaking the green average.

John Rogers: So, I think your first question... Can I give you some indications of the current returns by business unit? First and foremost, we will split all of that out and give you that detail at year end, and we're not going to disaggregate the balance sheet for you, but we will give you the heroic number by business unit, so you'll see that, you can sort of infer that. The Net Assets, if you..., but to give you a little bit of color. It won't be of any surprise to you that, if you look at our sports, for example.

Speaker Change: I think your first question was can I give you some indication as to the current returns buoyed by business units first and foremost we will split all of that out and give you that detail at the year end and we're not going to disaggregate the balance sheet for you, but we will give you the the ROIC number by business.

Speaker Change: So youll see that.

Speaker Change: And third.

Speaker Change: The assets if you if you want to but to give you a little bit of color on it.

Speaker Change: It wont be of any surprise to you that if you look at our sports business.

John Rogers: That's broadly speaking the group. [inaudible] is better, and our ortho business is worse, or maybe it's an improvement. So, you know, our sort of author business probably at the end of this year will be half of what we'd expect the group average to be, but we're driving that hard to improve that. But as I said, we'll give you a lot more detail at the end when we give you those numbers. I think your second question was on the 25 profits and whether or not the why no FX? FX is notoriously difficult to forecast at the best.

Speaker Change: <unk>.

Speaker Change: Broadly speaking the group average.

John Rogers: Our wound business is better than the green average. And our author business is worse than the green average, albeit on an improving trajectory. So, you know, our sort of author business probably at the end of this year will be in its circle a half of what we expect the green average to be, but we're driving that hard to improve that return over time.

Speaker Change: Our wound business is better.

Speaker Change: Than the group average.

Speaker Change: And our ortho business.

Speaker Change: Worse than that.

Speaker Change: Pembridge, albeit on an improving trajectory.

Speaker Change: So now also to offer business, probably the NVCA, which will be in it.

Speaker Change: Circa of half of what we would expect the great privilege to be but we're driving that hard to improve that return over time, but I will say, we will give you a lot more data out of the year and when we.

John Rogers: But I would say we'll give you a lot more detail at the end when we give you those figures. I think your second question was on the 25 profit bridge and whether or not the, why no FX? Well, I mean, FX is notoriously difficult to forecast at the best of times. We do hedge going forwards, roughly 75% of it serve our cover. As we sit here today, based on our best guess estimations, we think that the FX impact on 25 will be relatively neutral and maybe I'd know 10, 10, 15 bit headwind. So, we haven't included it on the chart, but we don't think it's going to be, at this stage, material.

Speaker Change: When we give you those figures.

Speaker Change: Your second question was on the 25 profit.

Speaker Change: <unk> and whether or not the what why no FX.

Speaker Change: Well I mean.

Speaker Change: FX this isn't a choice the difficult to forecast at the best of times, we do hedge going forwards roughly 75% of it so I'll cover as we sit here today based on our best guess estimations, we think that the FX impact on 25 will be relatively neutral and maybe Ed.

John Rogers: We do hedge going forward. 75% of it serves as our cover. As we sit here today, based on our best guess estimation, I think that the effects... 10-15 bit.

10, 10, 15 bps headwind. So we haven't included it on the chart, but we don't think it's going to be at this stage material.

John Rogers: So we haven't included it in the chart, but we don't think it's going to be material at this stage. And then your last question, I think, was about restructuring. What gives us confidence that there aren't sort of... additional restructuring costs coming through. And it is to the depth of your question, which is, the initiatives that are going to be driving that, a lot of opportunities in our manufacturing business that we've talked about in the past. We're doing a lot of work on our lean manufacturing, how do we become more efficient? We're looking at our [inaudible] associated with that, but we'll just take that into our underlying number.

John Rogers: And then your last question, I think, was on restructuring. What gives us confidence that there aren't a sort of huge additional restructuring costs coming through. And it is to your, the depth of your question, which is the initiatives that are going to be driving that. So, there's a lot of opportunities in our manufacturing business that we've talked about in the past. We're doing a lot of work on our lean manufacturing. How do we become more efficient? We're looking at our sales structures. We're looking at our indirect procurement. Indirect procurement is a big opportunity for us, for example.

Speaker Change: And then your last question I think it was on restructuring what gives us confidence that the wrong sort of a huge.

Additional restructuring costs coming through and it is to you or the depth of your question, which is that.

Speaker Change: The initiatives that are going to be driving that so.

Speaker Change: This.

Speaker Change: A lot of opportunities in our manufacturing business that we've talked about in the past we doing a lot of work on our lean manufacturing how do we become more efficient that we're looking at our sales structures where.

Speaker Change: We're looking at our indirect procurement indirect procurement is a big opportunity for US for example in these things generally speaking given the locations given the task at hand, they're not going to require huge restructuring charges additional restructuring charges now there may be some costs associated with that but we'll just take those in.

John Rogers: And these things, generally speaking, given the locations, given the task at hand, they're not going to require huge restructuring charges, additional restructuring charges. Now, there may be some costs associated with that, but we'll just take those into our underlying numbers. And just to clarify, our guidance is not on a at currency. It will need to work part of some of the initiatives to go work harder to identify those additional savings, is to offset those headwinds. This year, last year's FX, but there were other things, China VVP, so it's not on a constant currency basis. We take these things in our stride.

Speaker Change: Two our underlying numbers.

Speaker Change: And just to clarify.

John Rogers: And just to clarify, our guidance is not constant. We will need to work part of some of the initiatives to go work harder and identify those additional savings to offset those headway this year and last year's FACT, but there were other things trying to be. So it's not uncommon.

Speaker Change: Our guidance is not on a constant currency.

Speaker Change: So we will need to work part of some.

Speaker Change: The initiatives to go work harder.

Speaker Change: Identify those additional savings is to offset those headwinds this year and last year's FX, but there are other things China be repeated.

Speaker Change: So it's not uncommon currency basis.

John Rogers: We take these things in our stride, front row in the second. Good morning, Richard Felton from Goldman Sachs. Two questions from you, please. First of all, on Roboto... How far is Smith & Nephew away from having its fair share in the US?

Speaker Change: To take these things in Australia.

Richard Felton: The front row, the second row. Thank you, good morning, Richard Felton, from Goldman Sachs.

Speaker Change: The front row in the second round.

Speaker Change: Thank you good morning, Richard Howard Goldman Sachs.

Richard Felton: Two questions from you, please. First of all, on robotics.

Speaker Change: Few questions for me. Please first of all on robotics, and how far as Smith <unk> nephew away from having its fair share of robotics procedures in the U S. And then given some of the innovation and upgrades on Corey.

Deepak Nath: How far is Smith & Nephew away from having his fair share of robotics procedures in the US, and then given some of the innovation and upgrades on Currency, do you see a plausible path to getting your fair share?

John Rogers: And then given some of the innovation and upgrades on Cori, do you see a plausible path to getting your... That's question one. Question two is on China VVP, and in your second half margin, you've got the 130 basis points of margin headwinds, which John explicitly said was before any offseason. I was wondering if you could give us any sense of what those offsets are and how much benefit they might bring. I'll take that. So with Corrie, we're already placing, that's above our share, and Corey. Good night.

Speaker Change: G E. A plausible part you're getting your fascia. That's question. One question two is on China of Edp and your second half margin bridge, you've got 130 basis points of margin headwinds, which John you explicitly said was before any offsets I was wondering if you could give us any sense of what those offsets are and how much benefit might come with those.

Deepak Nath: Last question, one question to you, is on China VVP. In your second half, margin bridge, you've got the 130 basis points of margin headwinds, which John, you explicitly said, was before any offsets. I was wondering if you could give us any sense of what those offsets are, and how much benefit might come with those. I'm sure. I'll take that. So, with Corrie, we are already placing above our share position with Corrie today. We're still in the early stages of our journey. As I said, I'll come back and give you a utilization number. I gave you that.

Speaker Change: Sure I'll take that so with Corey we are already placing it.

Speaker Change: That's above our share position with Corey today.

Deepak S. Nath: And we're still in the early stages of our journey. As I said, I'll come back at year-end and give you a utilization number. I gave you that. But I can't remember now whether it was at year-end last year.

Speaker Change:

Speaker Change: And we're still in the early stages of our journey as I said I'll come back at year end and give you a utilization number I gave you that I can't remember now what it was at year end last year.

Deepak Nath: I can't remember now whether it was year end last year or half. We've given you the last number; fair to say, we're substantially above that. Now, even as placements have grown, which is very encouraging, we're replacing them for getting you less. That's a part of our strategy. That adoption has been driven by competitive activity going out and representing it's not just about Corrie. It's about the whole portfolio. It's important to put that perspective out there, which is we've got a very competitive and planned portfolio now with Corrie's enabling technology. That value proposition and combination is great.

Deepak S. Nath: We've given you the last number. Fair to say, we're substantially above that now, even as placements have grown, which is very encouraging, right? So we're replacing them because they're getting utilized, an explicit part of our strategy. And that adoption has been driven by competitive activity, right, going out and representing. It's not just about Cori, right; it's about the whole portfolio.

Speaker Change: We've given you the loss last number it's fair to say were substantially above that now even as placements have grown which is very encouraging right. So we're replacing them, where they're getting you had less of an explicit part of our strategy.

Speaker Change: And that adoption has been driven by competitive activity right going out and represent it's not just about Corey right. It's about the whole portfolio. It's important to kind of put that perspective out there, which is we've got a very competitive and planned portfolio now with Korea is an enabling technology that value prop.

Deepak S. Nath: It's important to kind of put that perspective out there, which is that we've got a very competitive and planned portfolio now with Cori's enabling technology and that value proposition in combination. But just double-clicking on Cori, the ASC is a big growth driver in the United States, but it's not so in other markets, at least not yet.

Speaker Change: Opposition combination is great, but just double clicking on Corey.

Deepak Nath: Just double-clicking on Corrie, the ASC is a big growth driver in the United States. It's not so in other markets, at least not yet. The form factor for Corrie has always had residents, and we've talked about that in the past. It's lighter form factors, flexibility, lower costs; all of these things lend themselves to the economics and the practices within an ASC. Of course, we're seeing that, and we're placing above our share of position within the ASC. For us, equally as important is that this is flexible enough across a range of settings. That's that earlier in the AMCs, the advantage of having a form factor like Corrie's, you can have one across multiple velocities.

Speaker Change: The.

Speaker Change: <unk> is a big growth driver in the United States, it's not so in other markets at least not yet and the form factor for Korea. It's always had residents and we've talked about that in the past right. It's it's lighter form factor is flexibility.

