Half-yearly Report

25 July 2007 VERY STRONG FIRST HALF FULL YEAR TARGETS LIKELY TO BE EXCEEDED Results at a Glance Q2 % change % change Year To % change % change Â£m actual constant Date actual constant exchange exchange Â£m exchange exchange Net Revenues Â£1,302m +6% +10% Â£2,560m +7% +12% Operating Profit Â£266m +25% +29% Â£510m +39% +46% reported Net Income reported Â£216m +43% +48% Â£395m +51% +60% EPS (diluted) 29.4p +43% 53.6p +51% reported Operating Profit Â£266m +17% +20% Â£510m +20% +26% adjusted * Net Income adjusted* Â£216m +33% +38% Â£395m +30% +37% EPS (diluted) 29.4p +33% 53.6p +30% adjusted * *% change numbers (adjusted basis) exclude the impact of the 2006 restructuring charge. - Q2 net revenues as reported rose by 6% (10% at constant exchange), and by 10% on an underlying (excluding BHI and at constant exchange) basis. Operating profit rose to Â£266m, +17% adjusted and +25% reported. Gross margin increased 140 basis points (bps) to 58.3% and operating margin expanded 180bps on an adjusted basis. Net income rose 33% on an adjusted basis (+43% reported) to Â£216m benefiting from Â£20m of one-off tax releases. - Half Year (HY) net revenues rose by 7% (12% constant) and by 10% underlying. Operating profit rose to Â£510m, +20% adjusted or +39% reported. Gross margin increased 190bps to 57.6% and operating margin expanded 210bps on an adjusted basis to 19.9%. Net income was Â£395m, +30% adjusted and +51% reported. - Net borrowings were Â£484m, reflecting continued strong cash flow from operations of Â£464m offset by payment of the final 2006 dividend of Â£179m and Â£143m share buybacks (Â£100m in Q2). Net working capital was minus Â£842m, Â£114m lower, completing the targeted reduction in BHI net working capital over a year early. - The interim dividend is increased to 25p per share +22%. To facilitate an increase in distributable reserves, the Company today announces a proposed new corporate structure, as explained on page 6. - Management today hosts presentations on Consumer Healthcare and Pharmaceuticals (formerly BBG) for which additional disclosures are on pages 6-7. Commenting on these results, Bart Becht, Chief Executive Officer, said: - "Reckitt Benckiser had a very good first half with like-for-like growth of 10%. Growth has come across all geographies and categories and was mostly driven by the success of initiatives like Air Wick Freshmatic, Finish Quantum and Vanish Oxi Action Crystal White. Profit growth was ahead of the full year target rate due to good gross margin expansion and BHI synergies coming ahead of schedule. "Given the strength of this momentum, we will likely exceed our full year target of net revenue growth of between 7% and 8% at constant exchange (base Â£4,922m) and net income growth in the mid teens percentage (base Â£786m) at constant exchange. We will update the market on the full year targets with our Q3 results in October." Basis of Presentation Where appropriate, the term `adjusted' excludes the impact of the restructuring charge, and the term `underlying' represents the results excluding the Boots Healthcare International business (BHI), acquired on 1 February 2006. Note that the former Buprenorphine Business Group (BBG) has now been renamed Reckitt Benckiser Pharmaceuticals (Pharmaceuticals), and is disclosed as a separate business segment, reflecting the Company's internal management structure. Detailed Operating Review Second Quarter 2007 Net revenues in Q2 grew by 6% (10% at constant exchange) to Â£1,302m. The underlying business grew by 6% (10% constant) to Â£1,168m. BHI contributed net revenues of Â£134m (Â£127m). Adjusted operating profit for Q2 grew 17% (20% constant) to Â£266m. Gross margin increased by 140bps to 58.3% due to the benefit of price increases and cost optimization. Marketing investment increased substantially, with media investment higher by 12% at constant exchange to 14.0% of net revenues, +20bps. Adjusted operating margins increased by 180 bps to 20.4% due to the gross margin expansion and BHI synergies, partially offset by