Haleon plc

good morning, or thank you for joining us for the Haleon 2024 half-year results Q&A. My name is Carly, and I'll be coordinating the call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad, and to remove yourself from that line of questioning, it's star followed by two. I'll now hand over to our host, Sonia Gabriel, to begin. Please go ahead.

Thanks very much. Good morning, everyone, and welcome to Halion's half-year 2024 Q&A conference call. I'm Sonia Gabriel, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer, and Tobias Hessler, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's UK and SEC filings for more details, including factors that could lead to actual results that differ materially from those expressed in or implied by such forward-looking statements. We've posted today's presentation on the website this morning with prepared remarks and a video running through the results in detail. So hopefully you've all had the chance to see that ahead of this call. With that, we'll go straight to opening the call with Q&A from my last time. Thank you. Operator, if you want to give us the first question, please.

Of course. First question comes from Guillaume Damas of UBS.

Thank you very much. Thank you. Morning, Brian, Tobias and Sonia. I've got two questions, please. The first one is on North America. I'm wondering if you could talk a bit about the trading conditions there, because it seems your pricing is very quickly normalizing between the first and the second quarter. And we've also heard some of your large competitors clearly not shine away from raising the promotional intensity. And on top of that, I mean, it's been several quarters now in the U.S. that we've seen a significant gap between your sell-in and your sell-out. So, Wondering if with the P reversal, the end of retailers destocking, the discrepancy between sell-in and sell-out should correct from Q3. And therefore, what I'm getting to is some meaningful acceleration for North America from a sales growth standpoint. And then my second question, it's on your organic sales growth outlook for the second half. Because here, when I exclude pain relief and respi from your Q2 or first half organic sales growth, I basically get 60% of your turnover growing in excess of 8% in the first six months of the year. So my question here is, you've got a more favorable basis of comparison for both pain and respi in the second half. So A, do you expect both units to be back into positive organic sales growth territory from Q3? And assuming continued momentum for the remaining 60%, I mean, would it be fair to assume a organic sales growth in the second half towards the top end of your 4% to 6% range? So any help on that would be great. Thank you.

Thanks for the question, Guillaume. Listen, I'll take the first question, and then I'll pass it to Bias for the second question. So in North America, just to get us grounded, We are down a little over 1% in the first half, but 1% growth in Q2. You know, we saw the inventory reductions in Q1 that we had shared with everybody. And then obviously in Q2, we made the decision to proactively take down inventory of our phenylephrine products ahead of the FDA decision. And just to remind you of that. is about efficacy, not safety for Penelope, but we took that proactive approach. So that's impacting, obviously, the volume and the growth in the U.S. You're right. Consumption has continued to be strong at mid-single digits, ahead of the market. So we feel good about the underlying business and the fact that we're growing market share. So I would fully expect that in the back half, we'll see some of that net sales growth now coming through on the business as we have a lot of those changes kind of in the base with the inventory reductions and things like that. So overall, I think I'd leave it there. Tobias, on the second question?

Yeah.

So look, for your half to organic sales growth, I mean, first of all, I mean, if you just look at the four to six guidance, I mean, it really implies five to nine in the second half. So I think, yes, it's clearly at the upper half. upper end of the range as a minimum. And I think, look, we're not going to guide to individual categories for the second half of the year. But, I mean, we'd expect that, you know, oral health and BMS continue to go strong. And, of course, in oral care, we're still in a situation that all brands have been doing extremely well. That is, you know, not something you usually have in the very long run. Also, denture care has done very, very well. in half one. And also VMS has come back strongly, but also we're hitting a bit of a base effect from last year as well. And yes, absolutely, the big drainers on pain relief and on pain relief are behind us, plus a bit of the destocking as well that has happened in half one.

Thank you. And just to follow up on North America, Brian, on the competitive environment and promotional intensity and how you're reacting to this.

