Normally, I would extend a warm welcome to you but I have to say it's a hot welcome, isn't it? Because I'm an admin team in UK like this. Let's not complain because you always seem to be complaining about weather and even when it's great, we still want to complain about it. Okay. Let's talk about, more than the weather.
With the usual disclaimers, let me get into, the half one results and give you a lot of detail around how we think about what is happening and how we think about what is, in front of us, but I wanna start again, of course, as, I always do with 3 key messages. The first one is that, the second quarter has been a quarter of progress but I have to say there is much more to do as you will see as we expand that further. The second point I wanted to make was that Mead Johnson is not only on track, I think it is a bit ahead of our expectation, certainly as you've seen in terms of top line growth rates, there is, more momentum in it. But equally, there is, again, more work here too, and I will hopefully talk to you about that too. And the 3rd bit, of course, is that as we look forward, from RB2 point to point of view, we really firmly as we did before 6 months ago when we announced it first, that this is a platform for growth and value creation, And again, we were gonna tell you about what what the work we have done so far is and what more there needs to be.
So let's talk about each of these, the first thing is on trading, Q2, as you saw, was was high single digit growth rates on IFCN, with 9% growth. The base health business was more muted, was 3% growth, and actually did have a benefit of cyber in this. So actually, these numbers do get a bit more flattered by Cyber Impact with Plus 3 and HyHo also with the Cyber Impact, but plus 4, which is, I think, still a good result for HyHo. In half one, just to carry forward of this, 4% in pro form a growth as if we owned Mead Johnson for the same period in the 1st 6 months week, we didn't. Actually, we owned it actually only for 15 days, with base health being 2% and 4% in High Ho, which is the same, in Q1.
And as a combination of all this and basically coming from the the higher growth on Mead Johnson delivered already in the first 6 months of the year, we are raising our full year targets from 13 to 14 to 14 to 15, and I'm going to expand that to you also later in the afternoon. Let's go into, the model that I've always shown you. I think each of my presentations I've done, I've actually shown you this model. And I want to call it virtuous, even though there are some pockets which require more explanation of why it looks less than perfect, So the first thing is gross margin. I always said our our earnings model starts with gross margin.
It continues to do so, but gross margin was negative 50 basis points. A lot of that is driven by our gross margin and and pricing in in the HIFO business, where we have invested more in competitiveness and, and, that has impacted gross margin. On the health side, the margins progression is more stable. So there is a lot of input cost pressure on both business units, but clearly a lot of pricing pressure in HIFO, although on the health side, we had pricing. In the in the quarter and in the half.
In terms of, fixed cost, you see negative forty basis points, there is, we, as we said, you know, there are increased costs from RB2.0, but we wanted to offset those costs from the cost of synergies. In the first half, the synergies are ahead well ahead of our in going assumptions, in terms of run rates, but clearly, there is also lower cost of RB2.0 in the first half, which might even out a bit more in the second half. So there is more fixed cost benefit in the first half, which I think Adrian will also explain to you. In terms of BII, number, we we carefully, target and also incentivize people or dissented incentivize people on, we are negative 60 basis points, In absolute, actually, BI remained flat. We had a material synergy benefit again from Mead Johnson, actually in so therefore, all the negative come comes from the Mead Johnson synergy in health.
In actually the HIFO business unit, we invested more in BI in the first half. There is also, I would say, phasing here as a lot of new people, particularly in the mid- in the health side coming to, you know, into business. There's also a bit of phasing between half 1 half 2, but I think we are broadly happy with the investment that we are making behind our brands and in fact, some increases that we see in some some parts of the business. And as a result of this, we have 3% growth on a like for like basis and 4% pro form a growth in the half. That's how, the the, the numbers work.
Clearly, the operating margin is a mathematical combination of gross margin decline of 50 basis points and improvements of 100 basis points on the other two lines. In terms of Mead Johnson, I know that a lot of people have actually talked about Mead Johnson ever since we bought it, we have been, we have owned Mead Johnson for just over a year, just over a year. And I was just doing the maths, actually, as we were walking in in terms of what has been the growth of Mead Johnson since the time we bought it, and it's broadly, 4% or so, broadly 4%. And I thought when we when we talked about Mead Johnson, when we got it, we said the category growth trends, we expect them to be in the 3% to 5% range, and you should expect us And clearly, 12 months ago, this business was in decline, right? So we said that you should see a steady progression towards these 3% to 5% growth targets hopefully at the end of it, we should be at the top end of the, of of the market.
And I think as I see the last 12 months, I think definitely the last 12 months have been a lot of progress. The last quarter has been is very good, high single digit, 9%. I'm going to explain that to but 7% clearly is also comping from a softer base of first half last year. That's 7% synergies, as I already pointed out, we raised the synergy target from $250,000,000 to $300,000,000 in the 1st 6 months we declared $75,000,000 which means since the time we got this, we have delivered a $100,000,000, one third of the target done. I think we have done well here.
It's firmly on track. I have, full confidence that we will get to our our increased target of $300,000,000 as for the time being scheduled, although we are ahead from a run rate point of view from, in the 1st 6 months, of the year. Operating margin expansion in half 1, you can do the math. We haven't quite given individual subcategory op margin, you know, progression, but you can do the maths here, higher top line growth rate synergies achieved a bit ahead of track, I think, on op margin, and I'm going to explain to you very shortly because there has been some confusion around op margins on Mead Johnson. I'm gonna explain to you actually in as much detail as I would have done inside the company.
So at least you should feel that I'm telling you how I would have seen this inside the company. So you might remember when we bought Mead Johnson that was in around 15th June last year, and we declared we declared the 1st half which were largely driven by the Mead Johnson Organization. And when we declared the results, the margins at the end of June last year were about 500 basis points lower than what they were around December 2016, right? Everyone on the same page on this. So we when we got Mead Johnson, the margins had declined by 500 basis points in the 6 month period of December 6-seventy 16 to June 17.
Now just for extreme clarity here, part of this decline was assumed in our financial modeling. And I'm going to give you now how much that was. That was about a $100,000,000. So delta between what we thought we will inherit in June 17 to what we actually inherited was about a $100,000,000 difference. I've tried to quantify it just to make sure we understand internally what the scale of the challenge is.
And what the scale of what we need to build back and bridge to is. It's about a $100,000,000. That's the delta. Where are we against that $100,000,000? And I did say, and we said every time that you should expect RB to make up the shortfall that we inherited.
We will make up the shortfall. We will inherit. It might not happen on day 1 because we lost it on day 1. It will happen during the course of the financial model. So where are we against that?
It has 2 components clearly, and we said we will use all the levers of the earnings model to drive it. The first component is increased synergies, $50,000,000 of declared increased synergies, closes half the gap. The other half of the gap, I can assure you, there are so many earning model levers that we have, improving gross margin, improving the mix, improving more efficient ways of running that business. And I have to say a higher top line growth rate. Higher top line growth rate, the easiest of them all, actually, or more difficult or the easiest to explain.
So if I I'm not saying that you should make any predictions into the future versus what has happened, but clearly we, as you can see from the 1st 7 months, we feel very comfortable that we will make up that $100,000,000 gap, from all the levers that are available to us and are being fully used to get there. So that's how I feel about where we are with B. Johnson, still only 12 months on a bit more bit ahead of where we thought we would be, but also every day I can see some things that we are not doing enough. And not right enough, and and some, which I think is is very good. So that's where we are on Mead Johnson.
On RB2.0, it is very important for you to understand and get to the same page as we are on RB2.0. It is our our platform for growth and outperformance and value creation. Inside the company, this has been understood, and actually, people are working in a rhythm and focus that I think is very difficult to understand from the outside. Why do I call it our, platform for growth and, an outperformance? Because it achieves 3 things.
