Final Results

8th February 2007 RECORD 2006 - TARGETS EXCEEDED 2007 TARGETS ANOTHER STRONG YEAR Results at a Q4 % change % change Full % change % change Glance £m actual constant Year actual constant exchange exchange £m exchange exchange (unaudited) Net Revenues 1,293 +17% +23% 4,922 +18% +18% Operating 319 +12% +17% 910 +8% +9% Profit reported Net Income 256 +13% +18% 674 +1% +2% reported EPS 35.1p +14% 91.8p +2% (diluted) reported Operating 364 +28% +33% 1,059 +26% +27% Profit adjusted * Net Income 291 +28% +34% 786 +17% +19% adjusted * EPS 39.9p +30% 107.1p +19% (diluted) adjusted * *adjusted to exclude the impact of the restructuring charge. Net revenues grew by 17% (23% constant) in Q4 and by 18% (18% constant) in the Full Year (FY) to £4,922m. The underlying business (excluding BHI) grew 3% (9% constant) in Q4 and 6% (7% constant) in the FY. BHI contributed net revenues of £151m in Q4 and £494m in the FY. Cost synergies from BHI were £18m in Q4 and £39m in the FY. Total synergies are expected to be £80m and net working capital reduction £130m by the end of 2008. Operating profit before restructuring increased by 28% in Q4 to £364m, and by 26% to £1,059m in the FY. Restructuring costs were £45m in Q4 and £149m in the FY. Q4 gross margins improved by 280 basis points (bps) to 58.7%, leading to a FY improvement of 180bps to 56.7%. Before restructuring, Q4 operating margins improved 250bps to 28.2%, and for the FY the improvement was 140bps to 21.5%. On an adjusted basis net income grew 28% in Q4 and 17% in the FY. There are £ 19m one-off tax releases in Q4 and FY 2006 (last year Q4 £3m and FY £16m). EPS diluted, adjusted, for the year grew 19% to 107.1p, benefiting from the share buyback program. Net borrowings at the year end were £660m after £115m share buybacks in Q4 and £300m in the FY. Net cash flow from operations was £953m, +26%. The Board recommends a final dividend of 25p (+19%) to bring the full year dividend to 45.5p, an increase of 17% on 2005 and intends to return a further £ 300m through a share buyback program in 2007. Commenting on these results, Bart Becht, Chief Executive Officer, said: - "Reckitt Benckiser had a record year in 2006, driven by new products such as Vanish Oxi Action Crystal White, Airwick Freshmatic, and Finish Quantum and the successful and rapid integration of BHI with synergies running ahead of targets. "With the benefit of the strong momentum from Q4, our 2007 targets are for net revenue growth of at least 6% (base £4,922m) and net income percentage growth in the low double digits, both at constant exchange (base £786m, excluding restructuring costs)." Basis of Presentation The results include the Boots Healthcare International business (BHI) from 1 February 2006, the date of acquisition. Where appropriate, the term 'adjusted' excludes the impact of the restructuring charge, and the term 'underlying' represents the results excluding restructuring and on a like-for-like basis (ie excluding BHI). The restructuring charge covers the necessary reorganization post-acquisition of BHI in order to integrate the business into Reckitt Benckiser, plus some further restructuring of manufacturing configuration in the enlarged company. Detailed Operating Review Fourth Quarter 2006 Net revenues in Q4 grew by 17% (23% at constant exchange) to £1,293m. The underlying business (like-for-like excluding BHI) grew by 3% (9% constant) to £ 1,142m. BHI contributed net revenues of £151m. Adjusted operating profit for Q4 grew 28% (33% constant) to £364m. Gross margin increased by 280bps to 58.7% due to the higher gross margins on the BHI business, increasing contribution from cost optimization and some benefit from price increases. Marketing investment increased during the period well ahead of the growth in net revenues with media 45% higher to 10.5% of net revenues. Adjusted operating margins increased by 250bps to 28.2% due to the gross margin expansion. Reported net income was 13% (18% constant) higher at £256m. Restructuring charges in the quarter were £45m. On an adjusted basis net income grew 28% (34% constant) to £291m with one-off tax releases of £19m in the quarter (2005 Q4 £3m). EPS (diluted, adjusted) increased 30% to 39.9p with the growth rate benefiting from the ongoing share buyback program by two percentage points. Reported diluted EPS was 35.1p, +14%. Full Year 2006 Net revenues grew by 18% (18% constant) to £4,922m. The underlying business grew by 6% (7% constant) to £4,428m. BHI contributed net revenues of £494m for the 11 months of ownership. Adjusted