25th Oct 2005 11:00
25th October 2005 RECORD QUARTER ON TRACK FOR FULL YEAR TARGETS Results at a Glance Q3 % change % change Year To % change % change ‚£m actual constant Date actual constant exchange exchange ‚£m exchange exchange Net Revenues ‚£1,058m +8% +5% ‚£3,072m +8% +6% Operating Profit ‚£210m +7% +4% ‚£555m +9% +7% Net Income ‚£174m +16% +13% ‚£442m +16% +14% EPS (diluted) 23.5p +19% 59.3p +17% * Net revenues grew 8% (5% constant) to ‚£1,058m in Q3, a record quarter for the Company, and 8% (6% constant) to ‚£3,072m year to date (YTD). * Operating profit increased 7% in Q3 to ‚£210m and 9% in YTD to ‚£555m. YTD operating margins improved by 20 basis points (bps) to 18.1%. * Net income grew 16% in Q3 to ‚£174m and 16% in YTD to ‚£442m after a non-recurring tax credit of ‚£13m in Q3. Fully diluted EPS grew 19% in Q3 to 23.5p, and 17% in YTD to 59.3p, the growth rate benefiting from the share buyback program. * Strong cash generation resulted in net funds of ‚£714m at the end of Q3, an increase of ‚£82m since last year-end, after share buybacks of ‚£243m and dividends of ‚£262m this year. The Company will complete its ‚£300m share buyback program for 2005 and has confirmed its intention of a ‚£300m buyback program in 2006. * Major initiatives contributing to these results included Cillit Bang, Finish 4in1, Air Wick Freshmatic and Vanish Oxi Action Max. Commenting on these results, Bart Becht, Chief Executive Officer, said"Reckitt Benckiser sustained its robust growth ahead of the market resulting inour highest ever quarter for net revenues. Growth came across all regions andwas strongly driven by new products like Cillit Bang, Finish 4in1, Air WickFreshmatic and Vanish Oxi Action Max. Operating profit and net income improvedin line with expectations despite the continuing pressure on input costs. Toaddress this pressure, Reckitt Benckiser is implementing price increases inNorth America and Europe."The results confirm that Reckitt Benckiser is on track to deliver its fullyear targets of net revenue growth of 5% to 6% at constant exchange and netincome growth in the mid teens on an adjusted IFRS base of ‚£563m at actualexchange." Detailed Operating Review Third Quarter 2005Net revenues in Q3 grew by 8% (5% at constant exchange) to ‚£1,058m.Operating profit for Q3 grew 7% (4% constant) to ‚£210m. Gross margin was levelwith last year at 54.6% due to higher margin new products and benefits fromongoing cost optimization programs offsetting higher input costs. Marketinginvestment increased during the period with a shift in marketing mix towardsother forms of consumer marketing as planned. Media investment was 5% higher at11.8% of net revenues. Operating margin was 19.8% (2004 20.1%) as a result ofthe higher marketing investment.Net income grew 16% (13% constant) to ‚£174m following a ‚£13m non recurring taxcredit. EPS diluted increased 19% to 23.5 pence.Nine Months 2005Net revenues grew by 8% (6% constant) to ‚£3,072m.Operating profit increased 9% (7% constant) to ‚£555m. Gross margin was 10bpsbehind last year at 54.5% as a result of higher margin new products, andsavings from ongoing cost optimization programs not quite offsettingsignificantly higher input costs. Media investment increased 7% to 13.1% of netrevenues (2004 13.3%). Other marketing investment increased due to a shift inmarketing mix towards other forms of consumer marketing. Operating marginsincreased by 20bps to 18.1% due to tight control of fixed costs more thanoffsetting higher marketing investment.Net income for the nine months increased 16% (14% constant) to ‚£442m. Netinterest received of ‚£22m (2004 ‚£4m) was