Ontex Group NV (ONTEX) Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to Ontex's Q3 2020 Results Conference Call. This call is being recorded today. Today's call will be hosted by Thierry Navarre, Chief Executive Officer; and Charles Desmartis, Chief Financial Officer. Following the presentation, there will be an interactive question-and-answer session. Today's earning release and presentation are available on www.ontexglobal.com. I would now like to hand the call over to Philip Ludwig, Head of Investor Relations. Please go ahead, sir.

Thank you, Cecilia, and good morning, everybody. I'm Philip Ludwig, and we would like to welcome you to this investor and analyst webcast and call to discuss Ontex's Q3 2020 performance, which was published earlier today. Before we start, a few housekeeping items to quickly run through. First of all, please note that the safe harbor statements apply to this presentation and to our subsequent remarks in the Q&A session. Second, comments we make today about revenue are on a like-for-like basis except where otherwise indicated. Please also note that, as we've disclosed the last couple of times, 2019 revenue in the AMEAA divisions and Healthcare divisions has been adjusted due to a shift of customer responsibility between the divisions effective 1st of January this year. This has, of course, no impact on Ontex Group revenue, and the details are available in the appendix to the press release. Finally, definitions of the alternative performance measures can be found in our documents. With that, let me hand over the call to Ontex's CEO, Thierry Navarre.

