Annual Financial Report

RNS Number : 9875I
Reckitt Benckiser Group PLC
31 March 2015
 



31 March 2015

 

 

RECKITT BENCKISER GROUP PLC

 

Annual Report 2014 and Notice of the 2015 Annual General Meeting

 

Reckitt Benckiser Group plc ("RB" or the "Company") released its preliminary announcement of annual results ("Preliminary Announcement") for the year ended 31 December 2014 on 11 February 2015.  Further to the Preliminary Announcement, RB confirms that it has today published its Annual Report and Financial Statements 2014 ("2014 Annual Report") and Notice of the Annual General Meeting 2015 ("2015 AGM Notice").

 

Copies of both documents have today been posted to shareholders and are available on the Company's website at www.rb.com.

 

In compliance with LR 9.6.3, the following documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/nsm

 

·     2014 Annual Report

·     2015 AGM Notice

·     Form of Proxy for the 2015 Annual General Meeting

 

The Company's 2015 Annual General Meeting will be held at 11.15 a.m. on Thursday 7 May 2015 at the London Heathrow Marriott Hotel, Bath Road, Hayes, Middlesex UB3 5AN.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Preliminary Announcement. That information, together with the information set out in the Appendix below, which is extracted from the 2014 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5R. This announcement is not a substitute for reading the full 2014 Annual Report. Page numbers in the extracted information below refer to page numbers in the 2014 Annual Report.

 

Enquiries:

 

William R Mordan

Company Secretary

Tel: +44 (0)1753 217800

 

 

 

About RB:

 

RB* is the world's leading consumer health and hygiene company. The company has operations in over 60 countries, with headquarters in London, Dubai and Amsterdam, and sales in almost 200 countries. The company employs approximately 37,000 people worldwide.

With a purpose of delivering innovative solutions for healthier lives and happier homes, RB is in the top 20 of companies listed on the London Stock Exchange. Today it is the global No 1 or No 2 in the majority of its fast-growing categories, driven by an exceptional rate of innovation. Its health, hygiene and home portfolio is led by 19 global Powerbrands of  Nurofen, Strepsils, Gaviscon, Mucinex, Durex, Scholl, Clearasil, Lysol, Dettol, Veet, Harpic, Bang, Mortein, Finish, Vanish, Calgon, Air Wick, Woolite and French's.  75% of core revenues came from the health and hygiene categories of the portfolio.

 

Fuelled by a new breed of talent who blend intellectual curiosity with commitment to the highest quality standards, RB is set to redefine the world of consumer health and hygiene.  RB people and its culture are at the heart of the company's success. They have an intense drive for achievement and a desire to outperform wherever they focus, including in sustainability where the company is targeting a 1/3 reduction in water impact, 1/3 reduction in carbon and to have 1/3 of its net revenue coming from more sustainable products by 2020. It is also the Save the Children charity's largest FMCG global partner, with a new partnership vision to radically reduce the world's second biggest killer of under-fives, diarrhoea.  Overall RB wants to reach 200 million people to improve their health and hygiene behaviour.  

 


For more information visit
www.rb.com 

 

*RB is the trading name of the Reckitt Benckiser group of companies

 

 

APPENDIX

 

The primary purpose of this announcement is to inform the market about the publication of RB's 2014 Annual Report and 2015 AGM Notice.

The information below, which is extracted from the 2014 Annual Report is included solely for the purpose of complying with DTR 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Preliminary Announcement. Together these constitute the material required by DTR 6.3.5R to be communicated in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2014 Annual Report.

Page and note references in the text below relate to pages and notes in the 2014 Annual Report.

 

(i)   STRATEGIC RISKS (pages 24 to 27)

The following table provides a summary review of the strategic risks and uncertainties that could affect the Group, as identified by management. RB operates a major risk assessment process to identify, assess, control, mitigate and review those risks it considers to be most significant to the successful execution of our strategy. 

