Description
The report for the financial year 2010 - 2011 of reckitt benckiser.
8 February 2012
2011: FULL YEAR TARGETS EXCEEDED
Results at a glance
(unaudited)
Net Revenue - Like-for-like growth* Operating Profit - reported Operating Profit - adjusted ** Net Income – reported Net Income - adjusted ** EPS (diluted) – reported EPS (diluted) - adjusted **
Q4 £m 2,416 708 739 521 546 70.8p 74.2p
% change actual exchange
% change constant exchange
+6 +18 +5 +26 +8 +26 +8
+8 +3% +19 +6 +27 +9
FY £m 9,485 2,395 2,487 1,745 1,818 237.1p 247.1p
% change actual exchange
% change constant exchange
+12 +12 +11 +11 +9 +11 +9
+13 +4% +14 +13 +13 +11
* Like-for-like (“LFL”) growth excludes the impact of changes in exchange rates, major acquisitions (SSL & Paras) and disposals. ** Adjusted results (including % change figures) exclude exceptional items (see page 2).
FY highlights (at constant exchange unless stated): • • • • • • Total net revenue growth of +13% to £9,485m – ahead of +12% target. LFL growth (excluding full year SSL and Paras) +4% base business (+4% including RBP). SSL net revenue growth of +6% on a LFL basis to £843m. Adjusted net income +9% actual exchange, (+11% constant) – ahead of +10% target. Net working capital of minus £910m (2010: minus £925m). Net debt of £1,795m (2010: £2,011m), with strong cash flow offset by two dividends, acquisitions and restructuring. The Board recommends a +8% increase in the final dividend to 70p per share, bringing the total dividend for 2011 to 125p (+9% versus 2010).
Q4 highlights (at constant exchange unless stated): • • • Total net revenue growth of +8% to £2,416m. LFL growth (excluding SSL and Paras) +5% base business (+3% including RBP). SSL net revenue growth of +27% to £191m.
Commenting on the full year results, Rakesh Kapoor, Chief Executive Officer, said: “Reckitt Benckiser delivered another strong year, exceeding both our net revenue target (+12%) and adjusted net income target (+10%) in an increasingly tough environment. Likefor-like growth of 4% was underpinned by a robust performance in the base business, especially in Q4. “Growth was driven in particular by excellent growth in emerging markets, and growth in our Powerbrands – Dettol, Nurofen, Mucinex, Strepsils, Gaviscon and Harpic. SSL had a good first year with LFL growth of 6%, although full year growth is flattered by a soft Q4 last year. “At the end of 2011, the Suboxone film had captured a 48% volume share of the U.S. market. The in-market sales trend remains on a healthy growth track. “In 2012 we are targeting total Company net revenue growth, excluding RBP, of 200bps above our market growth rate. We expect the market to grow at 1-2%. 2012 will be a year of higher investment but, ex RBP, we are still targeting to maintain our operating margins. ”
Basis of Presentation and Exceptional Items The results include the business of SSL International plc (“SSL”) from 1 November 2010, and Paras Pharmaceuticals Limited (“Paras”) from 1 April 2011, their respective dates of acquisition. Operating profit is not separately disclosed for SSL or Paras as, in the view of the Directors, it is not practicable to identify their operating profit due to their integration into the commercial infrastructure of Reckitt Benckiser. Where appropriate, the term “like-for-like” (“LFL”) describes the performance of the business on a comparable basis, excluding the impact of major acquisitions, disposals, discontinued operations and foreign exchange. LFL analysis excludes the impact of SSL for the full year and Paras. Where appropriate, the term “base business” represents the Europe, North America & Australia and Developing Markets geographic areas, and excludes RBP. Where appropriate, the term “adjusted” excludes the impact of exceptional items. There was an exceptional pre-tax charge of £96m in 2011 mainly relating to integration and restructuring costs arising from the acquisition of SSL and Paras. This exceptional pre-tax charge is reflected in reported operating profit (£92m) and net interest (£4m, being financing costs associated with the acquisition). The tax effect of exceptional items in the period is £23m. The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010. There is no impact to the income statement for the year ended 31 December 2010.
Summary Operating Review Full year 2011 Total net revenue growth of +13% (constant) exceeded our full year target of 12%. LFL growth both including and excluding RBP was +4% (constant). SSL had a good first year with net revenue of £843m, representing 6% LFL growth (constant). Paras net revenue was £49m. The gross margin declined by –90bp to 59.7%, driven by higher input costs, increased investment in price and promotion to support volume shares, especially in Europe, and the impact of higher rebates related to Medicaid in RBP. This was partially offset by mix benefits, savings from cost optimisation programmes and a positive transaction impact from foreign exchange. Total marketing investment was higher, and media investment rose +9% (constant) to a level of 10.4% of net revenue. Within this, media spend on the base business (ex SSL) was maintained at 11.8% of net revenue. Cost synergies from the acquisition of SSL of £85m have exceeded the £50m target for the full year, due to savings being achieved earlier than expected. On an adjusted basis, operating profit was ahead +11% (+13% constant) to £2,487m; the adjusted operating margin declined by -20bp to 26.2% due to RBP. Base business adjusted operating margin increased by 60bp to 22.6%, with declines in Europe offset by margin expansion in NAA due to volume leverage and positive product mix, and DvM due to volume leverage, and a soft prior year comparative due to heavy marketing investment in Q4 2010. Net finance expense was £19m (2010: net finance income of £6m), of which £4m is an exceptional charge in respect of financing costs associated with the acquisition of SSL. The Group effective tax rate was 26%. Net income as reported was £1,745m, an increase of +11% (+13% constant) versus 2010; on an adjusted basis, net income rose +9% (+11% constant). Diluted earnings per share of 237.1 pence were +11% higher on a reported basis; on an adjusted basis, the growth was +9% to 247.1 pence. 2
Fourth quarter 2011 RB delivered a strong Q4 LFL net revenue growth in the base business of +5%. This was offset by RBP net revenue of –17% due to adjustments to previously estimated Medicaid rebates and film conversion. As a result total LFL net revenue was +3%. SSL contributed £191m net revenue in the quarter, representing a LFL growth rate of +27% versus a soft Q4 in 2010 when the business was first acquired. Paras net revenue was £14m. Total net revenue increased +8% (constant) to £2,416m, a slower growth rate than our YTD September run rate, as we now anniversary the acquisition of SSL. The gross margin declined by –100bp to 60.5%, due to increased Medicaid rebates in RBP. On the base business gross margin was maintained. Media investment rose +8% (constant) to a level of 10.0% of net revenue. Within this, while media spend on the base business (ex SSL) was maintained at 11.4%, we substantially increased media spend in both NAA to support the Mucinex Fast Max launch and in Europe to defend market shares. On an adjusted basis, operating profit was ahead +5% (+6% constant) to £739m: the adjusted operating margin declined by –30bp to 30.6% due to RBP. Excluding RBP, the adjusted operating margin increased by +140bp with increases in Europe behind positive product mix & SSL synergies, and DvM behind volume leverage and a soft prior year comparative due to heavy marketing investment in Q4 2010. Net finance expense was £4m (Q4 2010: £5m), of which £1m is an exceptional charge in respect of financing costs associated with the acquisition of SSL. The tax rate was 26%. Net income as reported was £521m, an increase of +26% (+27% constant) versus Q4 2010; on an adjusted basis, net income rose +8% (+9% constant). Diluted earnings per share of 70.8 pence were +26% higher on a reported basis; on an adjusted basis, the growth was +8% to 74.2 pence.
FY 2011 Business Review by Segment The Business Review below is given at constant exchange rates. Summary: % net revenue growth FY 2011 Europe NAA DvM Base Business RBP TOTAL Like-for-like -1% +3% +13% +4% +6% +4% Impact of SSL & Paras +16% +2% +11% +10% 0% +9% Exchange 0% -2% -3% -1% -3% -1% Reported +15% +3% +21% +13% +3% +12%
Analyses by operating segment of net revenue and adjusted operating profit, and of net revenue by product group are set out below. The Executive Committee of the Group assesses the performance of the operating segments based on net revenue and adjusted operating profit. This measurement basis excludes the effect of exceptional items.
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Review by Operating Segment
Quarter ended 31 December 2010** % change £m exch. Rates actual const. Net revenue 949 690 584 193 2,416 895 657 493 232 2,277 +6 +5 +18 -17 +6 +8 +4 +25 -17 +8 Europe North America & Australia Developing Markets Pharmaceuticals 4,009 2,402 2,312 762 9,485 3,490 2,323 1,903 737 8,453 +15 +3 +21 +3 +12 +15 +5 +24 +6 +13 Year ended 31 December 2010** % change £m exch. rates actual const.
