Reckitt Benckiser Group plc

Right, good morning, everyone. Welcome to Rekord's half-year 2023 results presentation. Before we start, I'd just like to draw your attention to the usual disclaimer in respect of forward-looking statements. Now, presenting to our results today, we've got Nicandro Durante, our CEO, Chris Licht, our CEO designate, and Jeff Carr, our CFO. Following the presentation will be the normal Q&A session, and so without further ado, I'll ask Nicandro up to kick things off.

Good morning everyone and thank you for joining us either in person here at Deutsche Bank or online. I'll kick off today's presentation with some key messages. Jeff will then take you through the financial review and our outlook. And then Chris will provide you with a business update as well as his initial thoughts on the business. We'll finish with the usual Q&A session. Well, we have delivered a strong half-one performance. The investments we have made in R&D and our innovation pipeline over the last few years are delivering. This, combined with our focus on improving our in-market execution and the relentless work by so many of our people on our productivity program, have enabled us to deliver this strong first half. We delivered growth towards the upper end of mid-single-digit growth despite some tough comps for our US nutrition business and lies all in Q1. We delivered gross margin expansion and we delivered a markedly leading operating margin. Second, when I talked to you in March, I said that we had a strong pipeline of innovations launching this year and that we are going to step up our brand equity investment to ensure they land well in the market. Well, we have done exactly that. Chris will walk through some of our large innovations shortly, as well as providing you with an insight into a particularly exciting life zone innovation that we are rolling out in half two in the US. The early success of innovations launches this year combined with our strong half one delivery give us confidence in our full year targets, which we have revised up slightly in respect of our outlook on margin. And I'm delighted to welcome Chris Licht as our next CEO. I have worked with Chris over the last 11 months, and he's an authentic leader, a strong operator, and the right person to lead the racket through the next stage of our journey, from transformation to outperformance. I'll now hand over to Jeff, who will take you through the financials and our outlook for the year.

