Reckitt Benckiser Group plc (RKT) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for being with us online for the Reckitt half year 2026 results presentation. I'm Nick Ashworth, and I head up Investor Relations at Reckitt. Before we begin, may I point you toward the customary disclaimers regarding forward-looking information? With us presenting today are our CEO, Kris Licht, and our CFO, Shannon Eisenhardt. Their presentation will be followed by the customary Q&A session. For those of you who cover us as analysts, if you'd like to pose a question live, please log into the Zoom link that was shared with you, and we'll bring you on screen when your turn comes. We'll be taking written questions through the webcast as well. If you could submit those by using the ask a question tab near the top of your screen, I can then read them out. Should you have any follow-ups once the event is over, please feel free to get in touch with the IR team, and we'll be glad to help. So with that covered, I'll now pass things to our CEO, Kris Licht, to kick off the presentation. Kris.

Thanks, Nick, and good morning, everyone. Welcome to the call. I'll begin with a look at how we performed in the first half and touch on some of the main highlights — in particular, the meaningful step-up in Q2 and the more balanced growth we achieved — and then Shannon will walk you through the financial results in greater detail. After that, I'll return to give you an update on how we're progressing in our areas and on the strategic priorities for the second half, which support the full year guidance we've reiterated. Once that's done, the two of us will be glad to take your questions. As I mentioned, we saw a significant acceleration right across the business during the second quarter. For the first half, like-for-like net revenue growth in Core Reckitt came in at 2.7%, and in the second quarter growth reached 4.2%. Importantly, every area and every category showed improvement in Q2, with volume and price/mix each contributing in a balanced way. That result speaks not only to the strength and equity of our powerbrands but also to the ongoing effect of innovation right across our portfolio. Beyond the top line, we kept making solid headway with our Fuel for Growth program. You can see that in the first half results, where we carried on lowering our fixed cost base to offset the stranded costs arising from the Essential Home divestment.

We're pushing for more efficiency throughout the company, and we're boosting our capacity to put money behind our powerbrands. On the whole, we keep generating advantages from operating as a simpler, sharper business. By delivering on the priorities we've set out consistently for the past two years, our portfolio has become more focused, our capabilities have grown stronger, and our execution keeps getting better. Moving to our financial results, during the first half we achieved like-for-like net revenue growth of 2.6% for the group, with a notably stronger Q2 at 4.7%. Our AOP margin for Core Reckitt and Mead Johnson came to 23.6% in the half. That beat our expectations, since gross margin headwinds proved less significant than we had anticipated, and we made solid progress offsetting stranded costs through Fuel for Growth. Taking into account the impact from the Essential Home divestment at the end of last year, we delivered adjusted EPS of 152.1 pence in the first half. We kept returning substantial cash to shareholders, handing back approximately £3 billion during the period via both the special and full year dividends and our ongoing share buyback. Today, we've announced a further £500 million share buyback and a 5% increase in our interim dividend. Since we announced our strategy two years ago, we have now returned £6.4 billion of capital to shareholders.

At the time we announced our plan, this represented roughly 20% of our market capitalization. The organizational shifts we've implemented throughout Reckitt are producing better execution and making us a more resilient company, one that can successfully take on challenges. You can see that in the sharp acceleration at Core Reckitt during the second quarter, where every one of our areas and categories posted better performance than in Q1. Emerging Markets once more posted strong high-single-digit growth, led by China and India, with Q2 helped by broader-based growth across our ASEAN and Latin American regions. Europe showed sequential improvement as we executed better despite continued category and consumer headwinds, and Q2 saw no seasonal impact. In North America, we got back to growth in Q2, helped by Lysol's continued strong momentum and by the June launch of Mucinex 12 Hour Cold & Fever. All together, Core Reckitt posted 4.2% like-for-like net revenue growth for the quarter. I'd like to return to innovation, since it keeps strengthening our competitive position, enhancing our category leadership, and supporting premiumization. This slide shows plenty of great examples from recent launches, but let me highlight just a few.

