1st Quarter Results
Reckitt Benckiser PLC
10 May 2001
Reckitt Benckiser
Press Release
10th May 2001
Good Year Expected Following Strong Q1
Results at a Glance Q1 % change
Net Revenues (continuing operations) £812m +12%
Operating Profit (continuing operations £97m +20%
Operating Profit £98m +14%
Net Income £58m +26%
* Net revenues of continuing operations at constant exchange grew 8% (12%
at actual exchange) to £812m. Total net revenues grew by 9% to £817m.
* Gross Margin increased by 150 basis points (bps) to 49.2%.
* Operating Profit on continuing operations at constant exchange increased
by 16% (20% at actual exchange) to £97m. Actual operating profit,
including discontinued operations was £98m, up 14% on last year.
* Operating margins increased by 50 bps to 12.0% on total operations, and
by 70 bps to 11.9% on continuing operations.
* Net Income increased 26% to £58m.
* Net working capital (measured as net current assets) reduced by a
further £14m from the end of 2000, on track to deliver the full year
targeted reduction of £50m.
* Net borrowings reduced by £35m from the end of 2000 to £560m.
Commenting on these results, Bart Becht, Chief Executive Officer, said
'Reckitt Benckiser made a strong start in 2001 behind the growth strategy the
company launched last year. We are very happy with the way our new initiatives
are performing and boosting net revenue growth. Encouragingly, profit margins
are expanding strongly behind our cost optimization programs like Squeeze 2-50
and cash generation continues to improve.
'The performance in Q1 gives us increasing confidence in achieving our targets
for the full year. The Company is now completely focused on executing our
clear strategy to deliver growth by concentrating on our core categories,
further increasing our rate of innovation, globalising our products and making
selective add-on acquisitions, such as those recently completed in Korea and
Indonesia. Consequently we confirm that we will likely exceed our 4% net
revenue growth target on continuing operations at constant exchange, and that
we will maintain for the moment our net income target of 18% growth on the
same basis.'
Basis of Comparatives
For clarity in evaluating the underlying performance of the business, the
following terminology is used.
* Continuing Operations. Excludes net revenues and operating profit
relating to businesses sold during the course of 2000 and to date in 2001.
In Q1 2001 the net revenues from discontinued businesses were £5m (2000 £
22m) and operating contribution was £1m (2000 £5m).
* Normalized. This excludes non-operating items. There were none in Q1
2001. In Q1 2000 there was a profit on disposal of fixed assets of £1m.
* Constant Exchange. Movements of exchange rates relative to sterling
affect actual results as reported. The constant exchange rate basis
adjusts comparisons to exclude such movements and show the underlying
growth.
The detailed financial schedules attached to the release contain full details
of the results as reported and as adjusted for these factors.
Detailed Operating Review
Q1 Net revenues grew 9% (5% constant) to £817m (£748m in 2000). Net revenues
from continuing operations grew by 12% (8% constant) to £812m.
Operating profit was £98m (£86m). Normalized operating profit from continuing
operations grew by 20% (16% constant) to £97m (£81m). Gross margin increased
by 150 bps to 49.2% (47.7%) due to merger procurement benefits, higher volume
throughput and to continuing savings in cost of goods from the Squeeze 2-50
program. Marketing investment increased substantially, with media investment
increased by over 20%, partly funded by gross merger savings. Operating
margins increased by 50 basis points to 12.0% (11.5%) and on a continuing
operations basis by 70 bps to 11.9% (11.2%).
Net income was £58m (£46m) an increase of 26%. Normalized net income was the
same, an increase of 26%.
Category Review at constant exchange rates
Fabric Care. Net revenues grew by 4% to £209m (£193m). The main contributors
to this growth were the roll-out of the Vanish fabric treatment range in Asia
and Latin America, market share gains for Spray'n Wash in North America, and
strong growth for Calgon water softener, particularly in Eastern Europe.
Vanish has now been launched in South Africa and Thailand.
Surface Care. Net revenues grew by 8% to £205m (£179m). Lysol grew strongly in
North America, both disinfecting spray and wipes, recapturing share. Harpic
lavatory cleaner grew strongly in Europe and Australia behind new initiatives,
foaming cleaner in Europe and in-bowl gel in Australia. Veja all-purpose
cleaner has reached record share in Brazil.
