Q2 2026 Smith & Nephew PLC Earnings Call

August 4, 2026

Speaker #1: Good morning, everyone. Welcome to the Smith & Nephew Q2 and Q1 results presentation. I'm Deepak Nath, I'm the Chief Executive Officer and joined by John Rogers, who is our CFO.

Speaker #1: So this quarter we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine and ENT performed strongly, once again. With consistent delivery across regions and categories, we saw double-digit growth from many of our key products.

Speaker #1: However, this was offset by softness in U.S. orthopedics, and in advanced wound bioactives. In U.S. orthopedics, knees remain weak, reflecting similar dynamics to Q1, although we saw a sequential improvement as expected.

Speaker #1: And we do anticipate further improvement through the remainder of the year. U.S. hips were affected by a delay in catalyst stem deployment and a tough competitor, with growth expected to resume as deployment increases during the balance of the year.

Speaker #1: Within bioactives, Santil growth was primarily impacted by strong distributor demand in the prior quarter, which did not repeat. This should normalize over the balance of the year.

Speaker #1: Despite the slower start on revenue, trading profit was strong at $566 million. Excluding M&A, trading profit grew by 9%, supported by stronger-than-expected efficiency savings and tariff refunds that fully offset the forecast tariff headwinds.

Speaker #1: Now, taking into account revenue performance, we now expect underlying revenue growth of around 4% for 2026. We recognize that orthopedics is not where we would want it to be, but we remain focused on delivering better performance as we strengthen the portfolio and build on the margin progress that we have made.

Speaker #1: We have clear growth drivers across all three business units that support our outlook for the remainder of the year. And importantly, despite the revised revenue outlook, we still expect to deliver our original guidance for profit, trading profit, free cash flow, and ROIC.

Speaker #1: This concludes an additional $50 million in efficiency savings that we identified for 2026, taking our total expected savings from $150 million to $200 million.

Speaker #1: And a broadly neutral impact from tariffs net of refunds. The changes that we implemented in our 12-point plan have made the group more resilient and better able to respond to these challenges.

Speaker #1: So with that, I'll hand over to John to take you through the financial performance, and I'll come back after he's done. John?

Speaker #2: Thank you, Deepak. Revenue for the quarter was $1.6 billion, representing plus $1.6% underlying growth and $2.8% reported including $120 basis points tailwind from foreign exchange.

Speaker #2: Geographically, the U.S. declined by 1.3%, reflecting softer performance in orthopedics and advanced wound bioactives. Other established markets grew by 1.7%, with performance led by Canada, Australia, and New Zealand, continuing the good momentum seen in the first quarter.

Speaker #2: Emerging markets grew 10.6%. Excluding China, group growth was 1.4% on an underlying basis, and we continue to expect China to be broadly neutral to growth for the full year.

Speaker #1: Good morning, everyone. Welcome to the Smith & Nephew Q2 and Half 1 Results presentation. I'm Deepak Nath, Chief Executive Officer, and I'm joined by John Rogers, our CFO.

Speaker #2: Let me now take you through the business units in more detail. I'll start with Sports Medicine and ENT, which had another excellent quarter and grew 8.6%.

Speaker #1: So, this quarter we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine and ENT performed strongly once again, with consistent delivery across regions and categories.

Speaker #2: Within Sports Medicine, the underlying growth drivers remain unchanged, reflecting the continued momentum of our key growth platforms and consistency of performance across the portfolio.

Speaker #1: And we saw double-digit growth from many of our key products. However, this was offset by softness in U.S. Orthopaedics and in Advanced Wound Bioactives.

Speaker #2: Growth was broad-based across regions and joint repair, again delivered double-digit growth supported by strong demand for Q-fix knotless and regenerative. In AET, fast seal and services continued to be the main contributors to growth.

Speaker #1: In U.S. orthopedics, knees remain weak, reflecting similar dynamics to Q1, although we saw a sequential improvement as expected. We do anticipate further improvements through the remainder of the year.

Speaker #2: In China, after intentionally restricting inventory in the channel at the end of last year, and ahead of the implementation of BBP, we saw strong demand for our products during the quarter.

Speaker #1: U.S. Hips were affected by a delay in Catalyst Stem deployment and a tough competitor, with growth expected to resume as deployment increases during the balance of the year.

Speaker #2: We continue to expect BBP to be implemented in the second half. Sports Medicine revenue again exceeded our recon and robotics revenue. Turning now to ENT, outside of China, we saw strong growth globally, including double-digit growth in other established markets and emerging markets as well as in our ARISK ablation bonds for turbinate reduction and our HALO bond for tonsil and adenoid surgeries.

Speaker #1: Within Bioactives, Santel growth was primarily impacted by strong distributor demand in the prior quarter, which did not repeat. This should normalize over the balance of the year.

Speaker #2: In China, we continue to reduce inventory in the channel ahead of BBP implementation, which had a negative impact on our growth. We still expect the profit headwind for China BBP to be around 15% to 20 million, for the full year.

Speaker #1: Now, taking into account revenue performance, we now expect underlying revenue growth of around 4% for 2026. We recognize that Orthopedics is not where we would want it to be, but we remain focused on delivering better performance as we strengthen the portfolio and build on the margin progress that we have made.

Speaker #2: Let's now look at advanced wound management, which declined by 2.1% in the quarter. Within that, advanced wound care grew 3.7%, with good growth overall, led by U.S.

Speaker #2: Aleva and strength in our emerging markets. Our Aleva complete care launch is off to a strong start in the U.S., with good early momentum, and we were pleased to launch in Europe in this quarter.

Speaker #1: This includes an additional $15 million in efficiency savings that we identified for 2026, taking our total expected savings from $150 million to $200 million.

Speaker #2: In bioactives, revenue declined 12.7% for the quarter, driven by the reimbursement change in skin substitutes and a soft quarter for Santil. Santil benefited from strong distributor demand in Q1, which resulted in a softer Q2.

Speaker #1: And a broadly neutral impact from tariffs, net of refunds. The changes that we implemented in our 12-point plan have made the Group more resilient and better able to respond to these challenges.

Speaker #2: We've also seen some impact from one of the payers introducing prior authorization for certain doses of Santil. Underlying demand remains healthy, but the change is creating friction in the prescription process.

Speaker #1: So with that, I'll hand over to John to take you through the financial performance, and I'll come back after he's done. John?

Speaker #2: And we're taking action to address this and expect Santil to return to growth in the second half. In our skin substitutes business, we continue to face headwinds in the U.S., as a result of CMS reimbursement changes that came into effect at the start of the year.

Speaker #2: Thank you, Deepak. Revenue for the quarter was $1.6 billion, representing 1.6% underlying growth and 2.8% reported. This includes a 120 basis point tailwind from foreign exchange.

Speaker #2: We saw a sequential improvement from the first quarter, driven by hospitals, however volumes and pricing in non-surgical settings remained under pressure, particularly in mobile where we have limited exposure.

Speaker #2: Geographically, the U.S. declined by 1.3%, reflecting softer performance in Orthopaedics and Advanced Wound Bioactives. Other Established Markets grew by 1.7%, with performance led by Canada, Australia, and New Zealand, continuing the good momentum seen in the first quarter.

Speaker #2: The market is adapting more slowly than expected, which continues to affect billing efficiency and inventory levels across the channel. We now expect the trading profit headwind from skin substitutes to be towards the upper end of the previously guided 20% to 40 million range.

Speaker #2: Emerging markets grew 10.6%. Excluding China, group growth was 1.4% on an underlying basis, and we continue to expect China to be broadly neutral to growth for the full year.

Speaker #2: We remain confident in the long-term fundamentals of the segment and see opportunities to benefit as the market normalizes. Advanced wound devices, grew 3.8%. Leaf delivered double-digit growth, reflecting strong demand.

Speaker #2: Let me now take you through the business units in more detail. I'll start with Sports Medicine and ENT, which had another excellent quarter and grew 8.6%.

Speaker #2: Both Pico and Renasis performed very strongly in emerging markets as we continue to expand geographically. Pico sales in other established markets were impacted by Doctor Strikes in Spain in the surgical sector, and the timing of tender offers.

Speaker #2: Within Sports Medicine, the underlying growth drivers remain unchanged, reflecting the continued momentum of our key growth platforms and the consistency of performance across the portfolio.

Speaker #2: In the U.S., sales of Renasis remained soft in the acute care channel, while performance in the post-acute channel was good. Turning now to orthopedics.

Speaker #2: Growth was broad-based across regions, and Joint Repair again delivered double-digit growth, supported by strong demand for Q-FIX, Nautilus, and Regeneten. In AET, FAST-Fix, Seal, and Services continued to be the main contributors to growth.

Speaker #2: This declined 1% on an underlying basis, primarily reflecting the ongoing issues in U.S. needs ahead of new product launches and temporary headwinds in U.S.

Speaker #2: In China, after intentionally restricting inventory in the channel at the end of last year, and ahead of the implementation of VBP, we saw strong demand for our products during the quarter.

Speaker #2: hits. Following four consecutive quarters of above-market growth in U.S. hits, we saw softer performance this quarter against a tough comparator. Catalyst Stem continues to grow strongly, but Q2 was impacted by a delay in set deployments and an increasing proportion of existing customer retentions, versus competitive conversions.

Speaker #2: We continue to expect VBP to be implemented in the second half. Sports Medicine revenue again exceeded our recon and robotics revenue. Turning now to ENT, outside of China, we saw strong growth globally, including double-digit growth in other established markets and emerging markets, as well as in our ARISC ablation wands for turbinate reduction and our HALO wand for tonsil and adenoid surgeries.

Speaker #2: We see a clear path to re-acceleration over the remainder of the year, as Catalyst Stem set deployment increases. As the product moves into its third-year post-launch, growth should remain strong, albeit at a lower rate than during the initial launch phase.

Speaker #2: In China, we continued to reduce inventory in the channel ahead of VBP implementation, which had a negative impact on our growth. We still expect the profit headwind for China VBP to be around $15 million to $20 million for the full year.

Speaker #2: U.S. needs remain weak, but we are seeing gradual improvement as expected, the underlying dynamics unchanged. Deliberate portfolio and capital discipline combined with an ongoing market shift towards cementless continue to influence performance in the near term.

Speaker #2: Let's now look at Advanced Wound Management, which declined by 2.1% in the quarter. Within that, Advanced Wound Care grew 3.7%, with good growth overall, led by the U.S.

Speaker #2: Sequential improvement was driven by strong uptake of Legion MS and double-digit growth in Legion Consuloc after cementless offering. Legion MS now represents almost 20% of our Legion mix, up from 15% in Q1, and is enhancing the competitiveness of our installed base.

Speaker #2: Eleven, and strengthened our emerging markets. Our Eleven Complete Care launch is off to a strong start in the U.S., with good early momentum, and we were pleased to launch in Europe in this quarter.

Speaker #2: We continue to expect improvement through the year, driven by increased Legion MS set deployments. This will remain the main driver until landmark launches. Outside of the U.S., needs were impacted by a large tender order in the Middle East in the prior year quarter that did not repeat.

Speaker #2: In Bioactives, revenue declined 12.7% for the quarter, driven by the reimbursement change in skin substitutes and a soft quarter for Santel. Santel benefited from strong distributor demand in Q1, which resulted in a softer Q2.

Speaker #2: We've also seen some impact from one of the payers introducing prior authorization for certain doses of Santel. Underlying demand remains healthy, but the change is creating friction in the prescription process.

Speaker #2: HIPS benefited from the launch of Catalyst Stem in Japan, although we saw some isolated weakness in Australia where we await regulatory approval of Catalyst Stem.

Speaker #2: And we're taking action to address this and expect Santel to return to growth in the second half. In our skin substitutes business, we continue to face headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year.

Speaker #2: Trauma and extremities performed well overall. We continue to see good growth in EVOS, IM nails, and shoulder driven by our ATOS implant. We are seeing the impact of competitor launches in the U.S.

Speaker #2: but we expect growth to strengthen in the second half as we launch EVOS pelvic and ramp up trigen max. Finally, other recon grew 0.8%.

Speaker #2: We saw a sequential improvement from the first quarter, driven by hospitals. However, volumes and pricing in non-surgical settings remained under pressure, particularly in Mobile, where we have limited exposure.

Speaker #2: This business can show some quarter-to-quarter volatility as revenue is influenced by contract timing and mix. This was more pronounced in the period given another strong prior-year comparator.

Speaker #2: That said, we saw double-digit growth in corridor deployments globally, alongside continued growth in utilization and penetration. And we expect growth to accelerate in the second half, supported by an easier comparator in Q3, continued strong demand for our robotic platform, and good uptake across ASCs and teaching institutions.

Speaker #2: We remain confident in the long-term fundamentals of the segment and see opportunities to benefit as the market normalizes. Advanced wound devices grew 3.8%. LEAF delivered double-digit growth, reflecting strong demand.

Speaker #2: Both Pico and RENASYS performed very strongly in emerging markets, as we continue to expand geographically. Pico sales in other established markets were impacted by doctor strikes in Spain in the surgical sector, and the timing of tender offers.

Speaker #2: Now I'll move on to the half-year financials. For the half-year, revenue was 3.1 billion, up 2.3% on an underlying basis, and up 4.6% on a reported basis.

Speaker #2: There was one fewer trading day versus the prior year, with underlying revenue growth of 3.1% on an average daily sales basis. Consistent with the performance in Q2, we saw strength in sports medicine, offset by softness in U.S.

Speaker #2: In the U.S., sales of Renesis remained soft in the acute care channel, while performance in the post-acute channel was good. Turning now to Orthopedics.

Speaker #2: orthopedics, and advanced wound bioactives. Moving on to the summary P&L. Underlying growth profit was 2.2 billion, representing a gross margin of 71.1%, up 60 bps year-on-year.

Speaker #2: This declined 1% on an underlying basis, primarily reflecting the ongoing issues in U.S. knees ahead of new product launches and temporary headwinds in the U.S.

Speaker #2: Hips. Following four consecutive quarters of above-market growth in U.S. hips, we saw softer performance this quarter against a tough comparator. Catalyst Stem continues to grow strongly, but Q2 was impacted by a delay in set deployments and an increasing proportion of existing customer retentions versus competitive conversions.

Speaker #2: This was driven by greater-than-expected efficiency savings across manufacturing and procurement, which more than offset cost inflation, and the headwind from inventory revaluation. Tariff refunds fully offset the forecast tariff headwind to gross margin.

Speaker #2: We see a clear path to re-acceleration over the remainder of the year as Catalyst Stem set deployment increases. As the product moves into its third year post-launch, growth should remain strong, albeit at a lower rate than during the initial launch phase.

Speaker #2: Trading profit increased 43 million to 566 million, with trading margin expanding 60 bps to 18.3%, reflecting the benefits of higher gross margin and ongoing cost savings.

Speaker #2: Moving further down the P&L, IFRS operating profit grew 4.3%, reflecting temporary higher restructuring charges, driven by further optimization of our manufacturing network and higher acquisition costs driven by, of course, our acquisition of Integrity.

Speaker #2: U.S. needs remain weak, but we are seeing gradual improvement as expected. The underlying dynamics are unchanged. Deliberate portfolio and capital discipline, combined with an ongoing market shift towards cementless, continue to influence performance in the near term.

Speaker #2: Basic earnings per share grew ahead of this at 6.2%, reflecting the buyback we announced at Q1, and adjusted earnings per share grew by 11% to 47.7 cents.

Speaker #2: Sequential improvement was driven by strong uptake of Legion MS and double-digit growth in Legion Conceloc, our cementless offering. Legion MS now represents almost 20% of our Legion mix, up from 15% in Q1, and is enhancing the competitiveness of our install base.

Speaker #2: The interim dividend was 15.6 cents per share, is up 4% on half-1, 2025. I'll now take you through a more detailed bridge of our trading profit growth.

Speaker #2: We absorbed 119 million of headwinds from cost inflation, inventory revaluation, changes to wound reimbursement, and China VBP, while continuing to invest 33 million in our growth.

Speaker #2: This was more than offset by 59 million of operating leverage and 128 million of efficiency savings, which I'll discuss in more detail shortly. While we had previously guided to an incremental tariff headwind in 2026, refunds received in the first half meant net tariffs were broadly neutral to profit growth.

Speaker #2: Hips benefited from the launch of Catalyst Stem in Japan, although we saw some isolated weakness in Australia, where we await regulatory approval of Catalyst Stem.

