Reckitt Benckiser Group plc

Good morning, everyone. Welcome to Reckitt's half-year 2024 results presentation and our strategic update. Before we start, I'd like to draw your attention to the usual disclaimer in respect of forward-looking statements. Now, presenting today is Chris Licht, our CEO, and Shannon Eisenhardt, our CFO. Following the presentation will be the normal Q&A session. So, without further ado, I'd like to introduce Chris to kick things off.

Good morning, everyone, and thank you for joining us. Shannon and I will kick off today's presentation with some key messages around our half-won performance, followed by a deeper dive into our numbers and outlook for the year. I will then take you through an update on our strategic agenda, in particular the actions we are taking to reshape Reckitt through a sharper portfolio and a simpler organization. We will finish with the usual Q&A session. I'm keen to talk to you about the actions we announced this morning to reshape Reckitt as a world-class consumer health and hygiene company with one of the strongest growth and margin profiles in our peer group. But first, let's talk about our H1 trading. In February, we said that our revenue and profit growth would be back half-weighted, given the seasonal factors impacting our health business and the continued rebasing of U.S. nutrition. We delivered the first half broadly in line with these expectations, and Shannon will provide further details by Global Business Unit shortly. We are revising our group outlook for the year from two to four percent like for like net revenue to one to three percent growth because of the tornado that hit our Mount Vernon warehouse on July 9th. This is not a structural issue nor a long term issue for our meat Johnson nutrition business. While the event will affect our revenue results this year, we do not expect a material impact on our earnings as we hold comprehensive property damage and business interruption insurance. We see positive underlying momentum in our business as we leave the inflationary cycle of the last few years behind and move towards a more normal and balanced trading environment. Many of our brands and markets are showing good volume growth, which is very encouraging. Our markets remain competitive, particularly in the US and in Europe, where we are seeing a return to a more normal promotional environment. Our innovation platforms are driving premiumization, penetration, and category creation. We saw good gross margin expansion in the first half. We increased investment behind our brands, and we are starting to see some good benefits from our cost optimization program. We also delivered strong free cash flow, which increased by 8% in the half. As we look to half two, I expect to see an improvement in the growth rate of health, continued broad-based growth in hygiene, and the final rebasing of our US nutrition business, which we expect to end in Q4. The positive momentum of the business, our strong free cash flow generation, and our confidence in our future have driven the board's decision to both increase our interim dividend and announce the next tranche of our share buyback program of 1 billion pounds over the next 12 months. Together, these actions show our commitment to increase cash returns to our shareholders. I will now hand over to Shannon to talk in more detail about the half one trading and our outlook for the year.

