Final Results

13th February 2008 EXCEPTIONAL GROWTH IN 2007 2008 TARGETS ANOTHER STRONG YEAR Results at a Glance Q4 % change % change Full Year % change % change £m actual constant £m actual constant (unaudited) exchange exchange exchange exchange Net Revenues 1,372 +6 +5 5,269 +7 +10 Operating Profit 385 +21 +21 1,233 +35 +39 reported Net Income reported 289 +13 +14 938 +39 +43 EPS (diluted) 39.6p +13 127.9p +39 reported Operating Profit 389 +7 +7 1,190 +12 +15 adjusted * Net Income adjusted 292 +0 +2 905 +15 +18 * EPS (diluted) 40.0p +0 123.4p +15 adjusted * *Adjusted results (including % change numbers), discussed below, exclude exceptional items (see page 2). Reported results for the Full Year (FY) 2007 includes a net exceptional gain of £43m pretax (Q4 2007: £4m charge) compared to a pretax charge of £149m in FY 2006 (Q4 2006: £45m charge). - Q4 net revenues rose 6% (5% constant). Adjusted operating profit rose to £389m, +7% (+7% const). Gross margin increased 130bps to 60.0% and adjusted operating margin increased by 20 bps to 28.4%. Adjusted net income was in line with 2006; however, excluding the one off £19m tax credit in 2006, net income growth was 7% (9% const). - FY net revenue growth was 7% at actual exchange (+10% const). Adjusted operating profit increased 12% (15% const) to £1,190m. Gross margin expansion was 160bps to 58.3%, while adjusted operating margin increased 110bps to 22.6%, achieving our 2008 target of 22% one year early. Adjusted net income was £905m, +15% (+18% constant) and adjusted, diluted EPS grew 15% to 123.4p. - On a reported basis, operating profits rose 21% to £385m in Q4, and by 35% to £1,233m FY. Net income grew by 13% to £289m in Q4 and by 39% to £938m FY. - Net borrowings reduced from £660m to £125m in 2007, after completing the £300m share buyback programme and the payment of £358m of dividends during the year. - Reflecting the Board's confidence in the business momentum, it recommends a 20% increase in the final dividend to 30.0 pence per share. This brings the total dividend for 2007 to 55.0p, an increase of 21% over 2006. The Board also intends to return a further £300m to shareholders through a share buyback programme in 2008. - The Group completed the acquisition of Adams Respiratory Therapeutics Inc on 30 January 2008 for a consideration of £1.1bn. Commenting on these results, Bart Becht, Chief Executive Officer, said: - "Reckitt Benckiser had a great year in 2007 due to the success of its 18 Powerbrands behind new products such as Air Wick Freshmatic or Vanish Oxi Action Multi, and strong growth for the ex-BHI brands Nurofen, Strepsils and Clearasil. Profit growth was driven by strong gross margin expansion and BHI synergies coming in ahead of schedule. "We are targeting for another strong year in 2008 with net revenue growth from continuing operations, excluding Adams, of around 6 - 7% (continuing operations base £5,220m) and for adjusted (ie excluding exceptional items) net income growth of 10 percent, both at constant exchange". Basis of Presentation and Exceptional Items Where appropriate, the term `adjusted' excludes the impact of exceptional items in both 2006 and 2007. Exceptional items consist of restructuring charges relating to the integration of Boots Healthcare International (BHI), further restructuring of manufacturing configuration of the enlarged company, impairments and the gain on disposal of Hermal. The impact of the extra month of trading of BHI in Q1 2007 and of business disposals in 2007, including Hermal and some minor BHI tail brands, is disclosed where significant. Detailed Operating Review Fourth Quarter 2007 Net revenues in Q4 grew by 6% (5% at constant exchange) to £1,372m. Adjusting for the impact of business disposals, net revenues grew 7% (6% constant) in Q4. Reported operating profit rose 21% (21% constant) to £385m. Net income grew 13% (14% constant) to £289m. Basic EPS was 40.6 pence per share (p). Adjusted operating profit for Q4 increased 7% (7% constant) to £389m. Gross margin increased by 130bps to 60.0% due to the benefit of cost optimization and mix. Marketing investment increased significantly, with media investment