Final Results

A World Leader in Household, Health and Personal Care 10 February 2010 RECKITT BENCKISER GROUP PLC 2009: A VERY GOOD YEAR FURTHER GROWTH TARGETED IN 2010 Results at a Q4 % change % change FY % change % change glance £m actual constant £m actual constant exchange exchange exchange exchange (unaudited) Net Revenue 2,063 +13 +10 7,753 +18 +8 Operating 605 +15 +14 1,891 +26 +14 Profit - reported Operating 605 +15 +14 1,891 +23 +12 Profit - adjusted * Net Income - 448 +14 +14 1,418 +27 +15 reported Net Income - 448 +14 +14 1,418 +24 +13 adjusted * EPS (diluted) 60.3p +10 194.7p +26 - reported EPS (diluted) 60.3p +10 194.7p +23 - adjusted * * Adjusted results (including % change figures) exclude exceptional items (see page 2). There are no exceptional items for the Full Year (FY) 2009 (Q4 2009: £nil) compared to an exceptional charge of £30m pre-tax in FY 2008 (Q4 2008: £ nil). FY highlights: Total net revenue +8% (constant exchange), driven by growth in the Group's 17 Powerbrands. Excluding Reckitt Benckiser Pharmaceuticals ("RBP"), net revenue was ahead +6% (at constant). Gross margin +90bp to 60.2%: adjusted operating margin +100bp to 24.4%. Adjusted net income +24% (actual exchange): adjusted diluted EPS of 194.7p (+23%). Net cash of £220m (2008: net debt of £1,096m), as a result of ongoing strong free cash flow generation. Net working capital of minus £1,257m, a £160m improvement versus the 31 December 2008 level. The Board recommends a +19% increase in the final dividend to 57.0p per share, bringing the total dividend for 2009 to 100.0p (+25% versus 2008). Q4 highlights: Total net revenue growth of +10% (constant exchange), +6% ex-RBP. Gross margin +100bp to 62.3%: adjusted operating margin +50bp to 29.3%. Adjusted net income +14% (actual exchange): adjusted diluted EPS of 60.3p (+10%). Commenting on these results, Bart Becht, Chief Executive Officer, said: "Reckitt Benckiser had a very good year in 2009 with net income growth of +13%, behind strong revenue growth of +8% (both at constant exchange). This performance was supported by the Group's 17 Powerbrands, behind significant investment in media and marketing and successful new product initiatives. Based on the current market outlook, we are confident of achieving continued good growth in 2010. Due to the uncertain timing of generic competition to Suboxone in the U.S., it is not considered appropriate to communicate targets for the total Group. For the business excluding RBP, our targets in 2010 are for net revenue growth of +5% (base: £7,144m) and for operating profit growth of +10% (base: £1,512m), both at constant exchange." Basis of Presentation and Exceptional Items Where appropriate, the term "adjusted" excludes the impact of exceptional items. There are no exceptional items in FY 2009, compared to an exceptional charge in FY 2008 mainly relating to integration costs arising from the acquisition of Adams Respiratory Therapeutics Inc. Detailed Operating Review Fourth quarter 2009 Q4 net revenue increased +13% to £2,063m, with growth of +10% at constant exchange. The gross margin improved by +100bp to 62.3%, largely as a result of easing input costs and benefits from cost optimisation programmes, partially offset by a negative transaction impact from foreign exchange. Total marketing investment was higher, and pure media spend increased by +8% (+4% constant) to a level of 10.1% of net revenue. Operating profit as reported was £605m, +15% higher than last year (+14% constant). The operating margin increased by +50bp to 29.3% due to gross margin expansion and operating cost efficiencies; this was partially offset by a charge predominantly relating to re-organisation in Europe. Net finance income was £2m (Q4 2008: net finance expense of £5m), reflecting strong free cash flow generation and progress made on net debt repayment during the quarter. The tax rate was 26%. Net income was £448m, an increase of 14% (+14% constant) on both a reported and adjusted basis versus Q4 2008. Diluted earnings per share (reported and adjusted bases) increased +10% to 60.3 pence. Full year 2009 FY net revenue increased +18% to £7,753m, with growth of +8% at constant exchange. The gross margin improved by +90bp to 60.2%, largely as a result of easing input costs and benefits from cost optimisation