8th Feb 2012 07:00
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, acquisitionsand 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, andgrowth in our Powerbrands - Dettol, Nurofen, Mucinex, Strepsils, Gaviscon andHarpic. SSL had a good first year with LFL growth of 6%, although full yeargrowth 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 1November 2010, and Paras Pharmaceuticals Limited ("Paras") from 1 April 2011,their respective dates of acquisition. Operating profit is not separatelydisclosed for SSL or Paras as, in the view of the Directors, it is notpracticable to identify their operating profit due to their integration intothe commercial infrastructure of Reckitt Benckiser.Where appropriate, the term "like-for-like" ("LFL") describes the performanceof the business on a comparable basis, excluding the impact of majoracquisitions, disposals, discontinued operations and foreign exchange. LFLanalysis 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 exceptionalitems. There was an exceptional pre-tax charge of £96m in 2011 mainly relatingto integration and restructuring costs arising from the acquisition of SSL andParas. This exceptional pre-tax charge is reflected in reported operatingprofit (£92m) and net interest (£4m, being financing costs associated with theacquisition). The tax effect of exceptional items in the period is £23m.The fair value of the identifiable assets and liabilities at the date ofacquisition of SSL were provisionally estimated and disclosed in the 2010annual report and financial statements. Final fair values at acquisition dateare now confirmed and have been recorded as a prior year restatement of thebalance sheet at 31 December 2010. There is no impact to the income statementfor the year ended 31 December 2010. Summary Operating Review Full year 2011Total net revenue growth of +13% (constant) exceeded our full year target of12%. LFL growth both including and excluding RBP was +4% (constant). SSL had agood 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 inRBP. This was partially offset by mix benefits, savings from cost optimisationprogrammes 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%, withdeclines in Europe offset by margin expansion in NAA due to volume leverage andpositive product mix, and DvM due to volume leverage, and a soft prior yearcomparative 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) versus2010; on an adjusted basis, net income rose +9% (+11% constant). Dilutedearnings per share of 237.1 pence were +11% higher on a reported basis; on anadjusted 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. ExcludingRBP, the adjusted operating margin increased by +140bp with increases in Europebehind positive product mix & SSL synergies, and DvM behind volume leverage anda 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 exceptionalcharge 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 Q42010; on an adjusted basis, net income rose +8% (+9% constant). Dilutedearnings per share of 70.8 pence were +26% higher on a reported basis; on anadjusted 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, andof net revenue by product group are set out below. The Executive Committee ofthe Group assesses the performance of the operating segments based on netrevenue and adjusted operating profit. This measurement basis excludes theeffect 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 financialposition of the reported segments, and therefore reported to the ChiefOperating Decision Maker outside of the individual segment financialinformation, are shown as reconciling items between the segmental informationand the Group totals presented in the consolidated financial statements. Forthe twelve months ended 31 December 2011, these items include a profit ondisposal of intangibles and an expense relating to legal matters. The netimpact of these items is £10m (31 December 2010: £nil). Europe 42% of net revenueFY 2011 total net revenue increased +15% to £4,009m. LFL growth of -1% was dueto a combination of slight volume decline on Fabric Care and negative netpricing in certain categories, reflecting higher levels of promotional spend toprotect volume shares against aggressive competition. This continues to be thekey factor behind the LFL result for net revenue in both Q4 and FY 2011. By category, within Healthcare, Nurofen, Strepsils and Gaviscon delivered astrong result, supported by such new initiatives as Nuromol and StrepsilsWarm. Growth in Personal Care was driven by the continued roll-out of theDettol No Touch Hand Soap System, which continues to deliver an encouragingresult. Surface Care grew from Dettol and Harpic. The result in Home Care wasboosted by such recent initiatives as the Air Wick 100% natural propellantspray and Air Wick Odour Detect as well as continued growth in candles. Thelargest factor in the decline in Fabric Care was continued weakness in LaundryDetergents and Fabric Softeners in Southern Europe. Heavy promotional andmedia investment continues behind Vanish to protect volume share againstcompetition.FY adjusted operating profit was ahead +10% at £908m; the adjusted operatingmargin decreased -100bp, due to a combination of increased investment in priceand 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 revenueFY 2011 total net revenue increased +5% (+3% LFL) to £2,402m. Growth came fromHealth & Personal Care, Dishwashing and Food. The increase in Health &Personal Care was driven by Mucinex, which benefited from the Q3 roll out ofMucinex Fast Max. In Dishwashing, Finish Quantum and All-in-1 tablets and gelpacks contributed an excellent performance. The increase in Food came from theconsumer brands of French's Yellow Mustard and Frank's Red Hot Sauce, which wassupported by additional marketing activity.FY adjusted operating profit increased +10% to £652m due to favourable productmix and fixed cost containment; the adjusted operating margin was +130bp higherat 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 revenueFY 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 fromDettol, Strepsils, Gaviscon and Veet. The increase in Fabric Care was drivenby Vanish, while Harpic and Veja were the key drivers in Surface Care. In HomeCare, 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 inQ4 2010. The impact of these factors resulted in a +270bp improvement in theadjusted 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 revenue2011 total net revenue grew +6% to £762m. The patent-protected Suboxone filmvariant continued to grow, and by the end of December had captured a 48% volumeshare of the total market and has further strengthened its position as marketleader, ahead of tablets. The NA business net revenue declined -2% to £587m ofwhich the film generated £249m. In Europe and Rest of the World, the resultwas helped by the buyback of the sales and distribution rights in the majorityof countries in July 2010. Adjusted operating profit for the total RBPbusiness increased +1% to £518m. The operating margin was down -400bp to68.0%, largely due to the lower margins of the film variant and the impact ofhigher rebates relating to Medicaid.In Q4, as earlier communicated, RBP results were affected by the 2011 and prioryear