Deepak S. Nath: And the form factor for Cori has always had resonance, and we've talked about that in the past, right? Lighter form factors, flexibility, lower cost; all of these things lend themselves to the economics and the practices within an ASC. And of course, we're seeing that, and we're placing above our share position within the, but for us, it's equally important that this is flexible enough across a range of settings. And as I said earlier, in the AMCs, the advantage of having a form factor like Cori is you can have one across multiple, or also Right, so that's an important piece of it, and it can co-exist with other robotic placements.

Speaker Change: Sure.

All of those things lend themselves to the economics, and the and the practices within an ASC and of course, we're seeing that and we're placing above our share position within within the ASC, but for us equally as important is that this is flexible enough across a range of setting and as I said earlier and the M sees the advair.

Speaker Change: Vantage of having a four partially coreys you can have one across multiple all suites right. So and that's an important piece of it and it can coexist with other robotic placements and we're starting to see that play out in fact, the number of multi unit Cory deals has been increasing was increasing I called that out in 2023.

Deepak Nath: That's an important piece of it, and it can coexist with other robotic placements, and we're starting to see that play out. In fact, the number of multi-unit Corrie deals has been increasing. We're actually built upon that in 24, and I alluded to the cross business unit deals in the context of sports, and in fact, what we're seeing is cross orthopedics and sports, and most of those involve Corrie and one my shape of form. That's been very, very encouraging. Some of the functionality that we've David, is been an important driver of that as well, and you've seen through various presentations what there I want and you'll rate them for you, but you can look those up.

Deepak S. Nath: And we're starting to see that play out. In fact, the number of multi-unit core has been increasing, was increasing, I call that out in 2023. We're actually built upon, and I alluded to the cross-business unit deals in the context of sports, and in fact, what we're seeing is cross-orthopedics. And most of those involve Corey and one.

Speaker Change: Actually built upon that in 'twenty, four and I alluded to the cross business unit deals.

Speaker Change: In the context of sports and in fact, what we're seeing this across orthopedics and sports and most of those involve Corey in one way shape or form so that's been very very encouraging.

Deepak S. Nath: So that's been very, very encouraging. Some of the functionality that we've added has been an important driver of that as well, and yeah, you've seen through various what there are, I won't enumerate them. You can look those up.

Speaker Change: Some of the functionality that we've added.

Speaker Change: Is there has been an important driver of that as well and you have seen through various presentations, what there I won't I won't enumerate them for you, but you can you can look those up one important thing I'll call out is we're in the very early stages of our journey, we called out the fact that.

Deepak Nath: One important thing I'll call out is we're in the very early stages of our hip journey. We call out the fact that we've just now launched Catalyst Dem, which is our offering for the fast-growing director and terrier approach, but there's a whole pipeline of functionality we're going to be adding to Corey. So you'll see more of that in the coming quarters. That should further fuel uptake of Corey. So hopefully that addresses the question; doesn't give you the numerics you're looking for, but hopefully the colour and context.

Deepak S. Nath: One important thing I'll call out is we're in the very early stages of our journey. We announced the fact that we've just now launched Catalyst-STEM, which is our offering for the fast-growing director interior approach, but there's a whole pipeline of functionality we're going to be adding to Cori. So you'll see more of that coming in the coming quarters, which should further fuel uptake. So hopefully that addresses the question, doesn't give you the numerics you're looking for, but hopefully, color and context.

Speaker Change: We've just now launched catalyst stem, which is our offering for the fast growing director interior approach, but theres a whole pipeline of functionality, we're going to be adding to Corey so you'll see more of that to come in the coming quarters that should further fuel.

Speaker Change: Uptake of Korea, So hopefully that addresses the question doesn't give you the numeric youre looking for but hopefully that color and context.

John Rogers: Thank you. And just on China, VBP, as you rightly call out, the second half, 24 impact is 130 bits. So the annualised is the F3 for 2024, 70 bits of headwind, as we've said, and guided it to previously. That is both actually a gross and a net number, so pre-imposed any mitigations in the second half. In the first half of 25, you've all else been equal, so all the new data have another sort of 70 bits, so of 60 bits of headwind at the gross level, but we believe in 2025, various actions can be taken to mitigate and offset that. But there's a little bit around volume that comes through that we think can offset some of that headwind.

Deepak S. Nath: Very helpful. Thank you. Sure. And just on China VBP, as you rightly call out, the second half 24 impact is 130 bits.

Speaker Change: Sure.

Speaker Change: On China ABP as you rightly call out the second half 'twenty four impact is 130 bps.

John Rogers: So that annualises effectively for 2024 at 70 bits of headwind, as we've said and referred to previously. That is both a gross and a net number, so pre and post any mitigations in the system. In the first half of 25, all else being equal, you'd have another 70 bits or so of 60-bit headwind at the gross level, but we believe in 2025, various actions can be taken to mitigate and offset that. There's a little bit around volume that comes through that we think can offset some of that headwind.

Speaker Change: So the annualized is effectively for 2024 70 bps of headwind as we've said and guided to previously that is both actually a gross and a net number let's say pre and post any mitigation in the second half.

Speaker Change: Yeah.

Speaker Change: In the first half of 'twenty five.

Speaker Change: All else being equal we say we'll.

Speaker Change: Having all that sort of 70 bps or so of 60 bps of headwind at the gross level, but we believe in 2025.

Speaker Change: Various actions can be taken to mitigate and offset that theres a little bit around volume that comes through that we think can offset some of that headwind.

John Rogers: There's a little bit about cost actions that will take, that will also help us, and they will take a little bit of time to come through, hence why you see them in the first half of 2025. And there's also, we didn't really call it out in detail in the bridge, but there's a little bit of the fact that we're going to be lapping some of the pre-incommentation effects that you've seen in the China number for the first half of this year. So when you look at it on a net and that basis, we think it's going to be, you know, we say broadly flat. I mean, there may be 10, 15 bits or something of headwind, but we're comfortable with the numbers and the guidance, obviously, the 20-cent plus for the four years.

John Rogers: There's a little bit about cost actions that we'll take that will also help us, and they will take a little bit of time to come through, hence why you see them in the first half. And there's also, we haven't really called it out in detail on the bridge, but there's a little bit of... The fact that we're going to be lapping some of the pre-implementation seen in the China number for the first half of this year, so when you look at it on a net-net basis, we think it's going to be, you know, we would say broadly flat. I mean, there may be 10, 15 bips or something of headwind, but we're comfortable.

Speaker Change: Is it a little bit about cost actions that will take.

Speaker Change: That would also help us and they will take a little bit of time to come through hence why you see them in the first half of 2025 and as also we didn't haven't really called it out detailed in the integration. It is a little bit of the fact that we're going to be lapping some of the pre implementation effects that you've seen in the China number.

Speaker Change: The first half of this year. So when you look at it on a net net basis. We think he is going to be a broadly flat decoding embraer I mean, there may be 10, 15 bps or something of headwind.

Speaker Change: But we're comfortable with the numbers and the guidance obviously at 20 plus for the full year.

John Rogers: The numbers and the guidance... Operationally, just one quick build on it, obviously we've got experience with mitigating actions having gone to the OrthoVBP recently, but one contrast I'll draw for you in sports versus orthopedics is that in orthopedics, it's pretty much the whole category that was impacted. In sports, it's a subset, it's a joint repair, the capital piece of it is not.

Deepak Nath: Operationally, just one quick build on it. Obviously, we've got experience of mitigating actions having gone to the ortho-VVP recently. That one contrast I'll draw for you in sports versus orthopedics is, in orthopedics, has pretty much the whole category that we're impacted in sports. It's a subset; as a joint repair, the capital piece of it is not. So there's still commercial activity that's going to be needed to represent the portfolio and actually drive sports across the board, right? So there is an important difference that irritates how orthopedics went. So the mitigation, mitigating actions we need to take here have to take that into account.

Speaker Change: Operationally just one.

Speaker Change: A quick build on it.

Speaker Change: Obviously, you've got experienced about mitigating actions haven't gone to the ortho V P.

Speaker Change: I mean that one contrast, I'll draw for you in sports versus Orthopedics is in orthopedics is pretty much the whole category that were impacted and sports. It's a subset of Isis joint repair the capital piece of it is not so theres still commercial activity, that's going to be needed to represent the portfolio.

John Rogers: So there's still commercial activity that's going to be needed to represent the portfolio and actually drive sports across the board, right? So there is an important difference there between how orthopedics went. So the mitigation and mitigating actions we need to take here have to take that into account. So I just want to operationally draw attention to the fact that it's not exactly that way. But obviously, our decisions will be informed by some kind of our experience in orthopedics from UBS. And three questions, but they should be quick.

Speaker Change: And and actually drive sports across the board right. So there is an important difference there between how orthopedics words, so the mitigation mitigating actions, we need to take here.

Have to take that into account. So I just want to operationally draw attention to the fact that is not exactly the way orthopedics win, but obviously our decisions will be informed by.

Deepak Nath: So I just want to operationally draw attention to the fact that it's not exactly the way Orthopedics went. But obviously, our decisions will be informed by kind of our experience in orthopedics.

Speaker Change: Kind of our experience in orthopedics.

Operator: Thank you very much. Great.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Yeah.

John Rogers: On the first half R&D... That was Dame quite a bit. Is that a factor of last year being overly high, amazing, or just to get a sense of what's going on. On the plant closures, are they done now? Most of that. Should we see a big step up then through the second half and first half next year in terms of the margin? And then one last one on...

Speaker Change: Great doing from UBS.

Speaker Change: Three questions, but it should be quick on the first half R&D spend that was down quite a bit is that a factor of last year being overly high or is it phasing or just to get a sense of what's going on and what's not.

Speaker Change: On the plant closures are they don't know have you got through most of that.

Speaker Change: Should we see a big step up then through second half and first half next year in terms of the margin there and then one last one on <unk>, which is if you look back at your ortho performance pre COVID-19 it was there or thereabouts with market.

Deepak Nath: and ASC's, which is, if you look back at your ortho performance pre-COVID, it was there there abouts with Marcus, and then it obviously starts the Virgin vs. Pears, and there's lots of reasons that could be, but we did see ASC step up massively in terms of share. Do you think that was a factor in us, and are there things that you can do post this transformation, which get you back on a front foot there? Yes, sure. So, first on the R&D spend, that's a phasing thing. So we expect when you step up into Q2, into H2, and year on year, should be broadly comparable, and that has to do with the nature of when the spend occurs in any given program.

