Annual Report and Accounts

A World Leader in Household, Health and Personal Care 11 February 2009 EXCELLENT GROWTH IN 2008 2009 TARGETS A STRONG YEAR Results at a glance Q4 % change % change FY % change % change Â£m actual constant Â£m actual constant (unaudited) exchange exchange exchange exchange Net Revenue 1,825 +33 +15 6,563 +25 +13 Operating Profit - 525 +36 +17 1,505 +22 +9 reported Operating Profit - 525 +35 +16 1,535 +29 +15 adjusted * Net Income - reported 393 +36 +13 1,120 +19 +6 Net Income - adjusted 393 +35 +12 1,143 +26 +12 * EPS (diluted) - 54.6p +38 154.7p +21 reported EPS (diluted) - 54.6p +37 157.8p +28 adjusted * * Adjusted results (including % change figures) exclude exceptional items (see page 2). Reported results for the Full Year (FY) 2008 include an exceptional charge of Â£30m pre-tax (Q4 2008: Â£nil) compared to a pre-tax net gain of Â£43m in FY 2007 (Q4 2007: Â£4m charge). Like-for-like ("LFL") growth describes business performance on a comparable basis, excluding the impact of business acquisitions, disposals and foreign exchange movements. FY highlights: - Total net revenue growth of +13% (constant exchange), of which like-for-like ("LFL") growth +10% reflects broad-based performance across the Group. - Gross margin +100bp to 59.3%: adjusted operating margin +80bp to 23.4%. - Adjusted net income +26% (actual exchange): adjusted diluted EPS of 157.8p (+28%). - Net debt of Â£1,096m (2007: Â£125m) with ongoing strong cash flow generation, offset by the Adams acquisition and a net -Â£332m adverse foreign exchange impact. - The Board recommends a +60% increase in the final dividend to 48.0p per share, bringing the total dividend for 2008 to 80.0p (+45% versus 2007). - The Company is immediately moving to a 50% dividend payout ratio. It is also currently prioritising further debt repayment over share buybacks. As a result, the 2009 share buyback is cancelled. Q4 highlights: - Total net revenue growth of +15% (constant exchange), of which LFL growth +8% in a record overall quarter for the Group. - Gross margin +130bp to 61.3%: adjusted operating margin +40bp to 28.8%. - Adjusted net income +35% (actual exchange): adjusted diluted EPS of 54.6p (+37%). Commenting on these results, Bart Becht, Chief Executive Officer, said: "Reckitt Benckiser had an excellent year in 2008 despite challenging conditions, with like-for-like net revenue growth of +10%. All regions and all 17 Powerbrands contributed to this growth, supported by significant media investment and successful innovations such as Vanish Intelligence and Finish Max in 1. Based on the current market outlook, our targets in 2009 are for net revenue growth of +4% (base Â£6,563m) and net income growth of +8-10% (base Â£1,143m), both at constant exchange." Basis of Presentation and Exceptional Items The results include the Adams Respiratory Therapeutics business (Adams) from 30 January 2008, the date of acquisition. Operating profit is not separately disclosed for the Adams business as, in the view of the Directors, it is not practicable to identify its operating profit due to its integration into the commercial infrastructure of Reckitt Benckiser. Where appropriate, the term "adjusted" excludes the impact of exceptional items. Exceptional items in 2008 consist of a restructuring charge of Â£30m mainly relating to the integration of Adams: exceptional items in 2007 consist of a Â£43m net gain on the disposal of Hermal, offset by restructuring of configuration of the Group. Where appropriate, the term "like-for-like" ("LFL") describes business performance on a comparable basis, excluding the impact of business acquisitions, disposals and foreign exchange movements. Detailed Operating Review Fourth quarter 2008 Q4 net revenue increased +33% (+15% at constant exchange) to Â£1,825m, with LFL growth of +8%. Adams contributed Â£108m in Q4 2008, while disposed businesses contributed Â£2m to Q4 net revenue in 2007. The gross margin improved by +130bp to 61.3% due to