Hello, welcome to the PZ Cussons 2023 interim results presentation. My name is Lauren, I will be coordinating your call today. There will be an opportunity for questions at the end of the presentation. If you would like to ask a question, please dial into the conference call and press star followed by one on your telephone keypad. I will now hand you over to your host, Jonathan Myers, CEO to begin. Jonathan, please go ahead.
Thank you very much. Good morning, everyone, and thanks for joining the call. Today, Sarah Pollard and I will update you on our results for the first half of the year and progress against our strategy. In terms of agenda, I'll start by providing some overall perspectives on the first half, and then hand over to Sarah to take you through the group financials and regional performance. After that, I will cover off some of the operational and strategic developments in more detail, and then it'll be over to you, and we'll be delighted to take your questions. I'm pleased to say that we have continued to make good progress against our strategy in the first half of the year as we continue the move from turnaround to transformation. Starting with our financial performance, we have delivered another half.
In fact, our fifth consecutive quarter of profitable like for like revenue growth, with the majority of our Must Win Brands up versus a year ago. While there has undoubtedly been some impact of the volatile and inflationary external conditions across our markets, the strength of our brands and the work we have done over the past few years to make PZ Cussons a stronger and more resilient business mean that we have largely been able to offset the impact through pricing and productivity initiatives. We have been working hard to use the full range of revenue growth management tools so we can avoid simply pushing price increases onto our customers and consumers wherever possible, including using our portfolio to ensure that we are meeting the needs of our consumers through innovation, through the reframing of value, and with the right pack formats and sizes.
We said we would continue to invest in our brands, and that is what we have been doing. We have doubled investment behind our Must Win Brands in the first half of our financial year compared to levels prior to the launch of our strategy. We have invested in new and improved advertising campaigns, a full restage of Sanctuary Spa and the relaunch of portfolio brands with Imperial Leather and Cussons Creations helping to broaden our appeal to a wider range of U.K. consumers. Childs Farm continues to make good progress, leveraging the strength of the group for new international listings, and we're excited about the imminent launch of the first new product development since we acquired the brand.
We are far from finished in addressing our legacy issues, but we have made good progress so far, especially in Nigeria, to drive significant and sustained improvement in financial and operational performance. Despite the challenging external environment, we reiterate our outlook for the full year. We are building a higher growth, higher margin, simpler and more sustainable business, and are confident in our long-term ambition of delivering mid-single digit revenue growth with a mid-teens margin. I'll be back to talk in more detail about some of these highlights shortly, but first, Sarah Pollard will take you through our financial performance in the first half.
Thanks, Jonathan Myers, and good morning, everyone. I'm going to provide a summary of the half 1 financials, walk you through the key movements year-on-year at a group level and then by segment, and finish with the outlook for the year. We've delivered a robust performance in the first half of this year against a backdrop of continued macroeconomic challenges with inflationary pressures and softer consumer confidence in a number of our markets. With another period of like for like revenue growth, profit in line with expectations and a strong balance sheet, we see a more resilient business emerging, capable of delivering more consistent financial outperformance. Let's take a look at the summary financials.
Total revenue is up nearly 19%, reflecting improved underlying performance, a strong contribution from the acquired Childs Farm business, favorable Forex movements and an additional six reporting days in the period, contributing around 3 percentage points to overall revenue growth. Within the 6% like for like growth, our Must Win Brands in aggregate were back into revenue growth, up 2% and up 7% excluding Carex, ahead of the overall group growth. Operating profit margin was lower at 9.9%, consistent with the guidance we provided at our full year results in September. Earnings per share was 8.5% lower as the 8% growth in profit before tax was more than offset by an increased tax charge and an increase in minorities, both due to the continued profitable growth of our Africa business.
Net debt remains very low, albeit up a little year on year, and the board has approved a dividend of GBP 0.0267 , unchanged from last year and the two years prior. Let's take a look at the revenue performance in more detail. Working left to right on the chart, you can see that like for like revenue growth of 6% was driven by the performances in Asia Pacific and Africa. Both regions are delivering ahead of the expectations we had for them at the start of this financial year. Carex and St.Tropez were the main contributors to the decline in Europe and Americas, and Jonathan and I will come on to describe both the drivers and our plans in some detail. Like-for-like volumes were down 5%. Around 3 percentage points is explained by Carex and our Nigerian electricals business.
The decline in Carex reflects the ongoing hand hygiene category normalization post-COVID. In electricals, which clearly sits outside our core categories of hygiene, baby, and beauty, we continue to intentionally and successfully take price to drive margin, willing to forego some volume. We therefore see the underlying volume performance somewhat better than the 5% headline decline, and these trends have remained fairly consistent throughout the period. That said, we continue to remain vigilant on evolving price elasticity trends, particularly in our developed markets. Childs Farm added just over GBP 6 million to revenue, while the combination of Forex and the benefit of the additional six reporting days added another GBP 28 million. The Forex benefit represents the general depreciation of sterling, and in particular versus the Naira, accounting for half the benefit.
The Naira was on average around 10% stronger during the first half, although this gain has reversed in recent months as we head into the uncertainty of the political elections. To help you with your Forex modeling, we've shown in the appendix the split of our revenue by currency along with the prevailing rates in recent reporting periods. The additional 6 days, which is not dissimilar to a retailer's 53rd week, have not been included in the like-for-like revenue growth number of 6%. This phasing unwinds in Q4, there will be no overall impact for the year as a whole. Turning to margin. As I mentioned, our operating margin declined as we guided it would, 170 basis points lower than the prior year period, down to 9.9%. Gross margin was down 270 basis points.
