Annual Financial Report

RNS Number : 9875I

Reckitt Benckiser Group PLC

31 March 2015

 



31 March 2015

RECKITT BENCKISER GROUP PLC

Annual Report 2014 and Notice of the 2015 Annual General Meeting

Reckitt Benckiser Group plc ("RB" or the "Company") released its preliminary announcement of annual results ("Preliminary Announcement") for the year ended 31 December 2014 on 11 February 2015.  Further to the Preliminary Announcement, RB confirms that it has today published its Annual Report and Financial Statements 2014 ("2014 Annual Report") and Notice of the Annual General Meeting 2015 ("2015 AGM Notice").

Copies of both documents have today been posted to shareholders and are available on the Company's website at www.rb.com.

In compliance with LR 9.6.3, the following documents have also been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/nsm

·     2014 Annual Report

·     2015 AGM Notice

·     Form of Proxy for the 2015 Annual General Meeting

The Company's 2015 Annual General Meeting will be held at 11.15 a.m. on Thursday 7 May 2015 at the London Heathrow Marriott Hotel, Bath Road, Hayes, Middlesex UB3 5AN.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Preliminary Announcement. That information, together with the information set out in the Appendix below, which is extracted from the 2014 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5R. This announcement is not a substitute for reading the full 2014 Annual Report. Page numbers in the extracted information below refer to page numbers in the 2014 Annual Report.

Enquiries:

William R Mordan

Company Secretary

Tel: [phone]

About RB:

RB* is the world's leading consumer health and hygiene company. The company has operations in over 60 countries, with headquarters in London, Dubai and Amsterdam, and sales in almost 200 countries. The company employs approximately 37,000 people worldwide.

With a purpose of delivering innovative solutions for healthier lives and happier homes, RB is in the top 20 of companies listed on the London Stock Exchange. Today it is the global No 1 or No 2 in the majority of its fast-growing categories, driven by an exceptional rate of innovation. Its health, hygiene and home portfolio is led by 19 global Powerbrands of  Nurofen, Strepsils, Gaviscon, Mucinex, Durex, Scholl, Clearasil, Lysol, Dettol, Veet, Harpic, Bang, Mortein, Finish, Vanish, Calgon, Air Wick, Woolite and French's.  75% of core revenues came from the health and hygiene categories of the portfolio.

Fuelled by a new breed of talent who blend intellectual curiosity with commitment to the highest quality standards, RB is set to redefine the world of consumer health and hygiene.  RB people and its culture are at the heart of the company's success. They have an intense drive for achievement and a desire to outperform wherever they focus, including in sustainability where the company is targeting a 1/3 reduction in water impact, 1/3 reduction in carbon and to have 1/3 of its net revenue coming from more sustainable products by 2020. It is also the Save the Children charity's largest FMCG global partner, with a new partnership vision to radically reduce the world's second biggest killer of under-fives, diarrhoea.  Overall RB wants to reach 200 million people to improve their health and hygiene behaviour.  

For more information visit www.rb.com 

*RB is the trading name of the Reckitt Benckiser group of companies

APPENDIX

The primary purpose of this announcement is to inform the market about the publication of RB's 2014 Annual Report and 2015 AGM Notice.

The information below, which is extracted from the 2014 Annual Report is included solely for the purpose of complying with DTR 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Preliminary Announcement. Together these constitute the material required by DTR 6.3.5R to be communicated in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2014 Annual Report.

Page and note references in the text below relate to pages and notes in the 2014 Annual Report.

(i)   STRATEGIC RISKS (pages 24 to 27)

The following table provides a summary review of the strategic risks and uncertainties that could affect the Group, as identified by management. RB operates a major risk assessment process to identify, assess, control, mitigate and review those risks it considers to be most significant to the successful execution of our strategy. 

