3rd Quarter Results
25th October 2005
RECORD QUARTER
ON TRACK FOR FULL YEAR TARGETS
Results at a Glance Q3 % change % change Year To % change % change
£m actual constant Date actual constant
exchange exchange £m exchange exchange
Net Revenues £1,058m +8% +5% £3,072m +8% +6%
Operating Profit £210m +7% +4% £555m +9% +7%
Net Income £174m +16% +13% £442m +16% +14%
EPS (diluted) 23.5p +19% 59.3p +17%
* Net revenues grew 8% (5% constant) to £1,058m in Q3, a record quarter for
the Company, and 8% (6% constant) to £3,072m year to date (YTD).
* Operating profit increased 7% in Q3 to £210m and 9% in YTD to £555m. YTD
operating margins improved by 20 basis points (bps) to 18.1%.
* Net income grew 16% in Q3 to £174m and 16% in YTD to £442m after a
non-recurring tax credit of £13m in Q3. Fully diluted EPS grew 19% in Q3 to
23.5p, and 17% in YTD to 59.3p, the growth rate benefiting from the share
buyback program.
* Strong cash generation resulted in net funds of £714m at the end of Q3, an
increase of £82m since last year-end, after share buybacks of £243m and
dividends of £262m this year. The Company will complete its £300m share
buyback program for 2005 and has confirmed its intention of a £300m buyback
program in 2006.
* Major initiatives contributing to these results included Cillit Bang,
Finish 4in1, Air Wick Freshmatic and Vanish Oxi Action Max.
Commenting on these results, Bart Becht, Chief Executive Officer, said
'Reckitt Benckiser sustained its robust growth ahead of the market resulting in
our highest ever quarter for net revenues. Growth came across all regions and
was strongly driven by new products like Cillit Bang, Finish 4in1, Air Wick
Freshmatic and Vanish Oxi Action Max. Operating profit and net income improved
in line with expectations despite the continuing pressure on input costs. To
address this pressure, Reckitt Benckiser is implementing price increases in
North America and Europe.
'The results confirm that Reckitt Benckiser is on track to deliver its full
year targets of net revenue growth of 5% to 6% at constant exchange and net
income growth in the mid teens on an adjusted IFRS base of £563m at actual
exchange.'
Detailed Operating Review
Third Quarter 2005
Net revenues in Q3 grew by 8% (5% at constant exchange) to £1,058m.
Operating profit for Q3 grew 7% (4% constant) to £210m. Gross margin was level
with last year at 54.6% due to higher margin new products and benefits from
ongoing cost optimization programs offsetting higher input costs. Marketing
investment increased during the period with a shift in marketing mix towards
other forms of consumer marketing as planned. Media investment was 5% higher at
11.8% of net revenues. Operating margin was 19.8% (2004 20.1%) as a result of
the higher marketing investment.
Net income grew 16% (13% constant) to £174m following a £13m non recurring tax
credit. EPS diluted increased 19% to 23.5 pence.
Nine Months 2005
Net revenues grew by 8% (6% constant) to £3,072m.
Operating profit increased 9% (7% constant) to £555m. Gross margin was 10bps
behind last year at 54.5% as a result of higher margin new products, and
savings from ongoing cost optimization programs not quite offsetting
significantly higher input costs. Media investment increased 7% to 13.1% of net
revenues (2004 13.3%). Other marketing investment increased due to a shift in
marketing mix towards other forms of consumer marketing. Operating margins
increased by 20bps to 18.1% due to tight control of fixed costs more than
offsetting higher marketing investment.
Net income for the nine months increased 16% (14% constant) to £442m. Net
interest received of £22m (2004 £4m) was due to the strong cash inflow over the
past year reducing the level of net borrowings after higher dividend payments
and share buyback, and the conversion of the convertible bond. The underlying
tax rate for the period is 26% before a non-recurring tax credit of £13m
arising from favorable tax settlements.
EPS diluted increased 17% to 59.3 pence.
Geographic Analysis at constant exchange
Europe 53% of Net Revenues
YTD net revenues grew by 5% to £1,614m. Growth came from key recent product
introductions. In fabric treatment, growth was due to the success of Vanish
with Vanish Oxi Action Max and Vanish Dual Power. In surface care, growth came
from Cillit Bang. In automatic dishwashing, growth was due to Finish/Calgonit
4in1. Home Care increased due to the successful launch of Air Wick Freshmatic.
Health & Personal Care saw strong growth for the health care portfolio due to
the roll-out of Gaviscon in Europe. YTD Operating margins were 50bps below last
year due to higher marketing investment, resulting in operating profits
increased by 3% to £338m.
In Q3, net revenues grew 3% to £537m, and operating profits increased by 2% to
£116m with operating margins 60bps lower at 21.6% due to higher marketing
investment.
