30th Jul 2012 07:00
30 July 2012 RECKITT BENCKISER GROUP PLC HY 2012 RESULTS ON TRACK - STRONG EM GROWTH FY TARGETS REITERATED Results at a glance Q2* % change % change HY % change % change(unaudited) £m actual constant £m actual constant exchange exchange exchange exchange Net revenue 2,312 -1 +3 4,669 +1 +4 - Like-for-like growth** +4 +4 Operating profit - reported 1,072 +2 +4
Operating profit - adjusted*** 1,120 +2
+4 Net income - reported 779 +3 +5 Net income - adjusted*** 818 +2 +4 EPS (diluted) - reported 105.8p +3 EPS (diluted) - adjusted*** 111.1p +2 * Q2 results were not subject to the independent review.
** Like-for-like ("LFL") growth excludes the impact of changes in exchange
rates, major acquisitions and disposals.*** Adjusted results exclude exceptional items (see page 2).
Highlights: Half Year (HY)
- LFL growth +4% (+4% ex-RBP) driven by strong Emerging Market (EM) growth.
- Q2 LFL growth +4% (+4% ex RBP). Similar trends to Q1.
- Gross margin -60bps to 56.3%: adjusted operating margin +10bps to 24.0%.
- Increased brand equity investment (BEI), ex RBP, of £40m* (+60bps) and within
this media +40bps.
- Adjusted net income +2% (+4% constant): adjusted diluted EPS of 111.1p (+2%).
- Net working capital of minus £752m, reflecting a £51m improvement versus year
end 2011.
- Net debt of £1,846m (31 December 2011: £1,795m), with strong free cash flow
generation offset by final 2011 dividend payment and share repurchases.
- The Board declares a +2% increase in the interim dividend to 56p per share.
* at constant rates
Commenting on these results, Rakesh Kapoor, Chief Executive Officer, said:
" Six months into our Purpose driven strategy, Reckitt Benckiser has deliveredrevenue growth well ahead of our market. On a LFL basis (ex RBP), Net revenuegrowth of 4% was driven by continued excellent performance from Emerging MarketAreas and Hygiene Brands such as Dettol, Lysol and Finish. While the consumerand competitive environment in Europe and North America remains challenging, weare doing the right things for the long term by increasing our Brand EquityInvestment.Our H1 margins are in line with expectations with higher input costs andincreased investment being partially offset by cost savings programmes. Thenew organisation structure is fully in place and we are seeing early benefitsof increased operational focus: speed, scale and consistency of our execution.RBP continues to make very good progress with the Suboxone sublingual film nowat 56% market volume share.
These results and our exciting innovations for H2, backed by further increased Brand Equity Investment underpins our confidence in our FY 2012 target of 200bps above our market growth rate of 1-2%."
Basis of Presentation and Exceptional Items
Where appropriate, the term "like-for-like" (LFL) describes the performance ofthe business on a comparable basis, excluding the impact of major acquisitions,disposals and discontinued operations. It is measured on a constant exchangebasis.
Where appropriate, the term "core business" represents the ENA, RUMEA and LAPAC geographic areas, and excludes RBP and RB Food.
Where appropriate, the term "adjusted" excludes the impact of exceptionalitems. There was an exceptional pre-tax charge of £48m in HY 2012 mainlyrelating to restructuring costs in respect of the new strategy reorganisationand integration costs arising from the acquisition of SSL. This exceptionalpre-tax charge is reflected in reported operating profit. Exceptional items inHY 2011 were £54m in reported operating profit and £2m in net interest. Thetax effect of exceptional items in the period is £9m (2011: £13m).As communicated in RB's February 2012 "Strategy for Continued Outperformance" announcement, the Group now uses a number of new, or refined, measures to monitor progress. This includes a revised gross margin definition (discussed in note 3 to the Half Year Condensed Financial Statements), as well as a new definition of net working capital (inventories, trade and other receivables and trade and other payables) and a new measure of total brand equity building investment (BEI). Detailed Operating Review: Total Group Half year 2012Total HY net revenue, at constant rates, increased +4% (LFL +4%) to £4,669m. Growth was driven by a very strong performance in both our LAPAC and RUMEAareas, with a stable, albeit still subdued result in ENA where weak marketconditions and consumer sentiment continues. Health and Hygiene underpinnedthe performance from a category perspective with particularly strongperformance from our major non seasonal Health powerbrands of Durex andGaviscon, and from Hygiene powerbrands such as Dettol, Lysol, Finish andHarpic.The gross margin declined by -60bps to 56.3%. As expected, this was primarilydue to higher input costs versus last year. There were further impacts fromadverse mix and foreign exchange, partially offset by savings from costoptimisation programmes (Project Fuel).Our newly defined Brand Equity Investment (BEI) metric increased by +£40m(constant) or 60 bps to 13.6% of net revenue (ex RBP). Within this, pure mediaincreased by 40bps to 12.5% of net revenue (ex RBP). BEI measures investmentbehind longer term equity building initiatives and includes TV and print,digital and social media, medical professional programmes and consumereducational programmes. The increase in equity investment is focused on powerbrands, power markets and new initiatives. We are on track to invest theadditional £100m in BEI planned for 2012. Operating profit as reported was £1,072m, +2% versus HY 2011 (+4% constant),reflecting the impact of an exceptional pre-tax charge of £48m (HY 2011: £54m).On an adjusted basis, operating profit was ahead +2% (+4% constant) to £1,120m:the adjusted operating margin increased by +10bps to 24.0%. Excluding RBP, theadjusted operating margin increased by +10bps to 20.4%.Net finance expense was £8m (HY 2011: £11m, of which £2m was an exceptionalcharge in respect of financing costs associated with the acquisition of SSL). The tax rate was 26%, consistent with prior year.
Net income as reported was £779m, an increase of 3% (+5% constant) versus HY 2011; on an adjusted basis, net income rose +2% (+4% constant). Diluted earnings per share of 105.8 pence was +3% higher on a reported basis; on an adjusted basis, the growth was +2% to 111.1 pence.
