3rd Quarter Results
Reckitt Benckiser Group plc
A World Leader in Household, Health and Personal Care
27 October 2009
CONTINUED STRONG MOMENTUM IN Q3
FY 2009 TARGETS INCREASED
Results at a Q3 % change % change YTD % change % change
glance £m actual constant £m actual constant
exchange exchange exchange exchange
(unaudited)
Net Revenue 1,907 +15 +7 5,690 +20 +7
Operating 467 +23 +10 1,286 +31 +15
Profit -
reported
Operating 467 +23 +10 1,286 +27 +12
Profit -
adjusted *
Net Income - 357 +25 +12 970 +33 +16
reported
Net Income - 357 +25 +12 970 +29 +13
adjusted *
EPS (diluted) 49.6p +26 134.4p +34
- reported
EPS (diluted) 49.6p +26 134.4p +30
- adjusted *
* Adjusted results (including % change figures) exclude exceptional items (see
page 2). There are no exceptional items in YTD 2009 compared to an exceptional
charge of £30m pre-tax in YTD 2008.
Year to date ("YTD") highlights:
- Total net revenue +7% (constant exchange) to £5,690m, driven by growth in the
Group's 17 Powerbrands. Excluding Reckitt Benckiser Pharmaceuticals ("RBP"),
net revenue was ahead +5% (at constant).
- Gross margin +90bp to 59.4%: adjusted operating margin +130bp to 22.6%.
- Adjusted net income +29% (actual exchange): adjusted diluted EPS of 134.4p (+30%).
- Net debt of £423m (31 December 2008: £1,096m), as a result of strong free cash
flow generation partially offset by the payment of two dividends totalling £648m.
- Net working capital of minus £1,275m, a £178m improvement versus the 31 December 2008 level.
Q3 highlights:
- Total net revenue +7% (constant exchange), +5% (constant) ex-RBP.
- Gross margin +120bp to 60.0%: adjusted operating margin +170bp to 24.5%.
- Adjusted net income +25% (actual exchange): adjusted diluted EPS of 49.6p (+26%).
Commenting on these results, Bart Becht, Chief Executive Officer, said:
"Reckitt Benckiser continued to see good momentum, with net revenue growth of
+7% at constant exchange. This result was supported by our 17 Powerbrands,
behind significant investment in media and marketing and successful new product
initiatives.
We are raising our full year target for net revenue growth to +6-7% at constant
exchange (previously +5-6%), as a result of continued strong momentum in the base
business, combined with upside on RBP compared to ingoing expectations. For
adjusted net income growth, we are raising our target to +12-13% at constant
exchange (previously +10-11%), or around +22-23% at actual exchange."
Basis of Presentation and Exceptional Items
Where appropriate, the term "adjusted" excludes the impact of exceptional
items. There are no exceptional items in YTD 2009, compared to an exceptional
charge in YTD 2008 of £30m mainly relating to the integration of Adams.
Detailed Operating Review
Third quarter 2009
Q3 net revenue increased +15% to £1,907m, with growth of +7% at constant exchange.
The gross margin improved by +120bp to 60.0%, largely as a result of easing
input costs and benefits from cost optimisation programmes, partially offset by
a negative transaction impact from foreign exchange. While media activity
increased, media spend declined by -5% (-9% constant) to a level of 10.4% of
net revenue due to further improvements in media buying rates. Total marketing
investment was higher, as savings from these more favourable media rates were
re-invested in Other Consumer Marketing activities. Operating profit as
reported was £467m, +23% higher than last year (+10% constant): the operating
margin increased by +170bp to 24.5% due to gross margin expansion and operating
cost efficiencies.
Net finance income was £2m (Q3 2008: net finance expense of £7m), reflecting
strong free cash flow generation and progress made on net debt repayment during
the quarter. The tax rate was 24%.
Net income was £357m, an increase of +25% (+12% constant) on both a reported
and adjusted basis versus Q3 2008.