2011 £m
2011 £m
Operating profit – adjusted* 241 233 112 143 10 739 (31) 708 226 225 68 184 703 (101) 602 +7 +4 +65 -22 n/m +5 +18 +8 +3 +75 -22 n/m +6 +19 Europe North America & Australia Developing Markets Pharmaceuticals Corporate*** Subtotal before exceptional items Exceptional items 908 652 399 518 10 2,487 (92) 2,395 823 599 278 531 2,231 (101) 2,130 +10 +9 +44 -2 n/m +11 +12 +10 +10 +48 +1 n/m +13 +14
% 25.4 33.8 19.2 74.1 30.6
% 25.3 34.2 13.8 79.3 30.9
Operating margin – adjusted* Europe North America & Australia Developing Markets Pharmaceuticals
% 22.6 27.1 17.3 68.0 26.2
% 23.6 25.8 14.6 72.0 26.4
* Adjusted to exclude the impact of exceptional items. ** 2010 comparatives have been restated to include SSL within the relevant areas ***Items of income and expense which are not part of the results and financial position of the reported segments, and therefore reported to the Chief Operating Decision Maker outside of the individual segment financial information, are shown as reconciling items between the segmental information and the Group totals presented in the consolidated financial statements. For the twelve months ended 31 December 2011, these items include a profit on disposal of intangibles and an expense relating to legal matters. The net impact of these items is £10m (31 December 2010: £nil).
Europe
42% of net revenue
FY 2011 total net revenue increased +15% to £4,009m. LFL growth of -1% was due to a combination of slight volume decline on Fabric Care and negative net pricing in certain categories, reflecting higher levels of promotional spend to protect volume shares against aggressive competition. This continues to be the key factor behind the LFL result for net revenue in both Q4 and FY 2011. By category, within Healthcare, Nurofen, Strepsils and Gaviscon delivered a strong result, supported by such new initiatives as Nuromol and Strepsils Warm. Growth in Personal Care was driven by the continued roll-out of the Dettol No Touch Hand Soap System, which continues to deliver an encouraging result. Surface Care grew from Dettol and Harpic. The result in Home Care was boosted by such recent initiatives as the Air Wick 100% natural propellant spray and Air Wick Odour Detect as well as continued growth in candles. The largest factor in the decline in Fabric Care was continued weakness in Laundry Detergents and Fabric Softeners in Southern Europe. Heavy promotional and media investment continues behind Vanish to protect volume share against competition. 4
FY adjusted operating profit was ahead +10% at £908m; the adjusted operating margin decreased – 100bp, due to a combination of increased investment in price and promotion and higher input costs, partially offset by SSL synergies. In Q4, net revenue rose +8% to £949m, with LFL growth of +0%. Adjusted operating profit was £241m, with the margin +10bp higher at 25.4%, due mainly to a soft comparative for SSL in Q4 2010. North America & Australia 25% of net revenue
FY 2011 total net revenue increased +5% (+3% LFL) to £2,402m. Growth came from Health & Personal Care, Dishwashing and Food. The increase in Health & Personal Care was driven by Mucinex, which benefited from the Q3 roll out of Mucinex Fast Max. In Dishwashing, Finish Quantum and All-in-1 tablets and gel packs contributed an excellent performance. The increase in Food came from the consumer brands of French’s Yellow Mustard and Frank’s Red Hot Sauce, which was supported by additional marketing activity. FY adjusted operating profit increased +10% to £652m due to favourable product mix and fixed cost containment; the adjusted operating margin was +130bp higher at 27.1%. Q4 net revenue rose +4% (+4% LFL) to £690m. Adjusted operating profit was ahead by +3% to £233m, equating to a -40bp decline in the operating margin to 33.8%, impacted by the significant media investment behind the launch of Mucinex Fast Max. Developing Markets 24% of net revenue
FY 2011 total net revenue was ahead +24% (+13% LFL) to £2,312m. By category, Health & Personal Care continued to grow well with good growth coming from Dettol, Strepsils, Gaviscon and Veet. The increase in Fabric Care was driven by Vanish, while Harpic and Veja were the key drivers in Surface Care. In Home Care, both Air Care and Pest Control contributed to the performance. Adjusted operating profit increased by +48% to £399m, due to volume leverage, positive product mix due to strong growth in H&PC brands, and pricing. Marketing investment fell to more normal levels following heavy investment in Q4 2010. The impact of these factors resulted in a +270bp improvement in the adjusted operating margin to 17.3%. Q4 net revenue increased by +25% (+15% LFL) to £584m. Adjusted operating profit improved +75% to £112m, with a +540bp uplift in the margin to 19.2%, due to heavy marketing investment in Q4 2010, as noted previously. RBP 8% of net revenue
2011 total net revenue grew +6% to £762m. The patent-protected Suboxone film variant continued to grow, and by the end of December had captured a 48% volume share of the total market and has further strengthened its position as market leader, ahead of tablets. The NA business net revenue declined -2% to £587m of which the film generated £249m. In Europe and Rest of the World, the result was helped by the buyback of the sales and distribution rights in the majority of countries in July 2010. Adjusted operating profit for the total RBP business increased +1% to £518m. The operating margin was down –400bp to 68.0%, largely due to the lower margins of the film variant and the impact of higher rebates relating to Medicaid. In Q4, as earlier communicated, RBP results were affected by the 2011 and prior year impact of US Health reforms, as a result of which higher rebates to Medicaid were required. As a result net revenues are down by -17% to £193m with profit down by 22% to £143m, compared to an exceptionally strong quarter last year when the film was being rolled-out. The in-market sales trend remains on a healthy growth track. At this time the Group has no intelligence as to the exact timing of potential generic competition to the Suboxone Tablets in the USA. For further information surrounding exclusivity of Suboxone products, please refer to pages 4 & 5 of the 2010 Annual Report and Financial Statements. 5
Review by Category
Quarter ended 31 December 2010* % change £m exch. rates actual const. Net revenue by category 791 357 353 330 230 67 2,128 193 95 2,416 651 370 352 310 224 51 1,958 232 87 2,277 +22 -4 +0 +6 +3 +31 +9 -17 +9 +6 +24 -1 +3 +8 +5 +29 +11 -17 +9 +8 Health & Personal Care Fabric Care Surface Care Home Care Dishwashing Other Household and Health & Personal Care Pharmaceuticals Food 3,156 1,503 1,422 1,204 896 227 8,408 762 315 9,485 2,318 1,576 1,391 1,152 875 100 7,412 737 304 8,453 +36 -5 +2 +5 +2 +127 +13 +3 +4 +12 +37 -5 +3 +5 +3 +129 +14 +6 +7 +13 Year ended 31 December 2010* % change £m exch. rates actual const.
2011 £m
2011 £m
Operating profit – adjusted 550 143 36 10 739 (31) 708 488 184 31 703 (101) 602 +13 -22 +16 n/m +5 +18 +14 -22 +16 n/m +6 +19 Household and Health & Personal Care Pharmaceuticals Food Corporate Exceptional items 1,864 518 95 10 2,487 (92) 2,395 1,613 531 87 2,231 (101) 2,130 +16 -2 +9 n/m +11 +12 +16 +1 +13 n/m +13 +14
% 25.8 74.1 37.9 30.6
% 24.9 79.3 35.6 30.9
Operating margin – adjusted Household and Health & Personal Care Pharmaceuticals Food
% 22.2 68.0 30.2 26.2
% 21.8 72.0 28.6 26.4
* 2010 comparatives have been restated to include SSL within the relevant categories
Health & Personal Care. LFL net revenue increased +8%. Total net revenue increased +37% to £3,156m . In Healthcare, the result was driven by very good growth for Nurofen, Mucinex, Strepsils and Gaviscon, boosted by such new initiatives as Strepsils Warm and Mucinex Fast Max. In Personal Care, Dettol continued to grow well both in Developing Markets, and in Europe where the continued roll-out of the No Touch Hand Soap System has been very encouraging. In Q4, Health & Personal Care LFL net revenue rose +9% and total net revenue +24% to £791m with a weaker than normal ‘flu season offset by the initial success of Mucinex Fast Max. Fabric Care. Net revenue decreased by -5% to £1,503m, predominantly driven by continued weakness in Laundry Detergents and Fabric Softeners in Southern Europe. The Group continues to invest aggressively to protect the market position of Vanish against competitor launches and intensive promotional activity; as a result market share trends are improving. Q4 net revenue declined –1% to £357m, with Vanish returning to growth as we anniversary competitive launches in Europe and continue to see good growth in Developing Markets. Laundry Detergents continue to decline but at reduced rates. Surface Care. Net revenue grew +3% to £1,422m. There was good growth for Dettol/Lysol and Veja, with a strong result for Harpic being boosted by Power Plus and Max Power toilet liquids. Q4 net revenue increased +3% to £353m.
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Home Care. Net revenue increased +5% to £1,204m, with growth in both Air Care and Pest Control. In Air Care, the result was supported by the launch of Air Wick 100% natural propellant spray and Air Wick Odour Detect, with continued good growth in candles. In Pest Control, a strong season and growth in automatic sprays contributed to the performance. Q4 growth was +8% to £330m. Dishwashing. Net revenue increased +3% to £896m, behind continued success for Finish Quantum and All-in-1. Q4 net revenue was +5% at £230m. Other. Net revenue was £227m (Q4: £67m), largely due to the inclusion of certain brands from the acquisition of SSL and Paras. Total Household and Health & Personal Care. Net revenue was ahead by +14% (+3% LFL) to £8,408m, adjusted operating profit increased 16% to £1,864m. In Q4, total Household and Health & Personal Care net revenue grew +11% to £2,128m, with LFL growth of +5%. Adjusted operating profit increased by 14% to £550m. Food. Net revenue grew +7% to £315m, with a good performance from the consumer brands of French’s Yellow Mustard and Frank’s Red Hot Sauce, boosted by additional marketing investment. Adjusted operating profit increased +13% to £95m. Q4 net revenue grew +9% and adjusted operating profit was £36m (+16%).
