27th Oct 2009 12:00
Reckitt Benckiser Group plc A World Leader in Household, Health and Personal Care 27 October 2009 CONTINUED STRONG MOMENTUM IN Q3 FY 2009 TARGETS INCREASED Results at a Q3 % change % change YTD % change % change glance GBPm actual constant GBPm actual constant exchange exchange exchange exchange (unaudited) Net Revenue 1,907 +15 +7 5,690 +20 +7 Operating 467 +23 +10 1,286 +31 +15 Profit - reported Operating 467 +23 +10 1,286 +27 +12 Profit - adjusted * Net Income - 357 +25 +12 970 +33 +16 reported Net Income - 357 +25 +12 970 +29 +13 adjusted * EPS (diluted) 49.6p +26 134.4p +34 - reported EPS (diluted) 49.6p +26 134.4p +30 - adjusted * * Adjusted results (including % change figures) exclude exceptional items (seepage 2). There are no exceptional items in YTD 2009 compared to an exceptionalcharge of 30m pre-tax in YTD 2008.
Year to date ("YTD") highlights:
- Total net revenue +7% (constant exchange) to 5,690m, driven by growth in the
Group's 17 Powerbrands. Excluding Reckitt Benckiser Pharmaceuticals ("RBP"),
net revenue was ahead +5% (at constant).
- Gross margin +90bp to 59.4%: adjusted operating margin +130bp to 22.6%.
- Adjusted net income +29% (actual exchange): adjusted diluted EPS of 134.4p (+30%).
- Net debt of 423m (31 December 2008: 1,096m), as a result of strong free cash
flow generation partially offset by the payment of two dividends totalling 648m.
- Net working capital of minus 1,275m, a 178m improvement versus the 31 December 2008 level.
Q3 highlights:
- Total net revenue +7% (constant exchange), +5% (constant) ex-RBP.
- Gross margin +120bp to 60.0%: adjusted operating margin +170bp to 24.5%.
- Adjusted net income +25% (actual exchange): adjusted diluted EPS of 49.6p (+26%).
Commenting on these results, Bart Becht, Chief Executive Officer, said:
"Reckitt Benckiser continued to see good momentum, with net revenue growth of+7% at constant exchange. This result was supported by our 17 Powerbrands,behind significant investment in media and marketing and successful new productinitiatives.We are raising our full year target for net revenue growth to +6-7% at constantexchange (previously +5-6%), as a result of continued strong momentum in the basebusiness, combined with upside on RBP compared to ingoing expectations. Foradjusted net income growth, we are raising our target to +12-13% at constantexchange (previously +10-11%), or around +22-23% at actual exchange." Basis of Presentation and Exceptional Items
Where appropriate, the term "adjusted" excludes the impact of exceptional items. There are no exceptional items in YTD 2009, compared to an exceptional charge in YTD 2008 of 30m mainly relating to the integration of Adams.
Detailed Operating Review Third quarter 2009
Q3 net revenue increased +15% to 1,907m, with growth of +7% at constant exchange.
The gross margin improved by +120bp to 60.0%, largely as a result of easinginput costs and benefits from cost optimisation programmes, partially offset bya negative transaction impact from foreign exchange. While media activityincreased, media spend declined by -5% (-9% constant) to a level of 10.4% ofnet revenue due to further improvements in media buying rates. Total marketinginvestment was higher, as savings from these more favourable media rates werere-invested in Other Consumer Marketing activities. Operating profit asreported was 467m, +23% higher than last year (+10% constant): the operatingmargin increased by +170bp to 24.5% due to gross margin expansion and operatingcost efficiencies.Net finance income was 2m (Q3 2008: net finance expense of 7m), reflectingstrong free cash flow generation and progress made on net debt repayment duringthe quarter. The tax rate was 24%.
Net income was 357m, an increase of +25% (+12% constant) on both a reported and adjusted basis versus Q3 2008.
Year to date (nine months) 2009
YTD net revenue increased +20% to 5,690m, with growth of +7% at constant exchange.
