Thanks, Jenny. And I
guess you said it all. Welcome to RB's Q1 trading update. We'll go through our normal prepared remarks and then go straight to Q And A. So, with that, let's pass over to Rakesh.
Hi, good morning and welcome to our trading update conference call. I'm joined today by Adrian Henna, our CFO and Ari Segal, our COO of Health. After a brief summary, we will be pleased to take your questions. Are 3 key messages for you today. Firstly, Q1 was a slow start.
It was expected and we remain fully on track deliver the full year targets we communicated to you in February. Secondly, the return to outperformance in health remains our top priority and I want to share with you some of the plans we have in this regard. And lastly, the work we are doing to create 2 fully separable business units remains on track. So let me give you some more color around these messages. You will have seen from our trading update this morning.
And as we flagged in February, it was a slow start to the year, but as expected, As usual, there are a number of moving parts. So I want to address those directly now. And then if you have any further questions, we can deal with them in the Q And A. So let's take the negatives first and true RB fashion and then come to the positive. Our OTC business experienced a negative 9% decline in Q1.
You will see from our geographic disclosures that the majority of this decline was driven by the U. S. Where we sell both Mucinex and a smaller cuff and congestion brand called DelSim. The weakness was due to 3 things: Firstly, as you're all aware, it was a very weak season. In the U.
S, the incidences of cold and flu in January February were down significantly on the prior year. Things improved in March, but this did not impact our net revenues as retailers use the pickup in incidences to reduce their inventory levels. And this brings me to my second point, which is about retailer inventory levels. As we signaled with our full year results, retailers had closed 2018 with relatively high inventories. As they did not adjust to a season, which relatively was weak in the last year through December.
Then through Q1, as the season failed to materialize retailers destocked. This impact was significant. As we ended the quarter, retailer inventories are now in line during the quarter as a result of the fuller availability of private label competition. We expect to lap the private label impact during 2019, and are ready with our plans to bring further innovation to this There are a few moving parts here too. On the positive side, that all performed well with good brand growth across both our developed and emerging markets.
Our VMS brands had a slow quarter, particularly airborne, which is also due to seasonality. The market for immunity supplements in the U. S. For the 1st 2 months of the year was mid single digit negative. We do, however, believe that our VMS brands will be a growth as we progress throughout the year, and we look forward to the success in our new BRAIN Health brand, Neuriva.
Shore had a weak quarter as we made a deliberate choice to focus the equity of Shoal from gadgets to foot health, therefore putting more resources and in store focus behind problem solution products and Foot Aid segments. This transition is creating some further turbulence for the brand. Gadgets now represent just under 15 percent of our Shoal portfolio. We believe this strategic reorientation will provide a more sustainable growth platform in the future. Now coming to the positive and our IRCN business.
Delivered a good quarter of 5% growth. Our U. S. Business continues to see strong momentum and further share gains behind the success of our NeuroPro launch last year and strong success in our specialty brand Nutramigen. In China, supply will remain constrained until we get to the second half of the year.
We're working hard to create a more resilient supply chain and our Australian facilities are now up and running. From a channel perspective, e commerce remained strong and broad based across our multiple e commerce platform. I'm pleased to say performance in the quarter. On On pricemix, we took pricing in line with the market, but also benefited in addition from a number of trade optimization initiatives. So it was slightly unusual pricemix quarter for us, but there is no change to our model or longer term expectation.
Where growth will come from as a source of material growth in the long term. In respect of Hygiene Home, we saw another strong quarter despite a tough competitor in the U. S. On Lysol. Our business continues to benefit from the additional focus of RB2.0, and we are seeing some excellent performances, particularly in Harpic, where we are addressing some very important social and hygiene causes and in Manish where we have simplified the portfolio and improved innovation.
Again, the volume versus price mix performance looks a bit unusual in the quarter, we are lapping an extremely tough volume comp from last year and weak pricing comps on the other side. There has been no overall change to our pricing strategy in Hygiene Home. We do not see increases in real price as a source of growth here too. So what does all this mean for full year targets? We expected a slow start.
