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Reckitt Benckiser Group Plc (OTCPK:RBGPF) Q2 2010 Earnings Call July 26, 2010 8:00 AM ET

Executives

Colin Day - CFO

Bart Becht - CEO

Analysts

Mark Christensen - Morgan Stanley

Celine Pannuti - JPMorgan

Susanne Seibel - Barclays Capital

Pablo Zuanic - Liberum Capital

Rosie Edwards - Goldman Sachs

Eamonn Ferry - Exane BNP Paribas

Gustavo Pifano - Gabelli & Company

Warren Ackerman - Evolution Securities

Xavier Croquez - Cheuvreux

Debra Aitken - Bryan Garnier

Alex Smith - Nomura

Simon Marshall Lockyer - Jefferies

Richard Taylor - Morgan Stanley

Chas Manso - Evolution Securities

Presentation

Good morning and welcome to Reckitt Benckiser first or half year presentation with results. I'm going to give you a quick overview and then I'm going to handover to Colin Day our CFO who will take you through the details of the results after which I will come back to take you through our key initiatives for the second half and then I'm going to make some final comments about SSL, the subject on which we will take very, very few questions because we are bound by the takeover code.

So don't take it as rude, we simply cannot answer practically any question on this subject. So quick summary, total business continues to perform very strongly, you've seen the result. Reckitt Benckiser Pharmaceuticals the half year performance was fully inline with the full year financial targets. We believe this is a very strong performance considering we set the targets in the context of a market growth rate of 4% and on year-to-date basis the market growth rate barely makes to 2%. So net we are now growing at over double the global market growth rate.

We also will see from Colin's presentation that the cash flow generation remains strong, interim dividend per share will be increased by 16 (percent) to 50p and we will be reiterating the full year 2010 targets clearly assuming the market growth rate doesn't drop further. So the total business continues to perform strongly with net revenue growth of 6% at constant rates at half year and net income up 18% at constant rates also at the half year. On a by area basis, I'm going to make some comments on the market growth rate, first and then, discuss the underlying performance.

In Europe, at the time we set the targets, the market growth rate was close to 4%. Currently, the market growth rate for Europe is running at less than 1%. Therefore, the performance within Europe is largely driven by the virtual absence of market growth and heavy promotional spend rather than market share movements. The heavy promotional spend we believe is paying off as year-to-date market share movements in the area on a volume basis are de minimis and therefore, results are very much driven by market growth or the absence thereof, as well as promotional spending.

In North America, and Australia and New Zealand, at the beginning of the year, we had a market growth rate of over 3%. Right now, there is no market growth in North America, and Australia and New Zealand combined. So the 4% growth should be seen against that market backdrop. So clearly, we've had substantial market share gains in particular and franchises like Lysol and Mucinex in North America and the other key factor which is playing a role is we have somewhat less promotional spend in North America to explain the top line growth rate.

In developing markets, there is no change to the underlying market growth on a year-to-date basis. We are still looking at a market growth which is in the high single digits. And so, you can see that our market growth rate of 19% is practically double the underlying market growth rate. It also the highest growth rate we have ever reported on developing markets and 19% for sure is the highest growth rate in developing markets within the industry.

This brings us to the base business, at the time we set the targets. The market growth rate was around 4% like I said before, currently the year-to-date growth rate is barely 2%, so the 5% growth rate is pretty much more than double the current market growth rate, which brings us to Reckitt Benckiser pharmaceuticals which you can see, it continues to perform very nicely. Clearly we would be coming back to the question of generics later and then you can see here on the right hand side the total company growth rate of 6%.

On a by category basis, let's start with Health & Personal Care. First-half year, growth of 7%. Q2 was back into the double-digit growth rates, which is very encouraging; this is clearly a key driver for total company growth. As you know, in Q1 we got hit by poor cold and flu season so it is very encouraging to see that in the second quarter we backed to double-digit growth which is very much driven by Dettol, Nurofen, Strepsils, and Gaviscon our key franchises.

Fabric Care is largely explained by Europe. This is very much of a European driven business. Clearly, here we have seen lower market growth rates, as well as heavy promotional spend which largely explains the negative minus 1%. In terms of market share, there is a small loss in fabric, if we want to discuss Vanish, just on Vanish in particular, the market share loss is than a percentage point on a market share which is close to 50 on a volume basis. So the market share loss is quite de minimus in the big scheme of things. Surface Care, good growth, driven by Lysol, Dettol and Harpic, as well as local brands like Veja in Brazil, good performance. Home Care, 8% growth, good growth in both Air Care as well as Pest Control. Air Care is very much driven by the innovation of Aqua Mist as well as Air Wick Freshmatic. Pest Control very much driven by the Mortein auto spray and doing very well. Dish washing, solid market share performance, net revenue growth somewhat held back by increased promotional spends in this category. That gives you a quick snapshot of the categories. Colin is now going to take you through the financials.

Colin Day

Good morning, it pretty much covered the category and the geography in the market. But I thought I just give you a sort of snapshot, not any of the numbers but how we see the trends. Probably many of you have already figured out by now that there is an air of predictability for ones with a better word, with the performance Q2 isn't that dissimilar to Q1.

If you went back and looked at last year, you'll see that's not that dissimilar to Q4 last year or Q3. And if you look at the reiteration of the targets, you'll probably think that it won't be much different for Q3 and Q4 if the market growth rates hold, which at this point in time we have no reasons to believe that won't be the case.

So, just to make the point, you can see the Q2, up 6, half year up 6 or profits up 17, 17 and net income 18, 18. There is a positive FX effect, you can see the number like I, and we don't expect the FX effect too dramatically change because it's all average going forward. It's because as most of you know, it's Dollar and Euro. So from the FX standpoint, that's not going to be anything other than slightly a positive factor, but from a constant growth rate, there is an air of stability and rather unstable and uncertain times certainly in Europe and to an extent, North America.

Critically for us, it is very important for us, we continue to drive the business from volume growth. I have a chart in a moment that gives you the trend of the volume growth, but if you just focus on the first half, the base business ex-RBP is growing four plus. Their price mix, mainly from developing markets, is a very little price, if any, coming out of Europe will NAA and there's a positive element on exchange.

If you look at the trend which I think it's quite revealing, if you go back to the dark days of when Lehman's fell over the end of 2008 and the first quarter of 2009 seems a long time ago now, we were at 3% volume growth on the base business but arguably what could one describe as the darkest hour, and we've consistently then driven the volume growth over those periods up to the peak in Q4 of '09 of 6% and then we've averaged around about 4.5, rounds out to 4 plus in 2010. So we are still well above in volume terms, the type, that sort of grows back in Q1 '09 and on a total basis, we are at 5 plus.