Dishwashing. Net revenues grew 8% to £112m (£101m). Calgonit automatic
dishwashing grew strongly in Europe behind the continuing success of 2-in-1
and the first impact of 3-in-1 which was on-shelf in Germany and France during
the quarter with good initial results. Sales in North America stabilized in
the quarter ahead of the launch of Electrasol 2-in-1 with Jet Dry in April.
Home Care. Net revenues grew by 25% to £109m (£86m). Air care grew very
strongly in North America behind the continuing outstanding success of Wizard
electrical oils which have now more than doubled the brand's market share, and
in Europe behind further success for Airwick Crystal Air. Air care was
successfully launched in Eastern Europe during the quarter. Pest control had a
strong quarter in all regions, behind the roll-out of Pif Paf in China, and
the success of several new initiatives for Mortein in Asia, Latin America and
Australia/New Zealand. Mortein pest control was launched in Eastern Europe
during the quarter.
Health & Personal Care. Net revenues grew 7% to £95m (£88m). Veet depilatories
again grew strongly in Western Europe behind new initiatives for 2001. The
launch of the category in Latin America, both Brazil and Mexico, and in Turkey
contributed to growth. Dettol antiseptic grew particularly in Asia and Middle
East/Africa due to improved in-market execution behind higher marketing
investment. Health care grew in Middle East/Africa but the 'flu season in the
UK failed to match the exceptional level of last year.
Core Household business net revenues grew 9% to £730m (£647m). Non core, other
household net revenues grew by 5% to £46m (£43m) after stripping out the
contribution of discontinued businesses. This brings total net revenues for
continuing operations in Household to £776m, an increase of 9%.
Food. Net revenues fell 10% to £36m (£36m) compared to a very strong Q1 in
2000, due to competitive product launches and some economic slowdown in the
foodservice industry.
Geographical Analysis at constant exchange for continuing operations.
Western Europe 43% of net revenues
Net revenues grew 6% to £350m (£324m). This growth was due to the success of
Calgonit 2-in-1 and the initial success of 3-in-1 in Germany and France, to
continuing success for Airwick Crystal Air particularly in France, Italy and
UK, to Veet in France and Italy and to the success of Harpic in France.
Operating margins were affected by lower UK health care sales, since European
household margins improved significantly. Operating profit increased by 5% to
£67m (£63m).
North America 29% of net revenues
Net revenues grew 6% to £235m (£201m). The outstanding success of Airwick
Electrical oils was the largest contributor to growth, but there was strong
performance also in fabric care with Spray'n Wash gaining share, and in
surface care behind further market share gains for Lysol disinfecting spray
and wipes. The major initiatives for 2001 will impact from April onwards. Food
net revenues were below the strong Q1 of 2000. Operating margins improved by
350 bps to 8.5% due to fixed cost savings due to the merger. Operating profit
increased 82% to £20m (£10m).
Latin America 7% of net revenues
Net revenues grew 6% to £56m (£52m). Growth came from the roll out of
initiatives such as Mortein insect-seeker in pest control, and from the launch
of Veet depilatories in Brazil and Mexico. Veja all-purpose cleaner grew
strongly in Brazil, recording record market share. Results in Argentina and
Chile were affected by local economic conditions, exacerbated by industrial
unrest in supply. Operating results were impacted by increased marketing
investment to secure long-term growth and the effect of currency on gross
margins, such that operating losses widened to £4m (£1m loss).
Asia Pacific 11% of net revenues
Net revenues grew 11% to £88m (£79m). In Australia/New Zealand growth came
from the success of recent initiatives behind Mortein pest control, from the
success of Harpic gel, and further growth in fabric treatment and dishwashing.
In Asia, growth came from Mortein pest control (rolled out as Pif Paf across
China), from Dettol antiseptic which benefited from improving in-market
execution and higher investment, and from the roll-out of Vanish fabric
treatment. Operating margins improved 320 bps to 4.5% due to merger savings in
Australia/New Zealand and gross margin improvement in Asia. Operating profits
increased 300% to £4m (£1m).
Rest of World 10% of net revenues
Net revenues grew 19% to £83m (£70m). In Eastern Europe, growth came from the
successful roll-out of Calgonit 2-in-1, from outstanding performance by Calgon
water softener due to higher investment and improved in-market execution, to
Vanish fabric treatment and to the first positive contribution from the launch
in Q1 of air care, pest control and furniture care in key markets in the
region. In Middle East/Africa growth was mainly behind Dettol antiseptic due
to higher investment supported by much better in-market execution. Operating
margins expanded 290 basis points to 7.2% due to substantial improvements in
gross margin helped by Squeeze 2-50. Operating profit doubled to £6m (£3m).
