Smith & Nephew PLC (SNN) 2011 Q4 法說會逐字稿

Good morning, everybody. So, as you know, I'm Olivier Bohuon. I'm the Chief Executive Officer of Smith and Nephew. And I welcome you to our fourth-quarter and my first full-year result presentation.

I will speak about our results for the fourth quarter and then hand over to Adrian to take you through the numbers. When Adrian is finished, I will come back and update you on the progress we're making against our new strategic priorities and some thoughts for 2012. As usual, we'll take questions at the end of the formal presentation.

So we finished 2011 well. For the year, our revenues were up 8% reported and 4% underlying to nearly $4.3b. All our business units contributed to this growth.

In Orthopedics, we led the market in knee growth and delivered a solid performance from our traditional hip portfolio. Trauma had a more mixed performance. I will talk more about what we are doing to change this in a few slides.

Our Endoscopy business performance reinforced my belief that minimally invasive joint repair is a good market to be in and a great market to lead. It offers scope for more innovation and obvious benefits to patients and payers.

For the third year in a row, Advanced Wound Management is our fastest growing business, exceeding this year $1b in revenues for the first time. Our successful entry into the negative pressure market is a major driver, but we should not forget that our large Advanced Wound Care business contributes also significantly.

We finished the year with a Group margin of 22.5%, and we are now well into our action plan to increase this. The generation of cash is a clear sign of a healthy business, and we generated free cash flow of over $0.5b. I joined Smith and Nephew in April last year. As these full-year results demonstrate, the Company has strong foundations.

In August, I set out our strategic priorities. These are necessary to ensure we are growing faster, better balanced, and are fit and effective for the future. 2011 was the start of this journey. 2012 will be a year of balancing the delivery of these priorities, while managing our more immediate operational challenges and opportunities. Later in the presentation, I will provide an update on our actions against these priorities.

Our Q4 revenue were up 4% to $1.1b, an underlying improvement of 3%. The overall trading environment in Q4 was roughly similar to what we have seen in Q4 -- in Q3, I'm sorry. Our trading profit margin was 25.2%, exceeding the 24% commitment we made last quarter. As I said then, we'll take the actions necessary to ensure all areas of our business maximize their growth and margin.

Adjusted earnings per share were $0.219, an increase of 1% on last year's $0.216. We have proposed a final dividend of $0.108 per share, up 10% on prior year.

Adrian will give you a detailed analysis of our revenue and margin performance in Q4, but just picking out the most relevant points. On the first slide, on the Orthopedic business, Ortho revenue in the quarter were flat on Q4 last year. This is a solid performance against the background of a challenging market and a tough comparative period. Market conditions, including pricing trends, are broadly consistent with those we saw in the previous period.

Overall, we think the global reconstruction market growth was again only marginally positive. Global knee growth was at plus 2%. This continues to be a market-leading performance; however, at a slower pace. The very strong full launches of our market-leading VERILAST and VISIONAIRE products are now annualizing.

Trauma growth declined 2% and would have been flat excluding the US royalty payment expiring. Some of this performance reflects a strong comparable. However, we believe we should do better, and during the quarter we appointed a new management team charged with achieving this.

Turning to our Endoscopy business, sales in endo grew strongly as Europe delivered again another good performance. Growth in Sports Medicine repair sales was double digit. During Q3, we widened the launch of Fast Fix 360, the next generation of our leading Meniscal Repair System. As anticipated, this received a positive response from surgeons and our knee franchise improved materially. Resectional blades also had a good quarter. Our new range of Dyonics Platinum blades are now making a valuable contribution to the growth.

Turning now to the Advanced Wound Management, our Advanced Wound Management business grew revenue by 8% in the quarter, more than double the market rate at around 3%. One of the most pleasing things for me about the quarter has been the continuation of our rate of product launches, 10 in the quarter, after 11 launches in Q3, for a total of 35 new launches in 2011. This rate of new product introduction and line extensions will continue into 2012.

Of the launches in Q3, Durafiber and PICO in particular contributed to the European performance, as well as a weak comparative. Our negative wound therapy franchise achieved strong revenue growth across all regions. In the US, we saw significant conversion activity at hospitals such as Cleveland Clinic, Kaiser and UAB. PICO gained a 510K approval in December, and has been commercially launched in the US in January this year.

So I'm going to leave the floor to Adrian. I will come back then to talk about the strategic priorities.

Well, thank you, Olivier, and good morning, ladies and gentlemen.

If we turn firstly to slide, I think it's 10, the income statement. Slide 10? Yes, it's slide 10, the income statement. Revenue in the quarter was $1.106b. As Olivier mentioned, this represents 3% underlying sales growth after adjusting for exchange rates on quarter four last year. Trading profit in the quarter was $279m, an underlying decline of 1%. The reported trading margin of 25.2% was in line with the commitments that we gave last quarter and 80 basis points lower than quarter four last year.

Restructuring costs charged in the quarter were $33m. $26m relate to the efficiency program announced with our last results in October. Olivier will explain the goals, main content and shape of this overall program in a moment.

The legal charge of $23m relates to the creation of a provision in connection with a previously disclosed investigation by the US Securities and Exchange Commission and Department of Justice into potential violations of the US Foreign Corrupt Practices Act in the medical devices industry. Based on information currently available, the Group believes that it is possible to make a reasonable estimate of the losses expected. The Group has not reached final agreement on a settlement on these matters, but believes that any additional material loss is unlikely.

We cannot say more on these legacy issues, as there is no final agreement. We can say that we believe that we have today an excellent compliance program across the business, and we have enhanced -- which we have enhanced since these investigations began in 2007.

Interest costs are down on last year, reflecting our lower debt.

Moving to slide 11, moving down the income -- moving further down the income statement, the tax rate for the full year on trading profit was 29.9%. This is a slight reduction on the 30.2% rate we had been expecting and had provided for at quarter three. Accordingly, the rate in quarter our is slightly lower, at 29.3%.

EPSA in quarter four were $0.219, an increase of 1.4% on last year. This is slightly stronger than the small underlying trading profit decline, due principally to the lower interest charge and a small exchange gain. EPSA for the full year also increased 1.2% on last year, stronger than the underlying trading profit decline, and also principally due to the lower interest charge and the relative weakness of the dollar.

Unadjusted earnings per share were 5.8% lower in the full year, impacted by the estimated cost of the SCPA settlement and by the restructuring costs.

There is no impact of the recently announced Bioventus transaction in these P&L numbers. In line with accounting requirements, we are treating the assets involved in the transaction as assets held for sale in the balance sheet. The impact on the P&L will commence on the closing of the transaction. I will touch on the details of this impact in a moment.

