Full Year Results 2011
8 February 2012
RECKITT BENCKISER GROUP PLC
2011: FULL YEAR TARGETS EXCEEDED
Results at a glance Q4 % change % change FY % change % change
£m actual constant £m actual constant
(unaudited) exchange exchange exchange exchange
Net Revenue 2,416 +6 +8 9,485 +12 +13
- Like-for-like growth* +3% +4%
Operating Profit - reported 708 +18 +19 2,395 +12 +14
Operating Profit - adjusted ** 739 +5 +6 2,487 +11 +13
Net Income - reported 521 +26 +27 1,745 +11 +13
Net Income - adjusted ** 546 +8 +9 1,818 +9 +11
EPS (diluted) - reported 70.8p +26 237.1p +11
EPS (diluted) - adjusted ** 74.2p +8 247.1p +9
* Like-for-like ("LFL") growth excludes the impact of changes in exchange
rates, major acquisitions (SSL & Paras) and disposals.
** Adjusted results (including % change figures) exclude exceptional items (see
page 2).
FY highlights (at constant exchange unless stated):
Total net revenue growth of +13% to £9,485m - ahead of +12% target.
LFL growth (excluding full year SSL and Paras) +4% base business (+4% including
RBP).
SSL net revenue growth of +6% on a LFL basis to £843m.
Adjusted net income +9% actual exchange, (+11% constant) - ahead of +10%
target.
Net working capital of minus £910m (2010: minus £925m). Net debt of £1,795m
(2010: £2,011m), with strong cash flow offset by two dividends, acquisitions
and restructuring.
The Board recommends a +8% increase in the final dividend to 70p per share,
bringing the total dividend for 2011 to 125p (+9% versus 2010).
Q4 highlights (at constant exchange unless stated):
Total net revenue growth of +8% to £2,416m.
LFL growth (excluding SSL and Paras) +5% base business (+3% including RBP).
SSL net revenue growth of +27% to £191m.
Commenting on the full year results, Rakesh Kapoor, Chief Executive Officer,
said:
"Reckitt Benckiser delivered another strong year, exceeding both our net
revenue target (+12%) and adjusted net income target (+10%) in an increasingly
tough environment. Like-for-like growth of 4% was underpinned by a robust
performance in the base business, especially in Q4.
"Growth was driven in particular by excellent growth in emerging markets, and
growth in our Powerbrands - Dettol, Nurofen, Mucinex, Strepsils, Gaviscon and
Harpic. SSL had a good first year with LFL growth of 6%, although full year
growth is flattered by a soft Q4 last year.
"At the end of 2011, the Suboxone film had captured a 48% volume share of the
U.S. market. The in-market sales trend remains on a healthy growth track.
"In 2012 we are targeting total Company net revenue growth, excluding RBP, of
200bps above our market growth rate. We expect the market to grow at 1-2%.
2012 will be a year of higher investment but, ex RBP, we are still targeting to
maintain our operating margins. "
Basis of Presentation and Exceptional Items
The results include the business of SSL International plc ("SSL") from 1
November 2010, and Paras Pharmaceuticals Limited ("Paras") from 1 April 2011,
their respective dates of acquisition. Operating profit is not separately
disclosed for SSL or Paras as, in the view of the Directors, it is not
practicable to identify their operating profit due to their integration into
the commercial infrastructure of Reckitt Benckiser.
Where appropriate, the term "like-for-like" ("LFL") describes the performance
of the business on a comparable basis, excluding the impact of major
acquisitions, disposals, discontinued operations and foreign exchange. LFL
analysis excludes the impact of SSL for the full year and Paras.
Where appropriate, the term "base business" represents the Europe, North
America & Australia and Developing Markets geographic areas, and excludes RBP.
Where appropriate, the term "adjusted" excludes the impact of exceptional
items. There was an exceptional pre-tax charge of £96m in 2011 mainly relating
to integration and restructuring costs arising from the acquisition of SSL and
Paras. This exceptional pre-tax charge is reflected in reported operating
profit (£92m) and net interest (£4m, being financing costs associated with the
acquisition). The tax effect of exceptional items in the period is £23m.
The fair value of the identifiable assets and liabilities at the date of
acquisition of SSL were provisionally estimated and disclosed in the 2010
annual report and financial statements. Final fair values at acquisition date
are now confirmed and have been recorded as a prior year restatement of the
balance sheet at 31 December 2010. There is no impact to the income statement
for the year ended 31 December 2010.
Summary Operating Review
Full year 2011
Total net revenue growth of +13% (constant) exceeded our full year target of
12%. LFL growth both including and excluding RBP was +4% (constant). SSL had a
good first year with net revenue of £843m, representing 6% LFL growth
(constant). Paras net revenue was £49m.
The gross margin declined by -90bp to 59.7%, driven by higher input costs,
increased investment in price and promotion to support volume shares,
especially in Europe, and the impact of higher rebates related to Medicaid in
RBP. This was partially offset by mix benefits, savings from cost optimisation
programmes and a positive transaction impact from foreign exchange.