 

The most senior managers of our business dedicate time each year in a facilitated discussion with the Group risk team to consider the risk environment for their particular functional or geographic area of responsibility and how their emerging or known risks could impact on the

achievement of the Group's strategic objectives. Similar sessions are held with the Group's external advisors. The key content from these sessions is then synthesised into the Group's 'Top Ten' risks, with each risk having an Executive Committee (EC) owner, who is accountable for executing the current control strategy and for compiling and executing a plan of mitigating actions to properly manage the Group's exposure to that risk. Progress is reviewed periodically and the full output from the major risk assessment process is formally submitted annually by the EC to the Board for its consideration and endorsement. Through the course of each year, the EC and Board agendas address all of the top risks through specific 'deep dives' to ensure proper focus and progress with mitigation. The Group's activities also expose it to a number of other risks which, while also actively managed, may still adversely impact the business and its financials. A more detailed consideration of the full range of risks faced by the Group appears on pages 126 to 132 of this report.

 

'Top Ten' risks

1. Health Regulatory Compliance

2. Technology Failure

3. Business Interruption

4. Legal Non-Compliance

5. Tax Legislation

6. Loss of Key Management

7. Brand Reputation

8. Actives Upscheduling

9. Developing Markets' Slow-down

10. 'Black Swan' Event

 

Exchange rate risk

A description of the exchange rate risk to the Group, and the means used to mitigate that risk, appears on page 127 (General Financial Risks of a Global Company) and on pages 127 to 128 (Currency Exchange).

 

 

Major Risk

Description

Context

Mitigation

Health Regulatory

Compliance

1

 

Risk that non-compliance

with regulations (e.g. licences,manufacturing, products and laws)

results in significant financial losses

arising from regulator-enforced factory closures, product recalls,delayed launches, penalties, etc.

Regulation is imposed in respect of, but not limited

to, ingredients, manufacturing standards, labour

standards, product safety and quality, marketing,

packaging, labelling, storage, distribution,

advertising, imports and exports, social and environmental responsibility and health and safety.

These regulations can change and may become more stringent. Additionally we are required to obtain, maintain and update licences for such

products. If we are found to be non-compliant with applicable laws and regulations, we could be subject to civil remedies such as fines, injunctions or product recalls, and/or criminal sanctions.

The Group has an ongoing Regulatory Excellence Programme,

which continues to make good progress. RB employs senior

regulatory and legal specialists at a Group, regional and local level who are responsible for

setting policies and ensuring that all employees are aware of, and comply with, both Group policies

and the laws and regulations relevant to their roles.

Technology

Failure

2

Risk that targets cannot be delivered due to technology failure

or a lack of growth-enabling systems and infrastructure

capabilities, leading to business disruption.

Failures or disruptions to our systems or the systems of third parties on whom we rely, due to any

number of causes, particularly if prolonged, or, if

any failure or disruption were to impact our backup

or disaster recovery plans, could result in a loss of key data and/or affect our operations. Sub-optimal

implementations of new systems could occur. Our computer systems, software and networks may be vulnerable to unauthorised access, computer viruses or other malicious code and other cyber threats that could have a security impact. All of these could be

costly to remedy and we may be subject to litigation.

The Group is engaged in a rolling

Enterprise Resource Planning (ERP) update programme. Disaster recovery plans are in place and are tested periodically. It also

invests in security measures and

anti-virus software to safeguard against this threat. Maintenance

of current systems throughout the

execution of the ERP programme

implementation is an ongoing priority.

Business

Interruption

3

 

 

Risk that our business continuity plans, including monosourcing

(materials and products) are inadequate and we face interruptions of our supply chain and disruptions in our production facilities, which could materially

adversely affect our results of operations.

We may face risks to continuity of supply arising from certain specialised suppliers, both of raw materials and of third party manufactured items.

Significant disruptions to our own, or our suppliers'

operations, may affect our ability to source raw

materials and negatively impact our costs. Suppliers

may fail to fulfil their contractual obligations.

Replacing suppliers may require them to be qualified

under industry, governmental or our own standards,

which could require investment and may take time to resolve.

Suppliers of key raw and packaging materials, co-packers of finished product and the Group's

manufacturing facilities and key

technologies are risk assessed for

their potential impact on supply disruption for branded products.