Second quarter 2012
Total Q2 net revenue, at constant rates, increased +3% (LFL +4%) to £2,312m. Growth trends in both Developed and Emerging Markets were similar to those inQ1. On a category basis, there was an improving trend on Health, whilst theHygiene powerbrands of Dettol, Lysol, Cillit Bang, Harpic, Finish and Veet allperformed well. Within Home, Vanish continues to gain market share in EmergingMarkets and stabilize in Europe, although market growth in the category remainsweak. HY 2012 Business Review
Summary: % net revenue growth
HY 2012 Like-for-like Acquisitions & Exchange Reported Disposals* ENA -1% -1% -2% -4% LAPAC +11% +1% -4% +8% RUMEA +9% - -5% +4% Food +4% - +2% +6% Group ex-RBP +4% - -3% +1% RBP +6% - +1% +7% TOTAL +4% - -3% +1%
* Reflects the acquisition of Paras (Jan-March), withdrawal from Private Label
(Propack), disposal of Paras Personal Care and a number of minor businesses.
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 Half Year ended 30 June 30 June 2012 2011 % change 2012 2011 % change £m £m exch. Rates £m £m exch. rates actual const. actual const. Total Net revenue 1,089 1,160 -6 -2 ENA 2,257 2,355 -4 -2 572 553 +3 +11 LAPAC 1,152 1,066 +8 +12 350 342 +2 +8 RUMEA 719 693 +4 +9 83 79 +5 +3 Food 156 147 +6 +4 2,094 2,134 -2 +3 Total - ex RBP 4,284 4,261 +1 +4 218 204 +7 +6 RBP 385 360 +7 +6 2,312 2,338 -1 +3 Total 4,669 4,621 +1 +4 Operating profit - adjusted* ENA 460 503 -9 -5 LAPAC 209 191 +9 +13 RUMEA 140 138 +1 +7 Food 36 35 +3 -3 Corporate** 30 - n/a n/a Total - ex RBP 875 867 +1 +4 RBP 245 236 +4 +2 Subtotal before 1,120 1,103 +2 +4 exceptional items Exceptional items (48) (54) Total 1,072 1,049 +2 +4 Operating margin - adjusted* % % ENA 20.4 21.4 LAPAC 18.1 17.9 RUMEA 19.5 19.9 Food 23.1 23.8 Corporate ** n/a n/a Total - ex RBP 20.4 20.3 RBP 63.6 65.6 Total 24.0 23.9
* Adjusted to exclude the impact of exceptional items.
**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 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 net impact ofthese items is £30m (30 June 2011: £nil).
The Business Review below is given at constant exchange rates.
ENA 55% of core net revenueHY 2012 total net revenue decreased to £2,257m, with LFL growth of -1% (total,constant -2%). Volume shares improved during the year behind significant BEI,underpinned by media. However depressed market conditions, particularly inSouthern Europe led to a subdued but stabilizing result for the period. In Health, Gaviscon delivered a very strong result, though this was offset byweakness in seasonal brands such as Mucinex, Strepsils and certain productswithin Nurofen on the back of a lower incidence of cold/'flu this year. Hygiene brands of Lysol and Finish performed strongly, particularly in the USbehind Lysol No-Touch Kitchen System, Finish Quantum and All-in-1 gel packs andtablets. In the Home category, Vanish shares showed positive momentum,although the market is still down. Within portfolio brands Laundry Detergentsand Fabric Softeners in Southern Europe remain weak. For the half year, adjusted operating profit declined -5% to £460m; theadjusted operating margin decreased -100bps, due primarily to a combination ofunfavourable input costs and adverse mix. The increased investment in BEI wasmore than offset by savings, coming from SSL synergies and fixed costcontainment.LAPAC 28% of core net revenueHY 2012 total net revenue increased +12% to £1,152m, with LFL growth of +11%. Growth was broad based across LATAM, North and South East Asia, driven bydistribution expansion, innovation and share gains. In Health, Paras in Indiaand Durex in China grew well ahead of expectations, primarily as a result ofincreased distribution. In Hygiene, Dettol, Finish, and Harpic deliveredstrong growth behind initiatives such as Dettol Daily Care and Re-energize plusHigh Performance for Men soap and shower gels. Surface Cleaners continued toexperience good growth. Vanish and Airwick performed well in the Homecategory.
For the half year, adjusted operating profit increased +13% to £209m; the adjusted operating margin was +20bps higher at 18.1%. Increased investment behind BEI was more than offset by volume leverage and fixed cost containment.
RUMEA 17% of core net revenueHY 2012 total net revenue of £719m was ahead +9% on both a total and LFL basis,with growth coming from all regions. In Health, growth was driven by Durex,Gaviscon, Nurofen and Strepsils. Hygiene performed particularly well behindDettol, Finish, Harpic and Veet driven by initiatives such as Dettol Daily Careand Re-energize. Air Wick performed well in the Home category with growthdriven by Freshmatic and Aqua Mist.
For the half year, adjusted operating profit increased by +7% to £140m. This resulted in a -40bps decline in the adjusted operating margin to 19.5%, due mainly to increased investment in BEI.
Food HY 2012 total net revenue increased +4% to £156m underpinned by continuedgrowth in French's Mustard and Frank's Red Hot Sauce. Operating margins fellby -70bps to 23.1% due to pricing benefits being more than offset by adversemix and input costs.Pharmaceuticals ("RBP") HY 2012 total net revenue increased +6% to £385m. Growth came from continuedstrong volume growth in the US offset by dilution from increased Filmpenetration and higher Medicaid rebates. Conversion from tablets to filmcontinues to increase with market volume share now 56%, up from 48% at the endof 2011, creating a significantly more sustainable business.
Operating profit for the total RBP business increased +2% to £245m. The operating margin was down -200bps to 63.6%, due to the materially lower margins of the new film variant and higher Medicaid rebates versus the prior year.