The most senior managers of our business dedicate time each year in a facilitated discussion with the Group risk team to consider the risk environment for their particular functional or geographic area of responsibility and how their emerging or known risks could impact on the

achievement of the Group's strategic objectives. Similar sessions are held with the Group's external advisors. The key content from these sessions is then synthesised into the Group's 'Top Ten' risks, with each risk having an Executive Committee (EC) owner, who is accountable for executing the current control strategy and for compiling and executing a plan of mitigating actions to properly manage the Group's exposure to that risk. Progress is reviewed periodically and the full output from the major risk assessment process is formally submitted annually by the EC to the Board for its consideration and endorsement. Through the course of each year, the EC and Board agendas address all of the top risks through specific 'deep dives' to ensure proper focus and progress with mitigation. The Group's activities also expose it to a number of other risks which, while also actively managed, may still adversely impact the business and its financials. A more detailed consideration of the full range of risks faced by the Group appears on pages 126 to 132 of this report.

'Top Ten' risks

1. Health Regulatory Compliance

2. Technology Failure

3. Business Interruption

4. Legal Non-Compliance

5. Tax Legislation

6. Loss of Key Management

7. Brand Reputation

8. Actives Upscheduling

9. Developing Markets' Slow-down

10. 'Black Swan' Event

Exchange rate risk

A description of the exchange rate risk to the Group, and the means used to mitigate that risk, appears on page 127 (General Financial Risks of a Global Company) and on pages 127 to 128 (Currency Exchange).

