Reckitt Benckiser Group PLC

LSE:RKT

Earnings Call Transcript 2021-Q2

[Laxman Narasimhan, Group CEO & Executive Director]

Good morning, and thank you for joining us. I'm encouraged by our progress to date and have 4 key messages for you today. First, we have had a solid first half of the year despite a strong comparator and a slower Q2 with a very strong 2-year revenue stack of over 13%, inclusive of IFCN China. Second, we continue to make good progress in building a better house in a great neighborhood. Third, we are addressing near-term cost pressures, while actively managing our portfolio.And fourth, we remain confident in meeting our medium-term targets of mid- single-digit revenue growth and mid-20s margins by the mid-20s. As usual, our agenda will comprise of 3 parts. I will give an overview of the half year. Jeff will go into the financial details, and then I will provide a strategic update.In the first half, like-for-like revenue, excluding IFCN China, was up 3.7%, and our 2-year stack growth is up nearly 18%, building on the very strong performance last year. Including IFCN China, our like-for-like revenue grew by 1.5%, reflecting more challenging trading in China in Q2. The continued rebasing of our disinfectant business, and a record weak cold and flu season. As anticipated, our margin, EPS and free cash flow are down year-on-year. This is driven largely by our step-up in investment, which is funded by productivity, increased commodity inflation, the mix impact of lower OTC revenue and the performance in IFCN China.Given the moving parts in understanding the current performance of the business, it is helpful to split our portfolio in 2: separating out the brands that have been more impacted by COVID, namely Lysol, Dettol and our key cold and flu brands from the rest of the portfolio.There is of course, some impact of COVID in the remaining 70%, both positive and negative. But the variance in brand performance is typical and manageable as a portfolio. This part of the portfolio, which makes up 70% of our business is, in effect, performing consistent with our medium-term objectives. The remaining 30% is down slightly in H1, overlapping last year's particularly strong performance.Let me take you through that portion of the portfolio in a little bit more detail, starting with the disinfection brands. First, Lysol and Dettol together make up 25% of the Group's revenue. As we have said before, we expect to see these brands normalizing about 2019 levels, but they will likely reduce from the 2020 peak. Every market has different characteristics, either with regard to current behaviors, germ sensitivity as well as the pandemic response. It is hard to extrapolate from one market to another in terms of level or timing. For Dettol, demand in markets such as China reflects more advanced rebasing, while demand in other markets reflect the sensitivity with new variants emerging. Both brands, however, are significantly up versus 2019 on a 2-year basis. Lysol by over 100%, and Dettol by over 40%.Overall, performance so far in 2021 is largely consistent with our expectations. Growth is slowing as expected after an extraordinary year, but rebased upwards from pre-pandemic levels. During the first half, we've seen growth in Lysol, and it also grew in Q2 and a decline in Dettol. Our challenge in Q2 came from a somewhat weaker-than-expected performance in North America, where a more accelerated vaccination program, coupled with government guidelines, led to some moderation in demand in earlier pipe fill. Our Lysol Disinfectant Spray business continues to be strong. But for us, the wipes category, which has grown significantly since the start of the pandemic, particularly reflects this earlier rebasing.In terms of equity metrics, both brands are stronger today than they were pre-pandemic. Of particular note has been the further strengthening of these brands with their core users and how even occasional users have come to the brand in times of need. Our brands frequently define their categories and are therefore well placed to benefit from new opportunities. Over the past year, we have already entered nearly 70 new markets, while establishing the Global Business Solutions business. Our performance for market expansion is on track to expectations. Our Global Business Solutions business, which is now a year old, is off to a strong start, and it has built the marquee partners, distribution and demand creation programs, consistent with its long-term potential. The near-term volumes of this business will reflect the strength of sectors, such as travel, offices and small and medium enterprises, which are in various stages of normalization.And at the same time, our equity has also allowed us to broaden the shoulders of the brands, addressing new usage occasions, which greater germ sensitivity has uncovered, particularly for our core base of heavy users with innovations like laundry sanitizers, Dettol Tru Clean and Lysol Pet. As we look at current sales rates, we continue to expect that the rebasing of disinfectants will