A World Leader in Household, Health and Personal Care 28 April 2009 STRONG START TO 2009 Results at a glance Q1 % change % change actual exchange constant exchange m Net revenue 1,911 +27 +8 Operating profit reported 405 +47 +20 Operating profit adjusted 405 +33 +10 Net income reported 303 +48 +19 Net income adjusted 303 +35 +11 EPS (diluted) reported 42.1p +49 EPS (diluted) - adjusted 42.1p +36 * Adjusted results (including % change figures) exclude exceptional items (see page 2). There are no exceptional items in Q1 2009 compared to an exceptional charge of 30m pre-tax in Q1 2008. Highlights: Total net revenue +8% (constant exchange) to 1,911m, reflecting broad-based performance across the Group and its 17 Powerbrands. Gross margin +90bp to 58.6%: adjusted operating margin +100bp to 21.2%. Adjusted net income +35% (actual exchange): adjusted diluted EPS of 42.1p (+36%). Net debt of 693m, 403m lower than the 31 December 2008 level as a result of strong free cash flow generation. Net working capital of minus 1,175m, a 78m improvement versus year-end December 2008. Commenting on these results, Bart Becht, Chief Executive Officer, said: Reckitt Benckiser had a strong quarter, with net revenue growth of +8% at constant exchange. This growth came across all Areas and was driven by our 17 Powerbrands, behind continued investment and successful product initiatives. While we are encouraged by this positive start to the year, the market backdrop clearly remains challenging. As a result, we are re-iterating our targets for 2009, being net revenue growth of +4% (base 6,563m) and net income growth of +8-10% (base 1,143m), both at constant exchange.
Basis of Presentation and Exceptional Items Where appropriate, the term adjusted excludes the impact of exceptional items. There are no exceptional items in Q1 2009, compared to an exceptional charge in Q1 2008 of 30m mainly relating to the integration of Adams. Detailed Operating Review Q1 net revenue increased +27% to 1,911m, with growth of +8% at constant exchange. The gross margin improved by +90bp to 58.6%, largely as a result of sales price increases, easing input costs and benefits from cost optimisation programmes, partially offset by a negative transaction impact from foreign exchange. Marketing investment was higher, and pure media investment rose +26% (+8% constant) to a level of 12.8% net revenue, broadly consistent with Q1 2008. Operating profit as reported was 405m, +47% higher than last year (+20% constant); on an adjusted basis, operating profit was ahead +33%, (+10% constant). The adjusted operating margin increased by +100bp to 21.2% due to gross margin expansion and rigorous fixed cost control, notwithstanding additional marketing investment. Net finance expense was 4m (Q1 2008: 9m), reflecting strong free cash flow generation and progress on net debt repayment during the quarter. The tax rate was 24%. Net income was 303m, an increase of +48% (+19% constant) on Q1 2008. On an adjusted basis, net income was up +35% (+11% constant). Diluted earnings per share of 42.1 pence rose +36% on an adjusted basis (+49%, reported), marginally ahead of net income growth. Summary: % net revenue growth Q1 2009 Business Review Q1 2009 Growth at Constant Exchange Exchange Reported Europe +2% +13% +15% NAA +9% +31% +40% DvM +15% +15% +30% Pharma* +37% +54% +91% TOTAL +8% +19% +27% * Pharma represents the Group s prescription drug business of Subutex and Suboxone 2
The Business Review below is given at constant exchange rates. Europe 48% of net revenue Total net revenue increased +2% to 918m, with growth driven particularly by Dishwashing, Home Care and Health & Personal Care. In Dishwashing, growth came from the continuing success of Finish Quantum and Max in 1, while Home Care increased largely as a result of such initiatives as Airwick Freshmatic and Freshmatic Mini. In Health & Personal Care, increased marketing investment helped drive strong growth for Nurofen, Strepsils and Gaviscon. The adjusted operating margin was +10bp ahead of last year at 22.4%, with adjusted operating profit of 206m. North America & Australia 27% of net revenue Total net revenue increased +9% to 522m, with growth coming across all categories. In Fabric Care, growth was led by Woolite and Resolve, and in Surface Care growth came from Lysol spray and disinfectant wipes. Dishwashing was helped by the launch of Quantum in the US. Home Care increased as a result of growth in Air Care behind Air Wick Freshmatic and Freshmatic Mini, while Mucinex and the launch of Nurofen Express helped to drive strong growth in Health & Personal Care. Food performed well, with growth coming particularly from the consumer brands of French s Yellow Mustard, French s Fried Onions and Frank s Red Hot sauce. Adjusted operating profit increased +15% to 92m; the adjusted