Reckitt Benckiser Group plc

Good morning and thank you for joining us online for the Reckitt Half Year 2026 results presentation. I'm Nick Ashworth, Head of Investor Relations here at Reckitt. Before we start can I draw your attention to the usual disclaimers in respect to forward-looking information. So presenting today we have our CEO Chris Licht and our CFO Shannon Eisenhardt. Following their presentation will be the usual Q&A session. For our covering analysts if you would like to ask a question live then please log into the zoom link shared with you and we'll bring you on screen when it shall turn. We'll also take written questions via the webcast. If you can submit these using the ask a question tab near the top of your screen I can then read the questions out. If you have any follow-ups after the event please feel free to reach out to the IR team and we'll be happy to help. So with all that said I will now hand over to our CEO Chris Lick to start the presentation. Chris.

Thank you Nick and good morning everybody. Welcome to the call. I will start with an overview of our first half performance and some of the key highlights, particularly the significant acceleration in Q2 with the more balanced growth that we delivered before Shannon takes you through the financial results in more detail. I will then come back and provide an update on the progress we're making across our areas and our strategic priorities for the second half, which underpin our reiterated four year guidance. After that, we will both be happy to take your questions. As I just said, we've delivered a significant acceleration across our business in the second quarter. In the first half, we delivered like-for-like net revenue growth of 2.7% in core record, with growth in the second quarter of 4.2%. Importantly, all areas in all categories improved in the second quarter, with a balanced contribution from volume and price mix. This performance not only demonstrates the strength and equity of our power brands, it reflects the continued impact of innovation across our portfolio. Alongside top line delivery, we continue to make good progress with our fuel for growth program. You can see this in our first half results, where we continue to reduce our fixed cost base to offset the stranded costs from the essential home divestment. We're driving greater efficiency across the organization and we're increasing our ability to invest behind our power brands. Overall, we're continuing to drive benefits from being a simpler and sharper business. Executing against the priorities we've outlined consistently over the last two years, our portfolio is more focused, our capabilities are stronger, and our execution is improving. Turning to our financial performance. In the first half, we delivered like-for-like net revenue growth for the group of 2.6%, with a much stronger Q2 of 4.7%. Our AOP margin for Core Reckitt and Mead Johnson was 23.6% in the half. This was higher than our expectations, as headwinds on gross margin were not as significant as anticipated, and we made good progress in offsetting stranded costs through Fuel for Growth. Including the impact from the essential home divestment at the end of last year, we delivered adjusted EPS of 152.1 pence in the first half. We continue to return significant cash to shareholders, returning approximately 3 billion pounds during the period through both the special and full year dividends and our ongoing share buyback. Today we've announced another 500 million pounds share buyback and a 5% increase in our interim dividend. Since announcing our strategy two years ago, we have now returned 6.4 billion pounds of capital to shareholders. This is around 20% of our market capitalization at the time of announcing our plan. The organizational changes that we've put in place across Reckitt are driving improved execution, making us a more resilient business able to successfully tackle challenges. This is evident in the strong acceleration in core Reckitt in the second quarter, with all of our areas and categories improving performance compared to Q1. Emerging markets again delivered strong high single-digit growth led by China and India with Q2 supported by more broad-based growth from our ASEAN and Latin American regions. Europe improved sequentially as we executed better in an environment of continued category and consumer headwinds with Q2 seeing the absence of a seasonal impact. In North America, we returned to growth in Q2 with the continued strong momentum of Lysol, as well as the launch of Mucinex 12-hour cold and fever in June. Together, Core Reckitt delivered 4.2% like-for-like net revenue growth in the quarter. I want to come back to innovation as it continues to strengthen our competitive position, enhance our category leadership, and support premiumization. There are lots of great examples of recent new launches on this slide, but just to call out a few. Dettol Active Botany, our naturally formulated range of disinfection solutions, continues to significantly exceed our initial expectations in China as it resonates very well with consumer desires for enhanced sensory experiences. Following