Thank you, Philip. And good morning to all of you, and thanks for joining us today. First of all, I hope that you're all safe and well in those very challenging and unique times that we are living. Before Charles drills down into our Q3 number, I'd like to share a few thoughts with you about the context in which we are operating, how we view our performance in that context, and what are we doing to address the key challenges that we are facing. It's no secret that we are currently navigating in a very complex and unprecedented market environments, that continues to be marked by the COVID-19 pandemic. The situation is evolving very rapidly, and even daily currently, as evidenced by the latest lockdown and restrictions announced in several countries, mainly in Europe. So we are clearly entering into a second wave of the pandemic, and this will certainly continue to impact consumer behavior and the competitive landscape around. Already, when we are seeing the Q3 results, it shows that clear trends are being highlighted there and are playing a role. First of all, and you can see that on the Slide 5, as new lockdown measures take hold, we see that the mobility restrictions translate into lower usage rates for the disposable hygiene products because people tend to be at home more, and therefore, need some fewer products. And you will notice that specifically in categories like Adult Incontinence or Femcare product, for instance. The other trend that we see is that shoppers are also much more cautious. They favor the one-stop shopping. They spend less time in stores and do also less comparison shopping. They want to make it really, really quick. And this can favor also brands or product with a strong equity behind. At the same times, with income sometimes impacted by the economic downturn, there is increased search for value for money propositions. And this can favor, for instance, large pack offerings but also retail brands offering in the more general terms. And of course, as we saw during the first wave of the lockdown, e-commerce is gaining at the expense of brick and mortar at a much faster rate than prior to the onset of the pandemic. Already for a category, e-commerce was growing before, and then they've been accelerated drastically with the COVID-19. And the interesting bit in there is that this behavior seems to stick even when the lockdown is over, at least that's what we have seen after the first wave. So while navigating in this challenging and uncertain environments, our operational priorities remain to ensure the continuity of operations and enhance at the same time profitability and the cash generation. And naturally, we continue as well to make all the efforts to protect our employees and support our communities around, amidst the intensifying COVID-19 pandemic. With that, let's move to Slide 6, where we have the headlines of the Q3 numbers. Starting with group revenue. We ended Q3 at EUR 508 million. This was down 4.6% on a like-for-like basis. But what we've seen is that after the demand surge as consumer prepare for a lockdown by stockpiling the product in Q1 and then the steep decrease in Q2, Q3 showed a recovery with a EUR 29 million improvement over Q2. However, we still saw lower-than-expected personal hygiene market demand, combined with significant ForEx headwind and increased competitions across most of our market. And our revenue globally was down 11.6% year-on-year, which includes a huge negative currency effect of EUR 43 million and as well a positive contribution of the Femcare U.S. acquisitions that we did and completed in July 1, which account for EUR 3 million. On the adjusted EBITDA side, we were up 50 -- we were landing, sorry, at EUR 57 million, down EUR 4 million versus Q3 last year. And this is including a negative ForEx impact of EUR 17 million. Our adjusted EBITDA margin improved, standing at 11.3% in Q3, which is actually 57 bps higher than in Q3 2019, thanks in part to the T2G driven measures, and on the other side, lower raw material indices as well. And later on, Charles will take you through the adjusted EBITDA details in his section. Net debt was EUR 878 million and remains under control as we deleverage. And there, again, Charles will elaborate further on this later on. Well, even allowing for those challenging and exceptional market conditions in which we're all operating now, it's clear that we are not satisfied with the current level of performance and we have recognized that it must be improved. Over the last couple of months, that's why we have mobilized all Ontex resources. And a series of decisions have been taken, and some actions are also underway, to step up the performance and restore the profitability growth. And this, I would like to detail a bit more in Slide 7 on your deck. First of all, following the appointment of the new Chairman, Hans Van Bylen in May, the change in leadership also in July, a full fledge strategic review has been launched in late August, and the Board has decided in October to create as well a strategic committee. And it is tasked to reshaping the company's strategic priorities and support expediting decision-making and execution, which is key. So the strategic committee is overseeing -- sorry, the full-fledged strategic review that the management has started. And this review is done, I can assure you, with no taboos. And we are assessing all opportunities to accelerate the delivery of the shareholder value. And this review covers a quite large scope of aspect. And notably, as you can see the few points on the slide, first is looking at accelerating delivery of operational efficiencies through intensifying the T2G efforts, which are ongoing, that we are looking at stepping up. We are also looking as well at reviewing the company's cost structure, which is a critical item. Also, strengthening our commercial capability in this increasingly competitive marketplace we are in. And it is as well one of the points key to reassess Ontex's strategic intent for each geographies, each categories, channels and brands. We need to relook at choices there on where to play, be more choiceful and focused on where we have the right to win. We also combine that with looking at opportunities to further rightsizing the operational footprint in line with those strategic choices and also in line with the level of activities that we have. And finally, we're also evaluating as well, where it makes sense, excellent growth opportunity with a strict financial discipline. And by the way, coming back on the company's cost structures. As a very first concrete decision, we will reduce overhead costs by EUR 11 million on a full year basis, with the first impact on the savings starting already in Q4 this year 2020. And let me emphasize that this is over and above the initially planned T2G gains. Overall, looking at this comprehensive review, the -- I believe that this outcome will be a strengthened business model for the company, reflecting very clear choices on the where to play and how to win, as I was mentioning, as well as measurable targets that we will follow very swiftly in terms of implementation. We will allocate as well capital in alignment with those key priorities. And we will also -- and we are being -- we are revising at the moment the remuneration policy so that we are making sure that management compensation ties much more closely with company performance on the defined targets. And on this last topic, by the way, taking into account this year, the expected reporting full year performance, which includes, as you know, a very significant negative ForEx impact. As a short-term mitigation action, it is to be noted that the management proposed to the Board a material cut in the 2020 variable management compensation pool, which the Board has approved, and which is now into our numbers. Let me also add that the Board has confirmed that it will not pay a dividend for 2020 in order to protect the company's cash. You probably recall that we had announced a suspension of dividends in April and pledged to revisit the issue later in the year. And the Board has now decided that it would not be appropriate to pay a dividend in the year in light of the ongoing uncertainties and the necessity to focus on cash preservation. So in a nutshell, I would like to say that, with this first series of actions, you can see that changes in the company is well underway. And I can assure you that we are fully committed to improving performance into the company. So this concludes my introductory remarks. Charles, I'll give you the floor. Thank you.

