Interim Results
26 August 2003
FIRMLY ON TRACK, FULL YEAR TARGETS RAISED
Results at a Glance Q2 % change Half Year % change
Net Revenues £960m +7 £1,834m +4
Operating Profit £163m +9 £280m +9
Net Income £117m +14 £199m +15
* Net revenues grew by 7% (7% at constant exchange) to £960m in Q2, and by 4%
(6% constant) to £1,834m in H1.
* Operating profit increased by 9% both in Q2 to £163m and in H1 to £280m.
Half year operating margins improved 70 basis points (bps) to 15.3% behind
a 200 bps gross margin improvement, offset by a significant increase in
marketing investment.
* Net income grew by 14% in Q2 to £117m and by 15% in H1 to £199m.
* Strong cash generation and further reductions in net working capital of £
102m resulted in a £200m change in the Company's net financial position in
H1 2002 to net funds of £95m.
* Interim dividend of 14.0 pence per share, an increase of 10%. The Company
has today announced its intention to return surplus cash flow to
shareholders through both dividend increases and a rolling share buyback
program.
Commenting on these results, Bart Becht, Chief Executive Officer, said
'Reckitt Benckiser had a strong first half of 2003 with net revenue and net
income growth running ahead of the target rate for the full year. Growth has
come from practically all categories and regions. In Western Europe, growth
behind new product initiatives was particularly robust resulting in strong
profit growth. Slower market growth resulted in net revenues more in line with
last year in North America but the monthly trend is improving. Recovery in the
emerging markets of Asia and Rest of World accelerated.
'After two strong quarters, Reckitt Benckiser is firmly on track to deliver at
the top end of the Company's full year target range for net revenue growth.
Consequently we are raising our target for net income growth to 14% at actual
exchange.'
Detailed Operating Review
Second Quarter 2003
Net revenues in Q2 grew by 7% (7% at constant exchange) to £960m. Net revenues
from continuing operations rose 7% (8% constant) to £960m.
Operating profit for Q2 grew 9% (7% constant) to £163m. Gross margin increased
by 130 bps to 54.1% due to higher margin new products and benefits from ongoing
cost optimization programs. Marketing investment, particularly media, increased
significantly during the period. Operating margins increased by 50 basis points
to 17.0%.
Net income grew 14% (11% constant) to £117m.
Half Year 2002
Net revenues grew by 4% (6% constant) to £1,834m. Net revenues from continuing
operations grew by 5% (7% constant).
Operating profit increased 9% (7% constant) to £280m. Gross margins rose 200
bps to 53.8% as a result of higher margin new products, favourable purchase
prices on raw and packaging materials and savings from ongoing cost
optimization programs. Operating margins increased by 70 bps to 15.3%.
Net income for the half year was £199m. Net interest expense of £11m (£20m) was
lower due to the strong cash inflow over the past year reducing the level of
net borrowings. The tax rate for the period on the taxable profit was 26%, in
line with the likely rate for the full year.
Category Review at constant exchange rates
Fabric Care. H1 net revenues grew 9% to £496m. In fabric treatment, Vanish grew
strongly due to the success of Vanish Oxi Action across Western Europe, Asia
Pacific and Rest of World, and the roll-out of Spray 'n Wash in-wash liquid and
tabs in North America. Woolite garment care grew behind further success for the
base business responding to higher marketing investment.
Q2 net revenues grew 11% to £264m.
Surface Care. H1 net revenues grew 3% to £373m. Disinfectant cleaners had a
strong performance. In North America, Lysol grew behind the roll-out of Lysol
Neutra Air air sanitizer and heavy duty wipes. In Western Europe, Dettol grew
strongly behind the launch of a new disinfectant spray and rapid dry floor
cleaner. Non disinfectant multi-purpose cleaners grew steadily with, amongst
others, an encouraging recovery for Veja in Latin America. Harpic lavatory care
grew in Western Europe behind the success of Harpic 2-in-1 in-toilet bowl
device, and in Asia Pacific and Rest of World behind higher investment on the
base business.
Q2 net revenues grew 2% to £184m.
Dishwashing. H1 net revenues grew 9% to £270m. Growth came across all regions,
with particularly strong growth in Europe behind the roll-out of the Finish /
Calgonit 3-in-1 Total cleaning upgrade and early results for 3-in-1 Brilliant
shine upgrade as well as continuing success for Calgonit Protector against
glass corrosion. In North America growth came behind further market share gains
for Electrasol Gel and the recently introduced mono-dose Gelpacs.