Total marketing investment was higher, and media investment rose +9% (constant)
to a level of 10.4% of net revenue. Within this, media spend on the base
business (ex SSL) was maintained at 11.8% of net revenue.
Cost synergies from the acquisition of SSL of £85m have exceeded the £50m
target for the full year, due to savings being achieved earlier than
expected.
On an adjusted basis, operating profit was ahead +11% (+13% constant) to
£2,487m; the adjusted operating margin declined by -20bp to 26.2% due to RBP.
Base business adjusted operating margin increased by 60bp to 22.6%, with
declines in Europe offset by margin expansion in NAA due to volume leverage and
positive product mix, and DvM due to volume leverage, and a soft prior year
comparative due to heavy marketing investment in Q4 2010.
Net finance expense was £19m (2010: net finance income of £6m), of which £4m is
an exceptional charge in respect of financing costs associated with the
acquisition of SSL. The Group effective tax rate was 26%.
Net income as reported was £1,745m, an increase of +11% (+13% constant) versus
2010; on an adjusted basis, net income rose +9% (+11% constant). Diluted
earnings per share of 237.1 pence were +11% higher on a reported basis; on an
adjusted basis, the growth was +9% to 247.1 pence.
Fourth quarter 2011
RB delivered a strong Q4 LFL net revenue growth in the base business of +5%.
This was offset by RBP net revenue of -17% due to adjustments to previously
estimated Medicaid rebates and film conversion. As a result total LFL net
revenue was +3%.
SSL contributed £191m net revenue in the quarter, representing a LFL growth
rate of +27% versus a soft Q4 in 2010 when the business was first acquired.
Paras net revenue was £14m. Total net revenue increased +8% (constant) to
£2,416m, a slower growth rate than our YTD September run rate, as we now
anniversary the acquisition of SSL.
The gross margin declined by -100bp to 60.5%, due to increased Medicaid rebates
in RBP. On the base business gross margin was maintained.
Media investment rose +8% (constant) to a level of 10.0% of net revenue.
Within this, while media spend on the base business (ex SSL) was maintained at
11.4%, we substantially increased media spend in both NAA to support the
Mucinex Fast Max launch and in Europe to defend market shares.
On an adjusted basis, operating profit was ahead +5% (+6% constant) to £739m:
the adjusted operating margin declined by -30bp to 30.6% due to RBP. Excluding
RBP, the adjusted operating margin increased by +140bp with increases in Europe
behind positive product mix & SSL synergies, and DvM behind volume leverage and
a soft prior year comparative due to heavy marketing investment in Q4 2010.
Net finance expense was £4m (Q4 2010: £5m), of which £1m is an exceptional
charge in respect of financing costs associated with the acquisition of SSL.
The tax rate was 26%.
Net income as reported was £521m, an increase of +26% (+27% constant) versus Q4
2010; on an adjusted basis, net income rose +8% (+9% constant). Diluted
earnings per share of 70.8 pence were +26% higher on a reported basis; on an
adjusted basis, the growth was +8% to 74.2 pence.
FY 2011 Business Review by Segment
The Business Review below is given at constant exchange rates.
Summary: % net revenue growth
FY 2011 Like-for-like Impact of Exchange Reported
SSL & Paras
Europe -1% +16% 0% +15%
NAA +3% +2% -2% +3%
DvM +13% +11% -3% +21%
Base Business +4% +10% -1% +13%
RBP +6% 0% -3% +3%
TOTAL +4% +9% -1% +12%
Analyses by operating segment of net revenue and adjusted operating profit, and
of net revenue by product group are set out below. The Executive Committee of
the Group assesses the performance of the operating segments based on net
revenue and adjusted operating profit. This measurement basis excludes the
effect of exceptional items.
Review by Operating Segment
Quarter ended Year ended
31 December 31 December
2011 2010** % change 2011 2010** % change
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenue
949 895 +6 +8 Europe 4,009 3,490 +15 +15
690 657 +5 +4 North America & Australia 2,402 2,323 +3 +5
584 493 +18 +25 Developing Markets 2,312 1,903 +21 +24
193 232 -17 -17 Pharmaceuticals 762 737 +3 +6
2,416 2,277 +6 +8 9,485 8,453 +12 +13
Operating profit - adjusted*
241 226 +7 +8 Europe 908 823 +10 +10
233 225 +4 +3 North America & Australia 652 599 +9 +10
112 68 +65 +75 Developing Markets 399 278 +44 +48
143 184 -22 -22 Pharmaceuticals 518 531 -2 +1
10 - n/m n/m Corporate*** 10 - n/m n/m
739 703 +5 +6 Subtotal before exceptional items 2,487 2,231 +11 +13
(31) (101) Exceptional items (92) (101)
708 602 +18 +19 2,395 2,130 +12 +14
% % Operating margin - adjusted* % %
25.4 25.3 Europe 22.6 23.6
33.8 34.2 North America & Australia 27.1 25.8
19.2 13.8 Developing Markets 17.3 14.6
74.1 79.3 Pharmaceuticals 68.0 72.0
30.6 30.9 26.2 26.4
* Adjusted to exclude the impact of exceptional items.
