1st Quarter Results

Reckitt Benckiser A World Leader in Household, Health and Personal Care 20 April 2011 STRONG START TO 2011 FULL YEAR TARGETS CONFIRMED Results at a glance Q1 % change % change £m actual exchange constant exchange Net revenue 2,283 +14 +15 - Like-for-like growth +5% * Operating profit - 492 +7 +9 reported Operating profit - 530 +15 +17 adjusted ** Net income - reported 355 +2 +4 Net income - adjusted * 384 +10 +12 * EPS (diluted) - 48.3p +2 reported EPS (diluted) - 52.2p +10 adjusted ** * Like-for-like ("LFL") growth excludes the impact of changes in exchange rates, acquisitions and disposals. ** Adjusted results (including % change figures) exclude exceptional items (see page 2). There was an exceptional pre-tax charge of £39m in Q1 2011 relating to the acquisition of SSL International plc, of which £38m is included in reported operating profit and £1m is an exceptional finance cost. There were no exceptional items in Q1 2010. Highlights: * Total net revenue growth of +15% (constant exchange) to £2,283m. LFL growth +5% (+4% ex-RBP). * Gross margin unchanged versus Q1 2010, at 59.5%: adjusted operating margin +20bp to 23.2%. * SSL integration on track: cost synergies of £11m delivered in the quarter. * Adjusted net income +10% (actual exchange, +12% constant): adjusted diluted EPS of 52.2p (+10%). * Net working capital of minus £1,000m, a £100m improvement versus year-end December 2010. * Net debt of £1,647m, £364m lower than the 31 December 2010 level. Commenting on these results, Bart Becht, Chief Executive Officer, said: "Reckitt Benckiser got off to a strong start in the first quarter of 2011. Like-for-like net revenue growth of +5% was driven by the success of innovations, such as the Dettol No Touch, and continued excellent performance in Developing Markets. RBP is making very good progress with moving more of its business into the patent-protected Suboxone sublingual film. By the end of March, the film had captured a 37% market volume share and represented 35% of the total RBP U.S. net revenue in Q1. The integration of the SSL business is well on track to deliver the targeted cost synergies and net revenue growth in 2011. With net revenue growth of +15% and adjusted net income growth of +12% for the total Group in the quarter (both at constant exchange), these results position us well to achieve our FY 2011 financial targets of +12% net revenue growth and +10% adjusted net income growth (both at constant exchange), and with that to deliver another year of above industry-average growth." Basis of Presentation and Exceptional Items The results include the business of SSL International plc ("SSL") from 1 November 2010, the date of acquisition. Operating profit is not separately disclosed for SSL as, in the view of the Directors, it is not practicable to identify its operating profit due to its integration into the commercial infrastructure of Reckitt Benckiser. Where appropriate, the term "like-for-like" describes the performance of the business on a comparable basis, excluding the impact of acquisitions, disposals, discontinued operations and foreign exchange. Where appropriate, the term "base business" represents the Europe, North America & Australia and Developing Markets geographic areas, and excludes RBP and SSL. Where appropriate, the term "adjusted" excludes the impact of exceptional items. There was an exceptional pre-tax charge of £39m in Q1 2011 mainly relating to integration and transaction costs arising from the acquisition of SSL. This exceptional pre-tax charge is reflected in reported operating profit (£38m, of which £1m relates to transaction fees) and net interest (£1m, being financing costs associated with the acquisition). There were no exceptional items in Q1 2010. Detailed Operating Review: Total Group Q1 net revenue increased +14% (+15% at constant exchange) to £2,283m, with LFL growth of +5%. SSL contributed £203m net revenue in the quarter, representing a LFL growth rate of -3% versus the comparable quarter in 2010 owing to the impact of aligning SSL's trading practices with those of RB. The gross margin was unchanged versus Q1 2010 at 59.5%, with mix benefits and a positive transaction impact from foreign exchange being offset by higher input costs. Total marketing was higher, and pure media spend rose +6% (+7% constant) to a level of 10.9% of net revenue. Within this, pure media spend on the base business was unchanged at 12.6% of net revenue. Operating profit as reported was £492m, +7% versus Q1 2010 (+9% constant), reflecting the impact of an exceptional pre-tax charge of £38m in respect of the acquisition of SSL. Cost synergies from the acquisition of SSL amounted to £11m in the quarter. On an adjusted basis, operating profit was ahead +15% (+17% constant) to £530m: the adjusted operating margin increased by +20bp to 23.2%. Net finance expense was £6m (Q1 2010: net finance income of £3m), 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 £355m, an increase of +2% (+4% constant) versus Q1 2010: on an adjusted basis, net income