Q2 net revenues grew 3% to £130m.
Home Care. H1 net revenues grew 4% to £258m due to slower market growth in the
air care category but with improving results in pest control. Airwick continued
to grow strongly in Western Europe behind a number of recent innovations such
as Airwick Decosphere and Crystal Air special selection, and the continued
roll-out of electricals. The air care category declined in North America, but
the new Airwick Decosphere sold well and market share continued to be strong.
Pest control improved behind strongly improving growth for Mortein in India,
the introduction of Mortein Ant Sand in Australia, and the roll-out of new
Mortein Ultra aerosol in Latin America and Rest of World.
Q2 net revenues grew 6% to £130m.
Health & Personal Care H1 net revenues grew 20% to £273m. Excellent growth was
achieved in all categories. Depilatories grew behind the success of Veet
Mousse, Sensitive Skin wax strips and the launch of Veet Express wax roll-on in
Western Europe. Dettol antiseptic grew strongly in Asia Pacific, in part due to
the SARS epidemic in East Asia, but also due to strongly improved performance
in India and Africa Middle East. The Health Care business performed strongly
with notable growth on Gaviscon in the UK and Continental Europe and by Lemsip
in the UK.
Q2 net revenues grew 22% to £156m.
Core Household grew net revenues 8% to £1,670m in the half-year, and 9% to £
864m in Q2.
Food. Net revenues grew strongly by 11% to £93m with good performance across
the portfolio, but particularly behind the recently launched initiatives of
French's Gourmayo flavoured mayonnaise and French's new Cheddar flavoured fried
onions. French's yellow mustard had a strong half-year, increasing market
share.
Q2 net revenues grew 10% to £55m.
Geographic Analysis at constant exchange for continuing operations
Western Europe : 47% of net revenues
Net revenues grew by 7% in H1 to £861m. This strong performance came across all
categories and markets, but with particular good growth in fabric treatment,
disinfectant cleaners, automatic dishwashing, air care and depilatories. In
fabric treatment, the growth came substantially behind the success of Vanish
Oxi Action across the region, with Vanish carpet cleaners also growing
strongly. Disinfectant cleaners grew behind a number of recent initiatives,
including Dettol disinfectant spray, rapid dry floor cleaner and floor wipes.
Automatic dishwashing grew due to Finish / Calgonit 3-in-1, both Total and the
new Brilliant format, and the continuing success of the glass Protector. Air
Care growth came behind Airwick Decosphere, Crystal Air special selection and
the continued roll-out of electricals. Veet depilatories increased sales behind
Veet Mousse and the recently launched Sensitive Skin wax strips and Express
no-heat wax roll-on. H1 operating margins increased by 20 bps to 21.4% due to
substantial gross margin expansion, resulting from higher margin new products,
lower input costs and cost optimization initiatives, offset by very significant
increases in marketing investment. Operating profits increased by 10% to £184m.
Net revenues grew 9% to £453m in Q2 and operating profits by 13% to £104m.
North America : 28% of net revenues.
Net revenues grew 3% in H1 to £510m. The growth came from Electrasol, Lysol and
Food. Electrasol automatic dishwashing detergent grew strongly behind the
success of Gel and the recently launched mono-dose Gelpacs. Lysol grew behind
the launch of Neutra Air air sanitizer and Lysol heavy-duty wipes. The launch
of Spray 'n Wash in-wash tabs and liquid has started encouragingly. However air
care declined despite continued strong Airwick market shares supported by the
success of Airwick Decosphere. Good gross margin expansion, due to new products
and cost optimization savings, was more than offset by substantially higher
marketing investment as a much higher proportion of investment was phased into
the first half of 2003 to support new product launches. As a result North
American operating margins were 180 bps lower at 11.4% and operating profit was
11% lower at £58m.
In Q2 market growth in our categories slowed to zero. As a result, net revenues
grew 1% to £255m. Net revenue growth improved as the quarter progressed.
Operating profit, after substantially higher marketing investment phased in the
quarter, was 31% lower at £29m.
Latin America : 4% of net revenues.
Net revenues rose 12% in H1 to £73m in constant currency although this was
offset by the continuing impact of substantial devaluation of local currencies.
Local markets recovered with strong growth in local currencies behind Mortein
pest control, Airwick air care products, Veet depilatories and Vanish fabric
treatment. Veja multipurpose cleaner recovered in Brazil. Market conditions
have improved in Brazil and Mexico, and stabilized in Argentina, although
Venezuela and Colombia remain difficult. H1 operating loss was £4m (2002 loss
of £3m).