operating profit increased 26% (27% constant) to £1,059m. Gross margins were 180bps ahead of last year at 56.7% due to the higher gross margins on the BHI business and the benefit of price increases and cost optimization on the base business. Marketing investment increased broadly in line with net revenue growth, with media investment increasing by 18% at 11.9% of net revenues and further increases in other consumer marketing. Adjusted operating margins increased by 140bps to 21.5% due to the gross margin expansion. Restructuring charges in the year were £149m. Net interest charges were £36m (2005 £36m income) due to the interest cost of the debt that financed the BHI acquisition. The tax rate is 23% (2005 24%) benefiting from one-off tax releases of £19m (2005 £16m). Reported net income for the year to date was 1% (2% constant) higher at £674m. Reported diluted EPS was 91.8 pence per share, an increase of 2%. Adjusted net income for the year to date increased 17% (19% constant) to £ 786m. Adjusted diluted EPS increased by 19% to 107.1 pence per share with the growth rate benefiting from the ongoing share buyback program by two percentage points. Geographic Analysis at constant exchange for continuing operations Europe 53% of Net Revenues Full Year net revenues grew by 23% to £2,624m. Underlying growth was 6%. Key growth drivers of the underlying business were Vanish, Airwick, Cillit Bang and Finish / Calgonit. In fabric care, the increase came due to the success of Vanish Oxi Action Crystal White, Vanish Oxi Action Multi and growth in laundry detergents. In surface care, the key driver was Cillit Bang Stain & Drain. In automatic dishwashing, Finish / Calgonit grew helped by the launch of Finish / Calgonit 5in1 and Finish / Calgonit Quantum. In home care, Airwick grew due to further success for Airwick Freshmatic and the launch of Airwick Xpress electricals. In health & personal care, Veet depilatories grew following the launch of the new In Shower cream and new Eternally Smooth Wax Strips. Operating margins (adjusted) were 10bps ahead of last year at 23.6% due to higher gross margins due to cost optimization and favourable mix offset by higher marketing investment in new products. This resulted in a 24% increase in adjusted operating profits to £618m. In Q4, net revenues increased 31% to £673m with underlying growth of 9%. Adjusted operating profits increased by 25% to £185m. North America & Australia 29% of Net Revenues Full Year net revenues increased 12% to £1,421m. Underlying growth was 5%. Key growth drivers were Airwick, Lysol, Easy Off Bang and Suboxone. In surface care, the key drivers were Lysol wipes and the roll-out of Easy Off Bang Degreaser and Stain & Drain. In home care, Airwick grew due to Airwick Freshmatic and Airwick electrical oils in part due to the launch of Airwick Xpress. In health and personal care, Suboxone prescription drug continued its expansion. Food saw growth from French's and Frank's Red Hot in retail offset by lost contracts in food service channels. Adjusted operating margins were 310bps higher at 24.2% due to gross margin expansion from better mix, excellent cost optimization savings and price increases in 2005 and 2006, resulting in adjusted operating profits increasing 30% to £344m. Q4 net revenues grew 14% to £394m with underlying growth of 7%. Adjusted operating profits were ahead by 38% to £145m. Developing Markets 18% of Net Revenues Full Year net revenues grew 15% to £877m. Underlying growth was 10%. Key growth drivers were Dettol, Vanish, Easy Off Bang and Harpic. In fabric treatment the increase was a result of Vanish Oxi Action Wow and the roll out of the brand into further markets. In surface care, the increase came from the roll out of Easy Off Bang and further growth for Harpic. In health & personal care, the Dettol personal care range performed strongly benefiting from higher investment and the launch of Dettol Active Soap. Adjusted operating margins expanded 220bps to 11.1%, due to strong gross margin expansion as a result of favourable mix, price increases and cost optimization, resulting in adjusted operating profits increasing by 45% to £97m. Q4 net revenues increased by 18% to £226m with underlying growth of 13%. Adjusted operating profits increased 70% to £34m. BHI Integration Update The integration of the former BHI business is essentially complete. Physical, commercial and systems integration is all complete. The manufacturing reconfiguration program is ongoing and is in line with plan. For full year 2006 (January to December), BHI