1st Quarter Results
7th May 2002
CONTINUED STRONG GROWTH IN Q1
Increases Confidence in Full Year Targets
Results at a Glance Q1 % change
Net Revenues £855m +5%
Operating Profit £108m +10%
Net Income £70m +30%*
* Q1 2001 net income restated for FRS 19
* Net revenues grew by 5% (7% at constant exchange) to £855m. For continuing
operations (excluding acquisitions and disposals) net revenue growth was 3%
(5% at constant exchange).
* Operating profit increased by 10% (13%) to £108m. Operating margin rose by
60 basis points (bps) to 12.6% behind a gross margin increase of 160 bps to
50.8%.
* Net income increased 30% (34%) to £70m. Excluding restatement for FRS 19,
net income grew 21% (24%).
* Strong cash generation saw net borrowings reduced by £82m to £385m.
* These results were driven by the success of recent initiatives such as:
Calgonit & Finish 3-in-1 tabs and Electrasol 2-in-1 tabs in Automatic
Dishwashing and Airwick Click Spray and Crystal Air Air Care.
Commenting on these results, Bart Becht, Chief Executive Officer, said
'Reckitt Benckiser made a strong start to 2002. While emerging markets
continued to show little or no momentum, this was more than offset by very good
growth in Western Europe and North America due to our focus on new product
initiatives for these markets. This has been leveraged into faster profit and
cash flow growth through the success of our cost optimization programs.
'This good performance gives added confidence in our targets for the full year
of 4%-6% growth in net revenues and 12%-15% growth in net income, both at
constant exchange, to the extent that for net income we are now looking towards
the top end of this range. '
Basis of Comparatives
For clarity in evaluating the underlying performance of the business, the
following terminology is used.
* Continuing Operations. Excludes net revenues and operating profit relating
to businesses acquired or sold during the course of 2001.
* Normalized. This excludes non-operating items. There were none in Q1 2002
(2001 none).
* Constant Exchange. Movements of exchange rates relative to sterling affect
actual results as reported. The constant exchange rate basis - shown in
brackets throughout this release - adjusts comparisons to exclude such
movements and show the underlying growth.
The detailed financial schedules attached to the release contain full details
of the results as reported and as adjusted for these factors.
Detailed Operating Review
Q1 Net revenues grew 5% (7% constant) to £855m (£817m in 2001). Net revenues
from continuing operations grew by 3% (5% constant) to £833m.
Operating profit grew 10% (13%) to £108m. Operating profit on continuing
operations grew 8% (11%) to £105m. Gross margin increased by 160 bps to 50.8%
(49.2%) due to favorable purchase prices of raw and packaging materials, to
higher margin new products, and to benefits from ongoing Squeeze 2-50 and
X-trim cost saving programs. Marketing investment was increased in total,
although media investment was at similar levels to Q1 2001. Operating margins
increased by 60 basis points to 12.6% and on a continuing operations basis by
60 bps to 12.6%.
Net income was £70m, an increase of 30% on the restated net income for Q1 2001
of £54m. Excluding the restatement for FRS 19, net income grew by 21% (24%).
Category Review at constant exchange rates.
Fabric Care. Net revenues grew by 7% to £216m. Fabric Treatment contributed
strongly due to high growth of in-wash additives, the roll out of the new
Vanish Powershot carpet cleaner in North America and Western Europe and the
addition of the new business in Korea. Fine Fabric grew, helped by the roll-out
of Woolite Black in North America and Western Europe. Laundry Detergent net
revenues were affected by the refocus of strategy in China.
Surface Care. Net revenues grew by 1% to £203m due to Surface Cleaning wipes
and Lavatory Care offset by market softness for multi-purpose cleaners in Latin
America. Surface Cleaning Wipes across the various sub-categories again
provided the major momentum to growth particularly in floor, disinfecting, and
all-purpose cleaning. Lavatory Care has grown both as Lysol in North America,
behind the success of Cling In Bowl Gel, and as Harpic in Western Europe,
behind a number of recent initiatives such as Powerfoam, tabs and wipes.
Dishwashing. Net revenues grew 9% to £119m. Calgonit automatic dishwashing grew
strongly in Europe behind the continuing success of 3-in-1 tabs. Sales in North
America were even more encouraging with the increasing success of Electrasol
behind 2-in-1 tabs, leading to significant share gains. Automatic Dishwashing
net revenues are also growing strongly in Eastern Europe and Australia New
Zealand.
