Reckitt Benckiser Group plc

Rakesh Kapoor - CEO Adrian Hennah - CFO

Martin Deboo - Jefferies Charles Pick - Numis Harold Thompson - Deutsche Bank Iain Simpson - Société Générale Erik Sjogren - Morgan Stanley

Good morning and welcome to RB's 2014 full year results presentation. I'm joined of course by the redoubtable Adrian Hennah, who is going to take us through our financial performance.

But before that let me just open up with a few comments to kick off the session. First of all we had good growth and outperformance in 2014 once again.

Some headlines here. Our net revenue grew in constant both like-for-like as well total by 4% which is very much in line with our targets.

Our net income grew by I would say outstanding 14% in constant well ahead of our targets that we set at the beginning of the year. And then finally of course our cash conversion remains a very strong feature of our financial performance converted around 100% of our net income and cash and just net income to cash and debt for the final dividend for the year turns into be – second half dividend is 79p, the final dividend of total dividend of 139p and the second half dividend of 79p is 3% ahead of the same period last year.

Now we talked about our virtuous earnings model and I know it's sort of cliché in the industry to talk about virtuous earning model, everyone does that. But I've always said that in our Company a virtuous earnings model is something we teach incoming people from day one.

This is how we open our business in slides. So you must remember in this Company everyone has a part to play in driving this virtuous earnings model and this earnings model starts with gross margin expansion.

If we don't do that properly we're not taking the space to invest behind brands, our capabilities and growth. So, actually it starts with there.

Of course we have fixed cost that we can also leverage, invest for this business, drive top line growth rate and of course in this process give good gross operating margin expansion. So '14 was another good year of virtuous model expansion.

Gross margins grew by 100 basis points, broadly split similarly in the first and the second half, driven most by mix and of course pricing and cost optimization programs. We have project Fuel in the company.

It's a regular feature of our program in terms of gross margin expansion. We have fixed cost leverage of 50 basis points.

So that also obviously helped. Our BEI expanded by 30 million in absolute and constant, although minus 10 in -- I call it minus 10 in basis points.

I just want to remind all of you that we actually we had a very significant media planning and buying program for last year and if you add that because we reinvested all of the savings back into media -- if you add that it was quite a substantial investment also in 2014 to backup what we did in 2012 and 2013 in BEI investment. So another very strong year of investment behind our brands in 2014 as well and therefore our revenue grew by 200 basis points ahead of market in line with what we have said that we want to target for the Company.

Now on the right hand side of the chart you see operating margin expansion, a staggering 260 basis points in the second half of the year, 160 basis points in total I think is a phenomenal achievement for '14. And we're going to come back to how do we actually keep this virtuous model alive and kicking as we proceed for the second half of the deck and over the next half of the deck.

Good progress also from a strategic point of view I think there were a number of strategic moves we made in '14 that are important to set this Company up for more outperformance in the future. The demerger of Indivior was an important move.

It was there for some time and I think we finally executed that I think well. I'm very pleased with what we have done and I hope that this Company will now find its own strong independent platform to outperform as well as creating for RB and very importantly creating for RB a sharp focus on what it knows best, what it does best, which is to build brands for a very long period of time.

There were a couple of other strategic moves less talked about but are important nevertheless. We licensed out the footwear business.

There is a business we always had which was a Russian Hospital Business. We called it Medcom hospital business.

And we separated that too. And then of course there was an important acquisition that enhances our strategic positions and structural well-being in important markets like the U.S.

the acquisition of K-Y. So there are important portfolio moves that have taken place in '14 in addition to what we've done in the previous years to make this Company a more focused, health hygiene home company.

On the other side, we are making some changes also to keep this Company a sharper, more agile Company. I want to talk about that under what I call project Supercharge.

So, we're going to come back to that. So, a number of things that happened in '14.

It's been a good year and I'm pleased about what we've done, but lot more to do and we're going to talk about a lot more to do in the second half of the presentation. But let's just go through some of the financial aspects of 2014 with Adrian.

Thank you, Rakesh and good morning ladies and gentlemen. So if we turn now to the next slide in the deck, the income statement.

Firstly, a point on format with regard to the demerger of RBP or Indivior as it's of course now called. As required by IFRS, the full results of Indivior for 2014 and in the 2013 comparatives are helpful included as a single row in the income statement immediately above the total income bottom line.

Accordingly all the numbers we refer to are for the continuing group, excluding the demerged Indivior, unless specifically stated to the contrary. So then turning to the continuing group, as we’ve seen revenue for quarter four was £2.304 billion, a like for like growth of 5%.

Total growth at constant rate in quarter four was also 5%, as effects of acquisitions disposals and the Medcom hospital treatment as a discontinued item net out. Revenue for half two was £4.513 billion, a like for growth of 4% and for the full year revenue was £8.836 billion also 4% like for like growth.

Looking forward into 2015, we expect the net effect of acquisitions disposals and discontinuations made or announced to date to be a small reduction in full year reported growth. The exact impact will depend on the timings around Medcom hospital.

Moving to foreign exchange rates, reduced the quarter four reported revenue growth by 5%. For the year as a whole the net translational impact of currency movements on revenue was 9% reduction.

We have set out an analysis of the impact of currency movements and net acquisitions in the appendixes of this presentation. Gross margin in half two increased by 90 basis points, in line with the increase in half one, giving a 100 basis points increase for the full year.

Adjusted operating profit before exceptional cost in the half was £1.307 billion, a 14% constant currency increase on last year. The profit margin was 29%, 260 basis points higher than half two last year and of course 160 basis points higher in the full year.

There were a number of drivers of the gross and operating margin movements, including a small restatement of the comparatives arising from the Indivior demerger. We’ll return to these in a moment.

Exceptional items in the half netted to zero. We have set out in the appendix that the guidance we have given for exceptional items and progress against that guidance, we are on track with the guidance given.

Moving then to the next slide further down the income statement, net finance cost in half two were £20 million, slightly higher than half two last year. Average borrowing levels were slightly lower but rates slightly higher due to the medium term bonds issued in quarter three last year.

The tax rate in adjusted net income excluding exceptional items for half two was 22% and 22% for the full year, in line with guidance and benefiting by about 1% from one off items. Described as net income discontinued, you can see in the middle of this slide the row relating to Indivior, £1.4 billion of net income in half two, £1.6 billion in the full year.

We'll look at this again briefly in a moment. Looking forward into 2015, a couple of more detailed points.

Firstly at the January 31, 2015 exchange rates were to continue to end 2015 the translational impact on full year reported revenue and profit will be a negative 1%. Secondly we continue to expect the tax rate excluding exceptional items of around 23% in 2015.

Turning to the next slide, capital allocation, the board is recommending -- or has mentioned a final dividend of £0.79 per share an increase of 3% on a final dividend last year. This is equal to the 3% increase in adjusted net income in half two for the group as a whole including Indivior.

Looking forward, our plans to maintain the current dividend policy of distributing 50% of adjusted net income subject to minor year-on-year variation and unusual circumstances and in half one, we’re reporting EPS so only due to movement in exchange rates. It remains the Board’s priority to use the group’s strong cash flow to reinvest in the business.

Our board continues to regard acquisitions as an important part of the Group’s growth and development and continues to see significant opportunities in this area. Where it’s not possible to be precise on future needs, the board is of the view that the Group has appropriate access to funds to support its business development agenda.

Accordingly we intend to put in place a program to buy back up to an additional £500 million of shares during 2015 on top of the regular about £300 million program to neutralize incentive plan share issuance, a total therefore of up to £800 million in the year. Turning to the next slide, I think its Slide 11, you can see here an analysis of the Indivior row in the group’s income statement.

The £1.4 billion net income in half two comprises both the trading performance of Indivior up to the December 23, 2014 and the gain, the rising on the merger. Revenue and profit progressed in line with expectations.

You may all have seen Indivior’s earnings release this morning and we will leave it to Indivior colleagues to explain their numbers in more detail when they address investors later today. The gain arising in demerger is measured by reference to the initial trading value of Indivior’s shares, the enterprise value of the new company, the relatively low carrying value of the assets demerged in the RB books and the transactional costs of the merger.

A couple of more detailed points on Indivior. In the next slide, aside from this discontinued net income item, there are three small impacts of the demerger on the rest of the group P&L.

Firstly as signaled previously, there are stranded costs of about £45 million per annum and its cost charged RBP, while it was within the RBP group, and wish no longer be recovered from it. Our 2014 numbers, let’s take it on the continuing basis.

In other words this £45 million is borne by the continuing businesses and shown as such in our segmental margin reporting. This requires restatement of the half one 2014 numbers and we've also seen 2013 on the new basis so as to provide transparency on underlying margin movement.

We have shown the before and after total and total and segmental margin numbers in the earnings release and in the slides later to this presentation. Secondly, about £275 million of net debt was included in Indivior on demerger and you can see the impact of this in the cash flow and closing net debt.

Certainly we do continue to provide a number of services to Indivior under transitional service arrangements. These would end over coming months extending the few cases to a low number of years.

