Unilever PLC (UL) Q1 2018 Earnings Report, Transcript and Summary

Good morning, everybody, and a warm welcome to this first quarter trading update. First, let me draw your attention to the usual disclaimer relating to forward-looking statements and non-GAAP measures, here it is. And with that, let’s kick off this brief update with a little bit of market context. Global GDP growth stepped up last year, and the latest forecast for this year indicates some further improvement. This is expected to come mostly from the emerging markets, in particular from Brazil, India and the Middle East. Now underpinning this, the high levels of currency-driven inflation that have been impacting consumers in some emerging markets have abated. This is a very welcome development as it takes inflationary pressure off of consumers and allows them to spend on their everyday needs more confidently. Looking at our own markets, we see market growth in aggregate of slightly less than 3%. There have been some small improvements in parts of Europe. However, the forecast GDP upturn in some key emerging markets, like Brazil, South Africa and Indonesia, has yet to fully impact the market growth for Unilever’s categories in those countries. This is quite normal. There’s always a time lag to some extent between GDP, in general, and the impact in our specific markets. Now the welcome slowdown in the high levels of price growth has, however, helped overall consumer demand. And after having been low for a year or so, market volume growth has now picked up to a little over 1%. For Unilever, overall, Q1 has been a good start. Underlying sales growth, excluding spreads, was 3.7%. The quality of delivery has been strong in the first quarter with virtually all growth coming from volume and mix. Volumes were helped by a very strong start in North America, driven by front-weighted phasing of innovations and promotions as well as good performance from the acquisitions. There were soft volume comparators in India, the UK and in Brazil as we lapped the after-effects of demonetization, trade issues and retailer de-stocking in the back year. There may also have been a little benefit from an earlier Easter. Nevertheless, we feel we are off to an encouraging start, especially considering a slow ramp-up to the ice cream season in Europe and North America. It was the hottest day of the year in Europe yesterday, but that comes after a long winter that went well into late March and April. As expected, pricing was muted. This was driven by low commodity inflation, by the impact of GST in India and from negative pricing in Latin America. Richard is going to come back to this in more detail when he covers the regions. Q1 growth was very nicely broad-based across the 3 divisions; Beauty & Personal Care grew by 3.9%, Home Care was up by 4.9%, and Foods & Refreshment grew by 3.7%. In emerging markets, the headline underlying sales growth number is 5.1%, but more importantly, volume growth in emerging markets has been maintained at 4% for the second consecutive quarter. Price growth, however, of 0.1% is lower than we’ve seen for quite some time. This was expected. This is actually the chart we showed you on the full year results call, but updated this time for Q1. We expected little contribution from price and the reasons were given then. But as a reminder, our reported price growth measure is pure price and does not include mix. Mix comes through in our underlying volume growth measure. We’re not concerned about relatively low pricing in aggregate. Pricing decisions are made locally, and we see positive pricing in places such as Turkey, Mexico, the Netherlands, Eastern Europe, and offsetting negative price in others such as Brazil, North America and the UK. What is important in making pricing decisions is that we balance the needs of the consumer and the shape of the P&L. We remain confident that our savings programs keep us on track to deliver a step-up in margin consistent with the trajectory of our 2020 margin targets. If we look at a bit more closely at the divisional performance now. In Beauty & Personal Care, we want to grow the core of the business while strengthening the portfolio in emerging growth segments like Naturals and by building Prestige. The division grew 3.9% in Q1 with all of the growth coming from volume. Skin cleansing had a strong quarter after several new launches like our new aerosol char mousse, which was launched across 5 different brands in Europe ahead of being rolled out globally. Baby Dove continues to expand its footprint and is on track to be in 30 markets in 2018 with at least a 5% share position in all of its key markets. In hair, Sunsilk continued to grow well, driven by the continued success of last year’s relaunch and further expansion of the Naturals range. Continued momentum on 2017’s Dove relaunch, which is now across 65 markets, contributed to a strong pickup in deodorants’ volume growth. Rexona was also helped by innovations such as the new stay fresh range with antioxidant technology, which was launched in Latin America. Love, Beauty and Planet and ApotheCARE, the 2 new Naturals brands launched in the U.S. last year, although still in early days, are off to a good start. And our Prestige business continues to perform well. It was up mid-single digits with online sales growing strongly at 70%. Dollar Shave Club has now launched here in the UK, and more recent acquisitions such Carver Korea and Shea Moisture are doing well, but are yet to contribute to our reporting underlying sales growth. Home Care continued to grow at around 5%, again, nearly all volume. Emerging markets have performed well for Home Care. In particular, India, Africa and Turkey all saw strong growth. Premiumization in India is delivering for us with mix benefits from consumers trading up to Surf Excel, which is growing very nicely, and the successful launch of Comfort Pure. Sunlight Dishwash was relaunched in Indonesia and the Omo brand had a good first quarter with strong momentum showing from the global relaunch last year and the introduction of new variants such as the Naturals range in China. We continue to see Home Care growth in Europe with a number of launches this quarter, including Persil triple-chamber capsules and the introduction of the Comfort Deluxe fabric conditioner in the UK market. Seventh Generation is now in our reported underlying sales growth numbers and continues to perform well in North America, whilst building out its presence in the UK. Our water purification business had a good start to the year. However, our Blueair business in China has suffered a slowdown in momentum since the Chinese authorities introduced strict air pollution controls in the big cities of China, which is Blueair’s biggest market. While we unreservedly welcome, of course, improvements in air quality, and hence, the quality of life for those that live in Chinese cities, we must now respond by focusing on the many other opportunities offered by Blueair’s product range. Turning to Foods & Refreshment. The priority for our newest division is to grow its presence in emerging markets, to modernize the portfolio and to continue to build growth in alternative channels such as food service and out-of-home impulse occasions. Excluding spreads, overall growth in Foods & Refreshment was 2.7%, nearly all of which came from volume. Ice cream grew by 3%, helped by the recent launch of Magnum pints in the U.S. and Ben & Jerry’s nondairy in Europe. Breyers delights has been rolled out at speed and is now available in nine European countries as well as North America, where it’s continuing to gain distribution. As I mentioned earlier, those in Europe or, indeed, in the East Coast of the U.S. will know that the weather has not been ice cream friendly so far in Q2, in contrast to 2017 when there was a European heatwave through much of the quarter. Knorr had a good quarter, launching a range of natural mini meals in 11 countries across Europe. And in North America, a new range of organic meal starters has gone into the market. We want to continue to be a strong growth driver in our emerging markets. Mae Terra, our recent Brazilian acquisition, is building from a small base but beginning to capture consumers in both the Naturals and premium segments of the market. The Foods & Refreshment division is now fully operational, and this should open up more opportunities to develop the portfolio further and drive our margin enhancement programs, such as 5-S, across the newly combined division. With that, let me hand over to Richard to take you through Q1 growth in a little more detail.