At this time the Group has no intelligence as to the exact timing of potentialgeneric competition to the Suboxone tablets in the US. For further informationsurrounding exclusivity of Suboxone products, please refer to page 11 of the2011 Annual Report and Financial Statements. HY 2012 Category Review Quarter ended Half Year ended 30 June 30 June 2012 2011 % change 2012 2011 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue by category 443 448 -1 +3 Health 904 908 0 +2 915 907 +1 +6 Hygiene 1,879 1,821 +3 +7 474 503 -6 -1 Home 960 983 -2 +1 179 197 -9 -2 Portfolio Brands 385 402 -4 +1 83 79 +5 +3 Food 156 147 +6 +4 2,094 2,134 -2 +3 Total - ex RBP 4,284 4,261 +1 +4 218 204 +7 +6 RBP 385 360 +7 +6 2,312 2,338 -1 +3 Total 4,669 4,621 +1 +4 Operating profit - adjusted Health, Hygiene, 809 832 -3 +1 Home & Portfolio Food 36 35 +3 -3 Corporate 30 - n/a n/a Total - ex RBP 875 867 +1 +4 RBP 245 236 +4 +2 Total 1,120 1,103 +2 +4 Exceptional items (48) (54) Total 1,072 1,049 +2 +4 Operating margin - % % adjusted Health, Hygiene, 19.6 20.2 Home & Portfolio Food 23.1 23.8 Corporate n/a n/a Total - ex RBP 20.4 20.3 RBP 63.6 65.6 Total 24.0 23.9
The Category Review below is given at constant exchange rates.
Health 22% of core net revenue
Net revenue increased +2% (+3% LFL) to £904m. A poor 'flu season impacted Mucinex, Strepsils and certain products within Nurofen. Other brands not susceptible to the 'flu season continued to perform well with particularly strong performances from Durex, Paras brands and Gaviscon. New initiatives such as Performax Intense condoms, plus increased distribution in China drove Durex growth, and the roll out and support of Double Action in a number of Emerging Markets underpinned the strong performance in Gaviscon.
Hygiene 46% of core net revenue Net revenue increased +7% on both a constant and LFL basis to £1,879m, largelydriven by strong growth in the Dettol / Lysol franchise in all our threeareas. New initiatives such as Dettol Daily care and Re-energize in EmergingMarkets and the Lysol No-Touch Kitchen System in ENA underpinned this strongperformance. Finish continues to perform well in a number of markets globally,and particularly in the US where Quantum and All-In-1 tablets and gel packscontinue to gain market share. Veet delivered good growth behind initiativessuch as the Veet Easy Wax Electrical Roll-On. Harpic enjoyed very stronggrowth in LAPAC and RUMEA by driving category penetration via consumereducation and increased distribution, backed by the continued success of HarpicPowerplus and Harpic Hygienic blocks in all geographies.Home 23% of core net revenue Net revenue increased +1% at both constant and LFL to £960m. Growth came fromVanish where there has been excellent growth in a number of emerging marketcountries, combined with more stable market shares in ENA where we have lappedcompetitive entries. Air Wick produced a robust performance behind Freshmatic,candles and initiatives such as Flip & Fresh.Portfolio 9% of core net revenueNet revenue increased +1% (LFL -1%) to £385m, largely due to the inclusion ofParas personal care products which were acquired in April 2011. The sale ofthese products was however completed in May 2012. On a LFL basis, net revenuedeclined slightly (-1%) due to continued weakness in Laundry Detergents andFabric Softeners in Southern Europe. New Product Initiatives: H2 2012
The Group has announced a number of new product initiatives for the second half of 2012:
In Health:
- Launch of Mucinex Fast-Max caplets. Multi-symptom relief from your worst cold
symptoms, now in a caplet.
- Launch of Nurofen Express Period Pain capsules. New soft cap painkillers.
Targets period pain fast and lasts up to 8 hours.
- Launch of Durex B Closer. Our 1st global crowd-sourced design to drive
relevance of Durex products with younger people. Designed for Youth, by Youth.
- Launch of new Cepacol. New range of cooling, warming and hydra sensations with
long-lasting and gentle numbing relief for sore throats.
In Hygiene:
- Launch of Finish Quantum Gel, a new concentrated gel format of Quantum that
leaves nothing behind but the shine, even in short cycles.
- Launch of Dettol, Touch of Foam Handwash, a range of Manual Foaming Hand Soaps
differentiated format in a highly competitive market. A range of manual
foaming hand soaps giving superior efficacy versus liquids and better
moisturizing for hands.
- Launch of Harpic Thick Bleach Multi Purpose Gel - new thick bleach and
multi-purpose gel. Innovation that takes Harpic beyond the toilet and delivers
superiority versus the competition.
- Launch of Cillit Bang Turbo Power, New Turbo Power that acts in seconds without
scrubbing.In Home:
- Launch of Air Wick Filter & Fresh with a carbon activated filter which breathes
in odours and a perfume that breathes out clean, fresh fragrance.
- Launch of Air Wick Black Edition Candles. Extends the highly successful glowing
candles Franchise with elegant designs. 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 policiesto be applied in the financial statements for the year ending 31 December2012. These are not materially different from those set out in the Group's2011 Annual Report and Accounts, unless separately disclosed.
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 results of the Group.
Net finance expense. Net finance expense was £8m (2011: £11m, which includedan exceptional charge of £2m in respect of financial costs associated with theacquisition of SSL).
Tax. The overall effective tax rate is 26% (2011: 26%).
Net working capital (inventories, trade and other receivables and trade and other payables) of minus £752m was a £51m improvement versus the 31 December 2011 level.
Cash flow. Cash generated from operations was £1,106m (2011: £1,167m), and netcash flow from operations was £784m, +5%. Net interest paid was £4m higher at£9m and tax payments decreased by £125m to £238m. Net capital expenditure(including intangibles) was £3m lower than the prior year at £71m. During theperiod the Group acquired the non controlling interests in Medcom for £104m andundertook share repurchases of £352m. Net debt at the end of the half year was £1,846m (31 December 2011: £1,795m),an increase of £51m. This reflected net cash flow from operations of £784m,which was more than offset by the payment of the final 2011 dividend of £511m,the acquisition of the non controlling interests in Medcom, and sharerepurchases. The Group regularly reviews its banking arrangements andcurrently has adequate facilities available to it.Restructuring charge. A total pre-tax exceptional charge of around £125m isexpected to be incurred in 2012 in respect of costs to implement the newstrategy announced in February (£75m) and the remainder of the SSL acquisitionand integration costs (£50m). In HY 2012 the exceptional pre-tax charge incurred was £48m. In HY 2011, anexceptional pre-tax charge of £56m was incurred, of which £54m is reflected inreported operating profit (of which £2m relates to transaction fees) and £2m isincluded in net interest. The amount incurred to date is £248m, out of the total restructuring announcedof £325m.Balance sheet. At 30 June 2012, the Group had shareholders' funds of £5,469m
(31 December 2011: £5,781m), a decrease of -5%. Net debt was £1,846m (31December 2011: £1,795m) and total capital employed in the business was £7,315m(31 December 2011: £7,576m).This finances non-current assets of £10,911m (31 December 2011: £11,188m), ofwhich £716m (31 December 2011: £732m) is property, plant and equipment, theremainder being goodwill, other intangible assets, deferred tax, available forsale financial assets and other receivables. The Group has net working capitalof minus £752m (31 December 2011: minus £701m), current provisions of £53m (31December 2011: £60m) and long-term liabilities other than borrowings of £2,524m(31 December 2011: £2,642m).Dividends. The Board of Directors declares an interim dividend of 56.0p (2011:55.0p), an increase of +2%. The ex-dividend date will be 8 August 2012 and thedividend will be paid on 27 September 2012 to shareholders on the register atthe record date of 10 August 2012. The last date for election for the sharealternative to the dividend is 6 September 2012.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. 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 at this time theDirectors do not believe that any potential impact would be material to theGroup 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
The HY 2012 results position the Group well to achieve its FY 2012 financial targets.