Yeah, no, thanks, Guillaume. I did not answer your question on promotional intensity, so I apologize. Listen, we're in a bit of a less promotionally sensitive business in OTC. And in oral health, our strategy has always been lower promotion on our brands where we invest heavily in A&P and heavily in the dental detailing piece. So we're not seeing anything in the categories we compete with that is radically different. Of course, every year there's ups and downs in promotional intensity and stuff, but there's nothing systemic happening in our categories worth noting.

Thank you very much.

Next question comes from Ian Simpson of Barclays. Ian, your line is now open.

Thank you. Thank you very much. A couple of questions from me, if I can. Firstly, just to make sure we've got the magnitude of that phenylephrine swing right. Am I right in thinking that was a 40-bip volume D stock at group level in your Q2 range? and that that all should reverse into Q3, so that sequentially you were down 40 Q2, you're up 40 Q3, so it's a sequential 80-bit volume swing at group. Just want to make sure I've got the moving part on that right. And then secondly, your sort of marginal profit guidance, given the strong H1, and given that you'll have, I presume, a ton more volume leverage in the second half, implies, I guess, that AMP spending is going up quite a lot in the second half. I guess part of that is probably the Oroxon launch. But anything else that we should kind of have an eye on in terms of where you might be spending money in the H2? Thanks very much.

Thanks, Ian. So, I'll take both of those. So, yes, on PE, you got it right. So, we said it's about a half a point impact for the group. It's about a two-point impact on PE, and that is a swing. So, I think you got that correct. And then on half one and half two. So, I mean... Absolutely. I mean, first of all, I want to say really pleased with the performance, really positive that the model is delivering. And then also, I mean, as a result, we're really confident on our full year guidance. And then, I mean, ultimately, the profit guidance we've upgraded is almost two times the midpoint of the organic revenue guidance that we have given. So now... Why is it lower in half two, which is correct? So maybe one step back. So when you look at last year, last year half one was nine and half two was 12. So recycling over a much stronger half two from prior year. And then there's really four reasons why organic profit growth is going to be lower. than the 11% we've seen in half one. And I think you already mentioned two of them or one of them in your question, Ian. So I think the biggest one really, and I'm going to do them in order of sort of sizing and magnitude. The first reason it's going to be lower is the phasing of the cost inflation. Cost inflation was really at its highest point at half one of last year. And then we saw costs starting to come down in half two of last year. And you saw that come through in our Q4 margin last year when gross margins started to growth and ahead of the rate of sales growth. So half one was really a low price, a gross profit comparator. So as we get into half two this year, we're going to start lapping the benefit of those lower costs. And usually you have this normal time lag when the costs come in until they run through inventory to come up. So that won't repeat in half two of this year. And the second reason is the one you mentioned, Ian. So yes, A&P growth will be higher in half two than it was in half one. And also here, a reminder, last year, A&P in half two was only up 1%. And then in addition, we're going to fully support the launch of Aeroxon. In addition to continue investing in the brands that deliver the growth, the continued high and strong investment into the launches we made, especially clinical-wide investments on Sensodyne and on the high growth drivers like Centrum plus all the geographic expansion that is running. The third is a bit of phasing, mainly in R&D. You've seen R&D spend was only up low single digits in half one. That is largely driven by project phasing, which is different. So that's going to reverse out and significantly accelerate in the second half of the year. And then, look, much smaller, but some other factors and up to that won't repeat. For example, we had an M3 tax credit in the U.S. in Q3 last year. So that won't repeat. So those are the drivers. But look, overall, very pleased with the high single-digit guidance for the year and very confident in that one. Brilliant. Thanks very much.

Our next question comes from Bruno Montier of Bernstein. Bruno, your line is now open.

