Ladies and gentlemen, welcome to the Smith & Nephew Q1 Trading Report. My name is Jenny, and I will be coordinating your call today. Certain statements in this presentation are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in those statements due to a variety of factors. More information about these factors is contained in the company's filings with the Securities and Exchange Commission. [Operator Instructions] I will now hand over to Deepak Nath to begin. Please go ahead.

Thank you. Good morning. I'm joined here by our Chief Financial Officer, John Rogers. I'm pleased to report a good start to the year. We achieved 3.1% underlying revenue growth in the first quarter, was ahead of the guidance we provided in February with consistent performance across all of our business units. Sports Medicine and Advanced Wound Management continue to perform well in established markets and U.S. recon is maintaining the improvement that we saw in 2024. We have successfully absorbed known headwinds, including a 240 basis points headwind in China and there being 1 fewer trading day. As we get into the detail of the quarter, you'll see that we're building on the operational and commercial improvements of the 12-Point Plan, which has brought better product availability, better commercial execution and the focus and accountability of the business unit model. Those foundations are enabling innovation-driven growth across our key platforms. To highlight a few, CORI, EVOS, REGENETEN and our Negative Pressure Wound Therapy portfolio, all delivered strong double-digit growth in the quarter and are visibly driving the broader segment growth rates. We're also delivering further innovations at a rapid pace. Later, I'll discuss new product launches that are expanding our offerings in the high-growth categories of foams dressings, foams, dressings and cementless knees. Additionally, I'll share new clinical evidence related to OXINIUM and rotator cuff repair. Overall, this quarter keeps us on track for our full year guidance, which remains unchanged on both revenue growth and trading margin. We should see higher growth in the remaining 9 months, giving a lower trading day effect on growth for the full year and the peak of the China headwinds having passed and continued fundamental progress in our commercial delivery, particularly a fifth piece. The drivers of the guided step-up in profitability have been in place for some time now, and we should see the benefits of our cost savings and network optimization flow through to the P&L. John will come back later to the effects of the recently announced tariffs on our business. But to summarize for '25, we expect to absorb the impact within our existing margin guidance. And first, John will take you through the detail. John?

Thank you, Deepak, and good morning, everyone. So revenue for the quarter was $1.4 billion with a 3.1% underlying growth and 1.6% reported after 150 basis points headwind from foreign exchange. Those growth rates include the effect of 1 fewer trading day than in the first quarter of 2024, which is considered proportionately reduced growth by around 1.7 percentage points. Growth was largely consistent across the business units, and I'll come to the detail in a moment. Driven by region, growth was stronger in established markets with 3.6% growth in the U.S. and 5% in other established markets. The 1.7% decline in emerging markets was due to the continuing headwinds in China, which we believe has now peaked. Growth in the other emerging markets was much stronger at 14.7%. For the business units, I'll start with Orthopaedics, which grew by 3.2% in the quarter and 5.1% excluding China. As indicated with the full year results, we've changed our reporting practice around robotics to be more in line with our Orthopaedics peers. As of this quarter, robotics consumable sales are now recorded under the procedure where they are used, while capital and service revenue remain in other recon. Growth rates are all on a comparable basis. In U.S. recon, the sequential trend in the headline underlying growth numbers mainly reflects trading days. Normalizing for that, U.S. recon maintained the improved performance from the previous quarter. The dynamics continue to be encouraging with customer churn moving to being net favorable in Q4 and maintaining that in Q1, and a pipeline of competitive conversions building for the rest of 2025. On the product portfolio, CATALYSTEM continues to perform well against our plans with excellent feedback from existing and competitive customers. Outside the U.S, recon growth reflects the expected slow quarter in China with…