The flu season turned out within, but I would say at the lower end of our expected range. We remain confident in our plans for the rest of the year and our ability to deliver both our full year target of net revenue of 3% to 4% like for like growth and our expectation of maintaining adjusted operating margins in 2018. And whilst we don't give targets by quarter, I want to reiterate what I said in February that you should not expect this 3% to 4% growth target to be consistent across quarters or even in each of the halves. Half 2 and Q3 in particular will be a key growth driver for us in 2019. And from a margin perspective, this is also true.
Now moving to my second message, and it is not a new message, but it is a top priority, and that is returning our health business to our performance. I firmly believe that we are operating in the right categories. We have excellent brands and now have the operating structure under RB2.0. With the integration of Mead Johnson within RB has now completed, our focus is very much about winning in the right channels. The growth channels.
We are outperforming in e commerce, and this is not just a China story. It is about investing in all markets and in all e commerce channels, including a direct to consumer. We are significantly increasing investment in e Commerce and digital versus 2018 2017. It is also about innovation. Our future innovation pipeline is materially bigger than was the case 12 months ago.
We should expect to see but our new BRAIN Health brand, Neuriva, has been well received by customers. And we are building a more resilient business. Over the past 2 years, our good growth across many brands and markets has been offset by one off factors affecting supply of our products. We are investing to build even more resilient operations. For example, our ISN business, we are working very hard to create a more resilient supply chain and our Australian facilities being up and running is a symbol of that.
And finally, my third and very short message, which is that the significant work we are doing to create 2 fully separable business remains, but very much in progress and on track with the timeline we have previously communicated, which is by mid-twenty 20. So to conclude, we are on track to deliver our targets for the year. We know we have work to do still to get our health business to where it needs to be, and we are on it. And we are also full steam ahead with creating 2 fully separable business units by a mid-twenty 20 company.
So with that, Adrian, Adi and I will now be at least to take your questions. So can we have the first one please? Thanks, Rakesh. We've got to take one to queue So, the
first on the line is to leave a duty for JPMorgan.
I think I know too, but it's very faint. No, okay. Well, look, we'll go to the second question and hopefully, if you
can get back in the queue.
Second PIN on the line is Richard Taylor from Morgan Stanley. Richard,
can you get through? There we go.
Good morning, gentlemen. Just two questions from me this morning. One very simple one to start with. What do you think the market growth rate was for baby food? In China and in North America, please.
So that's the first one. And the second one is a bit more of a broad question. I can understand how e commerce works very well in health, particularly for high value items like baby food, but maybe you can just color on why e commerce works well for the highly team having business where maybe the consumer value a lot of value.
Right. So let me just give you
a very big snapshot of what is happening in China. Although I
have to say that this year in China as usual, it remains a very difficult to fully read.
I would say that the in aggregate
the China business is is materially slower in terms of volume caused by the birth rate decline in 20172018, but there is still an impact a positive impact of, of, of, of, of, of,
of immunization. And therefore, when it
comes to this in aggregate, we are still seeing growth, I would say, so lower than last year, but still, I would say in the low to mid single digit level in China. In the U. S, you don't have the same volatility in growth rates. It's a much more steady market. There is, but there is very very modest volume growth rate and also very modest price growth rate.
So in aggregate, I would say it's very low single digits. In the U. S. We are definitely outperforming in the U. S.
I mean, I'm very, very pleased actually because we need to pull the business up just, I would say, maybe not month ago. The U. S. Business was a material impact on the total business and we have turned that around really over the last 6, 9 months. We can see positive share momentum, positive growth momentum.
And I think we are really, really doing well in the U. S. In China. Obviously, a very good performance in e commerce in rolling out our distribution to mom and baby stores, particularly three four downs with very new partnerships was going really very well. And then we had to set back in Q3, which obviously has put some kind of a dampener on this.
But we are recovering, we are recovering, we're working very hard to win back consumer choice to win back our distribution, but we are still supply constrained. So I would say that in aggregate, the results of Q1 in IFC are good, strong. And I think we have managed within the constraints that we have, we manage the brand and the categories rather well, but we are still a lot of work to do. There is no question that we can much better. I'm not more interested, but we can do better.
And we are working very hard to improve across innovation, across distribution and so on. Last question, I think on high yield commerce and how should we expect high yield there is no question that there is a difference between the e commerce civilians in some categories versus others. So if you ask, look, how we would agree beauty there is probably far more e commerce driven. Versus the toilet business is quite normal. There is a difference, because per unit items and the per unit costs and therefore, the economics works differently.
