Good morning, ladies and gentlemen and welcome to our half-year results presentation. I'll start by covering the highlights of the first half and then Mike Frazzette, our Chief Commercial Officer, will give you an update on trading. I will then take you through the numbers and conclude with a summary. As usual, we'll take questions at the end. Some of you have asked me about Olivier. His treatment is progressing well and we expect this to be completed by late autumn, as we announced previously. He's remained actively involved in running the business throughout the period and he's no doubt watching this webcast. The underlying revenue growth in the first six months was 3%. The strong growth in our knee implant franchise continues at plus 7%, led by JOURNEY II our kinematic knee. And we have further extensions to this platform coming. Sports medicine joint repair goes from strength to strength, with 10% growth. Geographically, the U.S. grew at 6% and, excluding China and the Gulf States, the emerging markets grew in the mid-teens. Blue Belt was acquired at the beginning of the year and the integration has been very smooth. In addition to its good operational performance, we've made important progress towards expanding the indications with the NAVIO surgical system. Trading profit declined 3% underlying to $483 million, giving a trading margin of 20.8%. Significant headwinds from transactional exchange, Blue Belt, China and the Gulf States, have been mitigated by the Group optimization program and acquisition benefits, to leave a net decline in our margin of 170 basis points. Our EPSA declined 2% at constant currency. And, today, we also declare an interim dividend of $0.123, in line with our formula and representing 4% growth. For our UK shareholders, at current exchange rates, this translates to 9.4p per share, representing over 20% growth, due to the recent weakening of sterling. I'm now happy to hand over to Mike for an update on the Q2 trading performance.

Thank you, Julie and good morning, everybody; great to see you all here. In addition to the Q2 and H1 trading performance, I will also provide some commentary on ArthroCare, we're two years into that acquisition, Syncera and Blue Belt. So I'll start with this familiar slide; it captures are underlying growth, on the left side geographically and on the right side by product franchise. In the second quarter, we delivered 2% underlying revenue growth and I would point out that there were some very good performances in the shadows of some bad guys that, as we expected, persisted through the first half. In the U.S., we had another good quarter, driving revenue up 4%. And the other established markets, sales grew by 1%, with the bookends being very good performance and very good dynamics in Japan and some softer results in some of our European countries. And I'm happy to comment during the Q&A. Emerging markets declined by 2%. Again, some really solid double-digit performances in Asia, Africa and Latin America, overshadowed by the headwinds in China and in the oil-dependent Gulf States that Julie talked about and that we discussed in Q1. We now expect the reduced activity and the size of the tenders in The Gulf will continue for the rest of the year, primarily impacting our trauma business, while we expect the China effect will improve, going forward. With respect to China, I recently spent a few days with our team in China. I had the opportunity to meet with some of our customers and some of our key accounts, of course, with some of our channel partners. And I did want to provide you with some additional insights to help you understand what's happened there and why we feel confident in the trajectory, going forward.…

Thank you, Mike. Returning to our financial performance, I'll cover the adjustments between the underlying and reported revenue performance. So starting with first half, the business delivered underlying revenue growth of 3%, as we saw headwinds mainly in China and the Gulf States. Acquisitions added 1 percentage point to the reported growth rate, including the contributions from ZUK and the Blue Belt Technologies. Sales growth in half 1 at constant exchange rates was, therefore, 4%. Currency was adverse at minus 2%, with a stronger euro and yen more than offset by continued weakness in emerging-market currencies against the dollar. And hence, in reported terms, Group revenue growth for the half was 2%. In the half-year, there were four additional trading days compared to last year. This typically benefits our surgical businesses more than wound management and our established markets more than emerging markets. For the second quarter, the trends are similar; underlying revenue growth of 2% translates to 2% reported growth, due to the net impact of acquisitions and currency. Next, our trading income statement, our revenue growth of 3% underlying but our trading margin reduced to 20.8%, with the major adverse effect being currency. On gross margin, we saw a significant headwind, due to transactional foreign exchange. As you know, the majority of currencies weakened against the U.S. dollar in 2014 and 2015, leaving the Group exposed, given the geographic location of our manufacturing facilities relative to our sales. In 2015, hedging cushioned this impact and we benefited from significant hedging gains in our gross margin. In 2016, however, we see the adverse impact on our margin coming through, with around 190 basis points in the first half. And we continue to expect this headwind to be 120 basis points for the full year. Offsetting gross margin, we saw…

