Interim Results

24 July 2006 STRONG FIRST HALF - 2006 PROFIT TARGET RAISED Results at a Q2 % change % change Year % change % change Glance Â£m actual constant To actual constant exchange exchange Date exchange exchange Â£m Net Revenues Â£ +19% +17% Â£ +18% +15% 1,224m 2,386m Operating Â£213m +15% +13% Â£367m +6% +4% Profit reported Net Income Â£151m +5% +3% Â£261m -3% -5% reported EPS 20.6p +7% 35.5p -1% (diluted) reported Operating Â£228m +23% +21% Â£424m +23% +20% Profit adjusted * Net Income Â£162m +13% +10% Â£303m +13% +11% adjusted * EPS 22.1p +15% 41.2p +15% (diluted) adjusted * *adjusted to exclude the impact of the restructuring charge. Net revenues grew by 19% in Q2 to Â£1,224m (+17% constant) and by 18% in H1 to Â£ 2,386m (+15% constant). The underlying business (excluding BHI) grew 7% (6% constant) in Q2 and 8% (6% constant) in H1. BHI contributed net revenues of Â£127m in Q2 and Â£204m in H1. Restructuring costs for the BHI acquisition were Â£15m in Q2 and Â£57m in H1. Cost synergies from BHI in H1 were Â£11m, on track for the full year target of Â£30m. Operating profit before restructuring increased by 23% in Q2 to Â£228m and by 23% in H1 to Â£424m. Half Year gross margins improved by 130 basis points (bps) to 55.7%. Half year operating margins before restructuring improved 70bps to 17.8%. On an adjusted basis net income grew 13% in Q2 to Â£162m and 13% to Â£303m in H1. EPS diluted, adjusted grew 15% in Q2 to 22.1p, and 15% in H1 to 41.2p, growth rates benefiting from the share buyback program. Net borrowings were Â£795m compared with Â£825m at March 2006, reflecting continued strong cash flow offset by the payment of the final 2005 dividend and Â£48m share buybacks in Q2 (Â£93m in H1). The interim dividend will be increased to 20.5 pence per share, an increase of 14% and the Company is committed to its Â£300m share buyback program this year. Commenting on these results, Bart Becht, Chief Executive Officer, said: - "Reckitt Benckiser had a strong first half in 2006. Success on the underlying business was mainly driven by new products such as Vanish Oxi Action Crystal White, Airwick Freshmatic, Cillit Bang Stain & Drain and Finish 5in1. "BHI contributed ahead of expectation. The integration of BHI is proceeding in line with plan. Promised synergies of Â£75m cost reduction and Â£130m net working capital reduction by the end of 2008 are expected to be delivered in full and on time. "Based on the strength of the business we continue to expect net revenue growth for the full year of around 15% at constant exchange (base Â£4,179m) and are upgrading our targeted adjusted net income growth (base Â£653m) to 14%, at actual exchange." Basis of Presentation The results include the Boots Healthcare International business (BHI) from 1 February 2006, the date of acquisition. Where appropriate, the term 'adjusted' excludes the impact of the restructuring charge, and the term 'underlying' represents the results excluding restructuring and on a like-for-like basis (ie excluding BHI). Detailed Operating Review Second Quarter 2006 Net revenues in Q2 grew by 19% (17% at constant exchange) to Â£1,224m. The underlying business (like-for-like excluding BHI) grew by 7% (6% constant) to Â£ 1,097m. BHI contributed net revenues of Â£127m. Adjusted operating profit for Q2 grew 23% (21% constant) to Â£228m. Gross margin increased by 210bps to 56.9% due to the higher gross margins on the BHI business and to the benefit of price increases and cost optimization offsetting higher input costs on the base business. Marketing investment increased during the period broadly in line with net revenue growth with media 10% higher to 13.8% of net revenues. Adjusted operating margins increased by 60 bps to 18.6% due to the gross margin expansion partially offset by higher fixed costs. Restructuring charges relating to the BHI acquisition in the quarter were Â£15m. Net income grew 5% (3% constant) to