[Audio Gap] factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include economic and financial conditions in the markets we serve, especially those affecting health care providers; payers and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals; reimbursement decisions or other government actions; product defects or recalls; litigation relating to patent or other claims; legal compliance risks and related investigative remedial or enforcement actions; strategic actions, including acquisitions and dispositions; our success in integrating acquired businesses; and disruption that may result from changes we make in our business plans or organization to adapt to market developments; and numerous other matters that affect our markets, including those of a political, economic, business or competitive nature. Please refer to the documents that Smith & Nephew have filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934 as amended, including Smith & Nephew's most recent annual report Form 20-F for a discussion of certain of these factors. Any forward-looking statement is based on information available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith & Nephew are qualified by this caution. Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.

Good morning, ladies and gentlemen, and welcome to the Smith & Nephew 2012 Q2 and Half Year Results. For your information, this conference is being recorded. At this time, I will turn the call over to your host today, Mr. Olivier Bohuon. Please go ahead, sir.

Good morning, everyone. This is Olivier Bohuon. And I'm here with Adrian Hennah, and welcome to our second quarter results call. I will cover the highlights and then hand over to Adrian to take you through numbers. And when he has finished, I will update you on how we have progressed on delivering our strategic priorities. As usual, we'll take questions at the end. This quarter, Smith & Nephew again delivered underlying top line growth and an improved trading profit margin in challenging markets, completing a good first half. We are delivering on our financial commitment and implementing our strategic priorities to reshape Smith & Nephew to provide the right commercial models, innovation and efficiencies to win in our markets today and the future. Taking into account this combination, we're pleased to announce a substantial step change in our dividend. Our Q2 revenues were up an underlying 2% to $1.029 billion. This is against challenging markets, particularly in Europe. This revenue growth is after the formation of Bioventus, which we completed in the early part of Q2, and Adrian will take you through the financial implications. For us, the transaction realizes value for reinvestment in near-term opportunities while retaining access to the exciting area of orthobiologics. Trading profit increased 6% underlying to $234 million, giving a 80 basis points improvement in our trading profit margin to 22.7%. This is evidence that the structural improvements we have made to our organization, particularly creating the Advanced Surgical Devices, are beginning to come through. Adjusted earnings per share were $0.181. Our cash generation remains excellent, and the group now has a net cash of $150 million. We have consistently delivered revenue and earning growth and strong cash generation in a challenging market for the last few years. This financial strength and our confidence…

Thank you, Olivier, and good morning, ladies and gentlemen. If you could perhaps turn now to Slide 10 in pack, on the income statement. Revenue in the quarter was $1.029 billion. As Olivier mentioned, this represents 2% underlying sales growth on quarter 2 last year, after adjusting for exchange rates and for the Bioventus transaction. Trading profit in the quarter was $234 million, an underlying increase of 6%. The trading margin was 22.7%, 80 basis points higher than quarter 2 last year. Restructuring costs charged in the quarter were $14 million, all related to the efficiency program announced in October. Olivier will give you an update on our progress to this program in a moment. Turning then to Slide 11 and moving further down the income statement, the Bioventus transaction completed on the 4th of May for a total consideration of $367 million. This gave profit on disposal of $251 million that you can see here on this chart. The loss on Associate of $1 million that you can see here is essentially the group's share of the Bioventus loss in the quarter. The entity made a loss due to start-up costs. On the 4th of May, United States CT business transferred to Bioventus. The much smaller O.U.S., outside the United States, businesses will transfer progressively over the next 18 months. These Q2 numbers, therefore, include a part quarter's trading for the U.S. business of CT/Biologics, and full quarter's trading for the small O.U.S. components, a gain on the disposal, 2 months' interest receivable on the vendor loan note to Bioventus and 2 months' of our share of the associate's results. We have set out in 2 appendices for this presentation, the trading history of the CT business for the last 6 quarters and each of the individual P&L and…