Thanks, John. It's a good first quarter, building on the operational and commercial improvements to the 12-Point Plan. Better product availability, commercial execution, and the focus and accountability of the business unit, all have established strong foundations for sustainably improved performance. As I set out at the beginning, innovation also continues to be a key component of our growth story, and you can see that playing out across our businesses. In Orthopaedics, EVOS, AETOS, CATALYSTEM and CORI are all growing well. In Sports and ENT, there's regenerative, the foot and ankle portfolio and the multiple applications of our COBLATION technology across our surgical businesses. And Advanced Wound Management, we had good growth in foams, skin substitutes and negative pressure. And we're continuing to build on that with a high cadence of innovation, delivering further new products and new clinical evidence in the quarter. In recon, we further developed our cementless knee offering with the addition of the LEGION Medial Stablized Inserts, which received 510(k) clearance. These are designed to provide surgeons with stability and improved kinematics while aligning LEGION with three major market trends in knees, the shift to medial stabilized inserts, which are now used in over 30% of procedures and the trends towards robotics and cementless fixation. In Wound, ALLEVYN Ag+ SURGICAL is in the early stages of its U.S. launch, adding a new antimicrobial dressing to our foams portfolio, including new silicone technology for gentle adhesion. We're continuing to innovate in this category as a high-growth segment within AWC. On clinical evidence, OXINIUM continues to demonstrate exceptional long-term performance. A report from the Australian National Registry reveals a 20-year survival rate in total hip arthroplasty of 94.1%, which is the highest among all bearing combinations. This corroborates similar results and peer-reviewed publications from the National Joint Registry…

[Operator Instructions] We will now have our first question from Richard Felton from Goldman Sachs. Please go ahead.

Two, please. The first one is on the phasing of growth through the year. On your full year call, you shared some reasonably detailed thoughts on how to think about phasing. Has anything changed in your view as you move through Q1? Can you maybe remind us of how you see top line growth progressing in Q2 and beyond. That's the first one. My second question is a product question on REGENETEN. I mean, could you maybe give us a little bit more color on what is driving growth within that product family? How big it is in your portfolio today? And then following the 510 clearance for the extra articular ligament repair at the end of last year, how much traction are you seeing there? And how big could that opportunity be over time? Thank you.

I'll maybe take a quick shot at REGENETEN, and I'll turn to John to color. But generally speaking, Q1 was our lowest growth quarter as this is what we guided to at full year. And because of the receding impact of the headwind from China as we flow through the year and the unfavorable impact of trading days also falling away, we should have growth pick up sequentially in each of the quarters going through. So we expect in Sports for growth ex-China to continue at near double digits, and in Wound as well across all the categories to continue to build as we go through the quarter. In Orthopaedics, what we have guided to is specifically in the U.S. recon side for sequential improvement quarter-on-quarter as we get to market growth levels by Q4 of this year in recon, and we are on track to achieving that. So I'll let John cover further details beyond that, but you should expect sequential improvement as we flow through the year. In terms of REGENETEN, last year, most of REGENETEN utilization was in the shoulder. We've indicated that REGENETEN is a platform technology, and we expect to develop evidence for appropriate use of that in other joints. What we have found now is roughly 10% of our utilization of REGENETEN is actually in now foot and ankle, which is a change relative to where we were last year, and that points to increasing utilization of REGENETEN, not only with further penetration into shoulder to rotator cuff repair, but also now increasing adoption of other joints and foot and ankle is the second category. So we expect REGENETEN to be a meaningful growth driver as we called out that it's now a material part of the growth story.

And maybe just to add a little bit of color on the growth trajectory. I think Deepak has covered some of the key component parts, but we all expect that Q1 would be a little bit soft. We guided to the 1.2 obviously delivering 3.1 base in Q1. We expect to see a step-up in Q2. And then in all likelihood, I think Q3 will be a little bit of a further step up. So we'll see another step up in Q3. And then Q4 will actually step back a little bit because obviously, we had a very strong Q4 in 2024. But generally speaking, that's the shape of the growth trajectory, all of which, of course, aggregates to around 5% growth for the year overall.

Next, we will have Julien Dormois from Jefferies. Please go ahead.

I have two. The first one relates to the performance of the recon business outside of the U.S. So it would be interesting if you could shed more light on what's going on outside of the U.S. So obviously, your performance in the U.S. is improving by the day, but maybe at the expense of what's happening outside of the U.S. So maybe if you could shed more light on what's happening there, that would be helpful. And the second question relates to more of a housekeeping question in light of the market swings in FX. Could you just remind us of what your expectations would be at this stage for the FX impact on your margin this year? I think you have a hedging policy in place that probably delays some of the potential benefits from a weaker dollar, but any color there would be helpful. Thank you.