Dettol Active Botany — that's our naturally formulated line of disinfection solutions — keeps beating our original expectations by a wide margin in China, since it connects strongly with what consumers want in terms of richer sensory experiences. Building on that win, we've rolled Active Botany out in further ASEAN and Europe markets as part of taking it global. Our newest Vanish innovation, the Turbo formulation made for fast washing and stubborn stains, has delivered solid results in the market, especially in Europe, bringing Vanish back to like-for-like growth in Q2. In Intimate Wellness, we keep growing the Durex Intensity platform, which has now reached 19 markets. That range is doing well and is a fine illustration of how better innovation can expand categories while also reinforcing our premium position. In North America, we've kept widening the Lysol Air Sanitizer lineup with seasonal extensions, and during Q2 we started shipping Mucinex 12 Hour Cold & Fever, one of our biggest innovations in recent years, which I'll return to a little later. Execution isn't only about in-market performance and innovation. We've run into difficulties with our input costs and supply chain stemming from the war in the Middle East.

Having dealt with these outside pressures before, we're in a strong position to lessen their effect. Let me walk you through a few of the steps we're taking in supply and procurement. We're locking in essential supply and building strategic stockpiles of key materials like solvents and plastics. Sourcing and manufacturing have been shifted to markets where the impact is smaller. Where we can obtain substitute raw materials, we've adjusted both sourcing and formulations, which includes greater use of post-consumer recycled plastic. These steps, and others, will keep being taken by us to reduce the persistent volatility in commodities. To sum up, the progress achieved in the first half pleases me. Our focused portfolio keeps delivering, with growth picking up in the second quarter and improving in every area and category. Our powerbrands compete in appealing categories that have strong structural growth drivers, and our pipeline of innovation keeps reinforcing both our position and the quality of that growth. There is, as ever, more work to do, and I'll return to our priorities and the opportunities that lie ahead in a moment. I'll now pass things to Shannon, who will take you through our financial performance.

Thanks, Kris, and good morning, everyone. As you'll have noticed in this morning's release, we've altered how our financial results are presented so that our reporting is as clear as it can be. Core Reckitt and Mead Johnson are being reported together so you get a clear picture of our ongoing operating businesses. Our group numbers also take in the Vestisee transitional services profit. That income is both time-limited and low-margin, which is why we think it makes sense to separate it out. For comparison purposes, we're comparing Core Reckitt and Mead Johnson against our previously reported 2025 group numbers, which do include Essential Home, since those were the reported numbers at that time. As always, should you have any questions, please get in touch with the Investor Relations team, and they'll gladly walk you through the numbers. Turning now to the key financials for the group. Core Reckitt and Mead Johnson like-for-like net revenue rose 2.6% in the half, with growth of 2.7% in Core Reckitt and 2.0% in Mead Johnson. That reflects a much stronger Q2, with Core Reckitt up 4.2% and Mead Johnson growing 7.2%. Core Reckitt and Mead Johnson gross margin was 50 bps lower at 60.5%, as the positive impact from the divestment of Essential Home was offset by increased input costs and change to category mix.

Core Reckitt's gross margin came in at 60.9%, which is 110 bps lower than a year ago. At Core Reckitt and Mead Johnson, the adjusted operating profit margin was down 100 basis points to 23.6%, which beat expectations thanks to a smaller gross margin hit from the Middle East war along with the pacing and phasing of our Fuel for Growth program. Adjusted EPS for the period fell 9.7% to 152.1 pence, mostly because of the Essential Home divestment. Turning to volumes, Core Reckitt showed sequential improvement there, with volumes rising 2% in Q2, which reflects momentum across every segment and a more balanced algorithm of volume and price growth. Mix gave us one more point of growth as well. In Emerging Markets, volumes were up 3.2% in Q2, or 4.4% if you exclude Russia Hygiene, lifted by continued strong performance from Dettol in China and India and from our VMS portfolio in China. Europe's volumes got better as the half went on despite a difficult consumer backdrop. In Auto Dish, even with promotional intensity staying elevated, Finish held on to its market leadership position and posted volume growth for the quarter. In North America, volumes climbed sequentially to 4% in Q2, powered by continued strong performance in Lysol and helped by the launch of Mucinex 12 Hour Cold & Fever.