Thank you, Adrian. I want to spend a few minutes reminding you of our achievements to date and our task for the rest of 2012. Hopefully, after 12 months, you are now all clear on our 5 strategic priorities. By narrowing the focus of our management on markets with similar dynamics, we are seeking to drive better growth by concentrating them more effectively on fewer priorities. Innovation is and remains more than ever at the heart of our business. And finding these areas is a need to simplify and improve our operating model, not only to develop resources for investment but also to make our institution more agile and faster. And through acquisition, we believe we can add further growth to our platform as well as significant value for our stakeholders. So looking in more details at these priorities. So winning in established market is the first one. Our ASD and Advanced Wound Management senior management teams are in place and are stable. The creation of ASD has been executed to plan. We have progressed well. We saw significant U.S. restructuring and are on track in Europe. Financially, we have seen the benefits in our improved trading profit margin while importantly, maintaining revenue growth. Regarding the second point, accelerating development in emerging markets, we have created this emerging markets organization uniquely focused on Brazil, Russia, India and China. We're investing in the infrastructure and people to drive the better growth we believe we can achieve. For example, we have made progress registering and selling more of our existing products. We're approaching 40, 4-0, new introduction in the first half of 2012 along across our full range of product franchise. Regarding specific products for the middle demographic tier in these countries, we are doing detailed work on both the right product…

[Operator Instructions] Today's first question is coming from Ms. Veronika Dubajova of Goldman Sachs.

It's Veronika here from Goldman Sachs. I have 3 questions, if I can. First on the pricing pressure. Given that like-for-like was at around minus 2 and that you did see the biannual pricing cut in Japan, I'm just wondering is it fair to assume that actually pricing pressure in the U.S. and Europe moderated slightly? My second question is regarding the wound manufacturing relocation. Just wondering what additional proportion of the portfolio you're moving to Suzhou and where that puts the overall proportion of wound products manufactured there versus rest of the world? And the last one, which should be quick in financial, just wondering what the retirement benefit obligations there, with the $50 million increase versus Q1, just wondering what drove that?

Do the last one?

Yes, the defined benefit obligations, I will just look it up to make sure I give you a technically accurate answer, Veronika. The -- it was almost completely driven by the reduction in the U.S. discount rate in the quarter. There were other ups and downs with regard to the U.K. But in fact, the discount rate movement and the expected inflation in the U.K. just about netted each other out. So in our case, the bulk of the increase was U.S.A. discount rate reduction from 4.6 to 4.1 and also a small weaker asset performance expected but absolutely nothing out of the usual, Veronika.

Veronika, it's Olivier. On the question regarding the Wound relocation, actually, it's a small -- very small proportion. So it's not a step change. So I think it's not, I would say, marginal, this one. Regarding the pricing pressure, well, it's not improving, actually. It is stabilized in the U.S., no doubt, and as expected, between 3% and 4%, and you have seen that this seems to be pretty well shared within the industry. Regarding Europe, I think that Europe is difficult. I mean the Wound pressure, for example, has been higher than what we were used to see in the past. We have not seen a lot of increased pressure in the minimal invasive surgery in terms of price. But I think that there is not much change, actually, so I do not make any type of extrapolation on what could become the price pressure in the future. I think it's stable.

And if I may just add to the mechanical part of your question, Veronika. Yes, clearly, in our numbers is now a sort of high-single-digit reduction for Orthopaedics in Japan because that were the announced numbers. The fact is in the round, it doesn't disturb the notion like-for-like. That does not mean there's been an offsetting improvement in Europe and the United States. That's not the way we're seeking to portray it at all.

We'll now go to Yi-Dan Wang of Deutsche Bank.

Just to cover the question Veronika asked. Can you give us a sense of what proportion of wound care's products Smith & Nephew makes versus what it buys from OEM manufacturers? And what percentage of these are manufactured in low-cost countries now versus what would be at the end of the additional amounts it's proposed to transfer from Hull? And how will this transfer impact the margins in this business? And then the second question I have is, can you -- I mean, with guys hopefully delivering efficiency benefits, which seems to be ahead of expectations, and increasing your margin outlook for the year slightly, Adrian, can you help us with your indication that, hopefully quantifying it if you can, what you mean by at the upper end of your original guidance? And then to what extent has this been a function of your ability to place the investments that you planned at the beginning of the year? Is that proceeding also ahead of expectations? Or is that a bit behind expectations?