Home Care. Net revenues grew by 27% to £136m. Air Care again grew strongly in
North America and Western Europe. In North America, the drivers to growth were
both Wizard Electrical Oils and the recently introduced Crystal Air, with
market shares continuing to improve. In Western Europe, Crystal Air, Click
Spray and Crystal Auto air freshener for cars all contributed to strong growth.
Pest Control had a solid performance due to good development in Indonesia,
Latin America and North America.
Health & Personal Care. Net revenues grew 10% to £100m. Veet Depilatories grew
strongly behind the launch of Veet Mousse in Western Europe. The category is
being launched in USA, Colombia and Venezuela. Dettol antiseptic grew strongly
in Africa Middle East, behind the launch of wipes and the roll-out of
moisturizing soap. UK Health Care grew strongly.
Core Household. Net revenues grew 9% to £774m. Non core, other household net
revenues declined by 4% to £43m. This brings total net revenues in Household to
£817m, an increase of 8%.
Food. Net revenues recovered with net revenue growth of 3% to £38m mainly
behind strong growth for French's Mustard which strengthened its market
leadership in the yellow mustard category.
Geographical Analysis at constant exchange for continuing operations.
Western Europe 42% of net revenues
Net revenues grew 6% to £361m. The major contributors were Automatic
Dishwashing, Air Care and Depilatories. Calgonit & Finish 3-in-1 continued its
success, particularly in the UK, France and Spain. Airwick grew behind recent
initiatives, notably Crystal Air and Click Spray, and the first benefits from
the roll-out of Crystal Auto. Veet Depilatories grew behind the introduction of
Mousse across the region. Woolite Fine Fabric and Vanish Fabric Treatment also
increased net revenues. Operating margins grew 70 bps to 19.9% behind very good
gross margin expansion offset by higher marketing investment. Operating profit
increased by 11% to £72m.
North America 31% of net revenues
Net revenues grew 11% to £268m. The portfolio performed strongly across the
board, but particular success came in Air Care and Automatic Dishwashing. Air
Care saw further success for Electrical Oils and the recently launched Crystal
Air. Electrasol grew net revenues and share in Q1 behind Electrasol 2-in-1
tabs. Lysol Disinfecting Spray market share exceeded 80% in a soft category.
Food net revenues grew behind success for French's Mustard which has increased
its market leadership in its category. Operating margins improved by 120 bps to
9.7% due to strong gross margin improvement. Operating profit increased 24% to
£26m.
Latin America 6% of net revenues
Net revenues declined 6% to £47m due to local economic and political
difficulties in Southern Cone markets, Colombia and Venezuela, and to the
impact of devaluation on the market in Brazil and Argentina. Despite this,
operating losses were reduced to £2m (£4m loss), benefiting from improving
gross margins and tight control over SG&A (net operating) expenses.
Asia Pacific 11% of net revenues
Net revenues grew 9% to £94m. In Australia New Zealand growth came from the
success of Automatic Dishwashing behind the launch of Finish 3-in-1 and share
gains, offset by a weak pest season. Korea and Indonesia both performed
strongly, delivering ahead of their acquisition plans. Business in China is
behind the equivalent period last year but ahead of H2 2001 performance
following the refocus of strategy on value-adding premium categories,.
Operating profits for the region increased 33% to £4m with similar operating
margins at 4.3%.
Rest of World 10% of net revenues
Net revenues grew 16% to £85m. Eastern Europe increased behind the success of
Calgonit Automatic Dishwashing, Calgon Water Softener, Vanish Fabric Treatment
and Veet Depilatories. Africa Middle East grew due to success for Dettol
Antiseptic, behind the launch of moisturizing soap and wipes, Mortein Pest
Control, Airwick Air Care and Harpic Lavatory Care. Operating margins expanded
100 basis points to 8.2% due to improvements in gross margin. Operating profit
increased 40% to £7m.
New Initiatives 2002.