** 2010 comparatives have been restated to include SSL within the relevant
areas.
***Items of income and expense which are not part of the results and financial
position of the reported segments, and therefore reported to the Chief
Operating Decision Maker outside of the individual segment financial
information, are shown as reconciling items between the segmental information
and the Group totals presented in the consolidated financial statements. For
the twelve months ended 31 December 2011, these items include a profit on
disposal of intangibles and an expense relating to legal matters. The net
impact of these items is £10m (31 December 2010: £nil).
Europe 42% of net revenue
FY 2011 total net revenue increased +15% to £4,009m. LFL growth of -1% was due
to a combination of slight volume decline on Fabric Care and negative net
pricing in certain categories, reflecting higher levels of promotional spend to
protect volume shares against aggressive competition. This continues to be the
key factor behind the LFL result for net revenue in both Q4 and FY 2011.
By category, within Healthcare, Nurofen, Strepsils and Gaviscon delivered a
strong result, supported by such new initiatives as Nuromol and Strepsils
Warm. Growth in Personal Care was driven by the continued roll-out of the
Dettol No Touch Hand Soap System, which continues to deliver an encouraging
result. Surface Care grew from Dettol and Harpic. The result in Home Care was
boosted by such recent initiatives as the Air Wick 100% natural propellant
spray and Air Wick Odour Detect as well as continued growth in candles. The
largest factor in the decline in Fabric Care was continued weakness in Laundry
Detergents and Fabric Softeners in Southern Europe. Heavy promotional and
media investment continues behind Vanish to protect volume share against
competition.
FY adjusted operating profit was ahead +10% at £908m; the adjusted operating
margin decreased -100bp, due to a combination of increased investment in price
and promotion and higher input costs, partially offset by SSL synergies.
In Q4, net revenue rose +8% to £949m, with LFL growth of +0%. Adjusted
operating profit was £241m, with the margin +10bp higher at 25.4%, due mainly
to a soft comparative for SSL in Q4 2010.
North America & Australia 25% of net revenue
FY 2011 total net revenue increased +5% (+3% LFL) to £2,402m. Growth came from
Health & Personal Care, Dishwashing and Food. The increase in Health &
Personal Care was driven by Mucinex, which benefited from the Q3 roll out of
Mucinex Fast Max. In Dishwashing, Finish Quantum and All-in-1 tablets and gel
packs contributed an excellent performance. The increase in Food came from the
consumer brands of French's Yellow Mustard and Frank's Red Hot Sauce, which was
supported by additional marketing activity.
FY adjusted operating profit increased +10% to £652m due to favourable product
mix and fixed cost containment; the adjusted operating margin was +130bp higher
at 27.1%.
Q4 net revenue rose +4% (+4% LFL) to £690m. Adjusted operating profit was
ahead by +3% to £233m, equating to a -40bp decline in the operating margin to
33.8%, impacted by the significant media investment behind the launch of
Mucinex Fast Max.
Developing Markets 24% of net revenue
FY 2011 total net revenue was ahead +24% (+13% LFL) to £2,312m. By category,
Health & Personal Care continued to grow well with good growth coming from
Dettol, Strepsils, Gaviscon and Veet. The increase in Fabric Care was driven
by Vanish, while Harpic and Veja were the key drivers in Surface Care. In Home
Care, both Air Care and Pest Control contributed to the performance.
Adjusted operating profit increased by +48% to £399m, due to volume leverage,
positive product mix due to strong growth in H&PC brands, and pricing.
Marketing investment fell to more normal levels following heavy investment in
Q4 2010. The impact of these factors resulted in a +270bp improvement in the
adjusted operating margin to 17.3%.
Q4 net revenue increased by +25% (+15% LFL) to £584m. Adjusted operating
profit improved +75% to £112m, with a +540bp uplift in the margin to 19.2%, due
to heavy marketing investment in Q4 2010, as noted previously.
RBP 8% of net revenue
2011 total net revenue grew +6% to £762m. The patent-protected Suboxone film
variant continued to grow, and by the end of December had captured a 48% volume
share of the total market and has further strengthened its position as market
leader, ahead of tablets. The NA business net revenue declined -2% to £587m of
which the film generated £249m. In Europe and Rest of the World, the result
was helped by the buyback of the sales and distribution rights in the majority
of countries in July 2010. Adjusted operating profit for the total RBP
business increased +1% to £518m. The operating margin was down -400bp to
68.0%, largely due to the lower margins of the film variant and the impact of
higher rebates relating to Medicaid.
In Q4, as earlier communicated, RBP results were affected by the 2011 and prior
year impact of US Health reforms, as a result of which higher rebates to
Medicaid were required. As a result net revenues are down by -17% to £193m
with profit down by 22% to £143m, compared to an exceptionally strong quarter
last year when the film was being rolled-out. The in-market sales trend remains
on a healthy growth track. At this time the Group has no intelligence as to
the exact timing of potential generic competition to the Suboxone Tablets in
the USA. For further information surrounding exclusivity of Suboxone products,
please refer to pages 4 & 5 of the 2010 Annual Report and Financial Statements.