For the Group excluding RBP, the target is for like-for-like net revenue growth of +200 basis points ahead of our market growth. We continue to expect the market to grow at 1-2%. We also expect to maintain margins on an adjusted basis* (ex RBP) as we invest behind brand equity building initiatives.
* Adjusted to exclude the impact of exceptional items.
Principal Risks and Uncertainties
The Directors consider that the principal risks and uncertainties which couldhave a material impact on the Group's performance in the remaining six monthsof 2012 are the same as described on pages 13 and 14 of the Annual Report andFinancial Statements for the year ended 31 December 2011. These include:
Market risks:
Competition, economic conditions and customer consolidation translates into increasing pressure on pricing and promotion levels and market growth rates, especially in Europe.
The expiry of the Group's exclusive licence for Suboxone in the US in 2009 andin the rest of the world in 2016 could expose the business to competition fromgeneric variants.Operational risks:
Business continuity plans prove insufficient to protect the business in the face of a significant and unforeseen supply disruption.
The successful integration into the Group of businesses acquired with non-controlling interests through recent acquisitions.
Key senior management leave the Group or management turnover increases significantly.
Non-delivery of expected benefits from the Group ERP programme.
The combination of the Group's strategic reorganization, and the systems andoperational changes, could result in sub-optimal implementations and reducedfocus due to conflicting demands for management attention.
Information technology systems may be disrupted or may fail, interfering with the Group's ability to conduct its business.
Product quality failures could potentially result in the undermining of consumer confidence in the Group's products and brands.
Regulatory decisions and changes in the legal and regulatory environment could limit business activities.
Financial risks:
Tax authorities are becoming more aggressive in disputing historically accepted tax structures and pursuing compensation for retroactive changes to tax 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 year ended 31 December 2011 are available on the Group's website at www.rb.com.
The Group at a Glance (Unaudited)
Quarter ended Half year ended 30 June 30 June 2012 2011 2012 2011 £m £m £m £m 2,312 2,338 Net revenue - total 4,669 4,621 +4% +5% Net revenue growth - like-for-like +4% +5% +3% +16% Net revenue growth - constant +4% +15% -1% +13% Net revenue growth - total +1% +14% Gross margin 56.3% 56.9% EBITDA - adjusted* 1,192 1,183 EBITDA margin - adjusted* 25.5% 25.6% EBIT 1,072 1,049 EBIT - adjusted* 1,120 1,103 EBIT margin 23.0% 22.7% EBIT margin - adjusted* 24.0% 23.9% Profit before tax 1,064 1,038 Net income 779 759 Net income - adjusted* 818 802 EPS, basic, as reported 107.1p 104.4p EPS, adjusted and diluted* 111.1p 109.0p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data 30 June 31 December 2012 2011 £m £m Net working capital * (752) (701) Net debt (1,846) (1,795) * Net working capital is defined as inventories, trade and other receivablesand trade and other payables. Shares in issue Millions 31 December 2011 728.6
Issued or transferred from Treasury 4.5 (10.0) Repurchased and transferred to Treasury
30 June 2012 723.1
For further information, please contact:
Reckitt Benckiser +44 (0)1753 217800 Richard Joyce Director, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communication and Affairs Brunswick(Financial PR) +44 (0)20 7404 5959David Litterick / Max McGahan Notice to shareholders
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.
Half Year Condensed Financial Statements
Group Income StatementFor the six months ended 30 June 2012 Unaudited Audited Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 (restated)(a) (restated)(a) note £m £m £m Net revenue 4 4,669 4,621 9,485 Cost of sales (2,039) (1,991) (4,036) Gross profit 2,630 2,630 5,449 Net operating expenses (1,558) (1,581) (3,054) Operating profit 4 1,072 1,049 2,395 Operating profit before 1,120 1,103 2,487 exceptional items Exceptional items 5 (48) (54) (92) Operating profit 1,072 1,049 2,395 Finance income 12 10 23 Finance expense(b) (20) (21) (42) Net finance expense (8) (11) (19) Profit on ordinary activities 1,064 1,038 2,376 before taxation Tax on profit on ordinary 6 (281) (274) (622) activities Net income for the period 783 764 1,754 Attributable to non- 4 5 9 controlling interests Attributable to owners 779 759 1,745 of the parent Net income for the period 783 764 1,754 Earnings per ordinary share: Basic earnings per share 7 107.1p 104.4p 239.8p Diluted earnings per share 7 105.8p 103.2p 237.1p
(a) see note 3 for further details.
(b) Finance expense for the six months ended 30 June 2011 and year ended 31 December 2011 includes an exceptional charge of £2m and £4m respectively, relating to financial costs associated with the acquisition of SSL.