The vast majority of this is explained by adverse geographic mix as our lower margin business in Africa, and to a lesser extent, our home care brands in Australia, grew faster than our Europe and Americas region, which contains our highest margin brands. While we remain encouraged with our overall ability to offset cost inflation through a combination of pricing, revenue growth management, and productivity interventions, the phasing of the pricing versus the inflation in a challenging U.K. market has contributed to the half one margin erosion. The improved second half performance in Europe and Americas, which I will come on to explain, will significantly improve both the geographic mix and the overall group margin performance in half two. Lower overheads contributed 50 basis points to margin and brand investment up in absolute terms year-on-year grew by less than the rate of revenue growth, leading to further margin progression.
Our palm oil joint venture saw its margin decline slightly, lapping a strong prior year performance. Finally, we saw a small Forex benefit related to fair value gains on hedges. I'll now give a little more detail on each of our three regional segments. Firstly, Europe and Americas. Although total revenue was up, like for like revenue declined 6%, broadly in line with Q1. The first half performance is explained by Carex and St.Tropez, and we saw good growth across other brands. Overall, margins were down 11 percentage points compared to the comparable period last year. Clearly, this is not where the margin for the business needs to be, but we're confident in the plans we have in place to address this.
Let me give a little more color on what is behind the margin movement and how we think these factors will evolve over the next 6-12 months. There were three drivers of the margin decline. Firstly, the external environment has been more challenging than we anticipated. U.K. washing and bathing, which is by far the most important category for our Europe and Americas region, was down 8% in the period as consumers have sought to make savings in their personal care routines in the face of cost of living challenges. On top of the inflation the consumer is seeing, we continue to see our own input costs higher year-over-year. This inflation is in part attributable to the stronger U.S. dollar, which represents significantly greater proportion of our costs than it does our revenue.
We estimate the impact of the stronger dollar on our Europe and Americas cost base to be approximately 2 percentage points. This will ultimately be covered through pricing, but there's a lag, with price increases implemented partway through the period. Secondly, the revenue of two of our highest margin brands declined. The decline in Carex continues to be a result of the ongoing normalization of consumer behavior post-COVID. We've seen extremely strong share gains in hand sanitizers, but overall, the hand hygiene category is down significantly. Taking a step back, however, Carex remains some 20% above pre-pandemic levels, and our market leading share position will stand us in good stead when the category momentum returns.
St.Tropez declined as we lacked the double-digit growth we posted this time last year on the back of the successful Ashley Graham activations and the distribution gains in the U.S. with both Ulta and Sephora. Finally, we make no apology for investing for growth. We're seeing strong returns from investing behind our Must Win Brands. Although it is easy to cut spend to meet short-term profit expectations, maintaining investment is the right thing to do. Jonathan will talk a little more about recent successes. We're also making targeted investments behind growth into white spaces, particularly in our beauty business. The margin decline also incorporates the consolidation of Childs Farm, which represents around 100 basis points of the total. Compared with the first half, we expect the second half revenue and margin performance in the Europe and Americas region to be markedly better.
Although the consumer outlook does remain uncertain, as noted, we will continue to invest behind long-term growth and our strategic transformation, the other down elevators in our margin bridge should reverse in half two. We expect Carex and St.Tropez trends to improve significantly. Even if there is further normalization of the hand hygiene category in half two, we expect the impact to lessen. For St.Tropez, we're encouraged by some extremely strong ePOS data in the U.S. over the past couple of months, consistently up double digits. Tomorrow, our beauty team will be announcing the first of our new products for the 2023 season, these will be heavily supported by our global brand ambassador, Ashley Graham, giving us further confidence that the half two performance will be better than the first.
We also expect several percentage points of margin improvement related to input cost trends in the second half as inflation moderates and mitigating actions increase. For example, the full annualized benefit of accelerated U.K. price increases and other RGM activities which took place during the first half. Overall, therefore, we expect the 6% like-for-like revenue decline we reported for half one to reverse in half two. Combined with a more favorable cost outlook, should lead to a significant improvement in the margin in the second half of the year. Moving on to Asia Pacific, where we have continued to see strong growth with revenue up 7.5% on a like-for-like basis. Our Australia. We can now contemplate new growth opportunities.
In Indonesia, we've seen a softer Cussons Baby performance, low single-digit revenue decline, as the more recent increase in inflation has put pressure on disposable household incomes and in turn led to a decline in the baby toiletries category. We continue to focus on evolving our portfolio towards the higher margin subcategories within baby, such as oils and lotions. Finally, Africa revenue increased by 30%, of which half was like-for-like growth. With high inflation, this growth has unsurprisingly been mainly price mix led. That said, volumes declined only low single-digits, reflecting the quality of our brands, both Must-Win and portfolio. This performance has seen us achieve an operating margin of nearly 12%, the highest since 2015. Jonathan will talk a little later about the actions we've taken to deliver this. Turning now to cash flow and the balance sheet.
Our balance sheet remains strong, with net debt to EBITDA of around 0.4x on a last 12 months basis. We generated GBP 4 million of free cash flow during the period, with our typical seasonal working capital outflow and some additional early buying of raw materials ahead of future price increases, translating to higher stock levels in Nigeria. We also expect a strong sell out performance in beauty in half two to further reduce stock levels. We realized another GBP 13.5 million from the sale of residential properties in Nigeria. Bringing the cumulative total to over GBP 30 million.
The other big movements in net debt were the payments of the final FY 2022 dividend, the extension of a loan to our Wilmar JV, as we elected to make our surplus Naira cash balance work well for us and limit the need for more expensive external operational funding locally and Forex. Turning finally to the outlook. We remain mindful of the challenging macroeconomic environment, but we still expect to deliver full year profit before tax in line with current consensus estimates. We've slightly updated our outlook on effective tax rates and the interest charge for the year, although these broadly net each other off. All in all, a robust performance set against a difficult external backdrop. We continue to see a picture of improving consistency of delivery and are building a higher growth, higher margin, simpler and more sustainable business.
