rb | protect, heal and nurture - reckitt benckiser · investor presentation: half year 2012 30th...

Reckitt Benckiser Investor Presentation: Half Year 2012

30th July 2012

Rakesh Kapoor Chief Executive Officer

3

HY 2012: Summary

Business outperforming our market growth: HY 2012 net revenue +4% LFL (ex-RBP), +4% total at constant FX

Strong progress in film conversion – share now 56%

Margins fully in line with expectations Phasing impact of inputs in H1 partially offset by Project Fuel

Effective fixed cost containment

Increased funding on BEI

4

HY 2012: Summary

Net working capital and cash conversion very good

Interim dividend per share increased by +2% to 56p

FY 2012 targets re-iterated

New Strategy – implementation well advanced

5

Financial performance – in line HY 2012 analysis

4.6

3.1

3.84.1

4.7

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

* Adjusted to exclude the impact of exceptional items

Net revenue (£bn) HY 2012: +4% @ constant LFL (Ex-RBP): +4%

2008 2012

802

465

613728

818

0

100

200

300

400

500

600

700

800

900

Adj.* net income (£m) HY 2012: +4% @ constant (+2% @ actual)

2008 2012 2009 2010 2011 2009 2010 2011

6

Update on RBP HY 2012: Driving a more sustainable business

Generic competition to Suboxone tablet a matter of when NOT if We continue to estimate 80-90% drop-off of the tablet business, plus some film loss

Suboxone sublingual film 56% market volume share at end June

Well ahead of our ingoing expectations & film is now the market leader

Liz Doherty Chief Financial Officer

New gross margin definition - more commercially focussed New brand equity investment (BEI) measure - capturing total investment £100m increase in BEI. Funded by: £50m Cost optimisation initiatives (Project Fuel)

£30m Effective fixed cost containment

£20m - other volume leverage, pricing etc

New NWC definition - more commercially focussed

8

What we said 2012 – Focussing on the right levers

9

Q2 & HY 2011 results Profit & Loss summary

2012 2011 % change £m £m actual constant

Q2 2012 Net revenue 2,312 2,338 -1 +3%

Net revenue – LFL (ex RBP) +4%

*Adjusted to exclude the impact of exceptional items

** 2011 gross profit restated for new definition

HY 2012 Net revenue 4,669 4,621 +1% +4%

Net revenue – LFL (ex RBP) +4%

Gross profit** 2,630 2,630 +0% +2%

Operating profit – adjusted* 1,120 1,103 +2% +4%

Net income – adjusted* 818 802 +2% +4%

10

0

500

1000

1500

2000

2500

ENA LAPAC RUMEA RBP

Growth by area

HY net revenue trend, 2010-2012 (in £m & LFL growth %)

-1% +11% +9% +6%

Excellent growth in EM areas

ENA LAPAC RUMEA 0

1000

2000

3000

4000

5000

Total ex RBP Total RB

+4% +4%

11

Balanced net revenue growth

0

500

1000

1500

2000

Health Hygiene Home Portfolio Food

HY net revenue trend, 2010-2012 (in £m & LFL growth %)

+3% +7% +1% -1% +4%

12

High quality net revenue growth Volume versus price / mix: HY 2012

Q1 Q2

HY

Volume Price/mix

+4% LFL growth (ex RBP)

Q1 % Q2 % HY % RBP +6 +6 +6

LFL growth (total) +4 +4 +4 Exchange -1 -4 -3

Acquisitions / disposals - -1 -

Reported growth +3 -1 +1

+3% +2%

+2%

Q1 Q2

HY

+1% +2%

+2%

13

Gross margin progression

56.957.656.3

40

45

50

55

60

HY gross margin, 2010-2012 (%) HY 2012: -60bps

2010 2012 2011

Phasing of inputs, but improving

Adverse mix

Project Fuel (@ £20m)

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Project Fuel – Packaging change Finish® Powerball® tabs

Current 100 count

Box 100 count

15

Projected annual COGS savings - >$2m Finish® Powerball® tabs

Current 100 count Pallet

Box 100 count Pallet

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Operating margin progression