programmes, partially offset by a negative transaction impact from foreign exchange. Total marketing investment was higher, and pure media spend rose +6% (-3% constant) to a level of 11.1% of net revenue. There was significant growth in Other Consumer Marketing, funded by savings from more favourable media rates. Operating profit as reported was £1,891m, +26% higher than last year (+14% constant): on an adjusted basis, operating profit was ahead +23% (+12% constant). The adjusted operating margin increased by +100bp to 24.4% due to gross margin expansion and operating cost efficiencies, partially offset by the re-organisation charge taken in Q4. Net finance income was £1m (FY 2008: net finance expense of £31m), reflecting strong free cash flow generation and progress made on net debt repayment during the year. The tax rate was 25%. Net income was £1,418m, an increase of +27% (+15% constant) versus FY 2008: on an adjusted basis, net income was up +24% (+13% constant). Diluted earnings per share of 194.7 pence was ahead +26% on a reported basis; on an adjusted diluted basis, the growth was +23%. FY 2009 Business Review Summary: % net revenue growth FY 2009 Growth at Constant Exchange Exchange Reported Europe +1% +6% +7% NAA +7% +15% +22% DvM +16% +10% +26% Pharma* +50% +22% +72% TOTAL +8% +10% +18% * Pharma represents the Group's prescription drug business of Subutex and Suboxone The Business Review below is given at constant exchange rates. Europe 45% of net revenue FY 2009 total net revenue increased +1% to £3,511m, with growth largely in Dishwashing, Home Care and Health & Personal Care. In Dishwashing, the continued success of Quantum contributed to growth, while Home Care was supported by such initiatives as Airwick Freshmatic, Freshmatic Mini and <i> motion. In Health & Personal Care, Nurofen, Strepsils and Gaviscon all performed strongly, boosted by increased marketing investment. For the full year, the adjusted operating margin was -100bp below last year at 22.9%, owing to a re-organisation charge taken in Q4; this resulted in a -3% decline in adjusted operating profit to £804m. Excluding the charge, the operating margin increased +10bp to 24.0%. In Q4, net revenue rose +1% to £867m. As a result of the re-organisation charge taken in the quarter, adjusted operating profit was -14% lower at £204m, equating to a -450bp contraction in the margin. Excluding the charge, the operating margin was +10bp ahead at 28.1%. North America & Australia 28% of net revenue FY 2009 total net revenue increased +7% to £2,160m, with growth coming mainly in Surface Care, Home Care and Health & Personal Care. Increased consumption of Lysol spray and disinfectant wipes boosted growth in Surface Care, while Airwick Freshmatic and <i>motion contributed to the result in Home Care. In Health & Personal Care, growth was driven by Mucinex. Food performed well, with growth coming particularly from the consumer brands of French's Yellow Mustard, French's Fried Onions and Frank's Red Hot sauce. For the full year, adjusted operating profit increased +12% to £500m: the adjusted operating margin was +60bp higher at 23.1%. Q4 net revenue rose +8% to £614m and adjusted operating profit was ahead by +13% to £197m, equating to a +160bp uplift in the margin to 32.1%. Developing Markets 19% of net revenue FY 2009 net revenue was ahead +16% to £1,494m, with strong growth across all regions and driven particularly by Fabric Care, Surface Care and Health & Personal Care. In Fabric Care, increased marketing investment and new initiatives helped generate a strong performance for Vanish. In Surface Care, Harpic, and Veja in Brazil, were the key growth drivers. In Health & Personal Care, additional marketing investment helped drive an excellent result for the Dettol personal care range, with Veet and Gaviscon also both contributing strongly. For the full year, adjusted operating profit increased by +21% to £216m. This resulted in a +80bp improvement in the adjusted operating margin to 14.5%. Q4 net revenue increased by +19% to £388m. Adjusted operating profit improved +23% to £70m, with a +60bp uplift in the margin to 18.0%. Pharmaceuticals 8% of net revenue FY 2009 net revenue for the Group's Subutex and Suboxone prescription drug business grew +50% to £588m. These buprenorphine-based