But the growth rates and the leverage that we start from, the growth rates on e Commerce whether it's one category or the other are still phenomenally affecting. And therefore, we are working hard, whether it's in health or in 2019, across e commerce channels, And that means we're working hard on marketplace. We're working hard on fixing plates. We're working hard on cross border and other channels as it been available across markets to further momentum. There's one figure that I want to quote to you, which I think tells me that eventually, irrespective of my We'll have a substantial business coming out in the future.
That might take time depending on where you want, but that's what's going to happen. And that's China on that call. So you would argue that all China should be like that, I mean, yes, maybe, or like so in the U. S. Or Harvey somewhere else?
In general, China, the contribution of e Commerce to total is, I would say, 40% to 50% it might improve on the other, but it's in that range. So can imagine that 40% to 50% of our total business is under commerce. Therefore, when I think about e Commerce in high quality health, I do not set somehow limitation or ambition should be materially different, even if the past might be a bit longer or different in one market versus the other.
That's very good. One quick follow-up. Sorry, maybe this is Fady.
Are there any new initiatives from the
Chinese government that we should be aware of to stimulate the birth rates?
I think the Chinese government is doing a number of things to simulate the birth rate, but we also know that has completed up. Birth rates tend to go in a particular direction. So it's clearly very much top of my chinese government and the finance management government is focused on balancing the demographic issues that will come up. And there's been many focus on that, but this is not an easy thing to move in the shop. Thank you.
Good morning. 2 quick ones, please. The loss of shared private label in OCC and obviously, the ultimate point of wind fever on well, their test trusted products. So your branch should be relatively insulated from private label competition. Does that argument still hold up And secondly, back to China, IFCN, you said you're still supply constrained.
What about consumer behavior following Q3's five problems. Again, you said that you're worried that some consumers might switch away from the grant, if that's on the right, we'll have that hang out. Thanks.
I'm sorry, this is a question. I'll get directly with that demand from the other companies, but it's really more resilient than many other categories. And therefore, less susceptible to public label. But we are talking about Houston next year. I mean, in the case of the index, we're talking about the entry of private label that's or reentry, I mean, I might be very precise.
That will happen over the last 12, 18 months. And that's why we believe it just comes in occupied mode sales rates and occupied make the availability. It is a one off impact that we are going to see just because that we've had many new things that come, it will definitely make an impact. Something comes in, it doesn't come. A drag out impact, and I expect that will not work in the year.
Indeed, that's fine, actually, but where practically it is fully in present for 12 months of Mucinex share, is really in there. So we are not losing share in channels where private label is equally there. It's just the fact that private label is not Fintasibility every store. And therefore, this is it. In the landscape of things in Q1, the impact of the share on using X performance is materially modest compared to the other factors of seasonality and destocking.
So I think it will be that in perspective. In the same one, I think you're right. Yes. So on your question about the consumer impact of issues that we had last year, we know that I think the category is built forward by the cohort faculty tend to travel over a period of time to Virginia of the model and maybe. And maybe as we for some of my concerns last we did not build as we thought that we would have done in a supply constrained manner.
And therefore, compared to everywhere
in the first half of last year.
In the second half, we were unable to build the same level of cohorts in the same momentum to come into 2019. Especially for our most premium and our bestseller's Derivative Infinitor. Now at the same time, As we've done into this supply issue, we were extremely conscious of where we continue to invest behind building our brand, building the equity, and making sure that we retain our shelf space because critical in China. And we have data subsequently that tells us that equity has not been impacted by this at all. And actually, the work that we did at that point of time to continue to retain shelf space has helped us as the product has started to come right to stop.
So while it still remains a slight constraint that we are rebuilding the cost cohorts, and this is something that takes a bit of time, the I would say that the momentum in the direction is quite positive and we are rebuilding a number of the lost cohorts that we have built earlier otherwise.
And just to be clear, why are you still life constraint because I knew it was 6 months ago now that all this was happening, shouldn't it, well, more than 6 months ago, shouldn't it have all worked its way through by now?