Â£151m. On an adjusted basis net income grew 13% (10% constant) to Â£162m. EPS diluted, adjusted increased 15% to 22.1p with the growth rate benefiting from the ongoing share buyback program by 2 percentage points. Half Year 2006 Net revenues grew by 18% (15% constant) to Â£2,386m. The underlying business grew by 8% (6% constant) to Â£2,182m. BHI contributed net revenues of Â£204m for the 5 months of ownership. Adjusted operating profit increased 23% (20% constant) to Â£424m. Gross margins were 130bps ahead of last year at 55.7% due to the higher gross margins on the BHI business and the benefit of price increases and cost optimization offsetting higher input costs on the base business. Marketing investment was higher, with media investment increased by 7% to 12.5% of net revenues and a higher rate of increase in other consumer marketing. Adjusted operating margins increased by 70bps to 17.8% due to the gross margin expansion offset by higher fixed costs. Restructuring charges relating to the BHI acquisition in the half year were Â£ 57m. Net interest charges were Â£17m (2005 Â£15m receivable) with the interest cost of the BHI acquisition offset by the strong cash inflow over the period. The tax rate is 26%. Net income for the half year was 3% (5% constant) lower at Â£261m. EPS diluted was 35.5 pence per share, a decrease of 1%. Adjusted net income for the half year increased 13% (11% constant) to Â£303m. Adjusted EPS diluted increased by 15% to 41.2 pence per share with the growth rate benefiting from the ongoing share buyback program by 2 percentage points. Geographic Analysis at constant exchange for continuing operations Europe 54% of Net Revenues H1 net revenues grew by 19% to Â£1,283m. Underlying growth was 5%. Key growth drivers were Airwick, Vanish, Cillit Bang, Harpic, Calgon and Veet. In fabric care, the increase came from Vanish Oxi Action Crystal White fabric treatment and further development on Calgon. In surface care, the key drivers were Cillit Bang Stain & Drain and Harpic 2in1 Max. In automatic dishwashing, Finish / Calgonit grew share with the launch of Finish / Calgonit 5in1 and Finish / Calgonit Quantum but net revenue growth was held back due to higher promotional investment. In home care, Airwick grew due to further success for Airwick Freshmatic and the launch of Airwick Xpress electricals. In health & personal care, Veet depilatories grew following the launch of the new In Shower cream and new Eternally Smooth Wax Strips. H1 Operating margins were 10bps ahead of last year at 21.5% due to higher gross margins partially offset by higher marketing investment in new products. This resulted in 18% increase in operating profits to Â£276m. In Q2, net revenues increased 21% to Â£660m with underlying growth 4%. Operating profits increased by 14% to Â£143m. North America & Australia 28% of Net Revenues H1 net revenues increased 12% to Â£671m. Underlying growth was 7%. Key growth drivers were Airwick, Lysol, Easy Off Bang, Electrasol and Suboxone. In surface care, the key driver was Lysol wipes and the roll-out of Easy Off Bang Degreaser. In automatic dishwashing, growth came from further success for Electrasol 3in1. In home care, Airwick continues its success due to Airwick Freshmatic and Airwick electrical oils in part due to the launch of Airwick Xpress. In health and personal care, Suboxone prescription drug continued its expansion. Food saw growth from French's yellow mustard in retail offset by some lost contracts in food service channels. H1 Operating margins were 110bps higher at 15.9% due to gross margin expansion following price increases in 2005 and 2006, resulting in profits increasing 20% to Â£107m. Q2 net revenues grew 12% to Â£345m with underlying growth 6%. Profits were ahead by 33% to Â£60m. Developing Markets 18% of Net Revenues H1 net revenues grew 11% to Â£432m. Underlying growth was 8%. Key growth drivers were Dettol, Vanish, Harpic, Easy