due to the strong cash inflow over thepast year reducing the level of net borrowings after higher dividend paymentsand share buyback, and the conversion of the convertible bond. The underlyingtax rate for the period is 26% before a non-recurring tax credit of ‚£13marising from favorable tax settlements.EPS diluted increased 17% to 59.3 pence. Geographic Analysis at constant exchange Europe 53% of Net RevenuesYTD net revenues grew by 5% to ‚£1,614m. Growth came from key recent productintroductions. In fabric treatment, growth was due to the success of Vanishwith Vanish Oxi Action Max and Vanish Dual Power. In surface care, growth camefrom Cillit Bang. In automatic dishwashing, growth was due to Finish/Calgonit4in1. Home Care increased due to the successful launch of Air Wick Freshmatic.Health & Personal Care saw strong growth for the health care portfolio due tothe roll-out of Gaviscon in Europe. YTD Operating margins were 50bps below lastyear due to higher marketing investment, resulting in operating profitsincreased by 3% to ‚£338m.In Q3, net revenues grew 3% to ‚£537m, and operating profits increased by 2% to‚£116m with operating margins 60bps lower at 21.6% due to higher marketinginvestment.North America & Australia 29% of Net RevenuesYTD net revenues increased by 4% to ‚£904m. In fabric care, Spray'n Wash DualPower fabric treatment and Resolve Dual Power carpet cleaner grew sales. Insurface care increases came from growth for Lysol disinfectant spray, and thelaunch of Easy-Off Bam. In automatic dishwashing increases came due to thesuccess of Electrasol with Jet Dry Action. In Home Care, Air Care grewfollowing the launch of Air Wick Freshmatic, and in Health & Personal Care,Veet depilatories and prescription drug Suboxone were the principalcontributors to growth. Food increased net revenues due to continued growth forFrench's yellow mustard and gains for Frank's Red Hot sauce. YTD operatingmargins were 50bps lower at 16.7%, due to substantially higher input costsreducing gross margins. As a result operating profits increased 1% to ‚£151m.Q3 net revenues grew 5% to ‚£328m, with profits increasing 3% to ‚£70m. Operatingmargins were 40bps behind last year due to higher input costs reducing grossmargins.Developing Markets 18% of Net RevenuesYTD net revenues grew 12% to ‚£554m. There was strong growth in all categories.In fabric care, growth came following the roll-out of Vanish Oxi Action fabrictreatment products. In surface care, increases came from the success ofEasy-Off Bang. Pest control grew strongly with the launch of Mortein PowerBooster coils. Health & Personal Care grew due to the continuing roll out ofVeet in new markets and strong growth for the Dettol range of personal careproducts. YTD Operating margins expanded by 210bps to 7.4%, resulting inoperating profits increasing by 52% to ‚£41m.Q3 net revenues increased by 10% to ‚£193m, and operating profits increased 25%to ‚£15m with operating margins expanding by 110bps to 7.8%. Category Review at constant exchange rates Fabric Care. YTD net revenues grew 2% to ‚£837m largely due to the success ofVanish Oxi Action, the Company's fabric treatment franchise and Calgon watersoftener, offset to some extent by softness in laundry detergent and fabricsofteners. Key drivers of growth included the roll out of Vanish Oxi ActionMax, Vanish Dual Power and continued growth for Vanish carpet cleaners.Q3 net revenues grew 2% to ‚£296m.Surface Care. YTD net revenues grew 12% to ‚£642m. The major growth driver wasthe roll-out of Bang under the Cillit brand in Europe, and the Easy- Off brandin North America and Developing Markets. The