Good morning, and welcome to RB's Q1 trading update.
I hope you've all got
the brief presentation we'll be talking through this morning. It's on the website and has been emailed to our investor and analyst distribution list. Before we start, I just want to quickly draw your attention to the usual disclaimers regarding forward looking statements, which is here on Slide 2. And without further ado, I'll hand over to Rakesh Kapoor, our CEO.
Thank you, Richard, and good morning. I will take you through a summary of today's announcement And then Adrian Henna, our CFO, and I will be pleased to take your questions. Let me remind you that this is a trading update only rather than a
full set of results.
So let me start with the 3 key messages for you today. The first one, we made a solid start to the year in Q1. Now operating under our new organizational structure RB2.0. As I said in February, we got RB2.0 off the ground in January 2018 to ensure we minimize transition risk I'm pleased to say 2nd, our Q1 performance saw some parts of the business exceeding, in going expectations and some parts not. In true RB fashion, I will first take what is not meeting expectations.
The health business is very attractive and with strong secular growth rates, but the Q1 performance was mixed. Whilst we grew 3% on a pro form a basis in both this quarter and Q4 last year, Shore continues to be a drag. We are working hard to address our problems in Shoal, which I will come back to later. On the rest, we have made strong progress. It has been only 3 quarters since we acquired Mead Johnson and the first as an integrated part of RB.
I'm really pleased that we are starting to see further improvements in this business. And Hygiene Home also made a strong start to the year. The third message is we remain well on track to achieve our full year net revenue targets. Now a bit more detail on each of these three messages. You will have seen from our Q1 trading update that we made a solid start to the year overall at 3% performer growth and 2% like for like As I said, health had a more mixed performance with 3% growth in pro form a and 1% in like for like.
IFCM delivered strong performer growth of +6 percent demonstrating that Mead Johnson is progressing well. This is a great business and I remain excited about the future growth opportunities. Hygiene Home made a strong start to the year with 4% like for like growth. This is of course the 1st quarter in which we are reporting under our new more focused and agile structure RB2.0. But for reference, in Q4 2017, we delivered 3% pro form a and like for like growth in health and flat in hygiene home.
Let me give you some additional color around our performance and let me start by reminding you of our portfolio architecture. We have a very coherent portfolio under the umbrella of health hygiene and home. Under RB2.0, we have club our health relief, health wellness, health hygiene and infant and child nutrition brands under 1 combined RB Health BU. The Hygiene Home And Home Care Brands from the new RBIT Hygiene Home Wheel. As a reminder, again, RB Health is around 60% of the business with the base health comprising 40% and IFCN about 20%.
The remaining 40% is Hygiene Home. Let me talk you through how each of these parts have performed in Q1 2018. And let me start with base RB Health, excluding IFCN, which comprises of health relief, health wellness, and health hygiene. Now the next slide shows the performance trends over 3 periods, half 1, 2017, half 2 2017, and Q1 twenty eighteen. As you can see from the right hand side of the chart, the performance trends over these 3 periods for RB based health have been broadly similar.
Growth has been flat in half 1, 2017 1% in the aggregated periods thereafter. On the extreme left of the chart, the core relief portfolio, which represents about 15% of the total business, has been performing well over all this period with around mid single digit growth rate. And lastly, the health, wellness and hygiene part in the middle of this chart. This represents about 25% of the total business and this has been more challenging. Now let me describe this in some detail and take each of these parts in turn.
So in the next chart, you will see the Health Relief, which includes brands like Mucinex, Strip sales, Neurofin, Gabascon, and they have been strong. Mucinex certainly benefited from a very strong start to the season, although the return of private label meant its growth rates have come down materially from the double digit levels of last year. This year. Private label competition is a reality across the industry, and we have dealt with this successfully with one key weapon innovation. We've always had a very strong pipeline of innovation on Mucinex and we expect to launch more in half to twenty eighteen in time for the next season.
Now turning to health wellness and hygiene. First, with wellness, which has brands such as Durex, shore and BMS. HealthWellness. Well, firstly, Durex and our GMS brands were again in growth. With airborne brand particularly strong benefiting from a good season.
The issue here again was sure, which suffered a significant decline. As we said in the February call, we are not fully out of the guaranteed decline. And some of our display space losses are impacting the brand. I'm very unhappy with this performance. And let me tell you some data points and some color on the corrective actions we are taking with Scholl.
In the next slide, you see that over the three quarters last three quarters, we have seen a relatively stable level of absolute sales. You can see it from the slide that Q3 2017, Q4 2017, Q1 2018 are in about the same territory. At the stable, at the stable rate, Q2 will still be negative versus Q2 2017. But thereafter, we should see our comps ease. Cadgets, which were almost 3 quarters of the total show sales at their peak, are now down to a quarter of the total category.
Given that these gadgets are high priced items, the gap fill from more normal priced innovations we have launched has not been enough to fully stem this impact. We are working very hard to reinvigorate our performance and many of the steps include accelerating our pipeline. We have 3 innovations coming down the track spread across the portfolio from insource to food aid treatments and other treatment products. We're also streamlining our range to make it stronger to make it more appealing and to enhance our on pack claims and education. So to summarize on Shoal, I would say we will see a weakness in the near term, but sales in absolute terms have been stable for the last three quarters.
And therefore, we would expect to see a materially less of an impact from Q3 this year. As I said, I am very unhappy with our past 2 years of show performance, but I also am reminded that in the long run, this is a category with strong potential. The category itself is important and underpenetrated. We spend 60% of our waiting time on our feet, and we walk three times around the world in a lifetime. Good foot health is an enabler of our overall health through movement, fitness, general well-being.