The gross margin improved by +90bp to 59.4%, largely as a result of easinginput costs and benefits from cost optimisation programmes, partially offset bya negative transaction impact from foreign exchange. Total marketinginvestment was higher, and pure media investment rose +5% (-5% constant) to alevel of 11.5% of net revenue. There was significant growth in Other ConsumerMarketing, funded by savings from more favourable media rates. Operatingprofit as reported was 1,286m, +31% higher than last year (+15% constant): onan adjusted basis, operating profit was ahead +27% (+12% constant). Theadjusted operating margin increased by +130bp to 22.6% due to gross marginexpansion and operating cost efficiencies.Net finance expense was 1m (YTD 2008: 26m), reflecting strong free cash flowgeneration and progress made on net debt repayment during the nine months. Thetax rate was 25%.
Net income was 970m, an increase of +33% (+16% constant) on YTD 2008. On an adjusted basis, net income was up +29% (+13% constant).
YTD 2009 Business Review
Summary: % net revenue growth
YTD 2009 Growth at Constant Exchange Exchange Reported Europe +1% +7% +8% NAA +7% +22% +29% DvM +15% +11% +26% Pharma* +42% +35% +77% TOTAL +7% +13% +20%
* Pharma represents the Group's prescription drug business of Subutex and Suboxone
The Business Review below is given at constant exchange rates.
Europe 47% of net revenueYTD 2009 total net revenue increased +1% to 2,644m, with growth mainly inDishwashing, Home Care and Health & Personal Care. The continued success ofQuantum contributed to growth in Dishwashing, with such initiatives as AirwickFreshmatic, Freshmatic Mini and motion supporting the result in Air Care. In Health & Personal Care, increased marketing investment helped drive a strongperformance for Nurofen, Strepsils and Gaviscon.For the nine months, the adjusted operating margin was +20bp ahead of last yearat 22.7%; this resulted in a +1% improvement in adjusted operating profit to 600m.
In Q3, net revenue growth was unchanged at 862m. Adjusted operating profit increased by +1% to 197m, with the margin up +40bp to 22.9%.
North America & Australia 27% of net revenueYTD 2009 total net revenue increased +7% to 1,546m, with growth coming largelyin Surface Care, Home Care and Health & Personal Care. Growth in Surface Carewas boosted by increased consumption of Lysol spray and disinfectant wipes,while Airwick Freshmatic and motion contributed to the result in Home Care. In Health & Personal Care, growth was driven by Mucinex.
In Food, the consumer portfolio delivered a good performance, with further growth in particular for French's Yellow Mustard and Frank's Red Hot Sauce.
For the nine months, adjusted operating profit increased +11% to 303m; the adjusted operating margin was +90bp higher at 19.6%.
Q3 net revenue rose +6% to 538m and adjusted operating profit was ahead by +6% to 134m, equating to a +130bp uplift in the margin to 24.9%.
Developing Markets 19% of net revenueYTD 2009 total net revenue was ahead +15% to 1,106m, with growth across allregions and driven particularly by Fabric Care, Surface Care and Health &Personal Care. Growth in Fabric Care was driven by a strong performance forVanish, behind increased marketing investment and new initiatives. SurfaceCare increased largely as a result of growth in Harpic, and Veja in Brazil.
In
Health & Personal Care, the Dettol personal care range delivered an excellentresult, boosted by additional marketing investment, with Veet and Gaviscon alsostrong contributors. For the nine months, adjusted operating profit increased by +20% to 146m.
This resulted in a +80bp improvement in the adjusted operating margin to 13.2%.
Q3 net revenue increased by +15% to 367m. Adjusted operating profit improved +17% to 48m, with a +90bp uplift in the margin to 13.1%.
Pharmaceuticals 7% of net revenueYTD 2009 total net revenue for the Group's Subutex and Suboxone prescriptiondrug business grew +42% to 394m. These buprenorphine-based products are usedto treat opiate dependence. This very strong growth was predominantly drivenby a continued increase in penetration of Suboxone in the U.S.
For the nine months, the adjusted operating margin improved by +300bp to 60.2%. Adjusted operating profit was 237m, an increase of +45%.