So actually, we were running flat out at full capacity for Infinitas before the issue happened. Then the issue happened and it sucked out a level of from the system. And after that, we've been running at full capacity on those lines again. And while we are we were waiting for our Australia facility to come online and take some of pressure away from our Netherlands factories. So that has happened and progressively as our Australia factory ramps up, some of the volume is moving to the Australia factory.
However, these are long term, movements in our supply chain, and it's a key part of making our supply chain more resilient as we go forward.
Thanks, James. Okay. Next on the line, Ian Simpson from Barclays. Go ahead, Ian. It appears.
Okay. Now we've got Marion Vicharron from MainFirst. Go ahead, Marion.
Yes, just two questions for me, please. One on the supply constraint coming out from this, What do you think was the impact still that you had on the FCN from the supply constraints? I mean, what proportion of sales are you missing? And then also on the guidance for the full year. So I understand it shouldn't be even quarter after quarters, but on the flu season that was exceptionally weak this year, how do you expect really to catch up on that part?
And also for H2, what is coming from comps? Because you will be lapping the production constraint issues and what growth is be driven by innovation or improved performance?
I don't think we are going to be able to quantify the impact apply constraint in the quarter for IFCN. Listen, we had I have seen to produce a quarter of +5 percent growth. A number of things are doing performing really, very well and some we can do better on. And what we just said was that we are not fully, fully back in terms of our supply. Position in China, although we're working very hard to get as close as possible, but there is still some more to do.
And I believe that in Q3 onwards, we should have a more, more, a stronger supply position. So I think that's where we are. In terms of I think you're pointing Marion to how we should think about targets for 2019 and half 2 particularly. So I would say as we said, that we have a very soft comp in Q3. And therefore, we've said in the release, actually that half the growth will be half to be awaited I said actually, just to remind you, on this whole thing of target setting, because we do get sometimes quite worked up about every quarter and we to make sure that every quarter is somehow very perfect in terms of what the full year target is.
Our target is for the full year. The target is 3% to 4%. We are confident of getting to the 3% to 4% target. We are in Q1 where we expected it to be. Okay.
So there is no change here. We also said back in February, I'm only repeating that you should not expect every quarter. To be in that same range of the full year target. We should also not expect every half to be in the full year target. We can see already actually that in Q2 and Q3, we have different moving parts.
In Q2, we have a very strong comp on IFCN, very strong comp on OTC. On the reverse, we have very weak comps on in Q3, particularly on the IFCN side. So you can read whatever you want on each of these quarters. But I would say to you that in aggregate, we remain on track with our full year target of 3% to 4%.
Okay. Thanks, Marianne. Hopefully we've got Celine Venuti back now. Celine, are you with us?
Yes. Good morning. My first question relates to the health business. Could you give us a quant by, you mentioned 3 different points destocking, the flu season in sedans and the share loss. Could you quantify how much all of each of these contributed to global level 1, to the decline?
And also what has been your exit rates in March since you mentioned that things were running back to normal. Maybe she could talk about sell out, possibly. That's my first question. My second question is with regard with your statement on Indivior. So you rightly point out that the deal change is against Indivior.
And there has been several U. S. Judgment in favor of Reiki Group that cannot be liable for it's subsidiary Indivior. So could you explain what are the thought behind your provision and why do you still have those? Thank you.
Yes, it's Saline.
It's Adrian here. So on your first question, the sort of components of the OT see a reduction in Q1. Of the 3 that Rakesh mentioned, so that the reduction in consumption in the U. S. And Europe the reduction inventory, particularly in the U.
S, but a little bit in Europe and the Mucinex market share, around half of its consumption. And you can see that in the incidence deduction in institutes, but this is across the quarters, but particularly heavily, so in January February, getting on for the bulk of the second half was reductions in inventory. And that was, as we said in the in the text, prepared text, the the season relative to last year tailed off through December last year and a significant number of retailers went into the end of the year with with inventory levels that were therefore in excess of the underlying consumption. So we saw a significant destocking through the quarter. Both reflecting the high stock levels they went into the quarter and the low consumption in the quarter itself.
