Annual Financial Report
Reckitt Benckiser Group plc (the "Company")
Report and Accounts for year ended 31 December 2008
Notice of Annual General Meeting ("AGM") - convened for 7 May 2009
(together the "Documents")
The Company announces that the Documents have been posted on its website,
www.reckittbenckiser.com
A hard copy of the Documents has been sent to shareholders who wish to continue
receiving paper communications and a Notice of Availability of the Documents on
the website has been sent to shareholders who no longer receive hard copy. A
copy of the Documents has been submitted to the UK Listing Authority and will
shortly be available for inspection at the UK Listing Authority's Document
Viewing Facility which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Telephone: ((0) 20 7066 1000
Attached to this announcement is the additional information for the purposes of
compliance with the Disclosure and Transparency Rules including principal risk
factors and a responsibility statement.
31 March 2009
Contacts:
Elizabeth Richardson
Company Secretary
Reckitt Benckiser Group plc
Telephone: + 44 (0) 1753 217 800
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.
APPENDIX A
i. Principal risk factors
The Company's critical external relationships are with its major customers,
typically the large grocery, mass market, multiple retailers, and its suppliers
of raw and packaging materials and finished goods.
The Company's customer base is diffuse with no single customer accounting for
more than 10% of net revenue, and the top ten customers only accounting for
between a quarter and a third of total net revenue. These customers are
becoming more concentrated and more multi-national, increasing demands on the
Company's service levels. In addition, many retailers compete with the
Company's products with their own private label offerings. The Company
maintains its relationship with its principal retail customers through the
efforts of its dedicated sales force, including key account directors, and its
global sales organisation specifically set up to manage its interface with the
growth of international retailers.
The Company has many suppliers. The suppliers are predominantly international
chemical and packaging companies. The Company sources most of its supplies
through its global purchasing function, which acts as its primary interface
with its suppliers.
The principal risk factors that may be considered in relation to the Group are,
in the opinion of the Directors:
Market risks
- Demand for the Company's products may be adversely affected by changes in
consumer preferences.
- Customers, mainly large retailers, may decide to de-list the Company's
brands, or not participate in the active promotion of the brands through
in-store programmes.
- Competition may reduce the Company's market shares and margins.
- The expiry of the Company's exclusive licence for Suboxone in the United
States in 2009, with the possibility that the Company will not develop new
forms that offer new intellectual property protection beyond 2009.
- Competition from private label and unbranded products may intensify.
Operational risks
- The Company's new product pipeline may not generate consumer-relevant
innovation and improvement to fuel growth and build market shares.
- Key management may leave, or management turnover may significantly increase.
- Information technology systems may be disrupted or may fail, despite the
Company's disaster recovery processes, interfering with the Company's ability
to conduct its business.
- Regulatory decisions and changes in the legal and regulatory environment
could increase costs or liabilities or limit business activities.
- Operating results may be affected by increased costs or shortages of raw
materials labour or by disruption to production facilities or operating
centres.
- Unfavourable economic or business conditions may adversely affect or disrupt
operations in countries in which the Company operates.
- Significant movement in the exchange rates in which the Group purchases its
raw materials and packaging may limit the Group's ability to expand margins.
- A major supplier or customer could experience financial difficulties,
impinging on the Group's normal course of business.
- The Company may not be able to protect its intellectual property rights.
Environmental, Social and Governance (ESG) and reputational risks
Another group of risks concern the reputation of the Company and its brands,
but are reduced by the fact that the Company and its brands are not necessarily
connected in the mind of consumers.
Risks from the perspective of Environmental, Social and Governance (ESG)
matters and reputation should be read in conjunction with the Company's annual
Sustainability Reports (available on the Company's website) which address a
number of potentially reputation-affecting ESG matters such as employee health
& safety at work and how the Company is addressing such matters, and which are
independently assured.
In summary, the principal ESG risks identified by the Company are:
- Industry sector and product & consumer safety / regulatory risks. The
household products and health & personal care sectors have a number of product
and ingredient issues relating to ongoing developments in ingredient regulation
and concerns voiced over the potential long-term effects of household chemicals
and OTC (over-the-counter) drug ingredients on human health and the
environment.
- Supply chain risks. Most product and raw material supply chains present a
number of potential reputational risks relating to: labour standards; health,
safety and environmental standards; raw material sourcing; and the social,
ethical and environmental performance of third party manufacturers and other
suppliers.
- Product quality risks. Failures in product quality controls could potentially
lead to damage to the reputation of and trust in the Company's brands.
The Company has a full set of policies, programmes and control arrangements,
building on its central Code of Business Conduct, that addresses the full range
of ESG matters and reputational risks. The Code itself is currently the subject
of a comprehensive internal training and awareness programme, and is covered by
an annual review and certification process carried out by Internal Audit and
the Legal Department. The Board holds a formal review of ESG matters at least
annually.