Thank you very much, Thierry, and good morning to you all. So we start with the general review of revenue, and starting on Slide 9. Of course, a lot of what I'm going to say has already been covered by Thierry, but I'll get into more details as usual. And of course, the exceptional changes in patterns between Q1, Q2 and now Q3 will be a recurring theme in my coming remarks. So as Thierry mentioned, we're reporting like-for-like revenue of EUR 548 million for the third quarter of 2020, which is a 4.6% decrease year-on-year, as already mentioned. From a market standpoint, demand recovery in Q3 following the unusual pattern of H1 was both slow and uneven, as we experienced a variety of patterns with regard to demand evolution and consumer purchasing behaviors across the geographies that we operate, depending on impact on consumption of our products of both the restricted mobility of the users during the lockdowns and the economic recession subsequent to the pandemic. Also, the shift of purchases to e-commerce was more marked in countries where this channel is more developed. But overall, with sales contracting in traditional channels, competition has been intensifying, with all industry players fighting to contain volume decreases. So in this market context, the decrease in our sales which we're reporting for Q3 was volume driven, while price/mix was stable. As Thierry mentioned, and this is a recurring theme, but we have to be clear on this, we faced further unfavorable currency impact in Q3, measured at EUR 43 million or -- with a 7.5% impact negative on our reported sales. So in Q3, more than in the full first half when the currency impact we reported was negative EUR 38 million. And we've got our main functional currencies outside the Eurozone contributing to this difficult impact, notably the Brazilian real, the Mexican peso, the Turkish lira and the Russian ruble, which all weakened strongly year-on-year. And this started, as we mentioned in our latest releases, as from mid-February last year. So as Thierry mentioned, we also reported in Q3 the first contribution from our acquisition of U.S. Feminine Care, which accounted for 0.5% increase in reported sales. So with this, on a reported basis, our revenue decreased by 11.6% to EUR 508 million. We can now move to the category review on Page 10. In Q3, we posted growth in Adult Incontinence, driven by both Europe and the AMEAA divisions. Revenue in Babycare was down despite an improvement in demand in the summer. And Feminine Care was also down due to lower demand in Europe, where most of our revenue is generated. Now looking at each category in detail. In Babycare, which made up 56% of our sales in Q3, revenue was down 8.5% like-for-like. So Q3 represented a sequential improvement of more than EUR 20 million against Q2, as indeed, market demand in the Babycare category has improved in the summer compared with the unwinding seen in Q2 from pandemic-induced pantry loading of Q1. But still, demand in Q3 is below the pre-COVID-19 levels. In the Adult category, which made up 33% of our sales in Q3, like-for-like revenue was up 2.7%. As a general remark, Adult Incontinence is a key long-term growth category for the industry and for us in particular. And we are well placed to serve consumers in both institutional and retail channels. And the strategic changes that Thierry hinted to, of course, will come to further strengthen our position in this category. Looking more specifically at Q3. Sales of Adult Inco products in retail channels grew by 10%, with both Europe and AMEAA posting higher revenue. Sales in institutional channels in Europe were below last year, as COVID-19 impact resulted in lower demand in hospital and care homes. We'll get back to this when we discuss our Healthcare division. In Feminine Hygiene, which represented 10% of our sales in the period, like-for-like revenue was down 6.7% compared with the same period last year. In Europe, where most of our Ontex Femcare sales are recorded, market demand was visibly lower, driven essentially by more intense competition in traditional channels and the shift of demand toward e-commerce. Reported revenue in this category was also impacted by our newly acquired U.S. business. Let's move now to the detailed review of our [ 3 ] divisions, starting with Europe on Slide 11. Like-for-like revenue in Europe decreased by 9.8% in the quarter to EUR 215 million. This is, of course, significantly below last year, but it shows an improvement over a very low Q2, although below H1 overall has COVID impacts weighted on market demand. Tracked channel sales decreased in Babycare and Feminine Care, with Adult Incontinence revenue slightly up, confirming that market demand has not returned to pre-pandemic levels. Competitive activity increased, as illustrated by the level of promotions of the leading international branded diaper players, which reached unprecedented levels in some major markets in Q3. Also, the quarter sales reported by Europe reflected the negative balance of retail brand contracts gain and losses over the last periods, which will also impact revenue in Q4. Our direct-to-consumer baby diaper offering in France and Benelux continued to record solid growth. In currencies, even in Europe had a negative impact year-on-year, essentially due to the Russian ruble, so that Q3 reported revenue in Europe was EUR 210 million, down 12% versus Q3 of last year. Let's move now to our Americas, Middle East, Africa and Asia division on Page 12. Q3 2020 like-for-like revenues stood at EUR 224 million, very stable year-on-year. As mentioned earlier, demand was lower in emerging countries due to the impact on purchasing power of higher unemployment and lower disposable income, while in the U.S., the pandemic accelerated the shift of demand to e-commerce. So revenue in the Americas had a limited decrease, explained by, on the one hand, lower sales in Mexico, on the back of softer market demand and increased promotional activities from competitors. The US sales grew, with higher sales at online customers and the new retailer brand business started to ship on the back -- at