Off Bang and Gaviscon. In fabric treatment the increase was a result of Vanish Oxi Action Wow and the roll out of the brand into further markets. In surface care, the increase came from the roll out of Easy Off Bang and further growth for Harpic. In health & personal care, the Dettol personal care range performed strongly benefiting from higher investment behind a new advertising campaign for Dettol Liquid and the launch of Dettol Active Soap, while healthcare grew with the roll-out of Gaviscon into new markets. H1 operating margins expanded 150bps to 9.5%, resulting in operating profits increasing by 32% to Â£41m. Q2 net revenues increased by 13% to Â£219m with underlying growth 10%. Operating profits increased 39% to Â£25m. BHI Integration Update The integration of the former BHI business is proceeding in line with plan. Physical and commercial integration is essentially complete, with BHI now integrated into Reckitt Benckiser commercial offices around the world, and BHI brands being sold by an integrated marketing function and single sales force from 1 July. Customers will be billed on a single invoice in all material countries by the end of Q3. Systems integration is proceeding with a view to placing the BHI business on the Reckitt Benckiser ERP platform in full by Q4. Cost synergies for the year are expected to be the promised Â£30m as part of the full target of savings of Â£75m by the end of 2008. Synergies in H1 were Â£11m. Progress on reducing net working capital has been strong with a reduction of Â£ 49m in the year to date. This is on track to deliver the target of a Â£50m reduction by the end of 2006, and Â£130m by the end of 2008. Restructuring charges in the first half were Â£57m out of the expected full year charge of Â£150m. Charges to date mainly relate to contract termination and headcount reduction in commercial operations and HQ functions plus write-offs related to redundant systems. Category Review at constant exchange rates Fabric Care. H1 net revenues grew 7% to Â£592m. Vanish Oxi Action grew strongly due to Vanish Oxi Action Crystal White in Europe and was further boosted by the roll out of Vanish Oxi Action Wow in Developing Markets and by a strong performance by Vanish carpet cleaners. Woolite grew behind the roll-out of Woolite Pro-Care. Calgon grew as a result of new advertising copy. Laundry detergent net revenues recovered from a low base last year. Q2 net revenues grew 6% to Â£301m. Surface Care. H1 net revenues grew 3% to Â£451m. The major category growth driver was the roll-out of Cillit Bang Stain & Drain in Europe and the continuing roll out of Easy Off Bang in North America and Developing Markets. Disinfectant cleaners also grew due to Lysol/Dettol multipurpose cleaners and Lysol wipes. Harpic lavatory care growth came from the roll-out of Harpic 2in1 Max in bowl gadget and from strong growth in Developing Markets. Q2 net revenues grew 2% to Â£219m. Dishwashing. H1 net revenues grew 1% to Â£295m. The Company's market share grew in Europe and Worldwide helped by the launch of Finish / Calgonit 5in1 and Finish / Calgonit Quantum, but net revenues were held back by higher promotional investment. Q2 net revenues were level at Â£141m. Home Care. H1 net revenues grew 10% to Â£325m with strong growth for air care. Air care benefited from the continuing success of Airwick Freshmatic and Airwick electricals in part due the launch of Airwick Xpress electricals with boost button for extra freshness. Mortein pest control was level with last year due to a different promotional phasing. Q2 net revenues grew 7% to Â£153m. Health & Personal Care. H1 net revenues grew 74% to Â£581m with underlying growth of 13%. Good growth was achieved by all power brands. Dettol antiseptics benefited from higher investment behind a new advertising campaign for Dettol liquid and new additions to the personal care range, notably Dettol Active Soap. Veet depilatories