New Product Initiatives: H1 2012 To support its growth aspirations for 2012, RB today announces a number of new product initiatives for the first half of 2012. These include:• • Nurofen Express Soluble Powder. The first dissolvable ibuprofen and the fastest ever Nurofen, gets to work in 5 minutes. Durex. Rollout of Durex Performax Intense, a more intense experience for both men and women. Launch of Durex Perfect Glide, the longest lasting lubricant ever, based on silicon for a warm touch. Scholl. Launch of the 2 in 1 Scholl Express Corn Pen, fast and effective treatment without unsightly plasters. Dettol Daily Care personal care range, gentle care and protection for complete skin health. Dettol Re-Energise personal care range, deeply clean, healthy and re-energised. Lysol. Launch of Lysol No Touch Kitchen System – cleans dishes, sparkles surfaces and gently cleans hands. Cillit Bang. Launch of Cillit Bang All-in-1 Dish & Surface, a no-touch system for sparkling dishes and gleaming surfaces. Muse No Touch Foaming Hand Wash. A unique dispenser that delivers the right amount of foam. Launch in Japan where 60% of the market is now in Foam. Finish Quantum Ultra Shine – leaves nothing behind but the shine. New packaging for Finish Quantum and Finish All-in-1 in consumer preferred waterproof re-sealable pouches. Clearasil PerfectaWash, automatically delivers the perfect dose for visibly clearer skin without over drying. Veet Easy Wax Electrical roll-on – Home waxing, Salon results, it’s that easy.
• • • • • • • •
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• • •
Vanish Power Shots, new gel caps from Vanish with the perfect dose for stain gone. Vanish Oxi Powerlift, new formulation of Powder to powerlift dried-in and greasy stains. Air Wick Fabric and Air spray, with fresh bubbles that rest on fabrics for up to 12 hours to be released by natural movement. Air Wick Colours of Nature, new range of fragrances based on vibrant colours and scents in Nature. Air Wick National Parks, with scents inspired by US National Parks (in partnership with National Parks Foundation).
Financial Review Basis of preparation. The unaudited financial information is prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board, and with the accounting policies set out in the Group’s 2010 Annual Report and Financial Statements, and as updated by the 2011 Interim Statement. Constant exchange. Movements in exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts the comparative to exclude such movements, to show the underlying growth of the Group. Net finance expense. Net finance expense was £19m (2010: net finance income of £6m), reflecting the acquisition of SSL and Paras. The 2011 net finance expense includes a £4m exceptional charge in respect of financial costs associated with the acquisition of SSL (2010: £3m). Tax. The underlying effective tax rate was 26% (2010: 26%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) of minus £910m was a £15m deterioration versus the 31 December 2010 level due mainly to an increase in inventories and a decrease in Tax liabilities. Cash flow. Cash generated from operating activities was £2,430m (2010: £2,215m) and net cash flow from operations was £1,581m (2010: £1,386m). Net interest paid was £13m (2010: net interest received of £8m) and tax payments were relatively flat at £677m (2010: £679m) due to the settlement of a number of outstanding matters in 2010. Capital expenditure was lower than the prior year at £205m (2010: £367m), due to the buy back of the remaining sales, marketing and distribution rights to Suboxone, Subutex and Temgesic in Europe and the Rest of the World and the investment in certain health and personal care brands from Combe Incorporated in 2010. Net debt at the end of the year was £1,795m (December 2010: net debt of £2,011m), a reduction of £216m. This reflected strong free cash flow generation, offset by the payment of two dividends totaling £873m and the acquisition of businesses (principally Paras) for £460m. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it. Restructuring charge. A total pre-tax exceptional charge of around £250m was announced in respect of the acquisition of SSL and further reconfiguration of the enlarged Group. In FY 2011, an exceptional pre-tax charge of £96m was incurred, of which £92m is reflected in reported operating profit and £4m is included in net interest. The remainder of the restructuring charge, of approximately £50m, is expected to be incurred in 2012. In FY 2010, there was an exceptional pre-tax charge of £104m, reflected in reported operating profit (£101m, of which £22m related to transaction fees) and net interest (£3m, being financing costs associated with the acquisition). Balance sheet. At the end of 2011, the Group had total equity of £5,781m (2010: £5,130m), an increase of +13%. Net debt was £1,795m (2010: net debt of £2,011m) and total capital employed in the business was £7,576m (2010: £7,141m). 8
This finances non-current assets of £11,188m (2010: £10,787m), of which £732m (2010: £735m) is tangible fixed assets, the remainder being goodwill, other intangible assets, deferred tax, available for sale financial assets and other receivables. The Group has net working capital of minus £910m (2010: minus £925m), current provisions of £60m (2010: £164m) and long-term liabilities other than borrowings of £2,642m (2010: £2,555m). The Group’s financial ratios remain strong. Return on shareholders’ funds (net income divided by total shareholders’ funds) was 30.3% on a reported basis and 31.4% on an adjusted basis (2010: 30.6% on a reported basis and 32.4% on an adjusted basis). Dividends. The Board of Directors recommends a final dividend of 70 pence (2010: 65 pence), an increase of +8%, to give a full year dividend of 125 pence (2010: 115 pence), an overall increase of +9%. The dividend, if approved by shareholders at the AGM on 3 May 2011, will be paid on 31 May to shareholders on the register at the record date of 24 February. The ex-dividend date is 22 February and the last date for election for the share alternative to the dividend is 10 May. The final dividend will be accrued once approved by shareholders. Contingent liabilities. The Group is involved in a number of investigations by government authorities and has made provisions for such investigations, where appropriate. Where it is too early to determine the likely outcome of these matters, the Directors have made no provision for such potential liabilities. During 2011, RB agreed to pay a €24m fine in the settlement of an investigation by the German Federal Cartel Office involving price fixing agreements on detergent and cleansing agents between 2005 and 2008. The Group has received a civil claim for damages from the Department of Health and others in the United Kingdom, regarding alleged anti-competitive activity involving the Gaviscon brand. The claim is under review and although it is at an early stage, the Directors do not believe that any potential impact would be material to the Group financial statements. The Group from time to time is involved in discussions in relation to ongoing tax matters in a number of jurisdictions around the world. Where appropriate, the Directors make provisions based on their assessment of each case. 2012 Targets 2012 will be a year of transition and investment for RB, the details of which will be explained in the strategic overview press release, which will be released later this morning. We continue to be committed to market outperformance and therefore target the following: • • Net revenue growth (excluding RBP) of +200bps versus our market growth. We expect market growth in 2012 to be 1-2%. Operating margins (excluding RBP) to be maintained.
The likelihood of generic competition to Suboxone makes setting total Company (inclusive of RBP) targets impossible at this time. RB will aim to update the market on total Company targets later in the year.
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For further information, please contact: Reckitt Benckiser Richard Joyce Director, Investor Relations Tom Corran Consultant, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communications and Affairs Brunswick (Financial PR) David Litterick / Max McGahan +44 (0)20 7404 5959 +44 (0)1753 217800
The preliminary results for the year ended 31 December 2011 and the results for the year ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board. The unaudited financial statements for 2011 are prepared using accounting policies in accordance with those set out in the Group’s 2010 Annual Report and Financial Statements, and as updated by the 2011 Interim Statement. The financial information set out in the announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 11 March 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2011 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement, and will be delivered to the Registrar of Companies following the Group’s Annual General Meeting. Cautionary note concerning forward-looking statements This document contains statements with respect to the financial condition, results of operations and business of Reckitt Benckiser and certain of the plans and objectives of the Group with respect to these items. These forward-looking statements are made pursuant to the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing to the Company, anticipated cost savings or synergies and the completion of strategic transactions are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors discussed in this report, that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside Reckitt Benckiser’s control. Past performance cannot be relied upon as a guide to future performance.
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The Group at a Glance (Unaudited)
Quarter ended 31 December 2011 £m 2,416 +3% +8% +6% 60.5% 777 32.2% 708 739 29.3% 30.6% 704 521 546 71.5 74.2 2010 £m 2,277 +5% +9% +10% 61.5% 754 33.1% 602 703 26.4% 30.9% 597 414 507 57.0p 69.0p Net revenue – total Net revenue growth – like-for-like Net revenue growth – constant Net revenue growth – total Gross margin EBITDA – adjusted * EBITDA margin – adjusted * EBIT EBIT – adjusted * EBIT margin EBIT margin – adjusted * Profit before tax Net income Net income - adjusted * EPS, basic, as reported EPS, adjusted and diluted * Year ended 31 December 2011 £m 9,485 +4% +13% +12% 59.7% 2,642 27.9% 2,395 2,487 25.3% 26.2% 2,376 1,745 1,818 239.8 247.1 2010 £m 8,453 +6% +7% +9% 60.6% 2,375 28.1% 2,130 2,231 25.2% 26.4% 2,136 1,568 1,661 216.5p 226.5p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data
31 December 2011 £m (910) (1,795)
31 December 2010** £m (925) (2,011)
Net working capital * Net debt
* Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. ** The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010.
