STRONG START TO 2008

Transcription

1 STRONG START TO th April 2008 Results at a Glance Q1 % change % change % change Actual Constant Like-for-like* Net Revenues 1,510m +20% +12% +11% Operating Profit - reported 275m +13% +3% Operating Profit - adjusted * 305m +25% +15% Net Income - reported 205m +15% +5% Net Income - adjusted * 225m +26% +15% EPS (diluted) - adjusted * 30.9p +27% n/a * Adjusted results exclude exceptional items; like-for-like excludes the impact of changes in exchange rates, acquisitions and disposals (see page 2 for further information). Net revenues increased 20% (12% at constant exchange) to 1,510m. Like-forlike growth (excluding acquisitions, disposals) was 11% at constant rates, driven by Power Brands such as Vanish, Finish, Airwick, Lysol and Dettol. Adams contributed 33m of revenues in the first two months of ownership. The Group completed the acquisition of Adams Respiratory Therapeutics Inc (Adams) on 30 January. Discontinued businesses since Q include Hermal which was disposed of on 31 August On a reported basis, operating profit increased 13% (3% constant) to 275m. On an adjusted basis, excluding the Adams-related restructuring, operating profit was 305m, an increase of 25% (15% constant). Gross margins increased 80bps to 57.7%. Operating margins before restructuring expanded 80bps to 20.2%. Marketing investment increased ahead of revenue growth, with media up 29% to 12.9% of net revenues. Reported net income was 205m, an increase of 15% (5% constant). On an adjusted basis, net income grew 26% (15% constant) to 225m. Net debt was 889m, 764m above the December 2007 level due to the debt taken on for the Adams acquisition. 1.5m shares were repurchased in Q1 at a cost of 40m. Net working capital improved 149m compared to December Commenting on these results, Bart Becht, Chief Executive Officer, said Q1 was a very strong quarter, benefiting from higher investments in our Power Brands and successful new product initiatives like Airwick Freshmatic Mini and Finish Max in 1. Based on the strong start to 2008 we are increasing our like-for-like full year target for net revenue growth to 7-8% (previously 6-7%) and for net income growth to 11% (previously 10%), both at constant exchange. As promised we are now adding the newly acquired Adams business to the targets. As a result the new consolidated full year targets are for net revenue growth of 11-12% (base 5,220m) and for net income growth of 11% (excluding restructuring, base 905m), both at constant exchange.

2 Basis of Presentation Results are presented under International Financial Reporting Standards (IFRS). The results include the Adams Respiratory Therapeutics business (Adams) from 30 January 2008, the date of acquisition. RB Pharmaceuticals, the Group s Subutex and Suboxone prescription drug business, has been disclosed entirely separately for the first time to more clearly show the performance of the various parts of the business. The Group has chosen to adopt early the new reporting standard, IFRS 8: Operating Segments, for the year ended 31 December 2008, which inter alia, requires the Group to assess its reportable segments. Accordingly, RB Pharmaceuticals has been identified as an additional reportable segment and comparatives have been restated as appropriate. Where appropriate, the term adjusted excludes the impact of exceptional items. Exceptional items in 2008 consist of a restructuring charge of 30m mainly relating to the integration of Adams. There were no exceptional items in Q Where appropriate, the term like-for-like describes business performance on a comparable basis, excluding the impact of exchange, business acquisitions and business disposals. Operating Review Q1 net revenues increased 20% (12% at constant exchange) to 1,510m. Like-forlike growth (excluding acquisitions, disposals and exchange) was 11%. Adams contributed 33m for the two months of ownership in 2008, representing a like-forlike growth rate of 28% against the comparable two months in Discontinued businesses contributed 18m to revenues in Gross margin increased by 80 bps to 57.7% due to sales price increases, benefits from cost optimisation programs and the impact of a positive mix more than offsetting increases in input costs. The inclusion of the Adams business from 30 January contributed 20bps to this increase. Marketing investment was significantly higher. Pure media investment increased 29% to a level of 12.9% of net revenues, an increase of 90bps on the equivalent period last year. Operating profit as reported was 275m, 13% higher than last year. On an adjusted basis, excluding the 30m restructuring charge for the integration of Adams, operating profit was 305m, an increase of 25% over Q Profit is not separately disclosed for the Adams business as, in the view of the Directors, it is impracticable to separately identify a profit stream for the acquired business due to its integration into the commercial infrastructure of Reckitt Benckiser. Operating margins excluding restructuring increased by 80 bps to 20.2% due to gross margin expansion and fixed cost leverage, partially offset by increased marketing investment. Net finance expense was 9m (2007 8m), reflecting interest on the debt taken on to finance the Adams acquisition early in the quarter. The underlying tax rate (excluding the effect of the Adams restructuring charge of 30m) for the quarter is 24%, in line with the expected rate for the full year. Net income was 205m, an increase of 15% (5% constant) on Q Adjusted net income was 225m, up 26% (15% constant) on the prior period. 2