higher marketing investment. Restructuring charges primarily relating to the BHI acquisition in Q2 last year were Â£15m. Net income grew 43% (48% constant) to Â£216m. On an adjusted basis net income grew 33% (38% constant). Net income in the quarter benefited from a Â£20m one-off tax release. Excluding this, adjusted net income would have been ahead by 21% (25% constant). Basic EPS was 30.1 pence per share. EPS diluted was 29.4 pence per share, an increase of 43% as reported or +33% adjusted. Half Year 2007 Net revenues grew by 7% (12% constant) to Â£2,560m. The underlying business grew by 5% (10% constant) to Â£2,287m. BHI contributed net revenues of Â£273m in the six months compared to Â£204m last year for the 5 months of ownership. Adjusted operating profit increased 20% (26% constant) to Â£510m. Gross margins were 190bps ahead of last year at 57.6% due to the benefit of price increases and cost optimization. Marketing investment was substantially higher, with media investment increased by 17% constant to 13.0% of net revenues, +50bps versus H1 2006. Adjusted operating margins increased by 210bps to 19.9% due to the BHI synergies and the gross margin expansion somewhat offset by higher marketing investment. Restructuring charges primarily relating to the BHI acquisition in H1 2006 were Â£57m. Cumulative synergies reached Â£68m at the end of June 2007, compared to Â£53m at the end of Q1, fully on track to reach the target of Â£80m by the end of 2007. Net interest charges were Â£16m (2006 Â£17m) with the interest cost of the BHI acquisition offset by the strong cash inflow over the period. The tax rate is 20%, benefiting from the Â£20m of one-off tax releases referred to above. Net income for the half year was 51% (60% constant) higher at Â£395m. Adjusted net income was 30% (37% constant) higher. Excluding the Â£20m one-off tax release, adjusted net income would have been 24% (30% constant) higher. Basic EPS was 55.1 pence per share. Adjusted EPS diluted increased by 30% to 53.6 pence per share. Geographic Analysis at constant exchange excluding restructuring Europe 55% of Net Revenues H1 net revenues grew by 11% to Â£1,398m. Underlying growth was 7%. All five categories contributed to this growth. The main driver in Fabric Care was fabric treatment due to the success of Vanish Oxi Action Crystal White and Vanish Oxi Action Multi, and to Calgon water softener following increased investment. Surface Care growth benefited from the launch of Cillit Bang 2X Power and from growth for Harpic Power Plus and Harpic Max In Toilet Bowl device (ITB) in Lavatory Care. In Automatic Dishwashing, the key driver was Finish Quantum and Finish All in One. In Home Care, Aircare growth was driven by continuing success for Airwick Freshmatic and the early results of the first launch markets of Airwick Freshmatic Mini. In Health & Personal Care, growth came from the healthcare portfolio due to higher investment, particularly behind Nurofen and Strepsils, and to growth for Veet depilatories following the initial launch of the new Veet 400ml Pump Pack. H1 Operating margins were 120bps ahead of last year at 22.7% due to higher gross margins and BHI synergies, partially offset by higher marketing investment in new products. This resulted in a 18% increase in operating profits to Â£318m. In Q2, net revenues increased 7% to Â£698m with underlying growth 7%. Operating profits increased by 13% to Â£160m. North America & Australia 27% of Net Revenues H1 net revenues increased 11% to Â£690m. Underlying growth was 11%. Within this, NAA Household grew 7% underlying, NA Food grew 7% and Pharmaceuticals grew 83%. H1 growth in Household came particularly from Surface Care, Automatic Dishwashing and Home Care. Surface Care growth was driven by Lysol disinfecting spray and wipes in NA and by Harpic Max ITB Lavatory Care in ANZ. Automatic Dishwashing increased as a result of the continuing success of Electrasol 3in1 monodose tablets. In Home Care, Air Care growth came across both Airwick Freshmatic and the launch of Airwick Freshmatic