FY Results 2010

A World Leader in Household, Health and Personal Care 9 February 2011 2010: A STRONG YEAR FURTHER GROWTH TARGETED IN 2011 Results at a Q4 % change % change FY % change % change glance £m actual constant £m actual constant exchange exchange exchange exchange (unaudited) Net Revenue 2,277 +10 +9 8,453 +9 +7 Like-for-like +5% +6% growth* Operating 602 +0 -3 2,130 +13 +10 Profit - reported Operating 703 +16 +13 2,231 +18 +15 Profit - adjusted ** Net Income - 414 -8 -10 1,568 +11 +8 reported Net Income - 507 +13 +11 1,661 +17 +15 adjusted ** EPS (diluted) 56.3p -7 213.8p +10 - reported EPS (diluted) 69.0p +14 226.5p +16 - adjusted ** * Like-for-like ("LFL") growth excludes the impact of changes in exchange rates, acquisitions and disposals. **Adjusted results (including % change figures) exclude exceptional items (see page 2). There was an exceptional pre-tax charge of £104m in Full Year (FY) 2010 relating to the acquisition of SSL International plc ("SSL") (Q4 2010: £ 104m), of which £101m is included in reported operating profit and £3m is an exceptional finance cost. There were no exceptional items in FY 2009. FY highlights: Total net revenue growth of +7% (at constant), to £8,453m. Group excluding SSL +6% LFL. Base business (ie, excluding Reckitt Benckiser Pharmaceuticals, "RBP") +5% LFL. Total gross margin +40bp to 60.6%: total adjusted operating margin +200bp to 26.4%. Total adjusted net income +17% (actual exchange) and adjusted diluted EPS of 226.5p (+16%): no material impact on growth from the acquisition of SSL. Net working capital of minus £900m, £357m adverse compared to the 31 December 2009 level, mostly due to the impact of consolidating SSL and an increase in RBP receivables following the buyback of the rights in Europe and Rest of the World from Merck & Co., Inc. ("Merck"). Net debt of £2,011m (2009: net cash of £220m), as a result of the acquisition of SSL International plc ("SSL"). The Board recommends a +14% increase in the final dividend to 65p per share, bringing the total dividend for 2010 to 115p (+15% versus 2009). Q4 highlights: Total net revenue growth of +9% (at constant). Group ex-SSL +5% LFL. Base business +4% LFL. Total gross margin -80bp to 61.5%: total adjusted operating margin +160bp to 30.9%. Total adjusted net income +13% (actual exchange): adjusted diluted EPS of 69.0p (+14%). Commenting on these results, Bart Becht, Chief Executive Officer, said: "Reckitt Benckiser enjoyed another year of market-beating results, despite declining global market growth. As targeted, like-for-like net revenue growth was +6% for the Group excluding SSL and +5% for the base business, driven in particular by excellent Developing Markets growth. Total adjusted net income growth of +15% (at constant) was also strong. This is further evidence that our strategy of focusing on our Powerbrands, behind new product initiatives and high levels of marketing investment, is one that continues to deliver. The progress we have made on the recently introduced and patented-protected Suboxone film is very encouraging. As is well known, our Suboxone tablets can become subject to generic competition at any time, and moving more of our business into the film has been a key priority. At the end of 2010, the Suboxone film had captured a 25% volume share of the U.S. market, well ahead of our ingoing expectations, and at this level it would represent approximately 23% of the total RBP U.S. net revenue. For 2011, we are aiming for another year of above industry-average growth: For the Group excluding SSL, our target is for +4% like-for-like net revenue growth, with profit growth ahead of that. This net revenue target compares to a global market which is currently showing no growth. For the recently-acquired SSL business, we are also targeting around +4% net revenue growth on a like-for-like basis (base: £762m): in addition, we are aiming to add 50% of the £100m cost synergies to the current profit level. For RBP, we continue to target further market share growth for the film variant. At this time, we have no new intelligence as to the timing of potential generic competition to the Suboxone tablets in the U.S. Taking all of the above into consideration, the targets for the total Group are for +12% net revenue growth (base: £8,453m) and +10% adjusted net income growth (excluding exceptional charges, base: £1,661m), both at constant exchange. These targets exclude the potential impact of generic competition to the Suboxone tablets in the U.S., and will be adjusted downwards in the event that generic competition emerges. " Basis of Presentation and Exceptional Items The results include the business of SSL International plc ("SSL") from 1st November 2010, the date of acquisition. Where appropriate, the term like-for-like describes the performance of the business on a comparable basis, excluding the impact of acquisitions, disposals, discontinued operations and foreign exchange. Where