Speaker #2: Trauma and extremities performed well overall. We continue to see good growth in EVOS, IM nails, and shoulder, driven by our ATOS implant. We are seeing the impact of competitor launches in the U.S., but we expect growth to strengthen in the second half as we launch EVOS Pelvic and ramp up Trigen Metal.

Speaker #2: Foreign exchange also had a broadly neutral impact. As a result of all this trading profit growth, it was 9% excluding 4 million dilution from the acquisition of Integrity Orthopedics.

Speaker #2: As I said, turning now to efficiency savings, we've delivered around 133 million in the first half, well ahead of expectations. Of this, approximately 50 million came from the 12-point plan and zero-based budgeting initiatives, and as a result, we have now achieved 330 million of cumulative savings since launching these programs, reaching the lower end of the 325 to 375 million target that we set ourselves at our 2024 interim results, more than a year ahead of schedule.

Speaker #2: Finally, Other Recon grew 0.8%. This business can show some quarter-to-quarter volatility, as revenue is influenced by contract timing and mix. This was more pronounced in the period given another strong prior-year comparator.

Speaker #2: That said, we saw double-digit growth in corridor deployments globally, alongside continued growth in utilization and penetration. We expect growth to accelerate in the second half, supported by an easier comparator in Q3, continued strong demand for our robotic platform, and good uptake across ASCs and teaching institutions.

Speaker #2: We expect further benefits to be realized through the remainder of '26 and into 2027. The remaining 80 million in the first half came from additional opportunities across procurement, manufacturing, sales and marketing, and business support functions.

Speaker #2: Now I'll move on to the half-year financials. For the half-year, revenue was $3.1 billion, up 2.3% on an underlying basis, and up 4.6% on a reported basis.

Speaker #2: We expect a further 70 million of savings in the second half from both the 12-point plan and ZBB and other opportunities. This takes forecast efficiency savings for the year up from around 150 million previously to around 200 million.

Speaker #2: The additional 50 million is expected to come primarily from manufacturing, including from ongoing corporate optimization as well as procurement and sales and marketing. Our 2026 guidance for trading profit is unchanged.

Speaker #2: Orthopedics and Advanced Wound Bioactives. Moving on to the summary P&L, underlying gross profit was $2.2 billion, representing a gross margin of 71.1%, up 60 basis points year-on-year.

Speaker #2: We expect to deliver around 8% reported trading profit growth, excluding M&A, and around 1.3 billion of trading profit including the impact of Integrity. We anticipate that the year-on-year impact of tariffs will be broadly neutral to trading profit net of refunds.

Speaker #2: This was driven by greater-than-expected efficiency savings across manufacturing and procurement, which more than offset cost inflation and the headwind from inventory revaluation. Tariff refunds fully offset the forecast tariff headwind to gross margin.

Speaker #2: The headwind from skin substitutes is expected to be towards the upper end of the previously guided 20 to 40 million range, and there are no changes to our assumptions regarding inventory revaluation or China VBP.

Speaker #2: Trading profit increased $43 million to $566 million, with trading margin expanding 60 basis points to 18.3%, reflecting the benefits of higher gross margin and ongoing cost savings.

Speaker #2: As previously disclosed, the acquisition of Integrity Orthopedics is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027, and accretive from 2028.

Speaker #2: Moving further down the P&L, IFRS operating profit grew 4.3%, reflecting temporarily higher restructuring charges. This was driven by further optimization of our manufacturing network, and higher acquisition costs, driven by, of course, our acquisition of Integrity.

Speaker #2: Coming now to trading margin by business unit. We saw 160-bit increase for sports medicine and EMT margin to 24.7%, a 10-bit decrease for wound to 22%, and a 30-bit increase in orthopedics margin to 13%.

Speaker #2: Basic earnings per share grew ahead of this at 6.2%, reflecting the buyback we announced at Q1. Adjusted earnings per share grew by 11% to 47.7 cents.

Speaker #2: The interim dividend of 15.6 cents per share is up 4% on half-one, 2025. I'll now take you through a more detailed bridge of our trading profit growth.

Speaker #2: In sports medicine and EMT, margin expansion was driven by operating leverage and efficiency savings. In wound, the small margin declined reflected the impact of U.S.

Speaker #2: skin substitute reimbursement changes, largely offset by savings initiatives. And in orthopedics, manufacturing savings from network optimization ongoing product initiatives and disciplined cost control more than offset the headwind from inventory revaluation and softer revenue growth.

Speaker #2: We absorbed $119 million of headwinds from cost inflation, inventory revaluation, changes to wound reimbursement, and China VBP, while continuing to invest $33 million in our growth.

Speaker #2: This was more than offset by £59 million of operating leverage and £128 million of efficiency savings, which I'll discuss in more detail shortly. While we had previously guided to an incremental tariff headwind in 2026, refunds received in the first half meant net tariffs were broadly neutral to profit.

Speaker #2: We expect further margin expansion over time as we work through the inventory revaluation headwind and benefit from improving revenue growth. The impact of actions already taken to right-size our manufacturing capacity and our auth 360 operating model.

Speaker #2: These results demonstrate the operational excellence we are driving across the business. As you know, inventory remains a key focus for us even now that we've completed the 12-point plan.

Speaker #2: Growth. Foreign exchange also had a broadly neutral impact. As a result of all this, trading profit growth was 9%, excluding the £4 million dilution from the acquisition of Integrity Orthopedics.

Speaker #2: DSI, Day Sales Inventory, fell by 72 days including the reclassification of instrument sets from inventory to PPE and by 40 if you exclude that.

Speaker #2: As I said, turning now to efficiency savings, we've delivered around £133 million in the first half, well ahead of expectations. Of this, approximately £50 million came from the 12-point plan and zero-based budgeting initiatives. As a result, we have now achieved £330 million of cumulative savings since launching these programs, reaching the lower end of the £325 million to £375 million target that we set ourselves at our 2024 interim results, more than a year ahead of schedule.

Speaker #2: The bigger reduction came from orthopedics down 62 days excluding reclassification, reflecting continued work to reduce the number of units in inventory and a focus on capital efficiency.

Speaker #2: We also saw a reduction in sports med, DSI, albeit to a lesser extent than in orthopedics, and no change in wound DSI excluding the reclassification.

Speaker #2: Both sports and wound are already much closer to industry benchmark DSIs. We expect to make further progress on inventory in 2026. Right now, moving on to cash flow, trading cash flow was 437 million in the first half, down 50 million or so year-on-year, but this reflects a 51 million step-up in capex year-on-year driven by investments in our new wound manufacturing facility in Melton and in some IT investments.

Speaker #2: We expect further benefits to be realized through the remainder of '26 and into 2027. The remaining $80 million in the first half came from additional opportunities across procurement, manufacturing, sales and marketing, and business support functions.

Speaker #2: We expect a further £70 million of savings in the second half from both the 12-point plan and ZBB, and other opportunities. This takes forecast efficiency savings for the year up from around £150 million previously to around £200 million.

Speaker #2: We do not expect this increase to repeat in the second half, and cash generation should improve versus half to 2025. Other working capital was higher, largely due to the timing of bonus accruals and related cash payments.

Speaker #2: Cash conversion was 77%, and we anticipate this will improve over the course of the year. Free cash flow was 231 million, down 13 million year-on-year, again reflecting these factors.

Speaker #2: The additional $50 million is expected to come primarily from manufacturing, including ongoing footprint optimization, as well as procurement and sales and marketing. Our 2026 guidance for trading profit is unchanged.

Speaker #2: I've just mentioned them partially offset by reduced restructuring cash costs. We continue to expect free cash flow in 2026 of around 800 million, driven by profit growth and continued focus on working capital offset by a modest temporary increase in restructuring costs.

Speaker #2: We expect to deliver around 8% reported trading profit growth, excluding M&A, and around $1.3 billion of trading profit, including the impact of Integrity. We now anticipate that the year-on-year impact of tariffs will be broadly neutral to trading profit, net of refunds.

Speaker #2: Net debt increased over the first half to 3 billion, an increase of 260 million, resulting in a leverage ratio of 1.8 times adjusted EBITDA, within our target of around 2 times.

Speaker #2: The headwind from skin substitutes is expected to be towards the upper end of the previously guided $20 million to $40 million range, and there are no changes to our assumptions regarding inventory revaluation or China VBP.

Speaker #2: And the increase was driven by our investment in our business, the acquisition of Integrity Orthopedics, growth in our dividend, and of course, the 500 million buyback we announced in Q1, of which we've actually now completed 260 million as of the 3rd of August.

Speaker #2: As previously disclosed, the acquisition of Integrity Orthopedics is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027, and accretive from 2028.

Speaker #2: This is in line with our capital allocation priorities. Before I turn to guidance, I want to highlight the progress we continue to make across margins working capital cash flow and returns.

Speaker #2: Coming now to trading margin by business unit. We saw a 160-basis-point increase for Sports Medicine and EMT margin, to 24.7%, a 10-basis-point decrease for Wound to 22%, and a 30-basis-point increase in Orthopedics margin to 13%.

Speaker #2: This broad-based improvement reflects stronger operational controls, and helps make Smith & Nephew a more resilient business, better positioned to manage through periods of revenue softness or external challenges while maintaining progress against our long-term objectives.

Speaker #2: In Sports Medicine and EMT, margin expansion was driven by operating leverage and efficiency savings. In Wound, the small margin decline reflected the impact of U.S.

Speaker #2: Coming now to our updated outlook. Reflecting softer performance in U.S. orthopedics and Santil, we now expect second-half growth to be in the range of 5 to 5.5%, and full-year growth to be around 4%.

Speaker #2: Skin substitute reimbursement changes were largely offset by savings initiatives. In orthopedics, manufacturing savings from network optimization, ongoing product initiatives, and disciplined cost control more than offset the headwind from inventory revaluation and softer revenue growth.

Speaker #2: Notwithstanding the lower revenue outlook, we are maintaining all other metrics of our guidance. We continue to expect around 8% trading profit growth, excluding M&A for the year, and this translates into approximately 1.3 billion of trading profit, including marginal dilution from the position.

Speaker #2: This reflects the step-up in efficiency savings that we are delivering across the business together with the removal of the forecast tariff headwind. The progress we demonstrated in the first half gives us confidence we can remain disciplined on costs while supporting improved revenue growth in the second half.

Speaker #2: These results demonstrate the operational excellence we are driving across the business. As you know, inventory remains a key focus for us, even now that we've completed the 12-point plan.

Speaker #2: We also remain on track to deliver around 800 million of free cash flow and a return on invested capital above 10%. Let me finish by outlining why we are confident in a step-up in revenue growth.

Speaker #2: Group DSI, Days Sales Inventory, fell by 72 days including the reclassification of instrument sets from inventory to PPE, and by 40 if you exclude that.

Speaker #2: The bigger reduction came from Orthopedics, down 62 days, excluding reclassification, reflecting continued work to reduce the number of units in inventory and a focus on capital efficiency.

Speaker #2: We expect second-half growth of 5 to 5.5%, driven by factors across all three business units. In sports medicine, we expect continued momentum across segments, including strong growth in regenerative and fast sale.

Speaker #2: We also saw a reduction in Sports Med DSI, albeit to a lesser extent than in Orthopaedics, and no change in Wound DSI, excluding the reclassification.

Speaker #2: Advanced wound management, we expect to see stabilization in U.S. skin substitutes, building on the sequential improvement we saw in Q2 versus Q1. We also expect a return to growth in Santil, further rollout of a leaving complete care in Europe, the ongoing launch of next-generation LEAF, and the benefits of greater investment behind PICO.

Speaker #2: Both Sports and Wound are already much closer to industry benchmark DSIs. We expect to make further progress on inventory in 2026. Right now, moving on to cash flow: trading cash flow was £437 million in the first half, down about £50 million year-on-year, but this reflects a £51 million step-up in capex year-on-year driven by investments in our new Wound manufacturing facility in Melton, and in some IT investments.

Speaker #2: In orthopedics, we expect an improving trajectory in U.S. knee implants driven by Legion MS and the launch of the cementless version of Landmark. We also expect U.S.

Speaker #2: We do not expect this increase to repeat in the second half, and cash generation should improve versus the half to 2025. Other working capital was higher, largely due to the timing of bonus accruals and related cash payments.

Speaker #2: hip implants to return to growth as we deploy more catalyst stem sets. And of course, we'll also have one extra trading day in the fourth quarter.

Speaker #2: So with that, I'll hand you back over to Deepak.

Speaker #2: Cash conversion was 77%, and we anticipate this will improve over the course of the year. Free cash flow was $231 million, down $13 million year-on-year, again reflecting these factors.

Speaker #1: Thank you, John. Before we conclude, I wanted to spend a few minutes talking about the progress we've made in the first half against each pillar of RISE, which is our strategy for the next three years.

Speaker #2: I've just mentioned them, partially offset by reduced restructuring cash costs. We continue to expect free cash flow in 2026 of around $800 million, driven by profit growth and continued focus on working capital, offset by a modest temporary increase in restructuring costs.

Speaker #1: These are the actions we're taking to strengthen the business today and position ourselves for sustainable growth over the long term. In order to reach more patients, we continue to expand access to our technologies through geographic expansion, new product introductions, and important clinical milestones across our portfolio.

Speaker #2: Net debt increased over the first half to $3 billion, an increase of $260 million, resulting in a leverage ratio of 1.8 times adjusted EBITDA, within our target of around 2 times.

Speaker #1: Including completing the first knee and shoulder procedures using our Corey XT handheld robotics platform and the European launches of a leave and complete care and Renaissance Edge.

Speaker #1: To innovate, we advanced our pipeline, strengthened our clinical evidence base, and launched a number of new products across all of our business units, including Flow Extend and LINX in sports medicine and ENT, EVOS Pelvic in orthopedics, and LEAF 3.0 in advanced wound management.

Speaker #2: And the increase was driven by our investment in our business, the acquisition of Integrity Orthopedics, growth in our dividend, and, of course, the $500 million buyback we announced in Q1, of which we've actually now completed $260 million as of the 3rd of August.

Speaker #2: This is in line with our capital allocation priorities. Before I turn to guidance, I want to highlight the progress we continue to make across margins, working capital, cash flow, and returns.

Speaker #1: And that brings the total number of new products launched so far this year to nine, putting us well on track to launch 16 for the full year.

Speaker #1: And a key highlight was receiving the FDA approval for Tessa, our spatial surgery system, which I'll come on to shortly. To scale, we continue to invest beyond our higher priority highest priority growth opportunities, including the acquisition of Integrity, orthopedics to strengthen our leading shoulder repair portfolio, Salesforce expansion for PICO, and continued progress in our new advanced management manufacturing facility in Melton.

Speaker #2: This broad-based improvement reflects stronger operational controls and helps make Smith & Nephew a more resilient business, better positioned to manage through periods of revenue softness or external challenges, while maintaining progress against our long-term objectives.

Speaker #2: Coming now to our updated outlook. Reflecting softer performance in U.S. orthopedics and Santil, we now expect second-half growth to be in the range of 5% to 5.5%, and full-year growth to be around 4%.

Speaker #1: Which remains on track to open, actually, in 2027. To execute, remain focused on driving productivity across the group portfolio simplification and operational excellence, and we're making good progress on streamlining our portfolio, which will allow us to manage significantly fewer SKUs across our value chain and improve our capital efficiency.

Speaker #2: Notwithstanding the lower revenue outlook, we are maintaining all other metrics of our guidance. We continue to expect around 8% trading profit growth, excluding M&A, for the year.

Speaker #1: Earlier this quarter, our advanced wound management manufacturing facility in Suzhou, China, was recognized with the prestigious Shingo Prize, which reflects more than a decade of sustained operational excellence and continuous improvement.

Speaker #2: And this translates into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity acquisition. This reflects the step-up in efficiency savings that we are delivering across the business, together with the removal of the forecast tariff headwind.

Speaker #1: Importantly, these aren't just strategic priorities. They're translating the tangible growth platforms that we believe can create value for shareholders for many years to come.

Speaker #1: The clearest example of that is an innovation where we're building a portfolio of technologies designed to both take share in existing markets and create entirely new growth opportunities.

Speaker #2: The progress we demonstrated in the first half gives us confidence that we can remain disciplined on costs, while supporting improved revenue growth in the second half.

Speaker #1: It's sports medicine. We now have four differentiated growth platforms that we refer to as our Big Four. Regenerative continues to perform strongly, delivering around 20% growth in the first half, with significant runway expanding remaining to expand penetration in rotator cuff repair and across other tendons and extra-articular ligaments.

