Interim Results
RECKITT AND COLMAN PLC
4 August 1999
Enquiries:
David Saltmarsh
Reckitt & Colman plc
Tel: (+44) 1753 746676
Bobby Leach/Ben Padovan
Shandwick
Tel: (+44) 171 329 0096
Reckitt & Colman plc, the global consumer products group,
anounces Interim Results for the half-year ended 3 July 1999
Summary of results
As
published
£m % change
Turnover 1,043.6 (6.1)
Operating profit 71.2 (58.5)
-excluding Year
2000 costs and
reorganisation 106.3 (43.4)
expenses
Profit before tax 41.6 (72.7)
-adjusted* 78.3 (51.2)
EPS adjusted, diluted
basis 14.3p (49.3)
Base dividend per
share 12.7p 33.7
* Adjusted for Year 2000 costs, restructuring charges and non-operating items.
Operating and Financial Review
We are pleased to report that our action plan to return Reckitt & Colman to
competitiveness and to drive future growth, which we announced in March, is
well under way and our stated annualised cost savings target will be exceeded.
As we expected, our results for the first half of 1999 reflect the impact of
the following key factors:
* our decision to eliminate half and full-year promotion spending by
implementing a destocking programme with our retail customers;
* the continuing economic and financial difficulties in Latin America and
East Asia;
* the first phase of restructuring costs relating to implementation of the
action plan.
In line with expectations, adjusted profit before tax at £78.3m, before Year
2000, restructuring charges and non-operating items, was 51.2% lower than
1998. The effective Group tax rate on the basis of adjusted profit increased
marginally from 24.3% to 25.0%. As a result, earnings attributable to
ordinary shareholders, on an adjusted reported basis, reduced by 51.5%.
Earnings per share was 14.3p on an adjusted, diluted basis.
On a reported basis, turnover at £1,043.6m and operating profit at £71.2m,
after writing-off £10.7m costs relating to Year 2000 compliance and £24.4m
relating to the restructuring programme, were 6.1% and 58.5% lower
respectively than the comparable period last year; these results reflect the
issues noted above. Fluctuations in exchange rates had little impact on the
half-year results. Operating margins, before the deduction of the Year 2000
and restructuring charges, declined from 16.9% to 10.2%.
Gross margins were maintained at 1998 levels despite the difficulties
experienced in achieving price increases in Latin America to offset cost
increases on imported raw materials. There was, however, a significant
increase in total marketing expenditure, which rose from 20.7% to 23.8% of
turnover, an increase which we believe is essential to stimulate an
improvement in top line sales growth. We also increased our investment in
research and development.
There was a net cash outflow from ordinary operations of £21.3m in the first
half, compared to an inflow of £16.9m in 1998. There has, however, been a
favourable cash impact from the Group's efforts to reduce its investment in
working assets. At the end of June net working assets were approximately £27m
lower than they were a year ago, a good start towards achieving the Group's
targeted reduction in total working assets of between £50m and £100m by the
end of 2000. The net debt of the Group at the close of the first half-year
was £639.6m, which compares with the net debt of £589.8m at the close of 1998.
Interim Dividend
The Board has declared an interim dividend of 12.7p per ordinary share, which
will be paid on 7 September 1999 to shareholders on the register at the close
of business on 13 August 1999. In the announcement of the merger with
Benckiser N.V., we stated that the interim dividend would represent
approximately 50% of the expected full year dividend.
Action Plan
Excellent progress has been made in the detailed planning and implementation
of the restructuring programme, which we announced in March. At that time, we
identified the challenges facing our business and committed to an action plan
to achieve £30-40m in annual cost savings by the end of the year 2000. We are
pleased to be able to report that we have significantly exceeded that target
and have now identified approximately £45m in savings. As a result, the
exceptional restructuring charge will be close to £75m, which will be spread
over 1999 and 2000.
The savings released by this programme will be re-deployed within the business
to improve the level and quality of our marketing spend, particularly in
media, and of our research and development activities. We have been careful
to protect the long-term potential of the business and have every confidence
that this programme is the right course of action for us to be taking at this
crucial point in the Group's return to profitable growth.
We will achieve these savings through a combination of the following actions:
* The elimination of our half- and full-year promotional spending ('trade
loading') and its related inefficiencies;
* A reduction in headcount of approximately 1,500 employees spread throughout
our business units and corporate headquarters; and
* The outsourcing of operations and the consolidation, closure or sale of 15
manufacturing and administrative facilities worldwide.