that success, we have launched active botany across additional markets in ASEAN and Europe as part of our global expansion. Our latest innovation in VANISH, the new turbo formulation designed for quick wash and tough stains, has driven strong results in the market, particularly in Europe, taking VANISH back to like-for-like growth in Q2. Across intimate wellness, we continue to expand the Durex Intensity platform, which has now been launched across 19 markets. The range is performing well and is a great example of how superior innovation can grow categories while strengthening our premium position. In North America, we've continued to broaden the range of Lysol air sanitizer with seasonal extensions. And in Q2, we began to ship Mucinex 12-hour cold and fever, one of our most significant innovations in recent years, which I'll come back to a bit later. Execution is not just about in-market performance and innovation. We have faced challenges across our input costs and supply chain resulting from the war in the Middle East. Our experience in navigating these external headwinds positions us well to mitigate the impact. I want to give you some examples of actions we're taking across our supply and procurement functions. We're securing critical supply and building strategic inventory in key materials such as solvents and plastics. We have moved sourcing and manufacturing to markets seeing lesser impacts. Where alternative raw materials are available, we have amended sourcing and formulations, including increased use of post-consumer recycled plastic. We will continue taking these actions and others to mitigate the ongoing volatility in the commodity environment. So in summary, I'm pleased with the progress that we've made in the first half. Our focus portfolio continues to deliver with growth accelerating in the second quarter and improving across all areas and categories. Our power brands are operating in attractive categories with strong structural drivers of growth and our innovation pipeline continues to strengthen our position and the quality of the growth. As always, there's more to do, and I will come back to our priorities and the opportunities ahead shortly. Now let me hand over to Shannon to take you through our financial performance.

Thanks, Chris, and good morning, everyone. As you will have seen in this morning's release, in order to ensure our reporting is as clear as possible, we've made some changes in the presentation of our financial results. We're reporting Core Reckitt and Mead Johnson together to ensure you have a clear view of our ongoing operating businesses. Our group numbers also include the Vestasi Transitional Services Profit. This is income that's both time limited and low margin, which is why we believe it makes sense to separate it. For comparison purposes, we're comparing Core Reckitt and Mead Johnson versus our previously reported 2025 group numbers, which do include Essential Home, as these were the reported numbers at that time. As always, if you have any questions, please reach out to the investor relations team and they'll be happy to walk you through the numbers. Turning now to the key financials for the group. Core Reckitt and Meade Johnson like-for-like net revenue grew 2.6% in the half, with growth in Core Reckitt of 2.7% and Meade Johnson of 2.0%. This reflects a much stronger Q2, with Core Reckitt up 4.2% and Meade Johnson growing 7.2%. Core Reckitt and Mead Johnson gross margin was 50 bps lower at 60.5% as the positive impact from the divestment of essential home was offset by increased input costs and change to category mix. Core Reckitt gross margin was 60.9% down 110 bps year on year. Core Reckitt and Mead Johnson adjusted operating profit margin was 100 basis points lower at 23.6% ahead of expectations due to a lower impact on gross margin from the Middle East war and the pacing and phasing of our fuel for growth program. Adjusted EPS was 9.7% lower at 152.1 pence in the period, largely driven by the divestment of essential home. Looking now at volumes, where Core Racket delivered sequential improvement, with volumes up 2% in Q2, reflecting momentum across all segments and a more balanced volume and price growth algorithm. We also delivered an additional point of growth from Mix. Emerging markets delivered volumes up 3.2% in Q2, or 4.4% excluding Russia hygiene, driven by continued strong performance of Dettol in China and India, as well as our VMS portfolio in China. Europe volumes improved through the half against a challenging consumer backdrop. In Autodish, despite continued elevated promotional intensity, Finnish maintained its market leadership position and delivered volume growth in the quarter. In North America, volumes grew sequentially to 4% in Q2, driven by continued strong performance in Lysol and supported by the launch of Mucinex 12-hour cold and fever. Mix contributed 1.4% in the quarter. Turning now to our area overview. Emerging markets delivered like-for-like net revenue growth of 9.4% in Q2 and 8.5% in the first half. Excluding Russia hygiene, emerging markets grew 10.3% in the half. Performance was broad-based in Q2, with