Business continuity plans are in place throughout the Group and major sites are routinely and independently assessed towards

achievement of a highly protected

site status.

Legal Non-Compliance

4

 

 

Risk that we are not fully compliant with UK and local laws including

the UK Bribery Act, Competition laws and Data and Privacy

Protection laws, resulting in damage to RB's reputation and

significant potential fines.

Failure to comply with applicable anti-trust and competition laws, rules and regulations in any

jurisdiction may result in civil and/or criminal legal

proceedings. We are subject to the UK Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977, as amended, and similar laws worldwide. Given our extensive international operations, we

are exposed to significant risks, particularly with

respect to parties not subject to our control such as

agents and joint venture partners, and also through

businesses we acquire. Any violation of applicable money laundering laws could also have a negative impact on us.

The Group is proactive in

addressing legal risks and responds to government

authorities in a forthright and

co-operative manner. A Group

compliance function was formally

established in 2013 and an expansion made to the mandatory

annual online training undertaken

by employees.

Tax

Legislation

5

Risk of significant unprovisioned

cash outflows as a result of tax authority challenge to filed tax

positions in key territories.

We are subject to tax laws and transfer pricing regulations in multiple jurisdictions, including those

relating to the flow of funds between RB and its subsidiaries. Our effective tax rate in any given

financial year reflects a variety of factors that may

not be present in succeeding financial years, and may be affected by changes in the tax laws of the

jurisdictions in which we operate.

The Group takes appropriate care

in establishing new tax positions in support of organisational

operating structures; we are proactive in responding to tax

authorities. The Board considers

that tax exposures are adequately

provided for, whilst recognising that an element of risk will always remain.

Loss of Key

Management

6

Risk that RB cannot implement its

strategies and meet objectives as a result of key management leaving the business who cannot be readily

replaced by equally experienced/

qualified candidates

The market for talent is intensely competitive and

we could face challenges in sourcing qualified

personnel. If we are unable to achieve our performance targets, our senior management would not be entitled to their variable pay, which may operate as a disincentive for them to continue

their employment with us.

 

The Group  structures its reward programme to attract and retain the best people. The formal

succession planning process continues to evolve with plans

being reviewed and updated regularly for key positions and

individuals.

Brand

Reputation

7

 

Risk of significant reputational impact as a result of systemic

product quality issues resulting in undermining of consumer confidence in our brands, particularly in the growing Health

Care portfolio.

Various factors may adversely impact our

reputation, including product quality

inconsistencies or contamination resulting in product recalls. Reputational risks may also arise

from our third parties' labour standards, health,

safety and environmental standards, raw material sourcing, and ethical standards. We may also be the victim of product tampering or counterfeiting or grey imports. Any litigation, disputes on tax matters and pay structures may subject us to

negative attention in the press, which can damage reputation.

The Group has a comprehensive

set of policies, processes and

systems to drive compliance with

good manufacturing practice and monitor quality assurance,

including an appropriately

resourced global quality audit team.

Actives

Upscheduling

8

 

Risk of upscheduling of active ingredients in Health Care to behind the counter or 'Rx' status.

We could be subject to regulatory investigations

or potential  enforcement actions that target active

ingredients, an industry, a set of business practices

or our specific operations.  Regulatory authorities

and consumer groups may request or conduct reviews of the use of certain of our ingredients,

or ingredient legislation may change. These could

result in a need to change our formulations which

could be costly or may not be possible.

The Group monitors and works with health authorities and trade

associations to properly influence

the debate. An RB Governance

Council was established during

2014 to ensure we continue to manage Health Care product

lifecycles in accordance with our

established high standards.

Developing Markets'

Slow-down

9

 

Risk of material impact on Group growth and profit of consumerled

slowdown in key developing markets, exacerbated by increasing currency volatility.

A variety of factors may adversely affect our results of operations and financial condition during periods

of economic uncertainty or instability, social or

labour unrest or political upheaval in the markets in which we operate. Such periods may also lead to government actions, such as imposition of

martial law, trade restrictions, foreign ownership

restrictions, capital, price or currency controls,

nationalisation or expropriation of property or other resources, or changes in legal and regulatory

requirements and taxation regimes.

