Half-Year Results 2013

29 July 2013 STRONG HY 2013 RESULTS Results at a glance Q2* % change % change HY % change % change £m actual constant £m actual constant(unaudited) exchange exchange exchange exchangeNet revenue 2,477 +7 +5 4,994 +7 +6 - growth (ex RBP) +6 +6- Like-for-like growth +6 +6(ex RBP)**Operating profit - 914 -15 -17reportedOperating profit - 1,163 +3 +2adjusted***Net income - reported 660 -15 -17Net income - adjusted*** 864 +6 +5EPS (diluted) - reported 90.4p -14EPS (diluted) - 118.3p +7adjusted*** * Q2 results were not subject to the independent review. ** Like-for-like ("LFL") growth excludes the impact of changes inexchange rates, acquisitions and disposals. *** Adjusted results exclude exceptional items of £249m, whichincludes a £225m provision for liabilities arising from historic regulatoryissues, principally competition law (refer note 9). Highlights: Half Year (HY) unless otherwise stated - LFL growth +5% (+6% ex RBP) driven by core areas and categories. - Q2 LFL growth +4% (+6% ex RBP). - Strong gross margin improvement +230bps to 58.7%: adjustedoperating margin (ex RBP) -10bps1 to 20.4%. - Increased investment in brand equity (BEI), ex RBP, of +80bps andin group capabilities. - Adjusted net income +6% (+5% constant): adjusted diluted EPS of118.3p (+7%). - Strong free cash flow generation of £893m. - The Board declares a +[7]% increase in the interim dividend to[60]p per share. 1 Prior year adjusted operating profit restated for IAS19adjustment and a reclassification of net pension scheme interest. Refer tonote 3 for further detail Commenting on these results, Rakesh Kapoor, Chief ExecutiveOfficer, said: "I am pleased that our strong focus on Health & Hygiene Powerbrandsis working and our improved company growth rates confirm that we are makingthe right strategic choices. Our Health portfolio has had an excellent 1sthalf, with Mucinex outperforming a very strong market with excellentinnovations such as Sinus-Max and the continued success of our Fast Max line.Durex also delivered an excellent performance supported by creative digitalcommunications across the world, particularly in China which has now becomethe largest Durex market in the world. In Hygiene, Dettol and Lysol areperforming strongly across the world, once again confirming the vast potentialof this franchise. Our organizational focus on 16 Powermarkets, such as China, isanother critical element of our growth strategy and is enabling us tosustainably outperform our markets. We have systematically increased our brandinvestment in all our Areas and at the same time invested in enhancing ourcapabilities to execute and win. I am delighted with the progress we have made with our recentstrategic M&As. The excellent early results from Schiff confirm that we haveacquired very high quality brands in an exciting VMS category which we firmlybelieve will deliver sustainable shareholder returns. On Suboxone, we have always been aware of the challenges ofoperating in a post generic environment. However, we continue to see strongpatient and doctor preference for film over tablets and we are very pleasedthat the film has maintained its volume market share of 69%. We continue to face challenging market conditions. Nonethelessthese strong H1 results, our sustained investment behind the equity of ourbrands, together with excellent progress on the integration of our recentacquisitions, give us confidence that we can achieve full year total revenuegrowth1at the upper end of +5-6% range (ex RBP) while maintaining adjustedoperating margins.2" 1 at constant rates including acquisitions and disposals /withdrawal from Private Label and other minor items, excluding RBP. 2 ex RBP, adjusted to exclude the impact of exceptional items Basis of Presentation and Exceptional Items LFL Definition Where appropriate, the term "like-for-like" (LFL) describes theperformance of the business on a comparable basis, excluding the impact ofacquisitions, disposals and discontinued operations. It is measured on aconstant exchange basis. Core definition Where appropriate, the term "core business" represents the ENA,RUMEA and LAPAC geographic areas, and excludes RBP and RB Food. Adjusted results and exceptional items Adjusted results exclude exceptional items. A breakdown ofexceptional items is detailed in note 5 and includes acquisition relatedintegration costs, restructuring costs in relation to the new organization,and a provision for liabilities arising from a number of historic regulatoryissues, principally competition law. Prior year restatements Prior year comparatives have been restated for the adoption ofIAS19 (Revised). The impact on operating profit, interest expense and netincome is detailed on note 3. Additionally there has been a presentation change to net pensionscheme interest. This had no impact on net income. Refer note 3. Detailed Operating Review: Total Group Half year 2013 Total HY net revenue (ex RBP) was £4,594m, a LFL increase of +6%(+6% total at constant rates, ex RBP). Growth was driven by a strongperformance in our Emerging Market areas despite a slowing of volume marketgrowth in certain regions. ENA also performed well in a challenging market.Our Health brands led growth from a category perspective with strongperformances from Mucinex in the US, and Strepsils, Durex and Nurofenglobally. Integration and synergy delivery in respect of our recentacquisitions are well on track. The gross margin grew by +230bps to 58.7%. This was due to acombination of the withdrawal from Private Label, modest price increases, ourfocus on improved mix, a more benign input environment and savings from costoptimisation programmes ("Project Fuel"). We raised investment behind our brands (as defined by our BrandEquity Investment (BEI) metric), by 80bps to 14.4% of net revenue (ex RBP).The increase in equity investment is focused on power brands, power marketsand new initiatives. This included an increase in investment behind our newlyacquired Schiff brands. We also increased investment behind capabilities important to ourfuture growth - in particular in the areas of Health, Emerging Markets and IT. Operating profit as reported was £914m, -15% versus HY 2012 (-17%constant), reflecting the impact of an exceptional pre-tax charge of £249m (HY2012: £48m). Details of the exceptional charge are set out in note 5 andrelate to a provision for historic regulatory issues, principally competitionlaw, restructuring costs in relation to the new organization, and acquisitionand associated integration costs. On an adjusted basis, operating profit wasahead +3% (+2% constant) to £1,163m: The adjusted operating margin decreasedby -80bps to 23.3%. Excluding RBP, the adjusted operating margin decreased by-10bps to 20.4%. Net finance expense was £16m (HY 2012: £18m). The tax rate was 26%after deducting the exceptional charge (which we do not expect to be fully taxdeductible), and 25% for adjusted net income. Net income as reported was £660m, a decrease of -15% (-17%constant) versus HY 2012; on an adjusted basis, net income rose +6% (+5%constant). Diluted earnings per share of 90.4 pence was -14% lower on areported basis; on an adjusted basis, the growth was +7% to 118.3 pence. On sustainability we have launched a campaign with our global partner Save theChildren to use our hygiene technologies and innovation capabilities toprevent diarrhoea from being one of the world's biggest killers of children -a UN millennium goal on which there has been less progress. Second quarter 2013 Total Q2 net revenue (ex RBP) was £2,278m, a LFL increase of +6%(+6% total at constant rates, ex RBP). Growth trends were similar to those inQ1. Emerging markets continued to perform strongly despite some slowing in thegrowth of their economies. On a category basis, Health continued its excellentperformance with Mucinex outperforming a strong market environment in the US,and most other Health brands also performing strongly. In Hygiene powerbrandsof Dettol, Lysol, Harpic, and Mortein all performed well. Within Home, bothVanish and Air Wick grew well in Emerging Market areas. HY 2013 Business Review Summary: % net revenue growth Q2 H1 LFL Net M&A* FX Reported LFL Net M&A* FX ReportedENA** +3% +1% +4% +8% +3% +1% +2% +6%LAPAC +11% +2% +1% +14% +11% +2% -2% +11%RUMEA** +5% - -1% +4% +6% -1% -1% +4%Food -2% - +3% +1% 0% - +3% +3%Group ex RBP +6% +1% +2% +9% +6% +1% +1% +7%* Reflects the acquisitions of Schiff and other minor acquisitions,withdrawal from Propack (Private Label) and disposal / discontinuance