Betterbusiness Betterfinancials How We Drive Growth and Outperformance
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Reckitt Benckiser Group plc Annual Report and Financial2015 Statements betterbusiness 2015 Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements We make a difference to people’s lives through a trusted portfolio of brands, across consumer health, hygiene and home. Our vision Our purpose A world where people are To make a difference, by healthier and live better. giving people innovative solutions for healthier lives and happier homes. Our strategy betterbusiness betterfinancials How we drive growth and outperformance Chief Executive’s Review on pages 8–9 bettersociety betterenvironment How we support How we reduce our communities and our environmental develop our people impact Strategic framework on pages 12–13 Contents Strategic Report bettersociety Governance Report 1 Highlights 24 – Workplace 46 Board of Directors 2 At a glance 26 – Communities 50 Executive Committee 4 Chairman’s Statement 26 – Products 52 Chairman’s Statement on 7 Reasons why RB delivers betterenvironment Corporate Governance 8 Chief Executive’s Review 27 – Greenhouse gas emissions 54 Corporate Governance Statement 10 Our unique culture 28 – Water 60 Nomination Committee Report 12 Strategic framework 28 – Waste 61 Audit Committee Report 14 Our market and resources 29 – Sourcing 66 Directors’ Remuneration Report betterfinancials 30 Our operating model 68 Our remuneration at a glance 16 – Our strategy to deliver 32 Our operating model in action 70 Annual Report on Remuneration 17 – Organisation 34 Creating stakeholder value 79 Directors’ Remuneration Policy 19 – Powermarkets 36 Financial Review 85 Report of the Directors 20 – Powerbrands 40 Strategic Risks 88 Directors’ Statement of Responsibilities 22 – Virtuous earnings model Financial Statements 89 Financial Statements Any information contained in the 2015 Annual Report and Financial Statements on the price at which shares or other securities in Reckitt Benckiser Group plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance. Strategic Report Governance Report Financial Statements Highlights betterfinancials Net Revenue Adjusted1 earnings per share (diluted) £8,874m 258.6p Like-for-like1 growth +6% +12% Gross margin Developing markets 59.1% 30% +140 bps of Net Revenue Adjusted1 operating margin Health and Hygiene 26.8% 74% +210 bps of Net Revenue 1. Note: Definition of non-IFRS measures and their reconciliation Read more on pages 16–23 to IFRS measures are shown on page 39. bettersociety betterenvironment Net Revenue from more Greenhouse gas emissions sustainable products per unit of production £558m 14% 6% of Net Revenue Reduction since 2012 Read more on page 26 People reached with Water use per unit Health and Hygiene of production messaging 30% 237m Reduction since 2012 Since 2013 Save a Child Every Minute Waste per unit of production £6.5m Committed to the programme in 2015 14% Reduction since 2012 Read more on pages 24–26 Read more on pages 27–29 Annual Report and Financial Statements 2015 / RB 1 At a glance The right markets, Millions of consumers worldwide love and trust our brands. We have operations in more than 60 countries and sales in most countries across categories and brands. the globe. We organise our business into two areas, centred on groups of countries with many similarities in consumer behaviour, brand development and how the retail trade is organised. This structure helps us to be faster to market, with more consistent in-market activation. KEY: ENA regions DvM regions ENA DvM Europe (including Russia/CIS and Israel), Africa, Middle East (excluding Israel), Turkey, Asia North America and Australia/New Zealand (excluding Russia/CIS) and Latin America Net Revenue Like-for-like growth Net Revenue Like-for-like growth £5,830m +5% £2,695m +9% 2014: £5,891m 2014: £2,629m Food We run Food as a standalone business. Net Revenue Like-for-like growth Its brands include French’s, the leading mustard brand in the US. £349m +4% 2014: £316m 2 RB / Annual Report and Financial Statements 2015 Strategic Report Governance Report Financial Statements Net Revenue Like-for-like growth Health £2,942m +14% Health 2014: £2,701m Health and wellbeing are the key to Market positions happiness. Our health brands are generally • Nurofen and Gaviscon are leading sold over the counter and include products analgesic and gastro-intestinal brands targeting everyday issues such as pain, fever, in Europe and Australia cold, flu, soreHealth throat or heartburn. Our sexual wellbeing products, including condoms, • Durex is No.1 worldwide in condoms lubricants and other aids, promote safe and for both safe and more pleasurable sex pleasurable sex. The Health category also • Strepsils is No.1 in medicated sore includes footcare, with products to address throat globally hard skin and other foot and nail conditions. • Mucinex is the No.1 cough brand in the US • Scholl has leading positions in many footcare markets Hygiene