Good afternoon, everyone. Thank you for joining us for today's webinar. I'm Peter Durman, Director of Investor Relations. Welcome to another of our IR webinar series. We use these webinars as a way of providing a deeper insight into different aspects of the business. Today's session will examine our Tobacco Max strategy and how our increased focus and prioritization of investment has strengthened the business, creating a foundation for future growth. We'll be focusing on tobacco today. We're planning a separate event on the 25th of September to update you on our growing next-generation products business. This event is being recorded. The slides and transcripts will be available on our website. We'll not be providing a trading update or commenting on performance today beyond the update we provided for our half-year results.
I'll just draw your attention to the disclaimer on slide two before I hand over to Alison to introduce today's webinar. Thank you.
Thank you, Peter. Good afternoon, everyone. The objective for today's session is to provide greater insight into our Tobacco Max strategy and to demonstrate how this is driving better share performances in our priority markets, underpinning the performance of the group as a whole. Here's a brief reminder of our strategy. You'll be familiar with this slide and our four strategic objectives. In essence, we have made clear choices for growth. These choices and this focus is even more critical in an evolving consumer environment. Our strategy is about making clear choices about the brands and markets to invest behind, just as importantly, choices about those we should not invest behind. It's about the right focus to deliver top-line growth. For our footprint, it's about winning in the right markets.
We've invested in the profit pools where we're well-placed to win that have good affordability to underpin margin growth. From a brand perspective, we focused our investment behind our strongest brands, prioritized the right SKUs, targeted investment in new formats to meet key demand shifts. We have a clear codified route to market in our successful market repeatable model with a differentiated focus on distributor and retailer engagement. We're also making the right choices with a lean operating model and a relentless focus on costs and cash. The whole business is focused on supporting our top-line growth agenda with lean ways of working and a daily focus on prioritizing spend that drives sales. Capital allocation is also critical in ensuring we have the right assets aligned to delivering quality sales growth.
This can include M&A to strengthen our next-generation assets and capabilities, as well as divestments or exits to enhance our focus on growth opportunities. What are the outputs of these choices? High margin growth and strong cash flows. Maximizing shareholder returns from tobacco, while also providing funds to invest in additive growth opportunities in next-generation products. What are these strategic choices delivering? Our focus on the right markets with targeted investment is delivering improved share trends in most of our priority markets, supporting improved group performance. The right brands, our growth brands, are outperforming, including absolute organic volume growth, which is driving a greater proportion of our revenues from our strongest equities. Our asset brands now represent almost two-thirds of our revenues, up from a half since 2013. We've also built a great NGP platform with the blu franchise and a growing pipeline of exciting innovations.
Our operating model not only improves ways of working but consistently delivers cost efficiencies. The consequence of our footprint focus and this cost efficiency enables us to deliver industry-leading margins, creating the headroom for increased investment. Our ongoing focus on cash conversion enables us to generate consistently strong cash flows. As we focus on the right assets for future growth, we've also highlighted opportunities to sell assets that aren't central to our strategy to further simplify the business and redeploy capital more effectively. Today's presentations will again affirm our thinking behind our strategic choices and our investment priorities, as well as how we have actively reshaped our operating model and cost base to support these priorities. Amal Pramanik will set out the industry context and current dynamics, as well as how we choose where to play and which markets to invest behind.
Dominic Brisby will outline how we prioritize our resources across our footprint and how our MRM has successfully provided an investment framework, driving out performances in our priority brands and markets. We'll give some real market examples with Dan Carr from the U.S., Michael Kaib from Germany, and Melvin Ruigrok from the U.K., who will talk about how the clear choices we've made in these markets have enhanced performance. Oliver will then outline how our portfolio and market focus has shaped our operating model and manufacturing footprint, all supporting delivery of high margin growth and strong cash flows. First, Amal.
Thanks, Alison. The tobacco value creation model has been remarkably resilient over the years, with some year-to-year variation caused by regulation and excise, and at times by competitor activities. However, it has been fairly consistent when viewed over the medium to long term. Across our footprint over the recent years, we have typically observed annual volume declines of around 3%-4% with positive price mix gains of around 5%-6%. There's been more variation in these trends recently, both positively and negatively. In 2016, the volume trends were better than the recent average, driven by a range of factors in different markets. In some markets, such as the U.S. and France, they even moved into the positive volume growth for a brief period.
We believe the relatively lower volumes and pricing seen in 2017 were driven by a greater incidence of regulatory intervention, such as the EU Tobacco Products Directive and a higher level of excise shocks in certain markets, particularly France, Saudi, Taiwan, and certain U.S. states. It was also a period of greater competitor activity in certain markets. For example, in Russia, we saw more value-oriented product launches, which had an adverse impact on product mix. We saw a carryover of some of these into early part of 2018, but we are now lapping many of these headwinds. The key question is whether 2017 is the new norm for tobacco. We don't believe so. It was just a tougher than normal year. As we said in our half-yearly results, we have already achieved price increases in several of our key profit pool markets.
Looking ahead, we are making the right investment choices to deliver growth in the right markets, supporting our drive for high margin and strong cash flows. As we evaluate markets, we take into account a number of factors in our investment choices. Evolving regulation and excise are ongoing features of the industry with an impact that ebbs and flows from year to year. In some cases, regulation can create investment opportunities, and we have demonstrated we are well-placed to manage these changes in markets such as Australia and the U.K. Many consumers are seeking value-oriented products and down trading is common in many markets and informs how we decide to prioritize and position our brands. Our portfolio is generally well-placed to manage these down trading dynamics.
There are other prevalent demand shifts within tobacco, such as new filter formats, crushball, and so on, that also influence our investment choices, which Dominic will come into in a moment. We are prioritizing our investment into the right route to market. As the retailer landscape continues to evolve, we are adapting our investment to ensure we are aligned to the right channels. For example, key accounts in many markets are often the fastest growing channel, and so we've directed our investment to enhance our key account capabilities. Some have also asked if the weaker performance of tobacco can be directly related to the growth of NGP. We think there are a limited number of markets where there has been a disruption, like Japan. However, looking across most of our major markets, the transition appears to be more gradual.