Q3 net revenue rose +41% to 140m. Adjusted operating profit increased +44% to 88m, for a +290bp expansion in the margin to 62.9%.
As a result of its Orphan Drug Status, Suboxone has exclusivity in Europe until2016: in the U.S., Suboxone lost exclusivity on 8th October 2009. Within thePharmaceuticals division, the U.S. Suboxone business generated YTD 2009 netrevenue of 342m and adjusted operating profit of 211m. While the Groupcontinues to search for ways to offset the impact of the loss of exclusivity inthe U.S., up to 80% of the revenues and profits of that business might be lostin the year following the launch of generic competitors, with the possibilityof further erosion thereafter. YTD 2009 Category Review (at Constant Exchange Rates) Fabric Care. Net revenue decreased -1% to 1,203m. Vanish showed a strongperformance in Developing Markets, although the result in Europe and NorthAmerica & Australia was impacted by increased competitive activity. Woolitealso contributed, helped by such new initiatives as Triple Protection andconcentrated formulations. Growth was offset by weakness in Laundry Detergentsand Fabric Conditioners. Q3 net revenue declined -4% to 396m.Surface Care. Net revenue grew +5% to 963m. Both the Dettol and Lysol rangesdelivered strong growth, with Harpic Lavatory Care also performing well, helpedby such new initiatives as Harpic liquid with Max Coverage. Q3 growth was +8%to 328m.
Dishwashing. Net revenue increased +2% to 628m, helped by the continued success of Finish Quantum. Growth was partially offset by weakness in Dishwashing Additives and higher promotional investment. Q3 net revenue decreased -5% to 188m.
Home Care. Net revenue increased +4% to 756m. Growth largely came in Air Care, supported by Airwick Freshmatic, Freshmatic Mini and motion. Q3 growth was +2% to 247m.
Health & Personal Care. Net revenue increased +14% to 1,511m. The Dettol personal wash range continued to deliver excellent growth, with Nurofen, Strepsils, Gaviscon and Mucinex all contributing to a strong performance in Healthcare. In Q3, Health & Personal Care grew +16% to 533m.
Total Household and Health & Personal Care. Net revenue was ahead by +5% to 5,103m. In Q3, total Household and Health & Personal Care grew +4% to 1,706m.
Pharmaceuticals. YTD 2009 net revenue for the Group's Subutex and Suboxoneprescription drug business grew +42% to 394m, predominantly driven by acontinued increase in penetration of Suboxone in the U.S. Adjusted operatingprofit was ahead +45% to 237m, equating to a +300bp improvement in the marginto 60.2%.
Q3 net revenue increased by +41% to 140m, while adjusted operating profit rose +44% to 88m.
Food. Net revenue rose +7% to 193m, led by the consumer brands of French'syellow mustard and Frank's Red Hot sauce. Adjusted operating profit increased+18% to 43m.
Q3 net revenue grew +7% and adjusted operating profit was 18m (+14%).
YTD 2009 Financial Review Basis of preparation. The unaudited financial information is prepared inaccordance with IFRSs as adopted by the European Union and IFRSs as issued bythe International Accounting Standards Board, and with the accounting policiesset out in the Group's 2008 Annual Report & Financial Statements, except asexplained in Note 3 to the Half Year 2009 Condensed Financial Statements.
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 working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) of minus 1,275m was 178m lower than the 31 December 2008 level, mostly due to an improvement in payables.
Net debt as at 30th September 2009 was 423m (December 2008: 1,096m), a decrease of 673m. This reflects ongoing strong net cash flow generation from the business, partially offset by the payment of two dividends totalling 648m.
In Q3, net debt decreased 102m compared to the position at the end of June 2009, reflecting strong cash flow generation, partially mitigated by the interim dividend payment ( 307m).
2009 Targets The Group is raising its full year target for net revenue growth to +6-7% atconstant exchange (previously +5-6%), as a result of continued strong momentum in thebase business, combined with upside on RBP compared to ingoing expectations. For adjusted net income growth, the Group is raising its target to +12-13% atconstant exchange (previously +10-11%), or around +22-23% at actual exchange.