We do not expect there to be any material impact on the Group's ongoing total as these runoff. Turning then to the next slide, an analysis of revenue growth rates, by business segment by quarter.

Firstly, on price and volume changes across the geographies we operate it, the 4% growth for the full year and for the Group as a whole was split broadly evenly between volume on the one side and mix and price only other. In quarter four, the growth had a slightly higher proportion of volume.

With respect to ENA sales, we achieved strong growth of 4% in quarter four after a weaker quarter three. Sales in the USA did however, benefit from some increase in channel inventory.

We saw channel inventory increases associated the launch of the Amope Velvet Express pedi, ahead of the launch of the Air Wick license range and across the seasonal healthcare products where we saw some retailer buying delay from quarter three, where you saw slightly weaker numbers to quarter four. In LAPAC we delivered a disappointing second 3% quarterly growth rate in quarter four.

The geographic pattern of growth is similar to quarter three with continuing challenging market conditions in Latin America, especially Brazil and in Southeast Asia especially Thailand and Indonesia. In RUMEA, we achieved a high 17% growth in quarter four.

The underlying performance was strong but reported sales are materially increased by buying patterns of consumers and trade customers in Russia ahead of expected price increases. Reporting growth also benefited from a weak comparator in a number of RUMEA markets and by price increases in increasingly inflationary environments in some countries we served.

In food, we can see another encouraging quarter with 4% growth in quarter four. Looking into 2015, we should expect the timing of Easter to boost food sales in quarter one with a corresponding reduction in quarter two.

We have included as an appendix a reconciliation of the reported for the like-for-like numbers shown in this slide. Turning then to the next slide, an analysis of revenue growth rates by our principle product categories.

Firstly health, we delivered a growth rate 8% in quarter four, in line with the rate for the full year. The performance of the Scholl brand now together with Amope in the Americas continue to be very strong, in particular Velvet Express pedi, Durex also continue to performed strongly with useful contribution from K-Y now evident too.

Mucinex was weaker with a strong comparative and the reintroduction of private label competition to some SKUs in the United States. In Hygiene we delivered a better quarter with 6% growth after a weaker quarter three, Dettol and Lysol continue to be important drivers of this segment, performing well across all areas.

Finish and Mortein also performed well in the quarter. In Home we delivered 3% growth in quarter four with good Vanish and good Calgon growth.

Portfolio brands were down 60% in quarter four. Following the disposal of footwear and the treatment of discontinued to the Russian Hospital Business, the main component of the continuing portfolio brands category is the laundry and fabric softener business.

Also included however are certain sales to institutional customers such as hospitals where sales can be quite volatile. Portfolio brands is now relatively small, less than £300 million per annum of ongoing business.

We do expect the laundry detergents market in Europe to remain tough. We're taking steps to improve our performance in this area and have created a new European household team to focus on this.

Turning to the next slide, an analysis of margins. We have clearly delivered a very strong 260 basis points operating margin improvement in half two, 160 basis points for the full year.

I expect a number of you are asking yourself how did we achieve this. Was it done in a healthy way?

How much is sustainable? This chart shows that of the 260 basis points improvement, 90 basis points came from gross margin, none came from brand equity investments and 170 basis points came from non-BEI SG&A spending.

Firstly on gross margin, the improvement in half two was the same as half one, an increase of 90 basis points. The growth in the half two gross margin continues to be driven by a number of factors.

Mix improvement, pricing and our own efficiency programs all contributed and the improvement was delivered in the face of a continuing material headwind in emerging markets from transactional ForEx exposure to weakening currencies. Secondly, we maintained in half two the level of investment in brand equity at 11.8% of revenue.

This delivered a £30 million increase in absolute BEI in the full year at constant rates and the complete reinvestment of the material savings from the restructuring of our approach to media buying, which Rakesh has also already mentioned. Thirdly, we succeeded in reducing our non-BEI SG&A by 170 basis points to 17.8% of revenue.

In the middle of the year following the end of negotiations for the Merck OTC business, and in the face of worsening impact on our actual currency results from the relative strength of sterling, we initiated work to prepare a significant initiative, Supercharge to free up in a sustainable way unnecessary expenditure in order to reinvest in our business and to enhance margin. You will hear more about this program from Rakesh in a few minutes.

At the same time knowing it would take some months to undertake preparatory work for Supercharge, we initiated a short-term program on cost reduction. This was aimed at generating momentum for the Supercharge program, delivering some immediate savings to account to the translation of ForEx headwind in 2014 and compensating for the £45 million annual cost that was stranded following the de-merger of Indivior.

This effort underpinned the indication we gave July of nice margin expansion in half two. We were very careful to ensure that the short-term effect did not impact expenditure important to the long-term growth of the Company.

You can see from our BEI numbers that we were successful in this. The short-term effort did include some reductions in expenditure which are not sustainable, hiring and travel freezes, deferral of some internal conferences are significant examples.

We estimate that something over 100 basis points of half two margin improvement or about 60 basis points annual margin improvement is not sustainable. Very importantly, however the Supercharge program will provide -- indeed is already providing sustainable margin improvement to build on the momentum of the short-term effort and this will enable us to lock in the full margin improvement in a sustainable way.

Together this gross margin improvement and SG&A initiative developed as I said 260 basis points increase in operating margin half two and 160 basis points in the full year. Turning then to the next slide, this shows an analysis of operating margin before exceptional items by business segment for half one and half two.

As mentioned early we've restated the half one 2014 and the 2013 margins to absorb across the remaining segments the cost previously charged to RBP. We show here the original and the restated numbers.

You can see the absorption of these stranded costs reduce the ongoing Group's margin by about 50 basis points. With a year we saw continued excellent margin progress, as 370 basis points increase in half two, all the levers of gross margin except price increases, plus the short-term SG&A program contributed materially.

In LAPAC we achieved 150 basis points increase in half two margin. The area suffered some headwinds in transactional ForEx exposure to weakening local currencies, but these were more than compensated with price increases, mixed improvements and cost reductions.

With regard to RUMEA, half two margin increased by 40 basis points. It was possible to take meaningful price measures to compensate for the weakening currencies and increasing domestic inflation in several markets and we saw mix improvement and cost efficiencies.

These outweighed the transaction of ForEx headwind and reversed margin decline in half one. In Food we sort of planned modest reduction in margin as we increased investment behind the French's and Frank's brands.

We have been encouraged to see the positive response in revenue growth from these very strong brands. There was no room on the particular slide but we have included a full year segmental operating margins in the appendix and of course also in the release.

Turning to the next slide, as a summary of the Group's net working capital position, you can see the strong overall position continues. The comparative numbers here do include RBP but this was not alter the trends.

The RBP numbers are sufficiently small. This does not alter the trend.

We saw improvements in payables, but some deterioration in the position in both receivables and inventory. Our consumer health business is more inventory and receivables intensive, due to the more centralized nature of the manufacturing and due to the nature of the channels in some markets.

We're however not minded to except a lengthening of the receivables and inventory ratios. The group's team focus on this area will clearly continue.

Turning to the next slide and the cash flow statement. We have shown here the free cash flow of the continuing business and stripped out the numbers for RBP.

The full impact of RBP is below the free cash flow line you see here, but is of course included in the closing net debt number you see at the very bottom. As you can see, the Group had another good half of cash generation.

Free cash flow generated in half two was £1133 million. This was 113% of net income.

The group had net debt of £1.5 billion at the end of the year. This was down from 2.2 billion at the end of half one due to the good cash generation and the $272 million of net debt that was demerged with Indivior.

Turning lastly in this part of the presentation, just the next slide and a couple of words on how we will evolve our segmental reporting to reflect the changes in the way the group is now run. We will as our primary segmental analysis move from reporting ENA, LAPAC, RUMEA and Food to reporting the new ENA, i.e.

including Russia, Australia, New Zealand and Israel, developing markets and Food, as this now reflects the way in the Group is run. We've included in an appendix to this presentation a pro forma showing how the 2014 segmental analysis would have looked in the new format.

We will in addition to this formal segmental analysis continue to show revenue by product category. This will be in the same form as now, except that we will combine food into the portfolio brands category.

In addition we plan to show the revenue and revenue growth rates within the new ENA for North America. For this two, we show the 2014 numbers in the new format in the appendix.

With that I will hand it back to the Rakesh.

I'm going to do a few things right now. I'm going to talk about the innovation pipeline for 2015 and then take a break and talk about us, where I think we are with our strategic update.

You remember three years ago we talked about a new strategy for this Company. I want to just give a snapshot of where we think we are with that and how do we actually start thinking about our performance in the second half of the decade, and then of course the targets for the year and Q&A.

Before I show the innovation pipeline, let me make a confession. When we showed this pipeline that I was going to present to Adrian he said this is looking so good even I would like to present this.

So Adrian, sorry to take your thunder away. I'm going to still do the innovation pipeline and present it for everyone.

It’s a bit long. I tried to cut it I think enthusiasm got the better of it.

Let’s start with the first one. Let's start with health.

In health, start with Nurofen with one initiative which is particularly interesting for you to show. There is more new product here.