be gradual, particularly in light of new variants, vaccination levels, the cold and flu season and government guidelines. We continue to track near-term underlying demand drivers carefully, and our management teams remain flexible to respond to near-term shifts.The other segment where COVID has had a material impact is in our cold and flu OTC brands. Despite much improved execution, brands such as Mucinex, Lemsip and Strepsils were down significantly as a result of the historically weak flu season last winter. However, we are now on an upswing with Mucinex with encouraging POS trends, reinforced by viruses like RSV and the brand has now returned to growth versus 2019.The chart on the right shows year-on-year performance by U.S. State, with the growth in Mucinex in the states where masks are not mandatory is clear. We're also actively monitoring trends in Australia. A lot has been written about the public data on flu incidences, which suggests unseasonably low numbers. Our point-of-sale data by contrast suggests that some consumer incidences are potentially not being captured, perhaps because consumers are choosing self-care versus seeking help.Looking at POS trends in Australia, transactions have until recently been mirroring the flu season in 2019. However, recent lockdowns in certain regions such as Victoria have resulted in POS transactions slowing, demonstrating the impact of government guidelines. Therefore, the key message is this. For cold and flu brands, we are encouraged by the point-of-sale trends we are seeing. However, it is early days and lockdowns, social distancing and government guidelines will all influence consumer demand in the balance of the year. We see these dynamics for OTC as short-term and transient. Our long-term outlook for the category is unchanged.Finally, on our in-market competitiveness, we reported this morning that 60% of our revenue from our core category market units or CMUs, were in markets where we're gaining or holding share on a 2-year basis. But let me show you also how our comparisons have trended over time. As you know, we made strong gains through 2020, shown here in the 18-month number, which excludes IFCN China. As we were lapping the COVID pantry loading, early in the year, that measure declined. But you can see good momentum here. And in the month of May, we have returned to previous levels with further strengthening evident in June, as our Health business recovers.Overall, our business is gaining share. We expect this picture to strengthen as the cold and flu trends improve. Our focus for share improvement is in the OTC area of the Health business. Some pockets in the Nutrition business, example, our Philippines business for infant formula and for Airborne, which is reversing some of its large gains last year and some important competitive battles in Hygiene. We move into H2, comfortable with our competitive position with plans in place.As I have said, we are making good progress in building Reckitt into a better house and rejuvenating sustainable growth. And I will detail our progress here shortly.In the meantime, Jeff, over to you for the financials.

[Jeffrey Carr, Group CFO & Executive Director]

Thank you, Laxman, and good morning, ladies and gentlemen. Like-for-like net revenue for the Group was plus 1.5% for the half and down 1% for the second quarter. Revenues were significantly impacted by weakening sales of IFCN China, following the strategic review announcement, and excluding IFCN China, like-for-like sales growth was 3.7% in the half and 2.2% for the second quarter. Since we are expecting the sale of IFCN China to complete in the second half of 2021, we will largely refer to performance excluding IFCN China. The second quarter last year included a revenue recognition adjustment, as we align to best accounting practice. This creates a tailwind in the current quarter of 2.8%. In the second quarter, we're facing tough comparative numbers in disinfection. And for example, in Lysol, we are seeing growth rates moderate from their peak in the first quarter. Having said that, Lysol was up double digits in the second quarter, and our Hygiene business, in total, was up just under 8%. Additionally, in the first half, we've seen a record weak cold and flu season. However, our current point of sales trends are encouraging as we look to the second half.Overall, we've made great progress from 2019. Our group 2-year stack growth for the half is 17.6% and 15.1% in the quarter. Volumes were up 0.3% in the half, and the impact of price and mix was 3.4%, largely resulting from lower trade activity in Hygiene in the first quarter and pricing actions to offset dairy inflation in IFCN.Our adjusted operating profit margin in the first half was 21.6%, lower than last year by 290 basis points, largely as a result of lower gross margins. At 57.8%, gross margins were down 310 basis points versus last year, and we'll show a detailed margin bridge later. But in summary, there were 3 main factors impacting gross margin: Firstly, as anticipated, our investments were weighted