higher by 11% at constant exchange at 11.3% of net revenues, 80 bps up on 2006. Adjusted operating margins increased 20 bps to 28.4% as gross margin expansion and BHI synergies were partially offset by substantially higher investment to drive long-term growth. There was an exceptional charge of £4m in Q4 2007 compared to a charge of £45m in Q4 2006. On an adjusted basis net income was flat (grew 2% constant). Tax in the quarter is at a rate of 24%, in line with the underlying rate for the year. There were no one-off tax releases in the quarter, compared to a £19m one off tax release in Q4 2006. Excluding the tax credit in 2006, net income growth was 7% (9% constant). Diluted EPS was 39.6p, an increase of 13% on an as reported basis. Adjusted, diluted EPS was 40.0p, in line with Q4 2006. Full Year 2007 Net revenues grew by 7% (10% constant) to £5,269m. The extra month of BHI in 2007 contributed 1% to this growth rate. Reported operating profit for the year rose 35% (39% constant) to £1,233m. Reported net income was 39% (43% constant) higher at £938m. Basic EPS was 131.2p, diluted EPS was 127.9p, an increase of 39% on 2006. Adjusted operating profit increased 12% (15% constant) to £1,190m. Gross margin was 160bps ahead of last year at 58.3% due to the benefit of price increases early in the year, favorable mix and cost optimization. Marketing investment was substantially higher, with media investment increased by 14% constant to 12.4% of net revenues, 50 bps ahead of 2006. Adjusted operating margins increased by 110bps to 22.6% due to the gross margin expansion somewhat offset by higher marketing investment, and to the BHI synergies which have been achieved ahead of schedule. The exceptional profit (net, pre tax) in 2007 was £43m compared to charges in 2006 of £149m. Cumulative synergies from the BHI acquisition of £87m exceeded the increased target of £80m and compares to £78m at the end of Q3. Net interest charges were £24m (2006 £36m) reflecting the reduction in debt during the year. The tax rate is 22%, benefiting from the £20m of one-off tax releases in Q2. Adjusted net income growth was 15% (18% constant). Adjusted, diluted EPS increased by 15% to 123.4p. 2007 results excluding RB Pharma In light of the increasing significance of the RB Pharma business, the Company provides the following information relating to the performance of the business in 2007 excluding RB Pharma (on an adjusted basis): RB ex Pharma RB Pharma Total RB £m % Const £m % Const £m % Const Net revenues 5,058 +9% 211 +42% 5,269 +10% Adjusted Operating 1,072 +13% 118 +44% 1,190 +15% Profit Adjusted Operating 21.2% +80bps 55.9% +90bps 22.6% +110bps Margin Adjusted Net Income 830 +16% 75 +44% 905 +18% Geographic Analysis at Constant Exchange excluding Exceptional Items Europe 54% of Net Revenues 2007 net revenues grew by 7% to £2,813m. The extra month of BHI in 2007 contributed 1% to this growth rate while business disposals deducted 1%. Growth was broad based across all five core categories. Fabric Care grew due to the success of Vanish Oxi Action Multi and Vanish Oxi Action Crystal White, and Calgon water softener following increased investment. Surface Care growth benefited from the launch of Cillit Bang Grease & Floor and from growth for Harpic Power Plus and Harpic Max In Toilet Bowl device (ITB) in Lavatory Care. In Automatic Dishwashing, the key drivers were Finish Quantum, Finish All in One and Finish Turbo Dry. In Home Care, Aircare growth was driven by continuing success for Airwick Freshmatic. In Health & Personal Care, growth came from the former BHI brands, Nurofen, Strepsils and Clearasil with all three brands responding to increased marketing investment, and from Depilatories. FY operating margins were 60bps ahead of last year at 24.2% due to higher gross margins and BHI synergies, partially offset by higher marketing investment to support new products. This resulted in a 11% increase in operating profits to £681m. In Q4, net revenues increased 1% to £705m. Excluding the impact of business disposals, net revenues grew 3%. Operating profits increased by 6% to £199m. North America & Australia 28% of Net Revenues 2007 net