New Initiatives 2001
In addition to initiatives already announced, the Company today announced
several new product introductions for Q2 2001. Calgon water softener liquid is
being launched in Europe. A new hot water wax roll-on and new spatula for Veet
depilatory is being introduced across Europe in Q2. Harpic Foaming in-bowl
cleaner is being introduced in Europe.
In addition, Calgonit 3-in-1 automatic dishwashing is being rolled out across
Europe and will be introduced to the UK in May. Airwick Crystal Air is being
expanded outside Western Europe; it has been introduced in Eastern Europe and
Singapore, is being launched in South Africa, and will be launched in the USA
during the summer. Globalising initiatives include the launch of Vanish fabric
treatment and of Calgonit dishwashing in several Asian markets.
Financial Review
Non-operating items. There were no disposals of businesses in Q1 2001, the
disposal of firelighters took place on 2 April 2001.
Net Interest reduced due to lower net borrowings, due to the strength of cash
inflow in 2000 and in Q1 2001 and slightly lower interest rates partially
offset by the impact of US $ strength on the Company's significant amount of
dollar denominated debt. Net borrowings at the end of the quarter were £560m,
a reduction of £35m on the 2000 year-end level of £595m.
Tax on profit for the quarter was £24m, an effective rate of 29.6%.
Net Current Assets reduced by £14m to minus £164m (minus £150m at the 2000
year end) due to further reductions in net working capital.
Half Year Results.
The Company will release results for the six months to 30 June 2001 on
Wednesday 29th August.
For further information
Tom Corran Tel: +44 (0)1753 217800
SVP Investor Relations & Corporate Communications
Lydia Wilhelm Tel: +44 (0)1753 217800
Investor Relations Manager
Bobby Leach Tel: +44 (0)207 329 0096
Weber Shandwick Worldwide
The Group at a Glance (unaudited)
Quarter Ended March 31
2001 2000
£m £m
From total ordinary activities
Net revenues 817 748
Net revenues growth 9% 4%
Gross margin 49.2% 47.7%
EBITDA normalized* 116 105
EBITDA margin normalized* 14.2% 14.0%
EBIT normalized* 98 86
EBIT margin normalized* 12.0% 11.5%
Profit before tax normalized* 82 66
PBT margin normalized* 10.0% 8.8%
Net Income normalized* 58 46
Net Income margin normalized* 7.1% 6.1%
EPS normalized* 8.2p 6.5p
EPS normalized, diluted* 8.1p 6.4p
From continuing operations
Net revenues 812 726
Net revenues growth 12% -
EBITDA normalized* 115 100
EBITDA margin normalized* 14.2% 13.8%
EBIT normalized* 97 81
EBIT margin normalized* 11.9% 11.2%
* Normalized to exclude non-operating items.
Selected Financial Information (unaudited)
Group Balance Sheet Data
March 31, December 31,
2001 2000
£m £m
Net current liabilities (164) (150)
Net borrowings (560) (595)
Group profit and loss account (unaudited)
Quarter Ended March 31
2001 2000 % change
£m £m
Net revenues - continuing operations 812 726 12%
Discontinued operations 5 22 (77%)
Total net revenues 817 748 9%
Cost of sales (415) (391) 6%
Gross profit 402 357 13%
Net operating expenses (304) (271) 12%
Operating profit - continuing operations 97 81 20%
Discontinued operations 1 5 (80%)
Total operating profit 98 86 14%
Non-operating items:
Profit on disposal of tangible fixed assets - 1
Profit on ordinary activities before interest 98 87 13%
Net interest expense (16) (20) (20%)
Profit on ordinary activities before taxation 82 67 22%
Tax on profit on ordinary activities (24) (20) 20%
Profit on ordinary activities after taxation 58 47 23%
Attributable to equity minority interests 0 (1)
Profit for the period 58 46 26%
Earnings per ordinary share:
On profit for the period 8.2p 6.6p
On normalized profit for the period 8.2p 6.5p
On profit for the period, diluted 8.1p 6.5p
On normalized profit, diluted 8.1p 6.4p
Average common shares outstanding:
Basic 698.7 693.3
Diluted 748.3 698.0
Segmental Analysis (unaudited)
Analyses by geographical area and product segment of net revenues and
operating profit are set out below. The figures for each geographic area show
the net revenues and profit made by companies located in that area.
