Smith & Nephew plc

Welcome everyone and thank you for joining the Smith and Nephew Q3 2026 Trading Report. My name is Gabrielle and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2. It is now my pleasure to hand over to your host, Deepak Nath, Chief Executive Officer. Please go ahead.

Thank you, Gabrielle. Good morning and welcome to the Smith and Nephew Q3 2026 results presentation. As introduced on Deepak Nath, I'm the Chief Executive Officer and joining me is Pierre Palacian, who's the Interim Chief Financial Officer. Welcome, Pierre. Today, we reported underlying revenue growth of 3.4% for the quarter, which is an acceleration from Q2. As expected, sports medicine and ENT performed strongly again, including double-digit growth in joint repair for the fourth consecutive quarter. We also saw improved performance in wound, led by acceleration in advanced wound devices. Orthopedics returned to growth with strength across international and emerging markets. In the U.S., we saw continued weak performance in knees and hips, partly reflecting market softness. We're also navigating a tricky period in knees as we remain impacted by the market shift towards cementless, where we have not had a full offering. We were therefore pleased to receive FDA approval for the cementless version of Landmark, our next generation knee, in the quarter. More than 100 Landmark cases have now been completed with positive early surgeon feedback. This begins to address an important portfolio gap and should support acceleration in knees as the launch scales during 2027. US hip growth has also been slower than expected. Catalyst stem continues to have good momentum, but the pace of set deployment has limited our ability to fully capture that opportunity. Looking further ahead, we expect to strengthen our competitive position in both knees and hips as our new product cycle builds. This includes the continuous scale-up of Landmark with the cemented version expected in Q2 2027, further Catalyst-STEM set deployment, and Cori execution on HIP starting in Q1 of 2027. Innovation remains central to our business. More than 50% of our growth comes from products launched within the last five years, and many key products are delivering double-digit growth, including Catalyst-STEM, Consulock, ATOS, Cori, Regenitin, Qfix, Fasceal, Leaf and Pico. We're also making good progress with Tessa, a first-in-industry spatial surgery platform designed to bring greater precision to arthroscopic procedures. Following FDA approval in Q2, we completed the first femoral cases during Q3, marking an important step in the early introduction to the platform. Q3 overall was broadly in line with our expectations. However, given our outlook for U.S. knees and hips in Q4 and current market conditions, we're no longer expecting a material improvement. As a result, we're updating our guidance for the year and now expect approximately 3% revenue growth for the full year. Trading profit is still expected to exceed revenue growth, but as a result of the lower revenue outlook, we now expect to deliver on 1.25 billion in trading profit. Free cash flow is expected to be around $750 million, representing continued strong cash conversion. While there remains work to do in orthopedics, we have strengthened the business and built a better foundation for future growth. Sports and Moon remain on track to deliver on the attractive long-term opportunities identified through RISE. You will have seen the recent press commentary around a potential transaction involving Smith and Nephew and J&J's Debut Synthies business. Those discussions followed an approach we made earlier in the year as part of the work already underway to consider strategic options for Orthopedics. While those discussions have now ended, we remain actively engaged in that broader work and will continue to explore the full range of strategic options for this business as we seek the best outcome for our shareholders, patients, customers, and our colleagues. At the same time, our operational focus remains on execution and the successful delivery of our key product launches, as well as continuing to invest behind our higher growth, higher margin sports and moon businesses, where we see significant opportunities to strengthen our market positions and drive long-term value. For now, I'll hand over to Pierre to take you through the quarter in more detail. Pierre.