Major Risk	Description	Context	Mitigation
Health Regulatory Compliance 1	Risk that non-compliance with regulations (e.g. licences,manufacturing, products and laws) results in significant financial losses arising from regulator-enforced factory closures, product recalls,delayed launches, penalties, etc.	Regulation is imposed in respect of, but not limited to, ingredients, manufacturing standards, labour standards, product safety and quality, marketing, packaging, labelling, storage, distribution, advertising, imports and exports, social and environmental responsibility and health and safety. These regulations can change and may become more stringent. Additionally we are required to obtain, maintain and update licences for such products. If we are found to be non-compliant with applicable laws and regulations, we could be subject to civil remedies such as fines, injunctions or product recalls, and/or criminal sanctions.	The Group has an ongoing Regulatory Excellence Programme, which continues to make good progress. RB employs senior regulatory and legal specialists at a Group, regional and local level who are responsible for setting policies and ensuring that all employees are aware of, and comply with, both Group policies and the laws and regulations relevant to their roles.
Technology Failure 2	Risk that targets cannot be delivered due to technology failure or a lack of growth-enabling systems and infrastructure capabilities, leading to business disruption.	Failures or disruptions to our systems or the systems of third parties on whom we rely, due to any number of causes, particularly if prolonged, or, if any failure or disruption were to impact our backup or disaster recovery plans, could result in a loss of key data and/or affect our operations. Sub-optimal implementations of new systems could occur. Our computer systems, software and networks may be vulnerable to unauthorised access, computer viruses or other malicious code and other cyber threats that could have a security impact. All of these could be costly to remedy and we may be subject to litigation.	The Group is engaged in a rolling Enterprise Resource Planning (ERP) update programme. Disaster recovery plans are in place and are tested periodically. It also invests in security measures and anti-virus software to safeguard against this threat. Maintenance of current systems throughout the execution of the ERP programme implementation is an ongoing priority.
Business Interruption 3	Risk that our business continuity plans, including monosourcing (materials and products) are inadequate and we face interruptions of our supply chain and disruptions in our production facilities, which could materially adversely affect our results of operations.	We may face risks to continuity of supply arising from certain specialised suppliers, both of raw materials and of third party manufactured items. Significant disruptions to our own, or our suppliers' operations, may affect our ability to source raw materials and negatively impact our costs. Suppliers may fail to fulfil their contractual obligations. Replacing suppliers may require them to be qualified under industry, governmental or our own standards, which could require investment and may take time to resolve.	Suppliers of key raw and packaging materials, co-packers of finished product and the Group's manufacturing facilities and key technologies are risk assessed for their potential impact on supply disruption for branded products. Business continuity plans are in place throughout the Group and major sites are routinely and independently assessed towards achievement of a highly protected site status.
Legal Non-Compliance 4	Risk that we are not fully compliant with UK and local laws including the UK Bribery Act, Competition laws and Data and Privacy Protection laws, resulting in damage to RB's reputation and significant potential fines.	Failure to comply with applicable anti-trust and competition laws, rules and regulations in any jurisdiction may result in civil and/or criminal legal proceedings. We are subject to the UK Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977, as amended, and similar laws worldwide. Given our extensive international operations, we are exposed to significant risks, particularly with respect to parties not subject to our control such as agents and joint venture partners, and also through businesses we acquire. Any violation of applicable money laundering laws could also have a negative impact on us.	The Group is proactive in addressing legal risks and responds to government authorities in a forthright and co-operative manner. A Group compliance function was formally established in 2013 and an expansion made to the mandatory annual online training undertaken by employees.
Tax Legislation 5	Risk of significant unprovisioned cash outflows as a result of tax authority challenge to filed tax positions in key territories.	We are subject to tax laws and transfer pricing regulations in multiple jurisdictions, including those relating to the flow of funds between RB and its subsidiaries. Our effective tax rate in any given financial year reflects a variety of factors that may not be present in succeeding financial years, and may be affected by changes in the tax laws of the jurisdictions in which we operate.	The Group takes appropriate care in establishing new tax positions in support of organisational operating structures; we are proactive in responding to tax authorities. The Board considers that tax exposures are adequately provided for, whilst recognising that an element of risk will always remain.
Loss of Key Management 6	Risk that RB cannot implement its strategies and meet objectives as a result of key management leaving the business who cannot be readily replaced by equally experienced/ qualified candidates	The market for talent is intensely competitive and we could face challenges in sourcing qualified personnel. If we are unable to achieve our performance targets, our senior management would not be entitled to their variable pay, which may operate as a disincentive for them to continue their employment with us.	The Group  structures its reward programme to attract and retain the best people. The formal succession planning process continues to evolve with plans being reviewed and updated regularly for key positions and individuals.
Brand Reputation 7	Risk of significant reputational impact as a result of systemic product quality issues resulting in undermining of consumer confidence in our brands, particularly in the growing Health Care portfolio.	Various factors may adversely impact our reputation, including product quality inconsistencies or contamination resulting in product recalls. Reputational risks may also arise from our third parties' labour standards, health, safety and environmental standards, raw material sourcing, and ethical standards. We may also be the victim of product tampering or counterfeiting or grey imports. Any litigation, disputes on tax matters and pay structures may subject us to negative attention in the press, which can damage reputation.	The Group has a comprehensive set of policies, processes and systems to drive compliance with good manufacturing practice and monitor quality assurance, including an appropriately resourced global quality audit team.
Actives Upscheduling 8	Risk of upscheduling of active ingredients in Health Care to behind the counter or 'Rx' status.	We could be subject to regulatory investigations or potential  enforcement actions that target active ingredients, an industry, a set of business practices or our specific operations.  Regulatory authorities and consumer groups may request or conduct reviews of the use of certain of our ingredients, or ingredient legislation may change. These could result in a need to change our formulations which could be costly or may not be possible.	The Group monitors and works with health authorities and trade associations to properly influence the debate. An RB Governance Council was established during 2014 to ensure we continue to manage Health Care product lifecycles in accordance with our established high standards.
Developing Markets' Slow-down 9	Risk of material impact on Group growth and profit of consumerled slowdown in key developing markets, exacerbated by increasing currency volatility.	A variety of factors may adversely affect our results of operations and financial condition during periods of economic uncertainty or instability, social or labour unrest or political upheaval in the markets in which we operate. Such periods may also lead to government actions, such as imposition of martial law, trade restrictions, foreign ownership restrictions, capital, price or currency controls, nationalisation or expropriation of property or other resources, or changes in legal and regulatory requirements and taxation regimes.	The Group develops and implements locally robust risk mitigation programmes designed to generate cost savings and higher returns on investment. Both results and currency volatility are closely monitored. Partnerships are strengthened with distributors to better manage local risks.
'Black Swan' Event 10	An absolute worst case scenario with sufficient potential impact to risk the future of RB as a strong and independent business operating in its chosen markets.	Significant reputational impact as a result of a major issue resulting in multiple fatalities, possibly compounded by apparently negligent management behaviour; extreme adverse press coverage and viral social media linking the RB name to consumer brands, leads to a catastrophic share price fall, very significant loss of consumer confidence and inability to retain and recruit quality people.	A strong governance framework and operating model are applied to drive compliance, transparency and oversight. Robust Group policies are maintained and a programme of rolling independent audits operated to ensure their proper application. Comprehensive crisis management training programme and support tools are in place and routinely updated.
Routine Risks	We are subject to a range of compliance and routine risks as part of everyday business.	In order to manage the more numerous and routine risks, the Group maintains a complete and robust governance framework.	This consists of a full set of policies, processes and systems covering all aspects of compliance, with international and local laws as well as with the Group's stated minimum control standards. Management provides primary assurance by driving risk compliance through their respective area, regional or functional responsibility. This is done through regular and detailed business reviews. Secondary assurance is provided Independently through a combination of internal and external audit covering all aspects of the Group's operations.