Turning to the next slide, slide 12, and an analysis of revenue by business segment. This slide shows the reported growth rates by division and the impact of currency movements on those growth rates. The impact of currency was small, a small net gain, as you can see, in the quarter.

And turning straight on to the next page, page 13, which provides an analysis of revenue growth rates by business and by geography. Olivier has talked to the shape of our revenue, and I will add a few more detailed points.

Market conditions remained, as we expected, challenging. Across our business as a whole, we saw essentially the same price picture in quarter four as in quarter three. In our Orthopedic business, we saw a like-for-like price reduction of around 3%, similar to quarter three. Within Orthopedics, you can see that the strong growth we achieved in recent quarters, especially in the USA, has eased as, in particular, the very strong performance of VERILAST and VISIONAIRE in the United States annualizes.

Headline Ortho growth in Europe was a minus 7% decline. Sales were reduced by $5m, due to a negotiated return of some supply lines from a wholesaler in Spain due to credit issues. Sales growth was also reduced due to the ordering patterns of a couple of quite large distributors who placed large orders in quarter four 2010, which were much smaller this year. Without these items, Ortho growth in Europe is a 1% decline.

As noted last year, within our Trauma business, an agreement under which we receive about $8m per annum in royalties expired in the middle of the year. This reduced worldwide Trauma sales growth by 2% in quarter four and US Trauma sales growth by 3%.

Ortho achieved a good 10% growth in the rest of the world, with China and India again growing very strongly. Global hip sales declined 2%, which was similar to the previous quarter. Declining sales of BHR again offset good sales from our other hips, including the fast-growing Oxinium bearing surfaces.

Clinical Therapies finished the year very strongly, with an 8% growth. Endoscopy sales grew by 7%, with good performances across all regions.

In our Wound business, sales grew by 8% in the quarter, again, well above the market rate. Within that 8%, NPWT sales again grew strongly and contributed over 4% of the total Wound growth. Reported Wound growth in the United States was low, due to a strong quarter four in 2010. Conversely, Wound growth in Europe and in the rest of the world was increased slightly by wholesaler stocking patterns. On a net basis, reported Wound growth was increased by 1% to 2% by wholesaler ordering patterns.

Turning to the next slide, slide 14, this shows the usual analysis of trading profit by business segment. As mentioned earlier, trading margin in the quarter was 25.2%, in line with our guidance from quarter three and 80 basis points below quarter four last year.

Margin increased in Wound by 40 basis points, as we continue to drive efficiency and as NPWT sales grow strongly.

Margin increased in Endo by 130 basis points. This showed the benefit of strong cost discipline, strong sales and the now lower proportion of Visualization sales which earn lower margins. It included a continued significant increase in the level of investment in biomaterial projects.

Margin decreased in Ortho by 220 basis points. Of the three pressures that reduced margins in quarter three, one was not repeated, one abated and we have begun very seriously to address the third.

Firstly, there was no repeat of the unusual bunching of periodic costs which we experienced in quarter three.

Secondly, we continued to experience pressure on gross margin as a result of mix pressures. However, as you've heard, the annualization of the significant increases in VISIONAIRE and VERILAST sales in the USA has led to a reduction in top line growth. Correspondingly, it has also reduced the pressure on gross margins as these products are slightly dilutive to gross margin.

Thirdly, we have begun to execute on our Revitalize program to reduce the Ortho cost base, in line with the market conditions in the established markets. We announced the elimination of around 150 positions in the new ASD division in the quarter. These reductions mainly took effect from toward the end of the quarter. Accordingly, within quarter four, the bulk of the quarter-on-quarter improvement under this heading was from tighter cost control, and we will see the more structural changes benefit ASD margin progressively through 2012.

We've added a column on the right of this slide -- on the right hand of this slide, which deducts for the full-year numbers the $25m Blue Sky credit from last year's Wound and Group margin. As you can see from this adjustment, the reported trading margin for the Group as a whole was down 140 basis points in the full year.

So, turning to slide 15 and the cash flow statement, we had another good quarter of cash generation. Free cash flow of $108m in the quarter was after payment of $77m in settlement of outstanding legal disputes, mainly in the IP area. The settlements were in line with provisions and did not impact profit. Part relates to future benefits and is included in the capital expenditure number you see here.

In the full year, we generated $521m in free cash flow, a trading cash conversion ratio of 87%, despite the substantial legal settlements. Net debt at the end of the quarter was down to $138m, down from $492m a year ago.

Turning briefly to the next slide, slide 16, which provides a brief summary of the terms of the Bioventus transaction which we announced on January 4. I will not go through each of these terms, as I expect that you are familiar with them from the announcement. We've included them here mainly for your convenience.

And on the next slide, slide 17, we've also included some more financial details of our CT and Biologics business which will transfer to Bioventus on the closing of the transaction. The details on this and the previous slide should allow you to model the impact of the transaction fully on our reported financials.

The transaction will be modestly dilutive to earnings, as you know, by about 3% in a full year. This dilution derives principally from the low interest rate earned from the cash received and the higher level of investment in R&D planned by the new entity.

We have not disclosed the interest income on the $150m (sic - see presentation) loan note that will be payable to us from the new entity, but have said that it pays a premium to Libor appropriate to the nature of the Bioventus entity. We expect the gain on disposal to be in excess of $250m before tax. This will be reported on the closing of the transaction.

Turning to the next slide, slide 18, this slide and the next slide set out the segmental, geographical and product analysis that we will give on the business from quarter one 2012, and also shows an indicative restatement of the 2011 full-year numbers in the new format. These changes are being made to reflect the new organization arrangements in the Group, which themselves reflect and drive our strategic direction and priorities.

On this slide, you can see the segmental analysis of sales, trading profit and margin. We will be replacing the three global business units that have been the way the Group is run with two divisions, Advanced Surgical Devices and Advanced Wound Management. This will also be the segmental analysis driving the fuller disclosures on capital employed and other matters in the annual report.

And turning to the next slide, slide 19, here you can see the analysis we plan to give of revenue and revenue growth by geography and business segment. You can see that we will be moving the geographic analysis from United States, Europe and Rest of World to United States, other established markets and emerging and international markets. Within other established markets, we will include all the European economic area countries, Japan, Canada and Australia and New Zealand. Within emerging and international markets, we will include sales in all other countries except those and in the USA.

You can see the indicative split of 2011 sales in this new format on this slide. This does provide new data on our sales in emerging and international markets. As you can see, these accounted for 11% of Group sales, at $454m, and grew at 20% in 2011.