the back end of the quarter. Finally, Brazil posted higher sales, as the actions engaged last year to expand our distribution capabilities are now translated in meaningful improvement in our branded sales. Inside AMEAA, the MEAA market: Middle East, Africa, Asia, posted higher revenue on the back of increased volumes, driven by Turkey, where we gained a new retailer brand customer, and also further improved our already very strong position in Adult Incontinence, as well as in Algeria, where our own brand performed well. AMEAA is by far the division most exposed to currency movements, and those were very unfavorable in Q3 compared with the same quarter last year, with an impact measured at negative EUR 38 million, essentially driven by the Brazilian real, the Mexican peso and the Turkish lira. Let's turn now to Healthcare on Page 13. So Healthcare like-for-like revenue decreased by 1.6% to EUR 110 million, compared with the strong performance in the same period last year. We continue to make good progress to increase our presence in the self-pay market and in e-commerce, and home delivery also increased. Now demand for Adult Inco products in hospital and nursing homes was lower due to continuing impacts from the pandemic, which results in both lower occupancy rates, in particular nursing homes and restricted access to the facility of our customers for our sales support staff. So double negative impact of the pandemic, which is continuing at this moment in the institutional business for Healthcare division. Currency movements had no material effect on our division for the period. Now after the category and division revenue review, we can move to the adjusted EBITDA analysis and performance, so please turn to Page 14. Thierry already mentioned that in Q3, adjusted EBITDA came in at EUR 57 million, which is EUR 4 million lower than last year, after giving effect to a EUR 17 million negative foreign exchange in the quarter. Now looking at the year-on-year adjusted EBITDA bridge using the same detailed bridge, the one we shared for the first time in our H1 results. So T2G benefits continued to be the main driver of improvement across the first 9 month of the year. These benefits amounted to EUR 57 million on a gross basis, with procurement and operational work streams delivering EUR 80 million of gains, while commercial work stream posted a negative impact of EUR 23 million. Out of this EUR 23 million, lower volumes accounted for approximately EUR 14 million, while investments in our local brands, very selective, of course, in the adverse of the pandemic, had a EUR 9 million impact on our adjusted EBITDA. In the operational work streams, procurement accounted for EUR 64 million out of the EUR 80 million generated by this area. And the other operational work streams, essentially manufacturing and supply chain, generated positive EUR 22 million gains. As we've been reported earlier, the T2G related resources dedicated to production, engineering and management to effect the manufacturing transformation impacted our EBITDA by EUR 6 million. So moving now to the other factors accounting for the evolution of operating performance. Raw material indices eased over the first 9 months of 2020, helping EBITDA by EUR 39 million over 9 months compared with the same period last year. And finally, over the 9 months, we incurred costs of around EUR 11 million related to COVID-19, essentially staff costs or additional premiums, various -- kind of compensation for people who have been working across the COVID and also supply chain-related costs, as the COVID, of course, resulted in a number of disruptions that we had to cover in our supply chain. And this EUR 11 million were recorded as operating expenses, impacting mainly our gross margin. So all in all, this resulted in adjusted EBITDA at constant currencies for the first 9 months at EUR 232 million and the related margin, again, at constant currency of 14.1% versus 10.2% in the same period last year. As Thierry mentioned, and I think it's hard to get back to this and giving you clear numbers, we experienced strong currency headwinds as for March, which intensified in Q3, mainly due to the depreciation of the peso and the Brazilian real, which all together account for about 60% of the ForEx impacts. So over the 9 months, we report a negative impact of EUR 49 million in adjusted EBITDA or 229 basis point on the EBITDA margin compared with last year. So as a result, adjusted EBITDA in the 9 months is reported at EUR 183 million and margin at 11.7%, still up 152 basis point compared with last year despite a strong unfavorable currency impacts. I will close this section with an indication of forecasted currency impact on our Q4 revenue and adjusted EBITDA, assessed on the basis of the priorities as of the end of September and on the forecasted activity for the quarter. As Thierry mentioned earlier, these impacts will be the highest of the year. On revenue, we forecast an impact of approximately EUR 55 million for Q4 versus Q3 -- versus, sorry EUR 43 million in Q3. On adjusted EBITDA, we expect an impact of approximately EUR 25 million in Q4 versus EUR 17 million in Q3. With this, the estimated full year unfavorable impact of currencies will stand at approximately EUR 135 million on sales and EUR 74 million in adjusted EBITDA. So before handing over to Thierry, I will have a word on our net debt, which is standing at EUR 178 million at the end of September, in line with the level on the same date last year, of course. And we are continuing this challenging environment to strictly managed working capital and CapEx. So the ratio of net debt to last 12 months adjusted EBITDA stood at 3.43 compared with 3.70 -- 3.68 a year ago, so a slight improvement, and 3.51 at the end of December. So just to remind you that net debt and leverage reflects the application of IFRS 16 leases since January 2019, and this is -- this accounting change has no impact on our financing arrangement. So net debt, excluding IFRS 16 impact, was EUR 748 million. So with this, I will now hand over to Thierry for his concluding remarks. Thank you very much.