Yeah, so just on your last question on the margin impact. I think we said at the prelims, we expect the Forex to be broadly neutral. Obviously, since then, there's been a weakening of the dollar. And we think that's going to translate into a tailwind of 20, 25 bps related to the full year, of course that could change with the stepup and volatile market environment, but 20 to 25 bps or so. In terms of the question on the OUS Orthopaedics, I mean, we saw 2.7% growth for the quarter. So it seems reasonably healthy. Knees, slightly positive. Hips, a little bit more challenged, but certainly good growth in other recon, plus 46%. So good quality sales in the quarter. But overall, we're very comfortable with the trajectory. We should see Q2 be relatively similar to Q1 and then we should see a step-up in Q3 come through is the expectation. And OUS, just to remind you again on the slides, ex-China, it's 4% in Knees and 7% in Hips. Exactly and to your point, that explains the step-up as you go into Q3 as you see the China impacts starting to annualize through Q2, hence why there will be a step-up in Q3 and Q4.

We will next have Jack Reynolds-Clark from RBC Capital Markets.

Two for me also. So starting with revenue guide. So obviously, Q1 is stronger than expected. I'm just wondering kind of how is Q2 shaping up so far? John, you talked about a step-up in Q2. Are you seeing that kind of come through? And then should we be thinking about potential upside to that kind of around 5% underlying revenue guide given that you're not expecting things really to slow down through the remainder of the year? And then the second question was just on tariffs. Could you talk a little bit more about the offsets you're implementing, i.e., sort of give a bit of detail around the operational offsets and kind of what is it comprised and how much you might be able to implement price increases.

Sure. In terms of revenue guide, obviously, we're not commenting on subsequent quarters, but we've maintained our revenue guidance of around 5% for the full year. And given that we exited at 3.1%, you can expect that growth should step up in subsequent quarters for us to attain the revenue guide. And we feel good about how we're positioned really right across the portfolio. When you look at our business across regions, we already commented on China, but look at all the established markets, emerging markets, we feel good about how we're positioned there and we look across our businesses. We feel really good about our position there. In particular, in Orthopaedics and especially in the U.S. recon part, which was the last bit of our business, we were expecting to turn around this year. We feel good about how we're positioned, how we performed in the quarter in terms of maintaining the momentum from Q4. And as we look at the rest of the year, we're particularly encouraged by the fact that the churn in surgeons has reduced. Now that started to minimize towards the end of Q3 and really turned positive. In other words, a net gain of surgeons in Q4. And that picture was maintained in Q1. And that sets us up nicely for the rest of the year. The contrast to that is in years past, where we had surgeon churn in the negative territory in the beginning of the year, which, of course, would create challenges for the balance of the year. So we feel good about how we're positioned to achieve the top line for the guidance we've provided. In terms of tariffs, what we're focused on is mitigating actions for that. As John pointed out, we've got a manufacturing network that gives us a measure of flexibility in terms of how we supply the market, how we direct product flows in order to minimize the impact of tariffs. And we've given you a sense of what the impact is going to be net of the mitigations that we can foresee operationally. And in terms of the longer term, obviously, we've got the manufacturing sites where we've got it, and there's different levels of exposure across our businesses. In Orthopaedics, we're relatively well positioned because of our manufacturing presence in Memphis, which is our major orthopaedics manufacturing center. But we also have Malaysia ramping up at the same time that allows us to actually position ourselves depending on how retaliatory tariffs go into effect. So there's a very dynamic picture, as John said. So we'll have to figure out how we balance where we manufacture and how we supply markets, from which factories to supply the markets. So those are some of the things underneath the headline of mitigations.

And maybe just to sort of help you and to clarify in terms of our guidance number, the bottom end of our range is based on the current, what I might describe as the 10% base case scenario, so basically 10% plus, of course, China. And the bottom end assumes that being in place for the remainder of the year. The upper end of our range, the $20 million assumes the reversion to the announced rates coming through on July 8. And that, of course, includes the China retaliatory rate as well. So just to be clear, what we've assumed in giving you that guidance number.

We will now have Lisa Clive from Bernstein. Please go ahead.

Could you just give us a little bit more guidance on the margin progression around the Malaysia ramp-up and then specifically the -- I think you were going to be closing down four plants, were those all in Europe? Just trying to understand in terms of the progression of your COGS this year and also potentially in the next year, how to think about that? And then just second on tariffs. Thank you for the guidance on that. It's very helpful. Between the U.S. and Europe, I mean, it seems U.S., China, you're pretty well positioned. U.S. and Europe, my understanding is there's a bit more back and forth. I think I'm right that there's a fair amount of Sports Medicine that goes from the U.S. into Europe. Just thinking through in a worst-case scenario where things ramp up with Europe, how well positioned you are to mitigate that?