John Rogers: If you look back at your ortho performance pre-Covid, it was there, thereabouts, and them. There are lots of reasons, but we did see ASC's step of mind. You'd think that was a factor in it, back on a So first, on the..., on the.

Speaker Change: And then he starts.

Speaker Change: It appears there's lots of reasons that could be but we did see a step up massively in terms of share.

Speaker Change: Do you think that was a factor in us and are there things you can do post this transformation, which get you back on a kind of front foot there, yes sure. So first on the.

Speaker Change: On the.

Speaker Change:

Speaker Change: Our R&D spend that's a phasing thing.

John Rogers: R&D spend, that's a phasing thing, so we expect when you step up into Q2, into H2, and year on year. Broadly. Broadly. And that has to do with the nature of when the spend occurs in any given program, second in terms of ASCs.

Speaker Change: So we expect when you.

Speaker Change: Step up into Q2, and H, two and year on year should be broadly broadly comparable and that has to do with the nature of the spend occurs in any given program.

Deepak Nath: Second, in terms of ASC's, what I'd write to remind you here is a good chunk. I think we've previously given a number of 40% of our sports business actually goes through ASC's, so we're actually quite well present in that channel. We know how to commercialize that channel, in that channel. We're in the earliest stages on the orthopedic side, particularly on the recon side. The industry is as well, but we are self-relatively industry on the earlier stage of that. But with Cory, we've got a great offering, a great part of a value proposition to be relevant in that ASC setting, and it's not just Cory as one thing, but as we add more features and optionality into it, our value proposition of Cory just increases.

Speaker Change: Second in terms of Asc's.

Speaker Change:

John Rogers: What I'd like to remind you here is... A good chunk, I think we've previously given a number, of 40% of our sports business actually goes through ASCs, so we're actually quite well present in that channel. We know how to commercialize that, and we were in the earlier stages on the orthopedic side, particularly on the recon side. The industry is as well, but we ourselves are on the earlier stage of that. But with Corey, we've got a great platform, offering a great part of a value proposition to be relevant in that ASP.

Speaker Change: What I'd like to remind you here is a good chunk I think we've previously given a number of 40% of our sports business actually goes through.

Speaker Change: So we're actually quite more present in that channel, we know how to commercialize that channel and that channel where in the earliest stages on the orthopedic side, particularly on the recon side the industry is as well, but we ourselves relative to the industry on that.

Speaker Change: The earlier stage of that.

Speaker Change: But with Cory we've got a great.

Speaker Change: Offering a great part of our value proposition to be relevant in that ASC setting.

John Rogers: And it's not just Cori as one thing, but as we add more features and optionality to it, our value proposition of Cori just... We just announced HOPCO, our arrangement with HOPCO. HOPCO, you know, as ASCs further evolve and adapt to the requirements around reporting patient-reported outcomes and other things, that becomes an important part of how you increase and enhance your value proposition to the ASC. So our agreement with HOPCO now is further evidence of us focusing on that channel, improving our offering to that channel, and ultimately translating that into HOPCO.

Cory: And it's not just Korea is one thing, but as we add more features and optionality into it.

Cory: Our value proposition of Corey just increases, we just announced HOKA arrangement with Opco Opco.

Deepak Nath: We just announced HOPCO, arrangement of HOPCO. HOPCO, you know, as ASC further evolve and adapt to the requirements around reporting, patient-reported outcomes, and other things, that becomes an important part of how you increase and enhance your value proposition into the ASC. So our agreement with HOPCO now is further evidence of us focusing on that channel, improving our offering into that channel, and ultimately translating that into outsized performance there. But we're also very clear-eyed about where we can compete, where we're advantaged in ASC and where we're not. So we have a pretty good understanding of how we segment the market, and we're very focused on where we want to win and where we have a pretty compelling value proposition.

Cory: No.

Cory: S. A S sees further evolve and adapt to the requirements around reporting patient reported outcomes and other things.

Cory: And that becomes an important part of how you increase enhance your value proposition into the S. C. So our agreement with Hopkins now is further evidence of.

Cory: US focusing on that channel improving our offering into that channel.

Cory: And and ultimately translate into outsized performance there, but we're also very clear clear eyed about where we can compete very advantaged and ASC and where we're not so.

John Rogers: But we're also very clear-eyed about where we can compete, where we're advantaged in ASCs, and where we're not. So we have a pretty good understanding of how we segment the market, and we're pretty focused on where we want to win and where we have pretty compelling revenue.

Cory: So we have a pretty good understanding of how we segment the market and very very progress pretty focused on where we want to win and where we have a pretty compelling value proposition. So all of that should translate into continued better performance.

John Rogers: So all of that should translate into continued better performance there or above-market performance. As I called out, there are many layers to this whole cross-business unit kind of deal and how we continue to do well with the portfolio we've got. One of those is for the driver.

Deepak Nath: So all of that should translate into continued better performance there or above-market performance. As I called out, there's many layers to this whole cross-business unit kind of deals and how we continue to do well, but the portfolio we've got, one of those is for the drive into that channel.

Cory: There or.

Cory: Above market performance as I called out this does many layers to this whole cross business unit kind of deals and how we continue to do well with the portfolio. We've got one.

Cory: One of those is for the drive into that job.

Deepak Nath: Plan closures. I mentioned four. We've just announced the closure of Warwick, which is a small site focused on one particular product portfolio, as we look to drive further productivity and efficiency. We're taking volumes from some of the smaller sites and transferring that over to our larger sites within the org. Felix Network. So that's an additional closure into it. And the Memphis Light produces for XUS as well. Yes, it does.

Speaker Change: Plant closures planned closures.

John Rogers: Plan closures. I mentioned four. We've just announced the closure of Warwick, which is a small site focused on one particular product portfolio. As we look to drive further productivity and efficiency, we're taking volumes from some of the smaller sites, transferring them over to a larger size with the old... So that's an additional facility, and the Memphis site produces for Ex-US as well. Yes. Second row.

I mentioned four we've just announced the closure of Warrick, which is a small site.

Speaker Change: We're focused on one particular product portfolio as we look to drive further productivity and efficiency.

Speaker Change: We're taking volumes from some of the smaller sites and transferring that over to a larger size within the orthopedics network.

Speaker Change: So that's that's an additional closure into it.

Speaker Change: And the Memphis night produces for ex U S as well, yes. It does.

Speaker Change: Okay.

Speaker Change: Second room that can ride hail.

Speaker Change: Good morning.

John Rogers: Good morning. Hello, sorry.

Speaker Change: Sorry opened Meramec.

John Rogers: Oh, there are just two questions for me. So first one, on the 12-point plan, are any of the initiatives behind where you are, and then on graphics, just a quick one, are you seeing any changes around customer stocking dynamics due to the draft? Yeah, so the 12-point plan, some of the lead indicators, we look at deal activity, particularly around CORI, so that's progressing well. In terms of reference points, I indicated that the start of 2022, and we've seen a nice healthy improvement.

Speaker Change: Okay.

Speaker Change: Just two questions from my side. So first one on the 12 point plan and are any of the initiatives behind where you wanted them to me at least.

Deepak Nath: Are any of the initiatives behind where you wanted them to be at this stage after a couple of years? And specifically in US Recon, are any of the operating metrics that have improved as a result of the 12-point plan giving you particular confidence in the second half recovery?

Speaker Change: Right.

Speaker Change: The company and.

Speaker Change: And specifically in U S recon.

Speaker Change: Operating metrics have improved as a result of it.

Speaker Change: 12 point plan, giving any particular confidence in the second half recovery.

Deepak Nath: And then on graphics, just a quick one. Are you seeing any changes around customer stock and stocking dynamics due to the draft LCDs in some suits? Yeah. So the 12-point plan, some of the lead indicators we look at deal activity, particularly Ron Corey, so that's progressing well. Set turns, I indicated that a reference point was the start of 2022. And we've seen a nice, healthy improvement. In other words, our capital efficiencies improving. And that's a result of a lot of actions commercially, how we do business, commercial processes that contribute to that. And as we look at our wins, they bowed well in terms of how the second half is going to evolve.

Speaker Change: And then on graphics, just a quick one are you seeing any changes around kosmos docking stocking dynamics due to the dropdown.

Speaker Change: In skin substitutes.

Speaker Change: So the 12 point plan.

Speaker Change: Some of the lead indicators, we look at deal activity, particularly around Corey. So so that's progressing well set turns I indicated that.

Speaker Change: Our reference point was the start of 2022.

Again, a nice healthy improvement in other words, our capital efficiencies improving and that's a result of a lot of actions commercially how we do business right commercial processes that contribute to that.

John Rogers: In other words, our capital efficiency is improving, and that's a result of a lot of actions commercially, how we do business, right, commercial processes that contribute to that. And as we look at our wins, right, you know, they bode well, right, in terms of how the second half is going to develop. So there are some lead indicators within the 12-point plan that gives us confidence that the second half will start to see the U.S. recon turn as well.

Speaker Change: And as we look at our wins right.

Speaker Change: You know the bode well right in terms of how the second half is going to give out. So there are some lead indicators within the 12 point plan that gives us.

Deepak Nath: So there are some lead indicators within the 12-point plan that gives us confidence that the second half will start to see the US recon turn as well.

Speaker Change: Confidence that the second half.

Speaker Change: We'll start to see the U S recon turn as well.

Speaker Change:

Deepak Nath: Yeah, I think on graphics. So, with graphics, we haven't seen particular changes in stocking behavior as a result of the LCD determination. Obviously, this draft, and it's hard to forecast when I would go into effect, but we're expecting at some point this year, and that will of course usher in a different dynamic.

Speaker Change: Yeah.

Speaker Change: Graphics, capex, so with graphics.

John Rogers: So with graphics... We haven't seen particular changes in stocking behavior as a result of the LCD determination. Obviously, this draft, and you know, it's hard to forecast when that will go into effect, but we expect it at some point this year, and that will, of course, usher in... Dynamic, but we haven't seen a necessarily different kind of stalking behavior with droppings related to that. Caitlin Cronin from Canon Corp Genuity. Two for me.

Speaker Change: We haven't seen particular changes in stocking behavior as a result of the LCD.

Termination obviously this draft.

Speaker Change: And you know it's hard to forecast when that will go into effect, but we're expecting at some point.

Speaker Change: This year and that will of course, Usher run a different dynamic, but we haven't seen necessarily different kind of stocking behavior with dropping as related to that.

Deepak Nath: But we haven't seen a necessarily different kind of stocking behavior with droppings related to that.