Thank you, Charles. Actually, before concluding with the outlook, I would like first to take this opportunity to inform you that Charles has communicated to the Board his intentions to retire at the end of March of next year. And a search for his replacement is already underway. And he will continue, of course, to be as active as he's always been in the next few months to ensure that we've got a smooth -- smart handover with the new CFO. Now let me conclude today's presentations on our prospects for Q4. And I am on Slide 16 now. Ontex continues to operate in a highly uncertain environment across all its markets due to the evolutions of the pandemic, which as you have seen and described by Charles, been undermining currencies of emerging countries, disrupting the consumer demand and as well as the purchasing behavior and resulting also in increasing competition because the industry players face sales contraction in their traditional channels. In such an environment, the full year group like-for-like revenue variations could be expected to be broadly similar to the 9 months 2020 period. However, unfortunately, the resurgence of the pandemic in many geographies, as I mentioned before, including essentially Europe for the moment, has already triggered the new lockdown measure, with impact on sales for the final 2 months of the year, whether those impacts are negative or positive, by the way, it's difficult to predict. Identically, concerning the profitability, we expect, on one side, a positive impact from further improvements of T2G work streams, also from raw material indices and seeing the first effect of the overhead cost reduction measure, which, actually, on the other side, are offset by the unfavorable impact of higher price investment and lower operating leverage. And additionally, as Charles dedicated, the effects of currency movement in Q4 on both revenue and adjusted EBITDA are expected to be the highest of the year. So this is, of course, a very challenging year due to the unprecedented conditions that are around us. But I can assure you that we are fully committed to making the necessary changes to address those challenges and return to a sustainable top and bottom line growth and accelerate the value creation that we needed. So this concludes our presentation for today. Thank you very much for your attention. And I'm now opening the floors for the Q&A. Thank you.