Shares in issue Millions 725.9 2.7 728.6
31 December 2010 Issued 31 December 2011
11
Group Income Statement Analysis (Unaudited)
Quarter ended 31 December 2010 % change 2011 £m £m 2,277 +6 2,416 (954) 1,462 (754) 708 739 (31) 708 6 (10) (4) 704 (180) 524 (877) 1,400 (798) 602 703 (101) 602 6 (11) (5) 597 (181) 416 +26 +18 +18 +18 +5 +4 Year ended 31 December 2010 % change 2011 £m £m 8,453 +12 9,485 (3,823) 5,662 (3,267) 2,395 2,487 (92) 2,395 23 (42) (19) 2,376 (622) 1,754 (3,332) 5,121 (2,991) 2,130 2,231 (101) 2,130 21 (15) 6 2,136 (566) 1,570 +12 +11 +12 +12 +11 +11
Net revenue Cost of sales Gross profit Net operating expenses Operating profit Operating profit before exceptional items Exceptional items Operating profit Finance income Finance expense* Net finance (expense) / income Profit on ordinary activities before taxation Tax on profit on ordinary activities Net income for the period
3 521 524
2 414 416
+26 +26
Attributable to non-controlling interests Attributable to owners of the parent Net income for the period
9 1,745 1,754
2 1,568 1,570
+11 +12
71.5p 70.8p
57.0p 56.3p
Earnings per ordinary share: On net income for the period, basic On net income for the period, diluted Earnings per ordinary share – adjusted**: On net income for the period, basic On net income for the period, diluted
239.8p 237.1p
216.5p 213.8p
75.0 74.2
69.9p 69.0p
249.9p 247.1p
229.4p 226.5p
* FY 2011 includes an exceptional charge of £4m (2010: £3m) in respect of financial costs associated with the acquisition of SSL. Q4 2011 includes an exceptional charge of £1m (2010: £3m). ** Adjusted to exclude the impact of exceptional items.
728.6 735.9
725.7 734.9
Average common shares outstanding: (millions) Basic Diluted
727.6 735.8
724.2 733.3
12
Group Statement of Comprehensive Income
For the year ended 31 December (unaudited)
2011 £m Net income for the year Other comprehensive income: Net exchange adjustments on foreign currency translation, net of tax Actuarial (losses) / gains, net of tax Gains / (losses) taken to reserves on cash flow hedges, net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year (226) (49) 3 (272) 1,482 103 4 (2) 105 1,675 1,754 2010 £m 1,570
Attributable to non-controlling interests Attributable to owners of the parent
4 1,478
3 1,672
13
Group Balance Sheet
For the year ended 31 December (unaudited)
2011 £m ASSETS Non-current assets: Goodwill and other intangible assets Property, plant and equipment Deferred tax assets Available for sale financial assets Retirement benefit surplus Other receivables Current assets: Inventories Trade and other receivables Derivative financial instruments Tax receivables Available for sale financial assets Cash and cash equivalents Total assets LIABILITIES Current liabilities: Borrowings Provisions for liabilities and charges Trade and other payables Derivative financial instruments Tax liabilities Non-current liabilities: Borrowings Deferred tax liabilities Retirement benefit obligations Provisions for liabilities and charges Tax liabilities Other non-current liabilities Total liabilities Net assets EQUITY Capital and reserves: Share capital Share premium Merger reserve Hedging reserve Foreign currency translation reserve Retained earnings Non-controlling interest Total equity 2010 £m Restated*
10,258 732 150 10 32 6 11,188 758 1,442 67 21 11 639 2,938 14,126
9,865 735 146 12 26 3 10,787 643 1,342 37 14 11 588 2,635 13,422
(2,505) (60) (2,901) (7) (227) (5,700) (3) (1,772) (502) (118) (211) (39) (2,645) (8,345) 5,781
(2,641) (164) (2,624) (10) (295) (5,734) (3) (1,714) (479) (145) (209) (8) (2,558) (8,292) 5,130
73 86 (14,229) (1) 110 19,672 5,711 70 5,781
73 59 (14,229) (4) 331 18,828 5,058 72 5,130
* The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010. There is no impact to the income statement for the year ended 31 December 2010.
14
Group Statement of Changes in Equity
For the year ended 31 December (unaudited)
Foreign currency translation reserve Total attributable to equity shareholders
Share capital
Share premium
Merger reserve
Hedging reserve
Retained earnings
Noncontrolling interests
Total
Balance at 1 January 2010 Comprehensive income Net income for the year Other comprehensive income Actuarial gains, net of tax Losses on cash flow hedges, net of tax Net exchange adjustments on foreign currency translation, net of tax Total other comprehensive income Total comprehensive income Transactions with owners Proceeds from share issue Share based payments Deferred tax on share awards Current tax on share awards Treasury shares re-issued Dividends Non-controlling interest arising on business combination Total transactions with owners Balance at 31 December 2010 Comprehensive income Net income for the year Other comprehensive income Actuarial losses, net of tax Gains on cash flow hedges, net of tax Net exchange adjustments on foreign currency translation, net of tax Total other comprehensive income Total comprehensive income Transactions with owners Proceeds from share issue Share based payments Deferred tax on share awards Current tax on share awards Non-controlling interest arising on business combination Dividends Put option issued to non controlling interest Total transactions with owners Balance at 31 December 2011
72
(14,229)
(2)
229
17,942
4,012
2
4,014
1,568
1,568
2
1,570
4 (2) 102 (2) (2) 102 102 4 1,572
4 (2) 102 104 1,672 1 1 3
4 (2) 103 105 1,675
1
59 62 (7) 12 20 (773)
60 62 (7) 12 20 (773) 67
60 62 (7) 12 20 (773) 67 (559) 5,130
1 73
59 59 (14,229) (4) 331
(686) 18,828
(626) 5,058
67 72
1,745
1,745
9
1,754
(49) 3 (221) 3 3 (221) (221) (49) 1,696
(49) 3 (221) (267) 1,478 (5) (5) 4
(49) 3 (226) (272) 1,482
27 61 (13) 2
27 61 (13) 2 1 (873) (29) (873) (29) (825) 5,711 (6) 70 (7)
27 61 (13) 2 1 (880) (29) (831) 5,781
27 73 86 (14,229) (1) 110
(852) 19,672
15
Group Cash Flow Statement
For the year ended 31 December (unaudited)
2011 £m 2010 £m
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations: Operating profit Depreciation and amortisation of tangible / intangible assets Fair value losses / (gains) Gain on sale of property, plant and equipment and intangible assets Other non-cash movements Increase in inventories Increase in trade and other receivables Increase in payables and provisions Share award expense Cash generated from operations: Interest paid Interest received Tax paid 2,395 157 1 (9) (131) (113) 69 61 2,430 (35) 22 (677) 2,130 144 (3) (32) 4 (50) (243) 203 62 2,215 (11) 19 (679)
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment Purchase of intangible assets Disposal of property, plant and equipment Disposal of intangible assets Acquisition of businesses, net of cash acquired Purchase of short term investments Maturity of long term investments
1,740
(164) (41) 5 12 (460) (2) 2
1,544
(170) (197) 12 30 (2,466) (7) 8
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares Proceeds from borrowings Repayments of borrowings Dividends paid to the owners of the parent Dividends paid to non controlling interests
(648)
(2,790)
27 249 (400) (873) (7)
80 2,966 (802) (773) -
Net cash (used in) / generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year Exchange (losses) / gains
(1,004)
88
568 (22)
1,471
225
334 9
Cash and cash equivalents at end of year
Cash and cash equivalents comprise Cash and cash equivalents Overdraft
634
639 (5)
568
588 (20)
634
568
RECONCILIATION OF NET CASH FLOW FROM OPERATIONS
Net cash generated from operating activities Net purchase of property, plant and equipment 1,740 (159) 1,544 (158)
Net cash flow from operations
Management uses net cash flow from operations as a performance measure.
1,581
1,386
16
Earnings per Ordinary Share
For the year ended 31 December (unaudited)
The reconciliation of the weighted average number of shares used in the calculations of the basic and diluted earnings per share is set out below:
Reported basis
Net income for the year £m 1,745 2011 Average number of shares 727,628,580 7,423,757 Earnings per share pence 239.8 Net income for the year £m 1,568 2010 Average number of shares 724,192,584 8,264,803 Earnings per share pence 216.5
Net income attributable to owners of the parent Dilution for Executive options outstanding and Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options outstanding On a diluted basis
780,818
839,710
1,745
735,833,155
237.1
1,568
733,297,097
213.8
Adjusted basis
Net income for the year £m 1,818 2011 Average number of shares 727,628,580 7,423,757 Earnings per share pence 249.9 Net income for the year £m 1,661 2010 Average number of shares 724,192,584 8,264,803 Earnings per share pence 229.4
Net income attributable to owners of the parent Dilution for Executive options outstanding and Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options outstanding On a diluted basis
780,818
839,710
1,818
735,833,155
247.1
1,661
733,297,097
226.5
The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the exceptional charge (net of tax) in the current year, provides the most meaningful measure of earnings per ordinary share.
17
doc_776463467.pdf
The report for the financial year 2010 - 2011 of reckitt benckiser.