We will also be making a couple of small changes to the product growth analysis which we provide in the appendix to the investors' presentation each quarter, and we have set these out in the appendix to this presentation.

Turning lastly, in this part of the presentation, to slide 20 and the outlook. Firstly, our revenue outlook for 2012 by product franchise.

In Orthopedic Reconstruction, our sales growth exceeded market growth in 2011. We expect continued growth from the excellent products which drove this 2011 outperformance. We do not expect, however, that they will drive market outperformance in 2012. Coupled with the continuing drag from market metal-on-metal perceptions, we expect our Reconstruction growth to be close to market growth.

In Orthopedic Trauma, we expect the 2% headwind of the reduction in royalty income to lead to growth slightly below market growth. In Orthopedic Arthroscopy, we expect to continue to grow at slightly above the market rate. And in Advanced Wound Management, we expect the momentum in the NPWT area to lead to growth substantially ahead of the market rate.

Secondly, our margin outlook for 2012. This is unchanged from last quarter. We expect to deliver a modest increase on the 22.5% delivered in 2011.

Turning to a few more detailed items lower down the P&L account; firstly exceptional costs. Olivier will give details on the restructuring program. He will mention that we expect around one half of the $150m per annum total benefit to arrive in 2012. This is incorporated in our margin guidance. It is challenging to predict exactly when progress on the various initiatives will reach the point when accounting rules require a P&L provision. We would, however, expect something over one half of the costs to be booked by the end of 2012. We will include a page in the appendix to each quarterly investor presentation summarizing cumulative spends on this program, so that you can easily track it.

As already mentioned, we expect to book an exceptional gain in excess of about $250m when the Bioventus transaction closes; that's before tax. We still expect this to be in late quarter one or quarter two. Secondly, we expect the charge for the amortization of acquisition intangibles to continue at about $10 a quarter -- $10m a quarter, that is. Thirdly, we expect the net interest cost line to continue to reduce as debt is repaid, all other things being equal. Fourthly, we expect other finance costs of around GBP5m (sic - see presentation) per annum.

Fifthly, we expect a tax charge on profit excluding exceptionals at around the current year's level, i.e. around 30%. Six, on exchange rates, if yearend exchange rates were to remain the same until the end of 2012, we estimate that reported full-year sales and trading profit growth would both be decreased by around 2%, and this position is coincidentally the same for quarter one. Lastly, we have as usual included a page in the appendix setting out business days by quarter. There is one extra day in 2012, which falls in quarter four.

And finally, on phasing within 2012, we do not see major variation in the drivers of top line growth across the year. With regard to the bottom line, however, we do, as you would appreciate, expect the benefits of the restructuring program to build progressively through the year.

And after those rather technical items, I'll hand back to Olivier.

Thanks. So I'd like to remind you of the strategic priorities to drive the growth, priorities I set out for Smith and Nephew, and I would like to update you on the progress we have made so far.

I'd like to start with a reminder of these priorities. We have set out five priorities in August. The first one is to win in established markets. Winning in established markets means that we want to gain market share in established markets, because we cannot surf on the growth of a market which is almost flat.

So, what does that mean, to win in emerging markets -- in established markets? Well, it means to launch innovations. I think the example I gave to you with the Wound Management is a good one. The second one is to optimize the sales and services, to help to gain market share. The third one is to improve the sales force effectiveness. And those are absolutely critical. And actually, there is a fourth one, which is also maximize the price and the premium prices linked to the innovative products that we launch. So those are really the main things that we want to achieve, and we have now set up a number of things to be able to handle all these programs.

The second priority I was mentioning in August is develop the emerging markets. As you know, we have -- when I talk about emerging markets, here I'm talking about the BRIC countries, okay? We have been pretty strong in China and we are strong in China, big growth, big base now, almost $100m of sales in China. And we want to develop our sales in Brazil, in India and in Russia pretty strongly.

So, to do that, what do we do? Well, we have so far now a top management in place. We have named January 1 a President of the emerging market, of the BRIC market. We have also named a Head of R&D, who's a very strong person and very competent. And this gentleman will be in charge of proposing the programs of development to develop the portfolio, specifically dedicated to the emerging markets.

Innovation remains core and, as I said to you, we are revisiting R&D. We have done our homework on this one. Reallocating resources, looking at what is important to do in the future, changing the processes. And we also, as I was mentioning to you, plan to spend more money in the R&D field, because we expect to spend something like $300m additional money in the next five years in this R&D to fund, A, the established market innovation pipeline and, B, to fund this portfolio of emerging markets.

The fourth priority was to simplify and improve the operating model, to liberate resources, to be more agile, to be faster and to support an enhanced sales force. We have also done that. We have now a lot of duplication that we took away. And Adrian was mentioning 150 jobs in the US. We have actually to date cut 220 jobs, and most of them are coming from this de-duplication. There's a lot more to do on this, and I think it will be critical.

And the last but not least is to supplement the organic growth with acquisitions. So, here again, we're working on these three items, bolt-on acquisition, emerging market platform and other acquisitions.

So, turning to the progress we have been making on these priorities, I've mentioned a few of them, but this slide sets out some of the actions we have taken in the last few months to deliver our strategic priorities. Needless to say, there's a lot ongoing. I've highlighted some of these actions elsewhere in the presentation, so I will only illustrate a few examples here.

The uniting of Orthopedic and Endoscopy to form our new Advanced Surgical Device division is progressing very well. In the US, we have substantially completed the work to form a single administrative structure to support our sales team.

In Advanced Wound Management, we have refined our European sales model. This recognizes the trends in some countries for better tendering, the greater growth in the community sector, and ensuring we have optimum share of voice in the marketplace.

In R&D we have appointed, as I was mentioning, an experienced Head of Emerging Market R&D, who is leading this critical initiative to develop the future requirements for these markets.

Finally, as promised last quarter, we are now ready to give more details on the $150m of structural efficiency improvement we intend to deliver in the next five years.

A quick reminder of the areas we are addressing, to ensure we have the right cost structure and that our resources are focused on the growth drivers of our business. A, we are working to improve the cost of goods. We currently produce or source 10% to 15% of our products in low-cost countries. We continue to review opportunities to increase this, balancing the existing expertise we have, the potential to improve existing manufacturing plants and our need to produce new product lines for the emerging markets.

Our Advanced Wound Management plant in Suzhou, China is an outstanding example of what we can achieve. We have just approved an extension of this plant, in order to in-source more products and meet our ongoing capacity as we continue to grow our business.