Let's say, as we've gone through the year, the price is become less of a factor and the volume as you know is critical for gross margin expansion because of the gearing effects as you'll see.

By area, we've talked this to an extent minus one, last talk, the key reason for that is a high promo content in Europe to support our market positions. The overall market growth has come down in Europe. So in a way, and one could argue that that's a very positive performance, and a consistent a plus 4, plus 4 and DVM, I mean it's broadly tracking 18%, 19%.

It is difficult in Europe from a profit standpoint clearly. I think that's a credible performance for us. I wasn't actually looking for anything more dramatic than that in the first half, we always look for more, but given the lot amount of promo, I think it's quite important that we support the top line and we've been able to do that and I'll come back to have we've done that momentarily.

And the rest of the operations, North America, RBP, DvM continue to do very well, both on a profit level and you can see, they're pretty much very stable in their evolution. We've got the P&L structures pretty well nailed down and that's a reflection of the work we've done in reorganizing the European business at the end of last year, when we took the $40 million restructuring which we discussed in the year before for North America, where we also downsized the overhead structure.

Gross margins, key driver, if you'll see, we better teach to reinvest the business. I think it's quite important to know, we got 90 basis points to the half year. The improvement is largely from the base business. We are seeing favorable PPV, we are getting the input cost savings, there is a positive FX, we continue to get our squeeze extreme contributions, cost optimization projects going through the P&L, no reasons to see that changing in the second half, the volume leave which as I've discussed and is consistent with our 50 to 80 basis points range which we indicated at the beginning of the year and in all, reality has been the sort of baseline trend we look for in GM was certainly over the last few years. So, from the standpoint of GM, I think we're doing all the right things and we're certainly getting up now at 60%, the leave which we need.

If you look at the op margin, we have got consistent progression, 210 basis points. There has been a lot of talk about are we cutting media in order to make the profit. I want to reassure everybody that's not the case. We have said before both, Bart and I, we have been able to renegotiate our media package at favorable rates and we have taken advantage along with pretty much everybody else.

So I would imagine of the rather benign market that has existed out there, and in GRP terms we are up. So 11.7 versus 12.1 is to be expected in terms of the advantage we have been able to take and there is some point where extra money doesn't necessarily get you any further return.

The savings, if you like -- we have put in media some of which has gone back in OCM Other Consumer Marketing, and of course as Bart has said, it's highly promo in Europe, and we've continued to support the top line in store. So 100 basis points I think is a very credible performance for the business. 80% coming from GM uplift, 20% from the op leverage, 23.7% overall.

By area, we are in positive territory for Europe, 30 basis points and the rest of the operation is doing extremely well certainly NAA and DvM going forward, and if you just cast your mind back, it's not that long ago where DvM, there was hardly any profits. If you go back down few couple of years before and a lot of the talk was how we were going to grow that business and make the model sustainable.

I think we've done a very creditable job in DvM, and I still believe there is a lot of opportunity. In NAA, we will clearly up the critical mass point. In Europe, I think if we can continue to maintain that sort of growth or profit advancement in the current climate, that's a good performance as well.

So overall, op profit doing very well. In the bottom half of the P&L, we have moved from a net debt to net cash position, clearly that's going to change by the end of the year. But, thus far, it's been a positive contributor to PBT. We believe, we were able to maintain the tax rate of 25%, this is at the half year plus an estimate of what we believe it will be for full year and of course for the accounting standards.

And so overall, net income percentage is 17.9% and we are up 17 on EPS fully diluted. So the sort of bottom half of the P&L is also well I think contained and well under control. Cash generation continues to be good with 113% of op profit, the cash generated from operations is slightly lower minus three.

In a great scheme of things that might cause some of you to worry. But if you actually do 3% of £1.1 billion, it is not a lot of money to frame it for you so that we get a sense. We're settled quite a significant amount in terms of tax matter, favorably. This is climate where there is most a lot of countries are looking for cash and we were able to in conjunction with the revenue settle a number of years, which has allowed us to, I thought it was the right thing to do.

So the net cash flow is £692. We're also working capital slightly down. But it is 15.3%, I am not concerned here because I have said consistently if we are in the 15, 16 range we are fine.

Just to give you a scale, and if you look at the sales, we did about £2 billion plus in the second quarter, £4 billion overall. I say you if are doing the math, it works about a £150 million to £160 million a day. So you can still work out roughly a week. So you can work out roughly what the day sales are and figure out a slight movement on working capital can be anything for a couple of hours of sales quite frankly exaggerating slightly to make the point.

So, a combination of working capital, strong June, together with settlements is why the cash is where it is. But, I don't see that as a negative, as an issue going forward at all in second half year.

Dividend went out 50p, we're upping at 16% as Bart has said and there is a positive FX in the cash flow so the net change is very positive. And you can see the dividend per share is now at 50p, up from 43, full year is 149.

So net, we're in good shape in tough conditions, financially up, very pleased with the first half and I think the with the reiteration of our initial year's targets in the current climate should be seen as a solid strong performance in what is still difficult in uncertain times.

Bart Becht

So clearly, we are sticking with the strategy based on the results. I'm going to take you through the key initiatives now for the second half and then, I'm going to spend a bit of time on the SSL transaction.

So first, we are rolling out Lysol No-Touch hand soap system on the Dettol. You can already find it in the stores here in the UK. The benefit of this is you never ever have to touch a grimy soap pump ever again, helping to stop the spread of germs and infections which clearly are predominantly transferred by hands.

So touching a germy soap pump is fully not very desirable. This innovation has done extremely well in the US. We already have a market share in the total liquid hand soap which is in the teens which is very, very good considering we're only six months into the market. And so, we have very good hopes for this also, in other countries.

We also continue to roll out our Dettol range in new geographies, just to give you some impression. We are going into Israel, Sweden and Romania which is following on from other markets where we just launched which are Brazil, Turkey, Italy and Poland where we have all gone into earlier this year and clearly this franchise which combined with Lysol is already the biggest franchise in the company is only going to get bigger.

On Lysol, we're launching Lysol Neutra Air fabric mist. This is a very product. It kills germs and eliminates odors on soft surfaces like fabrics and is being introduced into United States as we speak.

On Strepsils, our latest innovation will be Strepsils Warm which provides or combines a comforting warm sensation, a warming sensation in effective sore throat relief and this will be launched in a several European markets for the cold and flu season this year.