Fine. Thank you for those questions, Yi-Dan. I think we're going to disappoint you slightly on the first one in terms of -- or probably both of them actually. But certainly, the first one, in terms of the level of quantification, we think it's sensible to give. One of the reasons for that is conceptual. When you say what proportion is sourced from outside, the fact is you source from outside a whole set of products at different stages of their manufacture. So some you can just source the very basic raw material, others halfway through. And then a few, in our case, not very many, that you buy in the final good. We do not have very many in that category. What's happening here in Suzhou is Suzhou had already become a material part of our wound footprint and established itself very successfully under good leadership of our wound team over the last several years. And what we've done now is to expand that Suzhou facility, both in terms of its capacity to do stuff but also up-skilling it in terms of the sort of things it's capable to do. We retain, however, the philosophy that Hull is the core manufacturing unit where the bulk of our development is done, and Suzhou, although it will begin to do development relative to its markets or its type of markets, is still the sort of daughter unit at the moment. And so what we're doing here is there is indeed some movement of production from Hull to Suzhou, which does have economic advantages, but there's also stuff coming into Hull, too. So this is tough, this is a part of being a multinational company and optimizing our footprint, and we're not going to give specific percentages of what those are. These…

Okay. And in terms of the investments, are you -- where are you according to your plans there?

Yes. Well, one of these doubly good uses, if you like, you can see that actually at $14 million in the quarter, the restructuring spend is relatively modest today. So we have a sort of double good news; the program has been going in time-wise in line with our expectations, but actually in spend-type it is slightly slower than we expected. That does not affect, however, our view of a, the total cost of the program or the total benefit of the program. We are working very hard on flushing out the next and subsequent phases. They will become -- we will use the cost up, it'll just be slightly phased, slightly later than we'd originally expected, Yi-Dan.

Right. My question was actually on the investments that you -- having got the efficiencies, how the investments side are progressing according to your plans?

Okay. I'm sorry. Well, I'm pleased to have answered the question you didn't ask. But the -- well, the 2 main categories of investments, they are both progressing well, but they both take time if you're going to do them well and be solid about them. So our investment in R&D, as we signaled on several occasions, a couple of major categories of new types or new focuses for investment, one is around the emerging markets and products for that. We have been working very hard and I think very successfully on the underpinnings that, that required; skill sets you need to have in the marketplace, the connections you need to have between those skills in marketplace and the core engineering talent in the organization in order to properly define products of use to the marketplace and then move through to deliver them. So lots of good underpinning work is going on ahead. That underpinning work is less expensive than the work that we will when we actually get fully into it will be. And that's reflected in what you see is the R&D spend as a percent of sales, which has not gone up that very much. We do expect it to increase faster going forward. And the same applies to the other important switch of emphasis we're engaged in, and that's the switch towards the sort of biomaterial-type stuff, particularly in our arthroscopic business, which again is for us, a new skill set. We have some of it, but we are pushing the boundaries of our skill sets. That takes time to make sure one does it thoroughly and thoughtfully and as you get into an area. So again, we've been very focused on the underpinnings and very thoughtful on programs we're being forward. And you will, over time, I don't mean here quarter 3, quarter 4, you're going to see step changes. But you will, over coming quarters, see that R&D rate pick up as we've got the underpinnings in place, that the resources flow there.

And on SG&A?

What do you mean by on SG&A?

Right, so on SG&A, you've talked about the investments in R&D, but I [indiscernible] planning SG&A investments as well?

Yes, let me take this, Yi-Dan. I think that in SG&A, you have the G&As and the G&As, we have been working hard on these G&As as you can see to avoid the duplication following the restructuring and so on. We are committed to invest in the sales part of the SG&As pretty strongly, whether it is in the emerging markets or to keep a good share of voice in the established markets. So there's no change, actually. I mean, to summarize what Adrian said, I think that we are just trying to have a very disciplined way of spending the money. We have prepared the base of the programs for the emerging market R&D programs. Here they are. We slightly increase the amount of money spent in R&D. We are still on track to spend 5% on sales at the end of the plan, of the period, I was announcing. So this is – I mean there's no change here. We are just committed to spend the money, investing on the right place to deliver the best revenue.