8 February 2012
2011: FULL YEAR TARGETS EXCEEDED
Results at a glance
(unaudited)
Net Revenue - Like-for-like growth* Operating Profit - reported Operating Profit - adjusted ** Net Income – reported Net Income - adjusted ** EPS (diluted) – reported EPS (diluted) - adjusted **
Q4 £m 2,416 708 739 521 546 70.8p 74.2p
% change actual exchange
% change constant exchange
+6 +18 +5 +26 +8 +26 +8
+8 +3% +19 +6 +27 +9
FY £m 9,485 2,395 2,487 1,745 1,818 237.1p 247.1p
% change actual exchange
% change constant exchange
+12 +12 +11 +11 +9 +11 +9
+13 +4% +14 +13 +13 +11
* Like-for-like (“LFL”) growth excludes the impact of changes in exchange rates, major acquisitions (SSL & Paras) and disposals. ** Adjusted results (including % change figures) exclude exceptional items (see page 2).
FY highlights (at constant exchange unless stated): • • • • • • Total net revenue growth of +13% to £9,485m – ahead of +12% target. LFL growth (excluding full year SSL and Paras) +4% base business (+4% including RBP). SSL net revenue growth of +6% on a LFL basis to £843m. Adjusted net income +9% actual exchange, (+11% constant) – ahead of +10% target. Net working capital of minus £910m (2010: minus £925m). Net debt of £1,795m (2010: £2,011m), with strong cash flow offset by two dividends, acquisitions and restructuring. The Board recommends a +8% increase in the final dividend to 70p per share, bringing the total dividend for 2011 to 125p (+9% versus 2010).
Q4 highlights (at constant exchange unless stated): • • • Total net revenue growth of +8% to £2,416m. LFL growth (excluding SSL and Paras) +5% base business (+3% including RBP). SSL net revenue growth of +27% to £191m.
Commenting on the full year results, Rakesh Kapoor, Chief Executive Officer, said: “Reckitt Benckiser delivered another strong year, exceeding both our net revenue target (+12%) and adjusted net income target (+10%) in an increasingly tough environment. Likefor-like growth of 4% was underpinned by a robust performance in the base business, especially in Q4. “Growth was driven in particular by excellent growth in emerging markets, and growth in our Powerbrands – Dettol, Nurofen, Mucinex, Strepsils, Gaviscon and Harpic. SSL had a good first year with LFL growth of 6%, although full year growth is flattered by a soft Q4 last year. “At the end of 2011, the Suboxone film had captured a 48% volume share of the U.S. market. The in-market sales trend remains on a healthy growth track. “In 2012 we are targeting total Company net revenue growth, excluding RBP, of 200bps above our market growth rate. We expect the market to grow at 1-2%. 2012 will be a year of higher investment but, ex RBP, we are still targeting to maintain our operating margins. ”
Basis of Presentation and Exceptional Items The results include the business of SSL International plc (“SSL”) from 1 November 2010, and Paras Pharmaceuticals Limited (“Paras”) from 1 April 2011, their respective dates of acquisition. Operating profit is not separately disclosed for SSL or Paras as, in the view of the Directors, it is not practicable to identify their operating profit due to their integration into the commercial infrastructure of Reckitt Benckiser. Where appropriate, the term “like-for-like” (“LFL”) describes the performance of the business on a comparable basis, excluding the impact of major acquisitions, disposals, discontinued operations and foreign exchange. LFL analysis excludes the impact of SSL for the full year and Paras. Where appropriate, the term “base business” represents the Europe, North America & Australia and Developing Markets geographic areas, and excludes RBP. Where appropriate, the term “adjusted” excludes the impact of exceptional items. There was an exceptional pre-tax charge of £96m in 2011 mainly relating to integration and restructuring costs arising from the acquisition of SSL and Paras. This exceptional pre-tax charge is reflected in reported operating profit (£92m) and net interest (£4m, being financing costs associated with the acquisition). The tax effect of exceptional items in the period is £23m. The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010. There is no impact to the income statement for the year ended 31 December 2010.
Summary Operating Review Full year 2011 Total net revenue growth of +13% (constant) exceeded our full year target of 12%. LFL growth both including and excluding RBP was +4% (constant). SSL had a good first year with net revenue of £843m, representing 6% LFL growth (constant). Paras net revenue was £49m. The gross margin declined by –90bp to 59.7%, driven by higher input costs, increased investment in price and promotion to support volume shares, especially in Europe, and the impact of higher rebates related to Medicaid in RBP. This was partially offset by mix benefits, savings from cost optimisation programmes and a positive transaction impact from foreign exchange. Total marketing investment was higher, and media investment rose +9% (constant) to a level of 10.4% of net revenue. Within this, media spend on the base business (ex SSL) was maintained at 11.8% of net revenue. Cost synergies from the acquisition of SSL of £85m have exceeded the £50m target for the full year, due to savings being achieved earlier than expected. On an adjusted basis, operating profit was ahead +11% (+13% constant) to £2,487m; the adjusted operating margin declined by -20bp to 26.2% due to RBP. Base business adjusted operating margin increased by 60bp to 22.6%, with declines in Europe offset by margin expansion in NAA due to volume leverage and positive product mix, and DvM due to volume leverage, and a soft prior year comparative due to heavy marketing investment in Q4 2010. Net finance expense was £19m (2010: net finance income of £6m), of which £4m is an exceptional charge in respect of financing costs associated with the acquisition of SSL. The Group effective tax rate was 26%. Net income as reported was £1,745m, an increase of +11% (+13% constant) versus 2010; on an adjusted basis, net income rose +9% (+11% constant). Diluted earnings per share of 237.1 pence were +11% higher on a reported basis; on an adjusted basis, the growth was +9% to 247.1 pence. 2
Fourth quarter 2011 RB delivered a strong Q4 LFL net revenue growth in the base business of +5%. This was offset by RBP net revenue of –17% due to adjustments to previously estimated Medicaid rebates and film conversion. As a result total LFL net revenue was +3%. SSL contributed £191m net revenue in the quarter, representing a LFL growth rate of +27% versus a soft Q4 in 2010 when the business was first acquired. Paras net revenue was £14m. Total net revenue increased +8% (constant) to £2,416m, a slower growth rate than our YTD September run rate, as we now anniversary the acquisition of SSL. The gross margin declined by –100bp to 60.5%, due to increased Medicaid rebates in RBP. On the base business gross margin was maintained. Media investment rose +8% (constant) to a level of 10.0% of net revenue. Within this, while media spend on the base business (ex SSL) was maintained at 11.4%, we substantially increased media spend in both NAA to support the Mucinex Fast Max launch and in Europe to defend market shares. On an adjusted basis, operating profit was ahead +5% (+6% constant) to £739m: the adjusted operating margin declined by –30bp to 30.6% due to RBP. Excluding RBP, the adjusted operating margin increased by +140bp with increases in Europe behind positive product mix & SSL synergies, and DvM behind volume leverage and a soft prior year comparative due to heavy marketing investment in Q4 2010. Net finance expense was £4m (Q4 2010: £5m), of which £1m is an exceptional charge in respect of financing costs associated with the acquisition of SSL. The tax rate was 26%. Net income as reported was £521m, an increase of +26% (+27% constant) versus Q4 2010; on an adjusted basis, net income rose +8% (+9% constant). Diluted earnings per share of 70.8 pence were +26% higher on a reported basis; on an adjusted basis, the growth was +8% to 74.2 pence.
FY 2011 Business Review by Segment The Business Review below is given at constant exchange rates. Summary: % net revenue growth FY 2011 Europe NAA DvM Base Business RBP TOTAL Like-for-like -1% +3% +13% +4% +6% +4% Impact of SSL & Paras +16% +2% +11% +10% 0% +9% Exchange 0% -2% -3% -1% -3% -1% Reported +15% +3% +21% +13% +3% +12%
Analyses by operating segment of net revenue and adjusted operating profit, and of net revenue by product group are set out below. The Executive Committee of the Group assesses the performance of the operating segments based on net revenue and adjusted operating profit. This measurement basis excludes the effect of exceptional items.
3
Review by Operating Segment
Quarter ended 31 December 2010** % change £m exch. Rates actual const. Net revenue 949 690 584 193 2,416 895 657 493 232 2,277 +6 +5 +18 -17 +6 +8 +4 +25 -17 +8 Europe North America & Australia Developing Markets Pharmaceuticals 4,009 2,402 2,312 762 9,485 3,490 2,323 1,903 737 8,453 +15 +3 +21 +3 +12 +15 +5 +24 +6 +13 Year ended 31 December 2010** % change £m exch. rates actual const.
2011 £m
2011 £m
Operating profit – adjusted* 241 233 112 143 10 739 (31) 708 226 225 68 184 703 (101) 602 +7 +4 +65 -22 n/m +5 +18 +8 +3 +75 -22 n/m +6 +19 Europe North America & Australia Developing Markets Pharmaceuticals Corporate*** Subtotal before exceptional items Exceptional items 908 652 399 518 10 2,487 (92) 2,395 823 599 278 531 2,231 (101) 2,130 +10 +9 +44 -2 n/m +11 +12 +10 +10 +48 +1 n/m +13 +14
% 25.4 33.8 19.2 74.1 30.6
% 25.3 34.2 13.8 79.3 30.9
Operating margin – adjusted* Europe North America & Australia Developing Markets Pharmaceuticals
% 22.6 27.1 17.3 68.0 26.2
% 23.6 25.8 14.6 72.0 26.4
* Adjusted to exclude the impact of exceptional items. ** 2010 comparatives have been restated to include SSL within the relevant areas ***Items of income and expense which are not part of the results and financial position of the reported segments, and therefore reported to the Chief Operating Decision Maker outside of the individual segment financial information, are shown as reconciling items between the segmental information and the Group totals presented in the consolidated financial statements. For the twelve months ended 31 December 2011, these items include a profit on disposal of intangibles and an expense relating to legal matters. The net impact of these items is £10m (31 December 2010: £nil).