I have three questions, please. Firstly, can you comment on what the underlying sales growth was for the organization excluding China and also what it was for the advanced wound management business? Secondly, on Syncera, is that business now profitable or are you still incurring expenses as you roll out the program? And then the third question was in terms of the EBITA margin for the first half, can you also comment on what the benefit to margins was as a result of the ArthroCare synergies, the other cost savings that you've got from your restructuring program and also the margin tailwind that you may have had by having four extra selling days in the first half of 2016 versus the first half of 2015? In the past, we were told that delivers quite some nice operational leverage?

Okay, we can take those questions. If I take the underlying growth position, Mike is going to take Syncera and then I'll come back on the margin. The underlying growth excluding China, I think probably worth looking at both China and The Gulf in the second quarter actually because they both had an impact that we see to be temporary. So the impact on the growth rate we see at about 1.5 percentage points. So net/net you can add that back to the underlying growth rate to give around the 3.5% growth rate. AWM excluding China, we had positive growth; it did pull the growth rate down quite considerably. If you look at the wound care result, if you look at for instance U.S. growth was very strong in wound; China emerging markets had a big impact on wound, it was well into the double-digit negative territory overall. Mike, do you want to take Syncera and then I'll come back on margins.

Sure, I think your question was Syncera is it profitable? As you know, we don't comment on profitability of any single line. We introduced Syncera back in 2014; we built the program; we launched it last year; we do have a handful of accounts that have been converted. Some of those accounts are pure Syncera plays, but most of our business in Syncera are hybrid accounts where we have both Syncera product and that model being used in certain patients and other recon products being used in other patients. It just depends on how the surgeon matches it. So to get a profitability like that it would be near impossible. I guess it's fair to say that we've invested in the business. We've got great engagement from accounts. We're not realizing the business at the level we expected to realize at this time. But we're convinced, more than ever, that it's an evolving space and it's heading in this direction. And you can see, even by the recent announcement of CJR just yesterday or the day before, about adding hip fracture now and cabbage into this bundled payment environment that health systems in the U.S. especially are looking for solutions to drive quality and reduce cost. And with Syncera we're addressing the intra-operative aspect of that. And now with CJR and the effect that they're having on the entire episode of care, it's redirecting now the look at the entire episode of care, that 90-day episode. So our competitors as well as our own recon business are going at customers and engaging with post-surgical rehabilitation, for instance. How do our products and the utilization of our products drive earlier mobility, less hospital stay, less post-surgical complications. So we expect this to continue. We expect the opportunity to be in front of us and we're going to stay at it.

Just on that because in the past you mentioned that Syncera was not margin dilutive. So can you at least comment that so far is it margin dilutive because you're not hitting the run rates that you expected?

I don't think you can fairly say it's margin dilutive. We're engaging customers with an intra-operative model, as well as a comprehensive toolkit, to help them become more efficient in the episode of care. So if you want to package that up as a consulting type of front end, as some of our competitors have done or if you want to package it up as a business model, like we have done, one way or another you're engaging customers and you're trying to address their needs to make them more efficient in the operating room, as well as address the entire 90-day episode of care.

Okay, coming back on Michael's question relating to the margin, the margin benefits that we got from ArthroCare and GO, they were mostly related to GO, so it was about two-thirds towards GO and about one-third towards ArthroCare and there was a considerable benefit in the first half relating to that. We did actually, because we've obviously got headwinds there relating to China and the Gulf States and some lower sales levels, we got negative drop-through on the leverage on the margin in the first half. As you know, the biggest impact on the first half margin related to the 190 basis points of transactional exchange which we expect to be easing in the second half related to the phasing of the hedging benefits. So the full year is 120. In terms of the leverage and the additional sales days, it was really offset by some of the lack of operational leverage that we got from the emerging market franchises and, in particular, those two regions, China and The Gulf, where we actually had a fall in profits compared with the prior year. So we got negative operating leverage from that. And as a general rule of thumb, we do need a level of sales growth above 3% to be able to generate natural leverage in the business and Q2 was, of course, 2%.