Thank you, Deepak. Revenue for the quarter was $1.55 billion, representing 3.4% underlying growth and 3.4% reported, with no impact from effects. Trading days were unchanged year on year. Geographically, the U.S. grew 3%, other established markets grew 3.2%, and emerging markets grew 4.8%. Excluding China, group growth was 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. Starting off with sports medicine and ENT, it grew 7.9% on an underlying basis, including double-digit growth in the US across all three segments. Joint repair grew 11.2% with broad-based trends across both regions and the portfolio, including shoulder, hip and small joint repair. Regeniton maintained its strong growth trajectory with further penetration in rotator cuff repair and expansion beyond the shoulder. Cartil is also building momentum in the U.S. ahead of the Category 1 code in 27, alongside further international expansion. Tendencim remains on track with more surgeons coming on board. Together these differentiated platforms give us confidence in the sustainability of growth and position the business well for 2027. In AET, Fast Hill and Services were again the main contributors to growth. China BBP has not yet been implemented in either our AET or ENT businesses. Although we continue to see an impact from inventory management in the channel ahead of implementation, we still expect the profit headwinds from China BBP to be around 15-20 million for the full year. In ENT, outside of China, the business delivers double-digit growth. led by strong demand from our Aris Wand and Halo Wand for tonsil and adenoid surgeries. Turning now to advanced wound management, which declined 0.2% in the quarter. Advanced wound care grew 1.2%. We saw strong growth in the U.S., driven by 11 complete care, which has now launched in most major markets internationally. We expect this product to drive continued above-market growth in phone dressings. In bioactives, revenue declined 8.8% for the quarter. Central returned to modest growth following a weak Q2, which reflected the product's normal quarterly volatility. In skin substitutes, performance was stable sequentially. We continue to face headwinds in the US following the CMS reimbursement changes introduced at the start of the year, with the market adapting more slowly than expected. Despite these near-term dynamics, we remain confident in the long-term fundamentals of the segment, beyond this transition year, and are well positioned as market conditions normalize. We continue to expect the trading profit headwind from skin substitutes to be towards the upper end of the previously guided 20 to 40 million range. Advancement devices grew 10.7%, a strong acceleration from the first half. reflecting the investments we are making behind Pico and Thief. Pico delivered strong growth in the US and performed well internationally, while Leaf had its strongest quarter ever. Let's now turn to orthopedics. This grew to 0.5% on an underlying basis, an acceleration from last quarter. In the US, we saw soft market conditions and continued weak performance in knees and hips. Within U.S. needs, the decline primarily reflects the ongoing impact of business loss in previous periods, rather than significant new losses in the quarter. The continued shift towards cementless remains a need to handling for us. Cementless penetration is now approaching 40% of the U.S. market, compared to around 10% of our new portfolio. With the launch of the cementless version of Landmark, our new kinematic knee system We can more effectively compete in the growth of this part of the market. Importantly, we are better positioned to execute this launch than we have ever been in the past. Through Ortho360, we have introduced a more disciplined and targeted approach to product launches. And the success of Catalystem launch is just one example of the progress we have made. With Landmark, we now have a disinitiated product addressing a clear market opportunity, which we believe can strengthen our competitive position in needs over time. Within U.S. HIPS, we remain encouraged by the uptake and utilization of CatalyStem, which now represents 38% of our HIPS. However, alongside some market softness, we were held back by the pace of CatalyStem's sad deployment, which limited our ability to convert and retain our legacy HIPS customers. We expect U.S. HIP performance to improve as additional sets are deployed and customer access extends. The planned launch of CoriHIP in Q127 and the CoriHIP Impactor in Q327 will further strengthen our ability to convert and win new business as robotic HIP workflows become increasingly important for our customers. Outside of the U.S., performance was strong in both HIPs and NEEs. Both delivered double-digit growth in emerging markets, and Hibbs continued to benefit from the launch of Catalystem in Japan. Troma and Extremities delivered solid growth with good performance in IMNates and double-digit growth from our ATOS shoulder system. We had a very strong quarter for other recon with growth of 44.7%. It was our best Q3 ever for Cori placements globally and we are pleased with the continued traction we are seeing in enterprise level multi-site deals in the US. Corey Scholder is also performing well. Coming now to our updated outlook. Reflecting our outlook for US hips and knees in Q4 and market conditions, we now expect fully underlying revenue growth to be around 3%. Trading profit is still expected to exceed revenue growth, but reflecting the lower revenue outlook, we now expect to deliver around 1.25 billion of trading profits, including marginal dilution from the integrity acquisition. We also expect to deliver around 750 million of free cash flow and the return on invested capital of around 9%. This represents strong cash conversion and demonstrates significant and sustained improvement in cash generation. At the start of the 12-point plan in 2022, free cash flow was 56 million and trading cash conversion was 49%. In contrast, We now expect to finish 26 with free cash flow of around 750 million and trading cash conversion of around 95%. Our 500 million share buyback also remains on track, with 250 million completed by the end of Q3, demonstrating our disciplined approach to capital allocation and returning capital to shareholders. As previously disclosed, we expect the net year-on-year impact of tariffs to be broadly neutral to trading profits, and the headwind from skin substitutes to be towards the upper end of the previously guided 20 to 40 million range. The acquisition of Integrity Orthopedics is expected to be marginally dilutive to trading profit in 26, broadly neutral in 27 and accretive from 2028. With that, I will now hand you back to Deepak to look at each of our business units through a longer term lens and how we are positioning them to deliver sustainable growth and create value.