(ii)  RELATED PARTY TRANSACTIONS (pages 113 and 125)

[NOTE] 25 RELATED PARTY TRANSACTIONS

Subsequent to the demerger of RB Pharmaceuticals on 23 December 2014, the Group continues to lease a building to, and provide operational services to the newly formed Indivior PLC. These transitional services between the Group and Indivior PLC are on an arm's length basis. Adrian Hennah, the Reckitt Benckiser Group plc CFO, also sits on the Board of Directors of Indivior PLC.

On 19 March 2013 the Group purchased an additional 25% of Shanghai Manon Trading Company Limited, thereby increasing its share to 75.01%. The consideration for the transaction amounted to ￡28m, including transaction costs.

Key management compensation is disclosed in note 5.

The subsidiary undertakings whose results or financial position principally affected the consolidated financial statements at 31 December 2014 are disclosed in note 2 to the Parent Company financial statements.

[PARENT COMPANY NOTE] 11 RELATED PARTY TRANSACTIONS

The Company has taken advantage of the exemption within Financial Reporting Standard No. 8 'Related Party Disclosures' not to disclose related party transactions with wholly owned subsidiaries of the Reckitt Benckiser Group. There were no other related party transactions (2013: nil)

(iii) DIRECTORS' RESPONSIBILITY STATEMENT

The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the performance, business model and strategy.

Each of the Directors, whose names and functions are listed on pages 32 to 34 [as set out below] confirms that, to the best of his/her knowledge:

• The Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU and IFRSs as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

• The Report of the Directors includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

• In addition, the Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the performance, business model and strategy.

Name                           Function

Adrian Bellamy              Chairman and Non-Executive Director

Rakesh Kapoor              Chief Executive Officer

Adrian Hennah               Chief Financial Officer

Jaspal Bindra                Non-Executive Director

Nicandro Durante           Non-Executive Director

Peter Harf                     Deputy Chairman and Non-Executive Director

Mary Harris                    Non-Executive Director

Kenneth Hydon              Non-Executive Director

Pamela Kirby                 Non-Executive Director

André Lacroix                Senior Independent Director

Sue Shim                      Non-Executive Director

Christopher Sinclair        Non-Executive Director

Judith Sprieser              Non-Executive Director

Douglas Tough              Non-Executive Director

Warren Tucker              Non-Executive Director

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END

 

 

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