Okay. So would it then be fair for me to say that your efficiency benefits are coming through faster than you expected, but then the investments that you're placing are not coming -- are not going as fast as you had originally planned? So that the margin improvement that we have seen come through this year, which has ended up being higher than expected, that will then kind of reverse as those pace of investments pick up?

We have done better in terms of the savings, okay? But we have spend what we had to spend this quarter. Actually, if you look at the end of the year, we have to spend money in many things. Then, as Adrian said, we will be on track to deliver what we're supposed to deliver in terms of cost savings and we are going to invest. That's why when we're talking about the modest improvement, we remain committed to this modest improvement versus last year. Again, the range of modest can vary. So it's -- whether it's high modest or low modest, it's still modest.

We'll now go to our next question, which is going to be asked by Mr. Ed Ridley-Day of Merrill Lynch.

To start with the increase in your payout ratio, obviously very welcome, and sort of 2 questions related to this. Firstly, what would be the criteria, if there are any, for another raise in the payout ratio? So sort of whether there would be a time table for that? Or whether how related to another increase in the payout ratio is sort of the acquisition time table that you are looking at? And the second question is related to M&A. I know obviously you said that it hasn't an effect what you do. But does this perhaps mean that we should be thinking more about small- and mid-sized deals, and that you are not now looking at, shall we say, very large strategic deals, for example, in the wound space?

Thank you, Ed, for your question. Actually, let me start by the second one. No, it doesn't change anything. So again, if we have the right opportunity, it's a big opportunity, we'll take the big opportunity. Small one, we'll take the small one. It doesn't change at all our focus. It doesn't change at all our strategy. So there is -- it's absolutely not significant here. Regarding the payout ratio, I mean, the criteria for another raise, I mean, again, the board is looking at that very seriously as you can imagine, and we have a very strong balance sheet. If we do not do acquisitions, we'll certainly have to look at that again in the first half of 2013. But at this stage, we have done this interim increase. We are committed to acquire good opportunities making financial sense and strategic sense for the company and for the shareholders. So that's where we are.

Yes, and just a sort of quick sort of follow-up. I mean, would you -- to what extent are you prepared to gear the balance sheet to address your acquisition potential?

Ed, I would think – most important thing, there's no change in the approach that we have been articulating now for several quarters reflected by this dividend change. And this dividend change is now because we have an interim dividend to announce, and so why not do it now, was essentially the board's logic. So there is no change. And as part of what we said previously, we said it is our board's absolute intention that whenever we do on acquisitions, we will retain a solid investment-grade rating. We don't have a rating at the moment, but if we were have to have one or if we didn't have one, the equivalent of a solid investment-grade rating. So that is parameter in which the board is very clear that we will work and obviously puts a parameter around it. But basically, had no change. There is no change. This dividend -- our dividend in the year is $150-odd million last year, so a 50% increase is a $75 million. It doesn't affect the shape of our ability to pursue the acquisitions that we have been working or possibilities that we're working.

No, I understand that. No, I was just really perhaps, visiting on your, should I say, willingness to borrow for the right acquisition.

Yes, we will borrow for the right acquisition. It will be within the context of a unquestionable solid investment-grade rating. And we will flesh that out as part of the total statement on our view of the balance sheet that we've said we'd do for the first half of next year. But I think you should be able to get enough of a feel for it from what we've been saying over last few quarters.

Okay. Understood. And secondly, in terms of the hips business, just in terms of getting back to market growth but sort of retaking share in that business. And I'm talking of sort of away from BHR here. Is there anything you can point to in terms of your confidence on new products you're developing or actions that you're taking, that a potential timeline to sort of retaking share in the core hip business?

Well, regarding the hip business, it is true that we have not been performing very strongly actually on this quarter. If you take the figures I was mentioning, we're minus 5% for the hip business and the market is at 2%. So this is true. Now we have a number of reasons. Again, the headwind that we are facing in the BHR, I mean due to the metal-on-metal issue, is very strong. As I was telling you, it's minus 37% for the BHR, so it definitely brings us some negative headwinds. We are, however, not unhappy with many of our hip products actually. And again, it shows you why innovation is important. When you talk about products like OXINIUM, ANTHOLOGY, Stem, R3, I mean all these products are doing very well actually and growing for most of them at double digit growth. So it – we have cycles in the hip business. It is true that we are down here, but I'm very confident that we will be able to come back on track soon.