Thank you, Nicandro, and welcome, ladies and gentlemen. As you can see, at actual exchange rates, net revenue grew by 8.1% in the half to £7.4 billion. Like-for-like net revenue growth was 4.1% in the quarter and 6.0% for the half. Now, the impact of price and mix was 8.4% in the quarter and 10.4% for the first half. This was resulting from carryover pricing in the second half of last year, innovation-led price increases, and the increase in our nutrition business pricing deferred from last year, as well as mix improvements. We saw sequential volume improvement in our hygiene business with a strong performance from Lysol, which returned to revenue growth in the quarter. Overall, volume was down 4.3% in the quarter, with flat volumes in health and nutrition volumes down, impacted by the market issues in the previous year. Adjusted operating profit was strong in the half at £1.8 billion, and margins at 23.8% was a good performance, helped by our ongoing productivity programs. In absolute terms, adjusted operating profit was in line with last year at actual rates, slightly down at constant rates. But margins, you'll see, are down 180 basis points. But that is against an unusually high margin last year, which included some significant one-off items. In line with the confidence of our outlook, we've increased our interim dividend by 5%. That's consistent with our aim to deliver sustainable dividend growth. Moving on to the key drivers of performance. Gross margins were up 130 basis points to 59.4%. It's pleasing to see gross margins improve following obviously a difficult 2022. As I mentioned, gross margin benefited from the pricing, mixed benefits and the productivity programs which continue to offset the continued inflationary pressures that we see in cost of goods. As discussed earlier in the year, we've increased our brand equity investments up 60 basis points, or in absolute terms, just over 100 million pounds to support our innovation program, quite a significant increase. Other costs appear high, up 19.2%, as you can see, at constant exchange rates versus last year. However, the prior year first half costs at 20.8% of net revenue were unusually low, in part due to the one-offs I mentioned earlier, such as the profit on sale of land, which was almost £60 million in the first half of last year. Second half costs will be broadly in line with the prior year, which means for the full year, we expect total fixed costs to be around just under 10% ahead of 2022. Now moving on to our business units, let me start with hygiene. Net revenue grew very nicely up again into the mid single digit growth area at 5.5% in the second quarter. And while the growth was broad-based, it was particularly pleasing to see Lysol return to growth, up high single digits in the second quarter. As we stated earlier in the year, we saw hygiene volume trends improve quarter on quarter, from a double-digit decline in Q1 to minus 7.3% in the second quarter. Adjusted operating profit margin at 19.1% was down 250 basis points versus 2022. Now remember, hygiene is the business unit which was most impacted by the extraordinary COGS inflation in 2022. And additionally, this year, we've significantly stepped up our BEI investments in the hygiene division to support the innovation program. We expect hygiene margins to improve in the second half of the year, in a more benign cost of goods inflationary environment. So moving on to health, we had net revenues of 3.1 billion pounds in the first half. And like for like net revenue growth was 8.8% in the half and 4.9% in the second quarter. The growth was led by a strong performance across both our OTC business and intimate wellness portfolios. with an improving performance in China in the second quarter. Now, Dettol was mixed across many markets with growth in South Asia and parts of Africa, but this was more than offset by a difficult market in ASEAN, where we saw declines, and we faced some category weakness and some in-market challenges. This contributed to the lower volumes in our developing markets, but we expect the performance specifically for Dettol in the second half to improve. Adjusted operating profit margin was 28.7%, an increase of 40 basis points, helped by the positive mix from a strong OTC performance in the first half. Now let's look at nutrition. We delivered revenue of 1.3 billion pounds in the first half. Like-for-like revenue growth was 5.3% in the half, and we had a small decline of 0.9% in the second quarter as we're now fully lapping the prior year market disruptions. I'm very pleased that we have continued to maintain high market shares in the US and Canada. Enformil remains the number one recommended trusted infant formula brand in North America. Of course, we do expect a tougher competitive environment in the US and Canada in the second half. and where we'd be lapping much higher market share comps during the peak of the supply shortages from last year. However, Rekit has moved into clear market leadership in the US and Canada, and we're confident of maintaining that leadership through the second half of the year. In developing markets, we saw a continued strong performance in LATAM, again offset by mixed results in Asian markets. Adjusted operating profit margin was 23.1% in the half, helped by a positive mix from additional WIC benefits in Q1, higher market shares and pricing that was put in place at the start of the year. The decline of 590 basis points in the half was again due to the lapping of the profit on sale of Asian land, which I mentioned earlier. We expect margins in the second half to reflect the absence of the WIC benefits, that program was completed at the end of February, and higher trade and marketing investments as we face a tougher competitive environment. Now looking at earnings per share, was down slightly half from last year, from 178.6 pence per share to 173. As previously mentioned, adjusted operating profit was unusually high last year, so despite a good performance in the first half, AOP contributed to a 4.8 pence fall in EPS. Net financing costs were lower than expected, due to foreign exchange gains on financing instruments of around £30 million in the first half. However, this was offset, more than offset, by higher effective tax rates, with an effective tax rate of 24.7% in the half. Foreign exchange translation benefited EPS by 4.9 pence, partly due to US dollar and euro strength in the first half of the year. We generated 758 million of free cash flow, a year-on-year increase of around 4%. Now you'll see we had a rather disappointing working capital outflow of 451 million pounds in the first half. And while we've made good progress in reducing inventory, we saw a larger than expected decline in payables as a result of both the inventory reduction program and lower volumes. However, We expect a working capital inflow in the second half of the year, and we still expect to have a strong free cash flow above two billion pounds for the full year. And working capital remains a key focus for us throughout the group and throughout the organization. Now moving on to net debt. We've continued to see a reduction in leverage, and as you can see, net debt to adjusted EBITDR has reduced in the half from 2.1 times to two times at the end of the half. Our capital allocation policy has not changed. We amended our dividend policy at the end of last year, and consistent with this, we've increased our 2023 interim dividend by 5%. For the full year, we expect to have strong free cash flow, as I mentioned, and for our key ratio of net debt to EBITDA, adjusted EBITDA, we expect to be below two times by the end of the year. In line with our capital allocation policy, we're then committed to returning excess cash to shareholders. Now finally, let me cover the outlook for the year. Our revenue outlook remains unchanged at 3-5% like-for-like net revenue growth for the year. Now we've had a good first half and expect continued momentum in the second half, But equally, we are aware that we face tough comps in OTC, especially in the fourth quarter, and an increased competitive environment in US nutrition, while lapping the higher share gains that we had last year. On adjusted operating margins, we now target margins slightly above 2022 levels when excluding the U.S. nutrition impact of 80 basis points. And while this is a slight tweak up in our guidance, I don't expect consensus to move on the back of it, given that the market is already at 23.4% expectations for the full year. We've made a few other small adjustments to our other more technical elements of our guidance. We've nudged our finance expense expectations down, but our effective tax rate has gone up slightly. Now I'll hand over to Chris to provide you with a business update and his initial views on record. Thank you.