Year to date (nine months) 2009
YTD net revenue increased +20% to £5,690m, with growth of +7% at constant exchange.
The gross margin improved by +90bp to 59.4%, largely as a result of easing
input costs and benefits from cost optimisation programmes, partially offset by
a negative transaction impact from foreign exchange. Total marketing
investment was higher, and pure media investment rose +5% (-5% constant) to a
level of 11.5% of net revenue. There was significant growth in Other Consumer
Marketing, funded by savings from more favourable media rates. Operating
profit as reported was £1,286m, +31% higher than last year (+15% constant): on
an adjusted basis, operating profit was ahead +27% (+12% constant). The
adjusted operating margin increased by +130bp to 22.6% due to gross margin
expansion and operating cost efficiencies.
Net finance expense was £1m (YTD 2008: £26m), reflecting strong free cash flow
generation and progress made on net debt repayment during the nine months. The
tax rate was 25%.
Net income was £970m, an increase of +33% (+16% constant) on YTD 2008. On an
adjusted basis, net income was up +29% (+13% constant).
YTD 2009 Business Review
Summary: % net revenue growth
YTD 2009 Growth at Constant Exchange Exchange Reported
Europe +1% +7% +8%
NAA +7% +22% +29%
DvM +15% +11% +26%
Pharma* +42% +35% +77%
TOTAL +7% +13% +20%
* Pharma represents the Group's prescription drug business of Subutex and
Suboxone
The Business Review below is given at constant exchange rates.
Europe 47% of net revenue
YTD 2009 total net revenue increased +1% to £2,644m, with growth mainly in
Dishwashing, Home Care and Health & Personal Care. The continued success of
Quantum contributed to growth in Dishwashing, with such initiatives as Airwick
Freshmatic, Freshmatic Mini and <i>motion supporting the result in Air Care.
In Health & Personal Care, increased marketing investment helped drive a strong
performance for Nurofen, Strepsils and Gaviscon.
For the nine months, the adjusted operating margin was +20bp ahead of last year
at 22.7%; this resulted in a +1% improvement in adjusted operating profit to £
600m.
In Q3, net revenue growth was unchanged at £862m. Adjusted operating profit
increased by +1% to £197m, with the margin up +40bp to 22.9%.
North America & Australia 27% of net revenue
YTD 2009 total net revenue increased +7% to £1,546m, with growth coming largely
in Surface Care, Home Care and Health & Personal Care. Growth in Surface Care
was boosted by increased consumption of Lysol spray and disinfectant wipes,
while Airwick Freshmatic and <i>motion contributed to the result in Home Care.
In Health & Personal Care, growth was driven by Mucinex.
In Food, the consumer portfolio delivered a good performance, with further
growth in particular for French's Yellow Mustard and Frank's Red Hot Sauce.
For the nine months, adjusted operating profit increased +11% to £303m; the
adjusted operating margin was +90bp higher at 19.6%.
Q3 net revenue rose +6% to £538m and adjusted operating profit was ahead by +6%
to £134m, equating to a +130bp uplift in the margin to 24.9%.
Developing Markets 19% of net revenue
YTD 2009 total net revenue was ahead +15% to £1,106m, with growth across all
regions and driven particularly by Fabric Care, Surface Care and Health &
Personal Care. Growth in Fabric Care was driven by a strong performance for
Vanish, behind increased marketing investment and new initiatives. Surface
Care increased largely as a result of growth in Harpic, and Veja in Brazil. In
Health & Personal Care, the Dettol personal care range delivered an excellent
result, boosted by additional marketing investment, with Veet and Gaviscon also
strong contributors.
For the nine months, adjusted operating profit increased by +20% to £146m.
This resulted in a +80bp improvement in the adjusted operating margin to 13.2%.
Q3 net revenue increased by +15% to £367m. Adjusted operating profit improved
+17% to £48m, with a +90bp uplift in the margin to 13.1%.
