RB strategy for growth and outperformance
Rakesh Kapoor Chief Executive Officer
Agenda Where here we a we are t re today Who we want to be and why How we will keep winning Summary
RB has been a clear success story for more than 10 years Net revenue (£bn) CAGR + 7% LFL NOTES: 2004 restated following the adoption of IFRS * Adjusted to exclude the impact of exceptional items
RB has been a clear success story for more than 10 years Net income* (£m) CAGR +19% Constant FX NOTES: 2004 restated following the adoption of IFRS * Adjusted to exclude the impact of exceptional items
Outstanding shareholder returns % per annum TSR RB +20% 900 Unilever +11% Colgate +5% 800 P&G +4% 700 TSR (rebased to 100) 600 500 400 300 200 100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Deutsche Bank
What makes RB so successful? Relentless Unique culture A clear Portfolio of Strong track focus on cost of performance, strategy leading brands record of value- containment and ownership and for profitable that consumers enhancing M&A cash conversion entrepreneurship growth love …and none of this will change
Shareholder returns % per annum TSR RB +1% Unilever +8% Last 2 Years Colgate +9% P&G +8% TSR (rebased to 100) 2010 2011 Source: Deutsche Bank
Agenda Where we are today Who ho we w e want nt t to be o be and nd w why hy How we will keep winning Summary
Our visi ision is a world where people are healthier and live better Our pu purp rpose is to make a difference by giving people innovative solutions for healthier lives and happier homes
Healthier lives and happier homes is relevant and inspiring
It matters
This is the right purpose for RB
Leading and trusted brands
Geographic reach of RB Powerbrands Countries Brands
Innovation is in our DNA
World leading capability in Health & Hygiene • Cut Cutting ng ed edge e scien ence • Ext xtens ensive p peer rev eer review ewed public icatio ions • Mea eani ningfu ful p part rtners nerships
A World Leader in Household Cleaning
Building brand equity GRPs 2008 TV: 80% Consumer & Medical Education USA Social & Digital GRPs 2012 TV & Print TV: 50% USA
Appropriate KPIs to measure brand equity investment Includes: A new RB brand equity investment metric (BEI) Consumer & Medical TV & Print Media Education We will consistently increase investment in BEI to drive growth Digital Marketing Social & Digital Social Media [We will still show media in 2012] Will manage business Medical Professionals for long-term Sampling Move to Quart arterly rly IMS TV & Print In Home (HTH)
Agenda Where we are today Who we want to be and why How we w we wil will ke keep win winning Summary
RB strategy POWERBRANDS Focus on Hea Health, Hygien ene & e & Home e where we have capabilities to win Our purp urpose is to make a difference by giving people innovative solutions for healthier lives and happier homes
Why Health, Hygiene & Home? High igher gr growth High igher m mar argin gin HOME St Stro ronger b r bra rand nd lo loya yalt lty
Core NR NR £8,4 ,411m 11m NR NR 2 2011 011 £2,000m ,000m
Core NR NR £8,4 ,411m 11m NR NR 2 2011 011 £3,643 643m
Core NR NR £8,4 ,411m 11m HOME NR NR 2 2011 011 £2,009 ,009m
Portfolio brands NR 2011 £759m Rol ole 9% Builds local scale and cash margin to reinvest behind Powerbrands Str trate tegy Balanced growth: Hold share Core ore NR £8,41 411m
Private label business 2% private label business 10% 2008 08 2009 09 2010 10 2011 11 NRs £m 180 197 190 195 Margin 0% -0% -0% -3% Core ore NR £8,41 411m
Medium term KPI 2011 11 2016 16 Health 72 72% 67% 67% Health & Hygiene to be 72% of CORE NR by 2016 2
RB strategy POWERBRANDS Our pu purpo pose is to make a difference by giving POWERMARKETS people innovative Core markets prioritised on growth potential solutions for healthier lives and happier homes
RB strategy POWERBRANDS Our pu purpo pose is to make a difference by giving people innovative POWERMARKETS solutions for healthier lives and happier homes ORGANISATION
Medium term KPI 2016 16 2011 11 RUMEA RUMEA ENA 42% 50% ENA 58% 50% LAPAC LAPAC Emerging Market Areas to be 50% of CORE NR by 2016 3