benefited in particular from the launch of Veet In Shower cream and new Eternally Smooth Veet Wax Strips with specific skin type ingredients in Europe and selected other markets. Healthcare brands Gaviscon and Lemsip grew in Europe and due to new market launches in Developing Markets. Prescription drug Suboxone continued its substantial expansion in North America. The BHI brands contributed ahead of expectations in the five months of ownership and are running ahead of 2005 on a like-for-like basis. Q2 net revenues grew 86% to Â£335m, underlying growth of 16%. Food. H1 net revenues were level with last year at Â£90m with good retail performance particularly from French's yellow mustard offset by some contract losses in food service channels. Q2 net revenues were level at Â£49m. New Initiatives H2 2006 The Company announces a number of new product launches today for the second half of 2006. In fabric treatment, the Company is introducing Vanish Oxi Action Multi, providing one solution for any stain, on any fabric, any color at any temperature. Woolite Color is being launched in Europe and North America offering protection for all garments against color damage in the wash. In surface care, Easy Off Stain & Drain is being launched in North America. Lysol Wipes with Microlock Fibres for superior cleaning are being launched in North America. Lysol 3in1 Multipurpose Cleaner, to kill germs, cut grease and deodorize and Lysol Food Surface Sanitizer, approved for use to disinfect food contact surfaces, are being launched in North America. Harpic Power Plus, a superior toilet bowl cleaner for dissolving tough stains in front of your eyes, is launched in Europe and Developing Markets. In automatic dishwashing, Finish / Calgonit is rolling out 5in1 to additional markets outside Europe in H2, while it is launching a new range of automatic dishwasher deodorizers including Odorstop, the first dishwasher malodor neutralizer and freshener, in Europe. In home care, the Company will roll out Airwick Xpress into new markets and will launch Airwick Seasonals, a special seasonal range for winter and spring in Europe. In health & personal care, Gaviscon is launching Gaviscon Double Action to treat both heartburn and indigestion, containing both alginate and antacid. This comes in both liquid and tablet form. Clearasil Ultra is being rolled out globally following initial launch in North America in 2005. 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 2005, and in accordance with the Listing Rules of the FSA. Net interest. Net interest payable in H1 was Â£17m (2005 income of Â£15m). This resulted from the debt taken on following the acquisition of BHI. Q2 interest payable was Â£12m (2005 Â£8m income). Tax. The tax rate is 26% (2005 same). Cash flow. Cash generated from operations increased 30% to Â£616m due to increased operating profits and net working capital releases. Net cash flow rose 27% to Â£517m, after interest payments this year compared to net interest income last year, but after lower capital expenditure in H1. Net working capital (inventories, short term receivables and short term liabilities excluding borrowings and provisions) decreased by Â£111m in the period to minus Â£727m. This reflected further substantial increases in payables due to underlying payables management and to increased trade accruals resulting from the high trade spend to defend market positions in Europe. BHI net working capital reduced Â£49m in the period since consolidation on 1st February 2006. Net borrowings at the end of the half year were Â£795m (December 2005 net funds of Â£887m), This is the result of the requirement to fund the acquisition on 31 January 2006 of BHI, the cost of the final dividend for 2005 of Â£152m and the Â£ 93m cost of the share buyback program in the period offset by continuing strong net cash inflow from the business. Acquisition. The balance sheet as at 30 June 2006 includes the