Reckitt Benckiser Group plc

Good morning, everybody, and thank you for joining us for the Reckitt Full Year 2024 results presentation. For those of you that don't know me, I'm Nick Ashworth, and I head up investor relations here at Reckitt. So before we start, can I draw your attention to the usual disclaimers in respect of forward-looking information? Following the presentation, we'll do the usual Q&A session. We will take questions from the room first, and then followed by written questions via the webcast. For those of you who have joined online, please feel free to submit your questions via the questions tab, and that's at the bottom of the screen, and I'll read them out. If you have further questions after the event, please feel free to reach out to the IR team, and we'll be happy to help. And so with that said, I will hand over to our CEO, Chris Lick, to start the presentation. Chris.

Thank you, Nick, and good morning to everyone in the room and those who have dialed in. I'm joined this morning by our CFO, Shannon Eisenhardt. I'll start with an overview of our 2024 results and some of the key highlights, and then Shannon will take you through the financial performance for the year. I'll then come back and provide an update on our strategy and key priorities for 2025 focused on the sharpened core record business. After that, we'll both be happy to take your questions. 2024 was a foundational year for Reckitt as we announced a revised strategy and the steps that we're taking to deliver it. We're making big changes and I'm really proud of the work our team has done as we move towards becoming a world-class consumer health and hygiene company. We've grown the business delivering on our ambition of driving top and bottom line growth with strong earnings and cash returns to shareholders. we've also improved our market shares, with 55% of our top CMUs holding or gaining share across both health and hygiene. Our innovation platforms have achieved very good results, with new products and new category creation, driving higher margin growth across our power brands. We've also increased investment, with total capex of 500 million pounds, reflecting continued multi-year investments in R&D and our supply chain, which will help power innovation and the future growth of the business. We've simplified the business, moving from five to three organizational layers to increase accountability and decision-making, accelerating delivery and execution. And finally, we're seeing good early benefits from our Fuel for Growth program, which is supporting increased investment in our brands, to drive revenues, expand margins, and deliver sustained earnings growth. This can be seen in our 2024 financial performance, which delivered both top and bottom line growth with strong cash returns to shareholders. Group net revenue grew 1.4% in line with our guidance of plus one to plus 3% growth. While this includes the impact of the tornado in July, and a slow start to the cold and flu season, health and hygiene grew like-for-like net revenue by 4.6% and volume by 2.1%, excluding seasonal OTC. Regionally, we saw good growth in Europe and developing markets, notably in China, where net revenues grew double-digit, while seasonal OTC had a negative impact on our North American performance. Adjusted operating profit increased 8.6%, helped by the start of our Fuel for Growth program. The initial actions to sharpen our portfolio and simplify the business enabled us to increase investment in higher growth, higher return areas. Higher operating profit led to strong EPS growth of 7.9%, which was supported by our ongoing share buyback program, as well as a lower tax rate. We delivered another year of increased cash returns, with 2.7 billion pounds returned to shareholders through our dividend and share buyback program, up 75% on the prior year. As part of our strategy update, we also set out our intention to exit both Essential Home and Meet Johnson Nutrition over time. At Essential Home, the new leadership team is now in place, and we remain on track to exit this business in 2025. As we move through the process, we will share news with you in a timely fashion. On Meat Johnson Nutrition, the team has responded well to the challenges it has faced in 2024. We continue to defend ourselves against all cases in the ongoing litigation. Our brands remain strong, led by Enfamil, the number one infant formula brand recommended by pediatricians. And Q4 Like for Like net revenue was plus 8.4%. We're confident that nutrition will deliver growth in 2025. Overall, we've delivered a solid performance this year, and just as importantly, we're making good progress laying the foundations for future growth. At the end of 2023, I set out the four strategic priorities for our business. Our progress in each of these areas over the last 12 months has not only contributed to good financial results, it has also strengthened our position for the year ahead and beyond. Shannon will give more detail on the Fuel for Growth program, and then I'll come back to talk about the progress we're making against our innovation platforms and more detail on our outlook for 2025 and beyond for Core Racket. Shannon, over to you.