By the end of the quarter, But as we exited March, it very much matters that the inventory levels were in line with the level of consumption. So it all happened in the quarter. There was some there was some loss from Mucinex share loss to the private label as Vakesh has already mentioned in answer to a previous question, but it was a modest contributor to the reduction compared to the other 2 elements, Salim. And in terms of the exit rate, the, in March is always a lower or typically a lower consumption a lower consumption part of the quarter than January February just because of the incidence of the disease. And that happened normally.
We tend to call it the shoulder of the season in in the company. And the shoulder was actually relatively similar to last year's shoulder, although the head was significantly less. So So actually as the sort of year on year of the market effect balanced out in March, so actually the share of Mucinex improved which I think Rakesh has also alluded to. On the Indivior point, Celine, You're right. In that, a number of cases from, the states have the judge have ruled that we should not be we the Barbie Group should not be part of those because it's not relevant to us.
It's an individual matter. But we have had a since the beginning of 2017, provision of $400,000,000 in respect, not just our state actions, which were the ones that were subject to those rulings, but in general, the possibility that we be the subject of some form of action in the U. S. And that is what that provision was in the early part of 20 or the half year 2017. And that is why it's still in our books Seline.
From Bank of America Merrill Lynch.
Two questions for me. The first one is on the health division. Because in the press release this morning, you mentioned that, and I quote you've got more to do, to deliver sustained top of market level financial performance. Now if we put aside the unfavorable seasonal effects of Q1, which are the key areas under your control where you see a need for improvement? I mean, is it innovation, execution, more brand support?
And related to that, you're now 18 months into RB2.0. You've got a lot of traction in High Ho, but health continue to be a bit soft. So why is that? Why such a contrast between your 2 divisions? And my second question is on Shaw.
Last year, you were showing us a chart which was indicating the new quarterly sales level offshore, which, if I remember well, was in the 65 to $70,000,000 sterling range. You've done further SKU rationalization in Q1 this year. So what's the new absolute quarterly sales level? And should we expect a continued drag for the next three quarters? And maybe if I can squeeze in a last very short question, why is Rob the group not on the call this morning?
This is like a business review and how are you? I hope you're good. So let me just say to you that Rob is not here and Adi is here because of call calendars. And I would have very happily welcomed him. It's just a car in the clash and sadly we could not have him, but hopefully you will see him on the road sometime.
Let me answer a few things at the high level and then I'm sure Adi would like to chip into. First of all, we are not happy with our growth rates on health. Last year, we delivered 3% in health in total. And it's clearly not within the growth algorithms that we have set for this business unit. It's not in the growth algorithm.
3% is not what we expect the health business unit to deliver, which is what we delivered year in aggregate. I do not want to compare ourselves with every other company that is reporting results. Company A reported minus 2 company we reported plus 1 and so on and so forth. So if you look at the last 9, 12 months of reporting of other companies, I don't think we we somehow that is a standard, that is a caliber of our business that we want to set for ourselves. So really when we talk about outperformance actually here, It's our growth model.
There is a growth model, which is guiding us. And the growth model we've already talked about, that is the 3% to 5% growth rate of the health market, and we want to be ahead of that growth rate. Is what our growth algorithm is. I don't believe there is there are companies that are sustainably in that range, but we want to be. So that's the background I want to set.
I don't want you to get involved with the quarter and then say, well, okay, that's really where it is. In the aggregate when we saw last year was +3, And I know I'm not setting targets by a health business unit for this year, but clearly we have ambitions to get to our growth algorithm and we are not there yet. Why are we not there yet? I think you are asking some quite good questions. And I want to have a new voice to explain that to you and maybe, Adi, you should come in and maybe give your point of view.
Yes. So, actually, there are a few differences between our high hole unit, which has which has delivered very steady growth ever since RB2.0 has happened. And you can already see the benefit of that focus comes through in the numbers. And in the health business unit, Also, I think you can see the benefit of focus come through, but at a slower rate. And let me try and explain why I feel that is.
So first of all, we should just remember that RP has been playing for many, many years in the hygiene home categories. However, it is a relatively new player in health and health in an area where we are building up a huge amount of competencies, a huge amount of capabilities. The transformation in RB2.0 was much bigger in health than in HIFO because RB2.0 first for health, meant, and integration of Mead Johnson which was a very significant integration and a transformation. And in the case of HIFO, it was a transformation alone. This meant that we actually ended up with lots of new people in the countries in the markets who were looking at a wider business.