Sure. I'll take that. Lisa, so first, in terms of margin progression, what we've said in '25 is the step-up in margin will come through the benefits of the network actions we've taken in Orthopaedics coming through this year. So we've closed four plants, as you alluded to. And three of them were in Europe, one in China, is how that plays out. And that's an important part. In other words, that taking out of fixed costs associated with those plants is where the benefit comes in. And what we've done is transfer the production that was occurring in those plants into either Memphis or Malaysia. What's important to keep in mind is these plants were specialized by particular SKUs. So it's not like we have four factories producing everything, right? So there were particular SKUs being produced in these factories and which we've transferred, as I said, into Malaysia and into Memphis. So from a margin progression standpoint, it's the overall costs coming out that contributes to that and the benefits of that production coming through in Malaysia, where we have lower labor costs, and in Memphis, where we've got scale, greater scale that we had in those factories, translating into better COGS. So that's the benefit that we see coming through in 2025 as a key underpin for the step-up in the back half of the year. Regarding tariffs, in terms of U.S. and Europe, I mean, roughly the way to think about it is, we've got China, we've got Costa Rica and we've got Malaysia. And roughly 2/3 of the tariff impacts come from China. So China, you've got high tariff levels, relatively low volumes in terms of where the impact is. Costa Rica is relatively high volumes, but relatively low, not that low, but lower tariff levels. And Malaysia, somewhere in-between. So as we think through this now between U.S. and Europe, in terms of Sports Medicine, most of the volumes actually come from Costa Rica. Relative to U.S. and Europe, they're not necessarily going to be impacted. So we do have a factory in Mansfield in Massachusetts that does supply the world and it would impact Europe along with other geographies. But the volume is out of Costa Rica for Sports Medicine. And so in general, I would say, for your modeling, you should take a look at China, Costa Rica and Malaysia as the principal sources of impact.

We'll next have Hassan Al-Wakeel from Barclays. Please go ahead.

I have three, please. Firstly, on margin, Deepak at the full year, you pointed to tightening the range at the Q1 stage. Appreciate things are changing very rapidly. But given the $15 million to $20 million impact from tariffs or around 30 basis points, is the lower end now more realistic? Secondly, on growth, which was stronger than your expectation at the full year, can you talk about any updated views on hospital utilization for the rest of the year? And also any competitive dynamics that you're observing given some launches in hips at some of your peers? And then finally, can you talk about the strength in CORI placement in the quarter and what is driving this regionally? Also, given the restatement of consumable revenue, can you provide the growth in consumable revenue in the quarter that has now moved to recon and whether this was meaningfully different to underlying growth in the recon business prior to the restatement?

So in terms of margin, no, we've set a range of 19% to 20%. We've said you should think somewhere in the middle of that as the expected outcome was kind of our commentary, and that hasn't changed. And you can work out now what that means given that we've said that in the face of a tariff impact of $15 million to $20 million. So bottom line, no change in the guide or no change in expected outcome. Second, in terms of growth being stronger, as I said, we've anchored to around 5% at the beginning of the year, and we've reiterated that guidance. And implied within that is a step-up and I've already answered that previously, which is it's expected to come across all of our businesses and indeed all of our geographies. In terms of the competitive picture in Hips, we actually feel very good about how we're positioned with CATALYSTEM. As you'll recall, until recently, we didn't have a short stem offering, which basically meant we had limited participation in the direct anterior approach that's now increasingly a bigger part of hip procedures, particularly in the United States. With the launch of CATALYSTEM, we now have the ability to better participate in that growing portion of the market. And our early results a quarter-plus into the launch, we couldn't be happier with the level of uptake and the type of feedback we've received, not only from our own surgeons, but also from competitive surgeons as well. So really, really nice uptake of CATALYSTEM, which we believe will be a growth driver, and we feel very, very good about how we're positioned relative to competitors there. In terms of utilization in the overall procedures, historically, I've said I've shied away from commenting directly in terms of what's…