Thank you. So the first question is coming back on the organic growth. I've understood you correctly, Tobias. I think you just said on the first question that organic growth should be at least at the minimum at the upper end of the four to six range, just making sure I understood that correctly. But then my real question is about the launch of the erectile dysfunction cream at the end of this year. Ever remember from when you sort of IPO, you always said sort of launches, switches are above and beyond organic growth. But this launch should be actually, in launching in quarter four, you'll be filling the channel with that. Am I right that the kind of growth from that launch will therefore be above and beyond the usual guidance? And wouldn't that flip you at the top end or actually over the 4% to 6% range? And the second one is just a question on behalf of Tom Sykes on the China JV. I did notice that you are delaying it. You're sort of getting one year of extension before you do the new agreement. Is that because you can't really agree? Should we see that there's bad news, that this sort of is a bit of an issue, and you weren't able to finish the discussions in time? Thank you.

Great. Thanks, Bruno. Listen, I'll take the Araxan question and pass it to Beas on the change of AV. So first of all, we are excited about the first erectile dysfunction OTC launched in the U.S. So we're excited about the opportunity there. We said we would launch at some point before the end of this year, so I wouldn't expect it to have a big impact potentially on this year's results, and we'll give guidance for next year when we get to next year. But if we think about that category, we think it has very strong potential, but it is a new to OTC category. It is a topical product versus systemic product. And obviously, it's a direct to OTC, not an OTC switch. So Araxon doesn't have any brand awareness. So I think it's got great potential. It'll be a bit of a slower burn, potentially, because of some of those factors. But we're really happy to be at a point where we can announce it will launch before the end of the year and excited about the future potential. Tobias, you want to touch on China?

So on your first question, Bruno, on the second half growth, yes, I mean, the full year guidance of four to six for full year implies five to nine and a half too. So I think the five to nine puts you really into squarely into the upper half. of that at the lower end in the upper half of our full year range. And then, of course, above that, depending on where you put us in this five to nine for the second half of the year with our full year guidance. Then on the China JV, so we've extended it by nine months. So it was supposed to expire in September of this year, so we extended it to June. So that's a nine-month extension. I would call this more of a technical extension and maybe give you the background as well. So the joint venture is really the over-the-counter medicines part of the business in China, which is about 40% of our Chinese business. And as a result, our health and VMS is fully outside that joint venture. It's a complex joint venture with a number of partners. I mean, we own 55% in it. 25% are owned by a publicly listed entity. 20% are owned by an entity that is owned by a private shareholder and two of the provincial governments. The listed entity, the other entity is a majority shareholder. So as a result, we have a number of parties involved in that. And on top of that, in the Chinese, in a Chinese environment, including, of course, government partners as well. So it just takes a bit of time. The relationship is really good. And we mentioned the release. We're in active discussions with the partners on how to continue and run this business going forward. And to enable the conclusion of those, we've just agreed now to extend it so we're not up against a very hard deadline. The discussions are really positive. I think all the parties are aligned on the value of the joint venture and on the collaboration. So they're all pulling in one direction. And, you know, as you would expect, we would update you then as soon as we have news on what the future is.

Thank you.

Our next question comes from Chris Pitcher of Redburn Atlantic. Chris, your line is now open.

Thanks very much. And in advance, apologies, I have technical issues. I haven't listened to the presentation. I've read through the pages. So apologies if I've covered stuff that's already been said. In terms of the general consumer environment across your brand, are you seeing any evidence of some soft demand across perhaps some of your more discretionary brands? I mean, one brand performance that really stood out for me in this environment was the strong growth in Centrum, double digit growth. Are you able to give us a bit more detail on where the Centrum growth is coming from? You've launched in a lot of new markets. How much of that is sort of new market-driven growth? How much is sort of like-for-like growth across your existing sales base? Thanks very much.

Thanks for the question, Chris. Listen, so specifically on Centrum, we feel really good about the performance there. And it's a combination of two things. As you said, we announced we launched in a few new markets like India and Egypt and some other markets. At this point, it's still early in those markets. It's doing well, those launches, but probably not having a significant material impact on the overall growth of the business yet. We're quite optimistic it will down the road. I think the big driver of the central growth is something we've talked about, which is this COSMOS study that we completed now have just had the third readout of the study in partnership with Harvard Business School that showed that Centrum Silver is which, for instance, in the US is about 50% of our business, targeted towards older men and women, improves cognitive function by 60% if sent from silver is taken daily. So as a result of that, we've really seen strong take-up behind that claim, and we think this is a big opportunity It's a big opportunity for us to continue to drive those kind of scientific claims behind a category that does tend to have less science. I'd say that's the big driver behind our VMS and Centrum growth.