sales price increases, benefits from cost optimisation programmes and the impact of a positive mix more than offsetting higher input costs. The inclusion of the recently-acquired Adams business contributed approximately 100bp of the increase of +130bp. Marketing investment was higher, with pure media investment up +25% (+9% constant) to a level of 10.6% of net revenue. Growth in Other Consumer Marketing significantly outpaced the uplift in media spend in the quarter, owing to the phasing of brand-building initiatives. Operating profit as reported was Â£525m, +36% higher than last year (+17% constant); on an adjusted basis, operating profit was ahead +35% (+16% constant). The adjusted operating margin increased by +40bp to 28.8% due to gross margin expansion, partially offset by additional marketing investment. Net finance expense was Â£5m (Q4 2007: Â£4m), reflecting interest on the debt to finance the Adams acquisition earlier in the year. The tax rate for the quarter was 24%. Net income was Â£393m, an increase of +36% (+13% constant) on Q4 2007. On an adjusted basis, net income was up +35% (+12% constant). Diluted earnings per share of 54.6 pence rose +37% on an adjusted basis (+38%, reported), ahead of net income growth as the accretion from the buyback more than offset dilution from new share issues. Full year 2008 FY net revenue increased +25% (+13% at constant exchange) to Â£6,563m. LFL growth was +10%. Adams contributed Â£233m for the eleven months since acquisition, while disposed businesses contributed Â£49m in FY 2007. The gross margin improved by +100bp to 59.3% due to sales price increases, benefits from cost optimisation programmes, volume leverage and the impact of a positive mix more than offsetting higher input costs. The inclusion of the recently-acquired Adams business contributed approximately 50bp of the increase of +100bp. Marketing investment was higher, and pure media investment rose +26% (+14% constant) to a level of 12.4% of net revenue, consistent with FY 2007. Operating profit as reported was Â£1,505m, +22% higher than last year (+9% constant). Excluding the exceptional charge of Â£30m in FY 2008 and the net gain of Â£43m in FY 2007, adjusted operating profit was Â£1,535m, an increase of +29% on 2007 (+15% constant). The adjusted operating margin improved by +80bp to 23.4% due to gross margin expansion, partially offset by additional marketing investment. Net finance expense was Â£31m (FY 2007: Â£24m), reflecting interest on the debt to finance the Adams acquisition early in the year. The tax rate for the year was 24%. Net income was Â£1,120m, an increase of +19% (+6% constant) on FY 2007. On an adjusted basis, net income growth was +26% (+12% at constant). Diluted earnings per share grew +21% to 154.7 pence. Earnings per share (diluted, adjusted) increased +28% to 157.8 pence, ahead of net income growth as the accretion from the buyback more than offset dilution from new share issues. FY 2008 Business Review Summary: % net revenue growth FY 2008 LFL Acquisitions & Exchange Reported Disposals Europe +7% -2% +13% +18% NAA +6% +16% +11% +33% DvM +16% - +7% +23% Pharma* +45% - +17% +62% TOTAL +10% +3% +12% +25% * Pharma represents the Group's prescription drug business of Subutex and Suboxone The Business Review below is given at constant exchange rates. Europe 50% of net revenue 2008 total net revenue increased +5% to Â£3,269m; excluding disposals in the prior year, LFL net revenue improved +7%, with growth coming across all categories. In Fabric Care, growth was led by Vanish behind recent initiatives such as Vanish Oxi Action Intelligence and Magnets, and Calgon Water Softeners. Growth in Surface Care came from new Cillit Bang variants (such as Grease & Floors and Stain & Mildew), Harpic (including the new cageless in-the-bowl toilet cleaners) and Dettol All in 1. Dishwashing was driven by a strong performance from Finish Max in 1 and Quantum. Home Care increased as a result of new initiatives such as