appropriate, the term "base business" represents the Europe, North America & Australia and Developing Markets geographic areas, and excludes RBP and SSL. Where appropriate, the term "adjusted" excludes the impact of exceptional items. There was an exceptional pre-tax charge of £104m in FY 2010 mainly relating to integration and transaction costs arising from the acquisition of SSL International plc. This exceptional pre-tax charge is reflected in reported operating profit (£101m, of which £22m relates to transaction fees) and net interest (£3m, being financing costs associated with the acquisition). There were no exceptional items in FY 2009. Detailed Operating Review Unless otherwise stated, the detailed operating review below relates to the results of the total Group and includes the impact of SSL. Fourth quarter 2010 Q4 net revenue increased +10% (+9% at constant exchange) to £2,277m, with LFL growth of +5% for the Group excluding SSL and +4% LFL for the base business. SSL contributed £90m in the quarter. The gross margin declined by -80bp to 61.5%, as a result of higher promotional spend compared to Q4 2009, combined with a lesser benefit from input cost savings than in previous quarters. Total marketing was higher, and pure media spend rose +10% (+8% constant) to a level of 9.9% of net revenue. Operating profit as reported was £602m, unchanged versus Q4 2009 (-3% constant) owing to an exceptional pre-tax charge of £101m in respect of the acquisition of SSL. On an adjusted basis, operating profit was ahead +16% (+13% constant) to £703m. The adjusted operating margin increased by +160bp to 30.9% due to operating cost efficiencies. For the base business, adjusted operating profit rose +10% (+9% constant) to £516m, equating to a +120bp improvement in the margin. Net finance expense was £5m (Q4 2009: net finance income of £2m), of which £3m is an exceptional charge in respect of financing costs associated with the acquisition of SSL. The tax rate was 27%, this higher rate being the consequence of a small increase in the full year rate, itself being due to the less benign tax environment in which the Group now operates. Net income as reported was £414m, a decrease of -8% (-10% constant) versus Q4 2009: on an adjusted basis, net income increased +13% (+11% constant). Diluted earnings per share of 56.3 pence declined -7% on a reported basis; on an adjusted basis, the growth was +14% to 69.0 pence. Full year 2010 FY net revenue increased +9% (+7% constant) to £8,453m, with LFL growth of +6% for the Group excluding SSL and +5% LFL for the base business. SSL contributed £90m to the full year. The gross margin improved by +40bp to 60.6%, largely as a result of input cost savings, benefits from cost optimisation programmes and a positive transaction impact from foreign exchange, partially offset by higher promotional spend. Total marketing was higher, and pure media spend rose +5% (+3% constant) to a level of 10.7% of net revenue. Operating profit as reported was £2,130m, +13% higher than last year (+10% constant) owing to an exceptional pre-tax charge of £101m taken in Q4 in respect of the acquisition of SSL. On an adjusted basis, operating profit was ahead +18% (+15% constant), with the adjusted operating margin up +200bp to 26.4% due to gross margin expansion and operating cost efficiencies. For the base business, adjusted operating profit rose +12% (+10% constant) to £1,697m, equating to a +110bp improvement in the margin. Net finance income was £6m (FY 2009: net finance income of £1m), with strong free cash flow generation during the year partly offset by the payment in respect of the acquisition of SSL in November. The FY net finance income includes a £3m exceptional charge in respect of financing costs associated with the acquisition of SSL. The tax rate was 26%, this higher rate being reflective of the less benign tax environment in which the Group now operates. Net income was £1,568m, an increase of +11% (+8% constant) versus FY 2009: on an adjusted basis, net income was up +17% (+15% constant). Diluted earnings per share of 213.8 pence was +10% higher on a reported basis; on an adjusted diluted basis, the growth was +16% to 226.5 pence. FY 2010 Business Review Summary: % net revenue growth FY 2010 Like-for-like Acquisitions & disposals Exchange Reported Europe +0% -1% -1% -2% NAA +3% -1% +5% +7% DvM +18% - +8% +26% Base business +5% -1% +2% +6% RBP* +24% - +1% +25% Group ex-SSL +6% - +2% +8% SSL - +1% - +1% TOTAL +6% +1% +2% +9% * RBP represents the Group's prescription drug business of Subutex and Suboxone The Business Review below is given at constant exchange rates. Europe 41% of net revenue FY 2010 total net revenue decreased -1% (+0% LFL) to £3,429m, with growth coming mainly in Health & Personal Care, Home Care and Dishwashing. In Health & Personal Care, the launch of the No Touch Hand Soap System contributed to growth in Dettol, with a further contribution from