And just to maybe give you a little bit more color, Hassan, on the size of the consumables piece and the impact it has in sort of shifting it from other recon into Knees and Hips. Just from a Knees point of view, I mean, it's relatively de minimis. So the numbers under the new reporting regime for Q4 versus Q1 is 4.2 playing 4.6 in new money, if you like, and then 4.1 playing 3.6 in old money. So it really doesn't make much of a difference on U.S. Hips. In relation to Knees, obviously, where it's a bigger impact, we're shifting somewhere in the region of sort of $5 million to $6 million from other recon into U.S. Knees. And so the Q4 number we talked about in old money was around 2% and in new money is around 3%. If you remember at the time, we said it would make roughly a 1% plus contribution. So the Q4 number shifts from 2% to 3% in old versus new money. And the Q1 number roughly sort of 1.5% or so to 2.5%. Again, 1% addition to that. That helps you to size..

We'll next have Kane Slutzkin from Deutsche Bank. Please go ahead.

Just a quick one, John, just on the U.S. recon. I seem to recall you saying at the sort of roundtable in February that the U.S. Knees needed to be sort of 2% in Q1 and sort of the exit at 3% in order to kind of really be on track to return to market growth. Could you just confirm that was the case? And on the adjusted measures you've given for the trading days, would it be fair to say you're there and thereabouts?

Spot on. I mean I think we said from an ADS basis, we want to be around sort of -- we said we'd be consistent Q4 to Q1 around sort of 2% or so. And then we expect to see that 2% grow on an ADS basis through Q2, through Q3, and we then we will plan to exit the year at around 4% or so. And in fact, the numbers we're reporting today confirm that trajectory, and we remain confident in looking forward to our pipeline and Deepak's comments earlier on about the account wins and account losses and the continued positive trends that we're seeing there that we remain on track to deliver that improved trajectory through the remainder of this year.

Right. John, sorry, I just missed something you mentioned earlier you were talking about sort of the sort of scenarios that play out to get you to the lower and the upper end of that 19% to 20% range. I appreciate Deepak gave us sort of a view that you're probably going to come somewhere in the middle. But just could you just relay those scenarios? I completely missed it, you were sort of suggesting something around what gets you to 19% versus 20%.

Yes. The bottom just to be clear, the range on tariffs is $15 million to $20 million. The bottom end of the range is based on what I describe as being the current 10% base case and most countries on a 10% tariff. China on 145 retaliatory, 125 on China, et cetera. If that's in place for the remainder of this year, that gives you the bottom end of the range. The top end of the range, the $20 million assumes on July 8 that none of these issues are resolved and we revert back to the tariffs as announced. And again, I won't go through all the details, but that's largely the China remaining in place and clearly Malaysia kicks up 24%, Costa Rica goes up a little bit and so on and so forth. So the tariffs, as announced, as we would revert to all else being equal on July 8. That represents the top end of the range. So that gives you the balance at both the bottom and the top end of what we provided.

We will next take David Adlington from JPMorgan. Please go ahead.

Firstly, just on China, maybe you could just remind us of where China peaked as a percentage of sales and where you've come down to as of this quarter in terms of percentage of sales? And following on from that, does it still make commercial sense to maintain a presence in China? And then secondly, just to fully clarify, John, because I might have a bit this morning. But when you talk about the range and the top of the end of guidance that you just pointed to, are you talking about 15% to 20%, I think the impact of the tariffs or the 19% to 20% margin range that you've given?

I'm talking about the tariffs, David. The bottom end being 15%, the top end being 20%.

Yes, right. Understood. Perfect.

$20 million tariff impact just to be clear. So regarding China, David. So today, when we talk about the China impact fading away, so we've seen the peak in Q1. And what we mean by that now is China was previously for us about 7% of sales. This year, when we look at our budget, it's down to about 1.7%, 1.8% of sales.

For Q1, we're about 1.9%. For the full year, we think we'll be about 2.4%.

Thank you, John. So China is now a significantly smaller portion of our business. So when we talk about now AET part of our sports business coming under VBP, that gets implemented, we think, in the back half of the year. The impact of that is significantly lower than joint repair because it is a smaller portion of our business. And China overall is now quite a smaller proportion of our overall business. So hopefully, that gives you a little bit of a picture about the reducing proportion of China within our book of business. In terms of commercial steps to Canada and China, obviously, we've got some practice of this, if you will. We implemented changes in our go-to-market model in China following the implementation of VBP in recon. And when that came through in sports, we were informed by our experience of our recon side that we applied. So suffice it to say that we're applying the lessons as we go forward. And at the end of the day, to make the business now at a significantly lower price level be profitable for us. And that involves a series of steps that we've got to make in country in order to make the business profitable there. But we've got experience now doing this having gone through this a couple of times.