Speaker #2: We also remain on track to deliver around $800 million of free cash flow, and a return on invested capital above 10%. Let me finish by outlining why we are confident in a step-up in revenue growth.

Speaker #1: Our Integrity acquisition is performing ahead of our expectations, and integration is progressing well. As we increase manufacturing capacity and expand our commercial capabilities. With Carter Heel's AGLEC, we're continuing to build awareness and adoption in the U.S.

Speaker #2: We expect second-half growth of 5 to 5.5%, driven by factors across all three business units. In Sports Medicine, we expect continued momentum across segments, including strong growth in regenerative and FAST-FIX sales.

Speaker #1: ahead of the new reimbursement beginning in January of 2027, while also expanding internationally with our first cases completed in Australia, Italy, and in Belgium.

Speaker #2: In Advanced Wound Management, we expect to see stabilization in U.S. skin substitutes, building on the sequential improvement we saw in Q2 versus Q1. We also expect to return to growth in Santyl, further roll out ALLEVYN COMPLETE CARE in Europe, the ongoing launch of next-generation LEAF, and the benefits of greater investment behind PICO.

Speaker #1: And in this quarter, we achieved an important milestone with the FDA approval of Tessa, the first in industry spatial surgery platform. Tessa combines advanced imaging, navigation, and AI-enabled assistance to help surgeons perform arthroscopic procedures with greater precision.

Speaker #1: The initial application is femoral tunnel drilling, but we see a significant long-term opportunity to extend the platform across multiple joints and procedures. In advanced wound management, a leave and complete care strengthens our position in one of the largest and fastest-growing segments of the wound care market, initial customer feedback has been encouraging, highlighting meaningful differentiation versus current products that are actually on market today.

Speaker #2: In orthopedics, we expect an improving trajectory in U.S. knee implants, driven by Legion MS and the launch of the cementless version of Landmark. We also expect U.S.

Speaker #2: Hip implants to return to growth, as we deploy more Catalyst stem sets. And, of course, we'll also have one extra trading day in the fourth quarter.

Speaker #2: So with that, I'll hand you back over to Deepak.

Speaker #1: We're also expanding our advanced wound management wound market through the recent launch of our recent of LEAF 3.0. And by being in PICO into new care settings and patient populations.

Speaker #1: In orthopedics, we continue to build a connected ecosystem around Corey, linking planning, execution, and outcomes to support more personalized care and better optimized workflows.

Speaker #1: Clinical workflows. Corey XT provides the foundation for existing robotics platform. We performed our first robotic shoulder procedures on XT in February, the first knee procedures on it in May, and we remain on track to launch our hip execution in the first half of 2027.

Speaker #1: Including completing the first knee and shoulder procedures using our CORI™ XT handheld robotics platform, and the European launches of ALLEVYN LIFE and COMPLETE CARE, and RENASYS EDGE.

Speaker #1: Alongside robotics, our implant innovation continues to gain traction, catalyst stem is growing, and becoming an important contributor within TIPS. While in knees, increasing set deployments in supporting broader legion MS adoption.

Speaker #1: To innovate, we advanced our pipeline, strengthened our clinical evidence base, and launched a number of new products across all of our business units, including FLOW EXTEND and LYNX in Sports Medicine and ENT, EVOS Pelvic in Orthopaedics, and LEAF 3.0 in Advanced Wound Management.

Speaker #1: We're also looking forward to the launch of Landmark in the third quarter, our most robotically enabled implant system that we've developed to date. Overall, the breadth and strength of these innovation platforms give us confidence in our ability to deliver sustainable growth over time through a combination of market expansion, share gains, and new category creation.

Speaker #1: And that brings the total number of new products launched so far this year to nine, putting us well on track to launch 16 for the full year.

Speaker #1: And a key highlight was receiving FDA approval for TESSA, our spatial surgery system, which I'll come on to shortly. To scale, we continue to invest behind our highest priority growth opportunities, including the acquisition of Integrity Orthopedics to strengthen our leading shoulder repair portfolio, Salesforce expansion for PICO, and continued progress in our new advanced wound management manufacturing facility in Melton.

Speaker #1: In summary, our second quarter performance was below our expectation, with the strong momentum in sports medicine offset by softness in U.S. orthopedics and advanced wound bioactives.

Speaker #1: That's leading us to reduce our revenue outlook for the year. That said, we remain confident that the growth will step up in the second half, and John has given taken you to the drivers of all of that across our business units.

Speaker #1: Which remains on track to open, actually, in 2027. To execute, we remain focused on driving productivity across the group, portfolio simplification, and operational excellence. We're making good progress on streamlining our portfolio, which will allow us to manage significantly fewer SKUs across our value chain and improve our capital efficiency.

Speaker #1: But importantly, while we are lowering our revenue outlook, we remain on track to deliver our original trading profit guidance, free cash flow, and ROIC.

Speaker #1: And this is supported by a step-up forecast of efficiency saving, including a further $50 million of savings that we've identified, which helps offset the impact of lower revenue growth.

Speaker #1: Earlier this quarter, our Advanced Wound Management manufacturing facility in Suzhou, China, was recognized with the prestigious Shingo Prize, which reflects more than a decade of sustained operational excellence and continuous improvement.

Speaker #1: We also continue to build a more resilient and agile business. We're investing behind our growth platforms while driving improvements in margin, cash flow, and returns, strengthening our ability to respond effectively to challenges.

Speaker #1: Importantly, these aren't just strategic priorities. They're translating into tangible growth platforms that we believe can create value for shareholders for many years to come.

Speaker #1: While orthopedics is not where we want it to be, we remain focused on improving execution and delivering better performance. At the same time, we are positioning the business to capitalize on the significant opportunities that we see ahead.

Speaker #1: It's Sports Medicine. We now have four differentiated growth platforms that we refer to as our Big Four. Regenerative continues to perform strongly, delivering around 20% growth in the first half, with significant runway remaining to expand penetration in rotator cuff repair and across other tendons and extra-articular ligaments.

Speaker #1: These include the Landmark launch in knees, robotic execution on Corey in hips, the Big Four in sports medicine, launching new products and entering new settings in wound, and our broader pipeline.

Speaker #1: Of innovation. Taken together, these factors reinforce our confidence in the underlying strength of the business and our ability to create long-term value. So with that, we are ready for your questions.

Speaker #1: Our Integrity acquisition is performing ahead of our expectations, and integration is progressing well as we increase manufacturing capacity and expand our commercial capabilities. With CartaHeal's AGLEC, we're continuing to build awareness and adoption in the U.S.

Speaker #1: ahead of the new reimbursement beginning in January 2027, while also expanding internationally, with our first cases completed in Australia, Italy, and Belgium.

Speaker #2: Thanks.

Speaker #3: Hi there. Jacqueline Clark from Morgan Stanley. Thank you very much for taking the questions. I have three, please. First, on U.S. orthopedics, could you run through specifically what went wrong here?

Speaker #1: And in this quarter, we achieved an important milestone with the FDA approval of TESSA, the first-in-industry spatial surgery platform. TESSA combines advanced imaging, navigation, and AI-enabled assistance to help surgeons perform arthroscopic procedures with greater precision.

Speaker #3: How much of it was the market? How much of it was kind of other issues? And what you're seeing so far in Q3? And if it has any impact on your assumptions around midterm margin expansion?

Speaker #1: The initial application is femoral tunnel drilling, but we see a significant long-term opportunity to extend the platform across multiple joints and procedures. In advanced wound management, Aleve and Complete Care strengthen our position in one of the largest and fastest-growing segments of the wound care market. Initial customer feedback has been encouraging, highlighting meaningful differentiation versus current products that are on the market today.

Speaker #3: Then on 2026. So the H2 guide obviously implies a pretty central step up versus H1. Given kind of the comments around VPP, delay, where do you see the biggest half-on-half step up on a segmental basis?

Speaker #3: And kind of really what gives you the confidence in that new guide? And then lastly, on the midterm guidance, the 4% growth in 2026 is kind of very much below the guidance, the midterm guidance range.

Speaker #1: We're also expanding our advanced wound management market through the recent launch of our LEAF 3.0, and by bringing PICO into new care settings and patient populations.

Speaker #3: What do you see as stepping up in future years to offset that?

Speaker #2: Yes, sure. So let me talk about that in turn. So U.S. ortho. There's some market slowdown with this, not the biggest factor, the biggest factor really comes from specific factors.

Speaker #1: In Orthopedics, we continue to build a connected ecosystem around CORI, linking planning, execution, and outcomes to support more personalized care and better optimized workflows.

Speaker #2: Fundamentally, it's a knees we had flagged that we are behind the market largely because of the portfolio gap we have. So we're not able to participate in the fastest growing part of knees, which is cementless.

Speaker #1: Clinical workflows—CORI XT provides the foundation for our existing robotics platform. We performed our first robotic shoulder procedures on XT in February, the first knee procedures on it in May, and we remain on track to launch our hip execution in the first half of 2027.

Speaker #2: We only have that on one half of our installed base. And in Q3, when we launched Landmark, we'll be better able to retain the market in the other half where we don't have a cementless offering.

Speaker #1: Alongside robotics, our implant innovation continues to gain traction. Catalyst Stem is growing and becoming an important contributor within TIPS, while in knees, increasing set deployments are supporting broader Legion MS adoption.

Speaker #2: By far, that's the biggest factor as a challenging thing that we're navigating through. We called that out as a factor in Q1. We continue to see it in Q2, although there was some sequential improvement.

Speaker #2: And I'll come on to kind of what we see for half-on-half. But that's the fundamental factor that's driving softness in U.S. ortho. There was a temporary blip in U.S.

Speaker #1: We're also looking forward to the launch of Landmark in the third quarter, our most robotically enabled implant system that we've developed to date. Overall, the breadth and strength of these innovation platforms give us confidence in our ability to deliver sustainable growth over time, through a combination of market expansion, share gains, and new category creation.

Speaker #2: hips, catalyst stem continued to grow very nicely. But we're in the third full year of launch. We do expect, as we go step forward from here, at some point we're going to need to pivot from competitive kind of takeouts to more holding on to our business retention.

Speaker #2: That'll happen as we progress through the launch. But there was a slower than expected deployment of sets. These sets are instrument sets are optimized for one or the other product.

Speaker #1: In summary, our second quarter performance was below our expectation, with the strong momentum in Sports Medicine offset by softness in U.S. Orthopedics and Advanced Wound Bioactives.

Speaker #1: That's leading us to reduce our revenue outlook for the year. That said, we remain confident that growth will step up in the second half, and John has taken you through the drivers of all of that across our business units.

Speaker #2: So for example, if we're trying to take business away from one competitor versus the other, competitor, we need to have slightly different instrument sets.

Speaker #2: So getting that right, is a bit challenging. That's what paced our set deployment from the quarter. It's a blip we expect to regain that in the back half of the year.

Speaker #1: But importantly, while we are lowering our revenue outlook, we remain on track to deliver our original trading profit guidance, free cash flow, and ROIC.

Speaker #2: So those are the two really the fundamental factors not so much slowdown in procedures of which there was some. Half-on-half fundamentally what we expect is in orthopedics, it's Legion MS, which strengthens our Legion offering.

Speaker #1: And this is supported by a step-up forecast of efficiency savings, including a further $50 million of savings that we've identified, which helps offset the impact of lower revenue growth.

Speaker #2: Right? That's going to be the most material driver. And then as we bring Landmark porous onto market, which we have largely a Q4 effect, like I said, we'll be able to better retain the business that we have.

Speaker #2: And then once we go into 2027, when we have the complete offering with Legion cemented as well with a Q end of Q2, we'll be able to go from defense into more of an offensive crouch.

Speaker #2: So in orthopedics, it's Legion MS and launch of porous. In sports, we'll continue the trend that you have seen quarter on quarter. There hasn't really been a H1, H2 effect in sports when you take away kind of the China effect and we expect the same to continue, right?

Speaker #1: These include the Landmark launch in knees, robotic execution on CORI in hips, the Big Four in Sports Medicine, launching new products, and entering new settings in Wound and our broader pipeline.

Speaker #2: In this year. And in wound, it's PICO, we're investing behind geographic expansion of PICO. We're starting to see some proof of that in Q2, but we expect to see that build in the back half of the year.

Speaker #2: And then skin subs, which there was sequential improvement Q1 to Q2. As we've said, we're in the upper end of the guidance range that we've given in terms of the impact and reimbursement.

Speaker #2: Thanks. Hi there, Jack Prince-Clark from Morgan Stanley. Thank you very much for taking the questions. I have three, please. First, on U.S. Orthopedics, could you run through specifically what went wrong here?

Speaker #2: But H1 to H2, we expect to see an improvement. So those are the components of H1 to H2 in terms of what accounts for the step up and growth that we see.

Speaker #2: How much of it was the market, and how much of it was due to other issues? What are you seeing so far in Q3, and does it have any impact on your assumptions around midterm margin expansion?

Speaker #2: Turning to finally the third question, which is around midterm guidance. Look, we always knew 26 was going to be a challenging year. Obviously, it's proved to be a bit more challenging.

Speaker #2: Then on 2026. So, the H2 guide obviously implies a pretty substantial step up versus H1. Given the comments around the VPP delay, where do you see the biggest half-on-half step up on a segmental basis?

Speaker #2: Than we thought. And that's largely on the back of U.S. knees that we talked about. And the prior authorizations that one of our one of the larger insurers rolled out this year that's impacting this is more friction in the system, but prescriptions does not end user demand, but it's really the rate at which prescriptions get filled.

Speaker #2: And kind of, really, what gives you the confidence in that new guide? And then, lastly, on the midterm guidance, the 4% growth in 2026 is very much below the midterm guidance range.

Speaker #2: What do you see as stepping up in future years to offset that?

Speaker #2: So that's just a reason for why we called down 2026. But the fundamental growth drivers, which are new products, either in existing categories or in creation of new products or creative new categories, those drivers remain well intact, whether it's in orthopedics, we talked about Landmark launch, we talked about hip execution on Corey, ATOS, which is on shoulder, and in trauma, rounding out our EVOs portfolio with the pelvic offering that's new.

Speaker #1: Yes, sure. So let me talk about that in turn. So, U.S. Ortho—there's some market slowdown, but it's not the biggest factor. The biggest factor is really company-specific factors.

Speaker #1: Fundamentally, it's in knees. We had flagged that we are behind the market largely because of the portfolio gap we have. So we're not able to participate in the fastest-growing part of knees, which is cementless.

Speaker #1: We only have that on one half of our installed base. And in Q3, when we launched Landmark, we'll be better able to retain the market in the other half, where we don't have a cementless offering.

Speaker #2: And then on the nail part of the portfolio, IM nails continuing to prove. So multiple growth drivers in orthopedics. We've got to look forward to in 2027.

Speaker #1: By far, that's the biggest factor, and it's a challenging thing that we're navigating through. We called that out as a factor in Q1, and we continue to see it in Q2, although there was some sequential improvement.

Speaker #2: And then in sports, Big Four continued execution on those. And then finally, in wound, it's PICO, it's building out of Renesas, and normalization of skin subs.

Speaker #1: And I'll come on to kind of what we see for half-on-half, but that's the fundamental factor that's driving softness in U.S. ortho. There was a temporary blip in U.S.

Speaker #2: So these are the growth drivers, as you can see, it's multiple of them across all of our business units. It gives us confidence that we are fundamentally a six to seven percent growth company.

Speaker #1: Hips, Catalyst Stem, continued to grow very nicely. But we're in the third full year of launch. We do expect, as we go forward from here, that at some point we're going to need to pivot from competitive kind of takeouts to more holding on to our business—retention.

Speaker #1: Yep. And maybe just to perfect answer. But maybe just a little bit of color on the phasing. In terms of the second half, sort of Q3, Q4, we do expect to see a step up in Q4 performance versus Q3 performance.

Speaker #1: That'll happen as we progress through the launch. But there was a slower-than-expected deployment of sets. These sets are instrument sets, optimized for one or the other product.

Speaker #1: So Q3 will improve on Q2, clearly. And then Q4 will be stronger. And that's not just that's not jam tomorrow. That is very clearly because of the timing of investments that we're making.

Speaker #1: So, for example, if we're trying to take business away from one competitor versus another competitor, we need to have slightly different instrument sets.