Thank you, Graeme. Let’s take a look at what has happened to turnover in Q1. Underlying sales growth was 3.4%, with volume contributing most of this. Price growth, as we flagged you at our full year results call, was low. There are four reasons for this: First, the impact of GST in India; second, the negative price from economic resets in Latin America, which I’ll will come back to in a moment; third, strong price-driven competition in Europe and North America; and finally, low commodity inflation overall. Acquisitions, the largest of which are Sundial and Carver Korea, have contributed 1.5% to turnover. Turning to currency. We saw a significant translational currency drag of 9.8%. This is a result of the euro strengthening against almost all of our major currencies. This depresses our sales, which is purely a reporting impact from consolidating our global numbers in euros. Against the USD, U.S. dollar, most emerging market currencies have been stable. This reduces imported inflation, which helps consumer affordability. This is the main driver for improvement in market volume growth and lower price growth. If exchange rates were to remain as they are today for the rest of the year, then we would expect there to be a negative translational impact of 6% to 7% on turnover and a little more on EPS. If we now turn to the regions. The emerging markets grew by over 5%, with most of this coming from volume. Billions of consumers in our emerging markets are back to using and buying more of our products every day, so the quality of our growth there has certainly improved. In Asia/AMET/RUB, our biggest regions, growth has continued at around 6%, but volume has been gradually picking up over the last year and is now over 5%. Our business in China grew strongly, but was adversely affected by the sharp decline in air purification, as Graeme mentioned. We can’t say too much today on the performance of India, as AQL have their own results update in May. But after 12 months of disruption, consumer demand is picking up and offtake has been good. Pakistan and Turkey grew at double-digit rates, while sales growth in Indonesia, South Africa and Russia were adversely affected by challenging market and competitive conditions. Whilst the pickup in volume in AAR is reassuring, overall growth was impacted by lower pricing. Pricing should pick up in the second half as we annualize the implementation of the Indian Goods and Services Tax, and we expect a higher level of commodity cost inflation. In Latin America, the return to volume growth we saw in Q4 has been maintained, with Brazil, Argentina and Mexico all contributing. Volumes in Brazil, now positive again for a second consecutive quarter, were notably strong in Q1, helped by a very weak comparator. Price was negative. We expect price to turn positive in Brazil as the year progresses and for volumes to slow from current levels as the comparators normalize. Turning briefly to developed markets, which grew 1.1% in the quarter. We were pleased with the 2.9% that was delivered in North America, helped by the timing of some innovations and promotions and strong performance of the acquisitions. Europe was flat overall. We see an encouraging improvement in market growth as price deflation continues to ease, but the retail environment remains tough, particularly in places like France, which weighed on our growth for the quarter. Aside from France, most of our countries grew modestly with good volume net growth in Germany and the UK. Overall, trading conditions in North America and Europe continue to be challenging. And with that, I’ll hand back to Graeme.