impact of US Health reforms, as a result of which higher rebates toMedicaid were required. As a result net revenues are down by -17% to £193mwith profit down by 22% to £143m, compared to an exceptionally strong quarterlast year when the film was being rolled-out. The in-market sales trend remainson a healthy growth track. At this time the Group has no intelligence as tothe exact timing of potential generic competition to the Suboxone Tablets inthe 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 revenueincreased +37% to £3,156m . In Healthcare, the result was driven by very goodgrowth for Nurofen, Mucinex, Strepsils and Gaviscon, boosted by such newinitiatives as Strepsils Warm and Mucinex Fast Max. In Personal Care, Dettolcontinued to grow well both in Developing Markets, and in Europe where thecontinued 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 initialsuccess of Mucinex Fast Max. Fabric Care. Net revenue decreased by -5% to £1,503m, predominantly driven bycontinued weakness in Laundry Detergents and Fabric Softeners in SouthernEurope. The Group continues to invest aggressively to protect the marketposition of Vanish against competitor launches and intensive promotionalactivity; as a result market share trends are improving. Q4 net revenuedeclined -1% to £357m, with Vanish returning to growth as we anniversarycompetitive launches in Europe and continue to see good growth in DevelopingMarkets. 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 Careand Pest Control. In Air Care, the result was supported by the launch of AirWick 100% natural propellant spray and Air Wick Odour Detect, with continuedgood growth in candles. In Pest Control, a strong season and growth inautomatic 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 consumerbrands of French's Yellow Mustard and Frank's Red Hot Sauce, boosted byadditional 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 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 2010 Annual Report and Financial Statements, and asupdated 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-termliabilities excluding borrowings and provisions) of minus £910m was a £15mdeterioration versus the 31 December 2010 level due mainly to an increase ininventories 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). Netinterest paid was £13m (2010: net interest received of £8m) and tax paymentswere relatively flat at £677m (2010: £679m) due to the settlement of a numberof outstanding matters in 2010. Capital expenditure was lower than the prioryear at £205m (2010: £367m), due to the buy back of the remaining sales,marketing and distribution rights to Suboxone, Subutex and Temgesic in Europeand the Rest of the World and the investment in certain health and personalcare 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 wasannounced in respect of the acquisition of SSL and further reconfiguration ofthe enlarged Group. In FY 2011, an exceptional pre-tax charge of £96m was incurred, of which £92mis reflected in reported operating profit and £4m is included in net interest. The remainder of the restructuring charge, of approximately £50m, is expectedto 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, otherintangible assets, deferred tax, available for sale financial assets and otherreceivables. The Group has net working capital of minus £910m (2010: minus £925m), current provisions of £60m (2010: £164m) and long-term liabilities otherthan borrowings of £2,642m (2010: £2,555m).The Group's financial ratios remain strong. Return on shareholders' funds (netincome divided by total shareholders' funds) was 30.3% on a reported basis and31.4% on an adjusted basis (2010: 30.6% on a reported basis and 32.4% on anadjusted 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 byshareholders at the AGM on 3 May 2011, will be paid on 31 May to shareholderson the register at the record date of 24 February. The ex-dividend date is 22February and the last date for election for the share alternative to thedividend is 10 May. The final dividend will be accrued once approved byshareholders.Contingent liabilities. The Group is involved in a number of investigations bygovernment authorities and has made provisions for such investigations, whereappropriate. Where it is too early to determine the likely outcome of thesematters, the Directors have made no provision for such potential liabilities. During 2011, RB agreed to pay a €24m fine in the settlement of an investigationby the German Federal Cartel Office involving price fixing agreements ondetergent and cleansing agents between 2005 and 2008.The Group has received a civil claim for damages from the Department of Healthand others in the United Kingdom, regarding alleged anti-competitive activityinvolving the Gaviscon brand. The claim is under review and although it is atan early stage, the Directors do not believe that any potential impact would bematerial to the Group financial statements.The Group from time to time is involved in discussions in relation to ongoingtax 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 themarket 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 forthe year ended 31 December 2010 have been prepared in accordance withInternational Financial Reporting Standards ("IFRSs") as adopted by theEuropean Union and IFRSs as issued by the International Accounting StandardsBoard. The unaudited financial statements for 2011 are prepared usingaccounting policies in accordance with those set out in the Group's 2010 AnnualReport and Financial Statements, and as updated by the 2011 Interim Statement. The financial information set out in the announcement does not comprisestatutory accounts within the meaning of section 434 of the Companies Act2006. Statutory accounts for the year ended 31 December 2010 were approved bythe Board of Directors on 11 March 2011 and delivered to the Registrar ofCompanies. The report of the auditors on those accounts was unqualified, didnot contain an emphasis of matter paragraph and did not contain any statementunder section 498 of the Companies Act 2006. The statutory accounts for theyear ended 31 December 2011 will be finalised on the basis of the financialinformation presented by the Directors in this preliminary announcement, andwill be delivered to the Registrar of Companies following the Group's AnnualGeneral 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 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 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) 103tax
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 ofacquisition of SSL were provisionally estimated and disclosed in the 2010annual report and financial statements. Final fair values at acquisition dateare now confirmed and have been recorded as a prior year restatement of thebalance sheet at 31 December 2010. There is no impact to the income statementfor 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 1,568 724,192,584 216.5attributable 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 1,661 724,192,584 229.4attributable 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, providesthe most meaningful measure of earnings per ordinary share.
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