3rd Quarter Results
11th November 2003
RECORD QUARTER
FULL YEAR TARGETS RAISED
Results at a Glance Q3 % change Year to % change % change
actual Date
exchange actual constant
exchange exchange
Net Revenues £989m +13 £2,823m +7 +7
Operating Profit £172m +25 £452m +14 +12
Net Income £123m +29 £322m +20 +17
* Net revenues grew by 13% (9% at constant exchange) to £989m in Q3, and by
7% (7% constant) to £2,823m in year to date (YTD).
* Operating profit increased by 25% in Q3 to £172m and by 14% YTD to £452m.
Year to date operating margins improved 100 basis points (bps) to 16.0%
behind a 160 bps gross margin improvement, offset by a significant increase
in marketing investment.
* Net income grew by 29% in Q3 to £123m and by 20% in YTD to £322m.
* Strong cash generation resulted in a £267m net cash inflow after dividends
in YTD 2003. Net Funds were £162m at the quarter end, an inflow of £67m in
the quarter.
* Recent initiatives contributing significantly to growth in the quarter and
year-to-date included Vanish Oxi Action fabric treatment; Finish/Calgonit
3-in-1 Brilliant in Europe and Electrasol Gelpacs in North America in
automatic dishwashing; Veet Express Roll-On and Wax Strips for sensitive
skin in depilatories; Lysol / Dettol disinfectant spray and Dettol Easy Mop
in surface care; and Airwick Decosphere in air care.
Commenting on these results, Bart Becht, Chief Executive Officer, said
'Q3 was a strong quarter. Both net revenue and net income growth were well
ahead of the full year targets. Western Europe continued its strong
performance. Net revenue and profit growth strongly recovered in North America
behind the success of its new products. All developing markets saw continued
good momentum. Strong net revenue growth combined with good operating margin
expansion resulted in significant profit growth.
'As a result, we are raising our full year targets. We now look for net revenue
growth of over 7% at constant and actual exchange (previously up to 6%) and for
net income growth of over 18% at actual exchange (previously around 14%). Net,
Reckitt Benckiser is firmly on track to deliver another strong year.'
Detailed Operating Review
Third Quarter 2003
Net revenues in Q3 grew by 13% (9% at constant exchange) to £989m.
Operating profit for Q3 grew 25% (19% constant) to £172m. Gross margin
increased by 110 bps to 53.7% due to higher margin new products, and further
benefits from cost optimization projects, Squeeze and Xtrim, offset by higher
marketing, particularly media investment. Operating margins increased by 160
basis points to 17.4%.
Net income was £123m, growth of 29% (25% constant).
Year to Date: Nine Months 2003
Net revenues grew by 7% (7% constant) to £2,823m.
Operating profit increased 14% (12% constant) to £452m. Gross margins rose 160
bps to 53.7% as a result of higher margin new products, favourable purchase
prices earlier in the year, and benefits from cost optimization programs,
Squeeze and Xtrim. Marketing investment, particularly media, increased
substantially. Media investment was around 12% of net revenues, over a full
percentage point higher than a year ago. Operating margins increased by 100 bps
to 16.0%.
Net income for YTD was £322m, increasing 20% at actual exchange (17% constant).
Net interest expense of £16m (£28m) was lower due to the strong cash inflow
over the past year reducing the level of net borrowings. The tax rate for the
period on the taxable profit was 26%, in line with the likely rate for the full
year.
Category Review at constant exchange rates
Fabric Care YTD net revenues grew 11% to £776m driven by a very strong
performance in fabric treatment behind the success of Vanish Oxi Action in
Western Europe and Developing Markets, and the success of Spray 'n' Wash
in-wash in North America. Vanish Oxi Action has been a major success, growing
substantially in all 26 markets in which it has been launched. It has also
allowed the Company to build a strong franchise in the category in a number of
markets in Western Europe, where Vanish was not previously represented. Calgon
Water Softener and Woolite Fine Fabric grew strongly in Rest of World behind
higher investment and expanded distribution.
Q3 net revenues grew 16% to £280m.
Surface Care YTD net revenues grew 4% to £580m. The main growth drivers were
disinfectant sprays, lavatory care and multipurpose cleaners. Disinfectant
sprays grew behind the rollout of Lysol Neutra Air in North America and the
launch of Dettol disinfectant spray in Western Europe and Asia Pacific.