RB strategy POWERBRANDS Our pu purpo pose is to make a MARGINS difference by giving Drive margins to people innovative POWERMARKETS fund investment and profit growth and solutions for healthier convert to cash lives and happier homes ORGANISATION
Liz Doherty Chief Financial Officer
What’s not changing • Continued focus on driving margins • Appropriate investment for future outperformance • Strong emphasis on cash conversion • Disciplined financial strategy
Strategy for margin expansion Gross mar margin gin: a) Costs ‒ Product re-engineering (Project Fuel) £50m in 2012 ‒ Supply networks b) Portfolio mix c) Volume leverage d) Price – including promotional strategy
New gross margin definition Tot otal l comp ompany (incl RBP) Moves the following items up • into COGS: – Bonus packs – Gadget seeding costs • Ensures commercial organisation focused on evaluating total promotional strategy – Better decisions 2008 2009 2010 2011 • OPERATING MARGIN WILL NOT Old gross margin CHANGE – classification only! New gross margin Old operating margin New operating margin
Strategy for margin expansion Core e busi siness ss • Fixed cost containment 2012 2013 2014 Fixed cost freeze* 30 ENA 30 30 SAP 10 • Geographical mix – RUMEA / LAPAC margins expand towards ENA levels *equivalent to saving from not increasing cost
The ‘virtuous cycle’ of margin expansion Gross margin Net revenue Fixed cost growth Reinvest drive Operating margin
Capital investment for future outperformance 1) 1) Organ ganic – New, best practice systems – SAP Capital cost £150m Annual benefit of £10m p.a. (2014/15) – High class facilities for healthcare But capex levels will not materially change approx £200m year for next 3-5 years 2) 2) M&A M&A
Restructuring Reorganisation of Area structure for new Powermarkets • • Reorganisation of category development organisation to £75 75m focus on Health, Hygiene & Home • Strategic review of private label business • Brings total restructuring announced to £325m (up from £250m) – Of which £125m in 2012 (including new £75m) – Mostly cash
Strong emphasis on cash conversion • No loss of focus on converting profit into cash – Costs/margin – Appropriate investment levels • New working capital definition – Removing corporate tax accruals and provisions – emphasis on commercial NWC – Change will reduce headline NWC from minus 10% to minus 7% Tax • – Efficient operations
What’s new for 2012? A. A. KPIs Is to o me meas asure re stra rategy – New gross margin definition – more commercially focused – New brand equity investment measure – capturing total investment – New working capital definition – more commercially focused B. B. Addi dition onal al programm ogrammes to deliver margi gin expan ansion on – To fuel investment – driving growth – To boost profitability – operating margin expansion from 2013
Disciplined financial strategy • Conservative balance sheet – Retain maximum flexibility to reinvest in our business – Will include M&A where opportunities arise • Appropriate balance between investment in the business and return to shareholders Dividend Policy – 50% payout ratio – – Share Buybacks : will initiate programme to counteract share dilution from Employee schemes Will continue to consult shareholders on favoured method of • returning cash if this becomes a more urgent consideration
Rakesh Kapoor Chief Executive Officer
Agenda Wher ere we a e we are e today Who Who w we want nt to be a and nd w why hy Ho How we wi w we will k keep eep win innin ing Summary mary
RB strategy POWERBRANDS Our pu purpo pose is to make a difference by giving people innovative POWERMARKETS MARGINS solutions for healthier lives and happier homes ORGANISATION
Summary – focus on core business Food Food RBP RB M&A S Strat ategy gy Focus on add-on Fantastic Not core business. A clear acquisitions to business, strategy for strengthen core. not core. Will maximise value core to shareholders. Geographic business Continue to maximise profitable Local Platforms value to growth shareholders. Powerbrands
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