23.920.5 21.6

23.7 24.0

0

5

10

15

20

25

HY operating margin, 2008-2012 (%) HY 2012: +10bps (ex RBP)

2008 2012 2011

* Adjusted to exclude the impact of exceptional items

2009 2010

Operating margins impacted by:

-60bps decline in gross margin

-60bps increase in BEI

+60bps effective cost containment

+70bps from profit on disposals

0

5

10

15

20

25

30

35

ENA LAPAC RUMEA Total ex RBP RBP Total RB

17

Operating margins by area

HY operating margin %, 2010-2012

-100bps +20bps -40bps +10bps -200bps +10bps

ENA LAPAC RUMEA

20.4% 18.1% 19.5% 20.4%

63.6% 24.0%

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Income statement Adjusted HY 2012 HY 2011 %ch %ch

£m £m Actual constant Operating profit 1,120 1,103 +2 +4

Interest (8) (9)

Profit before tax 1,112 1,094

Taxation (290) (287)

- Underlying tax rate 26% 26%

Non-controlling interest (4) (5)

Net income 818 802 +2 +4

- Net income % NR 17.5% 17.4%

EPS – fully diluted (adjusted) 111.1p 109.0p +2

EPS – fully diluted (reported) 105.8p 103.2p +3

19

NWC – more commerically focussed £(m)

752701

0

200

400

600

800

1000

Balance at 31 Dec 2011 Improvement in inventory Improvement in receivables Reduction in payables Balance at 30 June 2012

+19 +87 -55

(7.4%) (7.9%)

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Strong cash flow generation

0

200

400

600

800

1000

1200

Cash generated from operations Net cash flow from operations

HY operating & net cash flow, £m

2008 2012 2011

*Adjusted to exclude the impact of exceptional items

2009 2010

Cash generated from operations of £1.1bn

Net working capital of minus £752m £51m improvement versus y/e December 2011

Net cash flow of +5% to £784m Cash conversion @ 100% of Net Income

21

Net debt In £m

-1795-2011

-2195-1846

-2500

-2000

-1500

-1000

-500

0

FY2010 HY2011 FY2011 HY2012

Net cash flow offset by payment of FY11 dividend and share repurchases

Net cash flow from ops 784

Dividends (511)

Disposals 91

Share repurchases (352)

Other (inc. FX) 39

Change in net debt 51

22

Dividend per share In pence

80100

115125

55 56

0

20

40

60

80

100

120

140

FY08 FY09 FY10 FY11 HY11 HY12

H1 dividend increased to 56.0p

What we said

New gross margin definition - more commercially focussed New brand equity investment (BEI) measure - capturing total investment

£100m increase in BEI. Funded by: £50m Cost optimisation initiatives (Project Fuel)

£30m Effective fixed cost containment

£20m - other volume leverage, pricing etc

New NWC definition - more commercially focussed

2012 – Focussing on the right levers

Rakesh Kapoor Chief Executive Officer

RB strategy for growth and outperformance

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Our purpose is to make a difference by giving

people innovative solutions for healthier lives and

happier homes

Our vision is a world where people are

healthier and live better

A new vision for RB

27

A strategy to outperform

Our purpose is to make a difference by giving people innovative

solutions for healthier lives and happier homes

POWERBRANDS Focus on Health, Hygiene

& Home where we have capabilities to win

POWERMARKETS Core markets prioritised

on growth potential

ORGANISATION

MARGINS Drive margins to

fund investment and profit growth and convert

to cash

28

What we said

New organisation structure to execute new strategy

29 29

30

Driving greater consistency and speed in Europe & North America

EVP ENA

Northern Europe

Southern Europe

Western Europe

North America

Central Europe

UK Italy France USA Germany

31

What we said

New organisation structure to execute new strategy Brand Equity Investment (BEI) mindset Invest an additional £100m in BEI in 2012