of anumber of minor businesses. ** Scholl footwear business, previously reported as part of RUMEA,is now reported as part of ENA. Net revenue values and growth rates have beenrestated / calculated based on this reclassification. Note: due to rounding, this table will not always cast Analyses by operating segment of net revenue and adjusted operatingprofit, and of net revenue by product group are set out below. The ExecutiveCommittee of the Group assesses the performance of the operating segmentsbased on net revenue and adjusted operating profit. This measurement basisexcludes the effect of exceptional items. Review by Operating Segment Quarter ended Half Year ended 30 June 30 June 2013 2012* % change 2013 2012* % change £m £m exch. rates £m £m exch. rates actual const. actual const. Total Net revenue 1,191 1,104 +8 +4 ENA 2,451 2,303 +6 +4 654 572 +14 +13 LAPAC 1,280 1,152 +11 +13 349 335 +4 +5 RUMEA 703 673 +4 +5 84 83 +1 -2 Food 160 156 +3 - 2,278 2,094 +9 +6 Total - ex RBP 4,594 4,284 +7 +6 199 218 -9 -12 RBP 400 385 +4 +2 2,477 2,312 +7 +5 Total 4,994 4,669 +7 +6 Operating profit - adjusted** ENA 525 463 +13 +11 LAPAC 233 209 +11 +12 RUMEA 141 141 - - Food 36 36 - - Corporate*** - 30 n/a n/a Total - ex RBP 935 879 +6 +5 RBP 228 245 -7 -9 Subtotal before exceptional items 1,163 1,124 +3 +2 Exceptional items (249) (48) Total 914 1,076 -15 -17 Operating margin - adjusted** % % ENA 21.4 20.1 LAPAC 18.2 18.1 RUMEA 20.1 21.0 Food 22.5 23.1 Corporate *** n/a n/a Total - ex RBP 20.4 20.5 RBP 57.0 63.6 Total 23.3 24.1 * ENA and RUMEA comparatives restated to reflect the geographicalreclassification of Footwear. Prior year adjusted operating profit restatedfor IAS19 adjustment and a reclassification of net pension scheme interest.Refer note 3 for further detail ** Adjusted to exclude the impact of exceptional items. ***Items of income and expense which are not part of the resultsand financial position of the reported segments, and therefore reported to theChief Operating Decision Maker outside of the individual segment financialinformation, are shown in the Corporate segment. For the six months ended 30June 2012, these items include profits on disposals of intangibles and theParas Personal Care business, and corporate provisions. The Business Review below is given at constant exchange rates. ENA 55% of core net revenue HY 2013 total net revenue was £2,451m, with LFL growth of +3% withgood growth in North America and a stable result in Europe given the weakeconomic backdrop. Growth was driven by a strong performance in all Health powerbrands- Mucinex outperforming a strong market in the US and Strepsils in Europe,supported by the launch of Strepsils 6+. Nurofen, Durex, Scholl Footcare andGaviscon performed well, particularly in Europe behind significant BEI and newproduct innovations. In Hygiene, Lysol performed well in the US and Finish inEurope following the launch of the new Finish Quantum with Power Gel. In Home,Air Wick performed well. We have undertaken a number of specific actions to streamline ourScholl Footwear business in Europe. There is a short term impact of this inboth ENA and portfolio brands. The Schiff integration in the US is progressing very well withstrong LFL revenue growth, well in excess of the VMS market. Our costsynergies programme is also well on track. For the half year, adjusted operating profit increased +11%(constant) to £525m; the adjusted operating margin increased +130bps to 21.4%,due primarily to good gross margin expansion, withdrawal from Private Label,and cost synergies from the delayering of the European managementorganization. This funded increased investment in BEI. Q2 total net revenue was £1,191m, with LFL growth of +3%underpinned by continued strong growth in Health with all powerbrands growingstrongly. LAPAC 29% of core net revenue HY 2013 total net revenue was £1,280m, with LFL growth of +11%.Growth was broad based across all regions with particularly strong growth inLatin America and South East Asia. Growth was driven by a combination ofpowerbrand rollouts, innovation, distribution and penetration expansion,particularly in the key growth markets of India, Brazil and China. In Health,Nurofen, Strepsils, Durex and Gaviscon performed well and Vanish, Air Wick andWoolite drove the growth in Home. The strong performance in Hygiene was drivenby Dettol with the recently launched Dettol Kitchen Gel in India and Koreagaining good initial market share. For the half year, adjusted operating profit increased +12%(constant) to £233m; the adjusted operating margin was +10bps higher at 18.2%.Gross margin improvement funded investment in both BEI and in enhancing ourcapabilities. Q2 total net revenue was £654m, with LFL growth of +11% (total,constant +13%). Growth was broad based across Health, Hygiene and Home in whatwas a balanced performance. RUMEA 16% of core net revenue HY 2013 net revenue increased to £703m, with LFL growth of +6%. Ona category basis, Health was driven by a strong performance in Durex. Dettolled the growth in Hygiene, with supporting strong performances from Harpic,Finish, Cillit Bang and Mortein. As signaled with our full year 2012 numbers, RUMEA growth issomewhat impacted by the up scheduling of certain Nurofen products in Russiaand some operational and socio-political challenges in certain markets. For the half year, adjusted operating profit was maintained at£141m; the adjusted operating margin was -90bps lower at 20.1%. We continuedto invest behind our brands and in capabilities to drive future growth. Q2 total net revenue was £349m, with LFL growth of +5%. Growth wasdriven by Durex, Finish, Dettol and Air Wick. Food HY 2013 total net revenue was £160m, a level that was maintainedversus prior year and an increase of +3% at actual exchange rates. Weak marketconditions in the second quarter offset a robust start to the year. Operatingmargins fell by -60bps to 22.5%. Pharmaceuticals ("RBP") HY 2013 net revenue was £400m, an increase of +2% (constant). Theunderlying volume growth in prescriptions in the US continues to be strongwith low double digit growth, and in line with recent market trends. Thisgrowth was offset by the negative impact of conversion from tablets to film aswe voluntarily discontinued the sale of tablets in the US from 18 March. Theremaining tablet sales from early 2013 have largely been lost to genericSuboxone tablets, launched into the US market late in February. Since theirlaunch, generic Suboxone tablets have gained a 13% mg volume market share* ofthe buprenorphine market in the USA. We are very pleased that Film share oftotal buprenorphine prescriptions in the USA has been maintained since thelaunch of generic tablets, although we continue to believe that increasedprice pressure will lead to some loss of film market share over time despitethe clinical and patient benefits of the film format. In Europe, we were impacted by government imposed price reductionsin a number of markets. As a result of the above factors Q2 net revenue was £199m, adecrease of -12% (constant). HY adjusted operating profit for the total RBP business decreased-9% (constant) to £228m as a result of market share loss, negative mix andinvestment in the clinical pipeline. We expect this gradual increase inclinical investment to continue for the remainder of 2013 and beyond as webuild a strong, sustainable growth business. We have been informed of a paragraph IV notice of the filing of anabbreviated new drug application (ANDA) by Par Pharmaceutical for a genericSuboxone film in the USA (under the Waxman Hatch Act). There are a combination of formulation and process patentssurrounding the film. The most recent of these is a formulation patent, OrangeBook listed, in RBP's name which is valid until 2030. We are confident aboutthe strength of our intellectual property protection for Suboxone film andwill be filing a suit to enforce our intellectual property shortly. By virtueof filing this patent infringement lawsuit, the FDA cannot approve the genericentrant until the earlier of 30 months or the disposition of the patentinfringement proceedings *source: Healthcare Analytics Retail Phast Weekly Data as at 28June 2013 HY 2013 Category Review Quarter ended Half Year ended 30 June 30 June 2013 2012 % change 2013 2012* % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue by category 600 443 +35 +32 Health 1,197 904 +32 +31 968 915 +6 +4 Hygiene 1,993 1,879 +6 +6 491 474 +4 +2 Home 979 960 +2 +1 135 179 -25 -28 Portfolio Brands 265 385 -31 -33 84 83 +1 -2 Food 