And I'm gonna talk to you about each of these three things, and what I said for each of these three things, the first thing is on hygiene home. I said to you guys, that hygiene home, which is our history, actually. Our history is hygiene home. You know, we were raised, knowing how to drive categories growth on Finish and how to install more dishwashers in people's homes and how to work with wash dishwash manufacturers to make them better and make help sell their machines so that we could actually sell more finish. And the same thing on on Vanish and and brands, beautiful brands like that.
And clearly, Some of that, we have not performed to our potential because we showed to you in February that in the last 6 years or so, this group of brands grew at 1% compounded animal growth. And that was not good enough because we were clearly underperforming the market opportunity here. But how do you actually bring back focus here? When there are other shiny objects in the stable? How do you actually bring back the passion?
How do you bring back the the innovation focus and so on and so Highgiene Home for us, the creation of this business unit is to really understand that these are still beautiful brands right in this country, half the half the home still don't have a dishwasher, and we need to do market creation and market development here. We need to do, find ways, like we are in China, where still less than 2% of people have a dishwasher machine at the home. And we are working in ways through which we are finding different innovative different the products are different, the way they work in smaller dishwashers, different technical deliveries. So I think that requires more focus, more innovation, more investment and more growth. This is a simple formula for hygiene home, and we are unleashing this formula with the creation of RB2.0.
The second aspect of of this was, of course, the big objective of the company, which used to become a leader in consumer health. That's how we have spelt out our ambition very clearly. And we've used Mead Johnson as a catalyst to get there, you know, clearly, Mid Johnson has been a significant catalyst, but the immediate nature of what needs to be done is quite significantly different in health versus hygiene home. In health, people that can take it and run from day 1 in health, we have to actually make sure that two companies 2 businesses coming together, where many, many new people who don't understand the other half very, very well. And I think there's a lot of, I would say, a lot of work to be done here to create that, a global world class company in consumer health.
With Mead Johnson. So that is certainly what our our our our ambition is But the second bit is to drive the outperformance of Mead Johnson. We said that clearly Mead Johnson hasn't had a good performance, history, we need to get it, get it to upper end of the category growth that I just talked about 3 to 5%. And the third thing we said, and I think everyone talks about this more and more about the nature of digital disruption that is taking place in health and how should we be participant in this and how do we actually become a disruptor versus being on the other end of it. And that was clearly the part of health that we want to do.
I'm going to tell you how we're doing about this. But beyond the story of outperformance, that we definitely need to create in RB2.0, both on the hygiene home and the health side. We also said that actually we are going to take other steps in the company to provide us more strategic flexibility. And we talked about how we want to create, you know, separate legal entities and all the work around that. And that is something that is going to take place, not just from day 1, but will take some time.
And I think Adrian today will explain to you the work that is needed there, the amount of work that is being done there, and how that is on progress and and what what more to expect. So now taking each of these in turn, let me just talk about Hygiene Home. So as I said, more focus, more innovation, more investment, more growth, How's that looking? Actually, I'm going to give you 1 or 2 examples and then move on. So in terms of and at least early days, 6 months in.
So I would say more for more innovation. We've taken innovation, which we launched and explained to you last time, you know, on, on air brake. In the short time that we've had, This innovation has now gone to, more markets in 6 months and has tracking now 2 times the plan it was. And I there is always a subjective factor in how you feel you're doing. Apart from the objective factor that you will see on the extreme right hand side, but there are some markers.
There are some kind of how can I say input KPI leading indicators of how we are doing, and I can definitely see that actually the way, some of these innovations are being driven in market execution terms, is so much more granular, so much more, focused than otherwise might have got, in terms of attention when there was a wider portfolio take care of, and maybe a Mead Johnson business to, to also work on? More investment, I already alluded to it. In the 1st 6 months, we invested more in basis points terms in our hygiene home brands versus the same period last year, early phasing also here. And clearly more growth. You are seeing that we have reversed, certainly, the declines that we were seeing in the last 12 months of the year with positive growth momentum.
So I would say I do see a clear signs and evidence that RB2.0 is the right answer here. Now moving to health, and I said to you that there is there is the intent to be a global leader in consumer health. And clearly organic growth is the number one focus when we talk about leadership, the number one focus. But clearly, I have also said that this is a field which remains hugely fragmented, and that is not changing for the next 5, 10, 15 years who knows. But we have materially moved our business from where it was just 6 years ago to where it is.
It's now 6 years ago, we were 1 third health in the new definition of health, and now we are 2 thirds health in the new definition of health. So that is quite a material change. And therefore, it has become like a consumer health company. The second thing we said was on on Mead Johnson, I've already spoken about this, I think, it is difficult to, to, to maybe summarize everything that is happening in Mead Johnson, but let me first and foremost say that the market on Mead Johnson is very buoyant in China. I think you would have probably seen it from other people's commentary around this subject.
It is not unexpected. It is not unexpected. As I've said to you before, we have been tracking this market, this brand, this category, this company for a number of and we did see all these trends that we expected to play out. I'm although I'm a bit surprised by the buoyancy of the growth, I'm not surprised by the turnaround of the growth in this market. Having said that, just to give you an, a, a, you know, take it one more stage down, the number of births after opening of the 1s birth policy in China did go up significantly in 2016.
So they as soon as the shackles were removed, many families who are waiting for, you know, for for maybe having a second child decided to go ahead and do so, and you did see an, a spurt in birth rates in 2016 versus 2015. In 'seventeen, maybe against expectation, the birth rates in China have come down versus 'sixteen. And it begs the question which I do not have an answer to whether there was a one off effect, or there is a temporary change here. But clearly, when you think about the growth of the market, There are several stages of infant nutrition, so I'm just giving you another step down detail. There's stage 1 products, which apply to 0 to 6 months old babies, stage 2 products, which are 6 to 12 months, stage 3, 1 to 3 years, and so on and so forth.
So there is a staging of these. We track growth rates by segments and by stages to see how we should expect growth rates in the 1st stage to play out when the babies move from one stage and to the 2nd stage. It is very clear that this growth in the Chinese market is coming from stage 2, 34. The stage 1 growth rate in the 1st 6 months is now stable. And what you see in the market today in the first in the last, I would say, 6 to 12 months is nothing but the, the lag effect of the number of births that took place in 'sixteen.
I cannot precisely say whether some of these because these are social trends too. This is not just about an economic trend here. Their social trends to look at, and we watch them very carefully. How this is all going to play out in the growth rates of the market, but the market in China has been growing at double digits. I would say mid teens.
And against that market, we have done well. But clearly, there is a market factor in our results. And therefore, I want to make sure that you understand that extrapolation of growth rates, which happen quite significantly because of a large Chinese market, China contributes to 40% of the global infant nutrition market should be should be carefully interrogated as we look forward. And I for 1, clearly, I'm looking at, you know, the market trends. Having said that, there are a number of other operational changes we are making, and we have talked about that in before, you know, in e commerce, e commerce Mead Johnson was under serving the e commerce segment.
And clearly, there was a material opportunity to actually drive e commerce expertise of RB, which we I've talked about in the past. We have, just to give you another dimension of e commerce, if you take the non infant nutrition market out, RB now has more than 50% of its business in China coming from e Commerce, maybe closer to 60. So we have been a tremendous success story on driving commerce channels across the markets. But clearly, Mead Johnson was not there, and from a place where I think less than 1, less than 10% of the business was in e Commerce in China, we've moved that needle materially in the last 6 months. So that I feel good about that.