Deepak Nath: Hi, I'm Keeling Cronin from Canon Corp Genuity. To from me, first in trauma, you continue to note the importance of the evo's plating launch. Strikers launching its PNG, a plating system this year. Do you expect to see some competitive headwinds as their product pulls out? And then on agility, how are you thinking about the commercialization strategy here as you ready your sales team? And for reimbursement, has that been established? What are the codes, et cetera? I didn't acoustically hear the second. What product were you talking about the second question? Oh, on agility, commercialization strategy there and reimbursement if that's been established?

Speaker Change: Hi.

John Rogers: First, in trauma, you continue to note the importance of the EVOS plating launch. Stryker is launching its Pangea plating system this year. Do you expect to see some competitive headwinds as their product rolls out? And then, on agility, how are you thinking about the commercialization strategy here as you prepare your sales team? And for reimbursement, has that been established? I didn't acoustically hear the second. Oh, um, on a Jaws...

Speaker Change: From Canaccord Genuity two for me first in trauma and you continue to note the importance of the Evo launch Stryker is launching its pangea plating system. This year do you expect to see some competitive headwinds at their project.

Speaker Change: And then on a jealousy how are you thinking about the commercialization strategy here as you weigh your sales team and for reimbursement.

Speaker Change: What are the codes et cetera, I Didnt acoustically hear the second what product would you talk about the second question.

Speaker Change: On a jersey.

John Rogers: The commercialization strategy there and reimbursement, if that's... On the first part with EVOS, we're well aware of competitive activity in that area. We feel very good about our offering. You are obviously the results of trauma over the last couple of quarters, giving you a proof point of how well we are doing commercially.

Speaker Change: The commercialization strategy there.

Speaker Change: Men and establish yeah sure.

Deepak Nath: Yes, sure. On the first part with evos, we're well aware of competitive activity in that area. We feel very good about our offering. You are obviously the results of trauma over the last couple of quarters. Give you a proof point of how well doing commercially. So we don't underestimate our competition by any stretch, but equally we're confident of not only a product portfolio but actually the commercial team's ability to compete. Effectively. So we feel good about it. With Agile C., as I mentioned, the initial cohort of our reps have been trained. Our early experience with it has been very good, as we go beyond kind of the initial cohort of surgeons.

Speaker Change: On the on the first part with egos, we're well aware of competitive activity in that area.

Speaker Change: We feel very good about our offering.

Speaker Change: You are obviously the results of trauma over the last couple of quarters.

Speaker Change: Give you a proof point of how about doing commercially.

John Rogers: So we don't underestimate our competition by any stretch, but equally, we're confident of not only our product portfolio but actually the commercial team's ability to compete. We feel good about it with Agile C. As I mentioned, the initial cohort of our reps have been trained. Our early experience with it has been very good as we go beyond kind of the initial cohort of surgeons. The reimbursement will take time to establish, but we're still in the early stages of activity around that, right?

So we don't underestimate our competition by any stretch, but equally we're confident.

Speaker Change: Of our not only our product portfolio, but actually the commercial team.

Speaker Change: <unk> ability to compete effectively so we feel good about it.

Julie C.: With a Julie C.

Speaker Change: As I mentioned.

Speaker Change: The initial cohort of our reps have been trained our early experience with it has been very good.

Speaker Change: As we go beyond kind of the initial cohort of surgeons. The reimbursement will take time to establish we're still in the early stages of activity around that right, but we have <unk>.

Deepak Nath: The reimbursement will take time to establish; we're still in the early stages of activity around that, but we have good experience establishing this for other therapies, whether it's for regeneratism, one that I would call out as the most proximate experience. So we've got a good team working on it, and we feel good about our ability to get the appropriate reimbursement for innovative technology like that, but we're still in the early stages of that.

John Rogers: But we have good experience establishing this for other therapies, whether it's for regenitin, the one that I would call out, right, it's the most proximate experience. So we've got a good team working on it, and we feel good about our ability to do it, the appropriate reimbursement for innovative technology like that. But we're still the only. Questions on the phone?

Speaker Change: Good experience, establishing this for other therapies, whether it's for regenerative someone that I would call out right is the most proximate XP.

Speaker Change: Experience so.

Speaker Change: We've got a good team.

Speaker Change: Working working on it and we feel good about our ability to kind of get the fair.

Speaker Change: The appropriate reimbursement for innovative.

Speaker Change: Innovative technology like that but we're still in the early stages of that.

Speaker Change: Questions on the phone.

Operator: Questions on the phone? As a reminder, if you'd like to ask a question, you can press Style One on the telephone keypad. Our first question comes from Julien Dormois from Jeffries.

Speaker Change: So I wonder if you'd like to ask a question congrats style one on the telephone keypad.

John Rogers: I bet if you'd like to ask a question, you can press star 1 on the telephone keypad. Our first question comes from Julien Dormois from Jeffreys. The line is now open, please go ahead. Hi, good morning, Deepak. If you can come and answer my questions, I'll ask three, if I may.

Our first question comes from Julien do more from Jefferies. Your line is now open go ahead.

Julien Dormois: If it's not open, let's go ahead. Yes, hi, good morning. The impact is going to come. My questions are three, if I may. But the first one is kind of from the previous one on trauma. I mean, having covered stuff for quite a few years now, we've seen that business in terms of very much like one step forward, two steps back. So just what do you know? What is your degree of confidence and how comfortable are you about the business now being really back on the nice both trajectory? Second question relates to it's probably more for John, and I mean, you were disclosed up all around this, but in terms of the restructuring adjustments, historically, we have a difference of about probably six to seven percent each point between this and trading profit and reported margins.

Speaker Change: Hi, good morning.

And so my question to ask three if I may.

John Rogers: So the first one is kind of related to the previous one on trauma. I mean, having covered stock for quite a few years now, we've seen business financing very much like one step forward, two steps back. What is your degree of confidence, and how comfortable are you about the business now being really back on a nice growth trajectory? The second question relates to, probably more for John, and I mean, you've already disclosed a lot around this, but in terms of the restructuring adjustments, historically, we had a difference of about 6 to 7 percentage points between trading profit and reported margins. This has ballooned to something like 10 or 11 percentage points in the past few years.

Speaker Change: So the first one is kind of from the from the previous one on trauma.

Speaker Change #100: Having covered stock for quite a few years now.

Speaker Change #101: And that business, causing very much like one step forward two steps back.

Speaker Change #100: <unk>.

Speaker Change #102: But in all likelihood Ziegler and how comfortable are you that business now you're back on an iceberg victory.

Speaker Change #102: Second question relates to probably multiple Jon and I mean, you've already disclosed.

Speaker Change #102: Around the strategic restructuring adjustments.

Speaker Change #103: Historically, we had a difference of about probably six.

Speaker Change #103: Two seven percentage points between trading profit and reported margin.

Deepak Nath: This has been into something like 10 or 11 percent this point in the past few years. So it is a return to normalize or let it to historical range, credible in your view, and what would be the time horizon for this. And the last question also comes back on wound biologics and reflecting around the draft LCD. Have you had more discussions on the ground and so on as to how it could impact your share of business in that segment if you are one of the few lucky companies on the final. Okay, well, thank you.

This has been immune to something like 10, or 11% that's going to be the best three years. So either returned to normalized all related to Easter we call range credible in your view and what could be the time horizon for this.

John Rogers: Is a return to normalized or historical range credible in your view, and what would be the time horizon for this? And the last question also comes back on wound biologics and reflections around the draft LCG. Have you had more discussions on the ground and so on as to how it could impact your share of business in that segment of CCUR, one of the few lucky companies on the final list? Well, thank you, Sid. Let me take the first and third one out and then pass them to John. Is that good?

Speaker Change #103: And the last question.

Speaker Change #103: It comes back on wound biologics.

Speaker Change #104: And reflecting around a draft LCD have you had more discussions on the ground and so on as to how it could impact your share of the business segments. If you are one of the few lucky.

Speaker Change #105: Combat is on the on and off.

Speaker Change #105: Okay well. Thank you so let me take the first and the third one and then pass to John.

Deepak Nath: Let me take the first and the third one out in the past, John. So on trauma acknowledged, you know, your point about us taking a step forward and two steps back, but I do believe we're well positioned. And why do I believe this? We now have the full complement of products that we need. So with EVO, we've got EVO small large, the full planning system and full screws to be competitive. Trauma in terms of the contracting occurs. Typically, it's not contracts for large size plates or small size plates as crews that tend to contract for the whole kit.

John Rogers: So, on trauma acknowledged, your point about us taking a step forward and two steps back, but I do believe we're well positioned, and why do I believe this? We now have the full complement of products that we need. So with EVOs, we've got EVOs small, large, the full plating system, and full screws to be competitive. Trauma, in terms of how the contracting occurs, typically it's not contracts for large-sized plates or small-sized plates or screws.

John Rogers: So on trauma.

Speaker Change #106: Acknowledge your point about us taking a step forward in two steps back, but I do believe we're well positioned and why do I believe this.

John Rogers: We now have the full complement of products that we need says so with Evo as we've got the both small large the full plating system and full screws.

John Rogers: To be competitive trauma and trumps all of the contracting occurs typically its not contracts for large sized players or small sized places crews that tend to contract for the whole kit and.

John Rogers: They tend to contract for the whole kit, and we haven't necessarily approached that launch as well as we could have, right? It took us a long time to get the full product portfolio together, but we now have the full product portfolio. We can be competitive in RFPs, and it's a very competitive product. So the strength of the product, the completeness of the offering, and, of course, all the improvements we've made around availability and commercial execution make a difference to how we were positioned in the past.

Deepak Nath: And, you know, we haven't necessarily approached that launch. as well as we could have. It took us a long time to get the full product portfolio together, but we now have the full product portfolio. We can be competitive in RFPs, and it's a very competitive product. So the strength of the product, the completeness of the offering, and of course all the improvements we've made around availability and commercial execution, is a difference to how we were positioned in the past. So those are the ingredients that I feel good about in terms of ability to execute, right?

John Rogers: And we haven't necessarily approach that launch as well as we could have.

John Rogers: It took us a long time to get the full product portfolio together, but we now have the full product portfolio, we can be competitive in rfps and it's a very competitive product. So the strength of the product the completeness of the offering and of course, all the improvements we've made around availability and commercial execution is there.

John Rogers: Difference to how we were positioned in the past.

John Rogers: So those are the ingredients that I feel good about in terms of our ability to execute, right? So hopefully, it will now be two steps forward without the step back that you've seen, on the third on LCD.