growth across all regions and categories, excluding Russia hygiene. China delivered its 12th consecutive quarter of double-digit growth driven by recent innovations notably Duttall Active Botany and across our VMS portfolio. India grew high single digits with broad-based growth across all categories driven by continued sales force automation, wider distribution reach, and strong in-store execution. Africa, ASEAN, and Latin America all accelerated, with a number of smaller markets up double digits. Finally, in the Middle East, operational and supply chain conditions improved through the quarter following the initial ceasefire, contributing to growth across the region. We continue to monitor the situation closely given the ongoing volatility. Half One adjusted operating profit margin increased 150 bps to 21.4%, driven by gross margin expansion with benefits from category mix and selective pricing alongside our Fuel for Growth program, enabling increased marketing investment. In developed markets, performance improved in Q2. Europe was down 3% for the half with performance improving sequentially. Like-for-like net revenue was down 1.5% in Q2. All categories delivered sequential improvement in Q2 as we moved out of the season and continued to focus on delivering strong in-store execution in our household care business. In Auto Dish, Finish improved like-for-like net revenue and volumes, maintaining market leadership as we actively managed our promotional activity. Vanish returned to growth in the quarter, supported by the latest innovation, Vanish Turbo. In Intimate Wellness, Durex delivered volume growth in Q2 with a modest decline in like-for-like net revenue, reflecting targeted pricing investments. Half one adjusted operating margin was 27.7%, down 300 bps year on year. This reflected supply chain cost inflation ahead of our offsetting measures in the second half, partially mitigated by fuel for growth productivity savings. Turning to North America, like-for-like net revenue grew 0.8% in the half, up 2.8% in Q2, driven by strong volume growth. Lysol continued to outperform, benefiting from strong consumer demand in adjacent categories, including air sanitizer and laundry sanitizer. Self-care returned to growth in the quarter, supported by initial shipments of Mucinex 12-hour cold and fever. And household care remained softer in the quarter. Finished performance reflected weaker category demand in the grocery channel. Half Juan adjusted operating profit margin was 27.0%, down 260 bps year-on-year. Like Europe, higher input costs impacted profitability ahead of mitigating measures in the back half, partially offset by ongoing productivity gains. Moving now to our categories. Growth was broad-based in the half year, with three of our four categories delivering like-for-like net revenue growth, and all four categories improving performance in Q2. Self-care grew 2.4% in the half, driven by continued strength in the non-seasonal business, with strong growth from Gaviscon across ASEAN, Latin America, and Europe, alongside the VMS portfolio in China, which continues to benefit from innovation launches. Growth was partially offset by a weaker cough and cold season across Europe and North America, which impacted seasonal OTC brands in Q1. Germ protection grew strongly at 10.5% in the half, driven by continued impressive performance from both Dettol and Lysol. Growth was supported by innovation-led momentum in emerging markets, where Harpic delivered sequential improvement through the half. Household care declined 6.6% in the half, reflecting a 250 basis point impact from Russia hygiene, as well as elevated promotional intensity in the European auto dish category. This was partially offset by Vanish returning to growth in Q2. and Intimate Wellness grew 0.5% and half one, reflecting strong Durex performance in India and Latin America, offsetting the impact of VAT changes in China. VEAT delivered broad-based growth across all three areas. Through May, 45% of core record top CMUs were in gain or hold, versus 55% at the full year. It's important to remember that this is a binary metric, and large CMUs have a material impact. Mucinex US and Durex China are two examples of large CMUs that currently sit outside of gain-hold territory. We remain focused on driving strong share performance and achieving our target of 60%, and flipping these two CMUs back into growth would largely close our gap to that target. Now turning to our non-core businesses, starting with Mead Johnson Nutrition. Like-for-like net revenue grew 2% in the half, with strong price mix of 5.9%, offsetting volume decline of 3.9%, as it lapped elevated inventory build in the prior year. The international performance was led by Latin America. Innovation remained focused on portfolio expansion, with new rice-based product launches in both the Philippines and Mexico during the period. Finally, Vestasi generated £235 million of net revenue, delivering adjusted operating profit of £12 million from the service agreements we have in place. Moving now to adjusted operating profit. Core Reckitt and Mead Johnson adjusted operating profit was 