So there were people from the Mead Johnson side who now had to manage the RB portfolio, which they had not done before. People from the RB side who had to manage the Mead Johnson portfolio. And while I'm very convinced that we've done the right thing and we've put the right people, it does take time for people to
build
management team in health is relatively short. And I can see as I go through the markets that the teams are shaping up very nicely and actually this experience is building. The second point I would make is just in terms of the speed and impact of roll out of incremental innovation. In the case of IGENE and Home typically is quite easy to roll out innovation geographically very quickly. In the case of health, it is a bit less so because there are many more regulatory complexities.
And this takes time. Therefore, if you have great innovations, it takes a bit more time in health to roll them out globally, which is a key strength of RB, which we've done before. The other point I would just make here is that our health business unit actually has, sorry. So our health business unit also has additional
sorry, just give me a second.
I think you I think the points are quite clear, Adi. I would say that at this time, how do I see the health business unit? Let's come back to that year was 3%. It was at the lower end of our growth algorithm. We want to be at the higher end of our growth algorithm.
What Adi is trying to say is it's not going to happen in the short term. Why would it not happen? We have a major transformation and a major integration on our hands. But we're working extraordinarily hard to get the basics right. We've also been and that is unfortunate, but it is the reality.
We've also been hit. Of a lot of our stuff, last year, we produced plus I don't think any other company I personally remember has driven plus 5% growth in OTC. But we also got hit by several issues, which sadly take back some of the growth. So I would say that avoidance of these issues is a positive tailwind chain in our operation is very much a part of our investment strategy. Okay.
Is all the questions? Yes. Yes.
Okay. Sorry, there was a Shoal question. Yes.
Shoal can Yes, I think, listen, you
want to take that? I think
so on Shaul Rakesh at last year signaled that there is a big change that we're making on Schall, where we were moving away from this instant gratification device focus to focus much more on the therapeutic areas of Fort Health. This is actually a complex and time consuming task involves a number of things. It involves resetting the shelves, changing product registrations, complex supply chain management whole host of other activities. And given the complexity and the number of changes needed, this is always going to be a long run out change. This is not a short term change.
I'm pleased to say that we have now reduced our device contribution on short to 15% and we are well on our way to a much more healthy, unattended and sustainable business model. It will still take us some time to complete this transformation, but I look forward to the day where we can actually get back to the point where Shaw has been reset as a healthy brand, which is focused much more on the therapeutic side of the business and it's back to growth.
Thanks, Yale. Right now we've got Chris Pitcher from Redburn. Go ahead, Chris.
Thank you very much. Mentioned a couple of times on the call how you're working harder in China to win back infant child nutrition customers. Can you give us a bit more detail on what you're doing above and beyond your original plans prior to the supply constraints? What does this mean in terms of cost implications certainly in the first half and whether these will likely carry through to the full year?
Okay. So there are a number of things that we continue to do to drive our business forward. So the first And most important point is that we continue to work very hard to drive our business for our super high premium product infinitas. Which is like I told you before, back in stock. And we are, through the period, like I said before, of quarter 4 last year, where we were out of stock.
We had already continued to keep up our connection with consumers to make sure that when the product came in, we were actually able to continue the momentum and actually start rebuilding very quickly. So from that perspective, we continue to invest even through the last quarter of last year. And I would not say, therefore, there is much significant incremental investment in the P and L because of that reason. The second thing is really about our continued focus on e Commerce. In the last meeting in February, I told you that our e commerce contribution in China had already gone from 15% 25% during the time that we have acquired Mid Johnson.
And I can tell you that that e commerce percentage has moved a bit further now, and we remain focused on driving our e commerce capabilities. And the 3rd big thing that we are doing is really driving our business into the lower tier cities. And that is absolutely critical and crucial because that where a lot of growth is, specifically in the MBS channel. So we have a whole host of partnerships with mom and baby stores, and also with the key technology platforms like Alibaba and Jingdong to apply our abilities in e commerce to actually drive our offline mom and baby store businesses in these cities. And I'm pleased to tell you that we have expanded to more than 2 T cities through these initiatives, but the way we structured these initiatives is that it is relatively virtuous in terms of investment because we are using a O2O model sorry, a B2B model, which is driven by technology rather than through the old way of doing it, which involved, putting huge amounts of investment in feet on the street.