3 Earnings per share (diluted, adjusted) increased 27% to 30.9 pence per share, ahead of net income growth as the accretion from the buyback more than offset dilution from new share issues. On an as reported basis, diluted earnings per share grew 16%. Business Review (at constant exchange rates) Summary: % Net revenue growth Like-for-like Exchange Acquisitions & Disposals Reported Europe NAA DvM Pharma* TOTAL *Pharma represents the Group s prescription drug business of Subutex and Suboxone. Europe 53% of net revenues Like-for-like net revenues grew 8% to 801m. All five categories contributed to this growth. In Fabric Care, the Vanish Oxi Action variants Multi and Crystal White drove the growth across the area, together with Calgon water softener. In Surface Care, growth came from Cillit Bang Grease and Floors. In Automatic Dishwashing, the launch of Finish / Calgonit Max in 1 contributed to growth. Home Care growth came from innovations such as Airwick Freshmatic Mini and Symphonia. The Health & Personal Care business benefited from increased investment in marketing with both Nurofen and Strepsils strongly contributing to the growth. Operating margins were 30bps higher in the quarter at 22.3%. Operating profit increased by 7% to 179m. North America & Australia 25% of net revenues Like-for-like net revenues grew 10% to 341m. Including Adams, net revenues grew 20% to 374m. For the two months of ownership, Adams contributed 33m of net revenue, 28% ahead of the comparable prior year period. Growth across the area was driven by Surface Care, Automatic Dishwashing, Home Care and Health & Personal Care. Growth in Surface Care came across the Lysol range. Automatic Dishwashing growth was driven by Electrasol 3in1 Powerball tabs and Jet Dry Turbo Dry. In Home Care, Air Care growth continued to be driven by Airwick Freshmatic and Mini Freshmatic, while Pest Control growth was strong across the Mortein range due to a strong season in Australia. Health & Personal Care (excluding Adams) grew due to Nurofen and Strepsils, following increased marketing investment. Food grew strongly in the quarter principally due to growth from French s yellow mustard and Frank s Red Hot sauce. Operating margins were 50bps higher at 16.8%. Operating profit was 19% higher at 63m. 3

4 Developing Markets 18% of net revenues Net revenues grew 16% to 277m, 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 Vanish, driven by initiatives to drive consumption across the Area. In Surface Care, growth was due to Harpic across the Area and Veja in Brazil. In Home Care, Air Care grew behind the success of Airwick Freshmatic in a number of countries. In Health & Personal Care, the Dettol personal care range grew strongly benefiting from range extensions in the personal wash segments and additional investment, while in Healthcare, Strepsils continued to drive growth behind increased marketing investment. Operating margins improved by 60bps to 11.6%. Operating profit was 32m, an increase of 19%. Pharmaceuticals 4% of net revenues Net revenues for the Group s Subutex and Suboxone prescription drug business grew 49% to 58m. These products are based on buprenorphine and are used to treat opiate dependence. This very strong growth was driven by a continued increase in penetration of Suboxone in the USA. Operating margins improved by 600bps to 53.4%. Operating profit was 31m, an increase of 63%. Suboxone has exclusivity in the USA until the end of September 2009 and in Europe until Approximately 80% of the Pharmaceutical business s operating profit, and therefore approximately 8% of the Group s operating profit, in Q1 08 was generated by the US Suboxone business. The Group continues to search for ways to offset the impact of the loss of exclusivity in the USA in 2009, through qualifying alternative forms of intellectual property protection, but with no guarantee of success. Category Review (at constant exchange rates) Fabric Care. Net revenues increased 6% to 351m. Growth was driven by continuing success for Vanish Oxi Action Multi and Vanish Oxi Action Crystal White and initial success of the launch of Vanish Oxi Action Magnets. Calgon Water Softeners grew as a result of higher marketing investment. Surface Care. Net revenues grew 9% to 268m due to further growth for Cillit Bang with the launch of Grease and Floors in Europe. Lysol grew strongly in North America, led by Disinfectant Spray, Neutra Air Freshmatic and Deep Reach toilet bowl cleaner. Other contributors were Harpic and further success for Veja in Brazil. Dishwashing. Net revenues increased 7% to 186m due to the success of Finish / Calgonit All in 1 and the recently launched Max in 1 in Europe and growth behind Electrasol 3in1 Powerball tablets and Jet Dry Turbo Dry in North America. Home Care. Net revenues improved by 11% to 217m. Air Care grew strongly due to the success of Airwick Freshmatic and Airwick Mini Freshmatic. Pest Control growth came mainly from a strong season in Australia. Health & Personal Care. Net revenues grew 20% to 372m, with like-for-like growth (excluding Adams) of 17%. In Antiseptics, Dettol grew strongly in Developing Markets behind extensions to the personal wash range and significantly increased marketing investment. Healthcare grew strongly due to both Nurofen and Strepsils behind increased marketing investment. The newly acquired Adams business grew 28% in the two months of ownership against the prior year period as marketing 4