Thanks, Richard. So let me summarize how we see the first quarter. The overall performance is strong, and we’re very pleased to see a sustained return to volume-led growth. Our business model is working well, and we’re seeing more confidence and stability in many of our emerging markets. But when looking at overall performance, remember this is just one short quarter, so let’s turn our attentions back to the priorities and the gains for 2018. The priorities that Paul showed you at the beginning of the year remain unchanged. I don’t plan to talk through all of these, other than to say that everyone in Unilever remains very focused and on track to deliver each one. The only additional news here is the planned share buyback, which we announced this morning. We’d indicated already that with the successful sale of the spreads business and absent any significant acquisition, we would deliver the estimated €6 billion of sales proceeds back to shareholders. We intend to do this by starting a share buyback program from the beginning of May. Our full year outlook remains unchanged, and we’re happy to be off to a good start. As we discussed, strong volume has already come through, and we’ve explained the drivers behind that. We don’t expect price to pick up just yet. As a result, with spreads still in our numbers, we can expect growth for the first half of the year to be around the lower end of our 3% to 5% multi-year range. Our savings programs continue to progress well, and the significant work to complete the spread separation and deal with the stranded costs is on track. We’re also on track for 100% cash conversion target by 2020. And with that, let’s take your questions.

Thanks Graeme. [Operator Instructions] Okay. So our first question, I see, is from Warren Ackerman from SocGen. Go ahead Warren.

Good morning guys. Good morning Graeme. Two questions, please, from my side. The first one is on this weak pricing. Richard, you called out four factors just now: GST, LATAM, price competition, low commodity inflation. Would you be able to help us by elaborating on each of them, and maybe try to quantify them if you can, and perhaps give us a feel for how you see each of them sort of trending in the back half that gives us a feel for what kind of recovery in pricing might be realistic in the back half? That will be very useful. And then secondly, just back on the volume. Are you able to maybe just try and split it for us in terms of mix versus kind of real volume just to try and understand, because, obviously, you’re pricing is pure pricing, as you say, Graeme, but what’s happening to mix? Where are you seeing in the kind of premiumization happening most within your portfolio? Thank you.