Secondly, our G&A expense base. As we said before, we have started simplifying our operating model in order to achieve greater effectiveness, while continuing to support the sales team and the sales dynamic. This project is most advanced in the US, as I have already explained. In Europe, we now have confirmed the Advanced Surgical Device management structure, including a new European head of this function and regional and country heads. This work has been carried out in conjunction with a review of our sales force productivity and the best and most efficient way to serve the European customers.

Turning now to the financial implication of these efficiency improvements. As we said last quarter, we expect the completed program to generate savings of at least $150m per year. Roughly three-quarters of the benefits will be to SG&A, mainly G&A, and the balance cost of goods. We expect to get about half of the benefits by the end of this year. It remains our intention to deliver a sustainable trading margin of around 24% in the medium term.

The pace at which we achieve this will reflect our ambition to maximize both growth and margin by being more efficient in established markets and investing wisely in the significant growth opportunities we see. I believe that this balanced approach is in the best long-term interests of our shareholders.

In order to deliver on this efficiency improvement, we expect to incur cash restructuring costs of about $160m, of which we incurred $26m this quarter. A substantial portion of this cost will be redundancy expenses and will include roughly a 7% reduction in our global employee base over the next three years, including about the 220 positions I was mentioning lost to date. There will also be a number of non-cash write-offs, principally of plant and equipment, which we expect to be some $40m over the program.

I set out in this slide the members of my executive staff. Of the three additional hires I've made, one was an open position, HR, and two are new roles, the President of Emerging Markets and the Chief Technology Officer. The changes being made to improve our business are being driven by this team, which combines both a deep experience in Smith and Nephew and some new insight and experience from outside. To complete the team, we are hiring a Corporate Development Officer, actually mainly in charge of business development acquisitions, as we look for value-enhancing acquisitions.

I've talked a lot today about financials, management, efficiencies in G&A, but at the heart of the business are innovative products. They allow us to make market share in the established markets and achieve high growth in the emerging markets. I want to reinforce this message with you and what I mean by innovation over the next few years.

In Sports Medicine, the Fast Fix 360, the new generation of our market-leading Meniscal Repair System, is being rolled out. Fast Fix 360 perfectly illustrates that the market will pay the right price for innovative premium products. This product quickly mends a torn knee meniscus in a cost effective outpatient setting, and potentially reduces the chance of a nearly total knee replacement in future years. And it is this type of Sports Medicine product that demonstrates why I believe that the minimally invasive surgery market will grow for many years.

PICO, our canister-free disposable negative pressure system, is another good example of Smith and Nephew delivering innovative, even in this case disruptive, new products to market. We launched it in Europe, Canada, Australia and New Zealand in May last year, and have had excellent customer feedback in all launch markets.

PICO builds upon our existing technical expertise and customer relationships. It is capturing the attention of patients, clinicians and payers by delivering on our pledge to reduce the human and economic cost of wound. Meeting this agenda is another central part of how we are approaching our near-term product enhancement and our longer-term R&D planning.

These are two examples of what I mean by innovation, which includes obviously VISIONAIRE and VERILAST, as well as many other advanced technologies and devices.

So our business in 2011, this slide illustrates our 2011 revenue under the geographic and high-level product franchise analysis we'll provide from Q1 this year. It will allow you to measure the execution of our strategic priorities and monitor the direction we're taking at Smith and Nephew.

Over the coming years, you will see us build a better balanced Company, both geographically and across our product franchise. Even today, we are too often referred as just a hip and knee implant business, which only represents, by the way, roughly a third of our business. It also fails to capture much of what we do and the excitement we feel about our faster-growing product franchises.

As I have said, I believe there are material opportunities in the emerging markets, and we are setting the bar high; it's market leadership. We also desire to increase our skill in Advanced Wound Management and minimally invasive surgery.

And how would I summarize 2011? Well, I think it has reinforced all the conclusions I drew in the first three months, as I went round the businesses. Smith and Nephew has a great foundation, its innovation, its people, its culture of customer focus. And from my perspective, we made very good progress in 2011.

So, what about 2012? Well, I think Adrian gave you the detailed financial outlook guidance, including reconfirming our margin guidance for 2012, which will be a modest increase versus 2011. This is a key year, as we work to reshape the business through the liberation of resources and increased investment. We'll continue to do this without jeopardizing our day-to-day operational performance or relationships with customers.

Our Advanced Wound Management and Sports Medicine businesses have great momentum, which I expect to continue. In Reconstruction and Trauma, we have a strong portfolio of products, although we are past the strong initial launch phase of our newest product; Adrian was mentioning the annualization of VERILAST and VISIONAIRE.

As we look out beyond 2012, we see a rich pipeline of innovation we will bring to these markets. It is early days, but we're making extremely good progress and are very energized by the opportunity that we can see. We believe we can improve all areas of the Company, from product innovation to manufacturing, to ensure Smith and Nephew is fit and effective for the future.

Thanks a lot. And that ends the formal presentation, and we'll now take questions. Thank you.

Thanks for taking the question. It's Navid Malik from Cenkos. Three questions. On the PICO, I know you tend not to want to break out your market share, for example, in Europe, but can you give us some idea of the quantum of sales, approximately, what you're seeing in Europe, because obviously KCI being taken private, PICO offers advantage in terms of austerity and convenience, etc.? What impact is that happening -- is that having on market share trends, perhaps would be a better metric?

And in terms of hips, on BHR, obviously a big debate on metal-on-metal iron toxicity, etc., and then the recalls of ASR. How are you differentiating clinically? What evidence are you able to produce to drive that catch-up which we hope will occur over time, with the procedures that are obviously being offset?

And on the M&A -- on the acquisitions column on slide 23, it's conspicuously empty. What sort of acquisitions are you looking at, potentially, what type of acquisitions, which will help drive your strategic objectives?

Your first question was what? PICO, okay. Look, quickly on this one. The last one, acquisitions, to make it quick. I've said in Q2 and Q3 and now again in Q4 that we are looking for a bunch of potential acquisitions. We have done a number of bolt-on acquisitions, small stuff. We are working hard now on emerging markets. My new President of emerging markets has a very strong agenda. So we are moving fast on this one. So we look for many in Brazil and India at this stage.

In the rest, I reinforce what I've said to you previously, which is we are looking hard in Advanced Wound Management and in minimally invasive surgery and in extremities. That's what we do. There is nothing else I can tell you at this stage.