Pharmaceuticals 7% of net revenue
YTD 2009 total net revenue for the Group's Subutex and Suboxone prescription
drug business grew +42% to £394m. These buprenorphine-based products are used
to treat opiate dependence. This very strong growth was predominantly driven
by a continued increase in penetration of Suboxone in the U.S.
For the nine months, the adjusted operating margin improved by +300bp to
60.2%. Adjusted operating profit was £237m, an increase of +45%.
Q3 net revenue rose +41% to £140m. Adjusted operating profit increased +44% to
£88m, for a +290bp expansion in the margin to 62.9%.
As a result of its Orphan Drug Status, Suboxone has exclusivity in Europe until
2016: in the U.S., Suboxone lost exclusivity on 8th October 2009. Within the
Pharmaceuticals division, the U.S. Suboxone business generated YTD 2009 net
revenue of £342m and adjusted operating profit of £211m. While the Group
continues to search for ways to offset the impact of the loss of exclusivity in
the U.S., up to 80% of the revenues and profits of that business might be lost
in the year following the launch of generic competitors, with the possibility
of further erosion thereafter.
YTD 2009 Category Review (at Constant Exchange Rates)
Fabric Care. Net revenue decreased -1% to £1,203m. Vanish showed a strong
performance in Developing Markets, although the result in Europe and North
America & Australia was impacted by increased competitive activity. Woolite
also contributed, helped by such new initiatives as Triple Protection and
concentrated formulations. Growth was offset by weakness in Laundry Detergents
and Fabric Conditioners. Q3 net revenue declined -4% to £396m.
Surface Care. Net revenue grew +5% to £963m. Both the Dettol and Lysol ranges
delivered strong growth, with Harpic Lavatory Care also performing well, helped
by such new initiatives as Harpic liquid with Max Coverage. Q3 growth was +8%
to £328m.
Dishwashing. Net revenue increased +2% to £628m, helped by the continued
success of Finish Quantum. Growth was partially offset by weakness in
Dishwashing Additives and higher promotional investment. Q3 net revenue
decreased -5% to £188m.
Home Care. Net revenue increased +4% to £756m. Growth largely came in Air
Care, supported by Airwick Freshmatic, Freshmatic Mini and <i>motion. Q3
growth was +2% to £247m.
Health & Personal Care. Net revenue increased +14% to £1,511m. The Dettol
personal wash range continued to deliver excellent growth, with Nurofen,
Strepsils, Gaviscon and Mucinex all contributing to a strong performance in
Healthcare. In Q3, Health & Personal Care grew +16% to £533m.
Total Household and Health & Personal Care. Net revenue was ahead by +5% to £
5,103m. In Q3, total Household and Health & Personal Care grew +4% to £1,706m.
Pharmaceuticals. YTD 2009 net revenue for the Group's Subutex and Suboxone
prescription drug business grew +42% to £394m, predominantly driven by a
continued increase in penetration of Suboxone in the U.S. Adjusted operating
profit was ahead +45% to £237m, equating to a +300bp improvement in the margin
to 60.2%.
Q3 net revenue increased by +41% to £140m, while adjusted operating profit rose
+44% to £88m.
Food. Net revenue rose +7% to £193m, led by the consumer brands of French's
yellow mustard and Frank's Red Hot sauce. Adjusted operating profit increased
+18% to £43m.
Q3 net revenue grew +7% and adjusted operating profit was £18m (+14%).
YTD 2009 Financial Review
Basis of preparation. The unaudited financial information is prepared in
accordance with IFRSs as adopted by the European Union and IFRSs as issued by
the International Accounting Standards Board, and with the accounting policies
set out in the Group's 2008 Annual Report & Financial Statements, except as
explained in Note 3 to the Half Year 2009 Condensed Financial Statements.
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 working capital (inventories, short-term receivables and short-term
liabilities excluding borrowings and provisions) of minus £1,275m was £178m
lower than the 31 December 2008 level, mostly due to an improvement in
payables.
