Welcome to the Smith & Nephew second quarter and first half results meeting. I'm Deepak Nath, I'm the Chief Executive Officer, and joining me is Chief Financial Officer, John Rogers. So 2025 is a key year of delivery for Smith & Nephew. I'm pleased to announce the results that put us firmly on track for both our full year growth target and the guided step-up in profitability. On revenue, 6.7% underlying growth in the quarter reflects sequential acceleration across all regions and business units. In Sports Medicine, we've maintained the strong momentum across Joint Repair and AET outside of China. In Wound, the continued performance of AWD and the rebound in bioactives produced double-digit growth for the business unit as a whole. In Orthopaedics, we delivered yet another quarter of growth and in line with our previous commitment, our Recon and Robotics business sustained its recent improvement, both internationally and importantly, in the U.S. This is now the fourth quarter of sequential improvement in U.S. Recon and Robotics. On profitability, 100 basis points of first half trading margin expansion is slightly ahead of what we indicated as we brought some efficiency savings forward. We remain on track for our full year margin guidance of 19% to 20%, which includes the impact of tariffs. There's still a lot of uncertainty about where tariffs will settle, but we continue to expect a net headwind of about $15 million to $20 million in 2025. As previously indicated, we expect that margin expansion will pick up further in the second half. This should come from cost savings increasingly dropping through to our P&L, particularly from our manufacturing network optimization over the last 2 years, together with the reduced year-on-year headwind from value-based procurement in China. I've talked already about the improvements in growth and…

Thank you, Deepak. Revenue was $3 billion in the first half, up 5% on an underlying basis compared to Half 1 2024. Reported revenue was up 4.7%, including a foreign exchange headwind of 30 basis points from the relative strength of the dollar against most major currencies versus the same period last year. As the dollar weakened in the second quarter, the ForEx headwind on revenue became a tailwind, and we now expect a circa 50 bps ForEx tailwind on revenue for the full year. Performance in China was in line with expectations. And excluding these headwinds, growth would have been 7.2% on an underlying basis. This represents a 220 bps headwind in Half 1, in line with our guided full year impact of circa 150 bps as the impact of Sports VBP unwind in the second half. Performance was broad-based with all 3 business units contributing significantly to the overall group. Orthopaedics grew 4.1%. Sports Medicine and ENT grew 4.1%, although again, excluding China, growth would have been 9%. Advanced Wound Management grew 7.1%. Overall, a good set of growth figures and particularly good to see that 3/4 of our growth is drawn from products launched in the last 5 years. Moving now to the summary P&L. Gross profit was $2.1 billion, resulting in a gross margin of 70.5%, which is a 40 basis point increase on the prior year, driven by positive variances on price and volume. We saw a further 60 basis points of positive leverage across our operating expenses as we benefited from operational savings in SG&A and only a small uptick in R&D spend driven by Half 1, Half 2 phasing. Operational savings were slightly ahead of expectations as we accelerated some of our operational savings into the first half. We also expect to catch…

Thank you, John. So when we launched the 12-Point Plan, one of our core ambitions was to reposition Smith & Nephew as a consistently higher growth business. We're very much on track. In the first 2 years of the plan, we delivered growth of over 7% and 5%, respectively. And in the first half of the year, we've delivered yet another 5% despite some significant headwinds. That includes 2 fewer trading days for the half. And while China headwind has passed its peak, it still had an impact on H1. So if you look through the detail of the quarter, you'll see we're doing what we said we would do. Sports Medicine and Wound continue to grow well. In U.S. and the U.S. Recon specifically, we're showing progressive improvement quarter-by-quarter. And our investment in innovation is supporting the acceleration in revenue growth. Let me take a moment to go into more detail on these 2 last points. A year ago, we highlighted the strong performance in Trauma & Extremities based on new product introductions, implant supply, capital deployment and improved commercial execution. We also detailed that all the same elements were in place to improve performance in our U.S. Recon and Robotics business as well. As with T&E, these actions have driven 4 consecutive quarters of sequential improvements in U.S. Recon and Robotics revenue growth. On implant supply, key product line item fill rate reached its target in the fourth quarter of 2023 and capital availability followed soon after. With hip set shipment also was at goal in fourth quarter of 2023 and knee sets started reaching their goal in the second quarter of 2024. This is also being supported by a steady stream of product launches over time, such as the newly launched short-stem hip. We also launched 10…

Jack.