I feel good about the fact that we are working with innovative solutions here, I would say, like, maybe you would have heard that we announced a partner strategic partnership with JD dotcom to significantly fast track our entry into lower tier cities, in particularly in the mom and baby channel, in China. I'll give you my personal experience. You might remember, I I One stood here, and I said that I'm not happy with the the size and and our performance of our China business. This is like 6 years, 7 years ago. And one day, I hope I will be able to talk much more positively about it, It was not even in our top 25 markets, and clearly I said that it's our top 2 market, not only because of the Mead Johnson acquisition, but because of the tremendous transformation that our base business in China has had over the last 6 years.
Now the point I'm trying to make here is that It took us in the moments of trans transformation about 3 years or so to reach just 100 Cities or not just 100 cities, but it used to take us 3 years building distribution, building finding distributors, really putting our people on the ground, and it is not an easy job. It takes time. And then, of course, creating demand. I mean, you can't just say, well, I'm here, and please buy me. I believe we are going to do this and more in less than 1 year this year.
And this is the kind of speed and scale we can apply given our tremendous success in under understanding the new ways of dealing with China. So I, I think beyond the we aren't tempering you very much on the market, growth, which is, which is dictated quite a lot by what is happening in China. I would say I still think we have done quite a good job in number of areas here, including fast tracking innovation. I'm going to show you one example. So that, I think, is, is, is a in, in balance, progress.
And then the last part is e commerce and digital disruption, the one I talked about in the previous pages, So in our health business, which clearly is very important, e commerce is about 8% of our total revenue already, and that I think is a very, very nice progress over the last. I already gave you some examples of of infant nutrition in China. This is an area where we are deploying far more resources within each of these business units than we had just 12 months ago. And I do believe that this could be a very interesting model in many different ways. One simple way is how do we innovate and how do we actually change innovation, for different type of channels, including on e Commerce, but also on the second part of this chart, which says that we re we opened up our direct to consumer operations in 14 different countries is in the last 6 months.
This is quite significant, and it captures categories and brands like VMS, but it cat captures also sexual well-being and, of course, infant nutrition. I don't have to tell you that when you think about direct to consumer, you know, there are some markets which are going to be bigger than others. This is normal, but we are going to actually try and look at this More than just a revenue source, I think it's a a source to understand consumers better, in my opinion, direct relationships, direct engagement, and innovate better, try and use things and see, learn fast, fail, fast, if possible, but also then once you know, it works use you we can scale it up very well. So I think D2C is not just a growth channel. It's a more strategic channel for us, and that's the reason why we are excited about actually doing more in this area.
So that's helped. Then we come back to RB2.0 and the strategic flexibility. This is something that I'm sure Adrian talks to you, will talk to you in greater detail. Half one is all about getting our organization in shape, putting this organization structure, And I think again, I don't want to, underemphasize, because it, you know, I know that some of my own people will be watching this telecast, and they I think the speed with which we have moved 40 odd thousand people, you know, is gigantic. It is, stagling, and this would not happen if people don't show the agility and, openness and willingness to move.
And we've created this in record time, January 1, we were stopped. We started organization structure operating model And of course, customer management, because each of these two business units are going to manage their customers with with intensity and so on and so forth. So that's really very much on track. In the second half, but not just second half onwards. There's also the same pipeline of work, but then on the infrastructure and legal entity split types.
So this is what actually the work is. We are very much on track. I'm I'm, actually, a lot of work is taken place. Some of the people in this room are working, full time here, actually, on this, which should result in both improved performance on the one side, structurally independent, business units on the other side to give us the value creation that we all look for in the future. Last couple of things that I want to say before I hand over to, Adrian on the financial side and the detail.
You might remember, I talked about the medium term algorithm also in February. And and with putting the pieces in the right buckets, and these this algorithm hasn't really changed. It's just repeating the pieces, moving the pieces in the right buckets. I said health rate, health growth rate, In the new definition of health, which combined IFCN and so on and so forth, including, of course, our health hygiene business, the category growth rate is 3% to 5%, And our ambition is to perform at the upper end plus of this range. That's our ambition.
And when we are not performing, you should absolutely take it that we are not there. There is no more than this. If we if we print numbers, which are, you know, on the right hand side of this you think that's that's fine. And this is where we want to be. When we don't, we are not.
And I think that's the the algorithm here. The algorithm we have for head Hygiene Home, and this is actually just to clarify. This is based on where we are. Because the Hygiene Home business is predominantly a developed market business. So we have to look at the growth rates that we have available to us, and these are not the fastest growing markets in the world at this point in time, even though our categories offer us great opportunities to grow and drive business.
But these, the kind of gr category growth rates in the medium term. You should not expect this again in one quarter to the next, and sometimes not even, in a year, but that's the kind of algorithm we have, 2% to 3%, and you should expect us, certainly coming from where we were, in line to the upper end of this range. I mean, I would be not happy if it is not in that ballpark, but certainly would love to see it you know, towards the upper end of this range. And that's what RB is. This is RB group.
Where are we against this ambition? You know, again, this is a moment in time and not really every everything. In the first half, you saw in in we delivered 4%. This is performer, and therefore, in total, and also 4 actually on Hygiene Home to be 4 in total. It looks a bit boring, but this is where it is.
How do I feel about this? I think on Hygiene Home, I see a lot of good work and a lot of energy, even if the 4% growth in the second quarter is flattered by the absence of 5 cyber in the numbers. How do I see the health number? Again, some good things in health, I would say the OTC growth rates still continue to be good despite the fact that there is still a cyber benefit in those numbers, definitely so. You know, I have seen already spoke about that, but then there are a group of brands with the starting word s, that are still in the first half a drag on the business.
And when I look at all of this and I look at the work that has to be done, you know, in terms of getting everyone to understand the full health portfolios making this organization become more synergistic because there are lots of things that we can take from Mead Johnson and Applied to the RB side and the other way around, there's a lot of work to be done here, and I don't feel that despite the print of 4%, we are where it can can be and should be. So I feel there is more work to be done here, and maybe everywhere. So although the print looks okay, actually, but I can also see it deep inside something that need to be done to make us better in the health side, And if we can keep, you know, in line with our ambition on the Hygieneone side, I think that would be, a good, good result. So that's where we are on, on our medium term algorithm. We feel very good about the medium term growth algorithm.
I think this is this is the ambition we should have. And, you know, although, it's just one half, I think there is a bit of progress on on this side, but more work definitely ahead of us. So let's get Adrian to explain, the numbers, then he will explain the innovation.
That's back to you guys.
Well, you will keep the script. I just make, you know, you remember I just said something about, you know, sexual well-being and went off script
you're going to stick to the script. Thank you very much. Thank you, Rakesh. The, and good morning, ladies and gentlemen. So if we can just turn to the first of the numbers slides, yes, here we go.
So these are the aggregate reported numbers for the first half in our release, together with the headline pro form a 2017 numbers as if we had owned Mead Johnson from the start of last year. The numbers clearly include both the effects of trading performance and the effects of the MGM acquisition, the food disposal, and the RB2.0 organizational changes. In the coming slides, we will seek to distinguish trading performance through focusing on the business unit's in pro form a terms and, of course, clearly reconcile this back to the reported numbers. Deating just firstly with a couple of the more technical items on this slide, the adjusting items that you can see are principally cost of integrating the Mead Johnson acquisition and the associated RB2.0 restructuring costs. These are in line with guidance and we have, as usual, included an analysis in the appendices to this presentation.
The increase in net finance expense to 1,000,000 reflects, of course, the borrowing taken on to finance the acquisition. We cover later the movement in net debt during the half and the composition of the debt at the period end. Also included in the net finance expense is million of tax related expenditure now required to be included in this line. This item is hard to estimate and is likely to be quite volatile, and we manage this cost as part of the tax charge and have included this item within the tax charge in our adjusted numbers. Excluding this tax related item, the cost of the net debt remains in line with our guidance of about 3%.