total net revenues were 3% higher than in 2005 on a like-for-like basis, with strong growth particularly for Strepsils and Nurofen. For the period of ownership, from 1 February 2006, BHI had net revenues of £494m which was 1% ahead of the equivalent period last year. Cost synergies for the year were £39m, higher than the initial target of £30m due to earlier achievement of the integration. These are part of the full cost savings program which is expected to deliver £80m, rather than the initial target of £75m, by the end of 2008. Synergies in Q4 were £18m. The reduction in net working capital associated with the BHI acquisition was £ 55m compared to an initial target for the year of £50m. The target remains to reduce net working capital associated with BHI by £130m by the end of 2008. Restructuring charge Restructuring charges were £149m (compared to an initial estimate of £150m). Charges mainly relate to contract termination and headcount reduction in commercial operations and HQ functions plus write-offs related to redundant systems, together with the implementation of the manufacturing reconfiguration program in the enlarged Company. Category Review at constant exchange rates Fabric Care. Net revenues grew 8% to £1,194m. Vanish Oxi Action grew strongly due to Vanish Oxi Action Crystal White, Vanish Oxi Action Multi in Europe and the roll out of Vanish in new markets. Woolite grew behind the introduction of Woolite Color. Calgon grew as a result of new advertising copy. Laundry detergent net revenues recovered from a low base last year. Q4 net revenues grew 8% to £288m. Surface Care. Net revenues grew 5% to £909m. The major category growth driver was the roll-out of Cillit / Easy Off Bang Stain & Drain. Disinfectant cleaners also grew due to Lysol / Dettol multipurpose cleaners and Lysol wipes. Harpic lavatory care growth came from the roll-out of Harpic 2in1 Max in-bowl gadget, the launch of Harpic Power Plus and from strong growth in Developing Markets. Q4 net revenues grew 8% to £229m. Dishwashing. Net revenues grew 3% to £591m. The Company's market share remained strong in Europe and Worldwide helped by the launch of Finish / Calgonit 5in1 and Finish / Calgonit Quantum. Net revenue growth was somewhat held back due to higher promotional investment. Q4 net revenues grew 7% to £155m. Home Care. Net revenues grew 11% to £692m with strong growth for air care. Air care benefited from the continuing success of Airwick Freshmatic and Airwick electricals, the latter in part due the launch of Airwick Xpress electricals with boost button for extra freshness. Mortein pest control was modestly ahead of last year due to a different promotional phasing but growth improved in H2 driven by the introduction of Mortein Instant Kill aerosol and Mortein Liquid Vaporizer low cost electrical. Q4 net revenues grew 11% to £194m. Health & Personal Care. Net revenues grew 88% to £1,234m with underlying growth of 13%. Dettol antiseptics benefited from higher investment and new additions to the personal care range, notably Dettol Active Soap. Veet depilatories benefited in particular from the launch of Veet In Shower cream and new Eternally Smooth Veet Wax Strips with specific skin type ingredients. Gaviscon grew in Europe and due to new market launches in Developing Markets while Lemsip was down due to a weak flu season. Prescription drug Suboxone continued its substantial expansion in North America. The BHI core brands were ahead of 2005 on a like-for-like basis. Q4 net revenues grew 106% to £335m, with underlying growth of 13%. BBG. The prescription business of BBG, which markets two products, Subutex and Suboxone, contributed net revenues of £156m in the full year 2006 (2005 £121m), an increase of 30% due to strong growth of Suboxone in North America. Q4 net revenues for BBG were £53m. Excluding BBG and BHI, the underlying growth in Health & Personal care in 2006 was 9%. Both Suboxone and Subutex are forms of buprenorphine for treatment of opioid dependence. Suboxone is the more advanced form as it has substantially better protection against abuse by the opioid dependant population. Subutex is principally marketed in Europe by Schering Plough Corporation Kenilworth, New Jersey to whom it is licensed, while Suboxone is sold by Reckitt Benckiser directly in the USA, where market exclusivity runs to 2009, and Australia. Suboxone has recently received marketing approval from the European Commission giving 10 year market exclusivity for treatment in the European Union. As with all prescription drugs, the intellectual