Europe
42% of net revenue
FY 2011 total net revenue increased +15% to £4,009m. LFL growth of -1% was due to a combination of slight volume decline on Fabric Care and negative net pricing in certain categories, reflecting higher levels of promotional spend to protect volume shares against aggressive competition. This continues to be the key factor behind the LFL result for net revenue in both Q4 and FY 2011. By category, within Healthcare, Nurofen, Strepsils and Gaviscon delivered a strong result, supported by such new initiatives as Nuromol and Strepsils Warm. Growth in Personal Care was driven by the continued roll-out of the Dettol No Touch Hand Soap System, which continues to deliver an encouraging result. Surface Care grew from Dettol and Harpic. The result in Home Care was boosted by such recent initiatives as the Air Wick 100% natural propellant spray and Air Wick Odour Detect as well as continued growth in candles. The largest factor in the decline in Fabric Care was continued weakness in Laundry Detergents and Fabric Softeners in Southern Europe. Heavy promotional and media investment continues behind Vanish to protect volume share against competition. 4
FY adjusted operating profit was ahead +10% at £908m; the adjusted operating margin decreased – 100bp, due to a combination of increased investment in price and promotion and higher input costs, partially offset by SSL synergies. In Q4, net revenue rose +8% to £949m, with LFL growth of +0%. Adjusted operating profit was £241m, with the margin +10bp higher at 25.4%, due mainly to a soft comparative for SSL in Q4 2010. North America & Australia 25% of net revenue
FY 2011 total net revenue increased +5% (+3% LFL) to £2,402m. Growth came from Health & Personal Care, Dishwashing and Food. The increase in Health & Personal Care was driven by Mucinex, which benefited from the Q3 roll out of Mucinex Fast Max. In Dishwashing, Finish Quantum and All-in-1 tablets and gel packs contributed an excellent performance. The increase in Food came from the consumer brands of French’s Yellow Mustard and Frank’s Red Hot Sauce, which was supported by additional marketing activity. FY adjusted operating profit increased +10% to £652m due to favourable product mix and fixed cost containment; the adjusted operating margin was +130bp higher at 27.1%. Q4 net revenue rose +4% (+4% LFL) to £690m. Adjusted operating profit was ahead by +3% to £233m, equating to a -40bp decline in the operating margin to 33.8%, impacted by the significant media investment behind the launch of Mucinex Fast Max. Developing Markets 24% of net revenue
FY 2011 total net revenue was ahead +24% (+13% LFL) to £2,312m. By category, Health & Personal Care continued to grow well with good growth coming from Dettol, Strepsils, Gaviscon and Veet. The increase in Fabric Care was driven by Vanish, while Harpic and Veja were the key drivers in Surface Care. In Home Care, both Air Care and Pest Control contributed to the performance. Adjusted operating profit increased by +48% to £399m, due to volume leverage, positive product mix due to strong growth in H&PC brands, and pricing. Marketing investment fell to more normal levels following heavy investment in Q4 2010. The impact of these factors resulted in a +270bp improvement in the adjusted operating margin to 17.3%. Q4 net revenue increased by +25% (+15% LFL) to £584m. Adjusted operating profit improved +75% to £112m, with a +540bp uplift in the margin to 19.2%, due to heavy marketing investment in Q4 2010, as noted previously. RBP 8% of net revenue
2011 total net revenue grew +6% to £762m. The patent-protected Suboxone film variant continued to grow, and by the end of December had captured a 48% volume share of the total market and has further strengthened its position as market leader, ahead of tablets. The NA business net revenue declined -2% to £587m of which the film generated £249m. In Europe and Rest of the World, the result was helped by the buyback of the sales and distribution rights in the majority of countries in July 2010. Adjusted operating profit for the total RBP business increased +1% to £518m. The operating margin was down –400bp to 68.0%, largely due to the lower margins of the film variant and the impact of higher rebates relating to Medicaid. In Q4, as earlier communicated, RBP results were affected by the 2011 and prior year impact of US Health reforms, as a result of which higher rebates to Medicaid were required. As a result net revenues are down by -17% to £193m with profit down by 22% to £143m, compared to an exceptionally strong quarter last year when the film was being rolled-out. The in-market sales trend remains on a healthy growth track. At this time the Group has no intelligence as to the exact timing of potential generic competition to the Suboxone Tablets in the USA. For further information surrounding exclusivity of Suboxone products, please refer to pages 4 & 5 of the 2010 Annual Report and Financial Statements. 5
Review by Category
Quarter ended 31 December 2010* % change £m exch. rates actual const. Net revenue by category 791 357 353 330 230 67 2,128 193 95 2,416 651 370 352 310 224 51 1,958 232 87 2,277 +22 -4 +0 +6 +3 +31 +9 -17 +9 +6 +24 -1 +3 +8 +5 +29 +11 -17 +9 +8 Health & Personal Care Fabric Care Surface Care Home Care Dishwashing Other Household and Health & Personal Care Pharmaceuticals Food 3,156 1,503 1,422 1,204 896 227 8,408 762 315 9,485 2,318 1,576 1,391 1,152 875 100 7,412 737 304 8,453 +36 -5 +2 +5 +2 +127 +13 +3 +4 +12 +37 -5 +3 +5 +3 +129 +14 +6 +7 +13 Year ended 31 December 2010* % change £m exch. rates actual const.
2011 £m
2011 £m
Operating profit – adjusted 550 143 36 10 739 (31) 708 488 184 31 703 (101) 602 +13 -22 +16 n/m +5 +18 +14 -22 +16 n/m +6 +19 Household and Health & Personal Care Pharmaceuticals Food Corporate Exceptional items 1,864 518 95 10 2,487 (92) 2,395 1,613 531 87 2,231 (101) 2,130 +16 -2 +9 n/m +11 +12 +16 +1 +13 n/m +13 +14
% 25.8 74.1 37.9 30.6
% 24.9 79.3 35.6 30.9
Operating margin – adjusted Household and Health & Personal Care Pharmaceuticals Food
% 22.2 68.0 30.2 26.2
% 21.8 72.0 28.6 26.4
* 2010 comparatives have been restated to include SSL within the relevant categories
Health & Personal Care. LFL net revenue increased +8%. Total net revenue increased +37% to £3,156m . In Healthcare, the result was driven by very good growth for Nurofen, Mucinex, Strepsils and Gaviscon, boosted by such new initiatives as Strepsils Warm and Mucinex Fast Max. In Personal Care, Dettol continued to grow well both in Developing Markets, and in Europe where the continued roll-out of the No Touch Hand Soap System has been very encouraging. In Q4, Health & Personal Care LFL net revenue rose +9% and total net revenue +24% to £791m with a weaker than normal ‘flu season offset by the initial success of Mucinex Fast Max. Fabric Care. Net revenue decreased by -5% to £1,503m, predominantly driven by continued weakness in Laundry Detergents and Fabric Softeners in Southern Europe. The Group continues to invest aggressively to protect the market position of Vanish against competitor launches and intensive promotional activity; as a result market share trends are improving. Q4 net revenue declined –1% to £357m, with Vanish returning to growth as we anniversary competitive launches in Europe and continue to see good growth in Developing Markets. Laundry Detergents continue to decline but at reduced rates. Surface Care. Net revenue grew +3% to £1,422m. There was good growth for Dettol/Lysol and Veja, with a strong result for Harpic being boosted by Power Plus and Max Power toilet liquids. Q4 net revenue increased +3% to £353m.
6
Home Care. Net revenue increased +5% to £1,204m, with growth in both Air Care and Pest Control. In Air Care, the result was supported by the launch of Air Wick 100% natural propellant spray and Air Wick Odour Detect, with continued good growth in candles. In Pest Control, a strong season and growth in automatic sprays contributed to the performance. Q4 growth was +8% to £330m. Dishwashing. Net revenue increased +3% to £896m, behind continued success for Finish Quantum and All-in-1. Q4 net revenue was +5% at £230m. Other. Net revenue was £227m (Q4: £67m), largely due to the inclusion of certain brands from the acquisition of SSL and Paras. Total Household and Health & Personal Care. Net revenue was ahead by +14% (+3% LFL) to £8,408m, adjusted operating profit increased 16% to £1,864m. In Q4, total Household and Health & Personal Care net revenue grew +11% to £2,128m, with LFL growth of +5%. Adjusted operating profit increased by 14% to £550m. Food. Net revenue grew +7% to £315m, with a good performance from the consumer brands of French’s Yellow Mustard and Frank’s Red Hot Sauce, boosted by additional marketing investment. Adjusted operating profit increased +13% to £95m. Q4 net revenue grew +9% and adjusted operating profit was £36m (+16%).