This product has been there for a long-time. But we found new way to talk about this product which is relevant for people.

Now it also boasts I would say the enhanced medical and clinical capability we have been putting in our Company over the last years. Because clinical and medical research actually shows you that the real cause of headaches -- most headaches are really caused by tension in your neck and head muscles.

It's coming from the implementation and tension of your neck and head muscles. That’s what the real cause of headaches is.

And this is a fact which is certainly not known to people and it’s not even known to many key opinion leaders, medical professionals. This is what is come from a huge amount of clinical and medical research and we have converted that fantastic claim saying Nurofen Express targets, the real source of headaches providing faster relief and is better than paracetamol.

Many people think that paracetamol is a first line of treatment for a headache -- for a common headache, but actually Nurofen is better than paracetamol for treating headache. So I don’t know how many people are in this room, maybe 150, you heard it from me and now you see it an advertisement.

[Audio visual presentation]. As a very interesting initiative to target the real source of headaches on the one-side and target paracetamol on the other side.

So very interesting to show. The next one is, Scholl.

And as I think about Scholl actually I think about also what has happened with Scholl as the whole over the last four years that we've really have the ownership of Scholl, and not just Scholl of course, Durex. And the first I'd like to tell you is that in four years after what we bought, I think the whole acquisition of SSL looks so good.

And I think we have done a tremendous job, even from a ACSO [ph] to the brand that we acquired with Durex and Scholl. Scholl looked a bit messy when we first bought it because it is a bit of a complex brand but now I think what we have done on this brand over the last few years has been just really, really very good.

And the Scholl Express Pedi product has been a very good part of our success in 2014. What we're doing is actually launching a new line of Scholl Express Pedi is with Diamond Crystals.

And if you think Diamond Crystals don’t really do anything, they do. They actually exfoliate much better, offering you a superior hard skin removal management.

So this is what we are going with Scholl in a large number of European and possibly U.S. market, now that the U.S.

market has also got Scholl in the form of [indiscernible]. Staying with Scholl, when we were looking at the U.S.

market for reasons that you probably know, we found that actually the insole business is quite a nice business opportunity for Scholl, which is underdone in many of our normal Scholl markets, that we don’t have a major insole business. While insole remains a very important benefit that consumer seek from foot care brands.

So we are launching actually, a range of our insoles in -- principally in of course our Scholl markets and this insole which comes both for men and for women, it is in for work shoes, it’s for everyday shoes, it’s for sportswear. So it is a fairly well developed range.

But if you just call these are normal insoles, they are not. They actually come with a real significant technology that is a technology that we're using and it's proper, proper technology for dual [ph] gel technology which offers you both comfort on the one side but better arch support on the other side, better shock absorption.

So this is really technical stuff. It works and the best thing you can do is to really buy.

I'm not giving it in a goody bag because it’s something that you really owe it to your feet, which you have been neglecting I'm absolutely sure, and do something about it. So that’s on Scholl.

There's quite a lot of stuff to actually talk about but Scholl I think we feel very, very nice now that we have this and done very well with it. Coming to Durex, I will stay with the theme, we have launched something called Durex Invisible.

Now what does invisible mean here? Actually here -- this is a real simple insight from talking to people.

They want to have the thinnest possible -- some people, not always -- the thinnest possible condom to give them the closest connection, the intimacy that the thin condoms can give them, but at the same time we also know, the thinner you go with condoms, the more difficult the threshold of safety becomes in terms of making sure that the technology really keeps them safe. We have inside the Company even higher hurdles on safety than what regulation asks you.

So this is -- Durex technology is all about combining superior safety with the best possible technical product and this is not easy. How do you actually give people something that really feels thinner, closer, intimate and at the same time is from a technology point of view, safe.

So we've actually launched the thinnest possible Durex condom which is 20% thinner, 20% thinner and of course with the durability, reliability and excellence which is what Durex is called by the way that we can achieve. So Durex is launching Durex Invisible.

In China it's called Air for some nomenclature reason and that's what we're going to be doing, our thinnest condom fantastic product. The next one is my favorite.

The next one is my favorite, and it's my favorite because it tells me that RB is not staying behind at all when it comes to exploring the opportunity that a digital, mobile enabled world presents us. It's telling us that we're pushing the boundaries and really trying how we can actually engage with people in this very new world.

So very first time actually probably in our type of industry, we're launching a personalized condom. A personalized condom.

Each one can design one. So you go to our Web site and you have a range of designs to choose from.

You have a range of messages to write for yourself. You can write whatever you want and then you can buy it for yourself, for your partner, for your friends or whatever whoever you want.

And actually this is a very simple insight. It's not just like okay we can have personalized condom.

You can have personalized anything. But here the insight is that every box can tell a story.

You can create a story and start story telling through a box of condoms and that would be a really good fun. And sometimes you can communicate through a box of condoms.

So that's the kind of thing. So this is a not a showcase advertising, but just see the concept here and here, through this -- I'm not advertising but here the partner is trying to communicate what she wants to do through the box of condoms, creating a story.

[Audio-Visual Presentation] So she wanted to have -- she wanted to stay indoors and that's what she printed on the pack and gave it to him saying I want to stay home tonight and that was her story and maybe they start creating a story like that. Anyway, the interesting thing is when this thing was presented to me by my China team for approval, that we want to go and do this stuff, the way they presented the story was to tell me that it's true, that normally you can put anything you want but sometimes we say normal things in life, we say honey, you're driving too fast or should we start working out in the morning.

And when you say all these normal things in life, they are quite normal to say it, but as soon as they go on a Durex pack, they acquire a very different meaning, don’t they? So if he presented this whole concept, saying something quite normal to me and then gave me the pack that he had prepared for me, which says.

Quite a normal thing to say in a business meeting but quite a different story on a Durex pack. Anyway, moving off from this to Optrex, something even more exciting, I think.

This I have in your goody bag actually. Now we haven’t talked about Optrex.

I don’t think we've talked about Optrex and the reason I'm talking to you about Optrex is that actually we had it -- it's a nice brand and we have looked after this brand, nurtured it quite well in those market it stays. And then actually we found that we had some innovations, we always do, which made this brand quite responsive in eye care.

And we actually -- the one or two markets that this brand was a bit languishing in its previous life under RB ownership, we try to ignite it and we found it was really responding very well. So we are actually rolling out Optrex to 14 different markets in 2015.

So Optrex is going to 14 different markets in '15, fronted by Optrex ActiMist which is a unique product. Some 80% of dry irritated eyes which is everyday condition actually happens because the moisture on our eye gets depleted.

So the moisture barrier that eyes have that's depleted over the day. And we lose this moisture barrier because of which we have dry irritated eyes.

That's as simple as that. Most products -- 90% or more products don’t really look after this very simple condition, losing a moisture barrier.

ActiMist is designed, it's clinically proven to moisturize to moistures deal, but not only does it moisturize your eyes, it does it in a fairly clever way. For those of you who are eagle eyed, you would have seen that actually you can spray it on your eye without -- you can spray it on your lid.

So you’ll have to spray right without opening your eye and actually it goes through. The spray goes through the eye to provide that moisture level.

So you don’t even have to open your eyes to spray it inside. You can spray it on the eyelid, and it penetrates through to give you that moisture value.

And those -- for even more eagle eyed would have seen that it does not smudge. So I've provided a product for you to make sure that you don’t have dry irritated eyes and so that you don’t stay dry and irritated by the end of the day.

Moving on to MegaRed, MegaRed is launching a line of products for what we call Super Heart. We know heart health benefits are important part of people living everyday healthy lives and we’ve used three clinically, I would say proven ingredients and combined them.

So it’s not just krill here. It’s krill plus CoQ10 and vitamin D all combined, all three clinically proven ingredients combined for the very first time and provide the Super Heart product in the market.

And there is also another couple of line ups there. One is concentrated krill which is the most concentrated version that you can have.

So it is double the concentration of the previous one to make sure that you actually get the best heart health support in one pill. So that’s going into our MegaRed markets.

Hygiene, moving to hygiene, I have a couple of initiatives to share with you. Let me just start with Finish.

Now those of us who are privileged to have the responsibility to dish wash every night know that that is not where the moment of truth is, to put the dishes at night. The moment of truth comes when you open them in the morning and then see whether or not my glasses are as shiny as that light is going to be and whether there is any cloudiness, is there anything which has happened to ruin the glasses?

This is the key issue that most people feel, the moment of truth when I open the dishwasher and do I have amazing shine, yes or no. And we know that and keeping that shine -- keeping your glass protected for longer is a technological issue to deal with and I think what our scientists and R&D people have found with this new glass protect technology -- let me call it for simplification here -- is that the line-up of Finish Shine Protect basically keeps your glasses shinier or protected for two times longer than the current Finish products.

So it is going to be the best product in the market from the shine protection point of view and we’re launching it across our finished markets in 2015. So a real product upgrade.

Moving on to Dettol, and the reason I'm showing this product and not an emerging markets Dettol product is because of this. Maybe you are aware that we launched Dettol in many developed markets a number of years ago and principally launched it with hand wash.