But it's also very transformational. It's just, Chris, for you to realize that when we are doing these innovative models to reach lower end cities. I mean, I remember, Addie was in China a long time ago not a long time ago, I mean, not a long time ago, but But I remember we took for the going to 100 Cities would probably take you 18 months to reach or 2 years to reach. Here, we are talking about reaching 250 Cities. In less than a year.
So we have really truly transformed our approach to how we can go and distribute widely, at lower costs, and with greater speeds, but there is still a lot
of work to do. I mean, there's a lot of work to be done here.
Okay. Thanks, Chris. Now on the line, we've got Alaneskin from Credit Suisse.
Yes, most of my questions are actually being answered, but three three quick ones. 1, I mean, you seem to be implying that we shouldn't assume that Q2 gets back to the 3 to 4 range for the year. And I just want to better understand some of the moving parts there. And specifically in other health, dental was growing, think Turex was growing. So VMS was part of the flat overall picture, but that seems to have been partly to do with the flu season.
So should we assume that other health recovers in Q2? And then 2, 2, just quick clarification questions. 1, did I understand correctly that Infinitas is not being produced in Australia? I wasn't sure if if that plant had been registered to produce Infinitas? And then just going back to the Indivior situation, just a point of clarification, as I understand, you can receive an indemnification from civil actions, but can you be identified from criminal actions?
Thank you.
Yes. Yes. So Alan, on your first one, this is unsurprisingly, first thing I'm going to say, we're not going to go into quarter by quarter guidance. The I think I would repeat what Rakesh said a few minutes ago in response to an earlier question, which is back from last February when we could see the, full year numbers and we could see the poor season, we very much signaled that this was going to be a year where we saw stronger growth in the second half, partly low season that we were feeling in February, but partly also because we're lapping, we get into the second half, the infant nutrition supply difficulties we had. So I think that's really what we'll say.
We repeat that rather than going into quarter by quarter guidance, Alan. On your Infinity S ex Australia, you're right, or I think the creation of your question was really doesn't come from the Australia plant. The Australian plant is not approved for mainland China supply. We are supplying from there to Hong Kong in order to take the price off the supply, back in Europe before China. And on your last point about the nature of the indemnity that exists between RB Group and Indivior.
And just to remind on this indemnity came into existence at the time of the merger in 2014. And in essence, the indemnity says that for liabilities that arise from the prescription pharmaceutical business, those are true to Indivior and for liabilities that arise in their consumer business, those are
true to are reduced.
So therefore, he liability betterizes within indigo for the protection pharmaceutical business. We have no liability whatsoever to reimburse that. And that conversely, if anybody came to us in respect to a description of liabilities in certain circumstances, Indivior would have an obligation to reimburse you also make the innovations
of your question. That Indore is not it's silly
on this, not all forms of liability or asset reimbursement. There are uncertainties. And it's because of that that we made, that the one room is proving back in 2017 and maintain it. Okay. Thanks, Alan.
But more on the lines of also
instances, hopefully you're back in the U. S?
I am indeed, and hopefully you can hear that, for that earlier. So for me, firstly, digging into that minus 9% in OTT, are you able to give any indication as to how much Nucinex was down by given that you sound happy with Gavin's gone on your offense. So my sort of back of the envelope suggests a 20% or so, but I'm not sure if you can give additional color. And then more widely, looking both at your supply chain issues in the formula in China, but
it will be one of the
private computer viruses a few years ago. RV just seems uniquely vulnerable to these sorts of issues. Other companies have accidents that it doesn't take them the sort of 6, 9, 12 month recover from it, the W. But if there's a wider point that you just need more redundancy in your business, so you've got resilience to cope sort of softened. Is that why we're seeing CapEx move up?
Does it need to move up further? Thanks very much.
Yes. On your first question, and listen, we're not obviously not going to go in brand by brand. The, but let's suffice it to say that your macro, your macro numbers are going to be milestone from accurate. I mean, you can see that minus 9. I'm sure you've got a rule of thumb about how much is seasonal as opposed to non seasonal and Mucinex within that.