And we continue to expect a tax rate on adjusted profit of 23% for the full year, the charge in the half year. The discontinued net income rose, which you can see here, in 2018 is a small ForEx adjustment on the Indivior provision. Excluding adjusting items, total adjusted EPS growth was 6%. We look at this 6% earnings growth as comprising in performance terms 4% from pro form a net revenue growth, 2% from pro form a margin growth, a 6% increase from the net combined effects of the Mead Johnson acquisition, the food disposal, and their financing, and a 6% ForEx headwind. The reduction in interest cost as debt was reduced from free cash flow and the dilution from new share issuance broadly offset.
And the tax rate was unchanged. Looking forward, we continue to see a tax rate, including tax finance costs of about 23% and the finance costs at around 3 percent of net debt for the year. If the exchange rates end June were to continue to end 2018, the net translational impact on currency movements will be a 5% headwind for the full year, and a 4% headwind in quarter 3 and rather lower in quarter 4. Turning to the next slide. This slide Yeah, this slide shows the pro form a group revenue, gross margin, and adjusted operating profit numbers.
The pro form a membership performance as if we had owned MGM from the start of 2017, the like for like growth numbers include the MGM numbers from the anniversary of the acquisition date. That's 15th June 2018. In pro form a terms, the group net revenue grew at 5% in quarter 2 and 4% in the half, Like for like growth was 4% 3%, respectively, reflecting the higher infant nutrition growth rates, which we'll see in a moment. Pro form a operating margin increased by 50 basis points. The reported operating margin declined by 30 basis points.
The 80 basis points difference between the movement in the pro form a and the reported margins is the effect of consolidating the lower operating margin Mead Johnson business. We will return to the business unit operating margins and to a closer look at the drivers of margin change in total in a couple of slides' time. Turning to the next slide, he was showing analysis of revenue growth between volume and pricemix. For Q2, you can see that the 5% group pro form a growth comprised 3% volume and 2% price mix. Volumes growth was similar to Q1, pricemix a little stronger.
We will return to the volume pricemix balance within each BU in a moment. We have also set out here in numeric form, the commentary we have given orally on volume and pricemix for the last 4 years for the base business. You will see that until 2017 and indeed until mid-twenty 17, although we don't break it out on this chart, pricemix accounted for 2% to 3% of growth, and volume around the same level until We do not, as you know, see real price increase as any part of our growth model. We see pricemix of around 2% to 3% expressed in constant currency terms, as you see it here, as broadly maintaining real price. We have, over the last few years, operating in countries with CPI increases on average about 1.5% higher than our reporting currency sterling.
From mid-twenty 17, As discussed on many occasions, we have seen a tougher price environment in especially High Ho and in especially developed markets. This is evident in these numbers. Turning now to the next slide, an analysis of growth rates by geography for the group as a whole We will look at a little more detail within each business unit in a moment. You can see, however, from this chart, the strong performances In North America, the main HIGO brands continued to perform well. We did benefit in health from some further stocking by retailers of infant nutrition, as the switch to the new Enfamil NeuroPro product was implemented.
And in DVM, the China performance in infant nutrition and in the RB based health brands was especially strong. Revenue here too benefited from some trade stocking in as we move to excess more outlets for our products, especially in smaller and more inland locations. As you heard Rakesh describing earlier. In Europe, in particular, we had the benefit of lapping the cyber issues of last year, but also the headwinds from Shoal and Russia in health and the continuing price pressure in High Ho. Turning to the next slide and our usual analysis of group margins.
In pro form a terms, as noted earlier, we delivered 50 basis points operating margin improvement in Half 1. This becomes a reported reduction of 30 basis points as the lower margin MGM business is consolidated. Pro form a gross margin declined by 50 basis points, Pro form a BEI spend was lower by 60 basis points. This was, in large part, the result of cost efficiencies within the MGM spend, as we applied an RB approach to sourcing and deployment, and as Rakesh mentioned, also a little bit of phasing within the year. Other pro form a SG and A cost decreased by 40 basis points.
This was mainly the result of Mead Johnson cost synergies offset by RP2.0 costs, which we'll come back to in a second. We expect some increase in SG and A cost in half 2 as the effect of the Indian GST ends, it was a slight margin boost from the Indian GST, as you know, as RB2.0 staffing progresses and as we anniversary a half in which the incentive pay expense was inherently low, that's the second half of twenty seventeen and in the second half of twenty seventeen, was reduced further by truing up accruals that we had made that we provided for in the first half of twenty seventeen. Our expectations for the full year margins have not changed, and we remain happy with the consensus shown on our website. Turning into this next slide here. We have set out here a quantification for half 1 of each of the moving parts of margin, which we described in February as playing out through 2018 as part of our margin guidance.
Firstly, the arithmetical 80 basis points effect of consolidating the lower operating margin MGN business. This will clearly be 0 in half 2, It will, however, slightly counterintuitively be an 80 basis points reduction for the full year due arithmetically to the higher absolute RB margins and bigger difference with the Mead Johnson margins in half 2. Secondly, a 90 basis points gain as the Mead Johnson cost synergies are delivered, in line with expectations, in fact, slightly faster than expectations, and we'll return to these in the next slide. Thirdly, the 40 basis points cost of the RB2.0 changes. And as I've already mentioned, we expect these costs to be slightly higher in half 2.
And fourthly, the trading margin change from the two business units We do expect this to be more negative in half 2 for the reasons mentioned with the previous slide, in particular, GST and the annualizing of an artificially low incentive pay number. We will reduce, we will return to this with each business unit in a second. Turning to the next slide, here we show progress on achieving the Mead Johnson cost synergies. You can see the 1,000,000 that we delivered in 2017 and a further million that we achieved in half 1, We remain firmly on track for the expected $300,000,000 of synergies, and we expect broadly 50% of the total to be in the P and L by the end of this year. Turning to the next slide, are now looking just at the health business.
So we're now looking within the health BU Health Business Unit. Here we have set out the revenue and revenue growth for the 3 main components of the Health business. Infant nutrition, that is Enfamil, Nutramigen, and so on, which accounted for 38% of health revenue in half 1. Over the counter medicines, that is Mucinex, Gaviscon, strepsils, and so on, which accounted for 24% just under a quarter. And other consumer health products, which account for 38%.
This includes hygiene products, in particular, Dettol, wellness products, including Durex, KY and Shoal, VMS products, Move Free Airborne and so on, and some products closer to Personal Care, Clearasylvite E45. We will elaborate grew by 5% pro form a in Q2. And before getting into the ins and outs of cyber and shoulder impacts and so on, do we see the progress of this business unit? Rakesh has given you a sort of CEO level view. Let me give you a slightly more numerical overview before we get into the ins and outs.
Firstly, the market this business or the set of health businesses serves. We have said that we expect the markets that this business unit serves to grow at 3% to 5% in the medium term. We see the market served as growing towards the top end of this level at present. This has increased by the currently very strong growth in infant nutrition in China. Without infant nutrition, we see the consumer health markets we serve as growing in the middle of the range.
Secondly, our performance against that market or those markets is our medium expectation, as Rakesh mentioned, to perform at the top at the top at or above the top end of the market. We have built a synergistic set of consumer health business areas to which we are applying a proven but evolving operating model and the usual RB energy and drive. But we are not yet outperforming. We are losing some share and the underlying rate of growth in this business unit is beneath our medium term expectation and goal. Why we've come through a testing period from the tragic career event the cyber attack, the roller coaster show ride, and we have reconfigured the business with a major acquisition and material disposal and a reorganization to enable enhanced focus on consumer health and on our household brands at a time a material marketplace change.