Net debt as at 30th September 2009 was £423m (December 2008: £1,096m), a
decrease of £673m. This reflects ongoing strong net cash flow generation from
the business, partially offset by the payment of two dividends totalling £648m.
In Q3, net debt decreased £102m compared to the position at the end of June
2009, reflecting strong cash flow generation, partially mitigated by the
interim dividend payment (£307m).
2009 Targets
The Group is raising its full year target for net revenue growth to +6-7% at
constant exchange (previously +5-6%), as a result of continued strong momentum in the
base business, combined with upside on RBP compared to ingoing expectations.
For adjusted net income growth, the Group is raising its target to +12-13% at
constant exchange (previously +10-11%), or around +22-23% at actual exchange.
For further information, please contact:
Reckitt Benckiser +44 (0)1753 217800
Joanna Speed
Director, Investor Relations
Andraea Dawson-Shepherd
Global Director, Corporate Communications & Affairs
Brunswick(Financial PR) +44 (0)20 7404 5959
Susan Gilchrist
Senior Partner
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 Nine months ended
30 September 30 September
2009 2008 2009 2008
£m £m £m £m
1,907 1,664 Net revenue - total 5,690 4,738
+7% +13% Net revenue growth - constant +7% +12%
+15% +24% Net revenue growth - total +20% +22%
60.0% 58.8% Gross margin 59.4% 58.5%
497 408 EBITDA 1,378 1,058
26.1% 24.5% EBITDA margin 24.2% 23.2%
467 380 EBIT 1,286 980
467 380 EBIT - adjusted * 1,286 1,010
24.5% 22.8% EBIT margin 22.6% 20.7%
24.5% 22.8% EBIT margin - adjusted * 22.6% 21.3%
469 373 Profit before tax 1,285 954
357 285 Net income 970 727
357 285 Net income - adjusted * 970 750
50.1p 40.1p EPS, basic, as reported 136.3p 102.2p
49.6p 39.5p EPS, adjusted and diluted * 134.4p 103.4p
* Adjusted to exclude the impact of exceptional items.
Group balance sheet data 30 September 31 December
2009 2008
£m £m
Net working capital * (1,275) (1,097)
Net debt (423) (1,096)
* Net working capital is defined as inventories, short-term receivables and
short-term liabilities, excluding borrowings and provisions.
Shares in issue
Nine months
Millions
31 December 2008 708.7
Issued or transferred from Treasury 1.3
31 March 2009 710.0
Issued or transferred from Treasury 3.8
30 June 2009 713.8
Issued or transferred from Treasury 1.0
30 September 2009 714.8
Group Income Statement Analysis (Unaudited)
Quarter ended Nine months ended
30 September 30 September
2009 2008 % 2009 2008 %
change change
£m £m £m £m
1,907 1,664 +15 Net revenue 5,690 4,738 +20
(762) (686) +11 Cost of sales (2,311) (1,967) +17
1,145 978 +17 Gross profit 3,379 2,771 +22
(678) (598) +13 Net operating expenses (2,093) (1,791) +17
467 380 +23 Operating profit 1,286 980 +31
467 380 +23 Operating profit before exceptional 1,286 1,010 +27
items
- - Exceptional items - (30)
467 380 +23 Operating profit 1,286 980 +31
2 (7) Net finance income / (expense) (1) (26)
469 373 +26 Profit on ordinary activities before 1,285 954 +35
taxation
(112) (88) +27 Tax on profit on ordinary activities (315) (227) +39
357 285 +25 Profit for the period 970 727 +33
- - Attributable to equity minority - -
interests
357 285 +25 Attributable to ordinary equity 970 727 +33
holders of the parent
357 285 +25 Profit for the period 970 727 +33
Earnings per ordinary share:
50.1p 40.1p On profit for the period, basic 136.3p 102.2p
49.6p 39.5p On profit for the period, diluted 134.4p 100.3p
Earnings per ordinary share - adjusted*:
50.1p 40.1p On profit for the period, basic 136.3p 105.5p
49.6p 39.5p On profit for the period, diluted 134.4p 103.4p
* Adjusted to exclude the impact of exceptional items.
