WBA
#Rite Aid, yes, I agree with you that it is taking more than we expected.
But, I have to tell you that as you have seen from our presentation and from the fact that we have included some part of Rite Aid potential profit now in our guidance, from this you can really understand that we are confident, as confident as we were before about this deal.
Nothing has changed, we just have a delay in the execution of the deal.
This is our perception, we have always been optimistic because we have never seen an attitude from the FTC, which was an absolute negative, of course they were inquiring.
They were detailed.
They were asking a lot of questions.
Sometimes they were taking time to respond, but at the end of the day, I believe we have a good collaboration ---+ we're having a good collaboration.
We try to respond to all of their needs.
This takes time.
But at the end, we are still confident.
Of course, I know that we read on the papers are different news, no idea about the sources of this news, but for sure if we could talk, and of course you know that we cannot (laughter) our news would be different.
For what we see today, we see just a long administrative process, but we don't see substantial differences from what we were expecting.
Yes, probably more stores, a little more stores here and there, but at the end of the day ---+ as far as I can see today, as far as we can see today, we are absolutely confident that we can create, that we can do the deal and we can create the value.
Just this value will be a little postponed on time.
Because, even when we would do the deal, of course for the first month, we will not be able to extract immediately the synergies.
It will take some time.
We were hoping to do the deal at the beginning of this fiscal year for us.
In this case, we would have had time to level up some of the synergies.
Of course, if we close the deal relatively late in our fiscal year, the synergies will be smaller.
But we will find all of them next year.
Could you repeat, sorry.
Yes, so the TRICARE contract, as you know is the one, we have declared and that starts December 1.
We'll clear that in 2017, yes.
<UNK>, as you know, we agree what we disclose with our partners very carefully.
I haven't disclosed anything outside of TRICARE, so we can't disclose anything else this morning.
Thanks <UNK>.
On the program overall, as I have said, we are very much on track overall.
The big change really, from where we were a year ago has really been that we were able to deliver this for $300 million less than we previously anticipated, of which quite a portion of that will be true cash savings.
So, we're very pleased that we have been able to do this.
We're very much on track to complete the program next year.
It is very much a defined program with a start and a finish.
But, of course there are always ways to drive efficiencies.
It is just a way of life for us, we're looking out at every day across all aspects of our business.
We will continue to drive to do that.
Clearly, some of the investment that you are seeing in capital in some of the areas like IT, it will take us a little bit of time to get some of the new systems in place.
That will further enable us to both drive efficiencies and to drive ---+ and to manage the business in an increasingly more tighter way.
Next year, of course, we will have the big task of extracting value from Rite Aid.
This will be another huge opportunity for saving costs.
Just to remind ourselves, as I said in the presentation here, SG&A in the USA as a percent of sales fell 0.9 percentage points.
I think that's the best evidence really of what we are delivering.
Just add on to the question on capital, I haven't obviously given any specific guidance on capital for FY17, but in terms of thinking, I would expect it to be a little bit higher than we have seen in FY16, which is really reflecting some of the initiatives that we have got to develop in the offer that we talked about as well as the investment in the new IT that we are working on.
This is our view of it, which is why we have included on our accretion, it is built on our economics, which is the way we have built of the model up.
Really to emphasize a little bit of what <UNK> just said, and that <UNK> was saying, the synergies will take some time to come through.
As ever, when we approach a merger like this, our focus is always on the customer first to make sure that we deliver for the customer through this period.
We have got a very detailed plan to deliver the synergies but as we have said, this will take three to four years.
The important thing is to go in a straight line.
But it does very much reflect our view on the timing and the time it will take to start to deliver the synergies.
If I can give you an indication ---+ this is <UNK>.
Normally, I do not speak about the specific case, but normally when we have done a big merger, we have started to deliver the synergies after five, six months or something, because the first months of course you can do something.
But the first months are really needed to prepare the plan.
We cannot accelerate the plan.
We cannot do the plan now.
We are working on integration but we cannot do the plan for the synergies now because we do not know the numbers of Rite Aid.