We also see NGP as a significant additive opportunity for Imperial. We are a number four in tobacco globally with about 14% market share. We have 86% of the market to go after with our new products. We will provide more color on our progress here in September, as Peter mentioned. One of the most important factors determining future value creation is affordability. We have shown you this sort of chart before. It is based on the minutes worked at local average wages to buy a packet of 20 cigarettes at average local prices. The shorter the bar, the more affordable the market is, and vice versa. You can see that cigarettes are still highly affordable in markets such as the U.S.A., Germany, and Japan. While the taller the bar, the less affordable a market is.
Cigarettes are relatively expensive versus local wages in India, Morocco, and Indonesia. The markets highlighted in orange are markets where we have a reasonable presence and see future growth. These are predominantly markets with good affordability. This chart overlays this affordability data with market profitability. Markets on the right are most affordable versus local wages, and those in the upper half are most profitable. The size of the bubble is a measure of the market size by volume. You can see that our 10 priority markets are largely focused on the top right. Significant high margin profit pools that are relatively affordable with potential for future pricing and therefore further value creation. To give you some idea of the difference in relative value, the net revenue per stick in Australia at top of this chart is more than 15 times higher than Ukraine at the bottom.
This is looking at the tobacco market at a point in time, and we regularly reassess the market dynamics with a view to reprioritizing over time, or to deprioritize, or to tap into new opportunities. Just as we have made choices to invest in the right markets, we have made clear choices to invest behind the right brands, our growth brands, which have become the biggest contributor to our top line. The brand simplification process we began five years ago has been a great success, enabling us to focus our AMP and our sales teams on the brands consumers want. Growth brands are now consistently growing ahead of the market on an organic basis, excluding the benefit of brand migrations. I'll now hand over to Dominic to talk a little more about how we manage our markets and prioritize our investments and resources. Dominic?
Thank you, Amal. As part of the review of our strategy in 2016, we concluded that an increased focus to market prioritization would support enhanced performance, just as it has done with our brand portfolio. We operate across 160 markets. We've introduced a market prioritization which differentiates how we invest our resources and support our markets. You'll be aware of our 10 priority markets, which account for around 50% of our volume and 70% of our operating profit. This is where we're directing the majority of our investment. We divide the rest of the markets into 23 key markets and over 100 partner markets. In aggregate, these are still material to our business, and as Amal mentioned earlier, are potential future profit pools, and they also provide volumes that generate scale and support cost efficiencies.
We have a clear approach to how we manage these different tiers of markets so we can allocate resources most effectively. The 10 priority markets receive the lion's share of the investment and resources behind tailored initiatives. This is augmented by additional central and divisional support. These are large and high-margin markets with good affordability, where we either have a strong presence today, such as the U.K. or Germany, or where we see an opportunity to build a bigger presence over time, such as the U.S.A., Russia, or Italy. In our key markets, our investment is highly prioritized behind the best opportunities, while there is some divisional support, but on a more limited basis. These markets can still be relatively large profit pools or represent future growth opportunities, but over a longer timescale. The partner markets are optimized even further. We tailor our approach to the opportunity.
Here, we may use a distributor to minimize overhead costs and to leverage local expertise. For example, Serbia is an existing market where we introduced a new mutually aligned partner model, which has allowed both parties to benefit and turn around market share performance. Making the right market choices is only one aspect. Our market repeatable model has provided a robust framework to best allocate our investment in the key brands and SKUs and in the right retail channels. It is a simple and consistent operating framework focusing on the fundamental elements which have delivered successful market execution while reinforcing a consistent way of working in language so that the learnings can be shared across the business. There are six elements that all work together, and I will cover some market examples to bring it to life. Starting with the simple market focus portfolio in the orange segment.
We've simplified and focused our Polish portfolio from 14 brands to five, with a successful migration behind P&S, achieving a 200 basis point improvement in share over the past two years. We're seeing that a simplified portfolio aligned to the market has been a key foundation to our approach across our footprint. We then stepped up our investment behind these brands, represented by the second segment. For example, our sustained brand investment in JPS in Germany has driven a better connection with consumers and delivered share gains. Just as we're focusing behind the right brands, there are also some important demand shifts happening in tobacco at the moment that we're capitalizing on. For example, modern formats such as Queen-size are the fastest-growing segments in markets such as Eastern Europe and Russia, and there are similar positive trends with crushball, particularly in North Asia and Eastern Europe.
Our investment in both Queen-size and crushball formats at Parker & Simpson in Russia has supported overall share gains there. Consumers are also favoring lighter tobacco blends and new filter formats, and we'll cover some market examples shortly. One of the components of the wheel that is often misunderstood is our always-on price strategy. This is not about adjusting price for short-term gain or renting share. Always on price is about price parity. In each market, we have a clear view of how the equity of our brands compares with the brands of our competitors and what price point that equity will sustain. We can represent these as price ladders, where each brand will be placed within a benchmark on the ladder based on its positioning as a premium brand or discount brand, and so on.
In each case, we are seeking to maintain a consistent pricing position based on the brand equity with absolute price growth over time, subject to market dynamics. Core range everywhere all the time is all about maximizing the distribution of our strongest equities through our customer networks. We've invested in expanding our sales forces and in new technology to optimize their efficiency and increase our call rates. In conjunction with this enhanced distribution, we've also invested in tailored customer solutions. There are a couple of examples here. The Ignite program in the U.K. rewards retailers for their interaction against three key pillars: stock it, price it, and sell it. It has also been an effective tool to support retailers through legislative and other market changes.
In Russia, where the route to market has modernized and evolved significantly over the past few years, a focus on key accounts has been a key driver of our increased share. The final part of the MRM supports all the others as we take learnings from our experiences in different markets and share them across the group as an all-important feedback loop. Bringing all of this together, the combination of our prioritized approach to managing our brands and markets, together with targeted investment, is delivering quality share growth where it matters. This is evidenced in the consistent progressive share growth in our growth brands and the improving share in our priority markets, as you can see here. We are now going to hear some more examples of how this works in practice from our market managers of three of our priority markets.
First, our biggest investment choice in recent years was our decision to expand our U.S. business. Dan Carr, who runs ITG Brands, will give you an update.
Thanks, Dominic. Our acquisition in 2015 transformed our U.S. business. It gave us national coverage with a portfolio of much stronger brands, carrying a much heavier weight with our retailers and consumers. With blu, we acquired not only a strong brand in the U.S., but also a platform for innovation and international growth in NGP. Beyond the tangible assets, we acquired an experienced management team, solid infrastructure, and strong retail influence and capabilities to execute in the marketplace to gain additional visibility for our brands. We set out a clear strategy to focus our investment and drive profitable, sustainable share with our focus asset brands, Winston and Kool. We focused on turning around our mass-market cigar business while delivering financial returns. We have delivered on our strategic goals. Our cigarette asset brands have grown share by 50 basis points.
