Annual Financial Report

Reckitt Benckiser Group plc (the "Company") Report and Accounts for year ended 31 December 2009 Notice of Annual General Meeting ("AGM") - convened for 6 May 2010 (together the "Documents") The Company announces that the Documents have been posted on its website, www.rb.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. 6 April 2010 Contacts: Elizabeth Richardson Company Secretary Reckitt Benckiser Group plc Telephone: + 44 (0) 1753 217 800 Cautionary note concerning forward-looking statements This document contains forward looking statements, including statements with respect to the financial condition, results of operations and business of Reckitt Benckiser and certain of the plans and objectives of the Company 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. These forward looking statements are not guarantees of future performance: by their nature, forward looking statements involve known and unknown risk and uncertainty and other factors 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. Each forward looking statement speaks as of the date of the particular statement. APPENDIX A RELATIONSHIPS AND PRINCIPAL RISKS 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 diverse, with no single customer accounting for more than 10% of net revenue, and the top ten customers only accounting for between one quarter and one 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) matters 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) matter and reputation are discussed in the Report of the Directors on pages 12 to 18. These 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; 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 address the full range of ESG matters and reputational risks. The Code itself was in 2009 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 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 remittance 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 managed its interest expense rate exposure using a mixture of fixed rate and floating rate debt. The Group managed its interest rate exposure on its gross financial assets by using fixed rate term deposits. 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. Only £25m 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. Key management compensation Details of key management compensation are disclosed in Note 5 to the financial statements on page 37. Related party transactions Details of related party transactions are disclosed in Note 27 to the financial statements on page 59. Directors' responsibility statement Each of the Directors, whose names and functions are listed on page 11 to the financial statements confirm that, to the best of their knowledge: * The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and * The Directors' report includes a fair review 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 Richard Cousins Non-Executive Director Warren Tucker Non-Executive Director 14 4
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