revenues increased 11% to £1,488m. Within this, NAA Household grew 7%, NA Food grew 7% and NAA Pharma grew 60%. FY growth in Household came particularly from Surface Care, Automatic Dishwashing and Home Care. Surface Care growth was driven by Lysol in NA and by Harpic in ANZ. Automatic Dishwashing increased as a result of the continuing success of Electrasol 3in1 monodose tablets. In Home Care, Air Care growth came from both Airwick Freshmatic and Airwick Electrical Oils. In Health & Personal Care, increased net revenues came mainly from strong growth for Nurofen in ANZ behind higher investment. Pharma grew sales of Suboxone very strongly in the USA where the sales organization has been substantially increased and helped by a regulatory change which allows doctors to take on more patients for this treatment. Food grew strongly due to the consumer brands of French's yellow mustard, Frank's Red Hot sauce and French's Fried Onions. FY operating margins were 130bps higher at 25.5% mainly due to mix benefit from the high growth of Suboxone plus gross margin expansion and BHI synergies resulting in profits increasing 16% to £379m. Excluding NAA Pharma, operating margins were 20 bps lower at 21.2%. Q4 net revenues grew 9% to £418m with Household up 6%, Food up 3% and Pharma up 47%. Operating profits were ahead by 4% to £147m. Operating Margin declined 160 bps in total, and 170 bps excluding Pharma, in the quarter due to increased marketing investment behind new initiatives, in particular in the Airwick and Lysol franchises. Developing Markets 18% of Net Revenues Net revenues for 2007 grew 15% to £968m with strong growth across all regions of Asia, Latin America and Africa Middle East. The major contributors to growth were Fabric Care, Surface Care, Home Care and Health & Personal Care. In Fabric Care, the growth came from Fabric Treatment, mainly driven by initiatives on Vanish to increase category penetration. In Surface Care, the main drivers were Harpic Power Plus lavatory cleaner, supported by higher investment, and Veja in Brazil. In Home Care, the increase was in both Pest Control and Air Care. Mortein growth came from a number of new initiatives such as Mortein with Dettol, while in Air Care, the key driver was Air Wick Freshmatic. In Health & Personal Care, the Dettol personal care range grew strongly, benefiting from the Herbal range extension and additional investment, while in Healthcare both Strepsils, due to higher investment, and Gaviscon, due to geographical expansion, grew strongly. FY operating margins expanded 230bps to 13.4% as operating profits increased by 43% to £130m. Q4 net revenues increased by 10% to £249m. Operating profits increased 30% to £43m reflecting an operating margin expansion of 230 bps. Category Review at Constant Exchange Rates Fabric Care. 2007 net revenues increased 5% to £1,241m. The major drivers were strong continuing growth for Vanish Oxi Action Multi and Vanish Oxi Action Crystal White. Calgon Water Softeners grew as a result of higher marketing investment. Woolite Garment Care benefited from the roll-out of Woolite Color and from higher investment. Excluding the private label business, where the level of activity was reduced in the year, the branded business grew 8%. Q4 growth was 3% to £306m, or 6% excluding the private label business. Surface Care. Net revenues grew 8% to £951m principally due to the launch of Cillit Bang Grease & Floors, and to strong growth for Lysol in North America and Veja in Brazil. Harpic Lavatory Care net revenues were also stronger due to the success of Harpic Power Plus and Harpic Max. Q4 growth was 8% to £249m. Dishwashing. Net revenues increased 5% to £616m due to the success of Finish Quantum and Finish All in One in Europe and Electrasol 3in1 tablets in North America. Q4 growth was 5% to £167m. Home Care. Net revenues improved by 16% to £779m. Air Care grew strongly due to the continuing success of Airwick Freshmatic globally and strong growth for Airwick Electrical Oils in North America. Pest Control growth benefited from a number of initiatives such as Mortein Lantern, Mortein with Dettol and Mortein Professional Indoor Spray. Q4 