operating margin was +80bp higher at 17.6%. Developing Markets 19% of net revenue Total net revenue was ahead +15% to 360m, with strong growth evident across all regions and categories, in particular in Fabric Care, Home Care and Health & Personal Care. In Fabric Care, increased marketing investment and new initiatives helped drive a strong performance for Vanish across the Area. Growth in Home Care came from both Air Care behind AirWick, and from Pest Control. In Health & Personal Care, the Dettol personal care range delivered excellent growth benefiting from additional marketing support, with Veet also contributing strongly. Adjusted operating profit increased by +16% to 44m. This resulted in a +60bp improvement in the adjusted operating margin to 12.2%. Pharmaceuticals 6% of net revenue Total net revenue for the Group s Subutex and Suboxone prescription drug business grew +37% to 111m. These buprenorphine-based products are used to treat opiate dependence. This very strong growth was predominantly driven by a continued increase in penetration of Suboxone in the USA. The adjusted operating margin improved by +340bp to 56.8%. Adjusted operating profit was 63m, an increase of +40%. As a result of its Orphan Drug Status, Suboxone has exclusivity in the USA until the end of September 2009 and in Europe until 2016. Within the Pharmaceuticals division, the US Suboxone business generated Q1 net revenue of 95m and adjusted operating profit of 57m. While the Group continues to search for ways to offset the impact of the loss of exclusivity in the USA at the end of September 2009, up to 80% of the revenues and profits of that business might be lost to generic competition in 2010, with the possibility of further erosion thereafter. 3
Q1 2009 Category Review (at Constant Exchange Rates) Fabric Care. Net revenue increased +1% to 406m. Growth was led by the continued success of Vanish which benefited from additional marketing investment, and new initiatives for Woolite, partially offset by weakness in Laundry Detergents. Surface Care. Net revenue grew +1% to 321m, largely due to growth for the Dettol and Lysol ranges. Harpic Lavatory Care also performed well, due in part to such new initiatives as Harpic liquid with Max Coverage. Dishwashing. Net revenue increased +9% to 235m driven by strong growth for Finish Quantum and Max in 1, behind increased investment. Home Care. Net revenue increased +4% to 264m. Growth came predominantly in Air Care which continued to benefit from such initiatives as Airwick Freshmatic and Airwick Mini Freshmatic, with Pest Control also contributing. Health & Personal Care. Net revenue increased +18% to 505m. Dettol antiseptic delivered excellent growth in Developing Markets, with the personal wash range benefiting from higher marketing investment. Strong performance in Healthcare was led by Strepsils and Nurofen, boosted by the continued roll-out of such innovations as Strepsils Cool and Nurofen Express, supported by higher investment. The recently-acquired Mucinex brand also performed well. Total Household and Health & Personal Care. Net revenue was ahead by +6% to 1,739m. Pharmaceuticals. Net revenue for the Group s Subutex and Suboxone prescription drug business grew +37% to 111m, predominantly driven by a continued increase in penetration of Suboxone in the USA. Adjusted operating profit was ahead +40% to 63m, equating to a +340bp improvement in the margin to 56.8%. Food. Net revenue grew +4% to 61m with good performance across the consumer portfolio, in particular further growth for French s Yellow Mustard, French s Fried Onions and Frank s Red Hot Sauce. Adjusted operating profit increased +29% to 10m. Financial Review Basis of preparation. The unaudited financial information is prepared under IFRS, in accordance with the accounting policies set out in the Group s 2008 Annual Report and Accounts. Constant exchange. Movements in exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts the comparative to exclude such movements, to show the underlying growth of the Group. Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) improved by 78m to minus 1,175m, mostly due to further improvement in payables. Net debt as at 31 March 2009 was 693m (31 December 2008: 1,096m), a decrease of 403m in the quarter, reflecting strong free cash flow generation from the business. 4