Specific plans are in place and our business units have already begun
implementation. We expect to realise approximately £4m of the estimated £45m
savings in 1999. The total cost savings already identified break down as
follows: Europe £15m, North America £8m, Latin America £3m, East & South Asia
£6m, Africa & Middle East £3m, Australasia £1m and corporate overheads £9m.
We are giving wider operational responsibility to regional management, while
continuing to set the strategic direction from a leaner, more efficient global
headquarters. Smaller business units are being consolidated into regional
centres, and we will outsource some sales tasks to distributors or licensees.
Finally, although we have significantly reduced the size and complexity of our
supply chain over the past few years, we will improve this further in 1999 and
2000.
Comparisons of turnover in the following reviews are on a constant exchange
rate basis, which excludes the effects of exchange rate fluctuations except in
the case of Brazil which is reported at actual rates (see segmental analyses).
Operating margins are shown before Year 2000 costs and restructuring costs.
Regional Review
Europe, 35.5% of the Group's turnover, increased sales by 3.6% fuelled by the
UK pharmaceutical business with Lemsip, Gaviscon and the buprenorphine
products all recording good growth. Operating margins fell from 19.6% to
15.7% due principally to the strong growth in lower margin air care products
and a rescheduling of trade marketing spend. Sales were supported by a number
of new and existing product development launches and we appointed a new
regional director in July.
North America, which represents 35.4% of the Group's turnover, experienced a
sales decline of 6.1% as the business adjusted to the full effects of
destocking. Sales were also affected by softer consumption in the North
American household market as a whole, although our key brands generally
maintained or grew market share. Operating margins fell from 15.8% to 10.1%
after significantly increasing marketing spend. The level of new product
introductions picked up towards the end of the first half and will continue to
gather momentum. Food sales declined by 2.4% due to the planned destocking
programme.
Latin America represents 9.6% of total turnover. Sales (with Brazil
translated at actual rates) declined by 32.9%, reflecting the severe impact of
the currency devaluation in Brazil and the resulting economic downturn.
Operating margin fell from 19.4% to 0.5%. The economic recession and
resulting weaker consumer demand has been felt across the whole region,
although our market shares in key brands are holding despite aggressive
competitor activity. A new regional director was recruited in March 1999 and
new country managers have been appointed in Mexico and Argentina.
East & South Asia, which represents 7.3% of Group turnover, experienced a
slight decline in sales of 1.0%, while operating margins fell from 4.1% to a
negative 4.6%. These figures mask an extremely strong performance by South
Asia, where sales grew by 16%. India's growth was principally driven by the
pest control, antiseptics, lavatory and surface care categories, with both
Mortein and Dettol registering substantial share gains. Our East Asian
performance continues to be adversely affected by the economic situation and
sales were also considerably affected by destocking. There are, however, some
signs of an increase in consumer demand for the second half.
Africa & Middle East represents 6.5% of total Group turnover. Sales fell by
7.2% and operating margins were significantly eroded, falling from 22.1% to
12.6%. The region has been subject to continuing economic and political
instability which has contributed to a serious lack of consumer confidence.
Sales have also been hit by destocking, particularly in Pakistan.
Pharmaceutical sales in Pakistan have suffered as well due to the Government's
decision to reduce analgesic prices. Marketing investment has been increased
across the region in support of new product development and we expect an
improved performance in the second half.
Australasia represents 5.7% of total turnover. Sales declined 7.2% as a
result of destocking and operating margins declined from 12.4% to 8.9%.
Marketing investment across the region was increased in support of new product
launches in pest control, air care, fabrics care and surface care, which will
drive sales in the second half.
Category Review
Sales in our global categories declined by 7.1% as the destocking programme
affected all areas. The best performances were recorded in the pharmaceutical
categories where sales were up by 4.9%, with our core categories of
analgesics, cold/flu, antiseptic and gastro-intestinal products producing good
results.
Our household and food categories declined by 8.1% and 6.5% respectively,
primarily due to destocking. Market shares were generally held and over 75%
of our brands retained their number one or number two market positions.
First half-year category sales were disappointing, as predicted. However, we
expect our 21% increase in consumer spending this year to support an
increasing number of new product introductions, with results beginning to flow
through in the second half.
In particular, we will increase significantly our media investment in the US.
Outlook
Our action plan to improve the Group's competitive position is progressing as
planned. We have significantly increased our speed-to-market and the rate of
new product introductions, as we promised in March, and the underlying
consumption of our products remains sound. We remain confident that the
expected improvement in sales performance in the second half-year will be
achieved.