Our next question is coming from Martin Wales of UBS.

If one looks at the top line performance of your businesses, and I think the previous questioner partly alluded to this, you're under growing the market in hips. Excluding BHR, your knee growth has dropped to market growth. If you take out Negative Pressure Wound Therapy, you're not growing in wound management at all, and by definition, under growing the market. When -- I'm guessing you're not particularly satisfied with any of these performances. So in what timeframe can we expect to see you return to market or above market growth more generally?

Martin, it's Olivier. Okay, hip, I think we just give a comment on hips, so I'm not going to come back on the hip business. Knee, again, we have been growing 3% in a market growing at 3%. Again, that problem here is the very strong comparable last year. So I don't see why, with all the products that we plan to launch in knee business, we'll not be able to grow better than the market, or at least at the market rate for the recon business as a whole. Regarding Advance Wound Management, we have been basically doubling the market rate. This is a fact for a while now. I do expect that this will continue. So we expect the full year doing much better than the market for the Advanced Would Management business. Regarding the Trauma, you have seen that we are back on track in Trauma, which is a good sign of the refocus that we have on this business. So I'm not as pessimistic as you are on the situation. So I do believe that we do well and we plan to do better.

And in what timeframe do you think you can start to do better then, given the planned timeframe of investment that some of the previous questions have alluded to?

Well, I think, Martin, I guess you're coming from slightly different place. We have a portfolio of different areas and it's a fact of life that some -- to get every single one of them going at peak performance at the same time isn't usually the way that it works. There are some areas which today we are very pleased in. But you single out half of wound, the fact that the other half of wound is doing extremely well, and we're growing at twice the market rate and you can see great dynamic going along there. We're very pleased with the way that joint repair is growing, it's a strong market, and we're growing strongly within it. So there are some elements of strong markets growing very strongly. And at the other end of the spectrum, you rightly call out hip switches, it's something that we are -- which we are confident about will revert back and overtake that. But it isn't going to happen tomorrow. These things take time and these things take work. So in the round, we're very happy. There are individual elements of the portfolio, of course, we've got to work on. And of course we are working on, that's part of business. I don't – I think it's a little unrealistic to expect us to sit here and give you for each part of the portfolio, this is the evolution quarter-by-quarter. I don't think that...

No, and that's – no, I agree. And that's not what I'm not looking for. I guess I'm just slightly concerned that organic sales growth, the trend has been -- the group as a whole has been, if anything, the organic sales growth has slowed even relative to the markets you operate in. And clearly while you're delivering cost savings, the investment buy, as you actually keep on, is being very careful in how you get – to try and make sure you get that investment right. So I'm just kind of curious as to when we should start seeing the fruits of that investment?

Well, when? I do hope as soon as possible. Again, the pace of investment is good. I do believe we invest in the right place. If I take the Negative Pressure Wound Therapy for example, I think that's a good example of what we do well. If you look at the U.S. market, for example, I mean, we're used to fight 1 against 10, versus KCI. Well, one of the good news that KCI has reported a cut of 300-plus people, so we'll now up to be at 1 against 6, which is a very good news. So I think we have -- we're doing very, very well actually against a very tough market. We are increasing the R&D. This is a strong commitment. We are happy with the pace of launch of the new products, whether it is in Advanced Wound Management, again, I would mention the 11 new products, which is same number than what we had in Q1. I remind you also that we have launched 35 new products last year in the Advanced Wound Management. If you take the ASD business, we have launched also products in all the parts of our business. So yes, it will come. Again, Martin, I mean, I'm not going to tell you that you have cycles and you have quarters which are higher and some lower. Depending also the comparative, we had some strong comparative last year, particularly in the knee business. I mean, there is no, for us, any issue there. And we're very confident that we spend the right amount of money, that we spent well the money and much better than we were in the past. And I do believe also that the sales will come.

We'll now go to Michael Jungling of Morgan Stanley.