Jack Reynolds-Clark from RBC. I've three, please. The first is on revenue guidance. So with Q2 having been, I guess, stronger than I think people were expecting, does that imply that there's upside to the 5% target for the full year? Or are you expecting things to slow down elsewhere in the business? Then on margin guidance. So I appreciate you mentioned some kind of moving around of R&D and possibly some other expenses as well. But could you walk us through, John, the bridge in H2 margin and whether the kind of upper end of the 19% to 20% margin range is possibly more achievable? And then the last question was on U.S. Knees. So could you just run us through some more detail of the work you're doing there and kind of how much of the weakness was driven by the market versus your own activities and how you're thinking about kind of growth versus margin in that segment going forward?

Sure. I'll frame this up, and I'll leave it to John to kind of give you the margin guidance. So overall, as we mentioned, given all the puts and takes that we see, we feel good about the guidance for the full year. So there are positives and negatives as we go through. We'll continue to improve commercially in the back half of the year, but we do have a step-up that we expect, right, both from a revenue standpoint and from a profit standpoint. We're in a more uncertain environment. We've characterized for you what we expect the impact of tariffs to be. But fundamentally, there is a much more uncertain period. That, coupled with the step-up that we need to see in the back half of the year, particularly around margins and all the various effects around comparators, China VBP falling off and other things, we feel at this point, it is prudent to maintain the guidance that we've given, both in terms of revenue and margin. In terms of U.S. knees, as we unpack that a little bit, the headline is that at a U.S. Orthopaedics level, including Trauma and Recon, U.S. Recon and Robotics level and at a Global Orthopaedics level, we're seeing sequential improvement. And those are very, very strong proof points that the improvements in supply and product availability, commercial execution, our ability to connect all the different pieces together is delivering the desired effects. So that's the headline in terms of where we are. I'm pleased with the progress we're making. The softness in knees, which were offset by the greater-than-expected strength in hips, a couple of factors. First, we are going through a step to refocus our commercial organization to the higher volume accounts. I've said in previous settings that we've got…

Yes. Just to sort of build on a little bit what we said, we saw the 230 bps of margin accretion in Orthopaedics in the first half, which was a reflection of those changes that Deepak just talked about. And that very much puts us on track to deliver the margin expansion that we set out last year for Orthopaedics. So we ended last year with just below 12%. And if we look forward to this year, we should end north of 14%. So a big step-up, a big improvement in margin for Orthopaedics. In terms of setting a little bit of color on the revenue guidance, I mean you're right to highlight that we did say that we would expect to see a step-up in Q3 given China annualizing, given the reversal of the impact of trading days. So in Q3, we've got level trading days year-on-year as opposed to 2 less in the first half. So we will expect to see a step-up in Q3. That said, important to remind you that Q4 for us last year was a very strong quarter, particularly in the U.S. So we've got quite a tough comparator. So I would say that we're only 6 months of the way through the year. There continues to be significant sort of uncertainty over macro and external conditions like tariffs, for example. So now is not the time to be changing our guidance. In terms of the margin phasing, again, we talked about bringing savings forward from Half 2 into Half 1. And of course, those savings will repeat in Half 2. So that's an upside. At the same time, we've got the impact of tariffs, the $15 million to $20 million that we made reference to. And that will, of course, primarily hit us in the second half. So that broadly offsets that. And then also, we've got the U.S. OUS mix in Q4 as well. Again, we had a very strong U.S. in Q4 of last year. So again, at this stage, I would say now is not the time to be changing our guidance on margin, the 19% to 20% holds. And we've said in the past that we expect it to be broadly center of that range. And actually, if you look at the bridge from Half 2 '24 to Half 2 '25, so I'll give you a little bit of color here. We'd expect sort of cost inflation of around 1.9% or so. VBP on China will be about a drag of 80 bps or so. Remember, we said it was going to be 110 bps for the year. So that's averaging out Half 1, Half 2. We'd expect to see revenue leverage of around 200 bps or so and then operating savings of a similar amount to get us up to the circa 19% to 20% margin for the full year. So that gives you a little bit of color on the Half 2 bridge.