The turnaround of the cigar business has been a huge success, with share growing 150 basis points over the same period. We achieved a double-digit post-tax return on capital in the first year and have consistently delivered strong revenue and profit growth. The U.S. market remains highly attractive. It is the world's largest revenue pool after China and accounts for about a quarter of the global tobacco profit annually. Although volumes are declining in the market, the rate is generally steady and predictable. There has been a slightly higher rate of decline over the past year, which we attribute to the state excise increase in California and rising gasoline prices, leaving less money in our consumers' pockets. The U.S. profit pool has grown consistently over many years, and we expect this to continue.
In addition, as Amal said earlier, cigarettes are highly affordable in comparison to other developed countries, which bodes well for future price leverage. The regulatory environment is also reasonably predictable, with a greater reliance on science and evidence-based regulation than some other markets. We welcome the FDA's recognition of a risk continuum and the role that reduced-risk products such as e-vapor can play in converting consumers from combustible products. We've been continuously preparing our organization with our significant investments in regulatory science. The industry has shown it will hold the FDA to its mandate as according to the Tobacco Control Act. We are well-placed to win with a strong portfolio of assets focused on the key product categories, all supported by an experienced sales team that understands consumers and has a great relationship with our retailer network.
We made some clear portfolio choices and prioritized resources behind Winston and Kool with meaningful investments behind equity building and consumer activations. Having a focus on Maverick and USA Gold in the discount segment, while deprioritizing investment in our tail. New positioning work has enabled more modern imagery, building on the foundations of our brand heritage. We are currently launching Winston Black, a bold and robust non-menthol cigarette in the premium contemporary stylish pack. This enables adult smokers to discover or rediscover the Winston brand while enhancing Winston's premium non-menthol positioning. These have been the key building blocks and have driven sequential brand growth and increased shares in both real flavor and menthol. The discount segment has been more challenging as it become squeezed between the premium deep discount segments. Although we've achieved a better recent share performance for Maverick.
In deep discount, we have recently repositioned two of our non-strategic brands, Montclair and Sonoma, to capitalize on this growing consumer segment. We continue to support and grow our distribution network with over 180,000 retail stores on contract. Building shelf presence with our brands enabling us to gain broad awareness, visibility, and range for our portfolio. The U.S. acquisition has also enabled us to restructure our mass-market cigar business, where we've made great strides in rationalizing our portfolio while driving phenomenal growth in a dynamic category, outpacing the industry. In a category that skews pre-priced, our portfolio is uniquely positioned as we own super premium with Backwoods and premium with Dutch Masters without everyday pre-priced offerings, while participating with Dutch and Phillies in the highly contested two for $0.99 segments.
We've also chosen to invest in the natural leaf segment, which has been growing over two and a half times the category rate over the last three and a half years, moving from 20% to 30% of total category. This has been our fastest-growing and most profitable segment. We are the share leaders. For our range, we are focused on core variants and formats that meet consumer demand with an eye on the regulatory horizon. We continue to compete for space and have leveraged our much larger sales force across a much broader store base, delivering the largest distribution gains across all manufacturers. We see opportunities both in range and new outlets for additional placements for our brands. In summary, our investment and strategic choices have grown share in our focus asset brands.
With Winston up 30 basis points since acquisition, Kool up 22 basis points, and Backwoods up 350 basis points. We are also improving the quality of our growth and asset brand net revenue up 490 basis points in the first half to 48%. We are taking advantage of key growth segments by either repositioning or leveraging our portfolio strengths to enhance the growth dynamics. Our decision to invest in the U.S. market has also delivered strong revenue and profit growth in a market with significant potential for tobacco and NGP. Thanks very much. Let me hand it over to Michael, who manages Germany.
Good afternoon, everybody. Germany continues to be an important contributor to revenue and profit as one of our priority markets. A consistent record of both political and macroeconomic stability provides a strong foundation, with economic growth supported by rising employment and relatively high disposable income. A consistent regulatory framework and reliable excise structures supports a positive pricing environment and a growing profit pool, as well as a clear planning horizon. Relative marketing freedoms provide flexibility around how we invest in our brands. Similar in many ways to the U.S., the German market is one which a broad range of marketing option enables us to invest in traditional above and below line marketing activities in order to build brand equity. Volume decline in the market has been pretty stable at around 1% to 2% over the recent years.
Although in 2017, there was a temporary acceleration in volume decline following EU TPD2 implementation and the introduction of pictorial health warnings. The industry volume declines have now returned to the historic trend. Market revenue over the same time frame has grown by over 3%, supported by a positive pricing environment. We expect this broad trend to continue going forward with ongoing growth in the profit pool. Our strong position together with our focused portfolio of cigarette and Fine Cut Tobacco brands is a sound platform for us to win in Germany, particular as we invest behind our market repeatable model. In Germany, we made some clear portfolio choices to focus on growth brands and to invest in SKU to capitalize on key demand shifts.
For example, to meet the growing demand shift for larger value-oriented formats in both cigarettes and Fine Cut Tobacco, we have recently launched a new larger formats for Gauloises, West, and JPS. While we are also investing behind lower nicotine variants of with Gauloises Blondes and JPS Blue Stream with an innovative filter technology to meet consumer demand. This relatively bright market gives us the opportunity to sustainably invest behind our brands through the line. A good example is the product and pack upgrade on Gauloises, which is being supported by a full above and below the line equity campaign. We improved the distribution and availability of our core range by increasing our distribution points by more than 10% within the last two years.
A combination of our own sales force, merchandising support partners, and our outbound call center have enabled us to have more conversation with more retailers with over 340,000 calls a year, which is an outstanding number of contacts with our customers. We have increased investment in long-term contracts with key accounts, which are based on a higher proportion of distribution and shelf space, a optimal brand positioning, and exclusive digital communication. This key account partnership approach is generating positive returns with market share consistently above our national share in key retailers such as Germany's biggest hypermarket chain, the most important tobacconist group, and one of the biggest petrol station chains. This is an example for our digital point of sale communication. We've now installed around 20,000 new digital screens in over 5,000 outlets.