I have three questions; hopefully, one each. You gave us the H1/H2 FX impact, quite nice, that's very helpful. For Blue Belt, you've talked about 60 basis points for the full year but how does that headwind break down between H1 and H2? Secondly, you mentioned in the release and today changing market dynamics in Europe in the wound business. That sounds like a nice euphemism for horrible price pressure. Am I thinking correctly there? If not, could you clarify? And then thirdly, just more of a strategic one, maybe for Phil, this year it's China, last year it was RENASYS, before that it was - well, for years it was metal-on-metal, then it was the Greek tragedy that was Plus. Every year there seems to be something that keeps Smith & Nephew's revenue growth from getting sustainably above that 3%, 4%, 5% level where you get the natural operating leverage. How are you starting to think about this as an organization? Is it something you think about at all, it there something you think you can do to try and manage the risk a bit better in this business? Because it just seems that, every year, we all hope that there's going to be 4%, 5% revenue growth and lots of operating leverage and then, every year, something comes out of the darkness to take the edge off the revenue growth.

Okay, shall we take those in that order then? I'll deal with the margin question.

You've got the easy one.

Yes, so in terms of the impact of Blue Belt, we expect it to be broadly similar across the two halves. You do get a difference in phasing of costs and also, December tends to be a very good month in terms of capital sales in a capital-orientated business. But broadly, because of the level of spend on Blue Belt, because we're expanding into new indications and we've just had the approval for the Total Knee, I'd say, for the purposes of your modeling, I would just say the two are broadly equivalent. Mike, do you want to take the change in conditions?

Sure, marketing dynamics in Europe. In fact, it's not just horrible pricing pressure, although our pricing pressure remains. I really look at it terms of three things. First is, we have very strong comparators, so we were plus 12% in wound a year ago. And if you're familiar with the wound business, the way we distribute products in wound is we ship into distributors and they trace them out to accounts. And so you've got this natural kind of ebb and flow of product that doesn't always meet our quarterly cadence. So we've got that working against us this quarter where we had inventory being taken out, but we still see underlying tracing growth relatively healthy. However, we have seen some softening in a couple of markets. We've indicated that we've seen this long term trend of movement out of hospitals into communities and we see that accelerating some places. And with that actually does come some price pressure, so the prices are just lower in some markets than they are in others. So as it moves from more institutional care to more home health or long term care, there is a mix and a price challenge that's impacting our business. Now we're addressing some of these with our organization. We've changed some management; we've also changed some of our organizational structure to get after the community and the home health in some of these markets and we expect to be on it and have it resolved within the half-year. Phil, do you want to take the strategic question?

The strategic question, I'll take that. Thanks for that one, Tom. Many of those issues our peers speak about as well. Unfortunately, we're unable to do much about Chinese GDP. At a wider level, if you look at the five parts of our strategy, the third one there is around simplifying the business. And that is really focusing on delayering the organization, strengthening the functions, making them more global, putting in single MDs, upgrading the talent across the organization. And that's allowing us to react faster, see things earlier and improve the execution around many of these things. And if you look across most of our business that is what you're seeing. If you look at the acquisitions we've made over the last three or four years, Healthpoint, fantastic return; ArthroCare, Mike spoke about; our recon execution and performance against the market has improved materially over the last two or three years. These are all examples where we're improving what we're doing.

It's Alex Kleban from Barclays. Three from me, first of all, on the Medtronic deal, should we be reading into this anything more in terms of divesting, let's say, non-core streamlining the portfolio a bit more to focus on core franchises and if not, why not? Maybe that could apply to ENT or some other business lines you're in. Second, on the acquisition front, there is some management team transition, let's say, in the next six months. Does that mean you're taking a pause in terms of looking at deals, either bolt-ons or something more strategic in nature? Just a few, lastly, recon check-ins, just as I maybe missed this in the beginning. But just on price, hip and knee for the quarter and also on CJR, just want the conversations are on price currently and what hospitals are expecting maybe for 2017, if you have any visibility on that at this stage? Thanks.