Net Revenue Like-for-like growth Hygiene £3,589m +3% 2014: £3,627m Hygiene is the foundation for healthy living. Market positions Our brands promoteHygiene personal hygiene • RB is No.1 globally in the overall for good health and home hygiene, to category of surface care create a safe environment for families. Our range includes disinfectant cleaners, • No.2 worldwide in lavatory care with Lysol multipurpose and speciality cleaners, in North America and Harpic across Europe lavatory care, automatic dishwashing and Developing Markets detergents, pest control, depilatory • Dettol is No.1 worldwide in antiseptic liquids products and acne treatments. • Finish is No.1 worldwide in automatic dishwashing • No.2 worldwide in pest control with the Powerbrand Mortein, the Group’s international brand, supported by local brand franchises like d-Con in Home North America • Veet is No.1 worldwide Home in depilatory products Net Revenue Like-for-like growth Home £1,715m +2% 2014: £1,810m Home is the centre of family life. Our brands Market positions help create the right environment for families • Vanish is No.1 worldwide in fabric treatment to enjoy their time together. Products in this category include air care, water softeners, • Calgon is No.1 worldwide in water softeners garment care and fabric treatment. • Woolite is No.2 worldwide in garment care • Air Wick is No.2 worldwide in air care Portfolio (including Food) The Portfolio category includes our Net Revenue Like-for-like growth laundry and fabric softener business, as well as our Food brands. £628m +1% 2014: £698m Annual Report and Financial Statements 2015 / RB 3 Chairman’s Statement A year of delivery “Our purpose-driven 2015 was another successful year for RB, as we continued to benefit from the strategy we outlined in 2012. Total Net Revenue was flat due to the negative impact of foreign exchange, but increased by 6% on strategy is delivering a like-for-like basis. Reported Operating Profit was up 4% in actual currency and 7% in constant currency terms. Adjusted Operating for all stakeholders.” Profit rose 9% in actual currency and 12% in constant currency, resulting in a 210bps increase in our Adjusted Operating Margin. Reported Diluted Earnings Per Share were 240.9p, up 6% while Adjusted Diluted Earnings Per Share were 12% higher at 258.6p. Our strong operational performance and continued excellent cash conversion enabled us to return a record amount to Shareholders in 2015. We maintained the level of dividend this year, despite the loss in earnings from the Indivior demerger in December 2014. The Directors have proposed a final dividend of 88.7p per share, up 12%, giving a total dividend for the year of 139p. Subject to Shareholder approval, the final dividend will be paid on 26 May 2016 to Shareholders on the register on 15 April 2016. We also increased our share repurchase programme to £0.8 billion for the year (up from £0.3 billion) while maintaining our net debt position at around £1.6 billion. The Directors believe this policy of balanced returns leaves your Balance Sheet in a healthy position, while giving us the financial strength to invest in strategic, value-accretive acquisitions, in line with our strategy. It is pleasing that RB’s share price performance continues to reflect our successful delivery. During the year, RB’s share price rose by 20.6% to 6281p, well ahead of the 4.9% change in the FTSE 100. A successful strategy RB’s strategy concentrates our resources on the attractive Health and Hygiene categories and looks to deliver well-balanced growth across developed and developing markets. The Board remains highly focused on the success of this strategy. Each year, we spend considerable time with the Executive Committee, reviewing RB’s competitive environment and our plans for driving the business forward. We also Adrian Bellamy / Chairman carefully monitor the Company’s progress against its plans. Through this work, we remain convinced that our strategy is the right one and that it continues to position RB to outperform for the long term. Sustainability is a fundamental part of this strategy, as we recognise that we have a wider responsibility that goes beyond our commitment to deliver financial returns for Shareholders. We made further strong progress with our sustainability agenda this year, using our health and hygiene capabilities to make a Returns to Shareholders real difference to people’s lives, while ensuring we operate safely and with the lowest possible impact on the environment. At the start of 2015, we announced Project Supercharge, which £20.8bn is already making a significant difference to our organisation and its performance. At its heart, it is about simplifying our business, so we Of additional value delivered to our can get our innovations to market more quickly and effectively. At the Shareholders in the last three years same time, the substantial cost savings from the programme frees up cash for investment elsewhere, further improving our prospects for growth.