effect of the acquisition of BHI on 31 January 2006, including a provisional assessment of the fair values of assets and liabilities acquired and the resultant goodwill on acquisition. Total cash consideration of Â£1,941m was incurred to acquire intangible assets, including goodwill, and net tangible assets. Full disclosure of the accounting for the acquisition will be included in the Annual Report & Accounts for 2006. Financing. At the half year, the Group had shareholders funds of Â£1,844m (2005 year end Â£1,856m), a decrease of 1%. Net debt was Â£795m (2005 year end Â£887m net funds). Total capital employed in the business increased to Â£2,639m from Â£ 969m at end 2005 due to the acquisition of BHI in the period. Dividends. The Board of Directors announces an interim dividend of 20.5 pence per share (2005 18.0 pence per share), an increase of 14% in line with the Company's policy to increase the dividend in line with underlying earnings. The ex dividend date will be 9th August and the dividend will be paid on 28th September to shareholders on the register at the record date of 11th August. The last date for election for the share alternative to the dividend is 7th September. Share buyback. Between 21st February and 8th June 2006, the Group purchased 4.6m shares for cancellation at a cost of Â£93m as part of its ongoing share buyback program. In Q2, the Company purchased 2.4m shares for cancellation at a cost of Â£48m. The Company is committed to completing its Â£300m program for full year 2006. For Further Information Reckitt Benckiser +44 (0)1753 217 800 Tom Corran SVP Investor Relations & Corporate Communications Mark Wilson Corporate Controller and Investor Relations Manager PR Agency Tim Spratt Financial Dynamics +44 (0)207 837 3113 The Group at a Glance (unaudited) Quarter Ended June 30 Half Year Ended June 30 2006 2005 2006 2005 Â£m Â£m Â£m Â£m 1,097 1,028 Net revenues - underlying 2,182 2,014 127 - Net revenues - acquisition 204 - 1,224 1,028 Net revenues - total 2,386 2,014 7% 8% Net revenues growth - underlying 8% 8% 19% 8% Net revenue growth - total 18% 8% 56.9% 54.8% Gross margin 55.7% 54.4% 238 207 EBITDA 417 390 19.4% 20.1% EBITDA margin 17.5% 19.4% 213 185 EBIT 367 345 228 185 EBIT - adjusted* 424 345 17.4% 18.0% EBIT margin 15.4% 17.1% 18.6% 18.0% EBIT margin - adjusted* 17.8% 17.1% 201 193 Profit before tax 350 360 151 144 Net Income 261 268 162 144 Net Income adjusted* 303 268 20.9p 19.7p EPS 36.2p 36.8p 22.1p 19.3p EPS, adjusted and diluted* 41.2p 35.8p * Adjusted to exclude the impact of the restructuring charge. Group Balance Sheet Data# June 30, December 31, 2006 2005 Â£m Â£m Net working capital * (727) (616) Net (debt) / funds (795) 887 * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. # The balance sheet information contains provisional amounts in respect of the acquisition of Boots Healthcare International Shares in Issue First Half Millions 31 December 2005 722.2 Issued 1.2 Cancelled (2.2) 31 March 2006 721.2 Issued 2.5 Cancelled (2.4) 30 June 2006 721.3 Group income statement (unaudited) Quarter Ended June 30 Half Year Ended June 30 2006 2005 % change 2006 2005 % change Â£m Â£m Â£m Â£m 1,224 1,028 19% Net revenues 2,386 2,014 18% (528) (465) 14% Cost of sales (1,058) (918) 15% 696 563 24% Gross profit 1,328 1,096 21% (483) (378) 28% Net operating expenses (961) (751) 28% 213 185 15% Operating profit 367 345 6% 228 185 23% Operating profit before restructuring 424 345 23% (15) - - Restructuring charge (57) - - 213 185 15% Operating profit 367 345 6% (12) 8 - Net finance (expense)/income (17) 15 - 201 193 4% Profit before taxation 350 360 -3% (50) (49) 2% Taxation (89) (92) -3% 151 144 5% Profit for the period 261 268 -3% 0 0 - Attributable to minority interests 0 0 - 151 144 5% Attributable to equity shareholders 261 268 -3% 151 144 5% Profit for the period 261 268 -3% Earnings per ordinary share: 20.9p 19.7p On profit for the period 36.2p 