Airwick Freshmatic Mini, Aqua Essences and the Symphonia liquid electricals range. Growth in Health & Personal Care came principally from Nurofen and Strepsils, following increases in marketing support. For the full year, the adjusted operating margin was +10bp ahead of last year at 23.9%; this resulted in a +5% improvement in adjusted operating profit to Â£782m. In Q4, net revenue rose +5% to Â£828m. Adjusted operating profit increased by +5% to Â£232m, with the margin constant at 28.0%. North America & Australia 27% of net revenue 2008 total net revenue (including Adams) increased +22% to Â£1,766m. LFL growth was +6%, and Adams contributed Â£233m to net revenue in the eleven months of ownership. Excluding Adams, FY net revenue growth was driven particularly by Dishwashing, Surface Care and Health & Personal Care. In Dishwashing, growth came from the continuing success of Electrasol 3in1 Powerball tabs, while Surface Care increased as a result of Lysol disinfectants and disinfectant cleaners. In Health & Personal Care, increased marketing investment helped drive strong growth for Nurofen and Strepsils. Food performed well, with growth coming particularly from the consumer brands of French's Yellow Mustard, French's Fried Onions and Frank's Red Hot sauce. For the full year, adjusted operating profit increased +23% to Â£397m, due primarily to the mix benefit from the Adams acquisition. The adjusted operating margin was +100bp higher at 22.5%. Q4 net revenue rose +27% to Â£567m, with LFL growth of +3%. Adjusted operating profit was ahead by +23% to Â£173m, equating to a -160bp contraction in the margin to 30.5% Developing Markets 18% of net revenue 2008 net revenue was ahead +16% to Â£1,187m, with strong growth evident across all regions and categories. In Fabric Care, Vanish benefited from initiatives to drive category penetration across the Area. In Surface Care, Harpic, and Veja in Brazil, were the key growth drivers. In Home Care, growth came from Airwick, driven by Freshmatic. In Health & Personal Care, range extensions and additional investment generated growth behind Dettol, Veet and Strepsils. For the full year, adjusted operating profit increased by +19% to Â£163m. This resulted in a +30bp improvement in the adjusted operating margin to 13.7%. Q4 net revenue increased by +14% to Â£311m. Adjusted operating profit improved +17% to Â£54m, with a +10bp uplift in the margin to 17.4%. Pharmaceuticals 5% of net revenue 2008 net revenue for the Group's Subutex and Suboxone prescription drug business grew +45% to Â£341m. 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 USA. For the full year, the adjusted operating margin improved by +70bp to 56.6%. Adjusted operating profit was Â£193m, an increase of +43%. Q4 net revenue increased by +51% to Â£119m. Adjusted operating profit increased +43% to Â£66m, for a +70bp expansion in the margin to 55.5%. As a result of its Orphan Drug Status, Suboxone has exclusivity in the USA until the end of September 2009 and in Europe until 2016. Within the Pharmaceuticals division, the US Suboxone business generated FY net revenue of Â£285m and adjusted operating profit of Â£172m. While the Group continues to search for ways to offset the impact of the loss of exclusivity in the USA at the end of September 2009, up to 80% of the revenues and profits of that business might be lost to generic competition in 2010, with the possibility of further erosion thereafter. FY 2008 Category Review (at Constant Exchange Rates) Fabric Care. Net revenue increased +5% to Â£1,473m. This growth largely came from Vanish, driven by recent initiatives such as Vanish Oxi Action Intelligence and Magnets. Calgon Water Softeners also performed well due to higher marketing investment. Q4 net revenue grew +2% to Â£360m. Surface Care. Net revenue grew +6% to Â£1,112m, driven by strong growth for the Dettol and Lysol ranges, the launch of further variants of Cillit Bang such as Grease & Floors and Stain & Mildew, and Veja in