Good day. Welcome to the Smith & Nephew 2015 Q2 and Half-Year Results Conference Call. 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 these statements due to a variety of factors. More information of about these factors is contained in the company's filings with the Securities and Exchange Commission. Today's conference is being recorded. At this time, you will hear ambiance, and then the conference begins. Olivier Jean Bohuon - Chief Executive Officer & Director: (00:36-02:40) So it seems that we've attracted a lot of people. Anyway, good morning to you. I know you have a number of results today, so I'll try to be sharp. Welcome to our first half-year presentation. And I will start by covering the highlights for the first half and give you my views on the work in progress that we have made. And I will give you details on our Q2 revenue performance before handing over to Julie to take you through the numbers. And I will conclude with an update on our strategic priorities. And then, as usual, we'll answer questions. Well, I'm very happy and proud of what we have accomplished in the first half of 2015. As planned, we have accelerated the sales growth, improved the trading margin, and delivered improvements on the tax rate. We delivered underlying revenue growth of 4% in the first half of the year with a stronger growth in Q2. Our strong performance in H1 reflects successful execution of our strategy. In Advance Wound Care, the actions we started implementing last year resulted in solid growth. Our investment in emerging markets have again delivered a double-digit increase in revenues. In…

Thank you very much. It's Ian Douglas-Pennant, UBS, here. First, on CCGR, thanks for your comments there. It's interesting to get your first take. Could you give us an indication of what pricing pressure you're seeing in BPCI hospitals versus those others? Have you had more success launching since they're into those hospitals that have chosen to stay part in that program? And then on another tack, on your Wound Care, some very good growth rates there from your ALLEVYN Life portfolio. Is this because of the reps that you've taken out of NPWT that's driving that growth? And if so, will you be hiring more reps when NPWT comes back to market? Thanks. Olivier Jean Bohuon - Chief Executive Officer & Director: Okay. Thanks for the question. Let me start with the second question on ALLEVYN. No, we have not redirected (26:11) from negative pressure to ALLEVYN per se. The reps that we used to have in negative pressure have been reallocated to PICO. PICO is doing very well, as you can see, not only as a product, but we believe that having this type of disposable technology will help us dramatically in the future because the disposal market becomes more and more important for different reasons. Obviously, it's more convenient. We have more clinical data than before, and also it is in terms of outcome, pretty good for the patients and for the payers. On the CCGR, yeah – well, no, we have not seen any more price pressure at this time. We believe that for us an opportunity for different reasons. Managing, for example, the infection rate down is important. I think that PICO, again, is a great opportunity in the hospital to reduce the (27:48) indication because of the efficacy in post-surgical wounds. We believe – and you ask me if we see more and more, I'm not going to talk about the different centers for Syncera, but Syncera is definitely a very attractive offer if you want to reduce the cost. So it's absolutely – as I said in my presentation, I think we are arriving at the right time, not only in the U.S. but also in the rest of the world. So yes, it's for us an opportunity.

And just a quick follow-up on Syncera, I mean, we've heard in the market that some of your competitors have programs like this. I mean, can you comment on how frequently you see those when you're competing for this kind of accounts or are they much too early stage now? Olivier Jean Bohuon - Chief Executive Officer & Director: I think they're very early stage. I haven't heard anything specific. As I said in Q1, the complexity of Syncera is it's not just selling a product. It's actually selling a complete solution and offering a solution, which I think will be the key for success tomorrow, going from a product offer to be able to offer a solution, not only to the payers, also to the surgeons. It took us two years to put that together. It took us two years, and as you know, the strength of the model is the product, the quality of the product that we have, the hip and the knee, and the quality of the registry we have. I mean there is a huge experience with this product. They are known. People trust them. They are able, which is also important, to cover the majority of the population – the potential population receiving a knee and hip. And also the quality of the model behind that we enhance pretty significantly on a regular basis. If you require, the S2, which is one of the acquisitions which is part of the model of Syncera, makes me think that if someone comes – and someone will come, because I think it's obvious that there is a need for a cheaper model – it would not be today. We see some events here.

Thanks very much.

You talked about the timing on the RENASYS relaunch, or rather I suppose you're waiting for the generation 3 to get approved. Do you have any clarity on that? Because obviously, the re-approval of RENASYS 2 just took a lot longer than expected. Olivier Jean Bohuon - Chief Executive Officer & Director: No. It didn't, actually. It didn't. Thank you for the question, Lisa (29:49).