160 156 +3 - 2,278 2,094 +9 +6 Total - ex RBP 4,594 4,284 +7 +6 199 218 -9 -12 RBP 400 385 +4 +2 2,477 2,312 +7 +5 Total 4,994 4,669 +7 +6 Operating profit - adjusted Health, Hygiene, Home & Portfolio 899 813 +11 +9 Food 36 36 - - Corporate - 30 n/a n/a Total - ex RBP 935 879 +6 +5 RBP 228 245 -7 -9 Total 1,163 1,124 +3 +2 Exceptional items (249) (48) Total 914 1,076 -15 -17 Operating margin - adjusted % % Health, Hygiene, Home & Portfolio 20.3 19.7 Food 22.5 23.1 Corporate n/a n/a Total - ex RBP 20.4 20.5 RBP 57.0 63.6 Total 23.3 24.1* Prior year adjusted operating profit restated for IAS19adjustment and a reclassification of net pension scheme interest. Refer note 3for further detail. Q2 H1 LFL Net M&A* FX Reported LFL Net M&A* FX ReportedHealth +16% +16% +3% +35% +14% +17% +1% +32%Hygiene +5% -1% +2% +6% +7% -1% 0% +6%Home +3% -1% +2% +4% +2% -1% +1% +2%Portfolio -5% -23% +3% -25% -14% -19% +2% -31%* Reflects the acquisitions of Schiff and other minor acquisitions,withdrawal from Propack (Private Label) and disposal / discontinuance of anumber of minor businesses The Category Review below is given at constant exchange rates. Health 27% of core net revenue HY 2013 total net revenue was £1,197m, with LFL growth of +14%. Wehave had an excellent 1st half, with Mucinex outperforming a very strongmarket with excellent innovations such as Sinus-Max and the continued successof our Fast Max line. Durex also delivered an excellent performance supportedby creative digital communications across the world. Additionally we have seenencouraging early successes of recently launched innovations like StrepsilsChildren 6+ lozenges, Nurofen next generation heat patches and the roll out ofour Real Feel polyisoprene condoms in a number of markets. Our recent consumer health acquisitions have also made a verypositive start. In the US MegaRed and Airborne have performed exceptionallywell as we make early progress in the integration of the business. In Chinaour newly acquired Myanshuning sore throat brand has made a strong start, andwe have now received regulatory clearance for our collaboration agreement withBMS in Latam. Q2 total net revenue was £600m, with LFL growth of +16%. Growth wasbroad based, but also benefitted from a more sustained `flu season in the US,which contributed to another quarter of strong growth. Hygiene 45% of core net revenue HY 2013 total net revenue was £1,993m, with LFL growth of +7%(total, constant +6%). Growth was driven by strong performances in the Dettol/ Lysol franchise in all our three areas. In the US, our new "Healthing"campaign combined with new initiatives such as Lysol Power & Free drovegrowth. In Emerging Market areas growth was underpinned by brand equity driveninitiatives such as our new mums hospital visit programme in over 40countries, and successful new category extensions with Dettol Kitchen Gel.Harpic performed well in emerging markets behind penetration programmes andMortein delivered good growth in India and Australia aided by our Naturguardinnovations and a good pest season. Finish performed well in a number ofEuropean markets behind the launch of Finish Quantum with power gel, and incertain EM countries as we continue to drive penetration. Q2 total net revenue was £968m. LFL growth was +5%, with strongperformances in Dettol and Lysol. In the US we continue to gain shares inFinish in the face of higher promotional intensity. Home 22% of core net revenue HY 2013 total net revenue was £979m, with LFL growth of +2%. Whilstmacro conditions in the Home categories remain weak, particularly in ENA, wecontinue to invest behind innovation and geographical expansion. Air Wickproduced a strong performance behind electricals in the US market driven bythe recent successful launch of our new "National Parks" fragrances. We alsocontinue to expand our successful candles franchise and have recentlyannounced our newest innovation, Air Wick Pearl Infusions - a new range ofpremium candles, delivering a relaxing experience...pearl after pearl. Growthin Vanish was driven by innovation in both Developed and Emerging Markets,with a particularly strong performance in Brazil, our largest Vanish market. Q2 total net revenue was £491m. LFL growth was +3% against a weakmarket backdrop. Portfolio 6% of core net revenue HY 2013 total net revenue was £265m, with LFL growth of -14%. Thesignificant decline in LFL growth is due in large part to planned actions inthe European Footwear business noted earlier. We also saw further weakness inLaundry Detergents and Fabric Softeners in Southern Europe, driven primarilyby more competitive market conditions. Within total net revenue we saw theimpact of our withdrawal from our Private Label business. Q2 total net revenue was £135m, with LFL growth of -5% with similartrends to Q1, albeit with less of an impact from the planned actions in theScholl Footwear business. New Product Initiatives: H2 2013 The Group has disclosed a selection of new product initiatives forthe second half of 2013: In Health: - Launch of Mucinex Fast-Max Night Time Cold & Flu. Powerful relieffrom your worst cold & flu symptoms for a peaceful night's sleep. - Launch of Move Free One - Total Joint Health. One softgel tablet is theequivalent of two glucosamine and chondroitin tablets. - Launch of Durex Embrace. Two pleasure gels combine in one product. Warmingfor me, tingling for you & an amazing connection together. In Hygiene: - Finish Quantum with Powergel, now rolling out in 35 markets. - Launch of Veet Facial Precision Wax and Care. Combines theefficacy of a precision wax, with the benefits of a soothing after-care cream. - Launch of new Lysol Power & Free with Hydrogen Peroxide - a rangeof powerful cleaners without the bleach. - Launch of "Peaceful Nights" in the pest category. Launched inBrazil under the local brand, SBP, this is the safest electrical liquidmosquito repellent, with smart auto off capability. In Home: - Launch of Air Wick Pearl Infusions. A new range of premiumcandles, delivering a relaxing experience...pearl after pearl. - Launch of the new Vanish Super Bar in Emerging Markets. The powerof Vanish now available in a soap bar. Tough on stains, gentle on fabrics. Financial Review Basis of preparation. The unaudited financial information isprepared in accordance with IFRSs as adopted by the European Union and IFRSsas issued by the International Accounting Standards Board, and with theaccounting policies to be applied in the financial statements for the yearending 31 December 2013. These are not materially different from those set outin the Group's 2012 Annual Report and Accounts, unless separately disclosed. Constant exchange. Movements in exchange rates relative to sterlingaffect actual results as reported. The constant exchange rate basis adjuststhe comparative to exclude such movements, to show the underlying results ofthe Group. Net finance expense. Net finance expense is £16m (2012: £18m, whichhas been restated to include the impact of IAS19 (Revised) Employee Benefits,and reclassification of net pension interest (refer note 3)). Tax. The overall effective tax rate is 26% (2012: 26%). Net working capital (inventories, trade and other receivables andtrade and other payables) of minus £855m was a £155m improvement versus the 31December 2012 level. Cash flow. Cash generated from operations was £1,321m (2012:£1,106m), and free cash flow (net cash generated from operating activitiesless net capital expenditure) was £893m, +13%. Net interest paid was £4mhigher at £13m and tax payments increased by £92m to £330m. Net capitalexpenditure (including intangibles) was £14m higher than the prior year at£85m. During the period the Group undertook share repurchases of £279m. Net debt at the end of the half year was £2,760m (31 December 2012:£2,426m), an increase of £334m. This reflected the various M&A expenditures inChina and Latin America of £413m, the payment of the final 2012 dividend of£561m, and share repurchases of £279m, offset by strong net cash generatedfrom operating activities of £978m. The Group regularly reviews its bankingarrangements and has adequate facilities available to it. Exceptional items. In HY 2013 the exceptional pre-tax chargeincurred was £249m (HY 2012: £48m). The charge consists of the following items £225m provision for historic regulatory issues, principallycompetition law £24m restructuring costs in relation to the new organization,acquisition and associated integration costs Balance sheet. At 30 June 2013, the Group had shareholders' fundsof £6,037m (31 December 2012: £5,922m), an increase of +2%. Net debt was£2,760m (31 December 2012: £2,426m) and total capital employed in the businesswas £8,797m (31 December 2012: £8,348m). This finances non-current assets of £12,813m (31 December 2012:£12,023m), of which £753m (31 December 2012: £737m) is property, plant andequipment, the remainder being goodwill, other intangible assets, deferredtax, available for sale financial assets and other receivables. The Group hasnet working capital of minus £855m (31 December 2012: minus £700m), currentprovisions of £239m (31 December 2012: £128m) and long-term liabilities otherthan borrowings of £2,830m (31 December 2012: £2,668m). Dividends. The Board of Directors declares an interim dividend of60p (2012: 56.0p), an increase of +7%. The ex-dividend date will be 7 August2013 and the dividend will be paid on 26 September 2013 to shareholders on theregister at the record date of 9 August 2013. The last date for election forthe share alternative to the dividend is 5 September 2013. Legal Provisions. As previously reported, the Group is involved ina number of historic regulatory investigations by various governmentauthorities in Europe and North America. These investigations involve mainlycompetition law inquiries, most of which include several other companies. TheDirectors have made a provision of £225m in respect of these matters. As a matter of policy and practice, the Group cooperates with allgovernment investigations, including regulatory investigations involvingcompetition law. The Group maintains and continues to improve a robustcompliance training programme and ensures that all executive managers sign anannual disclosure and reporting document certifying compliance with theGroup's Code of Conduct. Contingent liabilities. The Group is involved in a number ofinvestigations by government authorities and has made provisions for suchinvestigations, where appropriate. Where it is too early to determine thelikely outcome of these matters, or to make a reliable estimate, the Directorshave made no provision for such potential liabilities. The Group from time to time is involved in discussions in relationto ongoing tax matters in a number of jurisdictions around the world. Whereappropriate, the Directors make provisions based on their assessment of eachcase. 2013 Targets The strong HY results, our continued and sustained investment behind the longterm equity of our brands, and good progress on the integration of our recentacquisitions, give us confidence that we can achieve the upper end our fullyear targets of +5-6% total net revenue growth1 (ex RBP) while maintainingadjusted operating margins.2 1 at constant rates including acquisitions and disposals /withdrawal from Private Label and other minor items, excluding RBP. 2 ex RBP, adjusted to exclude the impact of exceptional items Principal Risks and UncertaintiesThe Directors consider that the principal risks and uncertaintieswhich could have a material impact on the Group's performance in the remainingsix months of 2013 are the same as described on pages 13 to 15 of the AnnualReport and Financial Statements for the year ended 31 December 2012. Theseinclude: Market risks: - Competition, economic conditions and customer consolidationtranslates into increasing pressure on pricing and promotion levels and marketgrowth rates, especially in Europe. - The expiry of the Group's exclusive licences for Suboxone couldexpose the business to competition from generic variants. Operational risks: - Business continuity plans prove insufficient to protect thebusiness in the face of a significant and unforeseen supply disruption. - Key senior management leave the Group or management turnoverincreases significantly. - The combination of the Group's recently initiated strategicbusiness reorganization and ERP programmes could result in sub-optimalimplementations and reduced focus due to conflicting demands for managementattention. - Information technology systems may be disrupted or may fail,interfering with the Group's ability to conduct its business. - Product quality failures or ingredient concerns could potentiallyresult in the undermining of consumer confidence in the Group's products andbrands. - Regulatory decisions and changes in the legal and regulatoryenvironment could limit business activities. - Non-compliance with the 2011 UK Bribery Act - If intensity or scale of acquisitions and disposals activitydistracts management focus or undermines the control environment. Financial risks: - Tax authorities continue to aggressively challenge tax filingspositions and pursue compensation for retroactive changes to tax laws. - Government authorities have become more aggressive in levelingpunitive fines for historic breaches of law. Environmental, social and governance risks: - Industry sector and regulatory risks. - Product quality and safety risks to consumers. - Potential reputational risks around the supply chain. The Group's Annual Report and Financial Statements for the yearended 31 December 2012 are available on the Group's website at www.rb.com. The Group at a Glance (Unaudited) Quarter ended 30 June Half year ended 30 June 2013 2012 2013 2012** £m £m £m £m 2,477 2,312 Net revenue - total 4,994 4,669 +4% +4% Net revenue growth - +5% +4% like-for-like +5% +3% Net revenue growth - +6% +4% constant +7% -1% Net revenue growth - total +7% +1% Gross margin 58.7% 56.4% EBITDA - adjusted* 1,240 1,191 EBITDA margin - adjusted* 24.8% 25.5% EBIT 914 1,076 EBIT margin 18.3% 23.0% EBIT - adjusted* 1,163 1,124 EBIT margin - adjusted* 23.3% 24.1% Profit before tax 898 1,058 Net income 660 775 Net income - adjusted* 864 814 EPS, basic, as reported 91.9p 106.5p EPS, adjusted and diluted* 118.3p 110.5p* Adjusted to exclude the impact of exceptional items. ** Prior year comparatives restated for IAS19 adjustment and areclassification of net pension scheme interest. Refer note 3 for furtherdetail For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Richard Joyce Director, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communication and AffairsBrunswick (Financial PR) +44 (0)20 7404 5959 David Litterick / Max McGahan Notice to shareholders Cautionary note concerning forward-looking statements This document contains statements with respect to the financialcondition, results of operations and business of Reckitt Benckiser and certainof the plans and objectives of the Group with respect to these items. Theseforward-looking statements are made pursuant to the "Safe Harbor" provisionsof the United States Private Securities Litigation Reform Act of 1995. Inparticular, all statements that express forecasts, expectations andprojections with respect to future matters, including trends in results ofoperations, margins, growth rates, overall market trends, the impact ofinterest or exchange rates, the availability of financing to the Company,anticipated cost savings or synergies and the completion of strategictransactions are forward-looking statements. By their nature, forward-lookingstatements involve risk and uncertainty because they relate to events anddepend on circumstances that will occur in the future. There are a number offactors discussed in this report, that could cause actual results anddevelopments to differ materially from those expressed or implied by theseforward-looking statements, including many factors outside Reckitt Benckiser'scontrol. Past performance cannot be relied upon as a guide to futureperformance. Half Year Condensed Financial Statements Group Income Statement For the six months ended 30 June 2013 Six months ended Year ended 30 June 30 June 31 December 2013 2012 2012 (restated)(a) (restated)(a) Notes £m £m £mNet revenue 4 4,994 4,669 9,567Cost of sales (2,065) (2,038) (4,029)Gross profit 2,929 2,631 5,538Net operating expenses (2,015) (1,555) (3,096)Operating profit 4 914 1,076 2,442Operating profit before exceptional 1,163 1,124 2,577itemsExceptional items 5 (249) (48) (135)Operating profit 914 1,076 2,442Finance income 12 12 26Finance expense (28) (30) (60)Net finance expense (16) (18) (34)Profit on ordinary activities before 898 1,058 2,408taxationTax on profit on ordinary activities 6 (237) (279) (583)Net income for the period 661 779 1,825 Attributable to non-controlling 1 4 4interestsAttributable to owners of the parent 660 775 1,821Net income for the period 661 779 1,825 Earnings per ordinary share:Basic earnings per share 7 91.9p 106.5p 251.4pDiluted earnings per share 7 90.4p 105.2p 248.4p(a) refer to note 3 for