Announcement of merger with Benckiser N.V.
On 27 July 1999, the Boards of Reckitt & Colman plc and Benckiser N.V.
announced their intention to propose to their respective shareholders a merger
of the two companies. Full details of the merger will be sent to shareholders
shortly. Reckitt & Colman shareholders will have an opportunity to vote on
the merger at an Extraordinary General Meeting.
Group profit and loss account
for the half year ended 3 July 1999: unaudited
1st half 1st half Full year
1999 1998 1998
restated
£m £m £m
----------------------------------------------------------------------------
Turnover - continuing operations 1,043.6 1,110.9 2,202.4
----------------------------------------------------------------------------
Operating profit - continuing
operations
Ongoing 106.3 187.7 319.7
Reorganisation costs (24.4) - -
Year 2000 costs (10.7) (16.0) (31.5)
----------------------------------------------------------------------------
Total operating profit 71.2 171.7 288.2
----------------------------------------------------------------------------
Non-operating items:
(Loss)/Profit on disposal of
businesses (discontinued operations) (3.1) 7.0 (7.0)
Profit on disposal of tangible fixed
assets (continuing operations) 1.5 1.1 1.0
----------------------------------------------------------------------------
Profit on ordinary activities before
interest 69.6 179.8 282.2
Interest payable less receivable (28.0) (27.4) (54.4)
----------------------------------------------------------------------------
Profit on ordinary activities before
taxation 41.6 152.4 227.8
Tax on profit on ordinary activities
- UK (3.6) (10.9) (11.9)
- overseas (11.6) (27.2) (46.3)
----------------------------------------------------------------------------
Profit on ordinary activities after
taxation 26.4 114.3 169.6
Attributable to equity minority
interests (0.6) (2.0) (4.1)
Dividends on preference shares (0.1) (0.1) (0.2)
----------------------------------------------------------------------------
Profit for the period 25.7 112.2 165.3
Ordinary dividends: base dividend (51.8) (38.7) (103.2)
enhancement - (0.8) (0.8)
----------------------------------------------------------------------------
Retained (loss)/profit for the period (26.1) 72.7 61.3
----------------------------------------------------------------------------
Earnings per ordinary share
On profit for the period 6.3p 27.5p 40.6p
On profit for the period, diluted 6.3p 26.5p 39.7p
On adjusted profit, diluted 14.3p 28.2p 46.7p
Ordinary dividends per share
Base dividend 12.7p 9.5p 25.3p
Additional enhancement -p 0.2p 0.2p
----------------------------------------------------------------------------
The 1998 half year consolidated profit and loss account has been restated as
a result of the change in presentation of profits/losses on the disposal of
minor brands and tangible fixed assets.
Adjusted earnings per ordinary share on a diluted basis for the 1998 half
year has been restated as a result of the adoption of FRS14 (Earnings per
Share).
Group balance sheet
As at 3 July 1999: unaudited
1st half 1st half Full year
1999 1998 1998
£m £m £m
----------------------------------------------------------------------------
Fixed assets:
Intangible assets 1,260.4 1,217.9 1,219.0
Tangible assets 399.4 376.6 401.2
----------------------------------------------------------------------------
1,659.8 1,594.5 1,620.2
----------------------------------------------------------------------------
Current assets:
Stocks 172.2 169.4 157.6
Debtors due within one year 422.1 447.0 462.2
Debtors due after more than one year 138.9 154.2 130.8
Investments 170.6 268.5 265.8
Cash at bank and in hand 31.8 47.2 50.9
----------------------------------------------------------------------------
935.6 1,086.3 1,067.3
----------------------------------------------------------------------------
Current liabilities:
Creditors due within one year:
Borrowings (287.4) (301.4) (241.4)
Other (532.4) (571.8) (556.6)
----------------------------------------------------------------------------
(819.8) (873.2) (798.0)
----------------------------------------------------------------------------
Net current assets 115.8 213.1 269.3
----------------------------------------------------------------------------
Total assets less current liabilities 1,775.6 1,807.6 1,889.5
----------------------------------------------------------------------------
Non-current liabilities:
Creditors due after more than one
year:
Borrowings 554.6 607.6 665.1
Other 30.3 19.1 39.8
----------------------------------------------------------------------------
584.9 626.7 704.9
Provisions for liabilities and charges 224.2 194.4 198.5
Equity minority interests 18.1 18.0 18.7
----------------------------------------------------------------------------
827.2 839.1 922.1
----------------------------------------------------------------------------
Capital and reserves:
Called up share capital (including non-
equity capital of £4.5m) 47.4 47.4 47.4
Share premium account 142.7 141.3 141.6