Group Statement of Comprehensive IncomeFor the six months ended 30 June 2012 Unaudited Audited Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 £m £m £m Net income for the period 783 764 1,754 Other comprehensive income
Net exchange adjustments on foreign currency translation, net of tax (204) 57
(226)
Actuarial (losses) / gains, net of tax (28) 3 (49) (Losses) / gains on cash flow - (1) 3 hedges, net of tax
Reclassification of foreign currency translation reserves on disposal of 9 - -
subsidiary, net of tax Other comprehensive income for the period, net of tax (223) 59 (272) Total comprehensive income 560 823 1,482 for the period
Attributable to non-controlling interests 2 7 4 Attributable to owners of the parent 558 816 1,478 560 823 1,482 Group Balance SheetAs at 30 June 2012 Unaudited Audited 30 June 30 June 31 December 2012 2011 2011 (restated)(c) note £m £m £m ASSETS Non-current assets: Goodwill and other intangible assets 10,005 10,501
10,258
Property, plant and equipment 716 722
732 Deferred tax assets 115 163 150
Available for sale financial assets 10 11
10 Retirement benefit surplus 27 22 32 Other receivables 38 7 6 10,911 11,426 11,188 Current assets: Inventories 739 742 758 Trade and other receivables 1,355 1,450 1,442
Derivative financial instruments 36 31
67 Current tax receivables 1 128 21
Available for sale financial assets 7 49
11
Cash and cash equivalents 1,063 581
639 3,201 2,981 2,938 Total assets 14,112 14,407 14,126 LIABILITIES Current liabilities: Borrowings (2,948) (2,849) (2,505)
Provisions for liabilities and charges (53) (70)
(60) Trade and other payables (2,846) (2,967) (2,901)
Derivative financial instruments (4) (8)
(7) Current tax liabilities (265) (297) (227) (6,116) (6,191) (5,700) Non-current liabilities: Borrowings (3) (3) (3) Deferred tax liabilities (1,659) (1,847) (1,772) Retirement benefit obligations (494) (431)
(502)
Provisions for liabilities and charges (125) (175) (118) Non-current tax liabilities (211) (209) (211)
Other non-current liabilities (35) (39)
(39) (2,527) (2,704) (2,645) Total liabilities (8,643) (8,895) (8,345) Net assets 5,469 5,512 5,781 EQUITY Capital and reserves: Share capital 10 73 73 73 Share premium 155 81 86 Merger reserve (14,229) (14,229) (14,229) Hedging reserve (1) (5) (1)
Foreign currency translation reserve (83) 386
110 Retained earnings 19,548 19,127 19,672 5,463 5,433 5,711 Non-controlling interests 6 79 70 Total equity 5,469 5,512 5,781
(c) See note 13 for further details.
Group Statement of Changes in Equity
For the six months ended 30 June 2012
Foreign Total Merger Hedging currency attributable Non- Share Share reserve reserve translation Retained to owners of controlling TotalUnaudited capital Premium reserve earnings
the parent interests equity
£m £m £m £m £m £m £m £m £m Balance at 1 73 59 (14,229) (4) 331 18,828 5,058 72 5,130January 2011 Net income 759 759 5 764 Other comprehensive (1) 55 3 57 2 59income Total comprehensive - - - (1) 55 762 816 7 823income Transactions with owners Proceeds from 22 22 22share issue Share based 31 31 31payments Deferred tax on 2 2 2share awards Current tax on 5 5 5share awards Dividends (472) (472) (1) (473) Non-controlling interest arising on 1 1business combination Put option issued to non- (29) (29) (29)controlling interest Total transactions - 22 - - - (463) (441) - (441)with owners Balance at 73 81 (14,229) (5) 386 19,127 5,433 79 5,51230 June 2011 Net income 986 986 4 990 Other comprehensive 4 (276) (52) (324) (7) (331)income Total comprehensive - - - 4 (276) 934 662 (3) 659income Transactions with owners Proceeds from 5 5 5share issue Share based 30 30 30payments Deferred tax on (15) (15) (15)share awards Current tax (3) (3) (3)on share awards Dividends (401) (401) (6) (407) Total transactions - 5 - - - (389) (384) (6) (390)with owners Balance at 31 73 86 (14,229) (1) 110 19,672 5,711 70 5,781December 2011 Net income 779 779 4 783 Other comprehensive (193) (28) (221) (2) (223)income Total comprehensive - - - - (193) 751 558 2 560income Transactions with owners Proceeds from 69 69 69share issue Share based 28 28 28payments Deferred tax on - - -share awards Current tax on 11 11 11share awards Shares repurchased (352) (352) (352)and held in Treasury Dividends (511) (511) (4) (515) Acquisition of non-controlling (51) (51) (53) (104)
interest (note 14) Reclassification of non-controlling interest following (9) (9)loss of control (note 2) Total transactions - 69 - - - (875)
(806) (66) (872)with owners Balance at 30 73 155 (14,229) (1) (83) 19,548 5,463 6 5,469June 2012 Group Cash Flow StatementFor the six months ended 30 June 2012 Unaudited Audited Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 note £m £m £m
CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations:
Operating profit 1,072 1,049 2,395
Depreciation of property, plant & equipment, and 72 80 157 amortisation & impairment of intangible assets
Fair value (gains) / losses (1) (2) 1
Gain on sale of property, plant & equipment and (13) -
(9) intangible assets Gain on sale of businesses 13 (32) - - (Increase) in inventories (8) (83) (131)
Decrease / (Increase) in trade and 23 (55)
(113) other receivables
(Decrease) / Increase in payables (35) 147
69 and provisions Share based payments 28 31 61
Cash generated from operations: 1,106 1,167
2,430 Interest paid (21) (14) (35) Interest received 12 9 22 Tax paid (238) (363) (677)
Net cash generated from operating activities 859 799
1,740
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (76) (58)
(164) Purchase of intangible assets (5) (22) (41)
Disposal of property, plant and equipment 1 4
5
Disposal of intangible assets 9 2
12
Acquisition of businesses, net of cash acquired - (460)
(460)
Disposal of businesses, net of cash disposed 81 -
-
Maturity / (Purchase) of short-term investments 3 (38)
(2)
Maturity of long-term investments 7 1
2
Net cash outflow on deconsolidation 2 (6) -
- of a subsidiary
Net cash generated from / (used in) 14 (571)
(648) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of ordinary shares 69 22
27
Shares purchased and held as Treasury shares 10 (352) -
- Proceeds from borrowings 475 622 249 Repayments of borrowings - (400) (400)
Dividends paid to owners of the parent 11 (511) (472)
(873)
Dividends paid to non-controlling interests (4) (1)
(7)
Acquisition of non-controlling interest 14 (104) -
-
Net cash used in financing activities (427) (229)
(1,004)
Net increase / (decrease) in cash 446 (1)
88 and cash equivalents
Cash and cash equivalents at beginning of period 634 568
568 Exchange (losses) / gains (18) 1 (22)
Cash and cash equivalents at end of period 1,062 568
634
Cash and cash equivalents comprise
Cash and cash equivalents 1,063 581 639 Overdrafts (1) (13) (5) 1,062 568 634
RECONCILIATION OF NET CASH FLOW FROM OPERATIONS
Net cash generated from operating activities 859 799
1,740
Net purchases of property, plant and equipment (75) (54)
(159)
Net cash flow from operations 784 745
1,581
Management uses net cash flow from operations as a performance measure.