And yet today, Over 80% of the people suffer from some food condition at some stage and less than 20% of these people treat. So let's not forget also that we have doubled this business since the acquisition, but there is much more to go for in the medium term. So let's now turn to health hygiene. Health hygiene includes our brands of Dettol, wheat and clear cell. And that all is by far the largest brand here and has been a very successful brand.
We are a weak quarter in this segment, particularly driven by macro weakness in that all. We have seen some share improvement in the quarter as we continue with our penetration programs particularly in emerging markets, but we also continue to see very challenging market conditions in parts of Middle East. Total growth is down significantly in this region versus a year ago, but I expect the performance to improve in the second half of the year. Now let me come to some positives starting with As you can see, here, the progression over the last 15 months shows that we are turning this business around. The business was in decline in half 1, 2017, with key challenges in China, in U.
S. And a number of other markets. In Q1 twenty eighteen, which has been the 1st quarter under our integrated RB Health BU we have made a strong start with a 6% performer growth. In China, we are strengthening our presence in the e commerce channel which now represents already about a quarter of our Greater China business and an increase of 50% from a year ago. In the mom and baby store channel, we still have work to do, but the trends are promising and improving here too.
We are also working very hard to accelerate the innovation pipeline. In the U. S, the launch of NeuroPro Innovation more than offset the tailwinds from weak contract losses. Although all this was also some selling. Net, although we are seeing good early success, I want to temper this with the fact that the market growth in China is currently very strong and we are benefiting from this buoyancy.
We have much more to do but this is a very nice start and I remain excited about what is it can do and bring to RB and our shareholders. Now last and certainly not bad is Hygiene Home. Hygiene Home delivered a strong performance. And this is a business where 3 quarters of the turnover is in developed markets. You may have seen from public market data, that we have seen some decent share improvements in a number of our categories, which is encouraging, and I love seeing the renewed energy and focus this business is getting, clearly the strong seasonal trends trends on Lysol have played a role in the results.
Additional period innovation launches, such as the light solid daily cleanser and the daily cleansing wipes. But Harpic grew well behind the early success of our Color Power Six Innovation, Village had a good quarter holding the selling of our new quantum ultimate innovation, while there is a stocking benefit to this launch, The product has been well received by consumers and customers. Air Wick had a good quarter in the U. S. And Western European markets, behind the essential Mist Innovation and Vanish, while we also saw improving trends aided by some innovations that we've launched including the latest and most innovation efficient formula behind both Vanish Wipes and the Pink Ridge.
Overall notwithstanding the seasonal tailwinds and innovation launches, Hygiene Home had a strong performance in the quarter, beating expectations and giving us real confidence that 2.0 has given the business the new buzz it needed. So let me come As you know, our priority remains organic growth under our new focused organic organization structure RB2.0. And as I said, I'm very pleased to see such energy focus and a strong start by the teams across the BUs. It is also good to and I'm delighted at how quickly they have embraced the RB culture and our way of working. We see a lot of value creation opportunities here, and we are only still at the very beginning of this journey.
On RB2.0, it is early days. But we worked very hard at the back end of last year to enable our people to have a clean start in 2018 in their new roles. We've only been living it for a quarter, but already, we feel established, energized and focused Whilst we still have a significant amount of work to do, I believe this is the right platform for RB to deliver long term growth and our performance. So to conclude, I would say it has been a solid start to the year, a lot of moving parts and more work to do, but we are firmly on track to deliver our full year targets of 13% to 14% growth at constant rates, implying a 2% to 3% like for like growth and remain very focused on our priorities of improving our organic growth rate. With that, Adrian and I we'll be pleased to take your questions.
The first question comes from Ian Simpson from Societe Generale. Please go ahead. Your line is open.
Good morning, all.
I just wondered if I was to dig into the health performance a bit as that seems to be causing some concern this morning. You called out Health Relief as having grown mid single digit, health wellness ex Shoal looks to be growing mid single digit, but health Base Health as a whole ex Shoal is only growing 3%. So I'm guessing the swing factor there is Health hygiene, which previously wasn't part of the Health Division. So you're able to give us any color at all as to what the mix headwind from you now including Detle and the rest of health hygiene within health is? And then secondly, just looking at Shoal, You've called it out as having been flat for 3 consecutive quarters sequentially now, presumably if that continues.
Show ceases to be a like for like headwind in the third quarter 'eighteen, just checking if I've got that right. Thanks very much.
Ian, I think you are right on both counts that, when you take out, when you look at the old reporting structure of RB Health, the impact of the we would have reported, I think, 3% growth versus the 1% we've reported and the impact has been from the hygiene home side. And this has been a problem that we called out for Middle East headwinds actually. We had talked about Middle East So that is the key impact. On Shoal, again, you're right. We have had stable sales from the last three quarters as we've shown today.
And if these trends were to continue, we do expect some drag in Q2, but thereafter, they should be a materially less of a drag for the overall company to balance.
Thanks. So next, on the line, we've got James Ed with Jones from Royal Bank Canada, Goya, James.
Good morning, Richard. Good morning, Rakesh. Two questions, please. First on Shoal, I have to say at the time, I had no idea that Shoal sales were so heavily weighted towards gadgets. Are there any other brands where the shape of the business has moved materially away from record traditional high volume low ticket offering?
And secondly, on the negative pricemix and others have seen a big slowdown in pricing most recently in Nestle and Unilever, yes, today, but your 1% is quite a lot lower than they're talking about. So why is your record being disproportionately affected here?