Thanks, Warren. If I may, I’ll take a little bit of time on this, because I think the pricing one is well worth digging into. And Richard, by all means, chip in and build on this. So as Richard said in the talk there, there are four key drivers of the pricing being muted in the first half as we expected. First of all, most of the emerging market currencies are stable or appreciating against the weaker U.S. dollar. I know we’ve got big translational and consolidation accounting-driven impact of foreign exchange into euros, as Richard said on the presentation. But the most important one for us economically is the dollar, and most of our currencies are either stable or appreciating against the dollar. So there’s actually quite limited commodity pressure in local currencies in the first half. We think that will start to ramp up in the second half, and that’s one driver. Second one is the impact of GST in India. That depresses pricing by about 30 basis points a quarter, until we lap the impact of GST, which is in the Q3 and Q4, that will drop away. Third factor is the inflation is starting to ease off in Latin America. Argentina is now down to low double-digit inflation. Price growth in Brazil has been negative. That hardly ever happens, and we expect that, that will start to stabilize and get a little bit more price growth in Brazil in the second half. And of course, Venezuela is now out of our price growth from Q4 2017 onwards and is still sitting in the back period. And then the final point, as Richard mentioned, the promotional intensity remains really strong in Europe and North America. We’re very happy with how we’re competing in both markets. The example will be North America dressings, which has gone very promotionally intense, but we’re engaging toe-to-toe there and winning that battle. Home Care in the UK would be another example of that. Now I want to be clear that it looks like we’ve had zero price growth for a second consecutive quarter here, but that aggregate 0% price growth doesn’t mean in any way that there’s no price growth anywhere. In fact, there are plenty of our markets where pricing is strong and there’s good balance between volume and pricing, Turkey, the Philippines, the Netherlands, Mexico, et cetera. I could go on with examples of it. But there’s a big counter-balance to that, which is big markets for us: India, with the effects of GST, just depressing pricing until we lap it; Brazil, as we lap several years of high inflation and the economy resets; and the UK as we lap trade issues in the back year. So that’s a big factor. I think it’s really not worth overthinking price growth in any given quarter. We expected price growth to be muted in first half, and we’re clear on the drivers behind that. I think if you step out a little from it, and you think about 3% to 5% being our sort of multi-year range of growth delivery, and we go to look at the full year for 2018, to us the consensus growth for 2018 looks sort of stretching, but achievable for us. As we said, we should see a more balanced mix of price and volume in the second half within that. We’re probably a little bit more cautious on Q2, simply because of the impact of the ice cream season, the fact that we’ll still have the impact of India GST and spreads will still be on our numbers for the second quarter, et cetera. So a little bit more caution there. But that’s how we’d, Warren, think about the totality of the price landscape. Moving to volume and your question about mix within volume, we don’t separate it out for you, so I’ll not do that here. But I want to give you a very clear example of that, which is, the Brilhante brand in Brazil, which I know we’ve mentioned on a couple of other calls. But it’s a really a good example, because our Home Care business in Brazil really needs to shift with the consumer. Omo, which is the biggest single-country brand sell that we have in Unilever, isn’t down in the sort of tertiary Tier 3, Tier 4 positioning. So we brought the Brilhante brand in to catch a down-trading consumer in a very, very stretched market. It’s a great example of what an agile business plugged in and close to its consumers on the ground can do. Doesn’t happen overnight, of course, but we’ve had strong, strong growth in that Brilhante brand. And that, of course, is – that is mix that shows up in our numbers and volume that, of course, it’s actually the right thing to do because you’re maintaining the consumer relationship. The consumer in Brazil has moved into the cash-and-carry channel, and that’s the brand that we’re using to reset our portfolio with more Tier 3 and Tier 4 positioning. So that’s just a great example of that. Thanks for the opportunity to call it out, because I think the fact that we’ve got mix alongside our volume, which means that our price number is a pure price number, is always worth calling out, Warren.

Got it, got it. Great. Can I just clarify one quick thing? Just on this pricing again. I mean, when you get these big EMD valuations, in the past, Unilever would have taken a lot of pricing, and this quarter we’ve had like 30% devaluation in the Argentinian peso against the euro. So I don’t really understand why you are not taking more pricing. Is there something structurally changed now relative to sort of five years ago in that you’re just more reticent to take pricing because of local competition? Or is something else going on?