Review by Category
Quarter ended Year ended
31 December 31 December
2011 2010* % change 2011 2010* % change
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenue by category
791 651 +22 +24 Health & Personal Care 3,156 2,318 +36 +37
357 370 -4 -1 Fabric Care 1,503 1,576 -5 -5
353 352 +0 +3 Surface Care 1,422 1,391 +2 +3
330 310 +6 +8 Home Care 1,204 1,152 +5 +5
230 224 +3 +5 Dishwashing 896 875 +2 +3
67 51 +31 +29 Other 227 100 +127 +129
2,128 1,958 +9 +11 Household and Health & 8,408 7,412 +13 +14
Personal Care
193 232 -17 -17 Pharmaceuticals 762 737 +3 +6
95 87 +9 +9 Food 315 304 +4 +7
2,416 2,277 +6 +8 9,485 8,453 +12 +13
Operating profit - adjusted
550 488 +13 +14 Household and Health & Personal Care 1,864 1,613 +16 +16
143 184 -22 -22 Pharmaceuticals 518 531 -2 +1
36 31 +16 +16 Food 95 87 +9 +13
10 - n/m n/m Corporate 10 - n/m n/m
739 703 +5 +6 2,487 2,231 +11 +13
(31) (101) Exceptional items (92) (101)
708 602 +18 +19 2,395 2,130 +12 +14
% % Operating margin - adjusted % %
25.8 24.9 Household and Health & Personal Care 22.2 21.8
74.1 79.3 Pharmaceuticals 68.0 72.0
37.9 35.6 Food 30.2 28.6
30.6 30.9 26.2 26.4
* 2010 comparatives have been restated to include SSL within the relevant
categories
Health & Personal Care. LFL net revenue increased +8%. Total net revenue
increased +37% to £3,156m . In Healthcare, the result was driven by very good
growth for Nurofen, Mucinex, Strepsils and Gaviscon, boosted by such new
initiatives as Strepsils Warm and Mucinex Fast Max. In Personal Care, Dettol
continued to grow well both in Developing Markets, and in Europe where the
continued roll-out of the No Touch Hand Soap System has been very encouraging.
In Q4, Health & Personal Care LFL net revenue rose +9% and total net revenue
+24% to £791m with a weaker than normal 'flu season offset by the initial
success of Mucinex Fast Max.
Fabric Care. Net revenue decreased by -5% to £1,503m, predominantly driven by
continued weakness in Laundry Detergents and Fabric Softeners in Southern
Europe. The Group continues to invest aggressively to protect the market
position of Vanish against competitor launches and intensive promotional
activity; as a result market share trends are improving. Q4 net revenue
declined -1% to £357m, with Vanish returning to growth as we anniversary
competitive launches in Europe and continue to see good growth in Developing
Markets. Laundry Detergents continue to decline but at reduced rates.
Surface Care. Net revenue grew +3% to £1,422m. There was good growth for
Dettol/Lysol and Veja, with a strong result for Harpic being boosted by Power
Plus and Max Power toilet liquids. Q4 net revenue increased +3% to £353m.
Home Care. Net revenue increased +5% to £1,204m, with growth in both Air Care
and Pest Control. In Air Care, the result was supported by the launch of Air
Wick 100% natural propellant spray and Air Wick Odour Detect, with continued
good growth in candles. In Pest Control, a strong season and growth in
automatic sprays contributed to the performance. Q4 growth was +8% to £330m.
Dishwashing. Net revenue increased +3% to £896m, behind continued success for
Finish Quantum and All-in-1. Q4 net revenue was +5% at £230m.
Other. Net revenue was £227m (Q4: £67m), largely due to the inclusion of
certain brands from the acquisition of SSL and Paras.
Total Household and Health & Personal Care. Net revenue was ahead by +14% (+3%
LFL) to £8,408m, adjusted operating profit increased 16% to £1,864m. In Q4,
total Household and Health & Personal Care net revenue grew +11% to £2,128m,
with LFL growth of +5%. Adjusted operating profit increased by 14% to £550m.
Food. Net revenue grew +7% to £315m, with a good performance from the consumer
brands of French's Yellow Mustard and Frank's Red Hot Sauce, boosted by
additional marketing investment. Adjusted operating profit increased +13% to
£95m. Q4 net revenue grew +9% and adjusted operating profit was £36m (+16%).
New Product Initiatives: H1 2012
To support its growth aspirations for 2012, RB today announces a number of new
product initiatives for the first half of 2012. These include:-
* Nurofen Express Soluble Powder. The first dissolvable ibuprofen and the
fastest ever Nurofen, gets to work in 5 minutes.
* Durex. Rollout of Durex Performax Intense, a more intense experience for
both men and women. Launch of Durex Perfect Glide, the longest lasting
lubricant ever, based on silicon for a warm touch.
* Scholl. Launch of the 2 in 1 Scholl Express Corn Pen, fast and effective
treatment without unsightly plasters.