Thanks, Chris, and good morning, everyone. I'll start by taking you through our financial performance for the year before coming to our Fuel for Growth program and why we're confident in our ability to deliver a 300-bip reduction in fixed costs by the end of 2027. I'll then turn to the new structure of the group focusing on core record in particular, and share our expectations for 2025. Turning first to the key group financials for 2024. Like for like net revenue grew 1.4% in the year, consistent with our guidance. Excluding seasonal OTC, which accounts for around 10% of group revenues and is impacted by the timing of the cold and flu season, like for like growth was 2.4%. Our gross margin remained above 60% and expanded 70 BIPs year on year, driven by pricing and productivity efficiencies and a more benign environment for cost inflation. The additional impact of efficiencies from our Fuel for Growth program helped deliver a 90 basis point reduction in our fixed cost base and supported 140 BIP expansion in our adjusted operating margin to 24.5%. This progress enabled us to increase brand equity investment by 30 bps to 13.4% and drive EPS growth of 7.9% on an adjusted diluted basis. 2024 was another strong year for free cash flow of 2.2 billion pounds and enabled 2.7 billion pounds to be returned to our shareholders through our dividend and share buyback programs. This is consistent with our capital allocation policy of returning excess cash to shareholders while maintaining a strong balance sheet, which closed the year at two times net debt to EBITDA. Turning to volume, where we continued to see sequential improvement across the business. In hygiene, volume trends were supported by the strong performance of our innovation platforms, in particular across Lysol and Finnish. We exited the year with second-half volumes growing 2.5%. In health, volumes declined 0.4% in the second half, given the soft cold and flu season. Excluding this, volumes were up 2.7% in the second half, as we've seen broad-based growth across our power brands of Dettol, Durex, and Gaviscon, as well as double-digit growth in VMS. In nutrition, while there was volatility following the Mount Vernon tornado, volume trends improved in the second half as we were coming to the end of the market share rebasing. Moving to net revenue growth by business unit. Hygiene delivered 4.2% like-for-like growth for the year with a balanced volume and price mix growth algorithm, which is something we plan to continue into 2025. We delivered revenue growth across all of our power brands and across all of our regions in 2024, despite a more competitive environment. We're seeing positive market share momentum driven by being competitive on shelf and our successful innovation delivery. Looking at market shares, 55% of top CMUs held or gained market share, up from 47% a year ago. While not included in that 55%, it's pleasing to see Finnish move in to hold gain share territory in Europe as we exited the year. As the market leader in Europe, we intend to win and we have good momentum. Autodish remains a competitive category in the U.S. with focus on driving in market execution. Overall, Finnish grew revenue mid single digits in the year and grew high single digits in Q4. Strong innovation has also played a big part in our market share momentum, with new launches across a number of our brands. Lysol in particular has been a standout performer in 2024, up high single digits as volumes turned positive. We've seen strong growth across established segments, aided by innovation with our laundry and air sanitizer launches in recent years. Moving to health. Health delivered 2.1% like-for-like growth for the year. This reflects broad-based revenue growth across non-seasonal power brands, strong growth in China, and new innovations, partially offset by a weak cold and flu season in 2024. Excluding seasonal OTC, the rest of our health portfolio had strong performance, with like-for-like sales up 8% in Q4, up 5.3% for 2024, with volume growth of 2.5%. Looking at the market share data, 55% of health top CNUs either gained or held market share, which is up from 46% a year ago. You'll remember in October, we commented on the strong health share gains we were seeing in the most recent three-month results. Mucinex was a big part of this. It represents one of our largest category market CMUs, and has a significant impact on our external share reporting. With a slow start to cold and flu in Q4, Mucinex moved out of gain-hold territory and is not included in the 55% I just referenced. Our year-end share reporting captures prior 12-month results by CMU. However, as we've seen the cold and flu season develop in Q1, Mucinex has moved back into gain territory, With its superior efficacy, it performs best when consumers are looking for relief. China continues to perform well, up double digits, and is now our second largest country behind the U.S. Intimate wellness was a strong driver, up high single digits across the group, as we gained market leadership in PU condoms in China. And VMS was up 10% across the group, driven by the performance of Move Free in China. We've successfully navigated macro pressures by creating products that solve the unique needs of our Chinese consumers and finding new and innovative routes to market. Finally, our innovation pipeline across health continues to deliver, with a number of new launches across Mucinex, as well as our launch of Gavi Digest across a number of European markets, which is our first move into lower gastrointestinal. We're excited to see the growth that this can deliver. Turning now to nutrition, where Like for Like net revenue declined 7.3% in the year. Given the disruption to supply from the tornado in July, we exited 2024 with our non-WIC market share at 36%. We expect that to improve through the year as supply normalizes. Given the evolving regulatory environment in U.S. nutrition, our priority is strengthening our manufacturing capabilities in North America. We have doubled our capex spend in nutrition over the last two years, addressing key requirements to operate and sustain the business for the future with a focus on driving remediation, compliance, and resilience. Moving now to group adjusted operating profit. Consistent with our strategic ambition and in line with our guidance, we delivered growth ahead of net revenue at the group level as well as across each of our GBUs. Group adjusted operating profit margin growth was driven by a 70 basis point increase in gross margin from pricing and productivity efficiencies. A 90 basis point fixed cost reduction with early benefits from our fuel for growth program. This was partially offset by