[Operator Instructions] We will now take our first question from Alan Vandenberghe from KBC Securities.

I have 3. The first one is regarding the strategic review process that you initiated in -- at the end of the summer, I understand. I was wondering if you could provide us with some form of timing or timing framework when we can expect things to come out of the review process. The next question is for both -- the next 2 questions are for Thierry, and it's related to the introductory remarks that you made. The first question is on e-commerce, obviously, you see it accelerating drastically with COVID, but it's also sticky, it seems. I was just wondering how you are preparing or gearing up to capture this opportunity. Or is it an opportunity for you? And then the second one is regarding the fact that peoples tend to spend less time in stores and compare less, which, on the one hand, favors brands, but on the other hand, you also said that people are looking for value. I was wondering how those 2 conflicting elements played out for Ontex.

Thank you, Alan. So I'll take those questions, Charles. On the strategic review process, well, we mentioned the strategic review actually started in August, and it's now well underway. In the meantime, the Board has created the Strategic Committee in October. And I was mentioning earlier, the task of this Strategic Committee is to reshape the strategic choices and work together with management to finalize what will be our final priorities and choices for the company. So the Strategic Committee exists for a couple of weeks now. So we are catching up on that all together. And we are completely working in sync now to fine-tune and make those choices executable, which is very important for us is, first, we identified where we want to play or we want to win, and then make it actionable. And we're going to spend the necessary time for that. So that's one element. So it's difficult for me today to spin a date on this. The other, I think, dimensions, which is important is, as you can imagine, our strategy needs to be fully carried and supported by the CEO and a permanent CEO. And I would find it pretty logical that the permanent CEO is presenting that strategy to you and to the investors. And so there is also interdependencies there. But as soon as we will complete the exercise and the CEO will be finally confirmed, we will definitely set up a date to update you guys on where we are in the strategic review. Taking the second point on e-commerce. It's clear that this is going to be a game-changing for the industry and for Ontex. The surge during the pandemic showed people that the category of personal care is actually pretty open to the e-commerce channel and it is well suited to that e-commerce channel. And what we saw already before starting in Asia with a majority of sales in some countries being sold online, it is coming in an accelerated pace into Europe and North America. There, Ontex, I would say all evaluations, because we don't have a, let's say, Nielsen worldwide or [ your mentors ] or which are having precise data on online to date. But [indiscernible] with our knowledge and expertise is that worldwide online sales in Personal Care is at around 11% of sales. What we have today at Ontex is 5%. So as you can see, there is material potential for growth there. And we are accelerating the gearing up there to be ready for that. And when you look at e-commerce, you've got basically 3 areas we need to look at. The first one, the one which is in the hands of the marketplaces and the another likes of this world. And on this one, where we have the right to win, is really to offer retailer brands to those big players, and we have already started. The second is on the online retail platform of retailers. And this is where we are today adding resources with specific expertise and we got the sale of e-category to drive the acceleration there. And we are also reviewing our portfolio of products so that the product offering fits with the online, like the big packs, for example, or the type of packaging with -- which needs to be adapted. And the last segment is direct-to-consumer, where, as you know, we have launched our subscriptions model there, which is progressing on our -- own plan, and we're launching in France and expanding now in Germany. On your last question on the times in shops, yes, there are -- definitely, there's less time. People want to go very quick. And what I say, yes, that would favor, on one side, brands, or favor, on one side, value propositions -- value for money proposition. Actually, this goes also together because what we see is that in customers and country where retail brands are strategically supporting their brands to build equity behind it, they are actually winning because they are combining a strong brand equity with a value for money proposition. And this is the equation that we are pushing much more, and some of our key retail partner are in this mindset right now, and we will push more and more in that direction.