I think the first answer to the first question is, I think the weight of gas isn't shown is by far of the recent launches we've had the most. But I want to remind you that our Air Wick business had for the last 15 years, a number of gadgets. We have electrical gadgets, which have, which have refills We have charismatic gadgets with our aerosol refills, and that has been a constant feature. The big difference actually between our gadget launches of the past and this one has been the wafer stream has been a material part of the previous guided launches. So if you launch the gadget and most of the gadget launches were in less than the 10 pound $10, 10 euro range.
So the guide as well less than and the refills were, let's call it, half of that price. And then over a number of years, you would have repo sales being far more than the gadget sales. In this particular case, the gadget price has been materially higher, 1,000,000, 1,000,000, and the reefer prices and the reefer uptake also, the amount of refill you need to make these gadgets work has been also a very low material part of this business. So I think it is we've had gadgets in the past. We've been very successful with gadgets.
They form a very strong and stable part of our air rig business. I think the sole one has been a unique example. And I would that is why we are calling it out the way it is and explaining the how it is impacted. It was 3 nearly three ports of our business. For sure, at its very peak and now it's at one port.
So that's where it is. On the other side, I think you asked a question on pricing. Why is the pricing as low as 1% or something in our like for like number.
You said price well, maybe I answered it, but I think price mix was minus 1% in the quarter and others talking about kind of low, low but positive pricing. I was just wondering why record seems to be being more effective?
Well, they're not more affected, James. We can only talk about ourselves. I think whether it's more or less, you'd have to make your own judgments on, depending what other people have called out. But let's let's just spend a minute on the pricing environment that we're seeing. 1st of all, no significant change from what we experienced in the second half of last year.
So we have called out for the group as a whole that the pro form a 3% growth was 3% volume and flat price the 2% like for like was 3% volume and therefore minus 1 price, which and that minus 1 is, of course, exactly the same level that we called out in Q44 last year and Q3 last year. We've also given a little bit more color in the releases you'll have seen as to how that price movement has impacted between the 2 BUs. And in particular that, as we've been saying for some time, the price pressure has been felt more heavily within the Hio or household business as well as being more heavily within the developed markets Europe in particular. So this time, we've said that within the 3% pro form a health growth about a third volume and 2 thirds positive price mix, whereas conversely within the 4% growth in the high in the High Ho business unit, we've seen strong volume growth and negative pricemix. So I think hopefully nothing surprising there compared to what we've been talking about over the over certainly the second half of twenty seventeen either in terms of the magnitude on the group as a whole, James, nor was between the split between the two parts of the portfolio.
Good evening. Thanks for both. That's very helpful.
Thanks, James. Right next on the line, we've got Martin Deboo from Jefferies. Go ahead, Martin.
Yeah. Good morning, everybody. Good morning, Rakesh Adrian and Richard. Two questions, just again on Health And Health relief. You call out Gaviscon And Strep sells positively.
I just given the importance of those brands and the fact they seem to keep managing to grow, I just value some color on where the growth is coming from? Is it geographic rollout? Is it SKU extension? Just color there would be helpful. And second question on Food Care, just coming out of the conversation you had with James just now.
You know, Rakesh, you said you've learned many lessons from Foot Care. And I wonder given what you've said about the balance of gadget versus refill. Is there an argument going forward on gadgets that you go to a licensing model rather than take the total revenue risk on these products? Or do you think that, that foot care was just a one off and lessons are being learned and, you know, you're comfortable with with the gadget and refill model. Just interested in your thoughts on that.
Yes. Thank you, Martin. Listen, the first thing is I'll catch portfolio, relief portfolio has been performing steadily since as long as I can remember. So I don't think there is a specific reason to call out one brand or the other. Now clearly, when you have a portfolio of, let's say, 7, 8 brands in the health release, it's obvious and normal that in some periods, one will do a bit better than the other.
And that can be a combination of innovation, some tailwinds like seasonality, but also rollouts. But I would say our health relief portfolio has been a strong, stable, steady part of our portfolio. And it continues to be so. In some years, Mucinex done fantastically well. I mean, last year was one of them at double digit growth rates on Mucinex and some in some years like this one, we might have some headwinds from private label, which we will deal with obviously very strongly, and I hope, well.
But it has been, I mean, I don't want to call out one brand, Stresses of the Galveston. We have you asked me a question on white space. We have rolled out Galveston. Think in previous calls, we've talked about roll out of Gaticom into parts of Asia in the Middle East. And over a period of time, when they start, they start sometimes with I'm calling them behind the counter.
So not necessarily only prescription, but pharmacy recommendations are required and only pharmacies can can sort of give them away. And over a period of time, as they settle in the market, when the regulators are happy with their efficacy and safety profiles we get, let's call it, over the counter status, which is you can advertise them and so on and so forth. So for example, right now, Gavin has earned the over the counter status in Thailand as we speak. And as soon as that happens, that market does materially better. Overall because suddenly you start advertising and so on.
But I don't want to call out one market like Thailand or a white space launch, which has a is a normal on Way feature. Why space launches normally do not add materially on 1 year, but over the number of years, they can be a part of the growth model of portfolio and it has been. So net net, and I would just say that Health Integrated portfolio have been generally very steady and very stable and very good. In all the years that we've had them with some years being better for one brand or the other. So that's the first thing.
On gadgets, I would say we have been, we have been badly burnt. I would be open about this, like it's been a terrible, terrible part of RB. I mean, I have to say that we it's if you think about how small show is to the whole company and amount of time, we've all spent talking about Scholl as if it's the one thing that matters, which has, of course, because it has been a huge success for a number of years and we have done very well. I mean, I wish I could take away the gadgets from the last 6 years or 7 years and show you that we've still grown the underlying brand, like I've told you from the time of the acquisition, which was basically from 2011. Doubled this brand still.