Speaker #1: Specifically, in relation to the launch of Landmark. And then in the context of skin substitutes, we're actually starting to lap the impact of last year and the last Q4 last year was tough in skin substitutes because of the actions that were being taken by the market in anticipation of the changes to reimbursement.

Speaker #1: So, getting that right is a bit challenging. That's what paced our set deployment for the quarter. It's a blip; we expect to regain that in the back half of the year.

Speaker #1: So those are really the two fundamental factors—not so much a slowdown in procedures, of which there was some. Half-on-half, fundamentally what we expect is in orthopedics, it's Legion MS, which strengthens our Legion offering.

Speaker #1: So we've got a much softer comp in Q4 on skin subs and therefore we'd expect that to there's not only the continued recovery that we've already seen Q2 on Q1, we'll see come through in Q3, but we also start to lap in Q4 the impact from last year.

Speaker #1: So that will be particularly positive on skin subs. And then of course, dare I say it, we should also mention the fact we have got one extra trading day in Q4.

Speaker #1: Right? That's going to be the most material driver. And then, as we bring Landmark Porous onto the market—which we have largely as a Q4 effect, like I said—we'll be able to better retain the business that we have.

Speaker #1: Which when you add all that up, you'll see a big step up in growth in Q4 versus Q3, just to make that absolutely clear.

Speaker #1: And then once we go into 2027, when we have the complete offering with Legion cemented as well, with a Q2 end, we'll be able to go from defense into more of an offensive crouch.

Speaker #1: And then to your point around the headwinds on sports, I mean, you're right. I mean, Deepak's absolutely spot on, of course, that with continuing to see the momentum.

Speaker #1: So, in orthopedics, it's LEGION MS and launch of POROUs. In Sports, we'll continue the trend that you have seen quarter-on-quarter. There hasn't really been an H1, H2 effect in Sports when you take away kind of the China effect, and we expect the same to continue, right?

Speaker #1: But we would expect sports and ENT to be a little bit softer in Q3 than we saw in Q1 and Q2 because of the impact of VBP coming in both of those areas in the second half.

Speaker #1: So we've factored that into our forecast and that's fully baked into the expectation of the top line guidance of the 4% and also the profit guidance as well, which remains unchanged.

Speaker #1: In this year, and in Wound, it's PICO — we're investing behind geographic expansion of PICO. We're starting to see some proof of that in Q2, but we expect to see that build in the back half of the year.

Speaker #3: That's great. Thank you. Can I sneak in a cheeky follow-up? If you were to quantify Q3 versus Q4 growth, the phasing there, would you be able to offer any color there?

Speaker #1: And then skin subs, where there was sequential improvement from Q1 to Q2. As we've said, we're on the upper end of the guidance range that we've given in terms of the impact on reimbursement.

Speaker #1: I could. Look, I think in Q3, we will see growth in the order of sort of Q1 type dimensions. So if you remember in Q1, we were 3.1% growth, 4.7% on an ADS basis.

Speaker #1: Between H1 and H2, we expect to see an improvement. So, those are the components of H1 to H2 in terms of what accounts for the step-up and growth that we see.

Speaker #1: In Q3, we will see growth of a similar level. In Q4, we will see a step up in that growth. You can work out the math, but it will be that the growth level will be sort of 6 to 7%.

Speaker #1: Turning finally to the third question, which is around midterm guidance. Look, we always knew 2026 was going to be a challenging year. Obviously, it's proved to be a bit more challenging than we thought.

Speaker #1: And that's largely on the back of U.S. knees that we talked about, and the prior authorizations that are one of our drivers remain well intact. Whether it's in orthopedics—we talked about the Landmark launch, we talked about hip execution on CORI, ATOS, which is on shoulder—and in trauma, rounding out our EVOS portfolio with the pelvic offering that's new.

Speaker #1: But actually on an ADS basis, it will be just north of 5 because of the extra trading day. That is a step up on Q3 in absolute terms, not stripping out the trading day impact, but that is because of the skin subs, because of the investments being made in PICO and the timing of those investments, and because of course of the launch of Landmark, which takes place towards the end of Q3.

Speaker #1: So those are the reasons why we've got confidence in our ability to deliver that 4% for the full year.

Speaker #1: And then on the nail part of the portfolio, IM nails continue to prove themselves. So, multiple growth drivers in orthopedics that we've got to look forward to in 2027.

Speaker #3: That's great. Thank you.

Speaker #1: And then in Sports, Big Four continued execution on those, and then finally in Wound, it's PICO, it's building out of RENASYS, and normalization of skin subs.

Speaker #4: Hi, good afternoon. Hassan, Al-Wakil from Barclays. A couple from me on auto. So firstly, maybe to ask Jack's question a little bit differently. We've seen these softness this year.

Speaker #4: Now we're seeing hips which has been really strong before today. You've said this isn't market driven. What are you doing differently when it comes to execution?

Speaker #1: So these are the growth drivers. As you can see, there are multiple of them across all of our business units. This gives us confidence that we are fundamentally a 6–7% growth company.

Speaker #4: Why shouldn't some of these set delays in hips weigh on the second half? And then specifically on U.S. hips, how are you thinking about growth here beyond the next quarter or two as a catalyst them matures as a product?

Speaker #2: Yeah, and maybe just to perfect the answer, but maybe just a little bit of color on the phasing. In terms of the second half, sort of Q3, Q4, we do expect to see a step-up in Q4 performance versus Q3 performance.

Speaker #4: And then secondly, on robotics, if you can try and unpack the growth in the quarter and the development in Corey, is it entirely a function of comps?

Speaker #2: So Q3 will improve on Q2, clearly. And then Q4 will be stronger. And that's not just— that's not 'jam tomorrow.' That is very clearly because of the timing of investments that we're making.

Speaker #4: And how should we think about growth in the second half and beyond given the launch of Mako RPS last month?

Speaker #2: Specifically, in relation to the launch of Landmark. And then, in the context of skin substitutes, we're actually starting to lap the impact of last year. The last Q4 last year was tough in skin substitutes because of the actions that were being taken by the market in anticipation of the changes to reimbursement.

Speaker #1: Okay. So with hips, just to emphasize again kind of what I've said around site deployment. So first, there was a comparator, right? So we had a strong comparator in Q2 and so that numerically had an impact.

Speaker #1: When you look at a two-year stack, it's actually not that much of a deceleration in hips. So it's largely kind of consistent. So with set deployments, just to double-click kind of what I said, largely it has to do with instrument sets.

Speaker #2: So, we've got a much softer comp in Q4 on skin subs, and therefore we'd expect that too. There's not only the continued recovery that we've already seen in Q2 on Q1.

Speaker #2: We'll see that come through in Q3, but we also start to lap in Q4 the impact from last year. So that will be particularly positive on skin subs.

Speaker #1: So when you're trying to take a customer from their existing kind of approach, whether it's one of our legacy products or one of our competitor products, the instrument that you have to deploy to cater to the surgical approach of that particular surgeon has some variability.

Speaker #2: And then, of course, dare I say it, we should also mention the fact that we have got one extra trading day in Q4. Which, when you add all that up, you'll see a big step-up in growth in Q4 versus Q3, just to make that absolutely clear.

Speaker #1: It's not just some standard instrument that you deploy. That works regardless of which legacy platform that they're using. And getting the demand right for that instrument is a bit tricky because of that variability, right?

Speaker #2: And then, to your point around the headwinds on Sports, you're right. Deepak's absolutely spot on, of course, that we're continuing to see the momentum.

Speaker #1: And so we didn't quite get that right. And so we were somewhat paced by that in Q2, right? So the combination of numerically stronger comp plus that kind of led to what you saw.

Speaker #2: But we would expect sports and ENT to be a little bit softer in Q3 than we saw in Q1 and Q2 because of the impact of VBP coming in both of those areas in the second half.

Speaker #1: We've also said as we progress through the launch, typically what happens in orthopedics launches, certainly in the way we approach catalyst stem, is we targeted competitive surgeons initially.

Speaker #2: So we've factored that into our forecast, and that's fully baked into the expectation of the top-line guidance of the 4%, and also the profit guidance as well, which remains unchanged.

Speaker #1: Right? And you expect to do that for a period of time. But eventually, you are going to have to address your base of customers.

Speaker #3: That's great, thank you. Can I sneak in a cheeky follow-up? If you were to quantify Q3 versus Q4 growth—the phasing there—would you be able to offer any color there?

Speaker #1: So that mix of competitive versus retention will start to flip from competitive heavy against retention to more retention heavy smaller competitors. So at some point, that will normalize.

Speaker #2: I could. Look, I think in Q3 we will see growth in the order of sort of Q1-type dimensions. So if you remember, in Q1, we were at 3.1% growth, 4.7% on an ADS basis.

Speaker #1: So we'll get back to in effect market levels of growth and hips. So that's what you should expect as we proceed to the back half of this year and beyond.

Speaker #1: So hopefully that explains kind of the blip in kind of instrument deployment that paced Q2. But what you should expect as we go through the launches.

Speaker #2: In Q3, we will see growth of a similar level. In Q4, we will see a step-up in that growth. You can work out the math, but the growth level will be in the range of 6% to 7%.

Speaker #1: So the second question that you had was in Corey. For this quarter and beyond, I think John, you said we had double digit growth in Corey placements in quarter two and also that got a similar number in first half.

Speaker #2: But actually, on an ADS basis, it will be just north of 5 because of the extra trading day. That is a step up on Q3 in absolute terms—not stripping out the trading day impact—but that is because of the Skin Subs, because of the investments being made in PICO and the timing of those investments, and because, of course, of the launch of Landmark, which takes place towards the end of Q3.

Speaker #1: So continue to be pleased with the pace at which we're pacing, placing Corey and also where we're placing them, right? Hospitals versus ASCs, teaching institutions versus across the mix.

Speaker #1: So we're having actually nice impact across a range of care settings. And generally speaking, when I look across the board, we are at least at our market share.

Speaker #2: So those are the reasons why we've got confidence in our ability to deliver that 4% for the full year.

Speaker #3: That's great. Thank you.

Speaker #2: Yeah.

Speaker #4: Hi, good afternoon. Hassan Al-Wakil from Barclays. A couple from me on orthos. So firstly, maybe to ask Jack's question a little differently. We've seen this softness this year.

Speaker #1: That's encouraging. When I look in the ASC, it's slightly ahead of our market share in terms of Corey placements within the ASC. Not by leaps and bounds, but certainly.

Speaker #4: Now we're seeing Hips, which has been really strong before today. You've said this isn't market-driven. What are you doing differently when it comes to execution?

Speaker #1: So what it shows is that we are tracking relative to our share. The strategy we're following is that we're not just placing first and then allowing utilization to catch up.

Speaker #1: We're placing where we see a demand, where we see a surgeon who wants to integrate it into their practice. And we're equally monitoring utilization as we are placement, right?

Speaker #1: We could have followed a different approach, but ours is actually placement and utilization. So I'm actually pleased with not only the headline, but also the texture of thing.

Speaker #4: And then secondly, on robotics, if you can try and unpack the growth in the quarter and the development in CORI, is it entirely a function of comps?

Speaker #1: You referenced Stryker coming up with their handheld. Look, for me, as a headline, they're always questions around, well, is Corey a science experiment? Is this really a mainstream platform or not?

Speaker #4: And how should we think about growth in the second half and beyond, given the launch of Mako RPS last month?

Speaker #2: Okay. So with hips, just to emphasize again kind of what I've said around site deployment: first, there was a comparator, right? So we had a strong comparator in Q2, and so that numerically had an impact.

Speaker #1: The last reported number was 1,100 that we talked about. We've talked about double digit growth off of that. You can do the rough math.

Speaker #2: When you look at a two-year stack, it's actually not that much of a deceleration in hips, so it's largely kind of consistent. So with site deployments, just to double-click on what I said, largely it has to do with instrument sets.

Speaker #1: It's and the fact that we're placing in proportion to our shares is Corey is a mainstream product where it's being accepted by the market.

Speaker #1: And the fact that there's competitors who are now thinking that they need to have their own handheld platform is validation of our approach. And also speaks to the innovation that's in Smith & Nephew at our scale where we have taken both bets.

Speaker #2: So, when you're trying to take a customer from their existing kind of approach—whether it's one of our legacy products or one of our competitor's products—the instrument that you have to deploy to cater to the surgical approach of that particular surgeon has some variability.

Speaker #1: We could have come up with our handheld rather a fixed arm robot too, but we didn't, right? We had the strength of our conviction to go with a handheld platform.

Speaker #1: And great that our competitors are following suit. But at the end of the day, it's deploying them in the playbook that we've developed. And I feel very confident about how we're doing that.

Speaker #2: It's not just some standard instrument that you deploy that works regardless of which legacy platform they're using. And getting the demand right for that instrument is a bit tricky because of that variability, right?

Speaker #1: I think those are the questions that you had.

Speaker #2: Yeah. Just to build a little bit on just on Deepak's comments. And notwithstanding, that double digit growth in placements. And of course, when you place Corey's initially, they start off with low utilization.

Speaker #2: And so we didn't quite get that right. And so we were somewhat paced by that in Q2, right? So the combination of numerically stronger comp plus that has kind of led to what you saw.

Speaker #2: And then slowly ramp up over time. So notwithstanding that double digit growth in placements, we continue to see progression on both utilization which has gone up four or five percentage points from the end of 2025.

Speaker #2: We've also said, as we progress through the launch, typically what happens in orthopedics launches—and certainly in the way we approach Catalyst STEM—is we targeted competitive surgeons initially.

Speaker #2: Right? And you expect to do that for a period of time. But eventually, you are going to have to address your base of customers.

Speaker #2: And also in penetration which has gone up about two percentage points from the end of 2025. So it's even notwithstanding the dilutive impact of putting out more Corey's there and the build-up curve that those necessitate, we're still continuing to see improving trends in penetration and utilization, which I think is very encouraging.

Speaker #2: So that mix of competitive versus retention will start to shift from competitor-heavy against retention, to more retention-heavy with smaller competitors. So at some point, that will normalize.

Speaker #2: So we'll get, in effect, market levels of growth and hips. So that's what you should expect as we proceed to the back half of this year and beyond.

Speaker #1: Great. So I don't betray a leftward bias in my who I call on. I'll go the right part of the room and I'll call on colleagues.

Speaker #2: So hopefully that explains kind of the blip in instrument deployment that paced Q2. But what you should expect as we go through the launches...

Speaker #1: And then I'll hop around the room.

Speaker #3: Thanks. Deborah Johnson, with Pamela Librium. Just a couple of questions then. So just on tariffs, obviously you've had the guidance has changed. I remember you were talking about 60 million dollars hit prior to that.

Speaker #2: So, the second question was on CORI. For this quarter and beyond, I think John, you said we had double-digit growth in CORI in Q2, and also that we got a similar number in the first half.

Speaker #3: I just want to check that the growth and the net numbers haven't changed. So the refund is still 60 million. And just check the logic that that just shifts as a headwind into '27 rather than '26 then.

Speaker #2: Yeah. So you're right. So just to say it was really, really clear on tariffs. The P&L impact for last year was 15 million. The anticipated P&L impact for this year was 60 million.

Speaker #2: We're pleased with the pace at which we're placing CORI and also where we're placing them—hospitals versus ASCs, teaching institutions, versus the mix.

Speaker #2: So it was a 45 million drag. We now expect refunds for this year to be around 50 million. So that's a so net-net when you net all that out, it broadly means that tariffs in total compared to last year is neutral on the P&L.

Speaker #2: So we're having growth, actually, across a range of care settings. And generally speaking, when I look across the board, we are at least at our market share.

Speaker #2: So the refunds effectively offset what would have been the P&L charge.

Speaker #2: That's encouraging. When I look in the ASC, it's slightly ahead of our market share in terms of CORI placements within the ASC—not by leaps and bounds, but certainly.

Speaker #3: And then we'll get the headwind next year effectively.

Speaker #2: And then you will get the headwind next year. So the cash tariffs is of the order of 50 million. So that's the P&L impact in next year will be circa that quantum.

Speaker #2: So what it shows is that we are tracking relative to our share. The strategy we're following is we're not just placing first and then allowing utilization to—

Speaker #2: But there's also a little bit of further refunds that will come through likely in next year. I mean, look, there's a lot of moving parts on tariffs.

Speaker #2: We're placing where we see demand, where we see a surgeon who wants to integrate it into their practice. And we're equally monitoring utilization.

Speaker #2: And we've still got to see the outcome of the section 232 review that's we probably won't find out about until the back end of this year.