Can I just comment? Did you say 5-0 VMS business is silver or 1-5 percentage?

Is it 5-0? Oh, 5-0. I'm sorry. I'm sorry, Chris. I didn't hear you. You broke up. Yes. Centrum Silver is 50% of our business. Yeah. Thanks very much. Thank you.

Our next question comes from David Hayes of Jefferies. David, your line is now open.

Thank you. Good morning also to you from me. Just on the oral care, obviously impressive growth continuing. But we assume some of that's driven by the rollout of the whitening range, the new whitening range. I just wonder whether there's any kind of way of quantifying that at all. I guess we're thinking more about thinking the comping effect next year just to get a sense of the benefit in terms of channel pipe fill. And then secondly, on the share buyback shift to going into the market, just to kind of check, that we assume is completely independent of any Pfizer plans. You're not kind of indicating that you don't think they're going to sell down again But I guess if they did sell down again this year, is it still within the options that you would then participate in that rather than continuing to buy through the rest of the year? Thank you so much.

Thanks, David. Let me take the share buyback question, then Brian will come on the oral care one. So look, on the share buyback, it's not a shift, right? I think it's ultimately what you would expect the company to have that has a share buyback program is a program that buys it back on an open line. This is a muscle we still need to build. We have never done that, right? So I think we now put the machine in place, and we need to learn that muscle, how to operate and run that. And I think it's something that's totally normal. And that opens up just avenues to do it across all the three avenues that are available as new share buybacks. One is on the open market. Secondly, buying it back directly from Pfizer at a given discount. And then thirdly, of course, participating in a placing. And for us, it's just all the optionalities. And also, I think you saw in the stock exchange announcement, I think it says up to 185 million. So I don't think we don't have to buy 185 from the open market. It's just opening up all the three avenues. That's all that is. Optionality for us, ensuring we can complete the 500 million share buyback by the end of this year.

Super. David, on oral health, just To reaffirm, very, very happy with the performance we've seen there and the share growth across all three of our franchises, our DentureCare, ParadoxX, and Sensodyne. You're right, clinical white is doing quite well. Whitening is a really fast-growing category. As I've said in the past, whitening toothpastes tend to be not good for sensitivity. So having a product that's clinically proven, I think we've been able to secure dental recommendations behind this. They typically don't recommend whitening toothpastes. But listen, every year we come out with a big innovation on the Sensodyne franchise. Last year it was pro-enamel active enamel repair. Years back it was sensitivity plus gum. It was rapid. So every year we have a big launch in the beginning of the year and other launches throughout the markets. We'll continue to see that trend as we go forward. I also think Clinical White is a product that will drive growth in year two, year three of launch. We think it has long-term potential. So I wouldn't necessarily quantify the pipeline or what it looks like. Just know that this is our model. We have big launches every year. It's successful, and we follow them up the following year. Thank you.

Thank you so much. Our next question comes from Rashad of Morgan Stanley. Rashad, your line is now open.

Hey, good morning, guys. Thanks for taking my questions. Just two for me, please. First one, can you update us on what you're seeing in China? You said it was flat in the first half. Obviously, tough cold and flu comes, of course, but what was the performance ex-cold and flu? And obviously, it's been a tough backdrop across the board there. What are you seeing in terms of consumption across your categories? Second question, on running down your oral phenylephrine stock, obviously the FDA hasn't made a formal decision there. So just curious as to how you think about these decisions, what drives you to take action at this point in time. Thank you.