more heavily in the second half of 2020 and these rolled forward into 2021. The investments are largely funded by strong productivity savings, which is spread across all lines of the P&L, but the majority of which impacted cost of goods; second, as expected, lower cold and flu sales from brands such as Mucinex had an adverse gross margin mix impact in the half; and finally, and not foreseen at the start of the year, we, like our other peers are seeing significant commodity price inflation. BEI was 13.5% of net revenues, 30 basis points favorable to last year, largely due to significant productivity savings in our media buying and production, additionally, we continue to build more in-house capabilities in areas such as digital, resulting in lower agency fees in BEI, offset by higher fixed costs.Other costs were up 10 basis points at 22.7% of net revenue, significant investments in areas such as R&D and sales and marketing centers of excellence were offset by savings in areas where we're able to leverage our scale and operate more efficiently. IFCN China was dilutive to Group margins by 110 basis points, and adjusted operating profit margins, excluding IFCN China, was 22.7%. For the full year, we anticipate IFCN China would be 90 basis points dilutive to the Group margins.Moving on to our business units and starting with Hygiene. The first half has seen an incredible performance from Hygiene with growth of 18%. And on a 2-year stack basis, 34.1%. The growth has been broad-based, led by Lysol, but supported by strong growth in Finish and Airwick.In the second quarter, it's also pleasing to see Vanish return to growth. With respect to Lysol, Lysol is up over 100% on a 2-year stack basis, and we're confident Lysol will be a significantly bigger brand once the COVID pandemic normalizes than it was in 2019. It's clear, however, the growth rates are slowing, with usage probably having peaked in quarter 1 of 2021. Retail shelves have largely now been restocked and supply in key areas, such as wipes, we've seen capacity come back into the market for key competitors and for private label.Margins were very strong for Hygiene in the half year, up 50 basis points to 25.6%, with volume-related operating leverage, more than offsetting increased investments and the accelerating inflation. Price and mix was up 4.1% in the half, and this is largely due to lower trade promotion activity in the first quarter of 2021 compared to the first quarter of 2020.Health revenues were down 10.2% on a like-for-like basis in the first half and 5.6% in the second quarter. On a 2-year stack basis, Health like-for-like revenues were up 6.8% in the half versus 2019. The key factor in Health is the weak cold and flu season in the first half of 2021 compared to a strong half in 2020, which included significant pantry loading at the start of the pandemic. Our brands Nurofen, Mucinex and Strepsils remain very strong. And as Laxman has said, we're seeing positive momentum into the second half of the year, as the category recovers, our brands will recover.Dettol sales declined in the half, as we have seen demand normalize. And obviously, we still see variations by country depending on vaccination rates and infection rates. However, Dettol net revenue remains around 40% higher than 2019, with the brand continuing to expand into new places and new spaces. Intimate wellness has strong growth in the half with double-digit growth in most major markets, and we had excellent performances in other areas of the portfolio, including Gaviscon and Veet.In addition to the inflationary environment impacting the group in general, absolute adjusted operating profit and margins have been heavily impacted in Health by the weak cold and flu season. Adjusted operating profit at GBP 468 million is down by GBP 248 million versus last year and margins at 21.8% are at historic lows. Clearly, we expect to see margins normalize in the second half as OTC sales improve.Moving on to Nutrition. In the half, total like-for-like revenues were down 8.5%. However, excluding IFCN China, sales were down 0.9%, which is primarily due to very challenging comparatives for VMS, especially Airborne. IFCN, excluding China, was positive 2.2% in the half, with strong growth in North America and Latin America. Adjusted operating profit margins for the half were 12.8%, including IFCN China and 16.6%, excluding -- note, the 16.6% is simply excluding the assets held for sale and doesn't take into account any rightsizing of overheads in the Nutrition business due to the reduced size of the operating unit.Now let me dive into an explanation of the first half adjusted operating profit margins. I'm going to take 2 different snapshots of the margin bridge. Firstly, you see here the impact on Group margins broken out by the performance of our 3 GBUs. Hygiene, as I mentioned, has a positive margin impact on the Group of around 20 basis points due to the leverage and higher productivity within Hygiene, more than offsetting the investments and the inflation.Turning to Health. The majority of the Group margin