The digital point of sales allows us to communicate in a more targeted, flexible, and efficient way, coupled with strong shelf visibility that leads to higher consumer awareness. Over the last couple of years, our focus on asset brand has grown asset brand market shares by 90 basis points. Our strongest brands now account for over 80% of our revenue. We've made excellent progress by focusing on demand shifts, particularly with bigger formats for fine cut, and we are now focusing on delivering a better performance in FMC. This has supported an improvement in our overall share position as we benefit from the additional market investments made in 2017. I'd now like to invite Melvin to talk about the U.K.
Thanks, Michael, and good afternoon. The U.K. market is characterized by a large profit pool and a strong market position for Imperial, with over 40% share in both FMC and FCT. While there is some political uncertainty, the overall economic indicators are positive, with high disposable income, low unemployment, and relatively good affordability for cigarettes, which has supported price increases. It has been a more challenging market over recent years, with some aggressive competitive discounting at the bottom end of the market and the implementation of EUTPD and standardized packaging. However, we successfully navigated these challenges, and we are positive on the outlook for future profit pool development for both tobacco and next-generation products. We are well-placed to win in the U.K., with a market-leading position and a strong track record of effective customer engagement together with our broad distribution network.
Against this challenging environment, and ahead of the EUTPD changes, we used a war game style approach to model a number of different scenarios for the U.K. market. This informed our choices and identified the opportunity to increase our investment to drive market share gains and create a better platform for future revenue and profit growth. In the U.K., we focused on three key areas. A simple market-focused portfolio in both FMC and fine cut aligns to current demand shifts, as well as key account management and improving our distribution. To capitalize on the strong growth in the capsule or crushball segment, we launched new crushball variants in JPS and Players. Innovation in modern fine cut formats is supporting significant share growth, with FCT share up around 300 basis points over the past 18 months.
Key accounts are important in the U.K., we have further invested in building these relationships. In some partner accounts, we've achieved about 600 basis points higher share than our average. We've also increased coverage through improving our call rates. Core to our ways of working is to learn and improve. A good example in the U.K. is our choice to leverage our strongest equity brands in different price segments. We recognized the opportunity to have a strong equity presence in the sub-economy segment. The launch of JPS Players accelerated our share of sub-economy as the brand quickly overtook the role of Carlton in that segment, reflecting Players' stronger brand equity. Overall, we have made great progress in strengthening our brands and have grown our market share to 41.9%, driven by excellent performances from JPS Players and Gold Leaf.
Our asset brands now represent an even greater proportion of our revenues at 74% of total tobacco revenue. We remain positive about the future of tobacco in the U.K. and our ability to maintain market share momentum while driving growth in revenue. Let me hand over to Oliver.
Thanks, Melvin, and good afternoon, everybody. We are also making very clear choices through a relentless focus on cost optimization and capital discipline. In other words, it's about the right operating model and the right assets. Our portfolio simplification and the prioritization of the right markets and brands has created opportunities to also reduce our cost of goods and simplify our operating model. We've implemented a lean operating model that allocates our overhead resources where they're needed and closer to frontline sales roles. We have simplified our back-office functions and optimized our manufacturing footprint and supply chain. We've deployed shared service centers to leverage our scale for our support functions, including finance and HR. Our brand and SKU simplification has not only driven better top-line growth, but has also delivered cost benefits.
Product costs are split evenly between leaf, non-tobacco materials such as packaging, filters, and paper, and the conversion costs, which are the labor and overhead costs of running our factories. Leaf complexity reduction has lowered leaf stocks and procurement costs. Our outsourced model means that we only buy the tobacco we need in the locations that make sense for us, rather than by being locked into buying the whole crop in a specific origin. We can source leaf at an almost 20% discount to the market. Brand and SKU complexity reduction, as well as careful supplier management, helps drive down our NTM unit costs. In this case, economies of scale are important as order sizes are a key driver of costs, as printed item costs are highly volume dependent. Similarly, conversion costs are the cost of our factory network, we have substantially reduced our footprint over recent years.
This cost discipline has delivered a 4% reduction in cost of goods over the last few years, more than offsetting inflation and volume declines, and reinforcing our manufacturing goal of being best in class with cost leadership but competitive quality. We are also leveraging our manufacturing expertise to support our growing NGP business. Our lean operating model has made us more responsive and agile at a lower overall cost to the business. We are progressively simplifying our business and cost structure, as this slide demonstrates. We operate across 160 markets, but we now manage these as 13 clusters with a simplified management structure and overhead base. Similarly, we have moved from five divisions to two, supported by a simplified manufacturing and supply base. We have also reshaped our costs from a high level of fixed cost structure to variable, with an increasing proportion of the costs in sales-facing roles.
This is all supported by a lean set of group functions that leverage scale through shared services and centralized procurement. We've undertaken a significant restructuring, which has delivered real benefits, and there's still more to go for. We've applied the same ruthless focus to our capital base. The simplification agenda has reduced our bill of materials and in turn, the inventories in both raw materials and finished goods. We've also aligned debtor and creditor payment terms more consistently. Our focus on driving quality revenue in high-margin markets, coupled with this capital discipline, has delivered industry-leading operating cash conversion that has consistently been above 90% over recent years. In the three years to the end of our financial year 2017, we've generated GBP 2.6 billion of free cash after dividends that we've used to repay debt following our U.S. acquisition.
This also allows flexibility for future investment in our business and in M&A. As we focus the business and make the right investment choices, we naturally deprioritize other assets that are less core to our growth strategy. We've already been reducing our stake in Logista and recently disposed of our U.S. OTP brands. As we announced with our results, given our focus on the right assets, we're looking to realize up to GBP 2 billion of divestment proceeds within the next 12 to 24 months. There are clear strategic benefits for the business. It drives an even sharper execution focus and facilitates further simplification and agility. It also delivers efficiencies in cost and cash, unlocking capital to redeploy in order to maximize value for shareholders. Thank you very much, and I'll hand you back to Alison.
Thank you, Oliver, and to the other members of the team for their presentations. We believe the tobacco value creation model remains resilient. For us, next generation products are a positive additive opportunity beyond our tobacco growth agenda, which we focused on today, and we'll give more details on our NGP strategy at the event in September. Our Tobacco Max strategy is about focus and it's about choices. With our investment and resources prioritized behind the right markets, brands, and route to market to deliver success. This is underpinned by a clear operating model and capital allocation focus, resulting in high margins and strong cash flows, generating tobacco returns and funds to invest in new growth opportunities. Thank you. Lisa?