products are used to treat opiate dependence. This very strong growth was predominantly driven by a continued increase in penetration of Suboxone in the U.S. For the full year, the adjusted operating margin improved by +650bp to 63.1%. Adjusted operating profit was £371m, an increase of +63%. Q4 net revenue increased by +66% to £194m. Adjusted operating profit increased +109% to £134m, for a +1,360bp expansion in the margin to 69.1%. Suboxone has data exclusivity in Europe until 2016: in the U.S., Suboxone lost the exclusivity afforded by its Orphan Drug Status on 8th October 2009. Within the Pharmaceuticals division, the U.S. Suboxone business generated FY net revenue of £502m and adjusted operating profit of £345m. While the Group continues to search for ways to offset the impact of the loss of exclusivity in the U.S., up to 80% of the revenue and profit of that business might be lost in the year following the launch of generic competitors, with the possibility of further erosion thereafter. FY 2009 Category Review (at Constant Exchange Rates) Fabric Care. Net revenue was unchanged versus the prior year, at £1,578m. Vanish increased, driven by a strong performance in Developing Markets; Woolite also contributed, supported by such initiatives as Triple Protection. However, growth in the Powerbrands was offset by weakness in Laundry Detergents and Fabric Conditioners. Q4 net revenue was unchanged versus Q4 2008, at £375m. Surface Care. Net revenue increased +5% to £1,290m, driven by strong growth for the Dettol and Lysol ranges, and Veja in Brazil. Harpic Lavatory Care also performed well, supported by such new initiatives as Harpic liquid with Max Coverage. Q4 growth was +7% to £327m. Dishwashing. Net revenue increased +2% to £843m. The performance was led by the continued success of Finish Quantum behind increased investment, partially offset by weakness in Dishwashing Additives. Q4 growth was +4% to £215m. Home Care. Net revenue increased +4% to £1,036m. This growth was largely driven by Air Care, with Air Wick Freshmatic, Freshmatic Mini and <i>motion contributing. Q4 growth was +4% to £280m. Health & Personal Care. Net revenue increased +14% to £2,078m. In Healthcare, Nurofen, Strepsils, Gaviscon and Mucinex all contributed to a strong performance, while the Dettol personal wash range continued to deliver excellent growth. In Q4, Health & Personal care grew +13% to £567m. Total Household and Health & Personal Care. Net revenue was ahead by +6% to £ 6,890m. In Q4, total Household and Health & Personal Care grew +7% to £ 1,787m. Pharmaceuticals. FY 2009 net revenue for the Group's Subutex and Suboxone prescription drug business grew +50% to £588m, predominantly driven by a continued increase in penetration of Suboxone in the U.S. Adjusted operating profit was ahead +63% to £371m, equating to a +650bp improvement in the operating margin to 63.1%. Q4 net revenue increased by +66% to £194m, while adjusted operating profit increased +109% to £134m. Food. Net revenue grew +5% to £275m 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. Adjusted operating profit increased +3% to £73m. Q4 net revenue grew +2% and adjusted operating profit was £29m (-18%). New Initiatives: H1 2010 The Group has announced a number of new product initiatives for the first half of 2010: In Fabric Care: Launch of Vanish Oxi Action Extra Hygiene, removing bacteria in laundry (which can survive lower temperature washing), while delivering the same amazing stain removal. Roll-out of Woolite Complete, offering both gentle cleaning and complete fabric protection for all wash-loads. In Surface Care: Launch of Harpic liquid 5x, delivering five times better toilet bowl cleaning than bleach. Re-launch of Harpic ITB range with Baking Soda Force, offering even better cleaning and freshening. Re-launch of Cillit Bang Grime & Lime 4x, offering four times more effective limescale removal than leading brands. In Dishwashing: Launch of Finish Quantumatic, the world's first automatic detergent dispenser system, delivering the Finish Quantum's outstanding cleaning and shine automatically for up to one month. In Home Care: Launch of Airwick Aqua Mist, a new alternative to aerosols. Due to the lack of chemical propellants, Airwick Aqua Mist delivers invigorating and more natural fragrancing. In Health & Personal Care: Launch of Lysol No-Touch Hand Soap System. This new Lysol system removes the need to touch a grimy soap pump ever again, helping to stop the spread of germs and infection. Launch of Strepsils Handy Tube, a compact and portable packaging format allowing immediate sore throat relief anytime, anywhere. Launch of a range of Clearasil Overnight products (facial wash, lotion and serum), visibly reducing redness and spot size while sleeping. Launch of the Veet Suprem'Essence range with essential oils, for gentle and delicately-fragranced hair removal, leaving skin incredibly smooth and moisturised. 