further details. Group Statement of Comprehensive Income For the six months ended 30 June 2013 Six months ended Year ended 30 June 30 June 31 December 2013 2012 2012 (restated)(a) (restated)(a) £m £m £mNet income for the period 661 779 1,825Other comprehensive incomeItems that may be reclassified to profit or loss insubsequent periodsNet exchange adjustments on foreign currency 167 (204) (255)translation, net of taxGains on cash flow hedges, net of tax 10 - 3Reclassification of foreign currency - 9 9translation reserves on disposal ofsubsidiary, net of tax 177 (195) (243)Items that will not be reclassified to profit or loss insubsequent periodsRemeasurements of defined benefit pension 1 (24) (41)plans, net of tax 1 (24) (41)Other comprehensive income for the period, netof tax 178 (219) (284)Total comprehensive income for the period 839 560 1,541Attributable to non-controlling interests 1 2 (1)Attributable to owners of the parent 838 558 1,542 839 560 1,541 (a) refer to note 3 for further details. Group Balance Sheet As at 30 June 2013 30 June 30 June 31 December 2013 2012 2012 Note £m £m £mASSETSNon-current assets:Goodwill and other intangible assets 11,711 10,005 11,175Property, plant and equipment 753 716 737Deferred tax assets 62 115 49Available for sale financial assets 2 10 2Retirement benefit surplus 20 27 27Other receivables 265 38 33 12,813 10,911 12,023Current assets:Inventories 785 739 735Trade and other receivables 1,466 1,355 1,407Derivative financial instruments 40 36 4Current tax receivables 41 1 20Available for sale financial assets 21 7 4Cash and cash equivalents 790 1,063 887 3,143 3,201 3,057Total assets 15,956 14,112 15,080 LIABILITIESCurrent liabilities:Borrowings (3,597) (2,948) (3,271)Provisions for liabilities and charges (239) (53) (128)Trade and other payables (3,106) (2,846) (2,842)Derivative financial instruments (11) (4) (43)Current tax liabilities (133) (265) (203) (7,086) (6,116) (6,487)Non-current liabilities:Borrowings (3) (3) (3)Deferred tax liabilities (1,854) (1,659) (1,814)Retirement benefit obligations (395) (494) (426)Provisions for liabilities and charges (186) (125) (100)Non-current tax liabilities (342) (211) (311)Other non-current liabilities (53) (35) (17) (2,833) (2,527) (2,671)Total liabilities (9,919) (8,643) (9,158)Net assets 6,037 5,469 5,922 EQUITYCapital and reserves:Share capital 10 74 73 73Share premium 243 155 184Merger reserve (14,229) (14,229) (14,229)Hedging reserve 12 (1) 2Foreign currency translation reserve 36 (83) (131)Retained earnings 19,899 19,548 20,022 6,035 5,463 5,921Non-controlling interests 2 6 1Total equity 6,037 5,469 5,922 Group Statement of Changes in Equity For the six months ended 30 June 2013 Foreign Retained Total currency earnings attributable Share Share Merger Hedging translation Retained to owners of Non-controlling Total capital Premium reserve reserve reserve earnings the parent interests equity Restated (a) £m £m £m £m £m £m £m £m £m Balance at 1 73 86 (14,229) (1) 110 19,672 5,711 70 5,781January 2012 Net income 775 775 4 779 Other (193) (24) (217) (2) (219)comprehensiveincome Total - - - - (193) 751 558 2 560comprehensiveincome Transactionswith owners Proceeds from 69 69 69share issue Share-based 28 28 28payments Current tax on 11 11 11share awards Shares (352) (352) (352)repurchased andheld in Treasury Dividends (511) (511) (4) (515) Acquisition of (51) (51) (53) (104)non-controllinginterest Reclassification (9) (9)ofnon-controllinginterestfollowing lossof control andsubsequentdisposal Total - 69 - - - (875) (806) (66) (872)transactionswith owners Balance at 30 73 155 (14,229) (1) (83) 19,548 5,463 6 5,469June 2012 Net income 1,046 1,046 - 1,046 Other 3 (48) (17) (62) (3) (65)comprehensiveincome Total - - - 3 (48) 1,029 984 (3) 981comprehensiveincome Transactionswith owners Proceeds from 29 29 29share issue Share-based 21 21 21payments Current tax on 12 12 12share awards Shares (183) (183) (183)repurchased andheld in Treasury Dividends (405) (405) (405) Acquisition of (2) (2)non-controllinginterest Total - 29 - - - (555) (526) (2) (528)transactionswith owners Balance at 31 73 184 (14,229) 2 (131) 20,022 5,921 1 5,922December 2012 Net income 660 660 1 661 Other 10 167 1 178 178comprehensiveincome Total - - - 10 167 661 838 1 839comprehensiveincome Transactionswith owners Proceeds from 1 59 60 60share issue Share-based 29 29 29payments Deferred tax on 7 7 7share awards Current tax on 20 20 20share awards Shares (279) (279) (279)repurchased andheld in Treasury Dividends (561) (561) (561) Total 1 59 - - - (784) (724) - (724)transactionswith owners Balance at 30 74 243 (14,229) 12 36 19,899 6,035 2 6,037June 2013 (a) refer to note 3 for further details. Group Cash Flow Statement For the six months ended 30 June 2013 Six months ended Year ended 30 June 30 June 31 December 2013 2012 2012 (restated)(a) (restated)(a) Notes £m £m £mCASH FLOWS FROM OPERATING ACTIVITIESCash generated from operations Operating 2,442profit 914 1,076Depreciation, amortisation and impairment 80 72 148Fair value losses / (gains) 1 (1) (7)Gain on sale of property, plant & equipment and - (13) (13)intangible assetsGain on sale of businesses - (32) (32)(Increase) / decrease in inventories (39) (8) 19(Increase) / decrease in trade and other (34) 23 (16)receivablesIncrease / (decrease) in payables and 370 (39) (167)provisionsShare based payments 29 28 49Cash generated from operations: 1,321 1,106 2,423Interest paid (26) (21) (34)Interest received 13 12 27Tax paid (330) (238) (528)Net cash generated from operating activities 978 859 1,888 CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant & equipment (77) (76) (166)Purchase of intangible assets (14) (5) (11)Disposal of property, plant & equipment 6 1 13Disposal of intangible assets - 9 9Acquisition of businesses, net of cash 13 (413) - (877)acquiredDisposal of businesses, net of cash disposed - 81 81(Purchase) / maturity of short-term (18) 3 7investmentsMaturity of long-term investments - 7 14Net cash outflow on deconsolidation of a - (6) (6)subsidiaryNet cash generated (used in) / from investing (516) 14 (936)activities CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of ordinary shares 60 69 98Shares purchased and held in Treasury 10 (279) (352) (535)Proceeds from borrowings 256 475 887Repayments of borrowings (7) - (112)Dividends paid to owners of the parent 11 (561) (511) (916)Dividends paid to non-controlling interest - (4) (4)Acquisition of non-controlling interest 15 (28) (104) (106)Net cash used in financing activities (559) (427) (688) Net (decrease) / increase in cash and cash (97) 446 264equivalentsCash and cash equivalents at beginning of 882 634 634periodExchange losses (4) (18) (16)Cash and cash equivalents at end of the period 781 1,062 882 Cash and cash equivalents compriseCash and cash equivalents 790 1,063 887Overdrafts (9) (1) (5) 781 1,062 882(a) refer to note 3 for further details. Notes to the Half Year Condensed Financial Statements For the six months ended 30 June 2013 1. General Information Reckitt Benckiser Group plc is a public limited company listed onthe London Stock Exchange and incorporated and domiciled in the UK. Theaddress of its registered office is 103-105 Bath Road, Slough, Berkshire SL13UH. The Half Year Condensed Financial Statements were approved by theBoard of Directors on 26 July 2013. The Half Year Condensed FinancialStatements have been reviewed, not audited. 2. Basis of Preparation The Half Year Condensed Financial Statements for the six monthsended 30 June 2013 have been prepared in accordance with the Disclosure andTransparency Rules of the Financial Conduct Authority and IAS 34 Interimfinancial reporting as endorsed by the European Union. The Half Year CondensedFinancial Statements should be read in conjunction with the Annual Report andFinancial Statements for the year ended 31 December 2012, which have beenprepared in accordance with European Union endorsed International FinancialReporting Standards (IFRS) and those parts of the Companies Act 2006applicable to companies reporting under IFRS. The financial statements for theyear ended 31 December 2012 are also in compliance with IFRS as issued by theInternational Accounting Standards Board. These Half Year Condensed Financial Statements do not comprisestatutory accounts within the meaning of section 434 of the Companies Act2006. Statutory accounts for the year ended 31 December 2012 were approved bythe Board of Directors on 8 March 2013 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 Group has considerable financial resources together with adiverse customer and supplier base across different geographical areas andcategories. As a consequence, the Directors believe that the Group is wellplaced to manage its business risks successfully despite the current uncertaineconomic outlook. The Directors have a reasonable expectation that the Grouphas adequate resources to continue in operational existence for theforeseeable future. The Group therefore continues to adopt the going concernbasis of accounting in preparing its Half Year Condensed Financial Statements. 