Dettol and Lysol disinfectingrange, particularly disinfectant spray, grew in Europe, North America andDeveloping MarketsQ3 net revenues grew 8% to ‚£223m.Dishwashing. YTD net revenues grew 6% to ‚£429m. Strong growth in automaticdishwashing. Growth came from the success of Finish/Calgonit 4in1 in Europe andfrom Electrasol with Jet Dry Action in North America.Q3 net revenues grew 4% to ‚£139m.Home Care. YTD net revenues grew 6% to ‚£443m with strong growth for both aircare and pest control. Air care grew behind the launch of Air Wick Freshmaticin Europe, North America and certain Developing Markets. Pest control growthwas driven by Mortein Power Booster coils.Q3 net revenues grew 4% to ‚£160m.Health & Personal Care. YTD net revenues grew 9% to ‚£493m with growth acrossall segments. Veet depilatories continue to benefit from the continuing rollout in Developing Markets and growth in North America. Dettol antiseptics grewbehind the personal care range in Developing Markets. Healthcare productsbenefited from the continuing roll-out of Gaviscon in Europe. Suboxonecontinues to grow strongly as distribution builds in North America.Q3 net revenues grew 11% to ‚£164m.Core Household grew net revenues 7% to ‚£2,844m YTD, and 5% to ‚£982m in Q3.Food. YTD net revenues grew 2% to ‚£130m with continued growth for French'syellow mustard and gains for Frank's Red Hot sauce.Q3 net revenues were in line with last year at ‚£44m. Financial Items Net Interest. YTD Interest receivable on the Company's cash and debt portfolioless payable on borrowings was ‚£22m (YTD 2004 ‚£4m). This increase reflectsstrong cash inflow in 2005 to date plus the interest saved on convertible bondsfollowing conversion in July 2004 and March 2005.Net working capital (defined as stock, short-term debtors and short-termcreditors excluding borrowings) at the period end was minus ‚£592m. Thedifference compared to the prior year-end position (minus ‚£521m) is due tofurther underlying improvement in net working capital.Net funds at the nine months were ‚£714m (2004 year-end ‚£632m), an improvementof ‚£82m during the year to date due to strong operating cash inflow offset byshare buyback and higher dividend payments.Share buybackBetween 1st January and 30th September 2005, the Group purchased 14.2m sharesfor cancellation at a cost of ‚£243m as part of its ongoing share buybackprogram. For the rolling 12 months to September 2005, the Group purchased 18mshares at a cost of ‚£300m.Shares in IssueThe number of shares in issue at 30th September was 725.0m reduced by therepurchase of 4.6m shares by the Company in the quarter at a cost of ‚£82m.For Further InformationReckitt Benckiser +44 (0)1753 217 800 Tom Corran SVP Investor Relations & Corporate Communications Fiona Fong Head of Corporate Communications Press calls Mark Wilson Corporate Controller & Investor Calls Investor Relations Manager PR Agency Tim Spratt Financial Dynamics +44 (0)207 831 3113 The Group at a Glance (unaudited)Quarter Ended September Nine Months Ended September 30 30 2005 2004# 2005 2004# ‚£m ‚£m ‚£m ‚£m From total ordinary activities 1,058 976 Net revenues 3,072 2,849 8% 1% Net revenues growth 8% 3% 54.6% 54.6% Gross margin 54.5% 54.6% 234 218 EBITDA 622 578 22.1% 22.3% EBITDA margin 20.2% 20.3% 210 196 EBIT 555 511 19.8% 20.1% EBIT margin 18.1% 17.9% 217 204 Profit before tax 577 515 20.5% 20.9% PBT margin 18.8% 18.1% 174 150 Net Income 442 380 16.4% 15.4% Net Income margin 14.4% 13.3% 23.9p 20.8p EPS 60.7p 53.4p 23.5p 19.7p EPS, diluted 59.3p 50.7p #Restated following the adoption of IFRS.Group Balance Sheet Data September 30 December 31 2005 2004# ‚£m ‚£m Net working capital * (592) (521) Net funds 714 632 #Restated following the adoption of IFRS.