Regarding metal-on-metal, we are actually pretty disappointed that some commentators do not differentiate BHR than the global metal-on-metal. And I think it's -- for a patient, this could be potential distress which is not necessary. When I see the article I read on Sunday, when you say poisoning patients, it's a big anxiety. Actually, we know that BHR is a good product. We have been following this product for 10 years in a row. We do not see any problem. Actually, all the data we have received recently, independent data, one is the English and Welsh Joint Register, is showing that BHR has the best survival rate for eight years, which is roughly 98.5%.

So we do not have any concern about the products. The problem that we have in the face of us are these adverse winds, actually, of metal-on-metal, which are a handicap for us. But we do not believe that there is any issue with BHR. On the contrary, we believe for a number of patients this is the best product to implant.

Now, the BHR represent roughly 12% of our hip business. The adverse wind we see is regular, actually; it's roughly minus 25%. So we are suffering about this, but not at a level which is crazy. And again, we don't think there is any issue here.

Regarding PICO, I'm not going to tell you anything about the market share, as you can guess, but what I can tell you, I have been following this product very deeply, because I love it. And I've been in Europe talking with physicians, talking with all our teams, and it has a very good start, actually, a very strong start. I was in the US last week in our Wound operations, and so we have an extremely good feedback of the first days of launch, I would say week, good adoption.

Again, the PICO -- the beauty of PICO, it is not supposed to replace the RENASYS. It is supposed to extend the market. So you don't foresee any type of cannibalization of the RENASYS, but we expect to really have a number of wounds not treated before by negative pressure were now treated by negative pressure. So it's very encouraging. That's what I can tell you.

Just a quick question, obviously on the venous --

Last one, huh?

Yes, last one, sorry. On venous leg ulcers and similar wounds, obviously Shire's bedded down Dermagraft now. What sort of -- what innovation can you bring into that part of the market, to attack that, because it's a very large market opportunity which Dermagraft has a small market share in currently, but has a lot of potential to grow in? It seems to be very complementary to obviously NPWT.

Are you going to AOS next week, no?

No, unfortunately not.

No? That's a pity. You would have seen everything, yes. So -- yes.

Maybe I'll get a ticket then.

Okay. Next question. Yes. Yes, whatever.

Thanks. Martin Brunninger from Nomura. Just a question on the margin improvement for this year. It seems like what you said on the cost savings and on the costs for restructuring, seems like almost margin neutral this year, $80m and $75m. So where are the margin improvements coming from this year? How much is there from product mix and how much from geographical mix?

Do you want to take it, Adrian?

And the other question I had on Spain. You said there was -- obviously we've seen a margin contraction on the Orthopedic side, on Q4. Is Spain included there? And if not --

Spain is included, yes.

In the adjustment?

Yes.

So what was the margin contraction driven by, exactly?

Well, I understand the second question. I didn't catch the first question. I think (inaudible).

No, the first question was you gave -- on your outlook you gave a margin improvement.

Yes.

For this year how much is it and where does it come from? Because what you said on the cost savings and the costs for the restructuring programs, it seems like it's neutral for this year. So where did the margin improvement come from?

What, going forward, in 2012?

Yes, just for this year.

Okay. This year, 2012, okay. Well, in terms of Ortho, what's happening to the margin, we went into some detail at quarter three, as you may recall, through what was impacting the Ortho margin. And we identified that there was a bunching of one-off costs in quarter three which hit us. But there were two more longer-term stuff that was hitting us in quarter three.

One was gross margin pressure, because the products that were growing fastest had lower gross margins, and you've seen that actually happening all the way through the year. And we showed that that has abated in quarter four, because VISIONAIRE and VERILAST growth rates have come down, so therefore the gross margin pressure from those growth rates have come down.

But the most important thing we've been doing in quarter four is starting on this restructuring program. Now, the actual -- the restructuring benefits, as in headcounts leaving and the associated process changes, frankly only began to take -- to impact in earnest towards the end of the quarter. So those 150 positions that were eliminated in Orthopedics and Endo during quarter four mostly happened at the end of the quarter. So most of the improvement you are seeing in Endo and Ortho in the quarter is not that. What it is is the tough cost environment that we put in place, coinciding with the start of that.

Now, some of that was cost reductions which frankly are not sustainable. They are things that we have absolutely started again doing in January, but they were important to do at the start, if only to -- well, not if only. One of their benefits was to accelerate the psychology that goes behind the structural changes. So that very tight control of discretionary costs is one of the elements you are seeing improving the margin, both in Endo and in Ortho, in quarter four. That, however, is not the core of what will improve the margins going forward in 2012, which is structural.

And that maybe is the answer to your second question, what are the sources of that. Well, what it is not is sales force. We are -- the absolute focus of this program is to sustain and improve customer service, but lower the cost to serve, and lower the cost to serve not by taking -- not by dealing with sales heads, but by dealing with everything that works behind that. So it certainly includes the platforms which serve salespeople, all the operational stuff that deals with getting the kit to the sales guy at the front, and everything going backwards from that.

Roughly, roughly, we see about a quarter of the total benefit in cost of sales and about three-quarters in G&A, and that's stuff sitting between the frontline sales force and the factory gate. The latter, the G&A, will be quicker, because it's much more directly headcount related and you can get after it quicker. The next wave of factory stuff will take a little longer, and we are starting on it. We're starting on it immediately, in fact. Olivier mentioned we just got Board approval for an extension to our Suzhou factory. Well, that kicks it off, but it will take longer for that to actually flow through into benefit (multiple speakers).

But that's what we're mapping in. That's the nature of the stuff we expect over the next couple of years to flow through, as a result of the program.

And you expect the price declines at the same pace as you have seen last year? That's part of your assumption, then?

Well, I don't know if it's part of our assumption. It's a core scenario. It's been a core scenario for some time that the environment will stay pretty much as it is for some significant time to come. We don't predict those sort of things. That's for people -- economists and things to do.

We have not seen any degradation of the prices in Q4 versus Q3. It has been roughly the same trend. So we don't see anything worse, actually, in 2012.

One question here.

Good morning. I have three questions. Firstly, on restructuring, who determines whether the $200m really are restructuring charges or normal costs? Is it purely the Finance Department, or is it also the auditors who have to sign off on those charges?

Question number two, on -- also on restructuring, where is the main hit taking place? Are you -- is it more the Orthopedic side, or is it more the Endo side?

It's -- on this one, I will leave Adrian answering it. On this -- actually, it's everywhere. It has been everywhere. But the 220 jobs that I was mentioning, 40 of them are in Wound, for example. So it's not only -- it's not only Ortho or Endo. It's just all across. Most of the savings in accounts are coming from -- actually, they come from everywhere. I think that's what we should say. It's a mix; it's a mix.