If I maybe take the first two on management change and Medtronic and Mike can take recon pricing and CJR. In terms of the Medtronic deal, we're always looking at the portfolio to see how we can make the most of those assets. In the case of the gyne disposal, we felt it was non-core to our major franchises. When we looked at possible acquirers, we could see that, because it had a greater degree of synergies with their existing businesses, they could make more of that business than we could. We were very pleased with the performance of gyne, but they just had the ability to realize greater degrees of synergies. And that was really what led to the decision to do the disposal. In terms of other parts of our portfolio, we're always looking to optimize it. We've actually, I think, successfully transformed - you mentioned ENT, we've successfully transformed the ENT business. It was actually growing slightly and then in decline in ArthroCare. And we've actually been delivering double-digit, consistently, teens growth out of that ENT business now. We're very, very pleased with the performance of that, so no intention to divest of that at all, at this stage. In terms of changes in management and deals and the impact on the M&A agenda, it's really important to say that Olivier has been consistently involved with the business. As people know, he's undergoing treatment; it's going very well. We expect him back actually, probably, in early autumn. So he's doing incredibly well with that treatment. We've got a really good management team, I speak for my colleagues on the left, really good management team. And there's been no real change in the operations or the focus. We're still obviously looking for M&A candidates. And we're still looking for opportunities to convert the business towards those higher growth segments such as sports medicine, trauma and extremities and wound management are the areas of real focus, together with technologies, so no change to the agenda.

Alex, we've got a healthy deal pipeline. We've been very active and we'll continue to be very active on that front. In terms of recon, price has been unchanged quarter on quarter. We see a little less pressure globally than in the U.S., but it's been roughly 2% to 3% I think is what we've been saying and it's been pretty consistent. CJR has not - it's early days, so the discussion at CJR has not necessarily focused on pricing. It's focused on entirety of cost across the episode, as I pointed out earlier. It's allowed us to engage at a comprehensive Smith & Nephew standpoint. So we've able to approach the c-suite with a bundling of offerings, combining our joints with our wound products that may reduce post-surgical complications, to reduce the cost of post-surgical rehab, things like that. But it has not increased any pressure, I wouldn't say, specifically on the price of implants. They're always looking for a lower price on implants, but CJR in itself hasn't changed that.

David Adlington from JPMorgan. Three questions, the first on the cost savings. It looks like you're ahead of certainly time in terms of delivering that $120 million. Is that just early delivery or should we expect some upside to that $120 million as we go into 2017? Secondly, could you just remind us of the tailwind you had from avoiding the medical device levy in the first half and what you've done with that saved money? An d then on bioactives, I think previously you were talking about mid to high single digit, now mid single digit. Just wondering what had changed there in the market to change those expectations.

The first one relating to the Group optimization program, we're incredibly pleased with the performance from Group optimization. We're ahead of schedule, as you say and we're continuing to look for benefits from Group optimization. I think all the streams in that program, whether it's procurement, whether it's the functions or whether it's the spans and layers program, we've actually exceeded the benefits to date. Not only do we anticipate that continuing, we anticipate that continuing to 2017. So overall, we'll have an upside on the $120 million that was previously announced. Only slightly ahead at the end of 2016, but we do expect additional benefits in 2017. In terms of the medical device excise tax, this was a figure of around $23 million and it was suspended for a period of two years. I think what ourselves and most players have done is we've reinvested that into the business because, clearly, it was only a two-year effect. What we decided to do was we put a lot of emphasis in the U.S. market because this was a U.S. benefit. We've recruited, for instance, another 100 engineers to focus on our engineering quality programs in the U.S. market, our regulatory framework, our manufacturing facility. This is really where we've put the emphasis, together with an element into R&D, into research and development. So it's all been about reinvestment of the medical device excise tax. In terms of bioactives, really the change there - we said mid to high single digits and we've moved it to mid-single digits. And the change there really, two major products within that portfolio. One is SANTYL and the underlying trace rate of SANTYL remains very strong; we're very committed to improving the growth of SANTYL. The headwind in the bioactive franchise has really been concentrated on OASIS which is the skin substitute product. And there, because there was a change in the reimbursement model, we've seen a serious headwind on OASIS and that's given us negative growth on that part of the franchise. Bioactives overall, completely committed to mid single-digit growth. I think there are actually some questions from the phone lines, so maybe we'll go to the phone lines first.

We will take our first question from Ian Douglas-Pennant of UBS. Please go ahead.