Financial risks
The Company's policies and procedures on the management of financial risk are
explained in detail below. The Company has a number of risk exposures in
relation to tax, treasury, financial controls and reporting that are actively
managed through the Company's financial manual of policies and procedures,
through regular review and controls, and through regular auditing, both
internal and external.
Financial risk management
The Group's multi-national operations expose it to a variety of financial risks
that include the effects of changes in foreign currency exchange rates (foreign
exchange risk), market prices, interest rates, credit risks and liquidity. The
Group has in place a risk management programme that uses foreign currency
financial instruments, including debt, and other instruments, to limit the
impact of these risks on the financial performance of the Group.
The Group's financing and financial risk management activities are centralised
into the Group Treasury Centre (GTC) to achieve benefits of scale and control.
The GTC manages financial exposures of the Group centrally in a manner
consistent with underlying business risks. The GTC manages only those risks and
flows generated by the underlying commercial operations and speculative
transactions are not undertaken.
The Board of Directors reviews and agrees policies, guidelines and authority
levels for all areas of treasury activity and individually approves significant
activities. The GTC operates under the close control of the Chief Financial
Officer and is subject to periodic independent review and audits, both internal
and external.
Foreign exchange risk
(a) Translation risk
The Group publishes its financial statements in sterling but conducts business
in many foreign currencies. As a result, it is subject to foreign currency
exchange risk due to the effects that exchange rate movements have on the
translation of the results and the underlying net assets of its foreign
subsidiaries.
The Group's policy is to align interest costs and operating profit of its major
currencies in order to provide some protection against the translation exposure
on foreign currency profits after tax. The Group may undertake borrowings and
other hedging methods in the currencies of the countries where most of its
assets are located.
(b) Transaction risk
It is the Group's policy to monitor and, only where appropriate, hedge its
foreign currency transaction exposure. These transaction exposures arise mainly
from foreign currency receipts and payments for goods and services, and from
the remittances of foreign currency dividends and loans. The local business
units enter into forward foreign exchange contracts with the GTC to manage
these exposures where practical and allowed by local regulations. The GTC
matches the Group exposures, and hedges the net position where possible, using
spot and forward foreign currency exchange contracts.
Market price risk
The Group is not exposed to equity securities price risk. Due to the nature of
its business the Group is exposed to commodity price risk related to the
production or packaging of finished goods such as oil related and a diverse
range of other raw materials. This risk is, however, managed primarily through
medium-term contracts with certain key suppliers and is not therefore viewed as
being a material risk.
Interest rate risk
The Group has both interest-bearing and non interest-bearing assets and
liabilities. The Group manages its interest expense rate exposure using a
mixture of fixed rate and floating rate debt. The Group manages its interest
rate exposure on its gross financial assets by using a combination of fixed
rate term deposits and forward rate agreements.
Credit risk
The Group has no significant concentrations of credit risk. Financial
institution counterparties are subject to approval under the Group's
counterparty risk policy and such approval is limited to financial institutions
with a BBB rating or above. The amount of exposure to any individual
counterparty is subject to a limit defined within the counterparty risk policy,
which is reassessed annually by the Board.
Liquidity risk
The Group has bilateral credit facilities with high-quality international
banks. All of these facilities have similar or equivalent terms and conditions,
and have a financial covenant, which is not expected to restrict the Group's
future operations. The committed borrowing facilities, together with available
uncommitted facilities and central cash and investments, are considered
sufficient to meet the Group's projected cash requirements. None of the Group's
borrowing facilities expires within one year.
Funds over and above those required for short-term working capital purposes by
the overseas businesses are generally remitted to the GTC. The Group uses the
remittances to settle obligations, repay borrowings, or, in the event of a
surplus, invest in short-term instruments issued by institutions with a BBB
rating or above.
ii. Directors' responsibility statement
Each of the current Directors, whose names and functions are listed below,
confirms that, to the best of his or her knowledge:-
* the Group financial statements, which have been prepared in accordance with
IFRS as adopted by the EU and IFRS as issued by IASB, give a true and fair view
of the assets, liabilities, financial position and profit of the Group; and
* the Business review section contained in the Annual Report includes a fair
view of the development and performance of the business and the position of the
Group, together with a description of the principal risks and uncertainties
that it faces.
Name Function
Adrian Bellamy Chairman and Non-Executive Director
Bart Becht Chief Executive Officer
Colin Day Chief Financial Officer
Peter Harf Deputy Chairman and Non-Executive Director
Kenneth Hydon Non-Executive Director
André Lacroix Non-Executive Director
Graham Mackay Senior Independent Non-Executive Director
Judith Sprieser Non-Executive Director
David Tyler Non-Executive Director