New Product Initiatives: H1 2012 To support its growth aspirations for 2012, RB today announces a number of new product initiatives for the first half of 2012. These include:• • Nurofen Express Soluble Powder. The first dissolvable ibuprofen and the fastest ever Nurofen, gets to work in 5 minutes. Durex. Rollout of Durex Performax Intense, a more intense experience for both men and women. Launch of Durex Perfect Glide, the longest lasting lubricant ever, based on silicon for a warm touch. Scholl. Launch of the 2 in 1 Scholl Express Corn Pen, fast and effective treatment without unsightly plasters. Dettol Daily Care personal care range, gentle care and protection for complete skin health. Dettol Re-Energise personal care range, deeply clean, healthy and re-energised. Lysol. Launch of Lysol No Touch Kitchen System – cleans dishes, sparkles surfaces and gently cleans hands. Cillit Bang. Launch of Cillit Bang All-in-1 Dish & Surface, a no-touch system for sparkling dishes and gleaming surfaces. Muse No Touch Foaming Hand Wash. A unique dispenser that delivers the right amount of foam. Launch in Japan where 60% of the market is now in Foam. Finish Quantum Ultra Shine – leaves nothing behind but the shine. New packaging for Finish Quantum and Finish All-in-1 in consumer preferred waterproof re-sealable pouches. Clearasil PerfectaWash, automatically delivers the perfect dose for visibly clearer skin without over drying. Veet Easy Wax Electrical roll-on – Home waxing, Salon results, it’s that easy.
• • • • • • • •
7
• • •
Vanish Power Shots, new gel caps from Vanish with the perfect dose for stain gone. Vanish Oxi Powerlift, new formulation of Powder to powerlift dried-in and greasy stains. Air Wick Fabric and Air spray, with fresh bubbles that rest on fabrics for up to 12 hours to be released by natural movement. Air Wick Colours of Nature, new range of fragrances based on vibrant colours and scents in Nature. Air Wick National Parks, with scents inspired by US National Parks (in partnership with National Parks Foundation).
Financial Review Basis of preparation. The unaudited financial information is prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board, and with the accounting policies set out in the Group’s 2010 Annual Report and Financial Statements, and as updated by the 2011 Interim Statement. Constant exchange. Movements in exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts the comparative to exclude such movements, to show the underlying growth of the Group. Net finance expense. Net finance expense was £19m (2010: net finance income of £6m), reflecting the acquisition of SSL and Paras. The 2011 net finance expense includes a £4m exceptional charge in respect of financial costs associated with the acquisition of SSL (2010: £3m). Tax. The underlying effective tax rate was 26% (2010: 26%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) of minus £910m was a £15m deterioration versus the 31 December 2010 level due mainly to an increase in inventories and a decrease in Tax liabilities. Cash flow. Cash generated from operating activities was £2,430m (2010: £2,215m) and net cash flow from operations was £1,581m (2010: £1,386m). Net interest paid was £13m (2010: net interest received of £8m) and tax payments were relatively flat at £677m (2010: £679m) due to the settlement of a number of outstanding matters in 2010. Capital expenditure was lower than the prior year at £205m (2010: £367m), due to the buy back of the remaining sales, marketing and distribution rights to Suboxone, Subutex and Temgesic in Europe and the Rest of the World and the investment in certain health and personal care brands from Combe Incorporated in 2010. Net debt at the end of the year was £1,795m (December 2010: net debt of £2,011m), a reduction of £216m. This reflected strong free cash flow generation, offset by the payment of two dividends totaling £873m and the acquisition of businesses (principally Paras) for £460m. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it. Restructuring charge. A total pre-tax exceptional charge of around £250m was announced in respect of the acquisition of SSL and further reconfiguration of the enlarged Group. In FY 2011, an exceptional pre-tax charge of £96m was incurred, of which £92m is reflected in reported operating profit and £4m is included in net interest. The remainder of the restructuring charge, of approximately £50m, is expected to be incurred in 2012. In FY 2010, there was an exceptional pre-tax charge of £104m, reflected in reported operating profit (£101m, of which £22m related to transaction fees) and net interest (£3m, being financing costs associated with the acquisition). Balance sheet. At the end of 2011, the Group had total equity of £5,781m (2010: £5,130m), an increase of +13%. Net debt was £1,795m (2010: net debt of £2,011m) and total capital employed in the business was £7,576m (2010: £7,141m). 8
This finances non-current assets of £11,188m (2010: £10,787m), of which £732m (2010: £735m) is tangible fixed assets, the remainder being goodwill, other intangible assets, deferred tax, available for sale financial assets and other receivables. The Group has net working capital of minus £910m (2010: minus £925m), current provisions of £60m (2010: £164m) and long-term liabilities other than borrowings of £2,642m (2010: £2,555m). The Group’s financial ratios remain strong. Return on shareholders’ funds (net income divided by total shareholders’ funds) was 30.3% on a reported basis and 31.4% on an adjusted basis (2010: 30.6% on a reported basis and 32.4% on an adjusted basis). Dividends. The Board of Directors recommends a final dividend of 70 pence (2010: 65 pence), an increase of +8%, to give a full year dividend of 125 pence (2010: 115 pence), an overall increase of +9%. The dividend, if approved by shareholders at the AGM on 3 May 2011, will be paid on 31 May to shareholders on the register at the record date of 24 February. The ex-dividend date is 22 February and the last date for election for the share alternative to the dividend is 10 May. The final dividend will be accrued once approved by shareholders. Contingent liabilities. The Group is involved in a number of investigations by government authorities and has made provisions for such investigations, where appropriate. Where it is too early to determine the likely outcome of these matters, the Directors have made no provision for such potential liabilities. During 2011, RB agreed to pay a €24m fine in the settlement of an investigation by the German Federal Cartel Office involving price fixing agreements on detergent and cleansing agents between 2005 and 2008. The Group has received a civil claim for damages from the Department of Health and others in the United Kingdom, regarding alleged anti-competitive activity involving the Gaviscon brand. The claim is under review and although it is at an early stage, the Directors do not believe that any potential impact would be material to the Group financial statements. The Group from time to time is involved in discussions in relation to ongoing tax matters in a number of jurisdictions around the world. Where appropriate, the Directors make provisions based on their assessment of each case. 2012 Targets 2012 will be a year of transition and investment for RB, the details of which will be explained in the strategic overview press release, which will be released later this morning. We continue to be committed to market outperformance and therefore target the following: • • Net revenue growth (excluding RBP) of +200bps versus our market growth. We expect market growth in 2012 to be 1-2%. Operating margins (excluding RBP) to be maintained.
The likelihood of generic competition to Suboxone makes setting total Company (inclusive of RBP) targets impossible at this time. RB will aim to update the market on total Company targets later in the year.
9
For further information, please contact: Reckitt Benckiser Richard Joyce Director, Investor Relations Tom Corran Consultant, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communications and Affairs Brunswick (Financial PR) David Litterick / Max McGahan +44 (0)20 7404 5959 +44 (0)1753 217800
The preliminary results for the year ended 31 December 2011 and the results for the year ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board. The unaudited financial statements for 2011 are prepared using accounting policies in accordance with those set out in the Group’s 2010 Annual Report and Financial Statements, and as updated by the 2011 Interim Statement. The financial information set out in the announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 11 March 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2011 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement, and will be delivered to the Registrar of Companies following the Group’s Annual General Meeting. Cautionary note concerning forward-looking statements This document contains statements with respect to the financial condition, results of operations and business of Reckitt Benckiser and certain of the plans and objectives of the Group with respect to these items. These forward-looking statements are made pursuant to the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing to the Company, anticipated cost savings or synergies and the completion of strategic transactions are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors discussed in this report, that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside Reckitt Benckiser’s control. Past performance cannot be relied upon as a guide to future performance.
10
The Group at a Glance (Unaudited)
Quarter ended 31 December 2011 £m 2,416 +3% +8% +6% 60.5% 777 32.2% 708 739 29.3% 30.6% 704 521 546 71.5 74.2 2010 £m 2,277 +5% +9% +10% 61.5% 754 33.1% 602 703 26.4% 30.9% 597 414 507 57.0p 69.0p Net revenue – total Net revenue growth – like-for-like Net revenue growth – constant Net revenue growth – total Gross margin EBITDA – adjusted * EBITDA margin – adjusted * EBIT EBIT – adjusted * EBIT margin EBIT margin – adjusted * Profit before tax Net income Net income - adjusted * EPS, basic, as reported EPS, adjusted and diluted * Year ended 31 December 2011 £m 9,485 +4% +13% +12% 59.7% 2,642 27.9% 2,395 2,487 25.3% 26.2% 2,376 1,745 1,818 239.8 247.1 2010 £m 8,453 +6% +7% +9% 60.6% 2,375 28.1% 2,130 2,231 25.2% 26.4% 2,136 1,568 1,661 216.5p 226.5p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data
31 December 2011 £m (910) (1,795)
31 December 2010** £m (925) (2,011)
Net working capital * Net debt
* Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. ** The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010.