Net revenues grew 17% to £41m in Q2 and operating loss was £1m (2002 loss of £
1m).
Asia Pacific : 12% of net revenues.
Net revenues grew strongly by 14% in H1 to £214m with good growth across most
countries in the region, but with particularly good performance in Australia
New Zealand, India, Korea and Singapore / Malaysia. The growth came mainly from
Vanish fabric treatment, behind the successful launch of Vanish Oxi Action, and
from Dettol, partly in certain East Asian markets during the SARS outbreak, but
also due to strong underlying growth across the region supported by increased
investment. Harpic lavatory care grew behind increased investment. Operating
margins improved substantially by 410 bps to 10.3% due to the recovery in India
and East Asia, to product mix and to cost optimization programs. Operating
profits increased 69% to £22m.
Net revenues grew 20% to £116m in Q2 and operating profits increased by 75% to
£14m.
Rest of World : 9% of net revenues.
Net revenues grew 8% in H1 to £176m. Growth came across most countries in both
Eastern Europe and Africa/Middle East. The growth came across most categories,
but notably behind the launch of Vanish Oxi Action, continuing growth for
Calgonit automatic dishwashing behind the roll-out of 3-in-1 Total cleaning
upgrade, Harpic lavatory care due to higher investment, Dettol antiseptics also
supported by higher investment and Veet depilatories behind the roll-out of
Veet Aqua system and Mousse. H1 operating margins rose by 20 bps to 9.7% with
higher gross margins benefiting from cost optimization somewhat offset by
increased marketing investment. Operating profit increased 13% to £17m.
Net revenues grew 9% to £95m in Q2 and operating profit increased 22% to £11m.
New Initiatives H2 2003
A number of new products are being launched across the summer and autumn of
2003. Vanish Oxi Action Gel and Vanish Oxi Action carpet cleaner are being
launched in Western Europe. Resolve Triple Action carpet cleaner is being
launched in North America. Dettol Easy Mop is being launched in parts of
Western Europe. In air care, Airwick Nite Light, the first electrical oil with
night-light, is being launched in North America. Airwick Design Spray, a new
portable click spray, is being launched in Western Europe. Dettol Cool soap
with Menthol has been launched. Gaviscon is launching a new long-lasting reflux
treatment, Gavilast, in Western Europe.
A number of successful recent innovations are also being rolled-out to new
markets. Lysol Cling 2-in-1 in toilet bowl device is being launched in North
America in lavatory care. Harpic Drain cleaner range is being launched in new
markets in Western and Eastern Europe, following its launch in UK. Finish /
Calgonit is rolling-out 3-in-1 Brilliant to all major markets, while launching
a new automatic dishwashing machine cleaner and completing the roll-out of the
Protector against glass corrosion.
Financial Review
Basis of Comparatives
For clarity in evaluating the underlying performance of the business, the
following terminology is used.
Continuing Operations. This adjusts comparisons to exclude the following
businesses which have been treated as discontinued or de-consolidated.
* The results of the Group's subsidiary in Zimbabwe which have been excluded
from the consolidated Group results with effect from 1st July 2002. The
effect of this is that net revenues of £7m in Q2 2002 and £13m in the first
half of 2002 will be shown as discontinued and de-consolidated. The
resulting operating profit impact in H1 2002 was £1m.
* An agency agreement under which the Group sold third party products in one
category in one European market (Bayer pest control products in Italy) was
terminated with effect from the end of 2002. This will be shown as
discontinued in the half year and full year results. This has no impact on
net revenues, but will reclassify operating profit by £1m in H1 2002 and £
2m in FY 2002 into discontinued business. No income was recorded in 2003.
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 show the underlying growth.
Net Interest. Interest payable on borrowings less receivable on funds on the
Company's cash and debt portfolio was £11m (£20m) in H1. This reduction
reflects strong cash inflow in 2002 and 2003 to date.
Profit before tax was £269m (£237m) an increase of 14%.
Tax on the profit for the half year was £70m, a rate of around 26% on the
taxable profit of £269m compared to a group rate of 27% in H1 2002.
Profit after tax was £199m (£173m) an increase of 15% (13% at constant
exchange) somewhat ahead of the target growth rate for the full year.
Cash Flow from operating activities rose by 31% to £427m due to increased
operating profits and a further release of cash from working capital. After
lower interest payments but a heavier phasing of capital expenditure in the
first half of the year, net cash flow from ordinary operations increased by 5%
to £278m.
