On Monday, Reckitt Benckiser Group PLC (RB.) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Rakesh Kapoor – CEO: Yes, first of all, I did not set market outperformance target by region. It would be nice if every market, every country would be outperforming by the same extent. It’s mathematically or realistically not possible. So first of all, I’d like to say that our outperformance on aggregate is 200 basis points, both like I’ve said, in volume term, but also in net revenue terms. I do not see a big difference in market between the first quarter and the second quarter really and neither has been our results very different actually between the first quarter and second quarter. I mean, surprisingly, although you can never say that, very similar from first quarter to second quarter by area. So I don’t think you should take much more than the fact that markets have remained as they were before.
Chris Wickham – Oriel Securities: I know you didn’t set by particularly country or anything like that, but I mean is there any color you can add on the regions or no?
Rakesh Kapoor – CEO: On the areas, you mean, I think we are outperforming. The situation hasn’t changed quite in that sense or not to the extent that we would all want it to be. Europe remains tough and challenging. I mean if that’s (where your) allusion is, Europe remains tough and challenging. Having said that, amongst all the battles that we are fighting there, as I’ve said before to you that we will slowly and surely get out of the game right. On Vanish plan for the very first time we’re starting to see our shares basically come back. That’s very good news. So far it was going in one direction, so we have now basically drawn the line and we are starting to see more or less market share gains in Vanish. So that’s really very good news. I wouldn’t say much more than that at this stage. North America we are star outperformer of the market in aggregate, I mean what can I say.
Unidentified Analyst – Canaccord: (indiscernible) from Canaccord. You are still targeting flat operating margin for the full year. At the half, you’re focusing clearly to some corporate income or disposal profit. Just checking whether you are expecting more of that type of profit in H2 or not.
Rakesh Kapoor – CEO: Yeah. First of all, when we set our targets for the year, we set our targets in aggregate. We never said that actually we’re going to lose some profit from disposals that we make because we also lose some ongoing profit for disposals. We also lose profit from discontinuations that we have done. I mean whether it’s the Paras personal care business or whatever it might be. So our targets are in aggregate. We do not expect any major swings and roundabouts in the second half from a corporate – in the corporate line, but you know I don’t think at the end of the year this is going to be a material aspect of our overall delivery. If you actually take out the loss profit also from divestitures and discontinuations, this is not a material number at the end of the year.
Martin Deboo – Investec Securities: Martin Deboo, Investec. Two separate questions. Just within the 4% core LFL growth, can you just clarify how much is volume, how much was price/mix? On the own label business, I think your comment was it’s well on track. What is the plan there, Rakesh? Is it that you’re closing that business down or are you looking to dispose a little part of it? Just a bit more color on what on track means, please.
Rakesh Kapoor – CEO: Martin, we did say that for the half, we are 2% on volume and 2% on price/mix. On the quarter also it was 2% on volume and 2% on the price/mix. So that’s what we have said. In terms of private label, we are on track. Our plan is to discontinue it, not to sell it. To discontinue it, and that’s what we’re working. We are working with our customers to disengage from our contracts and ensure that they have – we’ve committed to – we have a contract and many of these contracts are one-year contracts, so you just can’t sort of get out on in one day. So our plan is to discontinue it. We don’t want to hand over our business to anyone.
Jeremy Fialko – Redburn Partners: Jeremy Fialko, Redburn Partners. Just a question on the sort of overall market growth. I know you talked about it being between 1% and 2%. But now we’re kind of getting towards August, do you think it comes in at the kind of upper end or the lower end of that range, or do you think somewhere pretty much in the middle?
Rakesh Kapoor – CEO: Well, we are not in August yet, but I might grant you that extra few days that you are looking for. I would say that our expectation of the market is 1% to 2% and I don’t think – I would say quite a lot to go for. Last year – a lot happened in the last few months of the year with the flu. So I mean I don’t think we should predict anything about the market growth rate for the full year, I think the full year will be 1% to 2% and will be 200 basis points ahead of that, I would just keep it at that.
Jeremy Fialko – Redburn Partners: Just a follow-up question on your kind of volume and pricing, do you think the balance kind of stays roughly where we are sort of the TOO into over the balance of the year? Or we don’t have any firm indications?
Rakesh Kapoor – CEO: I’m not going to set a specific ratios for the balance of the year. I would just say that we have assumptions on the balance of the year based on price/mix both coming in positive not in a specific ratio, and we expect to see volume in the second half. So we expect both volume and price/mix, but I cannot give you any specific ratio between these two.
Home and Hygiene
Harold Thompson – Deutsche Bank: Two types of question. One is on products and one is on finance. If I look at your Home and Hygiene, there’s quite a big difference in the latest quarter and you did mention that Vanish and Airwick were doing kind of all right although maybe more modest. Is there something about the phasing of products or marketing in the (front end) of your brand equity spending of the GBP100 million increase this year, I think GBP60 million will be in the second half. So I guess one could say that you might expect better market share gains than you have in first half? The second question is on OTC, clearly bounced back from a weak cold and flu season in Q2. Is there any acceleration or ongoing rollout on an international basis of these products? Is this just going steadily or are you expecting more approvals? From a kind of more finance point, you say you’ve bought back your minority. Did I hear correctly that that would be zero therefore for H2 the minority line?
Liz Doherty – CFO: More or less will be a tiny little bit, but more or less.