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 set out in the Group's 2008 Annual Report and Financial Statements, and as updated by the 2009 Interim Statement. 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 finance income. Net finance income was £1m, a £32m improvement compared to FY 2008 (net finance expense of £31m), reflecting strong free cash flow generation. Tax. The underlying tax rate was 25% (2008: 24%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) improved by £160m to minus £ 1,257m, mostly due to further improvement in payables. Cash flow. Cash generated from operating activities was £2,323m (2008: £ 1,640m) and net cash flow from operations was £1,803m (2008: £1,177m). Net interest paid was £4m (2008: £27m) and tax payments increased by £91m to £371m (2008: £280m). Capital expenditure was lower than the prior year at £158m (2008: £216m). Net cash at the end of the year was £220m (December 2008: net debt of £1,096m), an improvement of £1,316m. This reflected net cash flow from operations of £ 1,803m, offset by the payment of two dividends totaling £648m. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it, only £25m of which expires within one year. Balance sheet. At the end of 2009, the Group had shareholders' funds of £ 4,014m (2008: £3,294m), an increase of +22%. Net cash was £220m (2008: net debt of £1,096m) and total capital employed in the business was £3,794m (2008: £4,390m). This finances non-current assets of £6,891m (2008: £7,228m), of which £639m (2008: £637m) is tangible fixed assets, the remainder being goodwill, other intangible assets, deferred tax, available for sale financial assets and other receivables. The Group has net working capital of minus £1,257m (2008: minus £ 1,097m), current provisions of £88m (2008: £73m) and long-term liabilities other than borrowings of £1,752m (2008: £1,668m). The Group's financial ratios remain strong. Return on shareholders' funds (net income divided by total shareholders' funds) was 35.3% on both a reported and an adjusted basis (2008: reported basis 34.0%, adjusted basis 34.7%). Dividends. The Board of Directors recommends a final dividend of 57.0 pence (2008: 48.0 pence), an increase of +19%, to give a full year dividend of 100.0 pence (2008: 80.0 pence), an overall increase of +25%. The dividend, if approved by shareholders at the AGM on 6 May 2010, will be paid on 27 May to shareholders on the register at the record date of 26 February. The ex-dividend date is 24 February and the last date for election for the share alternative to the dividend is 6 May. The final dividend will be accrued once approved by shareholders. Contingent liabilities. The Group is involved in a number of enquiries from competition authorities. As such, it is too early to determine the likely outcome of these matters. Therefore, the Directors have made no provision for such potential liabilities. 2010 Targets Based on the current market outlook, the Group is confident of achieving continued good growth in 2010. Due to the uncertain timing of generic competition to Suboxone in the U.S., it is not considered appropriate to communicate targets for the total Group. For the business excluding RBP, the targets in 2010 are for net revenue growth of +5% (continuing operations, base: £7,144m) and for operating profit growth of +10% (continuing operations, base: £1,512m), both at constant exchange. For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd Global Director, Corporate Communications & Affairs Brunswick(Financial PR) +44 (0)20 7404 5959 Susan Gilchrist Senior Partner The preliminary results for the year ended 31 December 2009 and the results for the year ended 31 