Either it was this automatic hand wash or it was the normal manual hand wash. We had been launching Dettol hand wash to create a strong equity for Dettol to really make it become something which stands for germ protection and hygiene.

And actually over the last number of years we have built very nice equity for Dettol in all these developed markets. So what we are doing very first time actually are launching a range of personal wash in these developed markets.

So this is going to be a number of developed markets in 2015 in support of the lineup that we already had, which is principally a hand wash line up. And if you ever wonder what does a personal wash do, which is relevant for germs, the actual scientific basis is very simple.

Sweat is odorless by itself, doesn’t have odor, but when it gets combined with the skin, the germs on the skin actually cause the malodors. And most products actually deal with suppressing those malodors.

Dettol kills the germs that cause the malodor. So there is a very simple strong scientific logic behind Dettol in personal wash, and I don’t want you to get away with -- that this is not based on the core benefit of germ protection for Dettol.

And this is what makes Dettol soap and line-up of personal washes so successful in emerging markets, where this product is going with the benefit of 12 hour germ protection. So it is actually going as 12 hour claim in many emerging markets.

Moving on from Dettol to Veet, and Veet basically, we all know that people who use waxes want the ultimate smoothness, but without the hassle that sometimes people have with waxes, the hassle people have, not being able to apply property, not being able to heat properly and so on so forth. How do they actually get fantastic results without the hassle that sometimes it has a complication it has.

So what we’ve actually done is launched what is called a Spawax. You get the result that you get in a spa, professional salon, because the container that you see in front of you can actually -- it heats the wax to the exact right level.

So it’s designed to heat it at the right level. And then we give people wax discs so that they can put the wax, the heating at the right level and gives you the right condition with a spatula to use it and get professional wax results at home.

So I think it’s very interesting technology in how we actually achieve that and we have good initiative for Veet in 2015. Mortein, I don’t believe I've spoken about sort of number of years, and I just thought it would be good time to get some -- of these brands that we haven’t talked about for some time to talk you guys.

Mortein of course is a pest control brand which is there in a large number of emerging markets and we're launching -- so in these many of these markets, not all people use coils, because these are cheap every day products and they burn these coils overnight and the coils burn overnight and they are basically -- they don’t kill normally these mosquitoes, but they at least prevent them from biting you. That’s what happens most of the time.

Many people don’t want these coils burning while they are asleep. They don’t want this stuff happening.

So what we provided is a active card. You burn it.

In three minutes it's gone, the card burns, but the products work to protect you from mosquitoes just after three minutes for about four to six hours. So it actually gives you a long term protection were the card burns and actually you get this and our claim there, which we are using, as you can see Rs.

10 is the naming pack, which is protection from dengue mosquitoes, because it does of course protect you from even dengue mosquitoes. So it's a very powerful claim, in three minutes, going into a number of emerging markets.

Moving to home and I have two initiatives to talk to you about in home. The first one is going to be on Air Wick.

Now Air Wick is one category where we want to inject with significant innovation and actually the innovation that I'm going to talk to about is one that is not just about launching new fragrances. It is a true breakthrough in fragrance technology.

And I'm going to describe it not through fragrances, I'm going to describe it through liquor. So imagine that want to drink whisky, vodka and gin in one glass.

So if you ask Diageo, my friend, he would basically pull a blend together and give you a bottle, when you drink it together, it's a blend. You can't make out whisky, gin and vodka because it's blended.

Actually the same thing happens when you mix fragrances. They become a blend.

It's very difficult for each of those fragrances inside to retain their identity. So when they come out, it's coming out of the blend.

It's not coming out as unique individual fragrances. So getting that technology where you can put fragrances together where each of these retain their identity and when they actually come out they come out one after the other, so that you feel that these fragrances are constantly changing, where your nose does not get sensitized to one fragrance and therefore always feels that the fragrance in your home is a very, very powerful technological breakthrough.

So we're launching this under the Air Wick Life Scents on a range of our products, across our markets and we are very excited about it because the technology is absolutely fantastic. It is absolutely fantastic.

It's like drinking in one glass, like I told you all these three things, each one of them one at a time, retaining the identity. I don’t think Ivan [ph] can do that.

And here it is [Audio Visual Presentation] So we're very excited about the both the advertising. We even have a new creative agency to work on this very nice emotional idea, but also a really nice technology to back lift and we're pushing this as a very nice initiative for '15.

Moving on, and the last one for today is on Vanish. Vanish has been a good success story over the last couple of years, particularly fending off the challenge from people and coming out strong by focusing daily on what we do best, which is bringing new consumers in, not focusing too much on extra frills, but focusing on already bringing on new people in and that’s why we started to focus on innovation, focus on penetration bringing new people in with real frills.

And I think that has really contributed to the success of this brand over the last couple of years. And we're launching now -- and we also know -- and this is very important point.

In Vanish people will pay for stain removal. If they know that they have stained clothes, they are petrified these stains won't go away, and if they wash them and the stains don’t go way, they become even more baked in, and people just don’t like it.

None of one would. So this is probably our ultimate basically bold standard in stain removal, remove stain in 30 seconds, but also has a best possible stain removal performance, launched as a lineup last year in Pink in the UK, did very well and we are rolling it across our inner markets, now also in a white -- Vanish for whites line.

So it’s an expanded line, it's a good line and it has the best stain removal, which people I know would like to pay for. So that’s on Vanish.

And that’s where I want to stop our innovation discussion for today. There's lots more to have talked about, but I think we have a nice program.

We're excited about many of the things we are doing and we hope that they would see about it. Moving on, I just like to spend few minutes on where we stand on our strategy, give you a context also for Supercharge and while we believe it is the right next step to super charge our growth and our performance story.

So before I go and do that, let me just try and explain to you, for those of who probably weren’t there in the room three years ago or so when we first talked about the strategy, and we said that this is a strategy that we have, which is quite simple. Simple because first of all we use a very simple and inspiring statement for what we stand for as a company.

We stand for innovative solutions for healthier lives and happy homes. It sounds a bit, maybe way [ph] for you.

It’s a very simple way through which we can decide right from. Healthier lives, happier homes, does it fit this?

Are we doing something which makes a real distance? Are we innovating, which really makes a difference?

And I think we use that very simple way to describe right from wrong, deciding which brands to focus on, which markets to focus on. So we organize our entire portfolio -- we organized our entire investment strategy based on this very simple purpose on health, hygiene and home.

We said it's not possible now to only talk about categories without thinking about the markets in which we want to be successful and the markets where we have both the opportunity to grow, as well as the ability to succeed. And we call those power markets.

We have 16 power markets for those of you who remember, 16 power markets, 19 power brands. So that's what we said.

The third thing we did that time was, like we said, the organization we should put in place should be one that is designed for the next decade, not the last one. In the next decade you start thinking about consumers and how do consumers behave, and is there a way through which you can put an organization around consumer clusters, around consumer behaviors, around your brand portfolios that brought you both the synergy but also at the same time give you a much better, sharper insight, and that we use this organization model, we use of course to create this idea of ENA, which was quite strange at that time, putting Europe and North America together, saying consumers in both of these markets are more similar than they are dissimilar.

And we then created two separate organizations to look after six consumer clusters for RUMEA, three for LAPAC. That's what we did.

And we also said at that time, just to remind you all, that I know and it's very difficult for you guys to right now take back to three years and also for me. It is very difficult sometimes to remember what happened three days ago, but three years ago everyone was focused on one thing, how big are you in emerging markets and how fast are you growing?

People had forgotten given up on growth in developed markets and I stood there and I said, it does not matter whether you have 60% of your business in developed markets or 40%, it's still very substantial and we have to find an answer to be successful, not just in emerging markets but also in developed markets, because if you can't grew in developed markets, we cannot optimize and deliver to our full potential. That's what we said.

So that's how we pull our organization, just to remind you all. That's the contest and finally of course margins.

Margin is about the virtuous operating earnings model that we've talked about. So I just want to quickly tell you how I see us doing in the last three years across these pillars.

On the first one, power brands. So at that point in time about 80% of our business was Health, Hygiene, Home, 20% was rest.

That's what we had. So there was a good concentration I would say of Health, Hygiene and Home, but there was also 20% of non-Health, Hygiene and Home.

What has happened over the last three years? 92% has become Health, Hygiene, Home, 8% rest, and this 8% is going to get lower and lower, because it still has something that will come out of the numbers as we go forward.

So this is becoming really quite a concentrated Health, Hygiene focused business that we wanted to always see for this Company, in line with what we said we want to be, healthier lives, happier homes. So that's what we've achieved from a portfolio focus point of view, when you think about what just happened in three years.

On power markets, we had identified 16 markets, I have disclosed five of those before, I said BRIC of course is are those and U.S. five.

I'm going to tell you a sixth one today. One year is quite a good idea.

And we had just put out just for an example a ranking of these markets just five years ago and where it is just now, and I've to tell you some of those ranking has been impacted by the FX. If I actually used 2011 FX rates, some of these markets would have even -- particularly Russia will be much higher than the list.