So I think it has been a terrible part of our discussion, but I think one of the key lesson here is when we have a portfolio of products, which are generally in the 5 to 10 rain. We couldn't be some of the lower also in different parts of the world. But in that kind of thing, and I'm taking infant nutrition out of it because infant nutrition obviously are high ticket items too. But when you think about our normal innovations, if you have a $40 40 pound innovation, which from the time of launch with a sell in that happens with the consumer optic that happens, the penetration we can drive does so well. And the refill sales don't follow, they can create new peaks and truss.
And I think the number one lesson here is the significant delta between the price of the gadget and the repeat rate of the refills and how frequently those frequency repeat rates. So I can tell you we have we've learned a very, very tough, but a lesson that we are not going to forget And I'm now double skeptical about gadget launches. I've said no to many of these obviously, because I'm not confident that we fully understood the gadget refill models. And the next time we do it, we probably will have to test our way before we roll those out. But to walk away completely is also not the right thing.
But to keep our messages intact and lessons intact and use those every time we look at these is what we're going to do. So that's how I would summarize it. A painful lesson, one we will not forget, but equally, these are, as we've shown in Air Care, over 10 years, 15 years, they've been a fantastic part of our business. And by the way, as we all know, refills are very margin accretive. They are stable sales, very margin accretive, and they can be a very good model for the future.
But not the one that Scholle has demonstrated. Definitely not.
Let's move on to Marion and Raymond James. Go ahead, Marion.
Hi, good morning, everyone. I was wondering if you give us some colors on what you're expecting in the upcoming quarters in emerging markets, whether you see some improvement there is not of the Russia or what's your outlook for the Middle East? And then, also on the innovation seems like it boosted EBITDAIGENE home in Q1. So what would have been an underlying growth rate maybe excluding the sell in I mean setting up this innovation or are you confident you could sustain such rates in the full year?
Well, take me take the second 1 first, Marion, in terms of can we quantify the effect of the the stocking as they're behind the new launches in, on Air Wick and Finish. They're material enough for us to want to call them out so you get a sense of what going on buying that 4%, but they're not so material as they're distorting the trend greatly here. And certainly not something we're going to quantify. And in fact, something's quite hard to quantify exactly. It's a big enough for us to want to call them out, in understanding not just the 4% growth in Idaho, but actually the 6% growth in the U.
S. And therefore also, by the way, the NeuroPro launch in Health, but not so as material as to be distorting trends. On the first one, you are in Russia, Middle East, what's the prognosis? Well, I'm not sure we are that qualified to give views on what's going to happen in Russia and Middle East more broadly. But in terms of, stuff that's directly affected us, there are slightly different the impact in Russia is more specific to the company and indeed it's more specific to the health side of the company.
And it's connected to the really very extensive pharmacy channel we have in Russia. And basically as we went through towards the end of 2017, in making calls about what the strength of the season was going to be in Russia. We because of our very close relationship with most individual pharmacies in Russia, we made sure that there was plenty of stock in and that plenty of stock turned out to be a bit too much. So that happens from time to time. We had it coming out in or running down in Q1.
So that was a more company specific thing, which will pass. The Middle East is clearly an effect of all the stuff going on, not very much for us economically centered in Saudi Arabia because of the size of the country and the size of our business in that country, where there are obviously some very profound things going on, but your knowledge of the place I suspected at least as good about us in terms of giving a prognosis for the Middle East
Okay.
Thank you, Mary. Let's move on. And, we now got Pablo Smith from Liberum on the line. Go ahead, Bob.
Morning guys. Just two questions if I can. With respect to Mucinex, I mean, clearly private label is is a reality in the market. I was just wondering if you could illustrate for us how much of the portfolio of Mucinex in the U. S.
Is now covered by private label entry and potentially therefore how much is potentially still at risk of further entries? And then secondly, you mentioned lower place slots for sholes, which would point to something a little bit different than just the gadget. Can you give some more color on what that is about how long that might persist? Thank you.
Yeah, listen, Bob, on Mucinex, I think Binder, just to remind you, the just the next two parts of the portfolio, one is the 12 hour range, which is one we had patent protection on and the other one is the normal 4 hour range, what we call the fast max range, which never had the same level of passion protection and always have private label. So the first thing is to call out is Mucinex has 2 big ranges, the 4 hour ranges, 44 Fastmax and the 12 hour range. So the 12 hour range is one that has been subject to private label reentry. Private label has been in and out of the 12 hour range. So if you go, I mean, you would have heard private label launch a few years ago too, And what has happened is 12 hours has been a notorious digital product to make, very unstable because when you combine the various ingredients, I don't want to get into technical details, not so easy to make.
That's why they've had trouble. And that's why they've never had a secured supply chain. But now after so many years, they have managed to secure that supply chain. It seems to be the case where they now have, launched it with Fulflow. So I do expect the very bulk of the impact to happen in 2018, the very bulk of the impact.
Provided they continue to obviously have the same supply chain that they've shown in the first quarter.
Okay. Thank you. And
so you had a question on the slot. Actually, you're seeing that reflected somewhat in the last three quarters of our sales. So you can see already that the sales are down. And what we are trying to tell you is that there is a gadget impact definitely, but clearly the gadget impact was positive for a number of years in getting the whole range and the whole display space. And now it is a bit of a negative, not just or it is a bit of a negative on the range.
But the guide is still from quite a large part. Now clearly, as I said, it's something that we are very aware of. And we have been working to counteract that. It's just that when we launched several innovations, the mathematical impact of those innovation launches given the lower ticket size is not enough to offset what we have to gather. We have 3 more coming with the next periods.
And hopefully, after getting a stable base of show sales, we can find a positive way of talking about Schrod in the future. And I hope to do that.