So yes, there were significant reductions. And as we said before, roughly half to do with consumption. And you saw big year on year reductions in consumption and the bulk of the other half was due to the a yield effect on the inventory side, but we're not firming
on any numbers, you're sort of at legal and not include the long version here. In terms of the sort of resilience of
the business and so on, I mean, you have absolutely heard us over the last year. Taking lessons from
some of the items
that you highlighted. We do take lessons from the
side of it. The real lessons from
the side of the wasn't one at Craggler's side of the most of
the tier that was so strong. Were so much lesser extent, type of things, and they were indeed the fact that it's for someone to get the supply chain back in line. And what items are from that was that we need to increase? The value in some way. And you've seen our numbers, but you
know, and a little bit
in our margins, we talked about for
the year before. The one we have invested in that correction, if you like before that, that adjustment is happening.
Really a learning organization
when things are happening as we have
and we'll continue to inform all the IFC impact. I think Ian, I would say that we had already on the decision to diversify our selection and to invest much more again in terms of a much more disease supply chain structure. But obviously, have a lot of your product in some of your key markets being shipped from a concentrated vaccine is never good. The fact of that is all that we do very well in that acquisition cannot be fulfilled, all by itself. And you know, we we would not see this completely are, are just being applied concentration availability for China.
As Adrian rightly said, these are big lessons. We are learning, we are investing absolutely nothing for resilience, as let's call it, you know, discount it haven't. We find much more resilient with coming out of them and much faster. To answer the last question. We've got now is, on the system, there's a shoutman.
So the message to Les, I
assume it's you, Chad. So please go ahead. Yes, thanks Richard. Yes, so I think I've got 3 questions. The first one is on the consumer health care category growth rates in the release?
And do you think it's on your lower end of the 3 to 5 range on seasonality and the slowdown in China baby? Could you try and sort of tease those 2 out? I mean, essentially given the China birth slowdown would be more difficult now generally for healthcare, happy growth to get back to the results. That's number 1. Number 2, on China Baby.
I mean, you're doing lots of things to drive credit there, but a question really on the on headwinds. I mean, is it fair to say that the real headwind from the 11% decline in number of baby born the real headwind is yet to come given that China is more of a late stage formula market now. So basically what are the risks that things get worse there before they get better? And number 3, I know this is a sales release, but I guess can't visit the temptation to answer the margin question. You've rebutted the margin we sent them quite strongly in last.
If you don't manage to get to algorithm you set yourself. How long do you think you'll give yourself before you feel it's appropriate to pay more to help fuel that that better top line?
So let me just say to you, Chad, that the consumable value, I've got a few percent is still very much active. And even if it's at the low end at incurring infrastructure, it's quite seasonal. And I think you should call it late. So I don't think
there is any, I will not point to any changes. And this is including the impact of NIB where we've said that Although there are some birth rate changes. Obviously, as is what it declines, there is plenty of premiumization opportunity. And I
think my macro position is that we should not also be worked out about the giant growth market. Given that there's some road there because we still have a huge runway for our end. I mean, we are still a modest share in China. And when I think about the opportunities in China, they are just mind boggling really, really good.
So I would not like to feel that they're developing in a world of constraints we're living
in a world of scary. This is a world of funds. And I think the growth in China maybe is massive, and we should be about that and not that Nielsen data on personally like this is how I want to internally also talk about it. So I think this is Hardy, you know, profit margin, I think, 1st of all, I want
you to know that we have been investing behind, like I said, in terms of CapEx, in terms of investments for more resilience, our brands over the last 18 months, we have if we wanted to move our margin needle up materially, we would have found a different approach to RB2.0. We might have found a different approach to Mead Johnson. And we did not. So I think this is a business which is working hard to create the right operating model, the right organization, the right investment profiles
for the company for long term growth. This is not so I think we
are making investments where we need to I already talked to you that even in a time when we were growth constrained from supply challenges in China, we continue to invest to make sure that we did not lose shelf space. We did not lose our in store, what we call nutrition consultants and the investment that goes behind brands just so that when we went back, we didn't have all the catch up, which would have been even worse if
we hadn't. So I don't think we remain as
we reiterated our our margin targets for the year, which
is to maintain our margins for 2019, and there is nothing more to add here. Okay. Thanks very much, Charles.
That's all the questions we have. So thank
you very much and we'll close call now.