John Rogers: So those are the ingredients that I feel good about in terms of our ability to execute right. So hopefully it'll be now two steps forward without the step back.

Deepak Nath: So hopefully it'll be now two steps forward without the step back that you've seen in the past. On the third run LCD, so first off, we're one of the 15 products that are covered. We feel really good about the quality of our offering, the innovation that's inherent in the products we offer, and really good about the clinical evidence that supports, or the evidence that supports not only clinical differentiation, but also the economic benefit of our products. So first principles, we are well positioned there. But I'll remind you again that it is draft coverage here. Now, in contrast to times in the past, it's all seven max now have come out with this.

Speaker Change #107: <unk> seen in the past on.

Speaker Change #108: On the third run LCD.

John Rogers: So, first off, we're one of the 15 products that are covered. We feel really good about the quality of our offering, the innovation that's inherent in the products we offer, and really good about the clinical evidence that supports, or the evidence that supports not only clinical differentiation but also the economic benefit of our products. So, first principles, we are well-positioned. But I'll remind you again that this is draft coverage here. Now, in contrast to times in the past, all seven MACs have now come out with this, so there's a high likelihood that it's going to go through.

Speaker Change #109: So first off but we're one of the 15 products that are covered we feel really good about the quality of our offering the innovation that's inherent in the products, we offer and really good about the clinical evidence that supports the evidence that supports not only clinical differentiation.

Differentiation, but also the economic benefit of our products. So first principles, we are well position there.

Speaker Change #110: But I'll remind you again that it is draft.

Speaker Change #110:

Speaker Change #110: Coverage here and now in contrast to times in the past, it's all seven Max now have come up with this was a high likelihood that it's going to go through but until its fully implemented its hard to say whether in the final form it'll be the same as what we've seen in draft right. So this is you know is a pretty.

Deepak Nath: This is a high likelihood that it's going to go through, but until it's fully implemented, it's hard to say whether in the final form it will be in the same as what we've seen in draft, right? So this, as you know, is a pretty is a fairly complex reimbursement mechanism in this category. It is inherently difficult to predict how things are going to go, but you got to go back to first principles, and the first principles is the strength of our product portfolio and the evidence base that supports it. That's the hard stuff, and we're well positioned to navigate whatever reimbursement landscape kind of looks like on that.

John Rogers: But until it's fully implemented, it's hard to say whether in the final form it'll be the same as what we've seen in drafts, right? So this, as you know, is a pretty, and fairly complex reimbursement mechanism in this category. It is inherently difficult to predict how things are going to go, but you've got to go back to first principles, and the first principle is the strength of our product portfolio and the evidence base that supports it.

Speaker Change #110: Early complex reimbursement mechanism in this category.

Speaker Change #110: It is inherently difficult to predict how things are going to go but you got to go back to first principles. The first principles as the strength of our product portfolio and the evidence base to support so that's the hard stuff and we are well positioned to navigate whatever reimbursement landscape kind of looks like on that but it's hard to kind of.

John Rogers: That's the hard stuff, and we're well-positioned to navigate whatever reimbursement landscape kind of looks like on that, but it's hard to kind of forecast how that's going to go, really play out when the draft turns into the final. John, do you want to take the restructuring?

Deepak Nath: But it's hard to kind of forecast how this will really play out when the draft turns into final legislation.

Speaker Change #110: How does this will really play out when the draft charges at the final legislation.

John Rogers: Do you want to take any structure? Yes, on your question on restructuring charges, I think you are alluding to a history of there being a big delta between our unadjusted profits and our reported profits as a consequence of putting large amounts of restructuring charges through the P&L. I think just to be clear, you know, we've clearly signalled the restructuring charges associated with the 12 point plan. They will come through; the bulk of the remainder comes through this year, little bit next year, as I said. Going forward, we're not saying there will never be any more restructuring charges; we're just saying we expect our restructuring charges to be significantly lower going forward.

Do you want to take the restructuring yesterday on your on your question on restructuring charges. I think you were alluding to a history of there being a big Delta between all on adjusted profits in our reported profits as a consequence of putting.

John Rogers: Yes, on your question on restructuring charges, I think you are alluding to a history of there being a big delta between our unadjusted profits and our reported profits, as a consequence, large amounts of restructuring charges through the PNC. I think just to be clear, you know, we've clearly signaled the restructuring charges associated with the 12-point plan. They will come through, the bulk of the remaining that comes through this year and a little bit next year, as I see it.

Speaker Change #110: Large amounts of restructuring charges through through the P&L.

Speaker Change #111: I think just to be clear.

We've we've clearly signal that the restructuring charges associated with the 12 point plant they will come through the bulk of the remainder of the country. This year a little bit next year as I said.

John Rogers: Going forward, we're not saying there will never be any more restructuring charges; we're just saying we expect our restructuring charges to be significantly lower going forward, so there won't be this material gap, this historical gap that's existed between underlying and reported, and I think that's that's been very clearly communicated. I understand there are more questions on the phone. Our next question comes from Veronika Dubajova from City. Your line is now open; please go ahead.

Speaker Change #112: Going forward, we're not saying there will never be any more restructuring charges were just saying, we don't we expect restructuring charges to be significantly lower going forward. So there won't be this material gap. This historical gap that existed between underlying and reported.

John Rogers: So there won't be this material gap, this historical gap that's existed between underlying and reported. And I think that's being very clearly signalled.

Speaker Change #112: And I think that that's that's being very clearly signaled.

Operator: I understand there are more questions on the phone. Take the next one. Thank you. Our next question comes from Veronica. Do we know if that's from SETI? Your line is not open; please go ahead. Hi guys, good morning. The passing John, thank you for taking my questions. I have three please. First one, maybe do you have to get a commitment from what you consider as success as far as the US hip and US performance is concerned in this in the second half of the year. I appreciate your commitment to improving performance.

Speaker Change #113: I understand there are more questions on the phone.

Speaker Change #113: Take the next one.

Speaker Change #113: Thanks.

Speaker Change #115: Next question comes from Dubai.

Speaker Change #116: <unk> from Citi.

Speaker Change #117: Now open. Please go ahead.

John Rogers: Hi, guys. Good morning. Deepak and John, thanks for taking my questions. I have three, please.

Hi, guys good morning.

Speaker Change #118: Thanks for taking my question.

Speaker Change #119: The first one.

John Rogers: The first one is, maybe, Deepak, just get a commitment from you on what you consider a success as far as the U.S. hip and U.S. performance are concerned in the second half of the year. I appreciate your commitment to improving performance. Maybe you can tell us what you consider a success versus a disappointment as you think about the second half of the year and the U.S. hip and U.S. growth rate. My second question is for John. And, John, thank you for all the margin bridges. They're incredibly helpful. Just maybe challenge you a little bit.

Speaker Change #119: Maybe maybe.

Speaker Change #121: <unk>, Inc.

Yeah, sorry.

Speaker Change #122: Performance is concerned.

Yeah.

Speaker Change #122: Appreciate it.

Speaker Change #122: Hey.

Veronica Dubajova: You can tell us what you consider as success versus disappointment as you think about the second half of the year and the US hip and e-growth rate. My second question is, John, and John, thank you for all of our margin bridges. They're incredibly helpful. Just maybe challenge you a little bit if I look at the second half versus the first half. You're expecting the same country. Deficient, positive contribution for revenue leverage and manufacturing efficiency. But you do expect higher growth in the back half of the year and also more progress on the structure. So he's trying to reconcile those statements in the British and Weather.

Speaker Change #122: Performing.

Speaker Change #122: Yes.

Speaker Change #122: Thank you Terry.

Speaker Change #122: Appointment.

Speaker Change #122: Yeah.

Speaker Change #122: U S GAAP.

Speaker Change #122: Any growth rate.

Speaker Change #122: My second question is John.

Speaker Change #122: John Thank you for all of the March Brexit, they're incredibly helpful. Just maybe challenge you a little.

John Rogers: If I look at the second half versus the first half, you're expecting the same contribution. (inaudible) I'm struggling to hear what you're saying. Maybe if you could just... We're in a massive hall, and it's sort of echoing around. Could you just repeat your question and perhaps a little bit slower, and if you can just pronounce it so that we can hear you? It's terrible acoustics.

Second half.

Speaker Change #123: In contribution a positive contribution.

Speaker Change #123: Great.

Speaker Change #124: Manufacturing efficiency.

Speaker Change #125: Higher growth in the back half of the year and I'll get more progress on restructuring, but I'm just trying to reconcile.

Speaker Change #124: Hey.

Speaker Change #124: The letter.

John Rogers: There's something that is boring. I'm struggling to hear what you were saying. Maybe if you can just, we're in a massive hall and it's sort of echoing around. Could you just repeat your question and perhaps a little bit slower, and if you can just pronunciate so that we can be terribly acoustics in this hall. At least for me, I don't know about the rest of it. Of course, no problem. I was just asking about the second half margin bridge. And if I look at the second half, bridge versus what you delivered in the first half, your expectation in the second half is the positive contribution from revenue leverage and from manufacturing efficiency is the same as it was in the first half.

Speaker Change #124: There.

Speaker Change #124: Yeah.

Speaker Change #126: I'm struggling to hear what you were saying that maybe if you can just we're in a massive hole in it sort of echoing around could.

Speaker Change #127: Could you just repeat your question and perhaps a little bit slower and if you can just pronunciation. So that we can get really terrible acoustics initial.

John Rogers: Lisa May, I don't know about the rest of you, but of course, no problem. I was just asking about the second half margin bridge, and if I look at the second half bridge versus what you delivered in the first half, your expectation for the second half is the positive contribution from revenue leverage and from manufacturing efficiencies is the same as it was in the first half. But clearly, you are guiding for better growth in the back half of the year, and you should also be making more progress on some of the savings initiatives that you have in place.

Speaker Change #128: At least for me I don't know how the rest of it of course no problem.

John Rogers: So just trying to reconcile those two data points, why should there not be more sales growth leverage and efficiency leverage in the back half of the year? I hope that was clear. And then my third question is a bigger picture question.

Speaker Change #129: I was just asking about the second half margin rich and if I look at the second half bridge versus what you delivered in the first half.

Speaker Change #130: Expectation in second half as the positive contribution from revenue leverage and for our manufacturing efficiencies.

Speaker Change #131: As it was in the first half, but clearly you are guiding for a better growth in the back half of the year.

John Rogers: But clearly, you are guiding for a better growth in the back half of the year. And you should also be making more progress from some of the savings initiatives that you have in place. So just trying to reconcile those two data points. Why should there not be more sales square leverage and efficiency leverage in the back half of the year? I hope that was clear.