And then the third question is if you look at your hip, your knee and your trauma growth rates, constant currency, adjusted for comps you've seen a very sharp slowdown in the fourth quarter compared to the previous three quarters.

In revenue, you mean?

Well, organic constant currency sales growth. Does this coincide with your restructuring efforts, meaning are your efforts affecting your growth rate?

Look, I was expecting this one. That's a good one. But it's -- no, it's obvious. No, actually, answer is no. And I give you two examples why no. Actually, dynamic has been not so good in Ortho, and I'm going to come back on this one. It has been extremely good on Endo, extremely good on Wound. So if this would have been a problem, you would have seen an issue everywhere, actually, not only in the Ortho business.

Actually, the Ortho revenue, the first thing that you have to think about when you think Q4 is annualization of VERILAST, VISIONAIRE. They have been launched in the last quarter, so you obviously see a growth which is not as strong as this one. You had a very strong 2010 comparator. Just two figures. It was 5% up in 2010 Q4 for the Recon business; it was 10% up for Trauma business. So you compare a Q4 with a very, very strong Q4 in 2010.

Then, the hip is constantly going down, and I was mentioning the BHR impact. It's still here. So these are things which show you why -- if you exclude this stuff, actually, we do pretty well in hip. It's not -- we're not worried about that. So I don't think that's an issue. And do we have any issue with the restructuring program touching the dynamic of the sales? Not at all, not at all.

And you know what? I was -- last week again, when I was in the US, I attended the big ASD sales force yearly meeting. 1,200 reps were here. And so I was talking to a guy, explaining what we're doing, and obviously had many interactions. None of them have said to me, by the way, we have a problem with your program, because this can kill the sales dynamic. None of them. So I haven't had any question telling me, oh, by the way, there's a problem. So they even don't feel it, so that's why it's not the point.

Here we talk about all the G&As. It's again not S; it's G&As. And a lot of things is duplications that we have had with Ortho/Endo, or a change of structure, business model that we are looking for in Wound, for example, where you have more tendering and so on. That's --

And on your first question, Michael, of looking at are we using these restructuring charges to prop up the trading profit line, certainly not. It's -- we are very, very rigorous about it. We are very, very rigorous internally, but obviously it's subject to audit too and we are 110% transparent with EY on it. That's a cardinal principle of transparent accounting, which I stand fully behind. So no, absolutely, and we have been as transparent as we possibly can on the content.

We have one question on the phone, I think, Phil, and then we'll come back to you guys. I'm going to turn my head on this side, because --

We'll now take our first question from Matt Miksic from Piper Jaffray. Please go ahead.

Hi, good morning. Thanks for taking our questions. Can you hear me okay?

Yes.

Just if I could follow up on the question just asked just now on the Orthopedic growth, I can see the [modestly] tougher comps in the prior-year quarter. I guess I would drill down a little further into the hip and knee, or the knee growth specifically. To what degree would you attribute the slower sequential growth to an easing of any of the DTC campaigns that you have been running for VERILAST? Had you eased off on that?

And then, to what degree is that more VISIONAIRE, which -- and if VISIONAIRE, is it slowing due to competitive pressure, or simply a slowdown in penetration or pricing in that sector? And then I have one follow-up.

Okay. On VISIONAIRE, yes, we have competition coming in. That impacts us potentially in market share. But you know what? Not much. And the boost given to market growth linked to the arrival of new competitors is really pushing us, so I don't see an issue at VISIONAIRE level.

Regarding the very last DTC campaign, that's true, we have not done VERILAST DTC campaign in Q4. You know we have done a number of -- and actually we don't know if we'll do or not next year, but we have done a number of exercises in DTC to see the value of DTC. Yes, you have a correlation between the DTC campaign and the revenue growth. Is it a good return investment? I'm not so sure. So, before starting a new campaign, I want to know if it is just a fire and then coming down or it means something more structural, and the value in terms of profit is good enough to follow up. So that's what I believe with the DTC campaign.

Do you want to take the other one, Adrian? I think there was (multiple speakers).

That was it. I don't think we heard the second question.

And you have a follow-up question, you said?

Yes, a follow-up question on -- you talked a little bit about looking at acquisitions in emerging markets.

Yes.

I'm wondering if you could be -- is it more specific around perhaps the lines of business that you are looking at, expanding lines of business in the emerging markets that you're in, or is it more of a product line additions or distributor type additions? Thank you.

It's actually both. It could be products, and we have some targets. It could be distributors, it could be manufacturing platforms, or it could be companies. So we are looking at this on a pretty wide basis. So, regarding the line of products, it's almost everywhere, actually, Ortho, Endo and Wound, I think. So that's all I can tell you, but it's pretty general, yes.

Thanks so much.

Thank you. Yes. And then I go this side. I'm sorry, guys.

That's great. Veronika Dubajova here from Goldman Sachs. Three questions, if I can. First of all, on the margin guidance midterm, I think you've put in a sentence in the presentation saying it excludes the impact of the excise tax, which of course brings me to the question we tackled last results, which is when you do think about the excise tax impact, do you think you can absorb it? And if so, how quickly?

The second question I had was negative pressure wound therapy sales. If I remember correctly, a year ago you said the run rate was around $100m. I was wondering if we could get an update on that.

And the last one was in terms of product launches, AOS or otherwise. I think normally you include a slide in terms of the plan for the full year, and I didn't see one in the presentation this year. So if you can run us through some highlights that you are planning for 2012, that would be really helpful.

On the -- on negative pressure, did we really say $100m last year?

The run rate for quarter four last year was $100m. It's significantly above $100m now, is what I can tell you (multiple speakers).

So -- exactly. So it's much more than that, actually. And so that's good. First question. Second question -- no, actually, we are very happy with this negative pressure wound therapy, that's what I can tell you. You take the rest?

Yes. On the excise tax, I guess there's two ways of absorbing it, as you describe, Veronika. One is what is going to happen to pricing, and one is what can you do about the costs to compensate. And pricing, who knows? We are just going to have to see what happens. It's a marketplace issue. It's not a company specific issue. Who knows? We are just going to have to wait and see.

And as regards the cost absorption, well, you've heard our intent, but we are also not putting a date to that intent because there's a lot of variables that can happen, including this as one. So we expect to have to fight hard to deal with this one. How much of it will be left after the pricing issue, I don't know, which is why we are deliberately carving it out as an uncertainty, frankly. Not very helpful, Veronika, but it is what it is.

Nobody knows on this tax increase.

Yes.