The Group develops and implements locally robust risk

mitigation programmes designed to generate cost savings and higher returns on investment.

Both results and currency volatility are closely monitored.

Partnerships are strengthened

with distributors to better manage

local risks.

'Black Swan'

Event

10

An absolute worst case scenario with sufficient potential impact

to risk the future of RB as a strong and independent business

operating in its chosen markets.

Significant reputational impact as a result of a

major issue resulting in multiple fatalities, possibly compounded by apparently negligent management

behaviour; extreme adverse press coverage and viral social media linking the RB name to consumer brands, leads to a catastrophic share price fall, very

significant loss of consumer confidence and inability to retain and recruit quality people.

A strong governance framework and operating model are applied to drive compliance, transparency and oversight. Robust Group policies are maintained and

a programme of rolling independent audits operated to

ensure their proper application.

Comprehensive crisis management

training programme and support tools are in place and routinely updated.

Routine Risks

We are subject to a range of compliance and routine risks as

part of everyday business.

In order to manage the more numerous and routine risks, the Group maintains a complete and robust

governance framework.

This consists of a full set of policies, processes and

systems covering all aspects of

compliance, with international

and local laws as well as with the Group's stated minimum control standards. Management

provides primary assurance by

driving risk compliance through

their respective area, regional or functional responsibility.

This is done through regular and detailed business reviews.

Secondary assurance is provided

Independently through a

combination of internal and external audit covering all aspects of the Group's operations.

 

 

(ii)  RELATED PARTY TRANSACTIONS (pages 113 and 125)

 

[NOTE] 25 RELATED PARTY TRANSACTIONS

Subsequent to the demerger of RB Pharmaceuticals on 23 December 2014, the Group continues to lease a building to, and provide operational services to the newly formed Indivior PLC. These transitional services between the Group and Indivior PLC are on an arm's length basis. Adrian Hennah, the Reckitt Benckiser Group plc CFO, also sits on the Board of Directors of Indivior PLC.

 

On 19 March 2013 the Group purchased an additional 25% of Shanghai Manon Trading Company Limited, thereby increasing its share to 75.01%. The consideration for the transaction amounted to 28m, including transaction costs.

 

Key management compensation is disclosed in note 5.

 

The subsidiary undertakings whose results or financial position principally affected the consolidated financial statements at 31 December 2014 are disclosed in note 2 to the Parent Company financial statements.

 

[PARENT COMPANY NOTE] 11 RELATED PARTY TRANSACTIONS

The Company has taken advantage of the exemption within Financial Reporting Standard No. 8 'Related Party Disclosures' not to disclose related party transactions with wholly owned subsidiaries of the Reckitt Benckiser Group. There were no other related party transactions (2013: nil)

 

(iii) DIRECTORS' RESPONSIBILITY STATEMENT

The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the performance, business model and strategy.

 

Each of the Directors, whose names and functions are listed on pages 32 to 34 [as set out below] confirms that, to the best of his/her knowledge:

 

• The Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU and IFRSs as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

 

• The Report of the Directors includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

• In addition, the Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the performance, business model and strategy.

 

 

 

Name                           Function

Adrian Bellamy              Chairman and Non-Executive Director

Rakesh Kapoor              Chief Executive Officer

Adrian Hennah               Chief Financial Officer

Jaspal Bindra                Non-Executive Director

Nicandro Durante           Non-Executive Director

Peter Harf                     Deputy Chairman and Non-Executive Director

Mary Harris                    Non-Executive Director

Kenneth Hydon              Non-Executive Director

Pamela Kirby                 Non-Executive Director

André Lacroix                Senior Independent Director

Sue Shim                      Non-Executive Director

Christopher Sinclair        Non-Executive Director

Judith Sprieser              Non-Executive Director

Douglas Tough              Non-Executive Director

Warren Tucker              Non-Executive Director

 

___________________________________


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