property protection of this business has a finite term and therefore the revenue and income of this business may not be sustained going forward unless replaced with new treatments or forms. Reckitt Benckiser is engaged in developing new treatments with third parties that would have either patent protection or market exclusivity in similar areas to where it is active today. Food. Net revenues were 1% ahead of last year at £194m with good retail performance particularly on French's and Frank's Red Hot offset by contract losses in the food service channel. Profits improved 4% to £49m, resulting in an operating margin of 25.3% +120bps. Q4 net revenues rose 3% to £63m and profits improved 4% to £26m. New Product Introductions: H1 2007 The Company today announces the launch during the first few months of 2007 of a number of new products. Fabric Care Vanish Oxi Action Multi Fabric with Colour Protect to help keep colours more true and whites whiter. Vanish Oxi Action Crystal White with Double Whitening - now whitens your whites even more than before, wash after wash. Woolite For Colors (international roll-out), provides superior colour protection against colour fade and colour run accidents, keeping colours fresher and more vibrant. Surface Care Cillit Bang 2X - Lime & Grime, Degreaser and Stain & Drain. Lime & Grime delivers twice the power on soap scum compared to the old formula; Degreaser delivers twice the power on grease compared to the old formula; Stain & Drain delivers twice the power compared to bleaches. Lysol Neutra Air Freshmatic (North America only) automatically neutralizes odours in the air from odour causing bacteria. Lysol Wipes Refill pack (North America only): Refill packs for Lysol wipes resulting in less packaging waste and better consumer value (lower cost per wipe). Lysol Disinfectant Spray To Go mini-pack (North America only): 1oz mini aerosol for out of the home. Lysol protection that you can take with you wherever you go. Dishwashing Finish / Calgonit All in 1 to give improved performance on stubborn everyday stains like scrambled egg. Finish / Calgonit Quantum with improved performance for top of the range clean and visibly brighter shine, also now available in a lemon variant. Home Care Airwick Mini-Freshmatic is a smaller and more mobile device compared to Airwick Freshmatic to deliver automatic fragrancing with an Xpress boost button. Available in 3 fragrances with essential oils. Mortein Lantern, a portable lantern for outdoor use. It provides a 25 square metre mosquito free area. Using a candle and mosquito mat combined, it provides good outdoor ambience as well. Mortein Professional Indoor Surface Spray. A 'Do It Yourself' product for indoor use as a barrier spray to control crawling insects. It uses the same ingredients as the professionals do. Mortein Total Double Protection with Dettol - Protection from insects and the germs they carry. Mortein kills the insect instantly and Dettol kills the germs they carry and would leave behind after the insect dies. Health & Personal Care Veet Pump pack cream - a new convenient dispenser for depilatory cream in both regular and sensitive skin variants. Clearasil Ultra Total anti-acne care kit. - Daily regimen kit of 3 steps (face wash, toner and lotion) plus a treatment cream for a quick start. Get clear and stay clear. Financial Review Basis of Preparation The results are prepared under IFRS accounting policies as set out in the Group's Annual Report and Accounts for 2005. Constant Exchange. Movements of exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts comparatives to exclude such movements and show the underlying growth. Restructuring. The charge of £149m in the full year covers the necessary reorganization post-acquisition of BHI in order to integrate the business into Reckitt Benckiser, plus some further restructuring of manufacturing configuration in the enlarged company. Net Interest. The net interest charge of £36m (2005 income £36m) was due to interest on the capital cost of the BHI acquisition (£1,893m) offset by strong cash generation over the past year reducing the net debt. Tax. The tax rate for the period was 23% after non-recurring credits of £19m (2005 £16m) relating to the recent resolution of long outstanding tax enquiries. The tax charge of £200m (2005 £207m) is split between United Kingdom tax of £6m (2005 £22m) and overseas tax of £194m (2005 £185m). Net Working Capital(defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions) further decreased during the year by £112m to minus £728m. BHI