growth was 11% to £218m. Health & Personal Care. Net revenues increased 13% to £1,199m. The extra month of BHI in 2007 contributed 5% to this growth rate while business disposals deducted 2%. Dettol was significantly ahead in Developing Markets due to new personal care products like Dettol Herbal soap and shower gel, and significantly increased marketing investment. Veet benefited from the launch of the new Veet Pump Pack. Healthcare, including the former business of BHI, contributed strongly to the growth in the year. Net revenues from the former BHI business, led by Nurofen, Strepsils and Clearasil, were £560m compared to £494m in the eleven months of ownership in 2006. Like-for-like growth in the former BHI business was 10%, mainly due to substantial growth for Strepsils, Nurofen and Clearasil. Q4 growth in Health & Personal Care was 2% to £291m, or 8% after adjusting for business disposals. Total Household and Health & Personal Care. Net revenues were ahead by 9% to £4,867m. In Q4, total Household and Health & Personal Care grew 4% to £1,249m. Pharmaceuticals. Full Year net revenues were £211m, 42% ahead of 2006, driven by the growth of Suboxone in the USA following a substantial increase in the sales organization and helped by a regulatory change that allows doctors to take on more patients for this treatment. Operating profit for 2007 was £118m, up 44%. Q4 net revenues increased 21% to £62m, Q4 operating profit was £34m, up 2%. Food. Net revenues grew 7% to £191m with good performance across the consumer portfolio, in particular further growth for French's yellow mustard, French's Fried Onions and Frank's Red Hot sauce. Operating profits increased 10% to £51m, with operating margins improving 140bps to 26.7%. Q4 net revenues grew 3% to £61m while operating profit declined 1% to £25m. New Initiatives H1 2008 The Company announces a number of new product launches for the first half of 2008: - In Fabric Care: - Roll out into Europe of Vanish Oxi-Action Magnet, the stain remover in a sachet that not only removes stains but also visibly traps grime and colour runs, protecting from loose dye accidents; - Launch in North America of Spray `n' Wash Max pre-treater spray offering a superior `in front of your eyes' solution to stain removal, removing even dried-in stains; Launch of Woolite All Textiles detergent, introducing Woolite's protection benefits to not just wool and silk but other fabric like denim in both hand and machine wash. - In Surface Care: - Upgrade of Dettol 4 in 1 multipurpose cleaner to All in 1 to deliver a visible shine in addition to even better cleaning performance against germs, grease and soap scum; - In Lavatory care, Harpic Odorstop liquid to not just kill germs and clean, but also to eliminate odours; - In Lavatory Care, the launch of Harpic / Lysol cageless in-the-bowl toilet cleaners, giving you a clean and fresh toilet without ever having to touch a cage for refills; - Cillit Bang Multi Power Lime & Grime and Degreaser, with formula upgrades to remove more stains like rust and dried food from more surfaces in more rooms such as the garage and kitchen; - In Automatic Dishwashing: - Launch in Europe of Finish Max in 1, superior cleaning, soluble wrapped multi benefit tablets packed in tubs that are resealable and reusable. - In Home Care: - Launch of Airwick Symphonia in Europe, a dual fragrance electrical plug-in to deliver a superior fragrance experience through anti-habituation technology which can use existing Airwick refills; - In Pest Control, the roll out of Mortein Naturgard into further markets with more SKU's, eg Flying insect killer and Fly Sticker. - In Health & Personal Care: - Introduction of Lysol / Dettol hand sanitiser; incorporating a formulation used in hospitals which not only kills 99.9% of germs, but avoids stickiness or dryness and leaves the hands feeling soft and cleansed. - Gaviscon liquid sachets to deliver direct and fast indigestion relief on the go; - Complete re-launch of the Clearasil Base range as Clearasil Stay Clear which delivers cleaner skin all day, every day by providing unsurpassed effectiveness on acne while being gentler on the skin. Included