It would have been higher in the list. And I think some of this progress we've made in these markets, where we -- as said we must find higher growth, we must invest in capabilities, has been significant.

It has been quite significant. So the identification of markets that we want to make sure that we succeed in has actually helped and created a lens on how we invest behind people, behind brands, behind innovation, behind capabilities.

And really I think is a good important driver of providing that focus from a portfolio point of view. On organization I think the results are quite obvious.

I think LAPAC/RUMEA have done okay, I would say. Three years [indiscernible].

8% LAPAC/RUMEA, if I take out I think the developed parts of LAPAC/RUMEA like ENZ, Japan and Korea, I think it would be in double digits growth in three years. So I think considering how the markets have shaped up in the last few years, it is an okay performance.

On the right hand side actually, and I did not go back beyond 2011, because we have '11, '12, '13, '14 there. If I went back, which we did not disclose.

So that was still negative. And 2010 also negative in ENA by the way.

So we have actually -- we have reduced I would say good growth in ENA. I would never say brilliant growth because there is no -- in this kind of way you can't say brilliant, but good growth in ENA, and I'm quite happy that actually from an organization point of view, how we wanted to reach that growth in ENA as well.

And for those of you again who have not followed this idea, let me just tell you what we did at that time. We put these two organizations together, we delayed this organization, we took 50 million out in cost and put it behind growth.

Because imagine if you have a Company which is growing at minus 1, you have a choice. You can actually grow and destroy margins or you can actually protect margins and not grow.

Which one do you want to really go for? Which one do you want to for?

And that's what the question for us was. And I said both.

We want to invest for growth and we want to keep our margins. And the way we are going to do that is self-fund the investment.

We took 50 million out of ENA, we put it behind ENA in that year and actually we believe that has been the [indiscernible] for reigniting this growth, which is the very important part of our three year progress. And finally on margins, what you will see in this chart, let me just tell you what has happened in the last few years.

Gross margin expanded by 330 basis points over three years. We reinvested 90 basis points in BI but actually more.

I have to tell you it's more than that simply because we reinvested quite a lot, all of our savings in this period particularly in '13 -- in '14 rather behind our brands. So we actually invested more and our margin expansion has been on an average 80 basis points a year, which I think if you ask me three years ago nobody would have put any money on this, nobody.

And we've done it. But this is good.

This is good because you have all feel good that there is been -- strategies been proven to be right. You all believe in this strategy, we do.

We believe its right, its working and of course it's delivered value creation. If you put £100 as some of you suggested in RD in 2000 today you would be sitting with nearly £1600.

You could have been sitting with £1,600. If you put £100 when I suggested you should out some money, you would have been sitting with £200.

But that is not where we should think about. We should think about what next?

How do we actually make sure that this Company is able to keep its growth and out performance for the next part of the decade. That's really the key question but we are obsessed about focusing on and that's where Supercharge comes in.

This is where Supercharge comes in. We really think about not what has happened but what we want to think about for the future.

And I just want to make sure that we go back to our pillars of our performance, the right portfolio strategy that we have in place. We absolutely believe in the portfolio strategy.

The fact that we are still an innovation culture, and we want to make sure that innovation can be fantastically executed in the market, because that's where it becomes real for everyone, including our customers and consumers, we want to know that. But the constant question is, is that enough or do we really still think about how do we actually sharpen the organization and how do we actually reignite our earnings model.

So Supercharge really is about this. It's about making sure that we can rejuvenate our organization, our talent our culture for the next decade or this coming decade of this -- the next part of the decade of this performance and then of course make sure we can reignite our earnings model.

Because we have delivered a significant expansion margin. How do we make sure that not only do we make that sustainable but how do we actually make sure that that earnings model is constantly reignited.

So that's what we ask ourselves a question and this where Supercharge comes in. So I'm going to take each one of them, one at a time.

Let's talk about organization culture and talent. And no matter what people tell you, but this the reality.

When an organization is growing, it's becoming bigger, inevitably it's becoming more complex. Inevitably complexity brings slowness.

It becomes rigidity in companies. People will not say this but the fact of the matter is size, growth, which people tout as scale has an implied complexity and lack of agility built into it.

And we have to fight this, and we have to fight this simply because our industry is called fast moving, FMCG, not SMCG, never called SMCG. FMCG.

So how do you actually create a culture which is fast moving, where speed always trumps scale? How do you actually keep a culture to just unleashed and not bogged down?

Because the last thing you want to do to cope up with increased size, scale complexities to install more and more processes, you can do that. Most companies actually follow this very simple logic.

They're like let's put more process. So anyone knows exactly what needs to be done and everyone will behave properly and everyone will be done.

But that kills creativity, it kills entrepreneurship. And we must fight this because that's what our special edge is, that we might be bigger and bigger and bigger, but we always have this very feeling of small.

How to remain feeling small, that I know exactly what is happening in the company because anyone will come and talk to me about this. And I think that is very important in our Company, to retain our agility, our entrepreneurship, our creativity our freedom but at the same time recognize that this is a thing we have to fight every day.

That's what the first part is. And of course the second part is the earnings model.

Let me tell you about how we do that? We started thinking about two things, because the two things that really truly matter when you think about organization design, consumer clusters, remember I told you that and increasing the store, and the store is changing.

It's changing quite rapidly actually now. So how do you design an organization which actually works seamlessly thinking about consumers, what exactly they are looking for, what do they want, what do they don’t know they want and how do you actually cater for what they don’t know what they want, to how do you actually execute it in the store.

These are the two things that really matter when you think about organization design and that’s what we would like to do. The first step is we need to create fantastic brands, fantastic brands, fantastic innovation that offers better solutions for [indiscernible].

So creating leading organization that will help you create. And when you think about creating -- in a Company like mine, I have to be very open and confess, in my Company everyone is coming up with the new idea.

There are huge number of ideas. And the question is how do we actually make sure we stay focused, while we actually nurture these ideas, because we have a huge number of projects in the Company.

Everyone wants to launch everything basically. But when we think about the store, and if you were the sales guy in the store, how many things can you actually execute in the store?

Actually a very small fraction of what people start working on in the Company. And whether we like it or not, there are hundreds and hundreds and hundreds of projects that are there in the Company.

So we are going to make sure that we actually have a way through which we can narrow our focus to make much more of these blockbuster innovations while keeping the creativity and freedom, so that if people really, really want their idea to be pushed, if they really believing it, if they have passion in their eyes, they really have -- we give them, go and do it but don’t bother rest of the organization. Go and do it and show me if it is possible.

But we want to make sure that we create brilliant blockbuster innovation, stop the small stories, which really don’t go anywhere or duplications that sometimes and narrow this Company’s focus. That’s normal stuff to do.

But you can’t really think about creating great innovation if you don’t know how to make them as global as possible. Remember what I just said making innovation as global as possible.

We don’t want to work in a Company where people come into an innovation meeting from various countries and say -- and think that is somewhere between a United Nations meeting or a car boot sale where they pick and choose exactly what they want and then go back home, no. We want to make sure our innovations can be scaled and we need an organization that can help us scale that innovation, scale our initiatives in the market, making it as global as possible.

So that’s the second thing we thought about from an organization point of view. [Indiscernible] very transparent in example, very transparent in example.

This is an innovation which is very interesting actually -- very nice innovation, it has very powerful cream. Dettol kills 100 illness causing germs.

That’s the claim actually. When you think about this 100, actually the theme here is Dettol kills 100 illness causing germs.

So you might say that what’s wrong with this chart? Well I will tell you what’s wrong with this chart.

That we did this theme and executed it in three and four different ways. In India it was like that, China was slightly different, Indonesia, Malaysia, Singapore are bit different and Middle East another difference.

So we say okay, that I don’t like as a marketer. I want my iconography to be very consistent.

I do not want my iconography to be stooled around basically from one market to the other. That’s one aspect which I don’t want.

The second aspect I really don’t want, this is not where I want to see creativity. The second aspect I don’t like is that there are four different people who work on the same thing.

People have done this once very well, and then everyone could have used it. So therefore the duplication.

Next, of course because everyone is reworking this, it takes longer to rollout. This we want to stop in the scale, making it as global as possible.

How do we scale it in a way and create a specific organization that can help us scale innovation, initiative, not just innovations, entire launch packages so that people don’t have to rework their launch packages in different markets properly. That’s what the purpose of scale is.

And when you think about really how do we scale without destroying this idea of a consumer cluster, we are going to bring RUMEA and LAPAC together under one area organization. So the regions remain our countries and configuration remains but they are no longer two different area organization managing RUMEA, LAPAC.

It will be managed as a one in exactly the same way we did for Europe, North America. Now as we move, we are moving some consumer clusters that work in LAPAC into ENA, because they do better belong -- we know this, we knew this at that time but it was for geographic proximity we had kept it.

Australia New Zealand moves into ENA from LAPAC, and Russia CIS plugs into Eastern Europe part of ENA. So Russia CIS retained its identity of course.