Speaker Change #132: And you should also be making more progress on the channel would be savings initiatives that you have in place. So I'm just trying to reconcile those two data points why should there not be more sales square Blackberry and.

Speaker Change #133: And efficiency leverage in the back half of the year I hope that was clear.

Deepak Nath: And then my third question is a bigger picture question. Good. And then my third question is a bigger question on the portfolio. And obviously, the fact that this is a question that comes up often in investor conversations. I know you get it a lot, but just your commitment to the shape of the group as it stands. And you desire to rebalance the contribution from the three divisions given their respective growth and return profiles. Thank you, guys. Thank you, Veronica. So I'll take the first and second. I guess we'll just a pattern here. So, in terms of growth, a great question in terms of what does success look like in the US?

Speaker Change #133: And then my.

Speaker Change #133: Bigger picture question.

John Rogers: And then my third question is the bigger question on the portfolio, and obviously, Deepak, this is a question that comes up often in investor conversations, and I know you get it a lot, but just your commitment to the shape of the group as it stands and, you know, any desire to rebalance the contribution from the three divisions given their respective growth and return profiles. Thank you, guys. Thank you, Veronika.

Speaker Change #133: Okay.

Speaker Change #134: And then my third question is a bigger question on the portfolio.

Speaker Change #134: And honestly Deepak. This is a question that comes up often in investor conversations I know you get it a lot.

Speaker Change #134: Yeah.

Speaker Change #134: To Australia.

Speaker Change #134: As it stands.

Speaker Change #134: And.

Speaker Change #135: Desire acutely Alan a contribution from three da Vinci, given their respective growth and Richard.

John Rogers: So I'll take the first and the second, I guess. Well, there's a pattern here, and I'll point it out to you, John, for the second. So in terms of growth, it's a great question in terms of what success looks like in the U.S. We're clearly below market, and we have been over the last couple of quarters. So the first step is really to get to near-market levels, and that's what we're getting to or expect to get to in the back half of the year. As we go into 2025, you should expect, as the quarters progress, for us to get to at least market levels and a little bit beyond. Certainly, in trauma, we're above market. OUS, we're above the market.

Speaker Change #135: Thank you Veronica I'll take the first and second I guess, we'll just a pattern here.

John Rogers: Try to you John for the second.

Speaker Change #136: So in terms of growth great question in terms of what does success look like in the U S.

Deepak Nath: We're clearly below market, and we have been over the last couple of quarters. So first step is really get to near market levels. And that's what we're getting to or expect to get to in the back half of the year. As we go into Q into 2025, you should express as the quarters progress for us to get to at least market levels and a little bit beyond. Certainly, in trauma, we're above market. Oh, US, we're above market in the US, getting to slightly above market as we exit 2025 is what we're targeting. Now, it doesn't sound hugely aspirational, but relative to where we've been, it represents a significant set of efforts for us on the journey that we've been on to get to that point.

Speaker Change #137: Were clearly below market and be happen over the last couple of quarters. So first step is really get too.

Speaker Change #137: Near market levels, and that's what we're getting to.

Speaker Change #137: We expect to get to in the back half of the year.

Speaker Change #137: Go into Q into 2025, you should expect as the quarters progress for us to get to at least market levels.

Speaker Change #137: And a little bit beyond certainly in trauma, where above market or U S were above market in the U S getting to slightly above market as we exit 2025 is what were what were targeting.

John Rogers: In the U.S., getting to slightly above market as we exit 2025 is what we're targeting. Hugely aspirational, but relative to where we've been, it represents a significant set of efforts for us on the journey that we've been on to get to that point. And if we do that, we are well able to deliver the set of targets that we've committed to. Second, on the portfolio question, as you rightly point out, that does come up. And this is not an idle question.

Speaker Change #138: Now it doesn't sounds.

Speaker Change #138: Hugely aspirational, but relative to where we've been at.

Speaker Change #138: There's a significant set of efforts for us on the journey that we've been on to to get to that point and if we do that we are well able to deliver the set of targets that we've that we've committed to.

Deepak Nath: And if we do that, we are well able to deliver the set of targets that we've committed to.

Deepak Nath: Second, on the portfolio question, as you rightly point out, that does come up. And this is not an idle question. It's certainly not an idle question for us as a management team or the board. But what I can tell you is the single biggest thing I can do for you all as shareholders is focused on driving operational improvement in orthopedics. As I look at all the different alternatives, the single biggest value driver is orthopedics humming along. As I said, there was 60% of our business; we are more or less either at or actually above market.

Speaker Change #139: Second on the portfolio question.

Speaker Change #139: As you as you rightly pointed out that that does come up.

Speaker Change #139: And this is not an idle question, it's certainly not an idle.

Speaker Change #139: Question for Us as a management team or the board, but what I can tell you is.

John Rogers: It's certainly not an idle question for us as a management team or the board. But what I can tell you is the single biggest thing I can do for... you all, as shareholders, focused on driving operational improvement in North America. As I look at all the different alternatives, the single biggest value driver is orthopedics humming along.

Speaker Change #139: The single biggest thing I can do for.

Speaker Change #139: You all as shareholders is focused on driving operational improvement in orthopedics.

Speaker Change #139: Look at all the different alternatives the single biggest value driver is orthopedics humming along.

John Rogers: As I said, 60% of our business, we are more or less either at or actually above market. We are focused on getting the U.S. to a place, to the same place. I've outlined how specifically we're going to get there. With the U.S. operating this way, that is the biggest unlock in terms of value.

Speaker Change #139: As I said, there was 60% of our business.

Speaker Change #139: <unk>.

Speaker Change #139: More or less either at or actually above market.

Deepak Nath: We are focused on getting the US to the same place. I've outlined how specifically we're going to get there. With the US operating this way, that is the biggest unlock in terms of value. What that does also do for us is create options for us in terms of how we move forward as a group. I've also said previously, I do see synergies across our businesses. Scale matters in that tech, and at the scale that we are, we do need all of our businesses to be performing for the group to perform. And we're very, very cognizant of that, which is why in the 12 point plan, even as we've outlined fixing orthopedics, not to be euphemistic about it, but equally to actually continue to nurture our businesses, ports and moon at the same time.

Speaker Change #139: We are focused on getting us to a place or to the same place I've outlined how specifically we're going to get there with the U S. Operating this way that is the biggest unlock in terms of value. What that does also do for us is key.

John Rogers: What that does also do for us is create options for us in terms of how we move forward as a group. As I've also said previously, I do see synergies across our businesses. Scale matters in MedTech, and at the scale that we are, we do need all of our businesses to be performing for the group to perform. And we're very, very cognizant of that, which is why in the 12-point plan, even as we've outlined fixing orthopedics, not to be euphemistic about it, but equally to actually continue to nurture our businesses, sports, and mood at the same time. And I think we've demonstrated that we are and have done that.

Speaker Change #139: Create options for us in terms of hobby move forward as a group.

Speaker Change #139: I've also said previously I do see synergies.

Speaker Change #139: Synergies across our business businesses scale matters in med Tech.

Speaker Change #139: And at the scale that we are we do need all of our businesses to be performing for the group to perform and we're very very cognizant of that which is why in the 12 point plan, even as we've outlined fixing orthopedics not to be euphemistic about it but equally to actually continue to nurture our businesses supports them but.

Speaker Change #139: And mood at the same time and I think we've demonstrated that we are and have done that with the last remaining bit U S. In place. We will have a portfolio that basically is in good shape and that gives us kind of the optionality in terms of how we move forward. So don't want to dance around the topic, but hopefully what you see.

Deepak Nath: And I think we've demonstrated that we are and have done that. Will the last remaining bit US in place, we will have a portfolio that basically is in good shape. And that gives us kind of the optionality in terms of how we move forward. So I don't want to dance around the topic, but hopefully what you see us being laser-focused on the things that we can do right now to drive shareholder value, and that is the set of initiatives of online.

John Rogers: With the last remaining bit of US in place, we will have a portfolio that is basically in good shape. And that gives us kind of the optionality in terms of how we move forward. So I don't want to dance around the topic, but hopefully, what you see is us being laser focused on the things that we can do right now to drive shareholder value. And that is the set of initiatives I've outlined.

Speaker Change #139: And us being laser focused on the things that we can do right now to drive shareholder value and that is the set of set of initiatives I've outlined.

John Rogers: And on your questions is a V, the margin bridges for half one and half two, and you made the observation that why we will ask a question: why we're not seeing more operational leverage in half two if we've got higher growth, and why we're not seeing more efficiency savings come through as we extend and deliver against our plan. The answer to that question, I think, is really simple. Of course, when you look at the operational leverage, there's two components, of course, to that. There's the price components, and there's the volume components. What we're seeing in the second half is a slightly lower price component, as a consequence of the timing of how increases are coming through.

John Rogers: And on your question vis-à-vis the margin bridges for half one and half two, you made the observation that why we're not seeing more operational leverage in half two if we've got higher growth and why we're not seeing more efficiency savings come through as we... Extend and Deliver against our plans. The answer to that question, I think, is reasonably simple. Of course, when you look at the operational leverage... There's two components, of course, to that. There's the price component, and there's volume two. What we're seeing in the second half is a slightly lower price composer.

Speaker Change #140: And on your question visit the margin bridges for half one and half two.

Speaker Change #141: And you made the observation that why why are we at Wassa question why are we not seeing more operational leverage in half two if we've got higher growth and why are we not seeing more efficiency savings come through as we obviously extend and deliver against our plan.

Speaker Change #142: The answer to that question I think is reasonably simple of course, when you look at the operational leverage.

Speaker Change #143: There's two components of course to that there's the price component and as the volume component.

Speaker Change #143: What we see in the second half is a slightly lower price component as a consequence of the timing of how increases are coming through so roughly for the year.

John Rogers: As a consequence of the timing of how increases are coming through, so it's roughly for the year, you know, the year is about one, a little bit less than 1% overall on price, but the timing of that is weighted more towards the first half than the second. And on the volume component, clearly, there's a volume step up in the second half, as there always would be. Net-net, it so happens that's the same number, 1.2%. Leverage dropping through.

John Rogers: So, roughly for the year, in the year it is about to be a little bit less than 1% overall on price, but the timing of that is weighted more towards the first half than the second. And on the volume component, clearly there's a volume step up in the second half, as there always would be net net. It so happens that's the same number the 1.2% leverage coming through. So that's the first answer. The second question was about efficiency savings. The reality here is that there's lots of moving parts, although I said to you, there's about 40 plus initiatives underway across seven different work streams, and they're each at different levels of maturity and cost base.