Certainly not, Warren. I mean, the key there is that it’s actually the movement of the peso against the dollar that’s important, not against the euro. The euro is only relevant for consolidation and GAAP reporting, one single set of numbers. The currency which is most important in the markets where we’re big, in our emerging markets, is the movement against the dollar. And the peso is actually down a bit against the dollar. It’s one of the few currencies that is. But most of our currencies are stable or are appreciating against the dollar. So you’re not seeing that local pressure when you actually are importing materials in – for the purposes of the – where the real action is within your markets. And that’s a good thing, because where you get stretched consumers, we would rather have more muted pricing and the ability to get our brands into more hands and get real volume growth in those markets, especially when you think about the four or five quarters we had preceding that where you’ve had quite a lot of imported inflation in those markets because of the reverse. So we’ve got this – I know it looks as if FX and everyone is going to reset their models today based on the translation FX, but that doesn’t have an impact on our business. I want to be really clear about that. What has an impact on our business is currencies versus the dollar, and it’s quite a benign environment, and that’s where you’re seeing the more muted pricing. And the good news is, when you have more muted pricing, more consumers buy more of your brands. It’s a good thing.

Yes, well, you’ve seen a lot of devaluation in Brazilian real against the dollar, but you’re not taking pricing in Brazil. I mean, it’s just on that point again, sorry.

Well, that’s more of an economic reset. We’ve spoken more about that in the past, but there’s been a lot of pricing in Brazil over many years, so it’s a complete reset of the economy. As I said, consumers – I think about a – I think the cash-and- carry channel now has 25%, 30% of the volume in Brazilian shopping, big shift away from the hypermarkets. You’ve got a channel shift and a fundamental reset. What we do there, as I mentioned earlier, is think about our portfolio and the relevance of our portfolio to make sure that we are in the right channels for shoppers and consumers we know, with affordable products that they can afford as an economy goes through a reset. That’s the most important thing. Richard, did you have something to add?

Yes. No, it’s just that I can assure that in Argentina that we have been taking strong price. It’s not as high as in the past inflation in Argentina, but we continue to take a strong price in reaction to the peso, as you called out.

I think it’s just the re-price. I mean, we’ve gone on a wee bit on this. Sorry about that one. But the – I think it’s a really important point that we’re not in a situation where we’re suddenly going from all price growth, no volume, to all volume growth, no price. It’s much, much more dynamic than that. It’s much more granular than that. We happen to have 3 or 4 big markets, which mean that mathematically it looks like we’ve only got 0.1% price. But the dynamism in the markets, the way the businesses are performing, they’re all doing the right thing. And there’s plenty of price growth in individual markets, it just doesn’t show up in the aggregate reported numbers.

Okay thank you very helpful.

Thanks Warren.

Thank you.

Okay. Next, we have Eileen Khoo from Morgan Stanley. Go ahead Eileen.

A quick question for you on emerging markets, actually. If I look at your organic growth run rate from last year, you’ve had a sequential slowdown. And I know it’s just one quarter, but basically your volume growth has stayed unchanged even though pricing has come off quite a bit. Would you have expected a bit more of a volume boost, perhaps? And I was wondering if there were actually any EMs where you’ve seen a deterioration, and perhaps you could give more color on the dynamics in some of your key markets, and also what your expectations are for the remainder of the year. That’s the main question. And I have just got a quick question on Foods & Refreshment, whether you’re able to split that 2.3% like-for-like into the 2 categories, how did they do? And I know you report them together now, but just curious on that.