Speaker #2: So there's lots of moving parts on tariffs as you always expect. But we would expect a little bit of an offset of the P&L charge next year with some further refunds.

Speaker #2: And we'll obviously we'll provide more guidance on that when we come to our premiums in 20.

Speaker #3: Okay. Thanks. And then the second question then is just around the kind of the cost savings and obviously you managed to kind of to get some decent kind of momentum in the cost savings.

Speaker #3: If I heard you correctly, you were saying the extra 50 million is largely coming from manufacturing and things like footprint kind of reduction. That type of area.

Speaker #3: I'm just wondering how I mean, those in my experience take quite a lot of time to achieve. So how have you managed to kind of to find new ones so quickly there?

Speaker #1: There's a lot of efficiency savings in the way that we run our facilities. There's some benefit coming through from the changes that were made historically that was better than expected.

Speaker #1: So there's an element of historical change that has come through, better than we thought would come through in terms of the way it's flowing through the P&L.

Speaker #1: But there's also been changes that we've made in how we operate things. We've also streamlined our operations, for example, from Austin and also Warwick, which we closed.

Speaker #1: We consolidated that into our Memphis facility. And we've delivered greater than expected efficiency savings. But they're not just the efficiency savings are not just in manufacturing.

Speaker #1: The bulk of them you're right to say are in manufacturing. But there's also savings we're seeing in sales and marketing. There's also. Saving that we're seeing in our business services as well.

Speaker #1: So and procurement.

Speaker #2: Yeah. Thank you, Deepak. Yeah. So it's I think it's very exciting. I think I alluded to I read back the script to the Q1 or the previous number.

Speaker #2: And I think I sort of said at the time 150 million or possibly better. And we always had a little bit of line of sight of being able to beat that 150 million.

Speaker #2: I think it's very pleasing to be able to talk about the 200 million target today. But I think it really reflects an ongoing discipline around our cost savings.

Speaker #2: That we built initially through the 12-point plan. And then added to with the ZBB program. And today we're now looking at our next wave.

Speaker #2: And we're not going to talk too much detail about this. But a lot of the stuff that we're doing, for example, I'm putting in new systems.

Speaker #2: And also the overlay of AI and we're doing a lot of work in the business now to look at how do we fundamentally simplify and streamline our end-to-end processes.

Speaker #2: Which remain quite complex. So we've gone through sort of three phases of cost reduction in our business. The first of which was just to get the P&L in the decent shape to deliver the numbers.

Speaker #2: The second of which is to basically take our existing processes and take away some of the what we call the fat and the cost in those.

Speaker #2: And the third wave is to fundamentally simplify and automate and streamline our processes. And we're now in that third wave. So we'll no doubt we'll talk more in the future about what the opportunity to come is.

Speaker #1: Just two things. One kind of clarification and just more a broader point. Just when we talk about footprint, it's not that we're closing any more factories that we hadn't contemplated.

Speaker #1: And you're right. Like those things take time. It's actually how we're utilizing our current footprint. That's the key driver. Apart from all of the things that John said, how we use Malaysia versus Memphis in terms of optimizing across our network.

Speaker #1: For example, an orthopedics is one of the contributors to that. We've called out the spirit of continuous improvement as kind of the key kind of underlying things that enables the strategy to happen.

Speaker #1: I'm pleased to report that some of those things that organizations embrace very, very nicely. So the spirit of continuous improvements that lead to these additional savings.

Speaker #1: It's not a point in time activity. It's actually how we're offering the business this way. And that's what enabled us to hold to a profit target despite the revenue miss.

Speaker #1: Yes, there's not the headwind that we had from tariffs that we expected. But it's more than that, right? It's all of these additional savings that allow us to make essentially that simple statement come true.

Speaker #3: Thank you. Charles Weston from RBC. Just to quickly clarify that. How much of that 50 is sort of brought forward from 2027 and how much of it is incremental and we should be modeling off that for 2027?

Speaker #1: Sure. I mean, do you want to take that or I can?

Speaker #2: I mean, I think the way I think about it is a little bit of the 50 that's I mean, in terms of first half performance, there's it's like there's an element of bringing forward some of the half to into half one.

Speaker #2: And in terms of the back half of the year, there's an element of bringing in some of the half one 27 into the half two of 26.

Speaker #2: So it's always shifting everything forward. The point I would make we're not going to sit here and guide now to 27 numbers. But the point I would make is that this is not a one-off exercise.

Speaker #2: To Deepak's language, just now. I mean, deliberately use the words continuous improvement. And I also talked to a little bit about some of the savings that we're now driving through things like our ERP program and also AI as well.

Speaker #2: So I would say we've got good visibility. And we're not going to set out the guidance now. But we've got good visibility of future opportunities to drive further efficiency savings in this business.

Speaker #2: And we'll set out that much more clearly, of course, when we give the guidance for 27. But I would not classify it as robbing Peter to pay Paul in terms of bringing it forward from 27 into 26.

Speaker #2: There'll be plenty more to come in 27.

Speaker #3: Okay. Thank you. Sorry. That was a long clarification. But I had two actual questions. One of them on ACA have you noticed any changes in terms of either procedure volumes or capex sale or capex demand from US hospitals?

Speaker #3: And secondly, just in terms of landmark launch timing, can you just confirm that everything's on track for both cemented and cementless and sort of the typical, like you said, it's two quarter ramp to really start meaningfully getting sales from those.

Speaker #3: Thanks.

Speaker #1: Sure. On ACA, we did see some impact of that in terms of procedure. So it's both across elective procedures. You have some hospital systems comment on that.

Speaker #1: And we did see that. But it was not the most pronounced effect. So we didn't overly major on that. But there is an impact.

Speaker #1: Of ACA related procedures laid down that we are that we have seen both across knees and hips. But like I said, it's not the dominant factor that explains our performance.

Speaker #1: In terms of landmark timing, porous is the very end of Q3. So largely a Q4 effect. And then the cemented version of landmark is the end of Q2 of 2027.

Speaker #1: And as you note, Charles, there's a ramp associated with that. You've talked about two quarters. It isn't quite as straightforward as that. It depends on competitive dynamics, right?

Speaker #1: But there's a good way and not so good way of introducing these launches, right? One you can throw a lot of capital at it.

Speaker #1: And encourage a lot of trial. At a great deal of capital expense, right? But a more methodical and a proper way to do an orthopedics launch is to be much more mindful in terms of how you deploy capital in order to encourage trial and then ultimately adoption.

Speaker #1: So one of the things that we've gotten much, much better as an organization is around capital discipline and capital efficiency in orthopedics business that we did not consistently have.

Speaker #1: So that does impact top line, right? And we've called that out in previous quarters. But we expect to bring that level of capital discipline and efficiency mindset to the landmark launch.

Speaker #1: The consequence of that is a more kind of slower ramp. But it'd be, I think, a more durable one. And also the more disciplined way to tackle these.

Speaker #1: Sure thing. Okay. One question here and then we'll go online.

Speaker #3: Thank you very much. Richard Fauchen from Goldman Sachs. The first one I want to ask about something that's been coming up. More in our invested conversations.

Speaker #3: And that is on potential competitive risk for Sandhill. Could you remind us the size of that product today? How revenue split between different care settings?

Speaker #3: And what you perceive as the key competitive strengths of Sandhill? And the second one is on advanced wing devices. So I suppose over the last four quarters or so, we've seen a bit of a deceleration from kind of double digit growth to mid-single digit growth for that part of the business.

Speaker #3: What has been driving that? And what is the right way to think about the trajectory for advanced wing devices going forward? Thank you.

Speaker #1: Sure. Sandhill, we don't typically give product-level detail. It is a multiple hundred million dollar product, right? And to your point, there are kind of there's a category where effectively a large proportion of that market.

Speaker #1: And there is some competitive activity in that. I just want to emphasize that that's not what's driving our numbers today. I just want to clearly emphasize that.

Speaker #1: Where we stand out in Sandhill is we don't require refrigeration. So supply chain is simpler. There isn't pain associated with the use of our product, which some of our competitors feature, right?

Speaker #1: And it's one of the disadvantages is that it is a slower process. I mean, it takes time for the product to take effect, right?

Speaker #1: That's one of the downsides of Sandhill. But having said that, it's got a proven kind of track record in utilization across a range of use cases and across settings, whether it's in an acute setting or when patients get discharged home with the prescription for Sandhill, right?

Speaker #1: So it is across all of those areas. We feel very good about how we're positioned. Within that category, we have a line of sight, obviously, to what competitor products are and what they offer and how Sandhill continues to be differentiated relative to it.

Speaker #1: Of course, we're not resting on our laurels there. There is a next-gen product. So we aim to improve upon Sandhill, building. On its advantages around supply chain, its advantages around the level of pain of which there isn't when they use the product.

Speaker #1: But actually have it be faster. In terms of how it works. So that's our next-gen Sandhill. In terms of AWD, there's two broad categories.

Speaker #1: So single-use and traditional negative pressure. We also classify leaf within that. And leaf has both the device component and the dressing component. Just to kind of disaggregate what's in our AWD, right?

Speaker #1: Largely, the deceleration that you see is in our traditional negative pressure category, which is our Renesas platform. There, as we've highlighted, we're doing well in the post-acute segment.

Speaker #1: We are not taking share in the acute kind of channel. And the answer to that is actually have a better rounded offering with Renesas.

Speaker #1: Both in terms of the next-gen canister, but actually having a whole assortment of dressings that's fit for purpose for the application, whether it's OB-GYN, whether it's GI procedures, orthopedic procedures, and the like.

Speaker #1: And that each one's got a specialized kind of dressing. And we've have a narrower range there than the large competitor within that. So we obviously have product development to address that.

Speaker #1: And we'll start to build that out in 2027. So the deceleration is largely within the acute care segment of pressure. On the single-use, with PICO, that's been a product that's been a growth engine for us for quite some time.

Speaker #1: And in addition to its use across care settings, we're actually invested to drive it in the geographies where we're not present in the same way today.

Speaker #1: That's part of the investment that we've talked about. And we expect to see the benefits of that come through in Q3 and especially in Q4, right?

Speaker #1: So we continue to do well there. There's competitor activity within the single-use segment. We feel well positioned within that. But we also have our pipeline there that we expect to, I think, we call that out in our capital market day presentation somewhere in the 28 timeframe.

Speaker #1: We expect to come up with our next generation of PICO. So hopefully, it gives you a feel for kind of how that segment, this categorize, and the dynamics within that.

Speaker #1: Thank you. Yeah. So we'll now go online first. And then I'll come back into the room.

Speaker #4: Thank you. As a reminder to ask your question on the telephone lines at these press stars followed by one on your telephone keypad now.

Speaker #4: If you change your mind, please press start followed by two. When preparing to ask your question, please ensure your device is in easy locally.

Speaker #4: Our first question is from Veronica Zubayoda from the city. Your line is now open. Please go ahead.

Speaker #5: Hi, guys. Good afternoon. And thank you for taking my question. I have two pleas. One sort of slightly diving into the nitty-gritty, but just curious to get your thoughts on what's happening in trauma extremities.

Speaker #5: Obviously, we had a number of good years post the HR launch and growth service really accelerated pretty dramatically here today. Just curious if you can touch upon the dynamics you're seeing in trauma versus extremities.

Speaker #5: And is there anything you can do to get that growth rate back into the mid to high single digit? And then my second question is, is it big picture?

Speaker #5: I apologize, but I have to come back to the midterm guide. I think even just to hit the low end of the six to seven, that you've got it for previously.

Speaker #5: If you are doing four this year, you have to do seven in the other two years. And that would be a pretty dramatic acceleration versus a trend we've seen in the last couple of years.

Speaker #5: I appreciate their hesitancy this year, but they're also hesitant to last year and the year before. So I'm just trying to understand the logic for why you are sticking to that six to seven.

Speaker #5: Is there any way at all in your mind to get anywhere but the low end of that range? And I guess what gives you the confidence at this point in time to maintain that?

Speaker #5: Thanks, guys.

Speaker #1: I sure thanks, Veronica. So I'll talk about I'll take them in order. So trauma and extremities, I'll talk about trauma and I'll talk about extremities.

Speaker #1: With trauma, we're positioned kind of nicely with our AVOS platform. I've talked about pelvic, which is something like 1.5% of the overall pie, but it's an important piece that we're going to launch and do, right?

Speaker #1: It'll be even fuller now. Now, we've been expecting competitors to launch within that category and two of our competitors are, in fact, at various stages of launch in the core plating category.

Speaker #1: This is for the application, whether it's OB-GYN, GI procedures, orthopedic procedures, and the like, and each one has a specialized kind of dressing. We've— you know, we have a narrower range there than the large competitor within that.

Speaker #1: So they will be some level of trial, some level of adoption, as those competitors launch within that category. And we're seeing some impact of that.

Speaker #1: And that's not a new factor. It's just that's been out there in the market. I think the AVOS compares very, very favorably to competitors' offerings.

Speaker #1: So, we obviously have product development to address that, and we'll start to build that out in 2027. The deceleration is largely within the acute care segment of traditional negative pressure.

Speaker #1: But over time, as surgeons try those, you'll see some quarterly variations depending on who's trying, who's adopted, and so forth, right? But I feel very good about how we're positioned within that category.

Speaker #1: On the single-use with PICO, that's been a product that's been a growth engine for us for quite some time. And, in addition to its use across care settings, we're actually invested to drive it in the geographies where we're not present in the same way today.

Speaker #1: We do have drivers of our own beyond AVOS, IM nails. We launched that, I guess, in Q1. You'll have to remind me, John. But in the recent quarter or two, we launched our own IM nails.

Speaker #1: We hadn't had a new product there in my salesforce likes to remind me in far too long. But we've got a nice offering there that should expect to kind of drive growth.

Speaker #1: And we called that out in the last quarter. So core trauma category, nicely positioned in terms of our products, but there is competitor launches particularly in plating.

Speaker #1: On extremities, our presence now, we're relatively small player in extremities, as you know. And for us, the real call-out out here is shoulder. With ATOS, right?

Speaker #1: And there, again, we are a relatively small player, but we now have more or less the offering we need on the implant side but actually importantly, we've got Corey enabled for planning and execution.

Speaker #1: And there's some real differentiation there within that anatomic, reverse anatomic, glenoid, and humeral planning and execution which is a quite a differentiating feature. And they're a handheld robot, actually, is differentiated relative to a fixed-arm robot for shoulder surgery.

Speaker #1: But we are working off of a small base and we are in the early stages of launch. It'll be more group-relevant, I would say, 2027, 2028.

Speaker #1: We're in that early stages. And then we're getting nice traction, not only with surgeons who are trying it, but surgeons who have actually integrated that as part of their routine practice.

Speaker #1: So it's there. It's just not as material to the group given the small base. So hopefully, it gives you a bit of texture and color around trauma and extremities.

Speaker #1: On the midterm guide, look, as I said, 2026 was softer. Veronica, you've done a bit of the numerics around four and then six to seven.

Speaker #1: The reality is we're two quarters into a three-year kind of plan, right? And obviously, we've thought through the numerics ourselves. And we've gone through the fundamentals of what actually drives the six to seven.

Speaker #1: And as I said earlier, once we get through the period today, I mean, what's holding us back this year? Why did we actually reduce the guide?

Speaker #1: One, it's our position in the US needs and how that's impacting us today. With the gap in the portfolio and the second is Santel, right, with the prior authorization that we are having to contend with.

Speaker #1: And on the skin subside, we're on the upper end of the range, but still within the corridor that we guided to. That is in combination, not a great thing to have you to navigate in this year because you have a bunch of headwinds and not a whole lot of tailwinds.

Deepak Nath: Good morning, everyone. Welcome to the Smith & Nephew Q2 and H1 results presentation. I am Deepak Nath, the Chief Executive Officer, and I am joined by John Rogers, our CFO. This quarter, we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine & ENT performed strongly once again, with consistent delivery across regions and categories, and we saw double-digit growth from many of our key products. However, this was offset by softness in US Orthopedics and in Advanced Wound Bioactives. In US Orthopedics, knees remain weak, reflecting similar dynamics to Q1, although we saw sequential improvement as expected, and we do anticipate further improvement through the remainder of the year. US hips were affected by a delay in CATALYSTEM deployment and a tough comparator, with growth expected to resume as deployment increases during the balance of the year.