We frankly showed resilience in the face of external challenges we would not have wished, and the important changes we have made are fundamentally value creating. But this change has detracted from the delivery of day to day performance, It is taking a little time to optimize how to get the best of each parts of our consumer health business we're in while respecting their differences. And this has caused some share loss. We are very confident that this business unit is very well placed strategically and that the operator excellence is on its way back, but over a few quarters. We remain very confident in our medium term algorithm that Rakesh has taken us through again for consumer health, a 3% to 5% growth market, and that we will perform consistently at or above the top end.
Turning then from the broader picture of how this business unit is doing to the ins and outs of the numbers, The 5% pro form a growth in Q2 was clearly assisted by about 2% from the cyber challenges in the base business in the prior year. It was held back to a similar extent by the Scholes trajectory, which we will show you in more detail in a moment. Across the business unit in Q2, The 5% growth comprised 2% volume and 3% pricemix. Priceemix was stronger infant nutrition, but still positive in RB based health. Across the components of the health growth, you can see the continued strong performance in infant nutrition.
As expected growth in China is the main driver here, as Rakesh has mentioned, we're benefiting from the increase in births, following the end of the one child policy. Also, from a further increase in brand quality level being sought by Chinese mothers, and from the very, very rapid channel change, including some stocking of those news channels. Looking forward, we see lots that is encouraging but do not expect that all factors will continue to be as favorable. In particular, as Rakesh again, as mentioned, after initial rise following the end of the one shell policy, berth numbers are falling back, and growth in the Stage 1 Informular market is now flat. Within the next largest component, OTC, growth continued to be of private label supply in the United States, and with the impact of this consistent supply expected through half 2, we expected to see lower OTC growth in the second half.
Within hygiene, growth was held back by the weak Middle East market where Dettol is a large brand for us. Within wellness revenue declined, the result of the well known Shoal challenges. And within VMS, we saw good growth. Cross border sales into China are a principal driver of this growth at present. The brands closer to personal care declined in the quarter.
This decline was principally the result of the same phenomenon that has called Shaw revenue performance to be volatile, but on a much, much, much smaller scale, the successful introduction of TRIMA devices, but finding it challenging to build quickly a sustainable pipeline. This chart also shows the operating margin of the Health Business Unit. You can see that in pro form a terms, it grew by 130 basis points. Pro form a gross margin was broadly flat, a combination of Mead Johnson cost synergies, cost pressures and a balanced pricemix picture The Mead Johnson cost synergies were relatively modest to date. Synergies in cost of sales take longer to realize in the P and L due to the nature of the activity and the inventory cycle.
Pro form a BII reduced largely the result of cost synergy savings partly the result of some delayed phasing as new country management teams have formed and pro form a SG and A reduced the net of cost synergies and RB2.0 savings as we noted earlier for the group as a whole. On this next slide, you can see the geographic progress of the health revenue The 3% growth in North America was boosted by annualizing of cyber and by some further infant nutrition stocking as NeuroPro is introduced. And was reduced by the expected advance of Mucinex in private label as in Mucinex private label share as product availability increases for retailers. Again, as noted, we expect the Mucinex headwind to remain strong for the second half and the neuroflow channel stocking to normalize. The Europe growth was boosted by lapping cyber, but held back materially as expected by lapping shoal.
Russia channel inventory destocking remained a drag too. Our health portfolio in Europe has a high proportion of OTC and very little VMS and infant nutrition. Market growth in the Consumer Health segments we currently serve in Europe is low. Within DFM, within DVM, the stand up market on the upside is, again, as Rakesh has mentioned, China, with strong growth in infant nutrition and in the RB based health business. As noted earlier, we do not expect that the China infant nutrition market growth to maintain its current level, We're very focused on improving access for our products to consumers.
This also means that reported sales growth benefits to some extent, as we mentioned, from the channel stocking. On this next slide, you can see those show run rates. This is an update of a slide we showed last quarter Revenue in Q2 was around 1000000, about 25% lower than the prior year, and devices accounted for around 30% of the total. As signaled previously, from Q3, we are lapping much lower Shoal numbers. Turning then to the next slide and the Hygiene Home business unit.
As for the Health Business Unit, we will start with a few comments on the underlying performance. We see the market served by this business unit as as growing at the bottom end of the 2 percent to 3 percent expected medium term growth. We see an especially tough market in Europe at present, which is our largest geographical market. And we and we see an improvement in our share performance over the last three quarters to a position of slight share gain, an underlying cadence of around 2% therefore. You can see here that reported 4% growth rate in Q2 and the growth rates for the last five quarters.
Reported growth in Q2 did as in the RB based health benefit from lapping last year's cyber issues by about 2%. As Q2 growth rate comprised 5% in volume and a negative 1% pricemix, similar to the position in quarter Folio, 9 of the top 10 brands grew, including the 5 largest brands, Finnish Airwick Lysol, Vanish and Harpic. You'll see that the operating margin in HIFO declined by 80 basis points in the half. Pressure from pricing and input cost headwinds on gross margin were the principal drivers of this. And Marcus has already mentioned there was a slight increase in beI spend in, in, in hygiene home.
More qualitatively, I would reinforce what Rakesh said its early days, but we are pleased to be seeing much evidence of the increased attention and focus on these brands that we expected to see following flowing from the RB2.0 changes. There is now a very talented organization with only this portfolio to work on. On the next slide, we have set out a geographical summary of the revenue in this business unit. You can see that 30% is in North America, 45% is in Europe and 25% in Developing Markets. You'll see that, in particular, that in Europe, despite the benefits of lapping cyber, revenue was flat in the quarter, again, principally the consequence of a challenging competitive environment, especially on price.
Growth in North America was encouraging, as was growth in DVM, although this is clearly quite a small proportion of this business. Turning to the next slide and the balance sheet. We show here the usual slide on net working capital. We continue to run the business with negative working capital slightly better than our 9% or negative 9% target. And despite pressures on receivables in developed markets from retailers and on inventory from the slightly more inventory intensive infant nutrition operating model, Turning to next slide on free cash flow.
Free cash flow remains strong. Free cash conversion fell slightly by 100% in the half, principally due to the timing of certain tax payments and, of course, the exceptional spend on the integration. As signaled capital expenditure is slightly higher, in line with the 3% of revenue guidance given. In half 1, this okay, my screen went yours is still there. The capital expenditure is slightly higher, in line with the 3 percent of revenue guidance given.
In half 1, this included significant spend on our new million R and D center in Hull, which is nearing completion. Net debt was broadly flat through half 1. The near $1,000,000,000 of free cash flow generation was offset by about $700,000,000 for the final 2017 dividend, and nearly $300,000,000 of adverse currency movements. We are seeing an adverse currency movement largely because most of the group's gross debt is denominated dollars, and the stronger period end value of the dollar against sterling. We have set out an analysis of the movement in net debt in the appendices.
Okay. Then turning from precise numbers to the second part brief part of what Rakesh signaled that I would talk about, which is a little more granularity on the mechanics of RB2.00. So on this slide and the next couple of slides, we have a little more information on the progress with the mechanics of RB2.0. This slide is a copy of one we showed to you in February, except for the title, obviously, It shows the 3 stages of implementation of RB2.00. Stage 1, the organization structure and appointment of people was done on the 1st January.
Stage 2, communication with customers and the alignment of sales forces was substantially complete at the end of half 1, and stage 3, the infrastructure is making good progress and on track for completion in mid-twenty 20. This next slide focuses just briefly on stage 1. We implemented an organization to bring the 2 businesses units to life, at country level and outside country on the 1st January. Within each country we had on the within each country we had on the 31st December, either one unit dealing with the RB based business or 2 units, one dealing with the RB based range and one with the Mead Johnson business. On the 1st January, we had 2 units in all but the very smallest markets, each with full management teams, general managers, marketing sales, finance heads and their teams, each with their own budgets and priorities for the year.