Thanks, Eileen. So let me maybe tackle the first one, and Richard if you want to, have a think about the second question on Foods & Refreshment. So I – this is – on my crib sheet, one of the things which I keep a little running total of is the sequential volume growth in our emerging markets, Eileen, and we went from – I think it’s 2.7% in 2015, it dropped down to 1.1% in 2016, went up to 1.6% in 2017. But the fourth quarter of 2017 was 4.2%, and now Q1 of 2018 is 4.3%. So there’s a clear uptick now in emerging markets’ volumes. I think that’s very significant strategically for Unilever, because the 25-year average, as I have probably bored people with for a while now, has been 20 – has been 5% as a long-run average. And the key question is, do you get back to 5% or does it get back to 3% or 4%. What I keep saying is, our growth algorithm works very well if we just come off the historically very low levels that we’ve got at the moment and get back to normalcy. And if you think about demographics and all the things we know about where population growth is and where income growth is in this world, you’ve got to believe that, that is going to be just a fundamental of nature. So good to see that start to come through, but you don’t want to call things too early. But we’re very happy with that step up. Now your question on specific markets. I’ll just run through a few. I think the one that’s the biggest standout for us, at least given my own of career history, is Indonesia. Indonesia is – has had negative volumes. That’s in the marketplace, a negative pricing in the marketplace. A negative price in the Indonesian market hasn’t happened in a very, very long time, if ever. There’s lots happening in Indonesia in terms of the government trying to support the poor. The mix of where people spend money has pulled through as well. And that is definitely having an impact. Our Indonesian marketplace is not really looking like the normal Indonesia that we’ve had over several years, and lots happening there at government level to boost consumer spending, particularly with low-income consumers. So that’s well worth calling out. Other emerging markets which had a negative volume: South Africa, doesn’t have a lot of growth overall, but is a couple of percentage points negative in volume, again 25% unemployment in South Africa. Some good things happening in terms of changes, but a big market for us, which is, obviously, a challenge. And indeed Brazil, of course, which was negative volumes through that period that you referenced. We had a period of negative volumes in Brazil. Actually, one of the other numbers we’ve been tracking is when does Brazil return to positive volumes, and this is the second consecutive quarter of positive volumes in Brazil, which is good news. Albeit, as we said in the talk, that there’s a little bit of price deflation in Brazil, which shouldn’t persist for a long time. Other 2 markets in the emerging world which are weak for us would be Russia and Thailand. Thailand’s got a little bit of volume growth, but no pricing growth. So it’s been flat overall. And Russia was down sort of mid-single digits with a little bit of negative volume. So it’s not an – emerging markets, there’s a lot of volatility, a lot of differences as you go market-by-market. But the really good news, I think, is in aggregate we’re sitting on 4% volume for the second quarter.

And third, Graeme, can you clarify on the market share performance as well in emerging markets? Would you say that you’re tracking ahead of the market there?

Yes, in all of those markets, we are, by and large, doing very well. Take Latin America. First of all, good gains in Argentina, and in Brazil we’re actually gaining share in all of the price tiers. But when we look in aggregate in Brazil, we’re losing a little bit of share overall, but only because we’re underrepresented in the more affordable Tier 3 and Tier 4 price tiers, which is why I was mentioning brands like Brilhante earlier. So competitive wherever we compete, but we’ve got a little bit of a portfolio mismatch there we’re working to address with the Tier 3 and Tier 4 brands. India off to a very strong start. I mean, all categories are growing ahead of the marketplace in India. I won’t say much more in India because they haven’t reported yet, but a good, good strong start there. In China, we are very happy with our performance, online in particular. There’s three categories what we measure share in the online e-commerce market in China, and we’ve made significant gains there. In Turkey, we’re winning very strongly against competition. Turkey has had very strong growth and balanced with both price and volume. The soft spot that we’ve got is Southeast Asia. We are not so competitive in Personal Care in Southeast Asia. Indonesia would be an example of that. And again, it continues to be the local players who are winning in Home and Personal Care there. We are making good gains in foods in Southeast Asia, and we’re winning share for the first time in a long time in Australia. Again, small market for us, but good to see. But SEA is, I think, the place where in Home and Personal Care we continue to lose a bit of share to the – to local players.