3. Accounting Policies and Estimates Except as described below, the accounting policies adopted in thepreparation of the half year condensed financial statements are consistentwith those described on pages 43-46 of the Annual Report and FinancialStatements for the year ended 31 December 2012. The Group applies, for the first time, amendments to IAS 1Presentation of Items of Other Comprehensive Income, IFRS 10 ConsolidatedFinancial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure ofInterests in Other Entities, IFRS 13 Fair Value Measurement and IAS 19(Revised) Employee Benefits Amendments to IAS 1 require items of other comprehensive incomethat may be reclassified to profit or loss to be presented separately fromitems that will never be reclassified. The statement of comprehensive incomehas been revised accordingly. IFRS 10 replaces previous guidance on control and consolidation,IFRS 11 requires joint arrangements to be accounted for as a joint operationor as a joint venture depending on the rights and obligations of each party tothe arrangement, and IFRS 12 requires enhanced disclosures of the nature,risks and financial effects associated with the Group's interests insubsidiaries, associates, joint arrangements and unconsolidated structuredentities. The impact on the Group of applying these standards is not material. IFRS 13 explains how to measure fair value and enhances fair valuedisclosures. The standard does not significantly change the measurement of fair value but codifies itin one place. The impact on the Group is not material. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 3. Accounting Policies and Estimates (continued) IAS 19 (Revised) replaces the interest cost on pension schemeliabilities and expected return on pension scheme assets with a net interestamount that is calculated by applying the discount rate used to measure thedefined benefit obligation at the beginning of the period to the net definedbenefit liability / asset. In addition, the Group now treats the net pension scheme interestamount as finance income / expense. Previously the interest cost on pensionscheme liabilities and expected return on pension scheme assets wereclassified in either cost of sales or net operating expenses. The Directorsbelieve that this change provides more relevant information about theperformance of the Group and aligns the Group's accounting policies withcommon industry practice. These restatements had no impact on the balance sheet and thefollowing impact on the income statement and statement of comprehensiveincome. Six months ended Year ended 30 June 2012 31 December 2012 £m £mGroup Income Statement Decrease in cost of sales 1 1Decrease in net operating expenses 3 6Increase in operating profit for the period 4 7Increase in finance expense (10) (19)Decrease in tax on profit on ordinary activities 2 4Decrease in net income for the period (4) (8) Group Statement of Comprehensive IncomeDecrease in actuarial losses, net of tax 4 8Increase in other comprehensive income 4 8Net impact on total comprehensive income - -Basic, diluted, adjusted basic and adjusted diluted earnings pershare all decreased 0.6 pence for the six months ended 30 June 2012 and 1.1pence for the year ended 31 December 2012 as a result of the adoption of IAS19 (Revised). The Cash Flow statement was restated as a result of the change inoperating profit, with an offsetting decrease in payables and provisions. Several other new standards and amendments apply for the first timein 2013. However, they do not impact the accounting policies applied inpreparing the annual consolidated financial statements of the Group, or thehalf year condensed financial statements. Furthermore, there are no standards,amendments or interpretations that are not yet effective that would beexpected to have a material impact on the Group. In preparing these Half Year Condensed Financial Statements thesignificant estimates and judgments made by management in applying the Group'saccounting policies and the key sources of estimation uncertainty were thesame as those that applied to the consolidated financial statements for theyear ended 31 December 2012. Income tax expense in the interim period is accrued using the taxrate that would be applicable to the expected total annual profit. Refer tonote 6 for further details. 4. Operating Segments The Executive Committee is the Group's Chief Operating DecisionMaker (CODM). Management has determined the operating segments based on thereports reviewed by the Executive Committee for the purposes of makingstrategic decisions. The Executive Committee considers the businessprincipally from a geographical perspective, but with the Pharmaceuticals(RBP) and Food businesses being managed separately given the significantlydifferent nature of these businesses and the risks and rewards associated withthem. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 4. Operating Segments (continued) The geographical segments, comprising Europe and North America(ENA); Latin America, North Asia, South East Asia and Australia & New Zealand(LAPAC); and Russia & CIS, Middle East, North Africa, Turkey and Sub-SaharanAfrica (RUMEA), derive their revenue primarily from the manufacture and saleof branded products in the Health, Home & Hygiene categories. RBP derives itsrevenue exclusively from the sales of buprenorphine-based prescription drugsused to treat opiate dependence and Food derives its revenue from foodproducts sold in ENA. As previously announced the Scholl Footwear business, previouslyreported as part of RUMEA, is now reported as part of ENA. Comparatives havebeen restated on a consistent basis. The Executive Committee assesses the performance of the operating segmentsbased on net revenue and operating profit before exceptional items. Financeincome and expense are not allocated to segments, as they are managed on acentral Group basis. Items of income and expense which are not part of the results and financialposition of the operating segments, and therefore reported to the ExecutiveCommittee outside of the individual segment financial information, are shownin the Corporate segment. For the six months ended 30 June 2013 this is £nil.For the six months ended 30 June 2012 this included profit on disposals ofintangible assets and the Paras Personal Care business and other corporateprovisions with a net effect of £30m. Six months ended 30 June 2013 ENA LAPAC RUMEA Food Corporate Total ex RBP Total RBP £m £m £m £m £m £m £m £mNet revenue 2,451 1,280 703 160 - 4,594 400 4,994Operating profit before 525 233 141 36 - 935 228 1,163exceptional itemsExceptional items (note 5) (249)Operating profit 914Net finance expense (16)Profit on ordinary activities before 898taxationSix months ended 30 June 2012 ENA LAPAC RUMEA Food Corporate Total ex RBP Totalrestated(c) RBP £m £m £m £m £m £m £m £mNet revenue 2,303 1,152 673 156 - 4,284 385 4,669Operating profit before 463 209 141 36 30 879 245 1,124exceptional itemsExceptional items (note 5) (48)Operating profit 1,076Net finance expense (18)Profit on ordinary activities 1,058before taxationYear ended 31 December 2012 ENA LAPAC RUMEA Food Corporate Total ex RBP Totalrestated(c) RBP £m £m £m £m £m £m £m £mNet revenue 4,744 2,327 1,338 321 - 8,730 837 9,567Operating profit before 1,156 465 296 92 32 2,041 536 2,577exceptional itemsExceptional items (note 5) (135)Operating profit 2,442Net finance expense (34)Profit on ordinary activities 2,408before taxation(c) restated for Scholl Footwear segment change and the impact of theaccounting policy change discussed in note 3. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 4. Operating Segments (continued) Analysis of Categories The Group also analyses its revenue by the following categories. 