Following the substantial program of new product initiatives in Q1, a smaller
number of new initiatives are being announced for Q2. Calgonit Protector, a
dishwasher additive to protect glasses, from corrosion is being launched in
Western Europe. In North America, Jet Dry automatic machine cleaner is
launched. Woolite Gel Caps for fine fabrics, offering single dose convenience
for liquid users, will shortly be launched in Western Europe. Spray'n Wash
fabric treatment for white laundry incorporating bleach has been launched in
North America. Veet Depilatories has launched a special roll-on wax for
underarm depilation across Western Europe. Dettol disinfecting personal care
wipes have been launched in Africa Middle East.
Roll-outs include heavy-duty Surface Cleaning wipes, with extra abrasion to
tackle stubborn marks, into Western Europe, Calgonit 3-in1 Total tabs into
Eastern Europe, and Crystal Air for Cars in Eastern Europe.
Financial Review
Non-operating items. There were no non-operating items in Q1 2002 (Q1 2001
none).
Net interest reduced due to lower net borrowings, due to the strength of cash
inflow in 2001 and in Q1 2002. Net borrowings at the end of the quarter were £
385m, a reduction of £82m on the 2001 year-end level of £467m.
Tax on profit for the quarter was £26m. The tax rate for the period is 27%
(2001 as reported: 29.6%; as restated under FRS 19: 34.1%). The full year tax
rate for 2002 is expected to be lower than the restated rate for 2001 as the
Group's long-term tax planning activities take effect.
Net working capital (stock, short-term debtors and short-term creditors other
than borrowings) reduced by £7m to £313m negative in the quarter. Following the
adoption of FRS 19 and the resulting impact on the Group's deferred tax assets,
the definition of net working capital has been revised. Debtors due after more
than one year are now excluded from net working capital in order to provide a
more meaningful measure of the evolution of working capital of the business. On
this basis, net working capital was £32m negative at 31 December 1999 and was £
306m negative at 31 December 2001, ahead of the Group's targeted reduction of £
250m by December 2002.
Half Year Results.
The Company will release results for the six months to 30 June 2002 on
Wednesday 28 August 2002.
For further information
Tom Corran telephone +44 (0) 1753 217 800
SVP Investor Relations & Corporate Communications
Lydia Wilhelm telephone +44 (0) 1753 217 800
Investor Relations Manager
Tim Spratt telephone +44 (0) 207 831 3113
Financial Dynamics
The Group at a Glance (unaudited)
Quarter Ended March 31
2002 2001#
£m £m
From total ordinary activities
Net revenues 855 817
Net revenues growth 5% 9%
Gross margin 50.8% 49.2%
EBITDA normalized* 128 116
EBITDA margin normalized* 15.0% 14.2%
EBIT normalized* 108 98
EBIT margin normalized* 12.6% 12.0%
Profit before tax normalized* 96 82
PBT margin normalized* 11.2% 10.0%
Net Income normalized* 70 54
Net Income margin normalized* 8.2% 6.6%
EPS normalized* 10.0p 7.7p
EPS normalized, diluted* 9.7p 7.6p
From continuing operations (excluding
acquisitions)
Net revenues 833 810
Net revenues growth 3% 12%
EBITDA normalized* 124 115
EBITDA margin normalized* 14.9% 14.2%
EBIT normalized* 105 97
EBIT margin normalized* 12.6% 12.0%
* Normalized excludes non-operating items.
# Restated following the adoption of Financial Reporting Standard 19 '
Accounting for Deferred Tax'
Selected Financial Information (unaudited)
Group Balance Sheet Data
March 31, December 31,
2002 2001
£m £m
Net working capital** (313) (306)
Net borrowings (385) (467)
** Defined as stock, short term debtors and short term creditors excluding
borrowings.