That's -- it's very --

And then lastly, on AOS, we do normally put in, as you say, a pipeline, except for our quarter-one numbers, because it's usually just before AOS. And then we say we won't do that; we'll do it when we get to AOS. So that's why there isn't one this time, Veronika, but there will be one next quarter, after the AOS.

(Inaudible - microphone inaccessible).

No, no, no. Go to AOS next week. You'll see.

Go there.

(Inaudible - microphone inaccessible).

Okay.

Okay. Here.

Thank you. Two questions relating to emerging markets. Firstly, on the cost, it looks like in the cost saving program there is relatively little of that coming from the cost of goods sold line. And you are also sourcing relatively little in low-cost countries and manufacturing (inaudible). Should we expect a second part, or another program starting later, where you are addressing more the cost of goods sold line, in addition to this $150m savings? And what sort of timescale should we be thinking about here?

The second question is on your target for sales in emerging markets to increase fivefold over five years, I think it was. How backend loaded should we expect that to be? Thank you.

On the sales, all will depend -- again, we sell $150m in the emerging markets, the BRIC countries, okay, out of the foreign revenues, $30m I think that we have between international markets and emerging markets. So if I just keep the BRICs, we have a growth here which is -- the organic growth of this business is around 40%, actually a little bit less than that, but it's in China. India was almost 50%. So it is -- you can make the calculation of the pace of growth of this. On top of this, everything which will be acquired will help, mechanically, to help that.

So I'm very confident that things will move very quickly on this field. I don't think there is any risk when I tell you at least fivefold. This is something which is pretty easy to reach, actually.

And in terms of the costs to emerging markets, it's not a question of another phase. It's in this phase. We -- around a quarter of the -- we expect of the benefit of $150m will be cost of sales, and that is largely low-cost sourcing. And we have -- I think we referred in the announcement to a recent approval of an extension to our Suzhou factory. The Suzhou factory has been tremendously successful in the Wound business, and we plan to build on it, and build on it quickly.

Just one quick follow-up there. So what percentage from low-cost countries would you then be sourcing in manufacturing at the end of this program?

We don't have a specific target for that now, but it will be -- it will go north. There are constraints on it. There are practical constraints, things like -- it's not a panacea, as you well know from other companies you follow. So we haven't got a -- we don't have a goal to get to. That doesn't seem like a sensible thing to have. But it will clearly be north of where we are now, materially north of where we are now.

Much more. We're 10 -- delivering 10%, 15% now, so I guess it will be much more than that, yes.

Thank you.

Yes.

I have two questions. First of all, on the manufacturing side again, can you give us a sense of does it -- whether it makes sense for you to relocate some of the manufacturing for Ortho and Endo to lower-cost countries?

And then, for Wound Care, based on what you have at the moment, is there further scope to move that?

And then the second question is you've provided your guidance relative to market for the different businesses. Can you give us your assumptions for the market?

No, we can't. We don't do that, actually. We don't give assumptions for the market, unfortunately. That's what we do.

Regarding the changes of manufacturing, yes, potentially. But again, we believe at this stage that we have very strong and good facilities in Andover, in Memphis. There is a lot of things to improve there, in terms of cost of goods management, in terms of manufacturing productivity, before thinking about moving these factories.

However, when I am talking about the emerging market development, you obviously have two ways of looking at it. A, the existing portfolio of products that we sell in the emerging markets, and here we have to improve the cost of goods. And we are not going to move this manufacturing at this stage, okay? We manage cost of goods, and we have a pricing policy in the emerging market for the high tier, which will change.

B, for the new portfolio of emerging markets, here definitely we will (inaudible) manufacturing of Ortho or Endo, change the manufacturing footprint and manufacture much more locally, as we do actually in China, in Beijing, for the Ortho business, for example.

Morning. Thanks. A couple of questions. Firstly, just on the Wound stocking, you pulled out the revenue impact. I just wondered what the impact on margins was from that stocking.

Secondly, you saw a big increase in margins, particularly in Endo and Wound, in the fourth quarter. I just wondered how much of that was just early delivery of the cost savings program than you were perhaps anticipating previously.

And then, finally, in terms of -- it looks like you are going to be reporting international revenues going forward. I just wondered what the margins -- relative margins were in those emerging markets, compared to the rest of your business, and whether you would be reporting those going forward as well.

Yes. The -- sorry, the first one was Wound margin --

Yes, the impact from the stocking.

Oh.

Is there any positive impact?

Marginal, marginal, but not significant. When you have a slightly extra sales that can sit one side or other of a period, depending when the customer wants it, is going to slightly affect (inaudible), but not materially, frankly.

The -- and then your second question was the margin improvement in Endo and Ortho in the quarter, was that bringing forward the --

Yes, was that just early delivery? Did you manage to let go of more people than you anticipated originally and therefore it's just a timing issue, rather than --?

The people -- the positions that were eliminated in Endo and Ortho in quarter four absolutely are part of the program. There is no question about that. Most of those did not happen till towards the end of the quarter, so the movement you have seen in the quarter was only in small part attributable to that, just simply because it was a phasing issue, didn't happen till the end of the quarter.

So actually, in the quarter, more of the benefit was around tough cost management, not all of which is sustainable. Some of it is just stopping things that you don't stop forever. You need to get back to it. They will not continue. We are back to those now. But the stuff that was started towards the end of the quarter will continue to yield benefit, and there will be more of that, if that answers your question.

The -- and then the emerging markets, what are the margins. The -- we're very clear, and Olivier mentioned two or three times in different contexts already, that there are different types of products for emerging markets. And our goal over time is to very much tailor what we have to the different parts of the emerging markets, and in that seek to bring up the margin to a much more -- level closer to where it is for the corporation as a whole.

Today that is not the case. Today, both because we still mainly sell top-end product, both at the top end in emerging markets but also in the middle end, it drags down your margin. But also, we are at a phase of investing in SG&A, really quite heavily, in the BRICs, which also brings down your margin. So today, in the BRIC countries, no, the margin is very low indeed. When you take together, as I say, investment in SG&A and the fact that we do not have a complete range of mid-tier product, which will be designed to be -- will be designed for the price points that are the mid-tier.

Actually, in the other international markets, those parts of EM and IM, as we will be calling them, that aren't the BRICs, the margins are pretty good, actually. But there we are not as -- investing as strongly in SG&A, if that makes sense.

There's one question by phone.

We'll now take our next question from Jason Wittes from Caris. Please go ahead.