And David, maybe just to help you a little bit more shape on the China trajectory as well because this is obviously a key driver for our improving performance on the top line as we progress through the year and indeed also on the margin as well. In Q1, year-on-year, we were down roughly 50% in China, and we think that's the peak of the China impact. In Q2, we're forecasting to be down 35% to 40%. In Q3, down 30%, and in Q4, down 10% to 15%. So you can see it having less and less of an impact as we progress through the year, which correspondingly helps our top line and equally helps the drop-through in terms of our profitability.

And just to clarify, are you profitable in China currently in any of the businesses?

So just I was going to come back to that actually. As a result of the commercial steps we've taken, when you look at the profitability of our affiliates in China, it's kind of middle of the road when you look at the country level profitability across our geographic mix. So in other words, we are profitable with our current book of business. And in terms of league tables, it's kind of middle to maybe a little bit on the upper end of the range when you look at the country mix.

We will next have Veronika Dubajova from Citi. Please go ahead.

Most have been asked and answered already, but maybe just two. One, I guess, just looking into 2026 and the tariff impact as it annualizes out on the worst-case scenario, is there any more mitigation that you can do, John, as you think about 2026? Or should we be taking the number you've given us for this year and doubling it for next year as far as tariffs are concerned? That's my first question. And then my second question is, no one's asked about what we spent all the time on ortho, but the strength in devices, if you can talk to what's driving it and how sustainable you feel that is through the rest of the year? Thank you, guys.

Maybe if I come to the tariff one and Deepak talk on the AWB. Look, I mean, it's obvious there's a lot of moving parts on tariffs, a lot of uncertainty out there. But as you'd expect, we've done all the scenario planning, positive, variations, permutations and combinations and so forth. I think without getting drawn into a huge amount of detail on picking that, I think what we can feel reasonably confident of is when we've looked at all those in the rounds and we've combined that with, of course, our improving margin trajectory and the savings that we've got coming through, both operational savings as well as what we can do from a very specific tariff mitigation point of view, then we're comfortable that we'll continue to see an increasing margin come through in '26 and beyond.

And regarding devices, just to orient you, it's both our single-use that's PICO and our traditional use product portfolio in RENASYS and of course, there are some other products like Leaf that are included in there. And all of those products are growing. So very encouraged by the performance there. PICO has had a long track record of delivering growth. And so Q1 just builds upon the trajectory that we've built up over time. So it's a picture of continuing performance. With RENASYS now, it too was a growth driver, but we've got a very solid kind of performance of RENASYS as well in Q1. As we adapt our business model within that category, we expect that to be a more meaningful growth driver as we get into subsequent quarters. So very pleased with how we're positioned there and how we're starting to perform. And Leaf is another component of devices. It's still a relatively small part of our overall portfolio, but it's been a nice growth driver for us. Hopefully, you'll hear us talk more about it as we go through the future. But overall, all of the product portfolio is growing nicely within that category.

We will next have Dylan van Haaften from Stifel. Please go ahead.

So just first one, just on the current working capital and with Ortho, because from my understanding, you guys have missed a couple of years of working capital theoretically in Ortho. Does that help you offset some of the tariff impacts? And is that sort of embedded into this number?

So short answer is yes, but I wouldn't get too carried away with the favorable impact of inventory because the devil, if you will, is in the details and it's in the SKU mix, right? So what we have actually, and you've heard me comment on this before, which is one of the challenges we have, is not only do we have high inventory, we started at the beginning of the 12-Point Plan in 2022 with the wrong mix, if you will, right? We produced not quite the right assortment of products given our underlying demand, which means that our inventory -- our new -- the new production now, the new inventory we're putting up is much, much healthier, and we've given you some proxies to assess that. But the base inventory level will grow into over time. So you put those pieces together, yes, at a high level, it does help you having a bunch of inventory. But the truth is that there's devil is in the detail. And as we get -- produce the right mix of products to cater demand, that will be hit with the level of tariffs that we've got today. But you're right, at a first level, the inventory does kind of help you.