We also had outside country teams to organize for each business unit in supply, global marketing, regulatory, R and D, and so on. A huge amount of change. Illustratively around 400 people changed not just roles, but also countries and or promoted into our senior management, Carla. This went well. Such change, frankly, is an unusual strength for this company RB.
But as we've said before, it takes time for so many people to settle into new roles, and figure out exactly how best to work together. This featured in our thinking on guidance for the year. We expected a settling in period, and this is what we have seen and are seeing. We are firmly on track. This next slide seeks to give a flavor of the Stage 2 changes.
The channels and customer with its customers, have therefore been very country specific. We have given here just the merest taste of just two markets. In India, we serve a large very large number of small distributors for whom RB products are often a very large part of their business. We have worked with them enable them to adjust their systems and their teams to our new model, and we have worked to align our sales teams and our systems accordingly. In the UK, a large alignment of approach and processes with each one individually, and again, the corresponding changes in our sales teams and systems.
As you can see, an enormous amount of change, that is done or all but done in the first half of the year. So then let's say this next slide illustrates at a high level the shape of the stage 3 infrastructure task. Together with the following slide, we hope it answers a question we get from some investors, on why this stage 3 will take materially longer than stages 12. Often along the lines of your IB, why don't you just get on with it? We had, following the acquisition of MGM, essentially 2 infrastructure ecosystems, MJN and RB, The MGM infrastructure had been inherited from Bristol Myers Squibb in 2009 and shaped into a very cohesive and tailored package for that business model in the subsequent 8 years.
Our RB infrastructure had grown over 18 years since the R and B merger, with a number of acquisitions fully integrated along the way. Philosophy had been one of complete integration of brands outside food and the Rx business in order to minimize unnecessary costs. There was very little distinction in the infrastructure, except in some very specialist areas within the old RB business between health and household. Country Organization's function systems were completely integrated. The task under RP2.0 is simply put to split the infrastructure, the very integrated infrastructure of the base RB, providing High Ho with an infrastructure optimized its consumers and customers, and providing the health business unit comprising a combined infant nutrition and base RB with an infrastructure optimized for its consumers and customers.
Turning to the next and final slide and seeking to give you a sense of the elements of infrastructure that we are working on, We have set out here the 7 work streams within our program. As you can see, they range from legal entity restructuring through ERP systems, shared service arrangements, detailed operating models, including the activities that happen in different parts of the world and the trading arrangements between them, financial reporting systems, systems that sit on top of the ERP layer and a specific project we already had underway to enhance handling of the product from R and D to product to production specification. This is a major undertaking involving a large number of people that deliverable is a structurally independent and optimized infrastructures for each business unit, We have a detailed plan leading to completion in mid-twenty 20. We have looked hard at the optimum speed and breadth of this plan, examining many options Faster would lead to materially higher cost, materially higher risk of disruption and materially greater distraction to the operations of the business. We're very comfortable with this plan and we are on track with this plan.
And with that, I'll hand back to the boss.
Right.
Before I get back to targets, let me just quickly talk about innovations. And I have a lot to talk about, but my people are telling me, please, speed up on health, Nutramigen, I think we already referred to Nutramigen, and Nutramigen is a specialist product for children who suffer from cow milk protein allergy. And it's a brand, which is really fared well. It's a specialist brand serves through, actually a health care professional channel, as well. Now what's new and exciting here?
There are 2 things. First, We are rolling this brand into China for the first time. So this this brand, we are in, you know, the innovation gets into China. The second is, and this is very important to remember in health care, clinical trials and new claims matter. This is what how you grow consumer health brands.
So here, we are actually relaunching this brand in 30 plus countries, with 2 new very important claims. The first one is, greater than 80% of babies reduced their cow milk protein allergy in 12 months versus the normal 3 to 5 years it normally takes. And the second one is people who are served with new Nutramigen LGG, are less likely to develop other allergies later in life, such as asthma, eczema, and allergic rhino conjunctivitis. So it's These are really, very important claims. And 30 markets where this brand already exists, we are going to doctors and medical professionals with very significantly differentiated teams, very exciting.
And in China, we launched this for the first time. Moving on to something, which has grabbed the headlines already, actually, Durex, we are launching, Durexair, a premium range in China, as we all know, across markets and categories, premium segments are doing well, This is our most premium range. It is our thinnest range, and we've launched a new, variant, which you can't probably read in in it's called warming, and the idea is to actually provide a warming sensation to maximize the heat of the moment. I won't I will stick to the script and not see anymore. Also on this one, on K Y, a brand we, bought a few years ago, and actually one way we've innovated quite strongly ever since we acquired it, Now this one is a duration, a gel for men.
I don't think it explains, you know, I does every explanation, actually. So it's a desensitizing gel. That we have, launched very 1st launch here again. And it's, the idea is, of course, to enhance the experience and temporally prolong the time, so that the intimacy is enjoyed for longer against taking very much to the script and know more. Moving to Shoal, and I have actually, I could talk about Shoal for quite some time.
And here, actually, what we are doing is quite simple. This is the aid range, the first aid range, if you want. You have a problem. You need it to be solved. The main thing about Food Care is half the people don't treat that condition.
Whether it's hard skin or Verucca or or, Dallas or whatever. And therefore, education and telling people what exactly the product is and what it does, and explaining that as simply as possible is very important. The second thing is to tell them what it does for you. So the first thing you'll see from the range is actually, we've launched the range, the relaunch of the range, is very clear proposition to tell people what exactly this product is for, and how it works, and how it makes you better. But the second thing is, obviously, the claims here, which require quite a lot of work and clinical testing, have been enhanced to make sure that the 1st stage range which is the bedrock of Shoal actually gets, the due due, advantage.
So I think we're very excited about bringing this range into, you know, next stage. Actually, across all the key vectors of Scholl ranging from 8, which I just showed you, to hard skinned hosiery and in Seoul. We have innovation going into the market, and it's not the product of the last 6 months, but the last 12, 18 months, So you'll see the hard skin, product is less than £5. It's not £50 anymore. It's a more manual, so you have to work a bit harder.
But you get quite a lot of the benefit, on hard skin. Similarly, on Tights, we have launched a, a 20 Dend product for those of you who probably so really the advantage of compression, but for everyday use, not for, for either winter or some for everyday use, available everywhere too, actually both online as well as on normal channels and also a range of insoles. Let me move forward to Mucinex We all know that Mucinex private label is going to be a factor as it has been in Q2 will be a factor in the second half too, but really we should not lose our focus on what makes, you know, us successful in consumer health, which is innovation. And this is why, again, we have an innovation from Mucinex going across the range. And here, I think the important thing really realizes, Mucinex has always been a, a brand which offers us a relief or a symptom.
So if you have a sinus, we have a sinus max product. You have a, a congestion. We have a cuff congestion product and so on, so forth. But we also know there are some people who prefer a 1 and done solution. You just want all in one kind of thing.
I want one product, which does all these things. So this all in one proposition actually resonates quite well for those people who want everything from so when you have a sore throat, a headache, a congestion, a sinus, So this is the 1st line of Mucinex products, which actually tackles an all in one, all in one and done proposition, and it, obviously, as you can see, available in, in, in tablets, in liquid form, and also in the day and night solution. So this is going into the market in the second half of the year in the US. I have a number of innovations on, on VMS to talk about. But I will talk about really only one, which is, m, shift, move free, for 2 reasons.