Cash conversion continued to improve. The ratio of cash flow from operating
activities to net revenues increased substantially to 23.3% (2002 18.6%). Net
cash flow from ordinary operations represented 140% of net income (153%).
Balance Sheet and Financing. At the half year the Group had shareholders funds
of £1,320m (2002 year-end £1,201m), an increase of 10%. Net funds were £95m
(2002 year-end net borrowings £105m). Total capital employed in the business
was £1,231m (2002 year-end £1,313m).
This financed fixed assets of £2,317m (£2,289m) offset by negative net working
capital of £593m (£491m) and provisions & net long term liabilities of £493m (£
485m).
Exchange rate differences have reduced net borrowings by £5m and increased net
assets by £11m.
Financial Ratios. The Company's financial ratios have improved over the period.
Interest cover (operating profit over net interest) for the half year was 25.5
times (H1 2002 12.9 times). The company has eliminated its net borrowings and
has net funds of £95m, so gearing ratios (net debt/equity or net debt/capital
employed) are zero.
Earnings per share. Details of the calculation of earnings per share are
contained in the accompanying notes to the Profit & Loss Account. These take
account of the holding of JAB in 'A' shares of Reckitt Benckiser Holdings B.V.
in 2002.
Dividends. The Board of Directors announces an interim dividend of 14.0 pence
per share (2002 12.7 pence per share), an increase of 10% in line with the
Company's policy of increasing the dividend once coverage ratios reach the
level of the industry peer group. The interim dividend is covered 2.0 times by
profit for the half year (1.9 times). The ex dividend date will be 3rd
September, and the dividend will be paid on 26th September to shareholders on
the register at the record date of 5th September. The last date for election
for the share alternative to the dividend is 5th September.
For Further Information
Tom Corran Reckitt Benckiser plc +44 (0)1753 217 800
SVP Investor Relations & Corporate Communications
Mark Wilson Reckitt Benckiser plc +44 (0)1753 217 800
Investor Relations Manager
Tim Spratt Financial Dynamics +44 (0)207 831 3113
The Group at a Glance (unaudited)
Quarter Ended June 30 Half Year Ended June 30
2003 2002 2003 2002
£m £m £m £m
From total ordinary
activities
960 901 Net revenues 1,834 1,756
7% 3% Net revenues growth 4% 4%
54.1% 52.8% Gross margin 53.8% 51.8%
183 167 EBITDA 322 295
19.1% 18.5% EBITDA margin 17.6% 16.8%
163 149 EBIT 280 257
17.0% 16.5% EBIT margin 15.3% 14.6%
158 141 Profit before tax 269 237
16.5% 15.8% PBT margin 14.7% 13.5%
117 103 Net Income 199 173
12.2% 11.4% Net Income margin 10.9% 9.9%
16.5p 14.7p EPS 28.1p 24.6p
15.8p 14.1p EPS, diluted 27.1p 23.7p
From continuing operations
960 894 Net revenues 1,834 1,743
7% 2% Net revenues growth 5% 3%
183 166 EBITDA 322 293
19.1% 18.6% EBITDA margin 17.6% 16.8%
163 148 EBIT 280 255
17.0% 16.6% EBIT Margin 15.3% 14.6%
Group Balance Sheet Data June 30, December 31
2003 2002
£m £m
Net working capital * (593) (491)
Net funds / (borrowings) 95 (105)
* Defined as stock, short term debtors and short term creditors excluding
borrowings.