* Net working capital is defined as inventories, short term receivables andshort term liabilities, excluding borrowings, convertible capital bonds andprovisions.Group income statement (unaudited) Quarter Ended Nine Months Ended September 30 September 30 2005 2004# % change 2005 2004# % change ‚£m ‚£m ‚£m ‚£m 1,058 976 8% Net revenues 3,072 2,849 8% (480) (443) 8% Cost of sales (1,398) (1,293) 8% 578 533 8% Gross profit 1,674 1,556 8% (368) (337) 9% Net operating expenses (1,119) (1,045) 7% 210 196 7% Total operating profit 555 511 9% 7 8 Net finance income 22 4 217 204 6% Profit before taxation 577 515 12% (43) (54) (20%) Taxation (135) (135) 0% 174 150 16% Profit for the period 442 380 16% 0 0 - Attributable to minority 0 0 - interests 174 150 16% Attributable to equity 442 380 16% shareholders 174 150 16% Profit for the period 442 380 16% Earnings per ordinary share: 23.9p 20.8p On profit for the period 60.7p 53.4p 23.5p 19.7p On profit for the period, 59.3p 50.7p diluted Average common shares outstanding: 727.6 720.7 Basic 728.2 711.0 740.4 752.2 Diluted 745.4 756.9 #Restated following the adoption of IFRS.Segmental Analysis (unaudited)Analyses by geographical area (primary segment) of net revenues and operatingprofit and of net revenues by product group (secondary segment) are set outbelow. The figures for each geographical area show the net revenues and profitmade by companies located in that area.Quarter Ended September 30 Nine Months Ended September 30 2005 2004# % Change 2005 2004# % Change ‚£m ‚£m exch. Rates ‚£m ‚£m exch rates actual const. actual const. Net revenues - by geographical area 537 509 6% 3% Europe 1,614 1,506 7% 5% 328 304 8% 5% North America & 904 868 4% 4% Australia 193 163 18% 10% Developing Markets 554 475 17% 12% 1,058 976 8% 5% 3,072 2,849 8% 6% Operating profit - by geographical area 116 113 3% 2% Europe 338 322 5% 3% 70 66 6% 3% North America & 151 149 1% 1% Australia 15 11 36% 25% Developing Markets 41 25 64% 52% 9 6 Corporate 25 15 210 196 7% 4% 555 511 9% 7% % % Operating margin - by % % geographical area 21.6 22.2 Europe 20.9 21.4 21.3 21.7 North America & 16.7 17.2 Australia 7.8 6.7 Developing Markets 7.4 5.3 - Corporate 19.8 20.1 18.1 17.9 #Restated following the adoption of IFRS.Segmental Analysis (continued)Quarter Ended September 30 Nine Months Ended September 30 2005 2004# % change 2005 2004# % change ‚£m ‚£m exch. rates ‚£m ‚£m exch. rates actual const. actual const. Net revenues - by product group 296 279 6% 2% Fabric Care 837 796 5% 2% 223 196 14% 8% Surface Care 642 561 14% 12% 139 132 5% 4% Dishwashing 429 400 7% 6% 160 148 8% 4% Home Care 443 412 8% 6% 164 145 13% 11% Health & Personal Care 493 449 10% 9% 982 900 9% 5% Core Business 2,844 2,618 9% 7% 32 33 -3% -6% Other Household 98 103 -5% -5% 1,014 933 9% 5% Household and Health & 2,942 2,721 8% 6% Personal Care 44 43 2% 0% Food 130 128 2% 2% 1,058 976 8% 5% Total 3,072 2,849 8% 6%Additional Information (unaudited) Operating profit - by product segment 192 181 6% 4% Household and Health & 509 476 7% 5% Personal Care 9 9 0% 0% Food 21 20 5% 5% 9 6 Corporate 25 15 210 196 7% 4% Total 555 511 9% 7% % % Operating margin - by % % product segment 18.9 19.4 Household and Health & 17.3 17.5 Personal Care 20.5 20.9 Food 16.2 15.6 19.8 20.1 Total 18.1 17.9 Shares in Issue Millions 31 December 2004 724.5 Issues on Conversion of Capital Bonds 8.1 Other Issues 6.6 Cancelled (14.2) 30 September 2005 725.0 93ENDRECKITT BENCKISER PLCRelated Shares:
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