For further information, please contact:
Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd Global Director, Corporate Communications & Affairs Brunswick(Financial PR) +44 (0)20 7404 5959 Susan Gilchrist Senior Partner
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 theplans and objectives of the Group with respect to these items. Theseforward-looking statements are made pursuant to the "Safe Harbor" provisions ofthe United States Private Securities Litigation Reform Act of 1995. Inparticular, all statements that express forecasts, expectations and projectionswith respect to future matters, including trends in results of operations,margins, growth rates, overall market trends, the impact of interest orexchange rates, the availability of financing to the Company, anticipated costsavings or synergies and the completion of strategic transactions areforward-looking statements. By their nature, forward-looking statementsinvolve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. There are a number of factorsdiscussed in this report, that could cause actual results and developments todiffer materially from those expressed or implied by these forward-lookingstatements, including many factors outside Reckitt Benckiser's control. Pastperformance cannot be relied upon as a guide to future performance.
The Group at a Glance (Unaudited)
Quarter ended Nine months ended 30 September 30 September 2009 2008 2009 2008 GBPm GBPm GBPm GBPm 1,907 1,664 Net revenue - total 5,690 4,738 +7% +13% Net revenue growth - constant +7% +12% +15% +24% Net revenue growth - total +20% +22% 60.0% 58.8% Gross margin 59.4% 58.5% 497 408 EBITDA 1,378 1,058 26.1% 24.5% EBITDA margin 24.2% 23.2% 467 380 EBIT 1,286 980 467 380 EBIT - adjusted * 1,286 1,010 24.5% 22.8% EBIT margin 22.6% 20.7% 24.5% 22.8% EBIT margin - adjusted * 22.6% 21.3% 469 373 Profit before tax 1,285 954 357 285 Net income 970 727 357 285 Net income - adjusted * 970 750 50.1p 40.1p EPS, basic, as reported 136.3p 102.2p 49.6p 39.5p EPS, adjusted and diluted * 134.4p 103.4p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data 30 September 31 December 2009 2008 GBPm GBPm Net working capital * (1,275) (1,097) Net debt (423) (1,096)
* Net working capital is defined as inventories, short-term receivables and short-term liabilities, excluding borrowings and provisions.
Shares in issue Nine months Millions 31 December 2008 708.7
Issued or transferred from Treasury 1.3 31 March 2009 710.0 Issued or transferred from Treasury 3.8 30 June 2009 713.8 Issued or transferred from Treasury 1.0
30 September 2009 714.8
Group Income Statement Analysis (Unaudited)
Quarter ended Nine months ended 30 September 30 September 2009 2008 % 2009 2008 % change change GBPm GBPm GBPm GBPm 1,907 1,664 +15 Net revenue 5,690 4,738 +20 (762) (686) +11 Cost of sales (2,311) (1,967) +17 1,145 978 +17 Gross profit 3,379 2,771 +22 (678) (598) +13 Net operating expenses (2,093) (1,791) +17 467 380 +23 Operating profit 1,286 980 +31 467 380 +23 Operating profit before exceptional 1,286 1,010 +27 items - - Exceptional items - (30) 467 380 +23 Operating profit 1,286 980 +31 2 (7) Net finance income / (expense) (1) (26) 469 373 +26 Profit on ordinary activities before 1,285 954 +35 taxation (112) (88) +27 Tax on profit on ordinary activities (315) (227) +39 357 285 +25 Profit for the period 970 727 +33 - - Attributable to equity minority - - interests 357 285 +25 Attributable to ordinary equity 970 727 +33 holders of the parent 357 285 +25 Profit for the period 970 727 +33 Earnings per ordinary share: 50.1p 40.1p On profit for the period, basic 136.3p 102.2p 49.6p 39.5p On profit for the period, diluted 134.4p 100.3p Earnings per ordinary share - adjusted*: 50.1p 40.1p On profit for the period, basic 136.3p 105.5p 49.6p 39.5p On profit for the period, diluted 134.4p 103.4p
* Adjusted to exclude the impact of exceptional items.