Mini, and from Airwick Electrical Oils. In Health & Personal Care, increased net revenues came mainly from strong growth for Nurofen in ANZ behind higher investment in the healthcare portfolio. Pharmaceuticals (formerly BBG) grew sales of Suboxone very strongly in the USA where the sales organization has been substantially increased and helped by a regulatory change which allows qualified medical practices to take on up to 100 patients each for treatment with Suboxone, rather than the previous limit of 30 patients. Food grew strongly due to the consumer brands of French's yellow mustard, Frank's Red Hot sauce and French's Fried Onions. H1 Operating margins were 350bps higher at 19.4% mainly due to mix benefit from the high growth of Suboxone plus gross margin expansion and BHI synergies resulting in profits increasing 35% to Â£134m. Q2 net revenues grew 11% to Â£359m with underlying growth 12%. Operating profits were ahead by 30% to Â£73m. Developing Markets 18% of Net Revenues H1 net revenues grew 18% to Â£472m. Underlying growth was 17% with strong growth across all regions of Asia, Latin America and Africa Middle East. The major contributors to growth were Fabric Care, Surface Care, Home Care and Health & Personal Care. In Fabric Care, the growth came from Fabric Treatment, mainly driven by initiatives to drive the category penetration across the Area. In Surface Care, the main driver was the continuing growth for Harpic Power Plus lavatory cleaner, supported by higher investment. In Home Care, the increase was in both Pest Control and Air Care. Mortein growth came from a number of new initiatives such as Mortein Lantern and Mortein with Dettol, while in Air Care, the key driver was Air Wick Freshmatic. In Health & Personal Care, the Dettol personal care range grew strongly benefiting from range extensions and additional investment, while in Healthcare both Strepsils, due to higher investment, and Gaviscon, due to geographical expansion, grew strongly. H1 operating margins expanded 280bps to 12.3% resulting in operating profits increasing by 57% to Â£58m. Q2 net revenues increased by 18% to Â£245m with underlying growth 17%. Operating profits increased 38% to Â£33m. Category Review at constant exchange rates Fabric Care. Net revenues increased 6% to Â£605m. The major drivers were strong continuing growth for Vanish Oxi Action Multi and Vanish Oxi Action Crystal White. Calgon Water Softeners grew as a result of higher marketing investment. Woolite Garment Care benefited from the roll-out of Woolite Color and from higher investment. Q2 growth was 4% to Â£306m with the growth affected by lower private label sales of laundry detergent. Surface Care. Net revenues grew 8% to Â£459m principally due to the relaunch of the Cillit Bang range with 2X Power, the roll-out of Cillit/Easy Off Bang Stain and Drain outside Europe, and to strong growth for Lysol disinfectant spray and wipes in North America. Harpic Lavatory Care net revenues were also stronger due to the success of Harpic Power Plus and Harpic Max ITB in Europe and ANZ and to strong underlying growth in Developing Markets. Q2 growth was 8% to Â£227m. Dishwashing. Net revenues increased 7% to Â£305m due to the success of Finish Quantum, launched last year, and the launch of Finish All in One. In North America, Automatic Dishwashing grew strongly, mainly due to Electrasol 3in1 monodose tablets. Q2 growth was 7% to Â£147m. Home Care. Net revenues improved by 18% to Â£364m. Air Care grew strongly due to the continuing success of Airwick Freshmatic in Europe and North America, and strong growth for Airwick Electrical Oils in North America, plus early benefits from the first launch markets of Airwick Mini Freshmatic. Pest Control growth came mainly as a result of the launch of new products, Mortein Lantern, Mortein with Dettol and Mortein Professional Indoor Spray. Q2 growth was 22% to Â£180m. Health & Personal Care. Net revenues increased 21% to Â£605m, with underlying growth (excluding BHI) of 11%. Dettol antiseptic was significantly ahead in Developing