Thank you, Alison. That concludes the presentation. We'd now like to open the call to Q&A. I'll hand the call back to the operator who will explain how you can ask questions.
Thank you. If you would like to ask a question, please signal by pressing star one. We will take our first question from Owen Bennett from Jefferies. Your line is now open. Please go ahead.
Afternoon, guys. A couple of questions, please. First of all, on the U.K. U.K., you speak about how the challenging market was reset. I was just wondering if you could give an idea of the profit performance during the challenging years and what you see as a possible new norm from here. Secondly, just on the strategy. It seems to me it's evolved a little bit from what was communicated a few years ago in terms of before it was returns markets and growth markets, where returns was just main focus on profitability, which includes the likes of the U.K. and France. Growth markets was where you were hoping to take share. Now it appears to be the 10 priority markets where focus is taking share. You've got the key markets with more limited investment, and then the partner markets.
I was just wondering if you could comment on that and if it has evolved somewhat since what was communicated a few years ago. Thanks very much.
Okay. I'll hand over to Melvin in a second just to talk a bit about some of the work we did in the U.K. to really reshape the market over the last couple of years, following the war games that he referenced. In terms of the overall evolution, the profit pool has had some pressure over the last couple of years, but as Melvin alluded to, we see that improving on a moderately growing trend going forward. I think the other dynamic which is interesting as well is we're seeing nicotine consumption and growth in the U.K. Therefore, also, as we move on to talking about our NGP strategy more in September, there's very much an additive opportunity for us there as well. Maybe you could just give a little bit more color to the work we did to reset the market, Melvin.
Yeah. I think about two years before EUTPD coming at play, we engaged in a war gaming session, which clearly articulated the need for us and the opportunity for us to leverage our equity at different price points in the U.K. We've, as a result of that, repositioned core brands in both FMC and FCT, which has driven share momentum over the last two, three years. The share momentum is continuing at the moment, whilst we see a recovery of the profit pool and our positive outlook of the profit pool in the coming years, we are very positive about the U.K. market now and in the near future.
Yeah. I think it's clear from what Melvin was saying earlier, it's an out and out focus on the right portfolio. I think a huge focus as well on leveraging the distribution and retailer capabilities we have in the market, but also as well in terms of the market environment, and some of the work in terms of how excise is managed within the U.K. as well, which has been helpful too. Yeah. In terms of the strategy overall, in reality, there's not a significant evolution of the strategy, but as I've been highlighting today, it is all about choices. As we looked at the priority markets, we saw opportunities with the work we'd done on the portfolio and the additional investment we put in 2017 to really improve our share position in a number of those markets. You're right, there is a distinction.
Returns markets, we tend to have larger shares, and therefore we're balancing the share and profit priorities. In a number of those markets, we had been losing some share for a period of time. It was right, we put the focus into rectifying that. There are growth opportunities for us there, but they will never be significant share growth opportunities in the sense of the opportunities we have in the growth markets, where we have much smaller shares and therefore we can see more we can deliver from those markets in terms of uplifting market share over time with the right assets. It's evolved a little bit, in terms of some of the choices, but the prime focus is still there.
Within the overall portfolio, clearly, we have some different ways of managing the less relevant markets to our growth within the business, in terms of prioritizing investment.
Okay. Thank you very much.
Thank you.
Thank you. We will take our next question from Vivien Azer. Please go ahead. Your line is open.
Thank you. Good afternoon. I was hoping you could expand, please, either Amal or Alison on the pricing dynamics in Russia. You noted that as you're anniversarying on some of the trade down and competitive activity, things are stabilizing. Could you expand on that? Does the rate pricing, has it improved, and/or is there less downtrading activity? Thanks.
Focusing in on Russia, sorry, the line wasn't very good at that point in time. I think the question around the pricing, and what we're seeing from our perspective in terms of pricing in the Russian market, just to confirm?
Yes, please. Thank you.
Yes. Okay. Thank you. Actually, Dominic's probably best placed to answer this one. I'm going to pass over to him. Yeah, the dynamics, we've seen definitely some improving situation in the current year.
Yeah, that's right. We have seen significant improvements this year, particularly versus what was experienced in Russia last year, which was quite a difficult pricing environment. Of course, we've had two benefits this year in Russia. One of them is better pricing. The other one is a really significant improvement in our market share in Russia. Key accounts have been growing very significantly in the Russian market. As key accounts have been growing, we've been growing with them. We've significantly strengthened our position in key accounts, which has also given us a very good share trajectory in addition to the pricing.
Thank you. If I could ask another
Certainly
separate question. Alison, can you comment at all on your announced stake in Oxford Cannabinoid Technologies, please?
Yeah, I think it's just to reinforce the messaging that we delivered on the day. Clearly, there's a lot happening in the cannabis space at the moment. That's something we continue to monitor. We saw this as a very good opportunity to really improve our understanding in this space, and make a small investment. Really that's something we'll just continue to monitor as things progress.
Thank you.
Thank you.
Thank you. We will take our next question from Gaurav Jain from Barclays. Please go ahead. Your line is open.
Thank you. I have one question for Dan on the U.S. cigar business. While Imperial's revenue growth has accelerated, I think north of 20% in the U.S. cigar business, the overall industry has also accelerated to 10%. What is driving that growth, and is that sustainable as we look out over the next two years? That's my first question, and then I will have a follow-up. Thank you.
We've been seeing very good growth in our mass markets cigar business, clearly it's also a growing category as well. It's common.
Yeah. We've seen the category grow over the last two years, double-digits, which has been very promising, and we view that to continue. I think what's driving that is the little bit of better retail, better merchandising from the market, and structure in the way that the assortment range sets up. In addition, I think the consumer is finding more occasions to utilize the product, that's adding a lot of value overall.
Thank you. My next question is on the traction with myblu. I believe that for the second half, the guidance or the indication has been that price mix will be +8%, of which about 3% is driven by vaping products launch, for which there is no associated volume. Based on the trends or your success over the last few months, do you think you are trending in the right direction, or you are above trend, below trend? If there can be any comments, that would be very helpful.
We're focusing really with this webinar more on the Tobacco Max side of the business. We have had a number of successful launches of myblu in recent months in the U.S. market, which is of significant importance for myblu, continues to trend well, I think any further specific comments at this stage, I wouldn't make.
Thank you.
Thank you. We will take our next question from Michael Lavery from Piper Sandler.