5 investment and penetration of Mucinex combination products drove further share gains in a strong end to the cold/flu season. Total Household and Health & Personal Care. Net revenues were ahead by 11% to 1,408m, +10% on a like-for-like basis. Pharmaceuticals. Net revenues for the Group s Subutex and Suboxone prescription drug business grew 49% to 58m. This very strong growth was driven by a continued increase in penetration of Suboxone in the USA. Food. Net revenues grew 13% to 44m with good performance across the consumer portfolio, in particular further growth for French s yellow mustard and for Frank s Red Hot sauce. Operating profits increased 17% to 6m, with operating margins improving 80bps to 13.6%. Financial Review Income Statement. Net finance expense was 9m compared to 8m in Q This was due to the debt taken on following the acquisition of Adams offset by continuing strong cash inflow during the quarter. Tax on profit for the quarter was 61m at a rate of 23%. The underlying tax rate (excluding the tax effect of exceptional items) for the period is 24%, in line with the expected rate for the full year. Earnings per share. On an adjusted basis, fully diluted earnings per share grew 27%, compared to a 26% increase in net income as the accretion from the buyback more than offset dilution from the issue of new shares. Exceptional Items. A restructuring charge of 30m was recognized in the quarter, mainly representing the cost of integrating Adams into the Group s North American business. Balance Sheet. The Group had net debt of 889m at the end of Q1 compared to 125m at the end of This is the result of debt taken out to finance the acquisition of Adams of 1.1bn offset by continuing strong net cash inflow from the business during Q1. The group repurchased 1.5m shares in Q1 at a cost of 40m as part of its target to buy back 300m of shares in No dividend is paid in Q1. Net working capital (inventories, short term receivables and short term liabilities excluding borrowings and provisions) decreased by 149m to minus 975m compared to year end 2007, reflecting further improvements in net working capital, in particular, payables. Half Year Results. The Company will release results for the six months to 30 June on Monday 28 th July For further information Reckitt Benckiser +44 (0) Mark Wilson Corporate Controller & Acting Head of Investor Relations (Investor calls) Andraea Dawson-Shepherd Global Director, Corporate Communications (Media calls) Fiona Fong Head of Corporate Communications (Media calls) 5

6 The Group at a Glance (unaudited) Quarter Ended March Net revenues - like-for-like 1,477 1,240 Net revenues - acquisition 33 - Net revenues - continuing 1,510 1,240 Net revenues - discontinued - 18 Net revenues - total 1,510 1,258 Net revenue growth like-for-like 19% 3% Net revenue growth continuing 22% 7% Net revenue growth total 20% 8% Gross margin 57.7% 56.9% EBITDA EBITDA margin 19.9% 21.1% EBIT EBIT adjusted* EBIT margin 18.2% 19.4% EBIT margin adjusted* 20.2% 19.4% Profit before tax Net Income Net Income adjusted * EPS, basic, as reported 28.8p 25.0p EPS, adjusted and diluted * 30.9p 24.3p * Adjusted to exclude the impact of exceptional items. Group Balance Sheet Data March 31, 2008 # December 31, 2007 Net working capital * (975) (826) Net debt (889) (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 First Quarter Millions 31 December Issued or transferred from Treasury 0.2 Repurchased and transferred to Treasury (1.5) 31 March