As you know, we are not allowed to see their numbers.
So, in reality we cannot put together the plan.
As soon as we will know their numbers, we will have done the deal.
We will start to put in place a plan, which will take a few months and after, we will execute the plan.
This is why it's so skewed.
At the end of the first year ---+ the first year of the merger, of any merger, not just this one.
Absolutely, it is in our guidance.
David [Mullett] made the announcement just a few hours ago, just orally.
But it was very consistent with what we have been anticipating, so no surprises there.
I think the overall goal obviously, as we have said, is to focus on our operating income and cash flow.
In terms of thinking, as we have tried to sort of shape, you should think as we develop the new partnerships, that we are able to build our pharmacy volume and as we have said and we expect that to be ---+ the growth to be faster in the second half of the year.
You can think then about taking that beyond, as we have said, a lot of the new partnerships come in around the end of this calendar, beginning of the next calendar.
There is obviously then the function of your views on inflation and then on mix and of course with very different profile in somewhere like our central specialty versus our core pharmacy.
There's an element of mix that comes through there and that will obviously change over time.
But we will continue to see the reimbursement pressures, but just very much aware of life.
In terms of retail, a lot of our focus has been on developing the offer, as <UNK> has said, both in terms of the actual offer in store, our own brand's leading US brands, the work we're doing on omni-channel.
So a lot of our focus has been on working our way through getting ready for that.
You should start to see the benefits of that coming through over time, focus being on the offer over time then we believe we will be able to grow.
But we're looking to grow in the right categories, which is very important.
So, mix is very important.
We know mix is an important way of managing the margin ---+ the gross margin in the retail products part of the US business.
So, we would expect to see the benefits of that coming through over time.
Then on costs, as we say as we drive efficiency then we are certainly very focused on continuing to improve our cost ratios, our SG&A as a percentage of sales is in a key area of focus.
Again, we would be seeking to see that progressing.
So, these really are the core drivers of what should drive the profit.
I am particularly talking obviously retail pharmacy USA here.
As we have said in our presentation, in constant currency, in the last two years, we have delivered a compound growth of more than 15% in earnings on a comparable basis.
So, this is independent on the acquisition of AB because we have restated performa.
This is an independent on the number of shares.
Tactically, we have not had any acquisition in the meantime, excluding AB (inaudible) acquisition we have contributed much in the last two years.
We've also divested something.
So the real growth, the underlying growth of our Company in the last two years has been 13% if we consider the effect of the devaluation of the pound Sterling, more than 15% in constant currency.
We have always said that we can deliver underlying double-digit growth ---+ low double-digit growth.
This is what we are doing.
This is what we are focused on.
Okay, I will take the tax one first.
Then I will let <UNK> take the second one.
In terms of tax, we have obviously not given specific guidance for FY17 on tax, but in terms of thinking about it, if you strip out the discrete items as I talked about last year, then our real underlying tax, pre-Rite Aid, last year was ---+ our underlying tax last year was 26.3% on an adjusted basis.
That is obviously excluding the ABC income, because of course that gets reported on a post-tax basis.
So it's quite ---+ in terms of modeling, we always model and think about it, the way I've just described, excluding ABC.
If you think of that 26.3% then, excluding Rite Aid, that is a fairly good proxy for what it should be going forward, because pre-Rite Aid, the mix will be broadly the same.
In terms of Rite Aid, you are absolutely right.
With Rite Aid as the proportion of profit increases from the Rite Aid deal once we are able to complete it, then we will see a higher portion of profit here in the USA and of course, here the tax rates are higher than in most parts of Europe, where the rest of the business operates.
But of course, this year, given the accretion that we have indicated, that will be a relatively modest impact.
<UNK> here.
We're not able to give the details.
First of all, I'll repeat again, we don't know in detail all the data of Rite Aid.
It is an early time for us to take these decisions, after, of course, even if we knew them, (laughter) we could not disclose them.
So, it is too early.
In a few months, probably we will be able to discuss about this.
Thank you very much.