Richard.

Richard Felton from Goldman Sachs. First one, just a follow-up on margin. John, can you remind us the drivers of the operating savings in H2? How well advanced are those programs? How much visibility do you have that, that is going to be achieved and fully derisked? And then also, what elements of those operating savings are structural? And how should we think about that dynamic into FY '26? That's the first one. The second one, just a follow-up on U.S. Knees, Deepak. You mentioned at the end of the quarter, a slightly softer procedure environment. Why do you think that happened? Why was that the case? And have you seen that continuing into Q3?

Sure. I'll take the U.S. Knees part. So this is in our base of customers, right? And it's hard to speculate. We don't know the reasons really. I mean we can talk about vacation schedules because there's vacations every year on that time frame. So it's hard to kind of really divide that. So it's hard to tell what drove that. What we can tell is there was a slowdown in our base. I've in the past, been somewhat loath to comment on market. We're in a period of performance recovery in the Orthopaedics business, where it's sometimes difficult to parse how much of something is you or us versus the market, right? We can do that in Wound. We can do that in Sports. I've been loath to comment on that. Now we're in a better place actually, much better place even in Orthopaedics in the U.S. than we were a year ago or 2 years ago. But having said that, what I do feel comfortable is talking about what's happening with our account base, right? And so -- but there seems to be, at least from what we can tell in our numbers, some slowdown related to vacations. Surgeon transitions was another factor. As surgeons were moving practices in some cases, from hospitals to ASC settings or across networks that did have an impact unless something within our base. What's encouraging for me is when I look at churn, you've heard me comment about that in the past, where through much of '23 and early '24, we were net unfavorable. In other words, we lost more surgeons than we gained. For a variety of factors, retirements and those types of things were the large factor. And we had some competitive losses, too. But we also commented in the previous period that those have turned favorable starting in really the Q3, Q4 of 2024. And I'm pleased to report that, that trend has continued even into Q2, building off of Q1. So I feel good about the operational progress that we're making. And I do feel confident as we go through the second half of the year, we'll be at a different place. And again, I come back to, in the end, there's different ways to slice and dice this. But what I'm looking at, in addition, knees [indiscernible], and we're looking at knees and hips separately as well. But in the aggregate, when you look at U.S. Recon, we're seeing nice sequential improvement, and we are closing the gap to market. We'll see, of course, not all of our competitors reported in the quarter. But when we look at the trend, Q3 '24, Q4 '24, Q1 of '25, we are closing the gap at the U.S. Recon level. And of course, outside the U.S., we've seen some strength now over the last couple of years. We've continued to maintain that. So overall, I feel good about where we're positioned. So I'll hand it to you, John, for...

So in terms of the savings and where they're coming from, again, I'd point you to the slide that we've got in the deck, which sets out, I hope quite clearly, they come from across the board. There's a big chunk clearly that come from manufacturing, procurement, but there's also warehousing and distribution, business support, sales and marketing. We're seeing savings across the entirety of our business. We had 51 different programs, most of which are -- all of which are already in train and many of which are already complete. And so in terms of visibility of those savings, I feel pretty confident that we'll see that margin accretion come through in the second half, as we said, consistently before. In terms of '26 and '27, again, point you to the chart, we should expect to see another $50 million to $100 million of savings flow through in '26 and '27 as a consequence of some of the changes we're making now as we see those flow through into future years. So again, we should see a little bit of support for margin improvement as we go into '26 and '27.

It's Graham from UBS. Just two for me, please. On the Ortho inventory in terms of the lower cost inventory started to flow through post the site closures over the last 12, 18 months. Have we seen much of that yet? I think we always thought that would be like a H2 sort of weighted story. So it'd be interesting to get some color on that. And then just on tariffs. One of your peers appears to be able to not pay tariffs on Hips and Knees. So just to get your sense as to have you explored the Nairobi Treaty for that protocol? And is there anything to do there?