Mix added 1.4% during the quarter. Now moving to our regional review. In Emerging Markets, like-for-like net revenue rose 9.4% in Q2 and 8.5% across the first half. If you set aside Russia Hygiene, Emerging Markets posted 10.3% growth in the half. Q2 performance was broad-based, with gains in every region and category apart from Russia Hygiene. China recorded a 12th straight quarter of double-digit growth, powered by recent innovations — most notably Dettol Active Botany — and across our VMS portfolio. India posted high single-digit growth, broad-based across all categories, supported by continued salesforce automation, expanded distribution reach, and strong in-store execution. Africa, ASEAN, and Latin America each accelerated, and a number of smaller markets rose by double digits. Lastly, in the Middle East, operational and supply chain conditions got better as the quarter progressed after the initial ceasefire, which contributed to growth throughout the region. We're still watching the situation closely given the continuing volatility. In half one, the adjusted operating profit margin climbed 150 bps to 21.4%, thanks to gross margin expansion from category mix benefits and selective pricing together with our Fuel for Growth program, which allowed for higher marketing investment. In Developed Markets, results improved during Q2. Europe declined 3% in the half, with performance getting better sequentially.

On a like-for-like basis, net revenue declined 1.5% during Q2. Every category showed sequential improvement in Q2 as we exited the season and kept our attention on strong in-store execution within our Household Care business. In Auto Dish, Finish posted gains in both like-for-like net revenue and volumes, holding market leadership while we actively managed promotional activity. Vanish came back to growth this quarter, helped by our newest innovation, Vanish Turbo. Within Intimate Wellness, Durex achieved volume growth in Q2 alongside a modest drop in like-for-like net revenue, which reflected targeted pricing investments. Adjusted operating margin for half one came in at 27.7%, a decline of 300 bps year-on-year. That reflected supply chain cost inflation landing ahead of our offsetting measures in the second half, partly cushioned by Fuel for Growth productivity savings. Moving to North America: like-for-like net revenue rose 0.8% in the half and was up 2.8% in Q2, powered by strong volume growth. Lysol kept outperforming, helped by robust consumer demand in adjacent categories such as Air Sanitizer and Laundry Sanitizer. Self Care returned to growth in the quarter, aided by initial shipments of Mucinex 12 Hour Cold & Fever, while Household Care stayed softer during the quarter. Finish's performance mirrored weaker category demand in the grocery channel.

For the first half, adjusted operating profit margin came in at 27.0%, a decline of 260 bps compared with a year earlier. As in Europe, increased input costs weighed on profitability before mitigation steps take effect in the back half, partly offset by continued productivity improvements. Turning to our categories now. Growth was broad-based across the half year, with like-for-like net revenue growth achieved in three of our four categories, and performance improved in Q2 across all four. Self Care rose 2.4% in the half, helped by sustained momentum in the non-seasonal business, with strong growth for Gaviscon in ASEAN, Latin America, and Europe, together with the VMS portfolio in China, which keeps gaining from innovation launches. That growth was partly offset by a weaker cough and cold season in Europe and North America, which hit seasonal OTC brands in Q1. Germ Protection posted strong growth of 10.5% in the half, powered by continued impressive results from both Dettol and Lysol. Innovation-led momentum in emerging markets supported that growth, with Harpic showing sequential improvement as the half progressed. Household Care fell 6.6% in the half, reflecting a 250 basis point impact from Russia Hygiene plus heightened promotional intensity in the European Auto Dish category. This was partly offset by Vanish returning to growth in Q2.

In the first half, Intimate Wellness posted 0.5% growth, driven by a strong showing from Durex in India and Latin America, which countered the effect of VAT changes in China. Veet achieved broad-based growth across all three areas. As of May, 45% of Core Reckitt top CMUs were in gain or hold, compared with 55% at the full year. Keep in mind that this metric is binary, and large CMUs carry a material impact. Mucinex US and Durex China are two examples of large CMUs that currently sit outside gain/hold territory. We stay focused on driving strong share performance and reaching our 60% target, and flipping these two CMUs back into growth would largely close our gap to that target. Now moving to our non-core businesses, beginning with Mead Johnson Nutrition. Like-for-like net revenue rose 2% in the half, with strong price/mix of 5.9%, offsetting a volume decline of 3.9% as it lapped elevated inventory build in the prior year. International performance was led by Latin America. Innovation stayed focused on portfolio expansion, with new rice-based product launches in both the Philippines and Mexico during the period. Lastly, Vestisee generated £235 million of net revenue, delivering adjusted operating profit of £12 million from the service agreements we have in place.