increased 10% (+12% constant). Diluted earnings per share of 48.3 pence rose +2% on a reported basis; on an adjusted basis, the growth was 10% to 52.2 pence. Q1 2011 Business Review Summary: % net revenue growth Q1 2011 Like-for-like Acquisitions & Exchange Reported Disposals* Europe +0% +17% -4% +13% NAA +2% +3% +0% +5% DvM +14% +9% +2% +25% Group ex-RBP +4% +11% -1% +14% RBP +23% - -4% +19% TOTAL +5% +10% -1% +14% * Reflects the acquisition of SSL The Business Review below is given at constant exchange rates. Europe 45% of net revenue Q1 2011 net revenue increased +17% to £1,028m, with LFL growth of +0%. Strong growth in Health & Personal Care and a more modest improvement in Surface Care and Home Care was offset by weakness in Fabric Care, with a relatively flat result in Dishwashing. The strong performance in Health Care came behind Nurofen and Strepsils, both of which benefited from such recent initiatives as Strepsils Warm and Nuromol in the UK, as well as a more normal incidence of cold/'flu versus Q1 2010. In Personal Care, the continued roll-out of the Dettol No Touch Hand Soap System delivered an encouraging early result. Dettol and Harpic contributed to the growth in Surface Care, while such new initiatives as the Air Wick 100% natural propellant spray supported the performance in Home Care. The decline in Fabric Care was primarily due to weakness in Laundry Detergent in southern Europe. Vanish, while still down year-on-year, is showing an improving market share trend. Adjusted operating profit increased +9% to £220m; the adjusted operating margin was -130bp lower at 21.4%, partly due to the inclusion of SSL. North America & Australia 24% of net revenue Q1 2011 net revenue increased +5% to £553m (+2% LFL). Growth came from Health & Personal Care, Dishwashing and Food. In Health & Personal Care, Mucinex benefited from a good performance in Mucinex DM (an expectorant-cough suppressant combination variant), as well as a more normal incidence of cold/ 'flu compared to Q1 2010. The increase in Dishwashing was led by Finish Quantum and All-in-1 tablets and gel packs. Growth in Food largely came from the consumer brands of French's Yellow Mustard and Frank's Red Hot Sauce, and was boosted by additional marketing activity. Adjusted operating profit increased +20% to £126m; the adjusted operating margin was +290bp higher at 22.8%. Developing Markets 24% of net revenue Q1 2011 net revenue was ahead +23% (+14% LFL) to £546m, with good growth across all regions. Health & Personal Care increased largely as a result of the continued excellent performance of the Dettol personal care range, with Veet and Strepsils also strong contributors. In Fabric Care, Vanish delivered a strong result helped by increased marketing investment, while Dettol and Harpic were the key drivers in Surface Care. Growth in Home Care came largely in Air Care. Adjusted operating profit increased by +31% to £85m. This resulted in a +100bp improvement in the adjusted operating margin to 15.6%. Pharmaceuticals 7% of net revenue Q1 2011 net revenue increased +23% to £156m. Growth came from the impact of the buy back from Merck of the Suboxone rights in Europe and Rest of the World and continued solid growth in the U.S. In the U.S. the recently-launched and patent-protected Suboxone film variant continued to grow, and by the end of March had captured a 37% volume share of the market for buprenorphine-based products used for opioid dependence. Despite the lower price of the film variant compared to the Suboxone tablets, net revenue in the U.S. business grew by +7% to £115m, of which the film generated £40m. Operating profit for the total RBP business increased +21% to £99m. The operating margin was down by -210bp to 63.5%, due to the materially lower margins of the new film variant and lower margins in the acquired business in Europe and Rest of the World. Suboxone has data exclusivity in Europe until 2016; in the U.S., Suboxone lost the exclusivity afforded by its Orphan Drug Status on 8 October 2009. As a result of the loss of exclusivity in the U.S., up to 80% of the revenue and profit of the Suboxone tablet business might be lost in the year following the launch of generic competitors, with the possibility of further erosion thereafter. On 31 August 2010, the Group announced that it had received approval from the U.S. Food and Drug Administration for its New Drug Application to manufacture and market Suboxone sublingual film. Suboxone sublingual film is patent-protected until 2020 and is patient-preferred. As the Group is rapidly converting Suboxone tablets to the sublingual film, there is a short-term dilutive impact on net revenue and operating profit: however, due to the film's patent protection, this conversion much better protects the medium and long-term earnings stream from the Suboxone franchise in the U.S. Hence, in the event of generic competition to the tablet, the Group expects that the Suboxone sublingual film will materially mitigate the impact of generic tablet launches. Q1 2011 Category Review (at