Thanks, Rishabh. So let me do China. So I think last year China was up over 20%. This year it's flat and it was up 20% last year due to the pretty much defended upside. So doing it flat on top of the 20% I think is a really, really strong performance. So I think it just means that the rest of the portfolio is doing really, really well for us. So I think overall the business has really grown significantly. through Fenbit. You can also step back on Fenbit, actually, very pleased with what we've done on Fenbit in China. We were able to retain quite a bit of the consumers that came into the category during COVID. So the brand is now quite a bit bigger than it was pre-COVID in China. So from that point of view, also on Fenbit, even you have the role, of course, if you take sort of a three or four year look at it, also good. So look, feel good about China, really good growth in the VMS business, in the oral care business, and also a bit of basic fact, oral care was a bit weaker in the first half of last year too, but still overall good performance. And I think it goes back to our brands, right? These are healthcare brands, right? I think we are sort of not that directly exposed to the economic health of the market and the business. So I think which speaks to the defensive nature of the brands that we're selling.

So... Yeah, let me jump on the... Thanks for sharing on this kind of left-hand question. Yes, we did make the decision to kind of... take down our inventory on phenylephrine and launch products for the cold season, not including phenylephrine. The FDA didn't make that decision. As you know, there was a 14 to zero recommendation to the FDA from advisory committee that phenylephrine wasn't efficacious, but obviously it's still safe. You know, we stand behind the efficacy of phenylephrine, but we worked with our retail partners to do this in a way that, that allows us to ensure that we will have the products on the shelf for the cold and flu season. Our main focus was to make sure that we could deliver for the cold and flu season, that consumers would have the products available to use. And we're not sure when the FDA will make that decision and what the outcome of that decision will be when the products would need to be phased out and moved off the shelf. So we decided to get proactively ahead of that to ensure we can continue supply.

Thank you very much.

Our next question comes from Jeremy Fialka of HSBC. Jeremy, your line is now open.

Hi. Morning. Thanks for taking the questions. So a couple from me. First one is on pricing. I think you'd implied that obviously the pricing was going to step down from Q1 to Q2, which indeed is what we have seen. But then actually from kind of here on out, it's a relatively stable picture with the new price rises sort of roughly offsetting the carryover effect. So just wanted to check that that is still the message. And then secondly, if you could talk about kind of bolts on M&As, it's something which you said you are keen to do. how you feel the market for these sort of mid-sized transactions is at the moment, or whether you think there could be a little bit more movement over the coming, say, six to 12 months? Thanks.

Thanks, Jeremy. I'll start with the bolt-on question, and then Tobias will talk for the pricing. You know, just to get grounded on what we've said in the past, which is, first of all, we love the portfolio we have. We don't believe we need to do anything with the portfolio to deliver on our our guidance that we've given. But that said, we want to proactively and actively manage the portfolio. And as a result, you saw the three divestments that we did. We did those because we felt like we generated more shareholder value in divesting than in keeping. And we will continue to proactively manage that portfolio. Bolt-on M&A is clearly something we are actively and will actively look at. It's in our capital allocation priorities, investing growth one, two bolt-on M&A, three return M&A. cash to shareholders. So I won't make any specific comments of what we're doing, but obviously if something strategically makes sense and it creates value for the business, we're very open to doing that.

And on your price question, Jeremy, yeah, you got that, I think, exactly right. It's exactly what we expected. The stepdown was predominantly in EMEA that time. And that is all driven by the rollover because most of the pricing negotiations across Europe are done in Q1. So in Q1, you still see the impact from prior year. In Q2, you see the new pricing data. That was agreed. So I think the step down is really the expected one from how the pricing works. It's not a change in how we're dealing with our customers. And I think in the other regions, it's much more stable. Of course, in the U.S., you have pricing taken at different times of the year, so that might be a little bit more spiky. up and down depending on do you cycle over a year where you didn't take the increase or where you did. But it's really the EMEA, the Euro pricing. So, and as you said, step down to Q2 and then much more stable throughout the rest of the year.

Okay, thanks. Our next question comes from Oliver Nicolai of Goldman Sachs.