* Dettol Daily Care personal care range, gentle care and protection for
complete skin health. Dettol Re-Energise personal care range, deeply
clean, healthy and re-energised.
* Lysol. Launch of Lysol No Touch Kitchen System - cleans dishes, sparkles
surfaces and gently cleans hands.
* Cillit Bang. Launch of Cillit Bang All-in-1 Dish & Surface, a no-touch
system for sparkling dishes and gleaming surfaces.
* Muse No Touch Foaming Hand Wash. A unique dispenser that delivers the
right amount of foam. Launch in Japan where 60% of the market is now in
Foam.
* Finish Quantum Ultra Shine - leaves nothing behind but the shine. New
packaging for Finish Quantum and Finish All-in-1 in consumer preferred
waterproof re-sealable pouches.
* Clearasil PerfectaWash, automatically delivers the perfect dose for visibly
clearer skin without over drying.
* Veet Easy Wax Electrical roll-on - Home waxing, Salon results, it's that
easy.
* Vanish Power Shots, new gel caps from Vanish with the perfect dose for
stain gone. Vanish Oxi Powerlift, new formulation of Powder to powerlift
dried-in and greasy stains.
* Air Wick Fabric and Air spray, with fresh bubbles that rest on fabrics for
up to 12 hours to be released by natural movement.
* Air Wick Colours of Nature, new range of fragrances based on vibrant
colours and scents in Nature. Air Wick National Parks, with scents
inspired by US National Parks (in partnership with National Parks
Foundation).
Financial Review
Basis of preparation. The unaudited financial information is prepared in
accordance with IFRSs as adopted by the European Union and IFRSs as issued by
the International Accounting Standards Board, and with the accounting policies
set out in the Group's 2010 Annual Report and Financial Statements, and as
updated by the 2011 Interim Statement.
Constant exchange. Movements in exchange rates relative to sterling affect
actual results as reported. The constant exchange rate basis adjusts the
comparative to exclude such movements, to show the underlying growth of the
Group.
Net finance expense. Net finance expense was £19m (2010: net finance income of
£6m), reflecting the acquisition of SSL and Paras. The 2011 net finance
expense includes a £4m exceptional charge in respect of financial costs
associated with the acquisition of SSL (2010: £3m).
Tax. The underlying effective tax rate was 26% (2010: 26%).
Net working capital (inventories, short-term receivables and short-term
liabilities excluding borrowings and provisions) of minus £910m was a £15m
deterioration versus the 31 December 2010 level due mainly to an increase in
inventories and a decrease in Tax liabilities.
Cash flow. Cash generated from operating activities was £2,430m (2010:
£2,215m) and net cash flow from operations was £1,581m (2010: £1,386m). Net
interest paid was £13m (2010: net interest received of £8m) and tax payments
were relatively flat at £677m (2010: £679m) due to the settlement of a number
of outstanding matters in 2010. Capital expenditure was lower than the prior
year at £205m (2010: £367m), due to the buy back of the remaining sales,
marketing and distribution rights to Suboxone, Subutex and Temgesic in Europe
and the Rest of the World and the investment in certain health and personal
care brands from Combe Incorporated in 2010.
Net debt at the end of the year was £1,795m (December 2010: net debt of
£2,011m), a reduction of £216m. This reflected strong free cash flow
generation, offset by the payment of two dividends totaling £873m and the
acquisition of businesses (principally Paras) for £460m. The Group regularly
reviews its banking arrangements and currently has adequate facilities
available to it.
Restructuring charge. A total pre-tax exceptional charge of around £250m was
announced in respect of the acquisition of SSL and further reconfiguration of
the enlarged Group.
In FY 2011, an exceptional pre-tax charge of £96m was incurred, of which £92m
is reflected in reported operating profit and £4m is included in net interest.
The remainder of the restructuring charge, of approximately £50m, is expected
to be incurred in 2012.
In FY 2010, there was an exceptional pre-tax charge of £104m, reflected in
reported operating profit (£101m, of which £22m related to transaction fees)
and net interest (£3m, being financing costs associated with the acquisition).
Balance sheet. At the end of 2011, the Group had total equity of £5,781m
(2010: £5,130m), an increase of +13%. Net debt was £1,795m (2010: net debt of
£2,011m) and total capital employed in the business was £7,576m (2010:
£7,141m).
This finances non-current assets of £11,188m (2010: £10,787m), of which £732m
(2010: £735m) is tangible fixed assets, the remainder being goodwill, other
intangible assets, deferred tax, available for sale financial assets and other
receivables. The Group has net working capital of minus £910m (2010: minus
£925m), current provisions of £60m (2010: £164m) and long-term liabilities other
than borrowings of £2,642m (2010: £2,555m).
The Group's financial ratios remain strong. Return on shareholders' funds (net
income divided by total shareholders' funds) was 30.3% on a reported basis and
31.4% on an adjusted basis (2010: 30.6% on a reported basis and 32.4% on an
adjusted basis).