Thank you. Just wanted to get a little more color on the U.S. You mentioned, I think you may have used the word repositioning, with Montclair and Sonoma. Can you just talk about what's different there? Is it a geographical expansion? Is it a price cut, or how has that evolved? Could you just touch a little bit on the price point for Winston Black. Is that parity with the rest of Winston or less? Just a little bit of that dynamic.
Sure, Michael. I think when you look at the deep discount market, it was a relatively stable segment for a bunch of years. Starting in 2017, we saw a little bit of share movement. It's still a relatively small segment. It's 9% of the total, but it's picked up a share point over the last year. Due to that, we took a strategic decision to take a couple of our non-strategic brands that quite honestly were declining and repositioned them into the deep discount segment so that we could compete in there. That's a segment we didn't currently have in our portfolio, and we made the change. Second question?
Winston Black.
Yeah, Winston Black. On Winston Black, it will be price parity across the market, but we have also identified some markets where we will have it below the Winston line, around $ 0.15.
Just a follow-up related to those. In the U.S., you've had strong, say, first half especially 2018 margin and price mix momentum. That's been the shifts within your portfolio where Winston and Kool have outperformed. How long a runway is there for that, and how much do some of these moves maybe offset it, or what do you expect as far as how we should think about the look ahead?
Yeah. Obviously, we're doing a lot of equity work as well. The first step when we did the acquisition was to get our pricing where we wanted to price the brands in the marketplace, and that takes time in the FMC category. We're seeing nice development. I think it's progressing sequentially. At the same time, we're doing a lot of work around positioning and building equities, and working really on consideration and trial into conversion. You know our shares. We're basically looking at two share brands. We see there's a lot of upside opportunity, but it will take time.
I think it's also fair to say in 70% of the market, the EDLP stores, we're in share growth. The dynamic we're really sorting with this portfolio shift in terms of the deep discount is really looking to get a share of that, which will be very positive for our overall development in the market.
Okay. Thank you very much.
Thank you.
As a reminder, if you would like to ask a question, please press star one. We'll take our next question from Mr. Adam Spielman from Citi. Your line is open. Please go ahead.
Thank you. I have two questions. The first one is a broad one, about how the cost savings programs play into what you've done in terms of restructuring. Obviously you've presented very impressively on your core tobacco business, but I was wondering to what extent this is either enabled by the cost savings programs or somehow.
slowed you down to some degree, and it would've gone even faster without them, and where that whole restructuring is going next. That would be my first question, please.
Adam, thank you for the question. It's Oliver here. The things are all interlinked. The restructuring has been part of what's been driving our overall cost savings across the business. They've been part of what's been delivering our simplification across our business and the ability for us to respond in a more agile fashion to market circumstance and events. What we've been focused on in terms of that program is aspects of simplifying our manufacturing cost base, restructuring, creating lean environments both across manufacturing and across our overhead base. That has led to both reduced overall cost, but it has also given us the headwind to invest behind those brands more fully to drive top-line performance, as well as enable top-line performance improvement by creating much stronger focus on the brands that matter in markets that are critical to us.
It is very much a circular process where the restructuring has been supporting the cost programs that have been driving elements of our ability to perform by increasing the focus both around our brands and around our SKU and market focus.
In what does it really amount to? Some people talk about putting in SAP or some other systems, often very expensive. Should I think, in your case, it's really a question of taking head count out in areas you don't want to focus on, and that gives you the ability to invest in areas you do? I guess by having fewer people, necessarily, they focus a bit more sharply.
That is certainly a strong element of it. It is about simplification, which means removing activities in large part, and by so doing, removing the people, as it was a great danger that if you just take the people out, you end up with the bag bursting at the seams, as a smaller number of people have to do the same activities. Hence the focus on simplification, creating agility so that we're not essentially overloading a smaller number of people with a more complicated activity. There's often a great temptation to believe that process enablement is facilitated by big IT spend. We don't believe that journey at all is the right way to progress, and we've seen plenty of examples of organizations who've been able to simplify what they do to drive benefits, and that's what we've been doing at Imperial.
I think it's also a question of daily challenge of spend as well, around making sure what we're doing is really focused and very choiceful behind spend that really supports the sales agenda. Very critical eye over spend that doesn't directly do that. We've adopted some quite strong principles in terms of daily cost management with cross-functional challenges and all those sorts of things going on, to really keep us honest around that and keep the focus on a daily basis. This isn't just about the big scale restructurings. It's a mindset as well.
Yeah. To be really concrete about this, if it was a department, I'm making this up here, it was focusing on trying to grow a brand like, let's say Moon, in a market, let's say like Morocco, you would just say it's a complete waste of time, that that activity is going, and if there are some people involved in that activity, then we'll look to redeploy them elsewhere or if not, let them go. Is that how I should be thinking about it?
Yeah. The specific example doesn't quite exist, but what you're trying to illustrate, absolutely. Dominic, why don't you want to comment?
It's exactly what we do. We're very clear about which markets we focus on. We're very clear about which brands we focus on. In turn, that means we defocus on other things. If there were a small local brand, it's very likely that in almost every case, we'd stop focusing on that. If there were a department that focused on that brand, we'd probably get rid of that department or deploy them to something that would be more beneficial to us.
Thank you. That's very helpful. Mine was purposefully absurd, I hope that's clear.
It wasn't entirely, was it?
Next question. I'm intrigued to what extent you believe NGPs are affecting the core existing tobacco market. This isn't a question about NGPs, your growth opportunities. Clearly, IQOS has had a big effect on volumes in Japan. There's no getting away from that. I was wondering to what extent you also feel that's been the case either in the U.S. with JUUL, or is potentially the case in Europe or elsewhere. Also, I suppose, what your feelings are about, we've just heard that JUUL is going overseas, what your feelings are about that. Thank you.
Okay. Japan accepted, in terms of the heated tobacco growth in Japan. In other markets, as we've looked at them and we're looking out across our planning horizon at the moment, we still don't see. It's much more of a gradual shift in terms of the shift into NGP. Actually, a lot of the time, it's actually also adding to the nicotine consumption in the market. It's not a question of a shift into NGP, that that comes straight off combustible tobacco consumption, because we are seeing nicotine market growth in the U.K., for example. Therefore, not only an additive opportunity for Imperial, but there's an additive opportunity there full stop as well. I'd still say it's quite small in terms of those overall dynamics.
Dan can comment specifically on JUUL in the U.S. and the impact we think that's having, maybe just to put a bit of color from that perspective.