Average common shares outstanding: (millions) 712.3 710.2 Basic 711.8 711.0 719.7 721.9 Diluted 721.7 725.2
Segment Information (Unaudited)
Analyses by operating segment of net revenue and operating profit, and of netrevenue by product group are set out below. The figures for each geographicalarea show the net revenue and operating profit made by companies located inthat area. Additional information is provided to show profit by class ofbusiness.Operating segment Quarter ended Nine months ended 30 September 30 September 2009 2008 % Change 2009 2008 % Change GBPm GBPm exch. rates GBPm GBPm exch. rates actual const. actual const. Net revenue 862 835 +3% +0% Europe 2,644 2,441 +8% +1% 538 441 +22% +6% North America & Australia 1,546 1,199 +29% +7% 367 303 +21% +15% Developing Markets 1,106 876 +26% +15% 140 85 +65% +41% Pharmaceuticals 394 222 +77% +42% 1,907 1,664 +15% +7% 5,690 4,738 +20% +7% Operating profit - statutory basis 197 188 +5% +1% Europe 600 550 +9% +1% 134 104 +29% +6% North America & Australia 303 194 +56% +24% 48 37 +30% +17% Developing Markets 146 109 +34% +20% 88 51 +73% +44% Pharmaceuticals 237 127 +87% +45% 467 380 +23% +10% 1,286 980 +31% +15% Operating profit - adjusted* 197 188 +5% +1% Europe 600 550 +9% +1% 134 104 +29% +6% North America & Australia 303 224 +35% +11% 48 37 +30% +17% Developing Markets 146 109 +34% +20% 88 51 +73% +44% Pharmaceuticals 237 127 +87% +45% 467 380 +23% +10% Subtotal before 1,286 1,010 +27% +12% exceptional items - - Exceptional items - (30) 467 380 +23% +10% 1,286 980 +31% +15% % % Operating margin - adjusted* % % 22.9 22.5 Europe 22.7 22.5 24.9 23.6 North America & Australia 19.6 18.7 13.1 12.2 Developing Markets 13.2 12.4 62.9 60.0 Pharmaceuticals 60.2 57.2 24.5 22.8 22.6 21.3
* Adjusted to exclude the impact of exceptional items
Segment Information (Unaudited), continued
Product segment Quarter ended Nine months ended 30 September 30 September 2009 2008 % change 2009 2008 % change GBPm GBPm exch. rates GBPm GBPm exch. rates actual const. actual const. Net revenue by category 396 393 +1% -4% Fabric Care 1,203 1,113 +8% -1% 328 282 +16% +8% Surface Care 963 814 +18% +5% 188 185 +2% -5% Dishwashing 628 555 +13% +2% 247 224 +10% +2% Home Care 756 646 +17% +4% 533 427 +25% +16% Health & Personal Care 1,511 1,195 +26% +14% 14 18 -22% -27% Other Household 42 48 -13% -23%1,706 1,529 +12% +4% Household and Health & Personal Care 5,103 4,371 +17% +5% 140 85 +65% +41% Pharmaceuticals 394 222 +77% +42% 61 50 +22% +7% Food 193 145 +33% +7% 1,907 1,664 +15% +7% 5,690 4,738 +20% +7% Operating profit - adjusted 361 316 +14% +4% Household and Health & Personal Care 1,006 854 +18% +5% 88 51 +73% +44% Pharmaceuticals 237 127 +87% +45% 18 13 +38% +14% Food 43 29 +48% +18% 467 380 +23% +10% Subtotal before exceptional 1,286 1,010 +27% +12% items - - Exceptional items - (30) 467 380 +23% +10% 1,286 980 +31% +15% % % Operating margin - adjusted % % 21.2 20.7 Household and Health & Personal Care 19.7 19.5 62.9 60.0 Pharmaceuticals 60.2 57.2 29.5 26.0 Food 22.3 20.0 24.5 22.8 22.6 21.3
mapperRelated Shares:
RB..L