On Nurofen and Mucinex, we are launching two children's variance, the Nurofen-1 is an ibuprofen suspension, offering fever and pain relief specifically for kids over the age of six years. And on Mucinex, we are launching a Multi-Symptom Cold Liquid which provides relief from a stuffy nose or cough and chest infection for kids.

On Air Wick, we are launching Air Wick Touch of Luxury. This is a range of products providing consumers with more luxurious fragrancing. And as part of this range, we are launching Air Wick Ribbons which is a premium price candle with the benefit of super-fragrancing. Every single time you can the layers in there. Every single time the candle burns through one of those layers, it provides an intense extra burst of fragrancing, which is very much appreciated by consumers.

So this is going into the market, the ribbons and clearly will be there for the candle season which typically starts towards the backend of this year.

And then finally we're on Finish, we have two upgrades. We have Finish Quantum Target which is an improved cleaning system; it has cleansing microbeads to target and soften even the toughest stains as well as offering amazing shine and cleaning and Finish Shine + Dry which is an upgrade to our rinse agent business which provides a quick dry formula. So not only does it sheet off the border but it also provides for better drying to make sure your glasses don't have water spots and marks on them as you take them out of the dishwasher. That gives you a quick snapshot of some of the key innovations that we're launching at this moment.

Let me reiterate the targets. So for the targets, for the full-year excluding RBP, we are continuing to target net revenue growth of 5% at constant exchange, like I said in the market which is now growing only 2%. Operating profit of 10% also at constant exchange and as Colin said exchange might add roughly 5 points to both of these numbers.

The total Reckitt Benckiser, we expect in continuing good growth for this is very much dependent on when generics will come against Suboxone in the US. Hopefully around the Q3 results time, we can give you a better perspective on this. I don't have any news; your news is my news. As I have said many times and I don't have any news. But hopefully around the Q3 results we will be more in a position to give targets for the full business for the year.

So now I am going to turn to the potential SSL transaction. So just to be clear, under the requirements of the city code and take over our mergers also called the code, Reckitt Benckiser cannot provide commentary or ancillary remarks about the offer that do not meet the obligation of the code. This presentation and all comments made by our representatives are or be above the offer and will be limited on the substantive information provided in rule 2.5 announcement.

So to be very blunt that means you can ask me question, but you will get no answer. So having said that, I mean just to reiterate what we have said in the 2.5 announcement. So first about SSL, this is clearly focused consumer's products company, its latest reported financials and their fiscal ends in March 2010 with net revenues of around $800 million and operating profit of about $126 million.

Their overall business, not high growth and growth at 1.8%, however the consumer branded business is growing at 4.1%. Their major business is clearly is condoms for sexual being as that's called the Durex and Contex is the Russian brand, Durex is clearly their global brand that represents 43% of the total show which is a combination of foot care and footwear is 34%. Local brands like to have in Italy and the UK is about 10% and then other is 13% which part of it is institutional or distributive business.

The geographic breakdown is largely European business, with 78%. Asia Pacific and ROW is 18%. And Americas is 4%, which is really is North America, since they have virtually no business in Latin America. There is relatively low business in Africa, Middle East. And so when you see Asia Pacific, ROW, that's mostly Asia.

The "Offer", you've seen is a 1,163 pence per share plus the entitlement for the SSL shareholders to get the final dividend of 8 pence. And this means there is a fully diluted offer value of share £2.5 billion on the table.

So what is the strategic rationale for us to do that? So, the key thing is it provides both a step change in Health & Personal Care as well as a step change in critical mass in East Asia.

As you've seen again, from the Q2 results and our first half results, Health & Personal Care is one of the highest growth drivers in the company at elevated margins. Just to give you some prospective, H&PC business grew 14% last year. It also grew 14% over the period 2006 through 2009 compared to the base business of about 67%. So clearly, it has disproportionate growth included the margin structure is very attractive. This transaction would give a 36% increase in our Health & Personal Care net revenue business and Health & Personal Care would become about a third of the total group net revenues.

The business also material enhances the critical mass in both China as well as in Japan, which is also another stated acquisition strategy objective.

So what are we getting? We're clearly getting two leading global brands in Durex and Scholl. Durex is the global leader in condoms. Scholl is the leader in foot care. In most markets where its presence, Scholl is not owned by SSL in North America and Latin America, there the brand is owned by Merck. But where Scholl is present on the SSL, most of the markets is a market leader. Clearly both brands would become power brands for Reckitt Benckiser, which means that the number of power brands would go from 17 to 19.

We are targeting cost synergies of £100 million per annum by the end of 2012, which largely would come from the removal of commercial and administrative overlaps as well as procurement synergies in a variety of areas.

So clearly, the combination of good growth potential which we are seeing in this business and the improved margin profile post cost synergies makes this an attractive transaction for Reckitt Benckiser. The transaction is immediately earnings enhancing excluding the restructuring charges, on which I will not comment.

Colin Day

Even this is been cut down from what I could say or what I would have liked to have said, but so, you have to bear with it. Just so you can all get a sense of what we're doing with this, the bilats have increased from 165 to 190, we're funding the thing. We put a new 364 plus term out bridge in place, and a two-year of £0.5 billion. We have total available facilities as you can see a 36 plus the cash, which means we are all in all about 4 billion. So there's no issue about funding.

And all I can say and will say is that the funding has been keenly and extremely competitively done. So, you can work that out yourself for your model. I would remind you of course that all costs associated under IFRS 3 now have to be expensed with transactions like this. So, bear that in mind when you do deliberations on this expense. None of this sort of thing can be capitalized anymore, just as a pointer.

So net, we've still got plenty of headroom. We are in good shape and clearly its earnings are enhancing and we would expect to push hard on cash generation to pay down whatever debt we have once we own the thing.

Bart Becht

All right, so which brings us to the last slide. So, the offer is clearly conditional on shareholder approval and antitrust clearances. The offer document will be posted in 28 days. The antitrust clearance potentially would happen either end of September or end of October. That kind of depends a bit, so we would expect the transaction to complete somewhere during Q4.

So in a nutshell, just to wrap it up before we take your questions, I think we have posted some good results certainly considering the current market environment with much reduced market growth and clearly we are excited about the transaction. However, we cannot answer too many questions. But having said, we will take your questions anyway.

Question-and-Answer Session

Mark Christensen - Morgan Stanley

Hi, Mark Christensen from Morgan Stanley. Can you just comment on the gross margin in the base business for the rest of the year? Obviously you are not going to give a number, but at the top are dynamics, so the impact of your FX of input cost perhaps in leverage you've given that sort of guidance in the past. Is there any comment there?