Brazil. Harpic Lavatory Care also performed well, due in part to the new cageless in-the-bowl toilet cleaner. Q4 growth was +3% to Â£298m. Dishwashing. Net revenue increased +9% to Â£754m due to the success of Finish Quantum and the launch of Finish Max in 1 in Europe, as well as strong growth of Electrasol 3in1 Powerball tablets in North America behind increased investment. Q4 growth was +3% to Â£199m. Home Care. Net revenue increased +6% to Â£908m, driven by Air Care. Growth was led by the continuing success of Airwick Freshmatic and such new initiatives as Mini Freshmatic, Airwick Aqua Essences and the Airwick Symphonia liquid electrical ranges. Q4 growth was +4% to Â£262m. Health & Personal Care. Net revenue increased +29% to Â£1,682m, with LFL growth of +16%. Dettol antiseptic grew strongly in Developing Markets, owing to the expansion of the personal wash range and higher marketing investment. Strong performance in Healthcare was led by Strepsils and Nurofen, boosted by such successful innovations as Strepsils Cool and Sore Throat & Blocked Nose variants and Nurofen Express, supported by higher investment. The Adams business contributed Â£233m to net revenue for the eleven months of ownership, as marketing investment drove increased penetration of Mucinex. In Q4, Health & Personal care grew +51% to Â£487m, including LFL growth of +19%. Total Household and Health & Personal Care. Net revenue was ahead by +11% to Â£5,996m, +8% on a LFL basis. In Q4, total Household and Health & Personal Care grew +13% to Â£1,625m, +6% on a LFL basis. Pharmaceuticals. 2008 net revenue for the group's Subutex and Suboxone prescription drug business grew +45% to Â£341m, predominantly driven by a continued increase in penetration of Suboxone in the USA. Adjusted operating profit was ahead +43% to Â£193m, equating to a +70bp improvement in the margin to 56.6%. Q4 net revenue increased by +51% to Â£119m, while adjusted operating profit increased +43% to Â£66m. Food. Net revenue grew +8% to Â£226m with 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. Adjusted operating profit increased +4% to Â£60m. Q4 net revenue grew +7% and adjusted operating profit was Â£31m (growth unchanged). New Initiatives: H1 2009 The Company has announced a number of new product launches for the first half of 2009: In Fabric Care: - Launch of the Vanish Oxi Action Intelligence â‚¬co pack, a better value and green pouch, offering the same amazing stain removal performance. - Entry into liquid in-wash laundry additives, with Vanish Oxi Action Intelligence liquid. - Upgrade of Vanish Oxi Action Intelligence, to include superior performance on greasy stains. - Entry into the US in-wash laundry additives market with the launch of Spray `n Wash Bright & White with Resolve Power, offering safe stain removal, whiter whites and brighter colours. In Surface Care: - Launch of Cillit Bang Grime & Lime, Degreaser and Grease & Floor with new concentrated formulas, giving consumers the versatility of dosing the power of the products for both light and tough cleaning. - Launch of new Cillit Bang Grime, Lime & Floors with Natural Vinegar and Cillit Bang Toilet with Natural Vinegar. Both new variants are especially effective on limescale and soap scum, but are also suitable for general cleaning. - Launch of Harpic liquid with Max Coverage, delivering superior cleaning and disinfecting results. - Roll-out of Harpic Hygienic cageless rim block, which cleans and freshens for up to 8 weeks. In Dishwashing: - Launch of Finish Quantum in North America, offering superior cleaning and shine performance. The launch of Quantum under the Finish brand represents the first step in the transition of the Electrasol range. In Home Care: - Launch of Airwick <i>-Motion, providing an instant boost of freshness when motion is detected, on top of regular automatic sprays of freshness. In Health & Personal Care: - Roll-out of Strepsils Cool, delivering an instantly cooling sensation for fast effective relief