in the new range is an exfoliating Skin Perfecting Wash that clears and prevents breakouts. - Roll out of improved Veet wax strips, with an improved formulation for more effective hair removal even on difficult to remove shorter hair. Financial Review Basis of preparation The unaudited financial information is prepared under IFRS accounting policies set out in the Group's audited IFRS Financial Statements within its Annual Report and Accounts for 2006. Constant Exchange Movements of exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts comparatives to exclude such movements and shows the underlying growth. Exceptional Items Where appropriate, the term `adjusted' excludes the impact of exceptional items. Exceptional items in 2007 consist of a net gain in respect of business disposals and impairments of £73m and restructuring charges of £30m. Reported results for 2007 therefore include a net exceptional gain of £43m pretax (Q4 2007: £4m charge) compared to a pretax charge of £149m in FY 2006 (Q4 2006: £45m charge). Net interest. Net interest payable was £24m, a 33% decrease on 2006 (£36m) due to strong cash inflow in the period and a reduction in the level of net debt during the year. Q4 interest payable was £4m (2006 £7m). Tax. The tax rate is 22% (2006 23%), benefiting from a £20m one-off tax release in Q2 (2006 £19m release in Q4). Net working capital (inventories, short term receivables and short term liabilities excluding borrowings and provisions) improved by £98m to minus £826m compared to the position at the end of 2006, mostly due to further significant reductions in the BHI net working capital. Cash flow. Operating cash flow was £975m (2006 £1,017m) and net cash flow from operations was £861m (2006 £953m). Net interest paid was £6m lower at £24m (2006 £30m) and tax payments increased by £51m to £232m (2006 £181m). Capital expenditure was higher than prior year at £134m (2006 £88m) due to one off investment in healthcare manufacturing. Proceeds from the disposal of Hermal were £260m. Net debt at the end of the year was £125m (December 2006 £660m), a reduction of £535m. This reflected net cash flow from operations of £861m, receipts on the disposal of Hermal of £260m, offset by payment of the two dividends (£358m) and share buybacks (£300m). Balance sheet. At the end of 2007, the Group had shareholders' funds of £2,385m (2006 £1,866m), an increase of 28%. Net debt was £125m (2006 £660m) and total capital employed in the business was £2,510m (2006 £2,526m). This finances non-current assets of £4,426m (2006 £4,421m) of which £479m (2006 £425m) is tangible fixed assets, the remainder being goodwill, other intangible assets, deferred tax and other receivables. The Company has negative net working capital of £826m (2006 £728m), current provisions of £36m (2006 £47m) and long-term liabilities other than borrowings of £1,054m (2006 £1,120m). The Company's financial ratios remain strong. Return on shareholders' funds (net income divided by total shareholders' funds) was 39.3% (2006 36.1%) on a reported basis or 37.9% (2006 42.1%) on an adjusted basis. In October 2007 a scheme of arrangement was put in place to create additional distributable reserves whereby Reckitt Benckiser Group plc was introduced as a new parent company. The consolidated financial statements of Reckitt Benckiser Group plc are presented as if both Reckitt Benckiser plc and Reckitt Benckiser Group plc had always been part of the same Group. Dividends. The Board of Directors recommends a final dividend of 30.0p (2006 25.0p), an increase of 20%, to give a full year dividend of 55.0p (2006 45.5p), an overall increase of 21%. The dividend, if approved by shareholders at the AGM on 1st May 2008, will be paid on 29th May to shareholders on the register at the record date of 29th February. The ex-div date is 27th February and the last date for election for the share alternative to the dividend is 7th May. Share buyback. During 2007, the Company purchased 11.1m shares at a cost of £300m as part of its ongoing share buyback program. In Q4, the Company purchased 2.4m shares at a cost of £66m. The Company announces the continuation of its