I hope you can hear me; the sound quality is dropping in and out. The first one is, could you maybe help us quantify the guidance revision that you've given today? Is it still reasonable to think that the margins can increase this year if we exclude currency? And if not, can you give some indication of how much you're trying to talk us down today? And then the second question is a little bit more technical. I notice your inventory levels are continuing to increase and you used to see say this was around safety levels, as you were rebuilding you Hull plant. But it seems to have been going on a little bit longer than that now. Can we link this increase over the past several years in some way to the relatively strong revenue growth we've been seeing in some of your line items? For example, are you more likely to leave inventory on consignment with customers, even though their volumes are lowering, now than you were in the past?

Okay, so I'll take the first one relating to the margin. The guidance for the margin that we gave at the end of the year which was at or above 24% less the foreign exchange headwind, the additional new pieces of information are really twofold. One is the disposal of gyne which on the half-year has a 20 basis point impact on the margin. And the other change we've made really relates to the leverage that we get from the sales. And because we flagged some softness in the sales relating to emerging markets coming from China wound and also coming from The Gulf which we expect longer to resolve that has a slight impact on that margin guidance we gave at the beginning of the year. So that's essentially where we're with the margin. In terms of inventory, the inventory level has largely risen in the first half simply because of the new product launches. We expect emerging market sales to pick up, as we've mentioned, in China in the second half. And also, we have increased the facility in Costa Rica relating to sports medicine. So there's an inventory build associated with the Costa Rican facility. But we're completely focused on inventory and driving inventory improvement and driving improvement in our processes in operations. And you can count on us to be able to deliver that. I don't know, Mike, if you have anything to add to that?

Yes, I can add a little more color on inventory. There's really four driving factors. There's the transfers in manufacturing that Julie talked about. There's along with that, often at times there's a transfer of regulatory approval. So we need to build inventory when we transfer one notified body to another, for instance. The third area is in new product introductions, especially in the asset-intense products like large joint reconstruction. So if you think of JOURNEY and the JOURNEY platform, there's three platforms within that knee and two different varying surfaces, so it's a highly, highly complex system. It's a new system which requires additional inventory. And then finally acquisitions, so we talked about Brazil and in past quarters Russia and then also Blue Belt. And all three of them contribute to inventory, at least in the short term. But as Julie said, we're committed to working on it and getting it down.

Can I follow up on either of those, just quickly?

Yes.

How far can we expect inventories to come down? Because it has increased by 50% over the course of four years, it's not a small change. And then, obviously, it's over one year's worth of inventory you've got now. And then on the operating leverage from China, what is the decremental margin that we should think about from those sales now? Is it for every $1 of lost sales you lose 80p of profit or is it less than that?

Okay, so in terms of the inventory, we have been through a whole series of product launches, manufacturing transfers and acquisitions, so that has driven the growth in the inventory. The way we think about this and look at it is we look at the inventory turn. So we don't look at inventory as a straight value number; we're always looking at the turn relative to the cost of sales. And actually, when you look at in turn ways, the previous year we improved the inventory turn by 12%. And this year in the second quarter, for instance, we've improved the turn by, I think, it's 3%. So we're looking at that in terms of a key metric and we're looking at the efficiency of our operations organization all the time. So what you can be sure about is that we will focus on this. We will get through the new platform launches, as Mike mentioned. We will integrate those acquisitions where we just basically take on board their stock. And we're fully committed to improving the turn of that inventory. But it is important to note as well that we have got more complex business. We have got a business now that is servicing many emerging markets and new platforms and new innovation, including Blue Belt. And that does bring with it an additional degree of complexity in the inventory channel. Just in terms of the leverage point and the margin, I think as a general rule of thumb, I know some of our analysts basically if there's a leverage issue on the sales line, they drop it through sometimes just at the trading margin of around 23% at the Group level. The drop-through tends to be higher than that. It depends on the nature of the cause. But if you've got, as we have now in China and The Gulf, we basically see these markets as very, very important for the future and they do go through perturbations. If you look at the trajectory for The Gulf and the history for The Gulf, this happens. But what we want to do is maintain the levels of investment to get the growth in the future in critical markets such as China. And so the drop-through will tend to be above the Group margin level. It will tend to be more around the 50% range. We'll try and mitigate some with cost. But I think if you use a 50% to 60% it would be a good measure in terms of where you see an opportunity for future growth in that market. Does that answer your question?