Dividends. The Board of Directors recommends a final dividend of 70 pence
(2010: 65 pence), an increase of +8%, to give a full year dividend of 125 pence
(2010: 115 pence), an overall increase of +9%. The dividend, if approved by
shareholders at the AGM on 3 May 2011, will be paid on 31 May to shareholders
on the register at the record date of 24 February. The ex-dividend date is 22
February and the last date for election for the share alternative to the
dividend is 10 May. The final dividend will be accrued once approved by
shareholders.
Contingent liabilities. The Group is involved in a number of investigations by
government authorities and has made provisions for such investigations, where
appropriate. Where it is too early to determine the likely outcome of these
matters, the Directors have made no provision for such potential liabilities.
During 2011, RB agreed to pay a €24m fine in the settlement of an investigation
by the German Federal Cartel Office involving price fixing agreements on
detergent and cleansing agents between 2005 and 2008.
The Group has received a civil claim for damages from the Department of Health
and others in the United Kingdom, regarding alleged anti-competitive activity
involving the Gaviscon brand. The claim is under review and although it is at
an early stage, the Directors do not believe that any potential impact would be
material to the Group financial statements.
The Group from time to time is involved in discussions in relation to ongoing
tax matters in a number of jurisdictions around the world. Where appropriate,
the Directors make provisions based on their assessment of each case.
2012 Targets
2012 will be a year of transition and investment for RB, the details of which
will be explained in the strategic overview press release, which will be
released later this morning. We continue to be committed to market
outperformance and therefore target the following:
Net revenue growth (excluding RBP) of +200bps versus our market growth. We
expect market growth in 2012 to be 1-2%.
Operating margins (excluding RBP) to be maintained.
The likelihood of generic competition to Suboxone makes setting total Company
(inclusive of RBP) targets impossible at this time. RB will aim to update the
market on total Company targets later in the year.
For further information, please contact:
Reckitt Benckiser +44 (0)1753 217800
Richard Joyce
Director, Investor Relations
Tom Corran
Consultant, Investor Relations
Andraea Dawson-Shepherd
SVP, Global Corporate Communications and Affairs
Brunswick(Financial PR) +44 (0)20 7404 5959
David Litterick / Max McGahan
The preliminary results for the year ended 31 December 2011 and the results for
the year ended 31 December 2010 have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by the
European Union and IFRSs as issued by the International Accounting Standards
Board. The unaudited financial statements for 2011 are prepared using
accounting policies in accordance with those set out in the Group's 2010 Annual
Report and Financial Statements, and as updated by the 2011 Interim Statement.
The financial information set out in the announcement does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2010 were approved by
the Board of Directors on 11 March 2011 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The statutory accounts for the
year ended 31 December 2011 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 Group's Annual
General Meeting.
Cautionary note concerning forward-looking statements
This document contains statements with respect to the financial condition,
results of operations and business of Reckitt Benckiser and certain of the
plans and objectives of the Group with respect to these items. These
forward-looking statements are made pursuant to the "Safe Harbor" provisions of
the United States Private Securities Litigation Reform Act of 1995. In
particular, all statements that express forecasts, expectations and projections
with respect to future matters, including trends in results of operations,
margins, growth rates, overall market trends, the impact of interest or
exchange rates, the availability of financing to the Company, anticipated cost
savings or synergies and the completion of strategic transactions are
forward-looking statements. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of factors
discussed in this report, that could cause actual results and developments to
differ materially from those expressed or implied by these forward-looking
statements, including many factors outside Reckitt Benckiser's control. Past
performance cannot be relied upon as a guide to future performance.
The Group at a Glance (Unaudited)
Quarter ended Year ended
31 December 31 December
2011 2010 2011 2010
£m £m £m £m
2,416 2,277 Net revenue - total 9,485 8,453
+3% +5% Net revenue growth - like-for-like +4% +6%
+8% +9% Net revenue growth - constant +13% +7%
+6% +10% Net revenue growth - total +12% +9%
60.5% 61.5% Gross margin 59.7% 60.6%
777 754 EBITDA - adjusted * 2,642 2,375
32.2% 33.1% EBITDA margin - adjusted * 27.9% 28.1%
708 602 EBIT 2,395 2,130
739 703 EBIT - adjusted * 2,487 2,231
29.3% 26.4% EBIT margin 25.3% 25.2%
30.6% 30.9% EBIT margin - adjusted * 26.2% 26.4%
704 597 Profit before tax 2,376 2,136
521 414 Net income 1,745 1,568
546 507 Net income - adjusted * 1,818 1,661
71.5p 57.0p EPS, basic, as reported 239.8p 216.5p
74.2p 69.0p EPS, adjusted and diluted * 247.1p 226.5p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data 31 December 31 December
2011 2010**
£m £m
Net working capital * (910) (925)
Net debt (1,795) (2,011)
* Net working capital is defined as inventories, short term receivables and
short term liabilities, excluding borrowings and provisions.
** The fair value of the identifiable assets and liabilities at the date of
acquisition of SSL were provisionally estimated and disclosed in the 2010
annual report and financial statements. Final fair values at acquisition date
are now confirmed and have been recorded as a prior year restatement of the
balance sheet at 31 December 2010.