And just one follow-up. Just thinking about sort of progression into the year. Are you guys at all concerned about any consumer dynamics? And could you maybe just remind us what the rough ortho private payer and co-pay exposure is? And if you are at all concerned, any change in behavior there could change growth dynamics for the market?

Look, I think the operative word here is dynamic or uncertain. I mean, there's clearly enough uncertainty and enough dynamics here. But -- so here's how we put it. There's an underlying demand that's driven by demographics. If you look at kind of our mix of businesses that go through kind of Medicare versus commercial, that kind of helps you think about the relative exposure in each of our businesses. At the end of the day, the demand for our products are based on medical need and underlying kind of demographic factors. So the demand is likely to be there. But of course, particularly in the U.S., things like co-pay and other things do determine the level of -- the ability for patients to access that care. So yes, there is some level of concern. And going back to some of the questions that people asked earlier on top line will be based on how we outturned in Q1 where we raised our guidance for the full year. Part of the reason why we haven't is, in fact, to take some of these uncertainties into account.

We will next have Robert Davies from Morgan Stanley. Please go ahead.

I had three. The first one was just in terms of the China phasing that you gave the sort of down 50%, which is progressing towards minus 10% over the year. Just curious in terms of the visibility. Give us a bit more color perhaps in terms of where that comes from, what's the underlying assumption in that trajectory over the year? The second one was just on -- I know you mentioned in some slightly old manufacturing or factory closures in different places. Just wondered if there's anything more to do on that? And that sort of ties in with the third question, which is just where we are big picture on the 12-Point Plan. What are the key elements of the 12-Point Plan you still have got to achieve? And are there any additional opportunities that you've come across over the last year relative to what you started out with?

Sure. So in terms of factory closures, the hard work around closing the factories, people impact associated with it, all those things, that's already done. So all of that done. Work was completed in '23 and the early part of 2024. So what we're expecting now in terms of the financial impact of that, as I indicated earlier, is when we transfer the production into our remaining facilities in Orthopaedics, Memphis and Malaysia, that we will see the benefits of basically the better cost position we have in those factories coming through. And of course, the fixed costs coming out of our cost base of the factories that we closed. So that is -- we're on track to seeing those financial benefits come through. So there's no more, if you will, operational work that needs to be around factory closures. In terms of the 12-Point Plan, essentially, there's ongoing work from what we embarked upon as part of the program that needs to progress and the benefits of that to accumulate. But there's no new initiatives that we need to kick off. It's just a continued kind of execution of the work that we identified and really embedding the new ways of working, the new rigor, the new culture of accountability that we've built in the organization that I'm very pleased with how that's gotten kind of embedded within the organization. So in effect, taking the improvements that we've already made around 12-Point Plan and making them stick. We've always said, once the program kind of formally concludes as it has, the full benefits of that will flow through in the remaining year, and that's the year in 2025. One of those examples is related to the factory closures that you asked about. But there is some of those in…

I mean, I'm reluctant to give you even more breakdown on what is now a relatively small part of our business in terms of the phasing. Q1, we can get quite a little deeper, but just I'll shape things a little bit. Obviously, on the ortho side, we expect to see a reasonably strong recovery in our ortho as we work through the channel down this organic phase. We were down quite significantly in Q1. We expect it also to continue to be down in Q2, but on improvement traject. Q3, a little bit down, but maybe flat, and then a little bit up in Q4 as we fully work through channel adjustments. Then it's the same pattern of recovery through the year, but there's a number of different dynamics there. There's the annualization of the joint recovery piece as we go through the second quarter. And then, of course, there's the impact of the AET, VBP in the second half. So that means that the actual movement in our Sports whilst it remains negative through the year, it's an improving negative trajectory. So call that around 50% down in Q1 and then improving, getting less negative as we progress through the year, but still exiting negatively because of the impact of AET. And then you look at our Wound business and of course, our ENT business, both of those remain in reasonably pretty healthy growth actually and having quite strong performance. So that gives you a little bit of the component parts that shape up the overall trajectory that I just got to tell you.

Absolutely. So that was our last question. So appreciate all of the interest, all the questions. Just to summarize, we've had a great start to Q1, and we're set up well for continued delivery through 2025, and I look forward to updating you as we progress through the year. So thank you very much.