The next question comes from Veronika Dubajova of Goldman Sachs. Please go ahead.

I will keep it to two questions, please and they're both focused on wound. My first question's on China and I guess maybe can you talk about to the extent that you're seeing any changes in end-market demand? Because I think a number of your competitors out there are continuing to see some pretty strong growth in China. And I've just been surprised to see how long it takes for the inventory to clear out on your side. And so I'm just trying to discern what here is competitive pressure, what here is end market and what here is just working through the inventory. So if you can talk about that with regards to wound that would be great. And my second question is just circling back on negative pressure and getting an update on where we're with RENASYS TOUCH and RENASYS CONNECT launch timelines with regards to Europe and U.S. that would be great.

On wound in China specifically, I think it does need to be clarified that the end-market demand in China is very good. On a relative basis it's very, very good. So we're not seeing 30% end-market growth, but we're seeing very high teens end-market demand across all of our businesses. And that's why there's a level of confidence that this business remains strong and we're going to continue to develop the market; we're going to continue to invest in that market. As I said, in Q2 we returned to growth in sports, in Q3 our trauma inventories will come down and will be normalized. In trauma as well the end-market demand continues to pick up and in wound we get to about normalization around the end of the year, first part of 2017. So bottom line is, end-market demand continues to be strong. We're seeing it from our trading partners, from our distributors in China and we've got every reason to believe that that's going to continue that way. In fact, our terms and conditions now actually indicate that they provide us that type of end-market information which gives us the confidence in what's going on. In terms of negative pressures, we're in limited launch with TOUCH in Europe. We do still expect to be in market with GO in the U.S. by the end of the year and then we'll be in limited launch early next year with CONNECT. So that's unchanged, Veronika.

With regard to CONNECT, Veronika, we're expecting approval in the second half in Europe, with the launch expected in 2017 and the U.S. is following Europe. Yes, any questions in the room?

Mick Cooper from Trinity Delta. A couple of questions¸ with the launches in the hip franchise and also Syncera, when could we hope that you might outperform the market in recon? And secondly, what are you doing to turnaround the trauma and extremities business?

Sure, so we launched hip revision this past quarter, we're seeing very good uptake. And as I said in Q1 and I'll reiterate now, we believe we can exit 2016 in hip at market growth rate. Within knees, we've been at or above market now for several quarters and we expect that to continue and hopefully, we can see some acceleration. We think we've got some upside with Blue Belt; the uptake there has been very good, if you recall we added ZUK last year and that's also helped. We're seeing that perform well, so we feel pretty good about our recon business and our recon growth rate. We expect it to continue and improve. In terms of trauma--

[Microphone Inaccessible]

So Syncera, again, we believe we've got the right solution, we believe we have a solution and where accounts have alignment between surgeons and administrators, we're seeing uptake. But look, I'd be kidding if I told you that it's not performing as expected. The engagement level is extremely high. We haven't run into an account that isn't interested, doesn't think it's a great solution, hasn't expressed a desire to engage further, has set up meetings with their orthopedic partners for us to get us involved. So I think it's the right solution and, as I said earlier, this market will continue to evolve. How fast it evolves and where it ends up I think is anybody's guess. We believe we've got a great solution in Syncera that covers the full gambit from intra-operative to post-surgical rehabilitation. How that will affect our overall recon number I think would be a guess, at this point. On trauma, you mentioned trauma, so we've made some investments in the trauma channel, again we're very subscale. As you know in trauma we've got a great portfolio, but I think you've got to peel the trauma numbers back really when you look at it in the industry. Our portfolio is much different than, say, Synthes, J&J and Stryker. We're heavy in the limb restoration business, we've got this big base of business in deformity correction and frankly, that portfolio is a little aged and so it's not performing as well it has in past years. Our hot trauma business, plates and screws, nailing business is growing out-market globally so we're doing a relatively good job there. It doesn't show through in the overall headline number because it gets weighed down by this limb restoration product. We'll continue to make investments in the business, either portfolio or channel-wise as long as they're not too dilutive, but it's a good business for us and we feel pretty good about where we're growing outside of limb restoration.