Notes to the Half Year Condensed Financial Statements For the six months ended 30 June 2012
1. General Information
Reckitt Benckiser Group plc is a public limited company listed on the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is 103-105 Bath Road, Slough, Berkshire SL1 3UH.
The Half Year Condensed Financial Statements were approved by the Board of Directors on 27 July 2012. The Half Year Condensed Financial Statements have been reviewed, not audited.
2. Basis of Preparation The Half Year Condensed Financial Statements for the six months ended 30 June2012 have been prepared in accordance with the Disclosure and TransparencyRules of the Financial Services Authority and IAS 34, 'Interim financialreporting' as endorsed by the European Union. The Half Year Condensed FinancialStatements should be read in conjunction with the Annual Report and FinancialStatements for the year ended 31 December 2011, which have been prepared inaccordance with European Union endorsed International Financial ReportingStandards (IFRS) and those parts of the Companies Act 2006 applicable tocompanies reporting under IFRS. These Half Year Condensed Financial Statements do not comprise statutoryaccounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011 were approved by theBoard of Directors on 9 March 2012 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 a diverse customerand supplier base across different geographical areas and categories. As aconsequence, the Directors believe that the Group is well placed to manage itsbusiness risks successfully despite the current uncertain economic outlook. TheDirectors have a reasonable expectation that the Group has adequate resourcesto continue in operational existence for the foreseeable future. The Grouptherefore continues to adopt the going concern basis of accounting in preparingits Half Year Condensed Financial Statements. The balance sheet at 30 June 2011 has been restated to reflect updated finalfair value adjustments for the acquisition of SSL International Plc (SSL) andParas Pharmaceuticals Limited (Paras) made within the hindsight period allowedby IFRS 3 (Revised) 'Business Combinations'. See note 13 for further details. Following a deterioration in the relationship between the Group and the localmanagement of TTK-LIG Limited (TTK), the Group considers it no longer has thepower to govern the financial and operating policies of TTK. Effective from 1January 2012 the results, non-controlling interests and net assets of TTK havebeen deconsolidated from the Group results. The remaining investment in TTK isheld as an available for sale investment. Results for the six months to 30 June2011 and year to 31 December 2011 and its balance sheets as at those dates
werenot significant.
3. Accounting Policies and Estimates
Except as described below, the accounting policies applied are consistent withthose described on pages 41-44 of the Annual Report and Financial Statementsfor the year ended 31 December 2011.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit. Refer to note 6 for further details.
The income statement for the six months ended 30 June 2011 and year ended 31December 2011 has been restated to reflect a change in the Group's accountingpolicy for certain consumer promotional costs. The Group now treats certainconsumer promotional costs as cost of sales where previously these wereclassified as marketing. The Directors believe that this change provides morerelevant information about the performance of the Group and aligns the Group'saccounting policies with common industry practice. This restatement had noimpact on the balance sheet and the following impact on the income statement. Unaudited Audited Six months Year ended ended 30 June 2011 31 December 2011 £m £m Increase in cost of sales 109 213 Decrease in gross profit (109) (213) Decrease in net operating expenses (109) (213) Net impact on operating profit - - There were no new standards, amendments and interpretations that were adoptedby the Group and effective for the first time for the period beginning 1January 2012 that were material to the Group. Furthermore, there are nostandards, amendments or interpretations that are not yet effective that wouldbe expected to have a material impact on the Group. In preparing these Half Year Condensed Financial Statements the significantestimates and judgments made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements for the year ended 31
December 2011. 4. Operating Segments The Executive Committee is the Group's Chief Operating Decision Maker (CODM).Management has determined the operating segments based on the reports reviewedby the Executive Committee for the purposes of making strategic decisions. TheExecutive Committee considers the business principally from a geographicalperspective, but with the Pharmaceuticals (RBP) and Food businesses beingmanaged separately given the significantly different nature of these businessesand the risks and rewards associated with them. As a result of the Group's strategy for continued outperformance, announced inFebruary 2012, the geographical segments have changed from those reported inthe Annual Report and Financial Statements for the year ended 31 December 2011to reflect the Group's increased focus on high growth emerging market clusters.The new geographical segments comprise Europe and North America (ENA); LatinAmerica, North Asia, South East Asia and Australia & New Zealand (LAPAC); andRussia & CIS, Middle East, North Africa, Turkey and Sub-Saharan Africa(RUMEA). Comparative information has been restated on a consistent basis. The geographical segments derive their revenue primarily from the manufactureand sale of branded products in the Health, Home & Hygiene categories. RBPderives its revenue exclusively from the sales of buprenorphine-basedprescription drugs used to treat opiate dependence and Food derives its revenuefrom food products sold in ENA.
The Executive Committee assesses the performance of the operating segments based on net revenue and adjusted operating profit. This measurement basis excludes the effects of exceptional items. Finance income and expense are not allocated to segments, as they are managed on a central Group basis.
The Executive Committee do not review inter-segment revenue information nor isit included in the measure of segment profit or loss reviewed by the ExecutiveCommittee. As such this is no longer included in the Group's operating segmentsdisclosures.