Nurofen, Gaviscon and Strepsils. The increase in Home Care was helped by the launch of Air Wick Aqua Mist and Air Wick Ribbons, with the growth in Dishwashing coming from the continued success of Quantum. The result in Fabric Care was impacted by increased competitive activity for Vanish, and weakness in Water Softeners and Laundry Detergents. For the full year, the operating margin was +110bp above last year at 24.0%, with operating profit of £823m. In Q4, net revenue growth was unchanged (+0% LFL), at £834m. Operating profit was +17% higher at £226m, with the operating margin up +360bp at 27.1%. North America & Australia 27% of net revenue FY 2010 total net revenue increased +2% (+3% LFL) to £2,313m, with growth coming mainly in Health & Personal Care, Surface Care, Home Care and Dishwashing. The launch of the Lysol No Touch Hand Soap System drove growth in Health & Personal Care, while the result in Surface Care was supported by the Lysol surface care range. The launch of Air Wick Aqua Mist and Air Wick Ribbons contributed to the performance in Home Care, with Quantum supporting the increase in Dishwashing. Food increased as a result of a very 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, and boosted by new variants for these franchises. For the full year, operating profit increased +13% to £599m: the operating margin was +280bp higher at 25.9%. Q4 net revenue growth was unchanged (+1% LFL) at £647m and operating profit was ahead by +8% to £225m, equating to a +270bp uplift in the margin to 34.8%. Developing Markets 22% of net revenue FY 2010 net revenue was ahead +18% to £1,884m, with growth evident in all regions. In Health & Personal Care, the Dettol personal care range, comprising bar and liquid soaps and shower gels, continued to deliver excellent growth. Veet, Strepsils and Gaviscon also contributed strongly. In Fabric Care, Vanish delivered a strong result, while Dettol, Harpic and Veja all contributed to growth in Surface Care. The increase in Home Care was driven by Air Care, and supported by the launch of Aqua Mist. For the full year, operating profit increased by +21% to £275m. This resulted in a +10bp improvement in the operating margin to 14.6%. Q4 net revenue increased by +16% to £474m. Operating profit decreased -7% to £ 65m as a result of a significant increase in marketing spend, with a -430bp decline in the margin to 13.7%. Pharmaceuticals 9% of net revenue FY 2010 net revenue for the Group's Subutex and Suboxone prescription drug business grew +24% to £737m. These buprenorphine-based products are used to treat opiate dependence. This growth was driven by an increase in the number of patients treated with Suboxone in the U.S. and price increases. The net revenue performance was further helped by the full inclusion of a number of countries in Europe and Rest of the World from 1st July 2010, as a result of the majority of sales, marketing and distribution rights to the buprenorphine-containing products Suboxone, Subutex and Temgesic being bought back by the Group. For the full year, the operating margin improved by +890bp to 72.0%. Operating profit was £531m, an increase of +37%. Q4 net revenue increased by +17% to £232m. Operating profit increased +25% to £184m, for a +1,020bp expansion in the margin to 79.3%. 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. As a result of the loss of exclusivity in the U.S., up to 80% of the revenues and profits of the Suboxone tablet business might be lost in the year following the launch of generic competitors, with the possibility of further erosion thereafter. To mitigate this potential impact, RBP introduced Suboxone sublingual film in September 2010, a patent-protected and patient-preferred delivery system. At the end of 2010, the market volume share for the sublingual film was 25%, and at this level it would represent c.23% of the total RBP U.S. net revenue (approximately £138m on an annualised basis). Further to an announcement on 19th March 2010, the majority of the sales, marketing and distribution rights to the buprenorphine-containing products Suboxone, Subutex and Temgesic were bought back by the Group, starting 1st July 2010. The rights apply to a number of countries in Europe and the Rest of World, and the consideration for the rights paid to Merck is approximately £ 100m. As a result, these countries are now fully included by the Group. On 31st August 2010, the Group announced that it had received approval from the U.S. Food and Drug Administration for its New Drug Application to manufacture and market Suboxone sublingual film. Suboxone sublingual film has been developed through an exclusive agreement with MonoSol Rx, utilising its proprietary PharmFilm® technology, to deliver Suboxone in a fast-dissolving sublingual film. As the Group is rapidly converting Suboxone tablets to the sublingual film, there is a short-term dilutive impact on net revenue and operating profit: however, this