Hi. Thanks. Just another question on emerging markets. You are obviously spending -- refocusing a lot of effort there. What's a realistic outlook in terms of the percentage of your revenues that you could expect to come from emerging markets in the mid and long term?

Well, I said that it will be more than $500m in the next five years. What is the percentage? I leave you to make the calculation of what it means. It will be significantly higher, actually, than what we have now. And again, emerging markets, here I'm mentioning -- when I say emerging market, it is BRIC. Don't be -- we still have a very high growth expectation for the international markets, led by South Africa, which by the way we have reached for the first time in South Africa more than $100m. That's a big operation for us, with a very strong margin and 30% market share. So that's what -- so we expect to do this everywhere we can, so.

Yes, but again, it will be a good point of revenue. Again, I am not pushing too strongly the pace of growth in the emerging market until I have the right basis to make a profitable growth. So it means manufacturing footprint and it means revisiting the price policy that we have for the high-tier products.

Okay. Thank you. And also, obviously there is continuing pressure on metal-on-metal. Did you guys provide what percentage of your hip revenues, US and worldwide, are metal-on-metal at this point? Any idea of what your exposure (inaudible) lies at the moment?

It's 12% across the globe. We haven't split it between the US and non-US, but globally it's 12% or thereabouts of our hip revenue is in BHR. And it's declining at, as Olivier mentioned, over 20%, and has been for some time, sadly. But we still have a great product.

Okay. Thank you.

One more, the last one in the -- what? In the room now? Okay, good. Yes. First one. Sorry. Then I come back there.

Thank you. Yes. On the Wound business, the durable medical equipment program has been expanded this year in the US, and the bidding process, we believe, is carrying forward the next couple of quarters. Can you give us an idea about how much the wound market in the US -- the negative pressure wound market in the US is going to be effectively up for tender? And how much of an opportunity do you believe that can be for you, as you obviously tender against KCI?

You know it's a -- I'll give a few figures here. Negative pressure in the US is a $1.7b market, which is a big market, the biggest in the world, which means that we in Europe and the rest of the world are very under-developed in negative pressure, which is a good sign, which means that we will have a huge number of opportunities here.

The growth of our business in Wound in the US has been roughly, I think, 6%, and global, you know, with about -- market growing at about, I think, plus 3% in the US. And when I was telling you that I think that we do great, and actually the negative pressure was very, very high growth within this part. We gain market share in negative pressure. We have about 60 people promoting negative pressure, versus about 800, 900 with KCI. So this shows you gaining market share within this context means how good is the product and how good we are in providing this product.

So that's why, when I am telling you I want to reinforce our share of voice and our strength in the US, is this through acquisitions or the reinforcement of our sales force, that's what I mean here. There is huge potential. So I am very optimistic about the future growth in the negative pressure wound therapy in the US and the rest of the world.

And just a quick follow-up. Do you have a feeling of how much of the -- of, say, KCI's current business is effectively going to be up for tender, what proportion of the US market?

No, we do not have a good feel for how that's going to play out. It's still pretty fluid. And I would say, compared to 18 months ago when we saw those tenders as definitely a good way to get in there, they still are. But actually, as our offerings got much more complete and our -- we've demonstrated our capabilities so much more effectively to customers, it's no longer as important a tool for getting KCI out as it used to be. If it happens, well, obviously we'll be in there and using every building which we can, obviously.

Last, last one, here.

I've got three questions, but two of them are quite quick. Just on the repair business, you've turned in yet another quarter of very, very solid growth. It would be helpful if you could give us a little bit of color as to where that growth is coming from in terms of price, mix and volume, and on the volume side how much share you are taking and how much is underlying market growth. I suppose what I'm really trying to drive at is how long can you continue to drive that business along at a double-digit rate?

The second question is just a follow-up on Veronika's Wound question. I think if I back that 4% coming from NPWT out, I get to a run rate of about $140m. Just a vague comment as to whether it's in the right ballpark or not would be helpful.

And then the third question, a follow-up on Michael's question about restructuring charges. Irrespective of where the bean counters are telling you you have to put them on your P&L, this will be the sixth, I think, consecutive year of restructuring charges, the eighth year in 11. Do you think it's about time the shareholders and investors started to think of these as an ongoing cost for your business and start to factor that into how we think about the business, and maybe we should think about some of these costs being more sustainable going forward?

Good question. The -- do you want me to do that?

(Multiple speakers).

All right, okay. Well, first, the two -- in the first two --

I don't like them.

Yes. Well, no, the first one I think is a very positive answer.

Yes, yes.

We absolutely see this business as sustainable, and that's why we are very keen to focus on the minimally invasive part of orthopedics. We are very pleased that that's the part of the broad orthopedic market where we are most, in market share terms, strong. There is lots of innovation happening in that field.

And there's a second important driver which we have talked about, and that is the arthroscopy minimally invasive approaches to the joint. They are the newest form of orthopedics. And they are -- the specialty has had its deepest roots and is most established in the United States, as tends to happen with these things. In other parts of the world it's less established. So you've actually got another driver, as you get outside of the USA, that more people are training in it. And I always find it interesting, if you look at young orthopedic surgeons being trained generically as orthopedic surgeons now and ask where do they want to go, well, more and more of them want to go the arthroscopic route. They see that as the route for the future.

So, for all those reasons, we are very comfortable that there is sustainable growth, both technological advancement and the spread outside the US of the specialty as it is today in the US. So we are very comfortable with that.

We -- to your narrow part of your question, we are seeing much less price pressure in the arthroscopic field than we are in implants, for obvious reasons. And I wouldn't say we are seeing price increases, but we are not -- certainly not seeing the same price pressure. And the growth is coming very healthily from volume and somewhat from mix.

The -- your calculations on NPWT aren't too bad.

One day we'll disclose it, actually. We will make --

Yes, the -- and yes, your point about restructuring charges is a good one. And clearly, at the end of the day, this is shareholders' money that's coming out, wherever you put it in the books. We -- transparency is very important to us. So doing these programs, being very clear what the costs are, where they come from, so that shareholders can make their judgment, is very important.

The -- clearly, as we look forward, we see this as a three-year program. It is important. It will be important, as you get to the end of this program, well, where are we? What is the environment? Can one sustain that in the total environment without having to need more fuel like that? It's hard to predict precisely, three years out. But that has -- that will be the -- that will clearly be the goal in the best functioning companies, wouldn't it, so you wouldn't have to do these things. But now it's no question it makes sense. We have to do this. There will be significant benefit for shareholders from doing this.

Good. I think we're done.

Done?

Thank you.

Sorry. I was happy to take one more, but they don't want (multiple speakers). Thank you.