buyback programme with a target spend of £300m in 2008. Hermal disposal. The Company announced on 16th July that it had agreed to dispose of the Hermal prescription skincare business to Laboratorios Almirall S.A. for a consideration of £260m in cash. The disposal was completed on 31 August 2007. Results for Hermal are included in FY as reported up to the date of disposal. The gain on disposal has been reported as an exceptional item in the 2007 income statement. Adams Acquisition. The Company completed the acquisition of Adams Respiratory Therapeutics Inc on 30th January 2008 for a consideration of $60 per share or approximately $2.3bn (£1.1bn). Results for the Adams business will be included in the Company's results from the date of acquisition. The Company announced an exceptional charge of $60m, or approximately £30m, to cover the necessary reorganization associated with the integration of Adams into Reckitt Benckiser, to be recorded post completion. For Further Information Reckitt Benckiser +44 (0)1753 217 800 Mark Wilson Corporate Controller & Acting Head of Investor Relations (investor queries) Fiona Fong Head of Corporate Communications (press queries) PR Agency Susan Gilchrist Brunswick +44 (0)207 404 5959 Catherine Hicks The preliminary results for the year ended 31 December 2007 and the results for the year ended 31 December 2006 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The unaudited financial statements for 2007 are prepared using accounting policies consistent with the audited financial statements for 2006. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 31 December 2006 as defined by SI 04/2947 - The Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004. The financial information for the year ended 31 December 2006 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2007 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Group at a Glance (unaudited) Quarter Ended December 31 Year Ended December 31 2007 2006 2007 2006 £m £m £m £m 1,226 1,142 Net revenues - underlying 4,709 4,428 146 151 Net revenues - acquisition 560 494 1,372 1,293 Net revenues - total 5,269 4,922 7% 3% Net revenues growth - 6% 6% underlying 6% 17% Net revenue growth - total 7% 18% 60.0% 58.7% Gross margin 58.3% 56.7% 410 343 EBITDA 1,326 1,007 29.9% 26.5% EBITDA margin 25.2% 20.5% 385 319 EBIT 1,233 910 389 364 EBIT - adjusted* 1,190 1,059 28.1% 24.7% EBIT margin 23.4% 18.5% 28.4% 28.2% EBIT margin - adjusted* 22.6% 21.5% 381 312 Profit before tax 1,209 874 289 256 Net income 938 674 292 291 Net income adjusted* 905 786 40.6p 35.7p EPS, basic, as reported 131.2p 93.5p 40.0p 39.9p EPS, adjusted and diluted* 123.4p 107.1p * Adjusted to exclude the impact of exceptional items. Group Balance Sheet Data December 31, December 31, 2007 2006 £m £m Net working capital * (826) (728) Net debt (125) (660) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. Shares in Issue Millions 31 December 2006 716.0 Issued or transferred from Treasury 6.2 Repurchased and transferred to Treasury (8.7) 30 September 2007 713.5 Issued or transferred from Treasury 0.9 Repurchased and transferred to Treasury (2.4) 31 December 2007 712.0 Group income statement (unaudited) Quarter Ended December 31 Year Ended December 31 2007 2006 % change 2007 2006 % change £m £m £m £m 1,372 1,293 6% Net revenues 5,269 4,922 7% (549) (534) 3% Cost of sales (2,197) (2,133) 3% 823 759 8% Gross profit 3,072 2,789 10% (438) (440) 0% Net operating expenses (1,839) (1,879) -2% 385 319 21% Operating profit 1,233 910 35% 389 364 7% Operating profit before exceptional 1,190 1,059 12% items (4) (45) - Exceptional items 43 (149) - 385 319 21% Operating profit 1,233 910 35% (4) (7) -43% Net finance expense (24) (36) -33% 381 312 22% Profit before taxation 1,209 874 38% (92) (56) 64% Taxation (271) (200) 36% 289 256 13% Profit for the period 938 674 39% 0 0 - Attributable to minority interests 0 0 - 289 256 13% Attributable to equity shareholders 938 674 39% 289 256 13% Profit for the period 938 674 39% Earnings per ordinary share: 40.6p 35.7p On profit for the period 131.2p 93.5p 39.6p 35.1p On profit for the period, diluted 127.9p 91.8p Earnings per ordinary