We will now take our next question from Fernand de Boer from Degroof Petercam.

A couple of questions I have. First one, you mentioned that you will have less variable payment, which is already included in the numbers. Did that mean that actually that you released the accruals built up in the first half? And could you quantify that? Because I think that must have been beneficial for the EBITDA. Then -- and coming back on your pricing strategy. Is the price competition primarily in the branded or in the private label? And -- because if you are going to cut your prices, it's going to be a race to the bottom. And in the past, you were very clear, we -- the only way to protect margins is to keep our prices up, et cetera. So is this really a change for you as you seem to be a little bit more proactive in that? If you look at others in the space, at least the branded who published so far, there the price/mix seems to be rather stable, where it's -- for you, it's quite negative, so could you elaborate on that? And then I didn't really understand the last question -- of the last answer on the question, the previous question of the branded first value. I have the clear impression that the big FMCG companies are pushing more value into their brand, and for that respect, gaining share. So could you give us a little bit idea what your answer is on that one? And then the last question is coming back on the online. Could you give us an idea how big online is now for you? And what has been achieved since you updated us on the Capital Market Day, where you also had and planned for your online strategy?

Thierry, I will take the first one. I didn't really understand the question because, I mean there was absolutely no release of provisions built in the H1 in Q3. The only release we had is the one we disclosed, which relates to the management bonus. There is no other release. And if there had been, we would have disclosed it. So that's my answer to the first question. I leave the rest for you, Thierry.

I think your accrual during the year for the variable payments. So I think you build up something in the first 6 months. So what happened with that buildup that you did in the first 6 months?

I mean, we released. In Q3, the difference between the -- for the first 9 months of -- the difference between what we had been accruing for until the end of June, which was on a full bonus basis, we believe the difference with the reduced bonus basis and the impact we disclosed in our press release or our presentation. It's about EUR 4 million. There's no other release. And anyway, the amount of bonus of management that we could really change completely the evaluation of the performance, specific, considered the accumulated EBITDA at the end of September. Therefore, there is no other impact of provision releases than the one which has been disclosed. But Thierry, I let you take the rest.

So Fernand just quickly. Online, I was mentioning that a bit before is like -- today is representing about 5% of our turnover. Regarding your questions on the value for money, actually, what I wanted to say is that when you have retailers where their retail brands have got a stronger equity value, and you've got several ones like that, especially the -- into U.K., also in Poland, where we've got examples of very strong brands and -- because the retail has created really good brands, and we together have worked on that. And this, combined with the value for money propositions in terms of price positioning, make it a winning equation. And if you look at the U.K., for example, retail brands continues to grow even in the last 3 months where we know that international brands have invested heavily to bigger market share because during the peak of the pandemic and the lockdown they could not do promotion, and they are really catching up on promotion big time on -- right after. But even with this, in countries or customers where the strong equity behind their brand is there, the brands are not succeeding in catching share. And that's why I mean where we could combine actually strong brand equity on retail brands together with a value proposition for consumer. Regarding the pricing strategy of -- is it pricing pressure across brands and retail brands? Yes, it is. It is across the different markets and across brands versus retail brands. Is it the rest of the bottom? Not so long that you're -- you need to become price competitive, that's one thing. And in order to remain price competitive while not compromising on your bottom line, an acceleration on the cost competitiveness is paramount of importance. And this is what we are doing. We said we need to reset the level of price competitiveness in the light of the current environment. And that's the fact. And the economics downturns is not helping, but we can mitigate that by very strong actions in order to reinforce the cost competitiveness. And this cost competitiveness goes from -- continue to work on the cost of goods, which T2G is driving heavily, and you've seen the results quarter after quarter. But also looking at our cost structure that we are adding at another levers of the different T2G streams. And the first actions, as we mentioned, was to decrease already by -- in the range of EUR 11 million of cost structures as a first action.

Sorry, can I just -- it's Philip. [Operator Instructions] Thank you very much.