Thanks, Chris, and good morning, everyone. Today I'm going to start by taking you through our results for the first half. Group like-for-like net revenue growth in the half was 0.8%, with a flat performance in Q2. As Chris said, we delivered half-won broadly in line with our expectations. Absolute net revenue was £7.2 billion, a decline on an IFRS basis of 3.7%, primarily due to the negative FX from the relative strength of sterling. However, it's important to note that our health and hygiene portfolio returned to growth with volumes up 0.4% for the half. Our gross margin continued to be above 60%, and funded increased BEI, driving our adjusted operating margin delivery of 23.5% in the half. Free cash flow grew 8%, and we delivered earnings per share of 161.3 pence. I'll now provide more detail on the volume results for half one. In hygiene, the improving trends we saw throughout the 2023 continued, and we returned to volume growth in half one, as expected. Growth was led by Lysol and was broad-based across North America, Europe, and our developing markets. Health delivered a relatively flat performance in the half. We saw broad volume growth across our brands, including Dettol, Durex, VMS, and Gaviscon. This growth was offset by a high single-digit decline in our seasonal OTC brands, and we don't expect this headwind in half two. Nutrition's volume decline primarily reflects the continued rebasing we're seeing in the United States. As previously communicated, we're returning to a more balanced growth algorithm driven by price, mix, and volume in our health and hygiene businesses. Moving to our market shares. As a group, the percentage of top CMUs holding or gaining share has declined to 38%, and nutrition is the key driver of this change. Hygiene CMU results are slightly down versus 2023, as we see strong competitive challenges in the U.S. and a return to a more promotional environment in Europe. We have taken actions to improve our market positioning. However, we expect the competitiveness in these markets will continue. Health CMU results are slightly down at 43%. Intimate wellness is seeing good share gains, and we see improving trends across OTC, germ protection, and VMS. Specifically within OTC, Mucinex is a large CMU for us and has returned to share growth over the last quarter, but not yet flipped to positive on a year-to-date basis. It's important to remember that CMU market share reporting is a binary metric, and it's also useful to look at total value market share alongside. We are holding total value market share in both health and hygiene on a year-to-date basis. We're pleased to share that we were able to fuel strong brand investment through our gross margin expansion while delivering a 23.5 adjusted operating margin. Gross margin increased 120 bps, aided by the benefit of carryover pricing actions and a more benign commodity environment. Fixed costs represent around 22% of our net revenue and increased by 50 bps in half one. Looking deeper into our fixed costs for the half, our cost base increased 50 bps, reflecting inflation impacts, negative FX, and costs associated with our fixed cost optimization initiatives, which we took above the line. These increases were mitigated by the benefits of our cost optimization initiatives. I'll now get into GBU-specific results. Hygiene delivered 4.5% like-for-like net revenue growth in half one, which is in line with our mid-single-digit growth expectations for the full year. All of our power brands were in growth, led by Finish and Lysol, and our Hygiene GBU delivered 0.9% volume growth for the half. Hygiene delivered 1.9% like-for-like growth in Q2, with both volumes and net revenue impacted by the reversal of a 2% sell-in benefit ahead of an SAP implementation in Brazil at the end of Q1, which we discussed in April. Excluding this headwind, hygiene's like-for-like growth in the quarter was closer to 4%, with volume growth of around 1%. Hygiene delivered an improvement in adjusted operating margin up 230 bps, driven primarily by gross margin expansion. Health delivered 1.3% like-for-like growth in half one, with sequential improvement across the quarters. Growth in the half was broad-based across intimate wellness, non-seasonal OTC, and our VMS portfolio. This growth was reduced by softness in our seasonal OTC brands, given the weak end to the cold and flu season and the impact of retailer inventory movements. Health delivered an adjusted operating margin of 27.8% in the half, with gross margin expansion more than offset by increased marketing investment behind our brands. For nutrition, I'll start with our half one performance and then share an assessment of the full year impacts we expect to see because of the tornado in the US. In half one, we saw a 9% decline in like for like net revenue, which is moderately better than the guidance we shared in February. North America declined mid-teens as the business rebases from elevated shares in the prior year. And we saw a low single digit decline in our developing markets business. Nutrition's adjusted operating margin was 18%, which was impacted by deleverage on the top line and a more normalized trade and marketing environment in the U.S. Moving to our EPS bridge, excluding the impacts of FX, our earnings per share is broadly flat, as interest and tax expense are partially offset by growth in adjusted operating profit and the benefits of our share buyback program. We face a 9.9 negative pence impact from FX due to the strength of our reporting currency. Our free cash flow generation was strong in half one. Our leverage of 2.2 times remains consistent with our capital allocation framework. And we're pleased to announce a 5% increase in our dividend, along with the next tranche of our share buyback program of 1 billion pounds over the next 12 months. We informed the market last week that on July 9th, a third party warehouse in Mount Vernon, Indiana was struck by a tornado and sustained damage. As things stand today, we believe we will experience a short-term impact to our sales of nutrition products this year. Taking this into account, our full-year net revenue outlook for nutrition will be a low double-digit decline. This is a reduction from our previous outlook of a mid to high single-digit decline. We expect the majority of this impact to happen in Q3. Reckitt holds comprehensive property damage and business interruption insurance, and we believe insurance proceeds will largely offset the impact on both the inventory write-off and our lost earnings. We're confident that insurance proceeds covering the write-offs will be recognized within this calendar year. However, we may not be in a position to fully recognize the recovery of lost earnings within fiscal 24. The change to our outlook for nutrition has impacted our group outlook, which I'll discuss now. This nutrition adjustment negatively impacts our group outlook by about 1%. For this reason, we are reducing our group like-for-like growth outlook from 2 to 4% to 1 to 3%. We reiterate our full-year expectation of mid-single-digit growth for our combined health and hygiene portfolios. This is likely to materialize at the low end of our range as our hygiene business faces a more competitive environment in developed markets. As a group, we expect nutrition's shortfall to materialize in Q3. For health, we expect a modest sequential improvement in Q3 with a very strong Q4 as we lap a weak comparative in Q4 of 23. We expect hygiene growth in the back half to be more weighted towards Q4. Despite the lowering of our full-year net revenue target, we continue to expect adjusted operating profit to grow ahead of net revenue growth this year. We reiterate our expectations for net finance expense, for our adjusted tax rate, and for CapEx. That concludes our financial summary and 2024 outlook. I'll now hand back over to Chris to take you through the actions we announced this morning around our portfolio and our organization.