First is going into the US and China at the same time, Actually, I must say that this is the first time I've seen that in VMS, we are doing actually innovation from China to US. All the innovations we've done so far are actually moving best ways This is one very interesting example where the innovation has actually happened. The innovation rates that we are now producing on, on VMS is about 3 X, as we had 3 to 4 years ago. And that's thanks to China. So what's good about Ultra-two in 1, where it's launching, you know, in both UF and China, in China through online channels only, it contains a patented combination of something called calcium, Fructible rate, and improves joint comfort in as less than as 7 days rather than the normal time it takes, you know, so it's it's It's a materially better product, and I think, we have, good hopes on on this.
I have also examples on Move Free but, on the other line of Mufry as well as on Megahertz. And the only one I wanted to point out to this is the first example where we've launched an Amazon exclusive. So I did say that part part of RB2.0, you should see some innovations that are more channel specific. Something maybe only for discount channel, addressing different price points and different consumer propositions, and something also for online only this is the first one I wanted to call out and talk more about this, but we'll you will see maybe not call out every day here, but in RB2.2 examples, where we will show innovation or new innovations that actually address different channel, and therefore, consumer propositions. On hygiene home, the reason I want to talk about Harpic and actually this is that although it looks like a small thing, actually, which it is, by the way, it's small, This is a single serve haptic, I think, but Indians, I think, will get 2, 2 serves out of this, in my opinion, but it's supposed to be a single serve product.
It seems like easy to develop because it's like a fashe. It's not. It contains, an acid. So therefore, the technology involved in developing a the serve is not just like a sachet in a shampoo, a shampoo in a sachet. It's more than that, but we know that there's something material happening in India.
And that is what is called clean India. Those of you who are connected to this, what what I'm just talking about, Swatchbharat, it's one of the biggest programs of the government. And RB through Detol and Harpic has been the number one partner in this program, actually, and we are very proud of the work we are doing to make sure that we can bring high and sanitation and education on the idea and other things like this and hand washing. But the reason I want to say this is in the last 4 years in this program, 75,000,000 toilets have been built in India. Think about this number, 75,000,000 toilets.
Have been built in India in the last 4 years, including 3, a 30 by my mother, ninety years old. And I think it's not laughing here because she's ninety, and she went and went around her villages and personally supervised, I'm I'm proud of her. And and personally surprised her at Citi. But I did give her a call and said, please make sure you do something, which is tell these people to clean them and to use them because the fact is building toilets does not mean people change their habits and use we might find this odd, but then that doesn't auto automatically run. So there is education required, and then there's cleaning required.
Nobody wants to use an unclean toilet. I didn't find one. So how to provide a solution that actually works for 75,000,000 new toilets? That is very important. And this is why I'm very excited about this, actually, because this is a grassroots program, but technologically challenging to, to bring, to people.
At 5 rupees a pop. And I think what we are trying to do here is not just education, but also make those toilets clean so that they can be used. Harpic is a very significant sized brand, growing at very high rates, but it has only a 15% penetration So we have a lot of work to do and a lot of work that can be very, very fruitful to us. Moving on, to finish, the reason I talk about this innovation is that we knew always that in Finnish, cleaning your dishwashers, not dishes only, cleaning or dishwas is an important thing to do. But actually, to clean dishwashers, till now, has meant that you have to unload the dishwasher and use it empty because of one simple reason, the technology of the dishwasher cleaner which is acidic actually neutralizes the technology of the detergent, which is alkaline, and therefore, you cannot use them together.
What does that mean? People get lazy. Don't use them that frequently. And secondly, you need more water and energy, actually, when you use a dishwasher and empty. This has been a technology challenge for quite some time, something that we knew of because we actually, of course, our front runners industry.
This is the first product which actually works in an alkaline environment. So that actually, first of all, it provides a synergistic benefit to cleaner dishes but also has a cleaner dishwashing. So you don't have to use your dishwasher empty. You can actually put with every dishwasher cleaning detergent, you can also choose to put a dishwasher cleaner. So that is very, very interesting here, and that's why I chose to actually point it out.
A number of innovations that have actually been going into Air Wick, as you saw, I've been talking about innovation rates on Air Wick for the last 12 months or so that have gone up and is doing well in the market. I I showed one example. Some more innovations going behind Air Week again. Highly innovative category, but I can see the innovation also an intensity on Evic, improve. On SVP, a brand that we own in Brazil, actually, it's the market leading brand by instance, this is the best product in the market in terms of personal insect repellency because it has 2 interesting things.
It first lasts for 12 hours, so you can actually apply it for 12 hours. And therefore, and of light months and and works for 12 hours of of, mosquito free, skin, because of the of a new ingredient in decadine. And the second reason I say so is, is actually it you can apply it. It's safe for children above 1 years of age. So I think that is quite interesting about, about this innovation, and we are the first, to market on, on, in SVP also.
Okay. Moving on from here, very quickly before we take Q And A is our net revenue guidance for the year. As you know, as I've already said, we are raising the that, that target, which, which is the, the total target from 13 to 14 to 15, which implies actually, if you do the math, if it it implies from 2 to 3 to the upper end of 2 to 3. That's really where we are in terms of top line growth rate. And as we want to make sure that you fully understand, we are keeping our operating margin guidance for the year, despite the elevators that actually the first chart, if think Adrian has shown in my 5 years that he has worked with me, first ever chart of a elevator or what do you call that bar chart?
1st bar chart. As he has shown you, some ups and downs that take place between first and second half that you should not expect any change to what we said, to our 2018, and you should not also expect what we set for our medium term targets, which remain moderate margin expansion in the medium term. So that's where we stand with, with regard to half one. And with this, I think both Adrian and I would like to take your questions.
Thank you. So, firstly, I just want to say that the extra disclosure in statement and the presentation, hugely welcome. It's been a bit of, an unfortunate trend in consumer staples over the last 5 years or so, large Staples company giving less and less disclosure. So, I just want to say really appreciate the actual disclosure given in the statement and the presentation today. So my first question is on price.
Richard, that's why we started the meeting a bit late so that you can digest all the information that we gave you. Sorry. Consistent.
So my first question is on price. There's been quite a bit of chatter about record pushing pricing too far. And this is the reason for maybe, some of the issues that that have been had. The disclosure in the statement suggests, perhaps that's not the case. Actually volumes have been quite steady and price mix, maybe up and down a little bit from time to time, but has been steady as well.
So maybe you can just talk a little bit to that. The record as a volume focused customer innovation business rather than a business that's been trying to push price.
I I listen. You know, I if I was to react to every, statement that comes out, I would really only do that in my life. I genuinely think that the business model of RB hasn't changed. Even in actually a hygiene home business, which has been under a price pressure, which we have called out, not just this time, but also before, There are plenty of volume growth opportunities. And the reason is very simple.
The penetration that we expect to see growing in brands ranging from Finnish to Vanishin harpic that I just showed you. This is nothing but volume. This is volume. This is our prize is really still an opportunity for us to drive volume growth. What is happening, and we should not and cannot ignore it, that I personally believe that the pricing the the commodity environment that had prevailed, not in the last 6 to 12 months, but prior to that, was relatively benign in a very tough market.
And I think there was pricing activity that took place that RB has participated in. Actually, so I the if you ask me, what has happened in the last 12, 18, 24 months, I would say, we've invested in price. I do not have the sense that we actually increase right there, right, have the opposite emotion on, on, and belief of this. And we, by and large, we mean a volume and price driven company. I would not say volume and no price.
There is volume and pricing to match, as Adrian actually pointed out, more than once, to match at least the inflation in the market, because we have to cover up for that, otherwise, we fall behind. It's a combination. Now in the last 12, 24, 36 months, even if you take out the Shoal Curia effect, which is all largely volume driven, actually, people can work the mats out, is volume driven impacts. If you take the look, I think our trends have not really changed. We have not really changed.