Turning next to adjusted operating profit. At constant currency, adjusted operating profit for Core Reckitt and Mead Johnson came in 14.5% lower, which followed the 2025 divestment of Essential Home. The margin of 23.6% declined 100 basis points versus a year earlier, though it was still ahead of what we had expected. That reflects a smaller gross margin hit from the Middle East war along with ongoing fixed cost reductions under our Fuel for Growth program, and those roughly offset the stranded costs resulting from the sale of Essential Home in the first half of the year. Let me give a bit more detail on Fuel for Growth. We've described savings as coming from four areas, and we're seeing strong progress in organizational simplification and in right-sizing our investments. Now the other two. Within shared services, we keep making progress as we expand our global operating model. We're rolling out shared services across HR, finance, IT, and supply, and our three global hubs are now up and running. Our focus is on extending shared capabilities further within those functions around the world, and across additional functions too. We're also speeding up how we apply digital and generative AI throughout the business, and we believe there's a long runway here to drive both growth and productivity.

Kris is going to return to this in a moment. Our attention stays on achieving those efficiencies as we handle the stranded costs tied to separating our non-core businesses. Turning to the figures, fixed costs were broadly flat versus half one 2025, at 20.1% of net revenue, as Fuel for Growth savings largely offset the Essential Home stranded costs. The program is still on course to hit our upgraded goal of fixed costs under 19% of net revenue by the close of 2027. On the costs of delivering the program, we still anticipate roughly £1 billion, with about £350 million of that falling in 2026. Moving now to EPS. We posted 152.1 pence in the half. The 9.7% drop compared with the first half of 2025 came mainly from lost income on the sale of Essential Home and weaker operating profit in Core Reckitt and Mead Johnson, reflecting higher input costs during the period. That was partly offset by income from the Essential Home vehicle, a reduced share count following the share consolidation together with the £1.6 billion special dividend, and our continuing share buyback program. It has been another strong stretch for cash returns. We paid an £800 million full year dividend, bought back £600 million of shares under the share buyback program, and returned £1.6 billion after the sale of Essential Home.

All told, we returned more than £3 billion to shareholders during the period, which brings total cash returned to shareholders to over £6 billion since the strategic plan was announced in 2024. That aligns with our capital allocation policy, under which we put priority on investing in organic growth and a progressive dividend, while keeping a single-A credit rating. Any excess cash goes back to shareholders. Now to cash flow. During the first half, free cash flow came to £419 million, and most of the year-over-year effect reflects the operating profit we lost from Essential Home. That resulted in cash conversion of 42%, as we keep investing behind our Fuel for Growth program. The half year dividend is going up 5%, matching prior year. Our balance sheet is still strong, with net debt to EBITDA of 2.5 times, consistent with what we expected after the £1.6 billion special dividend paid in February of 2026. As we noted in March, leverage should begin trending back down through 2027. Consistent with our commitment to return excess cash to shareholders, we announced a new £500 million 12-month share buyback program this morning. Lastly, let me turn to what we expect for the rest of 2026.

We feel good about how we performed in the first half and the momentum we're seeing throughout our business. Our outlook for Core Reckitt in full year 2026 — like-for-like net revenue growth of 4% to 5% — remains the same. Looking at the second half, we anticipate Emerging Markets will keep delivering broad-based growth at a similar level to half one. In Europe, we're expecting like-for-like net revenue growth to come back in half two, improving sequentially as the half progresses, helped by solid execution and new innovation launches, along with pricing actions we have planned. In North America, we expect a stronger second half, with more weight on Q4 because the comparative in Q3 is challenging. For our seasonal OTC business across every geography, we're planning on incidence levels running slightly above the prior season. Guidance for our adjusted operating profit margin is also unchanged, and for Core Reckitt and Mead Johnson we expect it to land in the range of 24.9% to 25.6% for the full year, with a significantly stronger second half. Commodity prices remain volatile, but we have confidence that the steps we're taking will offset any effects across the full year. We restate our ambition of delivering sustainable, long-term EPS growth, while recognizing the headwind caused by dilution from the divestment of Essential Home.