conversion much better protects the medium and long-term earnings stream from the Suboxone franchise in the U.S. Hence, in the event of generic competition to the tablet, the Group expects that the Suboxone sublingual film will help to mitigate the impact thereof. SSL 1% of net revenue Following consolidation on 1st November 2010, SSL delivered £90m net revenue in the two month period. Operating profit was £3m, after reflecting the cost of aligning SSL's trading practices with those of RB. For reference only The following information is pro forma to Reckitt Benckiser's December year-end and aligned with the Group's accounting policies, and is provided for reference purposes only. SSL delivered FY 2010 net revenue of £797m (+0% LFL). The new range of Feeling condoms, including RealFeel and Featherlite Ultra, boosted the performance of Durex, while the Hard Skin range of footcare products supported the result for Scholl. This growth was offset by weaker performance for the Local Brands and Other. Operating profit was £119m, equating to an operating margin of 14.9%. FY 2010 Category Review (at Constant Exchange Rates) Health & Personal Care (ex-SSL). Net revenue increased +6% to £2,265m. In Personal Care, the Dettol personal wash range continued to deliver excellent growth in Developing Markets and Europe, while the launch of the Dettol/Lysol No Touch Hand Soap System also contributed strongly. Veet increased, helped by the new Suprem'Essence range with essential oils. In Healthcare, a strong result for Gaviscon and Strepsils was mitigated by the impact of a challenging comparative in Q4 for Mucinex due to H1N1-related demand in Q4 2009. In Q4, Health & Personal care grew +4% to £598m. Fabric Care. Net revenue declined -1% to £1,576m, impacted by increased competitive activity for Vanish, and weakness in Water Softeners and Laundry Detergents. Q4 net revenue growth was unchanged versus Q4 2009, at £370m. Surface Care. Net revenue grew +4% to £1,391m. The Dettol/Lysol germ protection ranges increased, boosted by a strong result for Harpic behind new initiatives and continued excellent performance from Veja in Brazil. Q4 growth was +5% to £352m. Home Care. Net revenue increased +8% to £1,152m. In Air Care, growth was driven by the launch of Air Wick Aqua Mist and Air Wick Ribbons, while the performance in Pest Control was supported by the Mortein range of automatic sprays and a good pest season. Q4 growth was +8% to £310m. Dishwashing. Net revenue increased +3% to £875m. The performance was led by the continued success of Finish Quantum, with growth in dishwashing additives and the launch of Quantumatic also contributing. Q4 growth was +4% to £224m. Total Household and Health & Personal Care (ex-SSL). Net revenue was ahead by +4% to £7,322m. In Q4, total Household and Health & Personal Care grew +3% (+3% LFL) to £1,868m. RBP. FY 2010 net revenue for the Group's Subutex and Suboxone prescription drug business grew +24% to £737m, predominantly driven by a continued increase in the number of patients treated with Suboxone in the U.S. and the launch of the Suboxone sublingual film which, with a market volume share of 25% in the most recent reading, is well ahead of our ingoing expectations. The performance was further helped by the full inclusion of a number of countries in Europe and the Rest of the World from 1st July 2010, as a result of the majority of sales, marketing and distribution rights to the buprenorphine-containing products Suboxone, Subutex and Temgesic being bought back by the Group. Operating profit was ahead +37% to £531m, equating to a +890bp improvement in the operating margin to 72.0%. Q4 net revenue increased by +17% to £232m, while operating profit increased +25% to £184m. Food. Net revenue grew +9% to £304m with a very 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, and boosted by new variants for these franchises. Operating profit increased +19% to £87m. Q4 net revenue grew +9% and adjusted operating profit was £31m (+3%). SSL. Following consolidation on 1st November 2010, SSL delivered £90m net revenue in the two month period. Operating profit was £3m. New Initiatives: H1 2011 The Group has announced a number of new product initiatives for the first half of 2011: In Health & Personal Care: Continued roll-out of the Lysol / Dettol No-Touch Hand Soap System into new geographies. Launch of a stainless look version in the U.S., and new fragrance variants. Launch of Nuromol, a new ibuprofen - paracetamol combination tablet. Nuromol uses a patented manufacturing process called Synchrotec™ Technology, so that the active ingredients are released in a pre-determined way which leads to superior pain relief for longer. Launch of ClearasilUltra Acne + Marks, a wash / mask and spot lotion which helps reduce the appearance of visible marks left behind by pimples, as well as helping to reduce redness and pimple size in four hours. Launch of VeetEasyGrip wax strips, made