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 shown inthe Corporate segment. For the six months ended 30 June 2012 this includesprofit on disposals of intangible assets and the Paras Personal Care businessand other corporate provisions with a net effect of £30m. For the six monthsended 30 June 2011 this included miscellaneous items and regulatory costs witha net effect of £nil; and for the year ended 31 December 2011 a profit ondisposal of intangibles, miscellaneous items and regulatory costs with a neteffect of £10m. Six months ended 30 ENA LAPAC RUMEA Food Corporate Total RBP TotalJune 2012 ex RBP Unaudited £m £m £m £m £m £m £m £m Net revenue 2,257 1,152 719 156 - 4,284 385 4,669 Operating profit before 460 209 140 36 30 875 245 1,120exceptional items Exceptional items (48) Operating profit 1,072 Net finance expense (8) Profit on ordinary 1,064activities before taxation Six months ended 30 ENA LAPAC RUMEA Food(d) Corporate Total RBP TotalJune 2011- restated ex RBP Unaudited £m £m £m £m £m £m £m £m Net revenue 2,355 1,066 693 147 - 4,261 360 4,621 Operating profit before 503 191 138 35 - 867 236 1,103exceptional items Exceptional items (54) Operating profit 1,049 Net finance expense (11) Profit on ordinary 1,038activities before taxation Year ended 31 ENA LAPAC RUMEA Food(d) Corporate Total RBP TotalDecember 2011 - ex restated RBP Audited £m £m £m £m £m £m £m £m Net revenue 4,837 2,210 1,364 312 - 8,723 762 9,485 Operating profit before 1,157 417 293 92 10 1,969 518 2,487exceptional items Exceptional items (92) Operating profit 2,395 Net finance expense (19) Profit on ordinary 2,376activities before taxation Analysis of Product GroupsFollowing the new category focus announced in February 2012 the Group analysesits revenue by the following product groups: Health, Hygiene, Home, PortfolioBrands together with RBP and Food. Unaudited Audited 30 June 30 June 31 December 2012 2011 2011 (restated) (restated) £m £m £m Health 904 908 2,000 Hygiene 1,879 1,821 3,643 Home 960 983 2,009 Portfolio Brands 385 402 759 4,128 4,114 8,411 Food(d) 156 147 312 RBP 385 360 762 4,669 4,621 9,485
(d) Under the new category structure Food has been restated to exclude some minor brands sold predominantly in South East Asia. Food now comprises food products sold solely in ENA.
5. Exceptional Items The Group incurred £48m of restructuring charges relating to the implementationof the Group's new area and category organisations, integration of SSL andfurther reconfiguration of the Group (six months ended 30 June 2011: £54m; yearended 31 December 2011: £92m). This consists primarily of redundancy,relocation and business integration costs which have been included within netoperating expenses. 6. Income Taxes
Income tax expense is recognised based on management's best estimate of theweighted average annual income tax rate expected for the full financial year.The estimated average annual tax rate used for the year to 31 December 2012 is26% (the estimated tax rate for the six months ended 30 June 2011 was 26%). The March 2012 Budget Statement contained the announcement of a reduction tothe UK corporation tax rate from 26% to 24% from 1 April 2012 with furtherreductions of 1% per annum to 22% by 1 April 2014. The rate reduction to 24%has been substantively enacted and this change is reflected in these financialstatements. The Finance Act 2012 includes legislation to reduce the rate by 1% to 23% from1 April 2013, whilst the further reduction is expected to be included in futurelegislation. These changes have not been substantively enacted at the balancesheet date and, therefore, are not included in the Half Year CondensedFinancial Statements. 7. Earnings per Share BasicBasic earnings per share is calculated by dividing the net income attributableto owners of the parent (six months to 30 June 2012: £779m; six months to 30June 2011: £759m) by the weighted average number of ordinary shares in issueduring the period (six months to 30 June 2012: 727,389,222; six months to 30June 2011: 726,743,834). Diluted
Diluted earnings per share is calculated by adjusting the weighted averagenumber of shares outstanding to assume conversion of all potentially dilutiveordinary shares. The Company has two categories of dilutive potential ordinaryshares: Executive Options and Employee Sharesave schemes. As at 30 June 2012there are no Executive Share Options excluded from the dilution (30 June 2011:4m were excluded due to the option exercise price exceeding the average shareprice for the period). Reported Basis
The reconciliation between net income for the period and the weighted average number of shares used in the calculation of diluted earnings per share on a reported basis is set out below:
Unaudited Unaudited 30 June 2012 30 June 2011 Net Average Earnings Net Average Earnings income number of per income number of per £m shares share £m shares share pence pence Net income attributable 779 727,389,222 107.1 759 726,743,834 104.4to owners of the parent Dilution for Executive options outstanding and 8,292,794 8,161,717 Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options 677,949 787,471 outstanding
On a diluted basis 779 736,359,965 105.8 759 735,693,022
103.2 Adjusted BasisThe reconciliation between net income and the weighted average number of sharesused in the calculation of diluted earnings per share on an adjusted basis isset out below: Unaudited Unaudited 30 June 2012 30 June 2011 Net Average Earnings Net Average Earnings income number of per income number of per £m shares share £m shares share pence pence Net income attributable 818 727,389,222 112.5 802 726,743,834 110.4to owners of the parent* Dilution for Executive options outstanding and 8,292,794 8,161,717 Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options 677,949 787,471 outstanding On a diluted basis 818 736,359,965 111.1 802 735,693,022 109.0
* adjusted to exclude exceptional items as follows:
Unaudited 30 June 30 June 2012 2011 £m £m
Net income attributable to owners of the parent 779 759 Exceptional items 48 54 Exceptional charge included in finance expense - 2 Tax effect on exceptional items (9) (13) Adjusted net income attributable to owners of the parent 818 802 The Directors believe that diluted earnings per ordinary share, adjusted forthe impact of exceptional items after the appropriate tax amount, providesadditional useful information on underlying trends to shareholders in respectof earnings per ordinary share. 8. Net Debt Unaudited Audited 30 June 30 June 31 December 2012 2011 2011 Analysis of net debt £m £m £m Cash and cash equivalents 1,063 581 639 Overdrafts (1) (13) (5) Borrowings (2,950) (2,839) (2,503) Other 42 76 74 (1,846) (2,195) (1,795) Unaudited Audited 30 June 30 June 31 December 2012 2011 2011 Reconciliation of net debt £m £m £m
Net debt at beginning of period (1,795) (2,011) (2,011)
Net increase / (decrease) in cash and cash equivalents 446 (1) 88 Repayment of borrowings - 400 400 Proceeds from borrowings (475) (622) (249)
Exchange and other adjustments (22) 39 (23) Net debt at the end of the period (1,846) (2,195) (1,795)
9. Provisions for Liabilities and Charges
Provisions for liabilities and charges include a restructuring provisiontotalling £32m relating to the acquisition and integration of the SSL business,implementation of the Group's new area and category organisations, and furtherreconfiguration of the Group. This is expected to be utilised in 2012.