Chris Gretler from Credit Suisse. I've got three questions. First of them is on FX; could you speak about the positive margin effect from the pound weakness now at current rates prevailing? The second is Europe in reconstruction I think, Mike, you mentioned that you might want to come back. I think, if I remember right, Stryker indicated stronger markets and you're basically now having reported some weakness; could you compare and contrast that maybe? And then the last thing is just on wound care margins, actually; could you give us an approximate indication where wound care margins stand right now after the RENASYS withdrawal, the persisting wound care weakness now? Thanks.

Okay, so I'll take the margin questions and Mike can take European recon. Yes, sterling because we have got our net cost base in sterling, we will get a benefit from the recent weakening of sterling overall. At the transactional level, if we're just thinking about transactional exchange benefits, though, because we hedge there is a delay as you've seen between 2015 and 2016. There's a delay in terms of when those exchange rates affect the margins because we're hedging the currencies. But there will be a slight benefit which we'd expect to come through, in time, if rates stay at their current depreciated level. In terms of AWM margins, we no longer - because we're now a single entity, with single managing directors across the world, we no longer split out, it's impossible now to split out the ASD from the wound margins, for instance in Europe or now in the U.S. we've got a single MD in the U.S., because its managed as an integrated business. Clearly, if we were looking at that, the headwinds we've had, as you mentioned RENASYS and also the emerging market weakness, it would have affected the margins. We have calibrated the investment levels in some areas, in some of those emerging markets, for instance Latin America has been recalibrated, but we've maintained investments in key markets like China. But we can't honestly split that out any longer; we just look at the Group margin and focus on driving and improving that Group margin. Do you want to take reconstruction?

Yes, so European reconstruction we continue to see a relatively good market, continued price pressure, but good volume growth. And our performance in Europe is really no different than it is globally. According to the Eucomed data just recently published, we took share in knee in Europe. We're trailing in hip, as we're globally, but there again, we've just launched our Revision product, so we expect to see that improve through the balance of 2016 and into 2017.

We have got time for one more, which is Ines.

I have just one question, please. Just going back to the CJR program, I think some of your competitors have highlighted that hospitals are focusing a lot on post-acute care costs, maybe more than on implant costs. So with that I mind, could you tell us what kind of initiatives you're thinking about or how you could approach this on the wound side of the business in the U.S.?

Yes, it's a great question. In fact, we're seeing the same thing. It's early days with CJR, but they're clearly looking at this 90-day episode of care and engaging us and the other folks in the industry, with exactly that question; what is it that you can do to help us in this environment? What we've been able to do is, we've been able to offer a warranty, a guarantee, if you will, a combination program, we call it EPAC. It's a combination of our joint implant and our wound products, PICO and Acticoat. And when used post-surgically, we essentially guarantee against a surgical site infection over the 90-day episode. And to put that into context, surgical site infections account for about an additional incremental $50,000 cost per episode, relative to readmission rates. It's a program that's brand-new; we just put it together last quarter. We just started engaging with the c-suite on it. It's part of our Syncera offering, if you will and it's gaining pretty good traction. I think one of the differences between our Syncera offering and what you're hearing from some of the other folks in the space is that they're focused entirely on the post-surgical component, as they should. We're focused on the post-surgical piece, but we're also focused on the intra-operative piece, with our lower-cost business model. And I think hospitals recognize that, but that's the competitive nature out there. So we're out there with a complete offering, end to end intra-operative as well as post-surgical. Everybody else is focused on the post-surgical piece which comprises roughly 40% to 50% of the total episode of cost. So it's a good strategy; hospitals are interested in it and we believe we've got some pretty good solutions.

We will take our next question which comes from Lisa Clive of Bernstein. Please go ahead. Your line is open.

Two questions, just one on MAKO; there've been some recent headlines on a patent case versus Blue Belt - between Blue Belt and MAKO. Could you just give us an update on the status of that? And is this a threat to Blue Belt in any way? And I assume all of this was well known before you bought the business. And then the second question, when you mentioned in October that there was this big FX headwind because of your large dollar exposure on the COGS side, you mentioned that some of these items could be mitigated, over time. Given your somewhat more cautious comments on the H2 margin, perhaps that's taking a bit more time than expected. But could you just talk through some of the potential levers that you have to mitigate this FX issue? And what sort of timeline we should think about?