Lavatory care grew behind a number of initiatives including the Harpic 2-in-1
toilet-bowl rim device in Europe and Eastern Europe, and higher investment in
the base business in Asia Pacific. Multipurpose cleaners grew behind Lysol
sanitizing wipes in North America, the launch of the Dettol Easy Mop in Western
Europe and strong growth for Veja multipurpose cleaner in Brazil.
Q3 net revenues grew 5% to £207m.
Dishwashing YTD net revenues grew 9% to £405m benefiting from the success of
the launch of Finish/Calgonit 3-in-1 Brilliant across Europe and Electrasol Gel
and Gelpacs in North America. The roll-out of Calgonit Protector is providing
incremental growth.
Q3 net revenues grew 8% to £135m.
Home Care YTD net revenues grew 5% to £405m with both air care and pest control
showing growth. Air care grew in Western Europe behind the launch of Airwick
Decosphere. Air care growth improved in North America behind further success
for Airwick Decosphere and the launch of Airwick White Nights. Pest control
grew in Latin America and Asia Pacific as developing markets recovered.
Q3 net revenues grew 8% to £147m.
Health & Personal Care YTD net revenues grew 18% to £413m. The main growth
drivers were depilatories, antiseptics and health care. Depilatories grew
behind the success of Veet Express roll-on and Wax Strips for sensitive skin,
plus continuing growth for Veet Mousse in Western Europe and the launch of Veet
in the USA. Dettol antiseptic performed well, most notably in Asia Pacific and
Rest of World, behind increased investment and a number of new initiatives. The
Health Care business performed strongly with notable growth on Gaviscon in the
UK and Continental Europe.
Q3 net revenues grew 15% to £140m.
Geographic Analysis at constant exchange
Western Europe: 46% of net revenues
Net revenues grew by 8% in YTD to £1,309m. This strong performance was due to
the success of fabric treatment, automatic dishwashing, depilatories and
healthcare. Fabric treatment grew behind the success of Vanish Oxi Action in
all markets, including establishing Vanish in a number of new markets.
Dishwashing grew behind the success of Finish / Calgonit 3-in-1 Brilliant and
Protector. Depilatories grew behind the new initiatives, Express roll-on and
Wax strips for sensitive skin. Healthcare grew behind the success of Gaviscon
in a widening number of Western European markets. YTD Operating margins
increased by 40 bps to 21.8% due to substantial gross margin expansion,
resulting from higher margin new products, lower input costs and Squeeze and
Xtrim initiatives, offset by substantial increases in marketing investment.
Operating profits increased by 10% to £285m.
Net revenues grew 8% to £448m in Q3 and operating profits by 11% to £101m.
North America: 28% of net revenues
Net revenues grew 5% in YTD to £796m. The growth came from the success of
fabric treatment, disinfectant sprays, multipurpose cleaners, automatic
dishwashing, depilatories and food. Fabric treatment growth came behind the
launch of Spray 'n' Wash in-wash product. Disinfectant sprays and multipurpose
cleaner growth came from Lysol Neutra Air and sanitizing wipes respectively.
Automatic dishwashing growth came behind continuing success for Electrasol Gel
and Gelpacs. Depilatories grew strongly as distribution and market share built
following the launch of Veet in 2002. Food grew behind the success of French's
Gourmayo, and market share gains for French's yellow mustard. North American
operating margins were 20 bps lower at 13.9% due to significant gross margin
expansion, arising from new products, lower input costs and Squeeze and Xtrim
benefits, offset by substantially increased marketing investment behind new
initiatives particularly earlier in the year. Operating profit increased 5% to
£111m.
Net revenues grew 7% to £286m in Q3 and operating profits by 29% to £53m.
Latin America: 4% of net revenues
Net revenues increased by 14% in YTD to £116m. Strong growth in local
currencies has accelerated through the year, behind better growth for fabric
treatment, air care, pest control and multipurpose cleaners. YTD operating loss
was £3m (2002 £4m loss).
Net revenues grew 16% to £43m in Q3 and operating profit was £1m (2002 £1m
loss).
Asia Pacific: 12% of net revenues
Net revenues YTD increased by 12% to £328m. Key drivers of growth were fabric
treatment, antiseptics and pest control. Fabric treatment growth came behind
the success of Vanish Oxi Action. Antiseptic growth came from the launch of
Dettol disinfectant spray, from better growth from Dettol liquid and personal
care products responding to higher investment, and from the SARS effect earlier
in the year. Operating margins improved by 390 bps to 10.7%. Operating profits
increased 59% to £35m.