The FDA takes their time, I know. Olivier Jean Bohuon - Chief Executive Officer & Director: FDA is slow, but they come on track. And actually, the RENASYS is not just one device. It's a bunch of devices, actually. And we have a three 510(k), and two of them have been approved. We're expecting soon the third one. During the year, we don't plan to relaunch the RENASYS, as I said. In Q1, we plan, though, to just supply the existing customers, so that's while we're saying that there's no need to put any sales because we don't plan to make any sales with that. So the strategy now has been clearly to say, well, relaunching RENASYS will not bring anything. I mean, the cost of recapturing customers is very high. And if you bring a new product in a few months, it's much better to focus on this connected device that we plan to launch, which is really something different and really something better. And so we plan to have a launch between Europe and the U.S. during 2016. So that is the plan. So FDA has three 510(k), okay? There's no issue there.

Okay. So just for confirmation, you should expect all the components of that RENASYS 3 to be approved by, say, the end of 2015, positioning yourself for a launch? Olivier Jean Bohuon - Chief Executive Officer & Director: Absolutely. Absolutely. Absolutely.

Okay. And then, the second question on Trauma. I understand, obviously, you had tough comps due to, I think, it was a tender in Saudi last year. Olivier Jean Bohuon - Chief Executive Officer & Director: There was a big Saudi tender, yeah, and another one in the Middle East also. I mean, it was very high comparator last year.

Okay. And I suppose maybe more of a question for Julie, but if we strip that out, are you pretty much in line with the market in Trauma or is there still a bit of a lag for your performance versus the market? Olivier Jean Bohuon - Chief Executive Officer & Director: Well, I think that – Julie, you can answer. But then, we have 2% growth, I think, for the Trauma business as a whole. Without the effect in like-for-like, what will have been the growth rate of the market, I think we'll be very close to the market. Yeah, very close. Julie Brown - Chief Financial Officer & Executive Director: I mean, U.S. Trauma growth was strong. So it was definitely impacted by a major market. Yeah.

Okay. That's helpful. And then third question and final question, PICO use. Could you give us an idea of where it's being used? Is it mainly in diabetic foot ulcers, venous leg ulcers? I know you've done some really interesting studies in obstetrics and I know you're working on one in knees. How much of... Olivier Jean Bohuon - Chief Executive Officer & Director: It's hip, actually.

...that is – oh, in hip? Okay. How much – where is it coming from? Olivier Jean Bohuon - Chief Executive Officer & Director: It now comes from a wide range of situations, actually. It came at the start for all this venous leg ulcer pressure, then all these difficult wounds to treat. We have now a very strong collaboration between ASD and Advanced Wound Management in the hip post-surgery treatment. In GYN also, we use it a lot. So we have different sizes and shapes of PICO. So it varies. Frankly, I think we open it more and more and we realize, I think, there is, we believe, an amazing opportunity for this type of devices. We invest also, it's important to say, in the clinical outcomes, so we drive clinicals, and they show good results.

Thank you. Olivier Jean Bohuon - Chief Executive Officer & Director: Yes? Go ahead. Michael? Next.

It's Yi-Dan Wang from Deutsche Bank. Just couple of quick questions. The first... Olivier Jean Bohuon - Chief Executive Officer & Director: A couple, huh?

A couple, yeah. I promise it will be a couple. The first one is on the U.S. knee growth versus the hip growth. Can you comment on how much of the knee growth is coming from the DTC campaign versus the benefits you're getting from Syncera? Because you've run DTC for both hips and knees in the U.S., but there seems to be a fair big difference between the performance of the two product lines. And then secondly, Julie, could you comment on the effect of the acquisition on your top line and trading profit? So these are the Russian acquisitions and the UNI knee business. Thank you. Olivier Jean Bohuon - Chief Executive Officer & Director: On the U.S. knee saw, as you know, it's a very significant growth. I think the reason is not Syncera. Actually, it's purely the dynamic of the JOURNEY II, which is really good. Remember, we discussed at the stage launch, people were asking about, are you going to launch yet? Now, it's launched. And it's launched, and it works. We have great customer feedback on this one. So the campaign that we have based was a campaign based on the VERILAST technology. It has driven a lot of interest. I cannot give you the split, disclose between what is generated by the campaign and what is generated by our business. One thing I want to tell you also, and actually, we discussed it yesterday, the quality and the efficacy of our sales force is much, much better than what it was in the past. So you remember years ago, we said in the established markets, if you want to be successful, you have to bring new products, differentiated new products, because you want to get a price premium with this product and you want to keep this price, and you also need to have a better sales force effectiveness. We have worked two, three years on this. I think we have better reps, much more prepared than what we had in the past. And when you have good reps, well-trained, and good products, things are happening. So again, what I see is not an anecdote. What I see is a trend here, and you see the same. I mean the Recon business in the U.S. is improving; there's no doubt. There's no doubt. And it comes back, (35:37) that you don't need to be big to be successful. Bring new products, bring good reps, and bring innovative models. I think this is the recipe.