Yeah. From the U.S., we really see it sitting around the FCT impact in California. California's the number one market
We think the contribution to the category decline was close to 2.5% of it. You had some reduced promotion volume in there, about 1.3% of it. JUUL, based on the modeling we've done, we see that at around 0.5%-1% of the category. That's how we're looking at it, and kind of managing. The gasoline impact, in the U.S., it's gone from $2 to $3 for a gallon of gas. That has really impacted the consumer, and we see direct correlation. I can tell you that since we've passed over to California, some of those comps, we've seen a much more better category, where the last 13 weeks is around, it's declined to 2.2%. If you look at the latest 13 weeks, it's down 4.4%. There's definitely been a change in the category.
Thank you. Those numbers you just shared are MSAi data, I'm guessing.
That's correct.
The 2.2% and 4.4%.
That's right.
That's right. Yeah. In terms of JUUL coming to Europe, clearly it's quite a different dynamic in Europe compared to the U.S. I think, specifically, if you look at the nature of the product delivery, which as you know is a 5% nicotine level in the U.S. and the maximum ceiling is two in Europe. That's going to be a very different proposition from a consumer perspective, excepting that they're used to weaker cigarettes anyway, but even so, it's not the hit that JUUL has been in the U.S. in that sense. I think also as well, one of our learnings so far as we've been working with myblu is really the importance of retail, and that route to consumer strength that we have in our market. That's a very important part of our model.
Clearly that's something that JUUL will need to take time to build and to get to grips with, from a European perspective. I think it's clearly something we're going to be monitoring, clearly something we're aware and prepared for. The feedback we're getting from the tests we do with consumers with myblu, comparing that as well, head to head with JUUL as well, very positive in terms of the way myblu is perceived. As you know, we've got a significant innovation pipeline as well that we can build on that. But as we said earlier, September's about blu, so we'll do that then.
Thank you very much.
Thank you.
We will take our next question from Nicolas von Stackelberg from Liberum.
Hello. Yes. I just want to ask a quick question on driving cost optimization. As you are continuing to go through your cost optimization programs, do you have any call-outs in terms of regions where margins could significantly increase due to planned, whether it's restructuring or cost optimization, generally speaking, that we should be mindful of? Thanks.
Yeah. I think a lot of cost optimization opportunities are ones that benefit most parts of the business. I'll let Oliver comment.
As Alison says, we've got a relatively strong focus on a number of principles, which I think you heard Dominic talk about in terms of the MRM around portfolio simplification. That applies across the whole of our footprint. That, to some degree, has a strong influence over both the cost of manufacture and overhead. It's relatively widely shared across our geographic territories. I wouldn't single one out specifically.
Okay. Not, for example, the U.S. There's nothing you can do there in particular?
The U.S. is part of our footprint. We're constantly working on it, and you've seen we've performed very strongly in terms of profit performance in the U.S. over the last couple of years. I'm sure Dan, who's smiling next to me, would confirm he's felt the cost pressure.
I think probably the more we grow backwards, that's going to be the biggest impact on our margins, probably. I think there's a lot of levers that drive the U.S. margin, but cost focus is clearly one of them as well.
Okay. I had a quick follow-up on just migrations in general and how the cleaning up process goes. I get the sort of feel that it's easy to tackle the low-lying fruit, but as you continue through the years to migrate brands and to strengthen the right portfolio, it becomes incrementally a bit more difficult. Is that a fair assessment? Why or why not? Thanks.
No, it's not really. We did try and tackle some of the really difficult ones up front as well. I think there's only one migration I can think of that we're rewinding to some degree currently, that hasn't been successful. 95% conversion of all the other migrations, which have been very successful for us. I think, if I remember right, we've now migrated over 40 billion sticks over the last few years. It's a significant chunk of the portfolio. We tackle difficult ones along the way. Dominic highlighted one today, which was migrating Balkan Star with Russian heritage into Parker & Simpson, which wasn't a straightforward one to get our heads around. We very successfully implemented that with, I think, over 100% conversion of consumers, if you can get your head around that one. It's been a very successful program for us overall.
I know we do focus on the fact that we're generating organic growth here as well, you shouldn't overlook, I think, the success of those migrations in themselves has been very important.
Thank you so much.
We will take our next question from Chas Manso from Societe Generale. Please go ahead.
Yes. Good afternoon, everyone. Could you give us your level of confidence that the Tobacco Max strategy will enable you to maintain the improving market share momentum that you've enjoyed recently? Maybe more importantly, could you talk about translating that improving market share into an improving organic sales growth dynamic? Is there any reason why it shouldn't translate directly? Are you sacrificing anything on price mix to deliver on the volume market share? Some words basically on the top line part of your growth algorithm, the 1%-4% not really met in recent times. Are you expecting to get in there, into that range, and with this Tobacco Max strategy, to get towards the higher end of that range?
The guidance we've given back at the half year results is we very much saw ourselves back in the 1%-4% range in terms of the overall model that we're driving. From a market share perspective, we really are generating some really good improvements in market share in the priority markets. I think it's important to stress that the focus is on the right markets and the right brands for that quality share growth. Overall, that will support the overall development of the business. It's not just about a focus on growing share per se. It has to be the right sort of share growth. From a net revenue perspective, that's clearly supportive of net revenue.
As we highlighted at the half year, there's been a number of things in terms of the price mix environment in the first quarter, in particular, that held back the numbers. As we've alluded to, we've seen that improving with a number of price increases we've achieved over the last quarter or so. Definitely improving environment as Amal highlighted earlier. We see very positive dynamics from the work that we're doing from a Tobacco Max focus perspective.
Could I throw in a specific one on Germany? I think in the script it was mentioned that you are sort of turning your focus onto the FMC part of the German portfolio. Could you just give us a bit more color on that and how successful those changes are being?
Yeah. Overall in Germany, as you saw at the half year in share growth, the prime driver of that has really been our fine cut performance. Just to emphasize before Michael answers, fine cut delivers better profitability than the cheaper end of the cigarette portfolio. Actually it's really important share growth that we are delivering here in terms of the overall progress in Germany. Maybe talk about how we're doing in FMC, and the actions we're taking there.