Graham. So in terms of inventory, you're right, we've previously called out that the big -- the accumulated benefits of all of the network optimization efforts we've done will fully manifest in the second half of the year. We remain kind of on track to that. So that will be one of the key drivers of the continued margin step-up from where we are today into the back half of the year. But it's not like we haven't seen the impact of that already. So those have come over the period of time one at a time. And so mechanically, what happens is you close a site, obviously, there's upfront costs associated with the site closure. We'll typically build up some level of inventory as safety stock in terms of what we manufacture there. And then we transition that production to elsewhere within our network. So the impact of all of that will flow through and there's a time scale associated with it. What we're actually doing also in addition to that is as part of improving our product availability, which has twin objectives. One is to improve availability and actually reduce our inventory, right? And there, it's about how we connect supply and demand down to SKU levels. And we've been at this now since the start of the program. And there, we've made really, really good progress, in terms of being able to connect that at a much better level. Now there's still more work to be done. But when I compare to where we were in '22 versus this, it's kind of a night and day thing. And that's part of what John talked about in terms of our inventory health being better. So he provided some stats around what our slow turning inventory has been doing.…

Just to build on Deepak's point there. If you look at our manufacturing network, as it happens, the more of the tariff impact comes through for us on Wound and Sports and less on Ortho because most of our manufacturing is U.S.-based for Ortho. So there's a little bit more of an impact in Wound and Sports than there is in Ortho.

I think, David, you had a question?

A couple from David Adlington at JP Morgan. Just on the buyback, John, given the strong cash flow in the first half, I just wondered how you're thinking about ending the year in terms of net debt to EBITDA? And then secondly, also good to see progress on the inventories. As you look into the medium term, where do you think you can get down to? And how much cash could that free up?

Do you want to take that, John?

Yes. So on the buyback, notwithstanding the $500 million buyback in the second half, I'm still expecting us to exit the year below our 2x net debt-to-EBITDA sort of target level. So giving us plenty of capacity for all of our growth ambitions, et cetera. So very strong cash flow, which is very positive. On the inventory side, obviously, we don't want to overly guide to what we're going to deliver in the future. But you've seen the direction of travel over '24 and 2025. And we would expect that improvement to continue. I think when it comes to Sports and Wound, we're now getting down to what would be pretty good industry levels. I think the opportunity continues to exist in Ortho, and we've seen good improvement in the first half. We'd expect that to continue into the second half of this year and then further improvement in Ortho next year as well.

It's Sam England from Berenberg. So the first one, just in Hips, you called out the benefit from CATALYSTEM in Q2. How should we think about the market share gains you think this can drive, especially in the ASC channel given the focus on anterior surgery and how crowded is that space becoming now for anterior products? And then just looking at the other Recon business and the growth there that you called out was driven by Robotics. Can you just talk a bit about demand and placements for CORI in Q2? And I suppose, is more of the demand being driven by the hospital or ASC channel, just some sense for the sort of split of demand between channels?

Yes. So we're pleased with the uptake of CATALYSTEM. Obviously, not every one of our competitors have reported, but you've seen 2 report. We feel good about where we're positioned. The surgeon feedback on CATALYSTEM has been very, very good. And so we feel good about how we're positioned there and continuing to have traction across a range of settings, not only in ASCs, but also in hospitals, academic centers and community hospitals as well. So we feel good about its value proposition. As you know, the market over the last 3 or 4 years has gone through a fairly profound shift from a traditional approach into direct anterior approach. So we were among the later players, not the first players to come into that space, but we have a very compelling product offering in a segment that's rapidly growing. So feel good about the surgeon feedback and the resonance that we're getting across the range of settings. In terms of Robotics, what I'm looking at -- what we're looking at is not just placements, right? We could be executing a place first kind of strategy. What we're looking at is both placements and utilization. And we're seeing very nice uptake. In other words, where we place, we've got surgeon champions that are using that integrated into their kind of routine practice, which is really kind of the true measure of what we're trying to do. We're also looking at whether it's driving competitive conversions. So we're using that primarily to retain our existing customer base, both of which are important. So there's multiple things we're looking at around CORI, placements just being one of many factors. And continue to be pleased with the progress there. We're looking at how we do an ASC channel as well as in teaching institutions where historically, we've kind of skipped a beat or 2. And so the progress we're making on both of those is very, very encouraging for me. So overall, very pleased with how CORI is doing across channels, and the type of utilization that's getting and maybe where we replace them.