So, in terms of the differential between your hip and knee business, can we imply from that, then, that your knee portfolio is more differentiated than hips, or is it more of a timing thing? So your sales force is focusing more of their attention on knees as we sometimes see, and then we should see the hip business pick up later on? Olivier Jean Bohuon - Chief Executive Officer & Director: Hip business, we have at this quarter 1 percentage point of headwinds due to BHR (36:14). So the growth in the U.S. is not bad, actually. It's a decent growth that we have had, especially if you add the fact that BHR (36:25) was pushing down this product. Do we think that the knee business has been more pushed by the DTC campaign than the hip? Maybe, maybe. Again, the hip business is more complex than the knee business, because the hip is satisfied market, almost satisfied. We have 90% of patient satisfaction with the existing products. We are about 70%, 75% satisfaction with knees. So there is a lot of things. When you bring innovation in knee, you can make a difference. In hip, it's more marginal. We have worked, as I said, on the Ox on Ox (37:03). We did a very strong study in South Africa. We have started a clinical trial in the U.S. now. The first patient on Ox on Ox (37:10) has been implanted recently. So there are some things which can make the product, but it's a satisfied market. Julie Brown - Chief Financial Officer & Executive Director: Okay. So returning to your question about the acquisitions, so ZUK, we expect to get sales in the second half of around $10 million, if you want to put that in. In terms of Russia, it's likely to be completely immaterial at this stage. We had quite a small Russian business to start with going through the distributor. It will take some time to set that up properly. So I think it would be immaterial for the purposes of modeling this time.

And the profit impact for the (37:48)? Julie Brown - Chief Financial Officer & Executive Director: Yeah, the profitability on ZUK is very strong; it's very strong. So, obviously, Recon is a strong part of our business anyway. So ZUK, we expect to be strong. And clearly, in emerging markets, and the case of the Russian deal, in emerging markets and when we're setting up from the start, it takes a while to get the profitability there. So you would expect low profitability from the Russian deal.

But it's not loss-making? Julie Brown - Chief Financial Officer & Executive Director: No, it's not loss-making.

Thank you. Julie Brown - Chief Financial Officer & Executive Director: We'll make sure it's not loss-making. Olivier Jean Bohuon - Chief Executive Officer & Director: Yeah. ZUK was a great opportunity for us (38:19), actually. We're very happy to have been able to get this product.

Ed Ridley-Day, Bank of America. First of all, for Julie, great progress on your cost saving program, $50 million run rate, annualized. It seems to me you're a bit ahead of schedule, so should we start thinking more positively about the $120 million total savings or not? And on a related question, clearly you've reiterated the $85 million synergies from the ArthroCare deal. Can you give us an update on where you are on that? Julie Brown - Chief Financial Officer & Executive Director: Okay, sure. Yeah. So the group optimization program, we're really pleased with progress. We've got a comprehensive PMO around it, and it's meeting all the milestones. In terms of the slight margin beat in the first half versus consensus, I think it's just more to do with cost saving and timing rather than underlying delivery of group optimization or ArthroCare. So the program's on track. As you know, we've maintained the guidance; I think it's simply a phasing issue rather than anything else. ArthroCare, again, is going very well. The sales integration has gone well in the U.S. and the rest of the world. There's a real synergy with the reps now, because they've got both blades and COBLATION. So all that's working really well. At this stage, we're not changing the guidance there. We're maintaining the $85 million. We've owned ArthroCare now for one year only. So we're confident about it, but not upgrading the guidance. Olivier Jean Bohuon - Chief Executive Officer & Director: I was, on the $85 million, you remember the split. It was $65 million for cost savings and $20 million in sales synergies. I'm more optimistic that our CFO on the sales – I think that synergies will happen because it's pretty mechanical. And it's the sales – more I see that the way that this integration is happening, the value – Julie mentioned the reps feedback that we get. I mean, it's very good. And the ENT business, which we forget sometimes, but let me remind you that this business when we took was a negative growth business; it was minus 5%, minus 4%. And we're now over – we have seen between the GYN and the ENT a 7% growth that I was mentioning. We see (40:40) much more focus on it. We believe there's a lot of things there which are interesting in the emerging market and in the established market.