with a specially developed grip tab and designed to give even better long-lasting results. Launch of Durex Play Massage 2 in 1, an intimate lube which can also be used for all-over body massage, in either a sensual or stimulating fragrance. Launch of Scholl Fungal Nail Treatment, which kills 99.9% of nail fungus, helping prevent the spread and recurrence of infection. Launch of Scholl Hard Skin 2 in 1 Removal System, an easy and convenient way to treat hard skin, which is clinically proven to improve the look and feel of feet. In Fabric Care: Launch of Resolve QuicknClean carpet cleaning system, offering deeper ground-in dirt removal and greater carpet coverage in a convenient all-inclusive kit. In Surface Care: Re-launch of the Cillit Bang range, offering even better performance for specific cleaning tasks, as well as great effectiveness on a range of over forty stains. Launch of the Harpic Max in-the-bowl rim block, which cleans both above and below the water line and provides continuous fragrance for up to four weeks. In Home Care: Launch of Air Wick Freshmatic Odour Detect, which provides an instant boost of freshness when odour is detected, on top of regular automatic sprays of freshness. Launch of Air Wick 100% natural propellant spray, a new range of aerosols propelled only by fresh air, to deliver a cleaner fragrance experience. Roll-out of Air Wick Touch of Luxury White Collection, an elegant range of natural, crisp fragrances, available in Freshmatic, electrical, candle and aerosol formats. 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 2009 Annual Report and Financial Statements, and as updated by the 2010 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 £6m, a £5m improvement compared to FY 2009 (£1m), reflecting strong free cash flow generation during the year. The FY 2010 net finance income includes a £3m exceptional charge in respect of financing costs associated with the acquisition of SSL. Tax. The underlying tax rate was 26% (2009: 25%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) of minus £900m was £357m adverse compared to the 31 December 2009 level, mostly due to the impact of consolidating SSL and an increase in RBP receivables following the buyback of the rights in Europe and Rest of the World from Merck. Cash flow. Cash generated from operating activities was £2,215m (2009: £ 2,323m) and net cash flow from operations was £1,386m (2009: £1,803m). Net interest received was £8m (2009: net interest paid of £4m) and tax payments increased by £308m to £679m (2009: £371m) following the settlement of a number of outstanding matters. Capital expenditure was higher than the prior year at £367m (2009: £158m), due to the buy back of the remaining sales, marketing and distribution rights to Suboxone, Subutex and Temgesic in Europe and the Rest of the World and the investment in certain health and personal care brands from Combe Incorporated. Net debt at the end of the year was £2,011m (December 2009: net cash of £220m), an increase of £2,231m. This reflected net cash flow from operations of £ 1,386m, offset by the acquisition of SSL for £2,466m (net of cash acquired) in November, the payment of two dividends totaling £773m, the buy back of the remaining sales, marketing and distribution rights to Suboxone, Subutex and Temgesic in Europe and the Rest of World and the investment in certain health and personal care brands from Combe Incorporated. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it. Balance sheet. At the end of 2010, the Group had shareholders' funds of £ 5,130m (2009: £4,014m), an increase of +28%. Net debt was £2,011m (2009: net cash of £220m) and total capital employed in the business was £7,141m (2009: £ 3,794m). This finances non-current assets of £10,700m (2009: £6,891m), of which £740m (2009: £639m) 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 £900m (2009: minus £ 1,257m), current provisions of £164m (2009: £88m) and long-term liabilities other than borrowings of £2,493m (2009: £1,752m). The Group's financial ratios remain strong. Return on shareholders' funds (net income divided by total shareholders' funds) was 30.6% on a reported basis and 32.4% on an adjusted basis (2009: 35.3% on both a reported and an adjusted basis). Dividends. The Board of Directors recommends a final dividend of 65 pence (2009: 57 pence), an increase of +14%, to give a full year dividend of 115 pence (2009: 100 pence), an overall increase of +15%. The dividend, if approved by shareholders at the AGM on 5 May 2011, will be paid on 26 May to shareholders on the register at the record date of 25 February. The ex-dividend date is 23 February and the last date for election for the share alternative to the dividend is 5 May. The final dividend will be accrued once approved by shareholders. Contingent liabilities. The Group is involved in a number of investigations by competition authorities in Europe and has made provisions for such