Markets due to the expansion of the personal care range and significantly increased marketing investment. Veet depilatories saw the initial launch of the new Veet 400ml Pump Pack in Europe. Healthcare, including the former business of BHI, contributed strongly to the growth in the half year. BHI net revenues, led by Nurofen, Strepsils and Clearasil, were Â£273m in the half year compared to Â£204m in the five months of ownership in 2006. Adjusting for the extra month, the like-for-like growth in the former BHI business was 9%, mainly due to substantial growth for Strepsils and Nurofen as a result of higher investment. In Q2, Health & Personal Care grew 9% to Â£316m, comprising 10% growth excluding BHI and 6% for BHI. Total Household and Health & Personal Care. Net revenues were ahead by 11% to Â£2,380m, +9% on an underlying basis. In Q2, total Household and Health & Personal Care grew 8% to Â£1,199m. Pharmaceuticals (formerly BBG). Net revenues in H1 were Â£92m, 51% ahead of the equivalent period last year. This exceptional growth was driven by the growth of Suboxone in the USA following a substantial increase in the sales organisation and helped by a regulatory change that allows medical practices to take on 100 patients each for treatment with Suboxone, rather than the previous limit of 30 patients. Q2 net revenues increased to Â£54m +50%. Profit for the half year was Â£50m +72%, and for Q2 was Â£32m, +113%. Pharmaceuticals is now reported as a separate business segment. Food. Net revenues grew 7% to Â£88m with good performance across the consumer portfolio, in particular further growth for French's yellow mustard and French's Fried Onions and for Frank's Red Hot sauce. Operating profits increased 25% to Â£15m, with operating margins improving 260bps to 17.0%. Q2 net revenues grew 9%, and operating profit increased 11% to Â£10m. New Initiatives H2 2007 The Company announces a number of new product launches today for the second half of 2007. - In Fabric Treatment, the Company is launching Vanish Oxi Action Magnet, an in-wash stain remover and sachet that also traps grime and color runs. - In Surface Care, Cillit Bang Grease & Floors is being launched, the first dilutable all purpose cleaner with the power of Bang, and available in two fragrances, Fresh Force and Citrus Force. In lavatory care, Harpic Odorstop Max is being launched, the first toilet bowl rim device to neutralize malodor as well as clean. In North America, Lysol Deep Reach toilet bowl cleaner is launched, cleaning even below the water level. - In Automatic Dishwashing, Finish / Calgonit is rolling out Turbo Dry, a new drying agent, for superior drying and shiny dishes straight from the dishwasher. - In Home Care, the Company will roll out Air Wick Mini Freshmatic to new markets. The Company is launching Airwick Lumin'Air, a premium electrical combining fragrances with essential oils and soft ambient light. In North America, Airwick Hidden Pleasures, a premium electrical with aesthetically superior design, is being launched. In pest control, the Company is launching Mortein Killer Coils, which act four times faster than ordinary coils, and Mortein Naturgard, a range of pest control products with plant based active ingredients. - In Health & Personal Care, Dettol has launched Dettol Herbal bar soap and shower gel, with Aloe Vera and Botanical extracts to help nourish the skin. In healthcare, the Company is launching Nurofen Express, a new product that delivers pain relief twice as fast as standard pain killers, Lemsip All in One, relieving headache, fever, sore throat, blocked nose and chesty cough symptoms, and Strepsils Sore Throat & Blocked Nose is being rolled out. Proposals for New Corporate Structure The Company is also announcing today that it intends to propose a change to its corporate structure to enable it to increase the Group's distributable reserves. The proposed change, which is subject to Court and Shareholder approval, involves a scheme of arrangement to introduce a new parent company above Reckitt Benckiser