Bart Becht

For the balance of the year we will still see good gross margin expansion, maybe slightly less than what we have seen in the first half, simply because the benefit of lower impacts clearly is coming down a bit on a year-on-year comparison basis, as well as for the FX it would be similar also coming down a bit. So I would say gross margin expansion might be a bit lower that what we have seen, but we still see gross margin expansion I would say pretty much within the target range that Colin has outlined.

Colin Day

In order to get that it is not going to be dramatically different from a coverage standpoint for 2010, we are 85 plus in the same cupboard, so I wouldn't expect anything dramatic we've you said in the second half on the base business or even on the total.

Celine Pannuti - JPMorgan

Could you explain what happened in North America and Western Europe in terms of the market growth? It seems that there is less promotion in North America, but still the market has come down and more promotion in Western Europe. So just like the volume is your promotion, if you could shed light on that? And seems to me that the industry wants to have less promotion but still there is more promotions. So, when is it that this stops?

A second question on margin in North America, why has the margin gone up so much 240 basis point, growth was good 4% but still it was very magical, a real strength expansion and then last on SSL. Growth rate has been 1.8% for the company as a whole, and that is much done year growth. So do you think that could be an issue in terms of the growth separation?

Bart Becht

Let's start with the first one. So, let's go through the growth rates by area and then work our way to the net revenue numbers.

So in Europe, when we set the targets, we were looking at a growth rate which was close to 4% in market. Now, the market growth rate is less than one. So in Europe, we have an intense competitive environment in several categories, clearly the most intense at the moment is in Fabric Care.

And to make sure that we are defending our shares, we are clearly spending more money in A&P and in promo. And that basically has an impact on the top line, but it clearly also has an impact on the gross margin performance within Europe because we've more promotional spent and even though you have good basically raw impact material situation in Europe, a chunk of that is negated, but you increase promotional spent.

So that's Europe that explains both the top line and the gross margin situation. In North America, what you have in North America and actually from a market growth rate, kind of argue is even more dramatic because we went from a growth rate of over 3% to zero growth at the moment. There is no growth in the North American market.

Actually, when you look at the growth rate, you are looking at NAA and it is the last A which is sponsoring the NA. Just to be clear from our market growth point because Australia is clearly part of the Asian-Pacific basin and there is still good growth we had. So our North America is actually negative at the moment, from our market growth point of view.

We are gaining substantial share. Our bigger share increases are in North America which explains the fact that we have higher net revenue growth than the market. On top of that, we have lower promotional spent in North America but the bigger factor is the market share gained rather than the promo spent.

Part of the lower promo spent is because you all know that Wal-Mart is running fewer promotions at the moment because you all know that Wal-Mart is running fewer promotions at the moment because of their policy of cleaning up their stores and running fewer promotions.

So, that clearly is reducing the promotional spent. That also has an impact clearly immediately in the gross margin. So because they have a similar benefit from raws and packs.

However in contrast to Europe, where we are spending more in promos and in North America, we're spending less. So, this explains the substantial difference basically that you have between Europe and North America.

Susanne Seibel - Barclays Capital

Susanne Seibel here from Bar Cap. My question was a little bit going in the same direction. I also picked up that the underlying growth of the SSL business, even on the branded side, is 4.1%, and I just wanted to get a sense of how you feel about this going forward, and which of the brands you feel have a substantially lower or higher growth rate. I think it is a valid question from all of us, given.

Bart Becht

It is a very valid question. I feel very good about the 2.5% announcement.

Susanne Seibel - Barclays Capital

Okay. That's important.

Bart Becht

I'm very sorry, but we are not allowed to comment on this. We will clearly once the deal is closed, we will come back to all of those questions. And there is internally discussion if it's part of the Q3 results. We should have a broader discussion and maybe repeat a meeting like this. But for the time being, we just cannot comment on that. We can comment a lot more once the deal is closed.

Susanne Seibel - Barclays Capital

Tying in with the previous discussion about input costs and how that is going, I assume you are covered for the full year on your input costs. And could you let us know how that's going into 2011, of what your rates are, where you stand and where you see the trends are going, please?

Colin Day

As I have said, we've got 85 plus percent covered for 2010 and that's not just to the year end that will roll over. We haven't given guidance or direction yet and we don't normally do that at this juncture or year. So I think we can't really comment for 2011, I mean I don't see any difference in the process. This year with regard to 2011 is previous years and intended to be 75% minimum target. So this year not really a factor, as I said to the question earlier and we will see how 2011 pans out as we get there.

Susanne Seibel - Barclays Capital

I promise I won't mention SSL, can we drill a bit more into Europe. Just picking on Celine's question. You mentioned that Bart there is a lot of attitude to Fabric Care where I think you said that one percentage point market share less on 15.

But it feels to me if there maybe other factors going on in your other main product categories. Can you give a bit more color and commentary on what's being happening in Europe across your major categories, because you are down 1%?

I think the market was looking for modest positive after the weak cold and flu season it doesn't seem to have happen. So what's explaining that?

Bart Becht

Yeah, as you look in Europe the market growth rate is coming down pretty much across all categories. This is the key driving factor, when we talk about market share performance in one category like fabric treatment but it is the big scheme of things.

It's very minor basically impact. Is you can take category after category, doesn't matter if you take Air Care, Autodish, Fabric Treatment, Laundry Detergents, you can go category after category; the market growth rates are coming consistently down which is the main factor is their number one factor.

The number two factor, right after that is the promo spend. And the promo spend is because we are all battling for a market where there is less and less growth just to be close to clear.

So this is in particular evident in Fabric Care, but it is also evident in Air Care, it's also evident in dish and we can go down the line. So there is clearly when the pie basically doesn't expand anymore everybody is battling for the slice of the pie.

So we are having basically no role much more intense competitive environment within Europe. We are holding our own, our market share position on a volume basis is virtually unchanged whether we have a bit of a change basically in fabric treatment but like I said before its less than a percentage points on a market share basically which is close to 50 in fabric treatment.

So it is in the big scheme of things it is not a big swing, so it is consistently market growth closely followed by promotional intensity with market share being relatively de minimis as an impact.

Pablo Zuanic - Liberum Capital

Thank you, Pablo Zuanic from Liberum Capital. Couple of questions I am just trying to understand if in the case of Europe is there anything structural in the competition in Fabric Care as in terms of change or is it just a cyclical issue?

And what I mean by that you said that the North American market is actually flat to declining, European market is flat. So both are in terms of growth went through the same issue but the European market has become more promotional and the North American market has become less promotional for what you said.

So has there been any structural change, is Procter & Gamble or someone behaving in a different way because when we do our promotions it sounds like its temporary or funded by commodity cost, but is there something else, that's one question.