investigations, where appropriate. Where it is too early to determine the likely outcome of these matters, the Directors have made no provision for such potential liabilities. During 2010, one case has been settled with the Office of Fair Trading in relation to Gaviscon for an amount of £10.2m. The Group from time to time is involved in disputes in relation to ongoing tax matters in a number of jurisdictions around the world. Where appropriate, the Directors make provisions based on their assessment of each case. 2011 Targets For 2011, the Group is aiming for another year of above industry-average growth: For the Group excluding SSL, the target is for +4% like-for-like net revenue growth, with profit growth ahead of that. This net revenue target compares to a global market which is currently showing no growth. For the recently-acquired SSL business, the Group is also targeting around +4% net revenue growth on a like-for-like basis (base: £762m): in addition, the Group is aiming to add 50% of the £100m cost synergies to the current profit level. An exceptional pre-tax charge in the region of £150m is expected to be incurred in 2011, of which around £4m will be exceptional financing costs. This brings the total pre-tax exceptional charge in respect of the acquisition of SSL and further reconfiguration of the enlarged Group to around £250m, of which approximately £216m relates to restructuring and c.£34m is transaction costs. For RBP, the Group continues to target further market share growth for the film variant. At this time, the Group has no new intelligence as to the timing of potential generic competition to the Suboxone tablets in the U.S. Taking all of the above into consideration, the targets for the total Group are for +12% net revenue growth (base: £8,453m) and +10% adjusted net income growth (excluding exceptional charges on a base: of £1,661m), both at constant exchange. These targets exclude the potential impact of generic competition to the Suboxone tablets in the U.S., and will be adjusted downwards in the event that generic competition emerges. For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communications and Affairs Brunswick(Financial PR) +44 (0)20 7404 5959 David Litterick / Teresa Bianchi The preliminary results for the year ended 31 December 2010 and the results for the year ended 31 December 2009 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 2010 are prepared using accounting policies in accordance with those set out in the Group's 2009 Annual Report and Financial Statements, and as updated by the 2010 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 2009 were approved by the Board of Directors on 15 March 2010 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 498 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2010 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 2010 2009 2010 2009 £m £m £m £m 2,277 2,063 Net revenue - total 8,453 7,753 +5% +10% Net revenue growth - like-for-like +6% +8% +9% +10% Net revenue growth - constant +7% +8% +10% +13% Net revenue growth - total +9% +18% 61.5% 62.3% Gross margin 60.6% 60.2% 754 639 EBITDA - adjusted* 2,375 2,017 33.1% 31.0% EBITDA margin - adjusted* 28.1% 26.0% 602 605 EBIT 2,130 1,891 703 605 EBIT - adjusted * 2,231 1,891 26.4% 29.3% EBIT margin 25.2% 24.4% 30.9% 29.3% EBIT margin - adjusted * 26.4% 24.4% 597 607 Profit before tax 2,136 1,892 414 448 Net income 1,568 1,418 507 448 Net income - adjusted * 1,661 1,418 57.0p 62.5p EPS, basic, as reported 216.5p 198.9p 69.0p 60.3p EPS, adjusted and diluted * 226.5p 194.7p * Adjusted to exclude the impact of exceptional items. Group balance sheet data 31 December 31 December 2010 2009 £m £m Net working capital * (900) (1,257) Net (debt) / cash (2,011) 220 * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. Shares in issue Millions 31 December 2009 719.9 Issued / transferred from Treasury 6.0 31 December 2010 725.9 Group Income Statement Analysis (Unaudited) Quarter ended Year ended 31 December 31 December 2010 2009 % 2010 2009 % change change £m £m £m £m 2,277 2,063 +10 Net revenue 8,453 7,753 +9 (877) (778) Cost of sales (3,332) (3,089) 1,400 1,285 +9 Gross profit 5,121 4,664 +10 (798) (680) Net operating expenses (2,991) (2,773) 602 605 +0 Operating profit 2,130 1,891 +13 703 605 +16 Operating profit before exceptional 2,231 1,891 +18 items (101) - Exceptional items: (101) - (79) - - Exceptional restructuring charge (79) - (22) - - Transaction costs in respect of (22) - acquisitions 602 605 +0 Operating profit 2,130 1,891 +13 6 3 Finance income 21 17 (11) (1) Finance expense* (15) (16) (5) 2 Net finance income / (expense) 6 1 597 607 -2 Profit on ordinary activities before 2,136 1,892 +13 taxation (181) (159) Tax on profit on ordinary activities (566) (474) 416 448 -7 Net income for the period 1,570 1,418 +11 2 - Attributable to non-controlling 2 - interests 414 448 -8 Attributable to ordinary equity 1,568 1,418 +11 shareholders of the