It has a significant organization. But there are some benefits also because we have common portfolios between Europe and Russia and so on and so forth.

So I think from an organization point of view it’s a simpler design, but the big news here is that we will support a scale organizing by scaling up RUMEA and LAPAC as one market called developing markets. This is the hemisphere that we are looking after.

But beyond this really there is another concept, or what I'm going to talk about just now, it's called Power-One. Come back to Power-One later.

So you got an organization which is creating great innovations, finding out how we actually exercise this innovation in market. We've got an organization which is able to scale these innovations and initiatives in their markets, but we also need someone to activate them in the store, in the store, and this is where of course our Power markets and activation markets, our country organization and then supply service organization servicing customers comes in.

So there is an organization which is really thinking about how do I bring and make this – how do I fit this in the store, where will it work, next to what? How the planogram should look like, how to actually go and sell it to the customer and everything like that.

We need an organization which activates them brilliantly in the store. And sometime we need a consumer to store mentality.

That's why you see handshakes. You see interdependence over there.

And sometimes you also need a store back mentality. Thinking about store first and the store formats are changing and where there's -- ours are changing and then bring that back to the company.

And that's the kind of interdependence that we want to see. But that's where you see as local as needed.

So you have [indiscernible] and feel as global as possible, activate as local as needed. It might change the size of the pack, simply because it doesn’t fir the shelf or you might basically have to change the language on the pack, simply because it has to be a multilingual pack and so and so forth.

Maybe adapt your advertising for a regulatory need, as local as needed to activate it right in store. That's the simple organization design that we followed to create a Supercharge organization.

And when you think about this, how it actually steps works together as a more agile connected company and how do rules and responsibility fit. You know about the category development organization, you know this organization is a special organization in our company because this is not a Company, this is not a marketing organization.

It's a consumer organization which has R&D developing, which has medical people sitting alongside, clinical people sitting alongside to design and create fantastic themes, fantastic products, fantastic initiatives. In the middle, we are creating a Power One team; Power One team both in ENA as well as developing markets.

Now I don’t know whether some of you remember that in the July presentation I talked about Power One. Power One is an organization which is leading a specific category for the entire area.

For example and this is not a literal example, just as an example. UK leads Scholl for entire Europe, North America, which means when it gets the initiative that I just showed you, it takes that initiative with a handshake, fully understanding what needs to be done and then makes sure that the initiative readiness in terms of launch communication, in terms of content calendars, in terms of designing the launch records and how actually we go to customers, how exactly do we execute it so that people don’t have to rework this in 16 - 17 different markets.

They don’t have to rework it again and again. They design the master package, which is relevant for all our ENA markets by getting input from each of those country representatives, so that they don’t have to rework it.

So that they've done it once, so that it's done at a higher quality when we would be able to do in 16 different places, avoid the duplication, avoid the rework. Doing it once, but doing it better.

So we're creating this Power One teams to work alongside on the one side our category organization, and on the other side country organizations, and then hand over these packages -- it's a small team by the way, to hand over these packages so that they can be activated, adapted as local as needed. That's what we are going to do.

Now these are underpinned by a fundamental change we are also making in our supply organization. I have to say that the supply organization is a bit of a manufacturing driven organization, fantastic manufacturing excellence.

There is no doubt and we want to retain that. But there's couple of things that we have to recognize.

When you think about store, then on shelf availability, metrics on service are absolutely crucial for our customers and we want to have the capability and we want to have the metrics inside the Company which enable us to execute our innovations properly but also make sure that in store we have our products, with the right quality, with the right availability all the time, with the high standards that are demanded and the high standards that we want to execute. And I think that brings -- that makes us bring supply service people at the very top of the supply organization.

That's what we've done. So supply service is no longer reports to manufacturing.

It reports directly outside. It has become an organization now, works alongside our country teams to make sure that we can execute with customers in stores with excellence.

In the same time we've taken manufacturing and globalized it completely, which means all hygiene health plants, like health plants are going to be managed not area by area, country by country, but globally. All decision making on supply will be globally done.

They don’t decide whether make in one country or the other, where we invest based on a country or a geography or an area managing that location. It's all globalized.

It's all globalized. So these are fundamental changes and there you want the manufacturing organization to work with category to create these products, to make sure that these products can be launched, scaled, launched in as many markets as possible as rapidly as possible, yet the supply services organization working with the country teams to make sure on shelf availability in the supply metrics and I can go back and describe how well this virtuous circle will also work inside the Company from a supply point of view.

So you should not underestimate that we are not just doing what is right and visible in the front of the organization, what is happening at the back is also going to be very, very interesting and different. So I think that's what we mean when we talk about a supply -- a simpler, more connected, more enabled, more agile organization, where everyone realizes what they do, how their interdependencies work and really creating simple focus on consumers, focus customer [indiscernible].

That’s what we are doing. Everyone hears this from me, as global as possible, as local as needed.

So this is our organization template, doing things simpler, more agile, removing the duplication and making sure we can execute quickly. We have another aspect to Supercharge which is of course the virtuous earnings model and we are now already seeing what that means.

But I just want to tell you that when we think about virtuous earning model, everyone ask me the simple question, like aren’t you guys lean? Aren’t you already very, very cost optimized?

And the answer is yes and no. Yes, as you see it, no because we always think there is more.

There is always more. And when you actually interrogate our cost, I see the equation somewhat like this, that our COGS really have been coming down over the number of years and that’s good.

So that’s why it’s leaning down [indiscernible]. Our BEI has been going up and that’s good, even though you might call it as a cost, but our non-BEI cost, everything else is actually going up.

It is going up total of non-BEI. That includes other marketing by the way, non-BEI marketing.

What we pay for POS material and how we buy it and how many times we buy it and whether it actually fully gets used or not get used, all of this stuff, when you actually look at it all together is gone up and therein lies the opportunity. Therein lies the opportunity.

So actually what we did was we benchmarked ourselves on 15 of these cost categories, 15 cost categories that we benchmarked ourselves. Now if you think that was easy, it was a very, very difficult process because of course when you go around looking for numbers and getting all the numbers and the detail that we actually want to get those details in, to properly do a benchmarking exercise, RB is not that fantastic.

You can actually put a lot of pressure to get the right number, thank you very much Adrian to actually help us benchmark our cost categories and that’s where we stand. I'm not going to show you exactly the point but we found where we stand against those 15 benchmarks.

By the way each of these cost categories got ownership from each of the EC members. So EC members took two cost categories and said we are going to stand behind the benchmarking so that we will then decide where we want to set the right benchmark.

We personally took ownership to set the right benchmark saying that’s where we want to be and we said okay, we all sign up. So that’s what -- for each of those categories we want to set the benchmark.

And the answer between the two was 100 to 150 million. So I just remind you once again, an important part.

If you remember anything -- on the virtuous earnings model point of view, if you remember one picture, you remember this. There is always juice in the lemon and that’s what we are going to paint over here.

And when you just thought that the juice has been taken out, we’re going to find the next one. We're going to find the next one.

There always is. We just have to keep looking and asking and challenging.

And that’s what we are going to do, that’s what we’re going to do. Right is that simple?

But it’s not very. It’s also hard.

Simpler, more agile organization, you have to work hard that is, and super-efficient and cost conscious organization. That's what Supercharge stands for.

That’s what we are trying to do so that we can actually find ways of growing and out performing in the future as we hope to have done in the last few years. Okay, so before I get to my final messages for the day, let me start talking about the KPIs, and this is something to be taken into with the new organization in mind.

You might remember when we started our 11 journey, we had 67% of our business in health and hygiene. I don’t know some of you might remember 66, two thirds.

And we are already three fourths and we hope to be it depends [indiscernible] so our business being Health and Hygiene based. So we still believe that we are going to progressively become a Health and Hygiene company over 2020.

So we used 1% per year mathematics to actually think about our KPI. And that’s how we feel, higher growth from health and hygiene, because it is also virtuous, because some of the gross margin expansion you see over the last three years comes also from mix, not just from space or fuel or cost saving initiatives and that’s an important part of our model.

The second one you have to take with a slight mathematical caveat, which is about our -- what is DVM versus ENA. All ENA is not what other people classifies developed markets, because we have Russia, we have CIS, we have Eastern Europe, Poland et cetera, et cetera.

So it is for management business that we put ENA and consumer reason that we put ENA. It's not how the world classifies emerging markets.

So if you were to look at a pure emerging market classification then our developing markets would be in the high 30% number. So we believe that we want to still see a progressive shift from ENA, DVM from 70-30 to 60-40.

That’s how we want to track ourselves. But as you know the ultimate performance indicator that I always talked about was versus the market and we are keeping to that KPI, 200 basis points of outperformance versus the market, market growth rate with moderate margin expansion.

So we’re keeping with that KPI also for the medium term. Now let's talk about 2015.

So the first one is really is our like for like net revenue growth. Now just as another, if you note, our like for like net revenue growth, we are targeting 4% but on total growth, the combined impact of the discontinued stroke separated businesses like Medcom et cetera and acquisition impact of K-Y will be negative.