We remain confident in our long-term ambition of delivering mid-single digit revenue growth with a mid-teens margin. With that, I'll hand back to Jonathan.
Thanks, Sarah. While you will all hopefully be familiar with this slide by now, we will continue to show it to you as we do to our teams internally. It is important that we remain focused on our strategy, including where to play and how to win, as well as highlighting those areas that will enable progress as we move from turnaround to transformation. I'll talk you through some of the strategic progress we've been making. First, a word on the current environment. As Sarah mentioned, conditions in the U.K. have been tougher than we'd anticipated and probably tougher than any of the other markets in which we operate. However, we have been working hard to respond to those tougher conditions. We have invested behind our brands with new better marketing activity over the past year or two.
We have new leadership with talent in critical areas, and we're building stronger relationships with our key customers so we can serve their shoppers and our consumers better. First of all, we've been working hard to remove costs that the consumer doesn't see or value to ensure we offer them great brands at the best possible price. Beyond those efforts to cut out inefficiencies, there have been other ways that we have sought to offer consumers value when they need it most, while also mitigating our own cost pressures and preserving our flexibility to continue investing in the business. Take innovation and the power of our portfolio as an example.
Our recent relaunch of Imperial Leather was not only a chance for us to reestablish the brand as a touch of everyday luxury with improved fragrance, better lather and preferred packaging, but also an opportunity for us to introduce Cussons Creations, which has so far exceeded expectations, showing there is real demand for quality products at a lower price point. Simply put, we're aiming the right brand at the right price to serve the right target consumers. Another example is the reframing of value. Value means different things to different people. It does not have to mean cheap. Let's take St.Tropez and Sanctuary Spa.
As you know, these two brands sit at the more premium end of our portfolio, and they both offer consumers the chance that everyday indulgence and relaxation at home compared to the far higher price points of out-of-home treatments at their local spa or beauty salon. Finally, pack formats and sizes have a role to play. We have talked before about the role of refills on Carex, which continue to lead the refill category with a share of over 60%. Now we see good growth in our refill offerings on Sanctuary Spa too, growing 200% in the past year, and we're extending our refill range with the launch of an Original Source Bottle for Life as well. These all offer better value for consumers versus buying the regular packs, while also encouraging reduced usage of plastic.
The U.K. market has been a little more challenging than we expected, we've been working quickly to adjust and strengthen our plans in response. We have also been working hard in other markets too, most notably Nigeria, where we're beginning to see sustained improvement in performance. Some of you may recall the seven years of profit decline, culminating in Nigeria making a loss in our financial year in 2020. It was for this reason we set out as part of the strategy we launched a little over two years ago, that a key priority would be to turn around the performance of the market and that we would adopt a self-help approach to do so, that is what we've done.
We have significantly reduced complexity with the sale of non-core residential properties, delisting of tail brands, reduction of SKUs, and establishing clear portfolio choices to drive focus and quality growth. We have strengthened our leadership team and re-engineered our SAP setup to improve financial controls and drive process efficiencies. As with all our markets, we have been focused on growing our brands, specifically our market leading Must Win Brands in Nigeria, in which investment has increased dramatically since 2020, and innovation has been focused on boosting gross margin. At the same time, we have overhauled our route to market capabilities in our efforts to win wherever the shopper shops, getting the right SKUs into the right stores, which varies from region to region and between different channels in Nigeria is critical.
Our increased ability to get this right has been enabled us by us doubling the number of stores that we now cover and call on directly with our own distributor sales teams rather than delegating that role to wholesalers or sub-wholesalers. There is of course more to be done, but we have returned to growth after the years of decline. With all our Must Win Brands in Nigeria in strong growth and Premier Cool Soap, for example, growing at nearly 50%. Overall, we're on track for a third year of profitable growth. As Sarah mentioned, the market that has perhaps the furthest progressed through the journey to transformation is Australia and New Zealand, where the macro and consumer backdrop is somewhat more favorable than the U.K., albeit with inflation still running at nearly 8%.
Our plans have driven growth across all of our brands, contributing to category growth and making market share gains. As you can see here, our largest three brands, which account for over 80% of our revenues, are all in sustained growth over the past 12 months, and we're also seeing resilient performance of our brands against private label in Australia. In our largest category of washing up liquid, private label has lost around a fifth of its market share in the last quarter. In the past, ANZ for us was a business that was up some years and down others, reflecting the historic view that its role was more as a source of funds for expansion elsewhere and less as a source of growth.
We firmly called it out as one of the top four priority markets in the renewed strategy that I showed you earlier, and we reoriented our approach to drive profitable growth. Credit to the team on the ground and those who have supported them for their work to serve Australian and New Zealand consumers better, to build more effective relationships with their demanding modern trade retailers, and to build a stronger organization of brand builders. Not just in ANZ, but more broadly across all of our priority markets, our primary strategic focus is on building trusted and well-loved brands with a particular focus on our Must Win Brands. These are the brands which we are disproportionately investing in with brand investment so far in FY 2023 more than double the level of that in the first half of FY 2020.
This is in part funded by a 30% reduction in investment in our portfolio brands. We are intentionally focusing our spend behind our strategic priorities and striving to maximize our return as we do so. You can see a reminder of some of the campaigns we've supported over the past two years here, and I'm pleased to say that revenue of our Must Win Brands is up double digit compared to the first half of FY 2020. Let's look at a couple of our more recent campaigns in detail. We launched a new campaign for Original Source in 2021, and some of you might remember the slightly edgier execution of that campaign we showed you at our full year results when we were on the front foot to appeal to our target consumers. We've continued with this focus, launching our first ever TikTok campaign in 2022.