Harold Thompson – Deutsche Bank: Then finally just on per share repurchase, have you now kind of reached the end of your program or you plan to…
Liz Doherty – CFO: Well, I will answer this (multiple speakers)…
Rakesh Kapoor – CEO: Let’s just go through the first couple of ones. I think between Health, Hygiene we had a very nice Health, Hygiene business. The reality is this, Harold, that Hygiene has a more favorable, if I may say so, emerging markets mix versus Home and therefore when you see very significant differences in growth rates, it’s also shaped by the fact that Europe and North America make much more of a Home business versus a Hygiene business which has much more coming from emerging markets. That’s one type of explanation between the two results. Clearly, we also have big plans for our – I’ve just announced a few innovation just for Air Wick in Hygiene and we would want to see some of these things pickup, but what has also impacted some of our growth rates on Home in the first six months, although less talked about, we have a range of polishes and range of wax products, et cetera, et cetera, in some markets, where the market conditions for those categories have been a bit tougher than we’ve seen before. So I think I would not read too much about the quality of our brands in – the big brands in Home, they are I would say in good shape. It’s just that there is a mix on the one side and maybe just some recent issues which I don’t see as any structural issues to take ourselves. Let’s see what happens in the second half. Then you had another question regarding…
Harold Thompson – Deutsche Bank: Specialty marketing, I mean of your GBP100 million increase, I think you’ve done GBP40 million.
Rakesh Kapoor – CEO: We have done GBP40 million. We have GBP60 million to go. The second half is always going to be a more, I would say, portfolio – half rate you have more portfolio investment taking place. If you look at our healthcare phasing of investment, generally speaking the second half has more investment in healthcare portfolio anyway because of the flu seasonality. So I’m not – unless you guys were, I’m not at all – the GBP60 million is a proper representation, because we have more brands and more investment behind those brands to take place. So I would see it like that. If your question was also about whether we’re seeing more approvals coming in for – I think, it was at the Deutsche Bank conference that I showed in June which I might come and repeat in the February results that we are launching into more brand market combinations with our healthcare portfolio. So we have really significantly upped that as we get more and more approvals, whether this is to do with Nurofen, Strepsils, even Mucinex. So I would say that, yes, there is a component of that, but I don’t think we should get too excited about the brand market launches in healthcare in terms of their immediate impact. Their long-term impact is going to be phenomenal, but they are slower to build even if they are longer term much more sustainable, if you want. So the principal difference between GBP40 million and GBP60 million is that the portfolio investment becomes more wider and more intense particularly in the case of healthcare in the second half.
Liz Doherty – CFO: In terms of share buybacks, I think we’ve purchased just shy of GBP10 million so far and we have – our aim is to spend up to about – buy back about GBP15 million. So you’ve probably got another GBP5 million, whilst the business continues to talk of (cashes) it’s currently doing, we’ll just go ahead and purchase the remaining – another GBP5 million probably between now and the end of the year.
Rakesh Kapoor – CEO: Can I take one last question? Then we take a break.
Warren Ackerman – Societe Generale: Warren Ackerman, Soc Gen. Just a question on ENA, which obviously is 55% of your Group revenues. I hear your comments on the organizational changes that you’re making. But I’m still not clear about what the operational driver of growth and margins will be in the ENA region. Can you kind of clarify what will move the needle for you in that region? That’s the first question. Then secondly of the 12.5% spent on media, just wondering if you can update us how much of that is in digital, what was the growth in digital media spend in the first half and how do you actually define your returns on digital media?
Rakesh Kapoor – CEO: Right. So, first of all, what are the operations I was to get Europe and North America back? I don’t think we would rely too much on market conditions to change. We are trying to shape like I said our organization. We are trying to shape this organization to become leaner, faster, more responsive to share best practices faster, to scale up things that we are doing. I mean let’s face it, when you have two decision-making touch points, you’re going to have a game of snakes and ladders, let’s face it. I have to ask two different people to make a decision. I’ve taken that stuff out of the equation, so we have one decision touch point, we have a faster organization, we are going to be faster to market. This, hopefully, scale up our innovations better. So those are the operational drivers. I can talk about market growth rates, et cetera, that’s not in my hand sadly. It’s not in my hand. What I can do is shape the organization to be better, and then basically make sure that we’re launching the right innovation and we’re investing behind that innovation. So I remain committed to invest behind ENA irrespective of the market conditions. In many cases people would retrench from investing. In fact we have said this year we are going to increase our investment. So these are the things that we are going to do to get that market, it’s not – still it’s a tough market. I don’t want to underestimate for you also the challenge that everyone has. I mean it’s just a very, very tough market. Some people think it’s getting worse and I’m not in – I don’t spend much of my life thinking about the market. I just think about how do we actually keep outperforming. That’s our goal. In volume shares we are outperforming ENA, right. So did I miss another question from you?
Warren Ackerman – Societe Generale: Yeah, the second one was just on digital media?
Rakesh Kapoor – CEO: We don’t give out exact percentages really in digital. All I would say is actually and I know this like I said before, we are probably ahead of our competitors in terms of what percentage of our money we spend in digital versus the total TV. Well, I don’t want to measure myself against what competition is doing. I’ve always said that real benchmark is, are we keeping pace with consumers. So we are increasing our digital spending higher than our TV. So, percentage growth on digital is higher than what it is on Television. For sure, but we will always be asking ourselves how do we actually become better and better in this game, with much higher percentage on digital versus Television. So, can I just say thank you for joining us for the first part. We’ll take just a five minute break, 9.45 we should be back, okay. (BREAK)