32

Appropriate KPIs to measure brand equity investment

Share of mind

Online CRM, video etc Social media, web & apps etc

Share of heart

Medical marketing Detailing and Key Opinion Leader

(KOL) programmes Point of market entry programmes

Share of voice

TV campaigns Cinema advertising Radio and newspapers etc

Consumer & Medical Education

Social & Digital

TV & Print

33

BEI Metrics (ex RBP) HY 2012 £m

0

200

400

600

2010 2011 2012

Media

+40bps

BEI

+60bps

BEI

+£40m*

*at constant rates

34

What we said

New organisation structure to execute new strategy Brand Equity Investment (BEI) mindset Invest an additional £100m in BEI in 2012

Renewed focus on the core business

35

Focus on the CORE

Sale of Paras Personal Care business

Purchase of minority interest in Medcom

Discontinuation of Private Label business

Disposal /discontinuation of other small non core brands

Allows greater focus, resource and investment in powerbrands and powermarkets!

36

What we said

New organisation structure to execute new strategy Brand Equity Investment (BEI) mindset Invest an additional £100m in BEI in 2012

Renewed focus on the core business KPIs (core business) Net revenue +200bps above our market growth Health and Hygiene to be 72% of the business by 2016 Emerging Markets to be 50% of the business by 2016

37

RB medium term KPIs

1

Net revenue growth on average +200 bps per annum above our market growth

KPI 1

2

Powerbrands in Health & Hygiene – 72% of CORE NR from Health & Hygiene by 2016

KPI 2

3

Emerging market areas to be 50% of CORE NR by 2016

KPI 3

38

What we said

New organisation structure to execute new strategy Brand Equity Investment (BEI) mindset Invest an additional £100m in BEI in 2012

Renewed focus on the core business KPIs (core business) Net revenue +200bps above our market growth Health and Hygiene to be 72% of the business by 2016 Emerging Markets to be 50% of the business by 2016

New initiatives for H2 2012

40

Initiatives for H2 2012 - Health Mucinex® Fast-Max caplets

40 40 40 40

Multi-symptom relief from your worst cold symptoms, now in a caplet!

41

Initiatives for H2 2012 - Health Nurofen® Express PERIOD PAIN capsules

41 41 41

Targets period pain fast & lasts up to 8 hours

42

Initiatives for H2 2012 - Health Durex® B Closer

42 42

Designed for Youth, by Youth.

Durex trade video

45

Initiatives for H2 2012 - Health Cepacol® Sensations

45 45 45 45

New range of cooling, warming & hydra sensations with long-lasting & gentle numbing relief

46

Initiatives for H2 2012 - Hygiene Finish® Quantum Gel

46 46 46 46

New concentrated Gel format of Quantum that "Leaves nothing behind but the shine even in short cycles"

47

Initiatives for H2 2012 - Hygiene Dettol® / Lysol® / Sagrotan® Dettol® Touch of Foam handwash

47 47 47

Launch of a range of Manual Foaming Hand Soaps - differentiated format in a highly competitive market

48

Initiatives for H2 2012 - Hygiene Harpic® Thick Bleach Multi-Purpose Gel

Innovation that takes Harpic beyond the toilet & delivers superiority vs competition

48 48 48 48

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Initiatives for H2 2012 - Hygiene Cillit Bang® Turbo Power

49 49 49 49

New Turbo Power that acts in seconds without scrubbing

50

Initiatives for H2 2012 - Home Air Wick® Filter & Fresh

50 50 50 50 50

Breathes In Odours & Breathes Out Clean, fresh Fragrance

Air Wick Demo

53

Initiatives for H2 2012 - Home Air Wick® Black Edition Candles

53 53 53 53 53

Extends the highly successful Aurora Franchise with elegant designs

54

HY 2012: Summary

New strategy - well advanced Implementation ahead of schedule

BEI mindset in place

Renewed focus on the core

KPIs – early days but on track

Trading - in line with expectations Market growth as expected, and outperformance being delivered

RBP - becoming a more sustainable business

New initiatives - great new products to fuel H2 2012 and beyond 2012 targets - reiterated

55

2012 will be a year of

transition and investment

Targeting to outperform the market growth by +200bps We expect market growth to be 1-2%

2012 Targets - Reiterated

Maintain operating margins

Both these targets exclude RBP

Q&A