30 June 30 June 31 December 2013 2012 2012 £m £m £mHealth 1,197 904 2,068Hygiene 1,993 1,879 3,682Home 979 960 1,966Portfolio Brands 265 385 693Food 160 156 321 4,594 4,284 8,730RB Pharmaceuticals 400 385 837 4,994 4,669 9,5675. Exceptional Items Exceptional items totalling £249m have been recognised in the sixmonths to 30 June 2013. This includes £225m relating to legal provisions discussed in note9. The remaining £24m relates to the acquisition and integration ofSchiff, the collaboration with Bristol-Myers Squibb (BMS) and thereconfiguration of the Group announced last year (six months ended 30 June2012: £48m; year ended 31 December 2012: £135m relating to the implementationof the Group's new area and category organisation, integration of SSL,withdrawal of private label and further reconfiguration of the Group). Thisconsists primarily of legal and other professional fees, redundancy andbusiness integration costs which have been included within net operatingexpenses. 6. Income Taxes Income tax expense is recognised based on management's bestestimate of the weighted average annual income tax rate expected for the fullfinancial year. The estimated average annual tax rate used for the year to 31December 2013 is 26% (the estimated tax rate for the six months ended 30 June2012 was 26%). The March 2013 Budget Statement contained the announcement of areduction to the UK corporation tax rate from 23% to 21% from 1 April 2014,with a further reduction to 20% from 1 April 2015. The Finance Act 2013includes the legislation to enact the future reduction in the UK tax rate to20% but this legislation was not substantively enacted at the balance sheetdate and the effects of which are not included in these financial statements. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 7. Earnings per Share Six months ended 30 June 2013 30 June 2012 (restated)(a) pence penceBasic earnings per share 91.9 106.5 90.4 105.2Diluted earnings per share Adjusted basic earnings per share 120.3 111.9Adjusted diluted earnings per share 118.3 110.5 (a) refer to note 3 for further details. Basic Basic earnings per share is calculated by dividing the net incomeattributable to owners of the parent (six months to 30 June 2013: £670m; sixmonths to 30 June 2012 (restated): £775m) by the weighted average number ofordinary shares in issue during the period (six months to 30 June 2013:718,069,986; six months to 30 June 2012: 727,389,222). Diluted Diluted earnings per share is calculated by adjusting the weightedaverage number of shares outstanding to assume conversion of all potentiallydilutive ordinary shares. The Company has two categories of dilutive potentialordinary shares: Executive Options and Employee Sharesave schemes. The optionsonly dilute earnings when they result in the issue of shares at a value belowthe market price of the share and when all performance criteria (ifapplicable) have been met. As at 30 June 2013 there were nil (30 June 2012:nil) Executive Share Options excluded from the dilution. The Directors believe that diluted earnings per ordinary share,adjusted for the impact of exceptional items after the appropriate tax amount,provides additional useful information on underlying trends to shareholders inrespect of earnings per ordinary share. Details of the adjusted net income attributable to owners of theparent are as follows: Six months ended 30 June 2013 30 June 2012 (restated)(a) £m £mNet income attributable to owners of the parent 660 775Exceptional items 249 48Tax effect of exceptional items (45) (9)Adjusted net income attributable to owners of the parent 864 814(a) refer to note 3 for further details. 30 June 2013 30 June 2012 Average number Average number of shares of sharesOn a basic basis 718,069,986 727,389,222Dilution of Executive Options outstanding and Executive Restricted Share Plan 11,142,889 8,292,794Dilution for Employee Sharesave Scheme Options outstanding 858,718 677,949On a diluted basis 730,071,593 736,359,965 Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 8. Net Debt 30 June 30 June 31 December 2013 2012 2012Analysis of net debt £m £m £mCash and cash equivalents 790 1,063 887Overdrafts (9) (1) (5)Borrowings (excluding overdrafts) (3,591) (2,950) (3,269)Other 50 42 (39) (2,760) (1,846) (2,426) 30 June 30 June 31 December 2013 2012 2012Reconciliation of net debt £m £m £mNet debt at beginning of period (2,426) (1,795) (1,795)Net (decrease) / increase in cash and cash equivalents (97) 446 264Repayment of borrowings 7 - 112Proceeds from borrowings (256) (475) (887)Borrowings acquired in business combination - - (99)Exchange and other adjustments 12 (22) (21)Net debt at the end of the period (2,760) (1,846) (2,426) 9. Provisions for Liabilities and Charges Provisions are recognised when the Group has a present orconstructive obligation as a result of past events, it is more likely than notthat there will be an outflow of resources to settle that obligation; and theamount can be reliably estimated. Provisions for liabilities and charges include restructuring andother provisions. The restructuring provision of £33m (30 June 2012, £32m; 31December 2012, £66m) relates principally to redundancies, the majority ofwhich is expected to be utilised within one year. Within other provisions the Directors have recognised someexceptional legal provisions. The Group is involved in a number of historicregulatory investigations by various government authorities in Europe andNorth America. These investigations involve mainly competition law inquiries,most of which include several other companies. The Directors have made aprovision of £225m in respect to these matters. Other provisions includeonerous lease provisions and environmental and other obligations throughoutthe Group, the majority of which are expected to be used within five years.Total other provisions as at 30 June 2013 are £392m (30 June 2012, £146m; 31December 2012, £162m). 10. Share Capital Equity Nominal Subscriber Nominal ordinary value £m ordinary value £m shares sharesIssued and fully paidAt 1 January 2013 734,210,757 73 2 -Allotments 2,324,430 1 - -At 30 June 2013 736,535,187 74 2 - In the six months to 30 June 2013 the Group acquired 6,000,000 ofits own equity ordinary shares through purchases on the London Stock Exchange.The total amount paid to acquire the shares was £279m (including stamp duty)which has been deducted from shareholders' equity. The shares are now held as`Treasury shares' and the Company has the right to re-issue these shares at alater date. All shares were fully paid. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 11. Dividends A final dividend of 78.0 pence per share for the year ended 31December 2012 was paid on 30 May 2013 to shareholders who were on the registeron 22 February 2013. This amounted to £561m. The Directors are proposing an interim dividend in respect of theyear ending 31 December 2013 of [60.0] pence per share which will absorb anestimated £431m of shareholders' funds. It will be paid on 26 September 2013to shareholders who are on the register on 9 August 2013. 12. Contingent Liabilities The Group is involved in a number of investigations by governmentauthorities and has made provisions for such investigations, whereappropriate. Where it is too early to determine the likely outcome of thesematters, or to make a reliable estimate, the Directors have made no provisionfor such potential liabilities. The Group from time to time is involved in discussions in relationto ongoing tax matters in a number of jurisdictions around the world. Whereappropriate, the Directors make provisions based on their assessment of eachcase. 