And just again, just to build on Deepak's comments there. We're not going to split out, obviously, numbers that go into the channel, but it's fair to say that in the second quarter, we certainly over-indexed in ASCs in terms of the proportion of our CORI placements that went into ASCs in the second quarter, which I think is really encouraging. We said before, we think that CORI in terms of its form factor, in terms of size and its footprint and also its capital cost being significantly lower than the competition, actually puts it in a very strong position, particularly in the ASC channel. And we're starting to see that come through in terms of the number of placements we're putting into that channel.

Should we turn to the phone.

[Operator Instructions] The first question comes from Veronika Dubajova of Citi.

Hope you can hear me okay. I have three, please. First one is just Joint Repair. Again, another impressive quarter for you guys with double-digit growth, excluding China. Just curious, Deepak, if you could touch upon the drivers that are enabling you to deliver that growth and how sustainable you think that is not just into the back half of this year, but also as we think about 2026? My second question is just maybe if you can elaborate a little bit on the skin substitute exposure that you have and the risks that you might see there from the new proposal and maybe just give us a flavor for where your current pricing stands relative to the $125 that's been proposed by CMS. And then my final question is around the buyback. And just to what extent do you feel this year is giving us a good indication for your ongoing recurring future capacity to return cash to shareholders?

Sure. So in terms of Joint Repair growth, we take China out of it, as we've indicated multiple times, we will annualize the impact of Joint Repair VBP as we head into Q3. But when you look at our performance across all other regions, very, very nice double-digit growth. The key drivers are Q-FIX and what we've done with that and REGENETEN. And REGENETEN, it's increasing adoption within rotator cuff, which was kind of our lead indication. But as we expand indications into the Achilles in particular, we're seeing a bigger proportion of REGENETEN use -- not big a proportion, but increasing proportion within the Achilles as well. And of course, we're not stopping there. Hips is another area that we're going after. So very nice uptake of REGENETEN, we expect it to be a platform technology. So we're starting to see its utilization across different joints. So Q-FIX, REGENETEN key drivers of Joint Repair growth everywhere outside of China. In terms of skin subs, look, it will be a net headwind, both from a revenue and profit standpoint for our Wound business. Fundamentally, obviously, there's the pricing that you mentioned. But in addition to that, there was no products got taken off the market as a result of this. So how practice patterns change as a result of that does remain to be seen. But relative to a previous version of this where on the back of expected clinical evidence, there'll be fewer players in the market at lower price point with some limits on adoption was for us, we had characterized it as a net neutral thing for us as we pivot into this regime, which, of course, hasn't been finalized, it would be a net headwind. Obviously, for the year, we've taken this into account in our guide and made some remarks and John did as well. So we feel good about our ability to kind of navigate through this headwind for 2025. And of course, as to 2026, as we look in the year, we're not going to guide to that quite yet. Now it's not the moment to do so. But let's just say that we're active participants in it. We remain committed to bringing forward products that have strong clinical evidence back in. And in terms of what we're going to do, we're going to stick to what we think will be the right way to develop products that are substantiated with clinical evidence, and we'll see how things evolve from there. In terms of buyback, do you want to take that, John?

Yes, I'll cover that. Again, just to make very clear, I'll sort of draw your attention to the capital allocation policy, which is very clearly set out. So first and foremost, we want to be able to invest in our organic growth. That's absolutely clear. That's one of our key objectives is to drive the growth of our business forward. Secondly, we want to be able to acquire businesses that are complementary to our portfolio that will assist in driving growth. Thirdly, we've got to pay a dividend. And then if there's anything left over from that, then, of course, we have the option of paying a share buyback or doing another share buyback. But I want to make it very clear that, that is the last option and that the primary focus is driving our top line growth, investing in our business through organic growth and acquisitions and obviously paying a dividend. And then as the last element of the capital allocation, share buyback. So we were able to make the share buyback in the second half of this year of $500 million. As I said earlier on, we will expect to still end the year below our target leverage ratio and with all the capacity that we need to drive our top line growth.

The next question comes from Hassan Al-Wakeel of Barclays.