December 2008 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board. The unaudited financial statements for 2009 are prepared using accounting policies in accordance with those set out in the Group's 2008 Annual Report and Financial Statements, and as updated by the 2009 Interim Statement. The financial information set out in the announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2008 were approved by the Board of Directors on 10 March 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 237 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2009 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 Group's Annual General Meeting. 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 Year ended 31 December 31 December 2009 2008 2009 2008 £m £m £m £m 2,063 1,825 Net revenue - total 7,753 6,563 10% 15% Net revenue growth - constant 8% 13% 13% 33% Net revenue growth - total 18% 25% 62.3% 61.3% Gross margin 60.2% 59.3% 639 555 EBITDA 2,017 1,613 31.0% 30.4% EBITDA margin 26.0% 24.6% 605 525 EBIT 1,891 1,505 605 525 EBIT - adjusted * 1,891 1,535 29.3% 28.8% EBIT margin 24.4% 22.9% 29.3% 28.8% EBIT margin - adjusted * 24.4% 23.4% 607 520 Profit before tax 1,892 1,474 448 393 Net Income 1,418 1,120 448 393 Net Income - adjusted * 1,418 1,143 62.5p 55.4p EPS, basic, as reported 198.9p 157.6p 60.3p 54.6p EPS, adjusted and diluted * 194.7p 157.8p * Adjusted to exclude the impact of exceptional items. Group balance sheet data 31 December 31 December 2009 2008 £m £m Net working capital * (1,257) (1,097) Net cash / (debt) 220 (1,096) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. Shares in issue Millions 31 December 2008 708.7 Transferred from Treasury 11.2 31 December 2009 719.9 Group Income Statement Analysis (Unaudited) Quarter ended Year ended 31 December 31 December 2009 2008 % 2009 2008 % change change £m £m £m £m 2,063 1,825 +13 Net revenue 7,753 6,563 +18 (778) (706) +10 Cost of sales (3,089) (2,673) +16 1,285 1,119 +15 Gross profit 4,664 3,890 +20 (680) (594) +14 Net operating expenses (2,773) (2,385) +16 605 525 +15 Operating profit 1,891 1,505 +26 605 525 +15 Operating profit before exceptional items 1,891 1,535 +23 - - Exceptional items - (30) 605 525 +15 Operating profit 1,891 1,505 +26 3 9 Finance income 17 31 (1) (14) Finance expense (16) (62) 2 (5) Net finance income / (expense) 1 (31) 607 520 +17 Profit on ordinary activities before 1,892 1,474 +28 taxation (159) (127) +25 Tax on profit on ordinary activities (474) (354) +34 448 393 +14 Net income for the period 1,418 1,120 +27 0 0 Attributable to equity minority interests 0 0 448 393 +14 Attributable to ordinary equity holders of 1,418 1,120 +27 the parent 448 393 +14 Net income for the period 1,418 1,120 +27 Earnings per ordinary share: 62.5p 55.4p On net income for the period, basic 198.9p 157.6p 60.3p 54.6p On net income for the period, diluted 194.7p 154.7p Earnings per ordinary share - adjusted*: 62.5p 55.4p On net income for the period, basic 198.9p 160.9p 60.3p 54.6p On net income for the period, diluted 194.7p 157.8p * Adjusted to exclude the impact of exceptional items. Average common shares outstanding: (millions) 715.6 709.1 Basic 713.0 710.6 742.5 719.8 Diluted 728.2 724.1 Group Statement of Comprehensive Income For the year ended 31 December (unaudited) 2009 2008 £m £m Net income for the year 1,418 1,120 Other comprehensive income: Net exchange adjustments on foreign currency translation, net (191) 479 of tax Actuarial losses, net of tax (68) (74) Available for sale reserve, net of tax 8 (8) (Losses) / gains taken to reserves on cash flow hedges, (15) 19 net of tax Other comprehensive income for the year, net of tax (266) 416 Total comprehensive income for the year 1,152 1,536 Attributable to equity minority interests - - Attributable to ordinary equity shareholders of the parent 1,152 1,536 Group Balance Sheet For the year ended 31 December (unaudited) 2009 2008 £m £m ASSETS Non-current assets: Goodwill and other intangible assets 6,090 6,454 Property, plant and equipment 639 637 Deferred tax assets 121 93 Available for sale financial assets 16 25 Other receivables 25 19 6,891 7,228 Current assets: Inventories 486 556 Trade and other receivables 928 906 Derivative financial instruments 1 69 Available for sale financial assets 4 6 Cash and cash equivalents 