Good. Let's move on, right. So we've now got Jeremy Feocono. I got it, Jeremy.
Hi, good morning, Jeremy Cialco at Redburn here. So two questions from me. The first one is I know that this is age of the quarterly revenue, call you don't normally comment on these things, but just in view of how the shares move today, is there any way you can give us some confidence in terms of the full year margins and your happiness or otherwise with where the consensus is on that? And then the second thing is I guess you've gone through a collection of issues which perhaps helped your growth in Q1, but maybe greater drag in Q2 in terms of kind of stocking maybe greater impact from Mucinex in subsequent quarters. Besides the cyber attack, are there any things where you think there's a decent chance of seeing kind of improvements in let's say the ongoing run rate of the business as we go through the remainder of
yes, this is a trading update, so we're not talking about margins. We don't feel any need to talk about margins. We didn't give obviously quantified guidance in the in the full year numbers, but we did talk about the various drivers of margin. And we do feel the markets understood what we were trying to say there. Because this is a trading update, we don't feel the need to say anything.
We're quite happy with the dialogue that was had and how it was received. In terms of the sort of up ups and downs in the rest of the year, unsurprisingly we're not going to go into quarterly guidance and so on, Jeremy, but I think you are, you're right to point out the, there is clearly a cyber positive in Q2 and Q3. And clearly, there are a couple of other things, which we call attention to and you summarized back that the Mucinex private label in particular and, a little bit of a watch out from new product launches and some channel building behind them, which we've also called out. But that's in the nature of the fact we're giving full year guidance here maintaining full year guidance here. We're not giving quarterly by quarterly guidance.
There will be ups and downs, and we remain very comfortable with the full year guidance for revenue, Jeremy. And in so far as it was for margin.
Right. We've now got Guillaume Delmas from Bank of America Merrill Lynch. Go ahead, Guillaume.
Good morning, gentlemen. A couple of questions for me to Firstly on Mead Johnson, you said last year that mid margins were actually lower than you initially anticipated. We've seen strong like for like development in China in particular in Q1, likely to continue in to at least the second quarter. Dairy prices also have eased versus last year's peak. So on a pre synergy basis, are you not seeing a nice recovery in Mead Johnson margins in Q1, which would imply a less dilutive impact from the first time consolidation of Mead in your first half results.
And then my second question is actually on your full year 2017 results, because in the presentation, I can see the appendix you provide the margins for RB Health And RB High Ho. And I'm surprised to see a 30 basis points decline only for RB Health last year despite the dilutive impact from Mead Johnson and also the lack of organic sales growth part due to the cyber attack. So what was driving this nice underlying margin development in RB Health last year? Thank you.
Okay. Yes, you glide, Guillon. So first of all, on the Johnson margins, well, listen, yes, you're right. Clearly, when the top line grows well, it much light is easier further down the P and L. Yes, you're right.
We see the same data on dairy prices that you see and there was a peaking in the full fat. Milk cost in around the middle of last year. And as I think we said before, there's sort of 6 to 9 month lag between spot prices of milk and it appearing in our P and L. So that is sort of broadly coming in now. So those are both positive things, but we're not changing our view on the on the sort of economic model around infant nutrition that we had in our acquisition case.
We've been clear that notwithstanding the fact we inherited this business at a lower margin than we expected in the middle of last year, we'd still do expect to get back up to the margins. We have been anticipating in the financial case in both cost synergies and these other developments, you know, will help do that. In terms of the second part, yes, we have included indeed as an appendix in this presentation and on the website. As we said, we would the 2017 2016 operating profit and margin analysis for the 2 new business units ahead of half 1 when we're course, give that. And that does show the movements, therefore, between the 2 business units.
And you're right, so that we're seeing, we see a fall in both business units profitability But of course, within HealthOne, there is the arithmetical combination of Mead Johnson. But what is also going on there is both gross margin development, but also movements in bei. And I hate to mention the Shoalwood again, but of course, you will have seen in the movement in support from Shoal in one of those years. But as that product was not succeeding, clearly, we saw a movement away from that and it went not just to other health products, but also to HIGO products. So you see both of those effects in there, as explanations of the movements in the relative margins, Grier,
Thank you very much.
Yeah. Right now we've got Pinar from UBS. Go ahead, Pinar.
Hi, good morning. I have two questions. One is could you please give us an update on where you are with Mead Johnson's rollout to the higher gross e commerce and fallen baby stores in China? What is the share of the Johnson Chinese sales coming from various channels, for example? You mentioned that the Hong Kong business is declining.
Could you please give us an indication of the rate of decline there? And the second one what do you think about the share price before us? What what do you think the market's missing? I'm not sure if you can even comment on this, but I'll have a go anyway. Are you ready to personally buy, make it stock here as part of your long term compensation plan?
So I think you asked a number of detailed questions, Vina, about the data on various sales by channel, etcetera. Clearly, you can understand we're not going to give you all those pieces of information. All I would say is that China has been a focus for RB because clearly it has been a significant, which is a significant part of Mead Johnson, a significant underperforming part of Mead Johnson, which impacted, and I'm talking about Greater China, both Hong Kong as well as Mailland China. And we've put in a lot of effort and the effort has been on dialing up materially the e commerce platform, which was we were underweight there, dialing also the mom and baby stores, which is significantly, more than 50% of the business now of categories trading in mom and baby stores. And again, we will underweight there.
And the 3rd part, of course, was the Hong Kong cross border aspect. Now in all these three things, I would see pay progress. On e commerce, as I've already said in the call, our growth rate on e commerce in Q1 versus the same period last year is 50%. And e commerce is now in Greater China is a significant part of our growth and business. So that's that part is doing well.