I have three, please. Firstly, Deepak, if I can follow up on your comment on slowing procedures amongst more active surgeons in Knees. I wonder if you're seeing this beyond Knees. And separately, any color on the weaker OUS Hip performance and any key challenges faced here. And I guess, combined, what are your expectations here and in U.S. Knees in the second half? And then secondly, if I can follow up on Skin subs. Was the stronger growth in the quarter supported by any physician behavior changes due to the LCD? And then on the proposed reimbursement, I appreciate behavior can change as can volumes. But what is the impact from the lower price in isolation? And what is your exposure to the hospital inpatient channel? And what are the mitigating actions that you could take? And then finally, how are you thinking about the pipeline of potential bolt-on deals, particularly as we look into next year given the buyback announced for this year?

Okay. So what we've seen in terms of procedure slowdown was really in Knees and Hips. And medically, a different level of, I would say, urgency around knee placements versus hip replacements, as you know. So what we've seen in our active base was really more around knees compared to hips. And so that's that. In terms of hips OUS, there's a China factor or an ex-China factor OUS. There's a little bit in Japan, for example, that we're looking at. But overall, OUS orthopaedics performance remains an area of strength. So we continue to perform well commercially and although there's quarterly volatility, primarily around timing of distributor orders and things, we feel good about how we're positioned OUS very large. But there are individual markets where there may be something from one quarter to the next. In terms of Skin subs, in terms of physician behavior changes in response to pricing, we did see some of that, but it was not to the extent that, that was the dominant kind of factor driving our performance there. Now we have not previously split out how much of our business is Skin subs. But I'll just say it's material, but in the realm of -- from a group impact standpoint, I expect that with pricing changes here, we'll be able to navigate through this. So I guess, rather than get into breaking out the impact of Skin subs, I'll just leave it at that. In terms of proportion of utilization in hospital versus physician office, it's about 25% of -- sorry, 40% of use is in the physician office compared to the hospital. In terms of our own activities, we've always had a strong presence on the hospital side, which we continue to maintain. And in terms of development of products, we continue to be focused on not just coming up with the next version of skin subs, but also investing behind the development of clinical evidence. And that will remain the case as we go into next year and beyond. So skin subs. And in terms of acquisitions, as John mentioned, a key priority is to drive growth, top line. And at the level of buyback that we've announced, we are not going to be limited in terms of the type of bolt-on acquisitions that we're going to be able to do as a result of it. So we feel good about the opportunity set in front of us and the ability to execute on that. Bolt-on M&A or M&A in general is a key part of value creation in MedTech. We have an active corporate development team that's well plugged into the ecosystem, and we've got a pipeline that we feel good about. And we don't feel constrained in our ability to do those bolt-on M&A even with the announced buyback.

Yes. And just to add some color to your question on Hips, Hassan. Just looking at the numbers for the second quarter, we were actually up on an average daily sales basis. Globally, we were up around 5% for Q2. And actually, if you look at ex China, we were up 7.5%. So you're right to highlight the OUS growth was pretty flat in the second quarter. But to Deepak's point, we expect that to significantly step-up in the OUS numbers, significantly step up in the second half as some of the impacts on China start to reverse. And we should see a pretty strong Half 2 on our Hips ADS growth on OUS basis.

The next question comes from Robert Davies of Morgan Stanley.

I have three. First one was just how you're thinking about the strategic position within Ortho, I guess, within the context of both the 12-Point Plan and within the context of -- you mentioned the constructive discussions with the activist. Maybe just provide us a little more color on that. The second question was around the trajectory for margins beyond 2025 and whether the sort of savings plans that you've laid out has changed your views over the midterm profitability targets of the company? And then the final one was just around the sustainability of growth, I guess, and just getting a little more color on the future pipeline. You've obviously made a lot of comments over the last couple of years around the products you brought to market. I just wondered if you could provide some color around the pipeline looking forward over the next couple of years. Anything meaningful to look out for?

