Smith & Nephew plc

Good morning. Thank you for attending today's Smith & Nephew Quarter 3 2025 Trading Report. My name is Sarah and I'll be your moderator today. All lines will be muted during the presentation portion of the call, but an opportunity for questions and answers at the end. And if you'd like to ask a question, press star 1 on your telephone keypad. I'd like to pass the conference over to our host, Deepak Nath, Chief Executive Officer. Please go ahead.

Thank you. Welcome to the Smith & Nephew third quarter results. As mentioned, I'm Deepak Nath. I'm the chief executive officer. And joining me is John Rogers, our chief financial officer. Today, we reported Q3 results that remain consistent with our expectations and support our full year guidance of both revenue growth and trading margin. Underlying revenue growth was 5% for the quarter, in line with the run rate of H1. And that was driven by continued momentum in sports medicine and advanced wound management. Orthopedics growth reflected trends broadly similar to the prior quarter in our recon and robotics business. Strength in hips in the U.S. helped offset softer performance in knees, while internationally, strong knee sales balanced more modest results in hips. We had our strongest ever Q3 for Cori placements worldwide, and global growth in trauma and extremities was also strong. Group growth was well-balanced across geographies, and China headwinds are now beginning to bake. Excluding China, underlying revenue growth was 6.4%. Key product highlights for the quarter include strong double-digit growth in Regenitin, Q-Fix Nautilus, Evos, Atos, Facile, Catalyst Stem, and Leaf. These products are visibly driving the broader segment growth rates. Our operational improvements under the 12-point plan continue to flow through to the P&L. And we're seeing the expected step up in profitability in the second half. And that's supported by improved cost discipline, better mix and efficiencies across our commercial and manufacturing operations. Strong working capital discipline and a focus on operational efficiency also means we're ahead of our cash flow targets. As a result, we're raising our free cash flow guidance for the year from more than $600 million to around $750 million. Innovation remains central to our growth. And later, I'll share recent developments that support our confidence in our longer-term outlook. For now, I'll hand you over to John to take us through the quarter in more detail.

John? Thank you, Deepak. So revenue in the quarter was $1.5 billion, with 5% underlying growth and 6.3% reported, following a 130-bit tailwind from foreign exchange. Trading days were unchanged year on year. Geographically, the US grew 5.5% and other established markets grew 3.9%. Emerging markets grew 5.4%. Orthopedics grew 4.1% on an underlying basis. In recon, we saw a continuation of the trends of the first half. In the US, trauma and extremities grew strongly and hips grew above market again, which reflects both the sustained improvements in our commercial organisation under the 12-point plan and the strength of our portfolio. Hip performance continues to be driven by strong uptake of catalyst stem, which has now been on the market for a full year. The market shift to direct anterior hips is accelerating and we are well placed to benefit. We are increasing our catalyst stem set deployments to support growth in Q4. U.S. needs remain soft as sales continue to be impacted by our ongoing portfolio rationalization efforts. While this is ultimately the right strategy for the business, it has led to some volume loss in the process. That said, we continue to win new customers, and Cori placements in the U.S. were strong in the quarter. We see knee growth that outpaces market growth in accounts where Cori is established, underscoring the potential as adoption grows. And as we continue to build out our portfolio, we expect knee performance to improve, just as we've seen in hips. In OUS, knees, hips, trauma, and extremities all delivered strong performance overall, except for some localized weakness in hips in emerging markets. We launched Catalyst STEM in strategic sites in Japan, which will drive growth in the coming quarters. Trauma and extremities grew 7.5% overall and acceleration over the first half, as expected. we continue to benefit from our EVOS plating system and ATOS shoulder. Our new Trigen Max tibia nailing system is performing well ahead of expectations in the US, and we are awaiting regulatory approval in key international markets. Other recon grew 9.7%. Placements were strong, but revenue growth was impacted by contract mix with fewer direct purchases this year versus prior year. We are pleased with the continued growth of query placements in ASCs and teaching institutions. Sports medicine and ENT grew 5.1%. We are seeing stability and a gradual recovery in China following the anniversary of the joint repair BBP. The AET and ENT BBP are still to come, but the headwinds will be much smaller given the relative size of the businesses. We have taken actions to manage our inventory ahead of implementation. Excluding China, joint repair growth was 13% up, maintaining the positive momentum we saw in the first half. Regenitin and QFixinopolis, which launched in Europe this quarter, were key drivers. AET growth was led by RF and FastSeal in the US and strong emerging markets. ENT growth accelerated sequentially despite a continued soft tonsil and adenoid market in the US. Let's now look at advanced wound management, which grew plus 6% in the quarter. Within that, advanced wound care grew plus 1.1%. Good OUS sales growth was offset by some softness in the US ahead of our leave-in complete care product launch. We expect this to drive growth in the segment going forward. Outside the US, the leave-in performed well with significant tender wind in the UAE and Saudi Arabia. Turning to bioactives, which was up 12.2% of the quarter, we again saw strong growth in Sansa. This reflects easier comps given the supply chain challenges from last year, which are stabilised, and a recovery in underlying demand as customer confidence in supply returns. We continue to monitor developments around Medicare reimbursement and local coverage determinations. At the end of last week, CMS issued the final updates to Medicare reimbursement for skin substitutes in physician office settings, which is broadly in line with the initial proposed rate. Based on what we know today, we anticipate that this will be a headwind to advance wound management sales and have a 25 to 50-bit negative impact on group trading profit margin for 2026. However, there are still some unknowns, including how it will impact clinical practice and physician behavior, which will only become clear in the first few months or so after implementation. These results keep us on track to meet our previously raised outlook of mid-single-digit revenue growth for bioactives of the year, even despite a tough Q4 comp. Advanced wind devices grew 6.7%. Leaf and Pico performed well, reflecting strong demand. Pico is benefiting from targeted initiatives in the surgical setting in the U.S., and similar efforts are now underway internationally. Growth in U.S. renaissance moderated, reflecting some softness in the acute care channel, while performance outside the U.S. remains strong. I'll finish with the outlook for 2025. Guidance remains unchanged, except for free cash flow, which we are raising. We continue to expect around 5% revenue growth and a trading margin within the range of 19% to 20% for the full year. Our increased focus on cash and capital efficiency has yielded better than expected free cash flow, and we now expect to deliver around $750 million, up from our previous expectations of more than $600 million. This reflects the sustained progress we've made in working capital improvement, particularly within our auto business, and the operational cost savings we've driven over the life of the 12-point plan. The impact of tariffs for 2025 remains a net headwind of around 15 to 20 million, consistent with previous expectations, and will compound further in 2026. We continue to look for ways to mitigate this impact. And we continue to expect to drive further margin expansion beyond 2025 through continued momentum and efficiency gains. And with that, I'll hand back to Deepak.