Reckitt Benckiser Investor Presentation: Half Year 2012 30th July 2012
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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
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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%
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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)
14
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
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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
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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
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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!
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Initiatives for H2 2012 - Health Nurofen® Express PERIOD PAIN capsules
41 41 41
Targets period pain fast & lasts up to 8 hours
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Initiatives for H2 2012 - Health Durex® B Closer
42 42
Designed for Youth, by Youth.
Durex trade video
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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"
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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
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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
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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
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Initiatives for H2 2012 - Home Air Wick® Black Edition Candles
53 53 53 53 53
Extends the highly successful Aurora Franchise with elegant designs
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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
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