net working capital reduced £55m in the period since consolidation on 1 February 2006 compared to a full year target reduction of £50m. Cash Flow. Operating cash flow increased to £1,017m, due to higher operating profit and further improvement from net working capital in the base business and BHI. Net cash flow from operations increased to £953m. Net interest paid was £30m (2005 £34m received) while tax payments increased by £24m. Capital expenditure was slightly higher than prior year at £88m (2005 £78m). Proceeds from disposals of fixed assets were £19m (2005 £17m). Net Debt at the year-end was £660m (2005 funds of £887m), the movement is principally the result of the requirement to fund the acquisition on 31 January 2006 of BHI, offset by strong cash flow. Balance Sheet. At the end of 2006, the Group had shareholders' funds of £ 1,866m (2005 £1,856m), an increase of 0.5%. Net debt was £660m (2005 funds of £887m) and total capital employed in the business was £2,526m (2005 £969m). This finances non-current assets of £4,421m (2005 £2,343m) of which £425m (2005 £485m) is tangible fixed assets, the remainder being intangible assets, goodwill, deferred tax and other receivables. The Company maintains negative net working capital of £728m (2005 £616m), has current provisions of £47m (2005 £4m) and has long-term liabilities other than borrowings of £1,120m (2005 £ 754m). The Company's financial ratios remain strong. Return on shareholders' funds (net income divided by total shareholders' funds) was 36.1% (2005 36.0%) on a reported basis or 42.1% on an adjusted basis. Dividends The Board of Directors recommend a final dividend of 25 pence per share, an increase of 19%, to give a full year dividend of 45.5 pence per share, an overall increase of 17%. The dividend, if approved by shareholders at the AGM on 3 May 2007, will be paid on 31 May to shareholders on the register on 2 March. The ex dividend date will be 28 February 2007. Share Buyback During 2006, the group purchased 13.9m shares for cancellation at a cost of £ 300m as part of its ongoing share buyback program. In Q4, the Company purchased 5.0m shares at a cost of £115m. The Company has confirmed its intention to repurchase a further £300m of its own shares during 2007. For Further Information Reckitt Benckiser +44 (0)1753 217 800 Tom Corran SVP Investor Relations & Corporate Communications Fiona Fong Head of Corporate Communications Press calls Mark Wilson Corporate Controller & Investor Calls Investor Relations Manager PR Agency Tim Spratt Financial Dynamics +44 (0)207 831 3113 The preliminary results for the year ended 31 December 2006 and the results for the year ended 31 December 2005 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS") and are unaudited. The unaudited financial statements for 2006 are prepared using accounting policies consistent with the audited financial statements for 2005. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2006 or 31 December 2005 as defined by SI 04/2947 - The Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2006 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Group at a Glance (unaudited) Quarter Ended December 31 Year Ended December 31 2006 2005 2006 2005 £m £m £m £m 1,142 1,107 Net revenues - underlying 4,428 4,179 151 - Net revenues - acquisition 494 - 1,293 1,107 Net revenues - total 4,922 4,179 3% 8% Net revenues growth - underlying 6% 8% 17% 8% Net revenue growth - total 18% 8% 58.7% 55.9% Gross margin 56.7% 54.9% 343 308 EBITDA 1,007 931 26.5% 27.8% EBITDA margin 20.5% 22.3% 319 285 EBIT 910 840 364 285 EBIT - adjusted* 1,059 840 24.7% 25.7% EBIT margin 18.5% 20.1% 28.2% 25.7% EBIT margin - adjusted* 21.5% 20.1% 312 299 Profit before tax 874 876 256 227 Net Income 674 669 291 227 Net Income adjusted* 786 669 35.7p 31.4p EPS 93.5p 92.0p 39.9p 30.8p EPS, adjusted and diluted* 107.1p 90.0p * Adjusted to exclude the impact of the restructuring charge. Group Balance Sheet Data# December 31 December 31 2006 2005 £m £m Net working capital * (728) (616) Net (debt) / funds (660) 887 * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. # The balance sheet information contains provisional amounts in respect of the acquisition of Boots Healthcare International Shares in Issue (millions) Fourth quarter 30 September 2006 719.7 Issued 1.3 Repurchased (5.0) 31 December 2006 716.0 Full Year 31 December 2005 722.2 Issued 7.7 Repurchased (13.9) 31 December 2006 716.0 Group income statement (unaudited) Quarter Ended December Year Ended December 31 31 2006 2005 % change 2006 2005 % change £m £m £m £m 1,293 1,107 17% Net revenues 4,922 4,179 18% (534) (488) 9% Cost of sales (2,133) (1,886) 13% 759 619 23% Gross profit 2,789 2,293 22% (440) (334) 32% Net operating expenses (1,879) (1,453) 29% 319 285 12% Operating profit 910 840 8% 364 285 28% Operating profit before restructuring 1,059 840 26% (45) - - Restructuring charge (149) - - 319 285 12% Operating profit 910 840 8% (7) 14 - Net finance (expense)/income (36) 36 - 312 299 4% Profit before taxation 874 876 0% (56) (72) -22% Taxation (200) (207) -3% 256 227 13% Profit for the period 674 669 1% - - - Attributable to minority interests - - - 256 227 13% Attributable to equity shareholders 674 669 1% 256 227 13% Profit for the period 674 669 1% Earnings per ordinary share: 35.7p 31.4p On profit for the period 93.5p 92.0p 35.1p 30.8p On profit for the period, diluted 91.8p 90.0p Earnings per ordinary share - adjusted *: 40.6p 31.4p On profit for the period 109.1p 92.0p 39.9p 30.8p On profit for the period, diluted 107.1p 90.0p * Adjusted to exclude the impact of the restructuring charge Average common shares outstanding: (millions) 717.6 723.7 Basic 720.7 727.1 729.8 736.7 Diluted 734.2 743.3 Group balance sheet For the year ended December 31 (unaudited) 2006* 2005 £m £m ASSETS Non-current assets: Goodwill and intangible assets 3,842 1,766 Property, plant and equipment 425 485 Deferred tax assets 144 77 Other receivables 10 15 4,421 2,343 Current assets: Inventories 322 270 Trade and other receivables 670 545 Available for sale financial assets 19 77 Cash and cash equivalents 305 978 1,316 1,870 Total Assets 5,737 4,213 LIABILITIES Current liabilities: Borrowings (973) (88) Provisions (47) (4) Other liabilities (1,720) (1,431) (2,740) (1,523) Non-current liabilities: Borrowings (11) (80) Deferred tax liabilities (766) (377) Retirement benefit obligations (216) (261) Provisions (15) (10) Other liabilities (123) (106) (1,131) (834) Total liabilities (3,871) (2,357) Net assets 1,866 1,856 EQUITY Capital and reserves: Share capital 76 76 Share premium account 527 479 Capital redemption reserve 5 4 Merger reserve 142 142 Hedging reserve (1) (1) Retained earnings 1,114 1,155 1,863 1,855 Equity minority interest 3 1 Total equity 1,866 1,856 * Includes provisional fair values in respect of the BHI acquisition. Group cash flow statement For the year ended December 31 (unaudited) 2006 2005 £m £m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 910 840 Depreciation 88 82 Amortisation 9 9 Impairment of tangible fixed assets 23 - Impairment of intangible fixed assets 14 - Fair value (gains)/losses (2) - (Gain)/loss on sale of property, plant and equipment and - (8) intangible assets (Increase) / decrease in inventories (28) (1) (Increase) / decrease in trade and other receivables (23) (30) Increase / (decrease) in payables and other creditors 144 18 Increase / (decrease) in restructuring provisions 51 - Share award expense 42 36 Cash generated from operations 1,228 946 Interest paid (50) (16) Interest received 20 50 Tax paid (181) (157) Net cash generated from operating activities 1,017 823 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and intangible (88) (78) assets Disposal of property, plant and equipment 19 17 Acquisition of businesses (1,893) (4) Maturity of short term investments 57 493 Net cash (used) / generated by investing activities (1,905) 428 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 56 36 Share purchases (300) (300) Proceeds from borrowings 1,250 - Repayments of borrowings (473) (66) Dividends paid to the Company's shareholders (300) (262) Net cash generated / (used) in financing activities 233 (592) Net (decrease) / increase in cash and cash equivalents (655) 659 Cash and cash equivalents at beginning of period 969 301 Exchange gains / (losses) (16) 9 Cash and Cash equivalents at end of period 298 969 Cash and cash equivalents comprise Cash and cash equivalents 305 978 Overdraft (7) (9) 298 969 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 1,017 823 Net purchase of property, plant and equipment (64) (65) Net cash flow from operations 953 758 Management uses net cash flow from operations as a performance measure. Segmental Analysis (unaudited) Analyses by geographical area (primary segment) of net revenues and operating profit and of net revenues by product group (secondary segment) are set out below. The figures for each geographical area show the net revenues and profit made by companies located in that area. Additional information is provided to show profit by class of business. Primary