Shares in issue
Millions
31 December 2010 725.9
Issued 2.7
31 December 2011 728.6
Group Income Statement Analysis (Unaudited)
Quarter ended Year ended
31 December 31 December
2011 2010 % 2011 2010 %
change change
£m £m £m £m
2,416 2,277 +6 Net revenue 9,485 8,453 +12
(954) (877) Cost of sales (3,823) (3,332)
1,462 1,400 +4 Gross profit 5,662 5,121 +11
(754) (798) Net operating expenses (3,267) (2,991)
708 602 +18 Operating profit 2,395 2,130 +12
739 703 +5 Operating profit before exceptional 2,487 2,231 +11
items
(31) (101) Exceptional items (92) (101)
708 602 +18 Operating profit 2,395 2,130 +12
6 6 Finance income 23 21
(10) (11) Finance expense* (42) (15)
(4) (5) Net finance (expense) / income (19) 6
704 597 +18 Profit on ordinary activities before 2,376 2,136 +11
taxation
(180) (181) Tax on profit on ordinary activities (622) (566)
524 416 +26 Net income for the period 1,754 1,570 +12
3 2 Attributable to non-controlling 9 2
interests
521 414 +26 Attributable to owners of the parent 1,745 1,568 +11
524 416 +26 Net income for the period 1,754 1,570 +12
Earnings per ordinary share:
71.5p 57.0p On net income for the period, basic 239.8p 216.5p
70.8p 56.3p On net income for the period, 237.1p 213.8p
diluted
Earnings per ordinary share -
adjusted**:
75.0p 69.9p On net income for the period, basic 249.9p 229.4p
74.2p 69.0p On net income for the period, 247.1p 226.5p
diluted
* FY 2011 includes an exceptional charge of £4m (2010: £3m) in respect of
financial costs associated with the acquisition of SSL. Q4 2011 includes an
exceptional charge of £1m (2010: £3m).
** Adjusted to exclude the impact of exceptional items.
Average common shares outstanding:
(millions)
728.6 725.7 Basic 727.6 724.2
735.9 734.9 Diluted 735.8 733.3
Group Statement of Comprehensive Income
For the year ended 31 December (unaudited)
2011 2010
£m £m
Net income for the year 1,754 1,570
Other comprehensive income:
Net exchange adjustments on foreign currency translation, net of (226) 103
tax
Actuarial (losses) / gains, net of tax (49) 4
Gains / (losses) taken to reserves on cash flow hedges, net of tax 3 (2)
Other comprehensive income for the year, net of tax (272) 105
Total comprehensive income for the year 1,482 1,675
Attributable to non-controlling interests 4 3
Attributable to owners of the parent 1,478 1,672
Group Balance Sheet
For the year ended 31 December (unaudited)
2011 2010
£m £m
Restated*
ASSETS
Non-current assets:
Goodwill and other intangible assets 10,258 9,865
Property, plant and equipment 732 735
Deferred tax assets 150 146
Available for sale financial assets 10 12
Retirement benefit surplus 32 26
Other receivables 6 3
11,188 10,787
Current assets:
Inventories 758 643
Trade and other receivables 1,442 1,342
Derivative financial instruments 67 37
Tax receivables 21 14
Available for sale financial assets 11 11
Cash and cash equivalents 639 588
2,938 2,635
Total assets 14,126 13,422
LIABILITIES
Current liabilities:
Borrowings (2,505) (2,641)
Provisions for liabilities and charges (60) (164)
Trade and other payables (2,901) (2,624)
Derivative financial instruments (7) (10)
Tax liabilities (227) (295)
(5,700) (5,734)
Non-current liabilities:
Borrowings (3) (3)
Deferred tax liabilities (1,772) (1,714)
Retirement benefit obligations (502) (479)
Provisions for liabilities and charges (118) (145)
Tax liabilities (211) (209)
Other non-current liabilities (39) (8)
(2,645) (2,558)
Total liabilities (8,345) (8,292)
Net assets 5,781 5,130
EQUITY
Capital and reserves:
Share capital 73 73
Share premium 86 59
Merger reserve (14,229) (14,229)
Hedging reserve (1) (4)
Foreign currency translation reserve 110 331
Retained earnings 19,672 18,828
5,711 5,058
Non-controlling interest 70 72
Total equity 5,781 5,130
* The fair value of the identifiable assets and liabilities at the date of
acquisition of SSL were provisionally estimated and disclosed in the 2010
annual report and financial statements. Final fair values at acquisition date
are now confirmed and have been recorded as a prior year restatement of the
balance sheet at 31 December 2010. There is no impact to the income statement
for the year ended 31 December 2010.