It gained nearly 2 million views and has helped to drive brand awareness, household penetration and market share. Sanctuary Spa, another of our Must Win Brands, supported by a threefold increase in brand investment, was relaunched in the summer with new product innovation, new more sustainable packaging and a new TV and digital campaign. Sanctuary Spa grew revenue again in the first half of FY 2023. It is well-placed to deliver a third consecutive year of strong revenue growth, with household penetration increasing by a third compared to two years ago. Finally, a few words on Childs Farm. We are pleased with the performance and strategic progress of Childs Farm, which we acquired last year, our first acquisition in eight years. Being part of the PZ Cussons family is already paying off, with growth opportunities enabled by existing capabilities and new partnerships.
The first of our priority markets to integrate the Childs Farm business into our own operations is Australia. Our relationships with baby care buyers and Australian retailers are already well established thanks to our market leading portfolio brand, Rafferty's Garden, and we have now added Childs Farm to our PZ Cussons operations there from sales through to supply chain, including the launch of their new direct to consumer website in Australia, to which the response has already been positive. Elsewhere, we continue to see and realize opportunities to take the brand into new markets. We signed an agreement with Boots International to expand the brand in the Middle East, and we also see further opportunities for Childs Farm in Europe and the U.S.
Finally, we're pleased that Childs Farm will soon be launching this month a new range of baby and toddler products, the first new range of products developed since acquisition. Watch this space. In summary, we have made good progress against our strategy, delivering continued profitable like for like revenue growth. All of this achieved while managing the external volatility thanks to the strength of our brands and the work of our teams over the past few years.
We are confident in our strategy, and while we are under no illusions that there is still more to do in addressing some legacy issues, good progress has been made. We are building a higher growth, higher margin, simpler and more sustainable business and are confident in our long-term ambition of delivering mid-single-digit revenue growth with a mid-teens margin. With that, I'll hand back to the operator, and it's over to you for your questions.
Thank you. If you would like to ask a question, then please dial into the conference call and press Star followed by one on your telephone keypad. If you change your mind, please press Star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. As a reminder t hat is Star followed by One to ask a question. Hello, yes, can you hear me? Okay, we will now take our first question from Siobhan Lynch from Deutsche Bank. Siobhan, please go ahead.
Hi. Good morning. Thank you very much for taking my questions. I have three if it's possible. Maybe to start off with your guidance on the tax rate for 2023, you referenced the 26%-20%. Is this something that we should be applying beyond 2023?
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Hello, this is [Manchu] .
Oh, hi there. We're from PZ Cussons.
Hello, the speaker line has now reconnected. Siobhan Lynch, if you can continue with your question, please.
Hi. Morning, sorry. Thank you for that. Hopefully, you can hear me now. My first question was just on the tax rate guidance. Be thinking out about maybe from FX, for example, in Nigeria that don't maybe carry over into H2 and beyond. Then very finally, if you could just touch on pricing discussions with retailers, maybe kind of separately in each market, but have you taken most or all of the pricing that you need to take now, or is there more to come in the second half? How easy or difficult are those discussions at the moment? Thanks very much.
Thanks, Siobhan, for your question. Maybe if I take the first and the second questions, and then Jonathan will talk about pricing, the pricing environment and retailer dynamics. The reason we have guided to a higher tax rate for the FY 2023 financial year is the disproportionately high proportion of our profits that we are generating in Nigeria, a higher tax rate jurisdiction. I think in terms of forward modeling, I think 26%-27% is probably a little bit toppy. So I'd be thinking more around 24%-25% over a two, three, four year period. That's probably how I'd have you think about the tax rate. If I caught your question correctly, it was around the margin progression in Asia Pacific and Africa and the extent to which we believe it's sustainable.
Without making a glib one-line comment, the answer is yes, we do believe it's sustainable. We have benefited, specifically to your question around FX, from some translational benefits in the first half of the year. We see some of those benefits unwinding in the second half of the year as the Naira, which accounts for 30% of our profits and the Indian Rupee, have weakened by about 10% in recent months. We also have a relatively stronger U.S. dollar accounting for a high proportion of our cost base stronger year-over-year. I wouldn't think about FX as being a one-off help or hurt for us in FY 2023.
Actually, what is behind the 2 percentage point improvement in Asia Pacific margin and the 4 percentage point improvement for our Africa's region is the actions we've been taking through pricing and Revenue Growth Management, portfolio management, and self-help productivity initiatives to mitigate the external cost headwinds. I think you should consider that we have good underlying momentum in those two margins. Jonathan, do you want to talk?
Yes. Why don't I pick up the third question that you asked, Siobhan. We are continuing to talk to all of our customers about how we help them and us mitigate cost whilst also making sure we continue to offer great value to their shoppers, our consumers. I would say that we would expect that work to continue. Obviously, the bulk of inflation in terms of commodity and logistics has already been felt. There are still some lagging elements, but continue to see some pockets of increasing costs. Overall, we will be looking to get the benefit of some of the in-year pricing actions flowing to full year.
It's much more a question of how we continue the journey we had already started before the commodity inflation or the inflation crisis, if I can call it that, of trying to improve our overall price mix as a company whilst mitigating volume elasticities. We expect those volume elasticities to ameliorate as we move through calendar 2023, partly because of some of the more sophisticated revenue growth management actions we're taking versus straight pricing. As you can imagine, the execution of those actions can be quite different between a developed market such as the U.K. or Australia, or our more emerging markets such as Africa and Indonesia.