North America & Australia 29% of Net Revenues
YTD net revenues increased by 4% to £904m. In fabric care, Spray'n Wash Dual
Power fabric treatment and Resolve Dual Power carpet cleaner grew sales. In
surface care increases came from growth for Lysol disinfectant spray, and the
launch of Easy-Off Bam. In automatic dishwashing increases came due to the
success of Electrasol with Jet Dry Action. In Home Care, Air Care grew
following the launch of Air Wick Freshmatic, and in Health & Personal Care,
Veet depilatories and prescription drug Suboxone were the principal
contributors to growth. Food increased net revenues due to continued growth for
French's yellow mustard and gains for Frank's Red Hot sauce. YTD operating
margins were 50bps lower at 16.7%, due to substantially higher input costs
reducing gross margins. As a result operating profits increased 1% to £151m.
Q3 net revenues grew 5% to £328m, with profits increasing 3% to £70m. Operating
margins were 40bps behind last year due to higher input costs reducing gross
margins.
Developing Markets 18% of Net Revenues
YTD net revenues grew 12% to £554m. There was strong growth in all categories.
In fabric care, growth came following the roll-out of Vanish Oxi Action fabric
treatment products. In surface care, increases came from the success of
Easy-Off Bang. Pest control grew strongly with the launch of Mortein Power
Booster coils. Health & Personal Care grew due to the continuing roll out of
Veet in new markets and strong growth for the Dettol range of personal care
products. YTD Operating margins expanded by 210bps to 7.4%, resulting in
operating profits increasing by 52% to £41m.
Q3 net revenues increased by 10% to £193m, and operating profits increased 25%
to £15m with operating margins expanding by 110bps to 7.8%.
Category Review at constant exchange rates
Fabric Care. YTD net revenues grew 2% to £837m largely due to the success of
Vanish Oxi Action, the Company's fabric treatment franchise and Calgon water
softener, offset to some extent by softness in laundry detergent and fabric
softeners. Key drivers of growth included the roll out of Vanish Oxi Action
Max, Vanish Dual Power and continued growth for Vanish carpet cleaners.
Q3 net revenues grew 2% to £296m.
Surface Care. YTD net revenues grew 12% to £642m. The major growth driver was
the roll-out of Bang under the Cillit brand in Europe, and the Easy- Off brand
in North America and Developing Markets. The Dettol and Lysol disinfecting
range, particularly disinfectant spray, grew in Europe, North America and
Developing Markets
Q3 net revenues grew 8% to £223m.
Dishwashing. YTD net revenues grew 6% to £429m. Strong growth in automatic
dishwashing. Growth came from the success of Finish/Calgonit 4in1 in Europe and
from Electrasol with Jet Dry Action in North America.
Q3 net revenues grew 4% to £139m.
Home Care. YTD net revenues grew 6% to £443m with strong growth for both air
care and pest control. Air care grew behind the launch of Air Wick Freshmatic
in Europe, North America and certain Developing Markets. Pest control growth
was driven by Mortein Power Booster coils.
Q3 net revenues grew 4% to £160m.
Health & Personal Care. YTD net revenues grew 9% to £493m with growth across
all segments. Veet depilatories continue to benefit from the continuing roll
out in Developing Markets and growth in North America. Dettol antiseptics grew
behind the personal care range in Developing Markets. Healthcare products
benefited from the continuing roll-out of Gaviscon in Europe. Suboxone
continues to grow strongly as distribution builds in North America.
Q3 net revenues grew 11% to £164m.
Core Household grew net revenues 7% to £2,844m YTD, and 5% to £982m in Q3.
Food. YTD net revenues grew 2% to £130m with continued growth for French's
yellow mustard and gains for Frank's Red Hot sauce.
Q3 net revenues were in line with last year at £44m.
Financial Items
Net Interest. YTD Interest receivable on the Company's cash and debt portfolio
less payable on borrowings was £22m (YTD 2004 £4m). This increase reflects
strong cash inflow in 2005 to date plus the interest saved on convertible bonds
following conversion in July 2004 and March 2005.
Net working capital (defined as stock, short-term debtors and short-term
creditors excluding borrowings) at the period end was minus £592m. The
difference compared to the prior year-end position (minus £521m) is due to
further underlying improvement in net working capital.
Net funds at the nine months were £714m (2004 year-end £632m), an improvement
of £82m during the year to date due to strong operating cash inflow offset by
share buyback and higher dividend payments.
Share buyback
Between 1st January and 30th September 2005, the Group purchased 14.2m shares
for cancellation at a cost of £243m as part of its ongoing share buyback
program. For the rolling 12 months to September 2005, the Group purchased 18m
shares at a cost of £300m.
Shares in Issue
The number of shares in issue at 30th September was 725.0m reduced by the
repurchase of 4.6m shares by the Company in the quarter at a cost of £82m.