On mom and baby stores, the real challenges to penetrate the tiers CD and cities going down the city levels. And what we are trying to do is to figure out a really fast track model of capturing these new cities that we believe that are important for growth and important for reaching consumers. And without disclosing very much on what our plans are, but we have a very innovative strategy using basically a new approach to fast track our city launches. And I would say in Q1, we have reached a significant I'm not going to give you details. It is competitively sensitive, significantly more number of cities in the lower tier cities that I was just talking about.
With plans to accelerate during the course of the year. So I think mom and baby stores, the progress, like I said, in the call, early signs, but very promising and encouraging work already. On cross border, Hong Kong, this has become a very small part of the whole story, actually. It was a big part of the story. It is becoming a very small part of the story.
And I would say Hong Kong is now not a big topic for discussion here. And we're doing okay in Hong Kong in terms of our business with some interesting plans, obviously. I think beyond China and Hong Kong, you've already seen from the U. S. How we are working hard on the innovation pipeline because clearly innovation is the way through which we are going to make sure that we can bring long term traction in the in the category.
And we believe we can apply the innovation skill sets to infant nutrition. Now some of it will be fast and you will see that in the next periods and some of it will take time. But actually, the energy going behind innovation is incredible. And I think I also see some very promising signs that we can actually bring innovations to market and make this good. So net net, I mean, I think Q1 if you asked me 9 months ago, do you would you take 6% growth?
I think all of you would have taken a 6% growth. In Q1 this year. And I know it was a soft quarter for meat jobs in last year, but it should not also take away the good work that we've been able to do over the last three quarters of our ownership. You know, and then I think you asked some question on the share price. I think I mean, I'm on the call.
I don't know what the share price is, but clearly, I fully and I'm firmly of the belief The RB is a fantastic company with a fantastic opportunity to outperform in this market. We clearly have been weighed down by shore and one off factors, then it's clear. But if somebody can see beyond that, you will see a fantastic company, which is still running in an incredible way.
Okay. Thank you. Let's move on. So now we've got Rosie Edwards from Berenberg. Go ahead, Rosie.
Yes, good morning. Just one question. Just on pricemix, are you able to say whether it's positive in health, excluding infinitration? Or give me some sort of color as to whether it was positive, negative or like
Yes. We can and, as you've seen for, for health overall, Well, the answer is the answer to bottom line is slightly positive rather than by formulating a kilobytes
That's fine. Thank you.
Thanks, Rosie. Right, Nelson, we've got Graham on the line, but I know it's Richard Taylor from Morgan Stanley. Go ahead, Richard.
Yes, good morning. Richard Taylor here from Morgan Stanley. So thanks for the color on Shoal, but I do want suppress you further for more specifics on this. It's obviously dragged on the business now for eight quarters. And it's pretty tough from the outside to understand exactly what's going on.
So on our estimates, we think that devices is now below 1,000,000 of sales. And last year, like for like, for the devices part fell 60% with the broader show business falling 30% like for like. So I want to understand more on that like for like performance. Are we right in terms of the shape? And also the leg down you show in your slides in terms of absolute sales, what exactly drove that?
So that's just on show. And then the second part of my question is on Mead, obviously a very strong performance in China. Can you give us a bit more color on how well Infinitas is going there? And secondly, outside China, you've obviously launched NeuroPro in the U. S.
Maybe you can go some more color on your pipeline of innovation there?
So listen, let's just, the blurb of numbers, you throughout that, Richard, on show, but just let me recap the ones we're trying to do. So you've obviously seen we're trying to give a high degree of transparency on show because it is obviously such a a difficult issue. So the show brand in Q1, roughly the show brand in its entire in Q1, roughly roughly 2% of group net revenue. So let me get this in perspective. Within that, as Rakesh called out, the gadgets were about 25% of total shot.
So half a percent of group revenue you can see. We also called out because we also called out that at peak, which was in late 2015, Gadgets were over 70% I think requested 75% of show revenue. And just for completeness, so you can get a sense of the Q2 impact because you've seen that graph of stability for from Q3 onwards last year in absolute sales. But in Q2 last year, we're talking about a revenue, which was sort of roughly 2.5 times the gadget revenue in in Q1 this year. So roughly $40,000,000 to $50,000,000.
And so that will give you, I think all you need to know around the headwind we faced in Q2. And what should then pass? In terms of Mead Johnson, do you want to do that? So in terms of China Mead Johnson, Infinitas is a very significant part of the growth and he's going well. I'm not going to break down numbers for you.
Obviously, precisely, but it is an important part of the growth in China in line with the plan we talked about that was that we inherited from Mead Johnson when we acquired it. It is going well. It continues to go very well. In the rest of the world, mean, just to remind ourselves, there's sort of 4 bits of geographies that there are in Mead Johnson. There's Greater China, there's North America overwhelmingly the U.
S. Latin America and ASEAN. In the U. S, things continue to progress well. I mean, the market is obviously much more mature and stable than it is in China.
We're never going to see the big deltas of the sort you see in China. And the sort of gestation periods, if you'll pardon the slight pun on on changes you make because of the business model take a bit of time, but we're very, very happy with the way the operational improvements that have being being made progressively with our Mead Johnson colleagues since we, we acquired the business are playing through. We track in particular the market share of the non WIC because that has a slightly different dynamic from the WIC. And we can see that progressing incrementally in the direction we expect it to be not dramatic movements in the U. S, but movements that are consistently in the right direction.
