rb strategy for growth and outperformance · net revenue (£ bn) cagr + 7% lfl . rb has been a...
TRANSCRIPT
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RB strategy for growth and outperformance
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Rakesh Kapoor Chief Executive Officer
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Agenda
Where we are today Who we want to be and why
How we will keep winning
Summary
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Net revenue (£bn) CAGR + 7% LFL
RB has been a clear success story for more than 10 years
NOTES: 2004 restated following the adoption of IFRS * Adjusted to exclude the impact of exceptional items
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Net income* (£m) CAGR +19% Constant FX
RB has been a clear success story for more than 10 years
NOTES: 2004 restated following the adoption of IFRS * Adjusted to exclude the impact of exceptional items
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Outstanding shareholder returns
100
200
300
400
500
600
700
800
900
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
TSR
(reba
sed
to 10
0)
% per annum TSR RB +20% Unilever +11% Colgate +5% P&G +4%
Source: Deutsche Bank
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What makes RB so successful?
A clear strategy for profitable growth
Portfolio of leading brands that consumers love
Strong track record of value-enhancing M&A
Relentless focus on cost containment and cash conversion
Unique culture of performance, ownership and entrepreneurship
…and none of this will change
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Shareholder returns
Last 2 Years
% per annum TSR RB +1% Unilever +8% Colgate +9% P&G +8%
TSR
(reba
sed
to 10
0)
2010 2011 Source: Deutsche Bank
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Agenda
Where we are today
Who we want to be and why How we will keep winning
Summary
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Our vision is a world where people are healthier and
live better
Our purpose is to make a difference by giving people
innovative solutions for healthier lives and
happier homes
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Healthier lives and happier homes is relevant and inspiring
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It matters
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This is the right purpose for RB
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Leading and trusted brands
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Geographic reach of RB Powerbrands
Brands
Coun
trie
s
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Innovation is in our DNA
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World leading capability in Health & Hygiene
• Cutting edge science • Extensive peer reviewed
publications • Meaningful partnerships
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A World Leader in Household Cleaning
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Building brand equity
TV & Print
Social & Digital
Consumer & Medical
Education
TV: 80%
GRPs 2008
USA
TV: 50%
GRPs 2012
USA
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Will manage business for long-term
Move to Quarterly IMS
Appropriate KPIs to measure brand equity investment
A new RB brand equity investment metric (BEI)
We will consistently increase investment in BEI to drive growth
TV & Print Media
Digital Marketing
Social Media
Medical Professionals Sampling
In Home (HTH)
Includes:
[We will still show media in 2012]
TV & Print
Social & Digital
Consumer & Medical
Education
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Agenda
Where we are today
Who we want to be and why
How we will keep winning Summary
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RB strategy POWERBRANDS
Focus on Health, Hygiene & Home where we have
capabilities to win
Our purpose is to make a difference by giving people
innovative solutions for healthier lives and happier homes
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Why Health, Hygiene & Home?
Higher growth Higher margin Stronger brand loyalty HOME
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NR 2011 £2,000m
Core NR £8,411m
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NR 2011 £3,643m
Core NR £8,411m
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HOME NR 2011 £2,009m
Core NR £8,411m
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Portfolio brands
9% Role
Builds local scale and cash margin to reinvest behind Powerbrands
Strategy Balanced growth: Hold share
Core NR £8,411m
NR 2011 £759m
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Private label business
10%
2% private label business
2008 2009 2010 2011 NRs £m 180 197 190 195
Margin 0% -0% -0% -3%
Core NR £8,411m
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Medium term KPI
Health & Hygiene to be 72% of CORE NR by 2016
2011 2016
72% Health
2
67%
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RB strategy POWERBRANDS
POWERMARKETS Core markets prioritised
on growth potential
Our purpose is to make a difference by giving people innovative
solutions for healthier lives and happier homes
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RB strategy POWERBRANDS
POWERMARKETS
Our purpose is to make a difference by giving people innovative
solutions for healthier lives and happier homes
ORGANISATION
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Medium term KPI
2011
Emerging Market Areas to be 50% of CORE NR by 2016
LAPAC
RUMEA
ENA 58%
2016
LAPAC
RUMEA
ENA 50%
50%
3
42%
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RB strategy POWERBRANDS
POWERMARKETS
Our purpose is to make a difference by giving people innovative
solutions for healthier lives and happier homes
ORGANISATION
MARGINS Drive margins to
fund investment and profit growth and convert to cash
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Liz Doherty Chief Financial Officer
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What’s not changing
• Continued focus on driving margins
• Appropriate investment for future outperformance
• Strong emphasis on cash conversion
• Disciplined financial strategy
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Strategy for margin expansion
Gross margin: a) Costs
‒ Product re-engineering (Project Fuel) £50m in 2012
‒ Supply networks
b) Portfolio mix
c) Volume leverage
d) Price – including promotional strategy
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2008 2009 2010 2011
New gross margin definition Total company (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
• OPERATING MARGIN WILL NOT CHANGE – classification only!
Old gross margin
Old operating margin New gross margin
New operating margin
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Strategy for margin expansion Core business
• 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
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Fixed cost
Gross margin
The ‘virtuous cycle’ of margin expansion
Net revenue growth
Operating margin
Reinvest drive
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Capital investment for future outperformance
1) Organic – 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) M&A
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Restructuring
• Reorganisation of Area structure for new Powermarkets
• Reorganisation of category development organisation to 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
£75m
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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
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What’s new for 2012?
A. KPIs to measure strategy – New gross margin definition – more commercially focused – New brand equity investment measure – capturing total investment – New working capital definition – more commercially focused
B. Additional programmes to deliver margin expansion
– To fuel investment – driving growth – To boost profitability – operating margin expansion from 2013
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• 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
Disciplined financial strategy
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Rakesh Kapoor Chief Executive Officer
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Agenda
Where we are today
Who we want to be and why
How we will keep winning
Summary
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RB strategy POWERBRANDS
POWERMARKETS
ORGANISATION
MARGINS
Our purpose is to make a difference by giving people innovative
solutions for healthier lives and happier homes
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Summary – focus on core business
A clear strategy for core business profitable growth
Food Fantastic business, not core. Continue to maximise value to shareholders.
M&A Strategy
Focus on add-on acquisitions to strengthen core.
Geographic
Local Platforms
Powerbrands
RBP Not core business. Will maximise value to shareholders.
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So what’s changing and what’s not changing?
Changing Not changing • Outperformance – continue
to grow ahead of our market
• Tight cost control
• Steady margin expansion
• Strong conversion into cash
• New purpose driven strategy
• Powermarket strategy
• New organisation structure
• Higher investment in brand equity building
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New RB medium term KPIs
Net revenue growth on average +200 bps per annum above our market growth
KPI 1
Powerbrands in Health & Hygiene – 72% of CORE NR from Health & Hygiene by 2016
KPI 2
Emerging market areas to be 50% of CORE NR by 2016
KPI 3
1
2
3
2012 Outlook • 2012 will be a year of
transition and investment • Targeting to outperform
the market growth by +200bps
• Maintain operating margins
• Both these targets exclude RBP
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Passionate, innovative, entrepreneurial
Average length of service at RB = 13 years Top 40 managers at RB ownership requirement of RB shares = £100m
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RB strategy for growth and outperformance
Q&A HEALTH HYGIENE HOME
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