Constant Exchange Rates) Health & Personal Care. Net revenue increased +46% (+13% LFL) to £758m, with Durex and Scholl together contributing £172m in the quarter. The increase in Healthcare was largely the result of a strong performance for Mucinex, Nurofen and Strepsils, supported by new initiatives such as Strepsils Warm, and also benefiting from a more normal incidence of cold/'flu compared to Q1 2010. In Personal Care, there was excellent growth for the Dettol personal care range both in Developing Markets, and in Europe where the continued roll-out of the No Touch Hand Soap System delivered a very encouraging early result. Fabric Care. Net revenue declined -6% to £375m, largely driven by a weak performance in Laundry Detergents in southern Europe. Vanish in Europe, while still down, is showing an improving market share trend. Surface Care. Net revenue grew +3% to £363m. Growth came from the Dettol/Lysol ranges, with Max Power and Power Plus liquid toilet cleaners supporting a strong performance for Harpic. Home Care. Net revenue rose +1% to £283m. The result was supported by the launch of Air Wick 100% natural propellant spray in Air Care, and Mortein automatic spray in Pest Control. Dishwashing. Net revenue increased +1% to £235m, with continued growth in Finish Quantum and All-in-1 tablets partially mitigated by a weaker result in dishwashing Additives. Other. Net revenue increased to £44m, largely due to the inclusion of certain brands from the acquisition of SSL. Total Household and Health & Personal Care. Net revenue was ahead by +15% (+4% LFL) to £2,058m. Pharmaceuticals. Total net revenue for the Group's Subutex and Suboxone prescription drug business grew +23% to £156m, with adjusted operating profit +21% to £99m. Within the Pharmaceuticals division, the U.S. business generated net revenue of £115m. Suboxone film continued to grow and had captured a 37% market volume share by the end of March, generating net revenue of £40m in the quarter. In Europe and Rest of the World, the result was helped by the full inclusion of a number of countries from 1 July 2010, as a result of the majority of sales, marketing and distribution rights to the buprenorphine-containing products Suboxone, Subutex and Temgesic being bought back by the Group. Operating profit for the total RBP business increased +21% to £99m. The operating margin was down by -210bp to 63.5%, due to the materially lower margins of the new film variant and lower margins in the acquired business in Europe and Rest of the World. Food. Net revenue rose +6% to £69m. This growth was driven by a very good performance for French's Yellow Mustard and Frank's Red Hot Sauce, and was boosted by additional marketing activity. Adjusted operating profit was £16m (+14%). 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 to be applied in the financial statements for the year ending 31 December 2011. These are not materially different from those set out in the Group's 2010 Annual Report and Accounts. 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 working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) improved by £100m to minus £ 1,000m, due to further improvement in payables. Net debt as at 31 March 2011 was £1,647m (31 December 2010: £2,011m), a decrease of £364m in the quarter, reflecting free cash flow generation during the quarter. Restructuring charge. A total pre-tax exceptional charge of around £250m is expected to be incurred in respect of the acquisition of SSL and further reconfiguration of the enlarged Group, of which approximately £216m relates to restructuring and c.£34m is transaction costs. 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). For the full year 2011, an exceptional pre-tax charge in the region of £150m is expected to be incurred, of which around £4m will be exceptional financing costs. In Q1 2011, an exceptional pre-tax charge of £39m was incurred, of which £38m is reflected in reported operating profit (of which £1m relates to transaction fees) and £1m is included in net interest. Contingent liabilities. The Group is involved in a number of investigations by competition authorities in Europe 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. The Group from time to time is involved in disputes 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. On 23 February 2011, the Group 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. Post balance sheet events. Further to an announcement on 13 December 2010, on 11 April 2011 the Group confirmed that it had received the necessary regulatory clearances and had completed the acquisition of Paras Pharmaceuticals Limited in India. 