Now I’ll pass it back to Kris, who will discuss our strategic priorities.

Thank you, Shannon. With the time that remains, I'd like to talk about what we're prioritizing in each of our areas and the efforts underway to set Reckitt up for growth that is long-term, sustainable, and consistent. Let me begin with Emerging Markets. This represents our biggest opportunity for growth and keeps producing outstanding results. Our priorities in the area remain the same, and our new operating model is enabling us to unlock faster performance. We're raising penetration in mature categories, we're building new categories, and we're scaling the next generation of growth markets. At our event last December, we highlighted much of what we're doing across these areas. On penetration, we're delivering it through stronger execution in markets such as India and China, using consumer engagement strategies that differ sharply: offline-led in India and online-led in China. The learnings and best practices from these markets are today being carried into other markets. Self Care represents a major opportunity for us as we broaden education and activation around nascent categories in this space. We're seeing results from this today. Self Care grew double-digit in Emerging Markets in the first half, led by Gaviscon and continued strength of our VMS portfolio. We've been focused on scaling in a number of smaller, high-opportunity markets to deliver more broad-based growth across the area.

Apart from MENART, every one of our regions posted like-for-like net revenue growth in Q2. In China, Q2 marked a 12th consecutive quarter of double-digit growth. Strong innovation and executional excellence, especially online, keep driving this. The steadiness of our growth in China really shows the breadth and strength of our portfolio in that market. India keeps performing very strongly, with consistent growth across each of our categories, driven by our loved and trusted powerbrands and activated through increasingly smart distribution. ASEAN grew high single-digit, with Indonesia and Vietnam leading growth in the region. Colombia remains a very strong growth market, with Latin America overall back to mid-single-digit growth and Brazil showing an improved performance. In Africa, though small today, we see exciting long-term opportunities, and the region was in growth in Q2. Now back to China. In July, we opened our new Shanghai Science and Innovation Center, which speaks to our priorities and intentions across China and emerging markets. We're really proud of this facility, our ninth global innovation hub. This investment marks an important milestone in our continued commitment to China and the country's growing role in our global innovation.

This hub brings together what consumers want, new ideas, and regional know-how so we can build the following generation of products for buyers in China and across the globe. By linking R&D with live streaming that captures consumer feedback in real time, we'll sharpen both the quality and the relevance of what we innovate, get products to market faster, and foster stronger consumer preference. It's one more illustration of how we're localizing our capabilities in the growth markets that matter most to us and giving our teams game-changing digital science. Moving on to Europe. Conditions for operating there remain difficult, and growth in the category is still subdued. Even so, the steady improvement we've witnessed across the half gives us encouragement, underpinned by innovation, premiumization, and better in-market execution. That produced stronger performance in Q2 across all four of our categories in the region. In the highly competitive Auto Dish market, we've taken targeted steps to defend our leadership positions, and we've kept trading consumers up into the premium tiers of Finish. Durex Intensity stands out as a prime case of innovation fueling premiumization, delivering continued strong results as this first-to-the-world product rolls out into new markets and we bring extensions into the range. As we look toward the second half, our pipeline of new innovation launches is strong, and our focus is on consistent execution to drive growth.