Net revenues grew 9% to £114m in Q3 and operating profits grew 44% to £13m.
Rest of World: 10% of net revenues
Net revenues grew 12% in YTD to £274m. Growth came from fabric treatment,
antiseptics, water softener and lavatory care. Key drivers of growth were the
launch of Vanish Oxi Action and Dettol disinfectant spray, plus strong organic
growth behind higher marketing investment. YTD operating margins increased by
290bps to 10.2%. Operating profit increased 65% to £28m.
Net revenues grew 20% to £98m in Q3 and operating profit was £11m (2002 £2m).
Financial Items
Net Working Capital at the quarter end was minus £498m, an improvement of £7m
on the level at year-end 2002.
Net funds at the end of Q3 were £162m, an increase of £67m in the quarter and
of £267m since year-end 2002.
Full Year Targets
Full year targets have been raised to:
* Net revenue growth of over 7% at constant and actual exchange
(previously top end of a 4%-6% range at constant exchange)
* Net income growth of over 18% at actual exchange
(previously growth of 14% at actual exchange).
The Company will report its full year results for 2003 on Wednesday 11th
February 2004.
For Further Information
Tom Corran telephone +44 (0) 1753 217 800
SVP Investor Relations & Corporate Communications
Mark Wilson telephone +44 (0) 1753 217 800
Investor Relations Manager
Tim Spratt telephone +44 (0) 207 831 3113
Financial Dynamics
Conference Call
There is a conference call for analysts and investors at 14.30hrs UK time
today. Full details are available on the Company's web site
www.reckittbenckiser.com
The Group at a Glance (unaudited)
Quarter Ended Sept 30 Nine Months Ended Sept 30
2003 2002 2003 2002
£m £m £m £m
From total ordinary
activities
989 876 Net revenues 2,823 2,632
13% 4% Net revenues growth 7% 4%
53.7% 52.6% Gross margin 53.7% 52.1%
197 159 EBITDA 519 454
19.9% 18.2% EBITDA margin 18.4% 17.2%
172 138 EBIT 452 395
17.4% 15.8% EBIT margin 16.0% 15.0%
167 130 Profit before tax 436 367
16.9% 14.8% PBT margin 15.4% 13.9%
123 95 Net Income 322 268
12.4% 10.8% Net Income margin 11.4% 10.2%
17.5p 13.5p EPS 45.6p 38.1p
16.7p 13.0p EPS diluted 43.8p 36.7p
From continuing operations
989 876 Net revenues 2,823 2,619
13% 4% Net revenues growth 8% 4%
197 158 EBITDA 519 451
19.9% 18.0% EBITDA margin 18.4% 17.2%
172 137 EBIT 452 392
17.4% 15.6% EBIT margin 16.0% 15.0%
Selected Financial Information (unaudited)
Group Balance Sheet Data
Sept 30 Dec 31
2003 2002
£m £m
Net working capital** (498) (491)
Net cash / (borrowings) 162 (105)
** Defined as stock, short term debtors and short term creditors excluding
borrowings
Group profit and loss account
(unaudited)
Quarter Ended Sept 30 Nine Months Ended Sept
30
2003 2002 % change 2003 2002 %
change
£m £m £m £m
989 876 13% Net revenues from continuing 2,823 2,619 8%
operations
0 0 Discontinued and de-consolidated 0 13
operations
989 876 13% Total net revenues 2,823 2,632 7%
(458) (415) 10% Cost of sales (1,306) (1,261) 4%
531 461 15% Gross profit 1,517 1,371 11%
(359) (323) 11% Net operating expenses (1,065) (976) 9%
172 137 26% Operating profit from continuing 452 392 15%
operations
0 1 Discontinued and de-consolidated 0 3
operations
172 138 25% Total operating profit 452 395 14%
0 0 Non-operating items 0 0
172 138 25% Profit on ordinary activities 452 395 14%
before interest
(5) (8) 38% Net interest expense (16) (28) 43%
167 130 28% Profit on ordinary activities 436 367 19%
before taxation
(44) (35) 26% Tax on profit on ordinary (114) (99) 15%
activities
123 95 29% Profit on ordinary activities 322 268 20%
after taxation
0 0 Attributable to equity minority 0 0
interests
123 95 29% Profit for the period 322 268 20%
0 0 Ordinary Dividends (99) (90)
123 95 29% Retained profit for the period 223 178 25%
Earnings per ordinary share
(pence):
17.5 13.5 On profit for the period 45.6 38.1
16.7 13.0 On profit for the period, 43.8 36.7
diluted
Average common shares
outstanding (millions):
707.6 704.7 Basic 706.7 703.9
758.8 756.6 Diluted 757.6 756.3
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 Sept 30 Nine Months Ended Sept 30
2003 2002 % change 2003 2002 % change
£m £m exch. rates £m £m exch. Rates
actual const. actual const.