The second one just on Suboxone press release there is a comment that you paid £100 million I believe for the rights for Europe, can you elaborate in terms of what are their sales for that their business and earnings just to have an idea? And the last one if you can comment on the over-the-counter business is there again any change there in terms of the competition in structural terms and what I mean by that, I look at GSK compared to five years ago, they are a different animal. I have Sanofi bidding very aggressively last year for some businesses from Pfizer, I really went over the counter side. And what about private label, you know Perrigo in the US for example. So those are my questions, thanks.

Bart Becht

Clearly when competitors which have not been in the market come into a market segment, you will basically get at least a temporary impact for one to two years, which is what happens in Fabric Treatment and which used to happened in dish before and that what's happened basically in Europe. There is basically a change in the system, we're defending it.

Just to give you some perspective, in Fabric Treatment, where we are the market leader in Europe, like I said, on a volume basis, we've lost less than a percentage point. P&G basically is up to the 15 share in Fabric Treatment, we're close to a 50 share. So if you lose basically less than a percentage point, it clearly comes out somebody else's hide. So I would say that is a very good performance I would say within the Fabric Treatment business.

In short-term, clearly there is a cost associated with that which is promo spent. Once its cycles through, clearly it's gone; it's out of the system. We don't have the same battles at the moment in North America. It's not to say that we haven't had them in the past or could have them in the future, but like I always say, every year there is a different category and there is a different geography where these competitive battles take place. But that's not the key thing, the key thing is for us to deliver the targets while working our ways through basically these challenges and we've done that consistently over the last years.

In terms of OTC, Health & Personnel Care, this is where we have our biggest share gains also today. So yes, you might be right that they have changed their minds about their healthcare business, they are not fast moving consumer goods companies and they do not have the same capabilities as fast moving consumer goods companies. And so I would say this is also the reason why the consumer goods companies in this space of healthcare in particular are doing generally better than the pharma companies.

Colin Day

The Suboxone what you refer to as Europe is actually just for clarity, is the rest of the world, is some 30 something markets and just as very quick reminder here, this was owned by Schering-Plough when that Merck/Schering-Plough transaction took place. There was a perception by all parties, A, it wasn't called for them and B, that it would probably be better for us to bring these rights back earlier than May 2012, so we could get the structure right for our business and therefore give us a global operation.

It should be remembered and I think most of you are aware of it is, that we actually already produced and shipped to Schering-Plough/Merck for these markets. So from a revenue standpoint, incrementally you're probably looking at around about $80 million per annum, per annum extra over what we already have, that's baseline to what we've taken over assuming no growth.

So second half, you'll have about 30 to 40 is running effective July. From a profit standpoint, I wouldn't add anything in for this year because obviously we're taking over an infrastructure resource and that's got to be bedded down into the business.

Again, I think when we get to towards the end of the year and obviously 2011 that will be integrated in and you'll get more direction on where that global business as it will then be will be going.

Pablo Zuanic - Liberum Capital

On SSL, this is a name that's been on the table for six or seven or eight years and I am wondering why now and what took you so long?

Colin Day

Can't talk about it, sorry.

Pablo Zuanic - Liberum Capital

But that's not to do with the deal?

Colin Day

Sorry, you're not going to ask for that.

Bart Becht

Sorry, we're not allowed to.

Rosie Edwards - Goldman Sachs

Hello, I am Rosie Edwards from Goldman Sachs. I'm just trying to get an idea of the momentum in the trends as in, in terms of the market growth, you continued to see deceleration in North America and Europe, or has it stabilized at all? And similarly for the promotional spend in Europe, is that continuing to sort of accelerate, or again is there any stabilization?

Bart Becht

I would say both have dropped, started to drop in, I would say early this year, the market growth rate, and since, that is pretty much at the same level. But we are dealing only with April numbers so far. The full May-June numbers are not coming in for another two weeks or so. So we are not dealing with a full deck of cards. It will take another two weeks for us to assess if May-June is the same. But if you look at January-February, March-April periods, they basically have a drop and stable factor. So what you see is a drop off in North America and in Europe and absolute zero change in developing markets.

If anything in developing markets, the underlying market growth looks more healthy because the value growth is very stable but the volume growth is gradually ticking up which is clearly is a better quality growth in the market. So, as much physically as Europe is challenging, developing markets continues to look extremely attractive.

Eamonn Ferry - Exane BNP Paribas

Sorry, Eamonn Ferry, Exane BNP Paribas. Two questions if I may? The first is on Mucinex, can you give us an update on your plans for international rollout? I think it was originally posted for the end of this year, maybe next year. And then, as a sort of add-on, has there been any update on the generic entrants or threats on the Mucinex franchise in the US? Could I just have a little further? You guys are clearly going through a pretty tough time in Fabric Care at the moment. Do you expect similar competitive threats to intensify in other categories as we go through the year? I guess the obvious one is Air Care. And how are you preparing the organization for that?

Bart Becht

Let me start with the last one. These competitive threat cycle and themselves through categories. We have had discussions in the past in fabric before, on dish, on Air Care; so they come and go. In Air Care, where P&G basically is buying the Sara Lee business Ambi Purchase, that's an existing business and that's always been very competitive. Air Care is also bit different category. Because in Air Care, the category is much more flexible from an expansion point of view because much more discretionary in nature. Just to give you very simple concept around that.

In Dishwashing, there is only so many loads of dish you are going to do. You are not going to do more dishes simply because you get an exciting product. At least, I don't think you would. Air Care is very different. It is much more of an impulsive purchase, much more discretionary, so the category can't be expanded. When in particular every user sees something exciting on the shelf, the category expands.

So you don't necessarily compete as much against each other for the set number of lows that your were having in Dishwashing. It's much more flexible. So, even thought there might be increased competitive activities at times in these categories, Air Care if you have great innovations, you can expand your business. And quite frankly, it's much more interesting to look at your total consumption rather than just your market share, you look at both. You don't just look at one.

On Mucinex, there are several lawsuits basically happening where we are defending our intellectual property on this business. Perrigo basically got a court ruling where they could launch one format or one variant on Mucinex, the Mucinex-SE. They could launch it. Unfortunately for them, they still don't have FDA clearance to put it in the market. We are continuing our appeal process against them. There has been some hearings, what is the date on this?

Colin Day

It's the second half of this year.

Bart Becht

I think it's somewhere in the second half. There will be new hearings on the subject. So, we will see what happens on that but other than that there is no real update.