plc, followed by a reduction of the nominal value of the share capital of the new parent company. The reserves created will be available for the declaration of future dividends and for general corporate purposes, including the re-purchase of shares. At the same time, the Company intends to seek the repayment of its listed 5% cumulative preference shares of Â£1 each at par value (plus accrued dividend) in order to simplify the capital structure and reduce the associated administrative costs. The proposals will not affect or alter the Company's existing dividend or buyback policies and will result in Reckitt Benckiser's shareholders owning the same number of shares but in the new parent company. Furthermore, the reduction in nominal value of the new shares will not, in itself, have any impact on the market value of the shares. Shareholder approval of these proposals will be sought at an Extraordinary General Meeting, further details of which will be sent out to shareholders in due course. It is envisaged that this process will be completed before the announcement of the Group's third quarter results. Additional Disclosures - Pharmaceuticals In order to increase clarity on the impact of this business on the Company's growth rate and profitability, the Company is today making additional disclosures. The following is the historic financial record of Pharmaceuticals: - Year 2002 2003 2004 2005 2006 H1 2007 Â£m Â£m Â£m Â£m Â£m Â£m Net 49 68 89 121 156 92 Revenue Operating 34 43 56 73 84 50 Profit Operating 69% 63% 63% 60% 54% 54% margin In a presentation to investors today, the management of Pharmaceuticals will outline the history of this business, and its challenges, including the ending of the exclusive license status for Suboxone in the USA in late 2009 and the newly granted exclusive license for Suboxone in Europe to 2016. The Company continues to search for ways to offset the ending of the license in USA in 2009, through qualifying alternative forms of intellectual property protection, but with no guarantee of success. In the meantime the Company is examining opportunities to roll-out Suboxone in a number of European markets in conjunction with its distribution partner, Schering-Plough. Consumer Healthcare Strategy The Company is also presenting its Healthcare strategy today to investors, particularly its switch in focus from integrating BHI to driving long-term profitable growth in consumer healthcare from - Focus on its key power brands, Nurofen, Strepsils, Gaviscon, Lemsip, that are strongly positioned in interesting growth categories of OTC consumer healthcare - Driving growth through new products and claims, highlighting some new product initiatives announced today (see above) and - Complemented in the longer term by geographical roll-outs of the Power Brands to new markets once success models have been validated. Both the Healthcare and Pharmaceutical presentations are available from 0930hrs on 25th July 2007 for download at www.reckittbenckiser.com. Financial Review Basis of Preparation The unaudited financial information is prepared under IFRS accounting policies set out in the Group's audited IFRS Financial Statements within its Annual Report and Accounts for 2006. This press release does not constitute the Group's full Interim Financial Statement, which will be published in due course in accordance with the Listing Rules of the FSA. Net interest. Net interest payable in H1 was Â£16m (2006 Â£17m). This resulted from the debt taken on following the acquisition of BHI for a full six months, offset by strong cash inflow during the period. Q2 interest payable was Â£8m (2006 Â£12m). Tax. The tax rate is 20% (2006 25%), benefiting from a Â£20m one-off tax release in Q2. Cash flow. Cash generated from operations increased 3% to Â£634m due to increased operating profits and net working capital releases. Net cash flow from operations was Â£464m (Â£496m), with significantly higher net capital expenditure of Â£62m (Â£21m) due to manufacturing re-engineering following the integration of BHI. Net working capital (inventories, short term receivables and short term liabilities excluding borrowings and provisions) decreased by Â£114m in the period to minus Â£842m, mostly due to further significant reductions in the BHI net working capital, effectively achieving the Â£130m targeted reduction one year early. Net borrowings at the half year were Â£484m (December 2006 Â£660m), a reduction in the period of Â£176m. This reflected net cash flow from operations of Â£464m somewhat offset by payment of the final dividend (Â£179m) and share buybacks (Â£143m). Financing. At the half year, the Group had shareholders funds of Â£1,993m (2006 year end Â£1,866m), an increase of 7%. Net debt was Â£484m (2006 Â£660m). Total capital employed in the business decreased from Â£2,526m to Â£2,477m, a reduction of 2%. Dividends. The Board of Directors announces an interim dividend of 25 pence per share (2006 20.5 pence per share), an increase of 22% in line with the Company's policy to increase the dividend in line with underlying earnings. The ex dividend date will be 8th August and the dividend will be paid on 27th September to shareholders on the register at the record date of 10th August. The last date for election for the share alternative to the dividend is 6th September. Share buyback. Between February and June 2007, the Group purchased 5.3m shares at a cost of Â£143m as part of its ongoing share buyback program. In Q2, the Company purchased 3.7m shares at a cost of Â£100m. The Company is committed to completing its Â£300m program for full year 2007. Post Balance Sheet Event - Sale of Hermal. The Company announced on 16th July that it had agreed to dispose of the Hermal prescription skincare business to Laboratorios Almirall S.A. for a consideration of Â£255m in cash. The disposal is expected to complete during Q3 2007. 2006 Full Year net revenues were Â£58m, all in Europe, and operating profit was Â£14m. Management discussion of financial targets for the full year excludes any non-operating items that may arise on the disposal of Hermal. For Further Information Reckitt +44 (0)1753 217 800 Benckiser Tom Corran SVP Investor Relations & Corporate Communications Mark Wilson Corporate Controller and Investor Relations Manager (investor queries) Fiona Fong Head of Corporate Communications (press queries) PR Agency Susan Gilchrist Brunswick +44 (0)207 404 5959 Catherine Hicks The Group at a Glance (unaudited) Quarter Ended June 30 Half Year Ended June 30 2007 2006 2007 2006 Â£m Â£m Â£m Â£m 1,168 1,097 Net revenues - underlying 2,287 2,182 134 127 Net revenues - acquisition 273 204 1,302 1,224 Net revenues - total 2,560 2,386 6% 7% Net revenues growth - 5% 8% underlying 6% 19% Net revenue growth - total 7% 18% 58.3% 56.9% Gross margin 57.6% 55.7% 288 238 EBITDA 554 417 22.1% 19.4% EBITDA margin 21.6% 17.5% 266 213 EBIT 510 367 266 228 EBIT - adjusted* 510 424 20.4% 17.4% EBIT margin 19.9% 15.4% 20.4% 18.6% EBIT margin - adjusted* 19.9% 17.8% 258 201 Profit before tax 494 350 216 151 Net Income 395 261 216 162 Net Income adjusted* 395 303 30.1p 20.9p EPS 55.1p 36.2p 29.4p 22.1p EPS, adjusted and diluted* 53.6p 41.2p * Adjusted to exclude the impact of the restructuring charge. Group Balance Sheet Data June 30, December 31, 2007 2006 Â£m Â£m Net working capital * (842) (728) Net (debt) / funds (484) (660) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. Shares in Issue First Half Millions 31 December 2006 716.0 Issued or transferred from Treasury 1.6 Repurchased and transferred to Treasury (1.6) 31 March 2007 716.0 Issued or transferred from Treasury 3.5 Repurchased and transferred to Treasury (3.7) 30 June 2007 715.8 Group income statement (unaudited) Quarter Ended Half Year Ended June 30 June 30 2007 2006 % change 2007 2006 %change Â£m Â£m Â£m Â£m 1,302 1,224 6% Net revenues 2,560 2,386 7% (543) (528) 3% Cost of sales (1,085) (1,058) 3% 759 696 9% Gross profit 1,475 1,328 11% (493) (483) 2% Net operating expenses (965) (961) 0% 266 213 25% Operating profit 510 367 39% 266 228 17% Operating profit before restructuring 510 424 