Three questions, please. Firstly, on associates. Given what you sort of mentioned, should we assume that associates will be a loss-making proposition in the second half of this year? And if it is, could it be more loss-making than we saw in the second quarter? Question number 2 is on the cost savings. Have we seen -- I presume we have not seen any material cost savings yet in Europe as a result of the restructuring. I think last time you mentioned that the restructuring for Europe would be completed by the end of the second quarter. And last question I have is on VERILAST hips, how would you assess the progress that you're making in trying to get a 30-year wear claim for VERILAST hips in the United States? Is this something that you think is possible this year?

On the VERILAST, let me take the 2 last question, then I will hand it to Adrian. On VERILAST, we don't comment this and so this is obviously, as you can imagine, commercially sensitive. Regarding the cost saving program, you're absolutely right. I think that the -- what has been done so far is mainly U.S. and we plan to implement -- we are actually exactly on track in Europe to implement the program as stated and as discussed previously. This is really on track.

On the Associates, Michael, I mean, it's important to remember this is now not an entity we control. So they will do what they will do. Clearly, we have representation on the board, but they will do what they will do. Notwithstanding that, Michael, no, we would not expect it to be loss-making in the second half. Can't, obviously, guarantee that because it's not our entity, but we would not expect it to be loss-making in the second half. But we would expect it to be less profitable than the CT business would have been if they weren't going into this venture, a, because they've still got start-up costs over immediately; and b, because they are going to front-end load. I mean, they are -- they have a 7-year horizon, whatever it is, to make this business successful. They are going to front-end load their investments in some of the products and other activities. So we do expect this to be less profitable than it otherwise would have been.

And Adrian, on the cost savings for Europe, if I look at the first half, you've improved your EBITDA margins by 70 basis points with little help from Europe. Even if you were to make some adjustments or increase your investment in the second half, with the European savings coming through, why would it not be reasonable to assume that you can sustain a 70-basis-point margin improvement for the full year?

Because you forget one thing, is the investment that we want to do in geographies and in the different parts of our business. So that's why we are always talking about a modest improvement.

We'll now go to Tom Jones of Berenberg.

Just wanted to focus a bit on the ASD business. Just on the Arthroscopic Enabling Technologies, I'm sure you won't give a quantitative answer, but a qualitative one would be helpful. Just wondering whether that minus 4% that you reported that was coming from what you used to call the Visualization DOR business or was coming from softness on the consumables side on the shaver blades and the like? And then the second question was just on the hip business. I mean, the way the metal-on-metal, I mean I'm kind of guessing that you're probably selling less than 2,000 metal-on-metal hips a quarter now if you sort of back out the numbers that you've given. Is there a risk that this business becomes so low volume that it starts to become unprofitable to continue to produce and sell those hips? Or is that not a significant concern for you? And as sort of the second follow-on question to that is just on the modular hip side. There's some bubbling concern about modular hips in general. I just wondered how your short modular femoral hip is getting on against that backdrop at the moment?

Adrian, the first question?

Yes, your first question, Tom, on AAT, Advanced Arthroscopic Technologies and what's driving the minus 4% number, the minus 4% in the quarter. You're quite right, Tom, the -- I mean, there's 2 elements to this business. One is the -- or 2 main elements. One is the blade business and the pump that sits behind it, which as you know is within our arthroscopic franchise, are very solid, but the lowest growing part of the franchise because of the nature of the -- the lower nature of the technological improvement there than there is in the core joint repair, the Sports Medicine Joint Repair sector. So that's one underlying driver. But then on top of that, there is the camera element, which although far, far more restricted and limited than the old DOR days, because as you know we've pretty much completely got out of that now, is still a lumpy business. We do still have ups and downs when there are some big camera deliveries. And so that's what you're seeing playing out here with the slight variability in this line. So you're absolutely right to infer that, Tom.

Okay. And on the hip business?