segment: Geographical Area Quarter Ended December 31 Year Ended December 31 2006 2005 % change 2006 2005 % change £m £m exch. Rates £m £m exch rates actual const. actual const. Net revenues 673 521 29% 31% Europe 2,624 2,135 23% 23% 394 377 5% 14% North America & Australia 1,421 1,281 11% 12% 226 209 8% 18% Developing Markets 877 763 15% 15% 1,293 1,107 17% 23% 4,922 4,179 18% 18% Operating profit 159 151 5% 7% Europe 522 502 4% 4% 131 112 17% 25% North America & Australia 308 270 14% 17% 29 22 32% 45% Developing Markets 80 68 18% 19% 319 285 12% 17% 910 840 8% 9% Operating profit - adjusted* 185 151 23% 25% Europe 618 502 23% 24% 145 112 29% 38% North America & Australia 344 270 27% 30% 34 22 55% 70% Developing Markets 97 68 43% 45% 364 285 28% 33% Sub-total before restructuring 1,059 840 26% 27% (45) - Restructuring (149) - 319 285 12% 17% 910 840 8% 9% % % Operating margin - adjusted* % % 27.5% 29.0% Europe 23.6% 23.5% 36.8% 29.7% North America & Australia 24.2% 21.1% 15.0% 10.5% Developing Markets 11.1% 8.9% 28.2% 25.7% Sub-total before restructuring 21.5% 20.1% * Adjusted to exclude the impact of the restructuring charge. Segmental Analysis (unaudited) (continued) Secondary Segment: Product Segment Quarter Ended December 31 Year Ended December 31 2006 2005 % change 2006 2005 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenues 288 276 4% 8% Fabric Care 1,194 1,113 7% 8% 229 229 0% 8% Surface Care 909 871 4% 5% 155 150 3% 7% Dishwashing 591 579 2% 3% 194 185 5% 11% Home Care 692 628 10% 11% 335 169 98% 106% Health & Personal Care 1,234 662 86% 88% 1,201 1,009 19% 25% Core Business 4,620 3,853 20% 20% 29 33 -12% 0% Other Household 108 131 -18% -15% 1,230 1,042 18% 24% 4,728 3,984 19% 19% 63 65 -3% 3% Food 194 195 -1% 1% 1,293 1,107 17% 23% 4,922 4,179 18% 18% Net revenues of £494m in respect of the acquisition in 2006 are included within Health & Personal Care. On an underlying basis, growth of Health & Personal Care is 13% for FY 06 and 13% for Q4 at constant rates. Additional Information Operating profit - by product segment 338 260 30% 36% Household and Health & Personal Care 1,010 793 27% 29% 26 25 4% 4% Food 49 47 4% 4% 364 285 28% 33% Sub total before restructuring 1,059 840 26% 27% (45) - Restructuring (149) - 319 285 12% 17% 910 840 8% 9% % % Operating margin - by product segment % % 27.5% 25.0% Household and Health & Personal Care 21.4% 19.9% 41.3% 38.5% Food 25.3% 24.1% 28.2% 25.7% Sub total before restructuring 21.5% 20.1% Earnings per ordinary share For the year ended December 31 (unaudited) Reported Basis The reconciliation between profit for the year and the weighted average number of shares used in the calculations of the diluted earnings per share is set out below: 2006 2005 Profit Average Earnings Profit Average Earnings for the Number of per for the number of per year £m Shares share year £m shares share pence pence Profit attributable to 674 720,685,570 93.5 669 727,061,855 92.0 shareholders Dilution for Executive 12,365,411 13,496,383 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,145,515 726,783 Sharesave Scheme options outstanding Dilution for convertible - 1,970,687 capital bonds outstanding On a diluted basis 674 734,196,496 91.8 669 743,255,708 90.0 Adjusted Basis The reconciliation between profit for the year and the weighted average number of shares used in the calculations of the diluted earnings per share is set out below: 2006 2005 Profit Average Earnings Profit Average Earnings for the Number of per for the number of per year £m Shares share year £m shares share pence pence Profit attributable to 786 720,685,570 109.1 669 727,061,855 92.0 shareholders Dilution for Executive 12,365,411 13,496,383 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,145,515 726,783 Sharesave Scheme options outstanding Dilution for convertible - 1,970,687 capital bonds outstanding On a diluted basis 786 734,196,496 107.1 669 743,255,708 90.0 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the restructuring charge after the appropriate tax amount, provides the most meaningful measure of earnings per ordinary share. Statement of Recognised Income and Expense For the year ended December 31 (unaudited) 2006 2005 £m £m Profit for the year 674 669 Net exchange adjustments on foreign currency translation (185) 85 Net actuarial gains and losses 28 (17) Net hedged gains and losses taken to reserves - (1) Net gains/(losses) not recognised in the income statement (157) 67 Total recognised income for the year 517 736

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