14.5% lower at constant currency following the divestment of Essential Home in 2025. The 23.6% margin was 100 basis points lower year-on-year, although ahead of our expectations. This reflects a lower gross margin impact from the Middle East War and continued reductions in fixed costs through our Fuel for Growth program, which roughly offset the impact of stranded costs from the sale of essential home in the first half of the year. Looking at Fuel for Growth in a little bit more detail. We've talked about savings coming from four areas, with strong progress coming from organizational simplification and the right sizing of investments. Now looking at the other two. In shared services, we continue to make progress, expanding our global operating model. We're deploying shared services across our HR, Finance, IT and Supply organizations and now have our three global hubs up and running. Our focus is on extending shared capabilities further within these functions around the world as well as across additional functions. We're also accelerating the application of digital and generative AI across the business and believe there's a long runway in this space to drive both growth and productivity. Chris will come back to this shortly. We remain focused on delivering these efficiencies while managing stranded costs associated with the separation of our non-core businesses. Looking at the numbers, fixed costs remain broadly in line with half one 2025 at 20.1% of net revenue, with fuel for growth savings broadly offsetting the essential home stranded costs. The program remains on track to deliver our upgraded target of fixed costs below 19% of net revenue by the end of 2027. In terms of the costs to deliver the program, we continue to expect it to be around 1 billion pounds, and for this to be around 350 million pounds in 2026. Now turning to EPS. We delivered 152.1 pence in the half. The 9.7% decline versus the first half of 2025 was primarily driven by loss of income from the sale of essential home and lower operating profit in Core Reckitt and Mead Johnson due to higher input costs in the period. This was partially offset by income from the essential home vehicle, a lower share count from the share consolidation alongside the £1.6 billion special dividend, and our ongoing share buyback program. It's been another strong period of cash returns. We've paid an 800 million pound full year dividend, repurchased 600 million pounds of shares through the share buyback program, and returned 1.6 billion pounds following the sale of a central home. In total, we've returned over 3 billion pounds to shareholders in the period, taking total cash returns to shareholders to over 6 billion pounds since we announced our strategic plan in 2024. This is in line with our capital allocation policy where we prioritize investment in organic growth and a progressive dividend while maintaining a single A credit rating. Excess cash will be returned to shareholders. Turning to cash flow, in the first half we generated free cash flow of 419 million pounds with the majority of the year-over-year impact reflecting the loss of the operating profit from a central home. This has led to cash conversion of 42% as we continue to invest behind our Fuel for Growth program. The half-year dividend is increasing 5% in line with prior year. Our balance sheet remains strong with net debt to EBITDA at 2.5 times in line with our expectations following the £1.6 billion special dividend paid in February of 2026. As we said in March, we expect leverage to start to trend back down through 2027. In line with our commitment to return excess cash to shareholders, we've announced a new £500 million 12-month share buyback program this morning. Finally, turning to our expectations for the remainder of 2026. We're encouraged by our half-one performance and the momentum across our business. Our guidance of four to five percent like-for-like net revenue growth for core record in full year 2026 is unchanged. For the second half, we expect emerging markets to deliver ongoing broad-based growth similar to half-one. In Europe, we expect to return to like-for-like net revenue growth in half two, with sequential improvement through the half, supported by strong execution and innovation launches, as well as planned pricing actions. And in North America, we expect to deliver a stronger half two, weighted towards Q4, given the challenging comparative in Q3. Across all geographies in our seasonal OTC business, we're planning for incidence levels to be slightly higher than the prior season. Our adjusted operating profit margin guidance remains unchanged and is expected to be in the range of 24.9% to 25.6% for Core Reckitt and Mead Johnson for the full year, with a significantly stronger second half. Commodity prices continue to be volatile, but we're confident the actions we're taking will mitigate any impacts over the course of the full year. We reiterate our ambition to deliver sustainable long-term EPS growth, acknowledging the headwind from the dilution resulting from the divestment of essential home. I'll now hand back to Chris to talk about our strategic priorities.