36.8p 20.6p 19.3p On profit for the period, diluted 35.5p 35.8p Earnings per ordinary share - adjusted*: 22.5p 19.7p On profit for the period 42.0p 36.8p 22.1p 19.3p On profit for the period, diluted 41.2p 35.8p * Adjusted to exclude the impact of the restructuring charge Average common shares outstanding: (millions) 721.5 732.1 Basic 721.9 728.5 734.1 746.7 Diluted 735.2 747.8 Group balance sheet For the half year ended June 30 (unaudited) 30 June 31 December 30 June 2006* 2005 2005# Â£m Â£m Â£m ASSETS Non-current assets: Goodwill and intangible assets 3,981 1,766 1,705 Property, plant and equipment 459 485 475 Deferred tax assets 145 77 54 Other receivables 11 15 10 4,596 2,343 2,244 Current assets: Inventories 325 270 257 Trade and other receivables 680 545 537 Available for sale financial assets 15 77 257 Cash and cash equivalents 295 978 700 1,315 1,870 1,751 Total Assets 5,911 4,213 3,995 LIABILITIES Current liabilities: Borrowings (1,030) (88) (61) Provisions (17) (4) (4) Other liabilities (1,732) (1,431) (1,400) (2,779) (1,523) (1,465) Non-current liabilities: Borrowings (75) (80) (133) Deferred tax liabilities (791) (377) (367) Retirement benefit obligations (282) (261) (256) Provisions (14) (10) (9) Other liabilities (126) (106) (119) (1,288) (834) (884) Total liabilities (4,067) (2,357) (2,349) Net assets 1,844 1,856 1,646 EQUITY Capital and reserves: Share capital 76 76 77 Share premium account 497 479 470 Capital redemption reserve 5 4 3 Merger reserve 142 142 142 Hedging reserve 1 (1) (1) Retained earnings 1,120 1,155 954 1,841 1,855 1,645 Equity minority interest 3 1 1 Total equity 1,844 1,856 1,646 * Includes provisional fair values in respect of the BHI acquisition. # Restated for IFRS adjustment, see note 1 Group cash flow statement For the half year ended June 30 (unaudited) 30 June 30 June 2006 2005 Â£m Â£m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 367 345 Depreciation 45 40 Amortisation and impairment 9 5 Fair value (gains)/losses 0 (2) (Increase) / decrease in inventories (20) 2 Increase in trade and other receivables (15) (31) Increase in payables and provisions 209 97 Share award expense 21 18 Cash generated from operations: 616 474 Interest paid (25) (8) Interest received 12 23 Tax paid (86) (82) Net cash generated from operating activities 517 407 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and (37) (33) intangible assets Disposal of property, plant and equipment 12 2 Acquisition of businesses (1,941) (8) Maturity of short term investments 62 313 Net cash (used) / generated by investing activities (1,904) 274 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares 19 27 Share purchases (93) (161) Proceeds from borrowings 1,250 0 Repayments of borrowings (305) (27) Dividends paid to the Company's shareholders (152) (131) Net cash generated / (used) in financing activities 719 (292) Net (decrease) / increase in cash and cash equivalents (668) 389 Cash and cash equivalents at beginning of period 969 301 Exchange gains/ (losses) (11) 3 Cash and Cash equivalents at end of period 290 693 Cash and cash equivalents comprise Cash and cash equivalents 295 700 Overdraft (5) (7) 290 693 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 517 407 Net purchase of property, plant and equipment (21) (30) Net cash flow from operations 496 377 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 June 30 Half Year Ended June 30 2006 2005 % Change 2006 2005 % Change Â£m Â£m exch. Rates Â£m Â£m exch rates actual const. actual const. Net revenues 660 539 22% 21% Europe 1,283 1,077 19% 19% 345 303 14% 12% North America & Australia 671 576 16% 12% 219 186 18% 13% Developing Markets 432 361 20% 11% 1,224 1,028 19% 17% 2,386 2,014 18% 15% Operating profit 135 124 9% 8% Europe 247 231 7% 6% 55 44 25% 22% North America & Australia 88 85 4% -1% 23 17 35% 28% Developing Markets 32 29 10% 3% 213 185 15% 13% 367 345 6% 4% Operating profit - adjusted* 