And I think you wanted a little bit of what’s going on underneath the label of F& R. Let me give you a feel for some of the things. So ice cream, Savoury, tea, they’re all growing something around 3%. We’re very pleased with that performance. Ice cream is largely driven by innovation. We’ve mentioned Magnum pints in North America. There’s a new Magnum range out in Europe. Ben & Jerry’s nondairy also going well in Europe. So ice cream is about that level. Savoury, the same sort of level. That’s more emerging markets that’s driving that, cooking products, especially in Savoury. And tea is also about that level, which is a continuation of the momentum we saw last year. The one that’s a little bit lower than that is dressings, which is driven by pricing, a negative pricing in the U.S. We know there’s a big – a mayo battle, which we think we’re winning in. But the negative pricing there is keeping the dressings’ overall sales growth number down. So that’s just a little bit of color of what’s going on beneath the F&R banner.

Thank you. That’s really helpful.

Okay. Next, we have Jeff Stent from Exane.

Good morning, Jeff.

Good morning Graeme. Just a quick one, and I’m not really looking for prescriptive guidance, but would you expect, Graeme, that gross margin would expand this year?

I think so, yes. I mean, very much the 5- S program that we have and net revenue management, Jeff, both are designed to get the best part of the margin improvement overall coming through gross margin. Yes, that’s definitely a feature for us.

Okay, thank you.

Thanks, Jeff.

Okay. Next, online, we have James Edwardes Jones from RBC.

Two quick questions, if I may. Sticking on Jeff’s point about gross margin, is that before or after freight cost? In particular, obviously, in the U.S., there’s always pressure on freight cost. What are you seeing there? And while on the subject of costs, can you give any sort of indication about what you’re thinking in terms of marketing to sales in the full year? And secondly, on the share buyback. Given what’s happening with the domicile of the business, how is that going to be split between NV and PLC?

Good morning, James. So let me tackle the freight cost. In U.S. in particular, I guess, is where everybody is seeing an increase in the freight cost. Very interesting dynamic with both higher demand, demand for more frequent deliveries. And as retailers focus on working capital management, you get a lot more sort of granular supply chain. And also supply constraint with employment rates high in the U.S. and good job opportunities in other industries and all, that’s the thing. And also diesel costs are up. So I think everybody is feeling this a little bit. Of course, our freight cost, yes, they sit in our distribution cost, which are about 7% of the – of turnover sitting within our cost of sales number. So yes, we think, overall, that they’re going to go up to the high-single digits to high teens in the marketplace. We are having some success in mitigating that. We’ve got a particular ZBB cost segment, so we manage this as a sort of a discrete effort with one of our – sorry, two of our senior business leaders cross-functionally within the company, working on logistics, particularly, along with Marc Engel and the supply chain team. And that has delivered quite a lot of benefit for us. So there have been issues with some cost inflation. But there’s also been issues on availability. It’s been more the question of availability that’s been, I think, one of the challenges. There’s been some stock left on dock, et cetera. But we didn’t actually have that materially affect us in the first quarter. It was a bit of a watch there going into the quarter, but it didn’t actually pull through. Just on your question of the BMI spend. I think we are still seeing strong delivery from our savings programs, that’s good news. And we do think we’ll have competitive BMI. We know our BMI spend was very competitive in the first quarter as it was in Q4 of last year. We think we’ll have a step-up in absolute spend in BMI in H1 in local currencies, so we have good visibility of it. We’re happy to say that now. But finally, on the share buyback that we’ve announced, we will do that in the marketplace over the course of the balance of this year in NV and PLC. And then depending on progress with the simplification of the company, that can then move across into the new parent company.

Okay. Can I just check the comment on freight costs, up single – high-single, low-double digits? Is that U.S.-specific or does that apply to the group as a whole?

U.S.-specific, James.

Thanks, very much Graeme.

Okay. Well, we’ve got no more questions. So I suggest at that point that we close the call.

All right. Well, thanks, everybody. Enjoy the rest of the day. The IR team are here to take any other questions and dig into things in a little bit more detail, and we look forward to that. So have a good day.

Thank you for using the service. Good bye.