20% - (15) - Restructuring charge - (57) - 266 213 25% Operating profit 510 367 39% (8) (12) -33% Net finance expense (16) (17) -6% 258 201 28% Profit before taxation 494 350 41% (42) (50) -16% Taxation (99) (89) 11% 216 151 43% Profit for the period 395 261 51% 0 0 - Attributable to minority interests 0 0 - 216 151 43% Attributable to equity shareholders 395 261 51% 216 151 43% Profit for the period 395 261 51% Earnings per ordinary share: 30.1p 20.9p 44% On profit for the period 55.1p 36.2p 52% 29.4p 20.6p 43% On profit for the period, diluted 53.6p 35.5p 51% Earnings per ordinary share - adjusted*: 30.1p 22.5p 34% On profit for the period 55.1p 42.0p 31% 29.4p 22.1p 33% On profit for the period, diluted 53.6p 41.2p 30% * Adjusted to exclude the impact of the restructuring charge Average common shares outstanding: (millions) 716.7 721.5 Basic 716.6 721.9 735.7 734.1 Diluted 736.3 735.2 Group balance sheet For the half year ended June 30 (unaudited) 30 June 31 December 30 June 2007 2006 2006 Â£m Â£m Â£m ASSETS Non-current assets: Goodwill and intangible assets 3,827 3,842 3,981 Property, plant and equipment 448 425 459 Deferred tax assets 150 144 145 Other receivables 16 10 11 4,441 4,421 4,596 Current assets: Inventories 365 322 325 Trade and other receivables 689 670 680 Available for sale financial assets 22 19 15 Cash and cash equivalents 334 305 295 1,410 1,316 1,315 Total Assets 5,851 5,737 5,911 LIABILITIES Current liabilities: Borrowings (830) (973) (1,030) Provisions (18) (47) (17) Other liabilities (1,896) (1,720) (1,732) (2,744) (2,740) (2,779) Non-current liabilities: Borrowings (10) (11) (75) Deferred tax liabilities (773) (766) (791) Retirement benefit obligations (213) (216) (282) Provisions (16) (15) (14) Other liabilities (102) (123) (126) (1,114) (1,131) (1,288) Total liabilities (3,858) (3,871) (4,067) Net assets 1,993 1,866 1,844 EQUITY Capital and reserves: Share capital 76 76 76 Share premium account 533 527 497 Capital redemption reserve 5 5 5 Merger reserve 142 142 142 Hedging reserve (6) (1) 1 Retained earnings 1,241 1,114 1,120 1,991 1,863 1,841 Equity minority interest 2 3 3 Total equity 1,993 1,866 1,844 Group cash flow statement For the half year ended June 30 (unaudited) 30 June 30 June 2007 2006 Â£m Â£m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 510 367 Depreciation 40 45 Amortisation and impairment 11 9 Fair value (gains)/losses (1) 0 Increase in inventories (47) (20) Increase in trade and other receivables (7) (15) Increase in payables and provisions 104 209 Share award expense 25 21 Other non-cash movements (1) - Cash generated from operations: 634 616 Interest paid (25) (25) Interest received 10 12 Tax paid (93) (86) Net cash generated from operating activities 526 517 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and (67) (37) intangible assets Disposal of property, plant and equipment 5 12 Acquisition of businesses - (1,941) Reduction in / (purchase of) short-term investments (2) - Maturity of short term investments - 62 Net cash used by investing activities (64) (1,904) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 30 19 Share purchases (143) (93) Proceeds from borrowings - 1,250 Repayments of borrowings (143) (305) Dividends paid to the Company's shareholders (179) (152) Net cash (used) / generated in financing activities (435) 719 Net increase / (decrease) in cash and cash 27 (668) equivalents Cash and cash equivalents at beginning of period 298 969 Exchange gains/ (losses) 3 (11) Cash and Cash equivalents at end of period 328 290 Cash and cash equivalents comprise Cash and cash equivalents 334 295 Overdraft (6) (5) 328 290 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 526 517 Net purchase of property, plant and equipment (62) (21) Net cash flow from operations 464 496 Management uses net cash flow from operations as a performance measure. 