a 30 basis point increase in BEI investment as we use some of the benefits of Fuel for Growth to invest behind our brands. Adjusting for the impact of the tornado where insurance proceeds to cover lost revenue went through fixed costs, underlying group AOP margin grew 110 basis points to 24.2%. On an IFRS basis, operating profit for the year was 2.4 billion pounds. This includes 838 million pounds of impairment charges relating to IFCN and BioFreeze. For nutrition, this reflects the significant capital investment program underway to meet evolving regulatory environments. For BioFreeze, a more challenging marketplace within topical pain relief. Turning now to Fuel for Growth in a bit more detail. As we set out in July, our target is to exit 2027 with a 300 basis point reduction in fixed costs, landing at 19% versus 22% in 2023. We're confident that we'll deliver on this ambition. We shared in July we expect to incur estimated one-off cash costs of around £1 billion through the end of 2027, and that the 19% target is inclusive of any residual costs after exiting our non-core businesses. In 2024, we've taken 161 million pounds of costs against this program and expect around 500 million pounds in 2025, with most of the balance in 2026. Today, we've delivered a net 60 basis point improvement in our operating cost base, and we expect a continued, steady improvement of our cost base as we head to our 2027 target of 19%. I wanted to provide a little more color around the actions that we're taking and what's to come to reduce the cost base further. Savings will materialize across four areas. Organizational simplification, a greater adoption of shared services and automation, rightsizing some historical investments, and benefits from digital and generative AI opportunities. As Chris said, we've made great progress on organizational simplification, which will enable core Rekit to move quicker, make faster decisions closer to our markets, and is driving increased accountability. We're also making progress on our journey across automation and shared services. Today, we have pockets of services shared across the group, for example, within finance and within HR. And we can drive increased efficiencies and greater productivity with a more holistic approach to global business services across both functions and processes. We also see upside from rightsizing legacy investments. Take our global sales team as an example. We've optimized our global and local sales teams to reduce duplication, increasing focus on priority areas, while further investing in new digital technologies to drive better operational execution. We're also investing in digital and generative AI. As a component of fuel for growth, this area is important to improve costs as well as driving top-line growth through enabling greater levels of collaboration and innovation. And we're already seeing results within marketing. An example of this is around product concept development, where early findings show these tools reduce development time by up to 60%, while also significantly improving quality. Gen AI tools will next be rolled out across our R&D function in 2025 to drive both productivity as well as product superiority. There's still a lot to do, but we have clear line of sight to 19% fixed cost base, by the end of 2027. Turning to EPS, which grew ahead of net revenue at 7.9 percent in the year to 349 pence. This was primarily driven by our 140 BIP improvement in adjusted operating margin. Our ongoing share buyback program added 8 pence per share, while a lower effective tax rate of 22.2 percent helped as we continue to close out historic tax positions. We do expect our adjusted ETR to be in the 25 to 26% range in 2025. These increases were partially offset by the strength of sterling, our reporting currency. We delivered another strong year of free cash flow generation with a 91% conversion rate. We've increased the full year dividend by 5%, and we continue to return excess cash to our shareholders, with 1.3 billion pounds returned through share buybacks in 2024 and total cash return to shareholders up 75% year on year. We did this while maintaining a strong balance sheet with net debt to EBITDA at two times, which is consistent with our capital allocation framework. Our capital allocation policy remains unchanged. Turning now to our new operating structure. Going forward, we'll be reporting through three segments, Core Reckitt, Essential Home, and Mead Johnson Nutrition. We use the term Core Reckitt for now to denote the future Reckitt business post-exiting Essential Home and Mead Johnson Nutrition. Within Core Reckitt, we'll report three geographic areas, Emerging Markets, Europe, and North America. as well as reporting like-for-like net revenue each quarter across our four categories of self-care, germ protection, household care, and intimate wellness. You'll find pro forma financial information across our geographic areas and categories to aid in modeling of the new structure going forward in this morning's release. Core Reckitt has delivered 5% like-for-like growth on average over the past three years, with emerging markets in Europe above this and North America broadly flat following a period of rapid growth through COVID. Core Reckitt has the highest gross margin of the three businesses, enabling a greater BEI investment in our power brands, while still delivering the highest operating profit margin. Finally, Turning now to our expectations for 2025. This will be an important year for Reckitt as we continue repositioning our company. We're targeting 3 to 4% like-for-like net revenue growth in core Reckitt with a balanced delivery across half one and half two. Across our geographies, in Q1, we expect mid to high single digit growth in emerging markets with Europe flat. In North America, we expect low single digit growth partially driven by retailer destocking, and a slower-than-expected ramp-up in new capacity to meet stronger Lysol demand. We expect low single-digit like-for-like growth in both Essential Home and Mead Johnson Nutrition in 2025, with both being back half-weighted. Both of these businesses will show like-for-like declines in half-one. Taking this all together results in group like-for-like growth of 2% to 4%, with essential home and nutrition making this a little more second-half weighted. With our Fuel for Growth program moving into its second year, we expect to drive adjusted operating profit ahead of net revenue growth. With adjusted net finance expense of 350 to 370 million pounds and an effective tax rate of 25 to 26%, We expect to deliver another year of EPS growth. I'll now hand back to Chris to talk about our strategic priorities.