For Further Information
Reckitt Benckiser +44 (0)1753 217 800
Tom Corran SVP Investor Relations & Corporate Communications
Fiona Fong Head of Corporate Communications Press calls
Mark Wilson Corporate Controller & Investor Calls
Investor Relations Manager
PR Agency
Tim Spratt Financial Dynamics +44 (0)207 831 3113
The Group at a Glance (unaudited)
Quarter Ended September Nine Months Ended September
30 30
2005 2004# 2005 2004#
£m £m £m £m
From total ordinary
activities
1,058 976 Net revenues 3,072 2,849
8% 1% Net revenues growth 8% 3%
54.6% 54.6% Gross margin 54.5% 54.6%
234 218 EBITDA 622 578
22.1% 22.3% EBITDA margin 20.2% 20.3%
210 196 EBIT 555 511
19.8% 20.1% EBIT margin 18.1% 17.9%
217 204 Profit before tax 577 515
20.5% 20.9% PBT margin 18.8% 18.1%
174 150 Net Income 442 380
16.4% 15.4% Net Income margin 14.4% 13.3%
23.9p 20.8p EPS 60.7p 53.4p
23.5p 19.7p EPS, diluted 59.3p 50.7p
#Restated following the adoption of IFRS.
Group Balance Sheet Data September 30 December 31
2005 2004#
£m £m
Net working capital * (592) (521)
Net funds 714 632
#Restated following the adoption of IFRS.
* Net working capital is defined as inventories, short term receivables and
short term liabilities, excluding borrowings, convertible capital bonds and
provisions.
Group income statement (unaudited)
Quarter Ended Nine Months Ended
September 30 September 30
2005 2004# % change 2005 2004# %
change
£m £m £m £m
1,058 976 8% Net revenues 3,072 2,849 8%
(480) (443) 8% Cost of sales (1,398) (1,293) 8%
578 533 8% Gross profit 1,674 1,556 8%
(368) (337) 9% Net operating expenses (1,119) (1,045) 7%
210 196 7% Total operating profit 555 511 9%
7 8 Net finance income 22 4
217 204 6% Profit before taxation 577 515 12%
(43) (54) (20%) Taxation (135) (135) 0%
174 150 16% Profit for the period 442 380 16%
0 0 - Attributable to minority 0 0 -
interests
174 150 16% Attributable to equity 442 380 16%
shareholders
174 150 16% Profit for the period 442 380 16%
Earnings per ordinary share:
23.9p 20.8p On profit for the period 60.7p 53.4p
23.5p 19.7p On profit for the period, 59.3p 50.7p
diluted
Average common shares
outstanding:
727.6 720.7 Basic 728.2 711.0
740.4 752.2 Diluted 745.4 756.9
#Restated following the adoption of IFRS.
Segmental Analysis (unaudited)
Analyses by geographical area (primary segment) of net revenues and operating
profit and of net revenues by product group (secondary segment) are set out
below. The figures for each geographical area show the net revenues and profit
made by companies located in that area.
Quarter Ended September 30 Nine Months Ended September
30
2005 2004# % Change 2005 2004# % Change
£m £m exch. Rates £m £m exch rates
actual const. actual const.
Net revenues - by
geographical area
537 509 6% 3% Europe 1,614 1,506 7% 5%
328 304 8% 5% North America & 904 868 4% 4%
Australia
193 163 18% 10% Developing Markets 554 475 17% 12%
1,058 976 8% 5% 3,072 2,849 8% 6%
Operating profit - by
geographical area
116 113 3% 2% Europe 338 322 5% 3%
70 66 6% 3% North America & 151 149 1% 1%
Australia
15 11 36% 25% Developing Markets 41 25 64% 52%
9 6 Corporate 25 15
210 196 7% 4% 555 511 9% 7%
% % Operating margin - by % %
geographical area
21.6 22.2 Europe 20.9 21.4
21.3 21.7 North America & 16.7 17.2
Australia
7.8 6.7 Developing Markets 7.4 5.3
- Corporate
19.8 20.1 18.1 17.9
#Restated following the adoption of IFRS.
Segmental Analysis (continued)
Quarter Ended September 30 Nine Months Ended September
30
2005 2004# % change 2005 2004# % change
£m £m exch. rates £m £m exch. rates
actual const. actual const.
Net revenues - by
product group
296 279 6% 2% Fabric Care 837 796 5% 2%
223 196 14% 8% Surface Care 642 561 14% 12%
139 132 5% 4% Dishwashing 429 400 7% 6%
160 148 8% 4% Home Care 443 412 8% 6%
164 145 13% 11% Health & Personal Care 493 449 10% 9%
982 900 9% 5% Core Business 2,844 2,618 9% 7%
32 33 -3% -6% Other Household 98 103 -5% -5%
1,014 933 9% 5% Household and Health & 2,942 2,721 8% 6%
Personal Care
44 43 2% 0% Food 130 128 2% 2%
1,058 976 8% 5% Total 3,072 2,849 8% 6%
Additional Information (unaudited)
Operating profit - by product
segment
192 181 6% 4% Household and Health & 509 476 7% 5%
Personal Care
9 9 0% 0% Food 21 20 5% 5%
9 6 Corporate 25 15
210 196 7% 4% Total 555 511 9% 7%
% % Operating margin - by % %
product segment
18.9 19.4 Household and Health & 17.3 17.5
Personal Care
20.5 20.9 Food 16.2 15.6
19.8 20.1 Total 18.1 17.9
Shares in Issue
Millions
31 December 2004 724.5
Issues on Conversion of Capital Bonds 8.1
Other Issues 6.6
Cancelled (14.2)
30 September 2005 725.0
9
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