Profit and loss account 758.3 779.8 778.4
----------------------------------------------------------------------------
Total shareholders' funds
(including non-equity shareholders'
funds of £4.5m) 948.4 968.5 967.4
----------------------------------------------------------------------------
1,775.6 1,807.6 1,889.5
----------------------------------------------------------------------------
Group cash flow statement
for the half year ended 3 July 1999: unaudited
1st half 1st half Full year
1999 1998 1998
restated
£m £m £m
----------------------------------------------------------------------------
Cash flow from operating activities 90.7 127.7 317.5
Return on investments and servicing of
finance (30.1) (27.2) (57.2)
Taxation (14.6) (29.3) (68.9)
Capital expenditure and financial
investment (27.9) (18.5) (62.4)
Acquisitions and disposals 7.2 (92.2) (94.4)
Equity dividends paid (39.4) (35.8) (97.6)
----------------------------------------------------------------------------
Cash outflow before use of liquid
resources and financing (14.1) (75.3) (63.0)
Management of liquid resources 106.5 11.7 20.5
Financing (112.8) 10.5 34.6
---------------------------------------------------------------------------
Decrease in cash in period (20.4) (53.1) (7.9)
----------------------------------------------------------------------------
The 1998 half year consolidated cash flow statement has been restated as a
result of the change in presentation of profits/losses on the disposal of
minor brands and tangible fixed assets. The effect of this restatement in
the half year 1998 cash flow statement is a decrease in cash outflows from
acquisitions and disposals of £7.4m and a decrease in the cash inflow from
operating activities of the same amount.
1st half 1st half Full year
1999 1998 1998
restated
£m £m £m
----------------------------------------------------------------------------
Net cash flow arising from ordinary
operations (21.3) 16.9 31.4
----------------------------------------------------------------------------
Management uses net cash flow arising from ordinary operations as a
performance measure. This is defined as cash inflow before the use of liquid
resources and financing, less acquisitions and disposals.
Reconciliation of net cash flow to 1st half 1st half Full year
movement in net debt 1999 1998 1998
£m £m £m
----------------------------------
Decrease in cash in period (20.4) (53.1) (7.9)
Cash outflow/(inflow) from repayment
of/(increase in) debt 113.9 (6.6) (31.1)
Cash inflow from decrease in liquid
resources (106.5) (11.7) (20.5)
----------------------------------------------------------------------------
Changes in net debt resulting from cash
flows (13.0) (71.4) (59.5)
Premium on shares allotted on conversion
of convertible capital bonds - - 0.2
Translation differences (36.8) 9.5 5.0
----------------------------------------------------------------------------
Movement in net debt in period (49.8) (61.9) (54.3)
Net debt at beginning of period (589.8) (535.5) (535.5)
----------------------------------------------------------------------------
Net debt at end of period (639.6) (597.4) (589.8)
----------------------------------------------------------------------------
Other primary statements
Statement of total recognised gains 1st half 1st half Full year
and losses 1999 1998 1998
For the half-year ended 3 July 1999:
unaudited £m £m £m
----------------------------------------------------------------------------
Profit for the period 25.7 112.2 165.3
Net exchange (loss)/gain on foreign
currency borrowings* (14.1) 8.0 3.7
Exchange differences arising on
translation of net investments in
overseas subsidiary undertakings 20.1 (25.5) (17.0)
----------------------------------------------------------------------------
Total recognised gains and losses
relating to the period 31.7 94.7 152.0
----------------------------------------------------------------------------
*Net exchange (loss)/gain on foreign currency borrowings is stated after
deducting UK corporation tax
----------------------------------------------------------------------------
Reconciliation of movements in total 1st half 1st half Full year
shareholders' funds 1999 1998 1998
For the half-year ended 3 July 1999:
unaudited £m £m £m
----------------------------------------------------------------------------
Total recognised gains and losses
relating to the period 31.7 94.7 152.0
Ordinary dividends (51.8) (39.5) (104.0)
Ordinary shares allotted 1.1 3.2 3.5
Goodwill reinstated - - 5.8
----------------------------------------------------------------------------
Net (decrease)/increase in
shareholders' funds (19.0) 58.4 57.3
Total shareholders' funds at beginning
of period 967.4 910.1 910.1
----------------------------------------------------------------------------
Total shareholders' funds at end of
period 948.4 968.5 967.4
---------------------------------------------------------------------------
There is £4.5m of non-equity shareholders' funds included within total
shareholders' funds.