143 124 15% 14% Europe 276 231 19% 18% 60 44 36% 33% North America & Australia 107 85 26% 20% 25 17 47% 39% Developing Markets 41 29 41% 32% 228 185 23% 21% Subtotal before restructuring 424 345 23% 20% (15) - Restructuring (57) - 213 185 15% 13% 367 345 6% 4% % % Operating margin - adjusted* % % 21.7 23.0 Europe 21.5 21.4 17.4 14.5 North America & Australia 15.9 14.8 11.4 9.1 Developing Markets 9.5 8.0 18.6 18.0 Subtotal before restructuring 17.8 17.1 * Adjusted to exclude the impact of the restructuring charge. Segmental Analysis (continued) Secondary Segment: Product Segment Quarter Ended June 30 Half Year Ended June 30 2006 2005 % change 2006 2005 % exchange Â£m Â£m exch. rates Â£m Â£m exch. rates actual const. actual const. Net revenues 301 279 8% 6% Fabric Care 592 541 9% 7% 219 209 5% 2% Surface Care 451 419 8% 3% 141 140 1% 0% Dishwashing 295 290 2% 1% 153 139 10% 7% Home Care 325 283 15% 10% 335 179 87% 86% Health & Personal Care 581 329 77% 74% 1,149 946 21% 19% Core Business 2,244 1,862 21% 17% 26 33 -21% -21% Other Household 52 66 -21% -24% 1,175 979 20% 18% 2,296 1,928 19% 16% 49 49 0% 0% Food 90 86 5% 0% 1,224 1,028 19% 17% 2,386 2,014 18% 15% Net revenues of Â£204m in respect of the acquisition in 2006 are included within Health & Personal Care. On an underlying basis, growth of Health & Personal Care is 13% for H1 and 16% for Q2 at constant rates. Additional Information Operating profit - by product segment 218 175 25% 22% Household and Health & Personal Care 411 332 24% 21% 10 10 0% 0% Food 13 13 0% 0% 228 185 23% 21% Sub total before restructuring 424 345 23% 20% (15) - Restructuring (57) - 213 185 15% 13% 367 345 6% 4% % % Operating margin - by product segment % % 18.6 17.9 Household and Health & Personal Care 17.9 17.2 20.4 20.4 Food 14.4 15.1 18.6 18.0 Subtotal before restructuring 17.8 17.1 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: 2006 2005 Profit Average Earnings Profit Average Earnings for the Number of per for the number of per half year Shares share half year shares share Â£m pence Â£m pence Profit attributable to 261 721,948,180 36.2 268 728,470,049 36.8 shareholders Dilution for Executive 12,189,273 14,691,712 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,081,690 694,851 Sharesave Scheme options outstanding Dilution for convertible - 3,974,038 capital bonds outstanding On a diluted basis 261 735,219,143 35.5 268 747,830,650 35.8 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: 2006 2005 Profit Average Earnings Profit Average Earnings for the Number of per for the number of per half year Shares share half year shares share Â£m pence Â£m pence Profit attributable to 303 721,948,180 42.0 268 728,470,049 36.8 shareholders Dilution for Executive 12,189,273 14,691,712 options outstanding and Executive Restricted Share Plan Dilution for Employee 1,081,690 694,851 Sharesave Scheme options outstanding Dilution for convertible - 3,974,038 capital bonds outstanding On a diluted basis 303 735,219,143 41.2 268 747,830,650 35.8 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. Note 1: IFRS Adjustment As disclosed in the Group's press release of 8 February 2006, and subsequent to the publication of the June 2005 balance sheet on 25 July 2005, the Group now recognizes an additional deferred tax asset of Â£39m at 30 June 2005. This adjustment does not impact the income statement, net working capital or net funds. The impact on net assets is set out below. Net Assets 30 June 2005 Â£m Net Assets under IFRS as previously reported (25 July 2005) 1,607 IAS Deferred tax asset 39 Net Assets under IFRS 1,646 The above table supplements the information contained within the press releases of 8 March 2005, 25 July 2005 and 8 February 2006, which contained information concerning the conversion of the group's basis of accounting from UK GAAP to IFRS and restatements of previous results.

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