Net revenues - by
geographical area
448 385 16% 8% Western Europe 1,309 1,127 16% 8%
286 275 4% 7% North America 796 822 (3%) 5%
43 37 16% 16% Latin America 116 129 (10%) 14%
114 102 12% 9% Asia Pacific 328 295 11% 12%
98 77 27% 20% Rest of World 274 246 11% 12%
989 876 13% 9% 2,823 2,619 8% 8%
- - - - Discontinued and - 13 - -
de-consolidated
operations
989 876 13% 9% 2,823 2,632 7% 7%
Operating profit - by
geographical area
101 84 20% 11% Western Europe 285 241 18% 10%
53 44 20% 29% North America 111 116 (4%) 5%
1 (1) (200%) (200%) Latin America (3) (4) 25% 0%
13 8 63% 44% Asia Pacific 35 20 75% 59%
11 2 450% 450% Rest of World 28 18 56% 65%
(7) 0 - - Corporate (4) 1 - -
172 137 26% 20% 452 392 15% 13%
- 1 - - Discontinued and - 3 - -
de-consolidated
operations
172 138 25% 20% 452 395 14% 12%
% % Operating margin - by %
geographical area %
22.5 21.8 Western Europe 21.8 21.4
18.5 16.0 North America 13.9 14.1
2.3 (2.7) Latin America (2.6) (3.1)
11.4 7.8 Asia Pacific 10.7 6.8
11.2 2.6 Rest of World 10.2 7.3
- - Corporate - -
17.4 15.6 16.0 15.0
- - Discontinued and - 23.1
de-consolidated
operations
17.4 15.8 16.0 15.0
Segmental Analysis (continued)
Quarter Ended Sept 30 Nine Months Ended Sept 30
2003 2002 % change 2003 2002 % change
£m £m Exch. Rates £m £m exch. Rates
Actual Const. actual const.
Net revenues - by
product segment
943 834 13% 9% Household and Health & 2,684 2,483 8% 8%
Personal Care
46 42 10% 12% Food 139 136 2% 11%
989 876 13% 9% 2,823 2,619 8% 8%
- - - - Discontinued and - 13 - -
de-consolidated
operations
989 876 13% 9% 2,823 2,632 7% 7%
Operating profit - by product
segment
170 129 32% 26% Household and Health & 437 372 17% 14%
Personal Care
9 8 13% 29% Food 19 19 0% 12%
(7) 0 - - Corporate (4) 1 - -
172 137 26% 20% 452 392 15% 13%
- 1 - - Discontinued and - 3 - -
de-consolidated
operations
172 138 25% 20% 452 395 14% 12%
% % Operating margin - by % %
product segment
18.0 15.5 Household and Health & 16.3 15.0
Personal Care
19.6 19.0 Food 13.7 14.0
- - Corporate - -
17.4 15.6 16.0 15.0
- - Discontinued and - 23.1
de-consolidated
operations
17.4 15.8 16.0 15.0
Net revenues - Household and Health &
Personal Care
280 229 22% 16% Fabric Care 776 672 15% 11%
207 194 7% 5% Surface Care 580 585 (1%) 4%
135 119 13% 8% Dishwashing 405 359 13% 9%
147 134 10% 8% Home Care 405 395 3% 5%
140 118 19% 15% Health & Personal Care 413 344 20% 18%
909 794 14% 10% Core Business 2,579 2,355 10% 9%
34 40 (15%) (17%) Other Household 105 128 (18%) (17%)
943 834 13% 9% Net Revenues - 2,684 2,483 8% 8%
continuing operations
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