Deepak Nath: Good morning, everyone. Welcome to the Smith & Nephew Q2 and H1 results presentation. I am Deepak Nath, the Chief Executive Officer, and I am joined by John Rogers, our CFO. This quarter, we delivered underlying revenue growth of 1.6%, which was lower than expected. Sports Medicine & ENT performed strongly once again, with consistent delivery across regions and categories, and we saw double-digit growth from many of our key products. However, this was offset by softness in US Orthopedics and in Advanced Wound Bioactives. In US Orthopedics, knees remain weak, reflecting similar dynamics to Q1, although we saw sequential improvement as expected, and we anticipate further improvement through the remainder of the year. US hips were affected by a delay in CATALYSTEM deployment and a tough comparator, with growth expected to resume as deployment increases during the balance of the year.

Speaker #1: But as we move into 2027, we expect to normalize the skin subs, right? We expect to kind of normalize on the Santel. And then we'll have the portfolio complete in the way that allows us to be competitive.

Speaker #1: Now, there will be a ramp starting in Q4 this year. Cement was first. And then starting in the back of next year with cemented landmark.

Speaker #1: So there will be a phasing or pacing in terms of how we become more competitive in knees. But you put all of that together, we feel good about the growth drivers we've got stacked up in orthopedics.

Speaker #1: I've talked about knees and hips. It's about getting execution capability in Corey. We're seeing contracting activity, the ties together both knees and hips. And I think we'll be able to better compete within that as we have execution ability on Corey as well on the Corey XD platform.

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

Speaker #1: And then I've talked about ATOS becoming more relevant in the 2027, 2028 period. And then in sports, we've talked about Big Four and they're very nice growth drivers that are kind of lined up within that business unit.

Speaker #1: And then in wound, beyond the normalization of skin subs, you've got a new product launches coming in the traditional negative pressure category where we have given up ground.

Speaker #1: And I've previously commented on the fact that that's one part of the 12-point plan that didn't work as well, right? The growth rates were great, but when you looked at the placements of Renesas, we were behind on that.

Speaker #1: But we have addressed that. We understand the reasons why. But as we turn into 2027, that will become a growth driver together with the investments we've made in leaf and next-gen PICO.

Speaker #1: So you stack all of that up, that gives us the confidence that at the end of the day, we are a six to seven percent growth company despite the challenges we're navigating through in '26.

Deepak Nath: Importantly, despite the revised revenue outlook, we still expect to deliver our original guidance for profit, trading profit, free cash flow, and ROIC. This includes an additional 50 million in efficiency savings that we identified for 2026, taking our total expected savings from $150 million to $200 million, and a broadly neutral impact from tariffs, net of refunds. The changes that we implemented in our 12-Point Plan have made the group more resilient and better able to respond to these challenges. With that, I will hand over to John to take you through the financial performance, and I will come back after you start. John

Speaker #1: Yep. We'll come back into the room and then back online.

Speaker #2: Hi, can you hear me? Kenz Latkin Deutsche. John, just a quick one for you on the savings. Can you give us some comfort that, I guess, none of what's been done over the last few years will still to be done sort of is at the detriment of growth down the line?

Speaker #2: Often we do see these sort of situations where you could cut too close to the bone. And then just for Deepak, just quickly coming back to the US environment, you mentioned sort of some of it is a slower growth.

Speaker #2: Your bigger peers have kind of pushed back, seem to push back at it sort of view that the market is weakening. There was one smaller peer suggesting that we go back to pre-COVID sort of growth rates.

John Rogers: Thank you, Deepak. Revenue for the quarter was $1.6 billion, representing +1.6% underlying growth and 2.8% reported, including 120 basis points tailwind from foreign exchange. Geographically, the US declined by 1.3%, reflecting softer performance in Orthopedics and Advanced Wound Bioactives. Other established markets grew by 1.7%, with performance led by Canada, Australia, and New Zealand, continuing the good momentum seen in Q1. Emerging markets grew 10.6%. Excluding China, group growth was 1.4% on an underlying basis, and we continue to expect China to be broadly neutral to growth for the full year. Let me now take you through the business units in more detail. I will start with Sports Medicine & ENT, which had another excellent quarter and grew 8.6%. Within Sports Medicine, the underlying growth drivers remain unchanged, reflecting the continued momentum of our key growth platforms and consistency of performance across the portfolio.

Speaker #2: Just wondering if you have any thoughts on that with the views obviously trying to launch.

Speaker #3: Sure. Take the first.

Speaker #4: Yeah. Yeah. Just to be, I think we can be categorically clear that we are not sort of strangling the business vis-à-vis growth. In fact, we're very, very deliberately investing in growth in the business.

Speaker #4: So we've been very conscious about how do we deliver cost and efficiency savings, and how do we actually invest in our growth. So much so that we actually split it out in the bridge that we give you.

Speaker #4: So we're really super transparent. So you see the savings in that bridge. And you see the sort of 33 million investment that we're making in growth.

Speaker #4: What does that look like in practice? Very simply, I mean, if you look at it just purely in headcount terms, and I'm massively in favor of cutting headcount where we can.

Speaker #4: But actually, over the last 12 months or so, we've actually increased our headcount. But the areas where we've actually reduced our headcount, permanent headcount in those areas where we can drive efficiency savings.

Speaker #4: So, for example, manufacturing and operations, we've actually reduced our overall permanent headcount. And we've actually increased our headcount almost singularly in sports and wound.

John Rogers: Growth was broad based across regions. Joint Repair again delivered double-digit growth, supported by strong demand for Q-FIX KNOTLESS and REGENETEN. In AET, FASTSEAL and services continued to be the main contributors to growth. In China, after intentionally restricting inventory in the channel at the end of last year and ahead of the implementation of VBP, we saw strong demand for our products during the quarter. We continue to expect VBP to be implemented in the H2. Sports Medicine revenue again exceeded our recon and robotics revenue. Turning now to ENT. Outside of China, we saw strong growth globally, including double-digit growth in other established markets and emerging markets, as well as in our ARIS ablation wands for turbinate reduction and our HALO wand for tonsil and adenoid surgeries.

Speaker #4: Where we see very specific opportunities to grow our business. And so obviously, the sports story is very clear and Deepak's talked about the four opportunities we have across Carter Hill and Tesla and Regeneron and etc., etc.

Speaker #4: So that's very clear. And in wound, we have the opportunities in PICO and ACC and skin subs. And if you actually look at the increase in our headcount, all of it comes into wound and sport.

Speaker #4: And at least 75% of that increase comes in the front line. In other words, into sales. Into medical education. Into customer service. So we're not adding to the back office.

Speaker #4: So I can be absolutely clear that we are recycling resource. We are taking resource away from things like the back office functions where we're streamlining and taking cost out.

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

Speaker #4: And we're reinvesting into the front line to drive that top line growth. Now, we won't see a return on that investment within '26. They're 33 million or so that we're investing in that growth.

Speaker #4: But to Deepak's earlier comments about what gives us confidence in our ability to deliver why do we think we're a 6 to 7 percent growth company?

Speaker #4: Well, because we're investing in that growth. So we're being very deliberate. And we're spelling that out for you as well. It's not sort of assumed in one lump in the bridge.

Speaker #4: We're very clearly separating out the cost savings from the investment piece.

Speaker #1: Just a couple builds on it. As we navigated the 12-point plan journey, I'll tell you, with all the margin pressures we faced, it would have been easy for us to kind of meet the targets, particularly within the years the interim years by cutting R&D, I mean, I can tell you that that was a place we could have gone.

Speaker #1: Although we more or less got there at the end of the three-year period, you'll remember the periods in '23, '24, whether it was tremendous margin pressure and there's all the questions of whether we're going to get to kind of what we set out.

John Rogers: We've also seen some impact from one of the payers introducing prior authorization for certain doses for SANTYL. Underlying demand remains healthy. The change is creating friction in the prescription process, and we're taking action to address this and expect SANTYL to return to growth in the H2. In our skin substitutes business, we continue to face headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year. We saw a sequential improvement from the Q1, driven by hospitals. However, volumes and pricing in nonsurgical settings remained under pressure, particularly in mobile, where we have limited exposure. The market is adapting more slowly than expected, which continues to affect billing efficiency and inventory levels across the channel.

Speaker #1: But we resisted the urge to do that, right? We maintained the level of investment in R&D in order to fuel the growth. And we're starting to see the benefits of that.

Speaker #1: And it will come even as we go through the next three years. So it's a very conscious life's a balancing act, but what we have actually held onto is to not cut the things that position this business for sustainable kind of growth over the longer term.

Speaker #1: John's talked about the trade-offs there in manufacturing and commercial industries, but particularly in R&D as well. We've made sure that we have ring fence or protected the things that really drive long-term business long-term growth of this business.

Speaker #1: In terms of your question on US, Prestige, I assume it's primarily an orthopedics. Believe it or not, it's actually harder to get at what the market is doing than you might think, right?

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

Speaker #1: Third-party data sources in this space do not as not as robust as it is in other areas. So we're all trying to parse based on limited data points, kind of what the market actually is doing, right?

Speaker #1: And I have been somewhat loath to comment on the market because we've had performance challenges in the US. So I've been less front-footed and commenting on the market historically.

Speaker #1: Now, our performance still is challenged, but it's not necessarily all because of commercial executions. I've got a little bit more visibility into kind of what's going on in the market.

Speaker #1: So when I tell you there's a little bit of a market effect, it's based on what we can see. And I wouldn't have been able to say that even last year, never mind two years ago.

Speaker #1: So against that backdrop of market does not as robust third-party doors as to call it, I do believe when you look it's an exercise in triangulation.

Speaker #1: So what are those things you look at? First is look at reimbursement, right? And those are public and you can see what's happening to how procedures, knees, and hips get reimbursement.

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

Speaker #1: Reimbursed in various care settings, right? And you can see what that's done in the past, what's its projected to do in 2027. That's one data point.

Speaker #1: The second data point, you've got is a shift in site of care, right? As you go from a hospital setting into an ASC, the reimbursements are lower.

Speaker #1: There's an impact on ASPs as you go through that, right? And that's a very dynamic thing. But there's impact. Around that. Against that, you've got other factors like mix, right?

Speaker #1: In the shift from cemented to cementless, you have a mixed benefit that runs counter to the things that I've talked about. So you put all of these pieces together, working out what the market is doing in revenue terms and what it's doing in volume terms, can be trickier.

Speaker #1: And then you've got the ACA impact that you asked about earlier, which is not only patients who are coming off of the ACA roles, as they lose subsidies, but also what's really happening to those who are in commercial programs that are not necessarily recipients of those subsidies.

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

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

Speaker #1: But they're out of pay. Out of pocket proportion fees have gone up. The premiums have gone up. And how that impacts their desire or their willingness or ability to undertake elective procedures is also another factor into this.

Speaker #1: So you put all of this in what I see and what I've seen in Q2 is a slowdown. But I'm not going there to explain our performance in the quarter.

Speaker #1: So hopefully it gives you a bit of color around market, the position that I've taken, why I've taken it, based on what I see.

Speaker #2: Back to the calls, yes.

Speaker #5: Thank you. Our next question on the second line is from Caitlin Roberts from Canacorp. Your line is now open. Please go ahead.

John Rogers: We are seeing the impact of competitor launches in the US, but we expect growth to strengthen in the second half as we launch EVOS Pelvic and ramp up TRIGEN MAX. Finally, other recon grew 48%. This business can show some quarter-to-quarter volatility as revenue is influenced by contract timing and mix. This was more pronounced in the period given another strong prior year comparator. That said, we saw double-digit growth in current deployments globally alongside continued growth in utilization and penetration. We expect growth to accelerate in the second half, supported by an easier comparator in Q3, continued strong demand for our robotic platform, and good uptake across ASCs and teaching institutions. Now I'll move on to the H1 financials. For the H1, revenue was GBP 3.1 billion, up 2.3% on an underlying basis and up 4.6% on a reported basis.

John Rogers: We are seeing the impact of competitor launches in the US, but we expect growth to strengthen in the second half as we launch EVOS Pelvic and ramp up TRIGEN MAX. Finally, Other Recon grew 48%. This business can show some quarter-to-quarter volatility as revenue is influenced by contract timing and mix. This was more pronounced in the period given another strong prior-year comparator. That said, we saw double-digit growth in current deployments globally alongside continued growth in utilization and penetration. We expect growth to accelerate in the second half, supported by an easier comparator in Q3, continued strong demand for our robotic platform, and good uptake across ASCs and teaching institutions. Now, I'll move on to the H1 financials. For H1, revenue was £3.1 billion, up 2.3% on an underlying basis and up 4.6% on a reported basis.

Speaker #6: Great. Thanks for taking the question. Maybe just starting with hints of how are you thinking about the recovery of this business as you noted it taking longer for the market to adapt?

Speaker #6: And could this be misleading the 2027? And are there any efforts that you're making to really help the market adopt these changes?

Speaker #1: Right. I didn't get your name. I think it's Caitlin. So on skin subs, so what's happening there? So first, there's the utilization of skin sub across settings.

Speaker #1: It's in the hospital setting, it's in physician offices, it's in HOPD settings, so hospital outpatient settings, it's in mobile, right? So what we're talking about here in terms of impact is greatest in the mobile setting.

Speaker #1: Followed by physician office, and hospital outpatient by and large in-hospital users have been impacted by the change in reimbursement. The second thing that we're talking about is what products get used.

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

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

Speaker #1: Right? And you've got new entrants that have products that don't have a lot of clinical data supporting them. And then you've got players like us and a couple of others who've been in the market for a long period of time.

Speaker #1: We've got products that have withstood the test of time, and who've got a great deal of clinical data supporting the appropriate use in the clinic for those products.

Speaker #1: So what is happening this year now is as the change in reimbursement has gotten implemented, folks in the mobile is where we expected the greatest impact.

Speaker #1: And that's what we're seeing. We as Smith & Nephew have had the least exposure in the mobile segment. So we've had exposure in the physician office, and HOPD, and obviously in the physician office.

Speaker #1: And we previously detailed that out. You can go back through our previous releases to see how we've parsed that, right? So generally speaking, that impact in mobile offices is playing out as we thought.

Speaker #1: In the physician office, how they get reimbursed has changed. I mean, there's the mechanics of how you bill for it, whether it's per application or per episode of care.

John Rogers: IFRS operating profit grew 4.3%, reflecting temporary higher restructuring charges driven by further optimization of our manufacturing network and higher acquisition costs driven by, of course, our acquisition of Integrity. Basic earnings per share grew ahead of this at 6.2%, reflecting the buyback we announced at Q1, and adjusted earnings per share grew by 11% to $0.477. The interim dividend of $0.156 per share is up 4% on H1 2025. I'll now take you through a more detailed bridge of our trading profit growth. We absorbed $119 million of headwinds from cost inflation, inventory revaluation, changes to wound reimbursement, and China VBP while continuing to invest $33 million in our growth. This was more than offset by $59 million of operating leverage and $128 million of efficiency savings, which I'll discuss in more detail shortly.

John Rogers: IFRS operating profit grew 4.3%, reflecting temporarily higher restructuring charges driven by further optimization of our manufacturing network and higher acquisition costs driven by, of course, our acquisition of Integrity. Basic earnings per share grew ahead of this at 6.2%, reflecting the buyback we announced at Q1, and adjusted earnings per share grew by 11% to $0.477. The interim dividend of $0.156 per share is up 4% on H1 2025. I'll now take you through a more detailed bridge of our trading profit growth. We absorbed $119 million of headwinds from cost inflation, inventory revaluation, changes to wound reimbursement, and China VBP, while continuing to invest $33 million in our growth. This was more than offset by $59 million of operating leverage and $128 million of efficiency savings, which I'll discuss in more detail shortly.

Speaker #1: And that has changed, right? And so as physician offices have adapted to the new ways of billing, that's introduced friction into the system, right?

Speaker #1: And that part has taken time. The reimbursement part of it has also been slower. And there are about four max within the US that have gone through or currently covered under the Wiser model, which you've heard about either from us or from other disclosures, where there's an AI-based algorithm for how claims are reimbursed.

Speaker #1: And there's been friction associated with that, right? And so what are we doing about it? We are always expected that the parts of our portfolio that we've always had uptake based on the clinical data and everything else, will get robust utilization.

Speaker #1: And we're seeing that. In fact, our Oasis product line is growing by leaps and bounds, right? And that's been great. And as we move into 2027, where all of this administrative friction that I'm talking about, whether in terms of how claims get submitted or how claims get processed, and how physicians then adapt their care to which products they use, all of that, we expect to settle out in 2027 as the new calendar year, the new fiscal year in the United States, kind of turns over.