Hi, good morning, Brian, Tobias and Sonia. First question on net debt to EBITDA, which is below 2.9 times now, so big achievement today. But past the disposals of NRT and considering the stronger EBIT growth this year, is it fair to assume that you could reach your 2.5 times mid-term guidance as soon as your end? And is there more disposals to come? That was the first question. Secondly, just to highlight, obviously, very strong growth margin expansion in H1, 150 bits. How much of it is linked to lower input cost versus productivity gains? Do you see any benefits yet from the mid-end closure to kick in? And I guess more broadly, since you have achieved really good top-line growth since 2022, should we expect a bit more focus on margin progression since you are still a bit below PL? Thank you.

Yes, thanks, Olivier. So look, I mean, on net debt down to 2.9, it's really strong. Also, I mean, we returned 700 million to shareholders in half one as part of that. Part of that was supported by the chapstick proceeds, but also by, I think, very, very strong crash flows that have come through. It's true, at the end of the year, we're going to get the proceeds from the smokers divest, but also I think, look, you then roll this forward into 2025, it's also going to take EBITDA out, right? So the impact on why it brings the cash in, which is helpful, the impact on leverage is, of course, much, much smaller. Look, we're confident on our medium-term guidance range, which we set around 2.5, and we're working towards that. And then, of course, look, the net debt formula reacts very, very big to short-term FX movements as well. So it's very hard to predict a spot landing. This is a little bit like landing a 747 on the aircraft carrier. So it's hard to give you that. But I mean, if you take a step back, it's a highly cash generated business. We've been very clear on our capital allocation priorities and the building blocks for that. So I think the debt is coming down over time. On your gross margin question, so I think we've seen, of course, I mean, you look at half one. So clearly, there's still, you know, the help from pricing, because pricing was with the rollover a bit higher in half one. Some of that reduces slightly in the second half of the year, given the rollover from Q1 that I just talked about in the prior question. Then what we're seeing is... easing inflation, so there is still inflation, but it's on material costs. I mean, the first few materials are now, I think, actually getting into deflation, but then we have labor costs to cover because I think a lot of our cost of goods are tied to either our own labor or then the labor of our contract manufacturers because I think our conversion is very much labor intensive. it's less exposed to the material cost. But that's clearly easing compared to last year. But we're also seeing efficiencies improvement as we bring up our operating efficiencies in the sites. And I think that helps offset. And I think all these factors together. And there's a bit of freight cost as well. Last year, we shipped a lot of air freight because we had this unexpected spike in demand. So that was also a bit of help there. Your maidenhead question, not yet. I think it takes time to shift production. So I think these impacts are, the positive impacts are further out. We haven't shut down the site yet. We announced that we will do that. So these are usually, you know, two-ish year processes to happen. And as we shift production, you're going to see the benefits come through over time as the production moves across. Thanks.

Thank you.

As a reminder, if you would like to raise a question, please press star followed by 1 on your telephone keypad. And to remove yourself from that line of questioning, please press star followed by 2. Our next question comes from Celine Panuti of JP Morgan. Your line is now open.

Thank you. Good morning, everyone. I have one question on margin in the U.S., which was down 175 basis points reported. Can you flesh out, you said that higher A&P, you know, maybe a category or whatever, why that was quite a drop? And did I understand correctly that you said that last year H2 margin at a tax credit? So this year we are facing that plus further A&P. So are we expecting... U.S. margin to be down several hundred basis points for the year. Thank you.

Yeah, thanks, Celine. So, yes, I think U.S. margin was down. I think it's a factor of, I think, of several points. One, of course, the volume decline in the market, given the sell-in and also the stock, the inventory or the retailer destocking. So I think that, of course, if you're in a declining volume environment, that leaves some marks on the gross margin side. And, of course, that is very hard to offset with deficiencies that the team, of course, is still running. And then secondly, it's really, I think most importantly, is the step up in A&P and the investments we're making into the market. You saw and maybe you've seen in my slides the sellout, right, mid-single-digit sellout growth. And look, it's the overall environment, the U.S. market overall is still in a slight volume decline, right? And we've been gaining volume, so we have to work. For that, plus I think Brian mentioned earlier also, I think the launches we've done and the support we put behind the Sensodyne, the support we put behind the Centrum claims. We've also launched Benefiber extensions. So I think there's strong support to deliver the continued growth in the market overall there. I look for us who are not guiding on segment margin, but you should expect us to continue to invest in the U.S. as well. And also on top of that, behind Ericsson launch later this year.