Yes, sure. So with Orthopaedics -- look, we're a portfolio company as many other MedTech companies are. And in terms of Orthopaedics, what we've said a number of times is, as we look dispassionately at all different ways in which we can drive shareholder value, far and away, the best opportunity is to get orthopaedics functioning as it has the potential to do and as it once did within our portfolio. And as I've detailed in this quarter and its previous presentations, we're making really good progress in our ability to do that. And there's a number of elements associated with it in terms of product availability, the way we connect supply and demand, our commercial execution, which itself has multiple pieces around people, process, how we manage the business. On every one of those fronts, we've made tremendous progress. So when I take a step back and look at all the things we could be doing, driving performance improvement along the dimensions that I've outlined is by far the best thing we can do for shareholders at this point. And we are well on a path to doing that. And I do believe we get it to where this business can perform in its ability to deliver great returns, whether it's in terms of revenue growth contributor, contributor in terms of margin expansion, which, as John mentioned earlier, we're on track to go to about 14% margin this year, which is more than 200 bps. As we look ahead, that journey will continue. 14% is not the endpoint, but it's a waypoint along the journey. So as we look ahead, we expect it to do its part in driving growth, importantly, driving margin expansion as we get it back to levels at which we were a number of years…

And just to sort of comment on the margin trajectory. As always, there's a lot of moving parts on margin. As Deepak highlighted, we've got the positives in terms of the additional savings coming through, and I talked about $50 million to $100 million at least coming through in '26 and '27. We've got the positives in terms of the continued progression on the Orthopaedics margin, as Deepak says, 14% is not our end game. We expect to continue to improve that over time. At the same time, of course, we've got to offset the challenges of tariffs coming in, in '26 and also, of course, the impact of Skin subs. So there's always lots of moving parts, but we hope to set out at the Capital Markets Day clear direction of travel as to where we expect things to go forward and also, obviously, at the prelims in February of next year, provide very clear guidance as to what we expect to happen in 2026.

Yes. Just a quick build on what you said, John, in terms of sustainability of both growth and margin. Part of being a portfolio company is being able to go through all these different factors and offset these things to deliver more consistent kind of top line growth and margin expansion. That's part of being a portfolio company. But another thing that I'll accentuate here is in terms of sustainability. When you look at how Q2 turned out, the growth came from all regions and all of our businesses. And that's been a theme that if you go back and kind of look at our messaging over previous quarters, that is something that's been true actually for a number of quarters now. So it's not just coming from one particular part of our business, but the growth has been relatively broad-based. And that you should take as another encouraging sign in terms of the sustainability of growth as we move out of this period of transformation or turnaround into more kind of new and improved Smith & Nephew.

The next question comes from Kane Slutzkin of Deutsche Bank.

Just quickly on U.S. Recon, you're obviously still targeting the market growth rates by end of year, I would assume. I'm just wondering if anything has changed in your thinking there in terms of how you get there given the softer U.S. Knees, but stronger Hips? And then just secondly, you obviously mentioned you're in the final year of the transformation. You're making good progress against this plan. Without being too sensational, I'm just wondering with the Sapient stake sort of slowly building, could you sort of just provide us with any confirmation or details of the nature of any discussions you've had with them, what their influence has been to date, if at all? And I guess, just how active have they been?

Sure. In terms of what we're targeting, as we've said before, getting to market growth in U.S. Recon remains a goal. Ideally, we would like to do that with all parts of our business kind of working, right? So in other words, we want to continue to show progress in Knees and progress in Hips, right? But obviously, there's multiple ways we could get there. In Q2, we had -- not overperformance, great performance in Hips that offsets a somewhat softer performance in Knees, right? So we expect to build on both of those things as we go into Q3, Q4, but the objective is at the U.S. Recon level to exit market. So it could be a different shape, but that remains the goal. In terms of Sapient, as you know, our position has always been we maintain open dialogue with all of our shareholders. We spend a considerable amount of time, John and I do, engaging with our shareholders in an open and constructive way. And so we have done that with Sapient as well. The conversations so far have been quite deep, quite meaningful and constructive, and we expect to maintain that as we move forward as well.

The next question comes from Dylan van Haaften of Stifel.

So just one clarification at the end for me. Baked into your tariff guide, are you using the Nairobi protocol for any of the, let's say, non-U.S. for U.S. business? And I'll stop there.

The short answer is no, not at this time.

We currently have no further questions. So I'd like to hand back to the management team for any final remarks.

Great. Thank you very much for your questions. As we said, we're very encouraged by where we are in Q2 and remain confident in our ability to deliver within the guidance that we've set out. So thank you for your attention today.