Yeah. What we've done is the quality upgrade on Gauloises, which we support by an equity campaign through the line. This is the first one. Second one is that we focused on demand shifts very much. The first demand shift is larger packs in FMC, where we just launched a Gauloises EUR 10 pack, a West EUR 10 pack, and a JPS EUR 9 pack, focusing on that demand shift. What we've done as well with the recent price increase, we repositioned West in bigger pack formats to value for money. We are very well positioned now in the growing value for money segment. That gives us confidence to grow share and to improve our position and share growth in FMC.
Okay. Thank you.
Thank you. Our next question is from Jonathan Leinster of Berenberg. Please go ahead.
Hi. Sorry about that.
No worry.
Yeah. I was just wondering with regards to the restructuring, clearly the cash costs of expenditure or restructuring seem to be rising both this year and potentially next year as well, which after five or six years of restructuring and considerable number of the brand migrations having been done seems a bit sort of counterintuitive. Can you explain why the cash costs restructuring seem to be continuing to rise rather than decline?
Yeah. Oliver will pick up on it, but I think we've got a distinction here between how the P&L is handled and the cash flows work, which is, I suspect, going to be the essence of his answer.
Well, to start with, John, we've had two legs to our cost optimization program. We announced one back in 2012, which was a GBP 300 million saving at a cash cost of GBP 600 million, and then we moved last year into announcing a further cost optimization program to add to that. The timeframe of those programs are over through to 2020. The second one's actually being conducted over a shorter period of time, and we see in the current year and next year the vast majority of the expenditure on that second program taking place, which is why you see those levels rising over these two years, because we've done that program very quickly. There is, as Alison highlights, a difference between the cash cost and the P&L cost.
There will be certain items which don't have a cash impact, which form part of any restructuring that we undertake. There may be losses arising on the assets disposed of, things of that nature. The cash timing isn't always consistent with the point of time of announcement either. On occasions we may announce something that we then accrue into the P&L, the cost for, but the cash expenditure goes out over longer periods of time. You do end up with timing differences.
The second program was slightly more expensive than the first. It was GBP 300 million of savings, but it was going to cost us GBP 750 million to achieve those, rather than the GBP 600 for the first program. As Oliver highlights, it's really around the phasing of that cash going out the door. The programs are very much on track in terms of the benefits they're delivering, and the spend associated with them.
Just to be clear, the vast bulk of the cash cost of the second program will have covers come out in sort of 2018.
2018 and 2019.
2018 and 2019.
Probably 2019.
Yes, 2018 and 2019, John.
Yeah.
Right. If the brand migrations have been done, is there something obvious that I'm missing that is on the agenda? Is there a significant factory rationalization yet to do?
There's a number of things that still drive behind that program, but as you might imagine with the migrations, but also the broader simplification agenda in terms of the SKUs in the portfolio, there's a little bit of a lag in terms of how we then look at how we manage supply, and any decisions associated with that. It's not something you can necessarily always enact immediately. There's a bit of a lag, while we actually then restructure to realize those benefits. There is still migration ongoing as well, by the way. We haven't stopped. There is still some further migrations that we're continuing to progress.
Right. Okay, thank you very much.
Thank you.
Thank you. Our next question comes from Fulvio Cazzol of Goldman Sachs. Please go ahead.
Thank you for taking my question. Good afternoon to everyone. My first one is on France. I think you've mentioned that Australia and the U.K. are examples of where you've been able to do well on the back of regulatory changes. Presumably you also meant plain packaging. Can you give us an update on what you're seeing in France? I know that share for you was up ten basis points on slide 17. Can you give a bit more color on the latest there, please? Then I have a follow-up question.
In France, our share is still overall up year-over-year. We're anticipating, as I highlighted at the half year, for it to come under a bit more pressure, because we've taken a decision to pass on the excise to consumers on most of the portfolio, contrary to some of our competition. Having said that, though, we have seen some price moves from competition in recent weeks. That may be shifting a little bit. There's no doubt in France that this is a pretty tough time for both the tobacconists and the consumers. I think for us, therefore, our focus on NGP and other opportunities in that market is also very pertinent at this point in time in terms of the total consumer portfolio that we're promoting.
It's nothing very significant to update on since the half year, apart from the fact that it's a challenging market dynamic, as I highlighted at the time. Dominic took you through always on price strategy earlier around the price parity that we look to focus on with our brands. It's a market where we've chosen to come off that, and actually move our brands up, regardless of the competitive set, because of the dynamics in the market.
Great. Thank you. My second question is on the fact that 70% of your profits are coming from priority markets, and it sounds like these markets could become more important, particularly considering that up to GBP 2 billion of disposals that you have planned. How should we think about your dependence to just these 10 markets, considering that in the future we could have significant changes to regulation or tax as we've had? What impact could that have on your business, i.e., that limited diversification, if you like, geographically? Could that be a problem?
From my perspective, we have been very choiceful about the investments we're making and the markets we're focused on, and I think that focus is absolutely right in an evolving consumer environment, as we've talked about today. I think in these markets as well, as we've highlighted, we're seeing nicotine consumption growing. Overall, we only have a 14% share from a combustible perspective overall footprint. Therefore, there's a significant amount of consumers that aren't ours in terms of additive opportunity, both from a tobacco perspective, but also clearly from an NGP perspective as well. I think our positioning in those markets, combined with the choices we've made around why we want to focus there and the dynamics that we're seeing, I think very much underpins what we're looking to deliver from a growth perspective.
I do think focus is important in this environment, not necessarily just going after a broad church of market.
Okay. Clear. Thank you.
Thank you. We will take our final question from Adam Spielman of Citi. Please go ahead, sir.
Thank you very much. I was just wondering whether you can talk a little bit more about the up to GBP 2 billion of disposals. Whether we should think of this as something that basically allows another round of cost saves, if you like, or is more a sort of necessary part of the cost saves you've already announced? Thank you.
It's very much around our focus for growth rather than a cost saving agenda item. It's around as we focus behind the assets, the brands, the markets, the products that we see as being critical to our growth going forward. Naturally, other things are defocused. That's really the prime driver for what we're looking at here. Will there be opportunities for increased agility? Maybe some increased efficiency and focus as a result of these disposals? Yes, I'm sure there will be, but it's not the prime driver of why we're doing it. It will allow us to focus even more rigorously, behind the things that matter most to our growth going forward, both in tobacco, but also in next generation products.
Okay. Thank you very much.
Thank you. Okay. Well, thank you everybody for joining us this afternoon, and for the questions. I look forward also to catching up with you, if not before, when we do our NGP event towards the end of September as well. Thank you.