That's very helpful. And just a follow-up on Arthro, can you detail how much benefit maybe you saw in the quarter from the Zimmer-Biomet, the synergies from that deal? How much do you expect you can be able to benefit, maybe, in the second half from the focuses around the integration? Olivier Jean Bohuon - Chief Executive Officer & Director: I don't know, actually. It would be interesting today to see the results offer this company. And maybe I would be able to answer more – with more details there. I mean, we see the synergies; there's no doubt that its – integration like this is always pretty painful. So there will be certain opportunities, and it's why I cannot quantify them. I don't know. And actually, what – I think that what we have in our own plan takes this in consideration.

But you have been able to pick up potentially some salespeople from it? Olivier Jean Bohuon - Chief Executive Officer & Director: Not much more than – we have seen these synergies for a while now because they have been working. We have seen, as I said last quarter, there are obviously these going on and people willing to join us. And so we see the opportunity. We see distributors in the U.S. saying, you know what – one was with Biomet; one was Zimmer. Now, there's only one, so one is available. So they come to you saying, well, can we work together? I mean, you find a number of opportunities. Now, I think they are integrated in our business now.

Great. Thanks. Olivier Jean Bohuon - Chief Executive Officer & Director: Thank you, Ed. Sorry, there's four – if you will not be happy, we are all four people on the – and then we will (42:19).

Certainly. We will now take our first question from Mr. Tom Jones from Berenberg. Please go ahead, sir. Your line is now open. Tom M. Jones - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Oh, good morning, and thanks for taking my questions. I had two, one on Syncera, and one on the AET business. On Syncera, I just wondered how your conversations with hospitals have changed since the publication of the CCJR proposals from CMS. The PPCI program that ran before that, that was a voluntary program, but this is different, being a compulsory program, and is perhaps, or my thought at least, forcing half the (42:59) to start thinking about your kind of business model. So, kind of wondering how that's changed the conversation. And then, sort of a follow-on to that was if Syncera does prove to be successful, which we all hope it will be, how would you expect the incumbent, the big three just to start to respond? Because clearly, they're not just going to roll over and let you take all their shares. They're going to do something. I just wondered kind of how you plan for that and what do you expect to do about it. And then on the AET business, this doesn't get a lot of attention, but it's as big as the Sports Medicine business. Once again, it didn't really do much in the way of growth. So I just wondered if you – there's anything you've got planned or you have in the pipeline trying to improve matters in that business. Olivier Jean Bohuon - Chief Executive Officer & Director: Okay. Well, look. Phil, you want to take the Syncera or you want me to answer? Phil Cowdy - SVP-Corporate Affairs & Strategic Planning: I'll take it. I…

We'll now have our next question from Bill Plovanic from Canaccord. Please go ahead, sir. Your line is now open.

Great. This is actually Kyle on for Bill. Do you hear me all right? Olivier Jean Bohuon - Chief Executive Officer & Director: Hi, Bill.

He's Kyle.