351 417 1,770 1,954 Total assets 8,661 9,182 LIABILITIES Current liabilities: Borrowings (132) (1,571) Provisions for liabilities and charges (88) (73) Trade and other payables (2,286) (2,189) Tax liabilities (385) (383) (2,891) (4,216) Non-current liabilities: Borrowings (4) (4) Deferred tax liabilities (1,145) (1,172) Retirement benefit obligations (393) (316) Provisions for liabilities and charges (36) (31) Tax liabilities (158) (128) Other non-current liabilities (20) (21) (1,756) (1,672) Total liabilities (4,647) (5,888) Net assets 4,014 3,294 EQUITY Capital and reserves: Share capital 72 72 Merger reserve (14,229) (14,229) Hedging reserve (2) 13 Available for sale reserve - (8) Foreign currency translation reserve 229 420 Retained earnings 17,942 17,024 4,012 3,292 Equity minority interest 2 2 Total equity 4,014 3,294 Group Statement of Changes in Equity For the year ended 31 December (unaudited) Foreign Total Available currency attributable Share Merger Hedging for sale translation Retained to equity Minority capital reserve reserve reserve reserve earnings shareholders interest Total Balance at 1 January 2008 72 (14,229) (6) - (59) 16,605 2,383 2 2,385 Comprehensive income Net income for the year 1,120 1,120 1,120 Other comprehensive income Available for sale assets, net of tax (8) (8) (8) Actuarial losses, net of tax (74) (74) (74) Gains on cash flow hedges, net of tax 19 19 19 Net exchange adjustments on foreign currency translation, net of tax 479 479 479 Total other comprehensive income - - 19 (8) 479 (74) 416 - 416 Total comprehensive income - - 19 (8) 479 1,046 1,536 - 1,536 Transactions with owners Share based payments 59 59 59 Deferred tax on share awards (23) (23) (23) Current tax on share awards 15 15 15 Shares re-purchased and held in Treasury (300) (300) (300) Treasury shares re-issued 63 63 63 Dividends (441) (441) (441) Total transactions with owners - - - - - (627) (627) - (627) Balance at 31 December 2008 72 (14,229) 13 (8) 420 17,024 3,292 2 3,294 Comprehensive income Net income for the year 1,418 1,418 1,418 Other comprehensive income Available for sale assets, net of tax 8 8 8 Actuarial losses, net of tax (68) (68) (68) Losses on cash flow hedges, net of tax (15) (15) (15) Net exchange adjustments on foreign currency translation, net of tax (191) (191) (191) Total other comprehensive income - - (15) 8 (191) (68) (266) - (266) Total comprehensive income - - (15) 8 (191) 1,350 1,152 - 1,152 Transactions with owners Share based payments 59 59 59 Deferred tax on share awards (3) (3) (3) Current tax on share awards 29 29 29 Treasury shares re-issued 131 131 131 Dividends (648) (648) (648) Total transactions with owners - - - - - (432) (432) - (432) Balance at 31 December 2009 72 (14,229) (2) - 229 17,942 4,012 2 4,014 Group Cash Flow Statement For the year ended 31 December (unaudited) 2009 2008 £m £m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 1,891 1,505 Depreciation and amortisation of tangible / intangible 139 107 assets Fair value (gains)/losses (15) - Gain on sale of property, plant and equipment and intangible - 5 assets Other non-cash movements 2 - Decrease / (increase) in inventories 39 (65) (Increase) in trade and other receivables (12) (32) Increase in payables and provisions 220 61 Share award expense 59 59 Cash generated from operations: 2,323 1,640 Interest paid (23) (58) Interest received 19 31 Tax paid (371) (280) Net cash generated from operating activities 1,948 1,333 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and intangible (158) (216) assets Disposal of property, plant and equipment 11 9 Acquisition of businesses - (1,081) Maturity of short term investments 1 34 Maturity of long term investments 18 - Net cash (used) / generated by investing activities (128) (1,254) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 131 63 Share purchases - (300) Proceeds from borrowings - 1,146 Repayments of borrowings (1,359) (506) Dividends paid to the Company's shareholders (648) (441) Net cash used in financing activities (1,876) (38) Net (decrease) / increase in cash and cash equivalents (56) 41 Cash and cash equivalents at beginning of period 398 311 Exchange (losses) / gains (8) 46 Cash and cash equivalents at end of period 334 398 Cash and cash equivalents comprise Cash and cash equivalents 