So the combined impact -- so in total growth terms, as you might -- for those of who -- so we have a higher impact of the discontinued business of footwear, of Medcom, medical than the impact of K-Y. So in like for like 4%, in total it might be less.

There is a negative impact of those two. In terms of operating margin let me just make sure that you understand my language, because my language is unique.

I call it Hinglish. At the half year we delivered 40 basis points.

I said it's nice. This is my language.

You should not take anything more. And I said you should expect nice margin expansion also in the second half.

If you just followed exactly what I say you will find a clear consistent pattern on what I say, and I said we delivered outstanding output margin in the second half. We have.

There is no taking away from us. As moving forward, we are guiding to moderate to nice margin expansion.

Now I don’t want you to think its 40 basis points, because it's not. It's moderate to nice.

If you understand me I think you've done well. Okay, with that clear guidance and targets, let me now move to the final session, which is my messages for you.

We believe we have the right strategy and that strategy is working, but we are going to sharpen this focus on our portfolio, like we have in the last three years. That's what our intent is, to keep these Company's focus on our core, because that’s important for outperformance.

We want to make sure we are focused on what we are capable to deliver outperformance in. Second part we are not going to rest on what we've done.

There is no standing still in our Company. There is no status quo.

We're going to actually make this Company simpler, more agile, capable of outperforming over the next decade, and we're going to make sure that the earnings of model of this Company remains strong, virtuous. We're going to find ways through which we create space for growth in investment and of margin expansion.

That’s what we're going to do. And finally of course, this is a slide, the last one is exactly what I said last year.

Again you should not take much more out of it, challenging markets, exciting future. I still believe we are in challenging markets.

There is no question. We should not -- I think everyone gets caught up with the result of good or bad.

These markets are bad. '14 was a tough year by the way from a market point of view.

We just happened to do good. And that’s fine.

But the markets remain challenging. Our future remains very exciting.

Okay with that ask Q&A.

Martin Deboo, Jefferies. Rakesh, two questions.

I guess the things didn't go so well this year, the obvious one was being outbid for Merck, so the question, I think, in the light of what you've just said, what's the role of M&A in your consumer healthcare strategy going forward and how are you thinking about that ex-Merck? And the second one, completely different, is CapEx fell this year and CapEx to sales remains at about 2%; very low by sector standards.

The question is always asked but needs to be asked again. What does CapEx look like going forward given that you're in volume growth mode?

Okay so first of all the second one. I think in every bid of spend, CapEx is not free.

It is looked at with the same intensity and same mindset of ROI as any other spend, and by the way that is also for BEI. Anything we spend in this company, we want to get sure we get the right return.

We have guided through about 200 million of CapEx on an average year. Some years it might be less and some years it might be more.

But that’s what we've guided to and we believe that level of CapEx is at this stage of where we are, a reasonable estimate of what we're expected to be 200 million in year. Didn’t give any percentages at that time except 200 million, some years less, some years more.

And we are quite comfortable with where we stand with regards to CapEx. But I can tell you beyond a certain amount of spend, we will interrogate what we spend -- people don’t get CapEx because somehow it does not immediately impact P&Ls.

We manage our cash with the same passion as we manage our P&L, specialty very clear. And we are comfortable with that number, and I think you should ask other people that you know why their CapEx is much higher as a percentage to revenue then you should ask me.

Second question is about our M&A approach. So first thing I'd like to say is that lets blank out for the minute '14.

Just blank out for a minute because I think -- and say '14 never happened or '14 happened in 2008. That's another notion, whichever one you are more comfortable with.

I'm comfortable with either. The market remains fragmented.

Consumer health is a fragmented market, and it remains fragmented. The top 10 players still own about less than 30% of the total market.

Opportunities in this market will be there. The question is whether I feel awful about not being with Merck or happy is a delicate one to answer, because of course I still believe that we would have been fantastic owners of Merck, but then you have to ask yourself till when are you going to keep -- at what point in time you believe the value equation looks a bit doubtful.

And I think that's where we -- you said you feel good or bad, I think you can look at it both ways. And by the way, again, I don't want to look back.

We have moved on from there. We've done well with Scholl.

We have launched Scholl into -- not Scholl but I'm hoping into North America and I think no matter what you say, the Company does not -- and my presentation already tells you so much. We don't look back at the past.

I think the future is exciting. The future has opportunities in business development.

The future has a market which is largely very fragmented and these opportunities will come up and we just have to make sure that we do a good job in finding those right opportunities, in paying the right price and then doing a good job with those acquisitions, but I don't feel compelled that something has happened and I've not managed to do more. I really don’t.

We've moved on and I think the opportunities still exist.

Good morning. Its [indiscernible] here.

So two margin related questions. The first one is in terms of 2015 margins would you expect GM to be a positive contributor to your margin and also you're non-BEI cost?

Have both of those been positive as a percentage of sales to your margin? And then the second question is in terms of your non-BEI SG&A spend, you talked that coming down.

Would that be sort of absolute productions over let's say the next two to three years assuming no more revenue rate?

Sure, Adrian will answer many of these questions, but overall I'm not going to give you any specific numbers for what gross margin and BEI or non-BEI. I think we have a clear guidance about moderate to nice margin expansion.

First of all, moderate margin expansion over the medium term, '15 moderate to nice. I think that itself tells you quite enough.

Now after that, do we want to make sure that we expand our gross margins? Of course we want to make sure we expand our gross margins.

And that's what we are going to target. I think any more which I missed out --.

Charles Pick of Numis. I've got three questions please.

On the like-for-like in Q4, there were clearly some flattering factors which you outlined during the course of the presentation. Can you give any semblance of what the Q4 like-for-like and the annual like-for-like might have been without those?

Secondly, on project Supercharge, the 200 million cost over the three years, is it possible to split that down please? And finally on the margin front, I think you mentioned 60 basis points was the element of non-recurring margin boost last financial year.

Have you got enough in project Supercharge to offset that in the near term?

Yes, can we quantify the non like-for-like? No is the answer to that.

We won't -- they're material enough to point them out qualitatively, which is what we've done to try and be totally transparent, but we're not going to quantify them. So, I'm afraid the answer to the first one is no.

On the 200 million one off cost, again we're not prepared to give a breakdown. There's lots of internal reasons why you don't want to do that.

I'm sure you can understand that. But I think what you should be very happy with is you got 100 million to 150 million benefit in a going year which we expect to be essentially by the third year and 200 million over those three years.

So I think that's the equation. We're not -- I think you can understand why we're not prepared to go into under the 200 million.

In terms of the 60 basis points non-recurring cost improvement or margin improvement that was in last year, have we got enough fuel to deal with it? Yes however, Hinglish, the guidance was for margin for 2015, it was clearly positive.

So the answer to that I think mathematically is yes, and we have a confidence about that.

Thank you, Harold Thompson from Deutsche Bank. Two or three years ago RUMEA was -- you were not so happy with that region and it wasn't just market.

It was the organization. How far we travelled into its improvement?

What have been the key steps, what's left to do? And although LAPAC is the laggard this year and beyond market conditions are there similar issues which RUMEA may have had two to three years ago that couldn't be improved?

Just an [indiscernible] question I guess.

First of all I think RUMEA has done well, but are we happy with it? We are never happy.

So that is very difficult to answer saying we are happy. We always wanted to do more.

So RUMEA has done well and I have to say that many of the operational issues that we were candid to talk to you about, Turkey, South Africa have been really well dealt with, and I think I have to give them credit. They worked really hard.

They have been under pressure, but they have done well and I have to acknowledge that because if they're listening they'll kill me basically. So they've done well.

I want to tell them that, but we can always do better. So that’s on one.

On LAPAC I would just say that the markets have been very tough in LAPAC. If you think you -- you heard what Adrian said over the last couple of years.

I've been talking about emerging market slowdown and its how the emerging markets have been split up in our Company that we see it more clearly and I'm quite sure if we had put these two markets together and called them developing markets, you might not even have noticed the difference basically. That's the granularity of growth sometimes, that you see something more sharply simply because you're split in so many different ways that you'll always find a new stat.

But in aggregate I think our LAPAC markets are fundamentally strong markets. We have good businesses.

Do we have some in market challenges in some markets? Yes, we normally have some markets which is much more intense from a competitive point of view and have a much more difficult environment for another point of view.

Thailand is going through not necessarily a big competitive issue, but really it's a very difficult market right now, Thailand, Indonesia. We're doing very competitively in these markets, but the markets have been very disciplined.

In Brazil we have a combination of very tough market but also tough competition. So I think in LAPAC I do not sense there are -- I would say operational issues are the key aspect of what you see.

It's much more from market to market, a very distinct reality. But are we happy?

Despite whatever, we always like to feel that we are in control, that we can do something even better. And I think our objective and opportunity is to do better than what we have done.

And that's what we would like to do; do better in these markets despite the challenge of the market. That challenge is not going to go away.

You need to just go about it..

And just one follow-up. In the past you've sometimes said there's always one or two brands which you feel are not as good as you wanted them to be and they need refreshing so on and so forth.