John Rogers: While we had previously guided to an incremental tariff headwind in 2026, refunds received in H1 meant net tariffs were broadly neutral to profit growth. Foreign exchange also had a broadly neutral impact. As a result of all this, trading profit growth was 9%, excluding $4 million dilution from the acquisition of Integrity Orthopaedics. As I said, turning now to efficiency savings. We've delivered around $133 million in H1, well ahead of expectations. Of this, approximately $50 million came from the 12-Point Plan and zero-based budgeting initiatives. As a result, we have now achieved $330 million of cumulative savings since launching these programs, reaching the lower end of the $325 to 375 million target that we set ourselves at our 2024 interim results, more than a year ahead of schedule. We expect further benefits to be realized through the remainder of 2026 and into 2027.

John Rogers: While we had previously guided to an incremental tariff headwind in 2026, refunds received in H1 meant net tariffs were broadly neutral to profit growth. Foreign exchange also had a broadly neutral impact. As a result of all this, trading profit growth was 9%, excluding a $4 million dilution from the acquisition of Integrity Orthopaedics. As I said, turning now to efficiency savings. We've delivered around $133 million in H1, well ahead of expectations. Of this, approximately $50 million came from the 12-Point Plan and zero-based budgeting initiatives. As a result, we have now achieved $330 million of cumulative savings since launching these programs, reaching the lower end of the $325 to $375 million target that we set ourselves at our 2024 interim results, more than a year ahead of schedule. We expect further benefits to be realized through the remainder of 2026 and into 2027.

Speaker #1: And that's and in that new world, we expect to be very well positioned because we've got a product portfolio that's very, very relevant to that category.

Speaker #1: We've got a price point that works within the reimbursement level that the government has set at $127 per square centimeter. And we've got the clinical evidence for the products that we aim to use.

Speaker #1: So it's a great category, growing at double digit when products are used appropriately. Right? When it's relevant for a clinical setting and we're very well positioned within that.

Speaker #1: So it's really about navigating this year that's been a challenge and we've based on taking all of these factors into account, we provided a range of something like 20 to 40 million, right?

Speaker #1: We're navigating to the upper end of that range, but we're still within that quarter that we had provided all of these dynamics. Within that, we had also called for sequential improvement or normalization from first half to the second half.

John Rogers: The remaining $80 million in H1 came from additional opportunities across procurement, manufacturing, sales and marketing, and business support functions. We expect a further $70 million of savings in H2 from both the 12-Point Plan and ZBB and other opportunities. This takes forecast efficiency savings for the year up from around $150 million previously to around $200 million. The additional $50 million is expected to come primarily from manufacturing, including from ongoing footprint optimization, as well as procurement and sales and marketing. Our 2026 guidance for trading profit is unchanged. We expect to deliver around 8% reported trading profit growth excluding M&A and around $1.3 billion of trading profit, including the impact of Integrity. We now anticipate that the year-on-year impact of tariffs will be broadly neutral to trading profit net of refunds.

John Rogers: The remaining $80 million in H1 came from additional opportunities across procurement, manufacturing, sales and marketing, and business support functions. We expect a further $70 million of savings in H2 from both the 12-Point Plan and ZBB, as well as other opportunities. This takes forecast efficiency savings for the year up from around $150 million previously to around $200 million. The additional $50 million is expected to come primarily from manufacturing, including from ongoing footprint optimization, as well as procurement and sales and marketing. Our 2026 guidance for trading profit is unchanged. We expect to deliver around 8% reported trading profit growth excluding M&A, and around $1.3 billion of trading profit, including the impact of Integrity. We now anticipate that the year-on-year impact of tariffs will be broadly neutral to trading profit net of refunds.

Speaker #1: We have seen sequential improvement from Q1 to Q2, and we expect that trend from the first half to second half. So hopefully that unpacks the skin sub tactic.

Speaker #1: Anything you want to add to that?

Speaker #2: I mean, just a little bit of color, just on the numbers because you remember at the the beginning of the year we said that revenues would be down 15 to 20 percent.

Speaker #2: And that was driven by a 20 to 25 percent reduction in price. Offset by a slight positive on volumes. And that's what got us to the 2040 range and actually we were slap bang in the middle of that range.

Speaker #2: Hence why we said 20 to 40. What we've actually seen in practice is that actually revenues in the first half were off about 20 percent or so.

Speaker #2: So towards the upper end of that range. And that's broadly speaking what we're now forecasting for the full year. But we're not expecting the price impact for 20 to 25 percent that we previously called out to be quite as harsh.

Speaker #2: So the price impact will be less than that. And equally, the converse, we're not necessarily expecting the volume to be as flat a positive.

John Rogers: The headwind from skin substitutes is expected to be towards the upper end of the previously guided $20 to 40 million range, and there are no changes to our assumptions regarding inventory revaluation or China VBP. As previously disclosed, the acquisition of Integrity Orthopaedics is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027, and accretive from 2028. Coming now to trading margin by business units. We saw 160 basis point increase for Sports Medicine & ENT margin to 24.7%, a 10 basis point decrease for wound to 22%, and a 30 basis point increase in Orthopaedics margin to 13%. In Sports Medicine & ENT, margin expansion was driven by operating leverage and efficiency savings. In wound, the small margin decline reflected the impact of US skin substitute reimbursement changes, largely offset by savings initiatives.

John Rogers: The headwind from skin substitutes is expected to be towards the upper end of the previously guided $20 to $40 million range, and there are no changes to our assumptions regarding inventory revaluation or China VBP. As previously disclosed, the acquisition of Integrity Orthopaedics is expected to be marginally dilutive to trading profit in 2026, broadly neutral in 2027, and accretive from 2028. Coming now to trading margin by business units, we saw a 160 basis point increase for Sports Medicine & ENT margin to 24.7%, a 10 basis point decrease for Wound to 22%, and a 30 basis point increase in Orthopaedics margin to 13%. In Sports Medicine & ENT, margin expansion was driven by operating leverage and efficiency savings. In Wound, the small margin decline reflected the impact of US skin substitute reimbursement changes, largely offset by savings initiatives.

Speaker #2: We are expecting now to be a slight decline in the volume. So volume is a little bit worse than we thought. Price a little bit better than we thought.

Speaker #2: The net net is that we're up towards the upper end of that 20 to 40 million range. But it's not a million miles from where we thought we would be.

Speaker #2: What's really important is Deepak's point that sequentially we've seen Q2 is better than Q1. So we are seeing the market change, just a little bit slower than the first forecast.

Speaker #1: Right. Should we come back to the room? David? In fact, your hand up for a while.

Speaker #3: Thanks, guys. David Addington from JP Morgan. Sorry, John, just to come back on tariffs. The net amount, I think, was 5 million in the first half, but I just wonder what the gross was.

Speaker #3: Was it all 50 million received in the first half and how you expect that to play out through the second half? And then just wondering how that was spread across the three businesses.

Speaker #2: It's slightly focused towards orthopedics. And then a little bit more so on sports with wound being the least impacted is roughly the way it trades out.

John Rogers: In Orthopedics, manufacturing savings from network optimization, ongoing productivity initiatives, and disciplined cost control more than offset the headwind from inventory revaluation and softer revenue growth. We expect further margin expansion over time as we work through the inventory revaluation headwind and benefit from improving revenue growth, and from the impact of actions already taken to right-size our manufacturing capacity and our Ortho 360 operating model. These results demonstrate the operational excellence we are driving across the business. As you know, inventory remains a key focus for us, even now that we've completed the 12-Point Plan. Group DSI—days sales in inventory—fell by 72 days, including the reclassification of instrument sets from inventory to PPE, and by 40 days if you exclude that. The bigger reduction came from Orthopedics, down 62 days excluding reclassification, reflecting continued work to reduce the number of units in inventory and a focus on capital efficiency.

John Rogers: In Orthopedics, manufacturing savings from network optimization, ongoing productivity initiatives, and disciplined cost control more than offset the headwind from inventory revaluation and softer revenue growth. We expect further margin expansion over time as we work through the inventory revaluation headwind and benefit from improving revenue growth and the impact of actions already taken to rightsize our manufacturing capacity and our Ortho 360 operating model. These results demonstrate the operational excellence we are driving across the business. As you know, inventory remains a key focus for us, even now that we've completed the 12-Point Plan. Group DSI—days sales of inventory—fell by 72 days, including the reclassification of instrument sets from inventory to PPE, and by 40 if you exclude that. The bigger reduction came from Orthopedics, down 62 days excluding reclassification, reflecting continued work to reduce the number of units in inventory and a focus on capital efficiency.

Speaker #2: But it's not, to be honest, it's not massively differentiated across all businesses. And then the basically we saw a net benefit in the first half between tariffs and the refunds of 5 million or so.

Speaker #2: We're expecting to see a net benefit in the second half between the tariffs and the refunds of about 1 million or so. And so for the overall year, it will be plus or minus 4 million or 5 million or something of that nature.

Speaker #2: But effectively in both halves, the refund is effectively offsetting the on a year-on-year basis, the refund is effectively offsetting the tariff headwind.

Speaker #3: Thank you.

Speaker #2: So just to be absolutely clear, we still expect to see a net tariff cost in the year, but we saw it last year, we saw a net tariff cost of 15 million.

Speaker #2: This year, we expect to see a net tariff cost of 10 million. The delta is the 5 million positive. Make sense?

Speaker #1: Okay. I think we'll draw this to a close just to summarize then while our revenue performance in the first half was, of course, below our expectations.

John Rogers: We also saw a reduction in Sports Med DSI, albeit to a lesser extent than in Orthopedics, and no change in Wound DSI, excluding the reclassification. Both Sports and Wound are already much closer to industry benchmark DSIs. We expect to make further progress on inventory in 2026. Right now, moving on to cash flow. Trading cash flow was $437 million in H1, down $50 million or so year-on-year. But this reflects a $51 million step-up in CapEx year-on-year, driven by investments in our new Wound manufacturing facility in Melton and into my IT investments. We do not expect this increase to repeat in H2, and cash generation should improve versus H2 2025. Other working capital was higher, largely due to timing of bonus accruals and related cash payments.

John Rogers: We also saw a reduction in Sports Med DSI, albeit to a lesser extent than in Orthopedics, and no change in Wound DSI, excluding the reclassification. Both Sports and Wound are already much closer to industry benchmark DSIs. We expect to make further progress on inventory in 2026. Right now, moving on to cash flow. Trading cash flow was $437 million in H1, down $50 million or so year-on-year. But this reflects a $51 million step-up in CapEx year-on-year, driven by investments in our new Wound manufacturing facility in Melton and into IT investments. We do not expect this increase to repeat in H2, and cash generation should improve versus H2 2025. Other working capital was higher, largely due to timing of bonus accruals and related cash payments.

Speaker #1: We did deliver a strong profit performance and in doing that, we demonstrated that inherent resilience in our business that we've built we do remain confident of the actions we're taking to drive better performance more consistently over time.

Speaker #1: And. Want to take the moment to thank you for joining us today. Appreciate the engagement, the support, and your questions. And we do look forward to coming back and updating you on progress as we move forward.

John Rogers: Cash conversion was 77%, and we anticipate this will improve over the course of the year. Free cash flow was $231 million, down $13 million year-on-year, again, reflecting these factors I've just mentioned and partly offset by reduced restructuring cash costs. We continue to expect free cash flow in 2026 of around $800 million, driven by profit growth and continued focus on working capital, offset by a modest temporary increase in restructuring costs. Net debt increased over H1 to $3 billion, an increase of $260 million, resulting in a leverage ratio of 1.8x adjusted EBITDA, within our target of around 2x.

John Rogers: Cash conversion was 77%, and we anticipate this will improve over the course of the year. Free cash flow was $231 million, down $13 million year-on-year, again reflecting these factors I've just mentioned and partly offset by reduced restructuring cash costs. We continue to expect free cash flow in 2026 of around $800 million, driven by profit growth and continued focus on working capital, offset by a modest temporary increase in restructuring costs. Net debt increased over H1 to $3 billion, an increase of $260 million, resulting in a leverage ratio of 1.8x adjusted EBITDA, within our target of around 2x.

John Rogers: The increase is driven by our investment in our business, the acquisition of Integrity Orthopaedics, growth in our dividend, and of course, the $500 million buyback we announced in Q1, of which we've actually now completed $260 million as of 3 August. This is in line with our capital allocation priorities. Before I turn to guidance, I want to highlight the progress we continue to make across margins, working capital, cash flow, and returns. This broad-based improvement reflects stronger operational controls and helps make Smith & Nephew a more resilient business. Better positioned to manage through periods of revenue softness or external challenges while maintaining progress against our long-term objectives. Coming now to our updated outlook. Reflecting softer performance in US Orthopedics and SANTYL, we now expect H2 growth to be in the range of 5% to 5.5%, and full-year growth to be around 4%.

John Rogers: The increase is driven by our investment in our business, the acquisition of Integrity Orthopaedics, growth in our dividend, and, of course, the $500 million buyback we announced in Q1, of which we've actually now completed $260 million as of 3 August. This is in line with our capital allocation priorities. Before I turn to guidance, I want to highlight the progress we continue to make across margins, working capital, cash flow, and returns. This broad-based improvement reflects stronger operational controls and helps make Smith & Nephew a more resilient business, better positioned to manage through periods of revenue softness or external challenges while maintaining progress against our long-term objectives. Coming now to our updated outlook—reflecting softer performance in US Orthopaedics and SANTYL—we now expect H2 growth to be in the range of 5% to 5.5%, and full-year growth to be around 4%.

John Rogers: Notwithstanding the lower revenue outlook, we are maintaining all other metrics of our guidance. We continue to expect around 8% trading profit growth, excluding M&A for the year. This translates into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity Orthopaedics acquisition. This reflects the step up in efficiency savings that we are delivering across the business, together with the removal of the forecast tariff headroom. The progress we demonstrated in H1 gives us confidence we can remain disciplined on costs while supporting improved revenue growth in H2. We also remain on track to deliver around $800 million of free cash flow and a return on invested capital above 10%. Let me finish by outlining why we are confident in a step-up in revenue growth. We expect H2 growth of 5% to 5.5%, driven by factors across all 3 business units.

John Rogers: Notwithstanding the lower revenue outlook, we are maintaining all other metrics of our guidance. We continue to expect around 8% trading profit growth, excluding M&A, for the year. This translates into approximately $1.3 billion of trading profit, including marginal dilution from the Integrity Orthopaedics acquisition. This reflects the step up in efficiency savings that we are delivering across the business, together with the removal of the forecast tariff headroom. The progress we demonstrated in H1 gives us confidence we can remain disciplined on costs while supporting improved revenue growth in H2. We also remain on track to deliver around $800 million of free cash flow and a return on invested capital above 10%. Let me finish by outlining why we are confident in a step up in revenue growth. We expect H2 growth of 5% to 5.5%, driven by factors across all three business units.

John Rogers: In Sports Medicine & ENT, we expect continued momentum across segments, including strong growth in REGENETEN and FASTSEAL. In Advanced Wound Management, we expect to see stabilization in US skin substitutes, building on the sequential improvement we saw in Q2 versus Q1. We also expect to return to growth in SANTYL, further rollouts of ALLEVYN COMPLETE CARE in Europe, the ongoing launch of next-generation LEAF, and the benefits of greater investment behind PICO. In Orthopedics, we expect an improving trajectory in US knee implants driven by LEGION MS and the launch of the cementless version of Landmark. We also expect US hip implants to return to growth as we deploy more CATALYSTEM. Of course, we will also have one extra trading day in Q4. With that, I will hand you back over to Deepak.

John Rogers: In Sports Medicine & ENT, we expect continued momentum across segments, including strong growth in REGENETEN and FASTSEAL. In Advanced Wound Management, we expect to see stabilization in US skin substitutes, building on the sequential improvement we saw in Q2 versus Q1. We also expect to return to growth in SANTYL, further rollouts of ALLEVYN COMPLETE CARE in Europe, the ongoing launch of next generation LEAF, and the benefits of greater investment behind PICO. In Orthopedics, we expect an improving trajectory in US knee implants driven by LEGION MS and the launch of the cementless version of LANDMARK. We also expect US hip implants to return to growth as we deploy more CATALYSTEM. Of course, we will also have one extra trading day in Q4. With that, I will hand you back over to Deepak.