We're trying to work with all the tools in the revenue growth management toolkit to help us get that tightrope walk correct between mitigating costs as much as we can whilst also offering great value and protecting our ability to invest.
That's really helpful. Thank you very much.
Thank you. Our next question is from Damian McNeela from Numis Securities. Damian, please go ahead.
Hi. Morning, everybody. Thanks for taking the call. Just a couple of questions. I think on the European build back in H2, I think you gave some pretty clear indications of how. I was just wondering whether you could drill down into a little bit more about what you're expecting for the... What's assumed about the Carex sort of market recovery in that. Also, how much of the pricing that you need is actually secured with your retailers? How much is yet to be negotiated? How we should be thinking, I guess, about margin progression in the sort of the second half? Obviously, it's gonna be up, but, I mean, it's still...
I mean, are we expecting sort of comparable levels to FY 2022 in the second half, sort of high teens or perhaps not as much? FY 2024, we see a continuation of that trend, I guess, is my first question on Europe. Secondly, one for Sarah on central costs. Should we expect the central cost run rate in the first half to continue into the second half? I think just one more really, I think on Nigerian simplification. How much more property sales are there to go? Could you just remind us how much of that?
Sort of more generally, how close are you to sort of saying that, yeah, the simplification is now complete in Nigeria, and we can sort of think about the transformation, more about the transformation of that business, please?
Okay. I thought your first three questions were three questions, and then you said that was your first, Damian. It's good that you're keeping up on time.
Yeah.
Good morning, by the way. Why don't I deal with that whole question about Carex and pricing and the rest, and then Sarah can come in on central, and perhaps between the two of us, we can finish off, well, on Nigeria, what is the state of play, how far we are through that journey. The overall U.K. washing and bathing category is a volatile, and I'll explain what I mean by that category at the moment. We have ups and downs, but overall it's down. As Sarah's material said, it's down 8%. Within that, what we're seeing is two different dynamics. One is the continuing normalization post-COVID, and that is happening in liquid soap and in hand sanitizers. Hand sanitizers, that market is down 50% versus year ago.
We're growing share, very importantly, so we're well-placed for when it finally normalizes, but it's still in rapid decline, and that's on a 52-week basis. We are seeing double-digit decline in the liquid soap category as a whole, also as people begin to normalize in their soap usage post-COVID. Those two parts of the business, which are primarily impacting Carex, as you can imagine, the tide is going back down, and we are working hard to make sure we are best fit to hold and grow market share as that market normalizes. Sarah mentioned that our revenues on Carex currently are running 20% above pre-COVID. We've got some reasons to feel confident that as that market normalizes, we will continue to be well-placed as the market leader in both liquid soap and sanitizers.
Exactly when, it's harder to say, but we would expect that to be cycling through, we hope, over the next three to six months. Let's remember, we still had some form of lockdown as recently as December 2021, right? We are still trying to cycle through the effect of that. Your second question was more related to pricing, right? Have we secured it all? Are we still in negotiations? Well, we're obviously not going to talk publicly about what the state of all our detailed discussions are with our retail partners. The good news is that overall, we have already made a lot of progress at improving price mix.
Much of it not yet fully reflected in those H1 numbers because the actions and interventions were landing at various stages through H1. That obviously then links to our confidence in the improving picture of margin in H2 and then full year effects as we move fully into FY 2024. Hence, you can see it's a rather opaque right-hand bar on that bar chart in Sarah's presentation intentionally, but we are confident that we will see progression. Why don't I hand over to Sarah to say a little more on that, and then she can talk central costs, and then we can talk a bit more about Nigeria.
Morning, Damian. Let me try and contextualize the margin recovery. You should expect the Europe and Americas margin in the second half of this year to be up on the prior year and to be more like last year's full year margin. That implies for the full year this year, still a backward move in margin for Europe and Americas, which contrasts with a modest margin erosion for the group as a whole, as we've sought to maintain investment in the face of significant cost inflation. The reason I say that is actually for FY 2024, although it's very early, we see some of those cost headwinds ameliorating in terms of the external inflation environment. Also what's really held our margin back this year is that adverse geographic mix. We expect the U.K. market to recover and recover strongly in FY 2024.
If that gives a little bit of color around the magnitude of those margin moves. Central costs, certainly for those less familiar, houses three main buckets. One is our central capability investments, be they commercial or be they corporate, that don't reside in any of our specific business units. They also house our internal fragrance business and some of our intercompany movements by virtue of us having an internal procurement hub in Singapore. If you recall, we've announced a significant transformation of our supply chain. One of which is to move our procurement operations back to the U.K. for both some overhead savings and actually better buying. We are outsourcing, we've taken the decision to outsource our fragrance manufacture for a higher quality input into our products, but also a lower overall cost.
Yes, your half one central cost number, you can safely extrapolate into half two, but the makeup will be different. Increased investment behind strategic capabilities, but more economically viable fragrance and procurement business units, if that's helpful.
Yeah, that's really clear. Thank you, Sarah.
Good. Very good, Damian. My pleasure. Property sales. 13 and a half more in the period, cumulatively now just north of GBP 30 million. We are almost done on residential property sales. We have more commercial properties that given our operational simplification we don't need in our operation. They are a little more difficult to monetize. We are being very mindful actually because the property markets generally in Nigeria are appreciating, whereas the Naira is not. I'm not in any hurry to liquidate assets into Naira right now, but we think there's absolutely more value. We are probably two-thirds of the way through those operational non-core assets, I would say. I'll let Jonathan come in. I think on our definition of simplification in Nigeria, we are not done.
Some of those real simplification unlocks, if I think about the macro portfolio, are harder to get at, but of significantly more value. That will take us some time. We are determined to go after all the value that we can.