reduction is related to the lower Health margins in the half, 250 basis points out of the total Group margin decline of 290 basis points. Now Health is not just impacted by inflation, but as we've mentioned, the negative mix impact from lower cold and flu sales, which, importantly, as I mentioned, we expect to be largely reversing in the second half.Nutrition margins are down due to a weaker IFCN China performance, which we are addressing. Excluding IFCN China, margins are neutral year-on-year, with strong pricing action taken in most markets and productivity, offsetting investments and inflation. That still leaves second half commodity inflation as a key factor, but I'll come to that later in our guidance.My second look at the margin bridge is to look by activity. That's breaking out our investments, productivity and inflation, for example. This is the format we have reviewed over the last few periods. Firstly, we discussed the leverage benefits we're seeing in Hygiene, but these are offset by negative leverage impacts in Health and Nutrition. Net, we have 70 basis points year-on-year deleverage impact.Next, we see a cost of goods sold increase of 340 basis points. This is made up of 3 factors: first, adverse mix on gross margin principally from the weak cold and flu season. This is a 100 basis points negative contribution; next, we have commodity cost inflation in excess of pricing actions. And relative to last year, this is negative 160 basis points; and finally, we have various other items, such as incremental co-pack costs, which are 80 basis points adverse.Next, we have productivity and investments at plus 390 basis points and minus 270 basis points, respectively. We've stepped up our productivity program, and I'm very pleased with the progress we've made in 2021. We're well on target to deliver GBP 1.6 billion over the 3 years of the transformation program, which will, over time, fund the investments we are making in growth and capability. This gives a reported margin at 21.6%. And if I break out IFCN China, a margin of 22.7% for the first half.That brings me to cost inflation. As we said in April, we're seeing significant increases on key commodity groups, and inflationary pressures have continued to rise over the last 3 months. We are now looking at 8% to 9% inflation on cost of goods over the full year for 2021, clearly putting pressure on the second half of the year. The incremental cost since February is equivalent to 120 basis points on the full year Group margins. We show here certain commodity increases from June last year, which shows many key commodity groups such as plastics, surfactants and soap noodles, up in the range 50% to 100% based on standard indices. We had hedging and inventory in place to help protect the first half, but we will see more impact in the second half, and it's simply not possible to address this through pricing in the short term.Now before I move on to our guidance for 2021, let me just briefly touch on free cash flow. As a consequence of the higher volumes in 2020, we saw working capital inflows for the full year of 2020 of around GBP 900 million. At the time, we cautioned that an element of this would reverse in 2021. To date, we have seen a working capital outflow of GBP 416 million in the half compared to an inflow of GBP 711 million in the first half of last year. Therefore, we see a significant reduction in free cash flow, down from GBP 1.9 billion last year to GBP 520 million in the current period. Over the 2 years, we continue to see strong free cash flow conversion at over 100%, and free cash flow remains a key priority.I'd like to now turn to our margin guidance for 2021. This page tracks the key changes in our margin guidance. If we go back to February, we guided to 40 to 90 basis points decline in margins versus 2020, given a range of 22.7% to 23.2%.Now excluding the impact of IFCN China, on a full year pro forma basis, we will see a margin accretion of around 90 basis points. This is effectively offset by a small impact from the sale of Scholl and the acquisition of Biofreeze and the commodity inflation we've discussed, net of additional pricing actions and productivity to be delivered.In summary, we expect full year margins between 22.7% and 23.2%, excluding the impact of IFCN China. We've covered margins, so looking to the rest of our guidance. On revenues, we expect the third quarter to be slower due to the prior year comparatives. And although, it's early in the season, we're encouraged by the second quarter sales trends in our cold and flu portfolio and expect a moderate season to strengthen our performance in the fourth quarter. Based on the current situation, we, therefore, expect like-for-like net revenue growth to be within the 0% to 2% range set out in February 2021. Net finance expenses are expected to be 2.9% of net debt based on the net debt at the end of the first half, slightly lower than previously guided, and we expect our effective tax rate to be 22%, down from 23% as previously guided.Thank you. And now I'll hand back to Laxman.