Deepak Nath: Thank you, John. Before we conclude, I wanted to spend a few minutes talking about the progress we have made in H1 against each pillar of RISE, which is our strategy for the next three years. These are the actions we are taking to strengthen the business today and position ourselves for sustainable growth over the long term. In order to reach more patients, we continue to expand access to our technologies through geographic expansion, new product introductions, and important clinical milestones across our portfolio, including completing the first knee and shoulder procedures using our CORI™ XT handheld robotics platform, and the European launches of ALLEVYN COMPLETE CARE and RENASYS EDGE.

Deepak Nath: Thank you, John. Before we conclude, I wanted to spend a few minutes talking about the progress we have made in H1 against each pillar of RISE, which is our strategy for the next three years. These are the actions we are taking to strengthen the business today and position ourselves for sustainable growth over the long term. In order to reach more patients, we continue to expand access to our technologies through geographic expansion, new product introductions, and important clinical milestones across our portfolio, including completing the first knee and shoulder procedures using our CORI XT handheld robotics platform, and the European launches of ALLEVYN COMPLETE CARE and RENASYS EDGE.

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

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

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

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

Deepak Nath: REGENETEN continues to perform strongly, delivering around 20% growth in H1, with significant runway remaining to expand penetration in rotator cuff repair and across other tendons and extra-articular ligaments. Our Integrity acquisition is performing ahead of our expectations. Integration is progressing well as we increase manufacturing capacity and expand our commercial capabilities. With CartiHeal AGILI-C, we're continuing to build awareness and adoption in the US ahead of the new reimbursement beginning in January 2027, while also expanding internationally with our first cases completed in Australia, Italy, and Belgium. In this quarter, we achieved an important milestone with the FDA approval of TESSA, the first in-industry spatial surgery platform. TESSA combines advanced imaging, navigation, and AI-enabled assistance to help surgeons perform arthroscopic procedures with greater precision.

Deepak Nath: REGENETEN continues to perform strongly, delivering around 20% growth in H1, with significant runway remaining to expand penetration in rotator cuff repair and across other tendons and extra-articular ligaments. Our Integrity acquisition is performing ahead of our expectations. Integration is progressing well as we increase manufacturing capacity and expand our commercial capabilities. With CartiHeal AGILI-C, we're continuing to build awareness and adoption in the US ahead of the new reimbursement beginning in January 2027, while also expanding internationally, with our first cases completed in Australia, Italy, and Belgium. This quarter, we achieved an important milestone with the FDA approval of TESSA, the first in-industry spatial surgery platform. TESSA combines advanced imaging, navigation, and AI-enabled assistance to help surgeons perform arthroscopic procedures with greater precision.

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

Deepak Nath: We performed our first robotic shoulder procedures on XT in February, and the first knee procedures on it in May. We remain on track to launch our hip execution in H1 2027. Alongside robotics, our implant innovation continues to gain traction. CATALYSTEM is growing and becoming an important contributor within hips, while in knees, we are increasing set deployments and supporting broader LEGION MS adoption. We're also looking forward to the launch of Landmark in Q3, our most robotically enabled implant system that we've developed to date. Overall, the breadth and strength of these innovation platforms give us confidence in our ability to deliver sustainable growth over time through a combination of market expansion, share gains, and new category creation.

Deepak Nath: We performed our first robotic shoulder procedures on XT in February, and the first knee procedures on it in May. We remain on track to launch our hip execution in H1 2027. Alongside robotics, our implant innovation continues to gain traction. CATALYSTEM is growing and becoming an important contributor within hips, while in knees, we're increasing set deployments to support broader LEGION MS adoption. We're also looking forward to the launch of Landmark in Q3, our most robotically enabled implant system that we've developed to date. Overall, the breadth and strength of these innovation platforms give us confidence in our ability to deliver sustainable growth over time through a combination of market expansion, share gains, and new category creation.

Deepak Nath: In summary, our Q2 performance was below our expectation, with the strong momentum in Sports Medicine offset by softness in US Orthopedics and Advanced Wound Bioactives. That's leading us to reduce our revenue outlook for the year. That said, we remain confident that growth will step up in H2, and John has taken you through the drivers of all of that across our business units. Importantly, while we are lowering our revenue outlook, we remain on track to deliver our original trading profit guidance, free cash flow, and ROIC. This is supported by a step-up forecast of efficiency savings, including a further £50 million of savings that we've identified, which helps offset the impact of lower revenue growth. We also continue to build a more resilient and agile business.

Deepak Nath: In summary, our Q2 performance was below our expectations, with the strong momentum in Sports Medicine offset by softness in US Orthopedics and Advanced Wound Bioactives. That's leading us to reduce our revenue outlook for the year. That said, we remain confident that growth will step up in H2, and John has taken you through the drivers of all of that across our business units. Importantly, while we are lowering our revenue outlook, we remain on track to deliver our original trading profit guidance, free cash flow, and ROIC. This is supported by a step-up forecast of efficiency savings, including a further £50 million of savings that we've identified, which helps offset the impact of lower revenue growth. We also continue to build a more resilient and agile business.

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

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

Jack Reynolds-Clark: Thanks. Hi there. Jack Reynolds-Clark from Morgan Stanley. Thank you very much for taking the questions. I have three, please. First, on US Orthopedics, could you run through specifically what went wrong here? How much of it was the market, how much of it was kind of other issues, and what you're seeing so far in Q3? And if it has any impact on your assumptions around midterm margin expansion, on 2026. The H2 guide, obviously, implies a pretty substantial step-up versus H1. Given kind of the comments around VBP delay, where do you see the biggest half-on-half step-up on a segmental basis, and really, what gives you the confidence in that new guide? Lastly, on the midterm guidance, the 4% growth in 2026 is kind of very much below the midterm guidance range.

Jack Reynolds-Clark: Thanks. Hi there. Jack Reynolds-Clark from Morgan Stanley. Thank you very much for taking the questions. I have three, please. First, on US Orthopedics, could you run through specifically what went wrong here? How much of it was the market, how much of it was kind of other issues, and what you're seeing so far in Q3? And if it has any impact on your assumptions around midterm margin expansion. On 2026. The H2 guide obviously implies a pretty substantial step-up versus H1. Given kind of the comments around VBP delay, where do you see the biggest half-on-half step-up on a segmental basis, and kind of really what gives you the confidence in that new guide? Lastly, on the midterm guidance, the 4% growth in 2026 is kind of very much below the midterm guidance range.

Jack Reynolds-Clark: What do you see as stepping up in future years to offset that?

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

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

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

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

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

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

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

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

Deepak Nath: Look, we always knew 2026 was going to be a challenging year. Obviously, it's proved to be a bit more challenging than we thought, and that's largely on the back of US knees that we talked about and the prior authorizations. One of our drivers remains well intact. Whether it's in orthopedics, we talked about the Landmark launch, we talked about hip execution on CORI, AETOS—which is on shoulder—and in trauma, rounding out our EVOS portfolio with the EVOS Pelvic, that's new. On the nail part of the portfolio, IM nails are continuing to improve. Multiple growth drivers in orthopedics we've got to look forward to in 2027. In sports, big four, continued execution on those. Finally, in wound, it's PICO, it's the building out of RENASYS, and normalization of skin subs. These are the growth drivers, as you can see.

Deepak Nath: Look, we always knew 2026 was going to be a challenging year. Obviously, it's proved to be a bit more challenging than we thought, and that's largely on the back of US knees that we talked about and the prior authorizations. One of our drivers remains well intact. Whether it's in orthopedics—we talked about the Landmark launch, we talked about hip execution on CORI, AETOS, which is on shoulder, and in trauma, rounding out our EVOS portfolio with the EVOS Pelvic that's new. On the nail part of the portfolio, IM nails are continuing to improve. Multiple growth drivers in orthopedics we've got to look forward to in 2027. In sports, the big four—continued execution on those. Finally, in wound, it's PICO, it's building out of RENASYS, and normalization of skin subs. These are the growth drivers, as you can see.

Deepak Nath: It's multiple of them across all of our business units. This gives us confidence that we are fundamentally a 6% to 7% growth company.

John Rogers: Yeah. Maybe just.

Deepak Nath: Go on. Yeah.

John Rogers: Maybe just a little bit of color on the phasing in terms of the H2—so Q3, Q4. We do expect to see a step-up in Q4 performance versus Q3 performance. Q3 will improve on Q2, clearly, then Q4 will be stronger. That's not "jam tomorrow"; that is very clearly because of the timing of investments that we're making, specifically in relation to the launch of Landmark. Then, in the context of skin substitutes, we're actually starting to lap the impact of last year. Remember, Q4 last year was tough in skin substitutes because of the actions that were being taken by the market in anticipation of the changes to reimbursement.

John Rogers: Maybe just a little bit of color on the phasing in terms of the H2, so Q3, Q4. We do expect to see a step-up in Q4 performance versus Q3 performance. Q3 will improve on Q2, clearly, then Q4 will be stronger. That's not "jam tomorrow"—that is very clearly because of the timing of investments that we're making, specifically in relation to the launch of Landmark. Then, in the context of skin substitutes, we're actually starting to lap the impact of last year. Remember, Q4 last year was tough in skin substitutes because of the actions that were being taken by the market in anticipation of the changes to reimbursement.

John Rogers: We've got a much softer comp in Q4 on skin subs, therefore we'd expect that not only will the continued recovery that we've already seen in Q2 on Q1, and will see come through in Q3, but we also start to lap in Q4 the impact from last year. That will be particularly positive on skin subs. Then, of course—dare I say it—we should also mention the fact that we have got one extra trading day in Q4. When you add all that up, you'll see a big step-up in growth in Q4 versus Q3, just to make that absolutely clear. Then to your point around the headwinds on Sports, I mean, you're right. Deepak's absolutely spot on, of course, that we're continuing to see the momentum.

John Rogers: We've got a much softer comp in Q4 on Skin Subs. Therefore, we'd expect that not only the continued recovery that we've already seen in Q2 on Q1, and will see come through in Q3, but we also start to lap in Q4 the impact from last year. That will be particularly positive on Skin Subs. Then, of course, dare I say it, we should also mention the fact we have got one extra trading day in Q4. When you add all that up, you'll see a big step-up in growth in Q4 versus Q3, just to make that absolutely clear. Then, to your point around the headwinds on Sports, I mean, you're right. Deepak's absolutely spot on, of course, that we're continuing to see the momentum.

John Rogers: We would expect Sports and ENT to be a little bit softer in Q3 than we saw in Q1 and Q2 because of the impact of VBP coming in both of those areas in the second half. We've factored that into our forecast, and that's fully baked into the expectation of the top-line guidance of 4% and also the profit guidance as well, which remains unchanged.

John Rogers: We would expect Sports and ENT to be a little bit softer in Q3 than we saw in Q1 and Q2 because of the impact of VBP coming in both of those areas in the H2. We've factored that into our forecast, and that's fully baked into the expectation of the top line guidance of the 4%, and also the profit guidance as well, which remains unchanged.

Jack Reynolds-Clark: That's great, thank you. Can I just stick in a cheeky follow-up? If you were to quantify Q3 versus Q4 growth—the phasing there—would you be able to offer any color on that?

John Rogers: I could. Look, I think in Q3 we will see growth in the order of sort of Q1-type dimensions. If you remember, in Q1 we were 3.1% growth, 4.7% on an ADS basis. In Q3, we will see growth of a similar level. In Q4, we will see a step-up in that growth. You can work out the math, but at the growth level, it will be 6% to 7%. Actually, on an ADS basis, it will be just north of 5% because of the extra trading day. That is a step up on Q3 in absolute terms, not stripping out the trading day impact. That is because of the skin subs, because of the investments being made in PICO and the timing of those investments, and because of course, the launch of Landmark, which takes place towards the end of Q3.

John Rogers: I could. Look, I think in Q3, we will see growth in the order of sort of Q1-type dimensions. If you remember, in Q1 we were at 3.1% growth, 4.7% on an ADS basis. In Q3, we will see growth of a similar level. In Q4, we will see a step up in that growth. You can work out the math, but at the growth level, it will be 6% to 7%. Actually, on an ADS basis, it will be just north of 5% because of the extra trading day. That is a step up on Q3 in absolute terms, not stripping out the trading day impact. That is because of the skin subs, because of the investments being made in PICO, and the timing of those investments, and because, of course, the launch of Landmark, which takes place towards the end of Q3.

John Rogers: Those are the reasons why we have confidence in our ability to deliver that 4% for the full year.

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

Deepak Nath: Great. Thank you.

John Rogers: Yeah.

Hassan Al-Wakeel: Hi, good afternoon. Hassan Al-Wakeel from Barclays. A couple from me on ortho. Firstly, maybe to ask Jack's question a little bit differently: we've seen knee softness this year; now we're seeing hips, which had been really strong before today. You said this isn’t market-driven. What are you doing differently when it comes to execution? Why shouldn’t some of these set delays in hips weigh on the H2? Specifically on US hips, how are you thinking about growth here beyond the next quarter or two, as CATALYSTEM matures as a product? Secondly, on robotics, if you can try and unpack the growth in the quarter and the development in CORI, is it entirely a function of comps? How should we think about growth in H2 and beyond, given the launch of Mako RPS last month?

Hassan Al-Wakeel: Hi, good afternoon. Hassan Al-Wakeel from Barclays. A couple from me on ortho. Firstly, maybe to ask Jack's question a little bit differently. We've seen knee softness this year. Now we’re seeing hips, which have been really strong before today. You said this isn't market-driven. What are you doing differently when it comes to execution? Why shouldn't some of these set delays in hips weigh on the H2? Specifically, on US hips, how are you thinking about growth here beyond the next quarter or two as CATALYSTEM matures as a product? Secondly, on robotics, if you can try and unpack the growth in the quarter and the development in CORI. Is it entirely a function of comps? How should we think about growth in H2 and beyond given the launch of Mako RPS last month?

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

Deepak Nath: Okay. With hips, just to emphasize again, kind of what I've said around set deployment. First, there was a comparator. We had a strong competitor in Q2, that numerically had an impact. When you look at a 2-year stack, it's actually not much of a deceleration in hips. It's largely kind of consistent. With set deployments, just to double-click kind of what I said, largely it has to do with instrument sets. When you're trying to take a customer from their existing kind of approach, whether it's one of our legacy products or one of our competitor products, the instrument that you have to deploy to cater to the surgical approach of that particular surgeon has some variability. It's not just some standard instrument that you deploy that works regardless of which legacy platform that they're using.

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

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

Deepak Nath: That's what we should expect as we proceed to the back half of this year and beyond. Hopefully that explains kind of the blip in kind of instrument deployment that paced Q2, but what you should expect as we go through the launches. The second question that you had was in CORI for the first quarter and beyond. I think, John, you said we had double-digit growth in CORI placements in Q2, and also got a similar number in H1. Continue to be pleased with the pace at which we're placing CORI and also where we're placing them, hospitals versus ASCs, teaching institutions versus mix. We're having actually, impact across a range of care settings. Generally speaking, when I look across the board, we are at least at our market share. That's encouraging.

Deepak Nath: That's what we should expect as we proceed into the back half of this year and beyond. Hopefully that explains the blip in instrument deployment that affected Q2, and what you should expect as we go through the launches. The second question you had was on CORI for the first quarter and beyond. I think, John, you said we had double-digit growth in CORI placements in Q2, and also a similar number in H1. We continue to be pleased with the pace at which we're placing CORI, and also where we're placing them—hospitals versus ASCs, teaching institutions versus other types. We're actually having impact across a range of care settings. Generally speaking, when I look across the board, we are at least at our market share, and that's encouraging.

Deepak Nath: When I look in the ASC, it’s slightly ahead of our market share in terms of CORI placements within the ASC. Not by leaps and bounds, but certainly. What it shows is that we are tracking relative to our share. The strategy we're following is we're not just placing first and then allowing utilization to catch up. We're placing where we see a demand, where we see a surgeon who wants to integrate it into their practice, and we're equally monitoring utilization as we are placement, right? We could have followed a different approach, but ours is actually placement and utilization. That's not only the headline, but also the H2.

Deepak Nath: When I look in the ASC, it's slightly ahead of our market share in terms of CORI placements within the ASC—not by leaps and bounds, but certainly. What it shows is that we are tracking relative to our share. The strategy we're following is—we're not just placing first and then allowing utilization to catch up. We're placing where we see a demand, where we see a surgeon who wants to integrate it into their practice, and we're equally monitoring utilization as we are placement, right? We could have followed a different approach, but ours is actually placement and utilization. That's not only the headline, but also the H2.

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