That's the approach we're taking. Gaviscon is a really good illustration of how we put that into practice. We keep rolling out Gaviscon Double Action throughout Europe. It shows clearly what happens when a powerbrand gets a successful playbook executed consistently. With educational materials tailored locally in each market, all connected to one consistent message, we're achieving growth via extensions in format and flavor while bringing relief to more consumers daily. Gaviscon has performed strongly on a consistent basis, and that carried on in Europe during the first half, posting like-for-like net revenue growth of 9% and reaching new leadership positions in market share across eight countries. When it comes to North America, innovation, customer partnerships, and operational excellence are where our priorities sit. Our non-seasonal portfolio keeps delivering strongly, with Lysol posting high-single-digit growth in the first half. Several things drive this performance: the equity and trust that consumers hold for the Lysol brand, which is one of the strongest brands in North America overall; sharper execution throughout our supply chain and with key retail partners, where we're growing in the fastest-growing channels, omnichannel platforms in particular; and ongoing expansion of the range, with successful recent innovations now delivering multi-year growth. Looking ahead to the second half, executional excellence across the whole North America portfolio will remain our focus.

Mucinex 12 Hour Cold & Fever is a prime illustration of that — shipping got underway late in Q2. Engagement around the launch has been driven really well by our teams, and retailers have responded fantastically. We've locked in several shelf facings, with as many as nine in certain stores, and for a new launch that's genuinely a solid outcome. The assets are ready to build awareness and education for this launch, and deliveries into stores are already in motion. This product will add to our upper respiratory portfolio rather than cannibalize it, and the extra distribution points we've gained leave us happy. So we're nicely positioned for a powerful activation before the season arrives. Innovation has been a big theme in my remarks today. I hope lots of you joined the showcase we held recently on digital science. There, we showed how digital capabilities are being woven through our R&D organization. That's producing quicker innovation cycles, sharper consumer insight, and product development that works better. We discussed the enormous growth in virtual experiments conducted this year, plus how many users are already benefiting from our RideIT AI tool.

These capabilities are already pushing our pipeline higher and fueling innovations that align with stronger consumer preferences. They are tools woven into how we work right now, and as the examples we shared across our powerbrands show, they are producing results. On the 19th of November, we'll hold our next event at our North America headquarter in Nutley, New Jersey, where Jerome and team will give you more insight into what will drive growth in our North America business over the years ahead. Let me now finish with our outlook. We posted good growth in the first half, with performance picking up through the second quarter. Our innovation pipeline is strong and is landing well in the markets. Our Fuel for Growth program remains well on track to deliver fixed costs below 19% as we exit 2027. Our supply chain and digital capabilities are becoming ever more powerful enablers of growth. While the external environment remains uncertain, our strategy continues to deliver. So we remain confident in our outlook, and we reiterate our expectation that 2026 will deliver 4% to 5% like-for-like net revenue growth in Core Reckitt as we keep building a stronger Reckitt and create long-term, sustainable value for shareholders. Thank you for listening.

Shannon and I are glad to answer whatever questions you have now.

Thanks, Kris. We'll move on to the question portion now. To begin with, we'll take questions from the Zoom, and I can see plenty of hands raised. Just a reminder that you can also submit questions via the tab on your screen — the ask a question tab — and those will come to me, and I can read them out later, but we'll begin with Zoom. Scanning the screen, I'll go first to Guillaume. The floor is yours. Thanks so much, Nick. Good morning, Kris and Shannon. I have a couple of questions, please. First, regarding your like-for-like sales growth guidance for the core: can I just confirm whether it includes hygiene in Russia — that's the 70 to 80 basis points of dilution you're likely to see in 2026? If that's the case, it does imply 5% to 7% like-for-like in the back half, when comps get somewhat tougher. So my question is: what gives you confidence in that meaningful sequential acceleration? Is it that you expect more pricing to come through in the back half, or do you expect certain regions and categories to be significantly better? And would it be fair to assume it will be relatively back-end loaded — that Q4 will be much stronger than Q3?

Moving to my second question about North America. Can you discuss what you're observing in the second quarter when you exclude cough and cold? If I recall correctly, in Q1 North America ex cough and cold grew in the mid-single-digit range. It appears to have decelerated fairly markedly in Q2, so I'm curious what's behind that. Is it the category, retailer destocking, or some shift in market share? Thank you very much.