Exactly right. We are really looking not only to realize value from non-core assets, looking to simplify the operations so people can be focused on growing the business. Our goal is to create a springboard for growth both in Nigeria and Africa. I believe we have made good progress, but we still have some way to go, and we'll let you know when we have more to say.
Okay. Thank you very much.
Pleasure.
Thank you. Our next question is from Clive Black from Shore Capital Markets. Clive, please go ahead.
Well, good morning. Morning, Jonathan and Sarah. Thanks for the presentation. Sorry if I, if this has been asked already. I struggled to get onto the start of the Q&A. Three questions if I may. I don't think it's Damian's three. First of all, just in terms of your long-term aspirations around mid-teens margins, what's your definition of long term? That would be, that would be helpful. Secondly, from a market share perspective, you touched on Carex in the U.K. and the great successes in Australia. I just wonder at group level if you could talk to us about market share overall. I guess that links into my third question about the U.K. In terms of the evolving market.
I mean, is it a case that the dramatic growth in share and bargain stores, so Savers, B&M, Home Bargains, for example, is a structural impediment to margin advancement in the in your categories in this market that will probably persist after this or consumer recession, whether we're in recession or not remains to be seen, falls through? That would be helpful, please. Thank you.
Why don't I take the market share and the discounts? Why don't I do those now and then Sarah can come back on the on the definition of, yeah, mid-teens when, which is essentially what you're asking, Clive. Morning, by the way. Market share overall. We have genuinely, we have share gain momentum across the group, but it is not uniform. The reason it's not uniform is in some places we have consciously chosen to constrain volume in the pursuit of trying to improve some gross margins. You'll have heard Sarah mention on our electricals business in Nigeria, that was a clear choice at the beginning of the year. We demonstrated in Australia that we got really good momentum. You know, growing shares and growing categories is a really good place to be in a consumer goods business.
Indonesia has been a bit tougher, the reason it's been a bit tougher, we've held share or in the last 12 weeks, very marginally grown, right. The reason that we're not seeing bigger improvements in our revenue versus share, though, is 'cause the baby category is under a bit of pressure. We're actually growing share in the mini market channel, but the other 85% of the market, or 80% of the market, which is if you like, general trade, grocery outlets, we are holding in a declining category. In other words, it's a little bit, it's not totally similar to what we see in the U.K., Clive. You know, the poorest consumers are, those with the least discretionary spend are the ones getting hit hardest by cost of living.
In, if you like, the lower end of the trade, if I can use that term, you know what I mean.
In Indonesia, we're seeing people just stop buying. Right. We then look at Africa, actually we have better share momentum. As you can imagine, the share data quality is not as good, less empirical. We read it over longer periods to get a more reliable read. Overall, we're in good shape. In some of our categories, we're seeing really good growth in terms of share performance, particularly those that are disproportionately appealing to highest spending consumers. We see good share positions in Morning Fresh and Cussons Baby in Nigeria. I bring it back to the U.K. and then link it with your question on the, if you like, the long-term impediment of channel development.
In other words, if shoppers get established in either high street or German discounters as a result of the swing to discount channels in the current cost of living crisis, which I think is what you're talking about.
Yes.
You know, our job is to develop a portfolio that is able to win wherever the shopper shops, and that can mean in brand. We want to have a number of different brands that play at very different price points so that we're able to meet those different consumer spending levels. It also, as you well know from, you know, your expertise in this area, is how we play our brands in terms of pack price architecture across different retailers. In my experience, when it's done well, you can do that with the right margin structure to meet your ambitions over time. That is what we are working hard to do. Win where the shopper shops and ideally do it in a way which enables us to protect and improve our margin structure over time.
There's, that's the, you know, that's that Gordian knot of the brand building meets channel challenge in the U.K. We're working really hard at getting it right. Sarah, mid-teen.
Okay. Thank you.
Clive, good morning, thanks for the question. I'm inevitably going to say I'm not going to give you a precise number to a very precise timeline. The reason I say that is, you know, we see volatility on the horizon. Remember we said we did have and do have still some legacy issues which were years in the making. The transformation will be years in the fixing. That said, when we made that mid-teen margin statement at our Capital Markets Day in March 2021, we are as confident now as we were then. That's despite having absorbed some GBP 70 million or GBP 80 million of cost inflation since then.
We knew our margin progression would be a little more pedestrian in the early years as we put back much needed investment to drive future profitable growth, with us seeing some more meaningful margin progression from FY 2024 onwards. I hope that answers the question as best I can.
Well, it is a loaded question, Sarah, I'll give you that. It's, you know, short term to us would kind of be sort of a year or so. Medium term would be sort of two to three years, and long term would be sort of the back end of five years. I just wanted to understand your definition of long term. Thank you.
Thank you. Our next question is from Nicola Mallard from Investec. Nicola, please go ahead.
Hi. Good morning. I think I'll do the usual three questions as everybody else has.
All right.
Just starting on the margin. I mean, clearly, you've just reiterated the margin target is intact at mid-teens, which is where you'd set it at the outset of your plans. Clearly things have changed quite a lot, and you're still holding on to that margin target, which is fantastic. Did you expect to see the swing that we've seen away from Europe and into Africa and APAC? To some degree, perhaps not to the degree that it's happened. I'm just wondering how your maintenance of the target fits with what we've actually seen so far in terms of the geographic mixes. Secondly, on Nigeria, you've talked about self-help and, you know, that's been incredible the performance of the business there.
How do you see that faring if there is a bit of an economic shock, given the elections are due and, you know, these things always tend to create a bit of volatility? Finally, on the joint venture with the electricals business, you said you deliberately managed that for margin and you took a volume hit. Was that a strategy that you'd agreed with your JV partners? Clearly sometimes that doesn't suit them if it suits you. Thank you.