And then of course, we're very excited that the NeuroPro is now just reaching consumers, having reached the retail shelves during Q1. So very pleased with that Canada, by the way, continues to be an an exemplary market with some excellent communication with consumers going on in Canada and very much an example not just the rest of the Mead Johnson part of our business, but actually lots of other parts of our business. The other two geographies Latin America and ASEAN do remain more volatile to several countries in those two markets. And there's ups and downs within them. And we are getting progressively to grips at a deeper operational sense for those things, but I wouldn't say by any means that we've got our arms fully around every part of the improvement we need to in those 2 bits of business, but that they will come.
There's no doubt in our mind about that. Okay.
Thank you.
Okay.
Thank you, Jim. We've got another 7 minutes with 6 questions actually. So now we've got Faheem from Credit Suisse. Go ahead, Faheem. Thanks for the question.
Can I come back to Hygiene And Home? The reason being because last year you recorded minus 2% and this time in Q1, 4%. What are the moving parts? Is 4% a good growth number to, for it to continue for the rest of the year? And secondly, can I come to India?
How is the toll progressing in India? Because it used to be a strong driver for RB has growth stabilized there? Just those 2. Thanks.
Yes. Okay. Thanks. So first of all, hi, home, as I said, is the market basically overall market is we expect the medium term growth rates on this market to be in the 2% to 3% growth rate. And we have said that we were obviously you saw from the results last year, we were not performing in line with the market.
And clearly, when you see a 4% growth, we are definitely outperforming this market from a growth point of view. And when we see the trends on our business performance from the second half of last year to now, we see an improving trend. So we see an improving trend from the innovation we launched last year, but also the innovation we've launching this year, both in terms of in market results, our performance and share terms, but also in terms of growth. So we can see that happen. But 4% is not an extrapolation.
We would like you to carry, obviously, because the market is not in that range. 4% also has a very nice impact from light salt, both from season as well as from innovation. So I think there are a number of moving parts on 4, but the key message here is that we were not performing in line with the market growth rate. And we see improvement in progressive improvement, not a sudden improvement, progressive improvement, to the market performance and a bit of market outperformance levels. And we hope we can continue that in market results and in market performance, even if 4% top line growth rate is obviously well ahead of where the market is.
On that, well, I think that all has been a very good India is a very fantastic brand. We're one of the most trusted brands in India and we've always managed to outperform the market with that all and we continue to do so. So that all brand is outperforming the market. The growth has been very good. Clearly, from one period to the next, and a number of things have happened in India, be monetization, GST, and all of these changes.
So to just look at the sales delta in 1 quarter and compare it with the other, would never be in in India, given the volatility of what is happening in India, be the right way of looking at it. But the brand is performing well. We are doing well there.
Great. Thanks, Haim. Right. Let's move on. Alex Smith from Barclays.
Go ahead, Alex.
Hi, morning. A question on your organizational corporate structure, please. I guess you've had a bit of time now for work. Under the 2 new business units. But I'm just wondering how you feel about running North America and Europe still effectively as one market.
Under Yne. Can this work, I guess, in this sort of more decentralized consumer environment where you're trying to get some more bespoke innovation? So that's one question. And then secondly, on Hygiene And Home, just wondering how you feel about the opportunity for geographic white space rollout under this new organization. My impression was under the old record structure, the household business was more about growing within your geographic strongholds.
So just wondering if there's been a change in mindset there about geographic expansion?
Yes, I think in the new RB2.0, we are managing the business by business units actually. So I think, the business unit let's say, Heidi Home has North America, Europe, and developing market spend within developing market also there are some number of regions reporting directly to the BU President. And the same goes in health. We run North America Europe and several developing markets, reporting directly to the view present. So I think the material difference actually if you think about it is that we are now running the company through the lens of the BU.
And not the geographic lens. And the geographic lens plays a role in the organizational structure clearly because you need to have the organization in every any ever key market. So I think that is the material change that you will see. I think it's a white space for Hygiene. I think first of all, I think the Hygiene Home brands actually have other, if I may say so the legacy RB brands.
What I mean, legacy don't buy more, say positively or less, but it's iconic RB brands. They've been brands like Air Wake and Vanish and Finish and Harpic have been in the RB portfolio for a very long period of time. And unlike the health plan, some of them have been acquired over the last 7, 8, 10 years. So I think there are far more naturally geographically present. Having said that, clearly, there will be white space opportunity.
But if you ask me, the big opportunity in Hygiene Home is to apply that passion and focus and bring innovations like we are launching, we have been launching over the last 6 to 12 months to a much higher level than we have. And I think you will see the energy that and the passion that, that brings into our business to be the most material difference. As I've said, white space launches are important. But in 1 year to the next, they don't create the massive growth delta that you think they do. Over the period of time, they can be very important.
And that is the case for Hygiene Home II, but Hygiene Home Brands, generally speaking, have a very good spread Having said that, there are opportunities and I would call out Finish in China. Finish in China is still a very, very underpenetrated brand. And we are working extraordinarily hard to make it the big brand that it is in many parts of the world.
Right. Thanks. Thank you. Eddy Humphreys from Investec. Go ahead, Eddy.
I wanted to just quickly if you could dig further into the developing market growth, which was 5% in the quarter. Within that, you've said that, Greater China infant nutrition was double digit Brazil and India were growth accretive. We understand that Middle East was weak for reasons that you alluded to, but it means that some other, areas within Developing markets must have had quite seriously negative performance. I wonder whether you could just highlight what's going on under that plus five number given the good growth in Brazil, India and China?
Well, not really. I mean, the mathematics add up, we know we've highlighted the ones doing well, particularly China particularly India. And we've highlighted the ones not doing so well, which is particularly the Middle East, which, So I'm not sure I'm honestly sure what more we can say. Those are the numbers that they add up to the number you've got published here. I'm not sure what more color we can give to that, to be honest.
Well, how sizable is the Sorry,
go ahead.