Average common shares outstanding:
(millions)
712.3 710.2 Basic 711.8 711.0
719.7 721.9 Diluted 721.7 725.2
Segment Information (Unaudited)
Analyses by operating segment of net revenue and operating profit, and of net
revenue by product group are set out below. The figures for each geographical
area show the net revenue and operating profit made by companies located in
that area. Additional information is provided to show profit by class of
business.
Operating segment
Quarter ended Nine months ended
30 September 30 September
2009 2008 % Change 2009 2008 % Change
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenue
862 835 +3% +0% Europe 2,644 2,441 +8% +1%
538 441 +22% +6% North America & Australia 1,546 1,199 +29% +7%
367 303 +21% +15% Developing Markets 1,106 876 +26% +15%
140 85 +65% +41% Pharmaceuticals 394 222 +77% +42%
1,907 1,664 +15% +7% 5,690 4,738 +20% +7%
Operating profit - statutory basis
197 188 +5% +1% Europe 600 550 +9% +1%
134 104 +29% +6% North America & Australia 303 194 +56% +24%
48 37 +30% +17% Developing Markets 146 109 +34% +20%
88 51 +73% +44% Pharmaceuticals 237 127 +87% +45%
467 380 +23% +10% 1,286 980 +31% +15%
Operating profit - adjusted*
197 188 +5% +1% Europe 600 550 +9% +1%
134 104 +29% +6% North America & Australia 303 224 +35% +11%
48 37 +30% +17% Developing Markets 146 109 +34% +20%
88 51 +73% +44% Pharmaceuticals 237 127 +87% +45%
467 380 +23% +10% Subtotal before 1,286 1,010 +27% +12%
exceptional items
- - Exceptional items - (30)
467 380 +23% +10% 1,286 980 +31% +15%
% % Operating margin - adjusted* % %
22.9 22.5 Europe 22.7 22.5
24.9 23.6 North America & Australia 19.6 18.7
13.1 12.2 Developing Markets 13.2 12.4
62.9 60.0 Pharmaceuticals 60.2 57.2
24.5 22.8 22.6 21.3
* Adjusted to exclude the impact of exceptional items
Segment Information (Unaudited), continued
Product segment
Quarter ended Nine months ended
30 September 30 September
2009 2008 % change 2009 2008 % change
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenue by category
396 393 +1% -4% Fabric Care 1,203 1,113 +8% -1%
328 282 +16% +8% Surface Care 963 814 +18% +5%
188 185 +2% -5% Dishwashing 628 555 +13% +2%
247 224 +10% +2% Home Care 756 646 +17% +4%
533 427 +25% +16% Health & Personal Care 1,511 1,195 +26% +14%
14 18 -22% -27% Other Household 42 48 -13% -23%
1,706 1,529 +12% +4% Household and Health & Personal Care 5,103 4,371 +17% +5%
140 85 +65% +41% Pharmaceuticals 394 222 +77% +42%
61 50 +22% +7% Food 193 145 +33% +7%
1,907 1,664 +15% +7% 5,690 4,738 +20% +7%
Operating profit - adjusted
361 316 +14% +4% Household and Health & Personal Care 1,006 854 +18% +5%
88 51 +73% +44% Pharmaceuticals 237 127 +87% +45%
18 13 +38% +14% Food 43 29 +48% +18%
467 380 +23% +10% Subtotal before exceptional 1,286 1,010 +27% +12%
items
- - Exceptional items - (30)
467 380 +23% +10% 1,286 980 +31% +15%
% % Operating margin - adjusted % %
21.2 20.7 Household and Health & Personal Care 19.7 19.5
62.9 60.0 Pharmaceuticals 60.2 57.2
29.5 26.0 Food 22.3 20.0
24.5 22.8 22.6 21.3
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