Group profit and loss account
(unaudited)
Quarter Ended June 30 Half Year Ended June
30
2003 2002 % change 2003 2002 % change
£m £m £m £m
960 894 7% Net revenues from continuing 1,834 1,743 5%
operations
- 7 Discontinued and de-consolidated - 13
operations
960 901 7% Total net revenues 1,834 1,756 4%
(441) (425) 4% Cost of sales (848) (846) 0%
519 476 9% Gross profit 986 910 8%
(356) (327) 9% Net operating expenses (706) (653) 8%
163 148 10% Operating profit from continuing 280 255 10%
operations
- 1 Discontinued and de-consolidated - 2
operations
163 149 9% Total operating profit 280 257 9%
Non-operating items:
- - Profit on disposal of businesses - -
163 149 9% Profit on ordinary activities 280 257 9%
before interest
(5) (8) (38%) Net interest expense (11) (20) (45%)
158 141 12% Profit on ordinary activities 269 237 14%
before taxation
(41) (38) 8% Tax on profit on ordinary (70) (64) 9%
activities
117 103 14% Profit on ordinary activities 199 173 15%
after taxation
0 0 Attributable to equity minority 0 0
interests
117 103 14% Profit for the period 199 173 15%
(99) (90) 10% Ordinary Dividends (99) (90) 10%
18 13 38% Retained profit for the period 100 83 20%
Earnings per ordinary share:
16.5p 14.7p On profit for the period 28.1p 24.6p
15.8p 14.1p On profit for the period, 27.1p 23.7p
diluted
Average common shares
outstanding:
706.5 704.0 Basic 706.2 703.5
757.6 757.1 Diluted 756.8 756.2
Group balance sheet
For the half year ended June 30, (unaudited)
1st Half Full Year 1st Half
2003 2002 2002
£m £m £m
Fixed assets:
Intangible assets 1,795 1,764 1,801
Tangible assets 522 525 545
2,317 2,289 2,346
Current assets:
Stocks 231 230 229
Debtors due within one year 510 489 582
Debtors due after more than one year 84 85 76
Investments 571 379 250
Cash at bank and in hand 48 40 87
1,444 1,223 1,224
Current liabilities:
Creditors due within one year:
Borrowings (112) (106) (181)
Other (1,334) (1,210) (1,205)
(1,446) (1,316) (1,386)
Net current liabilities (2) (93) (162)
Total assets less current liabilities 2,315 2,196 2,184
Non-current liabilities:
Creditors due after more than one year:
Borrowings (219) (225) (262)
Other (162) (163) (171)
Convertible capital bonds (193) (193) (193)
(574) (581) (626)
Provisions for liabilities and charges (415) (407) (440)
Equity minority interests (6) (7) (8)
Net Assets 1,320 1,201 1,110
Capital and reserves:
Called up share capital (including non-equity 78 78 71
capital of £5m)
Shares to be issued - - 7
Share premium account 205 197 187
Merger reserve 142 142 142
Profit and loss account 895 784 703
Total shareholders' funds (including non-equity 1,320 1,201 1,110
shareholders' funds of £5m)
Group cash flow statement
For the half year ended June 30 (unaudited)
Reconciliation of operating profit to operating cash flows
2003 2002
£m £m
Operating activities:
Operating profit 280 257
Depreciation and amortisation 42 38
Loss on sale of fixed assets 2 -
Decrease / (Increase) in stocks 4 (10)
Increase in debtors (8) (6)
Increase in creditors and provisions 107 54
Reorganisation and merger integration costs paid - (6)
Cash flow from operating activities 427 327
Cash flow statement
Cash flow from operating activities 427 327
Return on investments and servicing of finance (12) (22)
Taxation (54) (34)
Capital expenditure and financial investment
Purchase of intangible fixed assets (54) -
Purchase of tangible fixed assets (30) (39)
Disposal of tangible fixed assets 1 26
(83) (13)
Acquisitions and disposals (1) -
Equity dividends paid (90) (90)
Cash inflow before use of liquid resources and 187 168
financing
Management of liquid resources (193) (163)
Financing 6 3
Increase in cash for the period 0 8
Reconciliation of net cash flow to movement in debt
Increase in cash in period 0 8
Cash outflow from decrease in debt 2 2
Cash outflow from increase in liquid resources 193 163
Changes in net debt resulting from cash flows 195 173
Translation differences 5 (5)
Movement in net debt in period 200 168
Net debt at beginning of period (105) (467)
Net funds/(debt) at end of period 95 (299)
Reconciliation of operating cash flow to net cash flow from ordinary operations
Operating cash flow 427 333
(excluding reorganisation and merger integration costs
paid)
Returns on investments and servicing of finance (12) (22)
Taxation (54) (34)
Capital expenditure (83) (13)
Net cash flow from ordinary operations 278 264
Segmental Analysis (unaudited)
Analyses by geographical area and product segment of net revenues and operating
profit are set out below. The figures for each geographic area show the net
revenues and profit made by companies located in that area.
Quarter Ended June 30 Half Year Ended June 30
2003 2002 % Change 2003 2002 % Change
£m £m exch. Rates £m £m exch rates
Actual const. Actual const.