[Laxman Narasimhan, Group CEO & Executive Director]

Thank you, Jeff. And on to sharing with you our progress in building Reckitt into a better house and rejuvenating sustainable growth. Our purpose, our fight and our compass guide everything we do as we continue on our journey to rejuvenate Reckitt. In terms of our strategy, we have 3 global business units in Hygiene, Health and Nutrition. China and e-commerce accelerate our growth enabled by global functions. We focus on 100 category market units with power brands as well as rocket brands. We grow by increasing our penetration, optimizing our market share and entering new places and new spaces. We have 6 strategic drivers that will allow us to strengthen the foundations of the business to deliver sustainable growth.Let me take you through each one in turn. First, our brands. We continue to invest firmly behind our brands, as they are the engine of our business. The investment is reflected in our equity metrics, where we see good growth and many areas, we are extending our leadership position versus our closest competitor. On innovation, investment in R&D will be up over 30% in 2021 compared to 2019 levels. This is funding 450 new roles, doubling our investment in OTC, doubling the local R&D investment that we have and resulting in a 40% increase in our corporate R&D function, which includes the safety, quality and regulatory teams. This has resulted in a 50% increase in the value of our 2022 pipeline compared to 2021. This gives us confidence in building momentum for years to come. We have talked previously about making investments in a more coordinated manner across the 3 Global Business Units in specific science platforms. A particular area of focus is the Microbiome platform, where we have significantly ramped up investments in bioinformatics, virology and bacteriology, building on our expertise in the IFCN business. We are broadening this out to include next-generation solutions towards breaking the chain of infection, long-lasting germ protection and air disinfection, thereby allowing differentiated solutions to protect heal and nurture consumers across the 3 GBUs. For example, the development of Dettol Tru Clean and adult nutrition products like ProVital have just launched in China and ASEAN. And a platform is strengthening our pipeline as our work drives insights for vaginal health, which will be used as we develop the Queen V brand, more on this later, or enhances our immune response to vaccines. I could tell you similar stories of the work we're doing across the other platforms, but I believe that Angela and the team for our September capital Markets Day.Turning to e-commerce. We continue to grow rapidly here, nearly doubling on a 2-year stack basis, excluding IFCN China, which in itself has strong e-commerce capability. As we have explained before, our omnichannel and platform customers are a big part of this, but we continue to invest behind smaller disruptive brands, our Be Bold and Be Open pillar. During the period, we have established further partnerships, launched nascent brands like Casa Home, Fight vitamins and little yawn collective. Our approach here is to build digital-first brands, owning the relationship with the consumer, while advancing our channel expertise with the philosophy of fail fast and learn fast.On commercial execution more broadly, investment is improving our commercial execution. We've talked previously about the centers of commercial excellence, medical sales, marketing excellence, e-commerce and sales outperformance. Our investment here is driving tangible results. We are generating greater share and quality of distribution. We are seeing better customer relationships, having recently been named supplier of year by Walmart, for example. And as I mentioned previously, we saw significant improvement in the annual advantage survey of retailers. And we are vastly improving our trade investments, which is directly contributing to revenue growth and also contributing to future productivity. Another area of investment has been our supply chain. For much of the last year, our supply chain has been responding to the exceptional demands placed on it by COVID and has increased capacity. However, we know we have much to fix, and they have continued to build on our underlying capabilities.Gaviscon is a brand that is growing through good innovation and marketing as well as market expansion. At the same time, we have expanded capacity by around 50%, driving our service levels by 20 percentage points and accelerating revenue growth from 5% in the first half of 2020 to over 30% in the first half of 2021. On an investment of GBP 20 million, we estimate our return on this to be over 50 percentage points. This strategic progress goes hand-in-hand with the progress we are making to become more sustainable business. I'm particularly proud of the team's efforts in recent months with another breakthrough packaging launch for Finish, where we are pioneering using 30% PCR in flexible packaging at scale. And elsewhere, we continue to improve our environmental impact as we configure