Principally, we've been delivering despite terrible growth rates of the last 4, 4, 6 quarters, we have not delivered different mixes, actually. With one caveat, more intensity in pricing in hygiene home in developed markets. How does that play out over the next several quarters? And, I think, at some point in time, personally, personal opinion, caught you should not write in on a model, I personally think this price environment which has actually been funded largely with commodities, you know, has to, at some point in time, mirror the headwinds that we see and, are faced actually in in businesses. So exactly how that plays out, when it plays out, who will link first who knows.
But I think I personally do not buy the proposition that the business model of RB changed from a volume to a price driven company. I and neither do I see it in the numbers, by the way?
That's very clear. Quick one for Adrian, if I may. And the fixed costs, associated with RB2.0, the split seemed to come in a little bit lower than we were expecting. And so maybe you could just talk about the, you know, why that might be in terms of what the dynamics are there. And then one, just back to you Rakesh, sort of over 12 months in now, on Mead, the mum and baby specialist channel obviously a big opportunity, for you.
Can you just talk about what you're doing differently there?
Let me just take that immediately and then. Sure. Sure. So on mom and baby, I think I pointed out to it, we are actually, you know, there is a, obviously, huge focus here, not only in China, but wherever this channel is evolving, particularly in Asia, But in China, particularly, we have actually tried to fast track this because otherwise it take a really long time to actually get to every city. So the focus is actually to reach more cities because we know that there's still an underserved market for Mead Johnson, and we have taken a very different approach with partnerships such as jv.com, but not really limited to that, to fast track our entry.
And I feel very confident that if we can actually realize some of the steps we taken, we should have a reasonably good presence. It will still not be good compared to some of the local Chinese competitors, I have to say, who have much deeper, deeper roots and sometimes a bond from those kinds of markets, but clearly, I think we would have sufficiently moved the needle in the next 12 months, 6 to 12 months. Yeah.
And, Richard, on the RB2.0 cost, you're right. They're coming at the half lower than we expected and we signaled, but our expectations are where they're going to get to remains the same. You will see some increase in that economic.
Hi, Jeremy, Fialko, Redburn. So two questions. The first one is when you talked about doing RB2.0 and the different stages associated with that. You said that you didn't want to go too quickly because of the operational risks that that might entail. Now when would you say, do you think you've passed the moments of peak operational risk with RB2.0 or do you think there are some moments kind of still to come that you need to navigate?
And then the second thing is on basically, I guess, IMF in general, particularly China, what sort of visibility do you have on your kind of sellout trends and the kind of let's say the level of stock that has built in the market kind of how much visibility you've got on that given this very sort of multi layered distribution system that you have particularly within China. So those are my two questions.
Let me take the first one and you take the second one. On China, we have as much visibility as you can think we can have. So visibility of our distributor stocks, we have visibility of channel, But at the end of the day, there is we do see, as we expand our distribution, there is an inevitable consequence that you reach stores for the very first time. There is you reach it through a channel, and there will be a channel pipeline, there. I do not get the sense that the channel pipeline is abnormal in the sense that It is very normal.
As you open a new store, you first give the, the store an inventory to keep and sell. And the same, and it is very normal. There is a one off effect in some of that. But there is a normal trend of how do you actually sell sell in? Take the Mucinex all in 1.
The Mucinex all in 1 will also have a pipeline part and a consumer offtake part for ongoing consumer after. I do not see any abnormal trend in our channel expansion in China, and therefore, I don't have a sense that what we're doing is artificially bubbled up.
So, yeah, generally, on the infrastructure change, what we would, you know, we have done in sort of dialogue through the investors up to now, but also when we were just talking a minute ago was to just give a sense of just there's a lawful lot to be done in this infrastructure change. And then thinking about the timing of it, there's a number of factors we wanted to take into account. One of them is clearly, if you try and do too much when it's of the scale, it's up. The chances of you getting things wrong of having SAP systems that don't work or cut it, increases. So there's a continual risk of that.
But there's also an ongoing risk of distraction. I mean, there is distraction going on now. You can't make these sort of changes without management paying attention to them. And we're trying to manage that to minimize it. And then there's also cost.
I mean, there is, there's a cost of all sorts of types in this changed, there's cost of the programs, there's fiscal costs, there's all sorts of things embedded in it. So as we've studied the program, we've tried to take all those into account. Yes, there are moments as you go through where there's bigger cutovers of systems to another. Is there a point of peak risk between now 2020? I don't think I could identify We've done an awful lot already, an awful lot has happened.
You're actually sitting three rows in front of one of the two guys that runs the program and have an excellent team working at running the program. So no, I don't see any I see continual hard effort and focus in a way that minimizes distraction from getting ourselves back to peak performance, but it is a latent drag until we get fully through it. And, you know, we've got a fantastic team working on it.
Yes, okay. James?
Yes, James. That was changed from RBC. Sorry, it's 3 more Richard, but I'll try and keep it quick. First, Richard's question, I didn't think the answer on pricemix was particularly clear. So just very specifically is Q2 an aberration where you move back to positive pricemix in the business or do you think we're now back to a sustainable, state where price mix will will continue to improve?
Secondly, this might be wrong, so that's more sort of ask asking about the arithmetic, but it looks to me that if you completely exclude Mead Johnson from last year and this year, the old records margins fell by about 40%. Sorry, 40 basis points. If you then take off 60 basis points of bei reduction. It implies that the contribution margin was down somewhere around 100 basis points does that feel about rice? And if so, is that sustainable?
And the final one, that 60 basis point reduction in A and P, can you give us some idea how that splits between the Health And Ohio divisions.
Why? Should I take the second and you take the first step?
It's okay.
I can't. Listen. Let's do a, in public, agreement. Next, results, I present financials. You present an innovation.
No. That's And, answer it's okay. I can take the challenge. Listen, you know, on on pricemix, We don't want to give and cannot give you guidance by a price mix, you know, by quarter and by year. And I don't think we we have a guidance for revenue, and there is a and baked into guidance is how we think about volume and pricemix.
And I don't want to actually delve into whether or not what we see in Q2 should be extrapolated or not. But I do say that price and pricemix has been a component of our of our growth. And I, in our growth algorithm, it's baked into into it. So I think that's what you should see in the macro and and a on a medium term basis, pricemix is a component of our growth algorithm. It's not just volume, and it's not just price mix.
So that's one. On, in terms of your you want to take the second one?
Well, only in general terms, you know, what we've called out quite specifically is High Ho, which is half of the previous business. We said minus 80 basis points in there. We said gross margins, the biggest negative BI is actually up a bit in hygiene home, which is sort of the answer to your last question. There are, in fact, some synergy benefits in hygiene home because they benefit because they take a lesser share of the shared costs. The, so I think that's high, you know, but we're honestly not gonna go breaking down within health all the nuances, I think you can see the performance in the round.
We're pretty happy with it, although lots of caution I hope you're hearing around, you know, don't extrapolate it fully to the second half. We stick with the full year guidance. But honestly not going to go down into every bit.
And, James, on BI, we remain confident that what we have invested behind is absolutely the right level. There are some nuances to this. 1st, we have a material synergy benefit for Mead Johnson. 2nd, on HIFO, as we flagged, we have invested more in basis points to but on health, there is a material, synergy benefit. Let's face it.
We are also, actually, at this point in time, when it comes to BI, We're also in an environment where actually how we used to spend money is rapidly changing. The channels where we were spending money, how the channels make an impact So I am very broadly happy about our BR spending in absolute. It was flat in basis points, 60 basis points, all of that comes from, and more of more than all of that comes from, our health synergy, you know, from Mead Johnson. And then there's some phasing also, but I think in the round, I don't think that's a number that bodies me, about how we are investing behind our brands. Okay.
I think there are many more, hands, but maybe we'll take it on the holidays, okay?