351 417 Overdraft (17) (19) 334 398 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 1,948 1,333 Net purchase of property, plant and equipment (145) (156) Net cash flow from operations 1,803 1,177 Management uses net cash flow from operations as a performance measure. Segment Information (Unaudited) Analyses by operating segment of net revenue, adjusted operating profit and statutory 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 Year ended 31 December 31 December 2009 2008 % change 2009 2008 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue 867 828 +5 +1 Europe 3,511 3,269 +7 +1 614 567 +8 +8 North America & Australia 2,160 1,766 +22 +7 388 311 +25 +19 Developing Markets 1,494 1,187 +26 +16 194 119 +63 +66 Pharmaceuticals 588 341 +72 +50 2,063 1,825 +13 +10 7,753 6,563 +18 +8 Operating profit - adjusted* 204 232 -12 -14 Europe 804 782 +3 -3 197 173 +14 +13 North America & Australia 500 397 +26 +12 70 54 +30 +23 Developing Markets 216 163 +33 +21 134 66 +103 +109 Pharmaceuticals 371 193 +92 +63 605 525 +15 +14 Subtotal before exceptional items 1,891 1,535 +23 +12 - - Exceptional items - (30) 605 525 +15 +14 1,891 1,505 +26 +14 % % Operating margin - adjusted* % % 23.5 28.0 Europe 22.9 23.9 32.1 30.5 North America & Australia 23.1 22.5 18.0 17.4 Developing Markets 14.5 13.7 69.1 55.5 Pharmaceuticals 63.1 56.6 29.3 28.8 24.4 23.4 * Adjusted to exclude the impact of exceptional items. Additional information is provided to show statutory operating profit by segment. Operating profit - statutory basis 204 232 -12 -14 Europe 804 782 +3 -3 197 173 +14 +13 North America & Australia 500 367 +36 +20 70 54 +30 +23 Developing Markets 216 163 +33 +21 134 66 +103 +109 Pharmaceuticals 371 193 +92 +63 605 525 +15 +14 1,891 1,505 +26 +14 Segment Information (Unaudited), continued Product segment Quarter ended Year ended 31 December 31 December 2009 2008 % change 2009 2008 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue by category 375 360 +4 +0 Fabric Care 1,578 1,473 +7 +0 327 298 +10 +7 Surface Care 1,290 1,112 +16 +5 215 199 +8 +4 Dishwashing 843 754 +12 +2 280 262 +7 +4 Home Care 1,036 908 +14 +4 567 487 +16 +13 Health & Personal Care 2,078 1,682 +24 +14 23 19 +21 +19 Other Household 65 67 -3 -12 1,787 1,625 +10 +7 Household and Health & Personal 6,890 5,996 +15 +6 Care 194 119 +63 +66 Pharmaceuticals 588 341 +72 +50 82 81 +1 +2 Food 275 226 +22 +5 2,063 1,825 +13 +10 7,753 6,563 +18 +8 Operating profit - adjusted 442 428 +3 +2 Household and Health & Personal 1,447 1,282 +13 +4 Care 134 66 +103 +109 Pharmaceuticals 371 193 +92 +63 29 31 -6 -18 Food 73 60 +22 +3 605 525 +15 +14 Subtotal before exceptional items 1,891 1,535 +23 +12 - - Exceptional items - (30) 605 525 +15 +14 1,891 1,505 +26 +14 % % Operating margin - adjusted % % 24.7 26.3 Household and Health & Personal 21.0 21.4 Care 69.1 55.5 Pharmaceuticals 63.1 56.6 35.4 38.3 Food 26.5 26.5 29.3 28.8 24.4 23.4 Earnings per Ordinary Share For the year ended 31 December (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: 2009 2008 Net Average Earnings Net Average Earnings income number of per income number of per for the shares share for the shares share year pence year pence £m £m Net income attributable to 1,418 712,995,914 198.9 1,120 710,569,582 157.6 shareholders Dilution for Executive 14,342,618 12,491,457 options outstanding and Executive Restricted Share Plan Dilution for Employee 834,338 1,047,123 Sharesave Scheme options outstanding On a diluted basis 1,418 728,172,870 194.7 1,120 724,108,162 154.7 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: 2009 2008 Net Average Earnings Net Average Earnings income number of per income number of per for the shares share for the shares share year £m pence year £m pence Net income attributable to 1,418 712,995,914 198.9 1,143 710,569,582 160.9 shareholders Dilution for Executive 14,342,618 12,491,457 options outstanding and Executive Restricted Share Plan Dilution for Employee 834,338 1,047,123 Sharesave Scheme options outstanding On a diluted basis 1,418 728,172,870 194.7 1,143 724,108,162 157.8 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the exceptional charge (net of tax) in the prior year, provides the most meaningful measure of earnings per ordinary share.

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