Speaker Change #144: Is that sort of one a little bit.

Speaker Change #144: Less than 1% overall and price, but are tied to the timing of that is weighted more towards the first half and the second.

Speaker Change #144: And on the volume component clearly, there's a volume step up in the second half as they've always would be net net is that happens is the same number the one 2%.

John Rogers: So that's the first answer. The second question was about... Efficiency Saver.

Speaker Change #145: Leverage kept dropping through so that's the first answer the second question was about efficiency.

Speaker Change #145: Efficiency savings.

John Rogers: The reality here is that there are lots of moving parts. As I said to you, there are about 40 plus initiatives underway across seven different works, and they're each at different levels of maturity and cost. And so, some that are already well advanced and have been, frankly, well advanced for 18 months; these are things that have been in train for some time now, and are now starting to pay dividends. Starting and starting later, like many of these, results in a cost increase sometimes before you have to sort of go through the wave of then delivering the effect. And so this is just merely an offsetting of multiple different initiatives over time. And again, it so happens that, broadly speaking, the Net Benefit is the same in the first half and the second.

The reality here.

Speaker Change #145: Here is that there's lots of moving parts as I say to you that.

Speaker Change #145: It was about 40 plus initiatives underway across seven different work streams and that each at different levels of maturity and cost base.

John Rogers: And so some that are already well advanced and have been, frankly, well advanced for 18 months. So things are doing a matter of, these are things that have been in train for some time now, are now starting to pay. Dividends. Others that we're starting at started later, like in many of these mischievous, resulting in a cost increase, sometimes before you have to sort of go through the wave of then delivering the efficiency. And so this is just merely an offsetting of multiple different mischievous over time. And again, it so happens aboard your speaking, the net benefit of that is the same in the first half and the second.

Speaker Change #145: And so.

Speaker Change #145: Some that are already well advanced in that being frankly, well advanced for 18 months and so the things we're doing in a matter of fact many of these are things that have been in train for some time now on now starting to pay dividends.

Speaker Change #145: Others that were starting it started later like in many of these initiatives result in a cost increase sometimes before you have to sort of go through the wave, but then delivering the efficiency and just maybe an offsetting at multiple different initiatives over time and again as that happens it broadly speaking.

Speaker Change #145: Net benefit of that.

Speaker Change #145: Is the same in the first half and the second there's a lot of stuff going on at the moment that probably in this year is a little bit of a drag in the second half, but actually starts to really pay back in the first half of 2024. So that's the reason why you don't see that both the operational leverage flow through in the second half and also the efficiency savings.

John Rogers: There's a lot of stuff going on at the moment that probably is a little bit of a drag in the second half this year but actually starts to really pay back in the first half of 2025. So that's the reason why you don't see that, both the operational leverage flow through in the second half and also the efficiency savings. There are lots of different moving parts to deliver. Thank you so much, I really appreciate it, from Robert Davies of Morgan Stanley. Your line is now open; please go ahead.

Robert Davies: There's a lot of stuff going on at the moment that probably in this year is a little bit of a drag in the second half, but actually starts to really pay back in the first half of 2025. So that's the reason why you don't see both the operational leverage flow through in the second half, and also the efficiency savings. There's lots of different moving parts to deliver those efficiency savings. Thanks so much. I really appreciate it. Thank you. The question comes from Robert Davies of Morgan Stanley. The lines are open; please go ahead. Yeah, morning.

Speaker Change #145: There's lots of different moving parts to deliver efficiency savings.

Speaker Change #145: So I'm not sure and I appreciate it.

Monica: Thank you Monica.

Speaker Change #148: So the question.

Speaker Change #149: It comes from Robert Davies of Morgan Stanley Your.

Speaker Change #150: Your line is now open. Please go ahead.

John Rogers: Good morning. Thanks for taking my questions. I had three.

Robert Davies: Good morning, Thanks for taking my questions.

Robert Davies: Thanks for taking my questions. The first one was just on the comment you'd made on the previous quarter, around the turnover and sales reps in the US business and the engines and the compensation structures you get there. I'd just be curious to get an update on where we are on that. The second one was just on your indicative phasing of savings on slide 20. It was a step up between 2024 and 2025. So just looking at the key risks for what's actually coming through there, and if there's any chance there could be a slippage to be on 25.

Robert Davies: The first one was just on the comment you had made on previous quarter on the turnover in sales reps.

John Rogers: The first one was just on the comments you'd made in the previous quarter on the turnover in sales rates in the U.S. business and the changes in the compensation structures you had there. I'd just be curious to get an update on where we are on that. The second one was just on your indicative phasing of savings on slide 20. It's quite a big step up between 2024 and 2025. So just looking at the kind of key risks for what's actually coming through there and if there's any chance there could be a slippage beyond 2025.

Speaker Change #152: In the U S business.

Robert Davies: And just some of the compensation structures.

Speaker Change #153: Just be curious to get an update on where we are on that.

Speaker Change #153: The second one was just on your indicative phasing of savings on slide 20, it is quite a big step up.

Speaker Change #154: 2024 and 2025.

Speaker Change #154: Looking at the kind of key risks for world of tanks.

Speaker Change #154: To be coming through.

Speaker Change #155: Any chance there could be slippage beyond 25.

John Rogers: And then just the final one was really around where your view was on elective procedure volumes by different regions. You had sort of different messages from various companies about tailwinds versus where we're already normalized. I would just be curious to get your views on where we are on that. Thank you.

John Rogers: And then just the final one was really around where your view was on the lack of procedure volumes by different regions, different messages from various companies available in the versus were already normalized. Just be curious to get your views on where we are on that. Thank you. I missed your third question. I'm sorry. I got it. You got it. Okay. Thanks. Okay. Sorry, the lack of procedure volume. Yeah. I got it. Yeah. So, in terms of sales rep turnover, what I indicated in 2023 is that through a significant part of the year in the US, had gaps in territories.

Speaker Change #156: And then just the final one was really around well.

Speaker Change #156: Your view was on elective procedure volumes by different regions.

Speaker Change #157: Messages from various companies.

Speaker Change #158: We're already normalized just be curious to get your views on where we are not thank you.

Speaker Change #159: I missed your third question on I'm, sorry, I got it you got it okay. Thanks.

John Rogers: I got it. You got it? Thanks. Sorry, the elective procedure volume is high. Yeah, I got it. So in terms of sales rep turnover, what I'd indicated in 2023 is that through a significant part of the year, the U.S. had gaps in territories. We had a leadership gap, in fact, in a significant part of the U.S. And that was one of the contributors to actually some of the performance challenges in the back half of the year, especially. As we now are in 2024, we've filled all of the territory, so we're operating essentially at full strength in the U.S. All of the leadership team is in place, so we are at full strength.

Speaker Change #159: Let me.

Speaker Change #159: Procedure growth.

Speaker Change #159: Got it.

Speaker Change #159: So.

Speaker Change #161: In terms of sales rep turnover, what I'd indicated in 2023 is through.

Speaker Change #161: A significant part of the year.

Speaker Change #161: B in the U S had gaps.

Speaker Change #161: Caps and territories.

Deepak Nath: We had a leadership gap in fact in a significant part of the US, and that was one of the contributors to actually some of the performance challenges in the back half of the year, especially. As we now are in 2024, we filled all of the territories that were operating essentially at full strength in the US. All of the leadership team is in place, so we are at full strength. And in terms of turnover in our reps, that's actually come down to normalized levels, right? So all of this points to a level of stability in the organization.

Speaker Change #161: We had.

Speaker Change #161: Our leadership gap in fact in a significant part of the U S and that was one of the contributors to actually.

Speaker Change #161: Some of the performance challenges in the back half of the year, especially.

Speaker Change #161: As we now are in 2024.

Speaker Change #161: We filled all the territories that were operating essentially at full strength in.

Speaker Change #161: In the U S.

Speaker Change #161: All of the leadership team is in place.

Speaker Change #161: So we are at full strength.

John Rogers: And in terms of turnover in our reps, that's actually come down to normalized levels, right? So all of this points to a level of stability in the organization. What's also important is product availability. That's been a very significant challenge for our commercial team.

Speaker Change #161: And in terms of turnover.

Speaker Change #161: And our apps, that's actually come down to normalized levels.

Speaker Change #161: Levels right. So all of this points to a level of <unk>.

Speaker Change #161: The ability and the organization. What's also important is product availability, that's been a very significant challenge for our commercial team and.

Deepak Nath: What's also important is product availability. That's been a very significant challenge for our commercial team. And with knee sets finally falling into place in Q2, on the back of hips really getting there in Q4 of last year, and replenishment kind of improving right along the year, product availability, I can tell you it's no longer a topic for reps. And that's been one of the factors driving. So we're in a good place on product availability. We're in a good place in terms of leadership. We've been able to attract actually good talent across the industry into the organization because people are attracted by our product portfolio.

John Rogers: And with knee sets finally falling into place in Q2, the back of the hips really getting there in Q4 of last year, and replenishment kind of improving right along the year, product availability is no longer a topic for reps, and that's been one of the factors driving RepChurn.

Speaker Change #161: With nice sets finally falling into place in Q2 on the back of hips really getting there in Q4 of last year and replenishment kind of improving right along the year product availability I can tell you is no longer a topic for reps and that's been one of the factors driving it.

John Rogers: So we're in a good place with product availability. We're in a good place in terms of leadership there. We've been able to attract, actually, good talent across the industry into our organization because people are attracted to our product portfolio. We've got great products in recon.

Speaker Change #162: Rep churn so we're in a good place on product availability. We're in a good place in terms of leadership there we've been able to attract ashleigh good talent across the industry into organization because people are attracted by our product portfolio. We've got great products and recall, yes, our share position does reflect it but if you are a patient viewership.

Deepak Nath: We've got great products in Recon. Yes, our share position is reflected. But if you're a patient, if you're a surgeon, you know how good our products are, and our reps see that. So we've been able to recruit good reps. And finally, on the compensation scheme, we've rolled that out, as I've indicated, in 2022. We're really largely, up until that point, operating in a mode of retention-based schemes. Now, there are good reasons for that. It's because historically we've had challenges retaining the business for product availability reasons, product portfolio gap reasons, and other things. So those challenges aren't even retaining business.

John Rogers: Yes, our share position isn't reflected, but if you're a patient, or a surgeon, you know how good our products are, and our reps see that, so we've been able to recruit good reps. And finally, on the compensation scheme, we've rolled that out, as I've indicated. In 2022, we're really largely, up until that point, operating in a mode of retention-based schemes. There are good reasons for that.