from a burning throat. - Launch of the Clearasil Pimple Blocker Pen, to help stop a pimple in its tracks. - Roll out of Clearasil 4-hour Treatment Cream, which visibly reduces redness and spot size in just four hours. - Launch of Veet Spray-On effective hair removal cream, with added moisturiser and easy no-touch application. - Launch of a new sensitive skin formula for Veet In-Shower hair removal cream, for touchably smoother skin while showering. - Roll out of Veet High Precision facial wax, a complete facial depilation kit with an applicator and tool for precise eyebrow shaping, and with aloe vera for sensitive skin. 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 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 expense. Net interest payable was Â£31m, a +29% increase on 2007 (Â£24m), reflecting interest on the debt to finance the Adams acquisition early in the year. Tax. The underlying tax rate was 24% (2007: 24%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) improved by Â£271m to minus Â£1,097m, mostly due to further improvement in payables. Cash flow. Operating cash flow was Â£1,333m (2007: Â£975m) and net cash flow from operations was Â£1,177m (2007: Â£861m). Net interest paid was Â£3m higher at Â£27m (2007: Â£24m) and tax payments increased by Â£48m to Â£280m (2007: Â£232m). Capital expenditure was higher than the prior year at Â£216m (2007: Â£134m) due to the investment in the Muse brand and the exclusive licensing agreement with QLT USA, Inc (totaling Â£51m). Net debt at the end of the year was Â£1,096m (December 2007: Â£125m), an increase of Â£971m. This reflected net cash flow from operations of Â£1,177m, offset by the acquisition of Adams for Â£1,081m, the payment of two dividends totaling Â£441m, the share buyback of Â£300m and the adverse foreign exchange translation impact on net debt (-Â£332m, net), predominantly arising from the strengthening of the US$ during the year. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it, none of which expires within one year. Balance sheet. At the end of 2008, the Group had shareholders' funds of Â£3,294m (2007: Â£2,385m), an increase of +38%. Net debt was Â£1,096m (2007: Â£125m) and total capital employed in the business was Â£4,390m (2007: Â£2,510m). This finances non-current assets of Â£7,228m (2007: Â£4,426m), of which Â£637m (2007: Â£479m) 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 Â£1,097m (2007: minus Â£826m), current provisions of Â£73m (2007: Â£36m) and long-term liabilities other than borrowings of Â£1,668m (2007: Â£1,054m). The Group's financial ratios remain strong. Return on shareholders' funds (net income divided by total shareholders' funds) was 34.0% (2007: 39.3%) on a reported basis or 34.7% (2007: 37.9%) on an adjusted basis. Dividends. The Board of Directors recommends a final dividend of 48.0p (2007: 30.0p), an increase of +60%, to give a full year dividend of 80.0p (2007: 55.0p), an overall increase of +45%. The dividend, if approved by shareholders at the AGM on 7 May 2009, will be paid on 28 May to shareholders on the register at the record date of 27 February. The ex-dividend date is 25 February and the last date for election for the share alternative to the dividend is 6 May. Share buyback. During 2008, the Group purchased 10.7m shares at a cost of Â£300m as part of its share buyback programme. In Q4, the Group purchased 2.0m shares at a cost of Â£54m. The Board of Directors has decided to move immediately to a dividend payout ratio of 50%, reflecting its confidence in the prospects of the Group and its future cash flow generation. The Board also considers that the optimal use of cash flow is currently to repay debt further. Therefore, it has decided to cancel the share buyback programme in 2009. Adams acquisition. The Group completed the acquisition of Adams Respiratory Therapeutics Inc on 30 January 2008 for a consideration of $60 per share or approximately $2.3bn (Â£1.1bn). Of the net assets acquired, intangible