Thank you. Our next question comes from Ian Simpson of Barclays. Ian, your line is now open.

Thank you very much for allowing me a follow-up. I just wondered if we could sort of briefly touch on some of the items between EBIT and EPS, because certainly historically there's been pretty good EBIT and above delivery, but EPS has not done an awful lot in the last year or two. So as we kind of think through 2025, I guess, You've told that we saw finance costs come down a little bit this year. Presumably, we'll get continued benefit there from deleverage. Nothing weird is happening to tax rate unless you're going to tell me otherwise. And share count presumably comes down as well. I'm just trying to think about how confident we can be that that 6% EPS growth that you did in H124, that we are now kind of in a place running forwards where EBIT growth translates to EPS growth. Thanks very much.

Thanks, Ian. So, look, yes, net finance costs should, you know, continue to come down as our net debt goes down. I think you've seen that very much come through in half one, where net finance costs were 11% lower than a year ago. So I think that's absolutely happening. On the adjusted tax rate, we're bang on in the middle of the guidance range we've given already in the year already on 24 to 25. So I think... That I think is, I think, I believe we're here absolutely in the right range. Of course, there's still, you know, pluses and minuses on that as a pillar two laws are enacted around the world. So I think there, you know, that could ease that, you know, but it's within this range, but plus minus 50 bps, let's see where we get to. But I think very confident that's the right range. Then let me mention one of the things you didn't mention, which is the non-controlling interest. Those were very much higher last year, given the Fenbit spike. Fenbit sits in the joint venture part, so it was much higher non-minority interest. That's normalized now. So what we have in half one is actually a pretty good run rate for the rest of the year. So probably you should take a look at half one as a, you know, would say it's pretty balanced in half one and half two, what we expect on that line. And then, yes, from the share buybacks, we're going to get the benefit of the share count coming down, which has also which has also been happening um so all of those i think moving moving uh in the in the right direction um uh and are supportive to eps overall yeah thank you thanks ian okay if we take one more question and then come back find some comments at the end of course

Our next question comes from David Hayes of Jefferies.

Hello. I'm going to join the theme of second question. So just to follow up on the margin question we had earlier on the U.S. from Celine, I think, is there also a one-off cost associated with the switch from the FDA-reviewed products? Do you have to buy those products back and effectively write them off? Is that part of the equation in the first half as well, which obviously we wouldn't see in the second half? I just want to understand whether that was contributing to the margin performance. Thank you.

Thanks, David. I mean, not material, right? I mean, there might be a packaging material here or there that's left over, right? But I think we've really proactively started at the beginning of the year to ramp down those inventory and not to repipe them, right? So the big mark in the P&L is from just selling less, of course, of higher margin brands. into the market that is going to reverse out in the second half of the year. I think, you know, the write-offs on that, we're not buying it back, right? So the write-offs should be, you know, not material. Of course, always some stuff left here or there, but not in the grand scheme of things that should impact the group margins materially in any way. Great. Thank you for that. Back to Brian then.

Yeah, super. So listen, thanks everyone for joining us today. As you can see from the results, our model is delivering. We feel really good about our first half. Do let Sonia and the RRT know if you have any further questions. But before we leave the call, I'd like to express a big thank you to Sonia. Today will be her last Halion investor call. And it's been an absolute pleasure working with Sonia these last four and a half years. I'm forever grateful for all she did to help in the creation of Helion. She's had a huge impact. I wish her well in her new life at Diageo, and just want to say a big thank you, Sonia, and well done, and wish you well. Okay, everyone, if you have any further questions, again, reach out to the AR team, and have a great rest of