Colin Day

Yeah. Just two points on that. On the Mucinex rollout, you are quite correct. We did target when we acquired the business towards the end of 2010 and into 2011. And I would say there may be a possibility that we could achieve something in some small markets towards the end of this year, but have no bearing on this year, and we will look to continue to see how we can move forward in 2011. The issue is not product, it's regulatory. If it was ever that, it's the regulatory process that goes behind this in making sure everything is in proper order to do that.

So, that is where we stand now. I'd just like to add on this point that you were just discussing with Bart. I think we have to recognize as we go further into this space, this type of challenge, Perrigo is more in the ordinary course of business. I mean in a way it's a bit like private label, and we have to expect and understand that that's what can happen once we move into this sort of Mucinex Delsym type of area, just the way it is.

Bart Becht

This was fully anticipated when we got the acquisition. There was nothing new in that for us. We knew that this would happen. So, it's not a surprise.

Gustavo Pifano - Gabelli & Company

Gustavo Pifano with Gabelli & Company. First I want to ask, how big is the condom market globally and can you just give us an idea of the competitive landscape particularly in Japan?

Bart Becht

No. Not going there.

Gustavo Pifano - Gabelli & Company

Okay. What are our acquisition opportunities and do you see room to consolidate within condoms?

Colin Day

We can't comment.

Bart Becht

We can't comment on that either.

Gustavo Pifano - Gabelli & Company

Any interest in Kiwi?

Bart Becht

Can't comment.

Warren Ackerman - Evolution Securities

Hi guys, its Warren Ackerman at Evolution. Just going back to Fabric Care, I just wonder whether you are able to give us a number for how much Fabric Care was down in Europe? We know the Fabric Care was down 3% in the quarter. We know that Europe was down 1% like-for-like in the quarter. So, I'm guessing Fabric Care in the quarter was probably down mid-to-high single digits, and if that's true, how does that square with the Vanish, and you lost the point of market share.

Are you saying that the overall fabric market is down significantly even though P&G is throwing so much money at the category? That's the first one. Second one is maybe I missed this, but what happened to total media spend in either Q2 or H1, and Colin, are you able to say how much higher promotional activity is in Europe? How should we kind of think about that or quantify that? And then finally again Colin, you remain quite bullish about emerging market margins longer term. I think margins are an all time high at 15.3% in the first half. Just wondering where you think margins might get to in three or four years time, is it just about critical mass coming in, could emerging market margins be 20% plus?

Colin Day

I'll take the last one of the list, a long question. I mean I don't think we are going to comment on margin progression, but clearly if you just look back where the so-called developing or emerging or faster growing, call them what you like, markets are, we were pretty much zero six to seven years ago and we've come up to where we are today.

So clearly we would expect to see some further progression, but I don't think it's appropriate that we sit here and articulate what it might or might not be three, four years out. My concern on developing markets is everybody thinks, this is the Holy Grail for growth given Europe, North America are more sluggish and I think we have to be realistic and not believe that we are going to burn these markets out in the next couple of years.

It's should be balanced, steady, growth evolution, right sort of investment, and top and bottom line, whatever if that's what's critical and not just be dependent on one geography or one country, but to see it spread across a number of geographies and get the category profile rights as well.

So we would expect to see positive development, but I am not going to nail down a number at this juncture.

Bart Becht

So on fabric, we are not disclosing basically by category or by area because if we started doing, then it would another add three pages to the press release probably, but what I can tell you is how does it square, it is very simple, the clue is heavy promotional spent in that category.

So if you look at volume basically it might be relatively flat, but clearly from a value point of view there is substantial number of spent basically associated with that. If you were to take Fabric Care out of Europe, you would come up with a positive number, from a growth point of view. And this is all promo-spend driven, just to be crystal clear.

Then you had a question on media, media you have seen, media was up in the second quarter, still marginally down percentage wise, media delivery is up. So actual GRPs is up, so you can already calculate that we are still looking at deflation. If you are looking at total consumer marketing as a percentage of net revenue, be it base or total business was up in the quarter as well as in the half year.

Colin Day

We don't disclose the total.

Bart Becht

We don't give the exact number, but what I can tell you is that, so we are continuing to strongly invest in the business even from a percentage or net revenue point of view.

Xavier Croquez - Cheuvreux

Two questions. The first one on powerbrands. I may have missed it, but what has been the growth of powerbrands in Q2? And I'll try it, also my way, as far as the two powerbrands of SSL, if you could remind us of what the CAGR was in the last five years perhaps?

Colin Day

The second one I don't think I can comment because the CAGR that they might put on that, I think you need to refer to SSL's figures.

Xavier Croquez - Cheuvreux

Your own brands?

Colin Day

Yes, the power brands, so the power brands in the first half are about 70% of total net revenues, in the first half grew just slightly below the company average however that was all driven by Q1 flu, cold and flu season. If you were to take that out, the power brands would be ahead of the company average and clearly also because they are becoming a higher and higher percentage of the total, the chances that there will be a big difference is clearly starting to shrink.

Xavier Croquez - Cheuvreux

You said that GRPs were up in terms of share of voice if you can assess that. Are you up versus competition, or flat?

Bart Becht

Well that, that's 60 operating entities times 17 brands. So if you ask me, have I've checked all of them? I would say no. I have not. So, but I would say, in general, we may keep a very careful eye and share voice to make sure, we don't get else.

Colin Day

And I'm pretty sure we're punching our way in.

Debra Aitken - Bryan Garnier

Hi, Debra Aitken of Bryan Garnier. Could you just give us a reminder of the situation when P&G came into the Air Care business a few years ago, in terms of your extensive market share in that category, the amount of share they took over maybe a two year period and then how that petered out. Could you just give us some reminder if that's the past frame or the framework?

Bart Becht

I think it would be easier from into Dish then Air Care because in Air Care, our market share has not really moved at all. So the P&G entry into Europe has really not impacted, so but I don't know exactly what their share is.

In Dish, just to give you some impression after these many years of launches and they started in the early 90s. The total Dish here in Europe is 8%. Just to give you some perspective and our market share is over 40.

Debra Aitken - Bryan Garnier

Particularly, sorry I didn't mean to, I'm particularly thinking of kind of the mid 2000's when they came in on a bit more aggressive again on.

Bart Becht

No, but if you look at our Air Care share and our work share.

Debra Aitken - Bryan Garnier

Sorry, Dish.

Bart Becht

The total market share right now is 8% of the total European market since the beginning of times.

Colin Day

So as I put it another way. When in 90s they came in, they basically went down, they resuscitated their efforts and now it's sitting about 8.

Bart Becht

Correct rate. Now clearly, they're not in every market in Europe still today, because they are still missing some big markets like Germany and France, but they are in the UK, they are in Italy, they are in Spain, they are in Turkey etcetera.