share - adjusted*: 41.0p 40.6p On profit for the period 126.6p 109.1p 40.0p 39.9p On profit for the period, diluted 123.4p 107.1p * Adjusted to exclude the impact of exceptional items. Average common shares outstanding: (millions) 712.5 717.6 Basic 715.0 720.7 730.3 729.8 Diluted 733.6 734.2 Group balance sheet For the year ended December 31 (unaudited) 2007 2006 £m £m ASSETS Non-current assets: Goodwill and other intangible assets 3,811 3,842 Property, plant and equipment 479 425 Deferred tax assets 106 144 Other receivables 30 10 4,426 4,421 Current assets: Inventories 382 322 Trade and other receivables 693 670 Available for sale financial assets 39 19 Cash and cash equivalents 328 305 1,442 1,316 Total Assets 5,868 5,737 LIABILITIES Current liabilities: Borrowings (487) (973) Provisions (36) (47) Trade and other payables (1,901) (1,720) (2,424) (2,740) Non-current liabilities: Borrowings (5) (11) Deferred tax liabilities (705) (766) Retirement benefit obligations (187) (216) Provisions (19) (15) Other liabilities (143) (123) (1,059) (1,131) Total liabilities (3,483) (3,871) Net assets 2,385 1,866 EQUITY Capital and reserves: Share capital 72 76 Share premium account - 527 Capital redemption reserve - 5 Merger reserve (14,233) 142 Hedging reserve (6) (1) Retained earnings 16,550 1,114 2,383 1,863 Equity minority interest 2 3 Total equity 2,385 1,866 Statement of Recognised Income and Expense For the year ended December 31 (unaudited) 2007 2006 £m £m Profit for the year 938 674 Net exchange adjustments on foreign currency 93 (194) translation Net actuarial gains and losses 20 28 Deferred tax movements on items taken to reserves 18 - Net hedged gains and losses taken to reserves (5) - Net gains/(losses) not recognised in the income 126 (166) statement Total recognised income for the year 1,064 508 Group cash flow statement For the year ended December 31 (unaudited) 2007 2006 £m £m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 1,233 910 Depreciation 84 88 Amortisation 9 9 Impairment of tangible assets 5 23 Impairment of intangible assets 27 14 Fair value (gains)/losses (2) (2) (Gain)/loss on sale of property, plant and equipment (1) - and intangible assets (Gain)/loss on disposal of subsidiary undertaking (127) - (Increase) / decrease in inventories (39) (28) (Increase) / decrease in trade and other receivables (13) (23) Increase / (decrease) in payables and provisions 3 195 Share award expense 52 42 Cash generated from operations: 1,231 1,228 Interest paid (46) (50) Interest received 22 20 Tax paid (232) (181) Net cash generated from operating activities 975 1,017 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and (134) (88) intangible assets Disposal of property, plant and equipment 19 19 Acquisition of businesses - (1,893) Disposal of subsidiary undertaking 260 - Maturity of short term investments (17) 57 Net cash (used) / generated by investing activities 128 (1,905) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 52 56 Share purchases (300) (300) Proceeds from borrowings - 1,250 Repayments of borrowings (503) (473) Dividends paid to the Company's shareholders (358) (300) Net cash generated / (used) in financing activities (1,109) 233 Net (decrease) / increase in cash and cash (6) (655) equivalents Cash and cash equivalents at beginning of period 298 969 Exchange gains/ (losses) 19 (16) Cash and cash equivalents at end of period 311 298 Cash and cash equivalents comprise Cash and cash equivalents 328 305 Overdraft (17) (7) 311 298 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 975 1,017 Net purchase of property, plant and equipment (114) (64) Net cash flow from operations 861 953 Management uses net cash flow from operations as a performance measure. Segmental Analysis (unaudited) Analyses by geographical area (primary segment) of net revenues and operating profit and of net revenues by product group (secondary segment) are set out below. The figures for each geographical area show the net revenues and profit made by companies located in that area. Additional information is provided to show profit by class of business. Primary segment: Geographical Area Quarter Ended December 31 