On other one is -- yes, on the other question, Tom, it's Olivier. You are asking about the modular hip systems. I guess you're referring to the recall of Stryker, of Rejuvenate and ABG II modular neck. So again, we have 3 modular hip systems in our portfolio: the SMF, the empirian [ph] and the new REDAPT that we have launched. And we have no reason actually when we are seeing this recall. We have looked at that, we have no reason to be concerned about any of our products. Because we take the safety very seriously and as always, we keep ultras and [ph] data sets under review. So I think that net-net, no worries on this. We're absolutely clear and fine. Regarding the metal-on-metal, well it's true that it is not -- BHR is not a big part of our business now because I think it's about 7% -- 7%, 8%, Adrian?

Hip sales.

Yes, of hip sales. So it's less than 1% of the total sales of the company. We still believe it's a good product. So I do believe and I do hope that one day, we will see this product coming back and all the feedback we've got is very good. You remember the registries are excellent. So I'm not really concerned at this stage about the profitability of this product.

Okay. And maybe just one quick follow-up, and I'm probably [indiscernible] here. But would you be prepared to quantify what percentage of your hip business is modular versus non-modular hips?

On the modular hip piece, it's pretty small actually. So I don't give you the right impact number, but it's a small part of our hip business.

We'll take our next question from Ingeborg Øie of Jefferies. Ingeborg Øie - Jefferies & Company, Inc., Research Division: Two questions, if I may. Firstly on the manufacturing footprint where you're stating that you're gathering pace. Could you elaborate on what the key objectives you're trying to achieve in the process are? And what the key considerations you're making when deciding on the appropriate place to manufacture some of your -- the specific products that you're looking at? Second question is on the R&D and the investments that you're making. Could you just help us understand the time frame over which we should see the projects coming to fruition? Maybe the 2 specifics one, you mentioned the products for emerging markets and the biomaterials?

Okay. On the -- let me start by the second question on the R&D. So when are we going to see products coming? Well, I think that you see products coming on a pretty regular basis. Again, it comes in every part of the company. We are very happy with the pace of innovation that we have. We do it better. We allocate better the resources. We'll spend more money. Again, I've been very cautious in asking the teams to present projects, which make sense for us and want to use well our R&D money. So the programs are starting to appear more and more, including the emerging market project. We have registered 40 products recently in the emerging market. That's very significant. Now the portfolio of the mid-tier for the emerging market is obviously extremely important, and actually they're related to your question regarding manufacturing footprint. You know that we have not launched mid-tier products in the emerging markets. When I talk emerging market, it's mostly the BRIC countries. We are working in defining a portfolio, which could be and will be a mix of acquisitions or/and organic product that we are going to develop specifically for these geographies. So obviously, if you want to be in Brazil, you better manufacture in Brazil. That's, for the mid-tier, absolutely important. So that could be one of the geographies. And we look at not putting all the eggs in one basket, so that's very important. So we look at the places where it makes sense, where we can fulfill the local needs, let's take India. Or we can also use this as a base for exporting the products. So we work on that. Actually, you will be happy to know that we have now a head of manufacturing for the emerging markets in place, and this is really his mission with the manufacturing team. Ingeborg Øie - Jefferies & Company, Inc., Research Division: So it sounds like costs is not one of the key concerns when you look at the manufacturing footprint, if I understood you correctly?

No, you didn't understand him correctly, Ingeborg. Just to give more a slightly more systematic answer. I would say there's 4 criteria. I mean quality is clearly preeminent. We won't – you aren't going to do anything in terms of location that jeopardizes quality. Security of supply is clearly very important and Olivier very much alluded to that one. And then there are, I think, 2 related more directly to economics in different ways. One of them, which Olivier absolutely rightly focused on, is there is an element in locational decisions that talks to support in the marketplace. And that sometimes is logistics driven, such as Brazil where you have tariff barriers and things to deal with. But also it's to do with development driven. We -- if there aren't tariff various-type things, logistics, actually isn't a huge driver in our business, but thinking about how you effectively develop products for a market is a factor in our thinking of the location of capabilities that we have around the world. And then lastly, but not leastly, is indeed, the cruder economic, the sort of arbitrage of the various costs that go into cost of goods sold, labor and the cost associated with labor, and location in particular. So all of those are things we play in and are becoming more systematic about.

So thanks a lot. So this ends this call, and wishing you a good day. Thank you.

Thank you.

Ladies and gentlemen, we thank very much for your participation. You may now disconnect.