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. Additional information is provided to show profit by class of business. Primary segment: Geographical Area Quarter Ended Half Year Ended June 30 June 30 2007 2006 % Change 2007 2006 % Change Â£m Â£m exch. Rates Â£m Â£m exch rates actual const. actual const. Net revenues 698 660 6% 7% Europe 1,398 1,283 9% 11% 359 345 4% 11% North America & Australia 690 671 3% 11% 245 219 12% 18% Developing Markets 472 432 9% 18% 1,302 1,224 6% 10% 2,560 2,386 7% 12% Operating profit - Statutory basis 160 135 19% 22% Europe 318 247 29% 34% 73 55 33% 38% North America & Australia 134 88 52% 63% 33 23 43% 43% Developing Markets 58 32 81% 100% 266 213 25% 29% 510 367 39% 46% Operating profit - adjusted* 160 143 12% 13% Europe 318 276 15% 18% 73 60 22% 30% North America & Australia 134 107 25% 35% 33 25 32% 38% Developing Markets 58 41 41% 57% 266 228 17% 20% Subtotal before 510 424 20% 26% restructuring - (15) Restructuring charge - (57) 266 213 25% 29% 510 367 39% 46% % % Operating margin - adjusted* % % 22.9 21.7 Europe 22.7 21.5 20.3 17.4 North America & Australia 19.4 15.9 13.5 11.4 Developing Markets 12.3 9.5 20.4 18.6 Subtotal before 19.9 17.8 restructuring * Adjusted to exclude the impact of the restructuring charge. Segmental Analysis (continued) Secondary Segment: Product Segment Quarter Ended Half Year Ended June 30 June 30 2007 2006 % change 2007 2006 % exchange Â£m Â£m exch. rates Â£m Â£m exch. rates actual const. actual const. Net revenues 306 301 2% 4% Fabric Care 605 592 2% 6% 227 219 4% 8% Surface Care 459 451 2% 8% 147 141 4% 7% Dishwashing 305 295 3% 7% 180 153 18% 22% Home Care 364 325 12% 18% 316 298 6% 9% Health & Personal Care * 605 517 17% 21% 23 26 -12% -8% Other Household 42 52 -19% -14% 1,199 1,138 5% 8% Household and Health & 2,380 2,232 7% 11% Personal Care 54 37 46% 50% Pharmaceuticals 92 64 44% 51% 49 49 0% 9% Food 88 90 -2% 7% 1,302 1,224 6% 10% 2,560 2,386 7% 12% Net revenues of Â£273m in respect of the acquisition of BHI are included within Health & Personal Care in 2007. On an underlying basis, growth of Health & Personal Care is 11% for H1 and 10% for Q2 at constant rates. * 2006 Comparatives have been restated to reflect the reclassification of Pharmaceuticals. Additional Information Operating profit - by product segment 224 202 11% 13% Household and Health & 445 381 17% 22% Personal Care 32 16 100% 113% Pharmaceuticals 50 30 67% 72% 10 10 0% 11% Food 15 13 15% 25% 266 228 17% 20% Sub total before 510 424 20% 26% restructuring (15) Restructuring charge (57) 266 213 25% 29% 510 367 39% 46% % % Operating margin - by % % product segment 18.7 17.8 Household and Health & 18.7 17.1 Personal Care 59.3 43.2 Pharmaceuticals 54.3 46.9 20.4 20.4 Food 17.0 14.4 20.4 18.6 Subtotal before 19.9 17.8 restructuring Earnings per ordinary share For the half year ended June 30 (unaudited) Reported Basis 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 is set out below: 2007 2006 Profit Average Earnings Profit Average Earnings for Number of per share for number of per share the half Shares pence the half shares pence year Â£m year Â£m Profit attributable to 395 716,622,035 55.1 261 721,948,180 36.2 shareholders Dilution for Executive 18,425,134 12,189,273 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,257,984 1,081,690 Sharesave Scheme options outstanding On a diluted basis 395 736,305,153 53.6 261 735,219,143 35.5 Adjusted Basis 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 is set out below: 2007 2006 Profit Average Earnings Profit Average Earnings for Number of per share for number of per share the half Shares pence the half shares pence year Â£m year Â£m Profit attributable to 395 716,622,035 55.1 303 721,948,180 42.0 shareholders Dilution for Executive 18,425,134 12,189,273 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,257,984 1,081,690 Sharesave Scheme options outstanding On a diluted basis 395 736,305,153 53.6 303 735,219,143 41.2 The Directors believe that a diluted earnings per ordinary share, adjusted for the impact of the restructuring charge after the appropriate tax amount, provides the most meaningful measure of earnings per ordinary share.

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