our supply chain, for example, with material savings made here in our U.S. IFCN business, resulting in a 70% reduction in our carbon dioxide emissions. All of this is done with an eye on our environmental targets, such as carbon neutrality by 2040 and the 65% reduction in greenhouse gas emissions by 2030.To support our progress here, we continue to build relationships with external partners, as indicated on the left of the page. And our work is being recognized by third-party agencies, with both our MSCI and Sustainalytics scores improving in recent months. We have recently been upgraded to AA with MSCI, just one band below the highest rating. And with Sustainalytics, our improved score means we are now ranked fifth amongst a peer set of 101 in the HPC sector. Once again, more to do but strong progress.Moving on to the pillar of productivity, which is how we are funding most of our investment. By the end of this year, we will have achieved over GBP 1 billion of savings since the beginning of 2020. And we feel good about the trajectory here, with annual run rate of productivity effectively doubling since 2019, while mitigating our impact on the environment. We expect to continue to maintain this momentum going forward on an ongoing basis, given the productivity muscle that we are building. Actively managing the portfolio remains a key element to our strategy. As previously announced, we completed the sale of Scholl at the beginning of June. We have very recently completed the acquisition of Biofreeze. The business has already been growing at double-digit rates in recent years and hasn't had a good start to the year, but we see further opportunity, though. Firstly, accelerating this growth as the brand joins the Reckitt sales and marketing platform. Secondly, using the science and technology to expand the Biofreeze suite of products. And thirdly, expanding geographically with the mass majority of current revenue coming primarily from the U.S.Finally, we are working to close the transaction of IFCN China and expect to complete this in the fourth quarter.The final of our strategic pillars is around leading and inspiring our people to succeed. We have built in what made us distinctive in our past and modernized it for the future. Feedback from our employees is strong, as we continue to make good progress with many of our feedback scores ahead of benchmarks. I've taken you through our strategic pillars and how we're investing to improve our foundational capabilities.Now let me walk you through how that is translating in performance as we seek to grow penetration, drive market share gains and enter into new places and new spaces, and why it gives us continued confidence in our medium-term growth.Firstly, Hygiene. As I mentioned earlier, Lysol is now in 22 million more homes than it was in 2019. Our share in Hygiene remains strong, with 60% of net revenue in our core CMUs holding or gaining share. An example here is Vanish, which is returning to growth after a difficult year in 2020. A specific example of Lysol entering a new European market in the second half of last year. This market has already contributed GBP 2.5 million of revenue from a standing start, and the brand has already established itself as the #2 in the MPC market, while effectively establishing the aerosol category. We continue to build our Global Business Solutions business, which remember, in its correct form, is only a year old. In recent months, we have signed British Airways, TripAdvisor and Dubai EXPO, to name just a few. Our distribution to offices and workspaces is also strengthening, as is our coverage of consumers on the go, where the brand is highly recognized. It is not only major corporate partners who need support from our brands, and we are, of course, expanding distribution to small and medium enterprises as they similarly seek to attract their customers back to their restaurants and other venues. We are growing well. And given the nature of these partnerships, revenue will build over time as planes take to the skies again and travelers visit hotels. In summary, we remain optimistic over the long-term opportunity for what is a new market for us.Turning to Health. Dettol is recently been named by Kantar, the brand with the highest ever penetration growth on record, growing penetration by 530 basis points last year. I mentioned earlier the Gaviscon story of relentless share gains over the past year. And we have continued to enter new spaces with GaviNatura and Veet Minima. Particularly exciting is what we are doing in Nuromol, a unique formulation of Nurofen and Paracetamol in Brazil, which we will launch in September.Turning to Intimate Wellness, our new name for this category, recognizing the broader opportunity within this part of our portfolio. We are already the leader in most of the markets in which we operate. Yet we continue to gain share. Our brand and our consumer relationships give us the ability to significantly grow this business. Gains in the half were particularly strong in Germany and the U.K., 2 of our largest markets, driven in part by an extremely