Just wondered if you could remind us of your cash priorities, where do you think about M&A buyback and dividends, the different puts and takes between those two? And then also, when you think about M&A moving forward, you showed the slide of building out in the emerging market. I mean, how do we think about the balance in M&A from a distribution standpoint and the focus on the emerging, but then also new technologies you've seen in the marketplace? Olivier Jean Bohuon - Chief Executive Officer & Director: So on the M&A, I mean it's still high on the agenda, not only in the emerging market where we continue to acquire what we believe is important to our distributors. We also look at companies which can help us to develop our mid-tier. You remember the mid-tier is the second growth lever of the acceleration of the emerging market in the future. And so that goes through (48:11) portfolio. We have launched our own portfolio. We follow that, and that will happen in the years to come. But we believe that in-licensing and acquisition, our support of this – that will remain high in the agenda. For the rest, we still have a serious appetite for bolt-on or companies filling gaps or adding value to our existing businesses; could be a product like ZUK, which really is a gap filler for us, which is important. It could be new technologies. Actually, we try to think about the new technologies more and more. And that's the complexity of the business, is to be able to ask your R&D to make products for tomorrow but also to think about what's next, which changes a lot. When you think about the impact of going from a technology to which is really molding and…

Thanks. David Adlington from JPMorgan. Just on your ENT and GYN businesses, that seems to be going very well. I'm just wondering if you see any scope for adding to that, sort of bulking that up from further acquisitions. Olivier Jean Bohuon - Chief Executive Officer & Director: Yes. Well, we can, we could. That's one of the opportunities that we believe which could be interesting for us to develop more these businesses, or one of these businesses, or none of these businesses. No, it's a good question because, obviously, we have this in mind every day, saying what do we do? I mean, GYN is a business which is roughly $50 million, $60 million. ENT is about $110 million. It's obvious that we don't have the mass that we could – that we should have to really use the strength of the groups because there is a growth potential here. And they are mono-product businesses mainly. So adding products or product for – product to these businesses will definitely help us. So we are looking at that. Yeah. Going back to the phone.

We'll now have our next question from Michael Jüngling. Please go ahead, sir. Your line is now open. Michael K. Jüngling - Morgan Stanley & Co. International Plc: Hi. Good morning. Hopefully you can hear me. I have three questions. Firstly, on the sustainability of organic sales growth in the second half of this year. What are the sort of the key drivers that will allow you to grow at the same rate for the second half of the year as we've seen in the second quarter? Question number two, when it comes to Syncera, can you provide some guidance on the future growth contributions, the timing of it when Syncera will add noticeable growth to hips and knees? I'm not referring to a specific quarter but more about which half year would we see the first signs of a material contribution? And the final question is on RENASYS. For 2016, U.S. RENASYS launched – was relaunched. Should we expect a slow recovery in profitability due to launch costs, re-entry costs, and perhaps also free samples to re-engage with lost customers? That's all. Thank you. Olivier Jean Bohuon - Chief Executive Officer & Director: Thank you, Michael. And so, let me answer the first question on the – I guess what you have in mind is that the sustainability of the growth for the second half. And my answer is yes, it's sustainable. And actually, we have said that at the end of last year, that H1 was improving. H2 should be also, I mean, even higher than H1. We believe this for a few reasons. And now, I'm more confident than I was before – six months ago, actually. The first one is mechanical impact. Obviously, RENASYS was not there in the second half of last year, so that…

Thank you. We'll now have our next question from Veronika Dubajova from Goldman Sachs. Please go ahead. Your line is now open.

Good morning. And thank you for taking my questions. I have three. The first one is just, Olivier, could you elaborate a little bit on the M&A comments that you've made? Reading between the lines, it sounds like maybe we might – you're not gearing up for big acquisitions, but you're looking more for bolt-ons. Is that a fair interpretation? And related to that, where do you see the biggest opportunities for acquiring disruptive technologies with part of your business? And then I have a couple of quick ones for Julie. The first one is just on the gross margin outlook. You've done a terrific job improving gross margins over the last number of years. Surprised to see the drop in the first half. If you can comment on how you're thinking about it for the full year and beyond, and if you still see some opportunities for gross margin to improve from here, that would be helpful. And the last one is Bioactives. Are you still comfortable with a low-teens growth for Bioactives for the full year, or should we be rethinking that assumption? Thank you very much. Olivier Jean Bohuon - Chief Executive Officer & Director: Let me take two question of this. The first one, very quickly on the Bioactives, yes, we are confident the guidance is there. We plan to have double-digit growth in the Bioactives. In the M&A, first of all, Veronika, I'm very happy to have a question from you. I was anxious not to hear anything from you. So it's good to hear from you. The M&A, I've never said that I was not looking for ambitious acquisition. I just – I focus my talk on bolt-on acquisitions and small acquisitions because that's what we've done during the first half in acquiring these…