How sizable is the Middle East within your developed markets then?
In Middle East, it's a chunky business. I mean, we've been clear on that over a long time. It's also you can see its materiality just in these quarters, but also the effect it has on debt or growth because it's a big brand in debt or a big part of the debt or brand. Yeah, the middle, the middle east in aggregate is a reasonably chunky part of our business.
Thanks, Eddie. Now I've got Toby from Macquarie Bank. Go ahead, Toby. Hi,
there. I guess, this is just a couple of clarifications. Firstly, apologies if I've missed the number somewhere. You've quantified the scale of relief or health relief within the health business But, wellness and hygiene looks still just to be lumped together. I wonder if you could quantify or give us the split in health between wellness and hygiene just so we can sort of do some math around those moving parts?
And then secondly, just a clarification around your commentary on margins for the year. You said that the market has understood what you were saying about margins in 2018. I mean, can we infer from that, are you that mean that you're happy with where consensus is at?
Look, on the first one, yes, we are obviously trying to give a better sense of the balance of the portfolio within health, and even the group as a whole, but we're not going to go giving you precise percent of each bit sorry, I can't give you the we can't give you the split between wellness and hygiene that you're looking for. And on margins, yes, I'll just repeat, we didn't quantify guidance the full year. We did talk about the moving parts. We do think the market's understood what we were trying to say and we're happy with that. Yes.
Okay. Thanks a lot. Okay.
Thanks, Katie. Right. 2nd last question, Jeff Stented Exane. Go ahead, Jeff.
Good morning gents. I sat down this morning with the release and I started to highlight all the sort of one off comments and now my page is kind of covered in yellow. So with that in mind, I was wondering, could you sort of quantify what you assess the underlying growth of the business
Listen, let's just go back to the, to the, the sort of market references. So we've said that within the health business, the pro form a health business, in the medium term, we look at 3 to 5. We said the market is is between, is in the middle of that range. And it's clear that we are underperforming that. You've seen that the biggest reason for the underperformance is Shoal.
But frankly, we are also underperforming the market slightly in infant nutrition still. We're closing in on the market. On the market growth as the market growth goes up, having inherited a position, which is quite weak, as you know, but then, so it's still a little bit behind although it's closing fast. The and on the high end side, I think Rakesh has already answered the question. We see a medium term market growth of 2 to 3, but we're currently we the market is currently at the bottom end of that are you around 2.
And we are we have over the progressively over the last 6 to 9 months been improving our our market share performance to the point where we see slight gains. So I think that's a sort of best measure I can give you of the underlying dynamic of the business.
So is it fair to assume it's less than the 2%?
Well, I think you should just replay what I just said in terms of HyHo and Health separately.
Okay. Thank you.
Let me step in. Why did you come to the conclusion that it's less than 2%
Well, I'm confused about that for help.
Everything we've said is just to is quite clear, I think, here. The performance is exactly what you read. There is nothing we are I don't think there is any anything hidden under the performance. I mean, it's as transparent as we can make it in a trading update like this. The performance is what you read.
There is no I don't think you should take out any underlying underlying care. This is actually if there was any underlying underlying, we would have also called it out.
Okay. Thank you.
Thanks, Jeff. Okay. And finally, we've got Celine Pannuti from JP Morgan.
Good morning, everyone. It feels like it has been a long call, but I just have one last question on your Slide 18, by the way, I wanted to thank you for the additional granularity and disclosure have given in terms of the moving parts in your release. But on slide 18, so you called out the differential in margin performance in H2 between Health and home hygiene, if I understood clearly as a rebalance of a BEI between health and home hygiene, fine. Just wanted to understand whether you also had a higher pricemix hit or negative pricing in the second half of last year, higher raw mat. Whether something that has as well been an issue for the second half.
I'm just trying to figure it out whether that's I should take into account as I look into H1? Thank you.
When we look at the incidence of pricemix developments, in between the two business units, if they had consistently been higher in High Ho than in Health So we've seen that in the current quarter and that was the case as we look back through last year. And it's also the case that in the second half of last year, 'seventeen, as you saw from our aggregate group numbers, price pressure in aggregates got bigger, if that too was disproportionately an I hope. So what you're seeing now in Ohio was also the case, was also the case as you look back into the comparative data here. Did that answer your question?
Not really. So the 190 visits point decline in H2 in IO was also led by lower pricemix, like, hence my question is whether we should carry this forward in the first half.
Oh, okay. But now you're saying, look forward, what do we see as the dynamics of price mix looking forward? But I think we'd repeat we are still on that perspective, so then where we were with our full year numbers in the sense that we do not see this as being a long term trend, but actually calling the moment this price mix is going to change. And, obviously, there's been a lot of discussion with other companies too, is very difficult. So embedded in our guidance for the full year, as we said, when we gave a full year numbers for 17 a couple of months ago, it is an assumption of the price environment of being broadly what it is now.
Not that we think that will last forever, but that is the thought we have essentially within our top line guidance.
Okay. Sorry to insist on last one. I'll try another way. So IO margin was down 14 H1 last year and then close to 2.082. How much of that was due for a BI, really a phasing change if you can answer that?
No, well, no, I'm not going to quantify that precisely, but what you saw in the half 2, the minus 190 if we're looking at the same chart has clearly got a significant element of the price mix in it. Okay. As well as the VI, which we've already mentioned, yes, exactly. Exactly. I mean, to the unconscious that we put these 2 slides out in the back and people will not have much of a chance to look at them.
Obviously, we can't give any selective disclosures, but anybody that does want a bit more technical explanation about in there, you know where Richard Joyce is.
Right. Well, thank you on that note. Thank you, Celine, and thanks for joining the call. Goodbye.