strong e-commerce performance due to e-commerce-specific pipeline and digital marketing strategies.Our business in China continues to be extremely strong, benefiting from the PU launch late last year. Allied to this, we continue to build partnerships to support our direct-to-consumer business. And overall, e-commerce is up 25% year-to-date. Earlier in the year, we acquired Queen V, a female intimate wellness brand focused on vaginal health. As I mentioned earlier, we are engaged in our microbiome science platform to develop this brand further. This will help us as we bring the brand back to the U.S. later this year with further geographic expansion plans beyond that. Looking forward, we continue to see significant opportunity to accelerate growth in our core business through addressing incremental needs, occasions and serving our consumers in an omnichannel way. No 2 sexual lifestyles or preferences are the same. And by continuously improving our understanding of the nuances and consumer needs, with improved innovation and marketing, we can better address unmet demand. At the same time, however, we are currently a small part of the overall market. Durex is the right to play in a much broader space, such as female intimate wellness, hygiene, treatment and libido as well as toys, devices and a broader sexual health. Here, science, trust, new business model innovation at scale and purpose-led brands are key. We are, therefore, optimistic about future growth and well positioned. We also have the opportunity to strengthen our geographic presence as our 3 largest markets currently represent around half of our revenue. This opportunity includes growing further in the U.S., the world's largest intimate wellness market as well as playing a leading role in expanding category penetration in fast-growing, emerging and under sale markets. We are moving from a single brand play with concentrated pockets of strength to a portfolio approach where global opportunities rooted in superior consumer understanding of demand spaces, portfolio and innovation. We, therefore, remain confident in delivering high single-digit revenue growth from this business, representing over 15% of health revenue, Intimate Wellness contribute around 1/4 of our annual growth of the GBU target of 4% to 6%. Our Nutrition portfolio has been consolidated and strengthened by the disposal of IFCN China with strong trends in much of the rest of the business. Across the world, we are bringing more consumers into the category. In China, through the annual shopping festival. In the U.S., through celebrity influencers for Neuriva. And in Brazil through increased investments in Sustagen, one of our local hero brands. On market share, U.S. IFCN grew share by 100 basis points on the non-WIC, women, infant and child segment of the market. This continues to be driven by the strength in NeuroPro, where we have built marketing campaigns around its Omega 3-DHA claims. Additionally, as we have said before, we see the VMS business growing mid-single digits medium-term with a strong e-commerce and digital play, a core strength. On Airborne, we had a very strong presence in 2020. And like our Hygiene brands, we are seeing some unwinding of that this year. Across the Nutrition portfolio, excluding China, we are gaining share, with over 70% of revenue from core CMUs gaining or holding share, and we have good momentum here.Turning to Specialty Infant Nutrition. This is our highest margin business, and it is a business that has taken a while for us to fully put the building blocks in place.The allergy segment is large and growing at 7% historically, as a result of increased prevalence with very supportive consumer trends grounded in science. We've recently become market leaders in the U.S. We see a global scaling opportunity for this business with our current offering and believe we can grow this portion of the business in the near double-digit range. So drawing all this together, I have talked about how we are executing against our growth drivers of penetration, share, places and spaces to outperform in each of our categories. And this slide summarizes directionally how we see that contributing to overall growth rates of the 3 GBUs you will be familiar with. And why we believe in our medium-term revenue target of mid-single digits growth. Our Hygiene business grew at 4% in the 2 years before the pandemic. Post the pandemic, we continue to see significant opportunity to grow Hygiene and Dettol through increased penetration to expand the category. The equity in these brands provide the basis for which to broaden their shoulders into new spaces and new places. Some of our Hygiene brands also have significant opportunities with e-commerce as well as with emerging markets. This, therefore, gives us confidence in the medium-term growth ambitions of 4% to 5%.In Health, we see similar opportunities with Dettol, but even greater opportunities in emerging markets. Through our work on consumer demand spaces, we will strengthen our OTC brands to address broader unmet health needs across both acute and chronic pain management. Our