Other provisions include onerous lease provisions and various legal, regulatory, environmental and other obligations throughout the Group, the majority of which is expected to be used within five years.
10. Share Capital Equity Nominal Subscriber Nominal ordinary value ordinary value Unaudited shares £m shares £m Issued and fully paid At 1 January 2012 728,621,602 73 2 - Allotments 4,472,702 - - - At 30 June 2012 733,094,304 73 2 - Between 15 March 2012 and 30 May 2012 the Group acquired 9,991,643 of its ownequity ordinary shares through purchases on the London Stock Exchange. Thetotal amount paid to acquire the shares was £352m (including stamp duty) whichhas 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. 11. Dividends A final dividend of 70.0 pence per share for the year ended 31 December 2011was paid on 31 May 2012 to shareholders who were on the register on 24 February2012. This amounted to £511m.
The Directors are proposing an interim dividend in respect of the financial year ending 31 December 2012 of 56.0 pence per share which will absorb an estimated £405m of shareholders' funds. It will be paid on 27 September 2012 to shareholders who are on the register on 10 August 2012.
12. Contingent Liabilities The Group is involved in a number of investigations by government authoritiesand has made provisions for such investigations, where appropriate. Where it istoo early to determine the likely outcome of these matters, the Directors havemade no provision for such potential liabilities. 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.
There have been no significant changes to the contingent liabilities of the Group from those disclosed in the Annual Report and Financial Statements for the year ended 31 December 2011.
13. Business Combinations & Disposals
Acquisition fair value adjustments
The Group acquired SSL International plc (SSL) in October 2010 and Paras Pharmaceuticals Limited (Paras) in April 2011. As described in the Annual Report and Financial Statements for the year ended 31 December 2011 the initial acquisition values were restated to reflect updated final fair value adjustments made within the hindsight period allowed by IFRS 3 (Revised) Business Combinations.
The table below sets out the affect of these updated fair value adjustments onthe balance sheet as at 30 June 2011. There is no impact to the Group incomestatement for the six months ended 30 June 2011 or the previously disclosed 31December 2011 Group balance sheet or income statement. 30 June 2011 (e) Fair value 30 June 2011 adjustments Restated £m £m £m Goodwill and other intangible assets 10,415 86
10,501
Property, plant and equipment 725 (3)
722 Deferred tax assets 181 (18) 163 Inventories 743 (1) 742 Trade and other receivables 1,454 (4) 1,450 Trade and other payables (2,960) (7) (2,967) Deferred tax liabilities (1,859) 12 (1,847) Retirement benefit obligations (430) (1)
(431)
Provisions for liabilities and (142) (33) (175)charges Non-current tax liabilities (178) (31)
(209)
(e) As disclosed in the Half Year Condensed Financial Statements for the sixmonths ended 30 June 2011, adjusted for certain reclassifications to newcaptions within the balance sheet for 30 June 2011. This included separatingcurrent tax receivables (£128m) out of trade and other receivables, derivativefinancial instruments (£8m) out of trade and other payables, and retirementbenefit surplus (£22m) out of other receivables. The Directors believe thisprovides more transparent information about the position of the Group and isconsistent with the captions disclosed in the Annual Report and FinancialStatements for the year ended 31 December 2011.
Disposal of Paras Personal Care
In May 2012 the Group sold the Paras Personal Care business for £81m, net ofcash disposed. A gain of £32m is recognised in the income statement, of which £15m arises from deferred tax.
14. Transactions with Non-Controlling Interests
On 31 May 2012 the Group acquired the remaining non-controlling interest inBeleggingsmaatschappij Lemore BV (BLBV), the holding company of OOO Medcom MP (Medcom), for £104m including transaction costs. Medcom is the Group's Russian distributor of condoms, footcare products and medical gloves and devices.
15. Related Parties There have been no changes in related party transactions from those describedin the Annual Report and Financial Statements for the year ended 31 December2011. 16. Seasonality Demand for the majority of the Group's products is not subject to significantseasonal fluctuations. While some Health and pest control products do exhibitseasonal fluctuations; peak demand in the northern hemisphere markets tends tolargely counter lower demand in the southern hemisphere markets and vice-versa.
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge, these Half YearCondensed Financial Statements have been prepared in accordance with IAS 34 asadopted by the European Union and that the interim management report includes afair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first six
months of the financial year and their impact on the Half Year Condensed
Financial Statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
- material related party transactions in the first six months of the financial
year and any material changes in the related party transactions described in
the last annual report.
The Directors of Reckitt Benckiser Group plc are listed in the Reckitt Benckiser Group plc Annual Report and Financial Statements for 31 December 2011. A list of current Directors is maintained on the Reckitt Benckiser Group plc website: www.rb.com.
By order of the Board Rakesh KapoorChief Executive Officer Adrian BellamyDirector 27 July 2012
Independent Review Report to Reckitt Benckiser Group plc
Introduction We have been engaged by the company to review the Half Year Condensed FinancialStatements in the half-yearly financial report for the six months ended 30 June2012, which comprise the Group income statement, the Group statement ofcomprehensive income, the Group balance sheet, the Group statement of changesin equity, the Group cash flow statement and related notes. We have read theother information contained in the half-yearly financial report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe information in the condensed set of financial statements. Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union and IFRSs asissued by the International Accounting Standards Board. The Half Year CondensedFinancial Statements included in this half-yearly financial report have beenprepared in accordance with International Accounting Standard 34, "InterimFinancial Reporting", as adopted by the European Union and as issued by theInternational Accounting Standards Board. Our responsibility Our responsibility is to express to the company a conclusion on the Half YearCondensed Financial Statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof 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 causes us tobelieve that the Half Year Condensed Financial Statements in the half-yearlyfinancial report for the six months ended 30 June 2012 are not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and as issued by the International AccountingStandards Board, and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered AccountantsLondon27 July 2012Notes:
(a) The maintenance and integrity of the Reckitt Benckiser Group plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
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