Sarah, do you want to talk margin and answer Nigeria and tech?
Yep.
Let's do that. Morning, Nicola.
Morning.
If I answer the question directly as posed, did we expect the U.K. decline to be such a margin drag for us this year? No, we didn't. The washing and bathing category decline was greater than we expected. That said, what it's meant we've been able to do and needed to do is pull different levers and pull them to, you know, differing degrees.
If I think about the full year margin, and indeed the half one margin, actually by far the biggest proportion is that adverse geographic mix. We mitigated the cost inflation to within 50 bits of margin, which gives us confidence as we go forward that actually in FY 2024 we ought to enjoy, if I can use that word, both a natural rebound from the Europe and Americas business, plus we will have built the capabilities and have the momentum to take that pricing through into FY 2024 whilst the inflationary headwinds cede. Have we had to pedal slightly harder this year to deliver the number? Yes. Have we learned some things? Are our capabilities intact and our teams up to the challenge? They absolutely are.
Thank you.
Okay. Let me pick up on Nigeria and then Electricals. All right. Yes, you're absolutely right, Nicola. You'll remember well that we specifically said we wanted to use a self-help approach to improve our prospects in Nigeria rather than necessarily as we may have done in the past, you know, say we float up and down with the tide and the challenges that we see externally. It was great that you recognize the progress that's been made. There are some things that are in our control and there are some things that are not in our control. What's been in our control is trying to make the business simpler so we can be a bit more resilient and also upgrade some capabilities where potentially we had some gaps before.
Some of that's been on the ground. We've made really good progress building stronger brands, overhauling our route to market. Some of it's been a combination of on the ground and also in our U.K. group area and some of the treasury management tools and capabilities that we have developed and adopted in the last year or so have really helped us. Helped us do what? Helped us get more resilient and better prepared for when there are shocks or surprises externally in Nigeria. You refer to the election. There are two rounds of elections, some this month, some next month. I would also add is there's been a change of currency, hard note currency, which is causing some day-to-day disruption literally on the ground this week in Nigeria.
What we've been seeking to do is to make ourselves better able to cope with those kind of disruptions. So far we absolutely have been able to. I'm very clear, a little bit like when we were talking a few years back with the risk of Brexit, what was it going to do to the U.K.? We can get ourselves ready. We can't control what we can't control. We're focused on making ourselves stronger and more resilient, and we will continue to do that. Sorry, just on Electrical specifically, you bet we've been staying close to our joint venture partners. You know, we want to build a more profitable, sustainable business in the long term, and actually we've only been talking to them in the last week reaffirming how we are going to grow that business successfully.
Okay. Thank you.
Thank you. Our next question is from Patrick Folan from Barclays. Patrick, please go ahead.
Hey, good morning, Jonathan and Sarah. Thanks for taking my questions. Yeah, I'm gonna continue the trend of three questions and kind of more brand specific. The first one's on the hand sanitizer category. Can you just give a bit of the dynamics going on in the market in terms of the category was down 50%? What was your kind of headwind within Carex for the last six months? The share gains you're seeing, is it from capacity coming out of the market or is it from other branded players? That'll be the hand sanitizer question. My second one would be on St. Tropez in the U.S. How is household penetration trended over the last six to nine months?
Some of the data we're seeing is that self-tanning kits have been seeing a bit of stagnation in the market. I'd say the third question, kind of going back to Nigeria, would be on the volume headwind you saw in the Electrical business. Which white goods were they in? If you can give a bit of color on that to get a bit of, I guess a color on the Nigerian consumer and how that may trend if we see a bit more deterioration in the macro environment there. Thanks.
Okay. Why don't I talk through some of those responses. Patrick, good morning, by the way. Hand sanitizer, let me talk you through the dynamics. Even at a 50% reduction over the last year, the category is still bigger than pre-COVID. Whilst the consumer habit may have waned for many, it has not waned for all. During that period we grew our market share by 7 points. The more underlying dynamic, even beyond the what are we doing as individuals, is what's happened to the glut of inventory and the plethora of non-branded and even branded entries that flooded the market during the peak of the pandemic. There have been huge pantry stock in consumers' homes. There've been huge stock in some retailers' warehouses and stores.
You know, you may also have seen what I have seen, which is some retailers literally giving it away free with other things just to clear the stock in their system. Actually, in an environment when there's free sanitizer gel going around, we're quite pleased that we've grown 7 share points in the market. Exactly how and when that all gonna unwind, as I said with liquid soap, when the unwinding finishes, we would expect that to be in the next three to six months. Our expectation is the market will settle a little higher and we will continue to be the clear market leader as and when it does do that. Moving to St.Tropez in the U.S. Over a multi-year period, we've had a really good track record of growth on St.Tropez in the U.S.
It was slower in our first half. It doesn't surprise me that what you've seen on household penetration, we have also seen. I would say, a couple of things to give you some reassurance. Since the end of our first half, we have, and i.e., into our second half, our third quarter, we have seen significantly improving trends in our U.S. St.Tropez business. That is before the introduction of the innovation that Sarah mentioned earlier. As you'll see when it comes, it's an introduction that is absolutely linking the self-tan benefit increasingly with premium skincare benefits, because we believe not only is that a way to drive real value for our consumers, but it also differentiates us from some of the other players in self-tan in the U.S. market.