Nurofen and Biofreeze growth plans in pain are an example of that. Additionally, we are expanding our brands like Gaviscon and Nurofen into new geographies, with clearly articulated playbooks and linking our local heroes like Tempra in Latin America to the pain platforms to scale innovation as appropriate. In the case of Intimate Wellness, we have the best globally recognized brands, but playing in a small part of the market, and it's another area where we expect our leadership capabilities in e-commerce to provide greater opportunities for growth. We also see opportunity across all of our growth drivers, penetration to expand the category, new spaces and new places. We are taking the brands to, like Queen V, building up the strength of our brands, innovation, omnichannel presence and increasing direct-to-consumer relationships to grow this business. And as I said earlier, we are moving from single brand play to a portfolio approach with global opportunities. All of this provides the basis for 4% to 6% growth rates we see in our Health business. Our Nutrition business has multiple parts. In infant nutrition, we continue to look to strong innovation and premiumization as opportunities to offset systemic birth rate declines in our base Enfa business. In specialty, we now have the building blocks in place to grow on Nutramigen and Puramino business in existing and new places, while expanding into adult nutrition with ProVital. We also believe that our Vitamins, Minerals and Supplements business can grow mid-single digits. All of this put together gives us confidence in the 3% to 5% growth rates we have set out for our Nutrition business in the medium term. It is, of course, these segmental growth rates that give us confidence in the 3 GBU targets that we have set out. And in turn, our mid- single-digit growth for the Group in terms of revenue.I am pleased with our progress in H1 despite a slower Q2. H2 will be slower with a very strong comparator from last year. Yet, it is particularly encouraging to see the benefits of the investments that we have made in the business starting to come through in terms of innovation, quality and service levels. This all bodes well for the future and builds my confidence in the medium-term outlook. Short term, we are obviously continuing to operate in a very dynamic marketplace with 30% of our revenue, more impacted by COVID and its impacts on consumer behavior and government policy and through a challenging cost environment. As I look at the plans, we do expect to exit 2022 with revenue growth in the mid- single-digit range. What gives me that confidence? First, I believe that where we play, our neighborhood is great, dynamic in many parts, but great. Second, I have talked today about the progress we have already made in our underlying brands as well as in our commercial, supply chain and e-commerce capabilities as well as our productivity muscle. But there is more to do and more to come. Third, I have talked to you about the 30% increase in R&D investment and the 50% plus growth in our innovation pipeline, which this is driving in 2022. Fourth, we have demonstrated our ability to be active managers of our portfolio and are executing actions consistent with our objectives. And finally, I've talked about the culture change we are bringing about in our people, where we have made significant progress in unleashing the talent in the company, and which will be even more embedded a year from now. Clearly, there will be many factors related to COVID that are impossible to predict, but we anticipate that by the second half of 2022, the short-term or transient effects of the pandemic will be largely behind us. Once the coming months have been navigated, we trust that the steady progress we are making in building a better house, in a great neighborhood, will become even more apparent. We therefore remain confident that we will exit 2022 with the run rate that should get us to deliver mid- single-digit revenue growth in 2023. As Jeff has also said, the mix of our portfolio and the increasing strength of our execution and where we play as well as how we win, including the elimination over time of some of the above the line transformation and onetime costs will lead us to delivering upon our margin objectives.So to recap, I am encouraged by our progress to date and have 4 key messages: first, we have had a solid first half of the year despite a strong comparator and a slower Q2, with a very strong 2-year revenue stack of over 13% inclusive of IFCN China; second, we continue to make good progress in building a better house in a great neighborhood; third, we are addressing near-term cost pressures, while actively managing our portfolio; and fourth, we remain confident in meeting our medium-term targets of mid- single-digit revenue growth and mid-20s margin by the mid-20s.Finally, I would like to thank all our people. All our associates at Reckitt around the world, our customers and our partners for their continued support. Thank you all for joining us this morning. Jeff and I will be glad to take your questions shortly.