2009 Targets While Reckitt Benckiser has had a positive start to the year, the market backdrop clearly remains challenging. As a result, the Group re-iterates its targets for 2009, being net revenue growth of +4% (base 6,563m) and net income growth of +8-10% (base 1,143m), both at constant exchange. For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd Global Director, Corporate Communications & Affairs Brunswick (Financial PR) +44 (0)20 7404 5959 Susan Gilchrist Senior Partner Cautionary note concerning forward-looking statements This document contains statements with respect to the financial condition, results of operations and business of Reckitt Benckiser and certain of the plans and objectives of the Group with respect to these items. These forward-looking statements are made pursuant to the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing to the Company, anticipated cost savings or synergies and the completion of strategic transactions are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors discussed in this report, that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside Reckitt Benckiser s control. Past performance cannot be relied upon as a guide to future performance. 5
The Group at a Glance (Unaudited) Quarter ended 31 March 2009 2008 m m Net revenue total 1,911 1,510 Net revenue growth constant +8% +12% Net revenue growth total +27% +20% Gross margin 58.6% 57.7% EBITDA 437 300 EBITDA margin 22.9% 19.9% EBIT 405 275 EBIT adjusted * 405 305 EBIT margin 21.2% 18.2% EBIT margin adjusted * 21.2% 20.2% Profit before tax 401 266 Net Income 303 205 Net Income - adjusted * 303 225 EPS, basic, as reported 42.7p 28.8p EPS, adjusted and diluted * 42.1p 30.9p * Adjusted to exclude the impact of exceptional items. Group balance sheet data 31 March 31 December 2009 2008 # m m Net working capital * (1,175) (1,097) Net debt (693) (1,096) * Net working capital is defined as inventories, short term receivables and short term liabilities, excluding borrowings and provisions. # Where appropriate, these amounts include provisional fair values in respect of the Adams acquisition. Shares in issue Millions 31 December 2008 708.7 Issued or transferred from Treasury 1.3 31 March 2009 710.0 6
Group Income Statement Analysis (Unaudited) Quarter ended 31 March 2009 2008 % change m m Net revenue 1,911 1,510 +27 Cost of sales (792) (638) +24 Gross profit 1,119 872 +28 Net operating expenses (714) (597) +20 Operating profit 405 275 +47 Operating profit before exceptional items 405 305 +33 Exceptional items - (30) Operating profit 405 275 +47 Net finance expense (4) (9) Profit on ordinary activities before taxation 401 266 +51 Tax on profit on ordinary activities (98) (61) +61 Profit for the period 303 205 +48 Attributable to equity minority interests - - Attributable to ordinary equity holders of the parent 303 205 Profit for the period 303 205 Earnings per ordinary share: On profit for the period, basic 42.7p 28.8p On profit for the period, diluted 42.1p 28.2p Earnings per ordinary share adjusted*: On profit for the period, basic 42.7p 31.6p On profit for the period, diluted 42.1p 30.9p * Adjusted to exclude the impact of exceptional items. Average common shares outstanding: (millions) Basic 709.4 711.6 Diluted 719.6 727.6 7
Segment Information (Unaudited) Analyses by operating segment of net revenue and operating profit, and of net revenue by product group are set out below. The figures for each geographical area show the net revenue and operating profit made by companies located in that area. Additional information is provided to show profit by class of business. Operating segment Net revenue Quarter ended 31 March 2009 2008 % change m m exch. rates actual const. Europe 918 801 +15 +2 North America & Australia 522 374 +40 +9 Developing Markets 360 277 +30 +15 Pharmaceuticals 111 58 +91 +37 1,911 1,510 +27 +8 Operating profit statutory basis Europe 206 179 +15 +0 North America & Australia 92 33 +179 +84 Developing Markets 44 32 +38 +16 Pharmaceuticals 63 31 +103 +40 405 275 +47 +20 Operating profit adjusted* Europe 206 179 +15 +0 North America & Australia 92 63 +46 +15 Developing Markets 44 32 +38 +16 Pharmaceuticals 63 31 +103 +40 Subtotal before exceptional items 405 305 +33 +10 Exceptional items - (30) 405 275 +47 +20 Operating margin adjusted* % % Europe 22.4 22.3 North America & Australia 17.6 16.8 Developing Markets 12.2 11.6 Pharmaceuticals 56.8 53.4 21.2 20.2 * Adjusted to exclude the impact of exceptional items. 8
Segment Information (Unaudited), continued Product segment Net revenue by category Quarter ended 31 March 2009 2008 % change m m exch. rates actual const. Fabric Care 406 351 +16 +1 Surface Care 321 268 +20 +1 Dishwashing 235 186 +26 +9 Home Care 264 217 +22 +4 Health & Personal Care 505 372 +36 +18 Other Household 8 14-43 -52 Household and Health & Personal Care 1,739 1,408 +24 +6 Pharmaceuticals 111 58 +91 +37 Food 61 44 +39 +4 1,911 1,510 +27 +8 Operating profit adjusted Household and Health & Personal Care 332 268 +24 +5 Pharmaceuticals 63 31 +103 +40 Food 10 6 +67 +29 Subtotal before exceptional items 405 305 +33 +10 Exceptional items - (30) 405 275 +47 +20 Operating margin adjusted % % Household and Health & Personal Care 19.1 19.0 Pharmaceuticals 56.8 53.4 Food 16.4 13.6 21.2 20.2 9