assets (net of deferred tax) represented $1.0bn and goodwill $1.1bn. Results for the Adams business have been included in the Group's results from the date of acquisition. On acquisition, the Group announced an exceptional charge to cover the necessary reorganisation associated with the integration of Adams into Reckitt Benckiser. Contingent liabilities. The Group is involved in the early stage of a number of enquiries from competition authorities. Any potential liability in respect of such enquiries is not quantifiable as at the date of this announcement, therefore the Directors have made no provision for such liabilities. 2009 Targets Based on the current market outlook, the Group's targets in 2009 are for net revenue growth of +4% (base Â£6,563m) and net income growth of +8-10% (base Â£1,143m), both at constant 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 The preliminary results for the year ended 31 December 2008 and the results for the year ended 31 December 2007 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 2008 are prepared using accounting policies in accordance with those set out in the Group's 2008 Interim Statement. The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2008 or 31 December 2007 within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of The Companies Act 1985. The statutory accounts for the year ended 31 December 2008 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 Company'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 31 Year ended 31 December December 2008 2007 2008 2007 Â£m Â£m Â£m Â£m 1,717 1,370 Net revenue - LFL 6,330 5,220 108 - Net revenue - acquisition 233 - - 2 Net revenue - disposed - 49 businesses 1,825 1,372 Net revenue - total 6,563 5,269 8% 6% Net revenue growth - LFL 10% 9% 33% 6% Net revenue growth - total 25% 7% 61.3% 60.0% Gross margin 59.3% 58.3% 555 410 EBITDA 1,613 1,326 30.4% 29.9% EBITDA margin 24.6% 25.2% 525 385 EBIT 1,505 1,233 525 389 EBIT - adjusted * 1,535 1,190 28.8% 28.1% EBIT margin 22.9% 23.4% 28.8% 28.4% EBIT margin - adjusted * 23.4% 22.6% 520 381 Profit before tax 1,474 1,209 393 289 Net Income 1,120 938 393 292 Net Income - adjusted * 1,143 905 55.4p 40.6p EPS, basic, as reported 157.6p 131.2p 54.6p 40.0p EPS, adjusted and diluted * 157.8p 123.4p * Adjusted to exclude the impact of exceptional items. Group balance sheet data 31 December 31 December 2008# 2007 Â£m Â£m Net working capital * (1,097) (826) Net debt (1,096) (125) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. # Where appropriate, these amounts include provisional fair values in respect of the Adams acquisition. Shares in issue Millions 31 December 2007 712.0 Issued or transferred from Treasury 6.5 Repurchased and transferred to Treasury (8.7) 30 September 2008 709.8 Issued or transferred from Treasury 0.9 Repurchased and transferred to Treasury (2.0) 31 December 2008 708.7 Group Income Statement Analysis (Unaudited) Quarter ended Year ended 31 December 31 December 2008 2007 % change 2008 2007 % change Â£m Â£m Â£m Â£m 1,825 1,372 33% Net revenues 6,563 5,269 25% (706) (549) 29% Cost of sales (2,673) (2,197) 22% 1,119 823 36% Gross profit 3,890 3,072 27% (594) (438) 36% Net operating expenses (2,385) (1,839) 30% 525 385 36% Operating profit 1,505 1,233 22% 525 389 35% Operating profit before exceptional 1,535 1,190 29% items - (4) Exceptional items (30) 43 525 385 36% Operating profit 1,505 1,233 22% (5) (4) 25% Net finance expense (31) (24) 29% 520 381 36% Profit on ordinary activities before 1,474 1,209 22% taxation (127) (92) 38% Tax on profit on ordinary activities (354) (271) 31% 393 289 36% Profit for the period 1,120 938 19% 0 0 Attributable to equity minority 0 0 interests 393 289 Attributable to ordinary equity 1,120 938 holders of the parent 393 289 Profit for the period 1,120 938 Earnings per ordinary share: 55.4p 40.6p On profit for the period, basic 157.6p 131.2p 54.6p 39.6p On profit for the period, diluted 154.7p 127.9p Earnings per ordinary share - adjusted*: 55.4p 41.0p On profit for the period, basic 160.9p 126.6p 54.6p 40.0p On profit for the period, diluted 157.8p 123.4p * Adjusted to exclude the impact of exceptional items. Average common shares outstanding: (millions) 709.1 712.5 Basic 710.6 715.0 719.8 730.3 Diluted 724.1 733.6 Group Balance Sheet For the year ended 31 December (unaudited) 2008 2007 Â£m Â£m ASSETS Non-current assets: Goodwill and other intangible assets 6,454 3,811 Property, plant and equipment 637 479 Deferred tax assets 93 106 Available for sale financial assets 25 - Other receivables 19 30 7,228 4,426 Current assets: Inventories 556 382 Trade and other receivables 975 693 Available for sale financial assets 6 39 Cash and cash equivalents 417 328 1,954 1,442 Total Assets 9,182 5,868 LIABILITIES Current liabilities: Borrowings (1,571) (487) Provisions (73) (36) Trade and other payables (2,572) (1,901) (4,216) (2,424) Non-current liabilities: Borrowings (4) (5) Deferred tax liabilities (1,172) (705) Retirement benefit obligations (316) (187) Provisions (31) (19) Other liabilities (149) (143) (1,672) (1,059) Total liabilities (5,888) (3,483) Net assets 3,294 2,385 EQUITY Capital and reserves: Share capital 72 72 Merger reserve (14,229) (14,229) Available for sale reserve (8) - Hedging reserve 13 (6) Retained earnings 17,444 16,546 3,292 2,383 Equity minority interest 2 2 Total equity 3,294 2,385 Statement of Recognised Income and Expense For the year ended 31 December (unaudited) 2008 2007 Â£m Â£m Profit for the year 1,120 938 Net exchange adjustments on foreign currency 491 93 translation Net actuarial gains and losses (74) 20 Deferred tax movements on items taken to reserves (23) 18 Available for sale reserve (8) - Net hedged gains and losses taken to reserves 19 (5) Net gains not recognised in the income statement 405 126 Total recognised income for the year 1,525 1,064 Group Cash Flow Statement For the year ended 31 December (unaudited) 2008 2007 Â£m Â£m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 1,505 1,233 Depreciation 100 84 Amortisation 7 9 Impairment of tangible assets - 5 Impairment of intangible assets - 27 Fair value (gains)/losses 5 (2) (Gain) on sale of property, plant and equipment and - (1) intangible assets (Gain) on disposal of subsidiary undertaking - (127) (Increase) in inventories (65) (39) (Increase) in trade and other receivables (32) (13) Increase in payables and provisions 61 3 Share award expense 59 52 Cash generated from operations: 1,640 1,231 Interest paid (58) (46) Interest received 31 22 Tax paid (280) (232) Net cash generated from operating 1,333 975 activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and (216) (134) intangible assets Disposal of property, plant and equipment 9 19 Acquisition of businesses (1,081) - Disposal of subsidiary undertaking - 260 Maturity of short term investments 34 (17) Net cash (used) / generated by investing (1,254) 128 activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 63 52 Share purchases (300) (300) Proceeds from borrowings 1,146 - Repayments of borrowings (506) (503) Dividends paid to the Company's shareholders (441) (358) Net cash used in financing activities (38) (1,109) Net increase / (decrease) in cash and 41 (6) cash equivalents Cash and cash equivalents at beginning of period 311 298 Exchange gains 46 19 Cash and cash equivalents at end of 398 311 period Cash and cash equivalents comprise Cash and cash equivalents 417 328 Overdraft (19) (17) 398 311 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 1,333 975 Net purchase of property, plant and equipment (156) (114) Net cash flow from operations 1,177 861 Management uses net cash flow from operations as a performance measure. 