Okay, thanks. I'll begin with those two points. First, regarding the like-for-like guidance, we had guided 4% to 5% for the year. Since we've run into some headwinds, we're addressing them—and I'd say I'm fairly happy with how that's going. Yes, our guidance stands at 4% to 5%, and it doesn't factor in the Russia transaction being completed. That's likely the first part of your question. Why do we think it's achievable? That's probably your second question. Sure, pricing plays a role, but what you're actually seeing is quite balanced growth across our results. You witnessed a sharp acceleration in our business and a genuinely strong Q2 performance. We anticipate that carrying forward. Really, the outlier this year was Q1, largely driven by the weak season. We have a very robust innovation pipeline, and I believe I went into considerable detail on that in my remarks. That gives us substantial confidence. It's great to see that meaningful innovation resonates strongly in the market, and consumers will pay a premium for it even in this climate, even given the headwinds consumers are facing.

We actually anticipate performing quite strongly on the innovation front in the second half too. The building blocks are in place. We believe our business will keep doing well throughout the fall, and that's why we're maintaining the guidance. Regarding the North America business specifically, we did observe some destocking, and that carried on into April, driven by the season as well as a bit of destocking in other areas. North America actually held up quite well. It was a solid performance in Q2. The non-seasonal business kept performing nicely. It was not quite as high as Q1, but it remained very strong. We're comfortable with North America as we move forward, though naturally we have a tougher comp in Q3, and then we anticipate a bigger Q4 coming through. Yes, overall, I think the last part of your question was whether this will be somewhat back-weighted toward Q4. It will be, but at the same time, the acceleration we've witnessed in the business is what we now expect to be the level we'll be performing at. I hope that covered your four or five questions in one question. Thank you very much.

Thanks, Guillaume. We’ll move across the screen now. Olivier first, and then we’ll go to Ed, just so everyone knows the order. Over to you, Olivier. Thanks, Nick. Good morning, Kris and Shannon. I’ll keep to two questions. First, on seasonal OTC, you’re planning for the incidence level to be slightly higher than it was last season. What gives you the basis for that? And second, coming back to the buyback: the £500 million share buyback is lower than what you’ve done historically, given the lower free cash flow generation. Should investors expect a lower rate of buyback going forward as cash generation stays a bit more under pressure? Thank you.

Perhaps I’ll answer regarding OTC.

Let me start by saying I appreciate everyone joining us today. Before we get into the details, I want to point out that some of the statements we make during this call may be forward-looking, and those are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a fuller discussion of those risks. With that, I'll turn it over to our CFO, Maria Chen, who will walk through the financial results.

Shannon, you can go ahead with the buyback question. Regarding the OTC planning assumption, I really believe it's fairly prudent. You'll recall that the season we just finished — Q4 and Q1 combined — was unusually low, and to a meaningful degree. If we look at historical averages, pre-COVID included, that was a very weak season. We aren't expecting a full recovery — at least we're not planning for a return all the way to a normal pre-COVID average season — but we do expect somewhat better results, with slightly higher incidences. That seems prudent to me. We have no facts suggesting anything else would occur. We continue to believe the variations we've observed are mostly a result of seasonal patterns, which are normal and have always existed. Naturally, COVID was in the base for a few years, and that has now dropped out. I think it's a solid planning assumption, and that's the reason we're adopting it. I don't view it as aggressive. I view it as prudent. Then

Regarding the share repurchase initiative, that program really stems from how we allocate capital, and we revisit and communicate those principles quite often. As for the size of the program, we manage it to make sure we can, above all, put money to work internally behind the business and generate top line growth. On your question about whether the size should be expected to shift as time goes on, 100%. We expect the program to be a key component of returning value to shareholders, but it will shift as time goes on consistent with how we allocate capital. Thank you.

Thanks, Shannon. Ed, you’re next. Yes. Thank you. On emerging markets, could you speak to any kind of disruption you saw from, I suppose, events in the Gulf and local suppliers or local competitors, which would have benefited your results in Q2, and whether that’s also a factor to consider for the rest of the year? Then there’s also a comment about gross margins in emerging markets—I remember this time last year they were pretty strong. It sounds like they’ve improved again. Can you just talk to that and the opportunity around the EM gross margins?

Perhaps I'll begin.

Shannon: Yes, of course.