Quarter Ended March 31
2001 2000 % change
£m £m exch. rates
actual constant
Net revenues - by geographical area
Western Europe 350 324 8% 6%
North America 235 201 17% 6%
Latin America 56 52 8% 6%
Asia Pacific 88 79 11% 11%
Rest of World 83 70 19% 19%
812 726 12% 8%
Discontinued operations 5 22 (77%) (77%)
817 748 9% 5%
Operating profit - by geographical area *
Western Europe 67 63 6% 5%
North America 20 10 100% 82%
Latin America (4) (1) (300%) (300%)
Asia Pacific 4 1 300% 300%
Rest of World 6 3 100% 100%
Corporate 4 5 (20%) (33%)
97 81 20% 16%
Discontinued operations 1 5 (80%) (80%)
98 86 14% 10%
Operating margin - by geographical area * % %
Western Europe 19.1 19.4
North America 8.5 5.0
Latin America (7.1) (1.9)
Asia Pacific 4.5 1.3
Rest of World 7.2 4.3
Corporate - -
11.9 11.2
Discontinued operations 20.0 22.7
12.0 11.5
Segmental Analysis (continued)
Quarter Ended March 31
2001 2000 % change
£m £m exch. rates
actual constant
Net revenues - by product segment
Household and Health & Personal Care 776 690 12% 9%
Food 36 36 0% (10%)
812 726 12% 8%
Discontinued operations 5 22 (77%) (77%)
817 748 9% 5%
Operating profit - by product segment *
Household and Health & Personal Care 95 76 25% 22%
Food (2) 0 - -
Corporate 4 5 (20%) (33%)
97 81 20% 16%
Discontinued operations 1 5 (80%) (80%)
98 86 14% 10%
Operating margin - by product segment * % %
Household and Health & Personal Care 12.2 11.0
Food (5.6) 0.0
Corporate - -
11.9 11.2
Discontinued operations 20.0 22.7
12.0 11.5
Net revenues - Household and Health & Personal Care
Fabric Care 209 193 8% 4%
Surface Care 205 179 15% 8%
Dishwashing 112 101 11% 8%
Home Care 109 86 27% 25%
Health & Personal Care 95 88 8% 7%
Core Business 730 647 13% 9%
Other Household 46 43 7% 5%
Net Revenues - continuing operations 776 690 12% 9%
* Due to a harmonisation in the allocation of corporate overheads the
segmental analyses for 2000 operating profit have been restated.
2000 Quarterly Segmental Analysis
Restated for change in allocation of corporate overheads and adjusted for all
disposals
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Full Year
£m £m £m £m £m
Net revenues - by geographical area
Western Europe 324 328 312 323 1,287
North America 201 236 245 280 962
Latin America 52 56 56 75 239
Asia Pacific 79 86 85 91 341
Rest Of World 70 79 83 84 316
726 785 781 853 3,145
Discontinued Operations 22 22 6 7 57
748 807 787 860 3,202
Operating profit - by geographical area
Western Europe 63 60 59 71 253
North America 10 34 26 58 128
Latin America (1) 2 0 5 6
Asia Pacific 1 2 2 6 11
Rest Of World 3 7 6 9 25
Corporate 5 5 3 (3) 10
81 110 96 146 433
Discontinued Operations 5 7 4 2 18
86 117 100 148 451
2000 Quarterly Segmental Analysis (continued)
Restated for change in allocation of corporate overheads and adjusted for all
disposals
Quarter Quarter Quarter Quarter Full
1 2 3 4 Year
£m £m £m £m £m
Net revenues - by product segment
Household and Health & Personal 690 733 738 781 2,942
Care
Food 36 52 43 72 203
726 785 781 853 3,145
Discontinued Operations 22 22 6 7 57
748 807 787 860 3,202
Operating profit - by product segment
Household and Health & Personal Care 76 94 91 122 383
Food 0 11 2 27 40
Corporate 5 5 3 (3) 10
81 110 96 146 433
Discontinued Operations 5 7 4 2 18
86 117 100 148 451
Net revenues - Household and Health & Personal Care
Fabric Care 193 209 206 206 814
Surface Care 179 182 203 200 764
Dishwashing 101 108 90 114 413
Home Care 86 80 92 113 371
Health & Personal Care 88 109 93 98 388
647 688 684 731 2,750
Other Household 43 45 54 50 192
Net Revenues - continuing operations 690 733 738 781 2,942