2011 Targets The Q1 2011 results position the Group well to achieve its FY 2011 financial targets. For the Group excluding SSL, the target is for +4% like-for-like net revenue growth, with profit growth ahead of that. For SSL, the Group is also targeting around +4% net revenue growth on a like-for-like basis (base: £762m): in addition, the Group is aiming to add 50% of the £100m cost synergies to the 2010 profit level. An exceptional pre-tax charge in the region of £150m is expected to be incurred in 2011, of which around £4m will be exceptional financing costs. For RBP, the Group continues to target further market share growth for the film variant. At this time, the Group has no new intelligence as to the timing of potential generic competition to the Suboxone tablets in the U.S. Taking all of the above into consideration, the targets for the total Group remain +12% net revenue growth (base: £8,453m) and +10% adjusted net income growth (base: £1,661m*), both at constant exchange. These targets exclude the potential impact of generic competition to the Suboxone tablets in the U.S., and will be adjusted downwards in the event that generic competition emerges. * Adjusted to exclude the impact of exceptional items. For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communication & Affairs Brunswick (Financial PR) +44 (0)20 7404 5959 David Litterick / Teresa Bianchi 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. The Group at a Glance (Unaudited) Quarter ended 31 March 2011 2010 £m £m Net revenue - total 2,283 2,003 Net revenue growth - like-for-like +5% +6% Net revenue growth - constant +15% +6% Net revenue growth - total +14% +5% Gross margin 59.5% 59.5% EBITDA - adjusted* 570 493 EBITDA margin - adjusted* 25.0% 24.6% EBIT 492 461 EBIT - adjusted* 530 461 EBIT margin 21.6% 23.0% EBIT margin - adjusted* 23.2% 23.0% Profit before tax 486 464 Net income 355 348 Net income - adjusted* 384 348 EPS, basic, as reported 48.9p 48.3p EPS, adjusted and diluted* 52.2p 47.5p * Adjusted to exclude the impact of exceptional items. Group balance sheet data 31 March 31 December 2011 2010 £m £m Net working capital * (1,000) (900) Net debt (1,647) (2,011) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. Shares in issue Millions 31 December 2010 725.9 Issued or transferred from Treasury 0.3 31 March 2011 726.2 Group Income Statement Analysis (Unaudited) Quarter ended 31 March 2011 2010 % change £m £m Net revenue 2,283 2,003 +14 Cost of sales (925) (812) Gross profit 1,358 1,191 +14 Net operating expenses (866) (730) Operating profit 492 461 +7 Operating profit before exceptional items 530 461 +15 Exceptional items (38) - Operating profit 492 461 +7 Net finance (expense) / income* (6) 3 Profit on ordinary activities before 486 464 +5 taxation Tax on profit on ordinary activities (129) (116) Net income for the period 357 348 +3 Attributable to non-controlling interest 2 - Attributable to ordinary equity holders 355 348 +2 of the parent Net income for the period 357 348 +3 Earnings per ordinary share: On net income for the period, basic 48.9p 48.3p On net income for the period, diluted 48.3p 47.5p Earnings per ordinary share - adjusted**: On net income for the period, basic 52.9p 48.3p On net income for the period, diluted 52.2p 47.5p * Q1 2011 includes an exceptional charge of £1m in respect of financial costs associated with the acquisition of SSL. There were no exceptional charges in Q1 2010. ** Adjusted to exclude the impact of exceptional items. Average common shares outstanding (millions): Basic 726.0 720.9 Diluted 735.3 732.5 Segment Information (Unaudited) 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. Operating segment Quarter ended 31 March 2011 2010 % change £m £m exch. rates actual const. Net revenue Europe 1,028 906 +13 +17 North America & Australia 553 528 +5 +5 Developing Markets 546 438 +25 +23 Pharmaceuticals 156 131 +19 +23 2,283 2,003 +14 +15 Operating profit - adjusted* Europe 220 206 +7 +9 North America & Australia 126 105 +20 +20 Developing Markets 85 64 +33 +31 Pharmaceuticals 99 86 +15 +21 530 461 +15 +17 Operating margin - adjusted* % % Europe 21.4 22.7 North America & Australia 22.8 19.9 Developing Markets 15.6 14.6 Pharmaceuticals 63.5 65.6 23.2 23.0 * Adjusted to exclude the impact of exceptional items. Segment Information (Unaudited), continued Product segment Quarter ended 31 March 2011 2010 % change £m £m exch. rates actual const. Net revenue by category Health & Personal Care 758 524 +45 +46 Fabric Care 375 407 -8 -6 Surface Care 363 343 +6 +3 Home Care 283 294 -4 +1 Dishwashing 235 237 -1 +1 Other 44 1 n/m n/m Household and Health & Personal Care 2,058 1,806 +14 +15 Pharmaceuticals 156 131 +19 +23 Food 69 66 +5 +6 2,283 2,003 +14 +15 Net revenue of £172m in Q1 in respect of the SSL business is included within Health & Personal Care. On a LFL basis, net revenue growth in Health & Personal Care is +13%. Net revenue of £31m in Q1 in respect of the SSL business is included within Other. Operating profit - adjusted* Household and Health & Personal Care 415 360 +15 +16 Pharmaceuticals 99 86 +15 +21 Food 16 15 +7 +14 Operating profit before exceptional items 530 461 +15 +17 Exceptional items (38) - Operating profit 492 461 +7 Operating margin - adjusted* % % Household and Health & Personal Care 20.2 19.9 Pharmaceuticals 63.5 65.6 Food 23.2 22.7 23.2 23.0 * Adjusted to exclude the impact of exceptional items.

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