Shares in issue Millions 725.9 2.7 728.6
31 December 2010 Issued 31 December 2011
11
Group Income Statement Analysis (Unaudited)
Quarter ended 31 December 2010 % change 2011 £m £m 2,277 +6 2,416 (954) 1,462 (754) 708 739 (31) 708 6 (10) (4) 704 (180) 524 (877) 1,400 (798) 602 703 (101) 602 6 (11) (5) 597 (181) 416 +26 +18 +18 +18 +5 +4 Year ended 31 December 2010 % change 2011 £m £m 8,453 +12 9,485 (3,823) 5,662 (3,267) 2,395 2,487 (92) 2,395 23 (42) (19) 2,376 (622) 1,754 (3,332) 5,121 (2,991) 2,130 2,231 (101) 2,130 21 (15) 6 2,136 (566) 1,570 +12 +11 +12 +12 +11 +11
Net revenue Cost of sales Gross profit Net operating expenses Operating profit Operating profit before exceptional items Exceptional items Operating profit Finance income Finance expense* Net finance (expense) / income Profit on ordinary activities before taxation Tax on profit on ordinary activities Net income for the period
3 521 524
2 414 416
+26 +26
Attributable to non-controlling interests Attributable to owners of the parent Net income for the period
9 1,745 1,754
2 1,568 1,570
+11 +12
71.5p 70.8p
57.0p 56.3p
Earnings per ordinary share: On net income for the period, basic On net income for the period, diluted Earnings per ordinary share – adjusted**: On net income for the period, basic On net income for the period, diluted
239.8p 237.1p
216.5p 213.8p
75.0 74.2
69.9p 69.0p
249.9p 247.1p
229.4p 226.5p
* FY 2011 includes an exceptional charge of £4m (2010: £3m) in respect of financial costs associated with the acquisition of SSL. Q4 2011 includes an exceptional charge of £1m (2010: £3m). ** Adjusted to exclude the impact of exceptional items.
728.6 735.9
725.7 734.9
Average common shares outstanding: (millions) Basic Diluted
727.6 735.8
724.2 733.3
12
Group Statement of Comprehensive Income
For the year ended 31 December (unaudited)
2011 £m Net income for the year Other comprehensive income: Net exchange adjustments on foreign currency translation, net of tax Actuarial (losses) / gains, net of tax Gains / (losses) taken to reserves on cash flow hedges, net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year (226) (49) 3 (272) 1,482 103 4 (2) 105 1,675 1,754 2010 £m 1,570
Attributable to non-controlling interests Attributable to owners of the parent
4 1,478
3 1,672
13
Group Balance Sheet
For the year ended 31 December (unaudited)
2011 £m ASSETS Non-current assets: Goodwill and other intangible assets Property, plant and equipment Deferred tax assets Available for sale financial assets Retirement benefit surplus Other receivables Current assets: Inventories Trade and other receivables Derivative financial instruments Tax receivables Available for sale financial assets Cash and cash equivalents Total assets LIABILITIES Current liabilities: Borrowings Provisions for liabilities and charges Trade and other payables Derivative financial instruments Tax liabilities Non-current liabilities: Borrowings Deferred tax liabilities Retirement benefit obligations Provisions for liabilities and charges Tax liabilities Other non-current liabilities Total liabilities Net assets EQUITY Capital and reserves: Share capital Share premium Merger reserve Hedging reserve Foreign currency translation reserve Retained earnings Non-controlling interest Total equity 2010 £m Restated*
10,258 732 150 10 32 6 11,188 758 1,442 67 21 11 639 2,938 14,126
9,865 735 146 12 26 3 10,787 643 1,342 37 14 11 588 2,635 13,422
(2,505) (60) (2,901) (7) (227) (5,700) (3) (1,772) (502) (118) (211) (39) (2,645) (8,345) 5,781
(2,641) (164) (2,624) (10) (295) (5,734) (3) (1,714) (479) (145) (209) (8) (2,558) (8,292) 5,130
73 86 (14,229) (1) 110 19,672 5,711 70 5,781
73 59 (14,229) (4) 331 18,828 5,058 72 5,130
* The fair value of the identifiable assets and liabilities at the date of acquisition of SSL were provisionally estimated and disclosed in the 2010 annual report and financial statements. Final fair values at acquisition date are now confirmed and have been recorded as a prior year restatement of the balance sheet at 31 December 2010. There is no impact to the income statement for the year ended 31 December 2010.
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Group Statement of Changes in Equity
For the year ended 31 December (unaudited)
Foreign currency translation reserve Total attributable to equity shareholders
Share capital
Share premium
Merger reserve
Hedging reserve
Retained earnings
Noncontrolling interests
Total
Balance at 1 January 2010 Comprehensive income Net income for the year Other comprehensive income Actuarial gains, net of tax Losses on cash flow hedges, net of tax Net exchange adjustments on foreign currency translation, net of tax Total other comprehensive income Total comprehensive income Transactions with owners Proceeds from share issue Share based payments Deferred tax on share awards Current tax on share awards Treasury shares re-issued Dividends Non-controlling interest arising on business combination Total transactions with owners Balance at 31 December 2010 Comprehensive income Net income for the year Other comprehensive income Actuarial losses, net of tax Gains on cash flow hedges, net of tax Net exchange adjustments on foreign currency translation, net of tax Total other comprehensive income Total comprehensive income Transactions with owners Proceeds from share issue Share based payments Deferred tax on share awards Current tax on share awards Non-controlling interest arising on business combination Dividends Put option issued to non controlling interest Total transactions with owners Balance at 31 December 2011
72
(14,229)
(2)
229
17,942
4,012
2
4,014
1,568
1,568
2
1,570
4 (2) 102 (2) (2) 102 102 4 1,572
4 (2) 102 104 1,672 1 1 3
4 (2) 103 105 1,675
1
59 62 (7) 12 20 (773)
60 62 (7) 12 20 (773) 67
60 62 (7) 12 20 (773) 67 (559) 5,130
1 73
59 59 (14,229) (4) 331
(686) 18,828
(626) 5,058
67 72
1,745
1,745
9
1,754
(49) 3 (221) 3 3 (221) (221) (49) 1,696
(49) 3 (221) (267) 1,478 (5) (5) 4
(49) 3 (226) (272) 1,482
27 61 (13) 2
27 61 (13) 2 1 (873) (29) (873) (29) (825) 5,711 (6) 70 (7)
27 61 (13) 2 1 (880) (29) (831) 5,781
27 73 86 (14,229) (1) 110
(852) 19,672
15
Group Cash Flow Statement
For the year ended 31 December (unaudited)
2011 £m 2010 £m
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations: Operating profit Depreciation and amortisation of tangible / intangible assets Fair value losses / (gains) Gain on sale of property, plant and equipment and intangible assets Other non-cash movements Increase in inventories Increase in trade and other receivables Increase in payables and provisions Share award expense Cash generated from operations: Interest paid Interest received Tax paid 2,395 157 1 (9) (131) (113) 69 61 2,430 (35) 22 (677) 2,130 144 (3) (32) 4 (50) (243) 203 62 2,215 (11) 19 (679)
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment Purchase of intangible assets Disposal of property, plant and equipment Disposal of intangible assets Acquisition of businesses, net of cash acquired Purchase of short term investments Maturity of long term investments
1,740
(164) (41) 5 12 (460) (2) 2
1,544
(170) (197) 12 30 (2,466) (7) 8
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares Proceeds from borrowings Repayments of borrowings Dividends paid to the owners of the parent Dividends paid to non controlling interests
(648)
(2,790)
27 249 (400) (873) (7)
80 2,966 (802) (773) -
Net cash (used in) / generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year Exchange (losses) / gains
(1,004)
88
568 (22)
1,471
225
334 9
Cash and cash equivalents at end of year
Cash and cash equivalents comprise Cash and cash equivalents Overdraft
634
639 (5)
568
588 (20)
634
568
RECONCILIATION OF NET CASH FLOW FROM OPERATIONS
Net cash generated from operating activities Net purchase of property, plant and equipment 1,740 (159) 1,544 (158)
Net cash flow from operations
Management uses net cash flow from operations as a performance measure.
1,581
1,386
16
Earnings per Ordinary Share
For the year ended 31 December (unaudited)
The reconciliation of the weighted average number of shares used in the calculations of the basic and diluted earnings per share is set out below:
Reported basis
Net income for the year £m 1,745 2011 Average number of shares 727,628,580 7,423,757 Earnings per share pence 239.8 Net income for the year £m 1,568 2010 Average number of shares 724,192,584 8,264,803 Earnings per share pence 216.5
Net income attributable to owners of the parent Dilution for Executive options outstanding and Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options outstanding On a diluted basis
780,818
839,710
1,745
735,833,155
237.1
1,568
733,297,097
213.8
Adjusted basis
Net income for the year £m 1,818 2011 Average number of shares 727,628,580 7,423,757 Earnings per share pence 249.9 Net income for the year £m 1,661 2010 Average number of shares 724,192,584 8,264,803 Earnings per share pence 229.4
Net income attributable to owners of the parent Dilution for Executive options outstanding and Executive Restricted Share Plan Dilution for Employee Sharesave Scheme options outstanding On a diluted basis
780,818
839,710
1,818
735,833,155
247.1
1,661
733,297,097
226.5
The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the exceptional charge (net of tax) in the current year, provides the most meaningful measure of earnings per ordinary share.
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