Net revenues - by
geographical area
453 381 19% 9% Western Europe 861 742 16% 7%
255 279 (9%) 1% North America 510 547 (7%) 3%
41 45 (9%) 17% Latin America 73 92 (21%) 12%
116 99 17% 20% Asia Pacific 214 193 11% 14%
95 90 6% 9% Rest of World 176 169 4% 8%
960 894 7% 8% 1,834 1,743 5% 7%
- 7 - - Discontinued and - 13 - -
de-consolidated
operations
960 901 7% 7% 1,834 1,756 4% 6%
Operating profit - by
geographical area
104 85 22% 13% Western Europe 184 157 17% 10%
29 46 (37%) (31%) North America 58 72 (19%) (11%)
(1) (1) 0% 0% Latin America (4) (3) (33%) (100%)
14 8 75% 75% Asia Pacific 22 12 83% 69%
11 10 10% 22% Rest of World 17 16 6% 13%
6 0 - - Corporate 3 1 - -
163 148 10% 9% 280 255 10% 9%
- 1 - - Discontinued and - 2 - -
de-consolidated
operations
163 149 9% 7% 280 257 9% 7%
% % Operating margin - by % %
geographical area
23.0 22.3 Western Europe 21.4 21.2
11.4 16.5 North America 11.4 13.2
(2.4) (2.2) Latin America (5.5) (3.3)
12.1 8.1 Asia Pacific 10.3 6.2
11.6 11.1 Rest of World 9.7 9.5
- - Corporate - -
17.0 16.6 15.3 14.6
- 14.3 Discontinued and - 15.4
de-consolidated
operations
17.0 16.5 15.3 14.6
Segmental Analysis (continued)
Quarter Ended June 30 Half Year Ended June 30
2003 2002 % change 2003 2002 % exchange
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenues - by
product segment
905 838 8% 8% Household and Health & 1,741 1,649 6% 7%
Personal Care
55 56 (2%) 10% Food 93 94 (1%) 11%
960 894 7% 8% 1,834 1,743 5% 7%
- 7 - - Discontinued and - 13 - -
de-consolidated
operations
960 901 7% 7% 1,834 1,756 4% 6%
Operating profit - by product
segment
148 138 7% 5% Household and Health & 267 243 10% 8%
Personal Care
9 10 (10%) 0% Food 10 11 (9%) 0%
6 0 - - Corporate 3 1 - -
163 148 10% 9% 280 255 10% 9%
- 1 - - Discontinued and - 2 - -
de-consolidated
operations
163 149 9% 7% 280 257 9% 7%
% % Operating margin - by % %
product segment
16.4 16.5 Household and Health & 15.3 14.7
Personal Care
16.4 17.9 Food 10.8 11.7
- - Corporate - -
17.0 16.6 15.3 14.6
- 14.3 Discontinued and - 15.4
de-consolidated
operations
17.0 16.5 15.3 14.6
Net revenues - Household and
Health & Personal Care
264 227 16% 11% Fabric Care 496 443 12% 9%
184 191 (4%) 2% Surface Care 373 391 (5%) 3%
130 121 7% 3% Dishwashing 270 240 13% 9%
130 127 2% 6% Home Care 258 261 (1%) 4%
156 127 23% 22% Health & Personal Care 273 226 21% 20%
864 793 9% 9% Core Business 1,670 1,561 7% 8%
41 45 (9%) (7%) Other Household 71 88 (19%) (17%)
905 838 8% 8% Net Revenues - 1,741 1,649 6% 7%
continuing operations
Earnings per ordinary share
For the half year ended June 30, (unaudited)
The reconciliation between profit for the half year and the weighted average
number of shares used in the calculations of the diluted earnings per share are
set out below:
2003 2002
Profit Average Earnings Profit Average Earnings
for Number of per for number of per
the Shares share the shares share
half pence half pence
year year
£m £m
Profit attributable to 199 706,240,741 28.1 173 703,540,108 24.6
shareholders
Dilution for Executive 10,499,650 12,186,732
options outstanding and
Executive Restricted
Share Plan
Dilution for Employee 1,168,219 1,510,793
Sharesave Scheme options
outstanding
Dilution for convertible 6 38,900,697 6 38,949,899
capital bonds outstanding
*
On a diluted basis 205 756,809,307 27.1 179 756,187,532 23.7
* After the appropriate tax adjustment, the profit adjustment represents the
coupon on convertible capital bonds. The earnings per share impact reflects the
effect of that profit and the assumption of the issue of shares on the
conversion of bonds.
The Directors believe that a diluted earnings per ordinary share, adjusted for
the distorting effects of non-operating items after the appropriate tax amount,
provides the most meaningful measure of earnings per ordinary share in
comparing the performance of the business over time.
1
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