Group profit and loss account (unaudited)
Quarter Ended March 31
2002 2001# % change
£m £m
Net revenues from continuing operations 855 810 6%
Discontinued operations - 7
Total net revenues 855 817 5%
Cost of sales (421) (415) 1%
Gross profit 434 402 8%
Net operating expenses (326) (304) 7%
Operating profit from continuing operations 108 97 11%
Discontinued operations - 1
Total operating profit 108 98 10%
Non-operating items:
Profit on disposal of businesses - -
Profit on ordinary activities before 108 98 10%
interest
Net interest expense (12) (16) (25%)
Profit on ordinary activities before 96 82 17%
taxation
Tax on profit on ordinary activities (26) (28) (7%)
Profit on ordinary activities after taxation 70 54 30%
Attributable to equity minority interests 0 0
Profit for the period 70 54 30%
Earnings per ordinary share:
On profit for the period 10.0p 7.7p
On normalized profit for the period 10.0p 7.7p
On profit for the period, diluted 9.7p 7.6p
On normalized profit, diluted 9.7p 7.6p
Average common shares outstanding:
Basic 703.1 698.7
Diluted 755.2 748.3
# Restated following the adoption of Financial Reporting Standard 19 '
Accounting for Deferred Tax'
Segmental Analysis (unaudited)
Analyses by geographical area and product segment of net revenues and operating
profit are set out below. The figures for each geographic area show the net
revenues and profit made by companies located in that area.
Quarter Ended March 31
2002 2001 % change
£m £m exch. rates
actual const.
Net revenues - by geographical area
Western Europe 361 349 3% 6%
North America 268 235 14% 11%
Latin America 47 56 (16%) (6%)
Asia Pacific 94 87 8% 9%
Rest of World 85 83 2% 16%
855 810 6% 8%
Discontinued operations - 7
855 817 5% 7%
Operating profit - by geographical area
Western Europe 72 67 7% 11%
North America 26 20 30% 24%
Latin America (2) (4) (50%) (33%)
Asia Pacific 4 4 0% 33%
Rest of World 7 6 17% 40%
Corporate 1 4 (75%) (75%)
108 97 11% 14%
Discontinued operations - 1
108 98 10% 13%
Operating margin - by geographical area % %
Western Europe 19.9 19.2
North America 9.7 8.5
Latin America (4.3) (7.1)
Asia Pacific 4.3 4.6
Rest of World 8.2 7.2
Corporate - -
12.6 12.0
Discontinued operations - 14.3
12.6 12.0
Segmental Analysis (continued)
Quarter Ended March 31
2002 2001 % change
£m £m exch. Rates
Actual const.
Net revenues - by product segment
Household and Health & Personal Care 817 774 6% 8%
Food 38 36 6% 3%
855 810 6% 8%
Discontinued operations - 7
855 817 5% 7%
Operating profit - by product segment
Household and Health & Personal Care 106 95 12% 14%
Food 1 (2) - -
Corporate 1 4 (75%) (75%)
108 97 11% 14%
Discontinued operations - 1
108 98 10% 13%
Operating margin - by product segment % %
Household and Health & Personal Care 13.0 12.3
Food 2.6 (5.6)
Corporate - -
12.6 12.0
Discontinued operations - 14.3
12.6 12.0
Net revenues - Household and Health &
Personal Care
Fabric Care 216 209 3% 7%
Surface Care 203 205 (1%) 1%
Dishwashing 119 112 6% 9%
Home Care 136 109 25% 27%
Health & Personal Care (Note 1) 100 94 6% 10%
Core Business 774 729 6% 9%
Other Household 43 45 (4%) (4%)
817 774 6% 8%
Note 1. 2001 comparatives for Health & Personal Care include an adjustment in
respect of the discontinued business of Reckitt Piramal (India).
Financial Review - FRS 19
Under the Group's accounting policies as disclosed in the 2001 Annual Report &
Accounts, the Group previously recognized deferred tax on timing differences
that were expected to reverse in the foreseeable future. With effect from 1
January 2002, the Group has adopted Financial Reporting Standard 19 'Accounting
for Deferred Tax' and accordingly now recognizes deferred tax on timing
differences that have originated but not reversed by the balance sheet date.
The prior year comparatives have been restated to comply with the above change
in accounting policy. The effect of this restatement is to reduce profit after
tax for the first quarter of 2001 by £4m from £58m to £54m. Earnings per share
have been restated from 8.2p to 7.7p and on a diluted basis from 8.1p to 7.6p.
The full year effect on 2001 is to reduce normalized net income by £24m from £
340m to £316m. On a quarter by quarter view, the restatements for 2001 are:
Q1 Q2 Q3 Q4
Normalized net income (£m)
As reported 58 85 74 123
Restated 54 79 67 116
Earnings per Share (normalized,
diluted)
As reported 8.1p 11.9p 10.3p 16.8p
Restated 7.6p 11.1p 9.4p 15.9p
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