parent 416 448 -7 Net income for the period 1,570 1,418 +11 Earnings per ordinary share: 57.0p 62.5p On net income for the period, basic 216.5p 198.9p 56.3p 60.3p On net income for the period, diluted 213.8p 194.7p Earnings per ordinary share - adjusted**: 69.9p 62.5p On net income for the period, basic 229.4p 198.9p 69.0p 60.3p On net income for the period, diluted 226.5p 194.7p * FY 2010 includes an exceptional charge of £3m in respect of financial costs associated with the acquisition of SSL (Q4 2010: £3m). There were no exceptional charges in FY 2009 (Q4 2009: £nil). ** Adjusted to exclude the impact of exceptional items. Average common shares outstanding: (millions) 725.7 715.6 Basic 724.2 713.0 734.9 742.5 Diluted 733.3 728.2 Group Statement of Comprehensive Income For the year ended 31 December (unaudited) 2010 2009 £m £m Net income for the year 1,570 1,418 Other comprehensive income: Net exchange adjustments on foreign currency translation, net of 103 (191) tax Actuarial gains/(losses), net of tax 4 (68) Available for sale reserve, net of tax - 8 (Losses) taken to reserves on cash flow hedges, net of tax (2) (15) Other comprehensive income for the year, net of tax 105 (266) Total comprehensive income for the year 1,675 1,152 Attributable to non-controlling interests 3 - Attributable to ordinary equity shareholders of the parent 1,672 1,152 Group Balance Sheet For the year ended 31 December (unaudited) 2010 2009 £m £m ASSETS Non-current assets: Goodwill and other intangible assets 9,778 6,090 Property, plant and equipment 740 639 Deferred tax assets 141 121 Available for sale financial assets 12 16 Other receivables 29 25 10,700 6,891 Current assets: Inventories 646 486 Trade and other receivables 1,363 928 Derivative financial instruments 34 1 Available for sale financial assets 11 4 Cash and cash equivalents 588 351 2,642 1,770 Total assets 13,342 8,661 LIABILITIES Current liabilities: Borrowings (2,641) (132) Provisions for liabilities and charges (164) (88) Trade and other payables (2,616) (2,286) Tax liabilities (295) (385) (5,716) (2,891) Non-current liabilities: Borrowings (3) (4) Deferred tax liabilities (1,735) (1,145) Retirement benefit obligations (479) (393) Provisions for liabilities and charges (93) (36) Tax liabilities (178) (158) Other non-current liabilities (8) (20) (2,496) (1,756) Total liabilities (8,212) (4,647) Net assets 5,130 4,014 EQUITY Capital and reserves: Share capital 73 72 Share premium 59 - Merger reserve (14,229) (14,229) Hedging reserve (4) (2) Available for sale reserve - - Foreign currency translation reserve 331 229 Retained earnings 18,828 17,942 5,058 4,012 Non-controlling interest 72 2 Total equity 5,130 4,014 Group Statement of Changes in Equity For the year ended 31 December (unaudited) Foreign Total Available currency attributable Non- Share Share Merger Hedging for sale translation Retained to equity controlling capital premium reserve reserve reserve reserve earnings shareholders interests Total Balance at 1 January 72 - (14,229) 13 (8) 420 17,024 3,292 2 3,294 2009 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 Comprehensive income Net income for the year 1,568 1,568 2 1,570 Other comprehensive income Actuarial gains, net of tax 4 4 4 Losses on cash flow hedges, net of tax (2) (2) (2) Net exchange adjustments on foreign currency translation, net of tax 102 102 1 103 Total other comprehensive income - - - (2) - 102 1,572 1,672 3 1,675 Total comprehensive income Transactions with owners Share based payments 62 62 62 Deferred tax on share awards (7) (7) (7) Current tax on share awards 12 12 12 Non-controlling interest arising on business combination 67 67 Treasury shares re-issued 20 20 20 Dividends (773) (773) (773) Proceeds from share issue 1 59 60 60 Total transactions with owners 1 59 - - - - (686) (626) 67 (559) Balance at 31 December 2010 73 59 (14,229) (4) - 331 18,828 5,058 72 5,130 Group Cash Flow Statement For the year ended 31 December (unaudited) 2010 2009 £m £m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 2,130 1,891 Depreciation and amortisation of tangible / intangible assets 144 139 Fair value (gains) (3) (15) Gain on sale of property, plant and equipment and intangible (32) - assets Other non-cash movements 4 2 (Increase) / decrease in inventories (50) 39 (Increase) in trade and other receivables (243) (12) Increase in payables and provisions 203 220 Share award expense 62 59 Cash generated from operations: 2,215 2,323 Interest paid (11) (23) Interest received 19 19 Tax paid (679) (371) Net cash generated from operating activities 1,544 1,948 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (170) (156) Purchase of intangible assets (197) (2) Disposal of property, plant and equipment 12 11 Disposal of intangible assets 30 - Acquisition of businesses, net of cash acquired (2,466) - (Purchase) / maturity of short term investments (7) 1 Maturity of long term investments 8 18 Net cash (used) / generated by investing activities (2,790) (128) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 80 131 Proceeds from borrowings 2,966 - Repayments of borrowings (802) (1,359) Dividends paid to the Company's shareholders (773) (648) Net cash generated / (used) in financing activities 1,471 (1,876) Net increase / (decrease) in cash and cash equivalents 225 (56) Cash and cash equivalents at beginning of year 334 398 Exchange gains / (losses) 9 (8) Cash and cash equivalents at end of year 568 334 Cash and cash equivalents comprise Cash and cash equivalents 588 351 Overdraft (20) (17) 568 334 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 1,544 1,948 Net purchase of property, plant and equipment (158) (145) Net cash flow from operations 1,386 1,803 Management uses net cash flow from operations as a performance measure. Segment Information (Unaudited) Analyses by operating segment of net revenue and adjusted 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 2010 2009 % change 2010 2009 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue 834 867 -4 +0 Europe 3,429 3,511 -2 -1 647 614 +5 +0 North America & Australia 2,313 2,160 +7 +2 474 388 +22 +16 Developing Markets 1,884 1,494 +26 +18 232 194 +20 +17 Pharmaceuticals 737 588 +25 +24 90 - SSL 90 - 2,277 2,063 +10 +9 8,453 7,753 +9 +7 Operating profit - adjusted* 226 204 +11 +16 Europe 823 804 +2 +4 225 197 +14 +8 North America & Australia 599 500 +20 +13 65 70 -7 -7 Developing Markets 275 216 +27 +21 184 134 +37 +25 Pharmaceuticals 531 371 +43 +37 3 - SSL 3 - 703 605 +16 +13 Subtotal before exceptional items 2,231 1,891 +18 +16 (101) - Exceptional items (101) - 602 605 +0 -3 2,130 1,891 +13 +10 % % Operating margin - adjusted* % % 27.1 23.5 Europe 24.0 22.9 34.8 32.1 North America & Australia 25.9 23.1 13.7 18.0 Developing Markets 14.6 14.5 79.3 69.1 Pharmaceuticals 72.0 63.1 3.3 - SSL 3.3 - 30.9 29.3 26.4 24.4 * Adjusted to exclude the impact of exceptional items. Items of income and expense which are not part of the results and financial position of the reported segments, and therefore reported to the Chief Operating Decision Maker outside of the individual segment financial information, are shown as reconciling items between the segmental information and the Group totals presented in the consolidated financial statements. For the twelve months ended 31 December 2010, these items include a profit on disposal of intangibles and an expense relating to legal matters. The net impact of these items is £nil (31 December 2009: £nil). Segment Information (Unaudited), continued Product segment Quarter ended Year ended 31 December 31 December 2010 2009 % change 2010 2009 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue by category 598 567 +6 +4 Health & Personal Care 2,265 2,078 +9 +6 370 375 -1 +0 Fabric Care 1,576 1,578 +0 -1 352 327 +8 +5 Surface Care 1,391 1,290 +8 +4 310 280 +11 +8 Home Care 1,152 1,036 +11 +8 224 215 +4 +4 Dishwashing 875 843 +4 +3 14 23 -39 -29 Other Household 63 65 -3 +2 1,868 1,787 +5 +3 Household and Health & 7,322 6,890 +6 +4 Personal Care 232 194 +20 +17 Pharmaceuticals 737 588 +25 +24 87 82 +6 +4 Food 304 275 +11 +9 2,187 2,063 +6 +5 Net revenue ex-SSL 8,363 7,753 +8 +6 90 - SSL 90 - 2,277 2,063 +10 +9 8,453 7,753 +9 +7 Operating profit - adjusted 485 442 +10 +9 Household and Health & Personal Care 1,610 1,447 +11 +9 184 134 +37 +25 Pharmaceuticals 531 371 +43 +37 31 29 +7 +3 Food 87 73 +19 +19 700 605 +16 +13 2,228 1,891 +18 +15 3 - SSL 3 - 703 605 +16 +13 2,231 1,891 +18 +15 (101) - Exceptional items (101) - 602 605 +0 -3 2,130 1,891 +13 +10 % % Operating margin - adjusted % % 26.0 24.7 Household and Health & Personal Care 22.0 21.0 79.3 69.1 Pharmaceuticals 72.0 63.1 35.6 35.4 Food 28.6 26.5 32.0 29.3 26.6 24.4 3.3 - SSL 3.3 - 30.9 29.3 26.4 24.4 Earnings per Ordinary Share For the year ended 31 December (unaudited) 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: Reported basis 2010 2009 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 1,568 724,192,584 216.5 1,418 712,995,914 198.9 attributable to shareholders Dilution for Executive 8,264,803 14,342,618 options outstanding and Executive Restricted Share Plan Dilution for Employee 839,710 834,338 Sharesave Scheme options outstanding On a diluted basis 1,568 733,297,097 213.8 1,418 728,172,870 194.7 Adjusted basis 2010 2009 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 1,661 724,192,584 229.4 1,418 712,995,914 198.9 attributable to shareholders Dilution for 8,264,803 14,342,618 Executive options outstanding and Executive Restricted Share Plan Dilution for Employee 839,710 834,338 Sharesave Scheme options outstanding On a diluted basis 1,661 733,297,097 226.5 1,418 728,172,870 194.7 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the exceptional charge (net of tax) in the current year, provides the most meaningful measure of earnings per ordinary share.

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