Alex Smith - Nomura

It's Alex Smith from Nomura. I just wanted to go back to emerging markets, I mean your business seems have taken a step change up in growth there. I was just wondering what are the drivers behind that, it seems like Dettol brand has been pretty incremental up, pretty instrumental in doing that.

And then going back to your comments that are not getting carried away with emerging market growth from a top or a bottom line perspective. I mean some of your competitors are talking about growth in emerging markets in the big cities having slowed down quiet significantly and the growth is all coming from the rural areas.

So I was just wondering is that something you have seen, what investments you might be having to put into get growth in more of the rural areas in emerging markets. And finally, if you could just comment maybe on the competitive environment in emerging markets, clearly its lot easier with the pie itself growing but are you seeing a step up in the level of competitive activity from the multinationals or even from local competition in those markets?

Bart Becht

And let's go back for a second. You have to realize that our developing markets business is different from some of our competitors in the sense that in a lot of these countries, we are establishing categories and growing categories, which is not necessarily true for a lot of our competitors because if we are talking about basic bar soaps, basic laundry detergents, those are in categories which has been around for a long, long time in these markets.

We're talking about categories like even specialist toilet bowl cleaners, dishwashing detergents, air care, the pilatories. All of these categories and a lot of these countries have to be created. It's not like they don't have anything that they use for clearly cleaning a toilet but a specialist toilet bowl cleaning category does not exist in every one of these markets.

A dish detergent category has to be built from scratch, which starts with us, basically trying to create dishwashing penetration, advertising people should have a dishwasher. It's the same in air care, it's not like they don't fragrance their house but there is not a specialist air care category. So, as disposable income arises in these markets, people are more open basically to try in these categories and use these specialist products. So we are not even into the rural areas, we are still establishing basically these categories in the urban areas and that's true if you go to Russia, to Brazil, to India, to China.

So it is even though we are gradually also pushing more into rural areas to extend the distribution, that is not the core driver of growth. It is the urban areas which are the core drivers of growth because that's where you have the highest disposable income per capita.

So it's a bit different from our competitors. So we are getting now to probably an inflection point where we have established these categories and they are starting to create momentum. At the same time when you start, when you grow basically in the early stages, let's say 20%, 30% on a category since it's off let's say £50,000 and then a £100,000 is very-very small. But at some point in time that cumulative impact starts to become really material and that's why you are seeing substantial growth basically in these markets. So I would say the developing market story is a fantastic story for us because we are really are now getting to a point where we really are taking off.

Colin Day

I think that's important because I am seeing some comments where we are underway therefore we don't have to scale. I actually see it as an opportunity for these reasons. I think we've got a lot of opportunity. My concern is we don't just think of that's the only opportunity in the business. We're in three areas plus RBP with a number of categories. We have to slice and dice across all of these geographies and areas and the categories are not just I think the only area of growth is developing markets, let's do that.

Bart Becht

So the other key factor clearly which is playing there is we are still launching power brands into these markets. For instance in Latin-America, we have launched Dettol in a number of different markets. Now Dettol is a huge franchise. If you combine Dettol and Lysol together, that is by far the number one franchise across the globe. So to roll that into these markets which have still a huge potential, clearly it would be very small in the beginning. Like all these brands are very small in the beginning.

But as we stick with it they gradually build them overtime, you get the combination of two things, a gradual rollout of the power brand portfolio, gradual critical mass building in those categories, and starting to take off. And that also benefits the margin profile of that business because these brands typically sit at higher gross margin than the original franchises which were in these countries, which tend to be more your shoe polishes and basic surface cleaners etcetera. So also from a margin point of view, it's a great story. Developing markets is for us is a very exciting story to be honest. It is a huge opportunity still.

Simon Marshall Lockyer - Jefferies

I just wanted to comeback to may be another striation through the BHI acquisition because the exit multiples were similar at the time to the exit multiples that are indication on SSL. Can you just sort of dwell back into your own memory as to the growth rates of BHI brands before your acquisitions and the growth rates that you've delivered since. These are your numbers, these are reported numbers. Colin, you know the numbers now. You remember it. I think it's two to three times the multiple of grades on those brands?

Bart Becht

No, no.

Simon Marshall Lockyer - Jefferies

Let's not get carried away.

Colin Day

I honestly we don't want to go here. I understand where you're going. I don't feel it's appropriate to go there because we have to authorize it.

Bart Becht

We implicitly commenting on the most important aspect of the transaction which is targeted growth and we just cannot do that.

Colin Day

I think what we can say is we feel good about this transaction; we think we know what to do, let's leave it there. So, come back in the end of October okay. That's the best of what I can give you.

Simon Marshall Lockyer - Jefferies

Colin, I've got another tricky one for you. It's a technicality.

Colin Day

Technicality?

Simon Marshall Lockyer - Jefferies

We're coming up for the first anniversary of the loss of exclusivity on Suboxone, and just from an accounting perspective, so all of us have been looking for the next quarter, expecting the generic to come in. This is one of the most profitable pharmaceutical products in the United States today. Everybody's slightly nonplussed by the process and the fact that generics haven't come in. Beyond asking you whether there's anything new, do you think there's a point where actually we've got to rethink the way we actually consolidate Suboxone? Maybe we should actually reconsolidate Suboxone after four quarters of expectations, just from an accounting point of view?

Colin Day

I mean the only point, I don't want to labor a theoretical potentially, longer term academic debate here, the only issue that I see is whether the reconsolidation if you want a better word is Suboxone, depending on what may or may not happen, would be whether we just integrate it back into the geographies, because that's the only issue. But that's the only issue for debate and I don't see that happening because this is a separate business, stands alone, it is not integrated into the business.

And so, I don't really see any change with this thing going forward. I mean we've acquired the European rights to give us a global portfolio. I think its right we've done that. I think strategically it's a good move for us and we believe we will continue to run this operation, this business along those same lines we have done previously. So I can't really see any change in consolidation, accounting thereof or redistributing it back over geographies. I really can't.

Bart Becht

Just to add some perspective on Subutex, which clearly and has gone generic. So far, the business has lost about 60%, which is completely on track in terms of what we said on Suboxone when once generics would come in. Or we say, in year one, it would drop off 80% with potential further loss they are after. So, all that does is basically confirmed but what we have communicated is more or less right. It's just a matter of, we know there are at least two companies which are gearing up for, going with generics. It is fully in the hands of the FDA to approve the timing. It's not a mater of if it's a mater of when.