Segmental Analyses
Analyses by geographical area and product group of turnover and operating
profit are set out below.
The figures for each geographical area show the turnover and profit made by
companies located in that area.
The turnover figures represent the sales made to third party customers by
geographical origin. Sales to other members of the group in other
geographical areas are not material.
Turnover and operating profit -
by geographical area
Turnover Operating profit Operating margin
---------------- ---------------- -------------------
1st 1st 1st 1st 1st 1st
half half half half half half
1999 1998 1999 1998 1999 1998
restated restated
£m £m £m £m % %
----------------------------------------------------------------------------
Europe 370.4 351.9 58.0 68.8 15.7 19.6
North America 369.9 388.7 37.5 61.3 10.1 15.8
Latin America 100.2 149.0 0.5 28.9 0.5 19.4
East & South
Asia 75.9 77.3 (3.5) 3.2 (4.6) 4.1
Africa &
Middle East 67.5 78.8 8.5 17.4 12.6 22.1
Australasia 59.7 65.2 5.3 8.1 8.9 12.4
----------------------------------------------------------------------------
1,043.6 1,110.9 106.3 187.7 10.2 16.9
Year 2000
costs - - (10.7) (16.0) - -
Reorganisation
costs - - (24.4) - - -
----------------------------------------------------------------------------
1,043.6 1,110.9 71.2 171.7 6.8 15.5
----------------------------------------------------------------------------
The 1998 half year figures have been restated for the disclosure of
profits/losses on disposal of tangible fixed assets which had previously been
shown as operating items but which are now included as non-operating items.
The effect of the restatement on the 1998 half year geographical segmental
analysis is to decrease the operating profits as follows:
Europe £0.1m, Latin America £0.6m, Africa & Middle East £0.1m and Australasia
£0.3m.
Within the product group analysis, the effect of the restatement on the 1998
half year segmental analysis is to decrease the operating profit as follows:
Household £1.0m and Pharmaceutical £0.1m.
Additionally, the 1998 half year figures have been restated for the
disclosure of profits/losses on disposal of minor brands which had previously
been shown as operating items but which are now included as non-operating
items.
The effect of the restatement on the 1998 half year geographical segmental
analysis is to decrease the operating profits as follows:
North America £0.7m, Europe £0.7m, Africa & Middle East £1.0m and Australasia
£4.6m.
Within the product group analysis, the effect of the restatement on the 1998
half year segmental analysis is to decrease the operating profit as follows:
Household £1.0m, Pharmaceutical £0.7m and Food £5.3m.
Turnover and operating profit - by
product group
Turnover Operating Profit Operating Margin
---------------- ------------------- ------------------
1st 1st 1st 1st 1st 1st
half half half half half half
1999 1998 1999 1998 1999 1998
restated restated
£m £m £m £m % %
----------------------------------------------------------------------------
Household 813.3 879.4 66.6 136.5 8.2 15.5
Pharmaceutical 137.7 133.7 31.1 37.5 22.6 28.0
Food 92.6 97.8 8.6 13.7 9.3 14.0
----------------------------------------------------------------------------
1,043.6 1,110.9 106.3 187.7 10.2 16.9
Year 2000 costs - - (10.7) (16.0) - -
Reorganisation
costs - - (24.4) - - -
----------------------------------------------------------------------------
1,043.6 1,110.9 71.2 171.7 6.8 15.5
----------------------------------------------------------------------------
Segmental Analyses (cont'd)
Turnover from continuing operations
excluding the effects of exchange
- by geographical area 1st half 1st half Growth
1999 1998
£m £m %
----------------------------------------------------------------------------
Europe 364.4 351.9 3.6
North America 364.9 388.7 (6.1)
Latin America 100.0 149.0 (32.9)
East & South Asia 76.5 77.3 (1.0)
Africa & Middle East 73.1 78.8 (7.2)
Australasia 60.5 65.2 (7.2)
1,039.4 1,110.9 (6.4)
----------------------------------------------------------------------------
- by product group 1st half 1st half Growth
1999 1998
£m £m %
----------------------------------------------------------------------------
Household 807.8 879.4 (8.1)
Pharmaceutical 140.2 133.7 4.9
Food 91.4 97.8 (6.5)
----------------------------------------------------------------------------
1,039.4 1,110.9 (6.4)
----------------------------------------------------------------------------
The figures above have been presented using 1998 exchange rates.