13. Business Combinations Collaboration with Bristol-Myers Squibb (BMS) On 8 May 2013 the Group received regulatory approval for athree-year collaboration agreement with BMS for a number of market-leadingover-the-counter consumer health care brands in Brazil, Mexico and certainother parts of Latin America. This arrangement, which also includes personnel,supply contracts and an option to acquire legal title to the relatedintellectual property at the end of the collaboration period for a multiple ofearnings, was secured for an upfront cash payment of $482m (£311m). Thistransaction is accounted for as a business combination under IFRS 3 (Revised)Business Combinations. The collaboration agreement provides the Group with an immediatehealthcare platform, distribution network and infrastructure in Latin Americaand trusted brands with a strong fit with the Group's existing healthportfolio. All assets and liabilities were recognised at the followingprovisional fair values. The amount of consideration transferred over the netassets acquired is recognised as goodwill in the Group financial statements. Provisional fair value £m Intangible asset 57Deferred tax assets 4Provisions (16) Net assets acquired 45Goodwill 36 Consideration transferred for net assets and goodwill 81Payment for prepaid option 250 Total consideration transferred 331 Cash consideration 311Deferred consideration 20 Total consideration transferred 331 Related to the transaction payments totalling £250m were made toBMS in relation to the future option to acquire legal title to the relatedintellectual property. The option is exercisable by the Group at the end ofthe collaboration period, subject to certain payments, in addition to the£331m, to be made at that time. The prepayment of this option is not an assetpurchased as part of the business combination under IFRS 3 (Revised), and istherefore disclosed separately. Notes to the Half Year Condensed Financial Statements continued For the six months ended 30 June 2013 13. Business Combinations (continued) The intangible asset acquired relates to the 3-year collaborationagreement. Goodwill represents the strategic premium to establish an immediateplatform, infrastructure and distribution network in the Latin Americanover-the-counter consumer health care market, the value of expected synergysavings, and assembled workforce. Acquisition related costs of £3m are included in net operatingexpenses and exceptional items in the income statement. The fair value of identifiable net assets are stated at provisionalamounts which will be finalised within the 12-month hindsight period followingacquisition. Provisional fair value adjustments cover the recognition ofacquired intangibles and their associated deferred tax and accounting policyalignment. All assets and liabilities are included within the LAPAC reportablesegment and the health category. Acquisition of Oriental Medicine Company Limited On 8 January 2013 the Group obtained control of Oriental MedicineCompany Limited, a manufacturer of traditional Chinese sore throat products,by acquiring 100% of the share capital. 14. Financial Instruments Carrying amounts versus fair values The carrying amounts of all financial assets and financialliabilities in the Group balance sheet, listed below, as at 30 June 2013 and30 June 2012 are a reasonable approximation of their fair value. - Auction rate securities- Short-term deposits- Trade and other receivables- Derivative financial instruments - FX forward contracts- Cash and cash equivalents- Borrowings (including finance lease obligations)- Trade and other payables- Other non-current liabilities The Group's financial instruments carried at fair value are notconsidered material, and as such, the valuation methods and fair valuehierarchy levels are not disclosed as at 30 June 2013. For further informationon valuation methods refer to the Group's Annual Report and FinancialStatements for the year ended 31 December 2012. The Group's financial risk management objectives and policies areconsistent with those disclosed in the Annual Report and Financial Statementsfor the year ended 31 December 2012. 15. Related Parties On 19 March 2013 the Group purchased a further 24.95% interest inShanghai Manon Trading Limited from the non-controlling interests.The Group has a forward contract to purchase the remaining non-controllinginterest in 2016 and the present value of the expected cash outflow isincluded in other non-current liabilities. There were no other related partytransactions. 16. Seasonality Demand for the majority of the Group's products is not subject tosignificant seasonal fluctuations. Some health and pest control products doexhibit seasonal fluctuations. Peak demand in the northern hemisphere marketsoffsets lower demand in the southern hemisphere markets and vice-versa. Theintensity of, in particular, the influenza season can vary from year to yearwith a corresponding influence on the Group's performance. Statement of Directors' Responsibilities The Directors confirm that, to the best of their knowledge, theseHalf Year Condensed Financial Statements have been prepared in accordance withInternational Accounting Standard 34 `Interim Financial Reporting' as adoptedby the European Union and as issued by the International Accounting StandardsBoard, and that the interim management report includes a fair review of theinformation required by DTR 4.2.7 and DTR 4.2.8, namely: - an indication of important events that have occurred during thefirst six months and their impact on the Half Year Condensed FinancialStatements, and a description of the principal risks and uncertainties for theremaining six months of the financial year; and - material related party transactions in the first six months ofthe financial year and any material changes in the related party transactionsdescribed in the last annual report. The Directors of Reckitt Benckiser Group plc are listed in theReckitt Benckiser Group plc Annual Report and Financial Statements for 31December 2012. A list of current Directors is maintained on the ReckittBenckiser Group plc website: www.rb.com. By order of the Board Rakesh KapoorChief Executive Officer Adrian BellamyDirector 26 July 2013 Independent Review Report to Reckitt Benckiser Group plc Introduction We have been engaged by the company to review the Half YearCondensed Financial Statements in the half-yearly financial report for the sixmonths ended 30 June 2013, which comprise the Group income statement, theGroup statement of comprehensive income, the Group balance sheet, the Groupstatement of changes in equity, the Group cash flow statement and relatednotes. We have read the other information contained in the half-yearlyfinancial report and considered whether it contains any apparent misstatementsor material inconsistencies with the information in the Half Year Condensedfinancial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and hasbeen approved by, the directors. The directors are responsible for preparingthe half-yearly financial report in accordance with the Disclosure andTransparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the annual financial statements of thegroup are prepared in accordance with IFRSs as adopted by the European Unionand IFRSs as issued by the International Accounting Standards Board. The HalfYear Condensed Financial Statements included in this half-yearly financialreport have been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union and asissued by the International Accounting Standards Board. Our responsibility Our responsibility is to express to the company a conclusion on theHalf Year Condensed Financial Statements in the half-yearly financial reportbased on our review. This report, including the conclusion, has been preparedfor and only for the company for the purpose of the Disclosure andTransparency Rules of the Financial Conduct Authority and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consentin writing. Scope of review We conducted our review in accordance with International Standardon Review Engagements (UK and Ireland) 2410, `Review of Interim FinancialInformation Performed by the Independent Auditor of the Entity' issued by theAuditing Practices Board for use in the United Kingdom. A review of interimfinancial information consists of making enquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an auditconducted in accordance with International Standards on Auditing (UK andIreland) and consequently does not enable us to obtain assurance that we wouldbecome aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causesus to believe that the Half Year Condensed Financial Statements in thehalf-yearly financial report for the six months ended 30 June 2013 are notprepared, in all material respects, in accordance with InternationalAccounting Standard 34 as adopted by the European Union and as issued by theInternational Accounting Standards Board, and the Disclosure and TransparencyRules of the United Kingdom's Financial Conduct Authority. PricewaterhouseCoopers LLPChartered AccountantsLondon 26 July 2013 Notes: (a) The maintenance and integrity of the Reckitt Benckiser Groupplc website is the responsibility of the directors; the work carried out bythe auditors does not involve consideration of these matters and, accordingly,the auditors accept no responsibility for any changes that may have occurredto the financial statements since they were initially presented on thewebsite. (b) Legislation in the United Kingdom governing the preparationand dissemination of financial statements may differ from legislation in otherjurisdictions.