7 Group Income Statement (unaudited) Quarter Ended March % change Net revenues 1,510 1,258 20% Cost of sales (638) (542) 18% Gross profit % Net operating expenses (597) (472) 26% Operating Profit % Operating profit before exceptional items % Exceptional items (30) - - Operating Profit % Net finance expense (9) (8) 13% Profit before taxation % Taxation (61) (57) 7% Profit for the period % Attributable to minority interests Attributable to equity shareholders % Profit for the period % Earnings per ordinary share: On profit for the period 28.8p 25.0p 15% On profit for the period, diluted 28.2p 24.3p 16% Earnings per ordinary share adjusted*: On profit for the period 31.6p 25.0p 26% On profit for the period, diluted 30.9p 24.3p 27% * Adjusted to exclude the impact of exceptional items. Average common shares outstanding (millions): Basic Diluted

8 Segmental Analysis (unaudited) An analysis of the Group s revenue and profit by reportable segment is set out below. Analysis by product segment is also provided as supplementary information. 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. Quarter Ended March 31 Net revenues % change exch. rates actual const. Europe # % 5% North America & Australia # % 20% Developing Markets % 16% Pharmaceuticals # % 49% 1,510 1,258 20% 12% Operating profit statutory basis Europe # % 7% North America & Australia # % -38% Developing Markets % 19% Pharmaceuticals # % 63% % 3% Operating profit adjusted* Europe # % 7% North America & Australia # % 19% Developing Markets % 19% Pharmaceuticals # % 63% Subtotal before exceptional items % 15% Exceptional items (30) % 3% Operating margin adjusted* % % Europe # 22.3% 22.0% North America & Australia # 16.8% 16.3% Developing Markets 11.6% 11.0% Pharmaceuticals # 53.4% 47.4% Subtotal before exceptional items 20.2% 19.4% * Adjusted to exclude the impact of exceptional items. # 2007 Comparatives have been reclassified to separately disclose Pharmaceuticals, previously reported within Europe and North America & Australia. 8

9 Additional Information Quarter Ended March 31 Net revenues by Category % change exch. Rates Actual Const. Fabric Care % 6% Surface Care % 9% Dishwashing % 7% Home Care % 11% Health & Personal Care ** % 20% Other Household % -28% Household and Health & Personal Care 1,408 1,181 19% 11% Pharmaceuticals % 49% Food % 13% 1,510 1,258 20% 12% **Net revenues of 33m in Q1 (2007 nil) in respect the Adams business are included within Health & Personal Care. On a like-for-like basis, growth of Health & Personal Care is 17%. Operating profit adjusted Household and Health & Personal Care * % 11% Pharmaceuticals * % 63% Food % 17% Subtotal before exceptional items % 15% Exceptional items (30) % 3% Operating margin - adjusted % % Household and Health & Personal Care * 19.0% 18.7% Pharmaceuticals * 53.4% 47.4% Food 13.6% 12.8% Subtotal before exceptional items 20.2% 19.4% * 2007 comparatives have been reclassified to separately disclose Pharmaceuticals, previously included within Household and Health & Personal Care. 9

10 Addendum: Restatement of 2007 Segment Analysis The following table of quarterly information for 2007 shows the reclassification of area net revenues, operating profit and operating margin to show RB Pharmaceuticals separately from the three geographical areas. 31 March 2007 Quarter Ended 2007 Full Year 30 June 30 September 31 December 31 December Net revenues Europe ,765 North America & Australia ,325 Developing Markets Pharmaceuticals ,258 1,302 1,337 1,372 5,269 Operating profit adjusted* Europe North America & Australia Developing Markets Pharmaceuticals Subtotal before exceptional items ,190 Exceptional items (4) ,233 Operating margin adjusted* % % % % % Europe 22.0% 22.6% 22.4% 28.0% 23.8% North America & Australia 16.3% 14.5% 21.4% 32.1% 21.5% Developing Markets 11.0% 13.5% 11.7% 17.3% 13.4% Pharmaceuticals 47.4% 59.3% 59.6% 54.8% 55.9% Subtotal before exceptional items 19.4% 20.4% 21.8% 28.4% 22.6% * Adjusted to exclude the impact of exceptional items. 10