Of course, what we'll be repeating as part of that launch is the very successful activation, leading with digital first of Ashley Graham as our brand ambassador. I've seen the, I've seen all the material and the content that we have filmed with Ashley, and we're very excited about how that campaign is gonna go. Then the last thing, to come back to your tech, we can follow up with some of the specifics as to which elements of which goods, 'cause you'll remember we have quite a, an array of products from fridges to freezers to washing machines and power generators in our Nigerian lineup.
What we have tried to do is make sure that we have priced, not beyond the market, but we have priced to protect our premium tier offering in the market rather than necessarily react to low price entries that have come in from other players. Part of protecting that price premium is a very strong after-sale service, which is a real competitive edge that we have. It's, it has been less acute in any one category and more a general drive for us to get that right balance between driving premiumization or protecting our premiumization in the market and accepting some level of low volume elasticity decline.
Maybe just in terms of the called portfolio, Patrick, what I would add is actually the team, it's a really good example of our multi-local operating model working because the team have put some highly relevant local innovation into the market. In what is, on the face of it, a highly discretionary category in challenging economic times, fridges are down a little bit. Actually, freezers are holding up because Nigerian families use it to run small businesses and sell the ice, and power generators is definitely not a discretionary choice in Nigeria. Fridges down a little bit. Some of the higher margin freezers and power generators are still doing very well.
Great. Thank you. Thank you. Our final question comes from Darren Shirley from Shore Capital. Darren, please go ahead.
Morning all. Just two questions from me, so we're easing down a little bit. First of all, you've mentioned on our sort of legacy issues on a number of occasions now in the presentation and on the questions. I mean, you've obviously highlighted Nigeria as being a hub of a lot of those, but I mean, is there anything elsewhere across the geographies which particularly stands out as an opportunity for you or as a big legacy issue for you that needs resolving? The second one would be, I mean, you guys now with a couple of years, two or three years into the business now, traded it through some extreme times.
I mean, when you look at the portfolio, that you're in now, is there anything that you're increasingly viewing as maybe non-core to the business, that may be not in the business on, say, like a two, three, five year view? Anything you can comment on that would be interesting as well?
All right. Hello, Darren. Good that it was two. Thank you. That's five to Shore Cap, but we'll let you off. Right. Very nice to talk to you. Right. The legacy issues, obviously we have talked a lot about Nigeria. We could extend that a little bit to some other parts of Africa. We still have some, you know, frankly, some non-core assets in some other West African countries that, you know, we haven't talked a lot about, but at some point we will do as we continue to tidy up some of those, if you like, minor legacies. On the broader question I about, you know, where else?
Actually, I would elevate it up a little bit and make it slightly more conceptual, which is actually the cultural change that we're continuing to try to drive in the company as we really try to shift us to a business that's demonstrating the pioneering spirit that we have tried to reignite back from some of the previous decades of growth. I think we've had some parts of our business that have responded really well. I love it in the next question you talked about extreme times since we started in roles. That's what been all we've known in roles. They're normal times, but it's just, it's extreme in those normal times, right? We've had some parts of the business and some individuals who have really demonstrated that they've embraced the new values that we put out there, right? One of which is bold, right?
Actually, we're still trying to dial up whilst being, you know, suitably risk assessed, more uniform level of boldness across the business. So that's more the legacy issue that I think I would be referring to there. Some of that definitely applies in the U.K. as well as other parts of the world. On the extreme times and, you know, what do we see as the right portfolio for the future? Yeah, we are really clear. We're in the business of building brands, and we're really clear it's in core categories of hygiene, baby, and beauty. We said before that we are now ready to look a bit beyond our priority markets to expand those categories. You know, putting Childs Farm into Middle East, for example, would be a really good proof point of that.
What we're not gonna do is suddenly put up a for sale sign up and give you three years notice on something else we may be trying to do with our portfolio. We are always very proactively looking at what is the best way for us to deliver our strategy and thereby realize value for our shareholders? That's what we're focused on doing.
Just coming back on that comment around cultural change. I mean, should we take away there that there's still some sort of silos within the business that's breaking down, needs breaking down, or it just needs more time for sort of the society you talk about just to further?
Yeah, no, Darren, I think it's less silos. It's more cultural change takes time, right? You know, we are trying to galvanize an organization of thousands of people to try to work in a different way. We've made really good progress. I mean, I hope that's not me scoring my own homework. I hope you would recognize the momentum in the organization and the business that maybe, you know, we had lost a little bit previously. What we're determined to do is to continue to drive that change as we drive an overall transformation of the business.
I mean, given you didn't seemingly leave that room for about 18 months now that the work is done with.
Come on, say that again, Darren. I didn't catch that.
No, I mean, given every time we spoke to you seemed to be in the same room for 18 months doing business, couldn't get out and about. Getting out.
Exactly.
seeing people face to face is gonna accelerate that process, isn't it?
Exactly right. Exactly right. Sarah and I will be in Australia in literally a couple of weeks. I'm gonna be in our U.S. office for the first time. That's the one office I haven't been to yet. I'll be in our U.S. office. Sarah and I were in our Nairobi office recently. We are genuinely trying to drive that change now that we have been unleashed and liberated to travel and meet our teams.
Yeah. Building up the air miles. That's great. Cheers, brother.
Thank you. That is the end of the Q&A session. I will now hand back over to Jonathan Myers for closing remarks.
Brilliant. Thank you very much. Moving on swiftly from the air miles reference from Darren. I would like to say thank you very much for your interest. Joining the call, thank you for your questions. I hope what we've been able to demonstrate is that we continue to make progress against our strategy. We are working hard to build a higher growth, higher margin, simpler and more sustainable business. We're trying to get that balance right between making progress on our strategy whilst delivering and by making progress on our strategy, delivering value for consumers the world over. We look forward to updating you on our progress next time.
This concludes today's call. Thank you for joining. You may now disconnect your lines.