Group Statement of Changes in Equity
For the year ended 31 December (unaudited)
Foreign Total
currency attributable Non-
Share Share Merger Hedging translation Retained to equity controlling
capital premium reserve reserve reserve earnings shareholders interests Total
Balance at 1 January
2010 72 (14,229) (2) 229 17,942 4,012 2 4,014
Comprehensive income
Net income for the year 1,568 1,568 2 1,570
Other comprehensive
income
Actuarial gains, net of tax 4 4 4
Losses on cash flow
hedges, net of tax (2) (2) (2)
Net exchange
adjustments on foreign
currency translation, net
of tax 102 102 1 103
Total other
comprehensive income (2) 102 4 104 1 105
Total comprehensive
income (2) 102 1,572 1,672 3 1,675
Transactions with
owners
Proceeds from share
issue 1 59 60 60
Share based payments 62 62 62
Deferred tax on share
awards (7) (7) (7)
Current tax on share
awards 12 12 12
Treasury shares re-issued 20 20 20
Dividends (773) (773) (773)
Non-controlling interest
arising on business
combination 67 67
Total transactions with owners 1 59 (686) (626) 67 (559)
Balance at 31 December
2010 73 59 (14,229) (4) 331 18,828 5,058 72 5,130
Comprehensive income
Net income for the year 1,745 1,745 9 1,754
Other comprehensive
income
Actuarial losses, net of tax (49) (49) (49)
Gains on cash flow
hedges, net of tax 3 3 3
Net exchange
adjustments on foreign
currency translation, net
of tax (221) (221) (5) (226)
Total other
comprehensive income 3 (221) (49) (267) (5) (272)
Total comprehensive
income 3 (221) 1,696 1,478 4 1,482
Transactions with
owners
Proceeds from share
issue 27 27 27
Share based payments 61 61 61
Deferred tax on share
awards (13) (13) (13)
Current tax on share
awards 2 2 2
Non-controlling interest
arising on business
combination 1 1
Dividends (873) (873) (7) (880)
Put option issued to non
controlling interest (29) (29) (29)
Total transactions with
owners 27 (852) (825) (6) (831)
Balance at 31 December
2011 73 86 (14,229) (1) 110 19,672 5,711 70 5,781
Group Cash Flow Statement
For the year ended 31 December (unaudited)
2011 2010
£m £m
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations:
Operating profit 2,395 2,130
Depreciation and amortisation of tangible / intangible assets 157 144
Fair value losses / (gains) 1 (3)
Gain on sale of property, plant and equipment and intangible (9) (32)
assets
Other non-cash movements - 4
Increase in inventories (131) (50)
Increase in trade and other receivables (113) (243)
Increase in payables and provisions 69 203
Share award expense 61 62
Cash generated from operations: 2,430 2,215
Interest paid (35) (11)
Interest received 22 19
Tax paid (677) (679)
Net cash generated from operating activities 1,740 1,544
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (164) (170)
Purchase of intangible assets (41) (197)
Disposal of property, plant and equipment 5 12
Disposal of intangible assets 12 30
Acquisition of businesses, net of cash acquired (460) (2,466)
Purchase of short term investments (2) (7)
Maturity of long term investments 2 8
Net cash used in investing activities (648) (2,790)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares 27 80
Proceeds from borrowings 249 2,966
Repayments of borrowings (400) (802)
Dividends paid to the owners of the parent (873) (773)
Dividends paid to non controlling interests (7) -
Net cash (used in) / generated from financing activities (1,004) 1,471
Net increase in cash and cash equivalents 88 225
Cash and cash equivalents at beginning of year 568 334
Exchange (losses) / gains (22) 9
Cash and cash equivalents at end of year 634 568
Cash and cash equivalents comprise
Cash and cash equivalents 639 588
Overdraft (5) (20)
634 568
RECONCILIATION OF NET CASH FLOW FROM OPERATIONS
Net cash generated from operating activities 1,740 1,544
Net purchase of property, plant and equipment (159) (158)
Net cash flow from operations 1,581 1,386
Management uses net cash flow from operations as a performance measure.
Earnings per Ordinary Share
For the year ended 31 December (unaudited)
The reconciliation of the weighted average number of shares used in the
calculations of the basic and diluted earnings per share is set out below:
Reported basis
2011 2010
Net Average Earnings Net Average Earnings
income number of per income number of per
for the shares share for the shares share
year pence year pence
£m £m
Net income 1,745 727,628,580 239.8 1,568 724,192,584 216.5
attributable to owners
of the parent
Dilution for Executive 7,423,757 8,264,803
options outstanding
and Executive
Restricted Share Plan
Dilution for Employee 780,818 839,710
Sharesave Scheme
options outstanding
On a diluted basis 1,745 735,833,155 237.1 1,568 733,297,097 213.8
Adjusted basis
2011 2010
Net Average Earnings Net Average Earnings
income number of per income number of per
for the shares share for the shares share
year £m pence year £m pence
Net income 1,818 727,628,580 249.9 1,661 724,192,584 229.4
attributable to
owners of the parent
Dilution for 7,423,757 8,264,803
Executive options
outstanding and
Executive Restricted
Share Plan
Dilution for Employee 780,818 839,710
Sharesave Scheme
options outstanding
On a diluted basis 1,818 735,833,155 247.1 1,661 733,297,097 226.5
The Directors believe that a diluted earnings per ordinary share, adjusted for
the impact of the exceptional charge (net of tax) in the current year, provides
the most meaningful measure of earnings per ordinary share.
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