Year Ended December 31 2007 2006 % Change 2007 2006 % Change £m £m exch. Rates £m £m exch rates actual const. actual const. Net revenues 705 673 5% 1% Europe 2,813 2,624 7% 7% 418 394 6% 9% North America & Australia 1,488 1,421 5% 11% 249 226 10% 10% Developing Markets 968 877 10% 15% 1,372 1,293 6% 5% 5,269 4,922 7% 10% Operating profit 221 159 39% 36% Europe 750 522 44% 44% 147 131 12% 15% North America & Australia 379 308 23% 30% 17 29 -41% -35% Developing Markets 104 80 30% 41% 385 319 21% 21% 1,233 910 35% 39% Operating profit - adjusted* 199 185 8% 6% Europe 681 618 10% 11% 147 145 1% 4% North America & Australia 379 344 10% 16% 43 34 26% 30% Developing Markets 130 97 34% 43% 389 364 7% 7% Subtotal before 1,190 1,059 12% 15% exceptional items (4) (45) Exceptional items 43 (149) 385 319 21% 21% 1,233 910 35% 39% % % Operating margin - adjusted* % % 28.2 27.5 Europe 24.2 23.6 35.2 36.8 North America & Australia 25.5 24.2 17.3 15.0 Developing Markets 13.4 11.1 28.4 28.2 Subtotal before 22.6 21.5 exceptional items * Adjusted to exclude the impact of exceptional items. Segmental Analysis (continued) Secondary Segment: Product Segment Quarter Ended December 31 Year Ended December 31 2007 2006 % change 2007 2006 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenues 306 288 6% 3% Fabric Care 1,241 1,194 4% 5% 249 229 9% 8% Surface Care 951 909 5% 8% 167 155 8% 5% Dishwashing 616 591 4% 5% 218 194 12% 11% Home Care 779 692 13% 16% 291 282 3% 2% Health & Personal Care * 1,199 1,078 11% 13% 18 29 -38% -37% Other Household 81 108 -25% -21% 1,249 1,177 6% 4% Household and Health & 4,867 4,572 6% 9% Personal Care 62 53 17% 21% Pharmaceuticals * 211 156 35% 42% 61 63 -3% 3% Food 191 194 -2% 7% 1,372 1,293 6% 5% 5,269 4,922 7% 10% * 2006 Comparatives have been reclassified to separately disclose Pharmaceuticals, previously included within Health & Personal Care. Net revenues of £560m in respect of the acquisition of BHI are included within Health & Personal Care in 2007. On an underlying basis, growth of Health & Personal Care is 12% for YTD and 14% for Q4 at constant rates. Additional Information Operating profit - by product segment 330 305 8% 9% Household and Health & 1,021 926 10% 13% Personal Care 34 33 3% 2% Pharmaceuticals 118 84 40% 44% 25 26 -4% -1% Food 51 49 4% 10% 389 364 7% 7% Subtotal before exceptional 1,190 1,059 12% 15% items (4) (45) Exceptional items 43 (149) 385 319 21% 21% 1,233 910 35% 39% % % Operating margin - by % % product segment 26.4 25.9 Household and Health & 21.0 20.3 Personal Care 54.8 62.3 Pharmaceuticals 55.9 53.8 41.0 41.3 Food 26.7 25.3 28.4 28.2 Subtotal before exceptional 22.6 21.5 items Earnings per ordinary share For the year ended December 31 (unaudited) Reported Basis The reconciliation of the weighted average number of shares used in the calculations of the basic and diluted earnings per share is set out below: 2007 2006 Profit Average Earnings Profit Average Earnings for the Number of per for number of per year £m Shares share the shares share pence year pence £m Profit attributable to 938 715,039,130 131.2 674 720,685,570 93.5 shareholders Dilution for Executive 17,345,740 12,365,411 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,240,227 1,145,515 Sharesave Scheme options outstanding On a diluted basis 938 733,625,097 127.9 674 734,196,496 91.8 Adjusted Basis The reconciliation of the weighted average number of shares used in the calculations of the basic and diluted earnings per share is set out below: 2007 2006 Profit Average Earnings Profit Average Earnings for the Number of per for number of per year £m Shares share the shares share pence year pence £m Profit attributable to 905 715,039,130 126.6 786 720,685,570 109.1 shareholders Dilution for Executive 17,345,740 12,365,411 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,240,227 1,145,515 Sharesave Scheme options outstanding On a diluted basis 905 733,625,097 123.4 786 734,196,496 107.1 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the restructuring charge net of tax, provides the most meaningful measure of earnings per ordinary share.

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