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 Year ended 31 December 31 December 2008 2007 % Change 2008 2007 % Change Â£m Â£m exch. Â£m Â£m exch. rates rates actual const. actual const. Net revenue 828 696 19% 5% Europe # 3,269 2,765 18% 5% 567 365 55% 27% North America & Australia # 1,766 1,325 33% 22% 311 249 25% 14% Developing Markets 1,187 968 23% 16% 119 62 92% 51% Pharmaceuticals # 341 211 62% 45% 1,825 1,372 33% 15% 6,563 5,269 25% 13% Operating profit - statutory basis 232 217 7% -5% Europe # 782 726 8% -4% 173 117 48% 23% North America & Australia # 367 285 29% 14% 54 17 218% 170% Developing Markets 163 104 57% 47% 66 34 94% 43% Pharmaceuticals # 193 118 64% 43% 525 385 36% 17% 1,505 1,233 22% 9% Operating profit - adjusted* 232 195 19% 5% Europe # 782 657 19% 5% 173 117 48% 23% North America & Australia # 397 285 39% 23% 54 43 26% 17% Developing Markets 163 130 25% 19% 66 34 94% 43% Pharmaceuticals # 193 118 64% 43% 525 389 35% 16% Subtotal before exceptional 1,535 1,190 29% 15% items - (4) Exceptional items (30) 43 525 385 36% 17% 1,505 1,233 22% 9% % % Operating margin - adjusted* % % 28.0 28.0 Europe # 23.9 23.8 30.5 32.1 North America & Australia # 22.5 21.5 17.4 17.3 Developing Markets 13.7 13.4 55.5 54.8 Pharmaceuticals # 56.6 55.9 28.8 28.4 23.4 22.6 * Adjusted to exclude the impact of exceptional items. # 2007 comparatives have been reclassified to disclose Pharmaceuticals separately, previously reported within Europe and North America & Australia. Segment Information (Unaudited), continued Product segment Quarter ended Year ended 31 December 31 December 2008 2007 % change 2008 2007 % exchange Â£m Â£m exch. Â£m Â£m exch. rates rates actual const. actual const. Net revenue by category 360 306 18% 2% Fabric Care 1,473 1,241 19% 5% 298 249 20% 3% Surface Care 1,112 951 17% 6% 199 167 19% 3% Dishwashing 754 616 22% 9% 262 218 20% 4% Home Care 908 779 17% 6% 487 291 67% 51% Health & Personal Care ** 1,682 1,199 40% 29% 19 18 6% -14% Other Household 67 81 -17% -26% 1,625 1,249 30% 13% Household and Health & 5,996 4,867 23% 11% Personal Care 119 62 92% 51% Pharmaceuticals 341 211 62% 45% 81 61 33% 7% Food 226 191 18% 8% 1,825 1,372 33% 15% 6,563 5,269 25% 13% **Net revenue of Â£108m for Q4 and Â£233m for FY 2008 (2007: Â£nil and Â£nil) in respect the Adams business are included within Health & Personal Care. On a LFL basis, growth of Health & Personal Care is +16% for FY 2008 and +19% for Q4. Operating profit - adjusted 428 330 30% 13% Household and Health & 1,282 1,021 26% 12% Personal Care 66 34 94% 43% Pharmaceuticals 193 118 64% 43% 31 25 24% 0% Food 60 51 18% 4% 525 389 35% 15% Subtotal before exceptional 1,535 1,190 29% 15% items - (4) Exceptional items (30) 43 525 385 36% 16% 1,505 1,233 22% 9% % % Operating margin - adjusted % % 26.3 26.4 Household and Health & 21.4 21.0 Personal Care 55.5 54.8 Pharmaceuticals 56.6 55.9 38.3 41.0 Food 26.5 26.7 28.8 28.4 23.4 22.6 Earnings per Ordinary Share For the year ended 31 December (unaudited) Reported basis 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: 2008 2007 Profit Average Earnings Profit Average Earnings for Number of per share for number of per share the year Shares pence the year shares pence Â£m Â£m Profit attributable to 1,120 710,569,582 157.6 938 715,039,130 131.2 shareholders Dilution for Executive 12,491,457 17,345,740 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,047,123 1,240,227 Sharesave Scheme options outstanding On a diluted basis 1,120 724,108,162 154.7 938 733,625,097 127.9 Adjusted basis 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: 2008 2007 Profit Average Earnings Profit Average Earnings for Number of per share for number of per share the year Shares pence the year shares pence Â£m Â£m Profit attributable to 1,143 710,569,582 160.9 905 715,039,130 126.6 shareholders Dilution for Executive 12,491,457 17,345,740 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,047,123 1,240,227 Sharesave Scheme options outstanding On a diluted basis 1,143 724,108,162 157.8 905 733,625,097 123.4 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the restructuring charge net of tax, provides the most meaningful measure of earnings per ordinary share.

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