Speaker Change #162: Surgeon you knew how good our products and our rep see that so we've been able to recruit.

Speaker Change #162: Good reps and.

Speaker Change #162: And finally on the compensation scheme.

Speaker Change #162: We've rolled that out right as I've indicated in 2022, we're really largely up until that point operating in a mode of retention based.

Speaker Change #162: Schemes now.

Speaker Change #162: There are good reasons for that is because historically, we've had challenges retaining that business for product availability reasons product portfolio GAAP reasons and other things. So it is a challenge around you've been retaining business worn out with all of those things largely at hand, we're able to be much more front footed and we've got an incentive scheme that rewards that not everybody is going to <unk>.

John Rogers: It's because historically, we've had challenges retaining business for product availability reasons, product portfolio gap reasons, and other things. So there's a challenge around even retaining business. We are now, with all of those things largely at hand, we're able to be much more front-footed, and we've got an incentive scheme that rewards that. But not everybody's going to like that, right?

John Rogers: We expect that. But it's now been rolled out, and people understand what they need to do to earn their quota. So that is all at hand.

Deepak Nath: We're now with all of those things largely at hand; we're able to be much more fun-footed. And we've got an incentive scheme that rewards that. Not everybody's going to like that, right? We expect that. But it's now been rolled out, and people understand what they need to do to earn their quota. So that is all at hand.

Speaker Change #162: Get that right, we expect that but it's now been rolled out and people understand what they need to do to earn their quota. So that is all at hand.

Deepak Nath: And then, in terms of procedures, I've commented in the past that in recon, because we've had performance challenges of our own, I don't tend to comment independently with our own data on how we're doing. We see all of the data sets in the industry that everybody else does, right? But when you have a performance challenge in that business, it can be hard to parse what's market and what's you. We can do that very well in our other businesses and sports and other things. We have a pretty good view of what's happening in the market. But in also, and particularly in recon, I've been somewhat circumspect about commenting on what's actually happening in the market, independent of what we all see with other companies reporting.

John Rogers: And then, in terms of procedures, I've commented in the past that in Recon, because we've had performance challenges of our own, I don't tend to comment independently on how we're doing. We see all of the data sets in the industry that everybody else does, right?

Speaker Change #162: And then in terms of procedures have commented in the past that in recon, because we've had performance challenges.

Speaker Change #162: Of our own.

Speaker Change #162: I don't tend to comment independently with our own data on how we're doing we see all of the data sets in the industry that everybody else does right, but when you have performance challenge that business. It can be hard to parse what's market and what's your.

John Rogers: But when you have performance challenges in that business, it can be hard to parse what the market is and what you are. We can do that very well in our other businesses, in sports, and other things. We have a pretty good view of what's happening in the market. But in ortho and, particularly, in recon, I've been somewhat circumspect about commenting on what's actually happening in the market, independent of what we all see with other companies.

Speaker Change #162: We can do that very well and our other businesses in sports and other things we have a pretty good view of what's happening in the market.

Speaker Change #162: In ortho and particularly in recon I've been somewhat circumspect about commenting on what's actually happening happening in the market independent of what we all see that.

Speaker Change #162: The company's reporting.

John Rogers: What I can say, with that proviso, is the market seems pretty, pretty robust, you know, back to more normalized levels. We clearly saw in Q1 and Q2 of last year a very frothy market. We're not in that world right now.

Deepak Nath: What I can say with that proviso is the market seems pretty robust; you know, back to more normalized levels. We clearly saw on Q1 and Q2 of last year a very frothy market. We're not in that world right now; we're in a more normalized world. But, so for us, our assumptions as far as the guidance that we gave assumed a normalized market. So we're not counting on a market tailwind to deliver numbers. Hopefully, it gives you the color around us, not as straightforward as answer as you might like, but at least, you know, our thought processor.

Speaker Change #162: What I can say with that proviso.

Speaker Change #162: Is the market seems pretty pretty robust.

Speaker Change #162: You know back to more normalized levels. We clearly saw in Q1 and Q2 of last year, a very frothy market, we're not in that world right now we're in a more normalized world but.

John Rogers: We're in a more normalized world. So for us, our assumptions, as far as the guidance that we gave, assumed a normalized market. So we're not counting on a market tailwind to skew our numbers. Hopefully, that gives you some color around it.

Speaker Change #162: So for us our assumptions as far as the guidance that we gave assumed a normalized market. So we're not counting on a market tailwind to dip our numbers. So hopefully that gives you.

Speaker Change #162: The color around is not a straightforward answer as you might like but at least you know that.

John Rogers: It's not as straightforward an answer as you might like, but at least you know our thoughts. And just on your question around the phasing of, say, The chart shows, as you know, accumulated savings over time on a 23rd base, and as you rightly highlight, there's a big assumed step up in 2025 versus 2024. That shouldn't be a surprise to you because our margin guidance for 25 is north of 20%, and our margin guidance for 24 is north of 18%, so that's what it takes to get to our 20%.

Speaker Change #162: Our thought process there.

John Rogers: And just on your question around the phasing of savings, the chart shows, as you know, accumulated savings over time on the 23 base, and as you rightly highlight, there's a big assumed step up in 2025 versus 2024. That shouldn't, obviously, be a surprise to you because our margin guidance, the 25, is north of 20% and our margin guidance of 24 is north of 18%. So that's what it takes to get to our 20%. The reason for that phasing is, you know, a lot of the savings that we're forecasting to come through from manufacturing. We see a big step up.

Speaker Change #163: And just on your question around the phasing of <unk>.

Speaker Change #162: Savings.

Speaker Change #162: The chart shows as you know accumulated savings over time on a twenty-three base and as you rightly highlight there's a big assumed step up in 2025 versus 2024 that shouldnt, obviously be a surprise to you because our margin guidance. The twenty-five is north of 20% in our margin.

Speaker Change #162: Guidance for 'twenty four is north of 18%. So that's what it takes to get to our 20%. The reason for that phasing is you know a lot of the savings that we're forecasting to come through from manufacturing, we see a big step up but actually if you look at the chart and you unpick the detail its really across all areas as we start to implement these initiatives.

John Rogers: The reason for that phasing is, you know, a lot of the savings that we're forecasting to come through from manufacturing we see a big step up. But actually, if you look at the chart and you unpick the detail, it's really across all the areas.

John Rogers: But actually, if you look at the chart and you want to pick the detail, it's really across all areas. We start to implement these initiatives, start to deliver. We get some within-year effects in the first year, and then we're going to full annualization in the second year, and then they build. So that's really explaining the nature of these savings coming through and the timing. I think you also asked the question about beyond 25, and again, you can see there's a little bit of further coming through in 25 and 26, which will also be equal; obviously, helps margin in those years.

As we start to implement these initiatives, start to deliver, we get sort of some within-year effects in the first year, and then we get a full annualization in the second year, and then they build. So that's really explaining the nature of these savings coming through and the timing. I think you also asked the question about beyond 25, and again, you can see there's a little bit of further coming through in 25 and 26, which, all else being equal, obviously helps.

Speaker Change #162: Start to deliver we get so there's some within year effects in the first year and then we've got a full annualized Asian in the second game then they build so that's really explaining the nature of these of these savings coming through and the timing I think you will say ask the question about beyond 25, and again you can see there.

Speaker Change #162: There's a little bit further coming through in 'twenty, five and 26, which all else being equal obviously helps.

Margin in those years, but as I said, what I don't want to happen is for this to translate into any form of indication as to where margins will be in 26 and 27. There's a lot of time between now and then, a lot of moving parts, and we'll come back to that in a moment, obviously in due course. The one thing I would want to make clear is that we said, you know, all along that the 25 margin target is challenging, and it is challenging because of all the reasons we've talked about.

John Rogers: But, as I said, what I don't want to happen is for this to translate into any form of indications as to where margins will be in 26 and 27. There's a lot of time between now and then, a lot of moving parts, and we'll come back to that, obviously, in due course. The one thing I would want to make clear, you know, we've said, you know, all along that the 25 margin target, you know, it's challenging. And it is challenging because of all the reasons we've talked about. We've got the inflationary headwinds, and they've been perhaps a little bit stickier than we first in business.

Speaker Change #162: Margin in those years, but as I said what are they won't happen is for this to translate into any form of indications as to where margins will be in 'twenty six 'twenty seven there's a lot of time between now and then a lot of moving parts and we'll come back to that obviously in due course, the one thing I would want to make clear we said all along that the 25.

Speaker Change #162: I've.

Speaker Change #162: Margin target it challenging and it is challenging because of all the reasons, we've talked about we've got the inflationary headwinds and they've been perhaps a little bit stickier than we first envisaged we've got the China V. P, which was it came out post us providing this target range.

We've got inflationary headwinds, and they've been perhaps a little bit stickier than we first envisaged. We've got the China VVP, which came out after us providing this target range. And so, you know, we've had to get into the business, get into the detail, look at the 12-point plan, and we've been able to identify these additional savings which help us offset some of those hedges and challenges. But, you know, the target for 2025 remains challenging, but we're confident in reiterating the guidance today from Norway.

John Rogers: We've got the China VBP, which was, you know, came out post us providing this target range. and so, you know, we've had to, necessarily, get into the business, get into the detail, look at the 12 point plan and we've been able to identify these additional savings which help us offset some of those headers and challenges. But, you know, the target 25 remains challenging, but we're confident in reiterating the guidance today of north of 20%.

Speaker Change #164: And so we've had to necessarily get into the business gains the detail look at the 12 point plan and we've been able to identify these additional savings, which helped us offset some of these headwinds and challenges.

Speaker Change #162: <unk> 25 remains challenging.

Speaker Change #162: But we're confident in reiterating the guidance today is north of 20%.

Operator: I think that's, I understand, we're at time. So, I wanted, on behalf of John, myself, and the management team. Thank you very much for your attention and engagement. I look forward to coming back to you on the next quarter or 40 on progress.

With that, I understand we're at a time, so I want to, on behalf of John, myself, and the management team, thank you very much for your attention and engagement and look forward to coming back to you next quarter reporting on progress.

Speaker Change #164: I think that that is I understand we're at time, so wanted to on behalf of.

Speaker Change #164: John myself and the management team. Thank you very much for retention and engagement and look forward to coming back to you in next quarter reporting on progress.

Speaker Change #164: Okay.

Speaker Change #164: [music].

Speaker Change #164: [music].