The trading of the Brazilian business has been translated from Real to US
Dollar at the average rate for 1999, and from US Dollar to Sterling using the
average rate for 1998. Management believes that this presents a more
comparable view of the business following the devaluation of the Real early
in 1999. If the figures had been translated directly from Real to Sterling
using the 1998 exchange rates, the impact would have been to increase
turnover in Latin America by £28.3m.
Dividends
1999 1998
Pence per 1st half Pence per 1st half
ordinary 1999 ordinary 1998
share £m share £m
----------------------------------------------------------------------------
Dividend on ordinary shares:
Proposed interim dividend,
payable 7 September 1999 12.7 51.8 9.5 38.7
Additional enhancement - - 0.2 0.8
----------------------------------------------------------------------------
Charged to profit & loss
account 12.7 51.8 9.7 39.5
----------- ----------
Preference dividend 0.1 0.1
--------- ---------
Total dividends for the period 51.9 39.6
----------------------------------------------------------------------------
Earnings per ordinary share
The reconciliations between profit for the half year and the weighted average
number of shares used in the calculations of the diluted earnings per share
are set out below:
1999 1998 restated
--------------------------- -------------------------------
Profit Average Earnings Profit Average Earnings
for number of per for number of per
the shares share the half shares share
half pence year pence
year
£m £m
-------------------------------------------------------------------
Profit 25.7 407,821,012 6.3 112.2 407,457,281 27.5
attributable
to
shareholders
Dilution for
Executive
options
outstanding 147,708 931,638
Dilution for
Employee
Sharesave
Scheme
options 130,085 358,852
Dilution for
convertible
capital
bonds
outstanding* 6.4 39,244,506
-----------------------------------------------------------------------------
On a diluted
basis 25.7 408,098,805 6.3 118.6 447,992,277 26.5
-----------------------------------------------------------------------------
*After the appropriate tax adjustment, the profit for the period impact
represents the coupon on the convertible capital bonds. The earnings per
share impact reflects the effect of that profit and the assumption of the
issue of shares on the conversion of the bonds. The impact of the convertible
capital bonds has not been included in the 1999 diluted earnings per share
calculation as the impact was antidilutive.
The reconciliations of profit for the half year and earnings per share in
issue between unadjusted and adjusted EPS calculation bases are as follows:
1999 1998 restated
-----------------------------------------------------------------------------
Profit Average Earnings Profit for Average Earnin
for number of per the half number of gs
the shares share year shares per
half pence share
year pence
£m £m
-----------------------------------------------------------------------------
Basic EPS 25.7 407,821,012 6.3 112.2 407,457,281 27.5
Non-operating
items 1.6 0.4 (8.1) (2.0)
Year 2000
costs 10.7 2.6 16.0 3.9
Reorganisation
costs 24.4 6.0 - -
Taxation
(including
deferred
taxation) (4.2) (1.0) (0.2) -
-----------------------------------------------------------------------------
58.2 407,821,012 14.3 119.9 407,457,281 29.4
Impact of
dilution - 277,793 - 6.4 40,534,996 (1.2)
-----------------------------------------------------------------------------
On an
adjusted,
diluted basis 58.2 408,098,805 14.3 126.3 447,992,277 28.2
-----------------------------------------------------------------------------
The basic EPS and the EPS on an adjusted, diluted basis have been restated in
1998 for the adoption of FRS14. The EPS on an adjusted, diluted basis has
been restated in 1998 for the reclassification of minor brand disposals and
fixed asset disposals. The effect of these restatements is to decrease the
1998 reported EPS on an adjusted, diluted basis by 1.2p.
The directors believe that a diluted earnings per ordinary share, adjusted for
the distorting effects of non-operating items and exceptional costs (i.e. Year
2000 and reorganisation costs) after the appropriate tax amount, provides the
most meaningful measure of earnings per ordinary share in comparing the
performance of the business over time.
Reconciliation of operating profit to
net cash flow from operating activities
1st half 1st half Full year
1999 1998 1998
restated
£m £m £m
-----------------------------------------------------------------------------
Operating profit 71.2 171.6 288.2
Non-cash items:
Depreciation 24.8 34.3 47.5
Other non-cash movements 7.2 9.0 10.2
Changes in working capital (32.6) (85.2) (28.4)
Reorganisation costs 20.1 (2.0) -
-----------------------------------------------------------------------------
Cash flow from operating activities 90.7 127.7 317.5
-----------------------------------------------------------------------------
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