Colin Day

And I think also, we shouldn't loose sight of the fact that this business is not the same as the rest of our portfolio, even the Health & Personal Care and I don't actually think it would be useful, I actually think it's not appropriate to put up RBP back into the core business whether HPC, Household, whatever, or spread it over the geographies. I think it's appropriate we leave it where it is so the market is aware…

Bart Becht

The skill set is very different.

Colin Day

Skill set, the operating model is all different.

Simon Marshall Lockyer - Jefferies

But if after, let's say after two years of it losing exclusivity, we're still in the same situation. There were still no generics.

Bart Becht

That's the other question.

Colin Day

Yes, I accept the point but we are not there today.

Bart Becht

No.

Richard Taylor - Morgan Stanley

Hello, Richard Taylor from Morgan Stanley. Three quick questions, really relating to retailing. First of all, in the first quarter, on your Cold and Flu business, did you actually see returns of the cold and flu product to you? That's the first question. Secondly, on your innovation, particularly with companies like Boots, do you have to show them, months beforehand, your latest innovations, so they can produce a private label version of it? And then thirdly, on BHI again, can you remind us the working capital improvements that you achieved on that business?

Colin Day

I will do the third one because that's I was have been, there was working capital improvements and I think all I will say is that if you feel, you need to see that go back to the presentations, we've given post PHI and you will find them referenced somewhere in there. That was for reference about 2006, and that's what I was saying on the third one. On the first part of your first question, by-and-large we don't see returns but we obviously take a prudent view for some returns because if we don't take the returns, it's just sold out through the trades with support. It's mixed, but we don't get an avalanche of returns back.

Bart Becht

And what was your second question?

Unidentified Analyst

(Question Inaudible).

Colin

We share with retailers our innovations as appropriate.

Chas Manso - Evolution Securities

Chas Manso from Evolution. Three questions from me. One on M&A, could you possibly comment whether you feel, you still have management capacity to do more M&A now if it happens to land on your doorstep or not? And secondly, could you say what percentage of your Fabric Care business now has a P&G rival in that market? And thirdly on the Air Care candle launch, I am not sure how big you are in Air Care candles. Is this kind of a first push into candles and how big is the candle segment of that and are you going into North American candles?

Bart Becht

So on M&A, Colin, can you comment on the financial capacity clearly. From a management capability you have to realize M&A is about strategy meeting opportunity. So if there is a critical opportunity for us, we are going to do the transaction. Clearly the timing of that always, they always better spread out than they all coming together as you can imagine. But if it's a critical one, we would definitely go out of our way to find your way to do the transaction because we have a limited list of our preferred opportunities.

Colin Day

Maybe if I can just add two points one on the finance, one to that. Even if there was something else out there, I mean we don't expect the integration of what we've discussed on SSL, I've to be very careful to be a lifetime project. So obviously if there are a lot of projects, there is a period of time to bring them home.

So I would hope that that won't be too much of a management bottleneck. And on the financing, this is a mid-sized transaction for us well within our capabilities to manage it financially and hopefully get us into a position where we have got even more capability than we have now, we certainly have enough capability, I would say $3 to $4 billion to do something else if it came our way.

That's not saying there is something out that is coming our way for $3 billion to $4 billion, not at all, I don't want to give them wrong impression.

Brat Becht

So on P&G, clearly we compete with Procter in a number of categories and we have been competing with Procter in a number of categories for the last 20 years and that has not stopped us to gain share.

So if you go back on Dish, automatic dish washing detergents, in 1991 we had a 28% share. Today we have a share which is in the 40s. At that point of time, Unilever was number one, P&G was number two, we were a distant number three. You do the math, so I think it is clearly P&G's a very good competitor, no question about that, but it does not mean that in our focus categories, we cannot gain share.

On candles, you are absolutely right. We are under represented in candles, which is a substantial part of the Air Care market for a three to four months period, November, December, January and February and so this initiative which is a very exciting initiative, because it's unique in the category, it would be nice initiative for both North America and Europe.

Chas Manso - Evolution Securities

Then just a follow-up on the over the counter business. If we just think of it more long term, I mean obviously, that's been a very successful business for you growing in the mid teens, how do you think of that business going forward next two or three years. What are the drivers of growth? I mean, the number of people getting sick in a year I suppose doesn't change much aside from changes in the flu season.

Is that a big market share opportunity? Just walk us through what is the growth algorithm there? And the second one, I know you said that in the case of Suboxone in Europe, which would effect on our EBIT for this year, but what about for the next couple of years? Are we looking there also a growth rate of 30%? Are we looking at 70% EBIT margins like in the US, can you comment on that?

Bart Becht

Yes. So clearly, consumer healthcare is an exciting business. Why is it an exciting business, because the combination of innovation, incremental innovation and strong basically distribution power in the markets is a very good combination of gaining share in these categories.

You are absolutely right. People don't pop more pills every year unless there is a growth basically in the population or alternatively, there is a switch over in medication, which can happen between molecules.

If you look at Analgesics, we are in Europe, clearly the number one IB perfume brands. We firmly believe that our IB perfume formulas are superior to the paracetamol formulas which are out there. We have clinical data to underpin that and we believe we can gain market share behind that.

In terms of cold and flu, our Strepsils innovation, you saw the warm one we believe appeals very much basically to consumers. There is also a large candy market out there and there is a switch some times in between medicated sore throat remedies in candies and so, we believe that people should use a medicated product, proper product when they have a true sore throat and that's a big opportunity for us.

And beyond that, clearly there is also geographical role of opportunities which, as Colin already explained, because the regulatory environment happens gradually over time but it does happen. We've seen Gaviscon being rolled out already across a lot of markets and we're gradually getting on with the other brands to expand them.

Bart Becht

Your second question is something on M&A, we can talk about. I think it's quite important to appreciate that this is a large number of markets; the business is low very concentrated in perhaps four or five key European markets as I think I said before and the growth under Schering-Plough Merck has not been stellar. I mean I had perhaps a different agenda to run that business, that's not for me to comment.

What I can say is clearly we would expect to see some. We can acquire these rights in order to stand still but I'm not going to promise nor would I expect growth in this thing to be 20-30-40% top line per annum. I think one has to be more realistic because we also have to roll this out in a staged way and the regulatory requirements for these geographies will be in place with the product, a different and also have some navigation has to happen here as well.

Profit wise, we would expect to see profit contribution to the company, but again, I'm not going to sit here and apply on what that might be. We didn't bring this. We didn't imply these things back through it to stand still. We brought it back with a positive year in mind.

Bart Becht

No further questions? Okay, thank you very much for coming.

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Source: Reckitt Benckiser Group Q2 2010 Earnings Call Transcript
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