And I think Vanish was one of those a few years ago. It's on the road to recovery.

Air Wick I think was one in '14. So are you saying this is the answer?

What -- which big brand franchises are you less excited?

First of all we have worked very hard over the last couple of years. Some of these things cannot sadly be switched on and off very quickly.

We recognize issues on LAPAC -- RUMEA, sorry. It did take a few quarters to get everything right.

I think the brands also -- you can't innovate today and launch it tomorrow. So I think Air Wick is certainly one of those brands where we would like to do much better than what we have done.

Although '14 was less bad than we were originally thinking it might be, so it's slightly better but I think we're not where it should be. So Air Wick is certainly one of those brands that from a big brand point of view, if you want to ask me; big brand point of view, I would really call out Air Wick as the one that we want to keep doing better on, and I think at least from a real innovation point of view we have a fantastic innovation.

Now at the end of the day the people who decide is not me, it's the consumer and what happens in the market. But we have also started to put in much more energy behind that innovation pipeline on Air Wick, knowing that this is the nature of the market.

So I think what we've done over the last couple of years on Air Wick to prepare for a better tomorrow could work. But we're not happy with where we're still.

It's Iain Simpson at Société Générale. Just a question on sort of Vanish goal if I may.

That's clearly an innovation that looks to have worked very well. Could you give us an indication as to what markets it was in at the end of 2014, just so we can try and get a sense of how much geographic space remains as you roll it out through 2015?

Second if I may, just on input costs. We've clearly seen oil come off a lot.

Obviously there's lot other moving parts. But any indication you can give on input costs for 2015 would be extremely helpful.

And then just lastly on MegaRed, I think about 18 months there were a variety of gloriously ill-informed tabloid scare stories linking omega 3 to prostate cancer that put a bit of a dent in the category. Has that started to recover?

So let me just deal with MegaRed. I think the long-term story on VMS growth rate is good.

These markets have been growing at 3% to 5% variously and I think that that trend should continue. And we have to accept that these categories and segments will have PR, many times positive.

For example quite a lot of good stuff has been written about CoQ10 and vitamin-D and krill oil but also sometimes some publishing stories. So I think it comes with the territory and we know this.

What we are trying to do is to bring more science into this, to bring more clinical evidence of what we're trying to achieve, so that it's not subject to a PR story. And I think -- and this again is not going to happen overnight.

This is -- just to remind you we got VMS two years ago. We launched MegaRed in Europe last year 12 months ago.

So I think it's something that we've been working hard and I just showed you a product today which has clinical and scientific evidence on what we are trying to achieve, but the long term VMS growth rate I still expect to be 3% to 5%. There was the question that I think you should answer on margin.

I think you asked that [indiscernible]

Unsurprisingly we don’t give results as you like. Can’t say it’s positive at the moment.

But as you look forward through the year how it's going to play out on the pricing environment from our products is obviously an uncertainty, how the commodities themselves would play out through the years, and uncertainty. So it’s positive at the moment, not going to quantify it for you expect to say it’s clearly within that crystal clear moderate to nice guidance you heard.

And on Vanish, it was launched actually and I said this when we launched. It was launched actually in.

So it where we launched Vanish Gold in Pink version. Now it’s being rolled out to I think 30 markets in pink and white.

So the bigger impact comes now. Principally in the UK.

Good morning. Robert [indiscernible].

A couple of questions -- with respect to RUMEA, obviously there is been some consumer and trade stock up ahead of the pricing, a difficult market there, obviously going to be lumped in with developing markets going forward. So more difficult maybe to split out, but how do you see that market evolving in 2015?

And second question on Mucinex with the reentry of private label, how is that impacting? What do you see happening there and how was the move into allergy going as well as counter balance?

And then just one last question in terms of dividend. Obviously dividend 50% payout on adjusted earnings go forward, on x endeavor would imply potentially different dividend relative to where we are now, and I don’t know if there's any scope within a one-year timeframe to maintain a flat cash dividend?

Let me deal with the first couple of ones, Russia. I think it’s very difficult to call Russia, seriously.

And I wish I could give you. All I would say is what has happened over the last two months of ’14 was extraordinary and there was in my opinion a lot of panic buying by consumers and customer across category [indiscernible] be flunked at a year of time and lot of us were forced to put price increases earlier than a normal price increase.

So what happened was the compounded impact of people panic buying knowing that it is going to inflationary anyway and then people knowing that actually price increases are coming therefore they there was some great buying too. And that happened I think across Russia.

And therefore our focus now is to of course understand that that has happened as the year progresses but also to make those very difficult calls in terms of how much more price increases should be put, what impact that will have on volume and consumption, and then how you actually support your P&L? Are you going to invest behind this brands when you know consumptions might be coming down or actually are you going to take momentum out?

And these are the difficult choices that us and other companies will be facing as we go forward, because clearly there has been some impact in the last months in Russia. By and large it should not still distract from the point of RUMEA performance.

RUMEA performance has been good anyway. And I think the fact there is we have done well in Russia despite the last months of trade and consumer I would say stocking in.

Difficult to call but really the major point here for us and we work very hard and very closely on making sure that with pricing looking at the impact on consumption and volume and then deciding how do we invest behind our brands in this very, very difficult situation and this is what we are supposed to doing our jobs and that’s what we are going to be doing. So that’s all I can answer.

You should expect uncertainty in Russia because the consumer patterns are not stable, and therefore trade patterns are not stable. So second question was Mucinex, the reentry of private label.

I know there is a reentry of private label. I think we deal with private label across our portfolio, across our brands every day, every year and sometimes they come in and sometimes they go out.

I think the strategy for Mucinex doesn’t change because every day there might be a simple news on -- our strategy is to innovate and provide products and hopefully when I come in July, I hope to be showing you some new products for the second half of the season which is mid-season launch of [indiscernible]. That’s why don’t show you much [indiscernible] at this point in time.

And therefore -- and we are going to fight as we fight every private label competitor, with better claims, with showing superiority, making sure we invest being our brands and actually that is what one of the thing we are going to be doing, investing more brand Mucinex, from an brand investment point view. That’s what we are going to do.

The other bit is about your -- your question was about allergy and allergy has been a difficult launch. It has been a difficult launch for Mucinex for a number of reasons which I want to make sure I share with you.

First allergy market itself has undergone quite a lot of change last year. I don’t know for those of you who follow it, the entire nasal decongestion spray, there was allergy sprays became -- were switched from RX to OTC.

They were switched last year from RX and OTC and there were a huge amount of customer retailer energy behind these sprays away from tablets if you want, the normal products. The trade environment was very, very -- changed, focus has changed, but also in anticipation of all these changes, which are quite important because sometimes when the switches happen, they have become big events in the U.S.

Switches are big event in the U.S. That's not an event in European markets, U.S.

is a huge thing. So the trade gets behind it completely of course because this is a new thing.

Now consumers are moving away from prescription to OTC. That's a great opportunity for them.

And then of course in anticipation, the whole market starts to go crazy from a promotional point of view. And when you do that, the market dynamics change where you either suck up the negativity of this or you say I'm not going to play this because clearly there is a nobody -- I personally never like to play a lose-lose game.

Really that's not what we are paid to do, play lose-lose. And it was turning to a bit of a lose-lose situation on allergy.

So basically [indiscernible] step the pedal off on allergy just to be clear, because it is -- and we will review the situation as we go along. The idea of Mucinex allergy remains an important idea, but the market dynamics of the switches impacting completely the trade and the dynamics and also the competitive dynamics in terms of the promo warfare that goes on is not one which is virtuous from a Mucinex point of view.

Mucinex is a good quality high growth, high margin brand and we want to keep it that way.

On dividend Robert, our Board in approving and reviewing the buyback policy, the outcome of which you see here in the announcement also looked again at dividends and the Board remains very comfortable with paying out around 50% of adjusted net income, which does mean this year we paid out for Indivior's part of the numbers. We will not be paying out on the basis Indivior's numbers next year.

I would point out that the directors of Indivior had stated an intent to pay out 40% of their net income this coming year. It's an intent stated by them, but we will not be paying out.

We do not intend to vary our policies. It's around 60% of adjusted net income.

We take one last question or questions. One last one, okay.

Erik Sjogren from Morgan Stanley. Just two quick questions.

First, on the U.S. market, a number of other companies talked about improving momentum here.

Are you seeing this too? And then secondly, on the competitive environment in consumer health after the moves during last year it's early days, but has anything changed here?

Second part, sorry.

The consumer health competitive environment after the transactions…

Second one is a easier one. I think the market is still very fragmented.

I will keep repeating one thing. Fragmented markets have a very different dynamic than concentrated markets.

And I think therein lies the answers. On the other question of U.S., I would say U.S.

is still early to call whether there is real consumer momentum, but I think from between the start of '14 to end of '14 I think we saw in our business because we've now disclosed the U.S. only results.

You see better momentum. So if that is anything to go by probably.

Okay so I have to put -- it's 10: 15 now. Can I just thank you once again for your longstanding attention for this day.

See you soon.