I think I can take the margin questions. I think Mike wants to take the MAKO question or the patent position on Blue Belt. Yes, so in terms of the FX headwind, basically the guidance is not changed at all. We're expecting 120 basis points for the full year. The mitigation, clearly it's really coming from a number of sources. One is the leverage from the sales line, critically important and that's been softer, obviously, in Q2. And the second source of leverage is the continuation of driving benefits from Group optimization and here, we're very confident. Clearly, it takes time to put these changes through into an organization. We couldn't accelerate everything immediately, but we're accelerating those benefits; as you've seen, we're already 110 going through cumulatively to the end of this quarter. So we're very focused on Group optimization. We've got a very professional procurement organization that's driving change. The functional optimization work will continue. The rationalization of systems which drives benefits and improved visibility of margins across the organization, is now being rolled out in some of our countries across Europe, Australia, New Zealand, but are still to go into America, so that will still drive benefit overall. And spans and layers we continue to be focused on spans and layers through the single MD program that we've recently done in the U.S.. So I think you will see a benefit coming through and we'd expect it to come through over the course of 2017/2018. But you can be sure that we're focused on driving operational efficiency in Smith & Nephew and we will absolutely do so. The real only setback has come because of the foreign exchange transactional headwind which obviously we're not able to address, short term. We have to address it over a longer period of time. So maybe Mike can take the patent.

Yes, I volunteered to take the MAKO question because we don't really comment on litigation. But I guess in a nutshell, the patents were invalidated, but as most of you know, these things go on and on and on, so there could be another play. But having said that, we don't see MAKO as a threat; we don't see this litigation as a threat. We continue to push ahead with our business plan. ):

Our next question comes from Julien Dormois of Exane. Please go ahead. Your line is open.

I have two questions. The first one relates to robotic surgery and Blue Belt; you've indicated that you are now planning the full commercial launch of the Total Knee, in 2017 and if I'm right, Stryker and MAKO have about the same timeline. Just could you just remind us how do you plan to differentiate, compared to MAKO, on that side? And more specifically, for example, do you have any ongoing trial, pharmacoeconomic trial, trying to demonstrate the value proposition of robotic surgery, especially in the context of CJR? And the second question is just a housekeeping one, about China. You've indicated in Q1 that China had declined by 15%; can you just update us on how that's fared in Q2 and if you do plan to return to growth in China, from Q3 onwards, please?

Okay, so if I take China and Mike takes robotics. Yes, China we had in the second quarter another decline in the sales in the teens, as we had in the first quarter. But we're fully expecting now to return to growth, in Q3 and clearly Q4 and beyond, with China. I think, as Mike said, of our four franchises, reconstruction, we've maintained growth throughout in reconstruction in the high single digits. With regard to sports medicine, we've returned to double-digit growth, already in Q2. With regard to trauma, we anticipate this returning in the second half, to growth. And with wound, it will take until early 2017. So that's across the franchises, but net/net, given the relative balance of sales in those franchises, we're confident of returning to growth in China, in the second half of this year. And maybe, Mike, if you want to take the robotic question?

Sure. Julien, we're very encouraged by the 510(k) approval for Total Knee and by the first Total Knee procedure that took place with the NAVIO system and our JOURNEY II knee. And just to remind everybody, there are some differences between Blue Belt and our NAVIO system and the MAKO system. For one, it's proprietary robotics. The NAVIO system is a portable system, so there's it requires a much smaller footprint. It's ideal for the ambulatory setting, especially. When you think about the procedures moving from high cost hospitals to lower cost ambulatory surgery centers and the desire for these facilities to move that system from theatre to theatre, you can do that with NAVIO. It's much more difficult to do with a product like MAKO. It's CT free, so it doesn't require any preoperative planning; again, a cost advantage as well as a time advantage. And then finally, it's a reduced cost. Our ASP for a NAVIO system is well below what the MAKO system sells for. So we think, when you put all that together - and, of course, we're doing clinicals with the product, when you put all that together with what we believe we'll be able to demonstrate a consistent outcome with our knee platforms, we think we've got a real winning combination in Blue Belt.

So I think, with that, we'll call it a day. Thank you very much for coming to see us this morning. Wish you a great day with all the other announcements that are going on. Thank you.